Of Dragon and Dragonfly: Sid Harth

[bademiyansubhanallah]

Anurag Viswanath: Green Dam on the back burner

Chinese netizens successfully stand up against govt gag order
Anurag Viswanath / August 2, 2009, 0:32 IST

China’s controversial Green Dam has been damned for now. “Net nanny”,
the web-content filtering software that was to be mandatorily
installed in every new computer sold after July 1, 2009 following a
directive by China’s Ministry of Industry and Technology, has been
stalled after a surprisingly furious public backlash. In the eye of
the storm was not the censorship attempt per se, but the larger issue
of its netizens’ right to information. China has the world’s largest
online population of 300 million and its internet penetration is 22.6
per cent, slightly higher than the world average of 21.6 per cent.

The official version is that the software, also called Green Dam/Youth
Escort, seeks to block “unhealthy and vulgar content”, or pornography.
Since the Open Door in 1978, the Communist Party has been struggling
with what it calls “spiritual pollution” and reiterating time and
again its commitment to building a “socialist spiritual civilisation”—
but given the realities, the objective is more of a rhetoric today.
But this did not prevent the Communist Party to sync netizens with
“socialist spiritual” by blocking “inappropriate” sites. However,
experts claim that the primary intention of the software is to sieve
and sift out politically-taboo content. In the software zealously
clamping down on inappropriate content, unwittingly trapped (by the
filter) was the hapless cartoon character Garfield—which presumably
even had the Party chuckling.

Critics, however, say that the reach of the software is no laughing
matter. The software would automatically update blacklisted topics
downloaded into the user’s computer. This would also open the
floodgates to hackers, cause intrusion into personal data and even
facilitate cyber-spying. Advocates of gay and lesbian rights say that
the software would prevent access to sites that discuss alternative
sexuality. Experts also argue that if the intention is indeed to block
adult content, then existing tried and tested software would have
served the purpose. And, therefore, there was no need to specially
commission this from two domestic companies—Jinhui Computer Systems
Engineering and Dazheng Language Technology.

Some observers say that it smacks of protectionism. On the other hand,
Solid Oak, a California-based software company that makes a similar
software—Cyber-sitter—has accused the two Chinese companies of
infringing intellectual property rights. Foreign PC makers are
concerned that it may damage operating systems. Thus far, only Acer
(the Taiwan-based world’s third-largest computer maker) has agreed to
install the software. Others such as Dell, Sony and HP have not
opposed this, but have expressed reservations.

However, China’s 300 million booming and flourishing netizens were not
the ones to take this measure lying down. They were alarmed and up in
arms—bloggers and social networking sites registered angry voices and
a cross-section of well-known public faces such as Ai Wei Wei (artist)
and Han Han (writer) protested the directive. Hackers flouted norms by
posting the list of banned content online, right under the
establishment’s nose. The attempt at arm-twisting the ever-growing,
enthusiastic bloggers and netizens—who are happily accessing social
networking sites such as YouTube, Face-book, Fanfou (China’s Twitter)
and many others—boomeranged.

Search engines Baidu, Sohu.com and Sina.com have ushered in a sea
change in access to cyberspace. Quite clearly, the younger, post-
socialist generation, which is already armed with anonymizers (for
surfing anonymously), are unfazed and getting better at getting ahead
in the cat-mouse game in China’s internet policing vis-a-vis guarding
their personal freedom.

Popularity of the net in China has already made the Communist Party
wary. But China, it seems, has acted on its concerns. China’s cyber-
policing has grown. The “Great Firewall”, which prevents access to
various sites, already exists. Critics allege that China’s cyberspace
is manned by internet volunteers and censors, some of whom blog and
comment to impact public opinion.

Among other unconnected incidents relating to cyberspace control,
which nevertheless raise questions, is the controversy in March 2009,
when researchers of the University of Toronto unearthed a cyber-
espionage, “GhostNet”, hacking into confidential information of the
Tibetan Government in Exile (TGE), which though not proven, raised
hackles. China’s adeptness at tracking down in 2004 journalist Shi
Tao, who used Yahoo! to send mails to a Chinese pro-democracy website
in the US, is still fresh in public memory. Ahead of the 20th
anniversary of Tiananmen in June this year, Hotmail and Twitter were
blocked. Given the ongoing crises in China’s western province
Xinjiang, Google has been ordered to cut access to foreign websites
from its local Chinese service.

Ironically, just a decade or so ago, China was waking up to the
information technology (IT) revolution. While IT is helping China
embrace the 21st century, it has also become a bane. The Communist
Party is visibly loosing control over the spread of information—and as
the recent handling of the rioting in Xinjiang shows, it wants to
manage information in as open a manner as possible, in its best
interests. Censorship is proving increasingly counter-productive.

For now, the decision has been postponed and netizens have got a
reprieve. But this is a sign of changing times—the complexity of
dealing with an increasingly affluent and information-based society by
an authoritarian regime that cannot possibly control everything today.
The Party’s discomfort and dilemma in negotiating and accommodating
societal forces, it has itself unleashed, will only increase.

(Anurag Viswanath is a Visiting Fellow, Institute of Chinese Studies,
Delhi. The views expressed are his own.)

...and I am Sid Harth

[bademiyansubhanallah]

India beat China in trust factor in business: survey

Press Trust of India / New Delhi July 31, 2009, 19:24 IST

Amid rising hopes of global economic turnaround Indians have emerged
as an optimistic lot than their Chinese counterparts when it comes to
trust in business.

The survey conducted in six countries including the US and France, for
public relations firm Edelman found out that India and China are the
most positive states in business.

"At 75 per cent, India recorded the highest level of trust in business
while China followed with 60 per cent saying they trust business to do
what is right," the report said.

The survey was conducted by research firm Strategy One and sampled
1,675 informed publics in two age groups (25-34 years and 35-64 years)
in India, China, US, UK, France and Germany.

The 2009 Midyear Edelman Trust Barometer has found that nearly one-
half of the informed publics (48 per cent) in the US trust business to
do what is right while 41 per cent of those surveyed in France share
the same thought.

According to the survey in India and China banks are the most trusted
industry.

"Our mid-year results reinforce the optimism evident in the Indian
market," Edelman India Managing Director Robert Holdheim said.

According to the survey, nearly 7 out of the 10 informed publics in
India and China rate the reputation of large multinational
corporations as good or excellent.

In China and India, 96 per cent and 81 per cent of the informed
publics say their country is headed in the right direction.

"They reflect a general perception that the economic situation is much
better in India than in many other countries, and that it will
continue to improve more rapidly than elsewhere.

"High levels of trust for both government and business (and the
banking sector specifically) are the reward for avoiding the problems
faced by so many others," Holdheim added.

...and I am Sid Harth

[bademiyansubhanallah]

Crouching dragon

July 30, 2009

First Published: 21:48 IST(30/7/2009)
Last Updated: 21:52 IST(30/7/2009)

Later this year, the Chinese armed forces are to launch their largest
round of military manoeuvres in recent years. Code-named Kuayue
(stride), for two months, 60,000 vehicles will be mobilised over some
50,000 sq km. For the last 20 years, the Chinese have been holding
massive manoeuvres each year to rehearse their projected invasion of
Taiwan. What is new — and disturbing — is the radical change in
pattern in Exercise Kuayue. For the first time, these are not directed
at rehearsing an amphibious assault on Taiwan but are focused on the
South China Sea instead.

The likely ‘target’ is Vietnam, with whom China has an ongoing dispute
over the Spratley Islands, and oil exploration sites in the South
China Sea. Last year, the Chinese had warned India’s ONGC not to take
up oil exploration in the Dai Hong oil field of Vietnam.

Deng Xiaoping’s phase of ‘Hide your capabilities and bide your time’
is now over. China is aggressively showcasing its military
capabilities and its willingness to use them. The test of its anti-
satellite rocket had sent shock waves across the world in 2007. This
year during its Naval Exposition held on April 23-25, China showcased
its naval might to the whole world. In November this year, the Chinese
Air Force will hold a similar exposition to flaunt its capabilities.

Over the last decade, China-Taiwan relations have improved vastly with
the Kuomintang government led by Ma Ying Jao. This improvement in ties
has rendered surplus a vast amount of Chinese military expeditionary
capability. Chinese military doctrine speaks of the concept of
‘Zaoshi’. This includes posturing of military force for intimidation.
Such displays of capabilities and overt deployments seek to signal the
Chinese capability and resolve to use military force.

The 2006 Chinese White Paper on defence had clearly articulated a
perspective roadmap to superpower status in three clear stages:

n First Stage (By 2010): Create a modern force capable of defeating a
moderate-sized adversary — namely Taiwan, India or Vietnam. This stage
now seems complete a year ahead of schedule. The recent Chinese show
of military muscle seems designed to highlight the actualisation of
this capability.

n Second Stage (By 2020): Catch up with second-tier world powers like
Russia, Europe and Japan.

n Third Stage (By 2050): Become a full-fledged superpower on par with
the United States.

The current change in China’s military profile is clearly indicative
of an acceleration of the Chinese pace of military transformation.
India’s military modernisation, on the other hand, is lagging far
behind schedule, by almost a decade. There is an urgent need to speed
up our weapons’ acquisition and military modernisation process.
China’s Exercise Kuayue may well turn out to be a long overdue wake-up
call.

G.D. Bakshi is a defence analyst and former major general with the
Indian Army.

The views expressed by the author are personal.

...and I am Sid Harth

[Sid Harth]

'China is the biggest thing to happen in the world economy for a
century'

Fundamentalist view: our regular series in which a leading fund
manager or expert at making money grow explains why savers and
investors should see things their way

By Tom Ewing
Published: 12:00PM BST 03 Aug 2009

Old and new: to ensure the Chinese economy was not engulfed by the
global malaise, the government injected huge sums into public spending
projects Photo: GETTY
Fund managers often talk about the "themes" that excite them and how
they work those ideas into their investments. China is full of
exciting opportunities but I would not call it a theme. It is much
bigger than that; it is the most important thing going on in the world
this decade and the next.

You might find it surprising that the manager of a UK equity growth
fund is as interested in China as the state of British banks and
whether M&S will increase its dividend. But what is happening in China
is as important to your investments as what happens here. Not to have
a view on it in your portfolio would be a huge mistake.

A Chinese puzzle: how long before the bubble bursts? China is a long
way away; culturally and geographically. As a result, some investors
here often dismiss China as something happening to someone else. Their
scepticism about the scale of activity means they enjoy belittling
this emerging economic superpower. The fact is, without China propping
it up, the global economy would be in a worse state than it currently
is. It matters to us all whether or not Chinese growth is
sustainable.

I have visited China several times in the past few years and my trip
in June demonstrated once more China's glorious ability to astound;
even after the financial crisis.

The main shopping street of any one of a hundred large Chinese cities
at 10pm on a Tuesday is virtually indistinguishable from Oxford Street
on a busy Saturday afternoon – perhaps with more neon!

China is a reason to be optimistic about the outlook for world growth.
Government finances are healthy and consumers are spending as
confidence returns. Chinese people, unlike us, are not encumbered by a
decade of over-borrowing. Things may be bad in the West, but it's not
often that a billion people go through an industrial revolution. In
fact, it's never happened before.

To ensure the Chinese economy was not engulfed by the global malaise,
the Chinese government injected huge sums of money into public
spending projects. Apart from being the catalyst for a stock market
recovery last autumn, you can see its impact everywhere. For example,
China Railways has been adding track to the network at about 1,000
kilometres a year. This will rise to 10,000 kilometres per year by
2012. To put that into context, the whole UK network is just 16,000
kilometres.

There are critics of this ''overdevelopment''. You can drive along
empty eight-lane motorways and wander shopping malls with more staff
than customers. Countless suburbs are being developed and redeveloped
to provide larger flats and to accommodate the 400 million people
moving from rural to urban areas.

I visited Shenyang in north-east China, a city you might not have
heard of despite having a population similar to that of Greater
London. In just one corner of this one city, there is a construction
site of two housing developments with a combined floorspace similar to
the whole of London's Docklands.

Rather than see this as a bubble waiting to burst, I see the longer-
term opportunity. Properties in Shenyang are selling faster this year
than last. Before long the aspirational emergent middle class of
China's mushrooming cities will be able to afford cars to fill the
roads and to shop in the malls. Urbanisation begets economic growth.

In a broad sense, Chinese growth is affecting asset prices, demand and
supply in almost every global industry. More specifically, despite
their ingenuity, capital and human resource, the Chinese still look to
British companies for certain goods and services.

British technology and engineering is in demand. Longer term, local
competition will catch up. Therefore, investors' challenge is to find
companies with whom the Chinese will never be able to compete.
London's mining sector is an obvious beneficiary of China's lack of
natural resources. Less obvious strong positions are those held by
Western brands. Diageo, maker of Johnnie Walker, and fashion label
Burberry, enjoy premium status among Chinese consumers. It is their
very ''un-Chinese-ness'' that creates opportunity.

I am realistic. Rampant growth creates imbalances. This is a long-term
story and not without risk. So be careful not to become overexposed
and ensure your investments are balanced against many other themes and
ideas. However, I am consistently surprised by the failure of many
people to appreciate and take advantage of China being the biggest
thing to happen in the world economy for a century.

Tom Ewing is portfolio manager at Fidelity UK Growth Fund

http://www.telegraph.co.uk/finance/personalfinance/investing/5964847/China-is-the-biggest-thing-to-happen-in-the-world-economy-for-a-century.html

"No Asian economy has so far demonstrated an ability for self-
sustaining growth."--Excuse me, but what a stupid remark. Most East
Asian countries, including China, are fully capable of going it alone.
Export dependence for Japan and China is actually relatively low; they
are just much better than us at making stuff and so it looks as though
they need to dominate our markets. Even South Korea and Taiwan could
'sustain' their economies if needs be, because they have developed the
technologies they need.
oohkuchi
on August 04, 2009
at 12:20 PM

The incomes you used for both ruel and urban China are for first half
only, not full year. The second half normally earns more because of
end of year bonus, etc. So you need to at least double the figure for
full year.

Mark
on August 04, 2009
at 11:02 AM
Report this commentIn every dynasty, China went through a glorious
period that last 50-100 years. Because China was a kingdom, the power
of government was passed from father to son. Eventually, the power
would fall into incapable hands. The economy would deteriorate to the
point when people would revolt and a new dynasty would be born. The
present dynasty was born in 1949. China is at this point not a
kingdom, the power of government is not passed from father to son. The
power of government is passed to selected more capable hands. Will
this break the system of how dynasty was changed? So far, China had
only 20-25 years of advancement, will China have 30- 80 years more as
in the past?
Ben Gee
on August 04, 2009
at 09:37 AM

"No Asian economy has so far demonstrated an ability for self-
sustaining growth." Oh yes, as if any western economy, especially UK
and America, has demonstrated an ability for such growth so far as
well. You mean creating a consumption boom on the back of huge
borrowings is a self-sustaining model of growth? You forget that Japan
also has a huge domestic market, so it's not only export and no
consumption as some misleading articles like to make it out. Germany
is also export-led, but you won't call that country not self-
sustained. If you you know a bit about economics there's no such thing
of a major economy that is self-sustained. If you ask a lot of
professionals where they'd like to be at the moment, they would tell
you they'd prefer most "export-dependent" Asian countries, like
Singapore or Hong Kong, than the "self-sustaining" UK or Europe.
Ming
on August 04, 2009
at 09:37 AM

Chinese rural GDP per capita rose last year by 8.1% to 2733 yuan (US
$400) which would place them 43rd of 52 African nations directly below
Togo at $436 and above Niger at $391.

Per capita income for urban residents increased to 8,856 yuan (US$
1296) up 11.2% after adjusting for inflation. Chinese urban dwellers
would rank 19 out of 52 compared to Africa.

As you can see the inequality between rural and urban income grew by
3.1% in 2008.

My manipulated, 30 year old statistics are from the IMF, Chinese
National Bureau of Statistics and the State Information Centre all
published in 2009. FYI approximately 70% of China's population is
rural or classed as rural dwelling.

@chinese_in_USA

I don't think anybody believes that China will collapse in 2-3 years.
Many westerners are fearful of China's growth but some of us are more
fearful that it will become unsustainable over the next 20-50 years if
the Chinese gov't does not address the problems of growing
inequality.

The Tibetan and Xinjiang riots, whilst newsworthy in the west, only
portray a very minor problem of ethnic unease in some of China's far
western provinces. It's other riots of mainly Han Chinese farmers in
central areas of China, Guangdong and the north east that should cause
alarm.

You're right that since 1979 naysayers have regularly said that the
wheels will come off the Chinese miracle. I firmly believe that whilst
China can maintain strong growth in personal incomes for its citizens
the miracle will continue. However, if growth stalls, and the economy
stagnates I see pent up pressures in the social fabric of China coming
to the fore.
Piers
on August 04, 2009
at 08:05 AM

Most Western "experts" miss one major point about the Chinese economy.
They continue to harp on about the inevitable collapse of an export
led economy. The point is, exports are relatively unimportant. What is
important is the huge growth in domestic demand arising from the new
middle class. So, if China stopped exporting right now, the country
could still grow GDP at 3-4% per annum, a figure which any Western
government would envy.
I'm fortunate to live in this amazing country and to witness what is
going on first hand, Over the last four years I have seen it for what
it is - a true economic miracle.
Hainan Feilipu
on August 04, 2009
at 06:23 AM

Where do you base your facts that 70% of Chinese have lower wages than
many countries in Africa? Er, probably from an article you read 30
years ago. Or just manipulating the figures (nothing new, btw) by not
stating which wages. You probably mean 70% of Chinese have lower wages
than the middle classes in South Africa. Now, that sounds already more
believable, just like the fact that many (& I'm not saying how many,
just many) people in the UK have lower wages than the middle classes
in South Africa (which is also true).
Ming
on August 04, 2009
at 06:22 AM

Where do you base your facts that 70% of Chinese have lower wages than
many countries in Africa? Er, probably from an article you read 30
years ago. Or just manipulating the figures (nothing new, btw) by not
stating which wages. You probably mean 70% of Chinese have lower wages
than the middle classes in South Africa. Now, that sounds already more
believable, just like the fact that many (& I'm not saying how many,
just many) people in the UK have lower wages than the middle classes
in South Africa (which is also true).
ming
on August 04, 2009
at 06:19 AM

To not include a component of your investment portfolio in China would
be an oversight. But the scale of the country means putting it in
context for viewing through the lens of Western investors is not
straightforwrd. The absolutes are blinding. Take this data from
'Foreign Policy' journal for example: 'Asia is nowhere near closing
its economic and military gap with the West. The region produces
roughly 30 percent of global economic output, but because of its huge
population, its per capita gdp is only $5,800, compared with $48,000
in the United States. Asian countries are furiously upgrading their
militaries, but their combined military spending in 2008 was still
only a third that of the United States. Even at current torrid rates
of growth, it will take the average Asian 77 years to reach the income
of the average American. The Chinese need 47 years. For Indians, the
figure is 123 years. And Asia's combined military budget won't equal
that of the United States for 72 years.'

TDP
on August 04, 2009
at 06:13 AM

come across this website by browsing over economic news from China on
yahoo.com. It hosts relevant articles from different sources. As a
chinese expatriate who has lived in US for quite a long period of
time, I have noticed a quite interesting difference between the
european and american readers when it comes to stories about China,
especially its economy. In general, the americans tend to express
their deep concerns about the ever-gorwing competitiveness of chinese
economy, while europeans are more likely to disqualify those as very
temporary illusions-"oh, it is a bubble, china will collapse in 2, 3
years, because of entering into WTO, SARS, TIBETIAN RIOTS, export-led
growth model, this and that". We have basically grown used to that
tone in the last few decades. To be honest, I hold tremendous respect
to american's vigility. In contrast,sadly, europeans, especially the
britons, often remind me of the mindset seen in the final years of
china's Qing gynasty(around 1850-1900). Frankly I think that is like
the mentality of a quickly declining power, reluctant to recognize the
incoming changes, basically because he has no effective power to stall
or reverse it. USA is very different in this respect, they are still
young and vigorous, and confident enough to recognize the challenges
and strive to overcome it. This is the difference, just my personal
opinion, a chinese who has lived in both the East and the West for
some years.
chinese_in_USA
on August 04, 2009
at 06:13 AM

No Asian economy has so far demonstrated an ability for self-
sustaining growth. All of them are export-oriented, mercantilist,
savings-heavy, and modeled on Japanese "miracle". It's hard to see how
China can be any different. The artificial stimulus - a temporary prop-
up at best - only assures harder landing ahead. I'll give China 2-3
years before light go out. This will not - indeed, it can not - last.
alec
on August 04, 2009
at 12:04 AM

Many experts make mistake by looking at China and applying their own
vision of the world as a plan for future China.
China is different civilisation, with a deep differences from us how
to live their lives - thanks god for that.

They are the most visible confirmation that the idea of globalization
is too shallow and half baked.

All the people who lose their jobs (20M or more) will do farming or
road building or tree planting. They will not be lazzy or expecting
any benefits, because government does not give them.

All the 'riots' are only natural, having in mind that China is big,
laws are 'slow', and most of the time that is the only way to attract
the attention of the authorities to grievances.

Each country should mind its own business, develop its own industry
and find a way to give workers jobs. That is what China is doing.
savo
on August 03, 2009
at 11:12 PM

The Chinese economic situation is deceptive. A large swathe of growth
comes from infrastructure projects which is only sustainable whilst
the Chinese export market can survive and bring in foreign currency.
Many factories in Guangzhou are struggling as their razor-thin margins
are squeezed. It's fairly common for senior managers to do a bunk
leaving migrant and low-wage workers unpaid and stranded far from
home.
Inequality is growing with numbers of Chinese super-rich taking the
lion's share of construction projects and adding to their wealth.
Meanwhile 70% of Chinese are living in rural areas with annual incomes
lower than in many African nations. The social implications of this
are frightening. Already there are over 100,000 reported riots every
year.

As you will have noticed from your recent trip to China, Tom, the
largest denomination banknote is the 100 yuan note (8 quid).
I once asked a banker why he thought the Chinese gov't didn't print
higher value notes since China remains a predominantly cash economy.
Imagine you're driving through the countryside, he said, and stop to
buy a meal or a bottle of water in a village and the only note you
have is a 500 or 1000 bill. The shopkeeper would look at you and think
"how can this guy carry my entire annual income in his wallet in one
note?"

The Communist revolution promised the Chinese people to eradicate
inequality. That promise was fudged by Deng XiaoPing to "some get rich
first, the rest later". My fear for China is that, in the medium term,
the opportunities for the poor to catch up won't materialise which
will threaten the stability of the nation and then the global
economy.


Piers
on August 03, 2009
at 08:46 PM

"I am consistently surprised by the failure of many people to
appreciate and take advantage of China being the biggest thing to
happen in the world economy for a century."

Well said. Congratulations. Even if our economic picture is nasty, the
chinese economic picture is more optimisctic. And after China will
come India.

Enjoy as you can.

...and I am Sid Harth

[Sid Harth]

Investment: think China, not Japan

Fundamentalist view: Before the end of this year, China will become
the world's second-biggest economy, replacing Japan about 10 years
ahead of schedule.

By Professor Shujie Yao
Published: 8:50PM BST 20 May 2009

'At times like this China's political structure has economic
advantages. If the Chinese government wants a major road built, work
will start straight away' Photo: EPA
This should ring alarm bells for traditionalist investors.

Traditional thinking is that China is an emerging market economy –
usually a small, high-risk part of investor portfolios; Japan the
stable, mature economy worthy of significantly greater exposure.

Japan's economy suffers record plunge But this turnaround in the
global gross domestic product (GDP) league tables should also,
arguably, trigger a turnaround for many investors. First, China. There
is no doubt China has been hit by the global recession.

Exports fell for the sixth month in succession in April, the Shanghai
Stock Exchange suffered worse drops than most other leading world
stock markets in 2008, when it fell by 65pc although it has recovered
since, and GDP growth has slowed from double figures in 2007 to a
likely 8pc this year.

But Beijing's recent 4,000bn Renminbi (£385bn) economic stimulus
package, worth 13pc of GDP for various infrastructure projects, as
well as increased bank lending will have an impact faster than similar
plans elsewhere.

For all the criticisms of China's political structure, at times like
this it has its economic advantages. If the Chinese government wants a
major road built, work will start straight away. If it needs the banks
to lend, they do.

Two years ago I was worried that rising food and commodity prices
could act as a drag on China's economic progress. The recession has
brought these prices down – and that is helping China's recovery and
growth.

The recession is also leading to a painful but necessary economic
shake-up within the country.

Manufacturers of cheap goods are going out of business because of the
collapse of the export market, and that is leading to the demise of
inefficient businesses and a drive to move Chinese manufacturers up
the technological ladder.

Finally, the crisis is helping to remove regional inequalities that
were threatening China's growth and political stability.

The drop in exports is encouraging manufacturers to move their
businesses from coastal regions to the interior to cut costs and
satisfy domestic demand and that is helping to correct some regional
imbalances.

This raises a crucial point for Western investors. China – as the
markets have shown in the past year – is an integral part of the
global economy. Those who argued that when America sneezes the rest of
the world no longer catches a cold, were wrong.

But China is not as dependent upon exports as other countries – or as
much as it was. This is not a cold that is sending the country
staggering to its bed.

The consumer economy is broadening and as the population ages excess
household savings will be spent. China can sustain its own endogenous
growth, so it will emerge stronger from the recession.

Japan, on the other hand, looks fragile. Government debt stands at
about 200pc of GDP. Japanese interest rates are very low, 10-year
Japanese Government Bonds yield just 1.4pc, so you might say this
isn't too much of a problem.

But follow the maths: debt at double GPD financed at 1.4pc takes 2.8pc
of GDP every year just to pay the interest and keep debt stable – and
that assumes the annual current budget is in balance.

Like most others, Japan's current budget is in deficit, by about 7pc
of GDP. The deficit is increasing, even before its recent stimulus
package. All of this adds to overall borrowings, which would be fine
if the economy were sufficiently strong to keep debt under control.

The snag is that Japan has not grown at 2.8pc for decades and there is
no realistic prospect of it doing so. Japan appears to be in a classic
economist's "debt trap"; a state in which the ratio of debt to GDP can
never fall. If it were a business, it would be deemed insolvent.

Exports and industrial production have imploded; even with some
recovery later in the second half the economy is likely to contract by
5pc this year (and that's being kind). For most countries this road
leads to hyperinflation and a trashed currency.

For the Japanese economy to implode is surely beyond imagining. But it
is far from impossible. The logic is simple, yet none of this seems to
be on anyone's agenda. Let's hope I am wrong but plan for if I am
right.

Stock markets may be bumpy, but any "long-term growth" investor
without a chunky exposure to China, and still preferring Japan, is
driving while looking through the rear-view mirror, not the
windscreen.

Professor Shujie Yao is head of the School of Contemporary Chinese
Studies at the University of Nottingham

...and I am Sid Harth

[Sid Harth]

India: does the Congress election victory signal an investment
opportunity?

The victory by India's ruling Congress and the subsequent stock market
bounce has reignited investor optimism.

By Paul Farrow
Published: 10:00PM BST 19 May 2009

Does the election result offer an investment opportunity? Photo: AP
The victory by India's ruling Congress and the subsequent stock market
bounce has reignited investor optimism.

As the outgoing cabinet tendered its collective resignation ahead of
the formation of a new government, the benchmark 30-share index on
Monday, the Mumbai stock exchange soared more than 17pc to 14,272.63,
up 2,099.21 points.

Indian exchange forced to close on post-election shares surge, but
debt crisis loomsIt was the biggest single-day gain in nearly 20 years
and could have gone higher, but the soaring index triggered a series
of circuit breakers that automatically halted trading for the day to
allow the market to cool down.

Confounding expectations of a close result and a fractured parliament,
the Congress-led alliance won 262 seats at the weekend – a mandate
nobody had predicted when voting began last month.

"I've never seen anything like it," said Shelley Kuhn, manager of the
Neptune India fund. "Because there was no exit polls everybody was
taken by surprise by the result, hence the euphoria."

Investing in India was in vogue not so long ago. The rationale made
sense. With a population of 1.1bn and an economy that is expected to
be second only to China by 2040, India was going to be difficult for
investors to ignore.

A McKinsey consumer report on India in May 2007 reckoned that of
India's 207m households in 2005, 14.5m were deemed middle class or
rich. By 2025 it forecasted the number of households will rise to
280m, of which 157.5m will be middle-class or rich owned.

Experts pointed to another advantage India had over its emerging
market peers. Services accounted for more than 50pc of GDP, whereas
exports as a percentage of GDP was only 18pc, which would make it much
more resilient to outside shocks.

Several fund managers pounced on the opportunity, launching new funds
investing in India. Fund managers, such as Fidelity, Jupiter and
Neptune, launched India-only funds, while others, such as Allianz
Global Investors and HSBC offering BRIC funds (investing in Brazil,
Russia, India and China).

Their timing could not have been much worse – they joined the India
party post 2006, which was a bumper year for Indian shares.

This is illustrated by one of the longest serving India funds,
JPMorgan India investment trust. It has returned 122pc over the past
five years, but much of that performance can be attributed to 2005/6
when it climbed 98pc.

In the past year, shares in India companies have been dragged through
the mire along with every other global market, despite generating
healthier economic growth numbers.

"India's economy has not been immune from the effects of the global
economic crisis, but so far it has weathered it better then most.
Growth is likely to fall to around 4pc this year from around 8pc in
2008, but in the context of conditions elsewhere this is impressive,"
said Hugh Young at Aberdeen.

"India's economy is more domestically oriented than those of other
emerging countries. Its export sector is more related to provision of
services, such as call centres and software, than it is to the
manufacture of goods, demand for which has been so badly battered."

Such statistics will do little to comfort investors who bought into
the India story in the past couple of years – they will still be
nursing hefty losses. The First State, Jupiter and Neptune funds are
all down by around 20pc over the year, so too is JPMorgan investment
trust.

But fund managers are breathing a sigh of relief because the victory
for the Congress Party removes one of the greatest risks to investing
in emerging markets such as India – it removes the political risk for
now.

A near majority for the ruling Alliance ensures political continuity
and should lead to a stable government for the next five years, they
said. Furthermore it is anticipated that a large single party at the
helm and marginalisation of regional and left parties mean less
hurdles and speedier decision-making.

Teera Chanpongsang, manager of the Fidelity India Focus said: "A
strong mandate for the Congress Party should lead to a stable
government at the centre, which increases the likelihood of speedier
and more focused economic reforms at a time when India’s fiscal
situation is deteriorating. I expect that the new government will take
steps to improve public finances, accelerate infrastructure spending
and raise funds through privatisation of government assets."

Kuhn said that with the reduction of political risk, the risk premium
for India will come down significantly and the equity market will re-
rate. She said that she sees market strength as being quite broad
initially as Indian equities are re-rated on an improved political
outlook.

Specific sectors, Kuhn said, that will benefit directly from Dr
Manmohan Singh's reform agenda, such as banks, insurers,
infrastructure plays and potentially the mining sector, will
eventually outperform the broader market.

However, Kuhn admitted that investing in India still had its issues
and a correction in the short-term could not be ruled out. "Political
reform in India can be tedious and clumsy so the reform may come
slowly, plus the market may have priced in a blue-sky scenario," she
said. "The market was flat the day after the 17pc rise so it could be
the shares have been re-rated already."

The consensus among fund managers is that India has its long-term
credentials in tact. Jupiter said the election will "have a big impact
on business sentiment", while JPMorgan said that it continues "to
believe that India, like China, remain the true long-term growth
opportunities for equity investors".

But investors hoping to make a quick rupee or two might want to
reconsider. The market has recovered so much so that shares are not as
cheap as they once were. Sanjiv Duggal, manager of HSBC GIF India
Equity fund, looks after US$4bn in Indian equities, the world’s
largest single holding of Indian equities outside the nation.

Although HSBC Global Asset Management is optimistic about India longer
term, it is wary of further upside in the near term.

"Although there were a lot of announcements by the governments on
their plans (infrastructure, social and physical), the government has
announced no intention to strategically privatise and no reform of
labour law. Questions remain over whether the surge of government
expenditure pre elections will now slow down," said Duggal.

Raj Nair, portfolio manager at JPMorgan agreed that the budget was a
key milestone for investors.

He added: "What's more, within the next several weeks, the government
will be formed and cabinet positions will be filled. With the Congress
party less dependent on other parties, they should have substantial
leeway to fill key ministries, such as that of Finance and Commerce".

Michael Konstantinov, manager of the Allianz RCM BRIC Stars fund said
that a correction after the big jump 'is possible’

Before you jump to invest in India, investors should remember that it
is an emerging market and therefore it will not take much to make
share prices wobble. Any fall in confidence in stock markets
generally, and emerging markets will bear the brunt of investors'
flight to safety.

Advocates claim that India remains one of the truly exciting places in
the world to invest, but potential investors need to weigh carefully
the shorter-term risks against the long-term benefits many experts
reckon that investors are better placed opting for a general emerging
markets or Asia fund which invests in India, rather than a country
specific fund.

Jason Walker from AWD Chase de Vere, said: "Investing in developing
markets is a volatile play, as the recent events highlight, and our
advice would be to diversify further where possible. Look at investing
in a BRIC fund like Allianz or emerging markets funds like Ignis Hexam
Emerging Markets or Martin Currie Emerging Markets.

Meera Patel, Hargreaves Lansdown, admits that India is not as cheap as
it once was, and she expects to see some corrections in the short
term.

She said: "But looking at the next 10 years, we think India's growth
prospects are back on track given the strength of its domestic demand,
infrastructure spend. Be brave to buy on the dips as long as investors
have a long term time frame in mind."

Patel suggests either Jupiter India or First State Indian Subcontinent
for such brave investors.

...and I am Sid Harth

[Sid Harth]

Funds drawn to China like 'moths to a flame'

Fund managers from across the world are shunning the West in favour of
China and emerging markets, yet still seem deeply concerned that rally
over the last four months may prove to be a false dawn.

By Ambrose Evans-Pritchard
Published: 4:03PM BST 15 Jul 2009

The July survey of investors by Merrill Lynch found that a net 63pc
believe the world will recover over the next year, but they lack
conviction and are not committing hard money to the rebound. “Asset
allocators remain very cautious on global equities,” said the bank.

It noted a “very sharp increase” in cash as funds opt for caution, as
well as a retreat from growth stocks into the safe havens of
pharmaceuticals, health care, and utilities. Hedge funds have cut
their net “long positions”, with many switching to the “short” side as
the rally falters.

Hillary Clinton pleads with China to buy US Treasuries as Japan looks
onDespite the skittish mood, investors still seem drawn like “moths to
a flame” towards Asia and emerging markets, convinced that the catch-
up economies will vastly outperform the Old World over the next twelve
months. A net 54pc are overweight emerging markets, the second highest
ever, led by Indonesia, China, Russia, and Brazil. They seem to be
disregarding warnings that China may soon have to clamp down on
rampant credit growth.

“Sentiment on emerging markets is so loaded that we could see some
disappointment,” said Gary Baker, Merrill’s head of European equity
strategy.

By contrast, the survey had never before seen such revulsion towards
Europe. A net 30pc expect to hold underweight portfolios on Europe
over the next year -- punishing the region for its “over-valued
currency”, and half-hearted stimulus by governments.

Mr Baker said the investor gloom over Europe could not be squared with
the optimism elsewhere since Europe is leveraged to global trade and
likely to recover in sympathy, even if slightly later. The divergence
has become “dangerously extreme”, and that creates an excellent
opportunity to start buying European stocks on the cheap.

The Merrill monthly survey covers 221 funds managing $635bn. It is
closely watched by experts because it reveals when consensus has swung
too far in one direction or another. One way to use the data is to
trim positions in hot sectors and rotate into those that are most
spurned, which today means cyclical and industrial stocks in the
eurozone.

...and I am Sid Harth

[Sid Harth]

Reporter's Notebook: Returnee Entrepreneurs in China, Part I
Posted by: Stacy Perman on August 07

I arrived in China last week and it is not difficult to be impressed
by the rapid economic progress this country has made. The sheer scale
and speed of the transformation is indisputable. In Beijing, massive
buildings soar into the hazy yellow sky while underground five new
subway lines were put into operation in just the past year alone.
Still, this is a developing country and outside the gleaming
metropolises of Beijing and Shanghai it is clearly a land in
transition. In Inner Mongolia, where I am currently, the countryside
doesn’t seem to have changed much in centuries. Its brush with
modernity appears to be the number of coal plants and nuclear power
plants that dot the landscape. And in the endless stretch of the
grasslands horses and cows graze among the six wind power farms and
the hundreds of windmills — generating hundreds of millions of clean
kilowatt power annually.

On the plane from Beijing to Hohhut in Inner Mongolia, I sat next to
Toyota’s chief representative here who commented on the distinct
difference between Japan, a country in economic distress and China
which despite the global crisis remains in growth mode.

Of course it is China’s centralized government that is largely
responsible for the growth that is visible at nearly every turn. Here
big business is just that – big and in most cases the enterprises
(cars, telecommunications, and other giants) are joint ventures with
the government. However, at the moment when China stands shoulder to
shoulder with the U.S. as an economic power burrowing its way at
lightening speed into the 21st century, there are signs that
entrepreneurship is emerging as a presence here – or at least it is
trying to make itself known.

While in Beijing, I had the chance to talk to a few “returnee
entrepreneurs.” These are Chinese individuals who were educated in the
west and stayed there working in companies, while some went on to
started their own firms. Lately however, many have begun to return to
China in order to launch their own outfits here. They cite a number of
factors. For starters, despite the dominant central government and its
attendant red tape, the economic reforms have created great
opportunities for new business that were not even remotely possible
before. Increasingly, the government has made strides at embracing new
ventures by offering start ups tax breaks and other business
incentives. Also making starting up attractive: there is a well-
educated, highly skilled workforce here. Moreover, the cost to
launching a company is considerably cheaper than launching one in the
U.S. Next up say these returnee entrepreneurs there will be a rapid
rise in the infusion of venture capital.

One of the returnee entrepreneurs I met is Hao Hong. Hong went to the
U.S. in the 1980s where he did post-doc work at the University of
Georgia and then returned to China before coming back to the U.S. for
good in 1988. An organic chemist by training, Hong taught and then
worked at a few small bio-tech firms before starting his own company
in 1994. Five years later, armed with the experience and training he
received in the States, Hong arrived in Beijing with about $250,000 to
launch the first of what would eventually become four pharmaceutical
manufacturing companies. Today, Hong’s Asymchem, has 1,000 employees
and is involved in drug discovery and commercialization. “Things have
changed here considerably,” Hong told me. “And they are still
changing.” Hong said that ten years ago when he started out, the
entrepreneur was a rare creature. Not today, “when I came here,” he
says, “there weren’t many. Now there are 100 times more
entrepreneurs.” He added, “to start the same size company it would
cost 25% more in the U.S.”

Currently, most of these returnee entrepreneurs are involved in high
tech and bio tech ventures and finance, consumer goods, and real
estate but as the country moves from a predominantly export
manufacturing oriented economy to developing its domestic market to a
more consumer-oriented society, there will be an increasing diverse
number of new ventures.

At the Guanghua School of Management at Peking University, the leading
business school in China whose dean, Weiying Zhang seeks to innovate
the practice of business and management here (including seeking
private funding sources outside of the government) entrepreneurship is
becoming a more important part of the curriculum. The MBA program has
increased the number of entrepreneurship courses and this fall will
launch an entrepreneurship major. According to Hongbin Cai, the
school’s associate dean (who earned his PhD at Stanford University),
Guanghua actively seeks to increase the level of entrepreneurial
activities into the curriculum. “We have mentors who help graduates
set up businesses,” he explained. “The entrepreneurial spirit is high
among our students, 40% of our MBA students are successful
entrepreneurs.” For instance the founder of Baidu, considered China’s
Google is a Guanghua alumni.

Interestingly, unlike the entrepreneurial culture in the United States
where many drop out of college in order to pursue their fledgling
businesses (Michael Dell, Bill Gates, Mark Zuckerberg come to mind)
here the opposite holds true. According to Cai and Zhang, a good deal
of China’s entrepreneurs return for their MBA’s after launching
successful businesses. Says Zhang: “Successful entrepreneurs develop
small businesses that become big businesses. They find it difficult to
manage. The main reason they come here is learn the system of
management. To start a business you need to be brave. There is risk in
the beginning. But after there is more risk, you need more knowledge
to maintain and grow it.”

Stay tuned for more…

Reader Comments

Vivek Wadhwa
August 7, 2009 11:54 AM
Stacy, fascinating report. But what were you doing in Mongolia?

I would love to hear about any really innovative products under
development there. Are there any technologies that may benefit the
West? Do you see local companies creating new products for export?

Most of what I saw there during my trips was the adaptation/copying of
western technology for local markets. It will be interesting to learn
if they are going beyond this.

Anne Field
August 7, 2009 01:00 PM
I don't think it's true that many entrepreneurs drop out of college.
There are some big names who get a lot of press, but they're not the
norm. It's a myth, but it makes for a good story.

Anne Field
Not Only for Profit
http://trueslant.com/annefield

Prashanth B
August 7, 2009 02:03 PM
Nice article but not much info in it.

john
August 7, 2009 02:45 PM
The world's next great superpower. They hold the economic power (debt)
over the United States, and the hold the military advantage (hundreds
of millions of conscripts ready to cross the border) over Russia.

[Sid Harth]

Indian PM meets with Chinese State Councilor on bilateral relations

www.chinaview.cn 2009-08-08 18:42:15

NEW DELHI, Aug. 8 (Xinhua) -- Indian Prime Minister Manmohan Singh
Saturday met here with visiting Chinese State Councilor and Chinese
Special Representative to the 13th China-India Boundary Talks Dai
Bingguo.

Dai conveyed to Singh the greetings from Chinese President Hu
Jintao and Chinese Premier Wen Jiabao, and conveyed an oral message
from Premier Wen to Prime Minister Singh.

Chinese State Councilor Dai Bingguo (L, front) meets with Indian Prime
Minister Manmohan Singh in New Delhi, India, Aug. 8, 2009. Dai is
Chinese special representative here attending the 13th meeting of
special representatives of China and Indian on the boundary issue.
(Xinhua/Wu Qiang)

Wen said in the message that China and India are important
neighbors and major developing countries. It is in the interests of
both countries and the people of the two countries to maintain
peaceful co-existence and seek common development, which is also
exerting a deep and far impact on Asia and the whole world.

Wen said China is willing to work with India to increase mutual
understanding and confidence, enhance cooperation in all fields, and
seek new progress in building the Sino-Indian Strategic Cooperative
Partnership.

Singh asked Dai to convey his greeting to President Hu and Premier
Wen. He said he completely agrees with Premier Wen regarding the
latter's message.

Singh said it is the common desire of the Indian government and
Indian people to strengthen Indo-Chinese Strategic Cooperative
Partnership. India is willing to work with China to expand and deepen
bilateral relations.

He said India and China share a wide range of opinions and stands
in international affairs and are keeping close coordination over
global issues like the international financial crisis and climate
change.

Singh said that as China's cooperative partner, India sincerely
wishes to work with China to promote peace, stability and prosperity
in Asia and the world.

Singh also said that since its establishment, the mechanism of
China-India Special Representatives for Boundary Issue has been
playing a very positive role. He expresses his wish that both
countries make further efforts to decrease differences, and find a
solution to the boundary issue which can satisfy both countries.

He also said that before the two countries settle the boundary
issue, both sides should work for the maintenance of peace and
calmness in the border areas.

Dai said that in the next several years, China and India will have
a rare time period of opportunity to develop bilateral relations, as
well as a rare time period of opportunity to solve their boundary
issue.

Dai expressed his confidence that in conformity with the common
stands reached by the leaders of the two countries, China and India
have the resolve, wisdom and capability to strengthen cooperation, and
make common efforts in finding a just and fair solution to the
boundary issue which is acceptable to both sides.

Editor: Wang Guanqun

...and I am Sid Harth

[Sid Harth]

China starts building its first 10 million-kw wind power station

www.chinaview.cn 2009-08-08 20:16:23

JIUQUAN, Gansu, Aug. 8 (Xinhua) - Construction started Saturday on
China's first 10 million-kw wind power station in the far northwestern
city of Jiuquan in Gansu Province.

China's wind power industry was entering a new stage, said Zhang
Guobao, vice minister of the National Development and Reform
Commission and head of the National Energy Administration, at the
groundbreaking ceremony.

After years of growth, China's wind power installation ranked
fourth in the world and subsidiary equipment manufacturing had turned
into a booming industry, Zhang said.

But China's wind power sector was dampened by distribution
imbalances between resources and markets, difficulties in connecting
wind power to power grids and construction policies that produced
stations of only small generation capacity, he said.

To solve the problems, the government decided to build the 10
million-kw-level wind power station, a "Three Gorges in the Air", to
maximize wind power efficiency through large-scale construction and
transmission, Zhang said.

With a 120 billion yuan (17.57 billion U.S. dollars) investment,
the station was designed to have an installed capacity of 5.16 million
kw by the end of 2010 and 12.71 million kw by the end of 2015. It will
be China's largest wind power facility upon completion.

China's installed wind power capacity topped 12.17 million kw at
the end of last year, fourth in the world behind the United States,
Germany and Spain.

Editor: Wang Guanqun

...and I am Sid Harth

[Sid Harth]

China, India hold talks on border row
Saturday, 08 Aug, 2009 | 10:50 AM PST |

We intend to improve the entire state relations to see how we can
further strengthen our boundaries, India’s National Security Advisor
M.K. Narayanan told reporters. –Photo by Reuters World
India, Pakistan discuss Kashmir border firings NEW DELHI: India and
China held another round of talks on Friday aimed at resolving a long-
standing border dispute that triggered conflict between the Asian
giants nearly five decades ago, AFP reported.

India’s National Security Advisor M.K. Narayanan met China’s State
Councillor Dai Bingguo for the 13th round of talks to settle the
dispute.

India and China appointed special representatives in 2003 to speed up
a resolution to the border row, which sparked a brief but bitter war
in 1962.

The two countries ‘intend to improve the entire state relations to see
how we can further strengthen our boundaries,’ Narayanan told
reporters immediately before meeting Dai for the closed-door talks.

Details of the outcome of the discussions were not divulged.

India says China occupies 38,000 square kilometres of its Himalayan
territory, while Beijing claims all of Arunachal Pradesh, which is
90,000 square kilometres.

A formal ceasefire line was never drawn after 1962, but the
militarised border has remained mostly peaceful, especially since
1996, when the two sides signed a historic pact to maintain
‘tranquillity’ on their frontiers.

Efforts to resolve the dispute come amid stepped-up political and
trade contact between the world’s two most populous nations, with
China now India’s second-largest trading partner.

...and I am Sid Harth

[Sid Harth]

The economic and financial intelligence that matters

Asia EconoMonitor

Will China Collapse?

Delicious Digg Facebook reddit Technorati Fabius Maximus | Aug 7,
2009
Here are more predictions of bust or even doom for China. I doubt any
of this is founded on adequate information or analysis, so these are
just WAGs. But interesting.

“The Coming Collapse of The Chinese Economy“, Professor Ching-hsi
Chang, The Epoch Times, 25 August 2005
“China has become a giant ponzi scheme“, Andy Xie, posted at an
unknown Chinese website, 3 August 2009
“The Return of Thomas Mun“, Martin Hutchinson, posted at The Prudent
Bear 27 July 2009 (well worth reading!)
“The Coming China Meltdown“, Martin Hutchinson, posted at The Prudent
Bear, 4 August 2009
The Coming Collapse of China, Gordon G. Chang (2001) – Also: an
interview at RealClearWorld.
About Martin Hutchinson

Martin Hutchinson is the author of “Great Conservatives” (Academica
Press, 2005). Details can be found on the Web site Great
Conservatives. He was formerly Business and Economics Editor at
United Press International.

About Andy Xie

Formerly an economist with Morgan Stanley Analyst. He became famous
for his bold email, for which MS fired him. See this Asia Sentinel
article for the text. See his Wikipedia entry for more about his
background.

Originally published at Fabius Maximus and reproduced here with the
author's permission.

Comments

The 'collapsing China' meme needs to be put into a larger frame. The
country is, from an economic standpoint, mismanaged. However, it's
unlikely that the market socialist system will be undone by a failure
to wisely direct capital or to optimize investment flow.

There's an obvious fact of life in a 'socialist' state that needs to
be considered as a counter to the 'collapsing China' meme:
specifically, it's still a command economy with respect to capital
allocation, new business entry into the market, and wages. In effect,
the country is a giant firm where market forces and market notions
like profit, loss, and return on investment have an additional and
overriding constraint: regime stability.

What are the implications? The regime will pursue goals like social
stability and provide the capital inputs and capital constraints that
help it attain its objectives. If that requires reckless lending that
jeopardizes the financial system, so be it. If there's a crash a few
officials at the top can be scapegoated, the accounting mess is hushed
up, the rigged currency is re rigged to restore equilibrium, wages and
taxes are rejiggered. The regime knows what is has to do to maintain
itself. It is not popular but there is no alternative.

Sure it's possible that growth rates go negative for a while and even
large swaths of real activity go belly up. That's more of a concern
for the western banks that are trying to get a piece of the action
than it is for the regime or the people themselves.

By Mandarin on 2009-08-07 20:47:03

...and I am Sid Harth

[Sid Harth]

India, China to set up hotline

Sandeep Dikshit

Decision taken to hold the Year of Friendship with China in India

PTI

Prime Minister Manmohan Singh with Dai Bingguo, State Councillor and
Special Representative on the Boundary Question to India, at a meeting
in New Delhi on Saturday.

NEW DELHI: India and China have decided to set up a hotline between
Prime Ministers Manmohan Singh and Wen Jiabao as a confidence building
measure. The decision was taken during the 13th Round of India-China
Special Representatives talks on the boundary question which concluded
here on Saturday in a “cordial and friendly atmosphere.”

Bilateral relations and regional issues were also discussed.

At the ministerial level, India now has a hotline only with Russia,
while China has a functional hotline with the United States. External
Affairs Minister S.M. Krishna told Parliament last month that the
proposal had come from the Chinese side and the intention was to
“maintain regular contacts at the highest level.”

‘Centrepiece’

Discussing a broader agenda than just the border issue, the two
special representatives — National Security Advisor M.K. Narayanan and
State Councillor Dai Bingguo — identified trade and economic relations
as the “centrepiece” of the bilateral relations and noted that despite
the global economic slowdown, India-China trade last year was $52
billion. They resolved to create suitable conditions and an
environment to maintain the expansion of trade ties.

In order to “fittingly” observe the 60th anniversary of the
establishment of diplomatic relations next year, it was decided to
hold the Year of Friendship with China in India, while China will also
kick off similar celebrations, said sources privy to the two-day
meeting. Mr. Narayanan and Mr. Dai also noted that the frequent
interactions between the two countries lent “global significance” to
the bilateral ties.

China had proposed the establishment of the hotline during a meeting
between Dr. Singh and Chinese President Hu Jintao on the sidelines of
the Shanghai Cooperation Organisation summit in Yekaterinburg, Russia.
There were expectations of the hotline getting activated in July. No
date has so far been announced and officials said technical and other
modalities were being worked out.

Describing ties with China as a key foreign policy priority, Mr.
Narayanan said the joint document on a “Shared Vision for the 21st
Century” signed during Dr. Singh’s visit to China January last year
had taken bilateral relations to a new level.

An External Affairs Ministry statement said Mr. Dai referred to the
rapid growth witnessed in bilateral relations in recent years.
Highlighting the importance of the ongoing consultations and
coordination between the two countries on multilateral fora, he hoped
that the two countries would jointly meet global challenges in the
spirit of the “Shared Vision.”

During his visit, Mr. Dai called on Dr. Singh and United Progressive
Alliance chairperson Sonia Gandhi. He conveyed the greetings of Mr. Hu
and handed over a written message of greetings from Mr. Wen to Dr.
Singh


...and I am Sid Harth

[Sid Harth]

Great expectations from China
S. VENKITARAMANAN

China achieved more success than the US and other countries in
stimulating its economy because it focused on infrastructure
development before the onset of the slowdown. However, China may
consider converting the renminbi into an international currency to
take care of its bloated reserves, says S. VENKITARAMANAN.

The Western media has been engaged in recent weeks in analysing the
prospects of China coming to the rescue of the global economy. The
issue of Time dated August 10, 2009 has an article discussing the
possibility of its economic resurgence. China’s economic growth has ,
of course, been exemplary. While it has grown at robust rates, its GDP
has depended, to a large extent, on demand for its exports in US and
Europe.

One view is that China is fast on its way to surpassing Japan as the
second largest economy in the world. China’s economic growth has
contributed to more than 70 per cent of the world’s economic growth in
recent times . Further, fortunately for China, the Chinese economic
stimulus package has worked far better than the much-touted stimulus
package of the US administration.

SUCCESSFUL STIMULUS

One reason why China’s economic stimulus package has worked is that
its stimulus package focuses on government spending on infrastructure
projects. The Chinese authorities were already in the midst of an
aggressive programme of building infrastructure, even before the onset
of the slowdown .

The additional money given for the stimulus package could, therefore,
be readily absorbed by readymade projects. Meanwhile, in the
countryside, the authorities have been busy spending the stimulus
package on infrastructure projects. These initiatives will provide a
boost to the economy, besides improving its manufacturing efficiency
and export competitiveness.

The Peoples’ Bank of China – its Central Bank – has also concentrated
on providing additional loans to various infrastructure projects from
the national banking system. This has meant that the fiscal economic
stimulus package of government works more efficiently in China than in
the US or elsewhere. Obviously, there was a risk that some of these
large loan funds could flow into equity or real estate. The Chinese
authorities are fully aware of the dangers of such mishaps.

The fact that the economic stimulus package in China has succeeded is
an illustration of how a determined government, which spends public
money efficiently on well-designed infrastructure projects to
stimulate the economy and ensure jobs and economic growth, can succeed
in the current context.

Chinese monetary authorities and the government have worked in tandem
to ensure that the objectives of growth and employment generation are
not compromised.

BLOATED RESERVES

The growing strength of China in the global economy brings with it
certain problems, both for China and the rest of the world. One of
them concerns the aggressive policy of China in encouraging exports by
maintaining competitive exchange rates. This has led to China’s
reserves increasing over the years.

A recent report points out that China’s reserves amounting to $2
trillion are parked in dollar-denominated securities, mostly US
Treasury bonds. China has legitimate concerns over the devaluation of
the dollar.

A recent article in the Financial Times (FT) exploring how China is
trying to find its wayout of the dollar trap points out that if China
tries to diversify its dollar holdings by selling its US Treasury
securities and moving into other currencies, it will damage further
the value of the US dollar and will reduce the value of its residual
holdings.

The Chinese dilemma is thus obvious. It can content itself by
threatening to move out of US Treasury securities. But, if it carries
out its threat by selling its Treasury holdings, it would be acting in
a self-destructive manner.

According to an FT article, China is, however, exploring the
alternative of making renminbi (the Chinese currency) an international
currency. That is to say, instead of trades into and out of China
being settled in dollars, which are then converted into renminbi,
China would, under the new alternative, encourage settling in terms of
renminbi itself. The article points out that this may not be such an
out of the way solution.

Much of Chinese trade, other than with US, is conducted with emerging
market economies, who are familiar with settlement in renminbi.

The FT reckons that such a mode of settlement will make the renminbi
one of the most active foreign currencies so far because of the size
of Chinese trade with other emerging market economies.

China is already encouraging trade denominated in renminbi by
subsidising exporters and importers who quote in that currency.
Internationalisation of renminbi and its emergence as foreign currency
is thus not out of reach. But whether this will by itself solve the
problem of China’s accumulated reserves is doubtful.

CURRENCY OPTIONS

Owning a reserve currency as the national currency is a course fraught
with certain problems. It tends to magnify every trade fluctuation
into a currency crisis. It was for this reason that Japan consciously
avoided the use of the yen as a reserve currency. China’s ambition
may, however, be for renminbi to take its place alongside the dollar,
establishing itself as a global reserve currency. The middle kingdom
aspires to be a real successor to the US and the UK!

Further consequences follow from the move to internationalise the
renminbi. China will have to liberalise its capital account rules.
China’s corporates and individuals should be free to move their wealth
into and outside the country without any permission from the
government or the monetary authority. Capital account convertibility
seems to be a prerequisite for any currency becoming a reserve
currency.

If China is to play a significant role in the world’s future alongside
the US and Europe, it will have to move towards renminbi also becoming
an internationally used currency, both for purposes of trade and other
settlements. This will call for fundamental changes in China’s
economic management.

China has, in keeping with its growing economic strength, asserted
itself in international economic management. It has played an
increasing role in the World Bank and the IMF. To wit, it is likely
that G-8 is reduced to G-2 — the US and China. Will India try to forge
a strategic alliance with China in future? The path of wisdom is to
recognise China’s increasing prowess in global economic affairs and
form an alliance with that mighty nation. We have a lot to gain and
little to lose by focusing on a China-India bloc.

China’s future role in the international dialogue across various
countries and financial institutions depends on its success in
handling the impact of the global economic crisis on its own economy.
So far, China’s success seems to have surpassed all other countries.
It has benefited from its conscious policy mix of state control and
market-related economic management. India has a lot to learn from
China’s success.

Related Stories:
Right time for India, China to explore investment synergy: FICCI
‘China, India should work jointly in the interest of developing
nations’

...and I am Sid Harth

[Sid Harth]

Industry & Economy - Industry Associations
Right time for India, China to explore investment synergy: FICCI
Our Bureau

New Delhi, June 7

At a time when the developed economies that have traditionally been
the demand drivers in world trade are shrinking, India and China have
an opportunity to co-opt and explore trade and investment synergies,
feels industry chamber FICCI.

To explore trade potential between the two countries, Mr K. K. Modi,
former President of FICCI and Chairman of India-China Joint Business
Council and Modi Enterprises, is leading a FICCI business delegation
to Hong Kong, Macau and Zhuhai from June 11-13.

According to Mr Modi, “There is an urgent need to develop greater
financial and manufacturing synergies between the two emerging
economic powers (India and China) of the world. The time is ripe to
take advantage of the window of opportunity offered by the growth
trajectory in India and China at a time when the economies of the
western world and other nations are shrinking.”

During the visit, the delegation will meet top business leaders in
Hong Kong, Macau and China to discuss possibilities of engagement and
cooperation between the two Asian giants, in finance, tourism,
entertainment, gems and jewellery and manufacturing.

The FICCI delegation will meet senior representatives of Hong Kong
Exchanges and Clearings, Hong Kong Monetary Authority (HKMA) and Hong
Kong Securities and Futures Commission. This is with an aim to explore
ties between India and Hong Kong’s financial sector system and explore
ways of making deeper forays into China.

...and I am Sid Harth

[Sid Harth]

‘China, India should work jointly in the interest of developing
nations’

Chinese Ambassador says we have right to develop, protect our
interests.

Priscilla Jebaraj

Chennai, April 7 China and India should work together in the interest
of developing countries on the global financial and economic stage,
including cooperation on such issues as a new world reserve currency,
according to Mr Zhang Yan, China’s Ambassador to India.

In a discussion with journalists from The Hindu at the newspaper’s
office in Chennai on Tuesday, Mr Zhang commented on the proposal of
the Governor of China’s central bank to consider a new world reserve
currency, possibly the International Monetary Fund’s SDRs or Special
Drawing Rights, that is based on a basket of four currencies: the
dollar, euro, pound and yen.

Single currency

“I think that’s our wish, and also I think it’s the wish of many
countries, because a single currency as the world dominant currency is
not safe and reliable, from what we have seen in the past one year,”
he said.

“So we need a basket of currencies to form as a basis for a world
currency which in our view will be more secure. Furthermore, I think
it will be more fair, fair to other countries. But now, it’s not fair
to us, not fair to India.”

The proposal has not been formally discussed with other countries but
has been touched upon during an exchange of views, he said.

While the Russians have openly supported the idea of a new reserve
currency, Mr Zhang said he expected that other emerging economies such
as India, Brazil and South Africa would also be interested.

“In the long run, India is also going to be a big economic power. I
think it also wants to have its part in the global financial and
economic system. So by doing so, maybe in the future, rupee also can
be part of the basket (of currencies), why not?” he said.

The ambassador said that the strong reaction of Western economies
against the proposal should push developing countries to work
together.

“You can see they are very nervous, because it affects their
interests. They have their interests; developing countries, we have
our interests. So we have a right to develop, to protect our interests
as well. In this sense, I think China, India should work together and
should join efforts,” he said.

He admitted that China has a keen interest in ensuring the recovery of
the world economy from the global recession.

While the Chinese economy is expected to show signs of recovery by the
second half of 2009, it was also dependent on the global markets in
the long run, even more than India.

“So if the foreign markets cannot recover in the long run, then we may
suffer as well,” he said. “Because for domestic (economy), we can
achieve a certain level of development, but to go beyond that, we need
foreign markets and cooperation with foreign countries.”

This was why China had announced a $40-billion contribution to the
IMF, he said. China’s $600 billion stimulus package was focussed on
large infrastructure projects, rural development, social welfare,
education and environment, as well as incentives for domestic
consumption. The measures seemed to be working, said Mr Zhang,
expressing optimism that China would achieve the Government target of
8 per cent GDP growth this year.

Biz delegates

The Ambassador was accompanied by representatives of Chinese industry,
including Mr Weimin Yao, Senior Vice-President of telecom firm Huawei
Technologies, which is setting up a plant in Tamil Nadu.

Both men dismissed security concerns about Huawei and other Chinese
firms, raised by a recent Canadian report.

“We want to do business, not something else. Business is what is
important to them. I think it is part of the Chinese Government policy
to encourage them to do so. If they are not doing so, the Government
will also stop them,” said Mr Zhang, who claimed that the allegations
by Western experts were politically motivated.

...and I am Sid Harth

[bademiyansubhanallah]

Sunday, August 09, 2009
PBoC Will Keep Lending at High Levels - China in a Bubble?

Fighting a harder Yuan while increasing domestic lending may pose new
problems for China's central bank, PBoC. The Chinese central bank
promised in a press conference last Friday to keep monetary policy
loose.
From Chinadaily:

The government will not change its stimulus policies because it could
derail its hard-won economic recovery, though record bank lending in
the first half of the year has raised fears over credit risks and
asset bubbles.
"The central bank is still committed to a 'moderately loose monetary
policy'," said Su Ning, deputy governor of the People's Bank of China
(PBOC), at a press conference in Beijing on Friday.
"When we say 'dynamic fine-tuning', we do not mean the monetary policy
but the monetary policy operations. We will sharpen the focus and
intensify the pace of the policies," Su said.
China's economy is expected to slow to a growth rate around 6% this
year. The government has to walk a fine line in its monetary policy:
Facing imploding exports that may require to keep the Yuan on the hard
side are contrasting with a domestic stimulus that may carry higher
inflation in its pouch.
China denies to consider asset prices a point of concern in its
monetary policy decisions. So far it appears willing to let credit
grow further.

The country's banks have lent nearly 7.4 trillion yuan ($1.08
trillion) in the first half of the year - far higher than the initial
full-year target of 5 trillion yuan.
On the back of the unprecedented rise in credit, the Shanghai
Composite Index has rallied about 80 percent this year and real estate
prices have rebounded to record levels in some major cities.
Some economists say much of the country's massive $586-billion
stimulus package and record lending in the first half may not have
been spent on real economic activities and created asset bubbles.
"How far the bubble will go depends on the government's liquidity
policy," said Xie Guozhong, board member of Rosetta Stone Advisors.
China may nurse a consumption bubble. Anecdotal evidence has it that
"buy to let" condos in cities of China's dynamic Southeast lack
renters. A property bubble plus bad credit reinvigorates pictures seen
in the USA and Europe. Banking on a stable Yuan may prove to be as
much of a Russian roulette as holding Federal Reserve Notes.

...and I am Sid Harth

[bademiyansubhanallah]

Meat, Milk and Motors: The New China Syndrome

Written by Robert Singer World Aug 10, 2009

August 21, theatres around the nation screened the documentary
I.O.U.S.A. and a live discussion with America’s most notable financial
leaders and policy experts, including Warren Buffett; William
Niskanen, chairman of the Cato Institute; Pete Peterson, senior
chairman of The Blackstone Group and former U.S. Comptroller General,
Dave Walker.

August 25, Mr. William Niskanen, CEO of the Cato Institute, confirmed
his remarks on the I.O.U.S.A. post-broadcast panel discussion.

Dear Mr. Singer,

I do not have a tape of my remarks last Thursday evening. As I
remember, however, I expressed being puzzled why the central banks of
China, Japan, and South Korea have continued to invest so much in U.S.
Treasury securities. For these central banks have earned a negative
real return on these securities, for which the interest rate has been
lower than the depreciation of the dollar.

I would value your judgment about this puzzle… William A. Niskanen

China is a “Hot Topic” at the nationally and internationally
recognized Center for Trade Policy at Mr. Niskanen’s Cato Institute,
but the research staff has been unable to find a political,
diplomatic, military or economic solution to the China puzzle, because
there isn’t one.

China’s economic policy is an enigma that would baffle Ludwig von
Mises and Karl Marx. The answer to the Chinese enigma: China is now
the Air Pollution champion of the world.

No country in history has emerged as a major industrial power without
creating a legacy of environmental damage. But just as the speed and
scale of China’s rise as an economic power have no clear parallel in
history, its pollution problem has shattered all records as well.

China’s environmental degradation is so severe it has become the
world’s problem. Sulfur dioxide and nitrogen oxides spewed by China’s
coal-fired power plants fall as acid rain on Seoul, South Korea, Tokyo
and according to the Journal of Geophysical Research, much of the
particulate pollution over Los Angeles originates in China.

Chinese officials, before and after the Tiananmen Square massacre,
pretend to pursue economic development and industrialization for the
benefit of their population, but in spite of the glitter of China’s
big cities and the rise of its billionaire class, the vast majority of
the Chinese people are repressed, working in slave labor camps and
living in poverty.

The path China took to industrialization was unusual. John Watson,
Professor at Reno-based Desert Research Institute, notes: “They’re
making a lot of the same mistakes we made in our air pollution
history. You can just see the parallels: they’re building more
highways and encouraging more sprawl.”

Mistakes? Consider the Communists First Five-Year Plan

When Communism became the ideology of the people in 1949, they fought
pollution during the successful First Five-Year Plan from 1953-57 and
were moving towards 100% recycling until 1958 when the Great Leap
Forward became the Great Leap Famine and between 16.5 million and 40
million people died before the experiment came to an end in 1961.

During the Five-Year Plan, Chinese articles and journals extolled the
benefits of recycling. “When a case of pollution arose, there was
scientific and collective action to undo the damage. The most harmful
industrial wastewater is that which contains phenol. If this kind of
poisonous industrial water is drained into a body of water (such as a
river, lake, or sea) before treatment, it will pollute the water, kill
the fish, and endanger the health of the people. And if such poisonous
waste water is drained into the farmland, it will badly affect the
normal growth of the crops.”

The “Mistakes” explanation requires you believe no one in China read
or studied the industrialization of the Western Countries. “Cost-
benefit analyses in the U.S. show that emission reduction programs
have provided much greater benefits than their costs, by a ratio of up
to 40 to 1. Air pollution damage not only impacts the ecosystem but
imposes major economic costs as well as, from premature mortality,
increased health care and lost productivity and, more importantly,
decreased crop yields.”

Air Pollution thick as Pea Soup

A World Bank study found China is home to 16 of the world’s 20 worst
cities for air quality. Three-quarters of the water flowing through
urban areas is unsuitable for drinking or fishing.

Pea-soup air in Beijing is caused in part by a sudden switch from
bicycles to automobiles as a means of transportation. With nearly 156
million motor vehicles, bicycles are no longer welcome in cities that
are being rebuilt to accommodate automobiles.

China’s bike lanes have been sacrificed in the name of road and
highway construction. In the Fujian province, Chinese city and
regional officials went so far as to ban electric bicycles because
they were worried “the lead-acid batteries are an environmental risk,
and that the use of electric bikes undercuts the use of public
transit.” Both arguments apply far better to automobiles, but
automobiles are encouraged and riding a bicycle without a license can
get you arrested.

Following Western Pollution’s Footsteps

The U.S. also sacrificed mass transit in the 1930’s when the National
City Lines (NCL) converted the nation into an automobile-dependent
society by dismantling most streetcar systems throughout the United
States.

John D. Rockefeller, the #1 wealthiest man in all recorded history,
was a founding member of the NCL holding company and our “Federal”
Reserve Bank. Under the ruse of Christian temperance, he gave $4
million to a group of old ladies, and the temperance movement was no
longer about drinking alcohol but about the knob on the dashboard of
the Model T.

The knob allowed the driver to adjust the fuel-air mixture for either
alcohol (ethanol) or gas. Henry Ford said that alcohol was “a cleaner,
nicer, better fuel for automobiles than gasoline.” Ironically, no one
followed Henry’s advice until 2000 when George W. Bush subsidized
Archer Daniels Midland to burn up, according to the distinguished
McKnight University Professor C. Ford Runge, enough calories to feed
one person for a year every time we fill up the 25-gallon tank in our
SUV.

The Federal Reserve and John D. were behind our automobile-dependent
consumer society and the outlawing of the production and sale of
alcohol. John D. was a notorious “robber baron”, so we naturally
assume his motivation was greed and profit.

But Rockefeller, known as a brilliant businessman and visionary,
already owned or controlled most of the world at the end of the 19th
century and as a member of the Federal Reserve he understood no one
gets wealthier printing their own Monopoly money.

Therefore, if profits were the motive of the world’s richest man –
John D. would have bought up all of the farmland in the United States
or for that matter all of the farmland in the world, so he could
really control the knob on the Model T.

Then Henry Kissinger’s quote would have been: “Control ethanol you
control nations and people”

Rockefeller and the Federal Reserve were critical to our fossil fueled
industrial and consumer society, but that also made them responsible
for much of the environmental damage done to the planet.

China’s leaders and their Central Bank were critical to the
unprecedented growth of the Chinese economy that benefited the West,
but replacing bicycles with automobiles is responsible for much of the
environmental damage done to the East, West, North and South.

The vast trade surplus of $1.4 trillion and counting, a result of
official Chinese government intervention to depress the Renminbi
(RMB), is that every person in the (rich) U.S. has borrowed about
$4,000 from someone in the (poor) People’s Republic of China so the
Chinese economy can produce the most environmental damage in our
history.

Our last president Bush wasn’t “stupid” if his goal was Ecocide.

All too often we see the result of failed public policies, government
actions and inactions, and conclude the leadership is inept, arrogant
or just “stupid.”

At the G8 summit, George W. Bush said, “Goodbye, from the (then)
world’s biggest polluter.” He proposed drilling in the Arctic National
Wildlife Reserve, which would trash America’s last arctic wilderness.
Sonar testing is about torturing whales and dolphins, and the border
fence that keeps everything out but the illegals is disrupting an
extraordinary source of biological diversity along a 2,000-mile-long
region that includes deserts, mangrove forests, plains, mountains,
river valleys and wetlands.

Chinese officials are worried about their people eating…meat

On November 11, 2008, NPR aired the story: “Chinese Government Fights
Recession,” where Beijing’s correspondent Anthony Kuhn reports:
“there is a lot of worry in the government that ordinary Chinese were
not going to be able to afford to eat meat.”

In 1980, when China’s population was still under one billion, the
average Chinese ate 20kg (44lbs) of meat. Last year (2007), with an
additional 300 million people, it was 54kg.

Promoting meat in the world’s highest populous country and diverting
grain to fatten animals will be, “the end of self-sufficiency for
China,” says James Rice, Chief of China Operations for Tyson Foods.
“This year will be the last in which China produces enough corn for
itself, and the last that it is self-sufficient in protein.”

The editors of World Watch state that “the human appetite for animal
flesh is a driving force behind virtually every major category of
environmental damage now threatening the human future—deforestation,
erosion, fresh water scarcity, air and water pollution, climate
change, biodiversity loss, social injustice, the destabilization of
communities and the spread of disease.”

Lee Hall, the legal director for Friends of Animals, is more succinct:
“Behind virtually every great environmental complaint there’s milk and
meat.”

Automobiles milk and meat are the answer to the Chinese enigma; China
is on the bridge to ecocide.

...and I am Sid Harth

[Sid Harth]

China’s Property Sales Surge 60% From Year Earlier (Update3)

By Bloomberg News

Aug. 10 (Bloomberg) -- China’s property sales surged 60 percent by
value in the first seven months, adding to concern that record lending
will create a real-estate bubble in the world’s fastest-growing major
economy.

Sales accelerated after a 53 percent gain in the first half from a
year earlier, the statistics bureau said in a statement on its Web
site today. Real estate investment rose 11.6 percent, up from 9.9
percent in the six months to June 30.

Home prices in 70 major cities advanced 1 percent in July from a year
earlier, the biggest increase in nine months, the National Development
and Reform Commission said today in a separate statement. Premier Wen
Jiabao reiterated yesterday that monetary policy will remain
unchanged, after climbing asset prices triggered speculation that a
tightening could be imminent.

“Policy makers may be getting a bit edgy about asset bubbles
developing,” said David Cohen, an economist with Action Economics in
Singapore. “They may use administrative measures to cool prices.”

Property stocks, which have gained 142 percent this year to be the
best performing group on the Shanghai Composite Index, fell 1.6
percent as of 2:12 p.m. local time on concern loan growth will slow.
Poly Real Estate Group Co. fell 2.7 percent.

China Construction Bank Corp. President Zhang Jianguo said last week
that the nation’s second-biggest bank will cut new lending by about 70
percent in the second half to avert a surge in bad debt.

$1 Trillion of Loans

“There’s concern that while the macro-economic policy will stay the
course, the real-estate industry won’t escape some policy fine-
tuning,” said Zhang Chifei, a Nanjing-based real- estate analyst at
Huatai Securities Co.

China’s economic growth accelerated in the second quarter and the
Shanghai Composite Index has climbed almost 80 percent this year,
powered by $1.1 trillion of lending in the first six months. Home
prices in the 70 cities began to rise in June after declining for the
previous six months.

Property sales by area climbed 37 percent in the first seven months
from a year earlier, the statistics bureau said.

“The overall increase that we’re seeing in property prices is still
manageable, the government would be more concerned about the stock
market,” said Sherman Chan, an economist at Moody’s Economy.com in
Sydney. “Higher confidence and more liquidity” are causing price
gains, she added.

No Alternatives

Central bank and finance ministry officials said Aug. 7 that they will
scrutinize gains in stock prices without capping new lending. The
Financial Times reported the same day that the central bank had told
the largest state-controlled lenders to slow growth in new loans,
citing unidentified people familiar with the matter.

Property prices are being boosted by a lack of investment alternatives
in China, Kenneth Tsang, Asia Pacific head of research at LaSalle
Investment Management, said Aug. 6.

“It’s property or the stock market,” Tsang said. “Some of the
government officials lately are increasingly concerned about the
situation in China and there may be a bubble,”

In July, new home prices rose in 43 cities and fell in 26 from a year
earlier, the NDRC said. The largest increase was a 6.4 percent gain in
the eastern city of Ningbo. Month-on-month, 63 cities posted increases
in new home prices, with three reporting declines.

Across the 70 cities, home prices climbed 0.9 percent from June, the
fifth straight monthly again.

To contact the Bloomberg News staff on this story: Paul Panckhurst in
Beijing at ***@bloomberg.net

Last Updated: August 10, 2009 02:39 EDT

...and I am Sid Harth

[bademiyansubhanallah]

India against China: finance, outsourcing, hightech, politics, trade,
jobs
by globalization, politics, management forum Sunday, Aug. 09, 2009 at
10:55 PM


Watch out on China and India! Are these giants are taking advantages
of global financial crisis? Will they emerge to become the leaders of
21st century? Is US going to struggle for leadership amid global
financial crsis?

World financial crisis vs global outsourcing, finance, leadership,
trade, hightech, wealth: China vs India

By http://www.bptiger.org

India may be the world leader in outsourcing IT and software services
field but in manufacturing China is by far the clear winner. There is
a perception that labor in China is cheapest, but leading strategist
George Zhibin Gu (in his new book: China and the new world order) is
on the opinion that labor in India is by and large 50% cheaper than
China but still China rules, why??

He feels that China in many aspects is ahead of India in
manufacturing. Firstly, when India does not even have an effective
manufacturing base at all, forget of having chain of key component
suppliers, or for that matter logistics chain, infrastructure etc.
China on the other hand over last 26 years has built up a complete
business chain

Quoting book: China and the new world order, by George Zhibin Gu

For example, in consumer electronics you can set up your shop in
Guangdong, then you get more than 10,000 component makers. For
example, Sony alone has more than [3,000] China based component
makers. Here, you need to know that these component makers come from
both Chinese companies and multinationals. So, Sony’s 3,000 come from
the Chinese, the Japanese, Koreans and Europeans, and American
suppliers, always in China - actually, in one province. That’s the
kind of effectiveness and efficiency China has, but in India, and even
in Europe you don’t have that kind of advantage.

I found the interview a bit inclined towards China. Yes, its a fact
that India lags behind, but not to the extent its been described here.
May I am worng, I dont know. Your comments are welcome.

Contents of "China and the New World Order"

This book consists of 26 chapters, which are organized into eight
parts:
I. China’s New Role in the World Development

Ch 1. China's social changes vs tourism
Ch 2. Whose 21st century?
Ch 3. Go east, young man!
Ch 4. Everyone in the same boat
ch 5. Power and limits of later developers

II. The Yuan, Trade, and Investment

ch 6. China's competitiveness vs rising yuan.
ch 7. Where to invest your money?
ch 8. Behind a rising yuan
ch 9. Beyond textile trade wars

III. China’s Fast-Changing Society, Politics, and Economy (in light of
Chinese and global history)

ch 10. Lessons from Shenzhen, China's new powerhouse.
ch 11. Hunan province: from red state to supergirl and superrice.
ch 12. A revolution of Chinese professions
ch 13. What is the Chinese bureaucratic tradition?
ch 14. Why does Beijing want to reform?

IV. China’s Banking, Insurance, and Stock Market Reforms

ch 15. The explosive insurance market
ch 16. Chinese banks on the move, finally.
ch 17. lessons from China's stock market.

V. Chinese Multinationals vs. Global Giants

ch 18. The coming of age of Chinese multinationals.
ch 19. Behind Chinese multinationals' global efforts.
ch 20. China's technology development.

VI. The Taiwan Issue : Current Affairs and Trends (federation as an
alternate way for unity)

ch 21. Federation: the best choice for Taiwan and mainland China.
ch 22. Taiwanese businesses in the mainland.
a vibrant Taiwanese force.
Hightech.
Other sectors.
What is the next?
Will Spring follow winter?

VII. India vs. China : Moving Ahead at the Same Time

ch. 23. China and India: can they do better together?
ch 24. Uneven development: India vs China.

VIII. The Japan-China Issue : Evolving Relations in Light of History

ch 25. Japanese business in China.
ch 26. Japan's past aggressions vs current affairs.

About the Author

George Zhibin Gu, a journalist/consultant based in Guangdong, China. A
native of Xian, he was educated at Nanjing University, Vanderbilt
University, and the University of Michigan. He holds two MS and a PhD
from the University of Michigan.

For the past two decades, he has been an investment banker and
business consultant. His work focuses on helping international
businesses to invest in China and helping Chinese companies to expand
overseas. He has worked for Prudential Securities, Lazard, and State
Street Bank, among others. He generally covers mergers and
acquisitions, venture capital, business expansion, and restructuring.

Also, he is a journalist on China and its relations with the world.
His articles or columns have appeared in Asia Times, Beijing Review,
The Seoul Times, Financial Sense, Gurus Online, Money Week, Online
Opinion, Asia Venture Capital Journal, and Sinomania, among others. He
is also a member of the World Association for International Studies
hosted by Stanford University.

He is the author of four books :

1.China and the New World Order : How Entrepreneurship, Globalization
and Borderless Economy Reshape China and World, foreword by William
Ratliff (Fultus, 2006) ;

2.China’s Global Reach : Markets, Multinationals, and Globalization,
afterword by Andre Gunder Frank (revised edition, Fultus, 2006) ;

3. China Beyond Deng : Reforms in the PRC (McFarland, 1991) ; and

4.Made in China ( English edition forthcoming, Fall 07 ; Portuguese
edition, Centro Atlantico, 2005).

[bademiyansubhanallah]

China Economy May Grow 9.4% This Year, Goldman Says (Update2)

By Shamim Adam

Aug. 10 (Bloomberg) -- Goldman Sachs Group Inc. raised its forecast
for China’s economic growth this year to 9.4 percent, citing “strong
momentum” and the likelihood that the government will delay tightening
policy.

The previous estimate was for a gain of 8.3 percent from a year
earlier, Hong Kong-based economist Michael Buchanan said in an e-
mailed report today. The economy may expand 11.9 percent next year, he
said.

“China is closer to a point at which it should be equally worried
about tightening too late as it is about tightening too early,” the
economist said. Policy makers won’t move quickly because they remain
“very cautious” against the backdrop of weakness in the global
economy, he said.

China’s gross domestic product expanded 7.9 percent in the second
quarter from a year earlier, rebounding from the weakest growth in
almost a decade, as a 4 trillion yuan ($585 billion) stimulus package
and record lending took effect. Premier Wen Jiabao reiterated in a
statement yesterday that monetary and fiscal policy will remain
unchanged because of problems including sliding export demand and
industrial overcapacity.

The government wants to avert bubbles in stocks and property without
choking off the recovery.

Surging Property Sales

Property sales surged 60 percent by value in the first seven months,
the statistics bureau said in a statement on its Web site today. Sales
accelerated after a 53 percent gain in the first half from a year
earlier. The Shanghai Composite Index has climbed 78 percent this
year.

Banks extended $1.1 trillion of loans in the first half, triple the
amount a year earlier, after the People’s Bank of China scrapped
quotas limiting lending and urged support for the stimulus plan.

A 9.4 percent increase in gross domestic product would top the
government’s 8 percent target for creating jobs and preserving social
stability after slumping global demand slashed exports. The economy
grew 9 percent last year and 13 percent in 2007. China is set to
release July economic data tomorrow.

Second-quarter growth was “impressively above trend,” and momentum
remains strong, Buchanan said.

Economies in Asia excluding Japan will grow 5.6 percent this year, and
8.6 percent in 2010, Goldman Sachs said, lifting its forecasts.
Goldman left its forecast for India’s growth unchanged in the current
fiscal year, and raised it to 7.8 percent for the 12 months ending
March 2010.

To contact the reporter on this story: Shamim Adam in Singapore at
***@bloomberg.net

Last Updated: August 10, 2009 06:21 EDT

...and I am Sid Harth

[bademiyansubhanallah]

UPDATE 1-Goldman Sachs raises Asia, China GDP forecasts
Mon Aug 10, 2009 5:06am EDT

BEIJING, Aug 10 (Reuters) - Goldman Sachs (GS.N) on Monday raised its
forecast for Asian economic growth this year and next based on a
stronger outlook for the United States and China.

The bank revised its projections for gross domestic product growth in
Asia ex-Japan, which were already above consensus, to 5.6 percent from
4.9 percent this year and to 8.6 percent from 7.8 percent in 2010.

Goldman said Asia would benefit from strength in China, which it now
expects to grow 9.4 percent this year and 11.9 percent in 2010.
Previously the bank had forecast 8.3 percent and 10.9 percent,
respectively.

Explaining its upgrade, Goldman said Chinese growth momentum remained
strong and policy tightening was behind the curve.

Michael Buchanan, the bank's chief economist for non-Japan Asia, said
the National Development and Reform Commission and the State Council,
China's cabinet, remained very cautious about any significant
tightening.

"We believe policymakers will only choose to tighten more dramatically
via significant hikes in policy rates once the consequences of above-
trend growth become obvious (i.e., actual inflation or supply
bottlenecks or significant asset price bubbles)," he said in a report.

This may mean that increases in interest rates will not come until
next year, perhaps after discussions at December's annual economic
policy-setting meeting, Buchanan added.

Premier Wen Jiabao said at the weekend that Beijing would stick to an
appropriately loose monetary stance and proactive fiscal policy to
achieve its goal of 8 percent GDP growth this year. [ID:nPEK220133]

That target looked out of reach until data for the second quarter
started to show the impact of the government's 4 trillion yuan ($585
billion) stimulus spending and a record burst of lending by China's
mainly state-owned banks.

Goldman said Asia would also draw strength from a rosier outlook in
the United States.

The bank raised its 2009 GDP forecasts for Hong Kong, Malaysia, the
Philippines, Singapore, South Korea and Taiwan, but kept its
projections for Indonesia, Thailand and India unchanged. (Reporting by
Alan Wheatley; Editing by Ken Wills and Chris Lewis)

...and I am Sid Harth

[bademiyansubhanallah]

Monday, August 10, 2009
Is China Cooking The Books?

Forbes Magazine is looking at the numbers coming out of China and
comes to the conclusion that they don't add up.

China watchers have been dubious about the quality of Chinese economic
data for some time. And a recent spate of seemingly conflicting data
has fuelled that criticism.

One particular quibble involves the relationship between electricity
usage and industrial value added -- another measure of output. The
worry is that failings in the way official data are compiled may be
generating results that are giving investors misconceptions about the
health of China's economy.

During the first half of this year, industrial value-added rose a
robust 7 percent, while total electricity usage fell 2.24 percent.
This seemingly implies that output is growing and contracting
simultaneously. The divergence has attracted attention, not least
because industry is half of the economy and electricity usage is one
of those bits of data that is hard to massage. Even Chinese Premier
Wen Jiabao has openly said that electricity usage is the data that he
trusts most.
Craig Pirrong at Seeking Alpha comments on the Chinese numbers.
First, reported Chinese growth is a chimera. Chinese government
statistics appear no more reliable than Soviet figures. The disconnect
between electricity generation changes and reported growth is highly
suspicious, especially for a manufacturing-intensive economy noted for
its energy-intensity as well. The focus on big state firms that don’t
produce what people want, and the slighting of small firms that do, in
the collection and reporting of statistics also raises red flags (and
not of the Red Flag of Revolution! variety).

Second, Chinese growth reporting is eerily like 90s-style earnings
management. There’s a target, and the numbers WILL be massaged in
whatever way necessary to hit the target. Indeed, some of the tactics
bring sordid episodes like Enron and WorldCom to mind.

Third, it seems that the Chinese are betting on a recovery in the
West, and hence a concomitant recovery in exports, and are determined
to keep up the earnings management and the credit stimulus until that
happens. That is a highly risky strategy. If the desired recovery
doesn’t happen before the bubbles collapse, China will face both a
domestic demand and a foreign demand crunch. Moreover, even if
“successful” in the sense that a recovery in exports allows the
government to ease up on the stimulus, it will have contributed to a
substantial misallocation of capital and created the risk of
substantial inflation.
It seems to me that a number of governments around the world
(especially the USA) think they can inflate their way out of the
problems caused by inflated bubbles. What happens when that is no
longer possible? We get the worst of all possible worlds. Low or
negative growth and inflation.

For an extreme example of that look at Zimbabwe.

Posted by M. Simon at 8/10/2009 01:28:00 PM

...and Iam Sid Harth

[bademiyansubhanallah]

09:08 August 10th, 2009
Britain’s economy should learn to speak a little Chinese

By: John Ross

- John Ross is visiting professor at Shanghai’s Jiao Tong University
where he writes a blog on globalisation. The views expressed are his
own. -

The success of China’s economic stimulus package has attracted
increasing attention in Britain and internationally for two reasons.
The first is simply its importance for the world economy. Second
whether there are general lessons to be learned.

The impact of China’s economic programme can be seen in that it is
likely the whole of world economic growth this year in net terms will
be accounted for by China.

The sceptics on China’s stimulus package have been disproved by the
facts. China’s GDP growth this year will be eight percent or slightly
above. China’s GDP grew by 7.9 percent year-on-year in the second
quarter and was accelerating –- the best private sector estimates are
China’s economy grew at an annualised 13-15 percent in the second
quarter. Urban investment increased 34 percent and as producer prices
were dropping the real increase was probably around 40 percent. Retail
sales increased 15 percent.

This is a stellar performance in conditions where most major world
economies will shrink this year. Compared to these results talk of
possible “green shoots” in other economies relates to minor
improvements.

China’s economy is not large enough that its growth is able by itself
to turn round the world economy. But it is sufficient to having a
stabilising effect in East Asia with beneficial knock on consequences.
Those wanting further detail on the scale of contribution of China’s
growth to the world economy should read Professor Danny Quah, of the
London School of Economics’, excellent recent paper on Asian growth.

But if the significance of the scale of the international impact of
China’s economic performance is evident are there policy lessons which
can be drawn by Britain?

Evidently the main features of China’s economic stimulus package
cannot be copied by the UK. China’s economic growth is being powered
by large investment programmes carried out by its state owned
companies.

China’s emphasis on infrastructural investment can, and should, be
copied in the UK in the limited areas of housing and transport. While
overall UK investment has fallen by 15 percent, investment in housing
has fallen by 30 percent and in transport equipment by 35 percent.
This is not a decline but a collapse in which direct intervention is
required if permanent structural damage is to be avoided.

But in infrastructure as a whole the necessary structures simply do
not exist in the UK to copy China’s success. This is unfortunate
because, as anyone who visits Shanghai or Beijing knows, in many areas
Britain’s city infrastructure now lags behind China’s but nothing can
be done about it except in some defined fields.

There is one area, however, in which direct lessons can be drawn from
China –- banking. The UK government is rightly desperately attempting
to increase bank lending in order to counter the economic downturn. As
is also well known it is having little success in these efforts
despite hundreds of billions of taxpayers money put into the UK
banking system.

In China this problem does not exist. The state owned banks can be,
and are, instructed to increase lending. The second part of China’s
stimulus package, after the investment programmes, is therefore a
rapid increase in bank lending — new loans in the first half of 2009
were $1.1 trillion and M2 to June rose by 28.5 percent providing an
extremely strong counter-recessionary impulse.

Vince Cable, the Liberal Democrat’s Treasury spokesman, has rightly
repeatedly pointed out the absurdity of the current situation with UK
banking. All UK banks today exist only due to taxpayer subsidy —
although Barclays and HSBC did not receive taxpayers equity, they
would not be profitable operating without the taxpayer funded
guarantee and economic stimulus schemes.

Yet despite UK banks existing only due to the taxpayer, Chancellor
Alistair Darling is reduced to ineffectually pleading with them to
increase lending. No such problem exists in China. A side effect is
that China now has the most valuable banks in the world by market
capitalisation –- but banks simultaneously doing the key job of
expanding lending. In China, private and public interest are properly
aligned within the banking system.

For the reasons outlined Britain cannot copy all of China’s stimulus
measures even if it wished. But on infrastructure and banking it
should learn to “speak Chinese”.

...and I am Sid Harth

[Sid Harth]

August 10, 2009

Almost coinciding with the 13th round of Sino-Indian border talks (New
Delhi [ Images ], August 7-8, 2009), an article (in the Chinese
language) has appeared in China captioned 'If China takes a little
action, the so-called Great Indian Federation can be broken up' (Zhong
Guo Zhan Lue Gang, www.iiss.cn, Chinese, August 8, 2009).
Interestingly, it has been reproduced in several other strategic and
military Web sites of the country and by all means, targets the
domestic audience. The authoritative host site is located in Beijing
[ Images ] and is the new edition of one, which so far represented the
China International Institute for Strategic Studies
(www.chinaiiss.org).

Claiming that Beijing's 'China-Centric' Asian strategy, provides for
splitting India, the writer of the article, Zhan Lue (strategy), has
found that New Delhi's corresponding 'India-Centric' policy in Asia,
is in reality a 'Hindustan centric' one. Stating that on the other
hand 'local centres' exist in several of the country's provinces
(excepting for the UP and certain northern regions), Zhan Lue has felt
that in the face of such local characteristics, the 'so-called' Indian
nation cannot be considered as one having existed in history.

According to the article, if India today relies on any thing for
unity, it is the Hindu religion. The partition of the country was
based on religion. Stating that today nation states are the main
current in the world, it has said that India could only be termed now
as a 'Hindu religious state'. Adding that Hinduism is a decadent
religion as it allows caste exploitation and is unhelpful to the
country's modernisation, it described the Indian government as one in
a dilemma with regard to eradication of the caste system as it
realises that the process to do away with castes may shake the
foundation of the consciousness of the Indian nation.

The writer has argued that in view of the above, China in its own
interest and the progress of Asia, should join forces with different
nationalities like the Assamese, Tamils, and Kashmiris and support the
latter in establishing independent nation-States of their own, out of
India. In particular, the ULFA (United Liberation Front of Asom) in
Assam, a territory neighboring China, can be helped by China so that
Assam realises its national independence.

The article has also felt that for Bangladesh, the biggest threat is
from India, which wants to develop a great Indian Federation extending
from Afghanistan to Myanmar. India is also targeting China with
support to Vietnam's efforts to occupy Nansha (Spratly) group of
islands in South China Sea.

Hence the need for China's consolidation of its alliance with
Bangladesh, a country with which the US and Japan [ Images ] are also
improving their relations to counter China.

It has pointed out that China can give political support to Bangladesh
enabling the latter to encourage ethnic Bengalis in India to get rid
of Indian control and unite with Bangladesh as one Bengali nation; if
the same is not possible, creation of at least another free Bengali
nation state as a friendly neighbour of Bangladesh, would be
desirable, for the purpose of weakening India's expansion and threat
aimed at forming a 'unified South Asia'.

The punch line in the article has been that to split India, China can
bring into its fold countries like Pakistan, Nepal and Bhutan, support
ULFA in attaining its goal for Assam's independence, back aspirations
of Indian nationalities like the Tamils and Nagas, encourage
Bangladesh to give a push to the independence of West Bengal
[ Images ] and lastly recover the 90,000 sq km territory in southern
Tibet [ Images ].

Wishing for India's break-up into 20 to 30 nation-States like in
Europe, the article has concluded by saying that if the consciousness
of nationalities in India could be aroused, social reforms in South
Asia can be achieved, the caste system can be eradicated and the
region can march along the road of prosperity.

The Chinese article in question will certainly outrage readers in
India. Its suggestion that China can follow a strategy to dismember
India, a country always with a tradition of unity in diversity, is
atrocious, to say the least. The write-up could not have been
published without the permission of the Chinese authorities, but it is
sure that Beijing will wash its hands out of this if the matter is
taken up with it by New Delhi.

It has generally been seen that China is speaking in two voices -- its
diplomatic interlocutors have always shown understanding during their
dealings with their Indian counterparts, but its selected media is
pouring venom on India in their reporting. Which one to believe is a
question confronting the public opinion and even policy makers in
India.

In any case, an approach of panic towards such outbursts will be a
mistake, but also ignoring them will prove to be costly for India.

D S Rajan, is Director, Chennai Centre for China Studies.

...and I am Sid Harth

[Sid Harth]

http://www.timesnow.tv/China-mum-on-offensive-article----/articleshow/4324679.cms

China mum on 'offensive' article
13 Aug 2009, 1711 hrs IST

A website, which published a controversial article about splitting
India into several parts, has denied links to any Chinese government
think-tank. The sites owner-editor says he ran the Internet
publication on his own without any government backing. Zhan Lue, China
International Institute for Strategic Studies, in an article suggested
that his country (China) should back aspirations of regional
communities and split India.

The offensive article presents a detailed roadmap for breaking up
India. Chinese censors routinely block Internet sites and investigate
their writers and editors whenever an article is not liked by the
government. This has not happened in the case of this anti-India
article since the piece was published on August 8th. The contents in
the article are shocking to say the least. It lists several strategies
to divide India.

Firstly, the article says, China must support the Ulfa in attaining
its goal for a separate Assam. It also says Beijing must encourage
Bangladesh to give a push to the independence of West Bengal. The
report says China for the progress of the whole of Asia should support
Assamese, Tamils, and Kashmiris in their quest to establish
independent nation-states of their own. Finally, the article says,
only after India has been broken up into 20-30 pieces will there be
any real reform or social change in the country.

Indians across the world have begun expressing outrage over the
article. Many people say China needs to look at problems of its own
before thinking about splitting India. Most recently nearly 200 people
died in the clashes with Uighurs in Xinjiang province. The unrest
began on 5th July during a protest by Uighurs over a brawl in southern
China. Uighurs has complained their rights and culture are being
overridden.

...and I am Sid Harth

[bademiyansubhanallah]

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2009/08/when-china-rules-the-world-a-review.html

Stumbling and Mumbling
An extremist, not a fanatic« Yes, the market is efficient | Main

August 13, 2009

When China rules the world: a review

Martin Jacques argues that as China gets rich, it will not become
westernized, but it will become a hegemonic power, using its economic
might for political, military and cultural purposes. This, he says,
will lead to a “different kind of world”, in which economic and
political progress are no longer identified with “western” liberal
democracy.

There are, though, several reasons to doubt this. For one thing,
Jacques contrast between illiberal China and the liberal west is
overdrawn. As Amartya Sen has pointed out, freedom is not a peculiarly
western ideal. And Jonathan Mirsky adds that Jacques’ image of China
as a nation with 5000 years of unbroken history is rather simplistic.
There is, though, a bigger problem - China’s economic dominance will,
for our lifetimes at least, be merely a function of its size, not its
ingenuity.

The World Bank estimates that China’s GDP per head is still under
$6000 a year, and that there are 254 million Chinese (equal to the
combined populations of the UK, France Germany and Spain) living on
less than $1.25 a day.
This means that even if China can grow 8% a year - its average rate
since 1981 - it will take almost a decade for the average Chinese to
rise above the US’s current (low) poverty line.

And if the relationship between GDP growth and poverty reduction
remains the same as it was between 1981 and 2004, then even 20 years
of 8% growth will still leave over 50 million living below $1.25 a
day, and leave the average Chinese only four-fifths as rich as the
average Englishman is today.

China, then, will remain a poor country for a long time. This, will,
surely, greatly dampen its hegemony. A nation’s influence arises, in
large part, from foreigners’ willingness to learn from it. If a nation
or business wanted to succeed in the early 20th century, it had to
adopt American innovations, such as mass production, Taylorism and
hierarchical companies - hence the US’s hegemony. But it is not the
case that success in the 21st century will require us to learn from
China.

There’s another reason why China might not become as important as
Jacques thinks - its lack of democracy. Jacques is right to say that
democracy is not necessary for economic growth; if we count women as
people, Britain did not become a democracy until 1928, 150 years after
its economic take-off began.

But democracy might be necessary for a nation to become hegemonic. I
say this not just because democracy is a source of moral authority (a
shining city on a hill) but because of the effects of the democratic
spirit. The US’s hegemony for the last century has rested in large
part upon its creativity not just in business but in the arts and
intellectual activities. For a long time, film, TV, popular music,
philosophy and economics have been, for practical purposes, American
creations. As a result, non-Americans see their world through American
eyes - a fact which, in turn, has enormous economic effects insofar as
it helps the US borrow cheaply.

But the creativity which gave rise to this hegemony is a democratic
creation. A people with the spirit of democracy look for their
betterment not to governments but to themselves. And this inspires
them to work, create and innovate. As de Tocqueville wrote:

On passing from a free country into one which is not free the traveler
is struck by the change; in the former all is bustle and activity; in
the latter everything seems calm and motionless…Democracy does not
give the people the most skillful government, but it produces what the
ablest governments are frequently unable to create: namely, an all-
pervading and restless activity, a superabundant force, and an energy
which is inseparable from it and which may, however unfavorable
circumstances may be, produce wonders.

The Chinese government is trying to confine this superabundant force
only to a narrow economic realm. But if it is to become as hegemonic
as Jacques believes, mightn’t this have to change? It is when American
high school students aspire to study at Chinese universities, and when
the brightest Americans migrate to China that China will become truly
hegemonic. How likely is this?

August 13, 2009

http://www.typepad.com/services/trackback/6a00d83451cbef69e20120a4eea4f3970b

Listed below are links to weblogs that reference When China rules the
world: a review:

Comments

Jacques is, in the words of Confucious, a complete bell end. I'm not
sure about the democracy/creativity/hegemony axis, though. One of the
slightly depressing things about the way China is developing
internally is how much "creativity" is entirely compatible with
dictatorial rule. The proximate barrier to hegemony here is really
language. There's also the fact that a)China isn't particularly
interested in spreading cultural influence outside the Chinese
speaking world on any mass level and b) there isn't a Chinese ideal
that is designed to serve as a beacon to others. Beijing isn,t saying
"you should all do it like us", Jacques is saying it. That's what
makes him such a bell end. It's transferred nationalism, in Orwell's
phrase.

Posted by: jamie | August 13, 2009 at 05:29 PM

Martin Jacques argues that as China gets rich, it will not become
westernized, but it will become a hegemonic power, using its economic
might for political, military and cultural purposes.

This is so and the name of my blog is drawn directly from this. They
are utilizing the market economy while it behoves them to.

Posted by: jameshigham | August 13, 2009 at 05:32 PM

An interesting talk on what life might be like in an Era of Chinese
Hegemony

http://fora.tv/2008/03/12/Eamonn_Fingleton_Discusses_In_the_Jaws_of_the_Dragon

Posted by: John Terry's Mum | August 13, 2009 at 07:52 PM

"the creativity which gave rise to this hegemony is a democratic
creation"

The US was a democracy at the time of de Tocqueville? Not if we count
Blacks as people.

Posted by: Phil | August 13, 2009 at 08:33 PM

...and I am Sid Harth

[Sid Harth]

http://www.chinastakes.com/2009/7/illusion-of-chinas-attack-on-india-before-2012.html

Illusion of "China's Attack on India Before 2012"

By Chen Xiaochen, Beijing,Published:July 17,2009

The 2000 km border between China and India has been a notable absence
from press headlines in the years since then-Indian PM Vajpayee’s 2003
visit to Beijing. Tensions, however, have risen again as India
announced last month a plan to deploy two additional army divisions
and two air force squadrons of Su-30 Fighter Unit, some 60,000
soldiers in total, in a disputed border area in the southern part of
Tibet, which India claims as its state of Arunachal Pradesh.

Adding fuel to the flames is an article by Bharat Verma, editor of
Indian Defense Review, predicting that China will attack India before
2012, leaving only three years to Indian government for preparation.

According to Mr. Verma, "growing unrest in China" due in part to
economic downturn will leave the Chinese government looking for
something to "divert the attention of its own people from
‘unprecedented��?internal dissent, growing unemployment and financial
problems." China will also want to strike India before the latter
becomes powerful, which is the reason for the 2012 "deadline." India,
with its growing affiliation with the West, is yet weak under China’s
fire.

But a "China’s attack" is not going to happen, and one wonders at the
basis for Mr. Verma’s thinking. First, although it is true that
China’s macro-economy has taken a hit from the global financial
crisis, the extent of the damage is under control. Recent statistics
shows China’s economy grew 7.1% in the first half of 2009, while its
foreign exchange reserve has exceeded $2 trillion. China’s stimulus
plan has been effective and given people confidence. China will
survive the global downturn as well or better than the rest of the
world’s economies.

And even if China’s economy was really all that bad, would the
government try to distract "unrest" by taking military actions against
India? Mr Verma’s reasoning rests on a lack of documentation. Looking
into the past 60 years, China has no record of launching a war to
divert public attention from anything. Moreover, while Mr. Verma
supposes the Chinese Communist Party has no cards to play other than
"invading India," the Party, widely experienced in dealing with
domestic disputes, will hardly in only three years have run out of all
options facing potential social instability. Moreover, even if Chinese
leaders considered such an option, they would certainly be aware that
an external war would severely jeopardize domestic affairs.

Other reasons the author mentions in the article are also vague. The
Western powers would not take kindly to a Chinese conflict with India,
leaving China rightfully reluctant to use force in any case other than
extreme provocation. US forces well deployed in Afghanistan and
Pakistan could check any China’s military action in South Asia. And
then there is also the nuclear problem: there has never been a war
between two nuclear equipped nations, and both sides would have to be
extremely cautious in decision-making, giving more room for less
violent solutions.

Further, it is important to realize there is no reason for China to
launch a war, against India in particular. Economic development,
rather than military achievement, has long been the consensus of value
among China’s core leaders and citizens. Despite occasional calls to
"Reoccupy South Tibet (occupied Chinese territory)," China’s decision-
making is always cautious. It is not possible to see a Chinese
"incursion" into India, even into Tawang, an Indian-occupied Buddhist
holy land over which China argues a resolute sovereignty.

Last but not least, China’s strategy, even during the 1962 border war
with India, has been mainly oriented towards the east, where Taiwan is
its core interest, while the recent Xinjiang unrest highlights China’s
growing anti-terrorist tasks in the northwest ��?both issues are more
important than the southwest border. If China were to be involved in a
war within the next three years, as unlikely as that seems, the
adversary would hardly be India. The best option, the sole option,
open for the Chinese government is to negotiate around the disputed
territory.

However, there is one scenario where there is possibility for war: an
aggressive Indian policy toward China, a "New Forward Policy," may
aggravate border disputes and push China to use force ��?despite
China’s appeal, as far as possible, for peaceful solutions.

Consider the 1959-1962 conflict, the only recorded war between China
and India in the long history of their civilizations. After some
slight friction with China in 1959, the Indian army implemented
aggressive action known as its Forward Policy. The Chinese Army made a
limited but successful counterattack in 1962.

Now, it seems "back to the future". Mr. Verma asserts another war will
happen before 2012, a half century after the last, regrettable one.
India has started to deploy more troops in the border area, similar to
its Forward Policy 50 years ago. Is Mr. Verma’s China-bashing merely a
justification for more troops deployed along the border? Will India’s
"New Forward Policy", as the old one did 50 years ago, trigger a "2012
war?"

The answers lie mainly on the Indian side. Given China’s relatively
small military garrison in Tibet, Indian’s 60,000 additional soldiers
may largely break the balance. If India is as "pacific" as Mr. Verma
says, and is sincere in its border negotiation, China-India friendship
will remain. After all, China shares a long and mostly friendly
cultural exchange with India as well as other neighbors. Now China is
seeking deeper cooperation, wider coordination, and better consensus
with India, especially in the global recession, and peace is a
precondition for doing so. China wants to say, "We are on the same
side," as the Indian Ambassador did in a recent interview in China.
Thus, "China will attack India before 2012" is a provocative and
inflammatory illusion.

(Chen Xiaochen serves as a journalist of editorial and comments in
China Business News.)

Tags: India China territory disputes

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August 12,2009

The ideas put forward by the different experts no dobut based on their
rich experience of the feild...One thing is very clear n
transparent..If China opens war then..it will give either end to earth
by Nuclear bomb or lead to third war....Because if China hits
india..it is very clear that Rusia,Japan,France,USA are such nation
which no dobut come in save India territorial rights and makes China
totally isloted in World..China will be backed by pakistan or South
Korea...As South Korea in totally against USA...so simply a third
world war can come up..

Posted by Prateek,INDIA

+0 +0 comments 0 Name: Company/Institution: Country:

August 11,2009

China has a large difference in its saying and doing. It is making all
efforts to destabalise India. It is building up large Infra near
arunachal long before we made countersteps of troops in the
region ,giving military aid to PAK.Recent think tanks in China
suggested dividing India into 28 countries. Now it's time for India to
realise what is the real intention of Chinese... we must take counter
measures to encircle the dragon (japan,taiwan,veitnam,Korea,Uyghur
Muslims...help peace loving tibetians...etc).If you dare attack this
time, we will break China to pieces, that's for sure.Thanks

Posted by Nagrajan tamil,India

+7 +0 comments 2 Name: Company/Institution: Country:

August 07,2009

war before 2012 may not seem likely but its occurence cant b neglected
in da near future.the present chinese govt is concentrating basically
on all round economical development.but beijing's communist regimes
love for empire expansion might not stop it from attacking its
neighbour given its intelligence inputs n secret decisions solve some
kind of equation which da world(except US)could understand.the best
dat India could do is to develop their intelligence nd make frienship
with China.the best relations can be developed by new delhi by
removing dis unecessary deployment in da border nd instead of crying
war threat begin military decisions on detailed intelligence nd
secretly.here always da basics must b taken into account from da war o
1962 bcos india is to blame for not developing their military
otherwise no war.now its time a very powerful force n secret advanced
intelligence can help to rejoin china and india.i guess da average
mandarin wont consider a weaker nd peaceful neighbour as a
partner.india nd china r brothers but not(trustful) bottle
partners....it would b sin 2 get drunk here

Posted by kalu,INDIA

+0 +1 comments 0 Name: Company/Institution: Country:

August 05,2009

Who give a fuck what you people think, its either Mr. Verma (of India)
or Mr. Chen Xiaochen (of China, the writer of this article), that
people are going to read, care for and think from their point of view.
Whatever I think, or YOU think is merely couple of litle paragraphs
written on the internet somewhere. All I am saying is that if we are
to base our assumptions about what India or China is about to do or
what they should do based on what these two men think, we are throwing
ourselves in the dark with only these two people shining lights upon
us. So stop reading people of this kind, that provoke people, and dont
let them decide the fate of these two great nation and billions of
people.
Posted by Aman,U.S

+1 +1 comments 0 Name: Company/Institution: Country:

August 03,2009

Indian goverment is largely vote driven. Many specialist interest
groups and regional tribes try to affect the decision of a weak
government. Remember the large majority of Indians are still livinf is
poverty. What we normally read on webblogs are the few Indian MRIs-
meaning indians living outside India. The NRIs tend to ignore the
reality of India being a very backward country and spread a vermous
nationalism. Militarily, China can defeat India easily in case of an
Indian provocation. China's policy of peaceful rise doesn't allow
China to launch an war against India.I do not see any reason for China
to move trrops into India, considering the large population in poverty
and a land of extreme hot weather.

Posted by harmon,USA

+2 +11 comments 2 Name: Company/Institution: Country:

August 02,2009

Nobody cares wat yu all write here .... proove to be of some economic
endeavor to yur respective nations .All time passers

Posted by MOHIT CHAUHAN,INDIA

+0 +0 comments 0 Name: Company/Institution: Country:

July 26,2009

I just have one question - Do 1.3 billion Chinese have any opinion or
can they choose the leaders in the near future?
Posted by Venkat,India

+23 +0 comments 0 Name: Company/Institution: Country:

July 25,2009

Yes..Iam absolutely sure that there will be a final war between India
& China/Pakistan..It will surely occur within 2015..It will be a part
of World War 3...Yes, WW3..believe it or not..We are on the verge of a
final war in next 1000 years...Good news is China & Pakistan will be
defeated....A DEAD MAN will lead India to Victory!!!

Posted by Kaushik Mandal,India

+2 +1 comments 0 Name: Company/Institution: Country:

July 24,2009

See on Google earth what china is doing along Indian borders.All the
infrastucture is being readied for movement. Chindia!!! (1962 - Hindi
Chini Bhai Bhai) China will not attack India, HUH!!! who said ......
Don't trust what we say trust what we do.

Posted by Indian,India

+7 +0 comments 0 Name: Company/Institution: Country:

July 24,2009

See on Google earth what china is doing along Indian borders.All the
infrastucture is being readied for movement. Chindia!!! (1962 - Hindi
Chini Bhai Bhai) China will not attack India, HUH!!! who said ......
Don't trust what we say trust what we do.

Posted by Indian,India

...and I am Sid Harth

[Sid Harth]

http://www.businessweek.com/globalbiz/content/aug2009/gb20090812_247456.htm?campaign_id=related_AK

Economic Times of India August 12, 2009, 9:27AM EST

Krugman Warns of Chinese Bubble

Economist says investors burned by the collapse in the U.S. property
market may be making the same mistakes now in China
By Andy Markowitz

Nobel laureate Paul Krugman, who teaches Economics at Princeton
University, has publicly lauded US Federal Reserve chairman Ben
Bernanke's efforts to pull the world's largest economy out of the
ongoing recession. In a free-wheeling chat with ET NOW's senior editor
in Kuala Lumpur, Mr Krugman predicts that the US economy may step out
of the worst recession in more than five decades by September, but
economic problems and weakness may persist. Excerpts: ( Watch )

Unemployment in the US fell for the first time in more than a year.
But you're telling us not to get our hopes up...

The new claims for unemployment insurance are not as bad as they were,
but still indicate a worsening labour market. So, we're basically at
best stabilising, probably not even quite stabilised. This is just
okay, it doesn't look like the world is going to end right now, but
it's not a recovery.

Will the recovery be W-shaped or a V-shaped one?

It certainly is not going to be V-shaped. There's no driver for rapid
recovery. The W (the double dip)—I guess there might be a W and it
will be fuzzy, so you won't be able to see it. But it certainly is
looking like a weak recovery with a possible setback. What drives
those V-shaped recoveries is the housing sector. We had this enormous
housing problem which imploded. Although housing is probably
stabilising now, there's still a huge overhang of excess building and
there are bad memories of what happened. We're not going to have a
traditional housing-led recovery. So, we don't have the set-up for a
traditional, strong bounce back.

US households have taken up their savings rate from almost nothing to
about 7%. Is that a problem for Asia, which has traditionally depended
on the US consumer for buying up its exports?

Yes, we built a system—as I was describing a few years ago—where
Americans have made a living by selling houses to each other, which
they pay for with the money they borrowed from China. That's over.
American savings rate is going to head higher from where it is.
Historically, it was 9-10%. And remember, American households took a
$13-trillion hit on their wealth between the housing collapse and
prices of nearly all assets fell. They have discovered that the rising
value of their house is not going to provide for their retirement.
Thus, they have got to start saving again.

Some people are saying that over-abundance of global liquidity has
already started pushing emerging markets into bubble territory. What
is your view?

I think I wouldn't say excess of global liquidity. What I would say is
that there was a global rush to safety. And some of that money is
being freed up, but it's sort of disillusioned about the things that
it was chasing in the past, and is chasing new things. So, there are
indications. There may be some equity bubbles out there. There may be
some even real estate bubbles in Asia resurfacing, which is
frightening. So, people who were terribly burnt on the US real estate
market are saying: Well, but this is Chinese real estate and it can't
have the same problems, but of course, it can.

What do you think of the Chinese stimulus package?

We are not sure how much of it is real. There has been a surge in
public investment, but some of that appears to be credit, which is
being used just for speculation. Some of the increase in demand for
raw materials seems to have been more speculative build-up, but in
inventories, there is really an increase in production.

The Baltic Dry Index has dropped so it looks like that the inventory-
building phase maybe coming to an end. And, of course, there are
indications of bad spending and corruption. I don't think it's not the
beginning of a sustained period of recovery.

So, is China really stoking a bubble here?

I think it is blowing some bubbles. If I was going to buy one
unfortunate phrase from Alan Greenspan, I think, it's right that it's
froth.


There's not one big bubble but there are probably many more bubbles
out there.

Does the US need another stimulus package?

Oh yes. If you believe the original estimates, the stimulus package
will have added, let's say three million jobs, to what we would
otherwise have had. The fact is that we have lost 6-7 million. And it
is getting worse. This package is not big enough to close the gap by a
long shot and it's limited by time. So yes, we need another package
and it has to be largely spending-oriented.

Now that the worst is probably behind us, should we still worry about
things like liquidity trap?

We're in a liquidity trap because interest rates are close to zero. I
think we're going to be in a liquidity trap for at least a year,
probably till the end of next year. But there are expectations in the
US of inflation coming

back in future. I think it's crazy. In Japan, the monetary base
increased by 80% in 10 years after 1997 and prices continued to fall.
When you are in a liquidity trap, it just doesn't matter.

You say in your book that financial globalisation has turned out to be
even more dangerous than we had imagined. Would you like to expand on
that?

Think about Iceland. Did anybody truly understand that possibility? We
thought before the crisis, the risks of financial globalisation were
primarily to emerging markets. But the problem was simply the high
leverage and exposure to foreign assets. We have seen that Germany had
no housing problems. Nonetheless, German banks can be caught in deep
trouble because of the fallout from the US or the Spanish housing
problems.

Markets as self-adjusting, self-correcting god-like mechanisms. Do you
think that dogma is out of the window now?

There's a great seductiveness to efficient markets here. So, efficient
markets have been very hard to kill. And, I think, it may survive even
this. The Asian crisis, the dotcom bubble, all of those should have
severely shaken faith in self-regulating markets and yet that faith
persisted pretty well. So, I'm not sure that even this will kill it.

What will be your advice to India as our budget balance is fairly
scary, but the FM has said: I'll worry about it later and play for the
growth now?

I think that's right. You do have to have a plan in place to restore a
healthy budget but not this year. Not with the world economy still so
fragile, not with so much excess capacity still out there.

What kind of financial regulations would you want to emerge out of
this crisis?

We need to have something like traditional bank regulation extended to
any financial product if it is capable of generating a crisis. We need
to have some central regulatory authority being given the freedom to
designate certain institutions systematically important and subject
those to capital requirements with limits on leverage first of all and
then other kinds of potential regulations as well.

Andy Markowitz is the multimedia editor of Transitions Online

Most Recent Comments


Miao

Aug 13, 2009 2:11 AM GMT

I see bubbles in the property, its obviously. how you can see prices
soaring 20% just within 3month. afterall property is a huge assets,
20% means much much money. Its a good way for gov to make the property
less fluid. On the other side, It means small portion of chinese hold
too much cash in hand. its gov's obligation to solve this. if we want
a peace and stable society.
LI

Aug 13, 2009 2:00 AM GMT

If Chinese market is a bubble, Krugman saying paper-money-printing US
market stabilising/not worsening, is simply blind.
Adi

Aug 13, 2009 1:24 AM GMT

There is a huge different between the US and China. The Americans buy
things by borrowing beyond their income, while the Chinese buy things
by using their hard earned savings.

...and I am Sid Harth

[Sid Harth]

http://www.expressindia.com/latest-news/The-dragons-rumble/501798/

The dragon’s rumble

Despite the commitment of Manmohan Singh and President Hu Jintao to
keep the India-China relationship on track, there is a widespread
acknowledgment in both countries that the relationship is becoming
increasingly contentious. The border issue is unlikely to yield any
significant breakthrough in the near future. The economic relationship
is also fraught: the rising number of anti-dumping cases, charges of a
Chinese conspiracy to falsely implicate Indian companies in a fake
drugs scam and China’s attempts to block a loan to India at the ADB
are adding fuel to anxieties in some quarters in India about how to
deal with China. The level of vitriol in the public sphere in both
countries is reaching unprecedented levels. In India great concern has
been expressed about an editorial in the People’s Daily castigating
India, and arguments emanating from a Chinese think tank about
strategies to dismember it. The trust deficit seems to be widening.
It is important to contextualise public discourse. Even in China
opinion is not as monolithic as we assume, and it is important not to
over-interpret articles. Most China observers agree on three
propositions. There seems to be a more general hardening of China’s
posture towards most other powers in recent months, whether it is
Canada or the European Union or other Asia-Pacific nations. India is
not an exception to this trend. Second, a more hardline external
posture is directly related to China’s sense of internal
vulnerabilities. Paradoxically, the world probably has less to fear
from a strong China than a weak one. China had witnessed, over the
years, a relative degree of internal intellectual openness. There are
signs that there might be greater clamping down on internal debate.
The events in Xinjiang and Tibet have created a greater sense of
vulnerability. It is very important for the self-identity of Chinese
elites that the trigger for these events is always projected as
emanating from abroad. There is often a belief that Xinjiang, Tibet,
in addition to Taiwan, will be fishing ground for anti-China foreign
powers. For all the immense power China has, including leverage over
the United States, it still has not got over the idea that it remains
a target for outsiders. Third, there is in all likelihood also more
intra-elite uncertainty about the direction China should take. Chinese
policy may not be as nimble as we often assume; certainly on Af-Pak
and North Korea it is more likely that the Chinese persist with the
status quo because they don’t know quite how to move, rather than
because they have a supremely well-thought-out policy. Its hardline
may be a default way of coping with hesitation.

But in the case of India there are three other complicating factors.
The first, perhaps minor, one is simply that there is no incentive for
China to settle the border issue quickly. But in part this is fuelled
by a perception that the domestic political economy constraints on
both sides will not allow for an easy settlement. Arguably, the Tibet
issue is only likely to become more potent in coming months. As an
aside, it will be interesting to see if President Obama grants the
Dalai Lama an audience and what the consequences of that might be.
China is certainly not going to give up any claims in a hurry.

But there is also a perception in China that no Indian leadership will
be able to politically deliver on a border settlement. The dominant
narrative of China as an aggressor in 1962 is still so ingrained that
when it comes down to the wire no Indian government will be able to
make a credible offer.

The second is that the Indo-US relationship is perceived to be
explicitly some part of a design to contain China. India can argue
with some justification that the China-US relationship is much closer
and more consequential, that improving relations with the US and China
is not a zero sum game, and the possibility of serious Sino-US
conflict is remote. But this argument does not seem as compelling to
many Chinese for two reasons. First, many of them rate the possibility
of Sino-US tensions increasing higher than what Indians normally do.
So whose side you are on matters to them. Second, while they are happy
with bilateral relationships, placing the relationship with the US in
a broader quadrilateral arrangement involving Japan and Australia has
not exactly gone down well. It has fed into their encirclement
syndrome.

But the final and perhaps most important issue is this. The simple
fact of the matter is that India’s success poses a challenge for the
Chinese regime. So far it was easy to sustain an argument that if you
are a large developing democracy, you will end up in a pathetic
position like India. India still has huge challenges, but there is a
sense in which it now genuinely offers a different path to
development. The interesting thing about the two pieces of anti-India
writing quoted in the Indian press was not their belligerence. It was
the fact that they spend so much time impugning the India story —
India is economically weak and backward, it cannot cope with
diversity, it is artificial and so forth. The message was more to
throw cold water on the Indian model, than belligerence in a classical
security sense. In a strange way this confirms what some Chinese
academics have been saying informally: India may pose a threat to some
sections of the regime, not by its power but by its success.

The India-China relationship was always complicated. Here are two
civilisations trying to get all the trappings of a nation state, each
dealing in its own way with colonial legacies on borders, and with
little domestic room for manoeuvre. On top of that there is an overlay
of differing perceptions of geo-politics, in part made more
complicated by a China that is more edgy in the last few months than
ever before. A robust economic relationship was supposed to be an
antidote to these tensions. But that has its limitations. Although
Indian industry is more confident, the fear of Chinese over-capacity
and pricing mechanisms remains. Cooperation in other multilateral
forums, while it has immense possibilities, will be hampered by
bilateral suspicions. India and China’s discourses about each other
are complicated, because they are tied to their complex processes of
self-discovery. There is not going to be an easy way to allay the
trust deficit. While vigilance is important, it is equally important
to throw some cold water on the paranoia building up.

The writer is president, Centre for Policy Research, Delhi

***@expressindia.com

...and I am Sid Harth

[Sid Harth]

http://www.daily.pk/india-doesn%E2%80%99t-have-capability-to-match-china-force-for-force-9032/

India doesn’t have capability to match China force for force

Written by Abhijay Patel World Aug 16, 2009

Less than a week after India and China held what they described as
fruitful talks on a long-standing border dispute, China embarked on a
massive war-game designed to improve its ability to dispatch troops
over long distances.

Not surprisingly, some in India are concerned.

As China’s economy has grown, so has its offensive military
capabilities, which has fueled something of an arms race in Asia,
particularly with the region’s other emerging economic power, India.

As we reported in June, the Indian Ocean – the vital transport hub for
the region’s goods and energy – will likely become a region of
increasing strategic jockeying as the world’s two largest countries
seek to secure their economic positions. China’s approach is dubbed
the “String of Pearls” strategy by US military officials.

China and India fought a border war over their poorly demarcated
boundary in the Himalayas in 1962, and China has at times since
claimed sovereignty over territory that appears to be well on the
western side of the border (this map shows the disputed area.)

On Tuesday, China began a series of military maneuvers that it is
describing as its “largest-ever tactical military exercise.” The war
games, called “Stride-2009,” will involve 50,000 troops form China’s
more than 2 million-member standing army, and are designed to help
China improve its “long-range force projection” by using high-speed
civilian rail and civilian aircraft in rapidly moving troops,
according to state news agency, Xinhua.

According to the PLA General Staff Headquarters, in charge of
organizing the exercise “Stride-2009,” one army division from each of
the military commands of Shenyang, Lanzhou, Jinan and Guangzhou, will
participate in a series of live-fire drills lasting for two months.
Unlike previous annual tactical exercises, the army divisions and
their air units will be deployed in unfamiliar areas far from their
garrison training bases by civilian rail and air transport.

The exercise will have troops operating from up to 1,000 miles from
their home bases. Though China is a vast country with significant
internal dissent – rioting by ethnic Uighurs in Urumqi this July (and
in Tibet last year) occurred more than 2,000 miles from Beijing – some
neighbors fear it is intent on expansion.

The Times of India said strategists have long worried about the
possibility that an expanding rail network in China could be used to
“enhanc(e) China’s military superiority over neighboring India.”

On Monday, Indian Navy chief Admiral Sureesh Mehta warned in rather
stark terms that China’s military is outstripping India’s, according
to the Hindustan Times. It was an unusually blunt admission:

“In military terms, both conventionally and unconventionally, we can
neither have the capability nor the intention to match China force for
force…” He said Beijing was in the process of consolidating its
comprehensive national power and creating formidable military
capability. “Once that is done, China is likely to be more assertive
on its claims, especially in the immediate neighbourhood,” said Mehta,
who as the Chairman, Chiefs of Staff Committee, is the country’s
senior most military commander.

Two months ago, India’s former Air Chief Marshal Fali Homi Major said
China was a greater threat to India than Pakistan. India wary as China
conducts biggest “long-range” war games. India’s Navy chief says his
military is no match for China’s growing forces.

“What the navy chief has projected is that our military asymmetry to
China is similar to our asymmetry vis-a-vis our economies. Instead of
matching China force by force we should harness technology more
innovatively. It is not alarmist at all but a prudent suggestion that
money allocated is spent and spent wisely,” National Maritime
Foundation director Commodore (retd.) C. Uday Bhaskar said.

Terming China one of India’s primary challenges, Mehta said at a
lecture Monday that “it would be foolhardy to compare India and China
as equals”.

“Whether in terms of GDP, defence spending or any other economic,
social or development parameter, the gap between the two is just too
wide to bridge (and getting wider by the day). In military terms, both
conventional and non-conventional, we neither have the capability nor
the intention to match China, force for force,” Mehta told an elite
audience at the India Habitat Centre.

Earlier IAF chief Major, who retired May 31, had said that China was a
bigger challenge for India as little was known about its capability.

“What I meant was while it is easy to gauge the intentions of other
countries, it is slightly difficult with China because it is a closed
society. Moreover quantity does not matter but capability does. We
need not be that overly concerned with China. We do not have to put
them on such a high pedestal,” Major added.

The Chinese armed forces overrun the Indian armed forces in sheer
numbers. While India has a 1.3 million strong army, China’s is around
2 million.

However, the Chinese air force and navy have been lagging behind in
terms of quality platforms and vessels. However, China has increased
its defence spending exorbitantly to achieve rapid modernisation of
its two forces and lately has flexing muscles to spread its influence
in the South Asian and Indian Ocean Regions.

The Chinese air force is at a nascent stage but the infrastructure
that it is coming up with in north-eastern region is cause for
concern, say Indian military experts.

Caught unawares, the Indian Air Force has also started work to revive
its advanced landing grounds and upgrade its existing runways in the
north-eastern states and Ladakh region bordering China.

India recently deployed its frontline fighter jets Sukhoi-30 MKI in
Tezpur in Assam. Though a symbolic induction has been done, a squadron
strength has not been completed yet, according to defence ministry
sources.

The Chinese navy, which is currently termed as a ‘brown water’ navy
with limited reach and endurance, does not operate a single aircraft
carrier. The Indian Navy, which operates one aircraft carrier, is
already constructing indigenous aircraft carrier and nuclear
submarine, compelling China to increase the pace of its efforts to get
an aircraft carrier soon. Moin Ansari

...and I am Sid Harth

[bademiyansubhanallah]

http://www.nytimes.com/2009/08/17/business/global/17iht-steel.html?_r=1

After Protest, Chinese Officials Halt Steel Mill Sale
By KEITH BRADSHER

Published: August 16, 2009

BEIJING — A Chinese provincial government on Sunday halted the
privatization of a state-owned steel mill where thousands of workers
protested last week and took an official hostage, in the latest sign
of increasing labor activism in the country’s steel industry.

The apparent capitulation of the government of Henan province in
central China came three weeks after rioting workers beat to death the
executive overseeing the sale to a private business of another state-
owned steel company, Tonghua Iron & Steel Works, in the northeastern
province of Jilin.

Local, provincial and national government agencies have been reluctant
to use overwhelming force against protesting workers. China Daily
newspaper reported Saturday that police had tried to break through the
ranks of workers Friday in the latest incident, at Linzhou Iron &
Steel in Anyang City, in Henan.

China Daily did not say if the police had been successful. The
official Xinhua news agency said that the workers decided Saturday to
halt their protests, which had attracted up to 3,000 participants at a
time, after a government mediation team agreed to reconsider the
takeover. Xinhua did not mention what became of the official who had
been held hostage.

The success of steel workers in blocking privatization could embolden
workers in other industries, experts on Chinese labor issues said
Sunday.

“It is no longer possible to push through privatization regardless,
without considering the workers’ interests,” said Geoffrey Crothall, a
spokesman for the China Labor Bulletin, a labor rights advocacy group
based in Hong Kong.

In a sign of high-level interest in the recent unrest, the government-
sponsored All China Federation of Trade Unions has posted a prominent
series of commentaries at the top of its Web page under the heading,
“Corporate restructuring: participation of the trade union is
essential.”

Chinese law has long required that each privatization be approved by
the workers’ congress of the affected company. But local government
officials and company managers have frequently been able to rig the
approval by running the congresses themselves, Mr. Crothall said.

In this weekend’s action, Xinhua said that the Henan provincial
government and the province’s Communist Party committee issued a
decision that “issues regarding the future of Linzhou Iron & Steel Co.
Ltd. and benefits of its workers should be decided by its workers’
congress.”

The Chinese steel industry, the world’s largest and a cornerstone of
the country’s construction-dependent economy, is in turmoil this year,
which may have fed labor unrest.

The global economic downturn has severely hurt the sector, with
Chinese steel exports down 15.4 percent in the first half of this
year. In addition, the Chinese government is locked in a series of
disputes with Australia over iron ore imports, and has arrested four
Rio Tinto executives accused of bribery and trade secret infringement
during price negotiations with Chinese steel makers. Rio Tinto has
strongly denied any wrongdoing.

Faced with a glut of steelmaking capacity and many small steel
companies vying to buy iron ore, Beijing officials on Thursday ordered
a three-year moratorium on the construction of any new steel mills or
the expansion of existing ones.

But the government has had less success in its efforts to force a
consolidation of existing mills, which might strengthen their
bargaining power with the handful of multinationals that dominate the
global iron ore business. Local and provincial government agencies
have been wary of losing control of businesses that are often vital to
their economies, and many workers are opposed to consolidation.

Yet many older, less efficient steel mills are deeply troubled.
Founded in 1969, the Linzhou mill has not been operating since March
because its sales fell, it ran short of cash and it failed to meet
environmental standards.

Xinhua said that Fengbao Iron & Steel had already paid 180 million
yuan, or $26.5 million, of the 259 million yuan it bid at an auction
to acquire Linzhou Steel. The 180 million yuan will be refunded,
Xinhua said, citing an unidentified local official.

Mary E. Gallagher, the director of the Center for Chinese Studies at
the University of Michigan in Ann Arbor, predicted that China would be
able to continue privatizing state-owned enterprises in the years
ahead, but that it would be costlier than during the big shift toward
private ownership from 1997 to 2001. At least 30 million workers at
state-owned enterprises were laid off then, but local protests did not
spread.

“I’m betting they can do it again, but that it will cost them with
higher compensation packages to laid-off workers,” she said.

...and I am Sid Harth

[Sid Harth]

http://www.guardian.co.uk/commentisfree/2009/aug/18/china-economic-growth

No secrets to China's successChina's rapid growth is no accident: it
has had the right policies both practically and from the viewpoint of
economic theory

John Ross guardian.co.uk, Tuesday 18 August 2009 10.30 BST Article
historyA major international debate has broken out on the success of
China's economic stimulus package. Taking non-Chinese writers, I am on
one side with Jim O'Neill, chief economist of Goldman Sachs, Professor
Danny Quah of the London School of Economics, Mark Weisbrot and others
who hold, naturally with differences on "why" and on scale, that
China's package is being successful.

On the other side are the Guardian's Larry Elliot, Morgan Stanley's
Stephen Roach, Michael Pettis of Peking University, Martin Wolf of the
Financial Times and others who consider, again with significant
differences on why and scale, that China's economic strategy is wrong,
its stimulus package is misconceived, or both, and therefore it will
end badly.

The practical importance of this issue is evident. The scales of
economic processes involved, as Danny Quah put it, are visible "from
outer space". This year China will probably account for the whole of
net world economic growth. China's GDP growth is projected to be 8.0%
or above. Its economy grew by 7.9% year-on-year in the second quarter
and was accelerating. Urban investment increased by 34%, retail sales
by 15%.

China's performance is stellar in conditions where this year most
major economies will shrink. Compared to such results, talk of
possible "green shoots" in other economies relates to minor
improvements.

China has good reasons for not seeking to promote its economic model
to other countries, or dissuade others from following it. It states
its system is "with Chinese characteristics", emphasising its
specifically Chinese character. The Chinese authorities rightly
constantly explain that their primary duty is to lead a country with
more than 1.3 billion people to economic development. But that China
does not seek to promote its economic model does not mean that others
cannot learn from it.

China's economic success is explicable by normal economics. The
specific combination of these policies is, of course, unique and
indeed has "Chinese characteristics". But the elements of that
economic model are universal in character.

It is therefore worth setting out succinctly why China has had such
success in confronting the economic crisis and why its policies are
right not only practically but from the viewpoint of economic theory.
The mistakes of critics of China's stimulus package can be set out
against that framework.

China has a series of interconnected and mutually reinforcing
policies.

The first is the economy's high proportion of exports – crucial to its
"opening" process. Every economist since Adam Smith has known that the
division of labour is a decisive lever in raising the level of
productivity, and division of labour in a modern economy is
necessarily international. A high level of exports and imports is the
way of participating in such a division of labour – as well as
benefiting from advantages such as economies of scale.

Economic theory therefore confirms what economic practice already
demonstrated. That the alternative to China's open approach, that of
inward-looking "import substitution" policies lead to inefficiency in
capital use and low productivity.

Critics of China's "export-led growth" confuse two ideas. The first is
a high level of exports in GDP, rightly integral to China's growth
model, the second is a high trade surplus – not integral to China's
model, which appeared only after 2005, and is now disappearing
rapidly.

Second is China's high level of investment. Modern econometric
research shows conclusively that, following division of labour, the
largest element in economic growth is the growth of fixed investment.
This applies not only to a developing economy such as China but also
to developed economies. Dale Jorgenson, the world's leading expert on
productivity growth, notes that "investment in tangible assets is the
most important source of economic growth in the G7 nations. The
contribution of capital inputs exceeds that of total factor
productivity for all countries for all periods."

Criticisms of China's high level of investment would be valid only if
China used that investment inefficiently, and contrary to claims made
without evidence, all studies on productivity show that China uses
that investment with an efficiency rate from respectable to high
(pdf).

Third, a decisive point showing China has a "socialist market economy"
and not "market capitalism", is its method of macro-economic
regulation.

Keynes noted in the final chapter of his General Theory, in a point
highly relevant to a situation where mass unemployment is again
soaring, that "a somewhat comprehensive socialisation of investment
will prove the only means of securing an approximation to full
employment".

That "somewhat comprehensive socialisation of investment" is
impossible in a private sector-dominated economy. The decisive
advantage China has in the present crisis is that it does not have to
rely only on indirect means (reduction of interest rates, budget
deficits etc) to attempt to reverse the plunging investment that is
the driving force of this as with every major recession. China can use
its large state-owned company sector to increase investment and
instruct its state-owned banks to lend. That is why its economy is
growing, while Alistair Darling is still pleading ineffectually for UK
banks to increase their lending and while UK investment in housing and
transport is plunging by 30% and more.

Other points could be added but these three fundamentals are by
themselves sufficient to ensure economic success.

For the last 30 years China has enjoyed the world's most rapid
economic growth not by accident but because its policies conformed to
the basic laws of economic development. Its economic stimulus package
is so successful for the same reasons.

...and I am Sid Harth

[Sid Harth]

http://www.china.org.cn/business/news/2009-08/18/content_18358493.htm

Belgian professor praises China's economic achievements

A Belgian professor hails the tremendous economic progress China has
made over the past 60 years, calling it one of the century's big
events.

Sylvain Plasschaert, professor of economics at the University of
Antwerp and University of Leuven in Belgium, made the following
remarks in a recent interview with Xinhua.

"The growth China has been able to achieve year after year with ups
and downs, but on an average of nine or 10 percent, is a great
success," he said. "It has never happened anywhere else. It was quite
a big event of the century."

"In China, this has been an average growth for the whole country. It
is average in terms of space and in terms of years," Plasschaert
explained. Plasschaert has been teaching at Leuven University on
China's economic developments for more than 30 years and is still
actively involved in studying, writing and giving talks on the Chinese
economy.

Plasschaert is quite familiar with the ups and downs China has
experienced over the past 60 years, as he has been closely following
the country's economic development since former U.S. President Richard
Nixon's unprecedented visit to Beijing in 1972.

Plasschaert was among the first European professors to teach in
Beijing at the European Commission's Business School in 1975, when the
school was founded.

In the 1990s, he taught at the China-Europe International Business
School (CEIBS) in Pudong, Shanghai.


Plasschaert said things have "changed a lot" since China's reforms and
opening-up to the world 30 years ago.

"You cannot compare Beijing with what it was in the 1970s," he said.
"I cannot recognize Beijing, I cannot recognize Shanghai, and even
Xi'an has changed and modernized a lot."

"It is difficult (for foreign observers) to catch China because it has
been changing rapidly," he added.

The Belgian professor, who used to work as a fiscal economist at the
World Bank in Washington and at a Belgian commercial bank, attributed
China's achievements to three factors.

The first was a change in agriculture, thanks to the initiative of the
household responsibility system by hungry peasants in Feng Yang, Anhui
Province.

The significant agricultural improvement made it possible for China to
achieve an eight percent growth on average in production in five
years, he said.

"With more than 80 percent of the population living on the land,
without the change in agriculture, even with the success of the
opening-up strategy, it would not have been possible for China to have
a growth rate of nine to 10 percent for years," said Plasschaert.

He remarked that people often overlook the change in the agricultural
sector, "because the rural sector is still in a relatively poor
shape."

Stressing the importance of China's township enterprises, he observed,
"They have created a lot of employment, up to more than 100 million
jobs."

The second factor was the opening-up of the economy.

The opening-up has brought about "tremendous growth of exports, and
also imports," as well as "tremendous growth of foreign direct
investments," he said. "Export has been a tremendous driver of growth
in China."

According to the professor, the third factor was the pragmatic
approach China had adopted in its development.

"You can see that once the basic option was taken to open the economy
to move towards a sort of market economy ... the first step was very
difficult and people did not always understand it very well," he said.
"But then one step was followed by other steps, and over the longer
run, this was quite logical development."

"It was not done at one stroke but gradually," he said. An economic
policy was first experimented in a few cities or a few provinces, and
when it worked well, it was generalized in the whole country,
according to the professor.

"I find it very intelligent and successful," he said.

"China is very pragmatic," he said, citing the "black cat-white cat"
theory by China's late leader Deng Xiaoping.

China later applied the idea of its "invention -- the household
responsibility system in agriculture" to various other sectors, such
as taxation, he added.

"Though some mistakes occurred unavoidably, it is quite successful,"
he concluded.

He said the Chinese model of economic development is "Chinese" with
experimentation and pragmatism in it, and that the model has served
China well as "the result is there."

Plasschaert noted that China has enjoyed the contribution by Chinese
compatriots overseas, and the compatriots "still play an important
role economically."

The professor also reviewed the first 30 years after the establishment
of the People's Republic of China in 1949.

He said that during the 30 years, China had a GDP growth of 4.5
percent, "which was not bad" given China's limited connections to the
outside world at that time.


Plasschaert also spoke highly of the efforts of the current Chinese
leaders in improving the country's rural sector, saying more has to be
done.

"The current Chinese leadership is putting a lot of emphasis on
improving the situation of the countryside. This is very, very
important economically," he said.

"Still, much has to be done now to improve the situation in the
countryside, in the agriculture sector," he added.

Regarding the impact of China's economic development on the world, he
said that China "is one of the engines behind the world's economic
growth."

"People in the United States and Europe hope that China could grow
rapidly because it has a positive impact on the European economy,
which was hit badly by the financial crisis," he added.

The Chinese economy "looks quite good" as "the growth is picking up
again rapidly," he said.

Talking about China's role in fighting the financial crisis, he said
the crisis has its origin in the United States and Europe, instead of
banks in China.

Therefore, "steps must be taken in the United States and Europe," he
believed. "What China can do is to take further steps to improve its
banking system, which is not perfect," and "to have a voice in
international discussions on banking system supervision" and
"supervise its own banks, because banks can easily make mistakes."

He said that the banking system in China as a whole "is fairly strong
today" and has improved significantly over the last 10 years.

(Xinhua News Agency August 18, 2009)

...and I am Sid Harth

[Sid Harth]

http://www.china.org.cn/business/news/2009-08/17/content_18348240.htm

China's FDI falls 35.7% in July

The used amount of foreign direct investment (FDI) in China dropped
35.7 percent year on year to US$5.36 billion in July, said Yao Jian,
spokesman of the Ministry of Commerce, Monday.

China's total export-import volume between January and July decreased
by 22.7 percent year on year to US$1146.71 billion. Imports and
exports volume for July amounted to US$200 billion, illustrating the
falling off in foreign trade, Yao said.

The amount of direct Taiwan investment in the Chinese mainland
totalled one billion U.S. dollars in the first half of the year, down
14.94 percent year on year, and the trade volume between the two
shrank 35.1 percent to US$52.53 billion in the same period, he said.

(Xinhua News Agency August 17, 2009)

...and I am Sid Harth

[Sid Harth]

http://www.china.org.cn/business/highlights/2009-06/29/content_18033332.htm

China only accounts for 2% global FDI

China is not regarded globally as a place for mainstream foreign
direct investment (FDI) and its current FDI only accounts for just
over 2 percent of the entire word's volume, reveals Ma Yu, Foreign
Capital Department's chief with the Ministry of Commerce's Research
Institute.

Overseas Chinese capital makes a major contribution to foreign
investment in China. FDI from developed countries accounts for 80
percent of the entire world's volume, but only a very meager portion
reaches China; standing for less than 20 percent of the country's
registration.

China's status as an FDI destination has weakened. In the mid 1990's,
FDI in China comprised for 11.8 percent of the world's volume. This
figure has declined to 5 percent currently, while those from developed
countries have dropped to 13 percent in 2008 from around 30 percent a
decade ago.

These years China absorbs foreign capital chiefly through new
investments, while the M&A is still in relatively small scale,
accounting for 3 percent of the entire foreign investment, and the
transactions were mostly below US$5 million.

Ma Yu indicates that the present status of China's economy allows for
much room for M&A, so the market should be more broadened,
particularly in terms of monopolized trades. Meanwhile, the investment
environment should be perfected as well, to facilitate future foreign
investments.

For more information, please consult the original coverage in Chinese
at:

http://paper.cs.com.cn/html/2009-06/29/content_21892456.htm

(China.org.cn by Maverick Chen, June 29, 2009)

...and I amSid Harth

[bademiyansubhanallah]

http://in.news.yahoo.com/32/20090817/1049/top-crumbling-fortune-cookie.html

Crumbling fortune cookie

Pratik Kanjilal
Mon, Aug 17 08:30 PM

A Chinese troublemaker who conceals his identity behind the nom de
guerre of 'Strategy' has raised a storm with the modest proposal that
China should break up India by supporting its million mutinies. Since
his essay appeared on the website of a Chinese think-tank just in time
for the current round of India-China talks, and since Beijing is quite
particular about who is allowed to publish and who gets beaten over
the kidneys in a soundproof location, maybe we can regard this as an
official communique.

This is serious. This is seriously irritating.

For a half-century, Beijing has been trying to influence the future by
fiddling with the past. Now, does it want to fiddle with the present,
too? We have to figure this out.

Follow me closely because your time is short and my space is limited
and space and time structure all realities, as Einstein demonstrated
in an elegant theory which is now, sadly, overshadowed by E=mc2, the
basic template for a nuclear bomb. The Chinese have more bombs than
us.

This is related trivia. However, the main issue between India and
China is its claim on Arunachal Pradesh, which it briefly occupied in
1962.

Beijing calls this tract South Tibet to justify its historical claim.
China had occupied Tibet after suppressing the rising of 1959, and
Arunachal became South Tibet by natural extension, since it was the
next acquisition.

That's Chinese history for you. Chinese foreign policy is irredentist,
reaching back into the distant past to justify current expansionist
aims.

In 2002, Beijing mandated the Chinese Academy of Social Science to
launch the fabulously named Northeast Borderland History and Chain of
Events Research Project, which posited the former existence of a
Greater China covering half of Asia. All the people of this area are
held to be intrinsically Chinese, even if they are now Koreans or
Tajiks.

The aim was to strengthen Chinese claims on ethnic Koreans in
Manchuria, who could secede if the two Koreas ever unite. But the
theory got Beijing into hot water.

Both Koreas protested because the early Common Era Korean kingdom of
Goguryeo was identified as Chinese. But their outrage did not prevent
Beijing from launching similar Southwest and Northwest Projects in
Tibet and Xinjiang to strengthen claims to the lands of the restless
Buddhists and Uighurs.

China has problems of its own. It is multi-ethnic like India and the
seams show.

Its internal differences have a bad habit of becoming huge
international issues like Tibet. The Chinese don't need anyone's help
to fall apart.

'Strategy' would be better off watching his own back instead of
stirring up trouble in the region

...and I am Sid Harth

[Sid Harth]

http://beta.thehindu.com/opinion/lead/article22850.ece


September 20, 2009
Who stands to gain from war hysteria?
M. K. Bhadrakumar

AP National Security Advisor M.K. Narayanan with China's State
Councilor Dai Bingguo during a delegation level talks in New Delhi.
File Photo: AP

What is abundantly clear is that neither India nor China stands to
gain from the war hysteria that has been whipped up through the recent
months over the relations between the two countries.

In a famous essay published in the Pravda newspaper in 1913 titled Who
Stands to Gain?, Vladimir Lenin wrote: “When it is not immediately
apparent which political or social groups, forces or alignments
advocate certain proposals, measures, etc., one should always ask:
“Who stands to gain?”? It is not important who directly advocates
particular views. What is important is who stands to gain from these
views, proposals, measures.”

What is abundantly clear is that neither India nor China stands to
gain from the war hysteria and xenophobia that have been whipped up
through the recent months over the relations between the two
countries. So much is evidently at stake at this historic juncture for
the two Asian powers as they pursue their respective trajectories of
growth and development in a highly volatile international environment.
Neither India nor China can afford to be distracted from its chosen
path that places primacy on development in the national policies. A
war for either of them is highly detrimental to core interests. Yet,
on any single day, sections of our corporate media -- print as well as
electronic -- are replete with stories that resonate with the sound of
distant war drums.

True, the media cannot be held solely culpable for such irresponsible
conduct. In a way, their panache for atavistic themes and Manichean
doctrines is quite understandable. Alas, they live in an ephemeral
world and their repertoire of survival techniques includes various
sorts of gimmickry to attract viewership. However, organisations
funded by the government and headed by ex-bureaucrats who held
sensitive positions in the government have also joined the fray in
building up the present hysteria. One government-owned think-tank even
featured in its journal an article recently by Arun Shourie as the
lead contributor, who of course duly cast China in an “enemy” image.
Again, retired officers of the Indian armed forces who are associated
with “think-tanks” funded by the services are visible too in the media
enthusiastically piloting the current campaign. Therefore, it is
necessary to go beyond what the National Security Adviser has done by
way of putting the blame solely on the doors of our media for all the
things that have gone wrong. The government needs to set its house in
order, too.

Broadly speaking, three categories of Indian opinion-makers are
raising the war hysteria over India’s relations with China. First, it
isn’t difficult at all to spot old familiar faces in the foreign and
security policy circuit who push the case with great sophistication
and aplomb that a growing Chinese menace leaves India with no
alternative but to calibrate its foreign policy and edge ever closer
to the United States. They are intelligent people, suave and
articulate, who held important positions in the government in various
capacities in India and abroad. Naturally, their assertion that India
should play the “Tibet card” against China carries weight. They will
insist they are hardened “realists” but it must be extreme naivety on
their part -- or plain dissimulation -- to say China can be pressured
over Tibet. They are far too experienced to know that if China
reciprocates by playing various sundry “cards,” the game can turn
quite rowdyish. See the amount of dust created by just one Chinese
article recently about “balkanising” India, written in response to
dozens penned in the past two-year period since unrest broke out in
Tibet by our fundamentalists fancying a break-up of China into nice
little pieces.

Second, an easily identifiable ebullient crowd of retired defence
officers presents a one-dimensional case that the civilian leadership
is underestimating the Chinese threat and the armed forces should be
provided far greater financial and material resources to meet the
threat. All militaries have corporate interests and a case needs to be
built for earmarking 7 per cent of India’s GDP for the defence budget.
The tussle for resources between butter and guns is an ancient one.
But, on the other hand, the Indian public opinion has never questioned
the country’s defence budget as excessive. The only disquieting aspect
is the manifest passion on the part of a growing lot within the
military to canvass for weaponry sourced from America. But then,
American arms manufacturers have a way of charming their potential
clients.

Third, of course, there are the ubiquitous right-wing Hindu
nationalists, the self-appointed custodians of national security, for
whom China is the hurdle to India’s emergence as a superpower. They
genuinely lack the intellectual wherewithal to comprehend that the
time for “superpower-dom” is gone with the wind in world politics. But
their doublespeak puzzles. China concluded a memorandum of
understanding with the RSS last year and senior RSS figures were
hosted by Beijing. It must, therefore, be concluded that they are
grandstanding to score a point or two against the ruling party.

These cliques coordinate in their untiring campaign on China’s evil
intentions. Indeed, they would have us believe that a war is round the
corner and there isn’t much time for preparing Indian defence
capabilities. The government should quickly decide on pending arms
procurements such as the 126 advanced multi-role fighter aircraft.

Against this tragicomic backdrop, Prime Minister Manmohan Singh has
stepped in and poured cold water on the war hysteria. Army Chief
Deepak Kapoor trooped in with the calming assurance that the border
with China remains tranquil. These interventions have not come a day
too soon. Dr. Singh has assured us that there will be greater
information flow to the Indian public so that it does not become a
captive audience of our China experts. That will help. But war
hysteria can only be countered on a “war footing.” Therefore, it will
help if the Army Chief could also enforce better discipline in his
ranks, which leak like a sieve. True, it is habitual for American
commanders to fight turf wars through aggressive media leaks. But we
Indians don’t have such Martian culture, nor do we need to cultivate
one.

Indeed, the India-China relationship has been steadily expanding and
maturing in the recent years. The regular high-level political
exchanges, burgeoning trade ties, nascent strategic dialogue,
cooperation in regional and international issues of common concern,
military-to-military cooperation and so on can only lead to greater
trust and confidence, enabling the two countries to address the border
dispute. This was also the pattern of Russian-Chinese normalisation.
There is no better way of steering India’s complex relationship with
China through the present sensitive corridor of time than what the UPA
government adopted. Most important, India’s China policy is being
conducted today in the policy establishment in highly professional
terms. Foreign Secretary Nirupama Rao is an outstanding diplomat and
China expert in the Indian Foreign Service and the political
leadership couldn’t have summoned a better person to lead the team in
South Block.

So, where lies the problem? Who indeed stands to gain by vitiating the
climate of India-China relations? Suffice to say, China is the second
largest economy in the world and India is poised to become the third
largest in an intermediate future. In strategic terms, as the two
countries probe ways and means of cooperating on a range of issues of
vital interest -- climate change, Doha Round, religious extremism and
terrorism -- their collective impact on the Asian security paradigm
can be phenomenal and it is beginning to be felt in some significant
measure already. A sense of uneasiness is appearing in the West about
the locus of world politics inexorably shifting eastward.

The objective reality is that China has not only nothing to gain by
invading India, but has a great deal to lose. In fact, the entire
edifice of Chinese policies, which focusses on the country’s economic
transformation, will come tumbling down. China’s international
standing as a responsible power and stakeholder in world stability
will suffer a serious setback. The suspicions regarding the “Middle
Kingdom” will resurface among China’s neighbours. As the current
developments in Myanmar show, China’s friendly ties with many of its
neighbours are delicately balanced -- though the common thesis
propounded by a junior American analyst in the Pentagon in her late
twenties and parroted by our seasoned strategic thinkers is that China
is constructing a “string of pearls” around the Indian neck. Last but
not the least, China is a cautious power. The disturbed conditions in
Xinjiang and Tibet and the extended supply lines to the border make a
protracted conflict with India quite a problematic proposition for
Beijing.

Curiously, the war hysteria has deflected attention from the U.S.
regional policies aimed at perpetuating a military presence in our
region by co-opting Pakistan as its key ally. It also generates
uncertainties in the regional environment just as India, Russia and
China explore the potentials of cooperation on issues such as
Afghanistan and terrorism. If the xenophobia is to be stretched to its
logical conclusion, India should unhesitatingly expand its military
cooperation with the U.S. to counter the Chinese menace. Lenin was
right.

(The writer is a former diplomat.)

...and I am Sid Harth

[Sid Harth]

http://beta.thehindu.com/opinion/editorial/article22847.ece

September 20, 2009
Beyond trade issues

The simmering trade dispute between the United States and China, if
allowed to escalate, might hinder ongoing efforts at promoting global
cooperation, so vitally needed for the world economy to come out of
recession. The rising tensions could, for instance, cloud the outlook
for the forthcoming G20 Pittsburgh summit meeting and affect the
progress of the Doha development round of negotiations that have just
resumed at Geneva. The genesis of the latest dispute lies in the U.S.
decision to slap a 35 per cent duty on tyre imports from China on top
of the countervailing duties levied on steel pipe imports. China has
responded by taking the first steps towards creating tariff barriers
to importing automobile products and chicken from the U.S. These items
form a very small portion of the total trade between the two
countries. During the first seven months of this year, Chinese tyre
exports to the U.S. amounted to just $1.3 billion. The U.S. exported
$800 million in automobile products and $376 million in chicken last
year. To put these in a proper perspective, the U.S had a whopping
trade deficit of $268 billion with China in 2008. For every dollar of
goods the U.S. exports to China, it buys nearly $4.46 worth of Chinese
goods.

It is clear that the trade dispute is but a manifestation of more
complex issues that have caused friction between the two countries.
The U.S. and some other countries having an unfavourable trade balance
with China have accused it of holding down the value of its currency,
thereby boosting its export competitiveness. However, successive
attempts by the U.S. government to persuade China to let the yuan rise
have met with limited success. China has accumulated more than $2
trillion of forex reserves, an overwhelmingly large part of which is
invested in U.S government paper and other dollar denominated assets.
There have been genuine fears in the U.S. that China might start
selling those assets or at least stop buying them. Obviously, a
permanent solution to the global imbalance lies in the U.S. saving
more and China increasing its consumption. For now, there is a
recognition that domestic pressures are behind the trade dispute. The
U.S. President is seen acting on his campaign promise to save
manufacturing jobs. A very large number of them have already been
shifted to China. Given the interdependence of the two countries that
goes well beyond trade and the overall size of their economies, it
will be in the interest of the global economy as a whole that the
disputes are resolved without any delay.

...and I am Sid Harth

[bademiyansubhanallah]

http://indiatoday.intoday.in/site/Story/62732/India/Smuggling+worth+crores+along+Sino-Indian+border+in+Ladakh.html

India Today India Story Smuggling worth crores along Sino-Indian
border in Ladakh
PTI
Leh, September 20, 2009

The age-old barter system is back along the Sino-Indian border but
with a twist as Indian traders smuggle daily needs into Tibet in
exchange for fancy Chinese goods through the Line of Actual Control.

The area - Changthang - is located south east of Ladakh and has been a
haven for smugglers who carry essential commodities like rice, wheat,
vegetables having longer shelf-life, cigarettes and "bidi" and cooking
oil.

And in return, the Indian smugglers flood the market with Pashmina
shawls, Chinese crockery, toys, electronic items and blankets, say
civil and military officials in Ladakh area.

According to these officials in this Himalayan township, before last
year's Olympics in Beijing, the Chinese had set up two temporary
shelters in Dumchele area opposite to India's Changthang area where
traders from both sides assembled and exchanged goods to the tune of
several crores of rupees.

Some of the officials also feel that smuggling was being allowed by
the Chinese because it was difficult for them to maintain the
essential supplies to western Tibet area from the mainland China.

As the Tibetan protests grew during the Olympics, the Chinese closed
down this facility and sealed the borders thus paving the way for
smugglers from both sides to operate in a major way on barter system.

...and I am Sid Harth

[bademiyansubhanallah]

http://www.organiser.org/dynamic/modules.php?name=Content&pa=showpage&pid=310&page=5

September 27, 2009

Editorial

UPA silence on Chinese intrusions

If there is an SMS poll on ‘who is running the country?’ the way TV
channels do, the maximum replies would be ‘it runs by itself’. Nobody
would accuse Manmohan Singh of doing it, in any case. And truthful
too. On a daily basis our borders are violated by our western and
eastern neighbours and neither the Defence Minister nor the Prime
Minister has deigned to respond. Not even the usual melodramatic
statements like we will never let anyone violate our borders.

And the sad joke is that China is angry that these incidents are being
reported in our media. Look at the list of LAC violations. In the past
few weeks, the Chinese Red Army violated international borders in
Arunachal Pradesh, Uttarakhand, Leh and Sikkim. The government has
denied that two ITBP jawans were injured in firing by the Chinese
soldiers in Sikkim, probably with the idea of underplaying tensions.
This was the first violation with weapons by China since the India-
China treaty in 1996 not to use weapons, whatever the provocation. It
should also be remembered that China had summoned its officers on
Indian border to Beijing, probably for a briefing on irritating the
Indian side. India has a 4056-km border with China.

Last week the Chinese men entered the Indian borders and wrote ‘yellow
river’ in Chinese on the boulders. Though it was reported in the
Indian media, with photographs, Beijing blatantly denied it, and
expressed anger over the Indian media. That China is trying to provoke
and is hoping for some reaction from India is clear. But what is
surprising is the meekness of India’s response. It was Army Chief
Deepak Kapoor who first spoke about it openly, in a way breaking an
unwritten protocol.

On the western side too, Pakistani soldiers have been firing rockets
into the Indian territory. Several rocket pieces have been picked up
by the defence personnel and the public. In this instance too, the
government has chosen to keep mum.

Nepal, a nation traditionally friendly to India, has started making
threatening noises under the Maoist pressure. The government is
allowing anti-India sentiments to grow and is deliberately seeking to
shake hands with China, which is looking to expand its territories
through means fair and foul. If Tibet was taken over demographically,
Nepal would be swallowed in friendly smile. It would pose fresh
dangers to India geographically, strategically, politically and
culturally.

It is not our case to indulge in war mongering. But the government
should in no uncertain terms warn our neighbours off our borders. If
there are consequences to their actions, they must be reminded that
they would be faced by both sides. India will not be a silent victim,
whatever be the might and buildup on the other side.

No doubt, Pakistan, Nepal and China have been emboldened to carry out
these border violations because of the lack of strong political
leadership in Delhi. Even a proxy nation like Pakistan is playing cat
and mouse with us, more so after the 26/11, especially enjoying
India’s reaction to it. That the UPA handles terrorists with kid
gloves and soft pedals the issue of terrorism has been written in
these columns several times. No self-respecting government would house
and feed terrorists as if they are state guests-Afzal Guru and Kasab
are prime examples. The provisions of legal protection do not apply to
illegal foreign nationals who go around killing our citizens. The best
we have done till now on terrorism is to go crying and complaining
about Pakistan to its patron and benefactor America. Our Home Minister
was there recounting through the list of woes.

When the NDA was in power, it made China finally accept officially
that Sikkim is part of India. But under the UPA I and II defence and
foreign affairs, the two sides of the same issue have been reduced to
a department-level functioning. If China could summon our ambassador
there, a lady, now our Foreign Secretary, in the middle of the night
for a talk down, India could at least show some guts and summon the
Chinese ambassador and give a talk down and let the world know about
it.

...and I am Sid Harth

[Sid Harth]

http://www.deccanchronicle.com/dc-comment/china-talk-softly-carry-big-stick-558

On China, talk softly, but carry a big stickSeptember 22nd, 2009

By Shankar Roychowdhury “Trust, but verify.” US President Ronald
Reagan’s stand on the relationship between the United States and the
Soviet Union during the Cold War carried military overtones, with a
subtext of restraint, but from a position of strength. The same
comment repeated by the Prime Minister, Dr Manmohan Singh, in the
context of India-Pakistan relations (the Manmohan Singh Doctrine?)
gratuitously neuters itself by delinking action on terrorism by
Pakistan from resumption of the so-called “composite dialogue” between
the two countries, and also unilaterally precludes any military
alternatives, whatever the degree of provocation in future. Pakistan
is strategically linked to China, India’s other and vastly more
powerful neighbour, in the relationship of surrogate and principal.
The question that naturally arises next is: How relevant will India’s
new doctrine be in the context of China, with whom relations are also
under strain at present?

India and China both emerged as independent Asian giants at around the
same time — 1947 for India and 1949 for the People’s Republic of China
— but subsequent events witnessed a much greater degree of hard-headed
realpolitik by China in managing its interest and affairs, until the
two emerging neighbours ultimately collided in the border war of 1962,
in which China’s definitive military victory over India clearly
established the leadership order in Asia.

The Sino-Indian border war of 1962 was a watershed. In its aftermath,
support for India was primarily articulated by the United States and
the West, entirely understandable in the context of the Cold War, but
nevertheless subtly tinged with more than a trace of ridicule and even
contempt that a vast country, which had so far attempted to moralise
and preach to the rest of the world, should prove so utterly
incompetent in defence of its own heartland. Within the Asian
neighbourhood, the silence was deafening. China had arrived with a
blast of trumpets, and Asia trod warily. China lost no time in
hammering home its regional primacy with a masterstroke of
realpolitik, a strategic linkage with India’s traditional opponent —
Pakistan — through the Sino-Pak Treaty of Friendship of 1963, followed
through with its first nuclear explosion in 1964. That position
remains unchanged to this day.

The domestic fallout from 1962 impacted the country’s self-esteem and
confidence as well, pushing it on a subconscious backfoot with regard
to China, and though much water has flowed down the Tsangpo since
then, India’s “1962 syndrome” is unaltered. This notwithstanding the
Indian Army’s post-1962 successes against Chinese attempts to intrude
at Nathu-La in 1967 and Sumdurong Chu in 1989-90. China is well aware
of this, and periodically exploits the psychological advantage
conceded by India to maintain pressure by various methods.

Sino-Indian border issues have been discussed extensively at national,
bilateral and international forums, but misperceptions still persist
in the public mind regarding the “border” between the two countries.
What actually exists is the “Line of Actual Control” in the Indo-Tibet
border region, with differing perceptions of its alignment by each
country. Both send military patrols up to their respective claim
lines, and signal their visit by leaving token indicators of
unmistakable national origins like cigarette packets, newspapers and
similar debris. Patrol movements generally take place on foot, and
often on vehicles in Ladakh where the terrain permits such movement,
but the Chinese helicopter reported there recently is certainly a
first in its category. In fact, from the Indian side, patrolling along
the LAC has been developed into a highly stylised ballet to avoid
contact or confrontation between opposing patrols, and a degree of
over-
watch if it happens in spite of best efforts. So when there are
reports in the Indian media of an increase in frequency in Chinese
patrolling activity to disputed areas in various sectors in those
regions, what is not reported whether Indian patrols too have also
conversely increased their own frequency, or whether the Indian
government has imposed restrictions on Indian movements to avoid
“provocations”. This will be a key indicator if India is apprehensive
regarding China.
But perhaps even more sensitive than Sino-Indian border issues is
China’s extreme umbrage to India’s sanctuary to the Dalai Lama, which
might conceivably have triggered Chinese ambassador Sun Xi’s
spectacularly timed reiteration of China’s claims on Tawang and indeed
the whole of Arunachal Pradesh (“Southern Tibet” in Chinese eyes) on
the immediate eve of the President, Mr Hu Jintao’s visit to India in
2006, though the Indian people did take note of Dr Manmohan Singh’s
avoidance of Tawang during his tour of Arunachal Pradesh in 2008. The
publication of the Zhong Guo Zhan Lue Chinese think tank’s
dissertation on dismembering the “Indian Federation” into 30 or more
states with the help of China’s friends and allies, as well as the
reported renewal of support and training to anti-Indian militants in
Manipur may also form part of a overall pattern of coercive
orchestration.
India’s responses to all these have been non-confrontational and even
passive, sometimes to the point of apparent deference. The psyche of
the Han race, who constitute the dominant majority of the Chinese
people, is another factor to be understood when interacting with
China, irrespective of the political system prevailing, whether
Communist as at present, Kuomintang earlier, or Imperial Beijing even
earlier still. Xenophobic by natural mindset, the Han consider China
as the “middle kingdom” of the world, superior to those countries and
peoples on the periphery, which in current perspective includes India.
The underlying inflexibility in matters of territory considered
national, no matter how long ago in history, has its origins in this
perception, and applies to territorial frontiers, whether Taiwan,
Vietnam, the South China Sea, or in India’s case the Sino-Indian
border in Tibet.
Against this background, India’s preferred life insurance policy has
to remain unchanged: build up sub-conventional, conventional and
nuclear military capabilities and create the long-neglected military
infrastructures along the country’s land, sea, and airspace frontiers
until a credible level of dissuasion and even deterrence is achieved,
whether for China, Pakistan or any one else.
In the meanwhile, the “trust, but verify” mantra needs a little
modification in the context of China. How about an alternative: “Speak
softly, but carry a big stick”?

Gen. Shankar Roychowdhury (Retd) is a former Chief of Army Staff and a
former Member of Parliament

...and I am Sid Harth

[bademiyansubhanallah]

http://timesofindia.indiatimes.com/news/india/What-incursions-Listen-to-your-leaders-Chinese-envoy-tells-media-/articleshow/5044578.cms

What incursions? Listen to your leaders, Chinese envoy tells media
IANS 23 September 2009, 12:54am IST

NEW DELHI: Days after the Indian government asked the media to eschew
"hype" over reported Chinese incursions, China's ambassador Zhang Yan
Tuesday
met Home Secretary G.K. Pillai here and tried to clarify the picture.

"Nothing is happening. You listen to your leaders," Zhang told
reporters when asked about his nearly half-an-hour meeting with
Pillai.

The Chinese ambassador's meeting came in the wake of repeated
assertions by top Indian officials and the army chief that reported
incursions have occurred due to differences in perception of the Line
of Actual Control.

Even Prime Minister Manmohan Singh downplayed the incursions amid
reports about Beijng's unhappiness at the way Chinese border
transgressions have been reported in the Indian media to conjure up a
China threat.

Seeking to deflate hype over reported Chinese intrusions across the
undemarcated border, Foreign Secretary Nirupama Rao Saturday stressed
that there was "no significant increase" in incursions across all
sections of the over 4,000 km border between the two countries.

"Contrary to the popular perception, the situation along the border
has remained peaceful for decades," Rao said.

National Security Adviser M.K. Narayanan and army chief Gen. Deepak
Kapoor also cautioned against the media hype and stressed that there
was nothing alarming about the reported incursions.

Narayanan expressed concern, saying that if such reports continued,
"someone somewhere might lose his cool and something might go wrong."

Underlining the developing nature of relationship between India and
China, Rao, a former ambassador to China, said the leaderships of the
two countries are in regular communication over important bilateral
issues.

"We remain in constant touch over all mutual issues. The leadership-
level understandings and communication remain open all the time," Rao
said.

...and I am Sid Harth