The Sinocism China Newsletter For 11.01.12

Follow me on Twitter @niubi or Sina Weibo @billbishop, spread the word by forwarding this email to your friends, support Sinocism

Hopes of a resolution to the China-Japan dispute over the Diaoyu/Senkaku islands appear misplaced. China has seized Diaoyu momentum (Globaltimes), claims that marine surveillance around the Diaoyu Islands is normal activity (Xinhua) and is now urging Japan to face change on the Diaoyu issue (China Daily):

Asked if China was constantly patrolling waters off the Diaoyu Islands, the spokesman said: “The Japanese side should face up to the reality that the situation over the Diaoyu Islands has seen a major change.”

The Financial Times reports that China has stepped up rhetoric on disputed islands:

MIT’s Mr Fravel said China had not made statements similar to Wednesday’s about the Spratlys or Scarborough Shoal, disputed islands in the South China Sea. But it did make similar statements about the Paracel Islands. The Chinese military seized these islands from Vietnam in 1974, in the most recent case of Chinese expansionist behaviour in an island dispute.

Yesterday Mr. Fravel wrote in The Dangerous Math of Chinese Island Disputes (Wall Street Journal) that:

China’s standoff with Japan over the rocky Senkaku (Diaoyu) Islands has entered its second month. The current confrontation, however, is more dangerous than is commonly believed. China’s past behavior in other territorial disputes demonstrates why the Senkaku standoff is primed to explode.

At a recent Australian military conference a Chinese general warned the participants:

…over the US pivot towards Asia, saying that “interference” is complicating progress to a new security order in the region. Lieutenant General Ren Haiquan also took a swipe at a key US and Australian ally Japan when he questioned the current actions of a one-time “fascist” nation that once bombed Darwin. He suggested territorial disputes could lead to open war.

David Blumenthal argues at Foreign Policy that the island dispute is the most explosive issue in Asia and calls on the US to take a foreful stand for Japan:

While the United States affirmed that the U.S.-Japan treaty covers the Senkakus, there still is a disagreement between Washington and Tokyo over who has sovereignty over the islands. This disagreement dates back to the 1970s and is yet another manifestation of the careless and rushed way in which Washington handled its normalization with China.

Japan feels isolated, and cannot understand why Washington remains neutral over this sovereignty dispute. Japan has a point.

Earlier this year Bruce Gilley called Xi Jinping a “Leninist Nationalist” (Jamestown Foundation). It is hard to see a happy outcome over these islands.

The last Plenum of 17th Party Congress opens today in Beijing (十七届七中全会今日在北京召开), to be followed immediately by the 18th Party Congress. Security is tight. Keep your balls out of Beijing’s taxis and definitely do not try to open the back windows. (China Digital Times)

Caixin’s Hu Shuli used this week’s column to make one more call for reform before the Congress. In Deng Xiaoping and the Date for Reform she wrote:

The government must find its resolve to push on. Over the past 10 years, the country has made significant progress in building a socialist market economy, but trial programmes in political, social and cultural reforms are only slowly being rolled out. Today, the support for comprehensive reforms is strong and growing, and government leaders are also clearer about the priorities and risks of reform.

The government must take a pragmatic approach to reform. It is no longer fashionable in today’s China to place politics on a pedestal. Instead, the mainstream view in society is that steady, prudent reforms are necessary and cannot wait. With public support, government leaders should draw up comprehensive plans on how to implement these reforms.

The stage is set for change. With boldness in vision, meticulous planning and careful implementation, the government can push past the hurdles to political, cultural and social reform, even as it presses on with economic reform. It’s worth remembering Deng’s caution to set a date for reform, for it cannot wait too long.

Xinhua reports that the CPC’s flagship magazine Qiushi has called for confidence in China’s future  (我们的道路越走越宽广_重要文章_求是理论网 ). This essay is the fifth in a series by the authoritative commentator 秋 石  (“Autumn Stone”) based on Hu Jintao’s July 23 speech:

“There are ample reasons for us to have high expectations and confidence in the future development of our country,” says the article.

In US concerns grow over Chinese economy the Financial Times quotes several pessimistic American China hands, including former Ambassador Huntsman:

Xi “is a pragmatist who knows very well how to work the system, the PLA, the princelings and the party,” says Mr Huntsman…But the Chinese-speaking former Republican presidential hopeful believes that within two to three years, Mr Xi will face significant pressure from a fast-changing society to set out a political reform agenda. “If people do not see a game plan being laid out, then the temperature is really going to rise sharply,” he says.

Two to three years seems too long. Change may be in the air in Beijing, but so is a lot of smog. I am trying to be hopeful, or maybe I am just naive.

The Internet in Beijing has been flakey over the last few days and there are some reports of possible shutdowns (TechInAsia) during the Party Congress. I am skeptical, but it would suck for lots of reasons, including that this newsletter would stop.

Today’s links:

BUSINESS AND ECONOMY

Twin China PMI surveys show economy perking up | Reuters - China’s economy is finally regaining traction, official and private sector factory surveys showed on Thursday, although the recovery remains sluggish with the latter recording its 12th straight month of slowing growth.

China’s strange quarterly GDP revisions could actually be good in YoY terms | FT Alphaville - can’t figure out if the “GDP is really under 6%” crowd is right, or too dogmatic/fallen in love with their positions. But generally we should be wary of cheerleading sell-side reports// Bank of America Merrill Lynch’s China economist Ting Lu has found something positive in this confusion, however: the downward revision of some of the Q0Q figures suggests growth bottomed in Q1, meaning that the year-on-year figures (you know, the ones everyone pays attention to, with regard to China) are likely to be better than he had expected in the next two quarters.

GDP accounting methods to be revised |Top Biz News |chinadaily.com.cn - The bureau told Xinhua News Agency on Tuesday that China’s current methods are derived from the 1993 version of the United Nations System of National Accounts, which was revised in 2008. The bureau is studying the 2008 version and will gradually revise the system in line with it.

Central Bank Chief Defends Money Supply Growth – Caixin - Consider China‘s new growth areas, Zhou Xiaochuan tells critics who say printing money stokes inflation

传证监会引导券商基金低位做多|证监会|引导|券商_21世纪网 - 21st Century Business Herald reporting that China’s CSRC has “guided” large public funds to buy stocks at market lows, to support prices. A share shorts learning you don’t buck Beijing?//

Guest post: defying the crowd on Chinese stocks | beyondbrics - Given the precarious economic situation, research is crucial to identify opportunities and to avoid traps. For example, we scrutinised fears of a Chinese property bubble by analysing real estate conditions in 70 cities. We found that house prices and home sales are more resilient than widely perceived. A government push for more affordable housing doesn’t imply a collapse in prices because when wages are rising by 10-15 per cent a year, houses become more affordable even when prices stay stable.

上市公司应收账款危情_股票频道_一财网 - receivables rising to “dangerous levels” at listed chinese firms// 据《第一财经日报》记者统计,截至10月31日,2471家上市公司应收账款达到2.22万亿元,同比上升近18%;如剔除金融类上市公司及中石化、中石油业绩数据,其他上市公司今年前三季度的应收账款则同比上升超过23%。可见今年以来上市公司在应收账款上升方面的压力未得到缓解,一定程度上拖累了企业的运营效率。

Chinese Banks Wary of Lending Risks, New Bad Loans at CNY50Bln in Q1-Q3-Caijing - Chinese banks had accumulated at least 50 billion yuan of new non-performing loans in the first three quarters despite relatively low non-performing loan ratios the banks recently reported, the official Economic Information Daily reported. Meanwhile, lenders including China Construction Bank, Bank of Communications, China Minsheng Bank, and Ping An Bank are assessing lending risks in major areas in a screening program, the newspaper said.

China Economic Watch | Systemic Dangers in Chinese Wealth Management Products - Our estimate for the current stock of WMPs outstanding is 11.5 trillion renminbi. To put this in perspective, this is about 13 percent of total deposits and growing. This number is big enough to start having implications for the stability of the Chinese financial system and the trend is going in the wrong direction. The China Banking Regulatory Commission (CBRC) and Peoples Bank of China can reduce risks emerging from the proliferation of WMPs by strengthening regulation and can protect investors by enacting tougher transparency requirements. The long-term solution, however, is to continue reforming the financial sector so that savers have better options, thereby reducing the popularity of WMPs.

Wage controls to narrow income gap – People’s Daily Online - A move to impose wage controls on highly paid executives of State-owned enterprises (SOE) in the hope of narrowing the country’s income gap are being reconsidered after a draft regulation first discussed the issue four years ago.

China sovereign fund takes 10 percent of Heathrow | Reuters- Ferrovial sold 5.72 percent of Heathrow holding company FGP Topco to China’s Stable Investment Corporation for 319.3 million euros ($414 million), it said in a statement.Other shareholders of FGP Topco sold 4.28 percent to Stable, making the Chinese fund an indirect holder of 10 percent of Heathrow Ltd, formerly known as BAA, the Spanish company said.

Presto! Designer products made by Chinese get ‘Made in Italy’ stamp – Rock Center with Brian Williams- What they’re making isn’t illegal. The Chinese aren’t making knock offs, or fake purses. They’re knocking off the entire “Made in Italy” brand name.Italian law doesn’t specify how much must be made in the country to be considered local.  So if a few buttons are sewn on in Italy, Presto! It’s made in Italy.

Zong Tops China Billionaires as Communist-to-Capitalist – Bloomberg - bloomberg does not mention the nasty 2007-09 Danone dispute  // Zong Qinghou says daughter Kelly Zong will take over Wahaha when he retires. Twenty-five years ago, when Zong Qinghou was 42, he made his living selling soft drinks and popsicles to schoolchildren. He says he earned about $8 a month — less than a third of China’s average wage at the time — and was so broke that he once slept in a tunnel under the streets of Beijing rather than spend on a hotel.

 

POLITICS AND LAW

EastSouthWestNorth: The New York Times Manages To Unify Chinese-language Media Around The World - This is something quite unimaginable.  Within China, the state media are supposed to mouth the official line.  Outside China, the non-state Chinese-language media (e.g. Boxun, DWnews, Epoch Times, Mingjing News) are supposed to hostile towards the Chinese Communist regime.  This has been almost always true in the past.  It gets so bad that one needs not bother reading any of these media because their positions on any issue are completely predictable.

Jiang Zemin’s Lyrical Memory – Caixin - Li Lanqing, who served as vice premier between 1998 and 2003, described in a newspaper article October 31 his recent correspondence with Jiang Zemin, China’s president from 1993 to 2003, about some of their favorite songs from the past.

Chinese former Vice Premier’s new book launched in London – Xinhua | English.news.cn - see above re Jiang Zemin and Li Lanqing correspondence about the songs. And wasn’t Jiang’s recent theater appearance to go watch a musical written by Li Lanqing?// The English edition of Works of Art by Li Lanqing: Chinese Seals and Calligraphy was launched here on Wednesday afternoon in the Millennium Hotel in London Mayfair. The book, jointly published by Macmillan Publishers Limited, Higher Education Press, and Foreign Language Teaching and Research Press, contains images of 461 seals and some calligraphy by the Chinese former Vice Premier.

Retired Premier Lauds Work on Aging Dam – Caixin - China’s former premier Li Peng re-emerged in the public spotlight with a statement issued at a ceremony for a controversial dam. Li sent a letter of congratulations for the ground-breaking ceremony on the rebuilding of the Fengman Hydroelectric Dam on October 29.

China’s former leaders step into the spotlight Washington Post- After Jiang Zemin, the 86-year-old former president of China, made his rare appearance at a concert in Beijing on Sept. 22, other retired top officials have started to join him one by one, like a coming-out party for China’s aged former leaders ahead of next month’s pivotal 18th Party Congress.

邓聿文:首个公开财产的官员的启示-财经网 - Deng Yuwen on need for officials to declare their assets// 鉴于当前改革陷入胶着状态,在人们对反腐的期望越来越高的情况下,公开官员财产是最能凝聚人心和形成改革共识的举措。我们不能再做鸵鸟,被腐败所挟持,必须勇于走出这一步。其实,我国已经有了《领导干部报告个人有关事项的规定》,只要在这一规定上再向前迈进一步,按照上面所讲进行补充完善,并使之成为法律,就能形成财产公示乃至反腐上的突破。

Dispute over village election highlights China’s Communist Party challenge | McClatchy- About 30 miles from the dead center of downtown Beijing, Raolefu went spiraling into something between protest and revolt.Election officials had announced earlier that Wei lost the election to a popular local businessman named Song Jianzhong, who’d previously served prison time for fraud. The vote count was 1,025-963 in Song’s favor. However, no winner could be declared because Song’s total didn’t exceed half of all votes collected.

Podcast from Financial Times – China’s new leadership faces many challenges Oct 31, 2012 - James Kynge, editor of FT China Confidential, and David Pilling, Asia editor, join Gideon Rachman to discuss the state of China at this crucial juncture.

Why the CCP Won’t Abandon Mao Zedong Thought–The Diplomat - Nor is Western speculation of whether the CCP will break entirely from Mao Zedong Thought new. In fact, in 2009, during the run-up to the National Day parade marking the 60th anniversary of the founding of the People’s Republic of China, many foreigners made this prediction.

Xi should draw up a new social contract for China – FT.com–David Pilling - “You must politicise your request,” says an academic at one of China’s most prestigious universities. “You must demand power, not just fix a specific grievance,” he says, predicting that anger could boil more forcefully on to the streets. If people are as disgruntled as he says, Mr Xi will have to conclude a new social contract that goes beyond trading political monopoly for economic liberty.

In China, A Ceaseless Quest To Silence Dissent : NPR - In a series of stories this week, NPR is examining the multiple challenges facing China. In this story, Louisa Lim looks at China’s pervasive efforts to maintain order

 

FOREIGN AND DEFENSE AFFAIRS

PICTURES: New Chinese fighter conducts maiden flight- Images have emerged on Chinese defence sites that appear to show a new Chinese fighter aircraft in flight.The flight was said to be the first conducted by the aircraft that is now being commonly referred to as the Shenyang J-31. Previous reports have variously given the aircraft’s designation as the J-21, J-31 or F-60.

江规胡随 胡锦涛将续任军委主席两年_多维新闻网 - duowei says done deal that hu jintao will stay on as CMC chairman

U.S. Navy Take Notice: China is Becoming a World-Class Military Shipbuilder – The Diplomat - China’s military shipyards now are surpassing Western European, Japanese, and Korean military shipbuilders in terms of both the types and numbers of ships they can build. If Beijing prioritizes progress, China’s military shipbuilding technical capabilities can likely become as good as Russia’s are now by 2020 and will near current U.S. shipbuilding technical proficiency levels by 2030.

China conveys condolences to U.S. over storm disaster – Xinhua | English.news.cn - top right story, page 1 of today’s People’s Daily// Chinese President Hu Jintao on Wednesday offered his deep condolences to his U.S. counterpart Barack Obama over the casualties and major property losses inflicted upon the U.S. East Coast by superstorm Sandy.

 

TECH AND MEDIA

China’s Twitter-like Weibo poses danger, opportunity for new leaders | Reuters - darkness before the dawn? good news for sina if true, though tencent’s weixin/wechat hurting weibo already. my weibo prediction? there will be official Xi Jinping Sina and Tencent Weibo accounts by close of the 2013 NPC meeting// When a significantly freer Internet in China will come about is anyone’s guess, but most industry experts interviewed expect some loosening after the Party Congress. That loosening, should it come, will be for an overtly political reason, analysts believe: at the outset of its tenure, the new leadership may want to project an image of being more open to political reform, including freer speech, than the old guard.

消息称工信部将召集搜索引擎签自律公约|搜索引擎|公约_互联网_科技时代_新浪网 - MIIT intervening into the Baidu-Qihoo search engine war, going have search engine firmes sign a “self-discipline convention”?//

Tmall Plans to Link China’s Consumers with Foreign Goods – Caixin - Tmall.com is planning to build a global procurement system to help Chinese consumers shop for foreign-made products, company Vice President Ma Xuejun says.

 

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

Wary of Future, Professionals Leave China in Record Numbers – NYTimes.com- Many experts on migration say the numbers are in line with other countries’ experiences in the past. Taiwan and South Korea experienced huge outflows of people to the United States and other countries in the 1960s and ’70s, even as their economies were taking off. Wealth and better education created more opportunities to go abroad and many did — then, as now in China, in part because of concerns about political oppression.While those countries eventually prospered and embraced open societies, the question for many Chinese is whether the faction-ridden incoming leadership team of Xi Jinping, chosen behind closed doors, can take China to the next stage of political and economic advancement.

Will China’s new middle class save it from disaster? – Telegraph - In the first of a three-part series, Mick Brown travels to the Chinese city of Wuhan to see whether its emerging great wealth has also brought great happiness

Opium Production Rises in Southeast Asia on China Demand – WSJ.com - Opium cultivation in Southeast Asia’s main poppy-growing countries has more than doubled over the past six years driven largely by rising heroin demand in China and despite recent efforts by regional governments to eradicate the crop, the United Nations’ narcotics office said in a report released Wednesday.

北京雷霆“禁奥”:20亿富矿前途未卜|奥数|北京|培训机构_21世纪网 - good that Beijing has banned “Olympic Math” and is investigating. But so much money and educational corruption involved, wonder how much will be investigated// 北京市教委还会同区县教委启动全面检查,集中查处与奥数竞赛和培训挂钩的入学行为,明确规定在10月31日前清理整顿与公办学校升学挂钩的培训班。

Chinese State-Affiliated Think Tank Calls for End to One-Child Policy – China Real Time Report – WSJ - China should have no need for birth planning after 2020, and should in fact begin encouraging families to have more children to avoid dangerously low fertility rates in the future, Xinhua quotes the report as saying.

 

ENERGY, ENVIRONMENT AND HEALTH

经济参考网–多部门拟扶持低碳产品和技术 碳捕集、碳再利用等主题概念股有望受益 - several government departments planning policies to support low-carbon products & technologies

China prioritizes use of natural gas by vehicles, ships | Reuters - Besides homes, utilities and factories, the government for the first time targeted the transport sector, covering buses, taxis, trucks, and vessels as preferred users of natural gas, according to a document published on the website of the National Development & Reform Commission

China mulls new rule on human genetic research – Xinhua | English.news.cn- The 50-article draft was designed to replace the existing interim measures on human genetic research, which was introduced in 1998, according to a statement posted on the central government’s website on Wednesday.The draft proposes a licensing procedure for all organizations involved in the collection and storage of human genetic resources, while also prohibiting any unauthorized activities in the field.

Organizing an Organ Donation System in China is Complicated Operation – Caixin - The Ministry of Health recently drafted a directive that aims to establish a fairer and more transparent way to distribute organs for transplant, along with a national database to organize the process…China is the only country in the world that systematically uses organs from executed convicts. Ministry of Health statics show that in 2009, 90 percent of cadaver donors were executed prisoners. To change this, in 2010, the ministry commissioned the Red Cross Society of China to launch a pilot organ donation program to raise awareness. And in 2011, the ministry carried out a one-year trial involving voluntary donors who had been heart attack victims. It offered to hospitals organs that were independently procured and distributed.

Follow me on Twitter @niubi or Sina Weibo @billbishop, spread the word by forwarding this email to your friends, support Sinocism