The Sinocism China Newsletter For 09.18.12

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The anti-Japan protests continue in China but there appears to have been little to no violence Monday. Police in Guangzhou arrested 11 people for vandalizing cars and shops in protests over the weekend and we should expect more arrests in the coming days. 1,000 Chinese fishing boats are heading for the islands and today is the 81st anniversary of the Mukden Incident, but given official media’s continuing calls for no more violence we should expect today’s activities to be relatively calm.

Some Japanese firms are closed for the anniversary and as Bloomberg notes in China-Japan dispute over islands risks $340 billion trade there is a lot of economic activity at stake. China’s markets were down 2% or so Monday but Japan’s Nikkei, which was closed Monday, opened up today.

The disgraceful behavior of some of the Chinese protestors was embarrassing to many Chinese, as Ministry of Tofu shows in On Weibo, Japanophobic mobsters are far from the majority | Ministry of Tofu 豆腐部) and Han Han discusses in Han Han to Japanese Car Vandals: You Are Not Patriots.

But is China’s vitriolic reaction without any basis? Why did Japan pick this moment, when China is in the middle of a leadership succession and the always sensitive Mukden Incident anniversary was looming, to take the provocative step of nationalizing the islands? As the Guardian writes in the editorial Japan and China: ghosts of the past:

Tuesday is the anniversary of the Japanese attack on China in 1931 that led to the invasion and occupation lasting 14 years. That Japan should use this date above all others to reassert its sovereignty over a group of uninhabited islands is – in Chinese eyes – nothing short of provocation.

Linus Hagström of the Swedish Institute of International Affairs argues in China–Japan tensions over Senkaku purchase an orchestrated affair that:

Current Sino–Japanese tensions with regard to the Diaoyu/Senkaku Islands could thus be seen as a result of Ishihara orchestrating the idea to buy the islands. The dominant narrative that Japan was ‘weak’ and ‘lost’ in 2010 clearly facilitated this, because more assertive and proactive Japanese countermeasures seemed to be the logical and most sensible response.

The current Japanese government will probably maintain its cautious policy. Still, the consensus on Japan’s ‘weakness’ and Chinese ‘aggressiveness’ is likely to bring about tougher Japanese measures in the short to medium term — especially if the next general election (believed to take place soon) produces a new government formed by parties and politicians who have profited from criticising the DPJ government’s ‘weakness’. This tendency is stirred by Ishihara, who has stated he will publicly ask the candidates in the coming election for LDP president how they would develop the islands if they were elected and become prime minister.

Hagström goes on to write that the 2010 Senkaku/Diauyu Islands incident:

…was instrumental for Tokyo in eliciting more explicit US reassurances in regard to the islands in the fall of 2010; enhancing the Japanese people’s ‘realisation’ of ‘the necessity’ to maintain US bases on Okinawa; and launching important changes to Japanese security policy in the revised National Defence Program Guidelines in December 2010.

Which brings us back to a quote in the Washington Post attributed to a senior US military official:

“I’m pretty frank with people: I don’t think that we’d allow the U.S. to get dragged into a conflict over fish, or over a rock,” said a senior U.S. military official, speaking on the condition of anonymity to discuss deliberations within the Obama administration. “Having allies that we have defense treaties with, not allowing them to drag us into a situation over a rock dispute, is something I think we’re pretty all well-aligned on.”

Yesterday I wrote that this statement might embolden China and that neither Japan or China views these disputed islands as just rocks. 

In fact, this statement, on such a sensitive issue, is not likely to be a slip of the tongue. Could it be seen as a subtle warning to the Japanese to get back to the status quo and stop rocking the rocks, so to speak? China certainly thinks that Japan believes it can act “recklessly” on this issue because Uncle Sam will protect it, and the last thing America wants is to be dragged into more disputes or even conflict with China, especially when the US is in the midst of a massive naval buildup in the Middle East as tensions with Iran continue to increase.

But this problem is far from a resolution and “Zhong Sheng” reminds everyone in today’s People’s Daily that China has the power and the confidence to defend the sovereignty of the Diaoyu Islands 中国有实力有信心捍卫钓鱼岛主权. Can China and Japan return to status quo on the disputed islands, or have things changed fundamentally? Sinocism has lots of very smart readers and I would love to hear what you think, on this issue or anything else.

In what is probably good news, Secretary of Defense Panetta is extending his China trip to meet Xi Jinping and visit the naval fleet at the Qingdao Port. Perhaps Xi is making up for missing his meeting with Secretary of Sate Clinton earlier this month, and while any increased military-miltary exchange should be seen as a positive, China may also want the US to see what it might deploy to the disputed islands in the very unlikely event there is a military clash (helpfully hypothesized last month by Foreign Policy in The Sino-Japanese Naval War of 2012).

Bo Xilai sidekick and disgraced police official Wang Lijun has gone on trial in Chengdu. Yesterday’s session was secret, today’s is supposed to be public. He is the last major character (Xu Ming is not “major) in the Bo case to try before Beijing gets to Bo’s verdict. We should expect to hear more about the handling of Bo Xilai’s case at the close of the imminent final Plenum of the 17th Party Congress.

The Wall Street Journal’s Jeremy Page has a fascinating look at Wang’s flight to the US consulate in as scandal shook China, quiet spy game unraveled.

Yesterday I wrote:

Speaking of budget woes, would you believe that America has a greater wealth gap than China does? Last week Bloomberg noted that the 2011 US Gini Coefficent was 0.463. An official Chinese report just released states that China’s Gini Coefficient for 2010 was 0.438, as the People’s Daily notes in New Gini figures show instability risks, need for reform.

Today the Wall Street Journal’s Tom Orlick questions China’s Gini data in China’s Inequality Gini Out of the Bottle.

On to today’s links:

BUSINESS AND ECONOMY

Profits continue to decline at China’s SOEs – Xinhua | English.news.cn – Profits at China’s state-owned enterprises (SOEs) have continued a downward trend, declining 12.8 percent year on year to 1.38 trillion yuan (219 billion U.S.dollars) in the first eight months of 2012, the Ministry of Finance said Monday. However the SOEs’ combined profits witnessed a rebound on a monthly basis, rising 1.1 percent in August from the July level. This compared with a 11.6 percent drop in July, according to the ministry.

China Needs Planned Infrastructure Projects, NDRC Says – Bloomberg – Xu Lin, head of the planning department at the National Development and Reform Commission, told reporters in Beijing newly approved projects, including subways in 18 Chinese cities and roads, were only a part of a pipeline of infrastructure projects being developed in the nation. “In an economic slowdown, the government has to take some counter-cyclical measures — it’s absolutely normal, and it’s part of macro-economic control,” Xu told reporters at an academic forum in the Peking University yesterday. “China still has large demand for infrastructure projects.”

Wu Jinglian: Local Governments’ CNY17Trl Investment Unsustainable-Caijing – Wu Jinglian, a leading mainland economist, warned Sunday that a string of stimulus moves taken recently by local governments to combat a slowing economy would risk posing long-term threats to the economy despite a potential boost in short terms. “Local government’s investments plans to prop up growth, which totaled as much as 17 trillion, according to incomplete statistics, are unsustainable with apparent exposure of problems,” the renowned economist said in a keynote speech at a finance forum.

Beware China’s quantitative tightening – MarketWatch – If China’s period of surpluses is over, it means the PBOC is no longer going to be creating yuan like before. In fact, the reverse will be true if the yuan weakens, where the central bank will effectively have to buy its own currency by selling foreign reserves to maintain its peg.

Debunking the “It’s China’s Fault That American Worker Real Wages are Falling” Myth « naked capitalism – What’s driving falling real wages is poor domestic economic policies, namely, the mismanagement of the post crisis period. Japan warned the US early on that the biggest mistake it had made was not forcing its banks to recognize losses. But we ignored their lesson and are in the process of suffering what may turn out to be a lost decade. Time to blame the real perps, our bank enablers, rather than the poster bad guy, the Chinese wage slave.

Once Again in the Spotlight – Caixin Online – Qiu Xiaohua, the former director of the National Bureau of Statistics (NBS), is back in the spotlight again with the news that he became chief economist of Minsheng Securities in late August. It has been nearly six years since Qiu was removed as NBS director. He was expelled from the Communist Party and public posts over alleged involvement in the Shanghai social security scandal and bigamy charges. He was convicted of bigamy and spent a year in jail.

Special Report: China’s car makers cut corners to success | Reuters – Reuters hired away the Wall Street Journal Beijing’s bureau excellent auto correspondent// Paring back on crash tests, skimping on frills, simplifying designs, using cheaper materials and, in a departure for the industry, outsourcing most of their design and engineering are having a profound effect on the cost bases of China’s dozens of car makers. Some are now able to sell cheap and cheerful small cars for about 40,000 yuan ($6,350) – less than half the price of a plain vanilla Toyota.

CHINASCOPE – Blue Book on the Priority of China’s Reforms – According to the “Blue Book on China’s Social Management,” which the International Institute for Urban Development released last Friday, the priority of China’s reform should be to develop five elements that are missing in Chinese society.

Investors Tiptoe Back Into China – MarketBeat – WSJ – Dutch asset manager Robeco Group, which has $20 billion of assets under management in Asia, recently moved to a slight overweight stance towards China, signifying the fund owns more than similar global benchmarks. Robeco holds construction stocks because they say they will benefit from government stimulus efforts, which include building social housing. Even for funds focusing on China, the low valuations are prompting more buying.

China to Expand Insurance So Sick Don’t ‘Lose Everything’ – Bloomberg - HuCare? XiCare?// ?China will expand national health coverage by roping in private insurers and include more major diseases, as it seeks to close the mortality gap between rural and urban residents while trying to contain costs.

《金融业发展和改革“十二五”规划》发布-中国金融新闻网 – sigificant financial reforms plan released

自行发债利率逐步回归正常 浙87亿地方债周五登场_理财频道_一财网 – 浙江省财政厅日前宣布,定于9月21日招标发行“2012年第一期、第二期浙江省政府债券”。

Standard Chartered Bank – Research – China – A sneak peek at 2013 – • We revise our 2012 and 2013 forecasts; we now look for 7.8% growth in 2013, and a better H2 than H1 • We believe the interest rate cutting cycle has ended and expect the next move to be up, in late 2013 • The CNY should remain stable against the USD in 2012, but appreciate mildly as the trade surplus revives in 2013-14; we forecast USD-CNY at 6.19 at end-2013, 6.00 at end-2014

 

POLITICS AND LAW

Xi’s Reappearance Shows Risks in China Leadership Change – Bloomberg – uh, it will not be a reserve currency in three years, for this and many other reasons// “Flash forward three or 20 years, when China’s renminbi is internationalized and used as a reserve currency,” said Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace in Washington. “What would happen to its value if the leader disappears like this? China needs a succession that is publicly understandable and that keeps people with interests — economic, social, security — informed as to who the present decision maker is.”

Reform: Are Its Chances Improving? – China Media Project – did not know the author took the Premier at such face value// Is there hope for political reform in China? This is of course a complex question. But the watchwords used in the political report to the 18th National Congress may give us some clue to related trends within the Party leadership. Will the phrase “political reform” appear more frequently, or more prominently, than it did in 2007? And will “Wen-style utterances” like “judicial independence” make their way into the Party agenda?

Zhang Gaoli: a man of means|Politics|People|WantChinaTimes.com – Zhang Gaoli, member of the Political Bureau of the CPC Central Committee and secretary of the CPC Tianjin Municipal Committee, is expected to enter the Central Politburo Standing Committee in the 18th National Congress.

Police chief’s dash for freedom triggered a landslide-Garnaut – He drove for seven hours on the provincial back roads to Chengdu, rather than the dual carriage freeway, which would have taken half that time, to avoid being spotted…Halfway into the journey he arranged a call to the British consulate in Chongqing, requesting a meeting to discuss his new portfolio, as a decoy to put Bo’s henchmen off his trail.

奢侈穿戴频致贪官落马 纪委组织学奢侈品知识_新闻_腾讯网 – in the wake of recent scandals anti-corruption units are trying to increase their knowledge of luxury goods

Obama tells Romney to ‘walk the walk’ on China | Reuters- “He made money investing in companies that uprooted from here and went to China … Now you can’t stand up to China when all you’ve done is sent them our jobs,” Obama told a crowd of some 4,500. “You can talk a good game, but I like to walk the walk, not just talk the talk,” Obama said to cheers from the crowd.

Romney’s ad on manufacturing and ‘China’s cheating’ – The Washington Post –

U.S. to Launch Ill-timed WTO Dispute Against China | China Hearsay – I am not so naive as to think that all trade enforcement actions are somehow insulated from politics and political influence. Far from it. Given that endemic problem, though, shouldn’t governments at least make an attempt to depoliticize the process? Announcing a new case and campaigning on it in an affected swing state during an election, that’s not only politicizing international trade, that’s ripping away whatever facade was in place and announcing to the world that politics trumps principles. That’s a damn shame.

 

FOREIGN AND DEFENSE AFFAIRS

Can Panetta Manage China? | Defense News | defensenews.com – Mark Redden and Phillip Saunders have outlined in a 30-page report, “Managing Sino-U.S. Air and Naval Interactions,” ways to understand Chinese behavior and avoid incidents at sea and in the air.

U.S. and Japan Agree on Missile Defense System – NYTimes.com – nice timing// The United States and Japan announced a major agreement Monday to deploy a second, advanced missile-defense radar on Japanese territory – an effort specifically designed to counter the North Korean threat but likely to anger China.

Giant panda Mei Xiang gives birth to cub – and avoids return to China | World news | guardian.co.uk – National zoo in Washington admits had Mei not given birth to 4oz cub she may been exchanged for a more fertile female

Senior US Admin Offl: Not Seeking Trade War With China | MNI – at least both sides are working through WTO// The United States is not seeking a trade war with China, despite filing another case in the World Trade Organization over subsidies Washington says violate trade rules, nor was the announcement timed to help President Barack Obama’s reelection campaign, a senior administration official said Monday.

People’s Daily implies economic measures against Japan – Xinhua | English.news.cn – The People’s Daily, the flagship newspaper of the Communist Party of China, warned in a commentary Monday that Japan’s provocations over China’s Diaoyu Islands will cause self-destruction for itself through possible economic punishments.

Chinese fishery department to provide fishing services off Diaoyu Islands – Xinhua | English.news.cn – The Chinese fishery administration department will manage and provide services for fishing in waters near the Diaoyu Islands.

PLA units hone their battle skills |Politics |chinadaily.com.cn – The Nanjing Military Command Area held a live-ammunition drill landing combat troops. Three landing ships carrying armored forces landed near the shore, releasing dozens of amphibian tanks, China Central Television reported.

China and Vietnam should continuously expand relations: official – Xinhua | English.news.cn – State Councilor Dai Bingguo said Monday that China and Vietnam should expand bilateral relations by firmly sticking to the “right direction” regarding their ties.

Why is China afraid of the Louisiana Purchase? | FP Passport – Why are authorities worried about Chinese netizens reading about Seward’s icebox and and the Gadsden Purchase? Is there a fear that these purchases are somehow a precedent for the Japanese government’s purchase of three of the disputed Senkaku/Diaoyu islands?

Why are the Neocons Still Around? | The National Interest Blog – In some other political system, anyone who had been involved in an official capacity in promoting that war might, after resigning in disgrace, retire from public affairs to tend a garden, write fiction, or make money in private business. But somehow that has not happened with many of the people concerned in this instance.

Task force targets Chinese shipments of meth chemicals – News – Stripes – About 80 percent of the meth in the United States is now made in Mexico mainly using Chinese ingredients shipped across the Pacific, according to the U.S. Drug Enforcement Administration.

 

TECH AND MEDIA

Unanswered Questions About Google’s Strange Fight With Alibaba in China | PandoDaily – discussed in some detail Sunday.// We don’t have enough information to call this one either way just yet, but the whole affair can be boiled down to two possible scenarios. 1. Alibaba is lying to Google and the public and did rely on Android to build Aliyun. In that case, it is not only misleading us all, but it also trying to have its cake and eat it – that is, it is pretending to be independent of Android while also offering all the benefits of Android, including an app marketplace stuffed with pirated apps. Or: 2. Provoked by Ming’s assertion that Alibaba wants Aliyun to be the “Android of China,” Google rashly pressured Acer to withdraw the A800 based on its suspicious that Aliyun was a mere Android rip-off. Even though Rubin wasn’t fully armed with specific facts that proved Alibaba’s alleged violation, he then had to dig in to justify Google’s hardline action, especially as some commentators suggested it could be anti-competitive behavior.

Chinese Search Giant Baidu Hits Japan – Business Insider – Baidu, the China-owned search giant, has apparently decided to capitalize on anti-Japanese nationalism currently in the air in China. The current “doodle” on the site shows an island with a prominent Chinese flag on it.

Baidu’s ‘paid post deletion’ scandal highlights industry problems|WantChinaTimes.com – Several people who allegedly carried out the illegal act of deleting online posts, working with or for Chinese search giant Baidu, were arrested recently, pointing to problems created by the heated competition among internet companies in China, an industry insider told the First Financial Daily.

Han Han wins piracy lawsuit against Baidu — Shanghai Daily | 上海日报 — English Window to China New – Baidu, the country’s biggest search engine, was ordered to pay more than 80,000 yuan to Han Han, one of China’s bestselling author, for publishing three of his books and offering downloads without his permission, a Beijing court ruled today.

 

SOCIETY AND CULTURE

What Microblogs Aren’t Telling You About China | ChinaFile Beta – There is no question that the emergence of Weibo platforms and the Internet more generally has amplified the voices of the laobaixing—the ordinary people. But in order to know what the Chinese people are really talking about, it is not enough to just follow the viral videos and microblogs on Weibo.

 

ENERGY AND ENVIRONMENT

China-built projects in US stir up environmental concerns-China Dialogue – California’s new Bay Bridge is one of several major infrastructure projects across the US in which Chinese contractors play a key role. What are the environmental consequences?

Arctic expert predicts final collapse of sea ice within four years | Environment | guardian.co.uk – One of the world’s leading ice experts has predicted the final collapse of Arctic sea ice in summer months within four years. In what he calls a “global disaster” now unfolding in northern latitudes as the sea area that freezes and melts each year shrinks to its lowest extent ever recorded, Prof Peter Wadhams of Cambridge University calls for “urgent” consideration of new ideas to reduce global temperatures.

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  • Tannerboyle

    For Gini coefficient, it might be more interesting to check the slope of the lines for US and China. 

  • Tofu Stinky

    China’s Gini coefficient in the mid-70s was somewhere in the high single digits (e.g., .09). (In 1980, fully sixty percent of Chinese lived on US$1 per day or less, and most of the rest lived on less than US$2 per day.) Some believe that China’s Gini coefficient may now exceed .50. By comparison, the U.S.’s Gini coefficient in the early 70s was in the low to mid thirties (e.g., .35). If this is true, China’s Gini coefficient has risen very fast indeed – much faster than the U.S.

    I can’t imagine that Japan is ready or willing to take on China over the islands. I wouldn’t be the least bit suprised to see China make a lightning-quick show of force and occupy the islands, build structures, station military, etc. What would the Japanese do in such a case? Shake their fists and nothing more, I suppose. Does anyone doubt China’s ability to quickly take possession? If U.S. military commanders are saying publicly that the U.S. will not back Japan militarily in a fight over the islands, this cannot but embolden the Chinese. Seems to me that China’s military and political elite would love a fight of this kind, provided that they are confident the U.S. will not “interfere.” From the Party’s point of view, what could be better that defeating the hated Japanese and reclaiming another piece of “sacred territory.” The domestic propaganda possibilities are immense, and may outweigh any concerns the leadership may have regarding how such a move may be viewed abroad. Likewise, the U.S. might be perfectly willing to see Japan humiliated by China – good for the U.S./Japan relationship, and all that. The same goes for the rest of Asia. Chinese control over the islands won’t do much to change the regional strategic balance and will likely drive China’s neighbors deeper into the loving embrace of Uncle Sam. If Japan is serious about maintaining control over the islands, it had better prepare to defend them without the help of the U.S.

    Funny how every last person speaking out against anti-Japanese violence still maintains that the islands belong to China. Han Han and Li Chengpeng too. I suppose this is what progress looks like.

  • Moonshine Graham

    “Why did Japan pick this moment…?”
    I don’t think *Japan* picked this moment as much as the Japanese central government’s hand was forced by a nationalist politician that threatened to purchase the islands. (Source: http://goo.gl/mKVgk )