The Sinocism China Newsletter For 09.14.12

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is blocked by the GFW. You can also follow me on Twitter @niubi or Sina Weibo @billbishop.

The Economist’s Gady Epstein addresses China-watching and how little we know in this week’s Banyan: The leader vanishes:

In the case of Mr Xi’s disappearance, explanations have ranged widely and wildly from a back injury to a heart attack to, most implausibly, an assassination attempt by means of a traffic accident [and cancer, stabbing by pool attendant, anger at Hu Jintao. Nothing about alien abduction. yet]

…elite politics remains an intricate and frustrating puzzle to be tackled with crude techniques and unreliable sources. Genuine knowledge of the handful of men who rule the country, including whom they will choose to rule after them and what policies they will favour, is as rare as the Chinese unicorn. Even their health is a state secret.

Such basic ignorance, however, has not stopped China-watching, once the arcane pursuit of a few experts, from becoming a vast industry. With China so engaged in the global economy, there is a never-ending stream of data, often unreliable, to feed the appetites of economic-research firms, investment banks, hedge funds, short-sellers, political-risk advisers, think-tanks, consultancies and financial and military newsletters—not to mention legions of academics, journalists, diplomats and spies. Their analyses of which direction China is going can command a small fortune [really? where do I sign up?]—and even change fortunes. China-watching is not only essential for diplomacy, it is also big business.

And it also rarely right. The opacity may serve the Party but it does not serve China’s aspirations to become a global economic superpower with the RMB as a reserve currency that can supplant the US Dollar.

Bloomberg has just published the results of a survey of 22 China-watchers. I participated and am looking forward to learning how wrong my predictions will turn out:

China’s Communist Party will approach its defunct Soviet counterpart in longevity in power after it navigates the leadership succession clouded by concern over Xi Jinping’s status, a Bloomberg News survey indicates.

The party that took control of the mainland in 1949 will still be in office a decade from now, according to 21 of 22 Chinese political analysts across seven nations who were surveyed in the past two weeks. Ten respondents cited the likelihood of some degree of evolution, such as embracing greater democracy within the party, and one predicted a split.

On to today’s links:

BUSINESS AND ECONOMY

Nestle Sees 20% China Growth in This Year as Wages Rise – Bloomberg – The slowing growth of Asia’s biggest economy hasn’t affected the local operations of the Vevey, Switzerland-based company, which has seen expansion in most of its businesses, including dairy products and coffee, Greater China Chairman Roland Decorvet said in an interview today. Nestle’s China sales increased by more than 20 percent last year and will grow by a double-digit percentage in 2013, he said.

George Magnus Explains Why China Is Lagging – Business Insider – really? How will Daniel Bell respond?// According to Professor Peng Gong of Tsinghua University and Berkeley, China’s problem isn’t the amount of R&D it produces, but the quality, and this is related to two cultural genes that have passed through generations of Chinese intellectuals.

China bears are misunderstood=Also Spracht Analyst – For bears like ourselves, the problem with China bulls, as Michael Pettis has very accurately pointed out, is that bulls really think the China bears are predicting an imminent catastrophe every other month (so to speak).  Of course, there are people like that, but most are not.  Surely we have mentioned a lot of rather scary stories about debts and many other messy stuff.  However, we are not suggesting that China will be drowned by all these difficulties and will sink to irrelevance forever.  Actually, far from that.

Foreign investors accused of ‘fourth round’ of short selling China|Economy|News|WantChinaTimes.com – China Minsheng Banking Corporation has sought to clear rumors and fought back against attempts by foreign investment institutions to short sell the bank in what has been called the fourth round of short selling China

Wanda Group, Superfast Chinese Mall Builder, Reveals Secrets Behind Speed – China Real Time Report – WSJ – So how does Dalian Wanda do it? By having a complete industry chain to churn out the malls from start to the end — and an unforgiving attitude towards delays.Wanda has a design institute, project development and commercial management teams all dedicated to planning and building malls, according to Mr. Wang.

RBA: Bulletin September Quarter 2012-Chinese Urban Residential Construction – Rapid urbanisation in China has been a key driver of global steel demand and therefore demand for iron ore and coking coal. This article considers the medium- and long-term prospects for residential construction in China and their implications for steel consumption. Residential construction is projected to remain at a high level for the next couple of decades. Steel consumption in this sector is expected to be boosted further by demand for higher quality buildings. Some alternative scenarios are considered, examining both upside and downside risks.

 

POLITICS

汪洋称不改革就像温水煮青蛙 等清醒已无出路|汪洋|改革|温水煮青蛙_新浪新闻 – Wang Yang calling for reform,says if no reform then will be slow boiled like frogs Wang yang seems quite confident and voluble. Normal for a provincial leader right before a party congress?// 9月11、12日,全省推广顺德南海综合改革试点工作现场会在佛山举行。在昨日下午的会议上,中共中央政治局委员、省委书记汪洋作重要讲话。省委副书记、省长朱小丹主持会议,省政协主席黄龙云出席会议。省领导朱明国、王荣、李玉妹、徐少华、林木声、万庆良、李嘉、陈用志、肖志恒、刘昆等参加了会议。 汪洋总结了广东近几年改革的成就、经验,并展望改革前景与路径。他表示,改革任重道远、不进则退,改革要毫不动摇、永不僵化、永不停滞。广大干部特别是领导干部要克服“改革疲劳症”,防止“精神懈怠症”,彻底消除“不愿改、不敢改”等畏难情绪和求稳怕乱思想,提高驾驭改革的领导能力。

中共十八大政治局常委3.0版_多维新闻网 – Duowei now says that the PBSC will be Xi Jinping, Li Keqiang, Zhang Dejiang, Wang Qishan, Li Yuanchao, Liu Yunshan, Zhang Gaoli. Previously they ha said Yu Zhengsheng was a lock. Take w a large grain of salt.

改革与改革家_杂志频道_财新网 – Zhang Weiying in China Reform, talking reform, Zhang an important voice// 2012年8月9日下午,首期财新《中国改革》读书会在北京城市规划展览馆举行。北京大学光华管理学院经济学教授张维迎作为特邀嘉宾参加了读书会。

Frank Talking Ex-Central Bank Adviser Takes Swipes at China’s Political System – China Real Time Report – WSJ– “We are now running out of the dividends from institutional reforms pushed out by the previous government,” he said, referring to the various public finance and land reforms pushed out a decade ago in China. “To continue to grow, we need a new round of institutional reforms.”Mr. Li noted that users of social media were already calling for such changes. “Reformist leaders can easily rally support from the grassroot level,” he said. Furthermore, “among the new leaders (of China) there’s religious belief in reform.”

The Politics of Student Cadres – Economic Observer– Summary:Obtaining a high position in university student unions requires political jockeying and social maneuvering that’s sometimes compared to that of actual government officials. Once in office, the student cadres continue to live lives much like those of government leaders, and in fact, often go on to become government leaders.

 

FOREIGN AFFAIRS

Chinese surveillance ships start patrol around Diaoyu Islands – Xinhua | English.news.cn – Two Chinese surveillance ship fleets have arrived at waters around Diaoyu Islands and its affiliated islets Friday morning and started patrol and law enforcement there.

Diaoyu Islands baseline announcement significant: Chinese diplomat – Xinhua | English.news.cn – “By doing so, we can proclaim to the international community our indisputable sovereignty over the Diaoyu Islands and the firm determination of our government and people to safeguard our territorial sovereignty and maritime interests,” Deng Zhonghua, head of the Department of Boundary and Ocean Affairs with the Foreign Ministry, said in an interview with China Central Television on Thursday.

Japan’s new ambassador to China collapses: report – MarketWatch – yup, tough job//Newly appointed Japanese Ambassador to China Shinichi Nishimiya collapsed in Tokyo on Thursday morning and remains unconscious, a government official said, Kyodo News reported.

Why the Japan-China island dispute is an American problem | FP Passport – Americans may see this as a problem between two longtime Asian rivals with little need for U.S. involvment — and judging by Hillary Clinton’s reception in Beijing last week, the Chinese government may see it that way too — but the fact is that the United States has played an integral role in the dispute from the beginning and will likely continue to be involved.

Commentary: Philippine renaming of South China Sea willful move, fond dream – Xinhua | English.news.cn – The Philippine government’s renaming of the waters off its west coast as the “West Philippine Sea” is a willful move and only a fond dream and will not affect China’s sovereignty over that part of the South China Sea it includes.

Information Dissemination: Five Points – China, among others, is coming to South America as we speak, indeed I fully expect China’s first carrier deployment to be to South America in early spring of 2016 – namely Brazil, not the Middle East as is commonly speculated. Brazil, India, China, and Russia are all poised for difficult, but productive decades ahead. The rise of the BRIC nations combined with an impending era defined by energy and resources – including water – of the next two decades will change the national security landscape globally. Unfortunately, every Powerpoint I have seen produced by the DoD fails to reflect what that change means to force posture, and ignores the key role South America is going to play regarding the national security landscape of the mid-term future. The time is now to start thinking about the BI in BRIC, and what they truly mean to national security for the United States in the 21st century.

Huawei, ZTE Called Uncooperative With U.S. Probe on Spying Risk – Bloomberg – “The companies refused to provide full and transparent answers to our questions, apparently because to turn over internal corporate documents would potentially violate China’s state-secret laws,” Representative Mike Rogers, chairman of the House Intelligence Committee, said at a hearing today where the companies stated their case for wider entry into the U.S. market. “This alone gives us a reason to question their independence,” he said.

Paper published by China’s Huawei decries U.S. treatment | Reuters – “Much of the evidence fueling lawmakers’ concerns remains classified,” said the heavily footnoted paper by Dan Steinbock, described as an authority on trade and investment and U.S.-Chinese relations. “However, when one set of allegations are substantiated with another set of allegations, the line between investigation and maltreatment grows thin,” the Huawei-commissioned paper said, decrying “allegations based on allegations.”

Dan Steinbock – Wikipedia, the free encyclopedia – “fellow at shanghai institutes 4 international studies”, china daily contributor. sure, dc will take him seriously

Chinese-Owned Ralls Corp. Sues U.S. Over Wind-Farm Order – Bloomberg – Ralls Corp., a holding company that controls wind-farm assets, alleged the multiagency Committee on Foreign Investment in the U.S., known as CFIUS, exceeded its authority when it ordered the company to cease operations and keep out of wind- farm development sites it had purchased, according to a lawsuit filed yesterday in federal court in Washington.

 

TECH AND MEDIA

Websites, microblog accounts closed for fraud, blackmail – Xinhua | English.news.cn – Specifically, 14 websites, including “China anti-corruption report website,” and “China news rights protection website” have been found fooling the public and threatening to reveal incriminating details about people unless they pay hush money.

百度员工有偿删帖半月赚6.7万 已被批准逮捕_DoNews – Baidu employee officially arrested for charging to delete posts

In China, iPhone Fights to Stay Cool – WSJ.com – Samsung really taking share at high end// Mr. Liang, chairman of Chinese travel website Ctrip.com, once used an iPhone. Now he uses a Samsung Galaxy Note, which he said lets him more easily peruse documents on the road, thanks to its large screen.”I’ve been seeing more middle and upper management using it as well now,” he said. “They’re probably just following the trend of executives using it.”

BBC News – Malware inserted on PC production lines, says study– In a report detailing its work to disrupt the Nitol botnet, Microsoft said the criminals behind the malicious program had exploited insecure supply chains to get viruses installed as PCs were being built.The viruses were discovered when Microsoft digital crime investigators bought 20 PCs, 10 desktops and 10 laptops from different cities in China.Four of the computers were infected with malicious programs even though they were fresh from the factory.

Alibaba Cancelled the Launch of Aliyun Phone on Google Threats-Caijing – AliCloud has partnered with a domestic phone maker K-touch, and chip company Nvidia to develop the new phone based on K-touch’s W700. According to AliCloud, one of its partners was informed by Google that if Google would dissolve partnership with the company if its new phone carries Aliyun operating system. It didn’t specify which partner but apparently it should be K-touch.

Letter from Chinese Top Web Game Companies to Citron » Citron’s Fraud – Citron may have really blown it with its focus on ARPU as key indicator of fraud// We, a group of nine Chinese gaming companies, join forces to take up Citron on its recent challenge that Qihoo’s ARPU claim of 400 RMB is fraudulent, “demonstrated” by Citron’s comparisons with other gaming companies in its reports. We prove here that Citron’s analysis lacked basic understanding of the Chinese gaming market. Citron compared different types of companies against each other, and didn’t even understand how ARPU is measured (!). We pooled our gaming statistics together to form a trusted third-party validation of gaming ARPU for Qihoo and its true peers, and we found that: 1) Qihoo’s ARPU is just about average in a group of five comparable gaming platform companies, and 2) The average ARPU of a large number of popular games on the Qihoo platform is also in line with Qihoo’s reported number. Like the earlier reports published on www.citronfraud.com, this report once again shows that Citron knows very little about Chinese market and companies, and that its analysis is as amateurish as its claims outrageous.

Under Verbal and DDoS Attack from China, Citron Seeks Retraction of “Libelous” Claims – Just as Citron’s Andrew Left told us he would do last week, he has resorted to legal channels in the bitter dispute between himself and numerous Chinese business CEOs and execs. The financial blogger and short seller has issued a demand for an apology and retraction via his lawyers, citing “libelous” allegations by the collective of tech execs, seemingly led by former Google China head Kai-Fu Lee, who set up CitronFraud.com to shoot down Andrew reports on US-listed Chinese stocks – especially tech stocks.

Neiman Marcus to Macy’s Trend Into China as Far as Web: Retail – Bloomberg – NM invested pretty much at top of recent ecommerce valuation bubble// Neiman Marcus, Macy’s Inc. (M) and Milly, the women’s clothier, are all tiptoeing into China — striking partnerships with local Web entrepreneurs because opening stores there is expensive and complicated.

 

SOCIETY AND CULTURE

High-Ranking City-Level Party Official Caught On Camera Ordering Staffers To Beat Up Journalists Beijing Cream – as bad as foreign journalists have it chinese have it worse

Rebuilding Trust in Government – Economic Observer – Summary:As early as the Qian Yunhui case, people began to say that the real facts of a case might never be known – that the truth in some instances might remain an “unfinished project.” That’s not to say that the facts of a case could never be known or that someone was intentionally trying to hide the truth, but rather that the process of trying to inform the public and of this version of events being broadly accepted by a large swathe of society had already become very difficult

The Street of Eternal Happiness: The CEO Motorcycle Gang | Marketplace.org – This is a motorcycle gang of Chinese executives and self-made millionaires. They meet for coffee here every Friday night. The Hells Angels — Chinese style. “Generally we just drink coffee and sit around and talk,” said Jim Rice. He’s the head road captain of the Harley Owners Group, Shanghai — HOGS for short. He’s the China CEO of the Dutch Food company CSM, and he’s one of the only Americans in the group. He introduces me to the rest of the gang.

 

ENERGY AND ENVIRONMENT

China rushes to build a new generation of mega-dams as thirst for power grows – Telegraph – China is rushing to build a new generation of super-dams on its rivers. The Daily Telegraph was the first Western news organisation to be given access to one of these mega-projects in Yunnan province.

One-third of China’s coal plants behind schedule-China Dialogue – Clean energy policies and high coal prices have left Chinese investors with little appetite for fossil-fuelled power plants, writes Cui Xuan

 

BOOKS

Amazon.com: Never Forget National Humiliation: Historical Memory in Chinese Politics and Foreign Relations (Contemporary Asia in the World): Zheng Wang– How could the Chinese Communist Party (CCP) not only survive but even thrive, regaining the support of many Chinese citizens after the Tiananmen Square crackdown of 1989? Why has popular sentiment turned toward anti-Western nationalism despite the anti-dictatorship democratic movements of the 1980s? And why has China been more assertive toward the United States and Japan in foreign policy but relatively conciliatory toward smaller countries in conflict? Offering an explanation for these unexpected trends, Zheng Wang follows the Communist government’s ideological reeducation of the public, which relentlessly portrays China as the victim of foreign imperialist bullying during “one hundred years of humiliation.” By concentrating on the telling and teaching of history in today’s China, Wang illuminates the thinking of the young patriots who will lead this rising power in the twenty-first century.

Never Forget National Humiliation – FT.com – The thesis of his book is that Chinese citizens are being inculcated with a powerful nationalism, based on the sense that their nation must overcome the bitter legacy of the “century of humiliation” – which ran from the first Opium War of 1840 to the defeat of the Japanese in 1945. China’s “historical memory” is key to understanding its foreign policy – in particular a determination to “stand up” to western powers and to Japan.

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is blocked by the GFW. You can also follow me on Twitter @niubi or Sina Weibo @billbishop.

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