The Sinocism China Newsletter For 10.10.12

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

Chinese investors pushed Chinese stocks to a three-week high on market support optimism (Bloomberg). First Financial has confirmed that the CSRC and SASAC have “encouraged and supported” central State-owned enterprises and other listed firms to buy back shares. Sinocism noted on September 29 that China’s Securities Regulatory Commission had called for market stability during the 18th Party Congress period-证监会部署十八大维稳工作 要求确保市场稳定 _一财网.

The $42 Billion “injection” by the PBOC (WSJ) could not have hurt A Shares and, after a discount to its pre-marketing range, China Molybdenum tripled in its Shanghai debut (Reuters).

The Chinese stock markets are amenable to manipulation, and Beijing is signaling it does not want the Shanghai index to drop below 2000. Economic fundamentals may not be that important to market performance in the near-term. Traders “buck Beijing” at their peril.

Yesterday I mentioned a Foreign Policy essay by Romney adviser Robert Zoellick–The Currency of Power:

Yet ever since the rise of “national security” as a concept at the start of the Cold War, economics has become the unappreciated subordinate of U.S. foreign policy. Today, the power of deficits, debt, and economic trend lines to shape security is staring the United States in the face. Others see it, even if America does not.

Aaron Friedberg, a fellow, rival Romney advisor and one of the neocons likely in Zoellick sights, has an article on The Diplomat arguing that America Cannot ‘Lead From Behind’ in Asia. Friedberg writes that:

As China grows stronger other countries are going to have to work harder to preserve a balance of power that safeguards their interests and helps keep the peace.  Taken together, the United States and its Asian friends and allies have more than sufficient means to maintain such a balance.  But if Washington wants others to do their part it needs to stand firm in its dealings with Beijing.  Even more important, it needs to make costly, long-term investments in the military capabilities that will be needed to counter China’s own.  When it comes to Asia, the United States does not have the option of leading from behind.

Friedberg offers no explanation of how the US can pay for these investments, nor has he in previous writings on this topic, such as in his Bucking Beijing: An Alternative U.S. China Policy in the latest issue of Foreign Affairs.

Sam Crane offers a cogent rebuttal to Friedberg in Actually, America Must “Lead from Behind” in East Asia, including:

But there is a bigger issue here, one that Friedberg elides, and that is the clear limitation of US power.  Neocons – and Friedberg is, at least, a fellow neocon traveler from his days as Dick Cheney’s foreign policy guy – never want to recognize that the US is limited in what it can do in the world.  They have not learned from the failure in Iraq.  And the failure to manage regime change there came well before the financial crisis of 2008, which has cut the economic rug out from under US power more generally.  Friedberg seems oblivious to the new global (it is not just a US problem!) economic realities.

No one should pretend that current trends do not point to serious strategic competition or worse between the US and China, and so the US must prepare. But do Americans want to live in a near-bankrupt, militarized state with a Gini coefficient approaching .5 (Bloomberg)?

China Gets Back to Work is my debut column for the New York Times Dealbook. I will contribute a weekly, exclusive version of Sinocism. From today’s:

Betting against the party’s staying power has proved to be a poor wager, but one wild card may be that in previous crises the party had an almost total monopoly on information flow and so had time to perfect a propaganda response. China is now in the microblogging-era of instantaneous information dissemination and discussion, making the party’s job more difficult, though far from impossible. Expect Mr. Xi to move quickly to project confidence and commitment to reform.

Happy 101st birthday to the Republic of Taiwan.

Today’s Links:

BUSINESS AND ECONOMY

经济新阶段_杂志频道_财新网 – long, interesting piece in Caixin about the next stage of China’s economic transition and growth,by Shao Ning, Vice Director and Deputy Party Secretary of SASAC// 中国经济整体和中国企业面临两个重大挑战:发展的核心问题是产业升级问题;挑战主要是制造业在目前产业层次上生产能力过剩的问题

中移动1800亿启动4G建设 新华社——经济参考网 – China Mobile has embarked on a 180 Billion RMB (28Bish USD) buildout of 4G network

新一轮“汽车下乡”政策有望近期出台 – new stimulus coming in form of discounts for cars and electronics sales into rural areas?

万科9月拿地金额创新高 招商保利销售超去年 – Vanke makes record land purchases in September. Vanke is a very connected real estate firm that has shown an uncanny sensitivity to policy trends. Or are these purchases driven solely by declining inventory and bargain prices?

Existing Beijing home sales exceed 100,000 units – Xinhua | English.news.cn – Driven by a housing market rebound, the sales in units were up 6.4 percent from a year ago, real estate agency Centaline Property revealed on Tuesday.

For Subway Projects, a Costly Ticket to Ride – Caixin – Dozens of urban transit projects won Beijing’s backing this year, but local governments need ways to pay

Port eyes big jump in cargo volume |Industries |chinadaily.com.cn – Qingdao port, the world’s seventh-busiest by cargo volume in 2011, expects to see its cargo volume increase in double digits this year.

How a Downshift in China Could Hurt GM, VW and Toyota – Corporate Intelligence – WSJ – that different from the US auto industry look like in its few decades? and remember, more and more local governments are repressing demand by limiting monthly sales to deal with traffic and environmental issues// A prolonged slowdown in the growth rate of Chinese auto sales – let alone a real contraction – will expose how oversupplied with car factories and car brands China has become, says John Humphrey, an analyst with the consulting and market research firm J.D. Power and Associates…China has about 95 different automotive brands, he says…The structure of China’s auto market, he says, is in many ways like the United States in the early 20th Century, where dozens of automotive brands fought and died

Cummins Engine Lowers Outlook Due To China – Business Insider – Demand in China has weakened in most end markets and we have also lowered our forecast for global mining revenues. EBIT margins will also be below our previous guidance primarily due to the sharp reduction in revenues.”

LIVE: Yum Announces Earnings! – Business Insider – “In China, our category-leading brands and competitive positions are stronger than ever. China system sales grew 22% as we opened 192 new restaurants and delivered same-store sales growth of 6%; operating profit grew 22%, prior to foreign currency translation. Importantly, China restaurant margin performance improved dramatically from the second quarter, once again demonstrating the ongoing strength of our business model. This strong performance, combined with our new expectation to open over 750 high-return new restaurants this year, further demonstrates why we are so confident in the long-term growth of our China business.”

Worries Over China ‘Overblown,’ Manufacturing Analyst Says – China Real Time Report – WSJ– Is China facing economic ruin? Fortunately, the short answer is “no” —- at least according to AsiaInspection, publisher of a quarterly report on Asia-based manufacturing and quality control.

Rio Tinto wary on China growth, speeds up cost cuts | Reuters – Rio Tinto cut its forecast for Chinese economic growth to just below 8 percent, from 8 percent previously, in line with the International Monetary Fund’s revised forecast on Tuesday.

China to send deputy finance minister to IMF Tokyo meet amid island spat | Reuters – at least they are going//According to Chinese protocol, only the most senior officials usually lead such trips, but the report said China’s deputy central bank governor and vice finance minister would be leading the central bank’s delegation later this week instead.

Chinese Firms Take Lonely Buyout Path – Deal Journal – WSJ– As Chinese companies listed in the U.S. are battered by corporate-governance concerns and general investor wariness, a growing number are being delisted and taken private. But in more than half the cases, these moves are driven by the company’s chairman, rather than private-equity firms, the traditional sources of funding for such activity.

Reform of Limited Property Rights Housing in Dilemma-Caijing – Due to its monopoly of the primary land market, the government can acquire rural collective land at low cost and sell it at inflated prices later after converting it into state-owned land, thereby gaining greatly from the gap between market prices for land and the compensation paid to farmers for land use. Once the land generates revenue, the government then balances land revenues to invest in public

re: The Auditors » Blog Archive » Casino Industry Suffering From China Denial Syndrome– U.S. based casino companies are accustomed to extra scrutiny from law enforcement because they operate a high risk, high reward business that’s been connected to a fair share of nefarious characters in the past. But U.S. casino companies doing business in China, in particular, and new media companies like Facebook and Zynga that actively seek to enter the online casino gaming business in the U.S. and abroad, present additional risks of fraud, bribery and other illegal acts given the nature of the business, where they’re gong to be doing much of it and the type of people they have to do that business with. Investors should be wary of investing in any U.S. companies with significant operations in China because those operations are immune to the jurisdiction of the SEC and Department of Justice and their auditor is not inspected by the PCAOB.

 

POLITICS AND LAW

A Legal Limbo in Criminal Procedure Law – – (Beijing) – On the surface, the dust has settled on the recently-revised Criminal Procedure Law approved by the National People’s Congress (NPC) last March.  However, a tug-of-war on this controversial piece of legislation has only begun on the hidden battleground of judicial interpretation, which is expected to be unveiled in October and implemented in January of next year.

Full Text: Judicial Reform in China – Xinhua | English.news.cn – The Information Office of the State Council published Tuesday a white paper on the judicial reform in China.

陕西“表哥”存款涉20多家银行 纪委正在核实_财经频道_一财网 – “Watch Brother” Shaanxi official has 20 bank cards?

 

FOREIGN AND DEFENSE AFFAIRS

China boosts economic diplomacy |Politics |chinadaily.com.cn – The Ministry of Foreign Affairs on Tuesday established the Department of International Economic Affairs to serve economic diplomacy, which is increasingly important in China’s diplomatic blueprint.

China Voice: U.S. should walk the talk – Xinhua | English.news.cn– The U.S. report unmasks the lies of the Japanese government, which has illegally seized the Diaoyu Islands and claimed them as its own. Its so-called “nationalization” of the islands and intention to resort to international rule of law for justification last month is pure hypocrisy and farce. However, the recent deployment of two U.S. aircraft carriers to the Western Pacific in light of the tension between China and Japan is giving the wrong signal to Japan.

Zhong Sheng-Japan should get used to China’s Diaoyu patrols – People’s Daily Online – China has maintained a group of fishery administration and ocean surveillance ships in waters just off the Diaoyu Islands during the Mid-Autumn Festival and National Day holidays, in order to safeguard its rightful sovereignty over the islands. Japan is not used to this

“The headline speaks to the Chinese people’s heart!”: Zhong Sheng on Diaoyu patrols, gets a Phoenix twist « southseaconversations 讨论南海 – “Zhong Sheng” repeatedly claimed that the patrols were regularized and would not go away, but in so doing, effectively admitted that China had changed the status quo on the waters out there: “Japan is not accustomed to this . . . Japan must learn to adapt to these regular actions of China.” In fact, the writer(s) even went one step further in this direction, nominating the specific date for one significant change in PRC policy

China’s first aircraft carrier celebrates National Day – People’s Daily Online – the liaoning in purple neon lights

After U.S. Intel Report on Huawei, Chinese Netizens Call For Apple, Cisco Investigation | Tea Leaf Nation – By day’s end, Editor Hu Xijin (@胡锡进) of the hard-line Global Times had published what he called an “editorial call[ing] for China to take protection of its corporations seriously and not be afraid to take revenge against such actions. China has to make America and Europe understand that if Chinese companies encounter injustice on their turf, some of their companies will become scapegoats in China.”

Fei Chang Dao: China Says United Nations Best Forum for Internet Governance– Huang said that there were three ongoing controversies regarding Internet security: Certain countries are using “Internet freedom” as an excuse to interfere with other countries’ internal affairs. Certain countries are using their technological advantages to militarize cyberspace. The United States and other countries are dominating the current Internet governance mechanisms.

China cyberspies suspected in new caper: what has experts worried – CSMonitor.com – A China-based cyberespionage gang has been linked to the infiltration of networks belonging to Telvent Canada, a major industrial control system company, in a case that some experts warn could facilitate creation of a dangerous cyberweapon.

Huawei hullabaloo hides Chinese minnows – FT.com – They were looking at a range of companies which, should deals be struck, are unlikely to trigger security concerns in Washington. Potential targets included Eric Buell Racing, a high-performance motorcycle maker, and AquaMost, a water treatment technology developer.

Romney Put Profits From China Ahead of Security for America – YouTube – Huawei and Bain Capital, new attack ad from Obama campaign

U.S. Government vs. Huawei, ZTE: This Was Doomed From the Start | China Hearsay – the Committee simply must require that these companies meet certain transparency standards. The U.S. government can not mandate one level of transparency for a U.S. company but allow a lower standard for a Chinese company simply because the system over here in China is different. Even if we assume the best of intentions to the Committee, once the scope of its inquiry was determined, there was simply no chance that this exercise was going to end well for Huawei and ZTE.

 

HONG KONG AND TAIWAN

Taiwan Says Apple Maps Has Revealed Its $1.2 Billion Top-Secret Radar Base – Business Insider –

 

TECH AND MEDIA

凤凰文化传媒基金 Phoenix Media Fund – Phoenix Media Fund is dedicated to investing growth capital in media and culture companies in China. Our diverse management team is comprised of individuals with a proven track record of private equity fund management in China as well as many years of media experience. The team’s local knowledge, deep industry understanding, and powerful network of connections set Phoenix Media Fund apart.

 

SOCIETY, ART AND CULTURE

人民网评:汽车文明需要严峻执法–观点–人民网 – new traffic rules, new push for “auto civilization”, this one on people’s daily online calling for strict enforcement of traffic laws…

Modern Chinese Kids Are Using Expensive DSLR Camera » M.I.C. Gadget – Leica loves China. Fancy camera w long…lenses a popular plaything with rich chinese guys

 

FOOD AND TRAVEL

Tasting and touring in Ningxia: A dozen pics from Jancis Robinson’s China trip | Grape Wall of China – This was not only the first time Robinson visited Ningxia but also the first time Ningxia hosted such a high-profile critic. As well as tasting 39 wines for the Ningxia Wine Awards, Robinson spent a day touring vineyards and wineries, from those with more than a decade in the business to those with facilities under construction and yet-to-be-planted fields, part of a plan to increase coverage by ~60,000 hectares.

 

BOOKS

To sell books to China, foreign publishers may have to play by its rules — paidContent – One country that can be particularly challenging, but also particularly rewarding, is China — the largest publishing industry in the world, and the focus of this year’s meeting. “This market more than pays off the time and effort if you are willing to invest in it,” said Lynnette Owen, copyright director at Pearson Education in the UK. Wuping Zhao, VP of Shanghai Translation Publishing House, outlined the lucrative opportunities for foreign publishers who want to sell translated titles in China

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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