The Sinocism China Newsletter For 10.23.12

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Beijing must be pleased. Tonight’s US Presidential debate was supposed to have a 10 minute segment on China but they barely talked about it. Governor Romney sounded much less confrontational towards Beijing (Bob Zoellick’s influence?). Romney did reiterate his crazy currency manipulation threat, but other than that he sounded a lot like….President Obama.

Interestingly, at least from a timing perspective, Paul Krugman, who previously took a very hardline on China and the RMB, today wrote that the currency is an issue whose time has passed.

In this week’s China Insider column for the New York Times Dealbook I talked about what might be in the China section of the debate:

President Obama has pursued a China policy that is broadly consistent with those followed by both Republican and Democratic administrations, and supported by most of the United States business community, for the last 30 years. If elected, Mr. Romney is unlikely to change that policy…The United States has much less leverage against China than most Americans think, and the best way for America to respond to China’s rise is not to lash out but to get our own house in order.

The Wall Street journal has a very interesting analysis of China’s resilient employment situation in an alternative look at China’s labor markets. Many have claimed that political uncertainty has kept Beijing from a launching more forceful stimulus response. The Journal’s data on the relatively healthy job market may support an alternative theory, that the lack of “panic” over the economic downturn and possible unemployment-related instability, along with resolution to push forward rebalancing, are behind the relatively muted stimulus response.

Beijing is making progress on the long-delayed and very sensitive income distribution reform plan. According to Xinhua the new policy will curb incomes in monopolized sectors:

A forthcoming income distribution scheme will regulate inappropriately high earnings in monopolized sectors in a bid to address income disparities, experts have said.  Aside from improving incomes for low-income groups, capping high wages in state-run sectors will become a focus in the reforms, Su Hainan, a former researcher with the Ministry of Human Resources and Social Security (MOHRSS), said in an interview. Su said the scheme will break monopolies by opening state-run sectors to private investors and regulate the sectors by levying higher tax rates on state-owned enterprises (SOEs) for using public resources.

Yesterday the New York Times had an interesting article on the hopes for reform under Xi Jinping. In many urge China’s next leader to press reform we learn that:

Those close to Mr. Xi who are urging reform go well beyond the usual liberal intellectual voices. They include active and retired officials, childhood friends from China’s “red nobility,” army generals and even a half-sister, Xi Qianping. Mr. Xi and his allies have dropped a few hints recently that Mr. Xi is at least open to hearing new ideas.

One political theorist said Mr. Xi, with the backing of Jiang Zemin, the former party chief, had overseen a team researching the Singapore model of governing that allows more liberal economic policies and political voices under one-party rule. Wu Si, the editor of a journal backed by liberal party elders, said that he has heard encouraging reports that “practical work on political system reform” could emerge after the transition.

I also looked at the growing pressures for reform in Candidates Debate Rise of China; China Debates Reform over at Dealbook:

Reuters has learned that Mr. Xi is seeking an ambitious economic reform agenda and canvassing advisers nationwide for ideas. The New York Times reported on Monday that Mr. Xi might be working on a reform agenda that goes beyond economics. And Chinese state media has recently run a series of articles calling for continued reform. That said, any political reform will not be toward liberal, Western democracy, and we should avoid the trap of looking for “China’s Gorbachev”.

Hu Jintao was thought to be a reformer too, although 10 years ago there was not the sense of impending crisis among the elite that there is today. The obstacles to deepening reform are significant, substantive changes will take time, and Mr. Xi and his administration may well fail, but there is at least a little more hope for change in Beijing than I have sensed in a long time.

Calling for the coming crash of China may be popular, but predicting the coming muddle-through is probably more accurate.

I know, some (many?) will say I sound hopelessly naive…

Today’s links:

BUSINESS AND ECONOMY

Chinese Money Mysteries Solved-Derek Scissors Heritage Foundation – The Wall Street Journal this week observed that money is leaving China. It has been doing so off and on since the economic crisis began, and during the last 18 months the amount of gross outflow may have been as much as $300 billion. This, however, sounds more important than it is. It certainly does not point to anything as dramatic as a Chinese collapse.

China’s Factories Losing Pricing Power in Earnings Threat – Bloomberg – Chinese factories are losing pricing power in the worst wholesale-cost deflation since 2009, signaling corporate earnings may deteriorate further and putting a damper on global inflation pressures.

China’s labor costs are now as high as Mexico’s – Quartz –

China Economic Watch | With Great Power Comes Great Responsibility – CSRC’s call for more state intervention this year is disappointing, and perhaps a step back for Guo Shuqing after implementing so many much needed reforms. Although such buybacks may have short-term benefits to investors or even make room for the listing of better performing private companies, in the long run these actions simply make investors more concerned with the decisions of regulators than the valuation of companies and undermine the effectiveness of equity markets as a source of financing in China. Perhaps this may explain why Chinese equity markets remain a minimal source of capital for the majority of firms over two decades after the opening of the Shanghai Stock Exchange.

Caterpillar On China – Business Insider – We remain very positive on long-term industry growth in China and our strategy to grow our business there. Our plans for the remainder of 2012 reflect a continued orderly ramp down of production that considers our entire supply chain in China. Given the current low rate of sales and the production ramp down, it will likely take the rest of 2012 and continuing into 2013 to reduce inventory to levels more in line with sales.

Local Chinese Govts Toughens Housing Policies on Higher Prices Expectations-Caijing – Local governments in several major Chinese cities are getting tough on the property markets under increasing pressures from higher house prices. Shaanxi provincial government recently asked property developers to keep the profit ratio for every single house below 10%.

Below-Belt Blows in Kungfu Restaurant Battle – Caixin- The crestfallen former chairman of fast-food restaurant giant Kungfu Catering Management Co. Ltd. is awaiting a verdict after a trial on corporate embezzlement charges apparently instigated by his former business partner’s wife.

证监会等10部门发文制止寺庙道观上市_要闻公告_新浪财经_新浪网 – CSRC and other departments issue notice banning temples/monasteries from listing shares on public markets

又见“三角债”_杂志频道_财新网 – Caixin on the return of triangle debt// 工业企业主营业务收入和应收账款净额的增速出现逆转,后者明显高于前者,且差距有拉大趋势

冯小刚电影:华谊文化地产的现金流之压|冯小刚|电影|华谊_21世纪网 – the theme park real estate scam is back..feng xiaogang now doing one in hainan

深圳房地产行业“潜规则”:部分建筑企业靠出借资质为生_财经频道_一财网 – disturbing piece on “unwritten rules” in shenzhen real estate business

经济参考网-前三季度地方非税收入大增 罚没收入成一些地方“增收挖潜”途径 – local governments desperate for money, relying more and more on fines// 今年以来,多地纷纷将非税收入尤其是罚没收入作为财政“增收挖潜”的重要途径。社科院数量经济与技术经济研究所副所长李雪松对此表示,特别要防止各地方为了完成增收目标而出现加强财政收入征管的超常情况,防止征收“过头税”,以避免将结构性减税的效应抵消掉。

 

POLITICS AND LAW

Jiang Zemin Resurfaces as China’s Communist Congress Approaches – Bloomberg – Jiang’s most prominent protege is Xi, the current vice president who is set to succeed President Hu Jintao as general secretary at the congress beginning Nov. 8 and assume the mantle of president next year, according to Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong. Other proteges include Chongqing Party Secretary Zhang Dejiang and head of propaganda Liu Yunshan, he said.

China Focus: CPC to amend Party Constitution at 18th National Congress – Xinhua | English.news.cn – The Political Bureau of the CPC Central Committee decided to submit a draft amendment for the CPC Constitution to the seventh Plenum of the 17th CPC Central Committee for further discussion on Nov. 1 before it will be tabled for the national congress.

中共中央政治局召开会议 研究拟提请十七届七中全会讨论的文件 – 高层动态 – 新华网 –

CPC to amend Party Constitution – Xinhua | English.news.cn – The Communist Party of China (CPC) is going to amend the Party Constitution at its upcoming 18th National Congress scheduled for Nov. 8, according to a meeting of the Political Bureau of the CPC Central Committee on Monday.

Deadly Ferrari Crash Puts New Focus on China Leaders – WSJ.com – interesting story, some bits differ from prior south china morning post and asia weekly stories on the subject// Ling Gu started a club at the university loosely modeled on Skull and Bones, the Yale secret society, say students who recall him discussing it. He invited other well-connected students or ones with top grades to join, but, knowing that Chinese authorities didn’t tolerate secret societies, he gave the club an official-sounding name: the Strategic and International Studies Council.

Web China: Gov’t official’s alleged bribery uncovered by netizens – Xinhua | English.news.cn – A government official in Guangzhou, capital of south China’s Guangdong Province, has been removed from his post after investigators found that his lifestyle, including his ownership of 22 homes, far outpaced his salary, according to a Monday announcement from the city’s commission for discipline inspection.

浙江政协委员身陷12亿欧元洗钱案|浙江|政协委员|身陷_21世纪网 – zhejiang provincial legislator caught in spanish money laundering case// 核心提示:浙江省政协委员、知名华商高平10月21日在西班牙被当地警方正式拘捕。根据拘捕令,高平等人涉嫌有组织犯罪、洗钱、偷税漏税、恐吓、侵犯公民权利等13宗罪名,高平本人被指控为“黑帮头目”。

铁路部门:进京进疆进藏列车将全部实名制验证_网易新闻中心 – starting today, ID checks for all train travelers to xinjiang, tibet and beijing..for real this time

 

FOREIGN AND DEFENSE AFFAIRS

Marching order: photos give clue to next military line-up-The Age-John Garnaut – political analysts believe they have gleaned the outlines of China’s future military leadership from the order in which they were photographed after an evening at a Beijing theatre on Saturday night. If the political analysts and theatre critics are right, one of the People’s Liberation Army’s most pivotal positions, Director of the General Political Department, will go to a dark horse candidate, General Zhang Yang, who is currently Political Commissar of the Guangzhou Military Region.

Two generals in line for Central Military Commission | South China Morning Post – CCTV’s military channel reported on Sunday that Zhang, in his new capacity as the PLA’s top political commissar, accompanied General Xu Caihou, a CMC vice-chairman, to a play in Beijing on Saturday evening…Zhang’s promotion also signals two former front runners for CMC membership – General Liu Yuan, 61, political commissar of the PLA’s General Logistics Department, and General Zhang Haiyang, 63, political commissar of the PLA’s strategic missile forces – have been virtually eliminated from contention

军队调整多名高级将领职务 _政经频道_财新网 – 马晓天任空军司令员,田修思任空军政委,王冠中任副总参谋长,朱福熙任成都军区政委

解放军高层近期密集调整 情报官员多被外调重用_新闻_腾讯网 –

解放军中将谷俊山涉贪移交司法_多维新闻网 – 【多维新闻】duowei reports gen gu junshan has been turned over to judiciary for prosecution// 解放军总后勤部原副部长谷俊山中将贪腐违纪案已完成侦查,进入司法程序。据香港媒体报道,中央军委纪检委审查认定谷违法违纪的事实,近日把他移交军方司法机关。总后军事检察院消息称,谷案尚未到起诉阶段,在中共十八大前料无法结案

U.S. delegation not entitled to China-Japan mediation: FM – Xinhua | English.news.cn– A U.S. delegation currently visiting Beijing is not entitled to mediate between China and Japan over the Diaoyu Islands dispute, a Foreign Ministry spokesman clarified on Monday. “The delegation is visiting China at the invitation of the Chinese People’s Institute of Foreign Affairs (CPIFA),” Hong Lei said at a regular news briefing in response to a question on the mission of the group, which includes former U.S. national security adviser Stephen Hadley.

专家呼吁:思科可能威胁中国网络安全_思科 网络安全 报道_安全资讯_eNet硅谷动力安全频道 – Chinese experts call for investigation of Cisco on security grounds

2nd icebreaker enters detail design phase |Sci-Tech |chinadaily.com.cn – The basic design of the icebreaker, China’s second after the Ukraine-imported Xuelong, was done by the Finland-based Aker Arctic Technology Inc..As the new icebreaker will go into operation in 2014, it will join the Xuelong for polar expeditions

Arctic thaw brings new security worries – Los Angeles Times – “Does the Navy have the ability to go up and operate a number of ships, a number of aircraft, for a sustained period of time in this environment, where it’s cold, it’s got bad weather, it’s got a lot of ice, and it’s really far away from everything that supports you? What we found is that the answer is, not really,”

Desperately Seeking City | ChinaFile Beta – Sister cities are serious in China; they’re international collector’s stamps—like UNESCO World Heritage Sites (forty-two and counting) and Olympic gold medals (thirty-eight in London)—showcasing the nation’s culture and development at once. To a child’s eye, they are, after all, for our friendship. So I drop the sense of wizened expat irony and do as the tour guide has asked, explaining to the children, in Minnesota-accented Mandarin, how Mill City life on the mixixibi (Mississippi) river is illustrated by the displayed box of Pillsbury Funfetti brownie mix

Tougher penalties mapped out to fight illegal surveys |Politics |chinadaily.com.cn – Foreigners carrying out illegal surveys, mapping without permission or marking the location of key facilities without authorization, will face tougher penalties amid measures to enhance security of strategic areas.

曾怒斥克林顿的北大女被美国老公抛弃_财经频道_一财网 – Ma Nan, Beida student who berated President Clinton over human rights during his 1998 visit to China, had nasty divorce with her American husband, who has now broken the custody agreement and run off with their kid

Australian mayor to investigate China bribes – Australia Network News – ABC News (Australian Broadcasting Corporation) –haha//  The mayor of Melbourne will request a police inquiry into allegations Chinese investors have tried to bribe councillors in return for help with planning favours.

Online tools to skirt Internet censorship overwhelmed by demand – The Washington Post – Activists and nonprofit groups say their online circumvention tools, funded by the U.S. government, are being overwhelmed by demand and that there is not enough money to expand capacity.

RealClearWorld – Obama’s China Policy Is a Massive Failure-Friedberg – Nowhere does Friedberg explain what leverage the US actually has. Classic neocon argument, long on threats, short on realistic measures

 

TECH AND MEDIA

National Cable Operator to Launch in November – Caixin – Preparation for company that will provide high-speed Internet, TV and radio via one terminal is in final stages

 

SOCIETY, ART, CULTURE AND HISTORY

The Street of Eternal Happiness: Mr. Qiu meets the President | Marketplace.org– Nixon was headed to the Street of Eternal Happiness. That’s where he and Chinese Premier Zhou En-Lai would sign the Shanghai Communique — the first step in opening up trade between the United States and China.They signed it at Street of Eternal Happiness number 175, the Jinjiang Hotel, an old brick building that looks the same today as it did decades ago. Qiu Huanxi was 24 years old back then. He worked the hotel’s service counter, a job that paid him $4 a month

The best way to see this daily post is to subscribe by email. You can also follow me on Twitter @niubi or Sina Weibo @billbishop

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