Today’s China Readings June 10, 2012

China released May data for several key economic indicators over the weekend. The economy is clearly struggling. As Bloomberg reports in China’s Slowing Inflation, Output Growth Add Stimulus Pressure:

China’s consumer prices rose the least in two years in May and industrial output and retail sales trailed estimates, adding pressure for more stimulus after the first interest-rate cut in three years.

“These data should defeat any remaining complacency that the policy response has been adequate to maintain steady growth,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing in the Chinese economy.”

James Fallows, writing in response to a colleague’s scaremongering post Time to Panic: Today’s China Looks Scarily Like 2006 America, argues in For the Record: China in 2012 Is Not Like America in 2006 that:

“Weakness,” yes. Danger, concern, possible dragging of the world into another long slowdown — yes in all cases. But “2006,” “panic,” and “scarily” all suggest the risk of another cascading round of Lehman-style collapses, and that is not the sort of danger the Chinese situation now poses. Read the item, but skip the headline.”

The cover of the May 26 Economist magazine asks “How Strong is China’s Economy?”. As I wrote in late May, the answer the Economist provides in that issue’s special report on China’s economy did not please the thundering herd of ursus sinica. The magazine wrote that:

China’s economy will not crash. Like the high-wheeled penny-farthing, which rolled serenely over bumps in the road, it is good at absorbing the jolts in the path of any developing country. The state’s influence over the allocation of capital is the source of much waste, but it helps keep investment up when private confidence is down. And although China’s repressed banking system is inefficient, it is also resilient because most of its vast pool of depositors have nowhere else to go.

No one paying attention disputes that China’s economy has serious issues. But some of the increasingly giddy bears look to be overstating their doomsday scenarios. I find it noteworthy that many vocal China bears, and much of the sensationalistic financial blogosphere, chose to avoid mentioning the Economist’s work.

Charges that China, and specifically Huawei, have built backdoors into telecom gear continue, this time coming from Lignet (The Langley Intelligence Group Network), a DC area research and consulting firm. Lignet’s F. Michael Maloof writes in a recent note that:

Chinese companies apparently have a covert capability to remotely access communications technology sold to the United States and other Western countries and could “disable a country’s telecommunications infrastructure before a military engagement,” according to former and current intelligence sources.

The Chinese also have the ability to exploit networks “to enable China to continue to steal technology and trade secrets,”

The Lignet guys may or not have accurate information, but regardless of their agenda there are enough people who want to believe that Huawei is a national security threat so as to render Huawei’s US efforts hopeless, as I wrote last year in response to attacks on Texas Governor Rick Perry for ties to Huawei:

Huawei has hired Burson-Marsteller to perform a corporate image makeover, including generating warm and fuzzy articles like Bloomberg Businessweek’s recent At Huawei, CTO Matt Bross Tries to Ease U.S. Security Fears. The firm has also ramped its DC lobbying efforts, all to no avail. CFIUS and the military/intelligence services are unlikely to be swayed by Huawei’s lobbying and public relations dollars.

For a reminder that the world can be fun, check out this Head-Cam Footage of a Child Playing Hide and Seek.

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The best way to see this blog is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. The email signup page is here, outside the GFW. You can also follow me on @niubi or Sina Weibo @billbishop. Comments/tips/suggestions are welcome, and feel free to forward to recommend to friends. Thanks for reading.

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