Does the Future Belong to China?

African Herbsman · Dec 9, 2005

Re: How is the West influencing China's future?

China Police Kill As Many As 10 Protesters

By AUDRA ANG, Associated Press Writer 1 hour, 12 minutes ago

BEIJING - Armed with guns and shields, hundreds of riot police sealed off a southern Chinese village after fatally shooting as many as 10 demonstrators and were searching for the protest organizers, villagers said Friday.

It was the deadliest known use of force by security forces against Chinese civilians since the killings around Tiananmen Square in 1989, and marked an escalation in the social protests that have convulsed the Chinese countryside.

During the demonstration Tuesday in Dongzhou, a village in southern Guangdong province, thousands of people gathered to protest the amount of money offered by the government as compensation for land to be used to construct a wind power plant.

Police started firing into the crowd, killing as many as 10 people, mostly men, and wounding up to 20, villagers reached by telephone said Friday. They said many remained missing.

Although security forces often use tear gas and truncheons to disperse demonstrators, it is extremely rare for them to fire into a crowd — as the military did in putting down pro-democracy demonstrations around Tiananmen Square, when hundreds, if not thousands, were killed.

State media have not mentioned the incident and both provincial and local governments have repeatedly refused to comment. This is typical in China, where the ruling Communist Party controls the media and lower-level authorities are leery of releasing information without permission from the central government.

The number of protests in China's vast, poverty-stricken countryside has risen in recent months as anger comes to a head over land seizures, corruption and a yawning wealth gap that experts say now threatens social stability. The government says about 70,000 such conflicts occurred last year, although many more are believed to go unreported.

The clashes also have become increasingly violent, with injuries sustained on both sides and huge amounts of damage done to property as protesters vent their frustration in face of indifferent or bullying authorities.

All the villagers reached by The Associated Press said they were nervous and scared, and most did not want to be identified for fear of retribution. One man said the situation was still "tumultuous."

A 14-year-old girl said a local official visited the village Friday and called the shootings "a misunderstanding."

"He said he hoped it wouldn't become a big issue," the girl said by telephone. "This is not a misunderstanding. I am afraid. I haven't been to school in days."

She added: "Come save us."

Another villager said there were at least 10 deaths. "The riot police are gathered outside our village. We've been surrounded," the woman said, sobbing. "Most of the police are armed. We dare not go out of our home."

"We are not allowed to buy food outside the village. They asked the nearby villagers not to sell us goods," she said. "The government did not give us proper compensation for using our land to build the development zone and plants. Now they come and shoot us. I don't know what to say."

One woman said an additional 20 people were wounded.

"They gathered because their land was taken away and they were not given compensation," she said. "The police thought they wanted to make trouble and started shooting."

She said there were several hundred police with guns in the roads outside the village Friday. "I'm afraid of dying. People have already died."

"These reports of protesters being shot dead are chilling," Catherine Baber, deputy Asia director at Amnesty International, said in a statement. "The increasing number of such disputes over land use across rural China, and the use of force to resolve them, suggest an urgent need for the Chinese authorities to focus on developing effective channels for dispute resolution."

Amnesty spokeswoman Saria Rees-Roberts said Friday in London that although she did not want to compare Tuesday's clashes with Tiananmen Square, "police shooting people dead is unusual in China and it does demand an independent investigation."

Like many cities in China, Shanwei, the city where Dongzhou is located, has cleared suburban land once used for farming to build industrial zones. State media have said the Shanwei Red Bay industrial zone is slated to have three electricity-generating plants — a coal-fired plant, a wave power plant and a wind farm.

Shanwei already has a large wind farm on an offshore island, with 25 turbines. Another 24 are set for construction.

Earlier reports said the building of the $743 million coal-fired power plant, a major government-invested project for the province, also was disrupted by a dispute over land compensation.

Authorities in Dongzhou were trying to find the leaders of Tuesday's demonstration, a villager said.

The man said the bodies of some of the shooting victims "are just lying there."

"Why did they shoot our villagers?" he asked. "They are crazy!"

Greed · Dec 22, 2005

China and OPEC start energy dialogue

China and OPEC start energy dialogue
Thu Dec 22,12:38 PM ET

BEIJING (AFP) - China and the Organization of Petroleum Exporting Countries ( OPEC) started an energy dialogue aimed at ensuring a steady supply for the world's fastest growing energy user, officials said.

OPEC president Sheikh Ahmad Fahd al-Sabah, who is also Kuwait's energy minister, met Chinese Vice Premier Zeng Peiyuan and Mai Kai, head of China's key economic planning body, the National Development and Reform Commission.

In a joint statement, Beijing and OPEC said they had established a future cooperation framework and exchanged views on energy issues -- "in particular, the security of supply and demand, in order to enhance market stability."

"China's economic growth requires secure, steady supplies of energy, while OPEC's crude oil reserves and production are expected to continue growing, ensuring that there will be enough oil to meet rising world demand for decades to come," the statement said.

OPEC -- which groups Saudi Arabia, Iran, Venezuela, Kuwait, the United Arab Emirates, Iraq, Nigeria, Libya, Indonesia, Algeria and Qatar -- now faces stronger competition than ever in China from non-OPEC suppliers.

Kazakhstan last week launched a new 806-million-dollar oil pipeline to China that symbolizes Beijing's growing influence in ex-Soviet Central Asia.

China has also been pressing Russia, its largest non-OPEC supplier, to work toward an early agreement on a oil pipeline from Siberian oil fields to China.

Russia delivered 5.8 million tons of crude by rail to China last year, and that amount is set to reach 8.0 million tons this year.

Asked about his view on the competition, Sheikh Ahmad said the purpose of the dialogue with China was not to increase OPEC's market share in China, but to secure supply and to provide an environment for stable oil prices.

"We're not looking for a bigger market but we're looking for cooperation (between) OPEC and consumers to secure the supply," he told reporters.

"We're happy that China has good relations with Russia and Kazakhstan ... to be their main suppliers for their demand."

"We believe, as OPEC, we'll do our best to make reasonable prices, but the main goal for us is to secure the supply for the demand, now and in the future.

"We believe OPEC, non-OPEC, even the consumers and the international oil companies should work together to secure the supply and jointly to invest in the downstream to raise the capacity ... which is very important for (making) the prices more stable."

Before he left for Beijing, he had said the group's first talks with China, the world's second-largest oil consumer, would focus on China's future demand.

"We want to know ... China's future requirements for energy and its investments in refineries and refining capacity," Sheikh Ahmad had said.

Sheikh Ahmad also said earlier he would complete negotiations in China that began in Kuwait two weeks ago for the construction of a five-billion-dollar refining and petrochemicals complex in southern Guangdong province.

On December 5, the two countries signed a memorandum of understanding for the project that includes building a refinery with a capacity of between 200,000 and 400,000 barrels per day.

http://news.yahoo.com/s/afp/2005122...4SFOrgF;_ylu=X3oDMTBiMW04NW9mBHNlYwMlJVRPUCUl

QueEx · Jan 11, 2006

Re: China and OPEC start energy dialogue

<center>Dissecting the 'Chinese Miracle'
just like the phoenix,
the idea of an inevitable Chinese juggernaut is a myth</center>
STRATFOR
By Peter Zeihan
January 10, 2006

The "Chinese miracle" has been a leading economic story for several years now. The headlines are familiar: "China's GDP Growth Fastest in Asia." "China Overtakes United Kingdom as Fourth-Largest Economy." "China Becomes World's Second-Largest Energy Consumer." "China Revises GDP Growth Rates Upward -- Again." Everywhere, one can find news articles about China, rising like a phoenix from the economic debris of its Maoist system to change and challenge the world in every way imaginable.

But just like the phoenix, the idea of an inevitable Chinese juggernaut is a myth.

Moreover, Western markets have been at least subconsciously aware of this for a decade. More than half of the $1.1 trillion in foreign direct investment that has flowed into China since 1995 has not been foreign at all, but money recirculated through tax havens by various local businessmen and governing officials looking to avoid taxation. Of the remainder, Western investment into China has remained startlingly constant at about $7 billion annually. Only Asian investors whose systems are often plagued (like Japan's) by similar problems of profitability or (like Indonesia's) outright collapse have been increasing their exposure in China.

Once the numbers are broken down, it's clear that the reality of China does not live up to the hype. While it is true that growth rates have been extremely strong, growth does not necessarily equal health. China's core problem, the inability to allocate capital efficiently, is embedded in its development model. The goals of that model -- rapid urbanization, mass employment and maximization of capital flow -- have been met, but to the detriment of profitability and return on capital. In time, China is likely to find itself undone not only by its failures, but also by its successes.

The Chinese Model

Until very recently, China's economic system operated in this way:

State-owned banks held a monopoly on deposits in the country, allowing them to take advantage of Asians' legendary savings rate and thus ensuring a massive pool of capital. The state banks then lent to state-owned enterprises (SOEs). This served two purposes. First, it kept the money in the family and assisted Beijing in maintaining control of the broader economic and political system. Second, because loans were disbursed frequently and at subsidized rates -- and banks did not insist upon strict repayment -- the state was able to guarantee ongoing employment to the Chinese masses.

This last point was -- and remains -- of critical importance to the Chinese Politburo: they know what can happen when the proletariat rises in anger. That is, after all, how they became the Politburo in the first place.

The cost of keeping the money circulating in this way, of course, is that China's state firms are now so indebted as to make their balance sheets a joke, and the banks are swimming in bad debts -- independent estimates peg the amount at around 35-50 percent of the country's GDP. Yet so long as the economic system remains closed, the process can be kept up ad infinitum: After all, what does it matter if the banks are broke if they are state-backed and shielded from competition and enjoy exclusive access to all of the country's depositors?

This system, initiated under Deng Xiaoping in 1979, served China well for years. It yielded unrestricted growth and rapid urbanization, and helped China emerge as a major economic power. And so long as China kept its financial system under wraps, it would remain invulnerable.

But the dawning problem is that China is not in its own little world: It is now a World Trade Organization member, and nearly half of its GDP is locked up in international trade. Its WTO commitments dictate that by December, Beijing must allow any interested foreign companies to compete in the Chinese banking market without restriction. But without some fairly severe adjustments, this shift would swiftly suck the capital out of the Chinese banking system. After all, if you are a Chinese depositor, who would you put your money with -- a foreign bank offering 2 percent interest and a passbook that means something, or a local state bank that can (probably) be counted on to give your money back (without interest)?

The Chinese are well aware of their problems, and perhaps their greatest asset at this point is that -- unlike the Soviets before them -- they are hiding neither the nature nor the size of the problem. Chinese state media have been reporting on the bad loan issue for the better part of two years, and state officials regularly consult each other as well as academics and businesspeople on what precisely they should do to avert a catastrophe.

The result has been a series of stopgap measures to buy time. Among these, the most far-reaching initiative has been a partial reform of the financial sector. The government has founded a series of asset-management companies to take over the bad loans from the state banks, thus scrubbing them free of most of the nonperforming loans. The scrubbed banks are then opened up so that interested foreign investors can purchase shares.

So far as it goes, this is a win-win scenario: Foreign banks get access to assets in-country before the December jump-in date, and the state banks avoid meltdown. In addition, a measure of foreign management expertise is injected into the system that hopefully will teach the state banks how to lend appropriately and -- if all goes well -- lead to the formation of a healthy financial sector. At the same time, the deep-pocketed foreign companies come away with a vested interest in keeping their new partners -- and by extension, the Chinese government -- fully afloat.

The only downside is that central government, through its asset-management firms, assumes responsibility for financially supporting all of China's loss-making state-owned enterprises.

But this rather ingenious banking shell game addresses only the immediate problem of a looming financial catastrophe. Left completely untouched is the existence of a few hundred billion dollars in dud loans -- linked to tens of thousands of dud firms for which the central government is now directly responsible.

Which still leaves for China the unsettled question: "Now what do we do?"

Two Opposing "Solutions"

As can be expected from a country that just underwent a leadership change, there are two competing solutions.

The first solution belongs to the generation of leadership personified by Deng Xiaoping and Jiang Zemin, and could be summed up as a philosophy of "Grow faster and it will all work out." It could be said that during Jiang's presidency, while the leadership certainly perceived China's debt problem, they -- like their counterparts in Japan -- felt that attacking the problem at its source -- the banking system -- would lead to an economic collapse (not to mention infuriate political supporters who benefited greatly from the system of cheap credit).

Jiang's recommendation was that everyone should build everything imaginable in hopes that the resulting massive growth and development would help catapult China to "developed country" status -- or, at the very least, raise overall wealth levels sufficiently that the population would not turn rebellious. In the minds of Jiang and his generation of leaders, the belief was that only rapid economic growth -- defined as that in excess of 8 percent annually -- could contain growing unemployment and urbanization pressures and thus hold social instability at bay.

The second solution comes from the current generation of leadership, represented by President Hu Jintao. This solution calls for rationalizing both development goals and credit allocation. The leadership wants to eliminate the "growth for its own sake" philosophy, consolidate inefficient producers and upgrade everything with a liberal dose of technology. Key to this strategy is a centrally planned effort to focus economic development on the inland areas that need it most -- and this entails tighter control over credit. Hu wants loans to go only to enterprises that will use money efficiently or to projects that serve specific national development goals -- narrowing the rich-poor, urban-rural and coastal-interior gaps in particular.

There are massive drawbacks to either solution.

Regional and local governors enthusiastically seized upon Jiang's program to massively expand their own personal fiefdoms. And as corporate empires of these local leaders grew, so too did Chinese demand for every conceivable industrial commodity. One result was the massive increases in commodity prices of 2003 and 2004, but the results for the Chinese economy were negligible. China consumes 12 percent of global energy, 25 percent of aluminum, 28 percent of steel and 42 percent of cement -- but is responsible for only 4.3 percent of total global economic output. Ultimately, while "solution" espoused by Jiang's generation did forestall a civil breakdown, it also saddled China with thousands of new non-competitive projects, even more bad debt, and a culture of corruption so deep that cases of applied capital punishment for graft and embezzlement have soared into the thousands.

Yet the potential drawbacks of the solution offered by Hu's generation are even worse. In attempting to consolidate, modernize and rationalize Jiang's legacy, Hu's government is butting heads with nearly all of the country's local and regional leaderships. These people did quite well for themselves under Jiang and are not letting go of their wealth easily. Such resistance has forced the Hu government to reform by a thousand pinpricks, needling specific local leaders on specific projects while using control of the asset management firms as a financial hammer. After all, since the central government relieved the state banks of their bad loan burden, it now has the perfect tool to strip power from those local leaders who prove less-than-enthusiastic about the changes in government policy.

Or at least that is how it is supposed to work. Local government officials have become so entrenched in their economic and political fiefdoms that they are, at best, simply ignoring the central government or, at worst, actively impeding central government edicts.

Hu's team is indeed making progress, but with the problem mammoth and the resistance both entrenched and stubborn, they can move only so fast for fear of risking a broader collapse or rebellion. And this does not take into consideration Beijing's efforts to strengthen the Chinese interior -- where the poorest Chinese actually live. Complicating matters even more, Hu's strategy relies upon the central government's ability to wring money out of the wealthy coastal regions to pay for the reconstruction of the interior.

That has made the coastal leaders even more disgruntled. However, they have come upon a fresh source of funding, replacing the traditional sources of capital that now are drying up as a result of the personnel changes in Beijing: the underground lending system, which was spurred by the official government monopoly over banks in years past. The central government now estimates that the underground banking sector is worth 800 billion yuan, or some 28 percent of the value of all loans granted in country.

Dealing with Failure -- And Success

The question in our mind is which strategy will fail -- or even succeed -- first. If Jiang's system prevails, then growth will continue, along with the attendant rise in commodity prices -- but at the cost of growing income disparity and environmental degradation. The likely outcome of such "success" would be a broad rebellion by the country's interior regions as money becomes increasingly concentrated in the coastal regions long favored by Jiang. And that is assuming the financial system does not collapse first under its own weight.

Local rebellions in China's rural regions have already become common, but two of are particular note.

In March, the villagers of Huaxi in the Zhejiang region protested against a local official who had used his connections to build a chemical plant on the outskirts of town. When rumors of police brutality surfaced, some 20,000 villagers quite literally seized control of the town from 3,000 security personnel. Before all was said and done, the villagers invited regional press agencies in to chronicle events in the town that had told the Politburo to go to hell, and started burning police property and parading riot control equipment before anyone who would watch. They actually sold tickets to their rebellion. Huaxi marked the first time local officials actually lost control of a town.

Then, in December, protests erupted against a local official in Shanwei, who had similarly lined his pockets with the money that was supposed to have been made available to farmers displaced by his expanding wind-power farm. The local governor figured that since he was investing not just in an energy-generating project in energy-starved China, but a green energy project, that he would have carte blanche to run events as he saw fit. He was right. When the protests turned violent, government forces opened fire -- the first authorized use of force by government troops against protesters since the Tiananmen Square incident in 1989.

Such events are, in part, evidence of a degree of success for the strategy espoused by Jiang's generation. The grow-grow-grow policy results in massive demand for labor by tens of thousands of economically questionable -- and typically state-owned -- corporations. This, in turn, draws workers from the rural regions to the rapidly expanding urban centers by the tens of millions. The dominant sense among those who are left behind -- or those who find their urban experiences less-than-savory -- is that they have been exploited. This is particularly true in places like Shanwei, on the outskirts of urban regions, when urban governors begin confiscating agricultural land for their pet projects.

But for all the complications created by Jiang's solution to China's economic challenges, it is Hu's counter-solution that could truly shatter the system. In addition to dealing with all the corrupt flotsam and high-priced jetsam of Jiang's policies, Hu must rip down what Jiang set out to accomplish: thousands of fresh enterprises that are unencumbered by profit concerns. A steady culling of China's non-competitive industry is perhaps a good idea from the central government's point of view -- and essential for the transformation of the Chinese economy into one that would actually be viable in the long term -- but not if you happen to be one of the local officials who personally benefited from Jiang's policies.

The approach of Hu's generation is nothing less than an attempt to recast the country in a mold that is loosely based on Western economics and finance. Even in the best-case scenario, the central government not only needs to put thousands of mewling firms to the sword and deal with the massive unemployment that will result, it also needs to eliminate the businessmen and governing officials who did well under the previous system (which did not even begin to loosen its grip until 2003). And the only way Beijing can pay for its efforts to develop the interior is to tax the coast dry at the same time it is being gutted politically and economically.

The challenge is to keep this undeclared war at a tolerable level, even while ratcheting up pressure on the coastal lords in terms of both taxation and rationalization. But just as Jiang's "solution" faces the doomsday possibility of a long rural march to rebellion, Hu's strategy well might trigger a coastal revolution. As the central government gradually increases its pressure on the assets and power of China's coastal lords, there is a danger that those in the coastal regions will do what anyone would in such a situation: reach out for whatever allies -- economic and political -- might become available. And if China's history is any guide, they will not stop reaching simply because they reach the ocean.

The last time China's coastal provinces rebelled, they achieved de facto independence -- by helping foreign powers secure spheres of influence -- during the Boxer Rebellion. This resulted, among things, in a near-total breakdown of central authority.

QueEx · Feb 9, 2006

Re: China and OPEC start energy dialogue

<center>Energy reshapes China's priorities</center>

By Kristi Heim
Seattle Times business reporter
February 9, 2005

China may have failed in its bid to acquire U.S.-based Unocal last summer, but just north of the border it has found a new partner in energy-rich Canada.

To meet its soaring demand for energy, China is scouring the globe for oil, natural gas and other sources, and that drive has major implications for North America, said Wenran Jiang, a China expert at the University of Alberta.

Jiang addressed the Seattle Economists Club on Wednesday and will speak from 8 to 10 a.m. today at the University of Washington's University Club.

"China is power hungry, not so much for political power but in the economic sense," he said. "China without energy cannot deliver" on its development plans.

Those plans include quadrupling its economy in the next 15 years.

From the early 1980s to the mid-'90s, China quadrupled its economy largely using domestic energy sources, Jiang said. But now it has become a net oil importer, and it will need to double its supply to reach its goals.

To understand the potential impact on energy consumption, China, with 22 percent of the world's population, now consumes 6.4 million barrels of oil per day. The United States, with 5 percent of the world's population, consumes 25 million barrels.

If China had the same per-capita consumption as the United States, it would need 85 million barrels per day, as much as the entire world consumes today, Jiang said.

For a country in search of oil, Canada looks like the Holy Grail. Its oil reserves in Alberta rank second only to those in Saudi Arabia, and some predict Canada will become the biggest global supplier by 2010.

When Chinese President Hu Jintao visited Canada in September to celebrate 30 years of diplomatic relations between the two countries, he announced both had moved from a "cooperative" to a "strategic" partnership, said Jiang, an academic member of Foreign Affairs Canada's Strategic Working Group on China.

The next month, China's largest oil company, China National Petroleum, spent $4.2 billion to acquire control of PetroKazakhstan, a Canadian company with assets in Central Asia. That was followed by a deal in which China National Petroleum and an Indian company jointly acquired Petro-Canada's stake in Syrian oil fields.

China relies on coal for about 70 percent of its energy, which results in severe pollution in many cities. In addition to searching for oil and natural gas, it is spending $40 billion to produce 32 nuclear reactors by 2020, Jiang said.

The country is also working to develop alternative energy such as wind farms.

Jiang described the country's energy grab as "driven by desperation." Already there are blackouts in major cities. If development hits a speed bump, the Communist Party in power may lose its grip if it can't deliver jobs and economic growth.

As a result, energy has become a central theme in China's foreign policy. Chinese companies are courting deals from Sudan to Iran to Peru.

Although China's rise is often viewed negatively in the U.S., evidenced by political interference in the Unocal deal, perceptions of China are more positive elsewhere, Jiang said.

Allowing China to participate in energy markets will encourage more moderate foreign policies and less desperate measures, Jiang contends. Either way, China's influence isn't going away.

"China not only has joined the world but is already changing it," he said.

Kristi Heim: 206-464-2718 or kheim@seattletimes.com
Copyright © 2006 The Seattle Times Company

http://seattletimes.nwsource.com/html/businesstechnology/2002793423_chinaenergy09.html

QueEx · Apr 27, 2006

Re: China and OPEC start energy dialogue

<center>China's President Continues African Tour
Focused on Trade </center>

By VOA News
26 April 2006

China's President Hu Jintao holds talks in Nigeria Wednesday on the fourth leg of his five-nation tour.

Mr. Hu's visit to Nigeria comes as China seeks new sources of oil. It recently purchased a major stake in a large Nigerian offshore oil field.

President Hu traveled to Nigeria from Morocco, where he met with Moroccan Prime Minister Driss Jettou for talks on expanding trade. He also signed agreements on trade, science, culture and health care with Morocco's King Mohammed.

Mr. Hu's trip concludes with a visit to Kenya Friday. He earlier traveled to Saudi Arabia and the United States.

http://www.voanews.com/english/2006-04-26-voa26.cfm

African Herbsman · Jul 5, 2006

Re: China and OPEC start energy dialogue

18 vans used as 'death on wheels'

By John Zarocostas
THE WASHINGTON TIMES

GENEVA — Provincial authorities in China have introduced "mobile execution vans" in a bid to improve the efficiency and cost-effectiveness of carrying out death sentences, Amnesty International reported yesterday.
The report said 18 converted 24-seat buses were being distributed to all intermediate courts and one high court in Yunnan province, each equipped for executing convicts by lethal injection.
It also said the president of Yunnan's provincial high court, Zhao Shijie, had praised the development as a sign that China's system is becoming "more civilized and humane."
However, an American congressman in Geneva for the annual meeting of the U.N. Human Rights Commission denounced the vehicles as "killing vans, just like their abortion vans which are used to destroy unborn children and to hurt women."
"The similarity to me is appalling," Rep. Christopher H. Smith, New Jersey Republican, said in an interview. "It's death on wheels."
Mr. Smith, a critic of China's human rights record and a vocal opponent of the death penalty in the United States, said the execution buses may be more efficient from the Chinese point of view.
"But they also mean there is significantly less due process being exercised. The right of the defendant and his or her ability to defend themselves becomes less possible."
The report said 1,146 executions were carried out in 28 countries last year, with 84 percent of those performed in China, Iran, the United States and Vietnam. At least 726 persons were executed in China, at least 108 in Iran, 65 in the United States and 64 in Vietnam.
At the same time, at least 2,756 death sentences were handed down by courts in 63 countries, the human rights group said.
Judit Arenas Licea, a spokeswoman for Amnesty, said the records for China and some other countries were incomplete and that the true figures could be much higher.
Chen Zhouglin, a member of the National People's Congress and a professor of politics and law in Chongging Province, suggested last month that China executes "nearly 10,000" people each year, Amnesty said.
Amnesty also criticized China for the execution of an ethnic Uighur on offenses of "separatism and ... terrorism," after he was forcibly returned from Nepal, where he had sought asylum and had been recognized by the U.N. High Commissioner for Refugees.

http://www.washtimes.com/world/20040406-105543-8430r.htm

Greed · Jul 7, 2006

China: Crisis and Implications

China: Crisis and Implications
By George Friedman

The Chinese government is continuing efforts to cope with its runaway economy. The People's Bank of China has raised interest rates. Banks have been told to curb lending. The government has said that it will implement procedures to rein in foreign acquisitions at low prices -- or, in other words, to block fire-sales of Chinese companies. As a recent headline in the Japan Times put it, "China's Monetary Surge Dooms Its Boom."

A lot of things have gone into dooming China's boom, and the money surge is one of the more immediate problems. However, as we have argued (and this article should be read in the context of past analyses), the end of the Chinese boom was inevitable. The issue now is how all of this will play out in China and in the world.

What must be understood is that China now is moving from an economic problem to a socio-political one. The financial problem is a symptom; the fundamental problem is that tremendous irrationality has been built into the Chinese economy. Enterprises that are not economically viable continue to function through infusions of cash. Some of the cash comes from borrowing, some by exporting at economically unsustainable prices. The result is a squandering of resources. The reasons that this continues have nothing to do with economic rationalism and everything to do with political and social reality.

If interest rates were to rise and lending were to become disciplined, many of China's enterprises would fail. This would bring several consequences.

First, and most important, it would result in a massive increase in unemployment. At this point, the irrationality has been going on for years. It is not only state-owned enterprises that are economically unsustainable; many newer enterprises, including those in which Western companies have invested, are not succeeding. When we look at the figures for nonperforming and troubled loans, they amount to nearly half of China's gross domestic product. That represents a lot of irrationality, a lot of financial failures and a lot of unemployment. And unemployment is a political and social problem. The question is whether China politically can afford the economic solution.

Second, lending has become a system for maintaining the political solidarity of China's elite. Loans have been made not only to avoid the problem of unemployment; they also were made as part of political arrangements that allowed the Chinese Communist Party and regional party organizations to avoid conflict and divisions. As long as the pie was growing, everyone could have a piece. But if the pie starts contracting, there will be losers and winners. The question of who will go bankrupt and who will not will become a highly divisive and potentially destabilizing political crisis. Again, the economic solution -- austerity -- and political reality may run counter to each other.

Obviously, China has massive cash reserves. These may not be massive enough to cover the financial crisis, but they are sufficient to allow the government to put off addressing the problem for a while. China also has the ability to promulgate rules and regulations that allow bankrupt entities to continue functioning. However, it always must be remembered that on the other side of a bad loan is a damaged creditor. A loan that can be deferred by fiat is an asset that can no longer be used. When you avoid economic disaster for the debtor, you transfer the pain -- and potentially the disaster -- to the creditor. And since the creditor is normally the economically healthier entity, you postpone the death of the weak by weakening the strong. The more you do this, the worse it becomes. Thus, whether the Chinese use cash reserves to postpone the problem or use regulation to do so, the net result will be buying time at the cost of increased pain.

China's Likely Path

Asia has been here before. Japan encountered this problem around 1990, and East and Southeast Asia encountered it in 1997. Roughly three models for dealing with the problem exist:

Japan model: Use reserves and formal and informal measures to avoid actions that would trigger massive bankruptcies and unemployment. Accept economic stagnation for the better part of a generation.

South Korea model: Move rapidly to restructure the economy, using economic and political means. Control social unrest with security measures. Move out of the problem in a matter of years.

Indonesia model: Lacking resources to manage the crisis, suffer both financial dysfunction and political strife among the elite and between regions.

Japan was able to do what it did because it is a highly disciplined, cohesive society, in which shared pain is viewed as preferable to social dislocation. South Korea was able to do what it did because the magnitude of its crisis was relatively less than Japan's, and because the state had the means for suppressing unhappiness. Indonesia failed to do what it needed to do because it lacked resources and political power.

Other countries have fallen somewhere along this continuum. China will make its own path. However, it should be pointed out that China is not socially similar to either Japan or South Korea. Like Indonesia, China is a diverse and divided nation. The Communist Party lost its moral standing in the 1970s. As with Suharto's government, its legitimacy now derives from the fact that it has created prosperity. When prosperity slows down or stops, the Party cannot fall back on inherent legitimacy, as was the case with the system in Japan. And the wildly diverse levels of economic development make a single, integrated solution, as was used in South Korea, unlikely. The most likely direction for China, therefore, is massive social and political instability.

Now, the Communist Party may lack moral authority, but it does wield tremendous power. The People's Liberation Army and the various security forces are an enormous presence in China. Indeed, the government already is using its security forces aggressively, cracking down on dissent and against at least some business leaders, in anticipation of coming troubles. The ability to suppress unrest is not trivial. Therefore, the most likely path for China in a post-boom environment is to increase suppression and reimpose systematic dictatorship.

This is not an absolute given. There are many in the Party who now are arguing that China has abandoned its Communist principles and its social base. In other words, they want to reach out to the peasants in the interior, who have benefited little from the boom and who resent the prosperity of the coastal regions. The idea is to use these peasants in a process of renationalization -- or, at least, a process in which the free market is dramatically limited and at least some of the wealth is redistributed.

This goal makes little economic sense, but what China needs economically is unsupportable socially and politically. Imposing a crushing austerity for five to ten years would solve the economic problem, but it is unlikely that the political center could hold. Indeed, if the Chinese were to follow this course, they could do it only with massive political suppression at the same time.

The Party's Tangled Web

Therefore, one likely path is the reimposition of dictatorship, followed by whatever economic solutions the leadership might want to make. But there is a problem here: The interests of Party and People's Liberation Army leaders in Shanghai diverge from those of the central government. These leaders are deeply involved in the financial process of the coastal area, in bringing in foreign investment, in taking advantage of the nonmarket access to capital. They have no inclination to stop. Indeed, their wish is to see the irrational boom continue as long as possible.

There are splits in the interests of regional Party leaders, as well as a split between the regions and Beijing. The interests of coastal leaders lie not with Beijing so much as with Tokyo, New York and London. They have integrated themselves in the international financial system, and they are busy making plans for sustaining their regional enterprises in the event of a crisis. Meanwhile, Party leaders from the interior are demanding that these actions be stopped and that investment flow to their regions instead. Beijing is riding two horses that are running in very different directions.

Beijing well might fall off the horses. China has a history of cycling between a dictatorial system that closes it off from the world (a poor, but equal and stable China) and a system in which China is open to the world but torn apart from the inside out. Consider: Mao marched into the interior, raised a peasant army, came back and liquidated the internationalist bourgeoisie in 1948. He closed off the country and united it, throwing out the foreigners. Under the other model, preceding Mao, the country was open to foreigners, who tore it apart in regional conflicts while the interior starved.

The end result of China's economic crisis, therefore, will be a deep-seated political crisis. Only ever-increasing amounts of money have allowed China to maintain the current political alignment. Without that, it has two options. The first is a return to some sort of dictatorship from Beijing, under which economic problems would be dealt with inefficiently but unambiguously. The other is to accept a split between the coastal regions and the interior, the weakening of Beijing's authority and a period of instability and intense regionalism. It all depends on the political moves Beijing is making now, but our bet would be on the latter course. The instruments of power that Beijing has are too complicit in the financial crisis, and have too many diverging interests, to make the first option likely.

Geopolitics and Ripple Effects

Two possible geopolitical models emerge from this. Under one -- in its extreme form -- China returns to some sort of geopolitical Maoism. It encloses itself from the world, becomes increasingly bellicose but is limited by its own geography in what it can do. Under the other model, China slowly fragments and becomes a cockpit for the ambitions of foreign economic interests -- backed up by political and military power, with regional Chinese officials collaborating with foreigners to continue economic development. Oddly, the latter model would be more destabilizing to the world than the former, inasmuch as everyone will want to maintain their investments in China and expand them. In this scenario, China would again be a magnet for problems.

Mind you, these are not absolutes, but represent extremes on a continuum. There is surely a model under which Beijing would muddle through, as have the Japanese or Indonesians. No coherent strategy would emerge; it would all be tactical. It is difficult for us to see how this would not lead to regional destabilization, but then, China might be able to live with that. How it handles the unemployment and displaced peasant issue, however, is yet another question. This is a possible mid-point on the spectrum, but not in itself likely, it would seem.

As for the effects on the international economy, there has been a great deal of discussion about China's ownership of U.S. Treasury instruments and the consequences if that money were withdrawn in a crisis. In fact, this is the last thing that is going to happen. If China has a massive financial crisis, no one -- including the Chinese government -- is going to shift money from a safe haven into an uncertain cauldron. In crisis, the tendency would be a flight to safety. That means that rather than being pulled out, money would surge into the U.S. market -- legally and illegally, from the Chinese standpoint.

It is interesting to correlate the massive U.S. market surges that began in 1991, after the recession, and intensified dramatically in 1997 and 1998, with trends in Asia. In both cases, these surges followed major economic crises in rapidly expanding Asian economies. The events were, in our opinion, linked. The crisis in Japan in 1990 and 1991 led to major capital flight and helped to fuel the U.S. market rise. Similarly, the impending and expected East Asian meltdown in 1997 produced massive capital flight from Taiwan, South Korea and elsewhere to safer havens. A massive withdrawal from the U.S. market is the last thing to be expected.

What are in danger, of course, are foreign investments in China. There is the obvious financial issue: Many of these investments were not economically viable to begin with. But there is a political problem as well. The Party is going to have to blame someone for China's troubles, and it will not be the leadership. The obvious culprits will be corrupt officials and their paymasters in the international banking system. The truth or falsehood of the charge will matter little; corrupt officials and bankers already are being arrested, in the early stages of the crisis. As the situation intensifies, we would not be surprised to see foreigners investigated for corrupt practices as well.

But the bottom line is this: China has a history of nationalization and expropriation, and the party that enacted those measures is still in power. No one would have believed that the Party of Mao possibly could have become what it is today, but one should not assume that the evolution of the Chinese Communist Party is complete. Leaders could find that they have reason to re-enact some of Mao's own economic policies. We would be surprised to see a complete return to Maoism. We would not, however, be surprised to see the Party deliberately reverse some transactions that are no longer in its interests or (as and if things get more intense) take even more radical steps. It is still a Communist Party, it might be useful to recall.

Ultimately, the choice that China is now making is how quickly it will allow the consequences of its economic irrationality to unfold. The economic answer to the problem is to let shaky enterprises fall -- but the political cost of doing so will be too great, and a solution has already been long delayed. The longer an economic solution is delayed, the less one becomes possible and the more intense becomes Beijing's need to address the problem with political and security solutions. The more dependent the Chinese become on such measures, the more catastrophic will be the consequences if these solutions don't work.

China is long past the point of being able to solve the problem easily. The question is simply whether to buy time and pay in intensity, or force the crisis now. At some point, there no longer will be a choice. But the single most important thing to understand is that China does not really have an economic crisis any longer. The time for that has come and gone. There is now a political crisis at hand.

www.stratfor.com

nighttherapist · Jul 10, 2006

Re: China: Crisis and Implications

Why are you mutha phuka's posting dissertations on on this naked woman board? Post a link to the dissertion and keep it moving.

If you wanna do something for the cats on her, post links to sites where we can go and work in Hong Kong. They speak English there..............................................

nighttherapist · Jul 10, 2006

Re: China: Crisis and Implications

Why are you mutha phuka's posting dissertations on this naked woman board? Can you please post a link to the dissertion and keep it moving?

If you wanna do something for the cats on here, post links to sites where we can find jobs to go to work in Hong Kong. They speak English there..............................................

QueEx · Jul 10, 2006

Re: China: Crisis and Implications

I suggest you read the rules of this board, if, that is, you don't want to have to think up another user name.

QueEx

GET YOU HOT · Jul 20, 2006

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--------------------------------------------------------------------------------

China's big clean-up sparks business boom By ELAINE KURTENBACH, AP Business Writer
Thu Jul 20, 11:16 AM ET

JINSHAN, China - Shanghai's gleaming chemical industrial park, a processing zone for some of the world's most toxic materials, is a showcase in China's campaign to clean up its polluted land, skies and water. Frederic Gourdin's job is to keep it that way.

ADVERTISEMENT

Gourdin's company, a joint venture between France's Suez Environment SA and the local company that runs the industrial park, is responsible for ensuring that the chemical-laden water discharged from the zone's huge, ultramodern factories poses no threat to the environment.

"We keep developing every day because we are always getting new customers," says Gourdin, general manager of Shanghai Chemical Industry Park Sino-French Water Development Co. "We never know what sort of chemicals we might need to deal with."

As China beefs up pollution controls following a spate of chemical spills it's turning to foreign businesses with the advanced technology it needs to help solve its increasingly complex problems with industrial waste.

The industrial park some 30 miles southwest of downtown Shanghai, along Hangzhou Bay, is an example of the potential opportunities offered by China's multibillion dollar for pollution controls.

Piecemeal efforts to tackle industrial pollution gained urgency after a spill from a chemical factory explosion in November in Jilin province tainted water supplies for millions living in northeastern China and in neighboring Russia.

"Last year, since the Jilin accident, there has been very strict control and monitoring," says Gourdin. "Safety here is not a joke. These are all chemicals that could be extremely dangerous."

China has budgeted some $162 billion for environmental protection in 2006-2010. At the same time, its more than 600 big cities are belatedly tackling long-neglected sewage treatment and searching for ways to restore depleted aquifers and purify tainted rivers and lakes.

SOURCE: http://news.yahoo.com/s/ap/20060720/ap_on_re_as/china_environmental_boom_lh1

QueEx · Nov 9, 2006

<center>Chinese-African Summit Yields $1.9 Billion in Deals</center>

By Chen Aizhu and Lindsay Beck
Reuters
Monday, November 6, 2006; Page A17

BEIJING, Nov. 5 -- Chinese and African leaders wrapped up a summit on Sunday with deals worth $1.9 billion and assurances from China that it would not monopolize Africa's resources as it builds influence across the continent.

The agreements, signed between 12 Chinese firms and various African governments and companies, followed Chinese President Hu Jintao's pledge on Saturday to offer $5 billion in loans and credit, and to double aid to Africa by 2009.

In a joint declaration ending the summit, delegates announced a strategic partnership and "action plan" that charts cooperation in the economy, international affairs and social development.

"We propose to enhance South-South cooperation and North-South dialogue to promote balanced, coordinated and sustainable development of the global economy," said Hu, reading out the declaration.

Delegates from nearly 50 African countries descended on Beijing for the weekend summit, the largest China-Africa gathering since the 1949 founding of Communist China.

The deals reached Sunday include commitments from China to build expressways in Nigeria, lay a telephone network in rural Ghana and erect an aluminum smelter in Egypt, the state-run New China News Agency reported.

China is eager to secure oil, gas and mineral resources from Africa to fuel its rapid economic expansion.

But China has come under fire from critics who say it is doing business with African countries without regard to governance or human rights and in the process bolstering governments that the West has tried to isolate.

Ethiopian Foreign Minister Seyoum Mesfin rejected such criticism, saying that the relationship was helping to fight poverty in Africa and that the continent needed cooperation without political conditions.

"This has nothing to do with turning a blind eye to the predicaments of Africa," he said at a news conference. "It is to promote human values, including human rights. Is not the right to development a human rights issue?"

The summit was also an opportunity for China to prove its credentials at hosting a major event ahead of the 2008 Olympics.

Beijing was decked out in banners proclaiming the Sino-African friendship, strict traffic measures kept the city's notoriously clogged roads running smoothly, and the estimated 1,700 delegates were treated to gala song and dance performances.

http://www.washingtonpost.com/wp-dyn/content/article/2006/11/05/AR2006110500742.html

QueEx · Nov 9, 2006

GET YOU HOT · Jan 19, 2007

A bump for good information on the subject of China...

African Herbsman · Jan 24, 2007

[frame][/frame]

<IFRAME SRC="http://en.epochtimes.com/news/7-1-22/50806.html" WIDTH=780 HEIGHT=1500>
<A HREF="http://en.epochtimes.com/news/7-1-22/50806.html">link</A>

</IFRAME>

QueEx · Jan 24, 2007

Epoch Times said:
...

... after the Mainland hospital receives payment, the transplant surgery could be performed in as soon as three days to a week. This means that a few days later, there would be a "prisoner" not only with the same blood type and matching tissue as the patient (who paid an enormous fee for the procedure,) but also this criminal would just happen to be scheduled for execution at that time, and would also be willing to donate his organs.

`

7milebreadbaker · Jan 29, 2007

My 2 cents to answer the question of does the future belong to China, i would say yes. As we know China is at the forefront of manufacturing and most importantly exporting a wide variety of goods. Consumer nations such as America depend on the China and India's of the world to produce low cost clothing, shoes, diapers, etc in order for our economy to remain stable. Imagine if diapers for example were produced in America. With high labor costs, unions, employee benefits and all the other factors that raise the cost, we would probably pay $150 for a pack of 50. Infact one of the articles mentioned that 80% of the items that Walmart sells comes from China. The reason these items are so cheap to begin with is because of the exchange rate. I do business in China and i can tell you first hand that the dollar is getting weaker and the renminbi is getting stronger every week. People who don't engage in Int'l business have no idea how week the USD is becoming and how fast it's losing value. The future belongs to China because as their currency gets stronger two things happen: One, instead of you getting 7.77 RMB for every USD, you will get less. If for expample you can buy 7.77 shoe strings for 1 dollar now, in the future will be able to purchase fewer shoe strings with that same dollar. This makes the cost per shoe string rise and inturn you have to charge more to the consumer to acheive the profit levels you once achieved. Two, the Chinese will give away fewer shoe strings as their currency increases in value and the profit they make per shoe string will increase. They could actually sell fewer shoe strings in the future to acheive the profit levels they acheive today. The Walmarts and Myers will have to raise their prices for goods because the price to aquire those goods will increase. They will also have to raise them for other reasons. As a company that has to answer to shareholders the executive compensation packages will be tied to profits. If Walmart spent 18 billion last year, imagine how much they will spend in the future with China. That's just one company folks. The future clearly belongs to China.

QueEx · Sep 6, 2007

Bumped from the archives.

QueEx · Sep 6, 2007

<center>China threatens 'nuclear option' of dollar sales</center>

Fistful of dollars - China's trade surplus
reached $26.9 billion in June

The Telegraph (London)
By Ambrose Evans-Pritchard
Last Updated: 8:39pm BST 10/08/2007

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.

Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".

Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

QueEx · Sep 6, 2007

<center>Is China quietly dumping US Treasuries?</center>

Telegraph (London)
By Ambrose Evans-Pritchard
Last Updated: 12:25am BST 06/09/2007

A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.

Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.

"This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency chief at BNP Paribas.

"We won't know if China is behind this until the Treasury releases its TIC data in November, but what it does show is that world central banks are in a hurry to get out of the US. They don't seem to be switching into other currencies, so it is possible they are moving into gold instead. Gold is now gaining momentum across all currencies and has broken through resistance at 500 euros," he said.

While the greenback has been resilient over recent weeks - even regaining something of a 'safe-haven' role as banks scrambled to buy the currency to cover dollar debts - most experts believe that America's $850bn current account deficit will eventually cause the dollar to resume its relentless slide.

David Powell, an economist at IDEAglobal in New York, pointed the finger at Beijing as the main suspect in the sudden bond flight this summer.

In a client note entitled "Has China started to dump US Treasuries?", he said the sales appear to coincide with early moves by Beijing to launch its new $300bn sovereign wealth fund.

The scheme is part of the government's plan to diversify it $1,340bn reserves from bonds (mostly in the US) to a broader portfolio of investments and a better yield.

If so, the switch comes at a very delicate time, just as tempers flair on both sides of the Pacific over China's policy of holding down yuan by currency intervention. A bill in Congress calls for punitive tariff sanctions of 27.5pc against Chinese imports, and there has been a growing outcry over contaminated pet food and lead-tainted toys.

Two top advisers to the Chinese government gave strong hints in August that Beijing should use its estimated $900bn holdings of US Treasuries and agency bonds as a "bargaining chip", words taken as an implicit threat to trigger as US bond crash if provoked.

The Chinese government has since put out an official statement clarifying that it has no intention in taking such an irresponsible step, which would in any case backfire by devaluing China's remaining holding.

Mr Powell said the switch out of Treasuires was a purely commercial decision. "If if turns out that the Chinese are behind this, it is merely an attempt to increase returns on investment. It has nothing to do with settling protectionist scores," he said.

Any evidence that China was pulling out would risk setting off an unstoppable stampede, which is why such a policy would never be announced. It holds the world's biggest pool of resrves, followed by Japan.

Robin Bhar, a metals analyst at UBS, said there was little evidence yet that Asian central banks were switching heavily into gold. Most of the recent buying of gold has been on the COMEX futures markets, the playground of hedge funds.

Central banks tend to buy their bullion in London at the AM and PM fixings, leaving a footprint that is visible to experts. They seem to have been largely absent from the market so far.

http://www.telegraph.co.uk/money/ma...7/09/05/bcnchina105.xml&CMP=ILC-mostviewedbox

QueEx · Dec 18, 2007

Ageing 'threatens China economy'

The report predicts there will be
437 million over-60s by 2050

BBC NEWS
Tuesday, 18 December 2007

China's position as the world's major supplier of low-cost labour could be eroded by an ageing population, the authorities have warned.

There are six workers for each retiree in China, but that could narrow to two-to-one between 2030 and 2050, the National Committee on Ageing says.

Officials say the economy will suffer as there will be fewer people working and more older people to support.

China's low-cost labour has provided the base for its economic growth.

Improved living standards and strict family planning laws have contributed to the demographic change.

"We might encounter the heaviest burden especially after 2030, when the demographic dividend is set to end," Yan Qingchun, deputy director of the office of the ageing committee, told China Daily.

"With fewer people of working age and more pressure in supporting the elderly, the economy will suffer if productivity sees no major progress," he added.

The BBC's Michael Bristow, in Beijing, says the change is partly because of improvements in healthcare and China's one-child policy, but also because fewer couples are having children.

'Not prepared'

China currently has six workers for every retired person, according to the latest report.

But estimates say that by 2050, the number of over-60s in China will climb to 437 million - more than a quarter of the population.

That would mean two workers to support every retiree.

Zhang Kaidi, director of the China Research Center on Ageing, told China Daily that the country is "not prepared" for the problems presented by an ageing population.

He warned that the authorities need to "allocate more funds to build a comprehensive and efficient system of support for the elderly".

Changes in the social structure in China have often meant a removal of traditional sources of help for the elderly and fewer than 5% of older people in rural areas receive a pension.

http://news.bbc.co.uk/1/hi/world/asia-pacific/7149330.stm

loppy · Dec 18, 2007

plenty reading, rather informative, the law of physics what goes up must come down

QueEx · Feb 3, 2008

CHINA

<center>This Little Piggy Shortage
Fat of the Land: Beijing has tapped the country's official 'pork reserve'</center>

By Melinda Liu and Sam Siebert | NEWSWEEK
Feb 11, 2008 Issue

A new breed of criminal has emerged in China: "pigjackers." Soaring pork prices in the People's Republic have sent thieves roaring off with truckloads of hogs—and sometimes with smaller hauls, as was the case with the gang that was busted last year in Shenzhen trying to make off with 275 pounds of pork on a motorbike. A local newspaper valued the meat at upwards of $420, or roughly three times what a stolen motorbike might fetch in the city. Police easily caught the getaway bike; it couldn't handle all that weight.

The porcine crime wave is no joke to China's leaders. They see it as a sign of a much larger problem: even more than they worry about a repetition of Tiananmen Square, they dread the kind of mass unrest that could erupt out of a spike in pork prices. A full 65 percent of the country's total protein consumption is pork. The threat of a spontaneous uprising has been made worse by a freak blizzard that paralyzed central China last week—the region's worst in 50 years—stranding mobs of migrant workers on their way home for the Lunar New Year and disrupting shipments of the pig meat that is essential to holiday feasts. Food prices in general, and pork in particular, have been skyrocketing for months. Economic boom times are boosting demand even as the supply has plunged because of shrinking farmlands, rising grain prices and a "blue ear disease" epidemic that forced pig raisers to cull many thousands of hogs.

In an effort to head off serious trouble, Beijing has tapped the country's official "pork reserve." That's no joke, either; it's the actual term for the special stash of meat the Chinese government keeps frozen in case of a sudden crunch—not unlike America's Strategic Petroleum Reserve. But snowbound shipments of pork probably won't reach many Chinese families' tables in time for the holiday. And the country's underlying agricultural shortages will only get worse. The prospect is something for the whole world to worry about. Experts predict that China, long a major exporter of corn products, will soon become a net importer—possibly this year. When that happens, global grain prices could jump like this year's oil market.

© 2008 Newsweek, Inc.

http://www.newsweek.com/id/107592

GET YOU HOT · Feb 12, 2008

Defense Department Official and Two Others Arrested on Espionage Charges Involving China

WASHINGTON, D.C. — Tai Shen Kuo, age 58, and Yu Xin Kang, age 33, both of New Orleans, Louisiana, and Gregg William Bergersen, age 51, of Alexandria, Virginia, were arrested today on espionage charges related to the passage of classified U.S. government documents and information to the government of the People’s Republic of China (PRC).

Both Kuo and Kang were charged by criminal complaint with conspiracy to disclose national defense information to a foreign government, in violation of 18 U.S.C., Section 794(a) and (c). Bergersen was charged in a separate complaint with conspiracy to disclose national defense information to persons not entitled to receive it, in violation of 18 U.S.C., Section 793(d) and (g).

Kenneth L. Wainstein, Assistant Attorney General for National Security; U.S. Attorney Chuck Rosenberg of the Eastern District of Virginia; and Arthur M. Cummings, II, Executive Assistant Director of the FBI’s National Security Branch, made the announcement today. Bergersen and Kuo are scheduled to make their initial appearances in federal court in Alexandria today. Kang will make her initial appearance in federal court in New Orleans.

“Today’s prosecution demonstrates that foreign spying remains a serious threat in the post-Cold War world. The conspiracy charged in this case has all the elements of a classic espionage operation: a foreign government focused on accessing our military secrets; foreign operatives who effectively use stealth and guile to gain that access; and an American government official who is willing to betray both his oath of public office and the duty of loyalty we rightly demand from every American citizen. Such espionage networks pose a grave danger to our national security, and we should all thank the investigators and prosecutors on this case for effectively penetrating and dismantling this network before more sensitive information was compromised,” said Assistant Attorney General Wainstein.

U.S. Attorney Rosenberg stated: “Those who compromise classified national security information betray the enormous responsibility and trust placed in them by our government and the American people.”

According to court documents, the criminal conduct spanned a two-year period from January 2006 to February 2008. Kuo, a naturalized U.S. citizen and New Orleans businessman, gathered national defense information on behalf of the government of the PRC.

Working under the direction of an individual identified in the complaint affidavit only as “PRC Official A,” Kuo cultivated friendships with Bergersen and others within the U.S. government and obtained from them -- for ultimate passage to the PRC -- sensitive U.S. government information, including classified national defense information. Much of the information pertained to U.S. military sales to Taiwan.

Bergersen, a Weapons Systems Policy Analyst at the Arlington, Va.-based Defense Security Cooperation Agency, an agency within the Department of Defense, was charged with being the source of the classified information collected by Kuo. Kang, a citizen of the PRC and a Lawful Permanent Resident of the United States, served as a conduit of information between PRC Official A and Kuo.

Meetings between Kuo and Bergersen took place at various locations in Northern Virginia, Charleston, South Carolina, and Las Vegas. On some occasions, Bergersen received undetermined cash payments from Kuo in exchange for information and documents he provided.

Kuo and Kang each face up to life in prison if convicted of conspiracy to disclose national defense information to a foreign government. Bergersen faces up to ten years in prison if convicted of conspiracy to disclose national defense information to persons not entitled to receive it.

The investigation was conducted by the FBI. The Air Force Office of Special Investigations (OSI) provided substantial assistance and cooperation throughout the course of the investigation.

The prosecution is being handled by Assistant U.S. Attorneys Neil Hammerstrom and Aaron Zebley from the U.S. Attorney’s Office for the Eastern District of Virginia, and Trial Attorney Ryan Fayhee from the Counterespionage Section of the Justice Department’s National Security Division.

Criminal complaints are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.

John_Gault · Feb 12, 2008

Tehuti, the simple answer is yes. The near and foreseeable future belongs to China.

Once globalized, trans-national, free trade was implemented, it was the end of American Imperial dominance.

JG

GET YOU HOT · Feb 13, 2008

Here are all the most recent statistics, available on the internet. It's a shame, there are metal shortages in some sectors, due to the spiking exoprt of metals of all types to China...

http://www.uschina.org/public/documents/2006/06/us-state-exports-china.pdf

QueEx · Sep 26, 2008

Re: How is the West influencing China's future?

<center>
EU welcomes 'responsible investment'
from China sovereign fund

"'China has always acted in an objective and responsible
way through the use of its sovereign wealth . . . 'We
welcome China's stake in the international financial system,
we want it to be maintained and we are happy for it to grow,'</center>

Forbes
Thomson Financial News
September 26, 2008

BEIJING (XFN-ASIA) - The European Union is open to 'responsible investment' from China Investment Corp (CIC), EU Trade Commissioner Peter Mandelson said ahead of a meeting with Lou Jiwei, chairman of the 200 bln usd sovereign wealth fund.

'China has always acted in an objective and responsible way through the use of its sovereign wealth, and I will be indicating to Lou Jiwei that we expect that to continue and we will welcome Chinese investment on that basis,' Mandelson told reporters in Beijing.

'We welcome China's stake in the international financial system, we want it to be maintained and we are happy for it to grow,' he said.

CIC was launched in September 2007 to manage part of China's foreign reserves. Its overseas investments include a 9.9 pct stake in Morgan Stanley (nyse: MS - news - people ) and a holding in US private equity firm Blackstone.

Mandelson also reiterated the need for openness and the strengthening of ties between the EU and China, particularly amid the current turmoil in the world's financial markets.

'I am coming to China with a very simple message, namely that openness, trust and cooperation will help us weather the current storm in our economy and become stronger for it. The world's financial system has become so interlocked, so interdependent, that we all have a stake in its success,' he said.

'While I understand the voices saying 'let's disengage,' I say those voices are wrong and I hope China does not listen to those voices. China is now a key player in the global economy and in its financial system, China needs to keep playing its hand and playing it smartly,' he added.

But he also called on Beijing to further open up to foreign investment, and added that more needs to be done in areas such as the protection of intellectual property rights (IPR).

'In Europe our markets are open for business and investment, they're not protectionist, we don't create artificial barriers or obstacles to the import of Chinese goods and services, but the same is not the case on the Chinese side,' Mandelson said.

'Sometimes (European industry's) patience is tested ... by regulation that discriminates against foreigners through the use of standards, bureaucratic hurdles, the abuse of monopolistic positions by Chinese companies in certain markets, the abuse of IPR and forced technology transfer,' he said.

To build further trust and confidence, China and the EU should prioritize balanced and reciprocal investment, while also stepping up cooperation in environmentally-friendly trade, Mandelson added.

'We need to ensure that the rules of engagement on investment between the EU and China are balanced and reciprocal, and secondly we need to focus especially on trade in environmental goods, services and technologies and building a low carbon economy,' he said.

Mandelson is meeting senior Chinese officials over a four day visit, and he will attend the World Economic Forum in Tianjin this weekend.

will.davies@afxasia.com

http://www.forbes.com/afxnewslimited/feeds/afx/2008/09/26/afx5474293.html

QueEx · Oct 11, 2008

Re: How is the West influencing China's future?

<center>
Beijing restrains buying urge

From Mexico to South Africa, investors and strategists
are calling on China's leaders to use the opportunity of
the spreading financial crisis to help determine the new
set of financial rules that will emerge from it.
Pundits in China and elsewhere to call on
Beijing to snap up stakes in United States
financial institutions and further China's
influence on global financial power</center>

Asia Times
By Antoaneta Bezlova
Oct 10, 2008

BEIJING - The Wall Street fire-sale has prompted economic pundits in China and elsewhere to call on Beijing to snap up stakes in United States financial institutions and further China's influence on global financial power.

From Mexico to South Africa, investors and strategists are calling on China's leaders to use the opportunity of the spreading financial crisis to help determine the new set of financial rules that will emerge from it.

"China cannot easily afford to pass up such an opportunity," says Chen Jie, professor of economics at Shanghai Fudan University. "We have been anxiously trying to find investment opportunities for our financial capital but before the crisis there existed a myriad of visible and invisible barriers for Chinese investment overseas, particularly in the United States."

China should lead rescue efforts for the US financial crisis, Mexican tycoon Carlos Sim, one of the world�s richest men, told the press last week.

"China is now the most important country to help responsibly in this crisis," he said. "In the past, developed countries had reserves and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries".

But China's response to expectations at home and abroad has been unassuming. Although fortified with great liquidity and large reserves, Chinese banks and government investors have preferred to sit on their hands rather than go on a shopping spree of tumbling Wall Street firms.

Chinese politicians have expressed support for the US bailout plan to save banks and arrest the financial turmoil but stopped short of pledging to do more than keep their own financial house in order.

Premier Wen Jiabao summed up China's cautious position: maintaining "steady and fast growth" is the "biggest contribution" China can make to help the world overcome the current financial crisis stemming from the United States, he said during an inspection tour of Chinese provinces this week.

Chinese bank officials have dismissed as groundless reports that China plans to buy up to US$200 billion worth of US Treasuries to help Washington combat the deepening financial crisis. In a statement published on the central bank's website this week, governor Zhou Xiaochuan said the bank views a "stable currency and job creation" as priorities in the current situation.

Some of Beijing's conservatism stems from the fact that the global credit crisis has walloped the value of the Chinese government's initial batch of investments in US financial institutions such as Morgan Stanley and Blackstone Group. In Internet forums and the press at home the government has been criticized for taking equity stakes in US financial companies that have nose-dived.

"No one can see the light at the end of the tunnel for the US crisis and in view of our past blunders it will be prudent of China to observe more and act less," the Investors Daily said last week.

Several media outlets have engaged in predictions about the decline of US dominance in world affairs, presenting the demise of Wall Street as a retribution for US "arrogance and greed".

"The crisis that befell ordinary American people is caused by the greed of Wall Street bankers," Wang Songqi, financial analyst with the Chinese Academy of Social Sciences, told the China Business Journal.

An editorial in the Economic Observer said: "The United States is no longer the omnipotent savior and global protector of American values ... The demise of Wall Street means that the cornerstone of this global financial empire has been broken and no one knows whether it can ever be repaired."

Officially, few Chinese officials have shared in the European politicians' criticism of the Anglo-Saxon model of capitalism, which they blame for spawning the global financial crisis.

While embarrassed by the nosedive of its initial Wall Street investments, Beijing has more pressing tasks than assigning blame for the crisis. Chinese policymakers have been racing to prevent the country's economy from slowing too sharply because of global economic forces.

The legitimacy of the ruling communist party rests on maintaining a robust economic growth and providing prosperity to its people. Over the past 30 years of reforms, Chinese people have grown richer but not much freer and the country's rulers have staked their future on efforts to preserve the status quo by fueling continuous economic growth.

A survey by the Pew Global Attitudes Project this spring found that 86% of Chinese said they were content with their country's direction, double the percentage who said the same thing in 2002. By contrast, only 23% of Americans polled in the survey said they were satisfied with their country's direction.

Yet China's growth, fueled by foreign investment and exports, is interlinked to the global economy. Any radical downturn in economic prosperity could undermine the communist party's chance of holding on to its political scepter. There are already signs of a slowdown. Growth in GDP dropped to 10.1% in the second quarter from 11.9% in all of 2007.

To counter the fallout, in recent weeks Beijing has made a u-turn on its tight monetary policy set last year to fight overheating and inflation. The government relaxed caps on bank lending and approved new tax breaks for textile exporters, which have been hard hit by weakening demand and rising costs.

Experts anticipate that the forthcoming plenum of the central committee of the communist party would approve even more decisive measures of easing fiscal and monetary policies to prevent the global financial crisis from dramatically slowing down the Chinese economy.

(Inter Press Service)

http://atimes.com/atimes/China_Business/JJ10Cb01.html

QueEx · Nov 16, 2008

US's road to recovery runs through Beijing

<IFRAME SRC="http://www.atimes.com/atimes/China/JK15Ad01.html" WIDTH=780 HEIGHT=1500>
<A HREF="http://www.atimes.com/atimes/China/JK15Ad01.html">link</A>

</IFRAME>

QueEx · Feb 14, 2009

Re: US's road to recovery runs through Beijing

<center>
Asia: The coming fury</center>

Asia Times
By Walden Bello
February 11, 2009

As goods pile up in wharves from Bangkok to Shanghai, and workers are laid off in record numbers, people in East Asia are beginning to realize they aren't only experiencing an economic downturn but living through the end of an era.

For over 40 years, the cutting edge of the region's economy has been export-oriented industrialization (EOI). Taiwan and South Korea first adopted this strategy of growth in the mid-1960s, with Korean dictator Park Chung-Hee coaxing his country's

entrepreneurs to export. He did this by, among other measures, cutting off electricity to their factories if they refused to comply.

The success of Korea and Taiwan convinced the World Bank that EOI was the wave of the future. In the mid-1970s, then-Bank president Robert McNamara enshrined it as doctrine, preaching that "special efforts must be made in many countries to turn their manufacturing enterprises away from the relatively small markets associated with import substitution toward the much larger opportunities flowing from export promotion."

EOI became one of the key points of consensus between the World Bank and Southeast Asia's governments. Both realized import substitution industrialization could continue only if domestic purchasing power were increased via significant redistribution of income and wealth, and this was simply out of the question for the region's elites. Export markets, especially the relatively open US market, appeared to be a painless substitute.

Japanese capital creates an export platform

The World Bank endorsed the establishment of export processing zones, where foreign capital could be married to cheap (usually female) labor. It also supported the establishment of tax incentives for exporters and, less successfully, promoted trade liberalization. Not until the mid-1980s, however, did the economies of Southeast Asia take off, and this wasn't so much because of the World Bank but because of aggressive US trade policy.

In 1985, in what became known as the Plaza Accord, the United States forced the drastic revaluation of the Japanese yen relative to the dollar and other major currencies. By making Japanese imports more expensive to American consumers, Washington hoped to reduce its trade deficit with Tokyo. Production in Japan became prohibitive in terms of labor costs, forcing the Japanese to move the more labor-intensive parts of their manufacturing operations to low-wage areas, in particular to China and Southeast Asia. At least US$15 billion worth of Japanese direct investment flowed into Southeast Asia between 1985 and 1990.

The inflow of Japanese capital allowed the Southeast Asian "newly industrializing countries" to escape the credit squeeze of the early 1980s brought on by the Third World debt crisis, surmount the global recession of the mid-1980s, and move onto a path of high-speed growth. The centrality of the endaka, or currency revaluation, was reflected in the ratio of foreign direct investment inflows to gross capital formation, which leaped spectacularly in the late 1980s and 1990s in Indonesia, Malaysia, and Thailand.

The dynamics of foreign-investment-driven growth was best illustrated in Thailand, which received $24 billion worth of investment from capital-rich Japan, Korea, and Taiwan in just five years, between 1987 and 1991. Whatever might have been the Thai government's economic policy preferences - protectionist, mercantilist, or pro-market - this vast amount of East Asian capital coming into Thailand could not but trigger rapid growth. The same was true in the two other favored nations of northeast Asian capital, Malaysia and Indonesia.

It wasn't just the scale of Japanese investment over a five-year period that mattered, however; it was the process. The Japanese government and keiretsu, or conglomerates, planned and cooperated closely in the transfer of corporate industrial facilities to Southeast Asia. One key dimension of this plan was to relocate not just big corporations such as Toyota or Matsushita, but also small and medium enterprises that provided their inputs and components. Another was to integrate complementary manufacturing operations that were spread across the region in different countries.

The aim was to create an Asia-Pacific platform for re-export to Japan and export to third-country markets. This was industrial policy and planning on a grand scale, managed jointly by the Japanese government and corporations and driven by the need to adjust to the post-Plaza Accord world. As one Japanese diplomat put it rather candidly, "Japan is creating an exclusive Japanese market in which Asia Pacific nations are incorporated into the so-called keiretsu [financial-industrial bloc] system."

China masters the model

If Taiwan and Korea pioneered the model and Southeast Asia successfully followed in their wake, China perfected the strategy of export-oriented industrialization. With its unmatchable reserve army of cheap labor, China became the workshop of the world, drawing in $50 billion in foreign investment annually by the first half of this decade. To survive, transnational firms had no choice but to transfer their labor-intensive operations to China to take advantage of what came to be known as the "China price", provoking in the process a tremendous crisis in the labor forces of advanced capitalist countries.

This process depended on the US market. As long as US consumers splurged, the export economies of East Asia could continue in high gear. The low US savings rate was no barrier since credit was available on a grand scale. China and other Asian countries snapped up US Treasury bills and loaned massively to US financial institutions, which in turn loaned to consumers and homebuyers.

But now the US credit economy has imploded, and the US market is unlikely to serve as the same dynamic source of demand for a long time to come. As a result, Asia's export economies have been marooned.

The illusion of decoupling

For several years China has seemed to be a dynamic alternative to the US market for Japan and East Asia's smaller economies. Chinese demand, after all, had pulled the Asian economies, including South Korea and Japan, from the depths of stagnation and the morass of the Asian financial crisis in the first half of this decade. In 2003, for instance, Japan broke a decade-long stagnation by meeting China's thirst for capital and technology-intensive goods. Japanese exports shot up to record levels.

Indeed, China had become by the middle of the decade, the overwhelming driver of export growth in Taiwan and the Philippines, and the majority buyer of products from Japan, South Korea, Malaysia, and Australia.

Even though China appeared to be a new driver of export-led growth, some analysts still considered the notion of Asia decoupling from the US locomotive to be a pipe dream. For instance, research by economists C P Chandrasekhar and Jayati Ghosh, underlined that China was indeed importing intermediate goods and parts from Japan, Korea, and member countries of the Association of Southeast Asian Nations, but only to put them together mainly for export as finished goods to the United States and Europe, not for its domestic market.

Thus, "if demand for Chinese exports from the United States and the EU slow down, as will be likely with a US recession", they asserted, "this will not only affect Chinese manufacturing production, but also Chinese demand for imports from these Asian developing countries".

The collapse of Asia's key market has banished all talk of decoupling. The image of decoupled locomotives - one coming to a halt, the other chugging along on a separate track - no longer applies, if it ever had. Rather, US-East Asia economic relations today resemble a chain-gang linking not only China and the United States but a host of other satellite economies. They are all linked to debt-financed, middle-class spending in the United States, which has collapsed.

China's growth in 2008 fell to 9%, from 11% a year earlier. Japan is now in deep recession, its mighty export-oriented consumer goods industries reeling from plummeting sales. South Korea, the hardest hit of Asia's economies so far, has seen its currency collapse by some 30% relative to the US dollar. Southeast Asia's growth in 2009 will likely be half that of 2008.

The coming fury

The sudden end of the export era is going to have some ugly consequences. In the past three decades, rapid growth reduced the number of people living below the poverty line in many countries. In practically all countries, however, income and wealth inequality increased. But the expansion of consumer purchasing power took much of the edge off social conflicts. Now, with the era of growth coming to an end, increasing poverty amid great inequalities will be a combustible combination.

In China, about 20 million workers have lost their jobs in the last few months, many of them heading back to the countryside, where they will find little work. The authorities are rightly worried that what they label "mass group incidents", which have been increasing in the last decade, might spin out of control.

With the safety valve of foreign demand for Indonesian and Filipino workers shut off, hundreds of thousands of workers are returning home to few jobs and dying farms. Suffering is likely to be accompanied by rising protests, as it already has in Vietnam, where strikes are spreading like wildfire. South Korea, with its tradition of militant labor and peasant protest, is a ticking time bomb.

Indeed, East Asia may be entering a period of radical protest and social revolution that went out of style when export-oriented industrialization became the fashion three decades ago.

Walden Bello is a Foreign Policy In Focus columnist, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and a professor of sociology at the University of the Philippines.

(Posted with permission from Foreign Policy in Focus)

http://www.atimes.com/atimes/Asian_Economy/KB11Dk01.html

geist · Feb 14, 2009

Re: US's road to recovery runs through Beijing

"When China wakes, it will shake the world."

-Napoleon Bonaparte

QueEx · Mar 5, 2009

Re: US's road to recovery runs through Beijing

<IFRAME SRC="http://news.bbc.co.uk/2/hi/asia-pacific/7925193.stm" WIDTH=780 HEIGHT=1500>
<A HREF="http://news.bbc.co.uk/2/hi/asia-pacific/7925193.stm">link</A>

</IFRAME>

QueEx · Jun 10, 2010

Re: US's road to recovery runs through Beijing

<center>
Rising Chinese businessman
killed on party official's orders</center>

9_CHINA-MURDER_2_MCT.standalone.prod_affiliate.91.jpg

In early 2004, Zhu Baoqi bought the mining and management rights to a
formerly state-run coal mine near Zichang.

McClatchy Newspapers
By Tom Lasseter |
Wednesday, June 9, 2010

XIANYANG, China — Zhu Baoqi should have been a shining example of China's economic miracle in the heartland of the ruling Communist Party. As government funds flooded into industry and construction across his home province of Shaanxi, Zhu became a rich man.

Starting in the 1990s, Zhu invested in former state property, trading up from a cement factory to oil fields, and then to a large coal mine. He moved his family out of cramped, bare concrete workers' housing to a three-story villa surrounded by honeysuckle bushes and fruit trees.

He rose with his province's fortunes to become a billionaire in Chinese currency, the sort of man the nation is depending on as it transforms into an industrial juggernaut. From 1990 to 2008, Shaanxi's daily economic output rocketed by 17 times. The clusters of cranes swinging in some sections of the provincial seat of Xi'an, where a major subway system is being built, evoke Dubai.

At the end, though, Zhu's ambitions couldn't keep up with the frenzy, and he ran afoul of party officials feeding at the trough of local projects. A local potentate who'd wanted to invest in Zhu's coal mine sent two men to his home just past midnight on June 15, 2008. One of them pulled out a blade and stabbed the 62-year-old Zhu repeatedly, leaving him for dead.

Late last month, a Shaanxi province court handed down death sentences for one party official and the thugs he hired to kill Zhu. Another official was given four years in prison.

The murder reportedly was part of a backroom deal to seize Zhu's coal mine, a damning example of what goes on behind the scenes of China's financial success.

While the central government likes to project the image of an authoritarian state that's creating a hybrid version of capitalism, many of those in charge of development in the interior behave more like mafia dons than like party cadres.

Zhu's tale, compiled from interviews with local residents, official Chinese press accounts and federal court and prosecutor's publications, makes it plain that even a cunning operator can quickly lose his footing, if not his life, doing business in the country's provinces.

"He earned too much money, which brings great danger," said Zhang Fanxiu, a neighbor of Zhu's for more than a decade. "A lot of things in China have to be done by working together with local officials. There is a lot of risk."

In dark red letters chiseled into rock, a sign inside the state museum says, "Yan'an is the holy land of the Chinese Revolution." Outside, a towering statue of Mao Zedong looks over the town, which sits on the Yellow River, beneath the rolling hills of coal country.

Yan'an is an icon in China's modern history and in Communist Party mythology.

During the 1930s, Communist rebel forces ended their famous Long March near Yan'an. Their retreat from the nationalist army allowed them to regroup and helped propel their revolution and solidify Mao's national political career.

Today, the town is filled with massage parlors, karaoke bars and cheap new hotels, the sort where prostitutes service midlevel bureaucrats and businessmen.

One recent morning, men in their early to mid-40s ambled out of the hotels on Bai Mi Avenue in Yan'an, accompanied by young women in their early 20s wearing high heels and short skirts. They paused across the street from a group of junior government workers doing synchronized calisthenics on the sidewalk, sneering a bit as they walked by.

This is where Zhu Baoqi was hoping for a fair deal, but got a death sentence instead.

In early 2004, Zhu bought the mining and management rights to a formerly state-run coal mine near Zichang, roughly 45 winding miles north of Yan'an. He laid off workers who'd thought they'd had jobs for life, and he planned to invest in upgrading the mine.

"Zhu first told us that he would continue to employ us at the coal mine, and then he told us he didn't want to use us anymore," said Wang Jie, who'd worked at a repair shop there for more than a decade. "Of course we hated him, because he didn't fulfill his promises to us."

Wang and his fellow workers went to Yan'an, the biggest city nearby, to petition the government for jobs or pensions beyond their severance payments. The government in Yan'an didn't want to hear about their troubles and turned them away, Wang said.

Back at the mine, word began to spread that Zhu had gotten himself into a position he couldn't quite afford. Guo Hong'an, who sat on a Communist Party advisory board in Zichang, apparently heard the rumors and smelled an opportunity.

In March of 2008, he approached Zhu, saying he represented an energy company with ties to a large firm. He offered Zhu a loan of 5 million yuan, more than $730,000, with the rights to the mine as collateral.

For reasons that aren't clear, Zhu then essentially doubled down, striking a deal with Guo worth 285 million yuan, or almost $42 million, making him a partner in the mine.

After the arrangement was sealed, Zhu looked deeper into Guo's background and found that not only did his company have no link with the bigger firm, but Guo also lacked the capital to develop the mine, according to state media. Worried that he was being swindled, Zhu demanded that the agreement be revoked.

"He was not cautious about this deal. If he had been cautious he would still be alive right now," said Zhang Jianwu, who lived next to Zhu in the villa community in Xianyang.

Zhang spoke affectionately of Zhu, but said he was always overreaching. Zhu's former neighbors at the workers' housing complex said that when Zhu's family moved out of the drab compound, they left all their furniture and many of their belongings behind. He was in a rush to have a bigger life.

"When I first met Mr. Zhu, he didn't have lots of money. He got into debt buying the house, and sometimes the real estate agent would drop by and ask him when he was going to pay back the money," Zhang said. "Then the oil business started to get better, and after he got this huge amount of compensation from the government (for the oil fields), he used that money to invest in the coal mine."

When Zhu asked to tear up the contract for the coal mine, Guo turned to the deputy secretary of Yan'an's government, who also directed the petitions and appeals office. Ironically, it was the same place that Zhu's miners had pleaded their case. The official, Wang Zhiguo, agreed to mediate an agreement.

Unbeknown to Zhu, Guo had arranged to give Wang a kickback of 2 million yuan, more than $290,000, if Wang found in his favor, according to a publication overseen by a Chinese government agency for prosecution and investigation.

Wang ordered Zhu to return the 5 million yuan loan and another 5 million yuan that Guo also had given him. He didn't stop there: Zhu also would have to give Guo an additional 30.5 million yuan, almost $4.5 million, in compensation. To drive the point home, Guo reportedly sent men to take the coal mine by force.

Zhu was trapped. He began paying the millions of dollars to Guo, but it didn't matter. Guo was out for blood, thinking that if Zhu were gone completely, he could take the mine with even less trouble, according to court testimony reported by state media.

In Yan'an, once the seat of a revolution against a corrupt nationalist regime, that's how business is done these days. A few weeks later, Zhu was dead.

Although Guo and two of his henchmen got the death penalty and Wang got four years in prison, the head of the propaganda department at the court that tried them shrugged off the implications of the case.

"Crimes like murder and robbing and stealing are quite common these days in China. People usually don't pay attention," Li Tiesuo said. "If Zhu wasn't a billionaire, it wouldn't have created this big stir."

The Yan'an government had no comment. A senior propaganda official who refused to give her name came to the gate outside the main government building and denied knowing anything about the arrest of Wang, the city's deputy secretary. "I shouldn't talk about this with you," she told McClatchy.

With that, the official was gone. There was business to do, and nobody wanted to talk about the death of Zhu Baoqi.

http://www.mcclatchydc.com/2010/06/09/95618/rising-chinese-businessman-murdered.html

QueEx · Mar 18, 2016

Analysis

China's biggest problem? It's turning into America.

REUTERS/Bobby Yip BY/SH

Jeff Spross
March 18, 2016

China has problems. Its economy is slowing, its exports are falling, and U.S. dollars are fleeing its shores as its economy and various state-run enterprises pay off enormous amounts of debt overhang. But if you want a pithy, counterintuitive, big-picture phrase to sum up what's going on over there, I'd put it this way: China's problem is it's turning into America.

China remains a very poor country: its economic output per person is still far, far, far below that of the United States. And despite the slowdown, it's still probably growing considerably faster than the U.S. has in decades. As nations develop and become richer, they go through a shift where their economy moves from being mostly manufacturing and heavy industry to being mostly services. America went through this transition decades ago, but China is still in the midst of it. And it includes a slowdown for the economy: Because you're richer, you have more wealth per person to go around, so growth qua growth becomes less important, and distribution becomes
more important.

This gets us to the heart of the matter: China's inequality.

America's Gini index is 41, which is remarkably high for an advanced western country. China's Gini is higher still, close to 55. And that's after government taxes and transfers are accounted for. The top 20 percent of China's population now claims 47 percent of all income in the country.

This a problem because of that shift from manufacturing to services. Services are, by their nature, a lot tougher to export than manufactured goods. So if your economy leans on services, that means the demand to feed that supply — lots of everyday consumers with money to spend — has to come mainly from inside your own borders. Inequality undercuts that by making it a lot harder for the majority of the population to provide sufficient demand and consumption.

But Chinese elites are very similar to American elites. They like inequality; it gives them disproportionate wealth and power. Like America, China's government has the policy tools to squash inequality and redistribute money down the income ladder. They just don't want to do it.

What China has done instead is rely on demand from abroad — from consumers with money to burn in other, richer countries, mainly America — to extend their manufacturing economy as much as they can, and they've driven down the value of their own currency to make their exports cheaper. This is where the two countries diverge: Both face a national demand shortfall, but China has dealt with its shortfall by bleeding demand from America and making our shortfall worse. And American elites have been basically fine with this, since they've been getting rich off the newfound opportunities of global free trade.

But now the global economic slowdown means the rest of the world isn't buying Chinese exports at the rate it once was. So China's major industries have been borrowing a ton to prop up production even as global demand slumps, to prevent massive layoffs — and thus political upheaval. The country may have moved away from full-blown communism and into a more mixed economy, but it's still ruled by the Communist Party; many of the party's major players are also heads of major industries, and the central authorities can't always control them. As a result, those regional rulers have tended to run their industries more as political fiefdoms than as market operations seeking financial sustainability. So the debt has just kept piling up.

The final wrinkle is China's geopolitical ambition: It wants to become a major player in the international financial markets, and get the renminbi accepted as an international reserve currency. But this means China is going to have to shape up its behavior in the eyes of international financial authorities.

As Ben Bernanke just laid out in an article at the Brookings Institution, the combination of all these forces has backed China into a tight spot. They're trying to use monetary policy to both prop up internal demand and keep the renminbi at a particular value vis-a-vis other major currencies. But they can't do that while dollars are fleeing the country because of the debt overhang. And they can't impose capital controls to hold onto those dollars, because that wouldn't go over well internationally. Something's got to give.

The escape hatch Bernanke recommends is something he calls "targeted fiscal policy." Sounds technical, but it basically boils down to "make China's welfare state bigger and more generous." China has improved a lot in this regard: It already has a pension system, unemployment insurance, near-universal health insurance, and other income supports. But as those earlier inequality figures show, it's not enough. They need to go bigger. And while other countries like America could pursue public investment and create jobs directly, too much poorly-directed state-run industrial policy has been one of China's big problems. They need to flood their economy with specifically domestic demand, but in a bottom-up way that allows the Chinese markets and the Chinese people to evolve through the manufacturing-to-services shift in their own way.

This probably won't make China grow faster. But it would likely make the slowdown more gradual and more manageable from the standpoint of international finances. It would also allow all the various pieces of China's economy to fit together better.

The final similarity between China and America is that, of course, we've got our own national demand shortfall, and should be doing Bernanke's "targeted fiscal policy" too. (Though we have the freedom to throw in more industrial policy.) That would bring down America's inequality, and repair our chronic failure to produce enough jobs for everyone — a failure that's been exacerbated by China's currency manipulation and our resulting trade deficit.

So what's grown up between China and America in recent decades is a kind of weird symbiosis, with elites in both countries profiting at the expense of workers in both countries. But it looks like the Chinese side of that arrangement may be close to unraveling.

SOURCE: http://theweek.com/articles/613321/chinas-biggest-problem-turning-into-america

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