Betrayers unite for personal profit - China's mining investment losses in Australia - switch to food

Nationalistic Australian citizens have voiced concern and opposition to selling more national assets to the Chinese despite the tremendous gains and spinoffs from foreign capital inflow. Aussies are not anti-foreigners as long as foreign ownership is exceeded by US (or a western nation) to offset undesirable influences from another state. 

In reality, Chinese state companies have been reformed since the 1980s and behave like private enterprises though the level of accountability is not well established ... not that all non-Chinese corporations are free from rigidity and unethical conduct. 

http://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/demystifying-chinese-investment-O-201207.pdf

In most transactions, the buyer and seller stand to gain or else there is no deal. Cash loaded and enthusiastic, China state owned enterprises have been lured and wooed by the opportunistic firms who are keen to sell.  

http://www.theaustralian.com.au/national-affairs/china-investment-elephant-is-well-and-truly-in-the-room/story-fn59niix-1226452825060

http://www.theage.com.au/opinion/political-news/chinese-investment-no-threat-20120422-1xf64.html

http://www.terradaily.com/reports/Chinese_bids_welcomed_in_42_bn_Australian_asset_sale_999.html


Despite investment restrictions, the Chinese have quite successfully bought up many mine shares to feed its mills back home. From hindsight, this is a blotched plan rather than an achievement. It would not be an overstating Chinese losses in the millions if not billions for purchasing overrated companies, changing market conditions, poor performance and unforeseen results. The true picture is probably less rosy than that painted by the buyers and sellers or what is reported in the media. There are good reasons why officials and business managers want to portray it negatively to cover their folly or mistakes. 

Inevitably, the topic of corruption cannot be evaded. Mistakes cannot be attributed mainly to innocent miscalculation, lack of due diligence and market changes as a result of falling production. Surely the Chinese investors are smarter and the Australian sellers would play harder to get. We may never know how much kickbacks were involved. 

Credit must be given to the Chinese for quick thinking and adjustments. Now, Chinese investors have decided that the mining sector is jinx. It is high time that the government directs investors to diversify into other sectors rather than placing all the bets in fading minerals sector. 


http://www.couriermail.com.au/business/chinese-investors-look-to-diversify-beyond-resources-sector/story-fnbdkrr9-1226443327176

Attention is now turned to the next most important resource - food - to feed its billions of people. More Chinese are investing in Australian farms recently. 

KPMG Australia’s China Practice, said that Chinese companies are showing an increasing appetite for investing in Australia’s food sector “from gate to plate” as they seek to meet rising food demand at home and capture more expertise from Australia’s companies and farmers.  

Banks, both domestic and Chinese, are also increasingly interested in financing the sector at a time when many miners and energy producers are struggling to secure financing for new projects in the face of falling commodity prices and concerns of a falloff in demand ...

http://blogs.wsj.com/dealjournalaustralia/2012/08/22/kpmg-sees-more-chinese-investors-buying-aussie-farms/?mod=google_news_blog

Another indication of change is China investing in mines (and others) elsewhere where the government and people may be less hostile to Chinese money.  

http://www.ibtimes.com/articles/374441/20120816/china-gold-rush-africa-supply-barrick.htm

Nevertheless, merely containing the damage will not solve the fundamental problems that has wasted Chinese funds which could be better spent helping its poor and boosting domestic development and consumption. 

Attempts to monitor and penalise corrupt officials venturing overseas have been put in place but with limited success. Reports of arrests have been random and rare, for most have used their positions to amass personal wealth and enrich their cronies at the expense of the nation's benefit with little reprisals. 

http://www.globaltimes.cn/content/728010.shtml

China is a growing domestic market for local businesses and USA exporters with the right strategy and skills

US style stores in China will be a big strategic business mistake. China is not USA. It has a different historical experience and its rising middle class folks are not as wealthy, more frugal, evaluate essential and luxury expenses with a different set of criteria, and expect sellers to understand customer needs and offer good service.

As with past and future failures in transplanting wholesale western economic management, political systems, religious beliefs, culture and frameworks into totally different societies, Chinese and foreign sellers must be able to capture what Chinese consumers really need and willing to spend on. Marketing pitched at customers' priorities and preferences is the principle that works. Success comes to those who could adapt quickly with their offerings. 

Quote :

China is counting on rising domestic demand from this rapidly growing segment. So, too, are Western exporters, faced with anemic growth in Europe and North America.

But China's middle class isn't Charleston's. Western companies have misjudged Chinese shoppers' priorities and clumsily tried to export U.S.-style stores.

The potential buying power of China's middle class is vast. About 247 million Chinese, 18.2% of the population, qualify as middle class, meaning their households spend between $10 and $100 a day on average, according to Brookings Institution economist Homi Kharas.

If current patterns continue, the number will soar to 607 million by 2020, and spending by China's middle class will rival that of the U.S., after adjusting for inflation and purchasing power.

The trend has the potential to remake China. With export markets weakening in Europe and the U.S., economists say, Beijing needs to lift spending by its own middle class or risk that growth will slow sharply. Steady middle-class growth also could help China's trading partners, bolstering a market for computers, cars and trendy clothing, as well as for commodities such as copper, oil and cotton.

China already is the world's largest market for some middle-class emblems, including cars, personal computers and smartphones. And multinational companies show no signs of taking their feet off the gas.

Growing sophistication among some Chinese middle-class customers has led Five Star to upgrade in some cities. The Qingdao store has higher-priced electronics than older outlets—for example, cameras and high-definition video equipment for a first voyage overseas or a road trip across China.

With brighter lighting, additional seating and customer-assistance stations, the store in this port city of 8.4 million people also has more of the trappings of a stateside Best Buy.

Following its parent's lead, Five Star opened a small research department last year to conduct consumer surveys. When it learned that some customers considered the chain stodgy, Five Star developed a new icon: cartoon characters that appear to be drawn by Hollywood animators.

http://online.wsj.com/article/SB10001424052702303444204577460693377819420.html?mod=e2tw&mod%3D=e2tw

Ignore China's rise - arrogance and ostrich mentality - the need to understand China

Personally, I sense the fear and hypocrisy are the weighing down heavily on many China watchers.   In fact, many Asian critics do not know better than their economic competitors. Despite having a globalised education and affluent lifestyle (myself included), the high speed at which Third world nationals (not confined to Chinese) are acquiring knowledge and skills could frighten many laid back workers in the developed world.

http://www.guardian.co.uk/world/2012/mar/25/china-rise-ignorance

Quote :

Our ascendancy of the past two centuries – first Europe and then the US – has bred a western-centric mentality: the west is the fount of all wisdom. We think of ourselves as open-minded but our sense of superiority has closed our minds. We never entertained the idea that China could surpass the US. Backward, lacking democracy, bereft of Enlightenment principles,the product of a very different history, it was not western. So how could it? We were the universal model that everyone else had to embrace to succeed. The only form of modernisation that worked was westernisation. China would inevitably fail: the project was unsustainable. By insisting on seeing China through a western prism, we refused to understand China in its own terms. Our arrogance bred ignorance: we were not even curious.

China is, indeed, in so many ways, not like the west. It is not even primarily a nation state but a civilisation state. Whereas the west has primarily been shaped by its experience of nation, China has been moulded by its sense of civilisation. This helps to explain why the Chinese place such a huge emphasis on unity and stability, their reverence for the state and their embrace of ideas such as "one country, two systems" in Hong Kong. Similarly, unlike Europe, China never sought to acquire overseas colonies but established a tribute system in east Asia. The Chinese state bears a fundamentally different relationship to society compared with any western state. The state is seen as an intimate, as a member of the family, rather than, as in western discourse, a problem, a threat, or even the enemy. For the Chinese, the state is the embodiment of its civilisation: as such, it could not be more important, it lies at the heart of the Chinese pysche.

It is impossible to understand or make sense of China through a western prism. As China becomes a great power and, over the next two decades, steadily usurps America as the dominant global power, we will no longer have any alternative but to abandon our western parochialism and seek to understand China on its own terms. But the shift in mindset that faces us is colossal.

What does it mean to be a civilisation state? What was the tributary system and how will it shape China's future behaviour? Why is China's idea and experience of race so different from ours? Just as every non-western country was compelled during the 19th and 20th centuries to understand the west in its own terms, it is now our turn to make sense of a country so different from our own.

It will be a Herculean task: we always look west, hardly ever east. When Bo Xilai, a leading contender for one of China's top positions, was dismissed more than a week ago, it received little attention in our media even though it was the most important event of its kind for more than two decades. Compare, if you will, the attention, devoted by the British media – notably the BBC and quality newspapers – to the Republican primaries with that given to China in the build-up to the Communist party congress in November, when President Hu Jintao and Premier Wen Jiabao will be replaced by Xi Jinping and Li Keqiang. The latter is of far greater consequence yet the coverage is paltry in comparison.

We have an enormous China deficit that urgently needs addressing. It is replicated throughout our culture; there has been much talk of promoting Mandarin in our schools and yet, in both the state and private sectors, pitifully few offer it as a serious option. Our economy exhibits the same morbid symptoms: Britain exports more to Ireland than it does to China, India, Russia and Brazil combined. Unless we address these questions, we face the prospect of being sidelined by history.

China's remarkable economic growth started in 1978, but as its economy was then only a 20th the size of America's, its global impact was minuscule. By the turn of the century, however, after more than two decades of double-digit growth, the Chinese economy was more like a quarter of the size of America's, with the consequence that its global effect was of an entirely different order. The story, moreover, was no longer simply about China because by then its rise had begun to transform the world. Only with the financial crisis in 2008, however, did the west finally begin to wake up to the implications.

Although countless commentators speak lazily of the global financial crisis, this is a misnomer. A visit to Beijing will soon dispel the illusion. The place is brimming with energy, elan, confidence and brio. While the west is mired in austerity and stagnation, with a psychology to match, China is riding an extraordinary wave of optimism. In 2010, according to a Pew poll, 91% of Chinese felt good about their country's economy compared with 24% in the US and 20% in Britain. While most western economies are still smaller than they were before 2008, the Chinese economy has been growing in the region of 9-10% a year. That is why it will overtake the US almost a decade earlier than previously predicted.

2008 ushered in a new era, the beginning of a Chinese world economic order. Until recently the US largely shaped globalisation but now China is increasingly assuming that role. Its most dramatic expression is trade. China will shortly become the world's largest trading nation. It imports huge amounts of natural resources and exports a massive volume of manufactured goods: in 2011, it overtook the US to become the world's largest producer of manufactured goods, a position America had previously held for 110 years. In 1990, there was hardly a country in the world for which China was its chief trading partner. By 2000, there were a few, but nearly all were in east Asia. By 2010 the list stretched around the world, including Japan, South Africa, Australia, Chile, Brazil, India, Pakistan, the US and Egypt. Imagine how long the list will be in 2020.

China is rapidly emerging as a great financial power. In 2009 and 2010 the China Development Bank and the China Exim Bank – which I would guess the great majority of Observer readers have never even heard of – lent more to the developing world than the World Bank. Just as the Rothschilds funded much of Europe's industrialisation in the 19th century, so these two banks are now doing the same on a far larger canvas, namely the entire developing world, comprising 85% of the world's population. Meanwhile, in late 2008, China began making the renminbi, hitherto a currency that circulated only in China, available for the settlement of trade. The HSBC has predicted that by 2013-15 half of China's trade with the developing world (which constitutes more than half of China's total trade) will be paid for in renminbi. It is the first stage in the process by which the renminbi will replace the dollar as the world's dominant currency.

The centre of gravity of the global economy is remorselessly shifting from the developed to the developing world. China is the main player and the outcome will be the rapidly declining influence of the developed world and the reconstitution of all major global institutions, notably the International Monetary Fund and the World Bank, to reflect this.

Pause for a moment and think what it feels like to be in Beijing these days. The place is on fire. It is alive with argument and debate. A country growing at 10% a year is constantly throwing up huge and novel problems that require response and solution. It is a far cry from Britain mired in stagnation, where debate rarely ever breaks new ground and for the most part is backdated. In contrast, China is not only remaking itself with extraordinary speed, but is also remaking the world. Beijing resembles London in 1850 or Washington in 1950, but on an epic scale. It is the most interesting and stimulating city in the world.

I spent much of last autumn as a visiting professor at Tsinghua University in Beijing. My stay was a whirl of talks and discussions. Far from the western image of China being devoid of debate, Beijing is positively throbbing with it. And it is extraordinarily open-minded and open-ended. I was invited to give a lecture at the ministry of foreign affairs to around 100 young diplomats at which I suggested that a foreign policy based on Deng Xiaoping's principles was no longer appropriate: a new approach was required that reflected Chinese growing global interests while also drawing on its history. Far from being taken aback, those present entered into a vigorous discussion. These debates, furthermore, are infused with huge significance. As China becomes a great global power they will shape its future policies and priorities – and thereby the world.

One might think that in such times, and with such glittering prospects, China would be full of hubris, bordering even on arrogance. On the contrary, the opposite is the case. The Chinese are still deeply preoccupied with the colossal problems that confront a still poor and developing country of 1.3 billion people. Inequality has soared, sowing the seeds of growing resentment against the rich; land seizures, as events in Wukan recently demonstrated, provide a continuing threat to social stability; massive corruption is corroding the sense of justice and fairness. While possessed of the kind of inner confidence and experience that comes from being the heirs of a great civilisation, the Chinese have no illusions about where they have got to and the tasks that lie ahead.

In November, the Communist party will hold its 18th congress. It will elect a new leadership for the next 10 years during which time China will undergo profound change. Already, there is a major shift under way in economic priorities from low value-added production and massive exports towards higher-end production and domestic consumption. During the next decade we can expect important political reforms.

In Britain, meanwhile, China will continue to receive scant coverage. But, kicking and screaming, forever looking backwards to the age of the west, we will, nevertheless, be dragged into the age of China. Time waits for no country. Over the next decade, we will increasingly come under China's spell.

It is worth reminding ourselves that last October, when the future of the euro was in grave doubt, European leaders pleaded with China to extend a huge loan. Britain is also broke and needs Chinese money for its infrastructure projects. There will be a growing clamour to learn Mandarin. And, as yet hardly recognised, we will find ourselves coming under the growing influence of Chinese soft power, be it the influence of Chinese parenting or the country's stellar educational performance. China will irresistibly shape our future.

China 2030 : mistakes that World Bank would not want to be associated with

Would Chinese economic policy makers be naive to the extent of taking the advice of China 2030 Report written by pseudo economists whom the World Bank has disclaimed from?   


Chinese state companies have undergone transformation and authorities continue to tighten regulations to check aggressive and unprofitable investments.


The authors may better make use of their talents to provide prognosis and prescription for the economic ills inflicting US and Europe. 


China experienced phenomenal success by adopting socialism with capitalist characteristics. Perhaps US and Europe would benefit from capitalism with socialist elements to address chronic economic excesses, unemployment and social problems. 

Drop Deng's policy? WB's wrong therapy

By John Ross

China.org.cn, March 2, 2012

The World Bank's report China 2030 has, unsurprisingly, provoked major criticism and protest. I have read World Bank reports on China for more than 20 years and this is undoubtedly the worst. So glaring are its factual errors, and economic non-sequiturs, that it is difficult to believe it was intended as an objective analysis of China's economy. It appears to be driven by the political objective of supporting current US policies, embodied in proposals such as the Trans-Pacific Partnership.

Listing merely the factual errors in the report, of both commission and omission, as well as the elementary economic howlers, would take up more column inches than are available to me. So what follows is just a small selection, leaving space to consider the possible purpose of such a strange report.

The report has no serious factual analysis of the present stage of China's economic development. On the one hand it is behind the times and "pessimistic", saying China may become "the world's largest economy before 2030". This is extremely peculiar as, by the most elementary economic calculations, (the Economist magazine now even provides a ready reckoner!) China will become the world's largest economy before 2020.

On the other hand, the report greatly exaggerates the rate at which China will enter the highest form of value added production. As such, the report calls for various changes in China, and bases its calls on the rationale of "when a developing country reaches the technology frontier'. But China's economy, unfortunately, is not yet approaching the international technology frontier, except in specialized defense-related areas. Even when China's GDP equals that of the US, China's per capita GDP, a good measure of technology's spread across its economy, will be less than one quarter of the US's. Even making optimistic assumptions, China's per capita GDP will not equal the US's until around 2040, by which time China's economy would be more than four times the size of the US's! Put another way, China will not reach the technology frontier, in a generalized way, for around three decades, so this rationale can't be used to justify changes now.

The report appears to envisage China's development path differing from that of every other country on the planet. It claims that in China "the continued accumulation of capital… will inevitably contribute less to growth". But one of the most established trends of economic development, first outlined by Adam Smith and econometrically confirmed to the present day, is that capital's contribution to growth increases with development. Deng Xiaoping certainly argued that economic policy must have "Chinese characteristics", i.e. be adapted to China's specific conditions. However, he never argued that China was exempt from economic laws, which is what this report appears to envisage!

The report makes elementary economic mistakes, such as confusing the consequences of high export shares with trade surpluses. It argues: "If China's current export growth persists, its projected global market share could rise to 20 percent by 2030, which is almost double the peak of Japan's global market share in the mid-1980s when it faced fierce protectionist sentiments… China's current trajectory… could cause unmanageable trade frictions." But if China increases its import share at the same rate as exports, this would not create major trade frictions. Japan's problem was trade surpluses, not export share.

It is almost impossible to believe, given such elementary mistakes, that this report was intended as a serious objective analysis of China's economy. What, then, is its goal? , The report spells out its goal clearly enough in calling for China to abandon the policies launched by Deng Xiaoping which brought such success. It says: "Reforms that launched China on its current growth trajectory were inspired by Deng Xiaoping… China has reached another turning point in its development path when a second strategic, and no less fundamental, shift is called for."

What is this new "non-Dengite" economic policy? Deng Xiaoping's most famous economic statement was "it doesn't matter whether a cat is black or white provided it catches mice". Effectively, this means, in economic terms, that a company should not be judged by whether it is private or state owned but by how it performs. The proposed new economic policy overturns Deng's dictum by saying: "Reintroduce judging cats by color, promote the private sector cat."

The consequences of this are clearly seen in the report's financial proposals. During the international financial crisis, China was protected by its state-owned banking system. The US and European privately-owned banks simultaneously created the financial crisis and were flattened by it, throwing their economies into crisis. China, however, suffered no significant setback.

The reasons for the US and European banking crisis are well understood. Modern banks are necessarily very large, both in order to undertake international operations and because of the inherent risk of large investment projects. They are literally "too large to fail", as the failure of any large bank creates an unacceptable economic crisis. This theoretical point was rammed home by the devastating consequences of Lehman's collapse, following which no government will allow a large bank to fail.

But a situation in which the state is blocking the bankruptcy of a large bank, whose profits are being privately retained, creates disastrous risk. If large private banks are state guaranteed against crippling losses, but retain profits, they are incentivized to undertake potentially profitable but highly risky operations. The disastrous results of this scenario were seen during the financial crisis.

Extraordinarily, this report proposes that China abandon the financial system which brought it successfully through the financial crisis and instead adopt the one which led the US and Europe to disaster. This is the real significance of "privatization would be the best way to make SFIs [State Financial Institutions] more commercially oriented".

This ties in with US TransPacific Partnership pressure for the elimination of China's state-owned companies, which are seen as giving China a completive advantage over the US. The US, of course, does not possess such companies. If the US is worried about the competitive disadvantage created by not having state-owned companies, it should create some, not call for China to abandon its own.

The last World Bank report of this type was published in February 1991 and its Study of the Soviet Economy provided the basis for Russia's economic policies of the 1990s.

The result was that Russia suffered the greatest peacetime economic disaster to befall any country. GDP declined by more than half. Russian male life expectancy fell by four years and we saw the beginning of a population decline, which continues to this day. The USSR subsequently disintegrated, in what Vladimir Putin called the greatest geopolitical catastrophe of the 20th century. Russia has not recovered.

This type of economic program is therefore not simply a "theoretical" model. It has been thoroughly and demonstrably discredited on account of the catastrophes it has produced. Russia was ill advised enough to adopt this type of economic program. It is to be hoped, then, that China does not follow the same course.

http://www.china.org.cn/opinion/2012-03/02/content_24786018.htm

China not buffered from global economic shocks and crises - hope for a soft landing in 2012?

While the capitalist model has propelled China to rapid economic growth and wealth generation for a growing number of Chinese enterpreneurs and professionals, it can't run away from the negative effects of the reeling economic gloom affecting China's trade partners.

The major evils are : speculation in the property margin, widening gap between the rich and poor and unemployment.

There is no doubt that China will be dragged down by the US and European nations (except Germany). The question is the extent not whether.

Quote :

Meanwhile, flaws in China’s growth model are becoming obvious. Falling property prices are starting a chain reaction that will have a negative effect on developers, investment, and government revenue. The construction boom is starting to stall, just as net exports have become a drag on growth, owing to weakening US and especially eurozone demand. Having sought to cool the property market by reining in runaway prices, Chinese leaders will be hard put to restart growth.

They are not alone. On the policy side, the US, Europe, and Japan, too, have been postponing the serious economic, fiscal, and financial reforms that are needed to restore sustainable and balanced growth.

Meanwhile, flaws in China’s growth model are becoming obvious. Falling property prices are starting a chain reaction that will have a negative effect on developers, investment, and government revenue. The construction boom is starting to stall, just as net exports have become a drag on growth, owing to weakening US and especially eurozone demand. Having sought to cool the property market by reining in runaway prices, Chinese leaders will be hard put to restart growth.

They are not alone. On the policy side, the US, Europe, and Japan, too, have been postponing the serious economic, fiscal, and financial reforms that are needed to restore sustainable and balanced growth.

http://www.roubini.com/author/nouriel_roubini

Beijing's Coalition of the Willing not a one track single way zero sum game

China has steered an independent path from the US and the Soviet Union evident from the Sino-Soviet split, Sino-American normalisation and post-Mao modernisation and open door policy.

Rather than viewing China's rising stars to reach the limitless sky and imposition of authoritarianism, China has adapted and bent to suit international norms.  Entry to WTO has been back breaking even to the extent of bankrupting many inefficient businesses.  China has come a long way and absorbed many western ideas, economic management and cultures to come to this day and stage of development.

Unlike plundering by previous and continuing colonialist/ imperialist industrial-military collaboration, China has given aid without strings attached to Third World countries.

The learning process is a dual carriageway. China is adept at imitating and adopting practices and even values that would promote its economic and national interests. It is a unique model that is still evolving, but which has so far shown to be working successful. You can't blame many developing nations from wanting to choose a better model over the high sounding "free" world's which has a poor track record.

From emperor with his cabinet, to chaotic elitist Republic, social egalitarianism, Mao dictatorship to the present day collective leadership and local elections. Isn't that change?

The Greek model of democracy was elitist and universal franchise was non-existent until the turn of the century. European countries which boast of liberalism today took hundreds of years to allow commoners and women to vote.

Going by the frank admission by Chinese leadership that the country must relax its controls, China will but not overnight as many had hoped for. Neither would it bail out irresponsible western governments and unethical businesses without conditions, scrutiny and accountability. The bottomline is to preserve stability as it has for thousands of years for it to survive as a civilisation on earth.

http://www.smh.com.au/opinion/society-and-culture/china-marks-the-route-on-new-global-roadmap-20111223-1p8hu.html

http://www.foreignpolicy.com/articles/2010/06/21/beijings_coalition_of_the_willing?page=full

China's Property Market : Bust? Freefall? Soft landing?

Chinese property markets are not fully sheltered from the global gloom. Nevertheless, steady government fiscal policies will steer it from going into a downward trend. The bottomline is that the economy would not be near what EU and US have and will be experiencing. 


Are China's Property Prices In Freefall?
There certainly has been a great deal of commentary on China’s real estate market recently, and it’s very difficult to separate fact from fiction. I’ve spent 70 percent or more of my time each and every year for the past 20 in China, have traveled extensively throughout the country and spoken to many government and business leaders in the course of a year, and I must admit that I am often confused when I listen to what the experts have to say in the press and on television. Most of the time, I just scratch my head and wonder if they are talking about the same China.
For example, the talking heads worry whether China will have a “hard” or “soft” landing, but I see steady 8 percent to 9 percent growth for as far as the eye can see. They opine that bad loans in China’s banks could be a problem, yet Standard & Poor’s recently upgraded its ratings for Bank of China and China Construction Bank, giving the two Chinese lenders higher grades than most of their largest U.S. rivals. They describe “ghost” cities and buildings in China, and I have yet to see one.At times like this, when the commentary seems so disconnected from my own experience, I like to do a reality check by speaking with as many Chinese business leaders as I can—people that have a real stake in the economy, not economists, government officials or foreign commentators. After all, it’s possible that there is a piece of information that I may have missed and not taken into account.Fortunately, I had an opportunity to do just that last week while on a bit of a road show in Shanghai, Wuhan, Hangzhou, Wuxi, Ningbo and Hangzhou with one of our clients. In Wuxi, we met with the head of a company that is at the heart of China’s economy. In fact, the company is so pivotal that the general manager apologized for having to leave the meeting for a brief period to take a call from Beijing. Referring to the recent meeting of China’s senior leadership in the capital city, he explained that the government was very interested in hearing his views on the state of the economy.
He began by saying that China has some unique characteristics that many foreigners don’t understand, and that they tend to rely too heavily on the observations of other foreign experts. That often causes the foreign press to get the wrong take. In his opinion, internal demand in China is so large that he doesn’t see any problem with the Chinese economy remaining stable and continuing to grow. On property prices, he noted that there has been some softening, but also pointed out that many prices had gone up too quickly. He certainly didn’t see a total collapse, or anything like a freefall.

What are the unique characteristics about China that he referenced? For one, the Chinese government, unlike those in the large developed economies, has full control of all the monetary and fiscal levers and has proven to be particularly adept at pulling on them. Like other countries, China can raise interest rates and bank reserve requirements. It can also, though, take administrative measures and tell banks not to lend, or quickly implement restrictions on residential property purchases or down payment requirements. Unlike just about every other major government in the world, China can also control fiscal policy, making key decisions based on economic, not political, considerations. When concerned about an overheated economy that was growing at 13 percent, China put infrastructure projects on the shelf in late 2007, only to take them off again in the final quarter of 2008 in response to the global economic crisis. For better or for worse, actions like these are very difficult to implement in most countries.

In answer to the question from our reader: No, property prices in China are not in freefall.

China is a big country, and it’s possible to find a statistic that supports any given theory at any given point in time. Rather than referring to anecdotes about Hong Kong developers slashing asking prices in Beijing or Shenzhen, we should instead look at figures for a greater cross-section of the country. The China Real Estate Index System measures prices in 100 cities across China. In November, the average home price at 8,832 yuan ($1,385) a square meter was 0.28 percent lower than October. The November average price was the lowest since May, when it was 8,819 yuan. That doesn’t sound like a freefall to me either!

Very simply, residential property prices have been softening recently in response to measures that the Chinese government has been taking over the past 18 months to stem the rapid rise in property prices that occurred in the aftermath of the global crisis. The government’s policies have worked, and we are now seeing the effects of those policies. With inflation under control, and the steam taken out of spiraling property prices, the Chinese government is now becoming more accommodating and the economy is in transition. In addition to looser credit, many expect housing restrictions in China to be lifted in 2012.

Read more :

http://www.forbes.com/sites/jackperkowski/2011/12/20/are-chinas-property-prices-in-freefall/

US takes issue with China's Intellectual Property forgot its lax approach to Japan and Taiwan allies in the 70s - the Truth about IP

Obama gets impatient with China over Intellectual Property rights enforcement, another key issue of contention after the currency manipulation charges. 


Some facts to note and reflect on before jumping to conclusions : 


- Developed countries own most of the IP and therefore have most to gain by insisting on strict regime implementation globally so its MNCs can profiteer.  


- Developing countries are naturally and unfairly disadvantaged by "RULES" set by economically advanced countries. This is translated into higher production costs and a form of disguised protectionism imposed on the poor before they are able to catch up.


- Consumers benefit from lower cost alternatives. Think universal education for poorer folks in developing countries and the chronically ill. They don't mind paying less for no frills and do not care about branded goods and medicines. 



- Paradox : the stricter the rules, the room for infringement increases discourage compliance and drive more potential violators underground instead of paying for costly rights usage and penalties.


-  Excessive IP protection stifles creativity even in the US and western countries.  Why must the originator always be the "winner that takes all"?  A way for monopolies to get around anti-trust laws?  


- US has restrictions on exporting high technology on strategic grounds. Ironically, US trade balance will be fixed in no time if bans are lifted.  


- TRIPS / WTO Doha Round actually endorses legitimate rights to fair competition by trade partners. It would help if they cooperate than fight head-on. US does not have a good track record of observing WTO regulations but likes to cherry pick what is advantageous and self serving. 



- Capacity building and judicial enforcement (not just institutions) takes time for countries that have been set back by colonialism and internal strife. 


- The previous wave of newly industrialised Asian economies, notably US allies Japan and Taiwan, were allowed imitation during its initial economic development stage. Does the US have short memory or inclined on applying double standards? 


- China is a large nation that is hard to detect creative wizards and businessmen bypassing monitors, regulators and police.  It is also not a priority for developing nations preoccupied with economic growth and income disparity social issues. 


-  Weaker and smaller US trade partners have submit to TRIPS-plus schemes imposed by the US to gain market access through the backdoor.  Talk about economic bullying. 


- Are US pharmaceutical companies paying patent and knowledge rights for TCM (traditional Chinese medicine) and piracy of South American and Indian herbal medicine and exotic plants? 


Rest assured, China pays important attention to IP as it is inevitable for  modern economies.  In the coming years, China, India and Brazil will institute stricter IP laws to protect their home inventions, some notable works of creativity and R&D are in the manufacturing pipeline. 


It pays to be patient. But who will have the last laugh? 


http://www.chinaipr.gov.cn/

http://www.mckinseyquarterly.com/Protecting_intellectual_property_in_China_1643

Rhetoric and Double Talk : Obama says US does not fear China - Action speaks louder than words, reassurance does not help to assuage excluded and irritated China's fear of reigniting Cold War

The logical thing for the US Administration and any government in dire economic straits is to cut budget, withdraw troops, turn ammunitions into economic capital, and focus on getting the economy out of the doldrums. But no, Obama has not lived up to expectations. He is desperate to prove to his political opponents and some American voters that he is hawkish and means business (in the military sense). Start a fire in your competitor's backyard and pretend that you mean no harm and act surprised that neighbours are alarmed. American Presidents have not learned from lessons in history when they have no qualms about bringing on the Cold War! 


Dictating terms and playing patron to another developing country is not new in US policy. Unfortunately, US has not been exemplary in its observance of international rules and norms, nor paying its fair dues.

Quote :

... the United States would deploy 2,500 Marines in Australia to shore up alliances in Asia, but the move prompted a sharp response in Beijing, which accused Mr. Obama of escalating military tensions in the region.

The agreement with Australia amounts to the first long-term expansion of the American military’s presence in the Pacific since the end of the Vietnam War. It comes despite budget cuts facing the Pentagon and an increasingly worried reaction from Chinese leaders, who have argued that the United States is seeking to encircleChina militarily and economically.

“It may not be quite appropriate to intensify and expand military alliances and may not be in the interest of countries within this region,” Liu Weimin, a Foreign Ministry spokesman, said in response to the announcement by Mr. Obama and Prime Minister Julia Gillard of Australia.

Some analysts in China and elsewhere say they fear the moves could backfire, rsiking a Cold War-style standoff with China.

The United States will not build new bases on the continent, but will use Australian facilities instead. Mr. Obama said that Marines will rotate through for joint training and exercises with Australians, and the American Air Force will have increased access to airfields in the nation’s Northern Territory.

Analysts say that Chinese leaders have been caught off guard by what they view as an American campaign to stir up discontent in the region. China may have miscalculated in recent years by restating longstanding territorial claims that would give it broad sway over development rights in the South China Sea, they say. But they argue that Beijing has not sought to project military power far beyond its shores, and has repeatedly proposed to resolve territorial disputes through negotiations.

The United States portrays itself as responding to a new Chinese assertiveness in the region that has alarmed core American allies. Secretary of State Hillary Rodham Clinton wrote a recent article in Foreign Policy laying out an expansive case for American involvement in Asia, and Defense Secretary Leon E. Panetta characterized China’s military development as lacking transparency and criticized its assertiveness in the regional waters.

Mr. Obama reached out to China even as he announced the new troop deployment. “The notion that we fear China is mistaken; the notion that we are looking to exclude China is mistaken,” he said.

The president said that China would be welcomed into the new trade pact if Beijing was willing to meet the free-trade standards for membership. But such standards would require China to let its currency rise in value, to better protect foreign producers’ intellectual property rights and to limit or end subsidies to state-owned companies, all of which would require a major overhaul of China’s economic development strategy. 

http://www.nytimes.com/2011/11/17/world/asia/obama-and-gillard-expand-us-australia-military-ties.html

From blunt capitalist-imperialist US President Obama : Play by the Rules even if we break them - teaching an ancient peaceful civilisation restraint defies common sense

Obama is under immense pressure as his precarious standing becomes more obvious as the presidential re-election nears. His belligerent attitude and proactive alignment with Asia Pacific ally Australia defies rationality. Despite rhetoric for change, Obama has succumbed to neo-Cons to put on an aggressive cowboy front to stir up peaceful waters in the region. While China has thousands of years of diplomacy and peaceful coexistence even at the zenith of the Tang and Ming dynasties, post-war US has seen more invasions in distant lands, resulting in painful casualties and fatalities on all sides (not to mention mammoth economic losses),  within half a century. More than any other imperialistic and hegemonistic nations had chalked up in history. 


As long as US continues its ranting on China's currency manipulation instead of reflecting on and redressing weaknesses in domestic economic fundamentals, it is not getting out of the rut. There are lots of hard work to be done to curb its credit manipulation, raise fiscal standards, improve productivity and bring about more equitable distribution of wealth. Carbon trading and taxes are not on the US government's agenda either, preferring to put the blame and burden on Third World countries trying to pick up from lost years of development to eradicate poverty by sacrificing their health and environment taking on the role as factories of the world. 

Quote :

Obama's tough-minded and bluntly worded message to China was that rising power brings with it rising responsibilities. China has an obligation not only to follow the rules, but, in Obama's words, to help underwrite them.

Obama's comments were in answer to a question about trade. But his bluntness with China reflects a deep disappointment in Washington with China's performance over a wide range of economic, security and global governance issues.

The Trans-Pacific Partnership is not designed to exclude China, Obama says, but if a country wants to join it has to open up its economy. This is shrewd diplomacy by Obama. The TPP is open to any nation that meets the criteria. Because China won't meet the criteria, the emphasis of the discussion is not on the US beating up on Beijing, but Beijing's refusal to liberalise.

http://www.theaustralian.com.au/national-affairs/opinion/blunt-diplomacy-a-shrewd-move/story-e6frgd0x-1226197235738?from=promo-strip-na

BofA Divests China Construction Bank Stake to Boost Capital, Not Declining Confidence in China

Bank of America's latest move to further divest its shares in the Chinese bank is more to lock in investment gains and take profits than a signal of loss confidence and an impending hard landing in the Chinese economy.


Where else can and should investors take their capital to if not China, India and smaller Asian economies?
Certainly not USA and Europe?


Quote :

Chief Executive Officer Brian T. Moynihan, 52, is selling assets to replenish Bank of America's capital and meet regulatory requirements for risk buffers after faulty mortgages led to about $40 billion of expenses. The lender joins Goldman Sachs Group Inc. in paring stakes in China's two biggest banks by tapping the stocks' biggest one-month rally in four years.

“We view this announcement positively for CCB as it removes a significant overhang from its shares,” Mike Werner, an analyst at Sanford C. Bernstein & Co. in Hong Kong, wrote in a research report. “This is especially true as the market was aware that BofA was seeking to improve its struggling capital adequacy ratios.”

http://news.businessweek.com/article.asp?documentKey=1376-LUNJLL6K50XS01-6V6EUMOEAT4U2F1PGK5CVJJIL5

US-Australia strategic and economic alliance vis-a-vis China : shifting goalposts in world trade and arms race

US and Australia's message to China : Do what you're told but don't follow what we do.
Obama has brought American imperialism to a higher level, expanding across the Pacific despite its economic woes. 
The blame game is on : currency manipulation pretext is an old trick used by politicians disregarding innocent poor and middle class enjoying cheap Chinese goods.  
US trade deficit could easily be resolved by exporting more high technology to China, if they are serious to match words with deeds.  Can Americans trust the Chinese and Iranians the way like you trust the Israelis to take ownership of strategic know-how? 
Why would Australia want to have a part of this conspiracy?


QUOTE :

Barack Obama's visit to Australia carries an invitation. It's an invitation to take America's side in its rivalry with China.

In one vital way, Australia has already chosen. Julia Gillard has intensified the strategic and military alliance with the US emphatically, and more deeply than the Australian public has yet grasped.

In another way, Australia is only partially and gingerly taking America's side. The US President comes to Australia fresh from his latest argument with the Chinese over trade and currency. His visit to Canberra will carry an implicit invitation, and perhaps even an explicit one in closed-door talks, to take America's side more fully here, too. It's an invitation Australia should politely, but firmly, refuse.

The strategic and military deals are already made. Gillard has presided over two major decisions in recent months.

Australia and the US have written a new clause into the ANZUS treaty giving cyber attacks the same weight as bombing raids and invasions. That revision to the treaty, a world first, happened in September. And Australia and the US have agreed to give the US a significant new military presence in northern Australia, the details to be announced during Obama's visit next week.

As the Herald revealed last week, Obama and Gillard will announce that the US will begin rotating marines through an Australian base in Darwin, in a permanent new military presence.

Australians, generally speaking, like Americans and favour the alliance. The alliance has had majority public support since it was signed 60 years ago, even during the darkest days of the invasions of Vietnam and Iraq.

But two new polls suggest the public has little appetite for intensifying it. The Herald-Nielsen poll reported in today's paper asked whether respondents thought the US-Australia alliance relationship was too close, not close enough, or about right. The answer is that 71 per cent of adults think it's about right; 24 per cent say it is too close; a scant 3 per cent say it is not close enough.

Another survey by Essential Media presented Australians with a list of nine countries and asked the same question. The country that topped the list as the one Australians would like to draw closer to was China at 35 per cent. The US was eighth at 18 per cent.

So why is the Gillard government clutching Uncle Sam ever tighter to the national breast? The reason is straightforward. China's recent conduct has disturbed all the capitals of the Asia-Pacific. It has revived maritime territorial claims it had earlier left dormant.

But the US trade and currency agenda with China is another matter altogether. The wise and far-sighted US policy for the past couple of decades was to work hard to bring China into the global rules-based system. Rather than having a rising giant outside the system breaking the rules, Washington wanted China in the system, playing by the rules.

It worked. China signed up to, among other things, the World Trade Organisation. But now the Obama administration is seeking to shift the ground rules, moving the goalposts.

A bizarre contrast presented itself in Hawaii at the APEC gathering at the weekend - the Chinese President, Hu Jintao, argued world trade agreements should be based on the global WTO system, while the US president recruited other countries, including Australia, for his little regional trade sub-group, the Trans-Pacific Partnership.

The WTO's latest round of negotiations is moribund and the US should be reviving it. Instead, it is rounding up the TPP countries that take all of 6 per cent of US exports. It's insignificant as a trade bloc.

It's a posse to get China, which is not a member. "It's all about China," says an American trade expert, Bruce Stokes, of the German Marshall Fund in Washington. "The White House is hoping that if this thing gets big enough, China will one day want to join. The hidden agenda is that they will only admit it if China accepts a high standard of policing for its state-owned enterprises."

Australia signed up to the TPP in the Bush years; it's a done deal. But Canberra should not sign up to the next US agenda item, which is to threaten China over its managed currency, accusing China of currency manipulation to win unfair export advantage.

The global rules-based system in no way bans countries from pegging or managing exchange rates. Indeed, the US was the centrepiece of the global fixed exchange rate system until the early 1970s.

And the US has not stopped manipulating its currency; it's just got subtler. One of the aims of the US Federal Reserve in flooding the world with $US1.8 trillion in US dollars in the past three years is to devalue the currency. It's devaluation by hyperliquidity.

Beijing has allowed the renminbi to appreciate by 30 per cent in recent years against the US dollar. This has solved none of America's problems. The US campaign against China's currency policy is misguided. Australia has remained aloof so far and should remain so, even under the hypnotic power of the high-beam smile of a US president in person.

In strategic and military matters and trade and currency matters alike, the world has a deep interest in keeping China in the global rules-based system. If the Americans occasionally lose sight of this in the economic realm, Australia should not abet its lapses. We are an ally, not an accomplice.

Peter Hartcher is Sydney Morning Herald international editor.

Extracted from :

http://www.nationaltimes.com.au/opinion/politics/no-reason-to-get-even-closer-to-uncle-sam-20111114-1nfgn.html