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 Posting a reply to post #240516

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240516 No.240516 Stickied
All news pertaining to China goes here.

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Taiwan's real GDP growth rate in 2007 - a year before the elections which swept the KMT to power in 2008 - was 5.7%. This was higher than that of South Korea, Australia and a whole host of developed nations. While a tad lower than that of Singapore and Hong Kong, it's quite respectable.

Ah Bian took office in 2000, gweilo.

My claim of Taiwan's economic failures is not without backing:
>Scroll down to (B. Taiwan's economy)
>Scroll to Stagnated Wages and Deteriorating Income Distribution: The Seven Lost Years, pg 148

Balance this with quotes from Ah Bian:

>Ah Bian took office in 2000, gweilo.

That whooshing sound is the sound of my point going over your head. 2007 was the year BEFORE the KMT came to power, and the DPP had been in power for years. That year Taiwan enjoyed a respectable 5%+ growth rate, hardly anything to be concerned about.


Sure is KMT propaganda in here.

source is legit. counter it or concede.

The world today seems absolutely crackers,
With nuclear bombs to blow us all sky high.
There's fools and idiots sitting on the trigger.
It's depressing and it's senseless, and that's why...
I like Chinese.
I like Chinese.
They only come up to your knees,
Yet they're always friendly, and they're ready to please.

I like Chinese.
I like Chinese.
There's nine hundred million of them in the world today.
You'd better learn to like them; that's what I say.

I like Chinese.
I like Chinese.
They come from a long way overseas,
But they're cute and they're cuddly, and they're ready to please.

I like Chinese food.
The waiters never are rude.
Think of the many things they've done to impress.
There's Maoism, Taoism, I Ching, and Chess.

So I like Chinese.
I like Chinese.
I like their tiny little trees,
Their Zen, their ping-pong, their yin, and yang-ese.

I like Chinese thought,
The wisdom that Confucious taught.
If Darwin is anything to shout about,
The Chinese will survive us all without any doubt.

So, I like Chinese.
I like Chinese.
They only come up to your knees,
Yet they're wise and they're witty, and they're ready to please.

All together.

[verse in Chinese]
Wo ai zhongguo ren. (I like Chinese.)
Wo ai zhongguo ren. (I like Chinese.)
Wo ai zhongguo ren. (I like Chinese.)
Ni hao ma; ni hao ma; ni hao ma; zaijien! (How are you; how are you; how are you; goodbye!)

I like Chinese.
I like Chinese.
Their food is guaranteed to please,
A fourteen, a seven, a nine, and lychees.

I like Chinese.
I like Chinese.
I like their tiny little trees,
Their Zen, their ping-pong, their yin, and yang-ese.

I like Chinese.
I like Chinese.
They only come up to your knees...


It was respectable in spite of the DPP charlatans. KMT could provide close to Singapore-like growth, and bring broader benefits to the East Asian race.

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I try to remain optimistic that the US and China will work out a more or less amicable way to run the world for the next half century, a “Chimerica” of interwoven superpowers.

But it was slightly disturbing to hear the warnings of a distinguished China-watcher at a closed-door session of the annual Ambrosetti conference on Lake Como.

(This gathering of the global policy elites at Villa D’Este is a hardship assignment for Telegraph hacks. It fell to me again this year, but somebody has to do it.)

“China’s military spending is growing so fast that it has overtaken strategy,” said Professor Huang Jing from the Lee Kwan Yew School of Public Policy in Singapore. (He kindly let me quote his remarks.)

“The young officers are taking control of strategy and it is like young officers in Japan in the 1930s. They are thinking what they can do, not what they should do. This is very dangerous.

“They are on a collision course with a US-dominated system”.

Harvard Professor Niall Ferguson rattled me even further with a talk warning that the Chimerica marriage of the last generation is “on the rocks”.

“China gets 10pc growth: the US gets 10pc unemployment. That doesn’t seem the basis for a happy marriage,” said Prof Fergusson, – who used to sit next to me at the Telegraph as a young leader writer almost 20 years ago, before he went on to become one of the 100 most influential people on the planet (Time magazine).

China’s trade surplus is surging back to near record levels, yet the yuan has barely moved against the dollar since the fixed peg ended in June. It has actually fallen against a trade-weighted basket of currencies.

This is not an accident. The exchange rate is controlled. The yuan must rise – ceteribus paribus – unless the central bank prevents it doing so by purchasing foreign assets.

Prof Ferguson said naval rivalry is passé – cyberwarfare is the issue of the future, and he advises the West to be a little more careful about its reliance on Chinese-manufactured microchips.

Be that as it may, the current flash-point is a very old fashioned showdown between gunboats in the Yellow Sea and the South China Sea (the latter now a “core interest” of China along with Tibet and Taiwan), also claimed in part by a ring of other nations who are not pleased.

In late July, the chairman of US chiefs of staff, Admiral Mike Mullen, said he had moved from being “curious” about what the Chinese were doing, “to being concerned about what they’re doing. They seem to be taking a much more aggressive approach.”

“I see a fairly significant investment in high-end equipment – satellites, ships … anti-ship missiles, obviously high-end aircraft and all those kinds of things. They are shifting from a focus on their ground forces to focus on their navy, and their air force.”

Last week this little spat escalated to the point where a Chinese submarine erected a Chinese flag on the seabed of the South China Sea, 4,000 meters below the surface.

China has a perfect right to develop a blue-water navy and to make its presence felt in the region. The question in such matters is judging the purpose and precise circumstances, and I must confess that Prof Huang’s comments were slightly disturbing, always bearing in mind that he has a Singapore (Chinese diaspora) perspective.

Let it be said in China’s defence that it occupies no overseas military bases, and has no modern history of projecting imperial power.

On balance, I remain hopeful that country with a one-child policy, an aging crunch from Hell, and a chronic dearth of young people, will show an enormous reluctance to support military adventurism. Losing an only child is especially cruel.

Let us hope that the Communist hierachy in Beijing can rein in those young officers. But as Dr Huang said, they can no longer control much of anything, least of all the 17m-strong base of the Communist Party.

“The empire has lost control of its officials, which is how Chinese empires have always fallen in history.”

This needs watching, I fear.

You're the idiot, gweilo. You posted the economic data of ONLY 2007, when Bian and the DPP has been in power SINCE 2000. My sources talk about the ENTIRE LENGTH of Chen Shui-bian's reign.

>Implying the young officers of the PLA have any say in things.
lol @ more blatant gweilo fearmongering.

They'll have say in ten years or so

Diplomatic tensions between China and Japan were reignited after Japan arrested the captain of a Chinese fishing boat which it had accused of straying into its territorial waters.

The Japanese ambassador to China was summoned for the second time in two days as the China lodged a formal protested against the arrest, demanding the release of the trawler's skipper and an end to Japanese patrols in disputed waters.
The rebuke came a day after China's foreign ministry warned it reserved the right "to take further actions" against Japan which has pledged to lay criminal charges against the captain who faces a maximum of three years in jail.

China and Japan dispute the ownership of a string of five small uninhabited islands in the East China Sea near where the incident took place – known as Senkaku in Japan, Diaoyu in China – which are believed to hold seabed oil deposits.
The diplomatic moves were accompanied by an organised demonstration outside the Japanese embassy in Beijing when 30 flag-waving Chinese chanted demands for Japan to "get out" of the disputed islands. The embassy accepted a petition from the demonstrators.
This year there have already been three incidents involving Chinese and Japanese shipping, the most serious coming in April when a Chinese navy helicopter came within 300ft of a Japanese military vessel observing a Chinese naval exercise.
In the latest incident Japan's coastguard said that the Chinese boat twice struck Japanese patrol vessels after ignoring instructions to cease fishing in the disputed waters. No one was injured in the clashes, though the two Japanese craft were reported lightly damaged.
Although there is a long history of distrust between the two nations, founded on the bitterness of Japan's occupation of large parts of China between 1931 to 1945, Sino-Japanese trade ties have deepened rapidly in the last decade, with China becoming Japan's largest trading partner in 2009.
Japan's top government spokesman, Chief Cabinet Secretary Yoshito Sengoku, promised to deal with the case "strictly" according to the law, but also urged calm on all sides.
"It is necessary to deal with the case calmly, not to heat things up in Japan. We have to conduct diplomatic dialogue firmly. Japan's stance is that a territorial problem does not exist," he told a news conference.
However China's state-controlled Global Times newspaper warned in a commentary of the grave risk of the row escalating, saying that "Japan's irresponsible moves may eventually set fire to the Sino-Japanese relationship, or even force a military showdown."

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(Southern Metropolis Daily) On September 2, a netizen posted a blog post titled “Shenglong Village officials of Gangkou town, Zhongshan city traveled and participated in sexual activities using public fund” which exposed photos of village security officer and a production team leader taken with the topless transvestites during the trip to Thailand. Southern Metropolis Daily reporter confirmed these photos were taken during a public funded trip to Thailand organized by the village in July. Village security officer Liangxi Quan said, the ladyboy is really a man, touching his breasts is not a big deal.

According to a responsible personnel, last year the village had the requirement of acquiring 6000 acres of land. In order to encourage the group leaders to smoothly meet the quota, the town promised them a trip. That was how the Thailand trip came about, but as for the cost of the trip, where exactly was it from? The village official said it was not from the village funds, and it was from the “top”, but from which specific level, the responsible personnel did not wish to disclose.

As a cadre of the community, using public funds traveling to Thailand, and having intimate photos with transvestites circulating the internet drew a lot of attentions. What does village community public security officer Liang Xiquan think about his behavior in Thailand? Reporter had a phone interview with him.

Reporter: What was the trip to Thailand for?

Liang: Before the land acquisition job, we were promised that if we do a good job we’d be awarded with the trip.

Reporter: Where did you guys go? For how long? How much was the expense?

Liang: Went to Thailand, Bangkok and Pattaya, total of 5 days, the tour package was around 2,800 yuan per person.

Reporter: Did you pay for the trip yourself?

Liang: No, the village paid for it. (Another leader of Shenglong village chimed in: “no, the village didn’t pay for it”, but he does not know the situation.)

Reporter: Did you know that your photos of the trip spread on the internet?

Liang: … (Silence)

Reporter: Where did you ‘play’ with the ladyboys?

Liang: Should be on the Oriental Princess, there are 1000 people on the cruise, mostly Chinese, many people also did it.

Reporter: What do you mean? did what?

Liang: On the boat, Thailand ladyboys take off their clothes and let your touch their breasts.

Reporter: How much for that? Was there woman in the tour group? Other than that, were there other similar activities?

Liang: I don’t know if others gave tips, but I did not pay. 7 or 8 men in our group also brought their wives. They also did it, even women played like that. There were no other activities other than that. (A Shenglong community leader interrupted: I header it was 20 baht tip to touch them once.)

Reporter: As a community cadre, do you think it was good to participate in such activities?

Liang: This was arranged by Zhongshan tour group, and playing like that in Thailand is also publicly accepted. Because he (ladyboy) is also a man, I felt it was not a big deal. However I felt it was not good that the photos went public.

Reporter: Now the villagers are aware of you using public funds went out for this, do you have anything to clarify? Has your family seen these yet?

Liang: I can’t help that, they like to talk, so let them talk. My family has not seen the photos at this point.

Reporter: Do you think this offends public morals?

Liang: This happened in Thailand, not in China, It is seen as the local customs and tradition, this may be offending public moral in China, but it is relatively normal in Thailand.

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New trade protection measures adopted by developed countries like the United States against China will not only sour bilateral relations but also hamper global recovery, Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development (UNCTAD) said on Wednesday.

Urging the nation to defend itself from such attacks, Panitchpakdi said the measures would strain China's economic ties with the US.

In an interview with China Daily, Panitchpakdi said he does not concur with the view of other nations that the investment environment is deteriorating in China.

"China should be more aggressive in defending its turf and be selective in allowing foreign investment," he said.

The UNCTAD chief's comments come at a time when some nations are emerging from the throes of a recession and others are busy withdrawing the massive stimulus packages.

"I am concerned that trade friction between nations is increasing. It may intensify (in the coming months) and China will be a major target and the most frequently attacked nation. They (China) should be aware of this," he said.

Alarmed by rising unemployment and a ballooning trade deficit, the US has started a tirade against China's trade policies and termed them harmful for American companies.

The US Commerce Department said recently that it would monitor the alleged illegal import practices of nations like China and Vietnam, and impose higher duties when required.

He said although "both countries (China and the US) are now doing their best to reduce trade disputes", he still remains concerned "that (Sino-US) trade friction will rise", as "(US) companies are clamoring for more government intervention".

Expressing his concern, he said the lingering disputes would come in the way of a faster global economic recovery.

China has been a victim of trade protectionism recently with the US launching 23 cases against China, accounting for 65 percent of the trade disputes in 2009.

More aggressive

"I don't think China's investment environment is getting worse as argued, as China is in the right direction and doing more mobilization (on investment policies), including larger participation in distribution, banking sector reforms, and improving enforcement of IPR (intellectual property rights) laws," he said.

But, "of course, you cannot please everyone", he said.

According to UNCTAD's latest survey, China will remain the hottest foreign direct investment destination for the next three years.

Speaking at the 2010 UNCTAD World Investment Forum, Vice-President Xi Jinping said the government will strive to create a more open and optimized investment environment for foreign businesses.

"China needs to come out and be more aggressive in telling them the truth, and asking them to check, instead of just making loose comments, as the explanation is necessary and useful," he said.

"The vice-president's speech (at the opening ceremony) is graphic, explaining what China is doing on investment policies in clear terms," he said.

Commerce Minister Chen Deming said while the government remains optimistic about the investment environment, it also believes that there is still ample room for improvement.

Chen said the biggest concern for China is the quality of its foreign investment.

China should not worry too much about foreign investment, as the nation is not in dire need of such huge inflows, said Supachai.

The nation should strive to get more investment in the knowledge and technology sectors, he said.

"If they are not comfortable with China's policies, they can go somewhere else," he said.

The new FDI guidelines announced by the government envisages more foreign investment in sectors like renewable energy, high-tech and services.

During the first seven months of this year, China's FDI grew by 20.7 percent year-on-year, the highest growth worldwide. FDI growth in the services sector zoomed to 37.6 percent, compared with 4.58 percent for the manufacturing sector.

Zhou Siyu contributed to the story.

Fuck the United Nations, it can be counted on to side with Third World savages over the civilised nations each and every time. Regardless what issue is as stake.

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> Fuck the United Nations, it can be counted on to side with Third World savages over the civilised nations each and every time. Regardless what issue is as stake.

Yes. Which is why the UN voted to allow America and Britain to Invade Iraq. Several times.

  chinese love race mixing

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Indeed, the thought of China increasing its role in the international community makes me shudder. It does not give a damn about any other country but its own. To use a current example, I heard a report on cctv recently condemning Britain and other countries for tampering in the internal affairs of a number of African countries. Apparently they were peeved that we simply did not wish to throw away billions of dollars in aid. Instead we insisted on constitutional changes and electoral reform rather than pissing away our money to prop up corrupt dictatorships. Why would that be? Would it be because China has oil interests in the region and as a result has contributed millions of dollars propping up these regimes to enjoy access to their oil infrastructure?
And to think of all the self righteous rhetoric certain western countries had to endure after Iraq. At least we got rid of a dictator instead of embracing genocide.

People believe that China is a country on the move and perhaps they are right but God only knows how. They are backward bunch of arrogant xenophobes. They only explanation I have is sheer numbers. They lack innovation, common sense, diplomacy and a sense of history. The society is both culturally and morally bankrupt. They may talk about 5,000 years of culture but if you come to China you'll have a hard time finding it. They'd tear down a 1000 year old temple arm off just to make a few yuan.

They also claim all invention as their own, despite the fact they haven;t contributed anything of significance in hundreds of years. I say let the dragon keep on sleeping because the only thing they are likely to to when they do fully wake up is bore everyone some more with tales of an old culture that no longer exists.

China is a vacuous and superficial shithole, a parody of what it may once have been.

Now don't get me wrong. I want the poor in China to propser. I want them to afford medicines and food for their children. I do however have a problem with China becoming a major player, if not the major player, in world politics. It has neither the sensitivity, the ability, the diplomacy or the compassion to carry out the job effectively. I am a Brit and I say give me the yanks everytime. Call me niave but in my heart I believe that they are on the whole a force for good.

Liberal thought process, oh no how dare a country look out for it's own people, and not permit race mixing and mass immigration and all sorts of disgusting perverse globalist things!


Agreed. Qin Shi Huang was a moron when it came to inventing a writing system (not to mention he burned everything already written and buried the folks who wrote it). And so we wind up with shit like 你媽媽是胖,她的寵物鯨魚得到粉碎了她。

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When three Chinese scientists plunged to the bottom of the South China Sea in a tiny submarine early this summer, they did more than simply plant their nation’s flag on the dark seabed.

The men, who descended more than two miles in a craft the size of a small truck, also signaled Beijing’s intention to take the lead in exploring remote and inaccessible parts of the ocean floor, which are rich in oil, minerals and other resources that the Chinese would like to mine. And many of those resources happen to lie in areas where China has clashed repeatedly with its neighbors over territorial claims.

After the flag planting, which was done in secret but recorded in a video, Beijing quickly turned the feat of technology into a show of bravado.

“It is a great achievement,” Liu Feng, director of the dives, was quoted as saying by China Daily, an English-language newspaper, which telegraphs government positions to the outside world.

The global seabed is littered with what experts say is trillions of dollars’ worth of mineral nodules as well as many objects of intelligence value: undersea cables carrying diplomatic communications, lost nuclear arms, sunken submarines and hundreds of warheads left over from missile tests.

While a single small craft cannot reel in all these treasures, it does put China in an excellent position to go after them.

“They’re in it for a penny and a pound,” said Don Walsh, a pioneer of deep-ocean diving who recently visited the submersible and its makers in China. “It’s a very deliberate program.”

The small craft that made the trip — named Jiaolong, after a mythical sea dragon — was unveiled publicly late last month after eight years of secretive development. It is designed to go deeper than any other in the world, giving China access to 99.8 percent of the ocean floor.

Technically, it is a submersible. These craft differ from submarines in their small size, their need for a mother ship on the surface, and their ability to dive extraordinarily far despite the darkness and the crushing pressures. The world has only a few.

Jiaolong is meant to go as deep as 7,000 meters, or 4.35 miles, edging out the current global leader. Japan’s Shinkai 6500 can go as deep as 6,500 meters, outperforming craft “all over the world,” according to its makers. Russia, France and the United States lag further behind in the game of going deep.

American experts familiar with the Chinese undersea program say it is unusual in that Beijing has little experience in the daunting field. As a result, China is moving cautiously. Jiaolong’s sea trials began quietly last year and are to continue until 2012, its dives going deeper in increments.

“They’re being very cautious,” Dr. Walsh said. “They respect what they don’t know and are working hard to learn.”

In an interview, Dr. Walsh said that the Chinese were especially interested in avoiding the embarrassment of a disaster that ends with the aquanauts’ entrapment or death. “If I’m the new kid on the block,” he said, “I’m going to make sure that I’ve got bragging rights.”

Still, China is already waving flags. The move resembles how Russian scientists, in the summer of 2007, plunged through the ice pack at the North Pole and planted their flag on the bottom of the ocean. Upon surfacing, the explorers declared that the feat had strengthened Moscow’s claims to nearly half the Arctic seabed.

Wang Weizhong, a Chinese vice minister of science and technology, said that the Jiaolong’s sea trials “marked a milestone” for China and global exploration. The recent successes of the craft, he said in late August at a news conference in Beijing, “laid a solid foundation for its practical application in resource surveys and scientific research.”

But at least one senior Chinese expert questioned what he called “the current propaganda.” The expert, Weicheng Cui, a professor at the China Ship Scientific Research Center, which is building the submersible, said Thursday in an e-mail that the craft’s sea trials had steered clear of contested islands “to avoid any diplomatic issues.”

The flurry of publicity over the flag planting, he said, “is not so helpful for us to complete the project.”

China’s splash in the arcane world of submersibles comes after years of singling out major industries and technologies for rapid development. China is rushing to make supercomputers and jumbo jets. With expanding political ambitions and territorial claims in neighboring seas, it has paid special attention to oceanography and building a blue-water navy, one that operates in the deep waters of open oceans.

The United States once held the submersible lead. In 1960, it sent Dr. Walsh, then a Navy officer, to the ocean’s deepest spot, seven miles down. But over the decades, it lost its edge to France, Russia and, most recently, Japan.

China began its push in 2002. A few Westerners became aware of the guarded effort when China ordered from Russia the forging of a spherical hull about seven feet wide.

At the heart of any submersible lies the hollow sphere where the aquanauts work. It houses a pilot and two observers, who can peer out of tiny portholes. Typically, a dive into the abyss is an all-day affair, requiring hours to and from the bottom.

American experts said China went on a global shopping spree to gather sophisticated gear for its submersible. From the United States, it bought advanced lights, cameras and manipulator arms. Dr. Cui estimated that 40 percent of the craft’s equipment came from abroad.

China also turned to the United States for tutoring. In 2005, five Chinese trainee pilots and one scientist participated in eight dives on Alvin, the oldest and most famous of the world’s deep-diving craft, which is run by the Woods Hole Oceanographic Institution on Cape Cod. China “bought time on Alvin to gain experience,” according to the Deep Submergence Science Committee, a group that advises the federal government and universities on ocean exploration.

Though Alvin can go down only 4,500 meters, or 2.8 miles, it has made thousands of dives and discoveries, and is widely seen among experts as highly productive and well run.

One of the Chinese trainees was Ye Cong, now a pilot on Jiaolong during its sea trials.

Last year’s tests went as deep as 1,000 meters (about a half mile), and this summer’s as deep as 3,759 meters. Next year Jiaolong is to dive to 5,000 meters and in 2012 reach its maximum depth.

Dr. Walsh said the flag issue prompted more awkwardness than swagger among those who are building and testing the new submersible.

“We had a laugh about it,” he recalled of his China visit. “I said, ‘Oh, you’re copying the Russians,’ and they kind of giggled. These guys are pretty apolitical and pretty well insulated” from Beijing. “They’re just contractors doing their job.”

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I apologize for taking so long to write but for the past rwo weeks (and the next five days) I have been travelling for conferences and meetings. I spent last week in Buenos Aires at the 75th Anniversary Conference of the Banco Central de la Republica Argentina, where I gave a presentation on China and the global imbalances. Four days ago I spoke at an event in Amsterdam, while in the past three days in Brussels I spoke at an event organized by the Carnegie Endowment and had meetings with a number of EU officials. Today I am off to London for three days of investor meetings.

In all of my meetings I think people were pretty surprised to hear about my misgivings over Chinese growth and the banking system, and shocked to hear that there is a worried and sometimes acrimonious debate taking place in China among policymakers and their advisors about the urgency of a (perhaps radical) adjustment in the growth model. It seems to me that foreign reports about China mainly fall either into the easily-dismissible China-is-about-to-crash-and-burn camp or, more likely, into the everything-is-going-wonderfully-well camp. Most people I spoke to assumed that China had emerged from the crisis largely unscathed and was about to embark on a new growth surge that would pull the world behind it. There was a hopeful sense that for all the mess in Japan, Europe and the US, there might be a ray of economic light emanating from China.

My claim that China has some deep-rooted problems which will be especially difficult to resolve, especially in a world of sluggish demand growth, was, for many I think, a serious downer, especially in Argentina. I also discussed why I believed that deepening imbalances in the world, set off especially by the financial crisis in the trade-deficit countries of Europe, would make global trade tensions much worse and would make the adjustment for trade surplus countries like China, Germany and Japan all the more difficult. My European friends generally agreed, very glumly, with the logic of the argument, although for all the heroic efforts of the likes of Martin Wolf at the Financial Times a surprisingly large number of people had not made the connection.

But as if to make me look foolish, trade numbers for both China and the US were released Thursday suggesting unexpected improvements in both the American and Chinese trade imbalances. The US trade deficit in July narrowed sharply from June’s $49.8 billion to $42.8 billion. China’s August trade surplus also narrowed. Here is what an article in the Financial Times said:

China’s trade surplus narrowed last month, with imports growing much faster than expected though not enough to defuse political pressure on Beijing over the level of its currency. According to figures released on Friday, the trade surplus was $20.03bn in August, down from $28.7bn a month earlier and short of analysts forecasts. Exports grew 34.4 per cent in August over the year before while imports increased 35.2 per cent.

Will these better-than-expected numbers reduce the threat of serious trade conflict? Almost certainly not, in my opinion. The US monthly trade deficits bottomed out in early 2009 at a still-mighty $26 billion or so, if I remember well, and have risen very steadily since then. July’s $42.8 billion is perfectly in line with that rising trend and only looks small because of a very sharp and unexpected spike in June. More importantly, the improvement in the trade deficit wasn’t caused by a surge in exports, which only grew 1.8%, but rather by a decline in imports, which dropped 2.1%.

In spite of the decline in the overall US trade deficit and in the overall Chinese trade surplus, the trade deficit with China barely budged, dropping from $26.2 billion to $25.9 billion. This means that China’s “share” of the US deficit rose from 52.6% to 60.5%. We should never over-interpret bilateral trade numbers, which contrary to much otherwise informed opinion are largely useless in explaining trade imbalances, but there is no question that the bilateral balance with China is politically very sensitive. The latest numbers are not going to soothe the concerns of US policymakers who worry about the impact on US employment of trade and industrial policies in China and elsewhere.

Interestingly enough although the US trade deficit declined against most of its major trading partners, it actually rose against Europe, from $9.4 billion to $12.3 billion, or from 18.9% of the total to 28.7% This should not be a surprise, as I discuss in my May 19 entry. Everyone, even in Europe, is relying on increased exports to the US to resolve domestic unemployment problems, and the weakness in the euro seems to be having a big impact on European competitiveness. I have written before about Germany’s role in the global imbalances and suggested that Germany-bashing in Europe and the US would become an increasingly popular sport. The latest numbers aren’t going to make life any easier. Basically they mean that not only does the collapse in the deficits of trade-deficit Europe have to be fully absorbed outside of Europe (i.e. the US), but Germany will even benefit from weakness in the euro to expand its surplus even further.

But there’s more. Friday’s Wall Street Journal had an article on Japanese anger at Chinese purchases of yen which, according to Japanese government data released Wednesday, showed that China’s yen purchases this year equal $27 billion, more than six times China’s combined yen buying in the previous five years.

Tokyo turned up the heat on Beijing for contributing to a strong yen, which is threatening Japan’s economic recovery and adding to tensions between the two countries. As the yen hovered near a 15-year high against the U.S. dollar Thursday, Japanese Finance Minister Yoshihiko Noda called for talks with China over its recent yen-buying spree, which has helped drive the Japanese currency higher, making Japanese goods less competitive with China’s.

“I don’t know the true intention” of China regarding its growing appetite for yen-denominated bonds, Mr. Noda said Thursday before the Japanese parliament’s upper house. “We are paying close attention,” Mr. Noda said. Mr. Noda reiterated a pledge to intervene in currency markets to stem the yen’s rise. Japan hasn’t entered currency markets since 2004, the last time it sold yen for dollars in order to weaken the yen. If Japan does intervene, it would add another complication to the China-Japan relationship.

Everyone is playing the same game — trying to force the brunt of the adjustment abroad — and here we have China and Japan squabbling over Chinese attempts to recycle its trade surplus into Japan rather than into the US or Europe. Japan is having none of it, although my older readers will remember wryly that twenty years ago Japanese officials dismissed as bizarre and dishonest American arguments that currency intervention of this sort justified angry responses. Times change, of course, and I guess you have to keep up with the latest trends.

Since I am travelling I haven’t been able to look closely at the Chinese trade numbers, but I did notice another article in the Financial Times. It pointed out that:

China, the world’s largest consumer of commodities, including copper and iron ore, registered strong growth in crude oil and copper imports in August, allaying fears of a slowdown in the country’s demand for materials. The preliminary numbers, published on Friday by China’s customs bureau, are a closely watched barometer of demand.

Imports of crude oil increased 13.3 per cent in August from the year prior to 20.9m tonnes – more than expected after figures showing weak oil import demand in July. Imports of copper jumped 16.7 per cent from a year earlier, continuing strong growth from the previous month thanks to demand from China’s expanding power grid.

The increased importing of commodities may be for real domestic use, but if it is for commodity stockpiling (including, I might add, stockpiling in the form of “use” in empty apartments and offices purchased for speculative purposes), it really represents investment, or anticipated consumption, more than current consumption, and so should be removed from the trade numbers to give clearer picture of the real trade balance.

What does this all mean? I would argue that the trade imbalances are getting worse, but the rising US trade deficit is not being driven by another US consumption binge. No matter what US consumers might choose to do, the US trade defcit will continue rising as an automatic consequence of events and policies abroad, and as they do, the US fiscal deficit will probably need to rise even faster to minimize the employment impact. This will keep on going until the US retaliates. For me this is not a matter of if, but when.


The seas belong to China!

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PRATO, Italy — Over the years, Italy learned the difficult lesson that it could no longer compete with China on price. And so, its business class dreamed, Italy would sell quality, not quantity. For centuries, this walled medieval city just outside of Florence has produced some of the world’s finest fabrics, becoming a powerhouse for “Made in Italy” chic.

And then, China came here.

Chinese laborers, first a few immigrants, then tens of thousands, began settling in Prato in the late 1980s. They transformed the textile hub into a low-end garment manufacturing capital — enriching many, stoking resentment and prompting recent crackdowns that in turn have brought cries of bigotry and hypocrisy.

The city is now home to the largest concentration of Chinese in Europe — some legal, many more not. Here in the heart of Tuscany, Chinese laborers work round the clock in some 3,200 businesses making low-end clothes, shoes and accessories, often with materials imported from China, for sale at midprice and low-end retailers worldwide.

It is a “Made in Italy” problem: Enabled by Italy’s weak institutions and high tolerance for rule-bending, the Chinese have blurred the line between “Made in China” and “Made in Italy,” undermining Italy’s cachet and ability to market its goods exclusively as high end.

Part of the resentment is cultural: The city’s classic Italian feel is giving way to that of a Chinatown, with signs in Italian and Chinese, and groceries that sell food imported from China.

But what seems to gall some Italians most is that the Chinese are beating them at their own game — tax evasion and brilliant ways of navigating Italy’s notoriously complex bureaucracy — and have created a thriving, if largely underground, new sector while many Prato businesses have gone under. The result is a toxic combination of residual fears about immigration and the economy.

“This could be the future of Italy,” said Edoardo Nesi, the culture commissioner of Prato Province. “Italy should pay attention to the risks.”

The situation has steadily grown beyond the control of state tax and immigration authorities. According to the Bank of Italy, Chinese individuals in Prato channel an estimated $1.5 million a day to China, mainly earnings from the garment and textile trade. Profits of that magnitude are not showing up in tax records, and some local officials say the Chinese prefer to repatriate their profits rather than invest locally.

The authorities also say that Chinese and probably Italian organized crime is on the rise, involving not only illegal fabric imports, but also human trafficking, prostitution, gambling and money laundering.

The rest of Italy is watching closely. “Lots of businesses from Emilia Romagna, Puglia and the Veneto say, ‘We don’t want to wind up like Prato,’ ” said Silvia Pieraccini, the author of “The Chinese Siege,” a book about the rise of the “pronto moda” or “fast fashion” economy.

Tensions have been running high since the Italian authorities stepped up raids this spring on workshops that use illegal labor, and grew even more when Italian prosecutors arrested 24 people and investigated 100 businesses in the Prato area in late June. The charges included money laundering, prostitution, counterfeiting and classifying foreign-made products as “Made in Italy.”

Yet many Chinese in Prato are offended at the idea that they have ruined the city. Instead, some argue, they have helped rescue Prato from total economic irrelevance, another way of saying that if the Italian state fails to innovate and modernize the economy, somebody else just might.

“If the Chinese hadn’t gone to Prato, would there be pronto moda?” asked Matteo Wong, 30, who was born in China and raised in Prato and runs a consulting office for Chinese immigrants. “Did the Chinese take jobs away from Italians? If anything, they brought lots of jobs to Italians.”

In recent months, Prato has become a diplomatic point of contention. Italian officials say the Chinese government has not done enough so far to address the issue of illegal immigrants, and they are seeking a bilateral accord with China to identify and deport them. Some Prato residents suspect that the flood of immigrants is part of a strategy by Beijing to exploit the Italian market, though the Chinese government does not generally use illegal migrants to carry out its overseas development plans.

Italian officials say Prato is expected to be on the agenda when Prime Minister Wen Jiabao of China visits Rome in October.

China in Italy’s Backyard

According to the Prato chamber of commerce, the number of Italian-owned textile businesses registered in Prato has dropped in half since 2001 to just below 3,000, 200 fewer than those now owned by Chinese, almost all in the garment sector. Once a major fabric producer and exporter, Prato now accounts for 27 percent of Italy’s fabric imports from China.

Resentment runs high. “You take someone from Prato with two unemployed kids and when a Chinese person drives by in a Porsche Cayenne or a Mercedes bought with money earned from illegally exploiting immigrant workers, and this climate is risky,” said Domenico Savi, Prato’s chief of police until June.

According to the Prato mayor’s office, there are 11,500 legal Chinese immigrants, out of Prato’s total population of 187,000. But the office estimates the city has an additional 25,000 illegal immigrants, a majority of them Chinese.

With its bureaucracy, protectionist policies and organized crime, Italy is arguably Western Europe’s least business-friendly country. Yet in Prato, the Chinese have managed to create an entirely new economy from scratch in a matter of years.

A common technique used, often with the aid of knowledgeable Italian tax consultants and lawyers, is to open a business, close it before the tax police can catch up, then reopen the same workspace with a new tax code number.

“The Chinese are very clever. They’re not like other immigrants, who can be pretty thick,” said Riccardo Marini, a textile manufacturer and the head of the Prato branch of Confindustria, the Italian industrialists’ organization.

“The difficulty,” he added ruefully, “is in finding a shared understanding of the rules of the game.”

Prato’s streets have slowly become more and more Chinese, as the Chinese have bought out Italian-owned shops and apartments, often paying in cash. Public schools are increasingly filled with Chinese pupils.

Hypocrisy abounds. “The people in Prato are ostriches,” said Patrizia Bardazzi, who with her husband has run a high-end clothing shop in downtown Prato for 40 years. “I know people who rent space to the Chinese and then say, ‘I don’t come into the center because there are too many Chinese.’ They rent out the space and take the money and go to Forte dei Marmi,” she added, referring to the Tuscan resort town.

A short walk past the city’s medieval walls, past the cathedral with Filippo Lippi’s Renaissance frescoes, lies Via Pistoiese, the heart of Prato’s Chinatown. Here, shop signs in Chinese and Italian advertise wedding photography, hardware, electronics and gambling parlors.

Outside a supermarket selling foodstuffs imported from China, an electronic job board flashes a running ticker of garment-industry jobs.

The work — long hours at sewing machines — takes place in back-room workshops with makeshift sleeping quarters. The heart of the “fast fashion” sector is an industrial area on the outskirts of town, Macrolotto, filled with Chinese fashion wholesalers.

Here, vans from across Europe line the parking lots as retailers buy “Made in Italy” clothing to resell back home at a huge markup. By buying in relatively small quantities and taking advantage of the fluid borders of the European Union, most manage to avoid paying import tariffs.

On a recent afternoon, a couple from Montenegro loaded racks of cotton summer dresses into boxes in the back of their van. The wife wielded a label gun, tagging each dress “Made in Italy.”

Just blocks away, Li Zhang, who immigrated to Italy in 1991 from Wenzhou, a city in southeastern China known for its global network of entrepreneurs, explained how his clothing company, Luma, produced on-demand fashion.

He showed off bolts of fabric, which he said he bought locally or in India or China. He often buys white fabric and has it dyed and cut by other Chinese companies in Prato before giving the pieces to subcontractors to produce the requested items — 1,000 green skirts, in a typical example — in a matter of weeks, if not days.

Mr. Zhang and hundreds of other Chinese like him are at the center of Prato’s so-called gray economy, whose businesses are partly above board in that they pay taxes, and partly underground, in that they rely on subcontractors who often use illegal labor. (Asked if his subcontractors used illegal labor, Mr. Zhang laughed and said, “You’d have to ask the subcontractors.”)

Since founding Luma in 1998, Mr. Zhang said, he has exported clothes to 30 countries, including China, Mexico, Venezuela, Jordan and Lebanon. He said that his biggest order was for the Italian retailer Piazza Italia, but that he had also sold to wholesalers who said they had sold to Zara, Mango, Top Shop and Guess, European retailers specializing in bargain chic.

The raids, he said, are hindering business, unsettling the local Chinese community to the point that many workers had gone into hiding.

“People are afraid,” Mr. Zhang said. “This was a political decision. At first, they left us too free. Now they are tightening things too much.”

The New Sheriff in Town

Much of the tightening comes from Prato’s new administration. In 2009, the traditionally left-wing city elected its first right-wing mayor in the postwar era, whose winning campaign tapped into powerful local fears of a “Chinese invasion,” and who seeks a broader European Union response to Chinese immigration.

“How can China leave a mark like this in the E.U.?” the mayor, Roberto Cenni, asked. “Noise, bad habits, prostitution. People can’t live anymore. They’re sick of it.”

An elegant man in a well-cut gray suit, Mr. Cenni is a former president and a current shareholder of Go-Fin, a Prato holding company that is behind several midrange Italian fashion companies. At least one of these, Sasch, has moved much of its production to China within the last 10 years.

Powerless to reverse the broader economic currents, the mayor has instead focused on small initiatives, including new rules that prohibit drying fish on balconies and require all Prato shopkeepers to speak Italian. These have won him praise from some local people, but also criticism for bigotry.

The mayor has also stepped up raids on Chinese businesses. Critics say they are little more than media spectacles, but local Chinese have seen them as unwarranted attacks.

On a rainy recent morning, a team of police officers, tax collectors and other state officers swooped in on two Chinese workshops in a residential and industrial area just outside Prato’s downtown.

Tucked behind apartment houses, the garage-like space was filled with rows of sewing machines, with white fabric strewn about and lace shirts lying unfinished on the concrete floor.

The police rounded up the workers in the courtyard. A woman in plastic flip-flops carried a black bucket filled with urine downstairs, accompanied by a young boy wearing only underwear. “Pantaloni,” she told the officers in broken Italian, “Pants.” “O.K., let him put on pants,” an amenable officer agreed with a shrug.

Next door, the police brought some Chinese workers in a small, windowless bedroom to be identified. A woman in a blue T-shirt sat on the bed and sobbed uncontrollably.

The officials sorted through paperwork. “This is the last name, right?” one asked an interpreter.

Between the two workspaces stood a little house with hydrangeas in the yard. The Italian couple in the doorway did not want to reveal their names.

“It’s an ant colony,” the man said. “Who knows how many? They closed the door and covered up the windows.”

His cautious wife tugged on his arm. “You can’t get into these discussions,” she said, drawing him back inside.

Soon an owner of the workspace came in from his home down the block. Paolo Bonaiuti, 73, a tall man with white hair, blue eyes and a look of unflappability, waved his lease, showing that he rented out the space for $2,220 a month. To judge from their expressions, the police officers did not look as if they believed it.

Italy’s Immigration Woes

But crackdowns like these can only do so much. In the first half of this year, the authorities raided 154 Chinese-owned businesses — out of more than 3,000. To do the job, “We’d need an army of people,” said Lina Iervasi, the head of the Prato Police Department’s immigration office.

Earlier this year, several officers in that office were arrested on charges that they took bribes in exchange for granting residence permits.

“We don’t go on the hunt for the illegal immigrants. We’re not so crazy as to do that,” said Mr. Savi, the former police chief. “But we seek a balance between norms and reality.”

That balance has been strikingly hard to find.

Many illegal Chinese immigrants arrive by bus from Russia or the Balkans, and either destroy their passports or give them away to the organized crime groups that help bring them. Many others overstay their tourist visas.

“Italy has a 20th-century immigration law; it tends to think of immigrants as a phenomenon linked to work, in which people move from poor countries to rich ones,” said Andrea Frattani, a former social welfare commissioner in Prato’s previous center-left government.

Instead, he argued, what Italy is witnessing in Prato is “a precise strategy” on the part of the Chinese government to create an economic foothold in Europe.

Asked at a recent public appearance if that was the case, China’s ambassador to Italy, Ding Wei, said only that Prato had been a central issue in his portfolio since he arrived in the spring, and that he had sent advisers to investigate.

“I’ve been very attentive to resolving the question of Prato, which is unique and particular,” he said in late July. “It should not have an impact on the cooperation between our countries.”

Italians in Prato are feeling less sanguine. “At 20, I was sure the world was mine,” said Mr. Nesi, 45, the culture commissioner and a writer whose family sold its three-generation, high-end textile business in 2004.

“It’s hard to accept that all this happened in a short time,” he said, bewildered. “It makes us feel old and without hope.”

The problems will not be resolved easily. “There’s no plan,” said Xu Qiu Lin, a local entrepreneur and the only Chinese member of Confindustria in Prato, echoing a widespread sentiment. “There’s no plan; that’s the problem.”

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ZHENGZHOU - A knife-wielding man attacked eight people aboard a train in central China's Henan province early Sunday, killing one and injuring seven others before police detained him.

The attack occurred at 00:20 a.m. Sunday on train No. K862 travelling from Lanzhou, capital of northwest China's Gansu province, to Wuhan, the provincial capital of Hubei province, said a spokesman from Henan's Zhengzhou Railway Bureau.

The injured were taken to three hospitals in Henan's Luoyang city. Their injuries are not life-threatening.

A preliminary investigation revealed the suspect is a psychopath, and a sudden onset of lunacy may have caused the tragedy, police said.

Police are investigating how the knife passed through the security check at the railway station.

typical gook behavior

China’s government isn’t protectionist: it will buy any product, so long as it’s made in China. That was the message Premier Wen Jiabao delivered to conference delegates on Sept. 13. The idea is conciliatory — namely, that China will treat foreign-invested companies and wholly home-grown ones equally. But trade partners may interpret this as a long-term commitment to an uneven playing field.

Foreign suppliers have long lamented China’s “indigenous innovation” policy, announced in 2009, which encourages government bodies to buy home-made products, and impacts an estimated $100 billion of annual spending. Official calls to “buy Chinese” go back almost a decade. But when only low-end products were involved, foreigners were unfazed. Now that it’s high-speed trains and green technology, hackles are raised.

Timing gives Wen’s comments particular significance. They echo recent remarks by Xi Jinping, the man widely expected to become the next president of China. Extra resonance comes from the fact that China is due to reveal its 12th five-year economic plan this October. What those at the top say now is likely to become hard and fast policy.

From a Chinese perspective, asking for products to be made in the People’s Republic makes sense. Beijing wants to create jobs and encourage scientific advances. Buying high-tech train parts from overseas does neither of those. But if a foreign manufacturer sets up shop in China, it achieves both. Foreign suppliers, concerned about their intellectual property, don’t always agree.

It also makes sense to upgrade China’s foreign investment. Foreign funds contributed to the creation of a manufacturing sector that helped pull 600 million people out of poverty. But more shoe and toy factories are the last thing China needs now. Foreign investment may pass $100 billion for the first time this year, but all too little of that goes into added-value activities. Preferential procurement may seem like a spur.

While that logic is attractive, it could be self-defeating. China’s trade partners are not happy. The United States, its biggest, is simmering with populist plans to slap tariffs on Chinese products. Treasury Secretary Tim Geithner this week faces a panel of U.S. representatives, hoping to diffuse their anger over China’s unfair play. Three months of $20-billion-plus trade surpluses, and a new commitment to “Buy China”, do not help his chances.

China’s currency manipulation is set to become a major campaign issue for Democrats in the final weeks before Election Day.

House Democratic leaders are considering legislation that would hit Chinese imports with tariffs for currency manipulation, while business groups have launched an all-out effort to stop that bill in its tracks.

In an interview, Rep. Tim Ryan (D-Ohio), the lead sponsor of the China bill under consideration, argued his bill could be “tremendously helpful” to Democrats trying to rally their base in the fall, particularly in the Rust Belt where manufacturing jobs have been lost to China.

“A lot of people talk about the enthusiasm gap. A lot of that is labor and union voters,” Ryan said.

Taking on China “makes sense to a lot of workers in the industrial Midwest” and will move Democratic and independent voters to the polls, he said. It will convince voters that Democrats are the party that is “going to be on your side, taking on the Chinese.”

Treasury Secretary Timothy Geithner will appear before panels in the House and Senate on Thursday to defend the administration’s diplomacy with China, which many Democrats find too weak.

No final decisions have been made, according to a leadership aide, but critics of China’s policy say interest has picked up among House Democratic leaders worried about a crushing defeat in the midterms.

Ryan and co-sponsor Rep. Tim Murphy (R-Pa.) have collected 100 signatures on a letter to House leaders urging a vote on their bill.

Separately, three dozen trade associations and business groups, including the U.S. Chamber of Commerce, the Business Roundtable, the Financial Services Forum and the Coalition of Services Industries, urged leaders of the House Ways and Means Committee in a letter Tuesday not to move forward with punitive legislation.

The letter follows an intense lobbying campaign over the August recess by the U.S.-China Business Council, which met with all but a handful of Ways and Means offices to discuss the issue, according to Erin Ennis, the group’s vice president.

The House Ways and Means Committee will open two days of hearings on China’s currency policy on Wednesday morning with testimony from Ryan.

Ryan’s bill would allow the Commerce Department to consider currency manipulation in calculating countervailing and antidumping duties on any imports from countries manipulating their currencies to lower the cost of their exports.

Democratic leaders were close to including Ryan’s legislation as part of a manufacturing push before the August break, business sources said, but held off. Now they are considering it again weeks before the election.

Many rank-and-file Democrats are frustrated with China, which promised in June to allow its currency to follow market trends. Since that announcement, China’s currency has increased by less than 1 percent.

Just a vote on currency legislation would complicate the Obama administration’s diplomacy with China, which is not only a valuable trading partner but holds trillions in U.S. currency reserves.

President Obama is set to meet Chinese Premier Wen Jiabao on the margins of a United Nations meeting next week, when he is expected to hear directly from China about the issue.

The administration has tried to hold off the Ryan measure and similar legislation in the Senate. Over the summer, White House Chief of Staff Rahm Emanuel called Sen. Charles Schumer (D-N.Y.), the leading proponent of legislation in the Senate, asking that he hold his China currency legislation back.

Click here to find out more!
Since then, Schumer has expressed frustration with the administration’s progress in winning concessions from China.

While efforts to move a currency bill have failed in the past, some believe the administration may not be able to hold the issue back this time.

“All research shows that this would be a popular move,” said Scott Paul, executive director of the Alliance for American Manufacturing. “It’s also one of the few things they can do to help the economy and jobs that doesn’t cost Treasury money.”

The U.S. trade deficit jumped more than expected in June before declining in July. The U.S. trade deficit with China stood at $25.9 billion, down from $26.2 billion in June.

U.S. manufacturers and labor groups say China keeps the value of its currency artificially low in order to lower the cost of its exports to the U.S. and other countries. This hurts American manufacturers who compete in the U.S. market against cheaper Chinese goods, and also drives up the price of U.S. exports in China.

Opponents argue legislation that would lead to tariffs on Chinese goods for currency manipulation would do more harm than good.

Rep. Peter Roskam (R-Ill.), a Ways and Means member, argued in a release Tuesday that while China’s currency manipulation is unjust, hurts U.S. economic competitiveness and costs U.S. jobs, Ryan’s bill would “inflame U.S-China relations and fail to improve the economic problems that leave U.S. businesses at a competitive disadvantage.”

In their Tuesday letter to Ways and Means Chairman Sandy Levin (D-Mich.) and ranking member Dave Camp (R-Mich.), business groups warned that China “is unlikely to proceed more quickly with currency reforms if threatened” by legislation that could lead to higher tariffs.

While both the Bush and Obama administrations have tried to stave off punitive bills on China, some suggest the Obama administration may be losing patience with the country on the issue.

In an interview last week with The Wall Street Journal, Geithner said China had made “very, very little” progress in letting its currency strengthen against the dollar. He also said he was “of course not” satisfied with China’s progress on the issue.

“China took the very important step in June of signaling that they’re going to let the exchange rate start to reflect market forces, but they’ve done very, very little — they’ve let it move very, very little — in the interim,” he said.

notice that they don't do this until they're in danger of losing seats

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Who lost North Korea? The question may sound odd, even impertinent. It carries echoes of a similar question that was bruited next door, 60 years ago, when North Korea was new.

Then, the question was: Who lost China? That was how some in the United States put it. They were anguished and angry that their man, Chiang Kai-shek, had unaccountably been chased off the mainland by an unknown communist upstart called Mao Zedong. In the emerging Cold War, which rapidly dissolved the pre-1945 anti-fascist global alliance, the world's most populous nation had in this view fallen on the wrong side of the fence. USSR 1, USA 0 - or so it seemed.

That debate - more a witchhunt, really - was nasty as well as presumptuous. In what sense was China ever America's to lose in the first place? Yet geopolitics won't go away.

Koreans don't need telling that - though nor do they like being reminded, understandably. Twice in little over a century, they could only watch in impotent fury as mightier powers first fought over and then carved up their country, with huge and baleful consequences.

Three watersheds
The first such watershed was at the turn of the previous century. After 500 years, Korea's Yi or Choson dynasty was enfeebled and inward-looking, prey to mighty neighbors it had fended off in the past. Two of these, imperial China and Tsarist Russia, were by then themselves creaking and moribund. So it didn't take much for the neighborhood's rising power, Meiji Japan, which had already had its revolution, to trounce both and nab Korea. That grab was completed exactly 100 years ago; an awkward anniversary, to say the least.

Japan's brutal if brief rule - a long occupation or a very short colonialism; take your pick - was ended only by a second outside intervention. You could call it a surgical amputation, but nobody consulted the patient. In 1945, the victorious US and USSR cut Korea in two. This was meant to be temporary; cue hollow laughter. A terrible war ensued, killing millions but settling nothing. By the time the wider world first heard of Korea, there were two of them.

Today, the peninsula looks on the brink of a third epochal shift. North Korea, at least as we have known it, is finished. It may cling on grimly for a while, but an ailing Kim Jong-il can't march his weary, half-starved and increasingly mutinous serfs down a dead end forever.

So what next in Pyongyang? Re-enter geopolitics. We tend to neglect this dimension, in part because North Korea has made itself such a royal pain to everyone. A framework such as the nuclear six-party talks, bringing together both Koreas and the Big Four powers - China, the US, Japan and Russia - may create an illusion of regional unity. Yet this is misleading.

True, nobody wants a nuclear Democratic People's Republic of Korea (DPRK). And everyone would like Kim to wise up and reform his collapsed economy. (Even Cuba is embracing markets now. And then there was one ...)

But beyond that, convergence starts to diverge. The Cold War may be over, but good old-fashioned spheres of influence are alive and well. The present conjuncture has a strong whiff of a gathering storm, and of the 1890s - with one crucial difference.

The rueful old Korean sokdam (proverb) – "when whales fight, the shrimp's back is broken" - no longer applies. Never again will Korea be a bystander in its own history. The peninsula today boasts the two strongest states it has ever seen. Each in its different way has gained global heft: the South as an industrial power, the North as a military threat and general pest.

But one of those roads leads nowhere. Like the Taewongun (regent) whose late-19th century efforts to keep the world at bay earned Korea the sobriquet "hermit kingdom", behind the ramparts Kim Jong-il has not truly protected his realm, merely enfeebled it. North Korea today is like some rotten little fruit. The question is into whose lucky lap this rancid plum will fall.

We are back in the 1890s again - but with a larger field of contenders, and with any luck no risk of war this time (although you never know). Moreover, while much is yet unclear about North Korea's future and the transition may yet prove perilous, we already have a winner, if only because three rival contenders, whether deliberately or by mishap and inadvertence, have already yielded the field. In each case, you can understand why they took their bat home, but you wonder if they'd really thought it through. Let's review each of this trio in turn.

From the USSR to Russia
The DPRK was Moscow's creation. Kim Il-sung came home in 1945 in Red Army uniform, but soon wriggled out of it, literally and metaphorically. Yet for 45 years, even while Kim trilled shrilly about juche (self-reliance), the Soviet Union quietly and grimly paid his bills.

By 1990, Mikhail Gorbachev had had enough. In quick succession, he recognized South Korea and abruptly ended aid to the North (and all other clients), plunging its economy into a tailspin. The USSR itself soon dissolved, and Boris Yeltsin was in no mood to court the world's last Stalinist. Vladimir Putin tried to mend fences, meeting Kim Jong-il three years running, but no dice.

How and why did Russia lose North Korea? It's understandable that Moscow got fed up with the ingrate rogues in Pyongyang, but whatever happened to raison d'etat? Today, the power that first created North Korea has the least power in determining its future: a striking irony.

Much of this is about money. North Korea's debts to the former USSR exceed US$8 billion, and despite a reported deal it's still not clear how much if any is being repaid. So Moscow refuses to throw good money after bad. Trade has shriveled, and Russia's only major recent investment is to modernize the cross-border railway to North Korea's ice-free port of Rajin.

Fair enough, in a way. But it leaves Russia with less influence on the peninsula than ever.

Japan on the sidelines
Then there is, or was, Japan. This was a rum do. For decades, neither the lack of official ties nor bitter Korean memories impeded pragmatic contacts between Tokyo and Japan.

There were two major go-betweens. Koreans in Japan, though mostly hailing from the South, at first tended to support the North politically (hard as that may be to imagine now). Japan obliged by colluding with Kim Il-sung to send 90,000 of them "home": a little-known and shameful story, brilliantly told by Tessa Morris-Suzuki in her book Exodus to North Korea.

Their wiser kin who stayed in Japan went back and forth. Some did business: Japan was long North Korea's number two trade partner, after the USSR. Other regular visitors came from Japan's Socialist Party (JSP), whose guilt-based pro-North stance did not stop them reporting obediently to the Foreign Ministry about their trips across the "Sea of No Agreed Name".

In 1990, it briefly seemed more was possible. The legendary Liberal Democratic Party (LDP) kingmaker Shin Kanemaru went to Pyongyang, and got on well with Kim Il-sung. Opening formal relations would have yielded $10 billion in aid: handy, with Soviet subsidies gone.

Might Japan have filled the vacuum left by the USSR, had each side played its cards better? We'll never know. Shin quit in 1993 amid a raft of scandals, with North Korean gold as Exhibit B.

A decade later came another breakthrough attempt, which backfired badly. In 2002, the then prime minister Junichiro Koizumi flew to Pyongyang, the first top Japanese leader to do so. He got Kim Jong-il, astonishingly, to admit and apologize for past kidnappings, hitherto indignantly denied. The five kidnapped survivors - eight had mysteriously died - were repatriated.

Yet instead of putting out a fire as intended, this fanned the flames. North Korea's refusal to tell a full or credible story about abductees who had perished, including 13-year old schoolgirl Megumi Yokota, infuriated Japanese public opinion, egged on by the same sinister rightist forces who seek to whitewash the past brutalities of Japanese imperialism.

Since then, things have gone from bad to worse. Japan has piled on sanctions, and now bans all trade with North Korea. Even regime change, with the Democratic Party of Japan (DPJ) promising all manner of winds of change on other fronts, has made little difference here.

Is this wise? Even on a register of threats, past abductions are surely outweighed by present danger from North Korean missiles and nukes. Like Moscow, Tokyo has every reason to be angry with Pyongyang and every right to shun it. Yet one has to ask - though in today's Japan it can be risky - whether this stance truly serves the long-term national interest. Its predictable result is to leave Japan, even more so than Russia, largely outside the North Korean loop: an onlooker more than an active player, just when things are getting interesting in Pyongyang.

South Korea: Sunset for Sunshine
North Korea's third potential suitor came later to the game, for obvious reasons. After false dawns in the 1970s and 1990s, sustained inter-Korean engagement finally took off in 1998 with Kim Dae-jung's "Sunshine" policy, continued by his successor, Roh Moo-hyun. Each held a summit in Pyongyang with Kim Jong-il, who did not make a reciprocal trip to Seoul.

Such asymmetry made many impatient with sunshine. Yet it was not moonshine, as critics sneered. The precedent of chancellor Willy Brandt's "Ostpolitik" in Germany should have taught the lesson that this was a long-term strategy, whose goal was not appeasement but leverage.

South Korean conservatives lacked that insight and patience. President Lee Myung-bak, elected in late 2007, lost no time in cutting much-needed rice aid, canceling win-win joint projects agreed by Roh, and telling Kim Jong-il that future cooperation depended on his first surrendering his nuclear arsenal. All quite reasonable in theory - but utterly unrealistic.

Two years on, we see the result. A furious North reacted the only way it knows how and lashed out, in March torpedoing the Southern corvette Cheonan. (Yes they did; of course they did; you know they did.) That was a vicious blow, which as doubtless intended has left Lee reeling.

With most of the world uninterested and even many South Koreans skeptical, less than six months later Lee is now busy scrambling to get past this and mend fences, offering flood aid and with family reunions upcoming. That's good - but nearly three years have been wasted.

Or worse, it may be too little too late. Lee lost the plot, and maybe he has lost the North too - permanently, or for the foreseeable future. Why, despite the Cheonan, is he now rushing to build bridges after all? Because an ailing, bankrupt and possibly desperate Kim Jong-il has just made his second visit in under four months to the one power he can still trust: China.

And the winner is ...
So there's our winner. Its rivals' missteps have helped, but Beijing has long played a skillful, patient game. Like Moscow, it irked the North by recognizing South Korea (in 1992), but unlike the abrupt Russians it worked hard to soothe sensitivities.

Eighteen years on, guess which power is the top trade partner of both Koreas? Now, there's subtle hegemony for you. No prizes either for guessing who's snapping up North Korea's mines, and beginning the lengthy, costly process of modernizing its decrepit infrastructure.

Face it: who else has the motive, or the means? As all agree, China's overriding worry about North Korea is not Kim's nukes but fear of collapse, and the chaos this could cause on its own borders. Beijing's consistent strategy is not to paint Kim into a corner, no matter what.

Knowing that, how did policymakers in Seoul or Washington delude themselves that China would hurry to join a chorus of condemnation over the Cheonan? No way. Beijing squirmed a bit, but the game was worth the candle. Let Washington and Seoul huff and puff. All that achieved was to push an ever-more isolated North Korea further into China's orbit and influence.

Nothing is certain, especially about North Korea where forecasts (this writer's not least) have a habit of turning out wrong. I expected North Korea to collapse long ago: guilty as charged, m'lud. I understimated this tough regime's staying power, or the horrors it would impose on its people - including famine - to cling to power while refusing to see sense.

But this can't go on forever. The old game of militant mendicancy is finally up. Kim Jong-il's frail health, a delicate succession, and an empty treasury - United Nations sanctions have hit arms exports, and crime doesn't pay like it used to - make defying the entire world just too risky.

North Korea needs a sugar daddy. There is only one candidate left standing, and one who fits the bill perfectly. It may not be a marriage made in heaven, mind you. Pyongyang will keep squawking, and even try the old game of playing off its interlocutors - as in its latest thaw with Seoul.

An offer they can't refuse
But at the end of the day Beijing is making an offer no one else can match, and which North Korea can't refuse. It goes roughly like this: Okay, we'll bail you out, we'll guarantee your security, we'll even stomach your weird monarchical tendencies - unless the kid turns out to be a complete klutz, in which case you know what to do. Jang Song-taek (brother-in-law to Kim Jong-il) knows the score.

You can count on us too not to shame you by spelling all this out and giving the game away. But yes, we do need something in return. Two things. First: markets. For goodness sake just leave them alone, nay let 'em rip - as we've been telling you to, ever since Deng Xiaoping.

Look where we are now, and where you are. We'll do the heavy lifting of investment, so you have functioning factories and railways again. But you have to let it happen. No going back.

Second: no more trouble. We know it may take time for you to give up your footling pesky nukes. But we need an absolute guarantee of no more tests, or else. No other provocations, either. Our People's Liberation Army will teach your Korean People's Army how to adapt and how to make money. The new North Korea will be a good global citizen, trading like we do. The returns are good. It beats mugging any day.

And guess what? You'll love it, all of you. You'll prosper. No more worries. Your people will eat; your elite will make money. What's not to like? Just stop all that shouting and marching; what a relief, eh? The rest of the cult can stay, if you must. All hail the young general Kim Jong-eun, finally fulfilling grandpa's dream of peace and prosperity for all! (With a bit of help from his friends, but we're modest.) You'll love him. You really will.

The only game in town?
This seems to me a plausible scenario for North Korea's future. In fact, I struggle to imagine any other. Korean reunification? Maybe in the very long run - but right now, who wants it?

Not the North, whose elite know the fate of their East German counterparts after unification. Can we really expect them to put their faith in the tender mercies of Lee Myung-bak? Even under Kim Dae-jung or Roh Moo-hyun it would have been tricky. What place would there be for most of them, frankly, in a reunified peninsula? Not a privileged one, that's for sure.

Ordinary North Koreans, too, have learned, from the trickle who have made it to Seoul, that South Korea is no land of milk and honey. True, they'd like a life, and to eat. But China, or a North Korea open to and learning from China, might look a better bet on that score.

Nor is the South enthusiastic, despite all the rhetoric. It would be embarrassing and galling to see the North become a Chinese satellite - yet perhaps also a huge relief. Let Beijing bear the brunt, the burden, and the costs of transforming the madhouse they have long sustained.

Further down the line, blood could prove thicker. By 2040 or so, a by then semi-transformed North Korea may tire of great Han chauvinism, slough off the Chinese yoke, and embrace the cousins south of the demilitarized zone (which would long ago have become more permeable). They'd be easier to absorb, too, now smoothed by a few decades of Chinese-style modernity.

Speculative, to be sure. But what other scenarios are there? And though from one viewpoint China has edged out rival powers as argued above, presumably to their chagrin, might some of them in truth be quietly relieved to be spared the responsibility? Let China take it on and deliver a new-style North Korea, vibrant and fit for a new century. It could last a long time, and spare the region and world much headache and risk. Does anyone have an alternative?

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So Japan has stabbed the United States and all the Western powers in the back - by joining China in the race to the bottom with its recent currency devaluation.

Now the United States and the European Union are likely to respond with increased tariffs and countermeasures of their own.

China has done something that is either a stroke of genius or sheer folly. It has forced Japan to choose between its ally and its largest trading partner.

The United States and the Europeans are understandably upset by what they see as Japan's decision to carry out a devaluation in their own interest, rather than working together with the West - as they have previously done - to pressure China into ending its current currency policies that are so hated by the Western powers.

It has no doubt chosen not to do so out of fear of China. So Japan slips out of our sphere of influence - and into that of China.

What the fuck is going to happen next? Congress was already likely to impose tariffs on China over the objections of the China lobby and the White House - and this most alarming event is likely to harden opinion against China further.

Japan always keeps its currency low

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The fastest way for China to develop a thriving electric-car industry that can overwhelm the West: Require foreign automakers to give up their electric car secrets and technology as a condition of selling cars in China.

That what the Chinese government is mulling as it tries to become the "world's leader" in electric-car technology within 10 years, the Wall Street Journal reports. The proposal could force foreign automakers -- basically all major makers since China has been a more vigorous market than the U.S. or Europe -- to hand over their technology to their Chinese companies.

China has long required foreign automakers to have Chinese partner companies as a condition of selling cars there. And there long have been worries that at some point, China might decide its own makers have learned how to make first-world cars from their foreign partners and might just kick them out.

The Journal says Toyota has delayed bringing the Prius -- its cutting-edge hybrid car -- to China until the government clarifies its policy on technology transfer and electric cars. The plan could allow China to leapfrog the U.S. and other nation in the race to develop electric-car technology.

Heh, and perhaps before we talk about how we lost north korea to the chi-coms, we need to talk about how the traitors and communists in the US government under FDR aided and abetted the chinese communists and left the nationalists out in the rain.

Sound familiar? Same thing we did in vietnam, south america, africa, etc etc.
America should execute the communists in our government, treachery is treachery.

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Mao Zedong, founder of the People's Republic of China, qualifies as the greatest mass murderer in world history, an expert who had unprecedented access to official Communist Party archives said yesterday.

Speaking at The Independent Woodstock Literary Festival, Frank Dikötter, a Hong Kong-based historian, said he found that during the time that Mao was enforcing the Great Leap Forward in 1958, in an effort to catch up with the economy of the Western world, he was responsible for overseeing "one of the worst catastrophes the world has ever known".

Mr Dikötter, who has been studying Chinese rural history from 1958 to 1962, when the nation was facing a famine, compared the systematic torture, brutality, starvation and killing of Chinese peasants to the Second World War in its magnitude. At least 45 million people were worked, starved or beaten to death in China over these four years; the worldwide death toll of the Second World War was 55 million.

Mr Dikötter is the only author to have delved into the Chinese archives since they were reopened four years ago. He argued that this devastating period of history – which has until now remained hidden – has international resonance. "It ranks alongside the gulags and the Holocaust as one of the three greatest events of the 20th century.... It was like [the Cambodian communist dictator] Pol Pot's genocide multiplied 20 times over," he said.

Between 1958 and 1962, a war raged between the peasants and the state; it was a period when a third of all homes in China were destroyed to produce fertiliser and when the nation descended into famine and starvation, Mr Dikötter said.

His book, Mao's Great Famine; The Story of China's Most Devastating Catastrophe, reveals that while this is a part of history that has been "quite forgotten" in the official memory of the People's Republic of China, there was a "staggering degree of violence" that was, remarkably, carefully catalogued in Public Security Bureau reports, which featured among the provincial archives he studied. In them, he found that the members of the rural farming communities were seen by the Party merely as "digits", or a faceless workforce. For those who committed any acts of disobedience, however minor, the punishments were huge.

State retribution for tiny thefts, such as stealing a potato, even by a child, would include being tied up and thrown into a pond; parents were forced to bury their children alive or were doused in excrement and urine, others were set alight, or had a nose or ear cut off. One record shows how a man was branded with hot metal. People were forced to work naked in the middle of winter; 80 per cent of all the villagers in one region of a quarter of a million Chinese were banned from the official canteen because they were too old or ill to be effective workers, so were deliberately starved to death.

Mr Dikötter said that he was once again examining the Party's archives for his next book, The Tragedy of Liberation, which will deal with the bloody advent of Communism in China from 1944 to 1957.

He said the archives were already illuminating the extent of the atrocities of the period; one piece of evidence revealed that 13,000 opponents of the new regime were killed in one region alone, in just three weeks. "We know the outline of what went on but I will be looking into precisely what happened in this period, how it happened, and the human experiences behind the history," he said.

Mr Dikötter, who teaches at the University of Hong Kong, said while it was difficult for any historian in China to write books that are critical of Mao, he felt he could not collude with the "conspiracy of silence" in what the Chinese rural community had suffered in recent history.

>Mao Zedong, founder of the People's Republic of China, qualifies as the greatest mass murderer in world history, an expert who had unprecedented access to official Communist Party archives said yesterday.

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BEIJING — When Bill Gates and Warren Buffett visit Beijing this month in a drive to promote philanthropy among China's super-rich, one person they won't need to convince is Chen Guangbiao.
The demolition company tycoon pledged this month to give his fortune -- estimated at more than 700 million dollars -- to charity after he dies and says more than 100 other rich Chinese had since contacted him to promise the same.
And the man who already has given away more than 200 million dollars over the years hopes such pledges can spur China to become a "great charitable nation" in line with its growing wealth.
"If you have a cup of water, that's for one person to drink. If you have a bucket of water, that's for your family to drink. But if you own a river, you should share it for all to enjoy," Chen, 42, told AFP in an interview.
Such views have made a media darling out of Chen, who has been honoured as China's top philanthropist in the past two years, and put him at the centre of a debate over whether the country's swelling ranks of super-rich are too selfish.
China had 64 dollar billionaires last year, second only to the United States' 403, according to Forbes magazine.
But several of China's richest have been laid low by corruption charges just as a widening wealth gap has caused official concerns of unrest among the poor.
Reports suggesting that the super-rich have been slow to answer an invitation to a September 29 banquet hosted by Gates and Buffett, out of fear that they would be pressured to donate, has done little to enhance their poor image.
The reports angered Chen, who sports a bristling buzz-cut and who says he wants to be like "Jesus Christ, sacrificing myself to make other people happy," although he is not religious.
"When I heard this, I was indignant. Rich people like that are just too selfish," said Chen.
"They think their wealth is purely a creation of their hard work and has nothing to do with the opportunities created by their country or society."
Charity has grown as China prospers. About five billion dollars were given last year, according to official figures.
That is down from a 2008 spike of 16 billion dollars due to a massive earthquake that devastated southwest China that year, but slightly above previous years.
Chen built his fortune through his Huangpu Renewable Resources Utilization Group, based in the eastern city of Nanjing, a demolition company that recycles salvaged materials.
But he says none of that would have been possible if not for China's Communist Party-led economic transformation -- views that have been lapped up by state media, no doubt due in part to an official desire for a positive "rich" role model.
Chen's rags-to-riches story perhaps makes him the perfect fit.
Growing up in rural eastern Jiangsu province as China was struggling to recover from Mao Zedong's disastrous economic policies, two of Chen's four siblings died of starvation, he said.
Still, his parents often gave away what little they had, imprinting on their son a combination of personal thriftiness and generosity.
That thrift -- and other idiosyncrasies -- can reach extremes.
Chen pantomimes how he blows his nose in his hands to save a tissue and boasts that he takes taxis for his many trips to the airport rather than employ his personal driver.
In 2008, he changed the given names of his two young boys in 2008 to "Huanjing" (environment) and "Huanbao" (protect the environment).
But his decision to leave none of this wealth for his sons -- a breach of tradition in family-oriented China -- is perhaps the clearest sign of his maverick nature.
"My parents left nothing to me and I wish to leave nothing for my kids" except the "spiritual wealth" that comes from philanthropy, said Chen.

Short video about Chinese immigrants in Senegal (Stolen from

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Japan today warned that a deepening row over its detention of a Chinese fishing boat captain should not be allowed to fuel "extreme nationalism" on either side.

The remarks follow Beijing's abrupt suspension of high-level contacts. China announced the measure in protest at Japan's decision to extend its detention of trawler captain Zhan Qixiong, whose ship collided with two Japanese coastguard vessels a fortnight ago near the Senkakus, a group of uninhabited islands claimed by both countries and which the Chinese call the Diaoyus.

"What is most important is that government officials in Japan, China and other countries try not to fuel narrow-minded, extreme nationalism," Japan's chief cabinet secretary, Yoshito Sengoku, told reporters.

"For the peace and development of east Asia and the Asia-Pacific, we want to use all available means of communication to ask that this be resolved without the situation escalating."

Sengoku said there were no plans for the prime minister, Naoto Kan, to discuss the crisis with the Chinese premier, Wen Jiabao, on the sidelines of the UN general assembly in New York later this week.

China's foreign ministry said a meeting between the two leaders would be inappropriate. "This matter has already seriously damaged China-Japan relations," Jiang Yu, a ministry spokeswoman, told reporters. "The key to solving this problem is in Japan's hands."

The US voiced concern at the prospect of a prolonged estrangement between China and Japan, which are engaged in long-standing disputes over the islands as well as drilling rights in oil and gas fields in the East China Sea.

A US state department spokesman, Mark Toner, said Washington expected the row to be "resolved through appropriate diplomatic means".

Japan's refusal to release Zhan has fuelled anti-Japanese sentiment among Chinese internet users and led to cultural exchanges being called off.

Chinese travel agencies have cancelled package tours to Japan, affecting thousands of tourists, while a youth association withdrew an invitation to 1,000 Japanese youngsters to attend the World Expo in Shanghai.

The Japanese band Smap, which has a huge following in mainland Asia, has postponed two concerts in China after a local ticket agency suspended ticket sales over the weekend, according to the Sports Nippon tabloid. The boyband was scheduled to play in front of 80,000 fans at the expo venue next month.

The centre-left administration in Tokyo has repeatedly called for calm on both sides, having made closer ties with China a key part of its foreign policy since taking office a year ago.

The finance minister, Yoshihiko Noda, said Japan would respond in a "level-headed manner" to avoid any impact on the countries' economic ties.

China became Japan's biggest trading partner last year, with bilateral trade reaching 12.6tn yen (£95bn) in the first half of this year, up more than 34 percentage points compared with the same period last year.

Analysts said it was in both countries' interests to defuse the crisis, given the strength of their economic ties and shared concerns about North Korea's nuclear weapons programme.

"They have all the reasons to improve bilateral relations and co-operate further in economic and other relations, especially when China's economic growth is very fast and when Japan's is slow or even contracting," said Victor Gao, director of the China National Association for International Studies in Beijing.

"Improving relations between the two countries is in their mutual interest. It is crucial for both to exercise maximum restraint and avoid anything which may escalate tensions."

Nationalist messages flooded internet forums. On one popular portal, Netease, a user from Ningxia, north-west China, wrote: "Our national humiliation can never be forgotten. As an ordinary common person, all I can do is be angry and boycott Japanese goods; if there is a war, as a reserve officer, I will not hesitate!" Others attacked the Chinese government for not taking a stronger line.

Aside from the anti-Japanese vitriol flooding online forums, protests in China have been low-key. A strong police presence ensured that demonstrations in Beijing on Saturday to mark the anniversary of the start of Japan's occupation in 1931 passed off peacefully.

China's decision to suspend contacts at the ministerial level and above came after a Japanese court approved a request by prosecutors to hold Zhan until 28 September, when they must either indict or release him.

Gao suggested that Tokyo could offer to release the captain, whose mother died following his arrest, on humanitarian grounds, and because tomorrow's mid-autumn festival is traditionally a time for family reunions in China.

"It could be an expedient way to wind this down without causing anyone to lose face or requiring either to compromise their principled position on the Diaoyu islands," he said.

U.S. lawmakers may vote next week on legislation that would penalize China for keeping its currency artificially low, a touchy issue that has gained broader political support as congressional elections approach.

The decision to move a bill to pressure China to let its yuan currency appreciate against the U.S. dollar comes a day before President Barack Obama is due to meet with Chinese Premier Wen Jiabao in New York.

A House of Representatives committee scheduled a vote for Friday on a China currency bill, and a Democratic aide said the full House was expected to vote on the measure next week.

Critics inside and outside Congress say China deliberately undervalues its currency by as much as 25 percent to 40 percent to give Chinese companies an unfair trade advantage, hurting U.S. exports and job prospects.

Obama said on Monday that China had not done enough to raise the value of the yuan, keeping up Washington's tough rhetoric on Chinese policy as U.S. lawmakers planned legislation to punish Beijing.

"It is time for Congress to pass legislation that will give the administration leverage in its bilateral and multilateral negotiations with the Chinese government," House Speaker Nancy Pelosi said in a statement.

"If China allowed its currency to respond to market forces, it could create a million U.S. manufacturing jobs and cut our trade deficit with China by $100 billion a year, with no cost to the U.S. Treasury."

Lawmakers have pressed this issue for years with little success, but it appears to be gaining momentum -- and bipartisan support -- six weeks before congressional elections in which the high unemployment rate is the top issue.

The bill being considered was co-sponsored by a Democrat and Republican, and several Republican lawmakers strongly criticized China's currency policy at congressional hearings on the matter last week.

Prospects for action in the Senate, which would also have to approve legislation, is uncertain. Key senators have said time may be too tight since lawmakers hope to leave Washington in just a few weeks to campaign ahead of the November elections.

The U.S. Treasury Department said it would "carefully examine" any proposals put forward by Congress.

Some analysts see pressure for a bill building.

"The momentum is certainly there on the Hill to push this forward before the mid-term elections," said Eswar Prasad, a professor at Cornell University. "There is a real prospect on this occasion that heated rhetoric will get translated into substantive legislative action."

China's central bank said in June it would loosen a peg against the dollar and let the yuan fluctuate more freely. Since then it has risen 1.8 percent against the dollar.

That makes the yuan an easy target for U.S. politicians eager to address high unemployment in an election year.

China's Wen said the two countries have shared objectives and their differences are easy to resolve, the Wall Street Journal reported.

China wants a "strong and stable U.S., just as the U.S. needs a strong, stable China," Wen said at an event with business leaders in New York, according to the Journal.


The proposed legislation, which is certain to irritate Beijing, would essentially treat China's "undervalued" currency as an export subsidy and allow the Commerce Department to impose countervailing duties to offset the undervaluation.

U.S. companies applying for the duties would have to show they have been injured by China's exchange rate practices.

Congressional aides said the bill does not guarantee the United States would apply countervailing duties against undervalued currencies, but eliminates a hurdle that has blocked the Commerce Department from doing that in the past.

"This bill is being advanced in the absence of effective action on a multilateral basis," House Ways and Means Committee Chairman Sander Levin said as he announced his panel would take up the bill.

"Hopefully the concrete step of this bill can spur efforts leading to the kind of multilateral structure needed to address major currency imbalances," he said in a statement.

Both Obama and his predecessor, President George W. Bush, pushed China to move to a more market-oriented exchange rate. But the results have not come fast enough for American lawmakers who blame the huge U.S. trade deficit with China for the loss of manufacturing jobs.

"It is very important that our companies face a level playing field around the world and that's why it's so important that we continue to try and encourage China to let their exchange rate reflect market forces and to end practices that discriminate against U.S. companies," U.S. Treasury Secretary Timothy Geithner told lawmakers on Wednesday.

In a strongly worded statement on Tuesday, China's Foreign Ministry told Washington to stop pointing its finger at Beijing over the yuan and focus instead on fixing its fragile economy.

But U.S. officials showed no signs of toning down their criticism. In a speech on Wednesday, U.S. Trade Representative Ron Kirk took aim at China's industrial policies that he said unfairly discriminated against U.S. companies.

"All we're asking China to do is play by the rules, get your thumb off the scales, let us go in and compete equally," Kirk said at the Global Services Summit, which brought together industry groups and trade officials from around the world.

HONG KONG — Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has placed a trade embargo on all exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.

Chinese customs officials are halting all shipments to Japan of so-called rare earth elements, industry officials said on Thursday morning.

On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese coast guard vessels about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.

A Chinese commerce ministry official declined on Thursday to discuss the country’s trade policy on rare earths, saying only that Mr. Wen’s comments remained the Chinese government’s position.

China mines 93 percent of the world’s rare earth minerals, and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound.

Dudley Kingsnorth, the executive director of the Industrial Minerals Company of Australia, a rare earth consulting company, said that several executives in the rare earths industry had already expressed worries to him about the export ban. The executives have been told that the initial ban lasts through the end of the month, and that the Chinese government will reassess then whether to extend the ban if the fishing captain still has not been released, Mr. Kingsnorth said.

“By stopping the shipments, they’re disrupting commercial contracts, which is regrettable and will only emphasize the need for geographic diversity of supply,” he said. He added that in addition to telling companies to halt exports, the Chinese government had also instructed customs officials to stop any exports of rare earth minerals to Japan.

Japan has been the main buyer of Chinese rare earths for many years, using them for a wide range of industrial purposes, like making glass for solar panels. They are also used in small steering control motors in conventional gasoline-powered cars as well as in motors that help propel hybrid cars like the Toyota Prius.

American companies now rely mostly on Japan for magnets and other components using rare earth elements, as the United States’ manufacturing capacity in the industry became uncompetitive and closed over the last two decades.

The Chinese embargo is likely to have immediate repercussions in Washington, where the House Armed Services Committee has scheduled a hearing on Oct. 5 to review legislation that would subsidize the revival of the American rare earths industry. The main American rare earths mine, in Mountain Pass, Calif., closed in 2002, but efforts are under way to reopen it.

The Defense Department has a separate review under way on whether the United States should develop its own sources of supply for rare earths, which are also used in equipment including rangefinders on the Army’s tanks, radar systems aboard Navy vessels and the control vanes on the Air Force’s smart bombs.

The Chinese embargo is likely to prompt particular alarm in Japan, which has few natural resources and has long worried about its dependence on imports.

Jeff Green, a Washington lobbyist for rare earth processors in the United States, Britain, Canada and Australia, said that China and Japan are the only two sources for the initial, semiprocessed blocks of rare earth magnetic material. If Japan runs out of rare earths from China — and Japanese companies have been stockpiling in the last two years — the United States will have to buy the semiprocessed blocks directly from China, he said.

“We are going to be 100 percent reliant on the Chinese to make the components for the defense supply chain,” Mr. Green said.

Japanese companies are now setting up rare earth processing factories in northern Vietnam, partly to use small reserves of rare earth elements found there but also to process rare earth elements smuggled across the border from southern China.

Rare earth elements are already in tight supply, with soaring prices, after the Chinese government announced in July that it was cutting export quotas by 72 percent for the remainder of the year. A delegation of Japanese business leaders met with Chinese officials in Beijing on Sept. 7 to protest the sharp reduction in quotas.

The price of samarium, crucial to high-temperature military applications like missile guidance motors, has more than tripled since July, to $32 a pound, Mr. Green said.

While Arab states used restrictions on oil exports as a political weapon in 1956, 1967 and 1973, China has refrained until now from using its near monopoly on rare earth elements as a form of leverage on other governments.

China tried until now to position itself instead as a reliable supplier, partly to discourage other nations from digging their own rare earth mines.

Despite the name, rare earths are actually fairly common; they are expensive and seldom mined elsewhere because the processing equipment to separate them from the ore is expensive and because rare earths almost always occur naturally in deposits mixed with radioactive thorium and uranium. Processing runs the risk of radiation leaks and disposing of the radioactive thorium is difficult and costly.

A senior Japanese Foreign Ministry official, who declined to be named, said that the Japanese government had not yet received any notice from China regarding an embargo. The official said, however, that the Japanese government has repeatedly asked China to not restrict its exports of rare earth elements, citing the severe consequences such a move would have on global production and trade.

Toyota had not yet received any information on an embargo and was unable to comment, said Masami Doi, a spokesman for Toyota in Tokyo.

Hiroko Tabuchi contributed reporting from Tokyo.

lol, so much for the DPJ's smoothing over of relations with China

Are the Chinese retarded?

It's like they're trying making the Americans look good by comparison by being such massive bullies to everyone around them.

>It's like they're trying making the Americans look good by comparison by being such massive bullies to everyone around them.

That's part of being a world superpower

I see what you're saying, but China isn't yet powerful enough to be able to bully countries like that without consequence.

Japan isn't the equivalent of a Panama or Venezuela, its economy is almost the same size as China itself. And it has an ally with many times the military and (for now) economic power of China.

What's the idea?

I don't think governments like China's are always rational. They just do things because they feel like it, even if it isn't in their best interest.

There is a vast difference between a nationalist dictatorship like in china, and with the 4 year transients who run the USA/western government.

In china, patriotism is the norm, if you do not do a good job they will execute you, it is your lifetime work.

In the west, patriotism is a dirty word, you are there temporarily and use your powers to set yourself up for generous "consulting" work afterwards. And so on.

Especially as the majority of our government tend to be catholics, jews, negros, and mexicans, none of whom have any common sense or stake in this countries well being.

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President Barack Obama urged Chinese Premier Wen Jiabao to speed up the revaluation of his nation's currency, telling him in a two-hour meeting Thursday that the slow pace of reforms was affecting both the global and U.S. economies, a top U.S. aide said.

The talks on the sidelines of this week's U.N. General Assembly opening also covered security issues including Iran, Sudan and the dispute between China and Japan -- a major U.S. ally -- regarding the South China Seas, said Jeff Bader, Obama's special assistant and senior director for Asian affairs.

Most of the focus was on economic issues, Bader said, because Wen is responsible for managing the Chinese economy, the world's second-largest behind the United States.

On Wednesday night, Wen said in a speech to the business community in New York that China will continue reforming and opening its markets under a policy it started in 1978 by officially ending decades of isolation.

However, demands by U.S. lawmakers that China revalue its currency by more than 20 percent would bankrupt Chinese companies and lead to "major unrest" in his country, the premier said.

Also Wednesday, the U.S. House of Representatives considered a bill to allow the United States to retaliate against China's handling of its currency. Some trade leaders say Beijing has suppressed the yuan's value, giving its exporters an unfair advantage in world trade.

In Thursday's talks, Obama noted that "there had not been much movement since" China said in June that it would implement a more liberal currency policy, Bader said. The president told Wen that the Chinese inaction "had consequences for the global economy and the U.S. economy," according to Bader.

Obama said the United States "looked for a more rapid and significant revaluation in coming months," Bader said.

Bader declined to characterize Wen's response to Obama, saying only that Wen "did reiterate Chinese intention to continue to with reform to their exchange system."

In remarks to reporters, Obama and Wen emphasized cooperation between their governments and the need for frank discussions on their differences.

"We have worked together on a whole range of issues," Obama said, citing the reaction to the financial crisis and global recession of recent years.

Obama said the countries also have cooperated extensively on issues of nuclear nonproliferation and have engaged in "very frank discussions and cooperated on issues of climate change."

"Obviously, we continue to have more work to do," Obama said. "On the economic front, although the world economy is now growing again, I think it's going to be very important for us to have frank discussions and continue to do more work cooperatively in order to achieve the type of balance and sustained economic growth that is so important and that we both signed up for in the context of the G-20 framework."

Obama praised Wen for "extraordinary openness and cooperation with us as we try to strengthen the relationship between our two countries, a relationship that is based on cooperation, on mutual interest, on mutual respect."

Wen noted that "common interests far outweigh our differences" and that despite "disagreements of one kind or another between our two countries, the differences can be resolved."

"Our two countries can have cooperation on a series of major international issues and regional hot-spot issues," Wen said. "We have cooperation on tackling the financial crisis and meeting the climate challenge. China and the United States have also embraced an even closer and bigger relationship in the fields of public finance, financial industry and economic cooperation and trade."

In his speech Wednesday, Wen initially struck an affable tone, beginning his remarks with a rare unscripted detour from his prepared statements. Wen referred to historical cooperation between Chinese and Americans, including references to five Chinese citizens who fought in the U.S. Civil War.

China and the United States have had a positive relationship despite "minor fluctuations," he said, apparently referring to differences over the U.S. trade deficit and currency policy.

However, the premier also accused the United States of policies that impede fair trade.

"China will continue to increase imports from the United States," he said. "Meanwhile, America should also recognize China's market economic status, relax export control against China and take concrete moves to promote free trade in a real sense."

Japan releases Chinese skipper

>After the decision, Nippon TV quoted the prosecutors office as saying: "We have decided that keeping him in detention isn't worth it, considering its effect on the public and the future of Japan-China relations."

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