Chinese Military,Political and Social Superthread

[Edward Campbell]

Good news in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, at least it is good news for those of us who think that the reunification of China and Taiwan is both inevitable and desirable and can be accomplished without too much fuss or disorder:

http://www.theglobeandmail.com/news/world/taiwanese-voters-choose-to-maintain-chinese-ties-by-reelecting-president/article2302748/

Taiwanese voters choose to maintain Chinese ties by reelecting president

MARK MACKINNON

Taipei— Globe and Mail Update
Published Saturday, Jan. 14, 2012

Taiwanese voters signaled a desire for continued rapprochement with mainland China on Saturday, reelecting President Ma Ying-jeou, whose first term saw a rapid warming of ties with Beijing.

Mr. Ma declared victory less than four hours after polls closed, as televised results showed him building a seemingly insurmountable lead over rival Tsai Ing-wen of the pro-independence Democratic Progressive Party. With over 90 percent of the vote counted, the official Central Election Commission said Mr. Ma was ahead with 51.6 per cent to 45.7 percent for Ms. Tsai.

“This is not my personal victory, the victory belongs to all Taiwanese,” Mr. Ma told throngs of elated supporters at the Taipei headquarters of his Nationalist (Kuomintang) Party. “They told us that we are on the right track.”

Mr. Ma’s re-election is likely to be greeted with cheers in Beijing – where President Hu Jintao has made warmer ties with Taipei a central plank of his foreign policy – and sighs of relief in Washington, where some feared a return to confrontation between China and Taiwan if Ms. Tsai and the DPP won the vote.

Taiwanese were “voting for consistency or continuity versus uncertainty,” said Alexander Huang, a professor of political science at Tamkang Univeristy in Taipei. He said the win was “a confirmation of Ma Ying-jeou’s policy towards the mainland.”

Mr. Ma’s Kuomintang Party also looked set to win at least a plurality of seats in legislative elections that were simultaneously held, although it the KMT was on pace to win fewer seats than it held going into the vote.

Mr. Ma’s margin of victory in the presidential race was also smaller than four years ago when he captured 58 per cent of the vote. Many saw the drop as signalling that some Taiwanese were uncomfortable with the idea of getting too close too fast to their giant cousin across the Strait of Taiwan.

“Ma’s hands will be even more tightened, given the close race and the [reduced number of] seats for KMT in the parliament,” Prof. Huang said.

After eight years of strained relations while the DPP’s Chen Shui-bian was president, Taiwan and China rapidly signed a series of pacts after Mr. Ma, a former Taipei mayor, came to office in 2008. The two sides established direct air, shipping and postal links for the first time since the Communists troops routed the KMT army in 1949, forcing them to retreat to island, which has existed in political limbo ever since.

The new ties clearing the way for a surge in cross-Strait trade and allowed millions of mainland Chinese tourists to visit the island. More controversially, the two sides inked the Economic Cooperation Framework Agreement in 2010, a trade deal that saw each side eliminate tariffs on hundreds of goods but which Mr. Ma’s critics say pulled Taiwan into Beijing’s economic orbit.

“All of our trade is going to China now, which means our economy will soon be governed by China and we will not have control of it ourselves. It’s another way for Taiwan to be governed by China,” said Stanley Chen, a 30-year-old industrial engineer who said he voted for Mr. Ma four years ago but cast his ballot for Ms. Tsai on Saturday.

Mr. Ma’s once-comfortable lead evaporated early in the campaign when he mused out loud about the possibility of signing a full-on peace deal with China’s Communist leadership sometime in the next decade, a position the 61-year-old was forced to quickly backpedal away from, promising to hold a referendum before entering into any such negotiations. But his poll numbers plunged and the race was considered too close to call heading into the final days of the campaign.

Nonetheless, the mild-mannered Mr. Ma overcame a challenge from not only from Ms. Tsai – who was seeking to become Taiwan’s first female president – but also veteran KMT figure James Soong, whose independent candidacy was expected to draw voters away from the incumbent. However, support for Mr. Soong – who once looked set to win around 10 per cent of the vote – seemed to bleed away in the final days as KMT strategists raised the fear that he would split the vote and help elect Ms. Tsai. Official results showed Mr. Soong set to take just under 3 per cent of the vote.

“A lot of voters, when the final decision came, they probably went back to vote for Ma, instead of voting for Soong, worried about splitting the vote and delivering the presidency to Tsai Ing-wen,” said Yen Chen-shen, research fellow in the Institute of International Relations at National Chengchi University.

Mr. Ma was also boosted by an estimated 200,000 Taiwanese living and working in mainland China who returned to cast their ballots, some at the encouragement of their employers. Most were expected to support Mr. Ma and a continuation of his Beijing-friendly policies.

“My family told me I had to come back and vote. They said if you don’t come back, Ma Ying-jeou could lose by one ballot,” said Sherry Yen, a 23-year-old trader who lives in Hong Kong but returned to cast her ballot in central Taipei yesterday. Her mother works in the neighbouring Chinese city of Shenzhen, and also returned to vote for Mr. Ma.

The result was a disappointment for the 55-year-old Ms. Tsai and the DPP, who until the last minute held out hope for an upset win. Nonetheless, the party could claim to have recovered from the depths of four years ago, when the corruption associated with Mr. Chen ‘s government handed Mr. Ma an easy victory. Mr. Chen is now in prison, serving a 20-year sentence after being convicted after leaving office of corruption and abuse of authority.

Ms. Tsai told supporters Saturday night that she would resign as party leader. “I will shoulder full responsibility,” she said shortly after conceding defeat and congratulating Mr. Ma.

Now Taiwan is, like Israel, an estimable country, much "better," qualitatively, than its neighbours but, at the same time, one that poses an existential threat to peace. Taiwan, simply by being an independent country is a problem. The problem can be solved in one of two ways:

1. China can recognize Taiwan as a sovereign nation and deal with it on that basis; or

2. Taiwan can rejoin China, as a province, under a "one country, three systems" basis.

In my opinion China will not, indeed cannot recognize Taiwan as a sovereign country - there is too much history and too much emotion in the issue and Taiwan is, essentially, Chinese, it makes sense for Taiwan to be part of China. (And, yes, I recognize that a similar argument could be used to suggest that Canada ought to be united with the USA ~ something I do wish to see happen.)

But for the sake of peace and prosperity - everyone's peace and prosperity, the reunification must be accomplished peacefully, with the consent of the peoples involved.

The reunification of Hong Kong with China demonstrates that "one country, two systems" works - to the advantage of both China and Hong Kong;* there is no reason why "one country, three systems" cannot work for China and Taiwan - or, perhaps, Hong Kong could move towards an even more independent status, à la Taiwan.

__________
* But it is amusing to watch China and Hong Kong in some international fora where Hong Kong retains a quasi-independent status and then votes against China.

 

[Brad Sallows]

Austria ought to be united with Germany.

The underlying problem is the cultural and racial chauvinism of many Chinese people.  It is so bad that it extends to their attitudes toward territories occupied by people who are manifestly not Chinese.  I have no interest in going along with that for the sake of their "face", irrespective of the political advantages.  In point of fact, I believe that the more peoples and lands the Chinese try to keep pinned under their thumb, the greater the threat to peace - the Chinese have a long history of formation and dissolution of empire, and it is never very attractive or humane.

 

[Edward Campbell]

The main, almost the only discernable strategic thread in 3,000 years of recorded Chinese history is defence. the Chinese are manifestly isolationist. Look at the Great Wall for heaven's sake: nowhere on god's green earth, in all of recorded history, is there such a monument to a defensive, isolationist mindset - it was built, rebuilt, maintained and manned for over 2,000 years, from 500 BCE until the 1700s CE. That qualifies as a long standing strategic principle. Even the expansions, into Taiwan, Tibet and Xinjiang in the 19th century were, essentially, defensive in nature.

And no, I am not a Chinese apologist. I dislike the current dictatorship as much as anyone else - but, like almost everyone else, I see no immediate alternative to it.

 

[Brad Sallows]

Is the Great Wall inside or on a border of China?

The Chinese are not defensive, except in the way the Soviet Union was defensive.  You annex a buffer of former neighbours, and defend your new territory.  Perhaps you acquire a large buffer of other clients on your new borders, and then you defend them.  You acquire a bunch of overseas or otherwise non-continguous clients with resources you need, and you defend those.  Yes, the Chinese are very defensive.  Not an offensive move to been seen.

It is a strange isolationism to subjugate other peoples and force them to pretend to be of your own race.

 

[Edward Campbell]

Is the Great Wall inside or on a border of China?

When it was built - over a period of about 1,000 years - it was, mostly, on China's Northern border. The goal was to defend China from the marauding Northern plains peoples.

The Chinese are not defensive, except in the way the Soviet Union was defensive.  You annex a buffer of former neighbours, and defend your new territory.  Perhaps you acquire a large buffer of other clients on your new borders, and then you defend them.  You acquire a bunch of overseas or otherwise non-continguous clients with resources you need, and you defend those.  Yes, the Chinese are very defensive.  Not an offensive move to been seen.

The Chinese are just as defensive as, and arguably much more so over the past 3,000 years, than the Persians, Greeks, Romans, Huns, Mongols, Spanish, Dutch, British, French, Germans and Americans.

It is a strange isolationism to subjugate other peoples and force them to pretend to be of your own race.

Race? How racially different are the Manchu, Zhuang or Uyghur peoples from the (majority) Han Chinese? For that matter, how different are the Mongols or Vietnamese from the Chinese? Are the Italians and Germans of the different races? How about the Americans and the Cubans? I'm sorry, Brad, you usually make good sense, but not with this silly, facile, racial argument; it's nonsense. The Zhuang  Uyghur peoples are to the Chinese as Finns and Latvians are to Russians.

 

[Brad Sallows]

My point is that the Great Wall was built a long time ago, and mostly I measure Chinese political aspirations by their behaviour of the past century.

Saying the Chinese are more defensive than a partial list of expansionists doesn't make them defensive - it makes them a member of a club of expansionists.  I don't think there is anything remarkable about the tendency of powerful nations to become expansionist or imperialistic; I just will not suffer the foolishness of the excuses and rationalizations offered when base and discreditable notions grounded in power-seeking and chauvinism will do nicely.

I'm not the one who brings race or culture or tradition or historical precedent or flavours of manifest destiny to the discussion; the Chinese do that all by themselves.  Try telling a Tibetan or Korean or Uighur that he is really just Chinese and therefore should be happy if he does or could live in greater China.  I'm not willfully blind or deaf to their excuses for subjugating their neighbours.  My point is that we would greet with derision a suggestion that Finns, for example, could possibly find any sort of acceptable excuse founded on race or culture or heritage or anything else for absorbing Latvia.  I grant the Chinese no exception to that standard.

 

[a_majoor]

Instead of a Great Wall, there is now a "Green Wall". Some positive geoengineering from China:

http://en.wikipedia.org/wiki/Green_Wall_of_China

The Green Wall of China, also known as the Green Great Wall or Great Green Wall (simplified Chinese: 三北防护林; traditional Chinese: 三北防護林; pinyin: Sānběi Fánghùlín), will be a series of human-planted forest strips in the People's Republic of China, designed to hold back the expansion of the Gobi Desert.[1] It is planned to be completed around 2050,[2] at which point it is planned to be 2,800 miles (4,500 km) long.

Effects of the Gobi Desert

China has seen 3,600 km2 (1,390 miles2) of grassland overtaken every year by the Gobi Desert.[3] Each year dust storms blow off as much as 900 square miles (2,000 km2) of topsoil, and the storms are increasing in severity each year. These storms also have serious agricultural effects for other nearby countries, such as Japan, North Korea, and South Korea.[4] The Green Wall project was begun in 1978 with the proposed end result of raising northern China’s forest cover from 5 to 15 percent [5] and thereby reducing desertification.
[edit]Methodology and progress

The 4th and most recent phase of the project, started in 2003, has two parts: the use of aerial seeding to cover wide swaths of land where the soil is less arid, and the offering of cash incentives to farmers to plant trees and shrubs in areas that are more arid. [6] A $1.2 billion oversight system (including mapping and surveillance databases) is also to be implemented.[6] The “wall” will have a belt with sand-tolerant vegetation arranged in checkerboard patterns in order to stabilize the sand dunes. A gravel platform will be next to the vegetation to hold down sand and encourage a soil crust to form.[6] The trees should also serve as a wind break from dust-storms.
[edit]Measuring success

As of 2009 China’s planted forest covered more than 500,000 square kilometers (increasing tree cover from 12% to 18%) – the largest artificial forest in the world.[7] However, of the 53,000 hectares planted that year, a quarter died and of the remaining many are dwarf trees, which lack the capacity to protect the soil.[5] In 2008 winter storms destroyed 10% of the new forest stock, causing the World Bank to advise China to focus more on quality rather than quantity in its stock species.[7]
[edit]Problems

There is still debate on the effectiveness of the project. If the trees succeed in taking root they could soak up large amounts of groundwater, which would be extremely problematic for arid regions like northern China.[6] For example, in Minqin, an area in north-western China, studies showed that groundwater levels dropped by 12-19 metres since the advent of the project.[5]
Land erosion and overfarming have halted planting in many areas of the project. China's booming pollution rate has also weakened the soil, causing it to be unusable in many areas.[3]
Furthermore, planting blocks of fast-growing trees reduces the biodiversity of forested areas, creating areas that are not suitable to plants and animals normally found in forests. "China plants more trees than the rest of the world combined," says John McKinnon, the head of the EU-China Biodiversity Programme. "But the trouble is they tend to be monoculture plantations. They are not places where birds want to live." The lack of diversity also makes the trees more susceptible to disease, as in 2000 where one billion poplar trees were lost to disease, setting back 20 years of planting efforts.[5]
Liu Tuo, head of the desertification control office in the state forestry administration, is of the opinion that there are huge gaps in the country's efforts to reclaim the land that has become desert and that it would take around 300 years to do so.[8] At present there are around 1.73 m sq kilometers of land that has become desert in China. Out of which 530,000 sq km is treatable but, at the present rate of treating 1,717 sq km a year, it would take 300 years to reclaim the land that has become desert. [9]
[edit]Relations to climate change

Recently[when?] the Great Green Wall has been used as defense against critics who accuse China of climate change irresponsibility[citation needed].
China’s forest scientists argue that monoculture tree plantations are more effective at absorbing the greenhouse gas carbon dioxide than slow-growth forests.[7] So while diversity may be lower, the trees purportedly help to offset China’s carbon emissions.
[edit]Criticism

There are many who do not believe the Green Wall is an appropriate solution to China’s desertification problems. Gao Yuchuan, the Forest Bureau head of Jingbian County, Shanxi, stated that “planting for 10 years is not as good as enclosure for one year,” referring to the alternative non-invasive restoration technique that fences off (encloses) a degraded area for two years to allow the land to restore itself.[5] Jiang Gaoming, an ecologist from the Chinese Academy of Sciences and proponent of enclosure, says that “planting trees in arid and semi-arid land violates [ecological] principles”.[5] The worry is that the fragile land cannot support such massive, forced growth. Others worry that China is not doing enough on the social level. In order to succeed many believe the government should encourage farmers financially to reduce livestock numbers or relocate away from arid areas.[6]

 

[a_majoor]

Numbers not adding up. These numbers would be indicitive of economic contraction, not growth, yet China continues to report growth. Something is not adding up, and eventually there will be a correction:

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100014380/china’s-very-mysterious-data/

China’s very mysterious data
By Ambrose Evans-Pritchard Economics Last updated: January 26th, 2012

A quick observation.

I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.

The Shanghai Container Freight Index fell 1.4pc to a record low of 919.44 in November, after sliding relentlessly for several months. It has picked up slightly since.

The Baltic Dry Index measuring freight rates for ores, grains, and bulk goods, has fallen 44pc over the last year. Kasper Moller from Maersk in Beijing said weak Chinese demand for iron ore was the key culprit.

Cautionary warning. The BDI index also reflects the shipping glut, so it is not a pure indicator.
However, rail, road, river and air freight volume for the whole of China fell to 31780m tons in November (latest data), from 32340m tons in October. Not a big fall, but still negative. (National Bureau of Statistics of China.)
Chinese electricity use was flat in over the Autumn, with a sharp fall in the (year-on-year) growth rates from 8.9pc in September, to 8pc in October, and 7.7pc in December.

Residential investment has been contracting on a monthly basis, and of course property prices are now falling in all but two of China’s 70 largest cities.
So how did China pull off an economic growth rate of 8.9pc in the fourth quarter?
Beats me.

I strongly suspect that the trade and power data reveal the true state of China’s economy.
There clearly was a pick up in early January but I stick to my view that China has inflated its credit bubble beyond the limits of safety – an increase of 100pc of GDP in five years, or twice US credit growth from 2002-2007 – and that Beijing cannot continue to gain much traction with this sort of artificial stimulus.

Indeed, the extra boost to GDP from each extra yuan of credit has collapsed, according to Fitch Ratings.

A final point. There is a widespread misunderstanding that China’s households can easily come to the rescue by cranking up spending because they have the world’s highest savings rate, and consumption is just 36pc of GDP.

Prof Michael Pettis from Beijing University puts that one to rest. The Chinese do not have a much higher personal savings rate than other East Asians. The reason why consumption is so low is that wages are low, the worker share of GDP is low, and the whole economy is massively deformed and tilted towards excess investment.

This is deeply structural. It cannot be changed with a flick of the fingers, and contains the seeds of its own destruction.
China is a marvellous country. I wish them the best. But they have not found the secret formula for perpetual uber-growth.
No such formula exists.

 

[sean m]

http://www.embassymag.ca/page/view/measuring-02-01-2012

hello,

this is an interesting article since it refers to the prime ministers efforts for exporting oil to. China. Does anyone else on this forum feel that our prime minister is over keen on doing business with china. Without a doubt China is very strong economy and there are advantages with making business deals with them. Yet they always seem to smile when you are looking straight at them and stab you in the back when you are not. Considering it is public knowledge that they are spying on us, should we really being so much effort on building a relationship with us. It seems that there are other economically strong nations who are continuing to grow and who maybe it would be more benficial for us to build more of an economic relationship with

 

[sean m]

Interesting interview with Charlie Rose interviewing David Barboza, from the New York Times, who talks about working conditions in China and the current social, political and economic conditions there.

http://www.charlierose.com/view/interview/12116

 

[Brad Sallows]

A pipeline to a Pacific port - especially a port further north - is close to a great number of Asian destinations other than Chinese.

 

[sean m]

That is true, but it seems that with the meeting's our prime minister will be having with the Chinese Head of State. I believe he publicly acknowledged that he desired to do more business with China. So considering those facts, maybe, it could be possible to guess that China is the main country he is directing his attention towards

 

[a_majoor]

Ideally, Canada would be vigerously persuing all kinds of avenues, but as a practical matter our time and resources are limited. The PM is going after the biggest payoff he can get out of his limited time and resources, if this works then many secondary markets will also open for Canada in the region.

If I were Imperator I would probably be more focused on India, as I feel there are more political and cultural similarities as a fellow member of the Anglosphere, but that's just a personal preference on my part. Japan and Korea will probably follow China's lead in the sense that if Canada gets a good deal with China they will want to get a piece of the action as well.

 

[sean m]

That is a good point you make. His policies seem to be based upon economics which  as you. Mr. thucydides, wisely pointed out due to our own resources and time. You also make an interesting point regarding Korea and Japan, yet I am sorry for the trouble but can you please specify on who the Japanese and Koreans would want to do business, us or the Chinese. India could be a good partner for us, another good point you make, maybe the fact with have so many people of Indian descent could work to our advantage again. It seems that many people are forgetting about the rising power of Brazil and other Latin American nations, and focusing on Asia. If I remember correctly the Canadian and Brazilian governments met yet there was no final outcome which would have been to our benefit.  Perhaps since we do not seem to have any problems with them we can focus on building a better relationship.

 

[a_majoor]

Since Canadian interests are involved, the ideal would be we market our value added products to China, Korea, Japan etc. The facts, though, are we are pretty weak in the value added sector, but Chine, Japan and Korea (etc.) are quite happy to buy our raw materials. If China gets a good deal on Canadian oil, it isn't much of a stretch to imagine the Japanese and Koreans will also want to get in on the deal; since the investment to build a pipeline and tanker port are already made (for China) the deal is even better for them as they benefit from pre existing infrastructure. Inexpensive resources for Japan and Korea allow them to supply both the Chinese and Canadian markets.

Brazil is sort of a Canada south, but they generally are competitors and also quite adept at the use of state subsidies to undercut our marketing in international markets (especially in high tech things like aircraft). Of course their political stability is less certain than ours, and as Edward Campbel points out, they are pretty good at snatching defeat from the jaws of victory. Given the general instability of South America, it is probably better for Canada to stay focused on places where we can make a difference (such as our free trade partner Chile) and expand from that beachhead when the time is right.

 

[a_majoor]

More mysterious indicators. The metrics that the Chinese release and independent data like this and the shipping data upthread are not adding up. The true danger would be the Chinese bubble pops suddenly, undercutting everyone's assumptions that China is becoming the lender and economic power of last resort and causing a global crash. More probably there will be a deflation of the Chinese bubble, causing long term recession as various markets tied to the Chinese economy go down with it, or make frantic attempts to cut ties and swim out on their own.

http://www.forbes.com/sites/gordonchang/2012/01/29/why-are-the-chinese-buying-record-quantities-of-gold/print/

Why Are the Chinese Buying Record Quantities of Gold?

This month, the Hong Kong Census and Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October’s 86,299 kilograms.  Beijing does not release gold trade figures, so for this and other reasons the Hong Kong numbers are considered the best indication of China’s gold imports.

Analysts believe China bought as much as 490 tons of gold in 2011, double the estimated 245 tons in 2010.  “The thing that’s caught people’s minds is the massive increase in Chinese buying,” remarked Ross Norman of Sharps Pixley, a London gold brokerage, this month.

So who in China is buying all this gold?

The People’s Bank of China, the central bank, has been hinting that it is purchasing.  “No asset is safe now,” said the PBOC’s Zhang Jianhua at the end of last month.  “The only choice to hedge risks is to hold hard currency—gold.”  He also said it was smart strategy to buy on market dips.  Analysts naturally jumped on his comment as proof that China, the world’s fifth-largest holder of the metal, is in the market for more.

There are a few problems with this conclusion.  First, the Chinese government rarely benefits others—and hurts itself—by telegraphing its short-term investment strategies.

Second, the central bank has less purchasing power these days.  China’s foreign reserves declined in Q4 2011, falling $20.6 billion from Q3.  The first quarterly outflow since 1998 was not large, but the trend was troubling.  The reserves declined a stunning $92.7 billion in November and December.

Third, the purchase of gold would be especially risky for the central bank, which is already insolvent from a balance sheet point of view.  The PBOC needs income-producing assets in order to meet its obligations on the debt incurred to buy foreign exchange, so the holding of gold only complicates its funding operations.  This is not to say the bank never buys gold—it obviously does—but there are real constraints on its ability to purchase assets that do not provide current income.

Apart from China’s central bank, there is not much demand from the country’s institutional investors for gold.  There are industrial users, of course, but their demand is filled from domestic production—China is the world’s largest gold producer.  Most of China’s gold demand from foreign sources, therefore, is from individuals.

So why are individuals now buying gold?  The easy answer is that the demand is only seasonal, as Jeff Wright of Global Hunter Securities believes.  The Chinese traditionally buy gold presents in the run-up to the Lunar New Year, which started a week ago.  Yet gift-giving does not begin to explain the surge in gold purchases that started as far back as July.  November was the fifth-consecutive month of China’s record gold purchases from Hong Kong.

A better explanation for the gold-buying binge of Chinese citizens is that they are using the shiny commodity as an inflation hedge, as the Financial Times recently suggested.  Yet the buying of gold has increased while inflation has eased.  And that means there must be another explanation.  The best explanation is that individuals in China are using gold as a substitute for capital flight.

Although indicators showed the Chinese economy faltered only at the end of September, there had been a growing sense of pessimism inside the country for months before then.  Beijing, after all, could build only so many “ghost cities” before citizens began to notice.  As Joseph Sternberg of the Wall Street Journal Asia said on the John Batchelor Show last Wednesday, “people inside China seem to be losing faith in the Chinese growth story that we’ve been hearing so much about for the past few years.”  Estimates of capital flight are sketchy, but it appears there was $34 billion of it in the third quarter of last year and a $100 billion in the fourth.

Not every Chinese citizen is in the position to export cash, so the next best tactic for the nervous is to buy gold, a refuge from plunging property prices and declining stock markets as well as an anticipated depreciation of their currency.  “Within China,” notes Michael Pettis of Peking University, “many are going to argue that the rapid decline in the trade surplus, coupled with unmistakable evidence of flight capital, means that the PBOC should devalue the RMB.”  And the fact that China’s leaders in public are talking about the adverse impact of the European crisis on China weighs heavily on sentiment.

The worst thing about capital flight and gold purchases is that they drain liquidity out of the Chinese economy just when it is needed most.  Beijing can continue to work its magic as long as strict capital controls keep money inside the country.  Once they fail to do so, however, all bets are off.  The purchasing of gold, of course, results in the exporting of cash.

Chinese asset values have not yet crashed across the board, but the buying of gold—a leading indicator of panic—is an especially troubling sign that they will.  Therefore, it is not surprising that gold purchases by Chinese citizens and investors are frightening Beijing’s technocrats.  At the end of last month, they shut all of the countries gold exchanges other than two of them in Shanghai.

 

[Edward Campbell]

A look at the agenda for Prim Minister Harper's forthcoming trip to China, in this article reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/news/world/the-remaking-of-harpers-china-gambit/article2326481/singlepage/#articlecontent

The remaking of Harper’s China gambit

MARK MACKINNON

BEIJING— From Saturday's Globe and Mail
Published Friday, Feb. 03, 2012

Prime Minister Stephen Harper arrives Tuesday in China for a trip that will see him sit down with Chinese President Hu Jintao and Premier Wen Jiabao to talk about shipping Canadian oil to China, as well as a possible pact to protect Canadian investors doing business in the Middle Kingdom. But arguably even more important to the future of bilateral ties will be the rest of Mr. Harper’s schedule, which will see him meet at least three senior Communist Party figures who are expected to take on more prominent roles after a once-in-a-decade power transfer that begins this fall.

If Mr. Harper can forge lasting links with the incoming Chinese leadership, it will cement one of the most dramatic foreign policy reversals in recent memory. The Prime Minister had stern words for the Chinese in 2006, saying he placed Canadian “values” like human rights over trade. In a statement last month, however, the emphasis was decidedly on economic ties.

Now the Prime Minister may emerge with closer ties to China’s Communist leaders than any of his predecessors. Getting to know China’s next leaders – and how they think – would bolster a relationship that has staggered at times. Gordon Houlden, a former director-general of the East Asian Bureau of the Department of Foreign Affairs and International Trade, said he was “certain” that reaching out to the next generation was a primary goal of Mr. Harper’s trip.

“To me, it has to be an objective: the need to renew the relationship at the highest level,” said Mr. Houlden, now director of the China Institute at the University of Alberta. “I think it shows a comfort with the China file that might not have been there before.”

In addition to the meetings with Mr. Hu and Mr. Wen, Mr. Harper’s itinerary in Beijing includes a sit-down with Vice-Premier Li Keqiang, the man expected to succeed Mr. Wen next year. Mr. Li is a Politburo veteran and protégé of Mr. Hu – a leader who took a steady-as-she-goes approach during his decade as president.

(The Canadian side also sought a meeting with Vice-President Xi Jinping, the man expected to succeed Mr. Hu as paramount leader later this year. However, no such meeting is currently planned.)

After three days in Beijing comes a rapid but carefully crafted two-city jaunt into southern China. Mr. Harper will split the last two days of his trip between the manufacturing hubs of Guangzhou, where he will give a speech to the Canadian business community, and Chongqing, where he is expected to announce that two Chinese pandas are headed for the Toronto Zoo.

Mr. Harper’s trip is primarily about trade, but his meetings in Beijing, Guangzhou and Chongqing could give his government unique insight into the coming changes in China. The biggest benefit from the southern tour, however, will be his face-to-face meetings with local Communist Party bosses Wang Yang and Bo Xilai, who represent extremes along China’s narrow political spectrum and are the faces of a next generation of leaders.

Mr. Wang and Mr. Bo are not only leading contenders to be promoted to join Mr. Xi and Mr. Li on the all-powerful Standing Committee of the Politburo this fall, when seven of its nine members are set to retire. The two men are often held up as rivals who offer starkly different visions for China’s future.

Mr. Wang presides over a liberalizing Guangdong province, where media and civil society are freer than anywhere else in the country. He also impressed observers recently with the tolerant way he handled protesters who overthrew the Party leadership in the village of Wukan, leading to one of the freest local elections China has ever seen.

Mr. Bo, meanwhile, has become popular for his crackdown on organized crime in Chongqing and his calls to redistribute the country’s growing wealth. At the same time, he has unsettled some with his Mao-style propaganda campaigns that recall of darker periods in the country’s recent past.

Mr. Harper is believed to be the first foreign leader to meet Mr. Li, Mr. Wang and Mr. Bo on the same official visit.

Even former critics of Mr. Harper’s China policy applaud his strategy on this trip. Howard Balloch, a former Canadian ambassador to China who now heads a Beijing-based investment bank, said that getting to know the incoming leadership early would be a “very smart” move, if that is indeed what Mr. Harper is coming to China to do. “I’m pleased that our China policy is on track right now,” Mr. Balloch said.

“For a leader like Harper to know the future leadership early would certainly have some advantages,” said Liu Jun, a Canada expert at the government-run Chinese Academy of Social Sciences. However, Mr. Liu said China’s one-party system means the policy changes from one generation of leaders to the next are rarely as dramatic as those that follow changes of power in multiparty democracies.

Indeed, the handover of power in China is expected to take years. If Mr. Hu follows precedent, he will remain as head of the military until 2014, and likely retain substantial influence long after that. His own predecessor, Jiang Zemin, is believed to still hold sway over key decisions, including the selections of Mr. Xi and Mr. Li.

Still, the effort itself is remarkable from a Prime Minister who once rankled Beijing by proudly bestowing honorary citizenship on the Dalai Lama and famously staying away from the 2008 Olympics in Beijing. Human rights groups say China has gone backward since then in terms of how it treats dissidents and ethnic minorities, but little of the old criticism is expected to make it onto the agenda while Mr. Harper builds ties.

“China is being treated with a softness and reverence on some issues that would have been a surprise to Liberal and even Conservative governments in the past,” said Paul Evans, director of the Institute of Asian Research at the University of British Columbia. “The period of treating China as a godless authoritarian country with nuclear weapons – it’s as if it never happened.”

The arrival of the two pandas – a centuries-old goodwill gesture known in China as “panda diplomacy” – will symbolize the new warmth between the Communist and Conservative governments.

Canadian leaders have sought pandas since Pierre Trudeau went to China on his inaugural trip in 1973. Mr. Trudeau went so far as to offer four beavers to then-Chinese-premier Zhou Enlai in hopes of provoking an exchange of national symbols that never happened. Until now.

See, also, this; despite our reservations about China's global intentions (wholly and completely self serving) and it governance (totalitarian) we need better, more profitable (for us) trade with China and with its neighbours. Improved relations with China does not mean we need or want to have less than excellent relations with the USA, quite the contrary, it is to be hoped that we can be positioned to act as a buffer when, inevitably, the anti-China sentiments in the USA rise.

 

[Brad Sallows]

"We are, after all, a trading nation..."

 

[Edward Campbell]

"We are, after all, a trading nation..."

Indeed, and I am, philosophically, a "free trader." I believe in unilaterally reducing and even eliminating tariffs (and other impediments) against foreign goods and services, even as I understand that the political consequences of such actions can be deadly ... but I also favour the use of export subsidies, so long as they are used by others. Although we subscribe to a whole ost of measures aimed at eliminating measures that distory global trade and commerce there are some measures that we can, legally, take to promote and protect our own industries - taken broadly - when we invoke a "national security" and "national defence" exemption that allows us to subsidize, directly, industries and sectors that are vital to our national security and defence. So long as our trading partners and competitors use (and abuse) the rules we can and should, too. I am conscious that the argument can be taken too far, and, inevitably, will be taken too far by the Americans and Chinese and by those on the political left who, too often and only sometimes accidentally, favour a sort of "national socialism."

 

[a_majoor]

Canada's trade mission to China as seen by the Financial Post. While I am not entirely sure that the power relationship is quite as the writer sees, it is a measure of how far Canada has changed in a few short years that we can even contemplate speaking in such terms. (To be blunt, we are indeed more powerful and in a much stronger postion than we were in the 1990's "Team Canada" era, but China is far more powerful as well):

http://opinion.financialpost.com/2012/02/03/lawrence-solomon-harpers-mission/

Harper’s mission
Lawrence Solomon  Feb 3, 2012 – 6:47 PM ET | Last Updated: Feb 3, 2012 7:01 PM ET

When Canadian Prime Minister Stephen Harper meets China’s President Hu Jintao in Beijing next week, it will be a meeting between a growing, newly confident power and one that is unsure of itself and its place in the world. Harper heads the confident power. Hu stands atop a vast chaos, a seething, heaving economy of plunderers that keeps the plundered at bay through an army of spies and thugs, of thieves that pirate the West’s designs and innovations, and of military adventurers who threaten to seize property and resources from nearly all its neighbours.

In aid of its territorial claims against its neighbours, China’s military – the world’s largest after the U.S.— has been growing rapidly and, most believe, surreptitiously — some estimates, such as from the Stockholm International Peace Research Institute, have had China underreporting military spending by a factor of five. Under this onslaught, Vietnam fears for its Spratly Islands, Japan for the Senkaku Islands, Taiwan for itself.

As remarkably, China’s official accounts show it to spend even more keeping its citizens in check — it calls this “social stability maintenance” — than on its military. Spending on social stability, which includes police, jails, and an elaborate domestic surveillance system that tracks citizens, has been increasing at a blistering rate – almost 14% in the current year. As with military spending, many believe the Chinese government is understating these expenses, too, to hide the shame of needing to crack down on a populace that holds it in contempt, that increasingly mocks its ham-handed stupidity, and that increasingly confronts it.

The number of protests against injustices has been steadily climbing. In 1993, according to the Chinese Police Academy, China experienced 8,700 “mass incidents.” By 2006, that figure had soared to more than 90,000 and in 2010, according to an estimate from Tsinghua University, it doubled to 180,000. The great majority of the protests are not political but economic, typically by communities protesting against the confiscation of their land by developers in league with corrupt government officials.

To defuse this powder keg, the government sometimes attacks, sometimes appeases, sometimes both. In one high profile protest last September, thousands of villagers in the southern community of Wukan demonstrated against the seizure of their farmland, leading to attacks by riot police, a counterattack by villagers, and a government siege of the village designed to starve the village into submission. After withering foreign coverage (but almost none in China’s official media), the government finally caved, agreeing to fire the corrupt officials and suspend the land seizures pending an investigation. The village of Wukan this week even conducted fair and free local elections, thought to be a first in today’s China.

But the appeasement of Wukan is very much the exception. China is today more repressive than at any time since the Tiananmen crackdown in 1989. Critics are being increasingly detained, beaten, or jailed for crimes such as “inciting subversion of state power” after writing essays on constitutional democracy.

“Disappearances” of dissidents are not only on the rise in China, the government’s draft criminal code is effectively legalizing them, raising fears that disappearances will become a common feature in the China of tomorrow. Chinese government caseworkers, in an odd mix of bureaucracy and brutality, advise their dissident “clients” on the liberties they may exercise (such as speaking to the press or writing an article), when they may exercise their liberties, and the merits of leaving their homes for extended periods of time, for either an exile in the countryside or outside China altogether.

What does Harper want with this government, about which he cannot have any illusions — he is, after all, the only Canadian prime minister in memory who has shown spine in his dealings with China. Harper travels not as a supplicant, as did former Prime Minister Jean Chrétien and his Team Canada of businessmen, but from a position of power, the leader of a country whose resources China, among others, covets. The itinerary for the Harper trip mostly reads like a goodwill foray — signing of “co-operation agreements,” a visit to the panda zoo, sealskin attire to promote Newfoundland jobs and other made-for-photo-op occasions. Harper hopes the Chinese will formally agree not to plunder Canadians who invest in China but he must know that China signs such agreements easily, and then fails to enforce them.

The takeaways from Harper’s trip to China — apart from the pandas that will soon visit Canada — have little to do with China proper. By promoting seal products, Harper will show Newfoundlanders he is standing up for their culture. By being respectful to China, Harper will please the large and chauvinistic Chinese-Canadian community. Mostly, however, Harper is going to China to impress upon the U.S. the danger of taking Canada for granted.

The Keystone pipeline, which President Obama has refused to permit in deference to his environmental funders, will be one of the major election issues in the U.S. presidential campaign. The prospect that Canada will ship its oil thousands of kilometres west across an ocean to China, instead of directly south to its ally and friend, offends Democrats and Republicans alike, particularly when doing so also costs U.S. jobs and makes the U.S. more reliant on unfriendly oil suppliers. The more the Obama Administration can be pressured, the better the chance of an early acceptance of Keystone, the more the Americans will understand where their interests lie. Harper wants this pipeline and he’s willing to go to China to help secure it.

Financial Post
LawrenceSolomon@nextcity.com