Defence shoots down Made in China reports

ABC News

Made in Australia: Diggers in Afghanistan (Australian Defence Force)
Australian Minister for Defence Personnel Greg Combet says Australian soldiers' combat fatigues are not and will not be made in China.
Reports today suggested that the clothing manufacturer given the tender to make the uniforms planned to source its camouflage material from China.
But in a statement this morning Mr Combet said all uniforms would be made from fabric sourced in Australia.
"Contrary to some media reports this morning, combat uniforms worn by Australian soldiers are manufactured in Australia," he said.
"A tender was won late last year by a local clothing manufacturer from Bendigo, Australian Defence Apparel (ADA) to provide camouflage uniforms under an interim arrangement.
"ADA will be sourcing the fabric used to make these uniforms from Bruck Textiles in Wangaratta for the contracted period."
Mr Combet said Defence turned down an offer to have extra uniforms made from fabric sourced from China.
"Under the contract ADA put forward an option to supply additional uniforms if required. For these uniforms ADA said they would source the fabric from a Chinese company," he said.
"This option has not been exercised by the Department of Defence and it will not be exercised."

Security threat
Earlier Australia Defence Association executive director Neil James said any plans to move manufacturing offshore would pose a security threat.
"If a foreign manufacturer has the ability to manufacture large numbers of Australian Defence Force combat uniforms, then it raises the risk of that being done illegally, and a potential adversary having the potential to mount deception operations with people dressed in Australian uniforms, or indeed propaganda operations with people wrongly dressed in Australian uniforms," he said.
Mr James says combat uniforms are a key part of Australia's defence, and, like ammunition, they need to be made in Australia to ensure security of supply.
"The first concern is the simple continuity of supply issue," he said.
"Just like we manufacture all our small arms, ammunition and explosives domestically, rather than import them, combat uniforms are really that type of basic defence industrial capacity that needs to be maintained domestically.
"The second aspect and it really stems from the continuity of supply one, is the mobilisation and preparedness issue. If you suddenly need to increase the size of the Defence Force, you need to be able to source the supply of their combat uniforms quickly and efficiently within Australia."
Mr James says it would also be undignified to ask Australian soldiers to fight in foreign-made uniforms.
"We're asking young Australians to risk their lives defending our country, we actually think they should probably be dressed in an Australian uniform to do that," he said.

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Should Europe Lift Its Arms Embargo on China?

Chinese People's Liberation Army soldiers get ready to march past Tiananmen Square during a National Day parade in Beijing

By LEO CENDROWICZ / BRUSSELS

Barack Obama is not the only one with a China-size headache.

Leaders in Europe have also tangled with Beijing recently on everything from trade to climate change to Iran.

But perhaps the thorniest issue between Europe and China is the arms embargo that's been in place ever since the bloody suppression of the Tiananmen Square protests in 1989.
The E.U. is now rethinking this 20-year-old arms ban.

Spain, which holds the E.U.'s rotating presidency until July 1, has called for a review of the embargo as a way of improving relations with Beijing.

"We are all aware of the new role which China is assuming in the world," said Spanish Foreign Minister Miguel Angel Moratinos.

This is great news for China, especially given its fury over the recent decision by the U.S. to sell $6.4 billion worth of arms to Taiwan, which China regards as a renegade province.
China says the lifting of the embargo is more symbolic than anything else — it would signal a European acceptance of the country's status as an equal player on the world stage.

The weapons ban has certainly not prevented China from becoming a military power — its annual defense budget officially stands at $70 billion, although the Pentagon believes the real figure to be twice as high.

Rather, Beijing sees the embargo as outdated and insulting, considering the other nations currently subject to an E.U. arms ban are all pariah states — Congo, North Korea, Iran, Burma, Somalia, Sudan and Zimbabwe. (A similar E.U. embargo against Uzbekistan was lifted in October, despite continuing concerns about human rights in the Central Asian nation.)
And Europe could certainly benefit from better relations with Beijing, which has been dismissive of E.U. diplomatic requests and disdainful of European attempts to be more of a global leader in recent years.

In 2008, China canceled a summit with E.U. leaders after French President Nicolas Sarkozy met with the exiled Tibetan leader, the Dalai Lama.

Then, last December, China executed a British citizen for drug-smuggling — the first European to be executed in China in 50 years — despite condemnations from the E.U. and pleas from supporters that he be spared because of his mental illness.

And at last year's Copenhagen climate conference, E.U. leaders were shocked by China's scorn for European efforts at securing a meaningful commitment to cut emissions.
The harsh tone from Beijing stings even more since the E.U. had hoped its new Lisbon Treaty — intended to create a more streamlined institution with a strong President and Foreign Minister speaking on its behalf — would ensure the bloc would have a bigger presence on the global stage. But China has historically sought to exploit the E.U.'s internal divisions to fuel its economic growth, not deal with the bloc as a whole.

All of the E.U.'s biggest members have cozied up to Beijing at one point or another in the hopes of guaranteeing lucrative trade deals.
But the tide is now turning in Europe.

Charles Grant, director of the London-based Centre for European Reform, published a paper last month arguing that Europeans need to agree on a single message in their dealings with China so that Beijing can't play a game of divide and conquer.

At the same time, he said, the E.U. should "abandon the fiction of a 'strategic partnership,'" which cannot be meaningful with such divergent value systems, and focus on a limited number of issues on which China and the E.U. can find agreement.
Lifting the arms ban may not be so simple, however, with strong resistance already developing against the idea.

Many E.U. countries are worried about China's increasingly threatening behavior toward Taiwan and are reluctant to sanction an arms buildup that would further isolate the island.

France, for one, had called for the embargo to be lifted in 2004, but now says it should stay in place.

The European Parliament is also opposed to ending the ban so long as Beijing continues to sell arms to countries like Zimbabwe and Sudan, whose governments the West accuses of committing or supporting violent acts against civilians.

And the E.U. would also have to think carefully about antagonizing the U.S., which has its own arms embargo on China.
François Godement, a senior policy fellow with the European Council on Foreign Relations and president of the Asia Centre at the Institut d'Etudes Politiques in Paris, says the Spanish bid to review the embargo is especially ill-conceived since there has been no mention of trying to squeeze concessions from China first.

"There seems to be some expectation of future Chinese goodwill of an unspecified nature," he says.

"But China has steadfastly refused to give anything in exchange."

Godement says Europeans have long deluded themselves that China will accept them as equal partners when, in fact, Beijing will likely continue probing the bloc for weaknesses and division. He says the ban should only be lifted after Europe takes a long and hard look at its China policy. "If there is one good thing about China's strident tone, it has been to help the E.U.'s big countries realize that they cannot go it alone and they need a united front," he says.

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Taiwan to hold biggest war games in over a year

TAIPEI (AFP) — Taiwan plans its biggest war games in over a year, the defence ministry said Wednesday, amid simmering tensions over US arms sales to the island which China claims as its own.
The military exercises, codenamed "Han Kuang No 26", will take place in April and involve units from the army, the navy and the air force, a defence ministry official told AFP.
"Among the scenarios, we'll test what would happen if the enemy were to invade Taiwan and how we would seek to nip it in the bud," he said, on condition of anonymity.
He said special emphasis would be placed on "asymmetrical warfare", in which a small force seeks to use special advantages to overcome a larger opponent, but he declined to give specific details.
The announcement of the exercise comes shortly after renewed tension between China and the United States over a US decision to sell 6.4 billion dollars worth of arms to Taiwan.
The island last held similar military manoeuvres in December 2008, but only computerised "Han Kuang" war games were held last year.
Ties between Taiwan and China have improved markedly since President Ma Ying-jeou of the Beijing friendly Kuomintang came to power in 2008 on a platform of boosting trade links and allowing in more Chinese tourists.
But Beijing still refuses to renounce the use of force against the island which it has considered part of its territory awaiting reunification since the two sides split in 1949 at the end of a civil war.

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Google says very hard to operate in China

MOUNTAIN VIEW, California (Reuters) - Google Inc co-founder Sergey Brin said on Tuesday it has become "very hard to operate" in China, but he is optimistic that the Internet company can continue to "open up information for everyone everywhere, free of political censorship."
"In the past couple of years, especially since the Olympics, the situation has gotten considerably worse on a variety of fronts," Brin told Reuters.
Google sent shockwaves across business and political circles when it declared on January 12 it would stop censoring Chinese search results, and said it was considering pulling out of the country.
Brin's comments are among the first by senior Google management on the issue since the announcement.
He said that not only has information been omitted from the company's core search service in China, but also other Google products as well.
"Other sites of ours, such as YouTube and Google Docs... are blocked," Brin noted.
Asked whether Google was in direct communication with the Obama administration regarding these issues, Brin would only say "there have been a lot of parties that have responded to our blogpost and offered interest."
Brin, who grew up in the former Soviet Union and controls the majority of Google's voting shares with co-founder Larry Page, said Google has had an important impact on China since it entered the market in 2006.
"The initial momentum that we saw hasn't really continued, and it's made it very hard to operate under these kinds of circumstances," Brin said, adding he had no new information to share about discussions between China and the Internet search leader.

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China artist-activist says Google email hacked

Chinese artist Ai Weiwei has spoken out in support of US web giant Google and said his Gmail accounts had been hacked

Chinese artist Ai Weiwei leads a group of volunteers investigating the collapse of poorly built schools in Sichuan

BEIJING (AFP) — One of China's most controversial artists on Wednesday spoke out in support of US Internet giant Google in its standoff with Beijing, and said his Gmail accounts had been breached by hackers.

In a commentary in The Wall Street Journal, Ai Weiwei said Google had set an important example for the Chinese people by challenging state censorship at the risk of sacrificing its place in the world's largest online market.
Ai -- who has a popular, but often censored, blog on which he writes political commentaries -- said two of his Google email accounts were hacked from October, with messages transferred to an unknown address.
The artist warned that China itself could not long prosper by persisting with broad censorship.
"The question then is how a state based on limiting information flows and freedom of speech can remain powerful. And if it can, what kind of monster it will become," he wrote.
Google last month threatened to abandon its Chinese-language search engine, google.cn, and possibly leave the country altogether over alleged China-based cyberattacks. The company also said it would no longer obey censorship rules.
The government has denied any involvement in the cyberattacks, which Google said had targeted the email accounts of Chinese human rights activists.
"It is encouraging for the Chinese people to see that a leading Internet company recognises that censorship is a violation of basic human rights and values," Ai said.
"To stand up and speak out in a society in which those values are under constant attack requires courage and deserves moral support.
"Politicians and enterprises should not trade those basic rights for profits, because any short-term deal will only lead to long-term losses."
Ai first came to prominence in the late 1970s as a member of an avant garde group of artists known as "The Stars". He then moved to the United States, where he lived for more than a decade before coming home in the 1990s.
He now leads a group of volunteers investigating the collapse of poorly built schools in the massive May 2008 earthquake in the southwestern province of Sichuan, which left more than 87,000 people dead or missing.

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Google tells creators of Chinese website to drop logo

• Lookalike infringes trademark rights, says US search firm
• Goojje launches after row with Beijing over censoring
By Tania Branigan in Beijing
A computer display shows the Goojje website at an internet cafe in Beijing, China. Google says the site infringes trademark rights.
Google has warned the creators of a lookalike Chinese site to scrap their logo because it infringes trademark rights.
Goojje appeared shortly after the US internet company said it was no longer willing to censor its Chinese service and its home page included what appeared to be a plea to the firm to remain in China.

The Chinese doppelganger offers search and social networking services.
Today one of its college student creators said Google had sent them a letter from its lawyers warning them to stop using its current logo or anything that might mislead the public into thinking there was a connection with the American firm.

A Google spokeswoman told Reuters it had asked Goojje to stop copying its trademarked logo.
The Chinese website's logo also incorporates the paw-print motif of Baidu, the domestic company that dominates the search market in China.
In an email to the Guardian one of the site's founders, who uses the pseudonym Xiao Xuan, said: "We will continue the site; we will insist on our own path; we will not give up; we won't abandon it. Anyone who knows Chinese knows the difference between the two."
The site's name is a pun because the second half of Google's Chinese name, Guge, sounds like the word for older brother, gege.

The latter part of Goojje sounds like "jiejie" or "older sister".
The homepage of the website originally bore the slogan: "Brother is leaving... sister will miss him."

That appeared to be a reference to Google's acknowledgement that its decision to stop self-censoring could lead to its departure from China.

After executives stressed they hoped to keep doing business on the mainland, Goojje changed the statement to express happiness that "brother stayed for sister".
Xiao told China's Global Times newspaper the site had 60,000 registered users and had repeatedly suffered cyber attacks.
Fang Xingdong, founder and CEO of Chinese blog portal Bokee, told the paper: "I don't believe Goojje will survive long. It's likely that these college students set up the site for fun. If they mean to be serious, it would cost a lot of cash and need advanced technology to support the website."

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Google Gives Us Hope

If China can remain powerful though it limits freedom of speech, what kind of monster will it become?
By AI WEIWEI
China may have become the second-biggest economy in the world, but its political system remains stuck in the early 20th century.

Even as Chinese people's horizons are broadening, the government clings to a one-party ideology that is hostile to personal freedom.

Technology is making possible greater expression and political participation, but that has only prompted the authorities to work harder to stifle these impulses.
All this makes Google's decision to stop censoring to protect its China operations especially significant.

First, it is encouraging for the Chinese people to see that a leading Internet company recognizes that censorship is a violation of basic human rights and values.

Such controls damage the core ethos underpinning the Internet.
To stand up and speak out in a society in which those values are under constant attack requires courage and deserves moral support.

Politicians and enterprises should not trade those basic rights for profits, because any short-term deal will only lead to long-term losses.
In several cases the judicial system has used information from an accused person's email as evidence of attempting to overthrow the government.

This is a clear case showing how an authoritarian state can use technology not to benefit social life and improve political participation, but rather to violate the privacy of individuals and control their thinking, communication and expression.
From last October, I found that two of my Gmail accounts were being hacked by unknown intruders, and my Gmail messages were being automatically transferred to an unknown address. Other activists have reported the same intrusions to their Gmail accounts.
Most discouraging to those of us who are fighting for increased freedom is the tendency for developed nations to lower the bar to please China.

They make excuses not to concern themselves with violations of human rights. To espouse universal values and then blind oneself to China's active hostility to those values is irresponsible and naïve.
When American officials come to China with a pretty smile and the soft tone of a so-called "friendly gesture," this only tells us how fragile and vulnerable these moral standards can be.

It makes the people still in the struggle feel disappointed.
In recent months China has tightened its censorship over every medium, from the Internet to the mainstream media to instant messaging over mobile phones.

This is the mark of a government that has lost confidence in its own ideology and is nervous about its power to control its own people.

Stopping the free exchange of information ultimately hampers economic growth and opportunity, which is the Chinese government's main claim to legitimacy.

The question then is how a state based on limiting information flows and freedom of speech can remain powerful.

And if it can, what kind of monster it will become.

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What Would Make China Budge on Iran

The country is facing increasing international pressure to support sanctions. But China will require something in return.
By Melinda Liu

President Hu Jintao at the United Nations last year

Has Iran finally gone too far, pushing China into changing its mind about sanctions?

Maybe not just yet.

Tuesday, after Iran ratcheted up its uranium-enrichment program—elevating the purity of its enriched product to 20 percent—Beijing looked increasingly isolated in its calls to continue negotiations.

"To talk about sanctions at the moment will complicate the situation and might stand in the way of finding a diplomatic solution," Chinese Foreign Minister Yang Jiechi said at a conference in Europe.

Western countries have been lobbying China, a permanent member of the U.N. Security Council, to join them in supporting increased sanctions against the Tehran regime.

The U.S. in particular has made known that it hopes to push through a regimen of "crippling sanctions" early this year.

But Chinese officials have stuck to their guns, arguing that sanctions don't work.
The haggling could go on for months.

On Tuesday, Chinese officials renewed calls for the international community to support a proposal backed by the International Atomic Energy Agency that would allow Tehran to procure nuclear fuel for its medical-research reactor in exchange for its low-enriched uranium.

"We expect and back all sides to reach an early agreement on the IAEA-raised draft proposal regarding the Tehran research reactor, which will help solve the issue," foreign ministry spokesman Ma Zhaoxu told a regular briefing.
It's not that China is irreversibly wedded to its "We don't do sanctions" mantra.

Beijing itself recently made the rare decision to publicly announce punitive sanctions against U.S. defense firms involved in the Obama administration's $6.4 billion arms sales to Taiwan, a transaction that includes Patriot missiles, Blackhawk helicopters, and other weaponry.

In the past, Beijing has quietly boycotted business with American firms that peddled arms to Taipei, but this is the first time it has publicized the move.

"This is kind of an experiment. It's unprecedented," acknowledges international affairs expert Tao Wenzhao of the Chinese Academy of Social Sciences.
Still, Beijing has way too much invested in its multibillion-dollar energy relationship with Tehran to risk it easily.

Chinese leaders won't even consider agreeing to sanctions without a really big quid pro quo—something akin to, say, Washington stopping or curbing its own longstanding arms sales to Taiwan.

That scenario isn't likely.
Another complication is that Beijing would need to be sure that any sanctions are appropriately targeted and, most important, likely to work the way they're supposed to.

That's a painful lesson that Chinese authorities learned back in 1840 when the imperial court tried to halt the opium trade by British traders near Canton.

Tasked with impounding and destroying more than a thousand tons of opium, erstwhile "drug czar" Commissioner Lin Zexu wrote a letter to Britain's Queen Victoria threatening to cut off Chinese exports to the West of, among other things, tea and rhubarb (which China's mandarins thought was essential to prevent Brits from becoming dangerously constipated).

"Foreign countries cannot get along for a single day without [these products]," Lin wrote, "If China cuts off these benefits with no sympathy for those who are to suffer, what can the barbarians rely upon to keep themselves alive?"
Commissioner Lin was well intentioned—and he's still hailed as a heroic if tragic historical figure in China—but his ignorance of diplomacy and the outside world crippled efforts to stop the drug flow.

These days the Beijing regime perceives sanctions to be a precision tool, like a surgical scalpel. Using them like a blunt instrument can hinder rather than help achieve the desired result.

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Taiwan insists submarines, jets still on arms agenda

The world's largest unmanned submarine, the 111 foot LSV 2 "Cutthroat"

TAIPEI (AFP) — Taiwan on Tuesday dismissed a report saying the island has dropped a request for US submarines, saying the vessels and fighter jets remained on the island's arms procurement agenda.

"It is absolutely untrue," Taiwan's defence ministry spokesman Yu Sy-tue told AFP.
"We hope the United States will provide submarines and F-16 C/Ds Taiwan has requested in accordance with the Taiwan Relations Act," the spokesman said.
Yu was reacting to a report which cited an unnamed military source as saying that the island was no longer asking for the submarines, because of rapidly improving ties between Taipei and Beijing.
Jason Yuan, Taiwan's de facto ambassador to Washington, said late January the United States was still considering whether to sell the submarines and F-16 fighter jets to the island despite the latest Beijing-Washington row over a 6.4-billion-dollar arms package.
Washington last month announced the package for Taiwan included Patriot missiles, Black Hawk helicopters, and communications equipment for Taiwan's F-16 fleet, but did not include the submarines and new fighter aircraft.
Analysts have said they doubt Washington would risk angering Beijing by approving the more sensitive items, but Yuan said the United States had never ruled out selling the submarines and fighters to Taiwan.
Beijing has reacted angrily to the arms deal, saying it would cut military and security contacts with the United States.
Chinese defence ministry spokesman Huang Xueping said the reprisals reflected the "severe harm" posed by the deal with Taiwan, which Beijing considers a breakaway territory.
Washington, which is required by the Taiwan Relations Act to supply Taiwan with sufficient weapons to defend itself, argues that the deal "contributes to maintaining security and stability across the Taiwan Strait".

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Taiwan cannot just rely on the US

By Paul Lin 林保華
The Sino-US relationship has undergone a change recently.

Although US President Barack Obama adopted a low-key approach during his visit to China last November, he was humiliated by Beijing at the UN Climate Change Conference in Copenhagen in December.

This has forced Washington to take a tougher stance, and it has used the spat between Google and China as a point of departure.

Both President Ma Ying-jeou’s 馬英九 transit stopovers in the US on his way to and from Latin America and the US announcement of the arms sales package to Taiwan involve what Beijing calls its core interests, and as a result, tension between China and the US has intensified.
It is obvious that the main reason the US gave Ma such a warm reception this time was Washington’s concern that his incompetence and isolation would accelerate his surrendering to China.

Washington wanted to show its support for Ma.

If China did not protest, the same kind of reception would probably be given to other presidents from Taiwan in the future.

If it did protest, then the Taiwanese would understand that China would be unlikely to respect Taiwan regardless of how Ma played up to Beijing.
As for the US arms sales package, Washington is simply granting a request submitted by the Democratic Progressive Party (DPP) during its years in power — a package that the Chinese Nationalist Party (KMT), as the then-opposition, vetoed.
However, the arms deal is a watered down version that the US discussed first with Beijing, a move that diminishes the Taiwan Relations Act.
Sadly, Ma appears so pleased with himself that it is no wonder DPP Chairwoman Tsai Ing-wen 蔡英文 is frustrated by his shallowness.
Although the US is making concessions to leave some leeway for Sino-US relations, Beijing’s series of reactions and retaliatory measures do not leave much room for maneuver.

The sign that there may be some leeway is the fact that the top leadership has maintained its silence.
The Chinese retaliation has taken four forms:

First, planned visits by military officials between China and the US have been suspended.

Second, other Sino-US military exchanges have been postponed.

Third, the next round of annual defense consultations at the deputy minister level on strategic security, multilateral arms control and non-proliferation have been postponed.

Fourth, US companies participating in the arms sale to Taiwan face sanctions.
The first two measures are relatively insignificant.

In light of Beijing’s hostility to the US, as well as the US’ military advantage, China would benefit more from such visits and exchanges.
The third measure means an end to China’s cooperation with the US on the issue of North Korea’s and Iran’s nuclear weapons development and terrorism.

But Beijing is already supporting these two countries, so Washington should not have high expectations. Perhaps it is a good thing that Beijing shows its true colors.
As to the fourth point, China purchases certain military products from US companies because it cannot produce them itself.

It would be good for both national security and world peace if the US stops selling these items to Beijing.

Ideally, other Western nations should not sell such products to China either.

Unfortunately, profit concerns make that difficult for US and other Western enterprises.

Will China retaliate economically? Chaos would ensue if it lost the US market.
For the Sino-US confrontation, whoever backs off first will be considered a “paper tiger.”

The US usually does not pursue defeated enemies, but give China an inch, and its rogue nature ensures that it will take a foot.

This has been evident in the development of Sino-US relations over half a century.

As Washington constantly backs down, Beijing has elevated the Taiwan issue to a core interest in recent years, and this can come to affect other US spheres of influence in the future.

Why doesn’t the US claim its founding ideals — freedom, democracy, human rights and rule of law — as its core interests?

The US used to offer protection to the KMT dictatorship in decades past, but today, Taiwan has transformed into a democracy. What kind of country would the US be if it sold out Taiwan to China now?
Chinese Rear Admiral Yang Yi 楊毅 said in an interview with China News Service on Jan. 6 that it was time for China to lay down the rules for the US.

Yang also recently criticized Ma.

By allowing a low-level official like Yang to insult Ma, Beijing is behaving like a bully. Does Ma still believe that “blood is thicker than water”?
Nevertheless, Taiwan should not pin all its hopes on the US.

To build a complete independent state, we have to rely on ourselves.

In the face of authoritarian China, we must all be determined to risk our lives.

To achieve this, we must consolidate domestic unity, including both the pan-green camp and the mid and lower levels of the pan-blue camp.

Otherwise, there will be no hope for Taiwan.

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Yuan change well off radar of China's exporters

By Lucy Hornby
BEIJING -- The United States is once more ratcheting up pressure on Beijing to let its currency appreciate, but for many of China's small exporters the issue is not even on their radar.
In marked contrast to the lead-up to China's 2005 revaluation, when rumors of a change swept Asian markets daily, there is very little discussion these days in China beyond economists' circles of allowing the yuan to resume its rise.
Several private export firms contacted by Reuters say they have taken no precautions against an exchange rate shift.
That could be a sign that, despite the hopes of officials in Washington, China has no immediate intention of ending its de facto peg of 6.83 yuan to the dollar, in place since mid-2008 to help exporters ride out the global financial crisis.
"It shows they haven't been prepared. If you were a cautious senior official, you'd think you'd give the export sector a heads up," says Stephen Green, head of research for Greater China at Standard Chartered Bank in Shanghai, who does not expect any movement in the yuan before the third quarter.
"We think it's still too early. If the State Council is picking up the phone and talking to exporters, they'd be hearing the story that it's still hard for them."
Despite surprisingly strong December export data, many of the private Chinese firms that supply the world with T-shirts, toys and teacups are still struggling for new orders and profits.
Green estimates that exports are still about 20 percent short of their pre-crisis peak and may not regain those levels until mid-2011.

Chinese officials say that exports need to recover before the yuan begins to rise again.
The Obama administration has said the currency is its top priority in strategic talks with China, but could be disappointed if China is not prepared to move for its own domestic reasons.
"Everyone sees the exchange rate as stable around 6.83. No one's thinking of a change. If it changed, there would be too much harm. The whole export sector would suffer," says Jimi Pang, a trader for an international steel trading house.
"Steel is OK, but in other industries like furniture or clothing the margins are too thin. They'd go from barely profitable to big losses if the yuan started appreciating."

CAUTION
Repegging the yuan has been a boon to China's exporters, who don't need to hedge currency risk when offering razor-thin margins on a contract.

They also benefited from last year's slide in the dollar, which helped keep Chinese exports competitive against those from other developing countries.
Many inexperienced exporters suffered when the yuan, after being pegged for more than a decade at 8.28 to the dollar, was revalued by 2.1 percent in 2005 and then set free to float within a tightly managed band.
Immediately after the shift in currency regime, many exporters did write provisions for exchange rate fluctuations into their contracts. But they stopped once the yuan stabilized, says industry and trade consultant Sun Jianliang.
"There's not a lot of talk about this," Sun says.
Chinese companies often get hints from ministries and state-backed industry associations when policies are about to alter.

For instance, the steel industry usually anticipates export tariff adjustments by adding a clause to contracts specifying which side will shoulder the additional cost.
Most small exporters, many of whom turn around contracts in just a few months, do not currently include a similar clause for any move in the value of the yuan.
That's particularly true in the highly competitive textile industry, where orders are rushed through to keep up with fashion and margins leave no room for error, business managers say.
"Our contracts are signed according to the spot exchange rates, and we don't commit ourselves beyond three months," says a manager surnamed Li at Cathaylink Import and Export Co, which makes Chinese crafts.
"Beyond that, it's too risky. Nobody can tell how the exchange rate will change."
A trade official from Yiwu, a manufacturing and wholesale trade hub in eastern China, says exporters are flocking to trade shows overseas with no obvious concerns about the appreciation of the yuan.
Some firms, however, are worried.
"We're thinking of developing sales into Europe because we are afraid the U.S. dollar will start moving," says Johnny Chan, whose family business sells unfinished coat hangers to Vietnam for completion and export to the United States.
"Our profit margins are already very low because we have to go through a middleman," he says. "If the dollar starts to change, small businesses like us can only raise prices, and that would remove the margin."

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Rumors of war: China PLA officers urge economic punch against U.S.

Members of the Chinese People's Liberation Army (PLA) Air Force Aviation stand at attention during a training session at the 60th National Day Parade Village in the outskirts of Beijing, September 15, 2009.

By Chris Buckley

BEIJING -- Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.
The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.
The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.
The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings.

Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.
While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.
"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences.
"Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."
Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington.
"For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said.
The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist."

MILITARY SPENDING BOOST
Chinese has blasted the United States over the planned $6.4 billion arms package for Taiwan unveiled in late January, saying it will sanction U.S. firms that sell weapons to the self-ruled island that Beijing considers a breakaway province of China.
China is likely to unveil its official military budget for 2010 next month, when the Communist Party-controlled national parliament meets for its annual session.
The PLA officers suggested that budget should mirror China's ire toward Washington.
"Clearly propose that due to the threat in the Taiwan Sea, we are increasing military spending," said Luo.
Last year, the government set the official military budget at 480.7 billion yuan ($70.4 billion), a 14.9 percent rise on the one in 2008, continuing a nearly unbroken succession of double-digit increases over more than two decades.
The fresh U.S. arms sales threatened Chinese military installations on the mainland coast facing Taiwan, and "this gives us no choice but to increase defense spending and adjust (military) deployments," said Zhu Chenghu, a major general at China's National Defence University in Beijing.
In 2005, Zhu stirred controversy by suggesting China could use nuclear weapons if the United States intervened militarily in a conflict over Taiwan.
The United States switched official recognition from Taiwan to China in 1979. But the Taiwan Relations Act, passed the same year, guarantees Taiwan a continued supply of defensive weapons.
China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October.
But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.
China has condemned previous arms sales, but has taken little action in response to them.

But Luo said the country's growing strength meant that time has passed.
"China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying.

"That is inevitable with rising national strength."

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Why China Keeps Poisoning the Milk

The latest melamine scandal exposes deep problems in the country's manufacturing culture.
By PAUL MIDLER

Are these dairy products tainted?

China and Japan are each going through their own unique quality crises.

In China, officials are hunting for 170 tons of contaminated milk powder that is still on shelves more than a year after the melamine scandal was first exposed.

And in Japan, discussions are focused on all that has gone wrong with its automotive industry after Toyota's recent recalls.

But a closer look at the two scandals shows how far apart the countries are in their approach to quality—and how much China stands to learn from Japan.

China's quality challenge has at times been compared to Japan's efforts in the 1950s and 1960s to transcend a bad reputation for manufacturing low-quality goods.

At that time Japan also suffered tragic industrial disasters, like the mercury poisoning in Minamata that left 1,000 people dead.

But Japan's leading companies have since been able to establish strong reputations for quality. Although the automotive recalls currently underway are extensive, design errors and electronic malfunctions are in a different league from China's instances of willful product manipulation, especially when that manipulation has involved artful efforts at circumventing third-party controls.
In China, operators display an incredible willingness to place public safety at risk in exchange for only the smallest gains in profit.

The dairy industry's 2008 scandal is instructive.

The trouble started when dairy farmers began adulterating milk with water, prompting dairy companies to test protein levels.

Milk suppliers next discovered they could trick laboratory equipment into believing protein concentrations were higher by adding a toxic, chemical compound—melamine.

Over time, more of the chemical was added, along with more water, and no one knows how little real milk was in the final product by the time scandal broke.

We only know the end result: six babies died, 300,000 were sickened and over 50,000 were hospitalized, causing untold grief to Chinese families.
The melamine scandal is by far the most disturbing of all the quality crises China has faced in recent years.

It was not just the amount of suffering endured, but the fact that the contamination was an open secret shared by possibly hundreds of individuals at dozens of companies.

While some people involved in the 2008 scandal might have been able to claim that they didn't know melamine could do so much harm, those caught using melamine more recently cannot possibly plead ignorance.
Making matters worse has been the government's wrongheaded response.

Beijing reacted to this year's melamine scandal with a heavy-handed cover-up.

Chinese journalists have been warned not to report details surrounding milk cases.

Parents of children sickened by melamine-tainted products who have attempted to organize themselves to protest or seek compensation risk being sent to jail for "social disruption."
China's state-directed legal system has failed to provide justice to victims.

The government meted out severe punishment to only a small number of perpetrators engaged in the distribution and production of poisoned milk—two were executed—and a far greater number were let off the hook.

China's response to past scandals has been to protect industry with a government shield, so no one should be surprised when fraud recurs in such an environment.
The melamine case illustrates the dangers of Chinese manufacturers' pathological focus on short-term profitability.

Accidents can happen in almost any production process, but melamine did not coincidentally make its way into milk.

China's obsession with thrift is a virtue often carried to a fault.

Police have noted that the current melamine scandal was made possible by the many tons of melamine that remained from the 2008 scandal. Some distributors chose to repackage the tainted powder and put it on store shelves.

They couldn't stand the thought of throwing away so much milk powder, even if it was dangerously contaminated, and even if it meant running the risk of being punished for it.
Japan's reputation for high quality in recent decades owes much to W. Edwards Deming, the father of "total quality management."

Were he around today, Deming would remind us that negative reinforcement mechanisms are no way to improve quality standards.

Quality must be seen as something positive, it must be seen as something that drives long-term growth. It must be a goal shared by all stakeholders. As it stands today, a small number of unscrupulous actors in China threaten to ruin the export opportunity for many.
When he arrived in Japan in the 1950s, one of Deming's goals was to drive fear out of manufacturing processes.

Workers ought to have an open line of communication with management. There must be an opportunity to report incidences and concerns from the factory floor.

Partly thanks to the work of Deming, Japan is today an economy that places a high value on the pursuit of quality for its own sake, and that vision has helped Japan to become an innovator in a wide variety of manufacturing sectors.
In China, workers are too afraid to report even the most obvious production errors or the most egregious cases of unethical misconduct.

Working with many factories, I have seen line operators reluctant to report anything at all. Managers ignore issues that might cause embarrassment.

Everyone involved is making a risk calculation, determining that staying silent reduces the likelihood of trouble, at least in the short run. Where workers ought to speak up, the inclination is to look the other way instead.
One of China's problems is that efforts to improve quality are focused on the finished product only.

Every time a scandal erupts, the answer has been to test more of the finished product.

This after-the-fact approach is no match for an emphasis on continual, systemic improvement. As Deming suggested, "we should work on our process, not the outcome of our processes."
China should not take Japan's recent stumble as an opportunity to gloat.

Japan's quality problems are unfortunate, but they are an aberration not representative of the manufacturing industry there.

Now more than ever, China should be looking to its easterly neighbor as an example of how its own economy can adopt a philosophy of quality and product development that is the envy of the world.

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China Toppled Germany As World Export Leader In 2009

By Geoffrey T. Smith
FRANKFURT -- Germany lost its status as the world's No. 1 exporter last year, as the sharp slowdown in the economy battered investment levels across the globe, according to Federal Statistics Office data released Tuesday.
Destatis said German exports fell 18.4% in 2009 as a whole, to a dollar equivalent of $1.121 trillion. By contrast, China's exports totaled $1.202 trillion.
Germany's status as the world's largest exporter has been a source of national pride for many years, and its export sector, dominated by high-technology engineering and automotive companies, has been the mainspring of economic growth for all of the Federal Republic's 60-year history.
However, with the global economy's center of gravity shifting eastward, China has been threatening to displace Germany at the top of the export league table for some years already. The collapse in business confidence and investment that followed the 2008 financial crisis has, at least in the short term, accelerated the trend.
"German industry has certain advantages in investment goods where it has conquered a lot of niches, but it seems that investment worldwide in the last boom was a little exaggerated, and it may not return to the previous level too quickly," said Kai Carstensen, an economist with the Munich-based ifo research institute.
However, Carstensen said German industry remains globally competitive.
More than 60% of Germany's exports go to other EU countries, many of which suffered severe recessions last year.

Exports to the EU were down 19.1% year-on-year, but exports to other countries, including the faster-growing regions of Asia and South America, barely fared any better, falling 17.1%.
The fall in exports bottomed out last spring, since which time the economy has been rebounding. Some recent data have caused concern among financial markets that the recovery may have slowed in the fourth quarter, but Destatis's data show that exports, at least, grew by 5.1% from the third quarter--only a fractional slowdown from a quarterly growth rate of 5.4% in July-September.
"The figures continue to suggest that Germany is benefiting from a healthy recovery in its export markets," said James Nixon, an economist with Societe Generale in London.
Nixon noted that imports had risen for the first time in three months, breaking a trend in which exporters had been running down their stocks of raw materials rather than accumulate fresh inventories.
In unadjusted terms, the December trade surplus fell to EUR13.5 billion in December from EUR17.2 billion in November, while the full-year trade surplus fell to EUR136.1 billion from EUR178.3 billion in 2008.
In calendar- and seasonally adjusted terms, exports rose 3.0% on the month to EUR72.3 billion, while imports rose 4.5% to EUR55.6 billion. Exports have risen in seven of the last eight months in seasonally adjusted terms.

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China Report Shows More Pollution in Waterways

By JONATHAN ANSFIELD and KEITH BRADSHER
BEIJING — China’s government on Tuesday unveiled its most detailed survey ever of the pollution plaguing the country, revealing that water pollution in 2007 was more than twice as severe as official figures that had long omitted agricultural waste.
The first-ever national pollution census, environmentalists said, represented a small step forward for China in terms of transparency.

But the results also raised serious questions over the shortcomings of China’s previous pollution data and suggested that even with limited progress in some areas, the country still had a long way to go to clean its waterways and air.
The pollution census, scheduled to be repeated in 2020, took more than two years to complete. It involved 570,000 people, and included 1.1 billion pieces of data from nearly 6 million sources of pollution, including factories, farms, homes and pollution treatment facilities, the government announced at a news conference.
But the comprehensiveness of the survey also resulted in stark discrepancies with some of the calculations and annual figures that the government has published in the past.
By far the biggest of these involved China’s total discharge of chemical oxygen demand — the main gauge of water pollution. These discharges totaled 30.3 million tons in 2007, the census showed.
In 2008, the Ministry of Environmental Protection did a much narrower calculation of these discharges, excluding agricultural effluents like fertilizers and pesticides as well as fluids leaking from landfills.

By that narrower measure, discharges came to only 13.8 million tons, which officials described at the time as a decline of more than 3 percent and a “turning point.”
Zhang Lijun, the vice minister of environmental protection, sought to play down the differences with previous data.

He noted that the census counted 13.2 million tons of agricultural effluents for the first time, and another 324,600 tons of discharges from landfills.
The census keepers had also employed updated methodologies and reached many more parts of the countryside and industrial sites than had official statistics, which helped account for the much larger figure in the census, Mr. Zhang said.

Were it not for the vastly expanded scope of the survey, the chemical oxygen demand level in 2007 would stand at only 5.3 percent higher than previously calculated, he said.
Ma Jun, director of the Institute of Public and Environmental Affairs, a nonprofit research group in Beijing, said that government planners estimated that the country’s rivers and lakes could only handle 7.4 million tons a year of chemical oxygen demand.

The scale and significance of agricultural effluent was seldom recognized in previous government planning, which focused on bringing down mainly industrial emissions to around 7 million tons a year from 13.8 million tons, said Mr. Ma, a leading expert on water pollution in China.
The new total of more than 30 million tons suggests a much bigger problem.

“We believed we needed to cut our emissions in half, but today’s data means a lot more work needs to be done,” Mr. Ma said.
The extent of agricultural waste could prove a more intractable problem than the many factories dumping effluent into China’s rivers and lakes.

“When it’s millions of farmers, it’s more difficult to bring it under control,” Mr. Ma said.
Steven Ma, senior campaigner for toxics at the Beijing office of Greenpeace, said that the government’s decision to calculate and release figures for agriculture would start to have an effect on the policy debate over water pollution in China.

“Everybody knew there was a problem with agricultural pollution in China, but now there are numbers,” he said.
Mr. Zhang said that the findings of the census were roughly in line with official expectations. “There were no major surprises,” he said.
Based on the narrower approach, officials say China is on track to meet or exceed the nation’s pollution goals: to trim levels of carbon dioxide as well as sulfur dioxide, a major air pollutant, by 10 percent between 2005 and 2010.

“For now, the census would not change how those targets are evaluated,” Mr. Zhang said.
“Current results of the census will not be linked to environmental performance.”
In terms of sulfur dioxide emissions in 2007, in fact, the census only totaled 23.2 million tons, compared with 24.7 million tons in the official data released in 2008.

But census figures for other metrics, such as soot and ammonia nitrogen, another indicator of water quality, were higher than the previous data by double-digit percentages.
The census also broke down China’s pollution toll into a considerably greater number of categories and sectors than the government does regularly.

Some Chinese environmentalists and media took particular note of the amount of poisonous discharge of heavy metals like arsenic, mercury and lead, a frequent source of protests in towns and villages over mass contamination from nearby factories.
The census would help the government take a more “targeted and focused” approach to combating pollution in coming years, Mr. Zhang said.

The government has indicated it will add emissions of ammonia nitrogen and nitrogen oxides, which are discharged from vehicles and power plants, to a list of reduction targets from 2011 to 2015.

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China's ancient sages and those dangerous blue aliens

By Damien Ma

To experience the visual spectacle that is Avatar, Chinese audiences have flocked to theaters, with some reportedly paying up to $100 for a ticket.

Yet, despite its spectacular success in China, the film has run into some trouble.

Authorities have decided to pull the 2-D version of the movie from theaters to make way for a Chinese-made film on the life of Confucius.

Why?
Part of the move is undoubtedly aimed at promoting homegrown cultural products at the expense of a formidable foreign competitor.

But that can't be the only issue, especially since many Chinese have roundly extolled the film's creative revolution.

Take a closer look, and you'll find that it's a quieter, subtler revolution that is unsettling the Chinese government.

In Avatar, many Americans see a film about exploitation, militarism, and environmental sustainability.

Many Chinese, however, see a cautionary tale about a form of social and economic injustice all too common across their country.

To many Chinese bloggers, Avatar is a fable about unscrupulous Chinese officials forcefully evicting residents in the name of local development.
"Land development with an iron fist" has become a volatile issue for Beijing.

Driven by rapid urbanization and the absence of property rights, city residents are often uprooted from their homes with little or no compensation to clear the ground for construction of luxurious new high-rises.

City enforcement officials, known as "chengguan," are often in cahoots with local developers, granting permits in exchange for kickbacks.

Flanked by public security officers, they demand that residents vacate or face removal by force. At times, the ham-fisted moves lead to tragic outcomes, as when a woman in Chengdu set herself on fire rather than be evicted.

In another incident, when an elderly man threatened to jump off the roof if he was forcibly removed, a chengguan quipped, "Go straight to the top floor. Don't choose the first or second."
Public outrage at this behavior has run rampant, fueled by the stubbornness of petty officials with unchecked power.

In recent years, individuals managed to attract national attention to the issue via iconic and viral images of the "nail house" (usually a single dilapidated shack standing amid razed ground, sticking out like a nail). The photo above tells the story.
These houses remain intact because the owners refuse to budge and chose to fight against developers.

On Chinese blogs, commentators immediately recognized the Pandoran aliens Na'vis' tree home as a nail house, and the army that descended upon it as chengguan.

Dripping with sarcasm, bloggers' reaction to Avatar as a metaphor for average Chinese woes is unmistakable: "The humans actually failed to successfully evict and demolish [the aliens]? Truly embarrassing. Why didn't they send China's chengguan there sooner?"

And "China's demolition crews must go sue old [James] Cameron, sue him for piracy/copyright infringement!"
With enormous numbers of comments like these moving across the web at lightning speed, Beijing, ever more preoccupied with public opinion on the Internet, grew nervous.

Corruption is surely involved in many of the development deals, and it doesn't take much of a leap for the public to shift blame to the central government's inability to weed out corruption as promised.

Though most of the ire is usually trained on local officials, the party leadership isn't going to take unnecessary risks.

Few things arouse more fear in official circles than the loss of message control-and Avatar is just so popular.

They decided they would need a wizened local sage to provide a little ancient wisdom.
Cue Confucius.

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China evading US duties via third nations

Chinese manufacturers are evading US duties on steel wire goods by exporting them via third countries, a US group says

WASHINGTON (AFP) — Manufacturers in China are evading millions of dollars of US anti-dumping duties on steel wire products by exporting them via third countries, an American industry group charged Monday.

The US Coalition for Enforcement of Antidumping and Countervailing Duty Orders said it had developed "compelling evidence how certain foreign manufacturers (in China) are evading duties."
In some cases, it said, they shipped the products via third countries and then "falsely designating it as the country of origin to evade the duties," a practice termed transshipment, the coalition charged in a statement.
"In other cases, an inconsequential modification is made to the product in third countries to avoid the duties (or) false labels displaying a different country of origin are placed on shipments of products actually made in China."
The coalition named the "third countries" as Vietnam, South Korea, Malaysia, Canada and Mexico.
The Hong Kong and Taiwan economies were also accused of being used by the Chinese based manufacturers to send the products to the United States in an apparent bid to evade duties.
The coalition, comprising six companies manufacturing steel wire products, said it had informed the US government and lawmakers on the problem, adding that duty evasions had cost the authorities "at least 84 million dollars annually" and also "threatened jobs."
"These schemes are blatant and purposeful," said David Libla, President of Mid Continent Nail and a coalition member.
"Not only are they clear evidence of attempts to maintain an unfair advantage in the marketplace, they're also costing taxpayers millions of dollars and reducing job opportunities in this country," he charged.
US duties slapped on Chinese steel products for alleged dumping or "unfair" subsidies have been part of increasing trade tensions between the United States and China.
In the latest high profile case in December, US authorities decided to impose countervailing duties of up to nearly 16 percent on imported steel pipes from China valued at 2.6 billion dollars in 2008.
It was the largest countervailing duty case filed against China, based on the value of trade and drew strong criticism from Beijing.

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Chinese-born engineer gets 15 years in spying for China

Dongfan 'Greg' Chung, who worked with Boeing and Rockwell International, was accused of providing information on the space shuttle and Delta IV rocket.
By Patrick J. McDonnell
A Chinese-born aerospace engineer who had access to sensitive material while working with a pair of major defense contractors in Southern California was sentenced Monday to more than 15 years in prison for acquiring secret space shuttle data and other information for China.
U.S. District Judge Cormac J. Carney in Santa Ana imposed a 188-month prison term on Dongfan "Greg" Chung, 73, a naturalized U.S. citizen who lives in Orange.
Carney declared that he could not "put a price tag" on national security and sought to send a signal to China to "stop sending your spies here," according to the U.S. attorney's office.
Chung, who worked at Boeing's Huntington Beach plant, denied being a spy and said he was gathering documents for a book, not for espionage.

His attorneys argued that much of the material was already available on the public record.
At his sentencing, Chung professed his love for the United States, even as prosecutors depicted him as a spy who would compromise U.S. national security.
"Giving China advanced rocket technology is not in the United States' national interest," said Assistant U.S. Atty. Greg Staples.

"There is a voracious appetite for U.S. technology in China."
Whether loyalty to his homeland or financial gain was Chung's motive remained unclear. The case is one of a number of prosecutions that have shed light on Chinese efforts to gain access to U.S. technology and research through espionage.
Chung was the first suspect tried with attempting to help a foreign nation under the terms of the 1996 Economic Espionage Act, passed to help prevent pilfering of sensitive economic information.

Chung chose to have the case heard by the judge rather than a jury.
Chung was convicted last year on charges of economic espionage and acting as an agent for more than three decades while employed by Rockwell International and Boeing Co.
When Chung was convicted, Carney said the case revealed Chung's "secret life" as a "spy" for China.

The case against him arose from an investigation into another engineer, Chi Mak, who worked in the United States and obtained sensitive military information for China.

Mak and several relatives were convicted of providing defense information to China, the U.S. attorney's office said.

Carney sentenced Mak to more than 24 years in prison in 2008.
Federal authorities said Chung stole restricted technology and trade secrets, including data related to the space shuttle and the Delta IV rocket.
"This case demonstrates our resolve to protect the secrets that help protect the United States, as well as the important technology advancements developed by scientists working for companies that provide crucial support to our national security programs," acting U.S. Atty. George S. Cardona said Monday in a statement.
Chung held a "secret" security clearance when he worked at Rockwell and Boeing on the space shuttle program, authorities said.

He retired in 2002 but the next year returned to Boeing as a contractor, a position he held until September 2006, the U.S. attorney's office said.
Between 1985 and 2003, Chung made trips to China to deliver lectures on technology involving the space shuttle and other programs, the government said.

During those trips, Chung met with Chinese government officials, including military agents, U.S. authorities said.

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China sabre rattling risks starting trade war

By Geoff Dyer
It is almost two months now since the Copenhagen climate change conference but one incident from the meeting is still causing a buzz in Beijing.

It was the moment in one of the tense final sessions when, according to witness accounts, a Chinese official started to jab his finger at Barack Obama, the US president.
More than anything else, that incident has symbolised what many see as a newly aggressive Chinese approach to diplomacy.

As a European diplomat said: “If one of the deputy heads of the planning ministry can behave like that to the American president, how are they going to treat the rest of us?”
Almost every day there appears to be a new source of irritation between China and the US about Tibet or Taiwan or the Chinese currency.

That is on top of Google, Iran, tyres and chicken feet. And it is not just the Americans: similar stories are being told by Indians, Russians and assorted Europeans.
There is a ritualistic quality to some of these disputes, especially Taiwan and Tibet.

But China seems to be raising the stakes threatening sanctions on US companies selling arms to Taiwan, including Boeing.

In lots of ways, China’s pushier approach is understandable.

Everyone has been telling the Chinese that they are the coming superpower. It should be no surprise, then, that China wishes to turn that position into real influence over “core” issues.
“We have to show the US that today’s China is very different from the China of eight years ago,” a Chinese businessman said last week, applauding the bolder stance on Taiwan.
Talking tough with the US is popular at home, where nationalist sentiments are often only just beneath the surface.

The idea of imposing sanctions on US companies over Taiwan arms sales was touted on the internet and in some newspapers before the Obama administration approved the $6.4bn package.

One poll last year found that 50 per cent of Chinese respondents view the US as a threat to China’s security.
Chinese frustrations with the US include some surprises.

China’s foreign currency reserves of US dollars are usually seen as a strength, but many in China complain that the government has been talked into buying assets whose value, they think, will inevitably collapse.

A headline in Sunday’s China Business News reads: “The US frequently uses cunning tricks to force China to buy its bonds”.
Some of the rhetoric might also reflect growing internal political battles, over the potential for inflation, for instance, or the leadership succession.
But even if such talk is good domestic politics, China is playing with fire if it takes a genuinely harder line with the US. Beijing has a lot to lose if these disputes become more than just a war of words.
The most obvious risk is that Chinese sanctions on US arms companies could help provoke a trade war.

There is a cupboard full of bills in the US Congress threatening tariffs on Chinese goods if Beijing does not let its currency appreciate, which are just waiting to be dusted off – especially if unemployment remains high.
More broadly, Beijing’s more abrasive approach risks undermining a decade or so of highly successful diplomacy that has helped sustain China’s booming economy.

Beijing has managed to neutralise a lot of potential tensions about the “China threat” by settling border disputes, increasing its participation in international organisations and distributing aid.

In Africa, people talk about “stadium diplomacy” because of all the Chinese-built football pitches. The cornerstone of this strategy was making sure relations with the US did not become too fraught.
But if Beijing follows through on some of its sabre-rattling, it could lead to a cascade of tactical adjustments on how to deal with China.

In its first year, the Obama administration emphasised engaging China but it could lean more towards containment.

Japan, Australia and India, for instance, might be pulled in a similar direction and neighbours in central Asia and south-east Asia could become more wary of being dominated by China.

The result would be to make it more difficult for China to do energy-supply deals and open new markets for its products.
China is too powerful to keep following statesman Deng Xiaoping’s advice to “adopt a low profile” and having a louder international voice will inevitably ruffle some feathers.

But as China’s leaders ponder how to exert more influence abroad, they need to ask: “Is it really worth tearing up a winning strategy?”

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U.S.-China growing pains

By Fareed Zakaria
Despite the recent squall in U.S.-Chinese relations, both countries have powerful reasons to cooperate with one another. These have grown over the past two decades, a progression that both countries seem to recognize.
China's reaction to the Obama administration's decision to sell arms to Taiwan has been furious but has mostly involved symbolic gestures.

Compare this with 1992, when the first Bush administration sent Taipei weapons and soon afterward Beijing reportedly sold missiles to Pakistan and signed a nuclear-cooperation agreement with Iran.
This time China's strongest threat -- to "retaliate" against U.S. companies involved in arms sales -- is likely to be targeted at those firms, like Raytheon, that have been longtime suppliers to Taipei and as a consequence have written off the Chinese market.

Beijing will likely not punish the three American giants involved in the deal: Boeing, General Electric and United Technologies.
Similarly, Beijing's indignant reaction to President Obama's decision to meet with the Dalai Lama is posturing.

The Chinese government could not have been surprised. Every U.S. president in recent memory has met with the Dalai Lama, and Obama told China's President Hu Jintao directly that he was going to meet with the Tibetan leader.
On Washington's part, despite Hillary Clinton's criticisms of China over Internet freedom and President Obama's declaration that he will get tough with Beijing over its currency, it is unlikely that this strong rhetoric will be matched with equivalent actions.

The United States has few arrows in its quiver, and the administration knows well that public admonition of Beijing rarely works.

In fact, both countries might well be playing the same game: feigning public outrage to satisfy domestic audiences.
But there are two trends that could take a manageable situation and make it something more worrisome.

The first is a growing perception in China that it is no longer as reliant on the West, and in particular the United States, as it was.

In the 1980s, Deng Xiaoping brought China out of the cold by embracing America and opening up to foreign investment.

This was different from the somewhat predatory, export-driven strategy of Japan and South Korea. But, the China scholar Minxin Pei argues, this was not an ideological conversion to free-market capitalism.

Ravaged by the Cultural Revolution, Beijing desperately needed Western managerial know-how, technology and capital to develop its economy.
Today, China is awash in capital; it has many top-notch local companies; and this year for the first time, the primary engine of Chinese growth has been its domestic market, not exports. As China expands, that internal market will probably become its dominant concern.
A similar reality applies in foreign policy.

Mao restored relations with the United States in some measure to buy himself an ally against the Soviet Union.

China has needed the United States as a political ally ever since; Jiang Zemin's fuzzy embrace of the United States was part of a strategy whose goal was concrete: membership in the World Trade Organization.

Today, China commands respect across the globe. It is confident, even cocky, in bilateral and multilateral fora.
None of this is nefarious.

But Beijing's newfound arrogance is not joined with a broader vision. The country does not appear ready to play a global role.

In international summits Beijing has been largely focused on pursuing its interests in a fairly narrow sense.

At the April Group of 20 summit, for example, China participated actively on only one issue: to make sure that Hong Kong was kept off the list of offshore tax havens being investigated. Perhaps it's too soon to expect China to play a broader role, taking on responsibilities for global order and making concessions for broader interests.

But given China's global impact, this is likely to produce paralysis on several fronts.

American isolationism during the 1920s was understandable, too, but it had unhappy effects on the world.
The second factor that could exacerbate Sino-U.S. tensions is America's economic fate.

There's great fear that the U.S. economy is in deep structural decline.

If American politicians cannot muster the courage to make the U.S. economy competitive again and Beijing perceives that it is dealing with a superpower in inexorable decline, relations between China and America will change fundamentally.

Of course, if that happens, America will have plenty else to worry about as well.

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China still has tonnes of tainted milk

A mother holds a portrait of her deceased grand-daughter in Beijing

BEIJING (AFP) — Authorities in China are hunting for nearly 100 tonnes of melamine-laced milk powder left over from 2008, when six babies died from consuming the toxic substance, state media said Monday.
The discovery came as authorities pursue a crackdown on dairy products that should have been destroyed after the melamine scandal but have been illegally resold -- reviving concerns about food safety and inspection standards.
Two dairy firms in the northern Ningxia region were closed down Saturday for selling tainted milk powder, and candies made with contaminated powder were found in the northeastern province of Jilin, the China Daily said.
Police in Ningxia found that a company outside the region gave one of the dairy firms around 170 tonnes of tainted milk powder left over from the 2008 scandal as debt payment in July last year, the report said.
The firm involved -- the Ningxia Tiantian Dairy company -- then repackaged nearly all of the powder and sold it to five factories in provinces and regions in northern and southern China, the report added.
Only 72 tonnes of powder have been recovered and authorities are tracking down the rest.
It was unclear whether the dairy firm knew the product was contaminated.
"As a small company, the Tiantian dairy company doesn't have a machine to test melamine," Zhao Shunming, secretary general of the Ningxia Dairy Industry Association, was quoted as saying.
"Such a machine can cost up to one million yuan (about 145,000 dollars)... But their repacking of the products is illegal," he added.
At least six babies died and another 300,000 fell ill in 2008 after consuming dairy products with melamine, which was added to give the appearance of a higher protein content.
In a sign of growing official concern, the government has dispatched inspectors to 16 provinces to check if melamine-tainted products have slipped on to the market, state media have reported.
Police have arrested at least three people as part of the new crackdown.
"Flaws in the previous system led to the current chaos," Zhao was quoted as saying.
"What if companies with tainted milk also hold back their stocks for this round of checkups and re-use them later, just like what's happening now?"

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Obama-Dalai Lama meeting only option

By FOSTER KLUG
A Tibet Freedom Movement activist makes a portrait of U.S. President Barack Obama with his blood in Shimla, India as he thanks him for agreeing to meet the Dalai Lama, Thursday, Feb. 4, 2010. China on Wednesday again urged Obama not to hold a planned meeting with Dalai Lama, saying it would further hurt already strained bilateral relations. According to Chhime R. Chhoekyapa, the Dalai Lama's secretary, the Dalai Lama will be in Washington on Feb 17-18.

WASHINGTON -- Just a week after enraging China with an arms sale package for rival Taiwan, President Barack Obama risks more damage to this crucial relationship by agreeing to meet with the Dalai Lama in two weeks.
The truth is, he has little choice.
Obama already postponed the visit once, angering U.S. lawmakers and human rights groups. As Obama struggles to regain his footing after political setbacks, the last thing he needs is to open himself up to fresh criticism that he is kowtowing to China.
So on Thursday, his administration confirmed what had long been expected: Obama will meet with the Dalai Lama when the Tibetan monk visits Washington on Feb. 17-18.
China immediately urged the United States to scrap the meeting to avoid hurting bilateral ties. China accuses the Dalai Lama of pushing for Tibetan independence, which the Dalai Lama denies, and believes that shunning the exiled Tibetan monk should be a basic principle of international relations for countries that want to deal with China.
In reality, China could not have been surprised by Thursday's announcement.
Every U.S. president for the last two decades has met with the Dalai Lama, and those visits are considered powerful signs of the American commitment to human rights. Obama also told Chinese leaders last year that he would meet with the monk.
The Dalai Lama enjoys widespread support in the United States. High-profile celebrities call him friend; college students flock to his frequent campus lectures; powerful U.S. lawmakers would call another postponed meeting a betrayal.
Obama is focused on domestic matters as he deals with a struggling economy and a series of Republican political victories. He does not want to add an outcry over his snubbing the Dalai Lama again.
For the last year, Obama has faced criticism that his administration is more eager to win Chinese cooperation on nuclear standoffs with Iran and North Korea and climate change and economic crises than to hold Beijing accountable for what activists call an abysmal rights record.
Much of that criticism stems from Secretary of State Hillary Rodham Clinton's comments during a trip to China a year ago that human rights should not interfere with improving U.S.-China ties. Activists also said Obama failed to make human rights a big enough priority during his China trip in November.
Just a month before that high-profile trip, Obama faced anger for putting off a White House visit when the Dalai Lama came to Washington.
Still, he has little to show from China for his outreach.

As Beijing refuses to give ground on many key issues, the Obama administration has shown an increasing willingness to get tough.
In September, Obama slapped tariffs on a flood of Chinese tires entering the United States. Although he antagonized China and heard complaints about U.S. protectionism, he was praised by powerful union allies, who blame Chinese tire imports for the loss of thousands of jobs.
In recent weeks, the administration announced the $6.4 billion arms sale to Taiwan, the self-governing democratic island Beijing claims as its own; Clinton urged Beijing to investigate hacking attacks that led to Google's threat to pull out of China; and Obama vowed to get tough with China on a currency dispute.
Now, China's anger will be focused on the Dalai Lama's visit.
China maintains that Tibet has been part of its territory for centuries, but many Tibetans say the region was functionally independent for much of its history.
Tibet and Taiwan are China's most sensitive issues, and Obama risks Chinese retaliation by stoking anger in Beijing.
Already, China has threatened to punish U.S. companies involved in any arms sales to Taiwan and has suspended military exchanges with Washington.
Many will be watching whether the Dalai Lama meeting wrecks a possible visit by Chinese President Hu Jintao to Washington in April.

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To resolve its 'core issue' Beijing needs to take heed of Dalai Lama

By ROGER PULVERS
"From the perspective of Chinese Communist Party ideology, China was a victim of Western imperialism from the mid-19th century to the mid-20th century, and, as a result, the Chinese tend to remember the humiliations they suffered while rarely considering their own nation to be an imperial power."
In this way, in "The Struggle for Tibet" (Verso, 2009), author and scholar Wang Lixiong sets out his theses about the past, present and possible future of China and Tibet.

Coauthored with historian Tsering Shakya, this superb collection of essays written between 2002 and 2009 presents arguments that elucidate not only the current state of Tibetan-Chinese relations, but also issues that may challenge the very fundaments of the power base of the Chinese Communist Party (CCP).
Chinese communist policies toward Tibet, and political actions there, have been, to a large extent, a mirror image of those pursued by Josef Stalin in the Soviet Union from the early 1930s until his death in 1953.

The Soviet Union that Stalin ruled over as a dictator was a multiethnic and multicultural conglomeration of nationalities directed from Moscow under the universal banner of state communism.
Stalin, not an ethnic Russian but a Georgian himself, purged non-Russian leaders in the various republics of the Soviet Union, but allowed for local color to flourish in them in the form of costumed dances, quaint ethnic customs and non-political magazines in the various native languages.

All of these tokens were thrown to the peoples of the ethnic republics and prominently exhibited before enthusiastic and well-meaning foreign visitors.

Wasn't this proof that the Soviet Union was freely tolerant of all minorities?
The CCP government has gone to great pains in schools to inculcate into its people the notion that Tibet has always been a part of China proper.

However, in his excellent introduction to "The Struggle for Tibet," historian Robert Barnett puts this into perspective.
"Since at least the 1970s," he writes, "Beijing has dated this incorporation to the 13th century, when Tibet became a part of the Mongol empire... From a Tibetan perspective, Tibet's relations had been with the Mongol or the Manchu emperors, not with China as a state or with their successor regimes, and it had therefore become fully independent in 1913 (after the last Manchu Emperor renounced the throne in 1912)."
The CCP government has by no means been inflexible in its approaches to Tibet. In the early 1980s, Beijing resumed contacts with the exiles who, together with the Dalai Lama, had fled Tibet after a rebellion in 1959.
As Wang points out, that new open-door policy can be traced directly to Deng Xiaoping (China's de facto leader from 1978-97), who stated in December 1978, less than a week after coming to power, that he was willing to have a dialogue with the Dalai Lama himself.
In March 1980, Hu Yaobang, who was to be made CCP chairman the next year, announced six proposals that were highly beneficial to Tibet.

These led to a rapprochement between the central government and the people of Tibet that did not come to an end until March 1989, when martial law was imposed and a crackdown began in earnest.
Among Hu's proposals were those permitting autonomous rule, the replacement of ideology-based laws with practical ones and the substitution of Han Chinese cadres with Tibetan ones.

In short, the Stalinist model of central control of an ethnic "republic" propped up on coercive sticks and fed with token carrots was to be dismantled.
Since the 1980s the Chinese government has poured huge amounts of money into Tibet to demonstrate to Tibetans and a world keenly conscious of events in the region that the Chinese people had Tibet's best interests at heart.

Han Chinese flocked to the "new" Tibet.

But just as Russians who migrated to the peripheral Soviet republics, living there in privilege and relative splendor, saw themselves as superior to the locals, many Chinese who moved to Tibet ostensibly to help the native populace develop, considered themselves more civilized than Tibetans.
The Chinese soon learned that development does not necessarily lead to stability.

By viewing Tibetans with disdain, Chinese people engendered wrath.

By treating Tibetan Buddhism, the essence of Tibetan culture, with hostility, the Chinese authorities succeeded only in creating the very circumstances of rebellion that they were trying to avoid.
"The level of police surveillance and control is far higher (in Tibet) than in other areas of China," writes Tsering Shakya.

The protests and riots that broke out in March 2008 in Tibet and neighboring provinces historically home to large numbers of Tibetans engaged not only the monks — the group that had spearheaded the demonstrations of 1959 — but people from all layers of Tibetan society.
The reaction of the Chinese government to the widespread unrest in 2008 was decisive and signaled a pattern devised for use in any ethnic disturbance.

That of course involved bringing out the police in force.

However, the local people were allowed to riot and perpetrate violence, particularly toward Han Chinese people, so fueling as much publicity as possible for events Beijing labeled "anti-Chinese" in nature.
This permitted Beijing, in the case of the 2008 unrest in Tibet, to blame the Dalai Lama and "his clique."

It also encouraged people throughout China to rush to their computers and spew forth a tsunami of nationalistic fervor to drown out any suggestion that what was happening in Tibet and surrounding provinces was anything other than a foreign plot to destabilize the nation.
Shakya concludes that it is the anti-separatists in the Chinese bureaucracy who have created the situation of ethnic confrontation we see today.
He writes, "In the name of anti-separatism and counter-terrorism, China's minority regions will inevitably be governed under authoritarian police states."

And he adds, "The events that occurred in Tibet in spring 2008 are likely to interrupt the process of liberalization in the Chinese state."
Tibet is of massive strategic importance to China, located, as it is, in the nuclear-weapons triangle formed by China, India and Pakistan.

Indeed, Barnett calls Tibet "a core issue... The Chinese state cannot resolve its key contradictions and become sustainable until it resolves its problems in Tibet."
The Soviet national anthem began with the words, "The indestructible union of free republics." Sung in a mere four words in Russian, this phrase screamed out a paradox: How could the union be indestructible if the republics were free to leave it?

Less than 40 years after the death of Stalin, the Soviet Union broke into pieces like a jigsaw puzzle shaken to the ground.
No one should wish violence or instability on China; and what degree of autonomous freedom or independence Tibet is to have is between the Tibetan and the Chinese people.
But after reading "The Struggle for Tibet," I was convinced that the only way to come to terms with history is for the political leaders of China to sit down at the table with the spiritual leader of Tibet, the Dalai Lama.
As Shakya wrote in March 2009, "Until the underlying issues of perception and language are resolved, until China listens to local voices, and local memories are understood, it is unlikely that any progress will occur."

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Beijing plays hardball with Washington

By Bill Schiller
Chinese President Hu Jintao and U.S. President Barack Obama held talks in Beijing on Nov. 17, 2009.

BEIJING–The first clear sign of China's new self-regard went on display at the unlikeliest of venues last fall: the Frankfurt Book Fair.
A Chinese delegation had bullied fair organizers into revoking invitations to a pre-fair event to two dissident Chinese writers.
Then, the organizers had a re-think and announced they'd allow the dissidents after all.
At the announcement, the official Chinese delegation rose and walked out of the hall.
"We didn't come here for a lesson in democracy," former Chinese ambassador Mei Zhaorong fumed to reporters. "Those times are over."
Few outside Germany took note of China's tough, new tone then.
Now many are.
After weeks of rancorous squabbling between Washington and Beijing over a range of issues, one thing is clear: China is emerging on the international stage as a stronger, tougher, more assertive nation than at any time in recent memory.
U.S. President Barack Obama knows it well.
His government's public support for Google in a bitter censorship wrangle; America's intent to ship billions of dollars worth of weapons to Taiwan; and a planned U.S. presidential meeting with the Dalai Lama, have all been met by Beijing with a barrage of threats.
Joint military meetings between the U.S. and China have been cancelled. Sanctions against American companies have been promised, and hints have emerged that some official Chinese visits might be scrapped.
Obama had been hoping Chinese President Hu Jintao would attend an international meeting on disarmament in Washington in April. Hu has yet to commit.
Everything seemed so promising in November when Obama swept into China on a three-day visit and left Beijing with a joint agreement committing both countries to working together.
The U.S. media panned the visit, saying the Chinese too tightly controlled Obama. But "respected" U.S. academics praised it for building a detailed plan for continued co-operation.

Now, suddenly, Sino-American relations are headed south.

Perhaps deep south.
Last Saturday, new U.S. ambassador to Beijing, Jon Huntsman, was summoned to China's Ministry of Foreign Affairs and told there would be a price to pay if Washington delivered weapons to Taiwan, which China regards as part of its sovereign territory.
It wasn't Huntsman's first time to be hauled in – and he has been in the country only five months.
Of course, rising rhetoric has always been a part of the U.S.-China relationship, says James McGregor, a Beijing-based business consultant and ex-chair of the American Chamber of Commerce here.
But this is different, he says. The game changer has been the financial crisis. While the Western world was left shaken, China emerged more powerful.
"The world has been turned upside down," says McGregor. "The Chinese are now feeling energized and proud."
And it happened so fast.
Western countries were preparing for a more assertive China to emerge over the next decade. No one thought it would happen virtually overnight.
"The balance of forces is changing far faster than anyone predicted," says Danish political scientist and long-time China watcher, Clemens Stubbe Ostergaard.
"Before the (Beijing) Olympics everyone believed it was going to be gradual. People would have time to adapt. But over the past 18 months things have just developed so rapidly."
China's ability to survive and thrive through the financial crisis left many Chinese feeling their system is just better, says Stubbe Ostergaard.
While many Western countries experienced negative growth last year, China registered a jaw-dropping 8.7 per cent increase. Though much of it was achieved by a generous stimulus package, it maintained jobs and, in the end, helped fuel feelings of superiority.
"There's more conflict now than before (with the U.S.) because China is gaining more influence in the international arena," says Yao Shujie, an economist who heads the School of Contemporary Chinese Studies at the University of Nottingham.

"The Americans want to say, `Hang on! We're still No. 1.'"
But the world's axis continues to tilt in China's favour, Yao explains.
Economic power is inexorably shifting away from the U.S. and towards China, he says, and coming with it is power and influence.
"China is stronger now. It's more influential," says Yao. "And the Chinese banking sector looks better than the Western banking system."
The Chinese are happy to co-operate with the U.S., he stresses. But he worries that Obama is making serious missteps.
"Saving face matters to the Chinese," he says. "But if you slap the Chinese face once, twice, three times, four times – that's too much."
That language underlines the stark differences in the two nations' perception of issues such as Taiwan, Tibet and the Dalai Lama.
For the Chinese, the Dalai Lama is a "splittist'' bent on separating Tibet from China. For China – which moved troops into Tibet in 1950 – it's an "internal matter."
For the Obama administration, the Dalai Lama is a spiritual leader seeking a measure of autonomy for Tibet within China.
If Obama goes ahead with his meeting with the Dalai Lama, China's reaction is likely to be "very strong," says Yao.
"China will probably call off a number of high-profile visits."
Says McGregor, "China has risen to a different place... It's clearly an unsettling stage in U.S.-China relations, a new paradigm. No one is really sure how it's going to shake out."

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China’s hawks demand cold war on the US

Washington believes President Obama was made to appear weak

By Michael Sheridan
MORE than half of Chinese people questioned in a poll believe China and America are heading for a new “cold war”.
The finding came after battles over Taiwan, Tibet, trade, climate change, internet freedom and human rights which have poisoned relations in the three months since President Barack Obama made a fruitless visit to Beijing.
According to diplomatic sources, a rancorous postmortem examination is under way inside the US government, led by officials who think the president was badly advised and was made to appear weak.
In China’s eyes, the American response — which includes a pledge by Obama to get tougher on trade — is a reaction against its rising power.
Now almost 55% of those questioned for Global Times, a state-run newspaper, agree that “a cold war will break out between the US and China”.
An independent survey of Chinese-language media for The Sunday Times has found army and navy officers predicting a military showdown and political leaders calling for China to sell more arms to America’s foes.

The trigger for their fury was Obama’s decision to sell $6.4 billion (£4 billion) worth of weapons to Taiwan, the thriving democratic island that has ruled itself since 1949.
“We should retaliate with an eye for an eye and sell arms to Iran, North Korea, Syria, Cuba and Venezuela,” declared Liu Menxiong, a member of the Chinese people’s political consultative conference.
He added: “We have nothing to be afraid of. The North Koreans have stood up to America and has anything happened to them? No. Iran stands up to America and does disaster befall it? No.”
Officially, China has reacted by threatening sanctions against American companies selling arms to Taiwan and cancelling military visits.
But Chinese analysts think the leadership, riding a wave of patriotism as the year of the tiger dawns, may go further.
“This time China must punish the US,” said Major-General Yang Yi, a naval officer.

“We must make them hurt.”

A major-general in the People’s Liberation Army (PLA), Luo Yuan, told a television audience that more missiles would be deployed against Taiwan.

And a PLA strategist, Colonel Meng Xianging, said China would “qualitatively upgrade” its military over the next 10 years to force a showdown “when we’re strong enough for a hand-to-hand fight with the US”.
Chinese indignation was compounded when the White House said Obama would meet the Dalai Lama, the exiled spiritual leader of Tibet, in the next few weeks.
“When someone spits on you, you have to get back,” said Huang Xiangyang, a commentator in the China Daily newspaper, usually seen as a showcase for moderate opinion.
An internal publication at the elite Qinghua University last week predicted the strains would get worse because “core interests” were at risk.

It said battles over exports, technology transfer, copyright piracy and the value of China’s currency, the yuan, would be fierce.
As a crescendo of strident nationalistic rhetoric swirls through the Chinese media and blogosphere, American officials seem baffled by what has gone wrong and how fast it has happened.
During Obama’s visit, the US ambassador to China, Jon Huntsman, claimed relations were “really at an all-time high in terms of the bilateral atmosphere... a cruising altitude that is higher than any other time in recent memory” (sic), according to an official transcript.
The ambassador must have been the only person at his embassy to think so, said a diplomat close to the talks.
“The truth was that the atmosphere was cold and intransigent when the president went to Beijing yet his China team went on pretending that everything was fine,” the diplomat said.
In reality, Chinese officials argued over every item of protocol, rigged a town hall meeting with a pre-selected audience, censored the only interview Obama gave to a Chinese newspaper and forbade the Americans to use their own helicopters to fly him to the Great Wall.
President Hu Jintao refused to give an inch on Obama’s plea to raise the value of the Chinese currency, while his vague promises of co-operation on climate change led the Americans to blunder into a fiasco at the Copenhagen summit three weeks later.
Diplomats say they have been told that there was “frigid” personal chemistry between Obama and the Chinese president, with none of the superficial friendship struck up by previous leaders of the two nations.
Yet after their meeting Obama’s China adviser, Jeff Bader, said: “It’s been highly successful in setting out and accomplishing the objectives we set ourselves.”
Then came Copenhagen, where Obama virtually had to force his way with his bodyguards into a conference room where the urbane Chinese premier, Wen Jiabao, was trying to strike a deal behind his back.
The Americans were also livid at what they saw as deliberate Chinese attempts to humiliate the president by sending lower-level officials to deal with him.
“They thought Obama was weak and they were testing him,” said a European diplomat based in China.
In Beijing, some diplomats even claim to detect a condescending racism towards Obama, noting that Yang Jiechi, the foreign minister, prides himself on knowing the Bush dynasty and others among America’s traditional white, Anglo-Saxon, Protestant elite.
But there are a few voices urging caution on Chinese public opinion.

“China will look unreal if it behaves aggressively and competes for global leadership,” wrote Wang Yusheng, a retired diplomat, in the China Daily.
He warned that China was not as rich or as powerful as America or Japan and therefore such a move could be “hazardous”.
It is not clear whether anyone in Beijing is listening.

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Facing up to China

The Economist

Making room for a new superpower should not be confused with giving way to it
FOR six decades now, Taiwan has been where the simmering distrust between China and America most risks boiling over.

In 1986 Deng Xiaoping called it the “one obstacle in Sino-US relations”.

So there was something almost ritualistic about the Chinese government’s protestations this week that it was shocked, shocked and angered by America’s decision to sell Taiwan $6 billion-worth of weaponry.

Under the Taiwan Relations Act, passed in 1979, all American administrations must help arm Taiwan so that it can defend itself.

And China, which has never renounced what it says is its right to “reunify” Taiwan by force, feels just as bound to protest when arms deals go through. After a squall briefly roils the waters, relations revert to their usual choppy but unthreatening passage.
With luck, this will happen again. But the squalls are increasing in number, and the world’s most important bilateral relationship is getting stormy. If it goes wrong, historians will no doubt heap much of the blame on China’s aggression; but they will also measure Barack Obama on this issue, perhaps more than any other.

The China ascendancy
As if to highlight the underlying dangers, China has this time gone further than the usual blood-and-thunder warnings and suspension of military contacts.

It has threatened sanctions against American firms and the withdrawal of co-operation on international issues.

Those threats, if carried out, would damage China’s interests seriously, so its use of them suggests that it hopes it can persuade Mr Obama to buckle—if not on this sale then perhaps on Taiwan’s mooted future purchases of advanced jet-fighters.

But the unusual ferocity of the Chinese regime’s response also points to three dangerous undercurrents.
The first is the failure of China’s Taiwan policy.

Under the presidency of Ma Ying-jeou, Taiwan’s relations with the mainland have been better than ever before. Travel, trade and tourist links have strengthened. A free-trade agreement is under negotiation.

Yet there is little sign of progress towards China’s main goal of “peaceful reunification”. Most Taiwanese want both economic co-operation and de facto independence.

A similar failure haunts policy in Tibet, where our correspondent, on a rarely permitted trip to the region, found the attempt to buy Tibetans’ loyalty through the fruits of development apparently futile.

As talks between China and the emissaries of the Dalai Lama ended in the usual stalemate this week, China warned Mr Obama against his planned meeting with Tibet’s exiled spiritual leader.
Again, nothing new in that.

There is, however, a new self-confidence these days in China’s familiar harangues about anything it deems sovereign.

That is the second trend: China, after its successful passage through the financial crisis of late 2008, is more assertive and less tolerant of being thwarted—and not just over its “internal affairs”.

From its perceived position of growing economic strength, China has been throwing its weight around.

It played a central and largely unhelpful role at the climate-change talks in Copenhagen; it looks as if it will wreck a big-power consensus over Iran’s nuclear programme; it has picked fights in territorial disputes with India, Japan and Vietnam.

At gatherings of all sorts, Chinese officials now want to have their say, and expect to be heeded.
This suggests a dangerous third trend.

As China has opened its economy since 1978, it has been frantically engaged in catching up with the rich West. That has led to the idea, even among many Chinese, that it would gradually become more “Western”.

The slump in the West, however, has undermined that assumption.

Many Chinese now feel they have little to learn from the rich world. On the contrary, a “Beijing consensus” has been gaining ground, extolling the virtues of decisive authoritarianism over shilly-shallying democratic debate.

In the margins of international conferences such as the recent Davos forum, even American officials mutter despairingly about their own “dysfunctional” political system.

A swing not a seesaw
Two dangers arise from this loss of Western self-confidence.

One is of trying to placate China. The delay in Mr Obama’s meeting with the Dalai Lama in order to smooth his visit to China in November gave too much ground, as well as turning an issue of principle into a bargaining chip.

America needs to stand firmer.

Beefing up the deterrent capacity of Taiwan, which China continues to threaten with hundreds of missiles, is in the interests of peace.

Mr Obama should therefore proceed with the arms sales and European governments should back him.

If American companies, such as Boeing, lose Chinese custom for political reasons, European firms should not be allowed to supplant them.
On the other hand the West should not be panicked into unnecessary confrontation.

Rather than ganging up on China in an effort to “contain” it, the West would do better to get China to take up its share of the burden of global governance.

Too often China wants the power due a global giant while shrugging off the responsibilities, saying that it is still a poor country.

It must be encouraged to play its part—for instance, on climate change, on Iran and by allowing its currency to appreciate.

As the world’s largest exporter, China’s own self-interest lies in a harmonious world order and robust trading system.
It is in the economic field that perhaps the biggest danger lies.

Already the Obama administration has shown itself too ready to resort to trade sanctions against China.

If China now does the same using a political pretext, while the cheapness of its currency keeps its trade surplus large, it is easy to imagine a clamour in Congress for retaliation met by a further Chinese nationalist backlash.

That is why the administration and China’s government need to work together to pre-empt trouble.
Some see confrontation as inevitable when a rising power elbows its way to the top table.

But America and China are not just rivals for global influence, they are also mutually dependent economies with everything to gain from co-operation.

Nobody will prosper if disagreements become conflicts.

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Chicken parts join menu of U.S.-China disputes

* China to slap duties of 43.1-105.4 pct on chicken parts
* Rising trade and currency tensions
* U.S. poultry sector says disappointed
By Lucy Hornby and Roberta Rampton
WASHINGTON/BEIJING -- China said on Friday it will slap heavy anti-dumping duties on U.S. chicken parts, a move likely to aggravate trade ties between two of the world's most important economies at a time of strained political relations.
The Chinese Commerce Ministry's initial investigation showed that U.S. companies had dumped chicken products into the Chinese market, according to the ministry's website (www.mofcom.gov.cn).
The preliminary tariffs were announced a day after Beijing requested a World Trade Organization ruling on European Union duties on shoes made in China in the latest case demonstrating China's use of the WTO to keep markets open to the exports on which it depends.
The United States Trade Representative was muted in its response, saying it would consult with U.S. producers as it analyzed China's move.
"USTR is following the investigation closely, and we will want to ensure that MOFCOM follows the applicable WTO rules," spokeswoman Carol Guthrie said in a statement.
But the USA Poultry & Egg Export Council said the American poultry industry was "deeply disappointed" by China's move.
The tariff decision disregarded facts provided by producers and "will virtually eliminate U.S. chicken exports to China for the foreseeable future," the lobby group said in a statement.
"We're hopeful that if Chinese officials study our submissions in greater detail, they will conclude that U.S. chicken products were, in fact, not dumped," said USAPEEC President Jim Sumner.
The United States and China are embroiled in a series of economic and political disputes, ranging from the value of the Chinese currency to Internet control, Taiwan and Tibet.
President Barack Obama this week vowed to get tough in dealing with complaints that U.S. exports are disadvantaged by China's artificially cheap yuan, drawing a sharp rebuke from China that its currency was set at "reasonable" levels.

CHINESE PRODUCERS CRY FOUL
The various disputes following placid ties during Obama's first year in office have alarmed the business community.
Chicken feet and wing tips, virtually worthless in the U.S. market, are a delicacy in southern China. Many U.S. poultry producers count on the Chinese market to round out their profits.
Chicken feet and wing tips fetch about 2 U.S. cents per pound in the United States, but land in China at about 42 U.S. cents -- a figure that Chinese rivals say represents the cost of the freight only.
"Chicken feet and wings are not wanted in the U.S. so they sell them to China, they dump them below cost," said Wang Xiulin, president of the Chinese Poultry Association.
"For over a decade, the U.S. has sent big volumes of chicken to the Chinese market, hurting producers here. Last year, the Chinese poultry industry was really hurting so we asked for this investigation."
Tyson Foods, an active investor and lobbyist in China, got the lowest duty of 43.1 percent. Pilgrim's Pride Corp was hit with an 80.5 percent duty. Most other firms, including Sanderson Farms, face a 64.5 percent duty.
Those that did not appeal the finding would pay duties of 105.4 percent, the ministry said.
China began its investigation of U.S. chicken parts after the U.S. imposed safeguard duties on Chinese-made tires, which China is fighting at the WTO.

DALAI LAMA ROW LOOMS
The latest flare-up in Sino-U.S. ties comes against a backdrop of disagreements over human rights after Beijing jailed a top dissident and over Internet freedoms after search engine Google Inc threatened to pull out of China over censorship and hacking attacks.
U.S. senators have taken up the Google case, backing the search engine with unanimous resolution.

A Congressional panel will hold a high-profile hearing on Google on Feb. 10.
China has been warning Obama against meeting the Dalai Lama, reviled by Beijing as a separatist for seeking self-rule for Tibet.

The meeting may happen as early as this month.
Beijing is also upset with Washington over a $6.4 billion U.S. weapons package for Taiwan, the self-ruled island that Beijing deems a breakaway province. China has said it will impose unspecified sanctions on U.S. firms selling weapons to the island.
U.S. officials have voiced frustration that the issues roiling ties now were all discussed directly by Obama and Chinese President Hu Jintao just last November in Beijing.
The Eurasia Group said in analysis published on Friday that China's government is reacting to nationalistic pressures at home and to resistance from foreign countries who want more Chinese action in correcting huge global imbalances.
"Beijing's amped up rhetoric was likely driven by domestic insecurities and an external environment that is less conducive to perpetuating its export-led economic model," it said.
Damien Ma, a China analyst at the Eurasia Group in Washington, said there are still many bilateral working relationships that can help defuse U.S.-China tensions.
"Just because there's a lot of issues and a lot of headline risk, doesn't mean these things won't be worked out through back channels," he said

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China's Export Focus Breeds Backlash

Developing Nations Join West in Criticism of Beijing's Policies to Support Its Factories Despite Fears of Global Imbalance
By ANDREW BATSON

A woman sells chickens in Hubei province, Wednesday.

BEIJING—China's efforts to extend its dominance as the world's top exporter are facing stiff challenges, as the policies it has used to support exports bring new economic problems and escalate tensions with a growing list of trade partners.
Key elements of the strategy—including a cheap currency, regulated interest rates and low energy prices—are stoking discontent in fellow developing countries, not just Western capitals. That could crimp its drive to seek gains from emerging markets as growth in the rich world falters.

At the same time, many economists argue, China's export-friendly policies are fueling inflationary pressures at home, placing a burden on the rest of the economy.
Beijing is increasingly pushing back against what it calls unfair protectionism.

Chinese authorities Friday set duties on some U.S. chicken products to counter alleged dumping. And on Thursday, Beijing filed a complaint to the World Trade Organization against European Union tariffs on imports of Chinese shoes.
China's current-account surplus narrowed sharply in 2009, the government said Friday, a reflection of the impact of the global financial crisis on the nation's trade balance.
But that may have just increased the pressure on Beijing to support its exporters.
China now accounts for more than 9% of global exports, a share that, after stagnating for most of 2007 and 2008, has been rising since the outbreak of the financial crisis and the ensuing collapse in global trade.
China has surpassed the U.S. as the world's largest car market and is close to passing Japan as the world's second-largest national economy after the U.S.—milestones that create a sense of its dominance at a time when other nations continue to struggle with the aftermath of the crisis.
"China and some of the other emerging economies are emerging intact out of this recession, and probably even stronger than before," said Maarten Kelder, Asia president of consultants Monitor Group.

"They have been able to adjust their cost structures and that has made them more competitive."
That may not be enough to keep China's exports growing at the 20%-plus rates of recent years, even when the world economy recovers.
While China has long faced pressure on trade from the U.S. and the EU, officials from developing countries such as Indonesia, Brazil, Thailand and Russia have also expressed concern in recent months.
India filed more trade complaints against China than any other nation last year, according to figures from China's commerce ministry.

"A balance of exports and imports is important," Indian Trade Minister Anand Sharma said in January in Beijing.

China's trade surplus with India grew 46% last year to $16 billion, probably aggravated by the weakening of the yuan against the Indian rupee.
"The dollar peg of the [yuan] has put additional strain on lower-end Asian exporters. This has led to charges of unfair trade from across Asia," said Jamie Metzl, executive vice president of the Asia Society.
Even nations in Africa and the Middle East that have benefited from China's oil demand and foreign aid are now voicing discomfort with its economic rise.

"When we look at the reality on the ground we find that there is something akin to a Chinese invasion of the African continent," Libyan Foreign Minister Musa Kusa said in November.
China's government says it isn't banking on an export-driven future and has tried, though so far without much success, to shift the emphasis of the economy to domestic consumption and services.
The collapse in world trade that began in late 2008 was far from painless for China: It put millions of people out of work and closed thousands of factories.

Chinese exporters responded to the downturn by redesigning products and looking for new markets.

They also benefited as the recession encouraged consumers to switch to the kind of lower-price products China provides.

Shipments of traditional products such as toys and clothing held up far better than its other exports last year.
Gu Wu, who runs a company exporting radio-controlled toy cars from Shenzhen, says export orders have started to pick up since September.

During the depths of the downturn, he asked his U.S. salespeople to fan out and find new clients, and is now reaping some of the benefits.

"Many of them have come back with big orders, although cheaper goods are still the most wanted," Mr. Gu said.
China's government worked to reinforce exporters' efforts. After allowing the yuan to rise for much of 2007 and 2008, authorities repegged it to the dollar in mid-2008. Exports got a further boost once the dollar started to fall in March.

The effective exchange rate of the yuan—its value against the currencies of all trading partners—is down by 9% to 10% since then, according to the Bank for International Settlements.
The result: China accounted for 19% of U.S. imports in the first half of 2009, up from 16% in 2008, according to U.S. Census Bureau figures.
China's global market-share gains enabled it to do less badly than other trading powers in the downturn. It exported $1.202 trillion of goods in 2009, 16% less than in 2008 but still more than any other nation. Export growth is expected to resume this year.
The export resurgence has reached into new markets: A majority of China's exports now go to other developing countries, with exports to India, Brazil, Indonesia and Mexico growing by 30% to 50% in recent months, according to China International Capital Corp.
"There's a potential spoiler for China in relations with the developing world. They've only been exporting and not importing," said Ben Simpfendorfer, an economist for Royal Bank of Scotland. "It's one thing to produce job losses in the U.S., but it's another to produce job losses in Pakistan," with which China has close military ties, he said.
If China is able to overcome the obstacles, it could continue to expand its share of global exports for several more years.

According to International Monetary Fund projections, if current trends continue, China's share of world exports could reach 12% by 2014, a higher portion than Japan managed at the peak of its dominance in the 1980s.
But some researchers at the IMF say current trends aren't likely to continue.

A paper by IMF researchers published last year suggests that for China to continue the rapid export gains of recent years, it would need to boost its share of world exports to about 20% in coming decades, an unprecedented level.

The fund's researchers said China is unlikely to be able to do that without using even more government subsidies, which would further aggravate trade tensions and cause domestic economic problems.

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After China pull-out bluster, will Google backtrack?

By Juan Carlos Perez
It has been a long three and a half weeks since Google made the dramatic announcement that it will no longer censor its search results in China, even if that means exiting that huge Internet market.
The decision, Google said, was prompted by its discovery that a China-originated attack let malicious hackers steal Google intellectual property and partially break into the Gmail accounts of Chinese human rights activists.
At the time, human rights and free speech activists applauded the decision, and held Google up as an example for other Internet companies to follow.
However, almost a month after its strongly-worded statement, Google hasn't followed through on its plan and continues censoring its search results in China.
Asked for an update on the matter, a Google spokesman said on Friday via e-mail that the company has nothing new to add beyond its initial blog posting on Jan. 12 and the brief comments CEO Eric Schmidt made afterwards.
In the blog post, Google said the decision to stop censoring search results in China had been made.

"We have decided we are no longer willing to continue censoring our results on Google.cn," wrote David Drummond, Google's chief legal officer.
Drummond further stated Google would engage in discussions with the Chinese government "over the next few weeks" to explore ways to run an uncensored search engine legally, fully aware that it may not be possible and "may well mean having to shut down Google.cn, and potentially our offices in China."
At this point, it's hard to figure out why it is taking Google so long to make good on its promise. Are Google officials now regretting the decision, feeling they jumped the gun?
It could be possible.

After all, nine days after Drummond's post, Schmidt adopted a much more conciliatory tone and said conversations with the Chinese government were underway.
"We wish to remain in China. We like the Chinese people, we like our Chinese employees, we like the business opportunities there," Schmidt said during the company's fourth-quarter earnings conference call on Jan. 21.

"We'd like to do that on somewhat different terms than we have, but we remain quite committed to being there."
Perhaps more significant, Schmidt seemed to pull back on Google's original certainty that the hack attacks had originated in China.

He described the attacks as "probably emanating from China with the origin details unknown" and added that the matter was "still under investigation."
Google, he said, would make "some changes there" in a "reasonably short time," without being more specific.
That was more than two weeks ago.
In the meantime, Google spokespeople have been very tight-lipped about the China issue, in sharp contrast with the bold attitude displayed on Jan. 12.

Many things aren't clear.

For example, even if it pulls out of the China search engine market, will Google still pursue other Chinese markets, such as mobile or other future opportunities, say, in enterprise software?

Will Google exit China for good or will it leave the door open to some business there?
With each day that passes without Google acting on its promise, the possibility grows that it has decided not to walk the talk.

If that's where this is heading, Google would do well to clarify the matter sooner rather than later.

The expectations it set a few weeks ago are pretty big -- as is the claim it staked on the moral high ground.

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With suspicious statistics, China obscures economy

By David M. Dickson
China has acknowledged that its export-driven economy took a beating in 2008 and 2009, but Western analysts, most of whom are suspicious of Beijing's willingness to concede downturns, think China may have even slipped into a recession.
Because of political pressures and different methods of measuring, Chinese economic statistics can be notoriously suspect when compared with Western numbers.

But the consensus among Western economists, including earlier skeptics, is that China has experienced an especially strong rebound since early 2009 from the global recession.
The Chinese government reported in late January that its economy expanded by 10.7 percent during 2009, measured on a fourth-quarter-over-fourth-quarter basis.
While official data point to a robust recovery, Chinese statistics may have masked a significant economic contraction at the height of the global financial crisis, according to analyses by Thomas G. Rawski, an economics professor at the University of Pittsburgh, and China specialist Gordon Chang.
"I agree with the trajectory and the timing of the recovery," Mr. Rawski said, "but the extent of the Chinese slowdown is far larger than suggested" by the official data.
Although China's economic figures do not reveal a definitive contraction during the global downturn, Mr. Rawski thinks China experienced an outright recession, when its gross domestic product (GDP) declined during one or more quarters.
"China is experiencing a classic V-shaped recovery," Mr. Rawski said.

He thinks the downward portion of the "V" dipped into negative territory, probably during the first half of 2009.
One problem with China's method of economic measurement is politically motivated fudging of the numbers, but another is a different method of calculation.
Other major economic powers measure growth from one quarter to the next, meaning that a recession will show up in the form of negative growth figures.

But because China measures growth by comparing a three-month period with the same quarter in the previous year, a recession in one or two quarters could be masked by intervening quarters of robust growth.

As a result, "negative growth" rarely or never happens in China.
For example, that 10.7 percent figure from China's National Bureau of Statistics for the fourth quarter of 2009 was a year-over-year growth rate compared with the fourth quarter of 2008. Similarly, the 6.1 percent growth rate reported for the first quarter of 2009 was a year-over-year comparison with the January-to-March period of 2008. Likewise, the 7.9 percent growth rate for the second quarter of 2009 measures growth against the same quarter in 2008.

The three growth rates -- 10.7 percent, 7.9 percent and 6.1 percent -- even if accurate, suggest a significant slowing of the economy in late 2008 and early 2009.
Regardless of accounting details, Mr. Chang and Mr. Rawski said, other Chinese economic figures are inconsistent with Beijing's official picture of robust growth.
Mr. Chang pointed to plunging export numbers and evidence of flat retail sales. Mr. Rawski cited official data showing that electricity output during the first half of 2009 was lower than it was during the first half of 2008.
"If electricity output is declining, I find it hard to believe that GDP is growing far ahead of electricity production," he said.

That phenomenon hasn't happened since the Asian financial crisis of the late 1990s, when Mr. Rawski also argued that official Chinese statistics were covering up a recession.
In a widely cited paper, "What is happening to China's GDP statistics?" published in 2001 in the China Economic Review, Mr. Rawski questioned how China's economy could have expanded by the reported 34.5 percent during the 1998-to-2001 period when, over the same period, energy use declined by 5.5 percent and employment increased by just 0.8 percent.
Mr. Rawski and Mr. Chang detected similar statistical anomalies during the recent global economic crisis, which ended during the second half of last year in large part because of the strength of Asia's rebound, propelled especially by China.
During the intervening decade between the Asian financial crisis and the latest downturn, China consistently reported annual growth rates in or near double-digit territory. Mr. Rawski said he had no dispute with those growth rates.
And then there are the political motivations.
"They couldn't admit to poor performance because the government believed it was necessary to maintain the image of a vibrant economy," Mr. Chang said.
In early 2009, Chinese Prime Minister Wen Jiabao projected 8 percent growth for 2009, making it unlikely that official data would contradict him, Mr. Chang said.
However, at the time Mr. Wen issued his forecast, many reports from China revealed that tens of millions of workers lost their manufacturing jobs in coastal factories that were shuttered because China's exports had collapsed.

Such an acknowledgment of mass unemployment could invite rampant speculation from abroad about imminent social unrest.
As it happened, year-over-year growth in 2009 came in at 8.7 percent, indispensably achieved by the booming fourth quarter. That strong growth figure was "probably too good to be true," Mr. Chang said.

"The reported 10.7 percent rate catapulted them over the 8 percent line, with room to spare," he said with a note of skepticism.
The national government thinks an 8 percent growth rate is needed to absorb the country's expanding labor force, including migrants from the rural areas into large cities and manufacturing hubs.
"The 8 percent number has been repeated so many times, including by Chinese government officials, that it has taken on a life of its own," said Nicholas Lardy, an analyst on the Chinese economy at the Peterson Institute for International Economics.
Mr. Lardy, who does not think China cooks its economic books in any substantive way, even to mask downturns, rejects the basis for the 8 percent growth requirement.
"There is no one-to-one relationship between China's growth rate and the amount of jobs created," he said. "That is too simplistic, especially for China."
Mr. Lardy said China has not generated as many jobs over the past few years, compared with earlier periods, because its unbalanced economy is disproportionately geared toward huge investments in capital-intensive industries.
Ironically, he said, China could create more jobs with balanced growth of 6 percent, including a focus on labor-intensive service industries, than it is creating by pursuing economic policies aimed at achieving an 8 percent, or higher, growth rate.
Derek Scissors, an Asia scholar at the conservative Heritage Foundation, said China systematically underreports its economic activity, only to have to upwardly revise its growth rate after taking a more complete picture.
"In 2004, China conducted a nationwide census and discovered its economy was almost 17 percent larger than previously reported," Mr. Scissors noted last week in a paper.

"The service sector was found to be larger than previously thought, as was also the case in the 1993 census."
Mr. Scissors says he thinks that China is "still undercounting" its economic growth.

"A proper census would show that China's economy has been larger than announced at the time for every single year in the reform period" that began more than 30 years ago.

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Can you trust Chinese computer equipment?

IT World
As you surely know, Google has accused China of hacking into its systems and is considering pulling out of China altogether.

The U.S. government is taking this seriously, and Google has partnered with the NSA (National Security Agency) to get to the bottom of this.

What you may not know is that the United Kingdom's MI5 -- Americans can think of this as a combination of the FBI and CIA -- has reported that the Chinese government has been giving UK executives electronics with built-in security holes.
According to the Sunday Times, "a leaked MI5 document says that undercover intelligence officers from the People's Liberation Army and the Ministry of Public Security have also approached UK businessmen at trade fairs and exhibitions with the offer of 'gifts' and 'lavish hospitality.' The gifts -- cameras and memory sticks -- have been found to contain electronic Trojan bugs which provide the Chinese with remote access to users' computers."
That's bad.

But why, if these stories are true, should the Chinese government stop there?

U.S. and British citizens buy billions of dollars every year of Chinese-made USB memory sticks, computers, hard drives, and cameras.

Why not just add security holes as a matter of course to the firmware of all of them?
It's not hard. Heck. It's trivial.
Backdoors, systems with a deliberate security hole that allows its creator full access to a system, have been around for ages.

Indeed, back in 1983, Ken Thompson, one the creators of Unix, admitted that he had included a backdoor in early Unix versions. Thompson's backdoor gave him access to every Unix system then in existence.
If China's government really is hell-bent on keeping an eye on American and European businesses, why not just incorporate 21st century backdoors into their products?

Then, you could just have them automatically call home to do a data dump of documents.

If there's anything interesting in the files, it can be set to monitor its user on a regular basis.
There's nothing difficult about doing this.

Not only are backdoors easy to create, running an automatic check for words of interest, even in terabytes of documents, just requires some servers. After all, Google does it every day with far more data than such a plot could ever uncover.
Best of all, if I'm a government snoop, once my broken machines are in place, it doesn't matter how good its users are about PC security. The malware is already on the equipment and ready to go.
Sure, if a company or government agency uses top network security they may spot the illegal activity, but how many actually have crack security analysts?

Far fewer than you might think.

It's easier to just put down any problem to some more mundane malware infection than to consider that the computers themselves were designed to be working for an enemy.
Do I think this is happening?

I honestly don't know. I have no proof.

What I do know though is that it's easy to do, hard to detect, and the Chinese government appears to be engaging in a massive IT espionage.

That's a worrisome combination.
If I were in charge of any enterprise where I thought I had any reason to think that these Chinese authorities might be interested in what I was doing, I'd stop buying Chinese computer products today.

Until this issue of Chinese cyber-espionage has been cleared up and cleaned up, I simply couldn't justify buying or using hardware that might be working against me.

If you consider it for a minute, I think you'll agree.

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Apple threatened by Chinese company over iPad

A Chinese company that makes a tablet-style computer is considering suing Apple after alleging that its iPad was a copy of its device
By Claudine Beaumont
A Chinese company has warned that it will sue Apple for copyright infringement if it tries to release the iPad in China

The Shenzhen Great Loong Brother company alleges that the iPad design is based on its P88 tablet, right down to the casing and bezel around the screen.

The company said that if Apple were to release the iPad tablet in China, it would seek an injunction against it.
"We won't have any choice but to report them," Xiaolong Wu, the company president, told the Spanish newspaper El Mundo.

"It will certainly affect our sales."
China is famous for its counterfeit culture, with pirated copies of DVDs, CDs and video games available on the streets within days of officially going on sale in other countries.

There is also a strong trade in "shanzhai" products – consumer electronics goods such as phones, games consoles and computers, that are cheap imitations of official devices.
But Mr Wu said the P88 was not itself based on the design of another Apple product, the iPod touch, despite some obvious similarities.

"They [Apple] have nothing to do with it," he said. "They [the P88 and iPod touch] have completely different functions."
Apple has refused to comment on the possible legal action, but industry experts say any legal action by the Chinese company is unlikely to succeed.

The two devices are wildly different, with the P88 using a resistive touch-screen rather than the multi-touch screen of the Apple iPad, and using a 250GB hard drive compared to the iPad, which uses flash memory.

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Vietnam Enlists Allies to Stave Off China’s Reach

Fishermen unloaded a boat in Da Nang, Vietnam. China has been detaining Vietnamese fishermen in a dispute over islands in the South China Sea.

By EDWARD WONG
HANOI, Vietnam — The archipelago called the Paracel Islands lies in the South China Sea 250 miles off the east coast of Vietnam, a series of rocks and reefs and spits of land that, to the undiscerning eye, appear as valuable as broken coral washed up on a beach.
But that archipelago and the nearby Spratly Islands are rich in oil and natural gas deposits, and so they are coveted by the nations that form a wide arc around the South China Sea.

China, Taiwan and Vietnam have competing claims in the Paracels, while all three and the Philippines, Malaysia and Brunei have claims on the Spratlys or the waters surrounding them.
The most vociferous are Vietnam and its traditional rival, China.

Indeed, no issue between them is more emotional or more intractable.
Tensions crept up another notch last month, after China announced plans to develop tourism in the Paracels, which the Chinese military has controlled since 1974.

It was an inauspicious start to what the two governments had officially labeled their “Year of Friendship.”
The Vietnamese Foreign Ministry loudly denounced China’s move, as it usually does in these situations. But quietly, Vietnam has been doing more than just complaining; it has laid the groundwork for another strategy to pry the islands from China’s grasp.
Vietnam is pushing hard behind the scenes to bring more foreign players into negotiations so that China will have to bargain in a multilateral setting with all Southeast Asian nations that have territorial claims in the South China Sea.

This goes against China’s preference, which is to negotiate one on one with each country.
In other words, Vietnam wants all parties at the same table to stave off China, the behemoth. This strategy of “internationalizing” the issue is one that smaller Asian countries like Vietnam may adopt more often as they wrangle with the Chinese juggernaut on many fronts.

The thinking is: As China’s political power in the world expands, smaller nations will gain leverage over China only if they force it to negotiate in multilateral forums.
Vietnamese officials “are internationalizing the issue, and they’re doing it in a quiet way, not in a direct way,” said Carlyle A. Thayer, a scholar of Southeast Asia and maritime security at the Australian Defense Force Academy.

“They say they want to solve it peacefully, but let the international community raise the issue.”
Analysts say a big test for this strategy will come this year, as Vietnam takes over the leadership of the Association of Southeast Asian Nations, or Asean.

Vietnam is likely to use its position to try to persuade the countries to join territorial negotiations with China, analysts say.

In November, Vietnam held a conference in Hanoi, its capital, where 150 scholars and officials from across Asia came to discuss disputes in the South China Sea — an opening salvo in the new strategy, analysts say.
“The kind of thing that I took away was that developments in the South China Sea had either deteriorated or had the potential to deteriorate,” said Mr. Thayer, who attended the workshop.
American military and intelligence officials say the South China Sea, which has some of the busiest shipping lanes in the world, is growing as a security concern because Beijing is increasingly emboldened to flex its naval muscles there.

In the past two years, China has been more aggressive in asserting control over the area — detaining Vietnamese fishermen, increasing sea patrols and warning foreign oil companies away from working with Vietnam.
The United States takes no sides in these disputes, but American officials “remain concerned about tension between China and Vietnam, as both countries seek to tap potential oil and gas deposits that lie beneath the South China Sea,” Scot Marciel, a deputy assistant secretary of state, said in July while testifying before Congress.

Mr. Marciel added that China had shown a “growing assertiveness” in regard to what it deemed its maritime rights.
Tensions over such rights plague China’s relations with many of its neighbors. Just last month, Japan protested Chinese plans to develop gas fields in the East China Sea.
For the Vietnamese, the South China Sea dispute is so emotional that it unites virtually all of them under an anti-China nationalist banner, even those in exile who usually abhor Vietnam’s ruling Communist Party.

In Houston, a South Vietnamese enclave usually hostile to the Vietnamese government, a pop band proudly calls itself Hoang Sa, the Vietnamese name for the Paracels.
In December, Vietnam asked China to return fishing boats and other equipment seized from fishermen detained by the Chinese military near the islands.

One Vietnamese news organization has estimated that China detained 17 vessels and 210 fishermen last year; the fishermen have all been released.
Also in December, the Vietnamese prime minister signed an arms deal in Russia that reportedly included the purchase of six diesel-electric submarines for $2 billion, presumably to be used in the South China Sea.
Meanwhile, China has agreed to continue talks with Vietnam, but it is willing to discuss only joint development of the area, not sovereignty rights. And it refuses to negotiate with all the relevant Southeast Asian nations in any multilateral way.
“There would be too many countries involved,” said Xu Liping, a scholar of Southeast Asia at the Chinese Academy of Social Sciences in Beijing.
Do Tien Sam, a scholar of China at the Vietnam Academy of Social Sciences, said the Vietnamese government believed the exact opposite, that the “negotiations should involve discussions between at least five countries.”
“They all need to sit down,” Mr. Do said.
The conference here in November was not an official site for talks but rather a workshop intended partly to explore multilateral approaches to the issue.

Despite China’s resistance to such approaches, several scholars from research groups in Beijing attended.
Some analysts are skeptical of whether Vietnam will get any traction with its new strategy, especially if it decides to press the issue as it presides over Asean. The association has members that have no stake in the fight, like Cambodia and Myanmar.
“Vietnam’s approach faces real obstacles,” said M. Taylor Fravel, a political scientist at the Massachusetts Institute of Technology who has written a book on China’s territorial issues.

“It is hard to see how consensus can be built within Asean short of a major armed clash involving Chinese forces.”

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Wife appeals for Chinese rights defender

Rights groups say Gao was snatched from his home on February 4 last year and has not been heard from since

By Shaun Tandon
WASHINGTON — The wife of one of China's best-known rights advocates says she is unable to sleep fearing for his safety one year after he vanished, as US lawmakers nominated him for the Nobel Peace Prize.
Gao Zhisheng, a lawyer, took on some of China's most controversial causes by defending coal miners, underground Christians, the banned Falungong spiritual movement and ordinary people seeking redress from the government.
Human rights groups say that security personnel snatched him from his home village on February 4 last year and that he has not been heard from since.
His wife, Geng He, and their two children staged a daring escape out of China last year to Thailand, from where they were granted asylum in the United States.
Geng said she was haunted by memories of what happened to Gao in the past.

In a previous 50-day detention after he wrote a letter to the US Congress, Gao said that guards inflicted him with electric shock, burned his eyes with cigarettes and stuck toothpicks in his genitals.
"Since 2005 my husband was kidnapped six or seven times and every time he would tell me of the torture that he experienced," Geng told AFP.
"These past few weeks, I can't sleep until 3 am every night. My heart aches because I recall every single detail," she said.
"Really, sometimes I feel that it might be better if he were dead than alive. But I am hoping and I am ready to trade my own life for his so that the family can go on," she said.
She voiced hope that appeals from the United States and other foreign nations would help her husband.
"Unless there is international pressure, I fear that in the future there may be no more lawyers in China who will take up these cases," she said.
In Beijing earlier Thursday, Chinese foreign ministry spokesman Ma Zhaoxu refused to answer questions by foreign reporters on Gao's whereabouts. Last week Ma said, "I guess that he should be where he should be."
Seven US lawmakers marked the anniversary by nominating Gao and two other imprisoned Chinese rights activists -- Chen Guangcheng and Liu Xiaobo -- for the Nobel Peace Prize.
"Though Chen, Gao and Liu are three of the most outstanding Chinese human rights defenders," they wrote, "few governments or inter-governmental organizations have the courage to brave the Chinese government's displeasure and honor them."
"Throughout its history, the Nobel Peace Prize Committee has often distinguished itself by its willingness to award prizes despite the strong opposition of governments," said the lawmakers, led by Representative Christopher Smith, a Republican of New Jersey.
"We can think of no one so deserving of recognition," they wrote, "and no one whose recognition would be more timely or do more to foster peace in the 21st century."
According to the Nobel committee, members of national assemblies are among those with the right to nominate candidates for the prize.
Liu, a writer, was jailed in December for 11 years for subversion after co-writing Charter 08, a widely circulated petition that called for political reform and was signed by more than 10,000 people.
Chen, a blind, self-trained lawyer who alleged abuses under China's one-child policy, was given a sentence of four years and three months in 2006.
The Nobel committee last year gave the prize to President Barack Obama for his contributions to world understanding, a controversial choice with the US leader himself saying he did not feel he had yet earned the award.
China has been increasingly defiant in the face of international pressure on its human rights record. It released no dissidents before Obama's visit to Beijing in November, moving away from a tradition of goodwill gestures for visits by US leaders.

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Google facing many risks in China standoff

By Alexei Oreskovic

SAN FRANCISCO -- Google Inc's near-silence and seeming inaction since its bombshell announcement it may exit China reflects the Internet search leader's fear of running afoul of the law and jeopardizing a multi-pronged strategy for the world's top Internet market.
Google sent shockwaves across the business and political worlds when it declared on January 12 it would stop censoring Chinese search results.

But in the three weeks since, the Web giant has trod cautiously.
Despite early reports suggesting Google had lifted filters on certain search results, the company insists it has made zero changes to its Chinese search engine and that it remains in dialogue with Beijing.

Otherwise, executives have mostly been tight-lipped about the entire affair.
That guarded, restrained approach reflects the thorny legal issues surrounding the situation and the high stakes involved in its standoff with China, the world's No. 3 economy and largest Internet market by users.
Many analysts believe the Chinese government would have no qualms shutting down an uncensored search engine. But experts on Chinese law warn that Google employees in China could also face prosecution for breaking the law.
China's detention of four Rio Tinto employees including Australian Stern Hu in July on accusations of illegally obtaining commercial secrets amid contentious iron ore contract negotiations has underscored the risk when business matters cross into politically sensitive areas.
"If they have a lot of personnel in China and they suddenly decide to change what they're doing in a way that was not permitted by the Chinese government, then that could lead to problems," said Donald Clarke, a professor of Chinese law at George Washington University Law School, noting Google staff could be at risk of everything from arrest to harassment.
And with political momentum building -- U.S. Secretary of State Hillary Clinton and the U.S. Senate have voiced strong support for freedom of expression on the Internet -- Google has room to sit back and let others advance its cause.
"As long as individual actors, even ones as large as Google, are doing this alone as opposed to collectively, then these risks are going to be much more pronounced," said Arvind Ganesan, director of business at Human Rights Watch.

STATE SECRETS: A CATCH-ALL
A sudden move by Google to lift search censorship in China could hurt other business interests in the country, including its fast-growing Android cell phone products, advertising sales and its research and development operations.
"Both parties probably want to reach some sort of a solution, so I think both have been careful in their public statements," UBS analyst Brian Pitz.
Websites in China are prohibited from publishing content that jeopardizes the security of the nation, divulges state secrets and disturbs the social order.
"It would be normal for anybody running a high-profile, politically controversial operation in China to anticipate worst-case scenarios, and to do everything possible to guard against them," said Rebecca MacKinnon, a fellow at the Open Society Institute who has written extensively about Internet censorship in China.
Google is therefore more likely to voluntarily shut down its search operation if it is unable to reach a compromise with China, rather than unilaterally lift censorship, she said.
Google CEO Eric Schmidt said last month the company was still censoring search results in China, but that it would be making changes in a "reasonably short time."

He added that Google was committed to having some presence in China.
The company does not disclose the size of its business in China, where it has several hundred employees and is the No. 2 search engine after Baidu Inc. Analysts estimate it generates $200 million to $600 million a year in revenue.
While many experts believe Beijing is unlikely to let Google operate an uncensored website, some say last summer's "Green Dam" software episode could offer a lesson for the company as it looks for a way forward.
Beijing backed down from a controversial plan that would have required personal computer makers to install special Internet filtering software on PCs in the face of opposition from industry groups, activists and Washington officials such as U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke.
"What you saw is a pretty much global pushback on what were pretty onerous and odious regulations on the part of the government. And guess what? As of today, there is no requirement" to install filtering software, said Ganesan of Human Rights Watch.

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Human Rights Leaders in China Nominated for Nobel Peace Prize by House Members

Activists Chen Guangcheng, Gao Zhisheng, and Liu Xiaobo Praised for Courage and Contributions Towards Peace
Three persecuted Chinese human rights advocates—Chen Guangcheng, Gao Zhisheng, and Liu Xiaobo—are being nominated for the Nobel Peace Prize by a bipartisan group of lawmakers from the U.S. House of Representatives who are active on human rights issues, Congressman Chris Smith (NJ-04) announced today.
In a letter to Thorbjorn Jagland, Chairman of the Nobel Peace Prize Committee in Norway, the group wrote that Chen, Gao, and Liu are worthy of the 2010 Nobel Peace Prize for their valiant human rights work.
“Chen, Gao, and Liu form a trio of activists outstanding for their human rights advocacy in China,” the congressmen wrote.

“For years, these three figures have called on their government to substantially improve its human rights record. In so doing they have been remarkable for their patriotism, their civil courage, and the generous tone of their work, which has never sought to divide their country or cause civil conflict, but always to raise the Chinese people’s awareness of their dignity and rights, and to call their government to govern within its constitution, its laws, and the international human rights agreements it has signed. These human rights advocates are making a signal contribution to peace.”
Chen and Gao are human rights lawyers who defend people the Chinese government persecutes for political and religious reasons, including gross abuses in the enforcement of China’s brutal one-child policy.

Liu is a leader who has repeatedly called on the Chinese government to recognize the human rights of its citizens, most recently as a leader of the Charter 08 movement, which calls for greater personal and political freedoms in China.

Currently, Chen is serving a prison term for his work, Liu is appealing an 11-year sentence to prison, and Gao disappeared under suspicious circumstances more than a year ago.
Smith, senior member of the House Foreign Affairs Committee and the Tom Lantos Human Rights Commission, and Ranking Member of Congressional-Executive Commission on China, was joined by Reps. David Wu (OR-01), Joe Pitts (PA-16), Thaddeus McCotter (MI-11), Bob Inglis (SC-04), Lincoln Diaz-Balart (FL-21), and Gus Bilarakis (FL-09) in signing the letter.
In the letter, the congressmen note the Nobel Peace Prize Committee’s history in awarding prizes despite the strong opposition of oppressive governments like that of China.
“These three heroes have stood up for the cause of freedom and human dignity, and they have sacrificed and suffered for their stands,” said Smith.

“They deserve consideration for the Nobel Peace Prize.”

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Havel nominates Chinese dissident for Nobel Prize

Associated Press
Former Czech President Vaclav Havel has joined forces with lawmakers and anti-communist dissidents to nominate a Chinese dissident for the 2010 Nobel Peace Prize.
Liu Xiaobo was sentenced in December to 11 years in prison for co-writing an appeal titled "Charter 08" calling for expanded political freedoms in China and an end to Communist Party dominance.
The document was modeled on the Charter 77 human rights manifesto co-written by Havel, then a dissident playwright and later president of Czechoslovakia and the Czech Republic.
Senator Alexandr Vondra said Wednesday that 40 Czech lawmakers and dozens of those who signed the original Charter 77 support the nomination.
Havel joined the initiative with a separate nomination signed by international figures, including the Dalai Lama.

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China Escalates Trade Fight With Europe Over Shoes

By STEPHEN CASTLE and DAVID JOLLY
BRUSSELS — China complained to the World Trade Organization Thursday about anti-dumping duties imposed by the European Union on Chinese-made shoes, escalating tensions between the trading giants.
The move comes amid growing concerns on both sides of the Atlantic over China’s exports and currency and will be seen by some as a sign of a more assertive stance by Beijing.
China, which joined the W.T.O. in 2001, filed its first unfair trade case against the E.U. last July, also involving anti-dumping duties.

The latest move appeared designed to increase pressure on the E.U., which had itself been sharply divided over extending the shoe tariffs.
In a statement issued by its mission in Geneva, where the W.T.O. is based, the Chinese government said Europe’s actions “violated various obligations under the W.T.O., and consequently caused damage to the legitimate rights and interests of Chinese exporters.”
It added that China “had repeatedly consulted with the E.U.,” but said that its concerns “had not been properly addressed or settled by the E.U.”
In an eight-page legal complaint the Chinese government requested consultations on both the original 2006 decision to impose the shoe duties and last year’s move to extend them.
Nuch Nazeer, a W.T.O. spokesman in Geneva, confirmed that China had formally lodged a case.
In Brussels, John Clancy, acting spokesman for trade issues, said the European Commission had taken note of the request.

“Anti-dumping measures are not about protectionism, they’re about fighting unfair trade,” he said.

“Our decision was taken on the basis of clear evidence that dumping of Chinese products has taken place and that this is harming the otherwise competitive E.U. industry.”
While some member states with footwear manufacturers, such as Italy, have welcomed the anti-dumping duties, others support the position of large retailers who argue that they hurt consumers by pushing up prices.
As a compromise, the E.U. decided late last year on a 15-month extension of charges which add between 9.7 percent and 16.5 percent to the import price of Chinese shoes and 10 percent to Vietnamese shoes.
The European Footwear Alliance, which represents several big global footwear brands, including Adidas, ECCO and Timberland, and opposes the duties, said in a statement that it “shares China’s view” that the E.U. decision was based on flawed analysis.

“Ironically the measure hurts European business and consumers the most,” it said.
In a letter to the former European Trade Commissioner, Catherine Ashton, sent last year, the alliance said its members had paid around €800 million, or $1.2 billion, in anti-dumping duties in the last three-and-a-half years, “and we fail to understand who has benefited.”
Lourdes Catrain, a legal adviser to the alliance, said China’s move was “not surprising in the light of the year-long controversy within the E.U. member states regarding the extension of the duties.”
“It is a very welcome development,” she added, “for the multilateral system and for the W.T.O. that China is exercising its rights within the organization.”
Until recently the Chinese government had made little use of the W.T.O. procedures in trade disputes with Europe.

But in 2009, when the E.U. applied anti-dumping tariffs on imports of iron and steel fasteners from China, Beijing responded by dragging the E.U. into the W.T.O. dispute settlement process for the first time.
Under W.T.O. rules, the E.U. and China now have 60 days to resolve the shoe dispute through bilateral consultations.

If no deal is reached, China can ask the 153 member nations of the W.T.O. to establish a panel of three experts to examine the issue.

Europe could block that once, but establishment is automatic if China makes a second request.
Given the possibility of appeals, a final decision can take 18 months or more.

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Avatar Backlash In China

By Damien Ma
Chinese audiences have flocked to theaters to witness the spectacle that is James Cameron's Avatar.

Some have reportedly paid $100 for a ticket and waited in serpentine lines for hours.

Its immense popularity has even prompted a local official to rename a part of the famous Yellow Mountains after the floating "Hallelujah Mountains" in the movie.
But the film's success in China has yielded controversy.

In late January, authorities from the State Administration of Radio, Film, and Television pulled the 2-D version of the movie from theaters to make way for Chinese-made biopic Confucius, starring Hong Kong movie darling Chow Yun-Fat.
Part of the move is undoubtedly aimed at promoting homegrown cultural products, as Beijing recently announced greater dedication to expanding domestic culture industries.

China has also imposed an import quota of 20 foreign films per year under the World Trade Organization. So it is no surprise that the Chinese government is now actively peddling Confucius.

Leveraging the official Xinhua news to pit the ancient sage Confucius against Cameron's blue Na'vi aliens, the media outlet has compiled links to bloggers who are defending Confucius, saying it embodies the enduring values of China.

The official endorsement of the ancient moral philosopher has another dimension: Confucius is increasingly becoming the face of Chinese soft power.

Taking a chapter from western public diplomacy, Beijing has set up numerous Confucius Institutes abroad--about 260 in 70 countries--to promote Chinese culture and language.
But the irony is that Confucius is proving much harder to sell at home, even as state media has tried to defend it.

Chinese critics and bloggers have panned the movie; some are even boycotting it to protest the government prematurely scuttling 2-D Avatar.

A recent report that circulated the Chinese Internet, claiming Confucius had racked in $5.6 million in the first three days of screening, was met with skepticism from netizens.

One anonymous theater operator said that 2-D Avatar had made up 74% of ticket sales in his theater, and the figure on Confucius' revenue seemed preposterous.

Many are offended that the government is treating the public like ignorant fools, and the excessive state intervention in this affair may be backfiring.
It's not the first time that official propaganda is countered by savvy netizens, and it won't be the last.

Yet that won't stop the officials from behaving in the same clumsy manner--because Avatar is unsettling the government in a subtler, political way.

Take a closer look at the plot. What is to Americans a film about colonialism, militarism, and sustainability is to the average Chinese a cautionary tale about frequently experienced social and economic injustice.

To many Chinese bloggers, Avatar is unmistakably a fable about unscrupulous city enforcement officials, known as chengguan, forcefully evicting residents in the name of local development.
China's pursuit of hyper urbanization has uprooted city residents from their homes, often without compensation and sometimes just a piddling sum, so new and luxurious high rises can be planted.

Often in cahoots with developers, the chengguan pockets kickbacks and summons the police or other henchmen to do the dirty work of people removal.

In the blogosphere, commentators immediately recognized the Pandoran Na'vis as victims of involuntary eviction, and the army that descended upon their tree home a cadre of chengguan. Emblematic of the remorseless attitude of these petty officials with outsized power is an incident involving an old man threatening to jump off the roof if he was forcibly removed.

To which the chengguan quipped, "Go straight to the top floor. Don't choose the first or second." That quote went viral and was selected by China Daily as one of the top 10 quotes of 2009.
Public outrage at this kind of behavior has already put Beijing on notice, especially as individuals have stood up to defend their property rights.

Paying increasing attention to public opinion zipping across the web, Beijing probably grew nervous at the proliferating commentary on the ugly side of urban development.

Though most of the vitriol is projected toward local officials, the center isn't willing to risk it. Numerous large development deals almost certainly involve corruption, and it doesn't take a logical leap for the public to shift the blame to top leaders' inability to weed out corruption like they pledged.

There is simply no way that the party propaganda apparatus will cede message control to a Hollywood flick.

It must act--political and social stability could well be on the line.
Political stability continues to be the prism through which most decisions are made.

The sanctity of that overriding objective requires the Communist Party to take the steps necessary to limit the channels through which ideas are transmitted, via Hollywood, Bollywood or the Internet.

Simultaneously, the government hopes that its cultural products will become innovative, appealing and ultimately used as instruments to project a particular Chinese image.
But herein lies the paradox: True innovation is exceedingly difficult to achieve without open information networks where ideas are freely exchanged.

Creative aspirations are seemingly at odds with political imperatives, leading some Chinese filmmakers to bemoan that it will be 100 years before China can make a movie on the same innovative plane as Avatar.

That may be an exaggeration, but the point is clear.

Innovation is by definition freewheeling and cannot be dictated by officials whose knee-jerk paranoia leads to the stifling of the very creativity that Beijing seeks to spawn.

If China continues to pursue this strategy, innovation will be held hostage to the power politics of maintaining a harmonious society.

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Google Working With NSA to Investigate Chinese Cyber Attack

By SIOBHAN GORMAN and JESSICA E. VASCELLARO
Officials at the National Security Agency have been working with Google Inc. to investigate the cyber attacks that Google announced publicly last month, according to people familiar with the investigation.
A Google spokeswoman declined to comment. NSA didn't immediately respond to requests for comment.
The partnership began weeks ago, as the Internet company shared details about the attack – which it said it believed originated in China and affected more than 20 companies – with various government agencies.
In response, Google said it would stop censoring its search results in China – a move it has yet to take as it continues discussions with Chinese officials about how it can continue to operate in the country.

In recent weeks, Google's chief executive Eric Schmidt has said the Internet company doesn't want to back out of China but wants to be there on "different terms."
Companies have been more reluctant to work with the NSA in the wake of the debate over domestic surveillance in Washington because they fear being seen as aiding intelligence agencies in a way that would undermine the trust of customers.

Addressing this private-sector anxiety is one of the largest challenges facing the White House's new cyber chief Howard Schmidt.
NSA officials had only heard rumors about the Google attack until the company announced it publicly, said one person familiar with the investigation.
While the Federal Bureau of Investigation could begin immediately on its criminal investigation, the NSA had to draft a legal agreement to begin sharing information with Google.
The NSA's general counsel began drafting what's known as a cooperative research and development agreement the day Google announced the breach, according to a people familiar with the investigation.

The agreement was finalized within 24 hours, but the flow of information was still limited, according to a person familiar with the investigation. It allowed the NSA to examine some of the data related to the intrusion into Google's systems.
Both the FBI and NSA dispatched officials to work directly with Google. Most of the information shared with NSA officials has been about the nature of the data that was stolen from Google, a person familiar with the investigation said.
As a result, some intelligence officers attempting to get a better understanding of the nature and scope of the attack resorted to tapping their own backchannel contacts and twisting arms to get information, said a person familiar with the investigation.

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China puts media ban on new milk scandal

AFP
Chinese officials have banned independent reporting on the latest toxic food scandal involving melamine, a chemical blamed for the deaths of six babies in 2008, a press watchdog says.
The International Federation of Journalists, citing local sources, said on Thursday censors in the southern Chinese province of Guangdong had ordered that media outlets "must only use information formally released by the authorities".
There was no immediate comment from authorities in Guangdong, which borders Hong Kong.
"The (IFJ) is appalled at the latest media order issued by Guangdong Province Propaganda Department banning independent reporting on a new toxic melamine milk scandal," the Brussels-based group said in a statement.
IFJ general secretary Aidan White said the order "raises further concerns about prioritising censorship over the well-being of citizens".
The watchdog warned in a report this week that China is intensifying its clampdown on local and foreign journalists.
White called on the central government in Beijing to "intervene immediately to ensure that all vital information regarding the health of citizens reaches the public".
The melamine contamination in 2008 was blamed for killing at least six babies and sickening more than 300,000 people. The chemical was found to have been added to milk in China to give the appearance of a higher protein content.
Now, Chinese reports say that tainted products supposed to have been destroyed after the 2008 scandal have found their way back on to the market.
Police have arrested four people involved in the dairy industry in the northern city of Weinan, state media reported on Wednesday.
And in a sign of growing official concern, the government has rushed inspectors to 16 provinces to check for food-safety problems, Xinhua news agency said on Tuesday.
A total of 21 people have reportedly been convicted over the 2008 scare. Two have been executed and others were given jail sentences ranging from two years to life.

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China Renews Opposition to Iran Sanctions

By ALAN COWELL
PARIS — Adding to a growing catalogue of disputes between Washington and Beijing, a senior Chinese official said on Thursday that pressure for tighter sanctions against Iran over its nuclear program could block chances of a diplomatic settlement to the dispute.
Foreign Minister Yang Jiechi was speaking in Paris less than a week after Secretary of State Hillary Rodham Clinton rebuked China over its opposition to stronger measures against Tehran, saying Beijing’s position was shortsighted.
Since then, President Mahmoud Ahmadinejad of Iran has been reported as reiterating support for a deal under which Iran would allow its low-enriched nuclear fuel to be exported for processing into nuclear fuel rods — prompting some skepticism in Europe and the United States about his motives.
“Iran has to be measured by its actions, not by what it says,” German Foreign Minister Guido Westerwelle said Wednesday.
The issue also arose during a visit to Paris by Mr. Yang, who was quoted on Thursday as telling reporters: "To talk about sanctions at the moment will complicate the situation and might stand in the way of finding a diplomatic solution.”
His remarks, quoted by Reuters, seemed a direct rebuff of efforts by the United States to secure broad international support for tougher penalties against Iran’s Revolutionary Guards, accused by the West of running a covert nuclear arms program. Tehran says the program is for peaceful civilian purposes only.
“China firmly supports the international nuclear non proliferation regime,” Mr. Yang said.

“All countries, Iran included if they obey I.A.E.A. rules, have a right to a peaceful use of nuclear energy.” The I.A.E.A. — the International Atomic Energy Agency — is the United Nations’ nuclear watchdog, based in Vienna.
The differences over Iran coincide with a plethora of other disputes.
In recent days, China has objected to plans by President Obama to meet with the Dalai Lama, the Tibetan spiritual leader, and to American weapons sales to Taiwan. Mrs. Clinton has also criticized China for censoring the Internet and the United States has challenged China on trade and financial issues.
The latest Iranian moves in the nuclear dispute have puzzled some of the Western countries — the United States, Britain, France and Germany — who form a group of countries along with China and Russia seeking to end the standoff.
“I am perplexed and even a little pessimistic,” French Foreign Minister Bernard Kouchner said on Wednesday, referring to Mr. Ahmadinejad’s reported offer to meet the demand for low-enriched uranium to be exported for processing.
News reports quoted the Iranian leader as saying on Tuesday: “There is really no problem. Some made a fuss for nothing. There is no problem.”

But, while Western experts say it would take a year to complete the process, Mr. Ahmadinejad said it would take “four or five months.”
Some Western officials said Mr. Ahmadinejad may be trying to buy time or dilute pressure for tougher penalties imposed by the United Nations.

His remarks also seemed to contradict earlier Iranian statements rejecting the deal to send low-enriched uranium abroad.

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China silence on missing lawyer

Mr Gao's family say they believe he is still alive

China has refused to comment on the case of a dissident lawyer who went missing one year ago.
Human rights groups, foreign officials and relatives of Gao Zhisheng have repeatedly urged Beijing to say where he is and what condition he is in.
But China has only ever given vague responses to requests for information.
Mr Gao's wife, now living in the US, said she was "certain" he was being tortured in prison and called on the US to increase its pressure on China.
At a regular news conference on Thursday, foreign ministry spokesman Ma Zhaoxu refused to answer questions from journalists about Mr Gao.
"I have made our position known many times, at least three times," the AFP news agency quoted him as saying.
"China is a country of rule of law and everything is handled according to the law," he said.
But Mr Ma said he might "refer to competent authorities for more specifics", said AFP.
US-based group China Aid said it believes Mr Gao is alive but suffering "extreme emotional and physical pain" in detention.

'Helpless'
Mr Gao was taken from his house in Shaanxi province by police last year and has not been seen since.
Writing in the Washington Post, Geng He said she feared the authorities had taken her husband in retaliation for her leaving the country last year.
"We knew that if Zhisheng had tried to leave with us, we would never have made it out of China," she said.
"Now I wait, helpless, certain that my husband is being tortured and wondering whether I should actually hope that he has already been killed."
On Wednesday, a US embassy spokeswoman said Washington was "deeply concerned" about Mr Gao's safety.
"We have raised our concerns about Mr Gao's well-being and whereabouts repeatedly, both in Washington and in Beijing," said Susan Stevenson.
But Mrs Geng said US must increase its pressure and "cannot allow China to continue to act with impunity".
"China's lawyers are the country's only hope for becoming a one-party state where the rule of law prevails, let alone a true democracy," she said.
"If China continues to imprison its lawyers, there will be never be change."
Mr Gao was once named one of China's top lawyers by the country's Ministry of Justice.
But he angered the authorities with his campaigns on behalf of people who had lost land, injured miners and the banned spiritual movement, Falun Gong, among others.

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The U.S. must speak out against China's offenses

Activists in Hong Kong call for the release of Chinese lawyer Gao Zhisheng, who was taken into custody a year ago.

By Geng He

One year ago today, China kidnapped my husband.
I don't know where he is. I don't know what is being done to him.

The only thing I know is why he disappeared: My husband, Gao Zhisheng, defied Beijing by representing people the government finds threatening.

As a leading human rights lawyer in China, he fought for those who had been abused by police, those who had their land stolen by the government and those who were persecuted for their religious beliefs.
And now my husband is one of those persecuted people he so vigorously defended. Chinese authorities abducted Zhisheng on Feb. 4, 2009. But they did not officially arrest him and won't tell anyone where they've taken him.
My children and I feared the worst.

After nearly a year, a Foreign Ministry official said on Jan. 22 that my husband is "where he should be."

I focused on the only thing I could glean with certainty from those ominous words: the indication that the government has my husband in custody. That Zhisheng was alive!

At first, this was cause for our family to celebrate. Then we started thinking about what "alive" meant.

The last time my husband was arrested, the government tortured him.

After he sent a letter to the U.S. Congress in 2007 denouncing human rights abuses in China, the government held him for more than 50 days.

His captors electrocuted him. They burned his eyes with lit cigarettes. They stuck toothpicks in his genitals.
My children and I escaped China last year shortly before my husband was abducted.

The United States granted us shelter. I fear that the Beijing government took my husband in retaliation for our escape.

We knew that if Zhisheng had tried to leave with us, we would never have made it out of China. Now I wait, helpless, certain that my husband is being tortured and wondering whether I should actually hope that he has already been killed.
Over the past several years Zhisheng and I watched the government regularly disbar lawyers and shutter their firms for taking politically sensitive cases.

We saw friends and their families beaten, harassed and in some cases imprisoned. We knew it was only a matter of time before the government did the same to us.
That time came in 2006.

I cannot adequately explain the panic and intimidation that come with 24-hour government surveillance. That come from knowing that the police could take Zhisheng at any time. Or worrying what government threats were doing to my children. But Zhisheng and I knew he couldn't give in.
I must ask my new country to help my husband; the father of my two children. China won't listen to me. If our relatives who remain in China press the government too hard, they will be arrested. But China will listen to the United States.
Some people here talk of a political hardening in Beijing since the 2008 Olympics.

They cite the kidnapping of my husband, or the sentencing of Liu Xiaobo for his role in Charter 08 or of Chen Guangcheng, the blind lawyer, and say that China no longer listens to the United States.

It's true that Beijing is silencing more political dissidents than ever. But this is a call to action, not a reason to stand idly by.
The United States cannot allow China to continue to act with impunity, particularly with respect to imprisoning lawyers.

China's lawyers are the country's only hope for becoming a one-party state where the rule of law prevails, let alone a true democracy. If China continues to imprison its lawyers, there will be never be change.
I worry about the next generation of Chinese lawyers. Will disappearances like my husband's deter them from becoming rights defenders? I imagine so. But if the United States were to speak out on my husband's behalf, perhaps this would change.
My 8-year old son, Peter, was surprised to discover last week that President Obama is a lawyer. To him, lawyers are people the government throws into prison, not leaders of the government itself. He asked me whether this meant that President Obama could help free his father. I told him that I hoped so.

We are waiting to see.

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Senator urges Obama call China currency manipulator

WASHINGTON (Reuters) -- President Barack Obama should formally label China a currency manipulator to get Beijing's attention that it needs to raise the value of its yuan, a top U.S. senator said on Wednesday.
"China is a big beneficiary of international trade, yet it fails to allow its currency to float freely," Senator Charles Grassley, an Iowa Republican, said in a statement, noting he had criticized former President George W. Bush for repeatedly deciding not to label Beijing a currency manipulator.
"President Obama has the opportunity to change course. His administration can label China a currency manipulator in its upcoming biannual report... Maybe that will finally get China's attention and lead to a more level playing field for U.S. exporters," Grassley said.
U.S. manufacturers complain that China's undervalued currency effectively subsidizes Chinese exports and inflates the price of foreign goods in China's market.
The U.S. Treasury Department is required by law by every six month to determine whether any country is manipulating its currency to gain an unfair trade advantage.
Obama criticized Bush for failing to label China as a currency manipulator but so for has decided twice against doing that himself.

The next report is due in mid-April.
"I gave this administration's diplomatic efforts the benefit of the doubt, but so far the Strategic and Economic Dialogue with China hasn't produced results," Grassley said.
In a meeting with Democratic senators on Wednesday, Obama acknowledged concerns about China's exchange rate policies.
"One of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price. That puts us at a huge competitive disadvantage," Obama said.
A senior Treasury official told reporters on Wednesday he expected G7 finance ministers to discuss China's currency practices when they met this weekend in Canada.

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Beijing feels the heat of mounting US anger

By James Politi and Daniel Dombey in Washington
US political heat on China intensified yesterday after Barack Obama, president, raised the issue of a weak Chinese currency a day after the US Senate condemned cyberattacks on Google.
Speaking to Senate Democrats yesterday, Mr Obama warned that the US should not back down from trade with China.
"For us to close ourselves off from that market would be a mistake," he said.

But he added that currency rates needed to be addressed internationally "to make sure our goods are not artificially inflated in price and their goods are artificially deflated in price".
Tensions between Washington and Beijing have risen in the wake of a $6.4bn (€4.5bn, £4bn) US arms deal with Taiwan and ahead of an expected meeting this month between Mr Obama and the Dalai Lama, the Tibetan spiritual leader.
US senators on Tuesday voted unanimously to condemn the cyberattacks on Google and other companies that caused the search engine group to threaten to quit China.
"It is important that the US not stand idly as China infringes on the free flow of information," said Arlen Specter, the Pennsylvania Democrat.
A senior Democratic senator also asked 30 large technology groups to provide details of their human rights practices in China.
Dick Durbin, the Illinois senator and assistant majority leader, sent a sharply worded request for information to US groups such as Facebook, Apple, IBM, Amazon and Oracle and to international companies including Nokia, Vodafone, SAP, RIM and Toshiba.
He said Google set "a strong example in standing up to the Chinese government's continued failure to respect the fundamental human rights of free expression and privacy. I look forward to learning more about whether other... companies are willing to follow Google's lead".
Mr Durbin said he expected the responses to include information on the companies' business in China and any efforts to ensure their products and services did not "facilitate human rights abuses by the Chinese government".
Next week the congressional executive commission on China, which was created in 2000 to coincide with the country's accession to the World Trade Organisation, will hold a hearing focused on the cyberattacks, including the intellectual property protection issues that it raised.
Dennis Blair, the US's director of national intelligence, highlighted China's "growing international confidence and activism" in testimony to Congress this week.
But he added that Beijing's policies were largely set by its commercial interests and that its "core priority remains ensuring domestic stability".
In his evidence, Mr Blair listed the global "cyberthreat" to the US ahead of all other threats Washington faced.
He described the recent cyberattacks on Google as "a wake-up call to those who have not taken this problem seriously".

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China Shows Little Patience for U.S. Currency Pressure

The People's Bank of China in Beijing. Washington wants China to stop depressing its currency.
By MARK LANDLER
BEIJING — A senior Chinese official said on Thursday that China would not bow to pressure from the United States to revalue its currency, which President Obama says is kept at an artificially low level to give China an unfair advantage in selling its exports.
The official, Ma Zhaoxu, a Foreign Ministry spokesman, said at a regular news conference here that “wrongful accusations and pressure will not help solve this issue.”
Mr. Ma was reacting to remarks on trade that Mr. Obama made on Wednesday when he met with Democratic senators in Washington.

Mr. Obama stopped short of saying China manipulates its currency, but his words on China’s economic policies were harsh — the United States, he said, has “to make sure our goods are not artificially inflated in price and their goods are not artificially deflated in price; that puts us at a huge competitive disadvantage.”
Economists agree with that assessment.

They say that the Chinese currency, the renminbi, is undervalued by 25 to 40 percent compared to the dollar and other currencies.

The gap is wider than at any time since July 2005, when the Chinese government, under pressure from the Bush administration, decided to the do away with the renminbi’s peg to the dollar and allow the currency to float in a narrow band against the dollar and other currencies.
The renminbi appreciated 21 percent, but since July 2008 it has remained at the same value — today, one dollar equals about 6.83 renminbi, also called the yuan.
“Judging from the international balance of payments and the currency market’s supply and demand, the value of the renminbi is getting to a reasonable and balanced level,” Mr. Ma said on Thursday.
The sharp exchange over China’s currency is only the latest symptom of rising tensions in American relations with China.

Internet censorship, hacking attacks directed at American companies, arms sales to Taiwan and the pending visit of the Dalai Lama to Washington have all cropped up in the last month as points of conflict.

China is exhibiting a brash sense of confidence as its economy continues to boom while much of the world remains mired in a recession.
On economics, Chinese officials now regularly lecture their American counterparts on the need to maintain the value of the American dollar.

China, which has more than $2.4 trillion in foreign exchange reserves, is the largest holder of American debt.

On Wednesday, Xinhua, the official state news agency, said Chinese economists are concerned that the American government, suffering from a record budget deficit, could print more dollars and issue more bonds, eroding the value of the dollar.
The finger-wagging from the American side is almost certain to intensify too.

With mid-term elections this fall, Mr. Obama is under pressure to alleviate the high unemployment rate in the United States.

Mr. Obama said last week in his State of the Union speech that he hoped to double American exports within five years.
In China, the export industry is a large employer in the coastal regions and draws hordes of migrant workers from interior provinces. Exports have slowed considerably since the global financial crisis began, and Chinese leaders and economists have been saying that domestic consumption should become a larger part of the economy.
Last year, the Chinese economy grew by 8.7 percent, surpassing the 8 percent benchmark set by the government and indicating that China was managing to push through the global recession with little damage.

A large driver of the growth was domestic spending — the Chinese government announced in November 2008 a stimulus package worth $585 billion.
But the spending, along with in-flows of foreign currency through private investments and speculation, what some economists call “hot money,” is fueling inflation.

The consumer price index in the fourth quarter of 2009 was 1.9 percent. Fears of an overheated economy could lead the Chinese government to revalue the renminbi later this year to help contain inflation.
In late January, Jim O’Neill, the chief economist at Goldman Sachs, told Bloomberg News that he expected the Chinese government to make a one-off revaluation of the renminbi, letting it appreciate by at least five percent before the end of 2010.

He said the revaluation will happen suddenly, without any warning from Chinese leaders.
Reopening the battle with Beijing over its currency may pay political dividends for Mr. Obama at a time of double-digit unemployment and growing fears that China is stealing American jobs.

But experts say the president will have even less leverage over Beijing than President George W. Bush did.

Mr. Bush prodded China for years to adjust its exchange rate with little success.
China, they say, is determined to reignite its export machine after a global recession that sapped demand for Chinese goods. A cheap currency is vital to that goal.

And as indicated by Mr. Ma’s statement on Thursday, China’s leaders have grown impatient with lectures on economic policy from their chief debtor, the United States.
“It will be like water off a duck’s back,” said Nicholas R. Lardy, a China expert at the Peterson Institute for International Economics.

“They’re puzzled by the criticism. They think they should be praised for keeping their currency stable at a time of global turmoil.”
Criticizing China’s policy, however, is likely to worsen a relationship already frayed by irritants on both sides.
In two weeks, Mr. Obama is expected to meet with the Dalai Lama, the Tibetan spiritual leader, over the objections of the Chinese, who condemn him as a subversive.

The administration forged ahead with sales of weapons to Taiwan, drawing an angry blast from Beijing, which regards Taiwan as a breakaway province.

Secretary of State Hillary Rodham Clinton criticized China for censoring the Internet, in the wake of Google’s allegations about hacking.
For its part, the United States is frustrated that the Chinese will not back tougher sanctions against Iran over its nuclear program.

And China has resisted American initiatives on climate change policy, turning the recent climate meeting in Copenhagen into a diplomatic drama.
The administration has struggled to prevent the ill will from any single issue from contaminating the broader relationship.

“We can’t pick the timing of when an issue becomes important,” said a senior official, who spoke on the condition of anonymity because of the delicacy of the matter.
Exchange rates are an arcane subject, harder to explain than a meeting with the Dalai Lama. But they influence easy-to-understand issues like the competitiveness of American exports and job security.
“The currency issue has the potential to become a very hot political issue,” said Kenneth G. Lieberthal, who worked on China policy in the Clinton White House.

“We’re in significant danger of hitting a very rough patch in trade relations, in the latter part of this year.”

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It's time for the Obama administration to burst Beijing's bubble.

The Washington Post
IN ITS FIRST year, the Obama administration went out of its way to cater to China's communist leadership.

It publicly put human rights concerns on a back burner, delayed a presidential meeting with the Dalai Lama and did not press Beijing hard about its currency manipulation.

Now it appears that effort produced the opposite of the intended effect.

Rather than respond with its own gestures of cooperation, Beijing is pressing hard for more American concessions.

Bursting with hubris about its emergence as a global power, it is testing to see how far a new and inexperienced U.S. president can be pushed.
That explains China's aggressive response to the administration's announcement last week of a $6 billion arms sale to Taiwan; its dire-sounding warnings about the consequences of an expected meeting between President Obama and the Dalai Lama this month; and its public resistance to a U.S. effort to impose new sanctions on Iran.

China is trying to tilt the balance of power in its direction by forcing the administration to back away from policies and principles the United States has defended for decades.

It's essential that Mr. Obama calmly but firmly reject the pressure.
The Taiwan arms sale that prompted Beijing's latest eruption is an example not of U.S. provocation but of the Obama administration fulfilling an obligation as unobtrusively as possible. The sale was agreed to years ago by the administration of President George W. Bush; supplying Taiwan with arms is mandated by a 30-year-old act of Congress.

To abandon the deal would signal the forfeiture of U.S. security leadership in Asia.

So the administration went forward with the sale -- but it withheld the weapon most desired by Taipei, and opposed by Beijing: F-16 warplanes. It made sure China knew the announcement was coming.
Part of China's reaction -- heated rhetoric and the suspension of some military contacts -- was in line with its response to past arms sales to Taiwan.

But Beijing also threatened to impose sanctions on U.S. companies that supply the weapons, something it has not done openly in the past.

Steps against Boeing, which supplies a naval missile to Taiwan and commercial aircraft to China, would cause a major escalation in trade tensions.
At the moment, Mr. Obama's most active diplomatic initiative is the effort to win U.N. Security Council approval for tough sanctions against Iran, something that will require China's cooperation.

The administration also hopes President Hu Jintao will attend a disarmament conference in Washington in April that is one of Mr. Obama's signature initiatives.

It may be tempted to believe that more conciliatory gestures -- another postponement of the Dalai Lama, or a slacking of support for Google's challenge to Chinese censorship of the Internet -- may unlock China's cooperation.
That would be a mistake.

Instead Mr. Obama should forthrightly support the cause of human rights in Tibet, and he should allow China to face potential isolation on Iran.

The administration rightly says it hopes to cooperate on issues of mutual interest while not shrinking from differences. That, in fact, is the status quo that Mr. Obama inherited.

Reinforcing it might require Mr. Obama to prick the bubble of inflated ambition that has been growing in Beijing.

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Changing China tied to rough ride with U.S.

By Chris Buckley
BEIJING -- "Ride on a tiger and it's hard to climb down," goes a Chinese saying that is proving apt for Beijing's quarrels with Washington this year, when swollen ambitions at home are driving China on a harder tack abroad.
China's outrage over U.S. arms sales to Taiwan and President Barack Obama's planned meeting with the Dalai Lama has shown that, in the wake of the global financial crisis, Beijing is growing pushier in public.
In past decades, a poorer, more cautious China greeted U.S. weapons sales to the disputed island with angry words and little else.
Not now, as China enters the Year of the Tiger in its traditional lunar calendar cycle of talismanic animals.
The Obama administration last week announced plans to ship $6.4 billion of missiles, helicopters and weapons control systems to the self-ruled island Beijing calls its own. China threatened to downgrade cooperation with Washington and for the first time sanction companies involved in such sales.
Beijing this week also condemned Obama's plan to meet the Dalai Lama, the exiled Tibetan leader reviled by China.
China's loud ire adds to signs the country is becoming surer about throwing around its political weight, growing along with an economy soon likely to whir past Japan's as the world's second biggest, though it will still trail far behind the United States.
Behind this assertiveness are domestic pressures likely to make it harder work for China's leaders to cool disputes with Washington and other Western capitals.
"There is this paradox of increasing confidence externally and lack of confidence domestically," said Susan Shirk, a professor specialising in Chinese foreign policy at the University of California, San Diego.
"There's also what I consider a serious misperception of the country's economic strength and how that translates in power."

RESPECT AND REACH
Chinese citizens and powerful constituencies, including the military, have been told through state media and leader's speeches that the nation's rising power would bring the nation greater international respect and reach.
"Staunch and cool-headed, battling the roaring waves," said one headline in the People's Daily, celebrating President Hu Jintao's role in fighting the financial crisis.
Having pulled through the global downturn with 8.7 percent growth in 2009, China's leaders face pressure to meet those expectations, or risk seeing their authority eroded.
Well-placed analysts do not expect Sino-American friction to spiral into full-blown confrontation. Both sides have too much at stake, economically and politically.
But China's stirring home-grown pressures will discourage Beijing from quietly stepping down over Taiwan and Tibet, and could encourage harder positions over trade disputes, exchange rate shifts and climate change policy, where national pride and prosperity are seen by many as threatened.
"These perceptions of strength create expectations on the part of the Chinese public of how their leaders will behave internationally," said Shirk, who served as a Deputy Assistant Secretary of State in the Clinton administration.
"It's too early to say there's been a strategic shift," she added. "But clearly it's going to be a difficult period for relations with the United States."

NOT A PASSING SQUALL
China's top-down political system gives the ruling Communist Party immense power to drive foreign policy.
But that power is not unconditional.
As revolutionary Communist ideology has sputtered, and social controls loosened by market reform, appeals to patriotic pride and national revival -- "prosperity and power" -- have become pillars of Party authority.
China's leaders must in turn heed public reactions in crafting foreign policy, especially dealing with volatile subjects such as Taiwan and Tibet, seen by most Chinese as unquestionably parts of their country.
"It's almost like a positive feed-back loop that puts China in a position where it can't be seen as weak or compromising, because people have had it drummed into them that China can't be weak or compromising," said Drew Thompson, director of China Studies at the Nixon Center, an institute in Washington, D.C.
With China boasting robust growth while Western economies floundered, those public expectations have swelled.
In a poll by the Pew Global Attitudes Project (pewglobal.org) last year, 41 percent of Chinese respondents said the United States was the world's leading economic power.

The same number, 41 percent, named their own country, China -- almost double the number who named it in 2008.
The U.S. gross domestic product was actually worth $14.2 trillion in 2008, while China's was worth $4.6 trillion -- for a much bigger population -- according to the respective statistics of each country.

PRESSURE FROM THE INTERNET
The domestic pressures bearing on China's leaders are clearest and loudest on the Internet, which the government says has 384 million users.
Nationalist calls for tough steps against the United States, Japan or other countries echo online at times of tension, and can reach beyond what officials deem acceptable.
"The Chinese government does pay careful attention to opinion on the Internet, and these troubles with the United States will affect that public opinion," said Liu Jiangyong, a professor of international relations at Tsinghua University in Beijing.
A Chinese public opinion poll last year organised by the Sydney-based Low Institute for International Policy found 50 percent of respondents thought the United States was a threat to their nation's security.

Younger Chinese citizens were more likely to support that view.
"The U.S. view that this will all be a passing squall could be out of date," said Liu, who formerly worked as a government adviser. "China's expectations for itself are changing."
Powerful arms of China's state could also bolster a harder stance against the West.
China's Communist Party leaders keep a tight leash on the country's military.
But after over two decades of near unbroken double-digit percentage growth in the official defence budget, People's Liberation Army officers have become more public about their expectations, including for a tough stand on Taiwan.
Major-General Jin Yinan of China's National Defence University said in a Communist Party newspaper last month his government would have to punish the United States if it went ahead with selling new arms to Taiwan.
"Our only choice is vigorous retaliation," he wrote in the Study Times, the newspaper of the Central Party School.
Whether China really does take counter-steps awaits to be seen. The government has so far not specified any penalties on the U.S. companies selling the arms.
Nor have officials even hinted at broader trade and economic hits at the United States, steps that could maul China's own economic health, alarm international investors, and turn public feeling against the government.
But abandoning the threats of sanctions could also prove humiliating at home and abroad.
"China has few palatable options for economic coercion," wrote Thompson in a comment on the arms sale dispute.

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Dalai Lama firm on Obama meeting

By Saransh Sehgal
DHARAMSALA, India - The Dalai Lama's envoys in Beijing have refused to bow to pressure from China to steer the Tibetan spiritual leader away from meeting US President Barack Obama.
In talks this week, Chinese and Tibetan government-in-exile officials failed to narrow their differences over Beijing's rule of Tibet as an autonomous region, Kelsang Gyaltsen, one of Dalai Lama's two envoys told Asia Times Online. Beijing raised the issue of his planned visit to the US later this month.
"Our reply was that the since 1991 every American president has met with His Holiness the Dalai Lama whenever he is in Washington DC, which is the reflection of the strong sympathy... for the Tibetan people," Gyaltsen said in the interview on his return to Dharamsala, where the exiled leader has been based since 1959.
After the riots in Lhasa, Tibet's capital, two years ago Beijing has repeatedly warned leaders of foreign countries with diplomatic ties with China not to meet the Dalai Lama, saying this would hurt their relations.

The possible Obama-Dalai meeting adds to the issues troubling US-Sino relations, together with US latest arms sales to Taiwan and Google's planned withdrawal from China over allegations of Chinese state support for hacking accounts.
The talks held this week in Beijing were the first for 15 months after riots on March 14, 2008, and a security clampdown of Tibetans in the run-up to the Beijing Summer Olympic Games later that year soured relations.
Gyaltsen brushed aside the view that Beijing agreed to resume talks with a purpose to prevent an Obama-Dalai meeting: "I don't think so because I think the American administration has always been very clear that President Obama will be going to meet with His Holiness."
At a press conference in Beijing after the conclusion of talks with the Dalai Lama's envoys, Chinese negotiator Zhu Weiqun, executive vice minister of the Communist Party's Central Department of United Front Work, warned of serious damage to Sino-US relations if the US leader were to meet the Dalai Lama, saying the move would "harm others but bring no profit to itself either". A meeting would be irrational and harmful, he said.

"If a country decides to do so, we will take necessary measures to help them realize this."

Washington brushed the warning aside. ''The president told... China's leaders during his trip last year that he would meet with the Dalai Lama, and he intends to do so," White House spokesman Bill Burton said on Tuesday.

"The Dalai Lama is an internationally respected religious and cultural leader, and the president will meet with him in that capacity.''
No date has been set for the meeting, Burton said.

The Dalai Lama is scheduled give talks in California and Florida from February 21 to 24. It would be possible for him to meet Obama after then. He is due to return to Dharamsala for a lecture on February 28.

Chinese Foreign Ministry spokesman Ma Zhaoxu repeated on Wednesday that "China resolutely opposes the visit by the Dalai Lama to the United States, and resolutely opposes the US leader having contact with the Dalai Lama in any name or any form".
Apart from this, Beijing and the Dalai Lama failed to narrow their differences on their positions on the Tibet issue.
At the press conference in Beijing, Zhu said Beijing and the Dalai Lama had "sharply divided" views in the latest talks.

"We have been accustomed to such a confrontation as views had been divided in previous talks," he was quoted by the Xinhua News Agency.
The talks "had some upside" as they let both sides know exactly their differences and how wide these were, Zhu said.

"It helps the Dalai Lama realize the position he has been in," he said, adding that the talks were not fruitless, as the central government arranged trips for the envoys to visit central Hunan province to better understand the country and the regional ethnic autonomy policy. The biggest difference lies in their interpretations of "Genuine autonomy for all Tibetans".

Zhu said that during previous round of talks, Lodi Gyari -- another envoy of the Dalai Lama -- had presented a "Memorandum from All Tibetans to Enjoy Genuine Autonomy", "intentionally using obscure words to explain the meaning of Greater Tibet and a high degree of autonomy". When the memorandum was rejected by the central government, Gyari said he would not want new talks, Zhu said at the press conference.
In the interview with Asia Times Online, however, Gyaltsen said: "We are not talking about greater Tibet, what we are talking about is that Tibetans living on the Tibetan plateau should not be divided in many parts but should be administrated under [a] single administration.
"Our demand is clear and simple -- the provision must be enshrined in the Chinese constitution as well as in the Chinese laws governing regional autonomy be implemented for the Tibetan people."

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China says Swiss asylum for Uighurs will harm ties

Swiss deputy director of the federal office of justice, Rudolf Wyss, left, looks on as federal councilor and justice minister Eveline Widmer-Schlumpf speaks at a press conference concerning the admittance of two Uighur Guantanamo Bay detainees to Switzerland, in Bern, Wednesday, Feb. 3, 2010. The Swiss government has given final approval for two Chinese Guantanamo inmates to be resettled in northwestern Switzerland. Beijing has said in the past that it wants the two ethnic minority Uighurs sent back to China, alleging they are terrorists

The Associated Press

BEIJING -- China said Thursday that a Swiss government decision to approve the resettlement of two Chinese inmates at the Guantanamo Bay detention center would harm relations between the countries.
The Swiss government on Wednesday approved the resettlement of the two, who are brothers from the ethnic Uighur minority, as part of its commitment to help President Barack Obama's administration close the much-criticized detention center that holds "enemy combatants" captured in the war on terrorism.
Foreign Ministry spokesman Ma Zhaoxu told a regular news conference Thursday that the decision "will surely undermine Chinese-Swiss relations."
Ma said the brothers were members of a group called the East Turkistan Islamic Movement, which China has called a terrorist outfit.
Beijing has demanded that the brothers, and other Uighurs held in Guantanamo, be sent back to China. However, the Obama administration has sought to resettle them in third countries out of worry that Uighurs might be persecuted back home.

Ma did not say what action, if any, China would take against Switzerland.
Switzerland's justice minister said the decision to take in the Uighur brothers was guided by humanitarian principles and should not be interpreted as giving preference to one country over another.
"We have stable, good relations with China and we want to keep them that way," Justice Minister Eveline Widmer-Schlumpf told reporters in the Swiss capital, Bern.
China's western region of Xinjiang has been tense in recent years. Nearly 200 people were killed last July in China's worst ethnic riots in decades.

Beijing accuses overseas Uighur groups of being behind the violence, while Uighurs say they have faced discrimination by China's majority Han population.
The brothers, who have been held in Guantanamo since being captured in Afghanistan in 2001 and 2002, will probably be transferred to Switzerland within a month, she said.

In January, an Uzbek became the first former inmate of the U.S. detention center to be resettled in Switzerland.
Six other Uighurs went to the Pacific island nation of Palau last year. Another four were resettled in Bermuda.

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One year on, China stays silent on missing lawyer

In this Friday, Feb. 24, 2006 photo, Gao Zhisheng gestures during an interview at a tea house in Beijing, China. The Chinese human rights lawyer missing for almost a year has been judged by legal authorities and "is where he should be," a Foreign Ministry official said in China's first public comment on the case.

By CARA ANNA
BEIJING -- One of China's most daring activist lawyers disappeared a year ago Thursday, and the government that so closely monitored him has not explained where he is, infuriating even those used to Beijing's indifference to outside pressure on human rights.
High-profile dissidents have disappeared in China before, but not for so long without details from authorities.

Family and friends have no idea whether Gao Zhisheng, who had been under strict police surveillance, is even in custody.
Officials have been teasingly vague, with a policeman telling Gao Zhiyi his brother "went missing" and a Foreign Ministry official last month saying the self-taught lawyer "is where he should be."

As is typical in China, state-run media have not mentioned the case.
"Why are you in such a hurry? Just wait," police told Zhiyi a few days ago, then hung up, Gao's wife said Wednesday night.
China's surprisingly casual response to a high-profile case raised repeatedly by U.S. officials, the United Nations and rights groups is a troubling sign of the country's overall hardening stance on a wide range of issues, experts said.

They pointed to ever-tightening Internet controls, last month's execution of a British man with reported mental problems and the unprecedented threat of sanctions against companies involved in a planned U.S. arms sale to Taiwan.
"All things combined contribute to the sense that things are deteriorating," said Joshua Rosenzweig, research manager for the U.S.-based Dui Hua Foundation, which has been seeking Gao's whereabouts.
The group has had some past success in negotiating the freedom of Chinese political prisoners, but in Gao's case the information has run dry.

The group last heard from officials in November, when it was told Gao wasn't in custody.
A U.S. Embassy spokeswoman said Wednesday the government is "deeply concerned" about Gao's safety.

"We have raised our concerns about Mr. Gao's well-being and whereabouts repeatedly, both in Washington and in Beijing," said Susan Stevenson. She said she couldn't talk about the details of diplomatic exchanges, including China's response.
Repeated phone calls and faxes to Beijing police asking for information about Gao have been ignored. Visits this week to Beijing's high court turned up nothing.
The scattered responses from officials have made Gao's friends and supporters even more worried about the forceful but charming man who took on extremely sensitive cases involving underground Christians and the banned Falun Gong spiritual group, and faced intense police harassment in return.
In a written statement made public just before he disappeared last year, Gao described severe beatings from Chinese security forces, electric shocks to his genitals and cigarettes held to his eyes during a 2007 detention.
"Your death is sure if you share this with the outside world," one of his jailers warned him, Gao wrote.
Some supporters fear the worst.

"I think at this point, most of us probably would settle for knowing he's alive and well," Rosenzweig said Wednesday.
Supporters will mark Gao's one-year disappearance Thursday.

The China Human Rights Lawyers Concern Group and others said they would demonstrate in Hong Kong.

Rights group Freedom Now plans to file a legal petition in Geneva with the U.N., asking it to put pressure on China to say where Gao is.
Even those accustomed to China's treatment of rights cases have grown exasperated with the government's response this time.
"The charade goes on," Jerome Cohen, an expert on China's legal system at New York University School of Law, said after the Foreign Ministry's comments last month.
The outspoken, rough-edged Gao was once so successful that China's Justice Ministry named him one of the country's top 10 lawyers in 2001 for his work in property rights. But then he pushed too far for officials' comfort.
He began to take on highly sensitive cases and eventually spoke out for constitutional reforms.
Like many of China's activist lawyers, he insisted that he was only pushing Beijing to follow and respect its own laws.
He was arrested in August 2006, convicted at a one-day trial and placed under house arrest. State media at the time said he was accused of subversion on the basis of nine articles posted on foreign Web sites.
Meanwhile, the constant police surveillance wore on his wife and children.

They finally fled China a month before Gao disappeared and were accepted by the United States as refugees.
Geng He didn't say goodbye to her husband, who wasn't at home at the time. She left him a note, apologizing.
The family's modest apartment in northern Beijing remains unoccupied. Neighbors said Wednesday the family was now in the United States.
They assume Gao is with them.

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China Won't Be a 'Responsible Stakeholder'

Washington needs to revise its approach to managing the rise of the Middle Kingdom.
By JOHN LEE
Reaching for the impossible

President Barack Obama, the world's most powerful person, spent much of 2009 attempting to charm, accommodate and appease the world's second-most powerful person—Chinese President Hu Jintao.

In return, on issues ranging from the revaluation of the Chinese currency to North Korea, Iran, climate change and human rights, China ignored, rebuffed or even rebuked American requests and advances.

Yet even if Republicans and many members of Congress are correct that being too soft on China is part of President Obama's problem, the reverse— getting tougher—is not a complete solution.
As Mr. Obama heads into 2010 determined to prove that he has the mettle to complement his charm, he needs to solve a much deeper problem.

The much lauded and still authoritative framework enunciated by former Deputy Secretary of State and current World Bank President Robert Zoellick to help China rise as a "responsible stakeholder" within the United States-led international system is failing.

The success of America's future China policy depends on Mr. Obama (or the person who replaces him in 2012) having the courage and creativity to construct a new approach.
Mr. Zoellick's framework argues that the best way to "manage" the rise of China is to offer it a stake in the existing international system within which China benefits.

China is thus encouraged to be a status quo power within a U.S.-led regional and global order. This is a clever advance from old-fashioned containment or appeasement strategies.

But the limitations and weaknesses of the responsible stakeholder framework mean China will be less accommodating and more defiant as time passes.
First, Washington erroneously assumes it can shape Chinese goals and purposes.

The "responsible framework" merely shapes the means by which Beijing conducts its foreign policy.

Although encouraging China to be a responsible stakeholder is seen by the U.S. as the end-game and ultimate purpose of a constructive China policy, internal debates within China reveal that Beijing simply sees behaving as a responsible stakeholder as a transient strategy to bide its time while it builds what it terms Chinese "comprehensive national power."
Second, the responsible stakeholder approach is designed to entrench China as a status quo power because it has been allowed to benefit from the current system.

For example, China benefits enormously from the U.S. naval role in the South China Sea, which creates helpful conditions for trade and commerce to thrive by protecting trade routes.

Yet while the U.S. devotes ships, men and money to these efforts, China benefits as a security free-rider in the region instead of a trusted contributor.

China has not become an entrenched stakeholder within the U.S.-led region. Indeed, its disruptive claims to over four-fifths of the South China Sea have only intensified rather than faded as it continues to rise within the existing order.
Third, the approach assumes there is no alternative for emerging states but to compete within the existing open and liberal order.

The responsible stakeholder framework does not account for the fact that rising participants—especially genuinely powerful ones—can seek to gradually dismantle and redesign the current order from within.

Note Beijing's attempts to create an alternative order in Central Asia and Africa.

Already, subversion and "winning without fighting," rather than confrontation and contest, is the preferred Chinese strategy for facing both the U.S. and the current regional order in Asia-Pacific.
Fourth, the responsible stakeholder framework also assumes that Chinese interests and ambitions are elastic and can be molded according to the circumstances of China's rise.

This argument ignores compelling historical and contemporary evidence that China is predisposed to seek leadership of Asia and to recast the regional order according to its preferences.

After all, regaining its paramount place in the region is inextricable from reversing what Chinese history books describe as 150 years of humiliation at the hands of Western and Japanese powers.
Finally, encouraging China to be a responsible stakeholder places enormous faith in a strong liberal line of thinking.

The argument is that as China becomes more integrated into the existing security, economic and diplomatic order, it will take bigger steps toward political reform and democratization.

But the structure of China's political economy means that its economic rise has disproportionately increased the wealth and resources of the state, enhancing Beijing's capacity to resist domestic and external pressure for change.
The U.S.-China bilateral relationship is the most important one in the world. But the flaws in the relationship model constructed by Washington are becoming more apparent.

The next generation of China's leaders, due to assume power in 2012, are already talking about the next phase of an increasingly bipolar world.

We should hope that the U.S. President who takes office 2013 will also be prepared.

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Obama Urges Pressure on China to Open Markets

By HENRY J. PULIZZI
WASHINGTON—President Barack Obama said the U.S. will put "constant pressure" on China and other countries to open their markets, but warned that to "close ourselves off... would be a mistake."
"I would not be in favor of revoking the trade relationships that we've established with China," Mr. Obama told Senate Democrats Wednesday.
He said the U.S. would need to monitor foreign-exchange policies around the world to make sure countries aren't giving themselves an unfair advantage by devaluing their currencies.

He didn't specifically mention the Chinese yuan, though the U.S. has long pushed for Beijing to let the currency appreciate.
"One of the challenges that we've got to address internationally is currency rates and how they match up, to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price," Mr. Obama said.

"That puts us at a huge competitive disadvantage."
The president, who slapped tariffs late last year on Chinese tire imports, said he would continue to make sure that countries live up to their sides of trade agreements with the U.S.
Trade relations between Washington and Beijing have become more tense over the last year, with the U.S. taking action against China for violating trade rules on a host of products and China accusing the U.S. of protectionism.
"The approach that we're taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways," Mr. Obama said.
But Mr. Obama, who vowed to put a "much bigger emphasis" on export promotion, said the U.S. can't shy away from international competition.
"Our future is going to be tied up with our ability to sell products all around the world and China is going to be one of our biggest markets, and Asia," Mr. Obama said, answering a question from Sen. Arlen Specter (D., Pa.).
Mr. Obama's meeting with Senate Democrats follows his session with House Republicans last week in Baltimore, and gave him a chance to pitch his agenda for job creation, health care and financial regulatory reform in front of a more receptive audience.
Many of the questioners, including Specter and Sen. Kirsten Gillibrand (D., N.Y.), face tough battles in November's mid-term elections.
The president said he still hopes to find bipartisan solutions, but pledged to call out Republican lawmakers "when we extend a hand and get a fist in return."
"I'm open to honest differences of opinion, but what I'm not open to is changing positions solely because it's good short-term politics," he said. "And what I'm not open to is a decision to stay on the sidelines and then assign blame."
Mr. Obama also renewed his push for regulatory reform and his proposed $30 billion program to kickstart lending to small businesses. He said that initiative, which would use funds from the Troubled Asset Relief Program, should be part of a broader jobs bill rather than implemented through executive order.
Mr. Obama said the focus on small-business lending is essential because there is "a sense that the pendulum has swung too far," with regulators being too cautious. The challenge, he said, is "to make sure that there's a consistency of approach that doesn't prevent banks from making what are good loans and taking reasonable risks."

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Obama to meet Dalai Lama despite Chinese intimidation

* Obama will meet the Dalai Lama - White House
* Beijing says will pursue sanctions over Taiwan arms
* U.S. says China has over-reacted, eyes dialogue
* China not forthcoming on specifics of retaliation
By Chris Buckley and Doug Palmer
BEIJING/WASHINGTON -- U.S. President Barack Obama still plans to meet the Dalai Lama, the White House said on Tuesday, despite China's warning that such a meeting would hurt ties already strained by U.S. weapons sales to Taiwan.
Digging in on two points of discord, China vowed to impose unspecified sanctions against U.S. companies selling arms to Taiwan and said any meeting between Obama and the exiled Tibetan Buddhist leader would hurt bilateral ties.
The White House shrugged off Beijing's warning.
"The president told China's leaders during his trip last year that he would meet with the Dalai Lama and he intends to do so," White House spokesman Bill Burton told reporters traveling with Obama to New Hampshire.
"We expect that our relationship with China is mature enough where we can work on areas of mutual concern such as climate, the global economy and non-proliferation and discuss frankly and candidly those areas where we disagree."
China has become increasingly vocal in opposing meetings between foreign leaders and the Dalai Lama, who Beijing deems a dangerous separatist.

A meeting between the Tibetan leader and Obama would raise tensions between the world's biggest and third-biggest economies.
Ties between the United States and China have also soured over trade and currency quarrels, cyber security and control of the Internet, and Beijing's jailing of dissidents.
U.S. State Department spokesman P.J. Crowley said Washington wanted to "work through" disputes in various bilateral meetings the United States has with China.
"You have two of the most powerful nations on earth and our interests coincide in many areas and our interests collide occasionally in a handful of those," he told reporters.
A senior Democratic senator said on Tuesday he had asked 30 companies, including Apple, Facebook and Skype, for information on their human rights practices in China in the aftermath of Google's decision to no longer cooperate with Chinese Internet censorship efforts.
"Google sets a strong example in standing up to the Chinese government's continued failure to respect the fundamental human rights of free expression and privacy," Assistant Senate Majority Leader Dick Durbin said.
Google, the world's top Internet search engine, said last month it would not abide by Beijing-mandated censorship of its Chinese-language search engine and might quit the Chinese market entirely because of cyber attacks from China.
Recent cyber attacks on Google were a "wake-up call" and neither the government nor the private sector can fully protect the U.S. infrastructure, Dennis Blair, director of national intelligence, said on Tuesday.
"Malicious cyber activity is occurring on an unprecedented scale with extraordinary sophistication," he said in written testimony for a Senate intelligence committee hearing.
"China's aggressive cyber activities" were among challenges posed by the Chinese military, Blair added.

'DAMAGE TRUST'
There had been expectations that Obama would meet the Dalai Lama as early as this month, when the Tibetan leader visits the United States. The White House has not announced a schedule.
Zhu Weiqun, a vice minister of the United Front Work Department of China's ruling Communist Party, said Beijing would vehemently oppose a meeting.
"If the U.S. leader chooses this time to meet the Dalai Lama, that would damage trust and cooperation between our two countries, and how would that help the United States surmount the current economic crisis?" said Zhu, whose department steers party policy over ethnic issues.
China routinely opposes meetings between the Dalai Lama and foreign leaders, especially after violent unrest spread across Tibetan areas in March 2008.

Beijing blamed the Dalai Lama's "clique" for the turmoil, a charge he repeatedly rejected.
Previous U.S. presidents, including Obama's predecessor George W. Bush, have met the Dalai Lama, drawing angry words from Beijing but no substantive reprisals.
But when French President Nicolas Sarkozy would not pull out of meeting the Dalai Lama while his country held the rotating presidency of the European Union in late 2008, China hit back by canceling a summit with the EU.
The Dalai Lama has said he wants a high level of genuine autonomy for his homeland, which he fled in 1959. China says his demands amount to calling for outright independence.
China recently hosted talks with envoys of the Dalai Lama but they achieved little.
The United States says it accepts Tibet is a part of China but wants Beijing to sit down with the Dalai Lama to address their differences over the region's future.

TAIWAN ARMS SALES
Beijing is already irate over U.S. proposals last week to sell $6.4 billion of weapons to Taiwan, the island that China treats as an illegitimate breakaway province.
The United States switched diplomatic recognition from Taipei to Beijing in 1979 but Washington remains Taiwan's biggest backer and is obliged by the 1979 Taiwan Relations Act to help in the island's defense.
Blair told the Senate intelligence hearing that China-Taiwan ties were now "relatively stable and positive" with progress on economic deals across the Taiwan Strait.
"Nevertheless, the military imbalance continues to grow, further underscoring the potential limits to cross-Strait progress," he said.
Chinese Foreign Ministry spokesman Ma Zhaoxu on Tuesday repeated Beijing's threat to impose "corresponding sanctions" against U.S. companies that sell arms to Taiwan, saying the firms had "ignored China's opposition."
He offered no details on how China would impose sanctions.
Companies that could be affected by Chinese sanctions include Sikorsky Aircraft Corp, a unit of United Technologies Corp; Lockheed Martin Corp; Raytheon Co; and McDonnell Douglas, a unit of Boeing Co.
Bruce Lemkin, deputy under-secretary of the U.S. Air Force, said China had over-reacted to the arms sales.
"The U.S. has been consistent with our stated policy and we carry out those policies," he said. "So certainly we believe that China should continue to work with us on issues of mutual concern and to work with Taiwan."
China says the arms dispute will also damage cooperation with the United States over international issues.

Washington has sought stronger Chinese support over several hotspots, chiefly the nuclear ambitions of Iran and North Korea.
A former senior U.S. diplomat earlier told Reuters that China may not follow up strong words with strong measures.
"Let's watch what they do, not what they say, because sometimes tough words in China are a substitute for tough action," said Susan Shirk, a professor specializing in Chinese foreign policy at the University of California, San Diego.

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Who Needs Whom More?

By PHILIP BOWRING
HONG KONG — Is what’s good for U.S. business good for the United States?

That old question has become pertinent again as the Obama administration stumbles in its relationship with Beijing.
Last week, the U.S. announced a weapons sale worth $6 billion to Taiwan. The United States has been selling defensive weapons to Taiwan for decades, but this latest deal set off strong reaction from a newly confident Chinese leadership, one that wants to believe that Washington is dependent on Beijing to finance its budget and trade deficits.
Beijing has responded to the weapons sales with threats of trade sanctions that are making some big U.S. companies, such as Boeing, nervous.

Likewise, technology companies with interests in the China market are worried about the fall-out from tensions over Google’s anti-censorship stance and charges of hacking.
So far, the Obama administration has been unwilling to call China’s bluff over its exchange rate and capital controls or sanctions threats, which run contrary to free trade principles.

Instead of a strategy for addressing the inequalities in the trade relationship, there are fitful protectionist outbursts, for example over tires.

The U.S. needs to regain its self-confidence and make Beijing face the question: Who needs whom more?
Forget diplomatic horse-trading on issues such as North Korea and Iran. Look instead at how real or imagined China business opportunities obstruct action by Washington.
China’s threats, explicit or implied, are at the very least contrary to the spirit of open trade.

But the concerns of a few businesses seem uppermost. They feed both on immediate sales prospects and the belief that China will continue to be a global growth leader for years to come.
For sure, individual companies may suffer from Chinese retaliation. But the U.S. government’s job is to look after national, not individual, corporate interest.

Take a long view and ask: Who has benefited most from the explosion of the U.S.-China trade and investment?
Years before China joined the World Trade Organization it enjoyed many privileges in America. The United States offered access to its markets, its capital and much of its technology to encourage the development of a market and private capital-based economy.
It hoped that China would join a U.S.-led world system and liberalism and democracy would follow in the wake of economic opening.

Others — Japan, Korea, Taiwan, Germany — played big roles in China’s trade-led modernization, but only following a U.S. lead.
China seized the trade and investment opportunities, but economic liberalism has failed to deliver its political counterpart.

The present trend is in the opposite direction: Success is fossilizing China’s political system and spurring nationalism and a military build-up.
Despite years of massive trade deficits, of seeing intellectual property stolen and profits on investment in China snatched from under their noses, U.S. businesses are still pursuing the rainbow of China growth.
Of course there are big U.S. winners. There are the brand names and retailers who fatten their margins by squeezing their Chinese suppliers. There are the manufacturers for whom loyalty to U.S. shareholders far exceeds loyalty to U.S. workers, and the investment bankers who have made vast sums bringing Chinese companies to foreign stock markets.
U.S. consumers have benefited. But then the U.S. might have benefited if Mexico or other friendly, open, democratic neighbors had been the supplier.
China, for a variety of reasons — including size, sense of historical grievance, level of development, nationalist aspirations and one-party rule — only plays by Western rules when those are to its advantage.
Other countries do that too at times, of course. But the asymmetry in the U.S.-China relationship transcends all of these.

Pushed by a mix of idealism and business interests, the United States clings to its hopes of tutoring China in freedom and private capital. But China is not listening. Nor is China listening to common sense.
An unsustainable trade imbalance with the U.S. remains largely unaddressed despite a long U.S. recession.

The West stands frozen in awe of an economy that has a grand exterior but, like the fast-growing Soviet economy of the 1950s, requires ever more capital to produce a unit of output.

Meanwhile China — and some Western commentators — naïvely believes that a trade surplus and massive foreign exchange reserves ensure stability. Look at Japan since 1990 or the U.S. in the 1930s.
No one wants a trade war. But the U.S. is in a stronger position to wage one than a half-modernized China still relying on foreign markets and foreign companies’ technology and investment.
Does President Obama have the guts to start a modest confrontation, like Nixon over gold convertibility in 1971, while he can control events? Or will events overtake leaders in both the U.S. and China?

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Chinese hacking -- A veteran correspondent recounts hints of surveillance

An intelligence service in Britain is warning that business travelers in China are targets of state hacking, China stole valuable bid data from US energy companies computers. A former China correspondent recounts his own brushes with surveillance.
By Robert Marquand

The Google logo is seen on the top of its China headquarters building behind a road surveillance camera in Beijing on January 26.

Paris – China’s “Googlegate,” and the newly disclosed British MI5 warnings on business traveler espionage in China – are helping bring global attention on a long-standing problem.

First, Chinese hackers got caught toying with Google accounts of human rights investigators.

US Secretary of State Hillary Rodham Clinton gave a tough speech in January on Internet freedom and against arresting bloggers, saying “an attack on one country’s network is an attack on us all.”

The Foreign Correspondent’s Club of China (FCCC) sent a warning note to members about foreign bureau emails being hacked and diverted to other accounts.
But it's the tip of the iceberg.
Some sense of the iceberg’s size is hinted at in a Christian Science Monitor exclusive Jan 17, showing that three major US oil companies were hacked and “bid data” -- details on the “quantity, value, and location of oil discoveries worldwide” -- was compromised.

Many experts think the hack came from the People’s Republic of China.
What’s new about “Googlegate” is the open discussion.

A US company and the White House seem to agree on rules and norms on Internet protection -- and say so openly.

Gady Epstein, a veteran correspondent in China now with Forbes, states: “I see that as a good thing.”
So now it comes out that British firms were warned by MI5, the intelligence service, a year ago about espionage on British execs and travelers to China – asserting that the People’s Liberation Army and the Public Security Bureau try to plant Trojan horse malware in the computers of foreign energy, public relations, and defense firms.
The behavior itself is not new.

In 2000 when I started work in Beijing I was told that all forms of communication were compromised – save, for some reason, fax machines.

Cell phones were easily tapped and could be used as a microphone by the Public Security Bureau – even when the phone was shut off.
The extent of such intrusion came out in the 14-page British report, titled “The Threat from Chinese Espionage,” which contains references to honey traps, manipulation, and other games: “Hotel rooms in major Chinese cities such as Beijing and Shanghai which have been frequented by foreigners are likely to be bugged. Hotel rooms have been searched while the occupants are out of the room,” the report asserts.
The report was promptly rebutted in the Beijing magazine Global Times, which quoted military strategist Dai Xu as saying that “MI5's report is purely unfounded fabrication.”
Journalists working in Beijing offer clues to the contrary: Once I came home early from a film series I’d been attending like clockwork on Fridays for months.

I left the theater after 30 minutes and went straight home. I walked in the living room to find my computer turned on, and cookie crumbs littered on the keyboard.

I don’t eat cookies, but kept a bag on the kitchen for guests. Hey, just who was in the cookie jar?
Another time I returned home, switched on the laptop, and found a new list of files appearing in the “most recent” story field. All related to material gathered in a visit to Japan. I hadn’t opened them in weeks. Hmmm.
Is diverting emails – one of the charges of the FCCC and Google -- new?

In 2003 our office computer was discovered to be diverting emails from an academic list serve to another address. We changed addresses and blocked access. What to do?
One thing we did was invite a senior Chinese engineer from Microsoft, a friend of a friend, to examine our computers.

A brilliant guy, sympathetic. He examined the machines, installed state of the art filters. Then he casually said something I well remember: If someone really wants to hack your account, they can.

“Most of the protection is psychological; it only makes you feel better,” he said.
The list goes on.

We arrived in Beijing with a cordless phone. But the phone wouldn’t work in the next room. It turns out there was so many electronic bugging systems in the wall that the phone signal was wiped out.
Actually, after a while, a journalist takes a pragmatic view: China employs people to watch foreigners; it’s their job.

That’s how China rolls now. It’s a one-party state.

Moreover, Chinese patriots can marshal arguments of hypocrisy and double standards – pointing out that the US has long sent surveillance aircraft along its coasts, or that the US conducts surveillance on its own citizens, too, particularly since 9/11. That list also goes on. And it should and does get heard.
But it should not divert attention from the main issue: lack of transparency, and intrusions that go on and on, unmentioned. Unlike the stakes for journalists, they also involve large sums, and strategic information.
The tech-policy blogger Nate Anderson notes in the wake of Googlegate in China, “A basic message has crystallized… as editors and reporters cover the basic talking points and conduct interviews with Chinese officials: there's a double standard at work, all our censorship is legal, and China had nothing to do with Google hacking.”
Before leaving Beijing in 2006, I called my editor and for the first time set hard dates for departure.

An hour later I went to lunch at a much-loved noodle shop.

Minutes later a personable young woman approached me, and sat down.

She soon got to the point: She represented a small moving company that relocated diplomats and journalists, just in case I might ever happen to need one.

I took her card, and ended up using her service. It was a good move; nothing was broken.

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The China Export Edge

By ALEXANDRA HARNEY
Anyone pinning their hopes on a rapid revival in American manufacturing as a result of a revaluation of China's currency needs to meet Ben, the owner of a coastal Chinese shoe factory.
Conventional wisdom holds that exporters in China like Ben, a Chinese man who asked that his surname be withheld to protect his competitive advantage, should have been devastated by the Great Recession of 2008-09.

China's export volume shrank 16% in 2009, and some 23 million migrant workers lost their jobs in the downturn.
But last year was Ben's best ever.

As his competitors teetered, Ben invested $2 million in new equipment to shift away from making cheap, no-brand shoes and into steel-toe work boots, hiking shoes and branded athletic footwear.

He now produces these under contract for well-known Western companies. Ben's average selling price has almost tripled. Sales are up more than 50% year-on-year.
China has turned the Great Recession into the Great Opportunity, growing its share of imports in the United States to 19.1% from 15.9% between November 2008 and November 2009.

That share is only going to increase, regardless of what Beijing does with the yuan.

After years of accumulating market share and building the infrastructure to supply the global market with the help of an undervalued currency, China's advantage is so entrenched in certain industries that a yuan revaluation is unlikely to divert substantial volumes of orders to other countries.
While the years of profligate American consumer spending were boom times for Chinese exporters, the slowdown was like a one-year MBA program: It forced surviving exporters to focus on the bottom line, invest more in research, development and product design, and find new markets for their products.

"We need to reduce labor intensity and improve productivity, or else we'll lose orders to our competitors," says Ben, who counts some 6,000 rivals in his city alone.
The Great Recession also threw into relief China's importance to global economic growth, reinforcing its allure as a sourcing destination.

Companies increasingly want to sell to China, not simply manufacture there.

Lou Longo, head of global services at Chicago-based advisory group Plante & Moran, says he sees U.S. companies buying from factories in China not only to take advantage of lower costs, but to learn their way around the local market.
In sector after sector, the story is the same: Even as the total pie of U.S. imports shrank, China amassed a larger piece.

In the first nine months of 2009, there were 81 products from China that saw imports to the U.S. expand by more than 20% and prices decline by at least 20%, according to data from the Census Bureau.
Of those products, roughly one-quarter were textiles, apparel or shoes.

Between January and November, China's share of nonknitted apparel and clothing imports into the U.S. rose to 41.6% from 37.2%, according to Global Trade Information Services, a South Carolina-based supplier of international trade data.

Its share of consumer electronics rose to 33.9% from 31.9%. In pharmaceuticals, cameras, medical devices, ceramics, rubber, plastics and even fish and seafood, China has gained share.
Take tilapia: American imports from China of frozen fillets of this popular fish leapt 15% by volume in the first ten months of 2009.

Norbert Sporns, chief executive of HQ Sustainable, a Seattle-based fish processor that buys from aquaculture farms in the southern Chinese province of Hainan, estimates about 80% of frozen tilapia sold in the U.S. comes from China.
"The major reason why we're sited in Hainan is not because of cheaper labor, but because of government support, because of the infrastructure that is laid out properly," he says.

Most U.S. states, he says, "choose not to lay out the infrastructure" to support aquaculture. Concerns about environmental damage from fish farming make aquaculture controversial in the U.S.
The same logic applies to computers and consumer electronics.

China's role now extends beyond assembly: Big global electronics brands used to assemble their products in China and then ship them to other countries for "flavoring"– industry lingo for tailoring a user manual, power supply cord or keyboard to an individual market.

Computers destined for Europe would be flavored in Holland, for instance. Today, they are flavored in Shenzhen, in southern China.

As big brands streamline their supply chains to reduce inventory and shorten products' time to market, it's easier to move these services to China, where the products are made, than to move the manufacturing elsewhere.
These examples show both how U.S. companies' cost-cutting efforts are driving business to China and how Chinese manufacturers have boosted their competitiveness independent of currency policy.

Indeed, Chinese factories are already shoring up their defenses in anticipation of a revaluation. Ben, the shoe factory owner, is consolidating orders from suppliers into fewer shipments to save on logistics costs, limiting air conditioner use to cut his electricity bill, and installing solar panels and LED lights to qualify for a modest local government subsidy for companies that invest in environmentally friendly technology.
Proponents of a Chinese revaluation often claim it would contribute to a global rebalancing between high-consuming Americans and high-saving Chinese.

The reality is that China has strong competitive advantages in manufacturing that will exist for the foreseeable future, whatever the exchange rate. Just ask Ben.

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China’s Defiance Stirs Fears for Missing Dissident

Gao Zhisheng, top, one of China’s leading human rights lawyers, has been missing for a year.

By ANDREW JACOBS
BEIJING — A year ago this week, Chinese security agents made a midnight visit to the home of Gao Zhisheng, one of China’s most high-profile human rights lawyers, and led him away.

They told his family he was wanted for a brief chat.
In the months that followed, his whereabouts have become a mystery and a growing source of concern for relatives, colleagues and human rights advocates, who fear that he has been badly tortured or worse.
His case is highly unusual, even by the standards of China’s opaque justice system.

After a previous detention in 2006, Mr. Gao was allowed to return home after publicly confessing to a number of transgressions.

Once out of custody, however, Mr. Gao recanted his confession and described abuse he said he had suffered. He also said his torturers told him he would be killed if he spoke publicly about the matter.
Diplomatic entreaties to the Chinese government have been brushed aside. Foreign reporters who ask about his plight have been treated to glib retorts.

Ma Zhaoxu, a Foreign Ministry spokesman, compounded the mystery two weeks ago by saying that Mr. Gao “is where he should be.”

When prodded again at a regular press briefing last Tuesday, he offered a smile and said: “Honestly speaking, I don’t know where he is. China has 1.3 billion people and I can’t know all of their whereabouts.”
Legal experts say the disappearance of Mr. Gao, whose case has been championed by American lawmakers, several European leaders and the United Nations, represents a disturbing milestone. Even in the most politicized cases, the Chinese authorities generally claim to be complying with their own criminal procedure laws.

Mr. Gao has vanished with no official accounting or legal explanation.
Emboldened by China’s newfound economic prowess but insecure about its standing at home, the Chinese Communist Party has been tightening Internet censorship, cracking down on legal rights defenders and brushing aside foreign leaders who seek to influence the outcome of individual cases.
In December, the authorities executed Akmal Shaikh, a British citizen, on drug trafficking charges despite Prime Minister Gordon Brown’s personal plea to President Hu Jintao that Mr. Shaikh was mentally ill.
During President Obama’s state visit to China in November, the plight of a pro-democracy advocate, Liu Xiaobo, was reportedly at the top of his list of concerns.

A few weeks later, on Dec. 25, Mr. Liu was given an unexpectedly harsh 11-year sentence for publishing an online petition that sought expanded liberties.
John Kamm, a veteran American human rights campaigner, said that during three decades working in China he had rarely seen such a hard line toward dissidents — and unbridled defiance against pressure from abroad.

“China right now doesn’t feel like it owes anyone anything on human rights,” said Mr. Kamm, the founder of the Dui Hua Foundation, which seeks clemency for political prisoners through quiet diplomacy.

“I’ve never seen a downward spiral like this.”
In the 31 years since the People’s Republic of China and the United States established diplomatic relations, Chinese officials have often resisted American intervention on human rights, calling the issue a domestic matter.

But there has generally been some give and take, largely behind the scenes, especially in the years after the violent suppression of protests in Tiananmen Square, when China was eager to shed its pariah status abroad.
That leverage began dissipating in 2001 after China was admitted to the World Trade Organization, and Congress surrendered the right to review China’s human rights record before granting it favorable trade status.
There is little space in Chinese society for unyielding dissidents like Mr. Gao.

But until recently, the authorities often allowed them to stay at home under close surveillance.

If they crossed certain unwritten lines, they might be prosecuted, often for the crime of inciting subversion or leaking state secrets.

Even if stymied in their defense, lawyers can expect a modicum of information about their clients. Family jailhouse visits are not uncommon.
But Mr. Gao’s case has defied these norms.
In September, a security agent who took Mr. Gao into custody told one of his brothers that he had simply disappeared during a walk.

The brother, Gao Zhiyi, said he suspected the worst.

“If he were alive, they would have allowed me to visit him,” he said in a telephone interview from his home in Shaanxi Province.

“Either that or he’s in such bad shape, it would be too horrible for anyone to see him.”
Rights advocates say Mr. Gao’s predicament can be partly traced to his persistent and caustic criticism of the ruling Communist Party.

A self-educated lawyer, Mr. Gao, 46, was named one of China’s top 10 lawyers by the Ministry of Justice in 2001 for his work defending victims of medical malpractice and farmers whose land had been seized for redevelopment.
But Mr. Gao quickly ran afoul of the authorities when he began representing members of unofficial Christian churches and adherents of Falun Gong, the banned spiritual movement.

In 2005, the Beijing judicial bureau closed his firm and suspended the licenses of its 20 lawyers. Mr. Gao countered by publicly renouncing his Communist Party membership and writing a series of open letters to senior leaders that demanded an end to the persecution of Falun Gong believers.
A week later, Mr. Gao was arrested.

In a letter published just before his latest disappearance, he documented what he said happened to him during his 54 days in custody. He was shocked and beaten almost continuously, he wrote, or forced to sit motionless, enveloped by blinding lights.

By the end, he said, “the skin all over my body had turned black.”

He was released only after he confessed to various crimes; he retracted his confession as soon as he was let go.
A month before he vanished last February, Mr. Gao’s wife and children slipped away from their minders and, with the help of Christian activists, left China. Ten days later, they were granted asylum in the United States.
Renee Xia, the international director of Chinese Human Rights Defenders, said the family’s escape, coupled with the revelations of Mr. Gao’s torture, probably infuriated those charged with reining in his activities.
Given the increasingly strained relations between China and the United States, it is unclear whether Mr. Gao’s supporters abroad can have any impact on his fate.

But some, like Nicholas Bequelin, a researcher at Human Rights Watch, said that Chinese leaders were still sensitive to international criticism and that a spike in global protests over Mr. Gao’s mistreatment would not go unnoticed.
“Beijing doesn’t care about releasing a prisoner or two,” he said.

“It’s not going to bring about the collapse of the Communist Party but if they don’t have to do it, they won’t.”

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Obama Plan to Meet Dalai Lama Prompts New Friction

By Hans Nichols

President Barack Obama plans to meet with the Dalai Lama later this month, ignoring Chinese warnings that it would further damage U.S.-China ties already strained by a proposed arms sales to Taiwan and a dispute over censorship of the Internet.
“The Dalai Lama is an internationally respected religious and cultural leader, and the president will meet with him in that capacity,” Deputy White House press secretary Bill Burton said yesterday.
Burton declined to say when or where the meeting might occur.

An administration official who spoke on condition of anonymity said it would be later this month when the Tibetan spiritual leader is scheduled to be in the U.S.
Friction between the world’s No. 1 and No. 3 economies may threaten U.S. goals for thwarting the nuclear ambitions of Iran and North Korea, reaching a global accord on climate change and addressing trade imbalances.

It also creates challenges for U.S. companies such as Chicago-based Boeing Co. and Mountain View, California-based Google Inc.
Obama’s decision to meet the Tibetan spiritual leader will bring the U.S.-China relationship closer to a “tipping point,” said Christopher McNally, an analyst at the East-West Center in Honolulu, Hawaii.
“The Chinese are really pushing back” against U.S. actions, he said. “They are pushing back because they feel much more self-confident in their international position.”

Threat to Cooperation
Zhu Weiqun, a Communist Party official who manages Tibet affairs, told reporters in Beijing yesterday that a meeting between the U.S. president and the Dalai Lama would “seriously undermine the political foundation of Sino-U.S. relations” and “threaten trust and cooperation.”
Today, Chinese Foreign Ministry Spokesman Ma Zhaoxu, responding to Burton, said in a statement that Chinese leaders had urged Obama during his visit to Beijing in November “not to allow ‘Tibetan separatist’ forces to use U.S. territory to engage in anti-China separatist activities.”
“China is firmly opposed to the Dalai Lama visiting the U.S., and is firmly opposed to the Dalai Lama having any kind of contact with the U.S. leader,” Ma said.

Taiwan Arms Sales
Yesterday Ma also reiterated China’s threat to impose sanctions on companies involved in U.S. arms sales to Taiwan announced by the Pentagon last week.
The proposed sales include United Technologies UH-60 Blackhawk helicopters valued at $3.1 billion and Boeing Harpoon missiles costing $37 million.
China and the U.S. also are at odds over censorship of Google’s Chinese search engine.

Google, which runs the world’s most popular Internet search site, said Jan. 12 it would stop censoring its search results as required by the government in China and might end operations there.
That followed what the company described as an infiltration of its technology and the Gmail Internet e-mail accounts of Chinese human rights activists.

Ten days later, China criticized Secretary of State Hillary Clinton for a speech in which she said the communist country’s Internet controls might hamper its development.

Trade Friction
The political difficulties coincide with rising conflicts over bilateral trade.

The U.S. is China’s biggest trading partner and China is the second-biggest U.S. trading partner after Canada, with two-way trade totaling $409.2 billion in 2008.

China’s $266.3 billion trade surplus with the U.S. that year helped spur its purchases of U.S. treasuries.
The confrontation has domestic political implications in both nations. China’s Communist elite is jostling for influence as it grooms new leaders to take over in 2012.
“They are quite insecure of the Communist party’s long-term position in China,” McNally said.
In the U.S., congressional elections in November may increase pressure on the Obama administration to stand firm.
“The Chinese test and they push and they probe,” said Representative Frank Wolf, a Virginia Republican and frequent critic of China’s human rights record.

“Hopefully the administration won’t blink.”
Obama didn’t see the Dalai Lama when the Tibetan leader was in Washington in October.

White House adviser Valerie Jarrett said at the time that the president would meet with the Dalai Lama sometime after Obama returned from a trip to Asia in November that included a stop in China.

November Summit
At the close of his formal meetings with President Hu Jintao in Beijing, Obama said that while Tibet is part of China, the U.S. “supports the early resumption on dialogue between the Chinese government and representatives of the Dalai Lama to resolve any concerns and differences.”
Burton said Obama told China’s leaders during that visit that he would meet with the Dalai Lama.
Every president since George H.W. Bush, who served in office 1989-1993, has sat down with the Dalai Lama, usually in private and frequently prompting criticism from the Chinese government.
In October 2007, President George W. Bush met the Dalai Lama in the Capitol Rotunda in Washington, the first time a U.S. president had met with him in a public setting.

The event didn’t set back ties with China, though then-Foreign Ministry Spokesman Liu Jianchao said the gesture “severely hurt the Chinese people’s feelings.”

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China Increasingly Stands Up To U.S. On Global Stage

By TOM GJELTEN
Chinese President Hu Jintao gestures to President Obama after a joint press conference at the Great Hall of the People, in Beijing on Nov. 16. Barely two weeks into the new year, U.S.-China relations have strained by tensions over Taiwan, Tibet, trade, military modernization and cyberattacks.
In the past two weeks, Chinese leaders have tangled with the United States over the following issues: Iran sanctions, climate change, arms sales to Taiwan, the Dalai Lama, cyberattacks, military modernization and exchange rates.
A single sentence in the Pentagon's 105-page Quadrennial Defense Review (QDR) this week even elicited a Chinese reaction.

The QDR report said China's military development raises "legitimate questions" about its future conduct and intentions. Pentagon planners have regularly made that point in the past, but Beijing immediately announced its "dissatisfaction" with the comment.
Those comments followed China's denunciation Tuesday of President Obama's plan to meet the Dalai Lama and its furious reaction last weekend to the administration's announced plans to sell some weapons to Taiwan.
The increasingly harsh Chinese attitude toward the United States has left U.S. officials and China analysts wondering where U.S.-China relations are headed.
At the State Department on Monday, spokesman P.J. Crowley seemed almost baffled by the strident Chinese reaction to the pending Taiwan arms sales.
"We're doing nothing different today than we did in 2008, than we've previously done," Crowley said.

"Based on our evaluation of Taiwan's needs, we do provide them articles that we think contribute to Taiwan's defense. What happened here was, I don't think, a mystery to China."
Similarly, the Chinese knew months ago that President Obama intended to meet with the Dalai Lama.

They have long known that the United States wants tougher sanctions on Iran over its nuclear program.

They are familiar with U.S. concerns over China's cyber-activities and climate change policies. But on each of those issues in the past few months, the Chinese have become more difficult.

Newfound Confidence
Kenneth Lieberthal, who advised President Clinton on China issues, attributes the country's increased assertiveness recently to a new sense of Chinese self-confidence, stemming from its strengthened position in the world economy in the aftermath of the global financial crisis.
"Some in the West have called it triumphalism," Lieberthal notes.

"I think that's too strong a term. But [there's] some feeling that, 'In the last two years we've done very well, and it's hard to find anyone else who has. And now people are really paying attention to us.'"

Lieberthal, now at the Brookings Institution, says this new feeling of Chinese confidence follows decades of China feeling "down and out" and not fully respected as a global player.

With the greater confidence, therefore, has come a greater willingness to assert Chinese national interests — on climate change policy, the global economy and security issues.

And that means standing up to the chief Chinese rival on the global stage, the United States.
"The question is what they think they can get in that relationship," Lieberthal says.

"Given that we want to work together, on balance, how much is that going to be the U.S. tilting toward Chinese preferences, and how much will it be the Chinese tilting toward U.S. preferences?"
The list of outstanding issues is long.

An early challenge will be to work out a proper economic relationship. China's growth has been largely driven by its booming export sector.

Chinese goods are relatively cheap, so manufacturing has shifted to China away from the United States.

U.S. and Chinese economic interests could soon be colliding.
"We are coming into 2010 with 10 percent Chinese growth and 10 percent U.S. unemployment," says Ian Bremmer, president of the Eurasia Group. "And those two 10s do not add up to 20. They are going to conflict with each other."
As politicians, both Democrat and Republican, take greater note of conflicts with China, U.S.-China policy could become a hot election issue.
"[In 2008], we voted for Obama or McCain with no interest in their positions on China," Bremmer notes.

"I believe that that will never happen again. This relationship is going to become politicized, and going forward it is going to be key in determining how we think about candidates, how we think about U.S. policy."

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China versus Taiwan: How the political standoff may end

By Ben Blanchard and Ralph Jennings
BEIJING/TAIPEI -- China has expressed fury at Washington's announcement of a new arms package for self-ruled Taiwan, saying it threatens the task of peaceful reunification between the two sides.
China and Taiwan, once at the brink of war before a thaw in relations, have avoided discussing their political future and instead focused on forming closer economic ties.
A non-violent solution is iffy more than 60 years after the Communist victory in the Chinese civil war, which forced the defeated Nationalist Party (KMT) to flee to Taiwan.
China, the world's third-largest economy and a veto-wielding member of the U.N. Security Council, claims sovereignty over ethnically Chinese Taiwan and has not renounced the use of force to bring the proudly democratic island under its control.
China has set no timetable for reunification, though the leadership has said it will not let the status quo last forever.
Here are the basic scenarios:

FEDERATION, WIDE-RANGING AUTONOMY
This proposal, which would bind the two sides under the same wide economic umbrella but guarantee autonomy for both, has been floated in the past by leaders in Taiwan.
China might spurn the idea for lacking the full sovereignty that it seeks, but the two sides may agree on some kind of fudge that lets Beijing claim one country while giving Taiwan enough autonomy to say it governs itself.
China has long hoped to use the Hong Kong and Macau model of "one country, two systems" to entice Taiwan. Both territories are officially part of China, but given a high degree of autonomy, including a largely free press.
But China essentially appoints leaders for Hong Kong and Macau, with a degree of democracy. Taiwan is unwilling to give up choosing its leaders after a long struggle for free elections.
Foreign firms with links to China's cheap labor could base regional headquarters in Taiwan to take advantage of stronger laws, transparency and higher standards of living while still being within a hour's flight of major Chinese cities.
Investors, who generally want to see tech-reliant Taiwan tie up with economic powerhouse China, would park more money long term in Taiwan's stock and currency markets.

TWO COUNTRIES, TAIWAN INDEPENDENCE
Unlikely any time soon, as a formal announcement to establish Taiwan as a nation and drop the island's official name, the Republic of China, would spark military action from China.
War would have a devastating economic impact, regionally and perhaps globally, especially if China rained missiles on Taiwan and Taiwan struck back by targeting the metropolis of Shanghai.
Since China-friendly Taiwan President Ma Ying-jeou took office in 2008, he has sought to reduce tension through a series of trade and economics talks with Beijing.
But widespread economic or social problems at home could goad China into rattling its saber or even starting a war against Taiwan as a way of diverting attention from domestic issues and rallying the people behind a broadly nationalist cause.
Without rapid U.S. intervention, Taiwan's military would likely quickly be defeated. Yet with China being the world's largest holder of U.S. government bonds, Washington would think carefully before getting involved.
Investors would rapidly pull out of Taiwan if war broke out or if the island's ties with China entered a long period of instability after independence.
China would see less impact due to its stronger economic growth and vast domestic market. But if a war prompted U.S. sanctions, the Chinese economy could spiral downwards and foreign investment would plummet, at least in the short term.
Direct Taiwan-China flights, direct shipping routes and China's investment in Taiwan stocks would likely be suspended, while Taiwan's tech-heavy economy would focus away from the fast-growing Chinese market to the United States and Europe.

FULL REUNIFICATION
Not as unlikely as once thought, given Taiwan's growing economic reliance on China.

From last month, Chinese qualified investors were allowed to trade in Taiwan stocks, and the two currencies are set to become mutually convertible.
Noted Chinese economist Hu Angang once said that China could force Taiwan to its knees simply by applying economic sanctions.
But as fewer Taiwanese identify themselves as Chinese and instead take pride in local culture, while China shows few signs of democratizing, Taiwan is cold to reunification at present.
If the two sides were to be unified under a system that left Taiwan with its stronger legal environment, foreign firms could find the island an attractive investment destination, with easy access to mainland China's enormous economy.
Long-term investors would park more money in Taiwan markets.
Investor sentiment would cool if Taiwan's democratic transparency were compromised by Communist rule, or if China limited foreign investor involvement in Taiwan's money and stock markets, assuming they were still allowed to exist.

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US senator asks companies about China rights practices

Dick Durbin seeks information about China rights practices

WASHINGTON (AFP) — A US senator on Tuesday asked 30 leading companies, including Amazon, Apple, Facebook, IBM, Nokia and Twitter, for information about their human rights practices in China after Google's threat to leave the country over cyberattacks and Web censorship.

Democratic Senator Dick Durbin of Illinois, chairman of the Judiciary Subcommittee on Human Rights and the Law, also announced plans to hold a hearing in February on global Internet freedom.
He said the hearing would feature testimony from Barack Obama administration officials and from Google and other firms about their business practices in Internet-restricting countries.
"I commend Google for coming to the conclusion that cooperating with the 'Great Firewall' of China is inconsistent with their human rights responsibilities," Durbin said in a statement.
"Google sets a strong example in standing up to the Chinese government's continued failure to respect the fundamental human rights of free expression and privacy.
"I look forward to learning more about whether other American companies are willing to follow Google's lead," he said.
Durbin, the assistant Senate majority leader, said the letters seeking information about human rights practices in China had been sent to 30 information and communications technology companies.
Durbin's letter asked each company for details of its business in China and to outline its "future plans for protecting human rights, including freedom of expression and privacy, in China."
Companies were also asked to describe specific measures being taken to "ensure that your products/services do not facilitate human rights abuses by the Chinese government."
The letters were sent to Acer, Amazon, Apple, AT&T, Cisco, Dell, eBay, Facebook, Fortinet, Hewlett-Packard, IAC, IBM, Juniper, Lenovo, McAfee, Motorola, News Corp., Nokia, Nokia Siemens, Oracle, Research in Motion, SAP, Siemens, Skype, Sprint Nextel, Toshiba, Twitter, Verizon, Vodafone and Websense.
Google said last month that following cyberattacks on the Gmail accounts of Chinese human rights activists it was no longer willing to censor Web search results in China even it that means it has to leave the country.
Google has not yet stopped censoring search results on google.cn, but Google chief executive Eric Schmidt has said it would happen soon.

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Google launches Chinese holiday travel map amid row

Google has launched a map search service in China for travellers taking trips during the Lunar New Year holiday

BEIJING (AFP) — Google has launched a map search service in China for travellers taking trips during the Lunar New Year holiday season, despite a row over cyberattacks and censorship.
"The service is available online now," a spokeswoman for Google China, Marsha Wang, told AFP on Tuesday.
The Google Spring Festival Map is based on the company's regular map service but has "more features" targeting users' special needs during this month's holiday, the busiest travel period of the year in China, she said.
The special map provides information including real-time flight status, train schedules and ticket prices, highway conditions and weather updates, according to a statement posted on googlechinablog.com.
About 240 million people are expected to crowd China's trains and planes for the holiday, according to government estimates.
Chinese traditionally return to their home towns and villages for family reunions with this year's travel period stretching from January 30 to March 10. The Lunar New Year falls on February 14.
Google last month threatened to abandon its Chinese-language search engine google.cn, and perhaps end all operations in the country, following hack attacks it says targeted the email accounts of Chinese human rights activists.
It has also said it is no longer willing to bow to Beijing's army of Internet censors -- and will stop filtering search results soon, a move China says would violate its laws.
US and Chinese officials have discussed the issue at length, with US Secretary of State Hillary Clinton qualifying her latest talks with Chinese Foreign Minister Yang Jiechi as "open and candid."
But the row is one of an ever-increasing list of issues threatening relations between the United States and China.
Google chief executive Eric Schmidt reiterated last week at the World Economic Forum in Davos that the Internet giant wanted to stay in China, but also said he hoped censorship rules would change.
Wang said Tuesday it was "business as usual" at Google China's headquarters in Beijing.

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China's Human-Rights Hacking

Attempts to silence critics extend beyond the mainland's borders.
The Wall Street Journal
Google's recent travails have drawn much-needed attention to the threat of Chinese cyber attacks on corporations.

But there's another war being fought against a less publicized target: China's online human-rights activists.
Only two days after Hillary Clinton's January 21 speech supporting Internet freedom, five Chinese human-rights groups' Web sites, most of which have foreign-based servers, were paralyzed for up to 16 hours by denial-of-service attacks.
It's impossible to pinpoint exactly where the attacks on the weekend of January 23 to 24 originated, but the groups' sites have been attacked before, usually at sensitive times such as the 20-year anniversary of the Tiananmen Square massacre last June and China's 60th anniversary in October.

For about the last three years, human-rights sites have not been able to operate from within China's censored borders.
Whether China's "cyber militias" are merely teenage hackers or are state-supported is uncertain. What's for sure is that these are not randomly targeted Web sites.

They include the Independent Chinese PEN Center and China Human Rights Defenders, which have been calling publicly for the release of Liu Xiaobo, the ICPC's former president and the co-author of the democratic manifesto called Charter '08.

Similarly, the London-based International Tibet Support Network's Web site has been down three times in the last two weeks.

China-based hackers have also targeted the State Department, the Naval War College, NASA and the World Bank in recent years.

The so-called "Titan Rain" and "Ghostnet" cyber-espionage campaigns starting in 2003 involved hackers systematically infiltrating thousands of computer systems in hundreds of countries. While there's no smoking gun, the Chinese military has heavily invested in equipping its cyber units, and there is a consensus in the U.S. defense community that the Chinese government at the very least tacitly supports thousands of hackers and cyberspace academics.

Tibetan activist groups in particular have gotten used to cyber intrusions, which surged after unrest erupted in western China last March.
The hacking of the human-rights groups' sites may not seem as threatening as, say, an attack on critical infrastructure.

But the intent is just as dangerous: to intimidate and silence those who try to speak up for the Chinese people.

Even more reason for the U.S. and other free nations to bolster their defenses.

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Foreign banks again hear the call of China

REUTERS
BEIJING: A clutch of Western banks that have escaped the worst of the financial crisis are seizing the opportunity to ramp up their presence in China in the hope of profiting from the sector's rapid growth.

In the wake of the worst global recession in 80 years, major banks have reined in their international ambitions to strengthen their balance sheets.
Bank of America and ING are among those that have pulled in their horns in China.

But heeding the maxim that a serious crisis should never go to waste, some other players are scrambling to build on strong positions in their home markets and speed up their expansion in China.
"It is set to become a trend that dominant Western banks from the United Kingdom or the United States will have to focus on domestic issues for a relatively long time to come," said May Yan, an analyst with Nomura International.

"And this will lead to second-tier, regional banks rushing to China, hoping to expand business," she said.

HOLA, AMIGO
Historically, Asia-focused banks, such as HSBC, Standard Chartered and Bank of East Asia have had a strong footing in China, as has US bank Citigroup Inc.
Since the global economic downturn, other lenders in Europe and North America that have traditionally focused on their home markets have joined the China pack.

Spain's two biggest banks have taken the lead in the tie-ups.

An important motive for the Spanish banks is China's growing business ties with Latin America, a market that has long been a priority for Spanish lenders.
Analysts also singled out banks from Asian countries, such as Korea and Singapore, as well as Australia, as the ones most likely to benefit from the increasing dependence between China and their home markets.

MORE PROMISING ROUTES
While tie-ups with Chinese partners would be a shortcut, analysts reckon organic growth and local incorporation are more promising routes.

Foreign banks are also limited by Chinese law to buying no more than 20 percent in a local lender.

"By incorporating locally, foreign banks would be able to do business both offshore and onshore, which is more meaningful to them," Nomura's Yan said.
"The bulk of their business is wholesale, so the structure would facilitate transactions across borders," she said.

Australia and New Zealand Banking Group Ltd, one of Australia's top four lenders, plans to open more than 20 new outlets in China by 2012 once it has won approval for local incorporation, which it expects by mid-year.
"ANZ continues to invest for growth in China and aims to be a top four foreign bank by 2012 through a combination of seeking local incorporation, expanding our branch network and opening rural branches," said Alex Thursby, CEO Asia Pacific, Europe & America.

At present, the bank owns a 19.9 percent stake in Shanghai Rural Commercial Bank and a 20 percent stake in Bank of Tianjin, one of more than 100 city commercial banks in China.

Hana Bank, South Korea's No. 4 lender and a unit of Hana Financial Group, was planning to buy 18.44 percent of Bank of Jilin in northern China for $316 million, the Yonhap news agency reported in September.

THE SMALLER, THE BETTER
The advantage for smaller foreign lenders of joining hands with a city commercial bank such as Bank of Jilin is that both parties will be better matched in terms of financial might and expertise. "Foreign banks with mega size do not suit small city commercial banks as their experiences and strengths are different," said an analyst in Beijing with GF Securities, which does not allow its analysts to be named.

Apart from taking equity stakes, more foreign banks are choosing to set up joint ventures with local partners in business segments with strong growth prospects.
Commonwealth Bank of Australia holds stakes of nearly 20 percent in two city commercial banks, but the second-largest lender in Australia is also partners with Bank of Communications, China's No. 5 bank, in a life insurance joint venture in Shanghai.

That could be a model for other foreign banks to emulate.

"In a word -- you don't have to be the biggest, just the most suitable," said the GF Security analyst.

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China Ore Standoff Shows Limits to Economic Clout

China ore standoff shows limits to rising economic clout as effort to lower prices flounders
By JEREMIAH MARQUEZ

In this Aug. 11, 2009 file photo, men work at a steel mill in a village part of Jiangyin city, Jiangsu Province, China. China is pressing to turn its status as the world's biggest steel producer into clout over global miners and cheaper iron ore prices. But its tactics failed in 2009 and there are few indications it will fare better this year.

HONG KONG -- China is pressing to turn its status as the world's biggest steel producer into clout over global miners and cheaper iron ore prices. But its tactics failed in 2009 and there are few indications it will fare better this year.
In a sign of the limits of China's growing economic might, months of price talks last year broke off without the price cuts demanded by Beijing, and tensions were heightened by the arrest of four Rio Tinto employees on spying charges.
Chinese mills wound up paying the same price as Japanese and South Korean producers — or more because they had to buy on the spot market where prices often exceed the contract rates.
This year, China's steel industry faces difficult odds as it tries again to get a better deal.
Steel demand is surging as the government's stimulus spending feeds a construction boom and Chinese consumers snap up more cars, appliances and other goods.

The country's mills are expected to churn out as much as 640 million metric tons of steel this year compared to about 570 million metric tons in 2009, when China produced almost half the world's steel.
As production has shot higher, so have prices for iron ore, the key material in steel.

Since last year, ore prices have nearly doubled to more than $120 a metric ton on the spot market.
China had hoped to be in a stronger bargaining position this year by consolidating its sprawling industry to present a unified front against the three big mining companies, which control most of the world's iron ore supplies.
But the industry has yet to undergo a big enough restructuring. That's left too many mills to cut their own deals with miners or boost production without paying heed to the government's industry goals.
"The suppliers are concentrated and the buyers are fragmented, so it makes it difficult for China to have bargaining power," said Helen Lau, senior research analyst at OSK Securities in Hong Kong.
Nor can China go around the major ore producers, Anglo-Australian miners Rio Tinto Ltd. and BHP Billiton Ltd. and Brazil's Vale SA.
Its own reserves scattered without enough high quality ore, China has become increasingly reliant on foreign supplies.

Mills imported some 72 percent of their iron ore last year, an all-time high and up dramatically from 33 percent a decade before, according to a report by Umetal, a Beijing-based research group.
China has objected to the dominance of the top miners — the three supply some 70 percent of iron ore transported by sea — and tried to rally global opposition against a proposed joint iron ore venture between BHP and Rio Tinto.

On Monday, European Union regulators promised to investigate complaints the tie-up could damage competition and lead to higher prices.
In search of alternatives, Chinese companies have been pouring investment into other mining firms from Venezuela to Canada. But the operations are relatively small or years away from significant production.
With demand strong, analysts say the benchmark contract price, traditionally set through talks between the miners and Asian countries, will only rise this year, with some estimating a hike of 40 percent or more.
Whether China will agree to a benchmark contract in 2010 is far from certain. But with few expecting ore prices to fall this year, buying through the spot market could prove more costly.
"Either way, China will have to pay up for iron ore," said Alexander Latzer, head of Asia metals and mining research at Daiwa Capital Markets in Hong Kong.
China appears to be bracing for tough negotiations.
Luo Bingsheng, vice chairman of the government-affiliated China Iron and Steel Association, which led last year's failed talks, said the miners were expected to demand prices 20 percent to 30 percent above last year's benchmark price, the China Securities Journal reported in December.

He believed "the difficulty of the talks is very big," the paper reported.
Representatives for BHP, Rio Tinto and Vale declined to comment on negotiations.
Once last year's talks collapsed, China ended up buying some 60 percent of its iron ore from the spot market, where prices rose far above the benchmark.
For China, the shift away from a yearly contract, a long-standing price system preferred by other major steel producers like Japan and South Korea, is likely to continue, analysts say.
That's partly because miners are looking to avoid the complications of negotiating with China, analysts say. Spot prices also favor suppliers. BHP has been pushing toward shorter-term arrangements.
But many Chinese companies are still willing to buy through the spot market and "either positively or passively giving up" on a longterm contract, according to Umetal.
Chinese officials, meanwhile, are keeping up their quest for more influence over the miners and prices.
"The international iron ore market is monopolized by the three leading miners," Zhu Hongren, spokesman for the Ministry of Industry and Information Technology, said last week, according to state media.
"We hope that they will bear in mind longterm interests of the industry and friendly long term cooperation with China. We're expecting a fair price which could be accepted by both sides."

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China threatens Obama over Dalai Lama meeting

The Dalai Lama
Jane Macartney in Beijing
Strained ties between the US and China could deteriorate further if President Obama goes ahead with a meeting with the Dalai Lama, Beijing warned today.
China’s anger at the Tibetan spiritual leader's overseas visits and the warm reception he is afforded by foreign leaders spilled over in tough words from officials in Beijing who led the latest round of talks with his representatives last week.
Zhu Weiqun, executive deputy head of the Communist Party’s United Front Work Department, who is in charge of the talks, said that a meeting between Mr Obama and the Dalai Lama would “seriously undermine the political foundation of Sino-US relations”.
An increasingly assertive Beijing even issued a veiled threat that such a meeting would not only fail to serve the interests of diplomacy but could damage the US economic recovery.

A view has become widespread that the strength of the economic revival in China, the largest holder of US treasuries, could help to lead the world out of the current downturn.
Mr Zhu said: “If the US leader chooses this time to meet the Dalai Lama, that would damage trust and co-operation between our two countries, and how would that help the United States surmount the current economic crisis?"
He added that the Dalai Lama was a troublemaker bent on inciting world hatred of China for its control of his mountainous homeland.
Mr Zhu gave no details of how China would retaliate if President Obama met the monk, whom Beijing views as a dangerous separatist working to win independence for the Himalayan homeland he fled in 1959 after an abortive uprising against Beijing rule.
He said: “We will take corresponding measures to make the relevant countries realise their mistakes.”
President Obama could meet the Dalai Lama as early as this month, when the monk is expected to make a visit to the United States from his home in the north Indian town of Dharamsala.
An announcement by the US last week that it would proceed with plans to sell $6.4 billion of arms to the self-ruled island of Taiwan, claimed by Beijing as a renegade province, has already chilled bilateral relations.

China quickly suspended military exchanges and announced an unprecedented threat of sanctions against the US companies involved in the sale.
Last week’s talks between China and the Dalai Lama’s envoys – the ninth round since the dialogue began in 2002 – appeared to have made no progress. Mr Zhu said: “As in previous rounds of negotiations, the positions of the two sides are sharply divided.”
How, he asked, could the Chinese trust the Dalai Lama’s sincerity in voicing respect for the Communist Party and for Chinese rule over Tibet when he had commented that after 60 years in power it was time for the party to retire?
The Tibetan side had stuck to a memorandum it submitted in the last round in November 2008 that insisted its autonomy demands were in line with China’s constitution.
Mr Zhu criticised the document as a ploy to win independence.

The talks could not move forward, he said, if the Dalai Lama "continues to devote himself to anti-China propaganda and sabotage on the international stage".

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Stop China’s hack attacks

The Boston Globe
GOOGLE’S DECISION this month to stop cooperating with Internet censors in China came only after the firm detected cyberattacks on Google e-mail accounts used by Chinese human-rights activists.

Yet this high-profile incident merely hinted at China’s capacity -- which by some accounts is unparalleled in the world -- to spy on or disrupt other nations’ computer networks.

To counter this potential security threat, President Obama ought to make continued progress in US-China cooperation contingent on China backing away from cyberwarfare.
Lately, Chinese authorities have denounced what they call “information imperialism.’’

That resort to Maoist-style rhetoric is aimed at Secretary of State Hillary Clinton, who recently declared, “Countries or individuals that engage in cyber-attacks should face consequences and international condemnation.’’

She was alluding to China’s use of 30,000 military cyberspies and 150,000 private-sector computer specialists to plant malware in the networks of the US Defense Department, Commerce Department, State Department, and Homeland Security, while also targeting the US power grid and telecommunications.

According to an FBI report that leaked out earlier this month, there were over 90,000 cyber attacks on Defense Department computers alone in 2009.

This is China’s version of asymmetric warfare.
The US has its own cyberwarfare programs, and government agencies are making a constant effort to improve computer security.

But the hacker-attackers have been able to stay several steps ahead.

As the threat posed by cyberattacks from China becomes clearer, President Obama should be hammering home the point, in private and in public, that both countries have an enormous stake in preventing a deterioration in their relationship.

At this point, any resolution to the computer disputes between China and the US will have to be diplomatic rather than technical.

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Japan, China still at odds over 'Rape of Nanking'

In this Dec. 1937 photo Japanese soldiers cheer as they hoist their flag from the roof of the central government building after they seized Nanking in the Second Sino Japanese War. Japan acknowledged its wartime military caused tremendous damage to China in the "Rape of Nanking" massacre, but the two sides failed again to agree on the death toll in a report published this week.

By MARI YAMAGUCHI

TOKYO -- Japan acknowledged its wartime military caused tremendous damage to China in the "Rape of Nanking" massacre, but the two sides failed again to agree on the death toll, a joint study obtained Monday said.
The massacre was one of the worst incidents during Japan's invasion of China in the first half of the 20th century, with Beijing claiming as many as 300,000 people died, but Tokyo saying the toll was far less.
The report was written by Japanese and Chinese historians appointed by the two governments. In it, Japanese scholars confirmed Japan's Imperial Army "massacred" war prisoners, soldiers and citizens in the city of Nanking, now called Nanjing, in the December 1937 attack, and committed repeated rapes of women, arson and looting.
But the two sides failed to agree on the death toll.
The Japanese listed figures ranging from 20,000 to 200,000, citing differences on the definition of "massacre," the area and the span of the event. China put the death toll at more than 300,000.
The report cited many pending lawsuits filed by victims of Japan's brutalities, including using and abandoning poison gas weapons, and forcing women to serve as sex slaves for front-line soldiers and men as slave laborers.
Japan invaded or colonized large parts of Asia in the first half of the 20th century.

Many Chinese believe that Japan hasn't shown sufficient remorse for atrocities committed, a sense of resentment that has flared repeatedly after attempts by conservative Japanese lawmakers to defend their country's wartime actions.
Japanese ultraconservatives typically claim the death toll in the Rape of Nanking massacre was grossly inflated.
Japan and China agreed the 1937-1945 Sino-Japanese War was an "act of aggression," defining Japan as the aggressor.

"We must admit that the Japanese side was responsible for creating most of the causes," the report said.
Sumio Hatano, professor of the University of Tsukuba and one of 10 historians involved, said "a spate of unlawful actions" by the Japanese military inflicted a heavy toll on China's civilian population, leaving "a deep scar that has prevented the peoples of Japan and China from establishing a new relationship after the war."
Japanese Foreign Minister Katsuya Okada welcomed the report, despite delays and differences that still remain. He said it was just the first step and suggested a second round.
"If two sides could gain mutual understanding just a little, we can call it a success," Okada said.
The report concludes a project launched in 2006 to promote mutual understanding on parts of the history that have often strained ties between the two neighbors.

The study was issued over the weekend and obtained Monday.

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China's interests may limit sanctions on U.S. firms

SHANGHAI (AP) — China blasted Washington's approval of an arms sale to Taiwan again Monday, but industry experts say Beijing's reliance on foreign technology may limit its ability to make good on threats to impose sanctions on the companies involved.
State media commentaries and editorials attacked U.S. plans to sell $6.4 billion of arms to Taiwan and backed the idea of punishing Boeing and other defense contractors involved, with the newspaper Global Times urging, "Let U.S. feel the heat over arms sales to Taiwan."
China protested vehemently and suspended military exchanges with Washington after the plan was announced Friday.

It has not yet said what sanctions it might impose to penalize the companies supplying democratic-ruled Taiwan with missiles, Black Hawk helicopters, information distribution systems and two Osprey Class Mine Hunting Ships.
But given China's reliance on foreign technology and know-how in the high-tech and aviation industries, Chinese analysts say Beijing's self-interest could limit its willingness to impose sanctions or boycotts.

China would likely hold back from penalizing companies involved in important joint ventures or supplying key products, according to Wu Xinbo, a professor at the Center for American Studies at Shanghai's Fudan University.
Boeing said Monday it had not received any notice of sanctions.

"This is a government-to-government issue. We are not in the position to comment or speculate on this matter," it said in a statement.
Boeing has contracted hundreds of millions of dollars' worth of parts for its 787 Dreamliner to Chinese suppliers, and more than a third of its aircraft have major parts made or assembled in China.

More than half of the aircraft flown by China's airlines are Boeing or McDonell-Douglas jets, and just keeping them maintained and supplied with parts is a huge part of Boeing's global business.
In October, the Chicago-based company signed an agreement — the Chinese side was represented by Jiang Mianheng, son of former leader Jiang Zemin— with the government-affiliated Chinese Academy of Sciences to collaborate on research on energy, materials and wireless technology.
But Wu also noted China's reaction was unusually strong and reflects its determination to discourage U.S. military support to the self-ruled island it views as its own territory.
"This is the first time the government has issued such an announcement, and I think they are very serious," said Wu about the threat of sanctions.
In the long term, that anger could sway China toward favoring European aviation giant Airbus for aircraft contracts, or stall or cancel some planned purchases of Boeing jets.

In the past, Beijing has often used such purchases to reward governments and companies for toeing the line on key issues like Taiwan.

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Britain Warned Businesses of Threat of Chinese Spying

By JOHN F. BURNS
LONDON — British business executives dealing with China were given a formal warning more than a year ago by Britain’s security service, MI5, that Chinese intelligence agencies were engaged in a wide-ranging effort to hack into British companies’ computers and to blackmail British businesspeople over sexual relationships and other improprieties, according to people familiar with the MI5 document.
The warning, in a 14-page document titled “The Threat from Chinese Espionage,” was prepared in 2008 by MI5’s Center for the Protection of National Infrastructure, and distributed in what security officials described as a “restricted” form to hundreds of British banks and other financial institutions and businesses.

The document followed public warnings from senior MI5 officials that China posed “one of the most significant espionage threats” to Britain.
Details of the document were confirmed Sunday by two people familiar with its contents, who both spoke on an anonymous basis because of the sensitivity of the subject.

The document’s existence was first reported in the British newspaper The Sunday Times.
Last month, Google announced that it was considering ending its operations in China after a “sophisticated and targeted” cyberattack that it said aimed primarily to gain access to the e-mail accounts of Chinese human rights activists.

Google said it was no longer willing to cooperate with China in what amounted to censorship of its search engine, which Google had operated in a way that prevented millions of Chinese from reaching Web sites deemed hostile by Beijing.
Secretary of State Hillary Rodham Clinton has called on China to investigate the cyberattacks, and said that companies like Google should refuse to support “politically motivated censorship.” Without acknowledging any government involvement in the attacks, China has responded by saying that Internet companies like Google are welcome to do business in China “according to the law.”

A Foreign Ministry spokesman said that “Chinese law proscribes any form of hacking activity.”
But a starkly different picture emerges from the document circulated by MI5, Britain’s domestic security service.

The Sunday Times account, quoting from the document, said that officers from the People’s Liberation Army and the Ministry of Public Security had approached British businesspeople at trade fairs and exhibitions with offers of “gifts” that included cameras and computer memory sticks that were found to contain bugs that provided the Chinese with remote access to the recipients’ computers.
“There have been cases where these ‘gifts’ have contained Trojan devices and other types of malware,” the document said, according to The Sunday Times.

The accuracy of the paper’s citations from the document was verified by the two people contacted by The New York Times who said they had seen the document.
The MI5 report described how China’s computer hacking campaign had attacked British defense, energy, communications and manufacturing companies, as well as public relations companies and international law firms.

The document explicitly warned British executives dealing with China against so-called honey trap methods in which it said the Chinese tried to cultivate personal relationships, “often using lavish hospitality and flattery,” either within China or abroad.
“Chinese intelligence services have also been known to exploit vulnerabilities such as sexual relationships and illegal activities to pressurize individuals to cooperate with them,” it warned. “Hotel rooms in major Chinese cities such as Beijing and Shanghai which have been frequented by foreigners are likely to be bugged. Hotel rooms have been searched while the occupants are out of the room.”
Britain’s powerful Joint Intelligence Committee, responsible for analyzing and coordinating policy between MI5 and MI6, the Secret Intelligence Service that is responsible for Britain’s foreign intelligence activities, warned last year that China’s growing sophistication in cyberespionage could enable it to shut down critical services, including power, food and water supplies.

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China increases media controls in 2009

The Associated Press
BEIJING -- China tried to increase control over its domestic media in 2009, issuing orders not to cover several topics including ethnic rioting in Xinjiang and corruption by government officials, an international press freedom group said.
In the report released Sunday by the Brussels-based International Federation of Journalists, the group gave details on 62 specific orders issued to local media between January and November 2009 that illustrate the wide range of subjects deemed sensitive by the Chinese government.
Banned topics included sensitive anniversaries such as the 20th anniversary of the Tiananmen Square crackdown and mass protests in western Xinjiang.
The orders detailed increased efforts by authorities since early 2009 to control online content and commentary, the 18-page report said in its assessment of restrictions faced by local and foreign journalists in mainland China, Hong Kong and Macau.

Among the instructions:
- Domestic media organizations were ordered not to send journalists to Sichuan ahead of the one-year anniversary of the earthquake that left nearly 90,000 people dead or m