Obama snubs democratic India, but kowtows to brutal China

By Dean Nelson
The arrival of Indian prime minister Manmohan Singh in Washington and the bad feeling towards the current U.S administration in New Delhi right now highlights a disappointing truth about President Barack Obama: Foreign policy is not his thing.
Well, not if we judge him on his achievements in South Asia – the front line in the war on terror, the home of Al Qaeda’s global headquarters, and the place where, more than anywhere in the world, he needs to succeed.
Yet in Afghanistan, he seems to be failing miserably. His favourite politician, Dr Abdullah Abdullah, the main Afghan guest at his inauguration, was defeated in a rigged election.

The president appears paralysed by indecision as rival advisors urge fewer or more boots on the ground.

If, as reported, he is set to deploy 30,000 more troops, they will be put in the way of danger to prop up a corrupt president, his warlord friends, and an Afghan army which doesn’t have the will to fight its own war.
Obama’s surge of troops earlier this year has led only to more American casualties, the Taliban are stronger than ever, and the prospects of their commanders cutting a deal with President Karzai, a man they do not respect, seem more remote than ever.
Worse, the election has strengthened Karzai’s position and underlined Obama’s lack of leverage despite the thousands of U.S troops in the country and the billions spent in U.S aid: the more he gives, the less he gets, and the limits of American power become ever clearer.
In Pakistan, the feel-good factor of a hated American president (George W Bush) being replaced by one with Muslim roots has faded, and Obama’s intentions are judged by the actions of his bossy special envoy Richard Holbrooke, who is regularly denounced as his ‘viceroy’.
Again, despite vast sums spent on military and civilian aid, American pressure for the Pakistan military to target Taliban militants who attack NATO troops across the border in Afghanistan is ignored.

The Taliban’s ‘Haqqani network’ based in North Waziristan, which kills more American troops than any other group, and Mullah Omar’s ‘Quetta Shura’ leadership which leads its jihad, are left in peace.
American officials have voiced their frustration publicly, but the war on terror appears to be no closer to Mullah Omar’s or Osama bin Laden’s safe havens in Pakistan.
Now, Obama has offended the one true friend it has in Asia by appearing to side with Beijing, India’s strategic rival in the region, in urging it to take a role in finding a solution to the conflict between India and Pakistan over Kashmir.
The timing could not have been more insensitive – just as Beijing was threatening India over their disputed Himalayan border in Arunachal Pradesh and shortly after it had condemned prime minister Manmohan Singh for campaigning in the state’s free and fair election.
With cause, India regards China as a dictatorship bent on regional domination and rightly wonders what the government which brutally crushed Tibetan dissent could offer in the way of peaceful solutions.
Since Obama’s Secretary of State Hillary Clinton promised a new deployment of ‘smart power’ to defeat terrorism and promote peace, Washington has rewarded Islamabad’s failure to fight terrorism, encouraged Beijing despite its suppression of democratic protest, and cosseted corruption and the opium trade in Afghanistan.
India, the one true secular democracy in the region, on the other hand finds itself sidelined and a little humiliated.
One seasoned Afghan policy expert said he feared Obama was lost in ‘policy-land’, bewildered by too many wonks.
Either way, the boy wonder needs to get a grip: there’s too much at stake in South Asia for him to be losing friends and alienating people so soon into his presidency.

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Taiwan leader presses US on fighter jets

Taiwan President Ma Ying-jeou (R) greets Raymond Burghardt, the chairman of the American Institute in Taiwan

TAIPEI (AFP) — Taiwan Tuesday urged the United States to sell the island F16 fighter jets to ensure its security, as a senior American envoy said a deal could not be ruled out during the Barack Obama administration.

Taiwanese President Ma Ying-jeou made the case for the aircraft in a meeting with Raymond Burghardt, a top US policy maker on Taiwan, amid growing concern here that the balance of power with China is shifting in the mainland's favour.
"Taiwan wishes to acquire the F16 C/D fighter jets as soon as possible to replace its aging F5 fleet and ensure its aerial safety," a presidential statement quoted Ma as saying.
Burghardt, chairman of the Washington-based American Institute in Taiwan, later said a sale of F16s might take place during the current US administration.
"It hasn't been ruled out," he told reporters.
Burghardt, who is on a five-day visit to Taiwan, said his local interlocutors repeatedly brought up weapons sales.
"The issue of arms sales, and specifically of F16s, was definitely raised quite seriously by nearly everybody I met with," he said.
Taiwan's relations with China have warmed since Beijing-friendly Ma became president in May last year, but apprehension about the growing might of the mainland still lingers.
"Taiwan has its list of items it wants to buy... and this is pushed with the same kind of urgency, the same kind of seriousness that it always has been. I really have not seen a difference," Burghardt said.
Taiwan frequently cites the missile threat from China as a source of insecurity.
The most recent Taiwanese estimate is that China has an inventory of 1,500 ballistic and cruise missiles, the majority of which are pointed towards the island.
"The number (of missiles) continues to grow. It's hard to have a good explanation of it. It's a form of threat. It's one way to look at it. And I would say that yes, of course they should remove the missiles," Burghardt said.
Burghardt's institute has handled unofficial ties with Taiwan since Washington switched diplomatic recognition from Taipei to Beijing in 1979.
In the 30 years since, the United States has remained a leading arms supplier to the self-ruled island.
Taiwan applied to the US government to buy 66 F-16 fighters in early 2007, but observers say Washington has held up the deal for fear of angering Beijing.
China opposes any arms sales to Taiwan, which it regards as part of its territory awaiting reunification, by force if necessary, even though the two sides have been split since the end of a civil war in 1949.

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Saab Retreat Hits China's Auto Ambitions

By Bruce Einhorn
Koenigsegg Group’s decision to walk away from a deal to buy Saab is not just a blow to GM, which now probably has no choice but to shut down Saab completely, and the automaker’s workers.

It’s also a setback for China’s auto industry’s global ambitions.

Beijing Automotive Industry (BAIC) had been one of Koenigsegg’s partners in the Swedish sports-car maker’s proposed acquisition; under the terms of an MOU signed in September, the Chinese company was going to be become a minority shareholder in Koenigsegg, which in turn was going to take Saab from GM.
That kind of minority role would have worked well for BAIC.

As my colleague Ian Rowley wrote in September, when BAIC first made its deal with Koenigsegg, Chinese automakers have typically not been all that successful in their attempts to expand beyond China.

And as BusinessWeek columnists Anil Gupta and Haiyan Wang wrote in August, BAIC “has no experience in mergers and acquisitions, whether domestic or cross-border. Success at postmerger integration requires highly cultivated and deeply embedded organizational capabilities. Such capabilities have to be built through experience. They can be neither bought nor rented.”
That’s why the Saab deal could have been such a good fit for BAIC.

As a shareholder of Koenigsegg, the Chinese company would have been well-positioned to have its managers observe the integration process and gain the sort of experience that could help BAIC if or when it decided to do an acqusition of its own.

Now BAIC won’t have that chance.

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China Environmental Protests Gather Force

A local, wearing a gas mask, holds a banner reading 'oppose garbage incineration, protect green Guangzhou' as she protests outside government offices in Guangzhou.

By Austin Ramzy / Beijing

Hundreds of residents of the southern Chinese city of Guangzhou took to the streets on Monday to protest plans to build a trash incinerator in their neighborhood.

In front of the municipal headquarters for one of China's largest cities, it was an unusually prominent place for a civic demonstration.

And rarely has a local Chinese demonstration been so conspicuous online, where activists posted photos and comments about events as they unfolded.

Those messages were then relayed to a broader audience on social networking sites like Twitter, despite its block by China's web censors.

While the demonstration was local in nature, the Guagzhou protesters' ability to spread their message so broadly will likely unnerve a government that fears organized dissent.
The protesters gathered Monday morning to voice their anger over plans to build an incinerator to deal with the rising amounts of trash produced by Guangzhou's Panyu district, whose 2.5 million residents are expected to generate 2,200 tons of garbage a day by next year, a local official told the state-run China Daily newspaper.

A site for an incinerator to replace two overtaxed landfills was proposed in 2006, but residents say they weren't informed about the plans until this fall.

In one survey cited by China Daily, 92% of residents thought the incinerator would harm their health, and 97% were opposed to its construction.
Around 8 a.m. several hundred demonstrators had gathered around Guangzhou's city hall, some carrying signs that read, "Oppose the trash incinerator; Support a green Panyu."

About 100 police officers converged to face off with the protesters, says Wen Yunchao, a blogger who was at the scene.

"The protest has been organized and peaceful," he said.

When asked by officials to select five representatives to negotiate their demands, the crowd began to chant, "We don't want to be represented," said Wen.

People seen as protest leaders are often targeted for future punishment.
Environmental concerns are a common cause of unrest in China. Last summer a handful of villages in the country's interior exploded with anger over heavy metal factories residents suspected of polluting the air and groundwater.

Those protests were cases of poor residents who, having had their complaints ignored by factory managers and local officials, felt compelled to take matters into their own hands, sometimes shuttering the offending plants by force.
Monday's protest represents a different thread of environmental demonstration, in which well-organized, middle class residents gather to oppose a threat to their common interests, says Shanghai-based environmental attorney Charles McElwee.

It follows similar efforts by citizens to block a chemical plant in the coastal city of Xiamen in 2007 and a demonstration against a proposed petrochemical facility near Chengdu in 2008.

"They are generally directed more toward proposed projects that they think may have an impact to health or property values," he says.

"These are classic 'not in my backyard' protests that you see happen in developed western countries."

And with few effective avenues for people to voice their complaints about the ambitious industrial projects springing up around the country, McElwee says, they "will continue to happen, I think, with increasing frequency."
Guangzhou officials say they have begun an environmental assessment of the incinerator project and are accepting public opinions of the plans.

But they have a long way to go before public opinion is assuaged.

Wen, the blogger, described one older woman who knelt for more than two hours in front of the municipal building in protest.

The crowd began to chant, 'Auntie is kneeling; mayor come out.'

Wen posted the call on his Twitter account, where it repeated dozens more times during the day by Chinese users.

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China Drywall Linked to Corrosion, Health Complaints

Nov. 24 (Bloomberg) -- Chinese-made drywall imported into the U.S. is linked to corrosion of metal and wires in homes and may also be causing health complaints by homeowners, according to a report by American investigators.
A study of 51 homes with Chinese-made drywall found corrosion, including on copper air-conditioner coils, according to the report by the Consumer Product Safety Commission.

The homes also had elevated levels of hydrogen sulfide and formaldehyde, which may cause eye irritation, coughing, headaches and sinus infections, the report said.
Drywall is the latest Chinese product accused of having harmful health effects after the nation’s dairy products were found to be tainted with the chemical melamine last year and Mattel Inc. recalled millions of toys shipped from China in 2007 because of excessive amounts of lead and choking hazards.

The U.S. government banned imports of Chinese drywall after 2,100 homeowners complained.
A spokesman for China’s Ministry of Commerce, who declined to give his name, said investigations of the drywall were ongoing and that he couldn’t comment further.

Calls to the news office of the General Administration of Quality Supervision, Inspection and Quarantine weren’t immediately answered today.
Most of the 2,100 U.S. homeowners who complained live in Florida or Louisiana, where the imported drywall was used to rebuild after hurricanes in 2004 and 2005.

About 7 million sheets of drywall were imported from China in 2006, according to the U.S. consumer agency.

American safety officials have banned further imports and set up a task force to consider remedies.

Task Force
“We now have the science that enables the Task Force to move ahead to the next phase -- to develop both a screening process and effective remediation methods,” Inez Tenenbaum, chairman of the consumer commission said in a statement.

“We are now ready to get to work fixing this problem.”
The levels of hydrogen sulfide and formaldehyde are low so they may be combining to act as irritants, safety officials said in a telephone conference with reporters yesterday.
The largest supply of Chinese drywall came from subsidiaries of Knauf Gips KG, Scott Weinstein, an attorney for some homeowners who filed lawsuits against builders and manufacturers, said last month.

Beijing New Building Materials Plc was another major supplier, Weinstein said.

Drywall Lawsuits
An official with the legal department of Knauf Plasterboard Wuhu Co. in the Chinese province of Anhui, who only gave his surname Zhang, said that the company had hired lawyers to represent it in the lawsuit and that he couldn’t comment further.
Products produced by Beijing New Building Materials have been investigated by the U.S. government, a member of the company’s investor relations department, who declined to give her name, said today.

The Shenzhen-listed company will issue more information after the Chinese government completes and releases results of its investigation, she said.
A group representing producers and users of formaldehyde also challenged the Consumer Product Safety Commission’s findings yesterday, calling the report’s hypothesis “irresponsible.”
The only difference from the control and complaint homes in the study was the level of hydrogen sulfide, said Betsy Natz, executive director of the Arlington, Virginia-based Formaldehyde Council Inc.

“There was no difference between the levels of formaldehyde measured in each group,” Natz said by e-mail.
Federal and state health experts said homeowners should open windows, keep temperatures low, run a dehumidifier, and spend time outdoors to limit the health effects of the irritants.

Chinese Manufacturers
U.S. safety officials asked manufacturers in China for a “just and fair approach” to compensate homeowners, Consumer Product Safety Commission spokesman Scott Wolfson said.
So far, there have been no fires caused by corroding wires or electrical fixtures, Wolfson said.
“There were no indications of significant overheating of conductors or conductive parts due to the corrosion events,” the report said.
Commission Chairman Tenenbaum warned Chinese quality regulators at a meeting last month that the drywall could cause a backlash in the U.S. Congress.
Previous Chinese imports of tainted products have led to trade restrictions.

More than 20 countries and markets in Europe, Asia and Africa banned Chinese dairy products last year after melamine, a product used to produce plastic and tan leather, was found in them.
A spate of toy recalls in 2007, many imported from China, with dangerous levels of lead or that posed choking hazards, led Congress to pass an overhaul of consumer protection laws that toughened the standards on lead testing.

The Consumer Product Safety Commission voted in January to delay the new rules for a year, after 67 business associations said the additional costs of the testing would lead to “widespread bankruptcies.”

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China's BYD boss in fast lane after Buffett buy

China's BYD Co Ltd Chairman Wang Chuanfu attends a news conference in Hong Kong, August 31, 2009.

By Doug Young

HONG KONG (Reuters) - Wang Chuanfu might aptly be called China's man of electric dreams.
The soft-spoken 43-year-old entrepreneur was zapped onto the world stage last year when his company, BYD Co Ltd, became the latest darling of U.S. billionaire investor Warren Buffet, who bought 10 percent of the electric car and battery maker.
The upward ride has been non-stop since then, with BYD's stock surging more than seven-fold over the last year, making Wang the richest man in China with a net worth of $5.8 billion, according to the latest ranking by Forbes magazine.
Wang started BYD in 1995 with money from a relative after leaving a government sector job where he worked as a researcher.
His company's name stands for "Build Your Dreams," according to its business cards, though Wang sometimes jokes that it really means "Bring You Dollars."
His somewhat geekish appearance and soft-spoken manner bespeak his humble roots.

He grew up in interior China's Anhui province, where siblings raised him after his parents died when he was young.
"His interest is his work," said Henry Li, general manager of BYD's auto export trade division, at the Guangzhou Auto show in south China, where BYD's electric cars were on display but Wang himself was absent.
Wang, whose company made its mark selling batteries to the likes of Nokia and Motorola and is now taking a plunge into electric cars, is a bit of a hybrid himself.
He blends the qualities of legendary former GE boss Jack Welch, known for his management prowess and grasp of his markets, and equally legendary inventor Thomas Edison, Li said.
Like Edison, who argued that genius is 1 percent inspiration and 99 percent perspiration, Wang is also famous for his dedication to his work and seldom takes a day off.
He regularly eats in the company canteen and lives in a BYD-owned housing complex with his wife and daughter, according to previous interviews.
When he started out, he studiously examined other battery technologies on the market, dismantling rival products to see how they worked.
He also believes strongly in his products, so much so that Wang made headlines earlier this year by reportedly drinking battery fluid to show that his company's batteries are fully non-toxic.
"His work is his hobby," said Jasmine Huang, also in BYD's auto export trade division. "He isn't always at the office, but he's always thinking about his company."
Wang's entrepreneurship seems to have landed him in hot water, however, in the form of a long-running dispute between his company and a unit of Taiwan's electronics giant Hon Hai, which has accused BYD of infringing on its intellectual property.

BYD denies any wrongdoing.
The company also came under scrutiny when Nokia announced earlier this month it was replacing 14 million BYD cellphone charges which it said could deliver an electric shock.
Some observers say the company, the world's largest mobile phone battery maker with 30 percent of the market, is built more on the hype of Warren Buffet's investment and the promise of electric cars that have yet to start commercial production.
Wang has said he wants to build BYD into the world's biggest car company by 2025.
"He is presentable and charismatic although he still has a distance to go from Apple's Steve Jobs," said an analyst who covers the company.

"He has a sellable story, but whether he can deliver remains to be seen."

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Obama Loses a Round

By YING CHAN
While the jury is still out on what President Obama’s China visit has achieved for the long term, the president has most decidedly lost the war of symbolism in his first close encounter with China.
In status-conscious China, symbolism and protocol play a role that is larger than life.

U.S. diplomatic blunders could reinforce Beijing’s mindset that blatant information control works, and that a rising China can trump universal values of open, accountable government.
During Mr. Obama’s visit, the Chinese outmaneuvered the Americans in all public events, from the disastrous town hall meeting in Shanghai to the stunted press conference in Beijing.

In characteristic manner, the Chinese tried to shut out the public, while the U.S. unwittingly cooperated.
The final image of President Obama in China that circulated around the world is telling: A lone man walking up the steep slope of the Great Wall.

The picture is in stark contrast to those of other U.S. presidents who had their photographs taken at the Great Wall surrounded by flag-waving children or admiring citizens.

Maybe Mr. Obama wanted a quiet moment for himself before returning home. But a president’s first visit to the wall is a ritual that needs to be properly framed.

Mr. Obama could have waited until the next visit, when he could bring the first lady and the children.

Instead, he went ahead by himself to pay tribute to China’s ancient culture. In return, the Chinese offered nothing, no popular receptions, not even the companionship of a senior Chinese leader.
The trouble for the U.S. started at the town hall meeting two days earlier — a more scripted event than those organized with students for earlier U.S. presidents.

There was no real dialogue, as a programmed audience, most of them Communist League Youth members, asked coached questions.
The Chinese also rejected the U.S. request for live national coverage and defaulted on a promise to live-stream the meeting at Xinhua.net, the online version of China’s state-owned news agency.

Mr. Obama scored a point when he managed to address the issue of Internet freedom after the U.S. ambassador, Jon Huntsman, fielded him the question from a Chinese netizen submitted online.
Meanwhile, Chinese officials garnered from the meeting generous quotes from Mr. Obama affirming China’s achievements and America’s expressions of good will, which were turned into glowing headlines for the Chinese media.

In this round of the propaganda skirmish, the U.S. scored one point while China reaped a handful.
Mr. Obama was similarly shut out from addressing the public in Beijing.

At the Beijing press conference, President Hu Jintao and President Obama read prepared statements and would not take questions from reporters.

“This was an historic meeting between the two leaders, and journalists should have had the opportunity to ask questions, to probe beyond the statements,” protested Scott McDonald, the president of China’s Foreign Correspondents Club, but to no avail.
In a final dash to break through the information blockade, the Obama team offered an exclusive interview to Southern Weekend, China’s most feisty newspaper, based in Guangzhou.

Once again, journalists’ questions were programmed and the paper censored.

In protest, the paper prominently displayed vast white spaces on the first and second page of the edition that carried the interview.

Propaganda officials are investigating this act of defiance.
Only the Obama team knows for sure how they allowed themselves to be outmaneuvered. Unwittingly, the U.S. helped to produce a package of faux public events.
Pundits argued that the visitors were not supposed to impose the “American way” on China and that America needs to respect Chinese practices.

The argument is both patronizing and condescending.

Increasingly, the Chinese public has been clamoring for greater official transparency and accountability, while the Chinese government has been making progress on these fronts.

No one in his right mind would ask Mr. Obama to lecture Beijing on human rights. But the Chinese public deserves better accounting, no less than Americans citizens.
To their credit, U.S. officials did try to get their message out online. But it was the Chinese bloggers who were most active in challenging official information control.

They at least fought the good fight with growing confidence, a fight the Americans seem unable to wage effectively.

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Obama’s Warming to China Is Seen as Slight in India

By LYDIA POLGREEN
NEW DELHI — The statement, on its surface, seemed like any other bland missive released at the end of a polite visit by a head of state.

It was put out by the United States and China after President Obama’s visit there, and said that the two countries would “work together to promote peace, stability and development” in South Asia.
But on the eve of the visit to Washington by the Indian prime minister Manmohan Singh, where on Tuesday he will be the guest of honor at President Obama’s first state dinner, the words rank as one of several perceived slights that have dampened hopes for a new chapter in the sometimes rocky relationship between the United States and India.
The vague statement has been widely interpreted here as an invitation to China to meddle in India’s backyard, and prompted howls of dismay across the political spectrum.
“How can you make China responsible for keeping peace in South Asia?” said Prem Shankar Jha, a columnist and political analyst, channeling the prevailing sentiment among Delhi’s chattering class.

“China has done nothing in South Asia except to play a destructive role here,” he continued, referring to China’s close ties to India’s archrival, Pakistan.
Beyond the surface issues, however, lies a deeper tension, in which India sees a warmer relationship between Washington and Beijing under the Obama administration as a threat to its rise as a global power, and worries that India is being relegated to a regional role on par with its troubled neighbors, Afghanistan and Pakistan.
“There is a feeling that in Obama’s international calculations, India is not that important,” said Lalit Mansingh, a former foreign secretary and ambassador to Washington.

“The suspicion is building up that Obama is not as keen on the strategic partnership with India as George W. Bush was. There is, underneath the surface, a suspicion that the Americans are scared or too dependent on the Chinese.”
Mr. Obama’s declining to meet the Dalai Lama in Washington was also seen as evidence that he was unwilling to offend China, never mind that India barred foreign journalists from covering the Dalai Lama’s visit to a disputed Indian province, in part to mollify China, which opposed the visit.
India and the United States grew closer than at any time in their history during Mr. Bush’s presidency, spurred in large part by a pact on nuclear technology that tacitly legitimized India’s nuclear weapons program and will allow India to import technology to build much-needed nuclear power plants.

The Bush administration saw democratic India as a natural counterweight to a rising autocratic China.
The Obama administration has been received more coolly.

While Mr. Bush saw India as a singular and vital ally, Mr. Obama “has tended to use Pakistan as the fulcrum of South Asia, and sees India as one knotty strand in the Afghanistan tangle,” said a disapproving editorial in the newspaper Indian Express on Monday.
Indeed, with America deeply mired in the Afghan war, and with Pakistan’s growing chaos increasingly inseparable from the Afghan morass, India worries that it will once again become merely a variable in a very complicated regional equation.
In this context what is seen as American reluctance to confront China on tricky issues has created the impression that the United States worries more about its pragmatic interests with China, to which it owes $800 billion, than standing up for the values it shares with India, analysts and former diplomats here said.
“His bowing before the emperor of Japan was an act of courtesy,” Mr. Mansingh said. “But his bending over backwards before the Chinese was an act of appeasement.”
These tensions in many ways predate both Mr. Bush and Mr. Obama.

India and the United States would seem to be natural allies — both are vast, multiethnic and religiously diverse nations that embraced democracy after throwing off the British colonial yoke. Indeed, the United States was an early supporter of Indian independence.
But the relationship has always been rocky, and has foundered on precisely the same grounds: India’s prickliness at being seen as anything but a singular nation with a unique destiny.

Cold War politics put the United States solidly on the side of Pakistan.

India, under its first prime minister, Jawaharlal Nehru, was officially neutral in the Cold War but had socialist leanings and a cozy relationship with the Soviet Union. But India chafed at being defined by these ideologies.
Obama administration officials have taken pains to paint the United States-India relationship as essential and to be respectful of India’s separate path.
“The U.S.-Indian partnership is one of the real keys to global order and global prosperity in the 21st century,” declared William J. Burns, under secretary of state for Political Affairs, in a statement released after visiting India last month.
Hillary Rodham Clinton, the secretary of state, made an extensive visit to India in July, making a point of visiting Mumbai and staying at the Taj Palace Hotel, which was attacked by Pakistani terrorists last year.
Mr. Singh himself sought to play down any disenchantment with the new administration.
“I have no apprehension that our relations with the United States would in any way suffer because of the change of administration,” he told CNN’s Fareed Zakaria on Sunday, and repeated his oft-stated view that “India and China are not in competition.”
China, meanwhile, has signaled that it has no intention of playing a role in mediating India’s longstanding quarrels with Pakistan. And despite the joint statement, it has not expressed any interest in getting involved in Pakistan’s domestic troubles.
Indeed, the relationship between India and the United States encompasses so many spheres that it is difficult to imagine any serious rupture, analysts said.

Beyond billions of dollars of trade, there are millions of Indians and people of Indian origin in the United States, studying at universities, building microchips, curing disease, writing novels and even serving in the Obama administration.
Since the attacks on Mumbai last November, cooperation between Indian and American intelligence and law enforcement agencies has been growing, with each providing the other with vital information on terrorist threats and networks.
Salman Haidar, a former foreign secretary, said that the natural alliance between India and the United States, frustrated for so long by historic events, is now too strong to be shattered by perceived blunders.
“The exchanges till now between Obama and Manmohan Singh have been very cordial and pointed toward mutual appreciation and respect,” Mr. Haidar said. “I think that there is a comfort level that has not been disturbed.”

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Playtime a luxury for competitive Chinese kids

By Kitty Bu and Maxim Duncan
BEIJING -- All work and little play is the norm for most children in China, where stiff competition for future jobs and ambitious parents mean long hours in the company of school books, not friends.
China's one-child policy has contributed to putting enormous pressure on children to succeed, and there is no shortage of wealthy Beijing parents these days willing to stump tens of thousands of yuan for elite educational institutions to give their offspring an academic head-start.
"Children have so much pressure to do well. There is a Chinese idiom: 'Every parent wants their boy to be a dragon and daughter to be a phoenix'," said Li Hongyan, who runs the 68,000 yuan ($9,960) a year MEG Bilingual International kindergarten.
But between maths, language and other so-called enrichment classes, there is often little time for play, which children's rights groups say is essential for healthy development.
Last Friday marked Universal Children's Day, which aims to promote the U.N. Convention on the Rights of the Child, established 20 years ago to protect the fundamental rights of all children -- including the right to play.
"This is what we usually call the 'forgotten right,' because of course adults think the right to play is perhaps a luxury. They don't realize that this is actually a necessity," said Kirsten Di Martino, Chief of Child Protection at UNICEF China.
Through play, children learn how to socialize, communicate and share as well as solve conflicts -- skills that can't be taught from a book, she said.
But for parents who pour all their hopes and ambitions into just one son or daughter, and know they will face a highly competitive society, those skills may be too abstract.
Introduced in the late 1970s to ease strain on the country's limited resources, the one-child policy forbids most urbanites from having two children, although there is more leeway for ethnic minorities and rural parents whose first child is a girl.

GENIUS SCHOOL?
In the Experimental Class for the Gifted and Talented Children at Beijing's No. 8 High School, which churns out "geniuses," students are used to a seven-day school week.
Most Chinese students start high school at 16 but each year a few dozen 9 to 10 year-olds are put on a fast-track to university with a speeded up curriculum, the director of the class said.
Each year thousands of parents put their children through rigorous exams to get onto the program.

The last few candidates even have to live with teachers for a few weeks until a panel of judges makes their final vote.
Those selected get to university up to seven years ahead of normal students. In return, many children in the class said they usually have just 30 minutes of play time a week.
Ten-year-old Wang Shaohan is already thinking about college.
"There are pluses and minuses. The negative side is that when we get into university we are not mature like others," Wang said.
"The plus side is that I can get ahead. My mother said the best time in life is college life so she wants me in early. It's not a bad thing to start early."
Wang's mother is not worried about the pressure.
"I think all children are different. This way of studying simply suits my child well. I haven't thought about other things. It's a good thing as long as it suits my child," she said.
And when asked about the right to play, most children simply shook heads and asked what it was.

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Internet Serves as Springboard for Chinese Attacks on US Military

Chinese cyberattacks on the U.S. military jumped sharply in 2009, a report reveals
By Robert McMillan
Cyberattacks on the U.S. Department of Defense -- many of them coming from China -- have jumped sharply in 2009, a U.S. congressional committee reported Thursday.
Citing data provided by the U.S. Strategic Command, the U.S.-China Economic and Security Review Commission said that there were 43,785 malicious cyber incidents targeting Defense systems in the first half of the year. That's a big jump.

In all of 2008, there were 54,640 such incidents. If cyber attacks maintain this pace, they will jump 60% this year.
The committee is looking into the security implications of the U.S.' trade relationship with China. It released its annual report to Congress Thursday, concluding that a "large body of both circumstantial and forensic evidence strongly indicates Chinese state involvement in such activities."
"The quantity of malicious computer activities against he United states increased in 2008 and is rising sharply in 2009," the report states.

"Much of this activity appears to originate in China."
"The cost of such attacks is significant," the report notes. Citing data from the Joint Task Force-Global Network Operations, the report says that the military spent $100 million to fend off these attacks between September 2008 and March 2009.

A Defense Department spokesman did not have any immediate comment on the report's numbers Thursday.
Attacks on department systems have been rising steadily for years.

In 2000, for example, only 1,415 incidents were reported. The increase is in part due to the fact that the U.S. military is simply better at identifying cyberthreats than it used to be, said Chris Poulin, the chief security officer of Q1 Labs, and formerly a manager of intelligence networks within the U.S. Air Force.

The department figures are "probably more accurate now," than they were nine years ago, he said.
Security experts have long known that many computer attacks originate from Chinese IP (Internet Protocol) addresses, but due to the decentralized nature of the Internet, it is very difficult to tell when an attack is actually generated in China, instead of simply using Chinese servers as a steppingstone.
Q1's Poulin says that his company's corporate clients in the U.S. are seeing attacks that come from China, North Korea, and the Middle East. "We do definitely see patterns coming from specific nation states."
He said that because China's government has taken steps to control Internet usage in the country, it could probably throttle attacks if it wanted to.

"China's defiantly initiating attacks," he said.

"State-sponsored? Who knows. But they're certainly not state-choked."

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China Money Leaks Offshore

By JONATHAN CHENG
HONG KONG -- Soaring property prices in Hong Kong and booming baccarat tables in Macau offer a telling glimpse of how money is leaking out of mainland China, in defiance of Beijing's strict capital controls, and shaking up two of the country's key offshore markets.
Housing prices in Hong Kong, a city still barely recovering from recession, have risen some 30% this year.

On the opposite side of the Pearl River Delta, Macau gambling officials are discussing measures to slow growth there after a trio of record-breaking months, including all-time highs in August and then October. October's revenue of US$1.58 billion is about double that of Nevada for the same period.
It is no secret who brought the party: cash-rich mainland Chinese, eager to put their money to work.
Massive stimulus spending and easy credit in China have likely added to flow of cash through under-the-table transfers, research firm GaveKal Dragonomics wrote recently in a note to clients.

"The sheer amount of 'shady money' flowing to Hong Kong and Macau is becoming slightly embarrassing for Beijing," the note said.
Officially, China's capital-control regime regulates the amount of money flowing in and out of mainland Chinese borders, including into the Chinese special administrative regions of Hong Kong and Macau.

But in practice, money flows liberally through offshore bank accounts and a number of other nonofficial channels, experts say.
Jane Jiang, a Beijing-based lawyer for Allen & Overy LLP who specializes in issues tied to China's foreign-exchange controls, says that while Beijing relies on banks to monitor offshore money transfers, there are countless ways to get around these measures, from falsifying contracts to carrying money in suitcases to Hong Kong.
Because mainland citizens are given an annual cap of US$50,000 a year that they are allowed to convert into foreign currencies for use for a variety of things such as vacations and online purchases from overseas Web sites, pooling money from family members is another easy way to get around restrictions.
Business owners with overseas operations or Hong Kong bank accounts have even easier access to foreign capital to play with, since these are beyond the control of Beijing's regulators. In short, Ms. Jiang says: "The possibilities are infinite."
To be sure, far more money is flowing into China than out, as global capital races to cash in on China's robust economic rebound and as many investors bet that its currency will strengthen. But there are also incentives driving money in the other direction.
Hong Kong partly encourages the inflow of Chinese money through a government immigration and investment program. Under the program Chinese nationals who already enjoy residency rights abroad can immigrate to Hong Kong after investing 6.5 million Hong Kong dollars, or about about US$839,000, in the territory.
A lot of that money goes into property.

Since the program began six years ago, 3,907 "investment immigrants" from mainland China had won approval by the end of September, plunking down a total of US$1.34 billion in the city's property market, according to government data.

This year alone, US$477.3 million went into Hong Kong's property market from mainland Chinese who successfully applied for local residency.
"Many mainland Chinese want to send their children to schools in Hong Kong, and they see the city as a window to the outside world," says Thomas Kut, the chief executive of Midland Immigration Consultancy Ltd., an arm of one of Hong Kong's biggest real-estate brokers.

"Hong Kong is close, the time zones are the same, the language is easy to learn and they can travel back and forth whenever they feel like it."
Over China's weeklong National Day holidays in early October, Mr. Kut led about 40 mainland Chinese to a new luxury condominium in the city's Fo Tan district, not far from Hong Kong's border with China.
"I'm not afraid to buy now," said one buyer, a Guangzhou resident who identified herself only as Ms. Sheng. Ms. Sheng, an exporter, was eyeing a 2,000-square foot apartment overlooking one of Hong Kong's horse-racing tracks.
Hong Kong's investment immigrant policy effectively opens a legitimate way for Chinese residents to buy property outside the mainland despite the capital controls, says Hing-yin Lee, a Shanghai-based property broker for Colliers International.
The tidal wave of mainland Chinese money into both Hong Kong and Macau has posed a challenge for policymakers.

Fears of overly rapid growth in Macau's gambling revenue have prompted mainland Chinese officials to tighten visa policies for mainland visitors traveling to the territory's casinos.

In recent years, a local backlash against mainland Chinese bidding up property prices forced Macau's government to scrap its own "investment immigrant" program.
Some Hong Kong people fear that Chinese money is pushing local property prices beyond their reach.
"Rich mainlanders are coming in, and it has a big effect. Hong Kong is so tiny, and China is so big," says Emily Lau, a legislator who attended a rally last month protesting soaring property prices.

When mainland Chinese buyers bid up luxury home prices, "the high end affects the mid-end of the market, and it pulls the whole thing up," says Ms. Lau, who has asked the government to investigate allegations of money laundering.
Cheng Lai-king, a 50-year-old social worker who attended the march, said the government should look into restricting home purchases in Hong Kong to only local residents.

"There's so much money flooding into Hong Kong from outside, and it's messing with our market."
Some of that money is flowing further afield. Yukihiko Ito, managing director of property broker Asterisk Realty Tokyo, says he has seen a sharp rise in mainland Chinese buyers in the Tokyo and Yokohama condominium market over the past two years, many of them brought in by Chinese travel agencies.
The buyers, Mr. Ito says, sometimes pay for their US$1 million condos with suitcases full of yen, hoping to collect rent while socking their money away overseas.

"We are brokers, so we don't ask where the money comes from if they don't say," Mr. Ito says.
Some experts think that Beijing may actually be countenancing the outward flows as a safety valve against rising pressure on its own currency, even if officially the government wants to keep money flowing through channels it can monitor.
The State Administration of Foreign Exchange, Beijing's principal regulator, has in recent years tested ways to let money flow more freely as it moves cautiously toward internationalizing its currency, creating release valves to prevent asset-price inflation amid currency inflows and expectations of the yuan's long-term appreciation.
In 2007, Beijing tinkered with letting Chinese invest directly in Hong Kong's stock market before the plan was scrapped.

Late last month, Beijing expanded a program that allows ordinary Chinese to invest indirectly in overseas stocks through licensed domestic institutions, approving an additional $1.5 billion in the program's first such expansion in 17 months.

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Boycott Microsoft Bing

By NICHOLAS KRISTOF
Critics have accused President Obama of kowtowing to Chinese leaders, by failing to meet dissidents, toning down his criticisms and delaying a meeting with the Dalai Lama.

On balance, I think that criticism is premature: Confrontation doesn’t help with China and can hurt, and so engagement becomes a fine line to navigate.

The Obama visit wasn’t a ringing success, but neither was it a craven embarrassment.
For the latest craven kowtowing, we can look somewhere else: Microsoft and its new search engine, Bing.
Western corporations have often behaved embarrassingly in China, sacrificing any principles to ingratiate themselves with the Communist Party authorities.

Yahoo was the worst, handing over information about several email account holders so that they could be arrested – and then dissembling and defending its monstrous conduct.

Now Microsoft is sacrificing the integrity of Bing searches so as to cozy up to State Security in Beijing.

In effect, it has chosen become part of the Communist Party’s propaganda apparatus.
If you search a term on Bing that is politically sensitive in China, in English the results are legitimate.

Search “Tiananmen” and you’ll find out about the army firing on pro-democracy protesters in 1989. Search Dalai Lama, Falun Gong and you also get credible results. Conduct the search in complex Chinese characters (the kind used in Taiwan and Hong Kong) and on the whole you still get authentic results.
But conduct the search with the simplified characters used in mainland China, then you get sanitized pro-Communist results.

This is especially true of image searches. Magic! No Tiananmen Square massacre. The Dalai Lama becomes an oppressor. Falun Gong believers are villains, not victims.
What’s most offensive is that this is true wherever in the world the search is conducted – including in my office in New York.

If Microsoft felt it had to bow to Chinese censorship within China’s borders, based on the IP address, that might be defensible. But when Microsoft skews its worldwide searches to make Hu Jintao feel better, that’s a disgrace. It becomes simply a unit of the Central Committee Propaganda Department.
(This is an issue with Google as well, but to a much lesser extent. Google censors results on its search engine used within China, google.cn, but offers mostly uncensored results using simplified Chinese characters on its worldwide browser, google.com. However, some searches on google.com, such as images for Falun Gong, are also censored.)
When I originally wrote about this issue back in June, Microsoft protested.

“From what you described, that’s not the way Bing is supposed to work,” wrote Kevin Kutz, a company spokesman.

He said that Chinese speakers at Microsoft could not replicate my results and did not detect this kind of skewed result.

I sent screen shots, and then Microsoft acknowledged the issue but said that it was simply a temporary mistake.

“It’s a bug,” Kutz told me. Later, he added: “What’s important is it’s getting fixed.”

Soon, he said, Bing searches would be the same for Tiananmen and other sensitive subjects, whatever the language.
Six months later, the censorship continues. And now all of a sudden, it’s company policy.

Microsoft’s current position, which insults my intelligence and yours, is that there was indeed a bug of some kind and that that is fixed – but that searches in simplified characters continue to produce pro-Communist results because of the algorithms used.

Mr. Kutz now asserts that a search in any given language emphasizes results from within the country that uses that language. Thus if you search in the simplified characters used within China, then you get disproportionately Chinese propaganda. Thus, he says, the explanation lies in the search algorithms, rather than in Microsoft policy.
Huh? How come that wasn’t the explanation in June?

And if that’s the case, then why is there a marked difference between text and image searches? And in any case, why should Bing use an algorithm that results in propaganda and skews results far more than Google? Why isn’t Wikipedia higher on the results with simplified characters?
Of course, it’s possible that Microsoft executives in Redmond, since they can’t read Chinese, are being misled by those executives focused on the China business.

Yet my hunch is that Microsoft simply has decided at a top level that it will compromise what principles it must to ingratiate itself with China.

This presumably isn’t at China’s specific request: it’s unlikely that Chinese authorities would be so detailed in their demands, and it doesn’t negotiate over minor points like this.

But China has made it clear that it dislikes search engines that lead to results it considers seditious, and it can block them.
Microsoft apparently doesn’t want to pursue the Google solution of having separate sites – one that produces generally legitimate results (google.com) and another within China that blatantly censors (google.cn).

Instead, Bing figured it would have one site and just censor all the results in simplified Chinese characters. It then compounded the problem by dissembling and disguising its policy.

That’s craven and embarrassing, it betrays the integrity of Microsoft searches, and for me it’s a reason to boycott Bing.
UPDATE: Microsoft has posted a measured response: http://bit.ly/6CD49e . It notes that some Bing searches are not skewed even in simplified characters but acknowledges that image searches in particular are sanitized. It says that this is a bug that was identified today and that it will soon be fixed. That’s basically what I was told last June, and I’m very skeptical.

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Boycotting Microsoft Bing Is No Funny Thing

By Clint Boulton
Microsoft's Bing search engine has seen a decent growth trajectory since it launched in June, growing from 8.4 percent to 9.9 percent through October.
Could November be the month when Bing cracks the double digit mark?

It could and probably will (at least according to comScore), but not if people keep micturating on it.
That's right. In a move he described as "craven kowtowing," Nicholas D. Kristof at the New York Times claimed Bing filters results for searches conducted outside of the People's Republic of China (PRC) using Simplified Chinese characters for their query.
He claimed in a Nov. 20 column that Microsoft is tweaking Bing searches to suck up to State Security in Beijing, becoming "part of the Communist Party's propaganda apparatus."

His evidence? Kristof wrote:
"If you search a term on Bing that is politically sensitive in China, in English the results are legitimate. Search "Tiananmen" and you'll find out about the army firing on pro-democracy protesters in 1989. Search Dalai Lama, Falun Gong and you also get credible results. Conduct the search in complex Chinese characters (the kind used in Taiwan and Hong Kong) and on the whole you still get authentic results.
"But conduct the search with the simplified characters used in mainland China, then you get sanitized pro-Communist results. This is especially true of image searches. Magic! No Tiananmen Square massacre. The Dalai Lama becomes an oppressor. Falun Gong believers are villains, not victims."
Kristof broached this subject with Microsoft back in June, and the company claimed it was a bug. Six months later, he wrote, the censorship continues, with Microsoft claiming "that a search in any given language emphasizes results from within the country that uses that language. Thus if you search in the simplified characters used within China, then you get disproportionately Chinese propaganda."
Kristof, smelling something fishy, believes he was hoodwinked in June, and that the company was merely covering up what was actually its policy of serving censored, simplified character results in China."
Microsoft responded here, claiming bug again, but Kristof is having none of it:
"Microsoft apparently doesn't want to pursue the Google solution of having separate sites -- one that produces generally legitimate results (google.com) and another within China that blatantly censors (google.cn).

"Instead, Bing figured it would have one site and just censor all the results in simplified Chinese characters. It then compounded the problem by dissembling and disguising its policy. That's craven and embarrassing, it betrays the integrity of Microsoft searches, and for me it's a reason to boycott Bing."

Kristof is a journalist for the Times asking people in the U.S. to boycott Bing over it's policy in China.

While it's nice to see a journalist -- a two-time Pulitzer prize-winning one at that -- take up a cause, it will fall flat.

I'm just not sure targeting a search engine -- the No. 3 one at that -- with the self-righteous measure is worthwhile.
Though I will be watching Bing's moves more closely.

Too many more whiffs of this type of impropriety will kill the fledgling search engine, Microsoft CEO Steve Ballmer's bluster be damned.

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China harnesses mountain wind power

China is the world's largest emitter of the greenhouse gases blamed for global warming

By Jerome Cartillier
DALI, China — In the mountains above the southwestern Chinese town of Dali, dozens of new wind turbines dot the landscape -- a symbol of the country's sky-high ambitions for clean, green energy.
At an altitude of 3,000 metres (9,800 feet), Dali Zhemoshan is the highest wind farm in China, where renewable energy has become a priority for a government keen to reduce its carbon emissions and which has taken full advantage of the global trade in carbon credits.
"Wind resources in Yunnan province are not the best in the country," says Zhai Cheng, a project manager at the farm for the Chinese group Sinohydro.
"But at altitude, it becomes more interesting," he adds, gesturing at the line of 48 metre-high turbines.
China, which relies on coal for more than 70 percent of its energy, is the world's largest emitter of the greenhouse gases blamed for global warming.
But it has set a target of generating 15 percent of its energy from renewable sources -- mainly wind and water -- by 2020.
In Yunnan, the wind turbines -- which operate at full tilt between October and April -- are there to boost the region's enormous hydroelectric power resources when productivity falls during the winter months.
"China is redoubling its efforts, with the 2020 target for wind power generation rising from 30 to 100 gigawatts," said Zhai.
The rapid boom in wind farming in China -- where installed capacity doubled in 2008 for the fourth year running to sit at 12.2 gigawatts -- places it behind only the United States, Germany and Spain.
"In terms of the scale and the pace of the build-up of the Chinese wind industry, it's without parallel anywhere in the world ever," said Steve Sawyer, secretary general of the Global Wind Energy Council (GWEC).
"They went from very little installed capacity and almost no industry five years ago to the point where they will be the number one market in the world this year" in terms of new capacity, he said.
"At the current rate, they will be the number one in the world in cumulative capacity by the end of 2011, early 2012," Sawyer predicted.
As well as major wind farms in the north of China, such as those in Gansu province, smaller projects -- like the one in Dali -- are multiplying, almost always relying on the Clean Development Mechanism (CDM).
The CDM, which was created as part of the Kyoto Protocol, allows industrialised countries to fulfil part of their greenhouse gas reduction commitments by investing in clean energy technology in developing countries.
With a generating capacity of 30.75 megawatts, the 41 turbines in Dali produce the same amount of energy as the burning of 20,000 tonnes of coal -- thereby preventing the emission of 50,000 tonnes of carbon dioxide per year.
The carbon credits produced by the Dali pilot project, funded with a 30-million-euro (45-million-dollar) loan from the French Development Agency, will be purchased by Dutch bank Rabobank, Zhai said.
Those credits should amount to between seven and eight percent of annual income, he added, predicting that the project should pay for itself in 10 to 15 years.
"The wind industry in China and India is one of the biggest success stories of the CDM," said GWEC's Sawyer.
"The Chinese example is a very good example: the only way you can make use of the market mechanism is if you have very clear and effective policies and measures to support the industry at the same time."
The challenge for China now, he says, is one of quality.
"They have had this rapid build-up and now they have to focus on the quality rather than just the quantity. Grid extension and connection is one issue, the performance of the turbines themselves is another."

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Plotting Thrillers in the Fog of China

By ALEX BERENSON
President Obama stood at a “town hall” meeting in Shanghai last week, fielding questions from eager Chinese students, an American leader demonstrating the give-and-take of democracy to a nation under one-party rule.

Except that the students were mainly members of the Communist Youth League, hand-picked by the Chinese Communist Party, and the first question set the tone: “What measures will you take to deepen this close relationship between cities of the United States and China?”
All in all, the “town hall” exemplified the sort of stagecraft that the Chinese seem to specialize in — managed in a way that is so obvious as to be condescending, but still successful at stifling dissent.
The moment reminded me of why I decided, three years ago, to center my second spy novel, “The Ghost War,” on a conflict between the United States and China.
For novelists, China’s rise is pure gold.

The Communist Party’s opacity and its passion to control China’s image have had the opposite effect: they feed Western fears of China’s intentions, and dare Western thriller writers to invent disaster.
Never mind that so far the Chinese have not projected military power outside of East Asia, that they prefer to compete mainly by accumulating dollars by the trillion.

Military power grows from economic strength, and military analysts do not doubt that the People’s Republic could one day become a full-bore competitor to the United States, offering its protection to all manner of governments throughout the Persian Gulf and Africa.
For journalists, could is a blank page. But novelists exist to fill that space.

So, in 2006, after outlining my book, I procured a tourist visa (I doubted the regime would welcome any working spy novelist, let alone one whose day job was being a business reporter for The New York Times), and went off to China.
The trip was fascinating.

I’d been to the People’s Republic in 1988, before the protests in Tiananmen Square forced China’s rulers to liberalize their economic policies.

I vaguely remembered a gray Communist country, with empty stores and note-pad sized currency. No more.

On Beijing’s giant avenues, cars and buses crowded out bicycles. Giant skyscrapers towered above Guangzhou and Shanghai. Even Xi'an, in the interior, was bustling and prosperous.
But I can’t pretend that I left China with a better understanding of the machinations at the top of the Communist Party.

Those doors stayed closed to me, as they do to nearly all Westerners.
Journalists and spies find such obfuscation frustrating; they are reduced to reading between the lines of official statements and guessing at the shifting alliances and ideologies of the middle-aged men who run China. Facts are hard to come by.
But the opacity that maddens reporters is manna for novelists, and the novelist in me had a fine time imagining what might be happening behind closed doors in Beijing.

What if a hard-line Chinese general wanted to take control of the People’s Republic? Could he maneuver China and the United States into a clash, a limited war, to grab control?
I did have a few facts to work with.

Military analysts and the Pentagon say China has sharply increased its military spending in the last decade (though it remains far less than the $680 billion the United States will spend this year).

The People’s Liberation Army Navy (yes, that’s its name) has been developing submarines and super-fast torpedoes whose only logical targets are American naval vessels.

Beijing is trying to build ties all over the world, especially with resource-rich nations in Africa. And China has deep national scars from the quasi-colonialism it faced during the 19th and 20th centuries.
Are old resentments and a shifting balance of power enough to push nuclear-armed powers to the brink of war?

In the real world, probably not. In a spy novel, absolutely.
Readers sometimes comment on the realism of my novels. But I don’t aspire to realism. I want, instead, the illusion of realism — a little like the way the Chinese government cares little about the reality of public consent, so long as it has the appearance of consent.
If I can conjure an image of the meetings of the Politburo Standing Committee that seems accurate to you the reader, I’ve succeeded.

After all, Hu Jintao — the general secretary of the committee — is unlikely to complain. (If only he would. What publicity that would be!) To steal an old joke: If a bear is chasing both of us, I don’t have to outrun the bear. I just have to outrun you.
And so I and other spy novelists can only hope that the Chinese, and the rest of the world’s authoritarian regimes, stick with their stage-managed town halls, Internet censorship, and jailings of mouthy dissidents.

During the 1990s, we had reason to worry: democracy seemed to be spreading globally, international tensions fading.

Now, though, those dark days are behind us, and we can get back to imagining the worst without fear of contradiction.
Bad for the world, I suppose. Lucky for us.

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'2012' a home run with patriotic fans in China

A Chinese cleaner removes trash from a bin near a poster advertising the Hollywood blockbuster 2012 at a theater in Beijing, China, Friday, Nov. 20, 2009. Chinese movie goers are flocking to the movie that appears to portray China as a savior of the world in a doomsday scenario where the earth's overheating core destabilizes the planet's crust and destroys humanity.

By CHI-CHI ZHANG
BEIJING — When the apocalypse comes, China will save the world.
Or at least that's how Chinese audiences are interpreting "2012," Hollywood's latest blockbuster disaster movie.
"It's about time the world sees us as a dominant ally," said Liu Xinliang, 27, a Beijing-based computer programmer who watched the movie twice.
The movie, currently No. 1 in the U.S., is also No. 1 in China, grossing $17.2 million here since it opened Nov. 13.
In the nearly 3-hour movie, the Earth's core overheats, threatening humanity. Leaders of the world embark on a mission to build an ark in the mountains of central China to house people and animals that can repopulate the planet — a story line many Chinese have praised.
Like others in a Beijing theater this week, Liu grinned with pride as he watched Chinese troops escort wealthy and important citizens onto the ark.
Chinese netizens on popular blogs have also been quick to note other scenes perceived as having pro-China messages — Chinese military officers saluting American refugees entering China, China being one of the first nations to agree to open the ark's gates to admit more refugees, and a U.S. military officer saying that only the Chinese could build an ark of such a scale so quickly.
"I felt really proud to be Chinese as I was watching our (military) officers rescue civilians in need," said Zhang Ying, 26, an advertising executive in Beijing.

"The movie along with (President Barack) Obama's visit this week made me realize that China has become a respected country on the world stage."
At a theater in central Beijing, hoards of people lined up to buy tickets.
"It's been sold out every night. They all want to watch China save the world," a ticket attendant said with a laugh.
It has also pulled in the crowds in Indonesia but has garnered a less positive response in some quarters in what is the world's most populous Muslim nation — because it predicts doomsday.
Conservative Muslim clerics on the islands of Java, Kalimantan and Sumatra have urged or banned their followers from watching the movie, saying it contradicts Islamic teachings.

They say only God, not man, knows when the world will end.
"We are worried that the film will make Muslims believe that the end of the world will really happen by 2012. That is not true. The end will surely come but no one can tell when," said Mahmud Zubaida, an imam in the eastern Javanese city of Malang.
Still, Indonesia's most influential Muslim body, the Ulema Council, say there is no need for believers to worry as "2012" is only a work of fiction.
In China, the movie is seen as a refreshing change for audiences after decades of unflattering portrayals of the communist nation in Hollywood movies such as "Red Corner" starring Richard Gere, in which an innocent foreigner faces a corrupt Chinese legal system, and Martin Scorsese's "Kundun," which highlights China's rule of Tibet.
Scenes with Chinese bad guys were cut from "Mission Impossible III" and Warner Bros. decided not to release its hit blockbuster last year, "The Dark Knight," in China due to "cultural sensitivities." The latest Batman movie sees the masked hero nab a Chinese criminal in Hong Kong.
As China's economy continues to burgeon, Hollywood has set it sights on the nation of 1.3 billion where they can share profits on only up to 20 of their releases every year — making it crucial for studios to reap as much as they can with each movie.
"China has a legitimate movie market that's growing, but Hollywood is learning that movies portraying us as poor or the enemy will not make money in China," said Shen Dingli, director of the Center for American Studies at Fudan University in Shanghai.
"Chinese love action and disaster movies with special effects, so "2012" would have been released regardless if China played a role in the story line," Li Chow, Sony Pictures Releasing International's general manager for China, said in a phone interview.
It is unclear whether director Roland Emmerich, who also directed "The Day After Tomorrow," "Independence Day" and "Godzilla," intentionally inserted the China element to gain wider viewership on the mainland.
Steve Elzer, a spokesman for Columbia TriStar Motion Picture Group, declined to comment on the China element or whether any scenes were cut from the movie.
China's box office is growing but is still small compared to the U.S. market.

Government statistics show that revenues surged from 920 million yuan in 2003 to 4.3 billion yuan ($630 million) in 2008 — compared to $9.8 billion in the U.S. last year.
The "Transformers" sequel earlier this year brought in $63 million in China, which broke the 11-year record of $53 million set by "Titanic" in 1998.

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Barack Obama dream fades as China visit fails to bring change

Even his allies feel let down by the president’s lack of progress both in Asia and at home
Obama had nothing to show for his trip to Beijing

Tony Allen-Mills in New York
Gazing serenely from the Great Wall of China last week, President Barack Obama appeared to be making the most of one of the supreme perks of White House occupancy — a private guided tour of Asia’s most spectacular tourist destination.
White House aides exulted that perfectly choreographed pictures of this moment would make front pages around the world.

Yet an experience Obama declared to be “magical” turned sour as he returned home to a spreading domestic revolt that is fanning Democratic unease.
It was not just that the US media have suddenly turned a lot more sceptical about a president with grand ambitions to reshape politics at home and abroad — even one previously friendly newspaper noted dismissively: “Obama goes to China, brings home a T-shirt.”
Nor was the steady decline in the president’s approval ratings — which fell below 50% for the first time in a Gallup poll last week — the main cause of White House angst.

Obama remains more popular than either Ronald Reagan or Bill Clinton a year after their elections, and both presidents eventually cruised to second terms.
The real problem may be Obama’s friends — or rather, those among his formerly most enthusiastic supporters who are now having second thoughts.
The doubters are suddenly stretching across a broad section of the Democratic party’s natural constituency.

They include black congressional leaders upset by the sluggish economy; women and Hispanics appalled by concessions made to Republicans on healthcare; anti-war liberals depressed by the debate over troops for Afghanistan; and growing numbers of blue-collar workers who are continuing to lose their jobs and homes.
Obama’s Asian adventure perceptibly increased the murmurings of dissent when he returned to Washington last week, having failed to wring any public concessions from China on any major issue.
For most Americans, the most talked-about moment of the trip was not the Great Wall visit but his low bow to Emperor Akihito of Japan, which the president’s right-wing critics assailed as “a spineless blunder” and excessively deferential.
While some commentators acknowledged that behind-the-scenes progress may have been made on issues such as North Korea, financial stability and human rights, even the pro-Obama New York Times noted in an editorial yesterday that “the trip wasn’t all that we had hoped it would be”.
Nor have the president’s domestic policies proved everything Congressman John Conyers wanted. The prominent liberal black Democrat startled colleagues last week by launching a direct assault on Obama’s handling of healthcare reforms, which were facing an important Senate vote last night.
Asked on Thursday if Obama had provided sufficient leadership on so divisive an issue, Conyers responded tartly: “Of course not... bowing down to every nutty right-wing proposal about healthcare... is doing a disservice to the Barack Obama that I first met.”
Tension over healthcare and what many Democratic legislators now view as neglect of economic issues reached an unexpected breaking point when members of the Congressional Black Caucus — previously regarded as unshakeable Obama loyalists — staged a startling rebellion over what they regarded as a lack of economic support for the African American community.
A vote on proposed financial reforms had to be shelved at the last minute as black caucus members threatened to oppose it as a protest against broader economic policy.

The revolt came as new reports showed that one in seven Americans were struggling to pay for food; that mortgage delinquencies are continuing to rise with almost 2m homeowners more than three months overdue on their payments; and that unemployment rose to 10.2% in October.
While many Democrats remain unswervingly loyal to Obama — and would rather blame President George W Bush for most of America’s ills — there has been no escaping a damaging sense of disappointment in liberal circles that a historic presidency is failing to deliver on its promises.
Others are disturbed that the president’s promises to clean up Washington’s “politics as usual” have dissolved in a familiar murk of cronyism and political patronage.
Susan Johnson, president of the American Foreign Service Association, noted last week that the age-old tradition of presidents handing out ambassadorships as rewards for campaign donors had continued undiminished under Obama, who has so far rewarded more than 40 of his key fundraisers with plum diplomatic jobs.
“There is a bit of disappointment, largely because expectations were raised by the ‘change’ theme of Obama’s campaign,” said Johnson.
Perhaps most depressing of all for a small number of influential Washingtonians was the little-noticed resignation of Gregory Craig, Obama’s former White House counsel, who is widely believed in legal circles to have been made a scapegoat for the administration’s difficulties in resolving the future of Guantanamo Bay.
Craig was a key campaign aide to Obama and played the role of Senator John McCain in rehearsals for television debates.

Charged with implementing the president’s instruction to close the terrorist prison at Guantanamo, he fell foul of Obama aides who had failed to predict the wave of public hostility to the prospect of Al-Qaeda inmates being shipped to American soil.
Elizabeth Drew, a presidential biographer and member of the Council on Foreign Relations, described the effective dumping of Craig as “the shabbiest episode of Obama’s presidency”. Drew blamed the “small Chicago crowd” that surrounds the president for undermining Craig’s position with a series of anonymous leaks — notably suggesting that the lawyer was “too close to human rights groups”.
This kind of White House infighting is par for the course in most presidencies — but Obama was not supposed to be the kind of man who jettisons old friends at the first hint of trouble.
All this provides the Republicans with an unexpected propaganda bonanza.

“We don’t need to slam Obama — his own folks are doing it for us,” one gleeful conservative declared.
The Republicans’ own divisions — magnified now that Sarah Palin, the defeated vice-presidential candidate, is crossing middle America with a new conservative manifesto under her arm — are nonetheless going largely unexamined as the Democrats implode.
Last week Republican governors meeting in Texas talked openly of winning all the states due for midterm elections next year.
The news is not all bad for Obama — America remains enchanted with his family, and many Democrat insiders are convinced that the party’s internal squabbling will melt away at the first hint of real economic recovery.
“Do Democrats have to worry about turnout and voter intensity? You bet,” said Peter Hart, a leading pollster.

“But it’s nothing that lowering unemployment by two points can’t solve.”

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Three's A Crowd In The India-China Theater

By Brahma Chellaney
The renewed Sino-Indian border tensions arising from growing Chinese assertiveness raise an oft-asked question: What has prompted Beijing to up the ante against New Delhi?

Until mid-2005, China was eschewing anti-India rhetoric and pursuing a policy of active engagement with India, even as it continued to expand its strategic space in southern Asia, to India's detriment.

In fact, when Premier Wen Jiabao visited New Delhi in April 2005, the two countries unveiled an important agreement identifying six broad principles to govern a settlement of the long-festering Himalayan frontier dispute that predates their 32-day bloody war in 1962.
But by late 2005, the mood in Beijing had noticeably changed.

That, in turn, gave rise to a nationalistic streak: Chinese newspapers, individual bloggers, security think-tanks and officially-blessed websites ratcheting up an "India threat" scenario.

By early 2006, some Chinese strategic journals and pro-Beijing Hong Kong newspapers like Ming Pao had begun publishing commentaries about a "partial border war" to "teach India" a 1962-style lesson.

And in the fall of 2006, Beijing publicly raked up an issue that had remained dormant since the 1962 war -- Arunachal Pradesh, India's remote northeastern state that China claims largely as its own on the basis of putative historical ties with Tibet.

In fact, the Chinese practice of describing Arunachal, with 1.3 million residents, as "southern Tibet" started only in 2006.
The following year, Beijing repudiated the most important principle it had agreed to during Mr. Wen's 2005 visit -- "in reaching a boundary settlement, the two sides shall safeguard due interests of their settled populations in the border areas."

Since then, China has stepped up military pressure along the Himalayas through cross-frontier incursions and border provocations.

New Delhi has been compelled to urgently enhance Indian defenses, including the deployment of new forces and a crash program to improve logistics.
Ominously, commentaries in the official Chinese media now echo the coarse anti-India rhetoric of the Mao era.

The People's Daily, the Chinese Communist Party's official newspaper, berated India in an Oct. 14, 2009 editorial for its "recklessness and arrogance" and for seeking "hegemony."

Even Chinese government statements on India have taken a harsher, more strident tone; the foreign ministry has begun using language such as "we demand" and labeling the Indian prime minister's recent Arunachal visit a "disturbance."
What happened in the months after Mr. Wen's visit to prompt such a change of heart?

The only major development in that period was the new U.S.-India strategic tie-up, as defined by the defense-framework accord and nuclear deal, but a U.S.-India military alliance has always been a strategic nightmare for the Chinese.

Thus, the ballyhooed global strategic partnership triggered alarm bells in Beijing.

Today, the relationship between the two Asian powers has deteriorated to the extent that trading verbal blows has become common.
Did Delhi help create the context, however inadvertently, for the new Chinese aggressiveness? In June 2005, India agreed to participate in U.S.-led "multinational operations," to share intelligence and to build military-to-military interoperability, all key elements of the June 2005 defense-framework accord.

Delhi also pledged to become Washington's partner on a new "Global Democracy Initiative," a commitment found in the July 2005 nuclear agreement-in-principle.

While Beijing cannot hold a veto over India's diplomatic or strategic initiatives, Delhi could have avoided creating an impression that it was being primed as a new junior partner in America's hub-and-spoke global alliance system.
India -- with its hallowed traditions of policy independence -- is an unlikely candidate to be a U.S. ally in a patron-client framework.

The strategic partnership with the America falls short of a formal military alliance. But the high-pitched rhetoric that accompanied the new partnership represented a tectonic shift in geopolitical alignments, and apparently Chinese policy makers began to believe that India was being groomed as a new Australia to America.

This perception was reinforced by subsequent security arrangements, defense transactions and an end-use monitoring agreement.

New Delhi failed to foresee that its rush to forge close strategic bonds with Washington could provoke greater Chinese pressure and that the U.S. would be able to offer little comfort to India in such a situation.
First, Beijing calculatingly has sought to badger India on three fronts -- border (according to the Indian government, Chinese cross-frontier incursions nearly doubled between 2007 and 2008, with "no significant increase" in 2009); diplomatic (issuing visas on a separate sheet to residents of the Indian-administered state of Jammu and Kashmir so as to set apart that region from India); and multilateral (launching an international offensive to undercut Indian sovereignty over Arunachal; for example, by successfully blocking the Asian Development Bank from identifying that region as part of India in its latest $1.3 billion credit package).

As the resistance to its rule in Tibet has grown since last year, Beijing has sought to present Tibet as a core issue to its sovereignty, just like Taiwan.

Tibet now holds as much importance in Chinese policy as Taiwan.

In ratcheting up the Arunachal issue with India, Beijing seems to be drawing another analogy: Arunachal is the new Taiwan that must be "reunified" with the Chinese state.
The Dalai Lama has said that Arunachal was never part of Tibet, using this to explain why Arunachal was not included in Tibet in a 1914 agreement that demarcated the borders between the then-independent Tibet and British-ruled India.

Beijing does not recognize that agreement because China's acceptance of the 1914 border would be admission that Tibet was once independent, which would seriously undercut the legitimacy of its control over the increasingly restive region.
Beijing originally fashioned its claim to Arunachal, a territory almost three times larger than Taiwan, as a bargaining chip to compel India to recognize the Chinese occupation of the Aksai Chin, a Switzerland-size plateau once part of the state of Jammu and Kashmir.

Thus, China withdrew from the Arunachal areas it invaded in the 1962 war but retained its territorial gains in Aksai Chin, which provides the only passageway between its rebellious regions -- Tibet and Xinjiang.

The late Chinese leader Deng Xiaoping put forth a package proposal: New Delhi accept the Chinese control over Aksai Chin and Beijing drop its claim on Arunachal, subject to "minor readjustments" in the line of control.
But as part of its hardening stance toward India, China has dredged up its long-dormant claim to Arunachal. It openly covets Arunachal as a cultural extension to Tibet -- a classic attempt at incremental annexation.

Because the sixth Dalai Lama was born in the 17th century in Arunachal's Tawang district, Beijing claims that Arunachal belongs to Tibet and thus is part of China.

By the same argument, it can also lay claim to Mongolia, as the fourth Dalai Lama was born there in 1589.

The traditional ecclesiastical links between Mongolia and Tibet indeed have been closer than those between Arunachal and Tibet.
What makes China's claim even more untenable is that it has hived off the birthplaces of the seventh, 10th, 11th and the present 14th Dalai Lamas from Tibet.

Before seeking Arunachal, shouldn't Beijing first return the traditional Tibetan areas of Amdo and eastern Kham to Tibet?
Second, even though the Indo-U.S. strategic tie-up has served as the key instigator of China's more muscular stance toward India, Washington is more reluctant than ever to take New Delhi's side in any of its disputes with Beijing.

President Barack Obama's administration -- far from supporting New Delhi -- has shied away from even cautioning Beijing against any attempt to forcibly change the territorial status quo. Indeed, on a host of issues, from the Dalai Lama to Arunachal, Washington has chosen not to antagonize Beijing.
In effect that has left New Delhi on its own at a time when some in China seem to believe that a swift, 1962-style victory in a border war with India is attainable to help cut a potential peer rival to size and fashion a Sino-centric Asia.

Accusing India of "walking along the old road of resisting China," an article on the Web site of the China Institute of International Strategic Studies -- a think tank run by the PLA General Staff Department's 2nd Department -- warned India "not to requite kindness with ingratitude" and not to "misjudge the situation as it did in 1962."

As a result of the bellicose rhetoric on India, 90% of respondents in a June 2009 online poll by Global Times-published by the Communist Party's information department -- cited India as the No. 1 threat to China's security.
India's current predicament is a far cry from what former U.S. President George W. Bush had touted in his valedictory speech as one of his signal achievements: "We opened a new historic and strategic partnership with India."

The Obama administration isn't unfriendly to India.

It just doesn't see India as able to make an important difference to U.S. geopolitical interests. Another factor is that America's Asia policy is no longer guided by an overarching geopolitical framework.
Whether one agreed with the Bush foreign policy or not, at least its Asia component bore a distinct strategic imprint.

By contrast, the best that can be said about Obama's Asia policy is that it seeks to nurture key bilateral relationships -- with China at the core of Washington's present courtship -- and establish, where possible, trilateral relationships.

The upshot is that the Obama team has unveiled a new trilateral security-cooperation framework in Asia involving the U.S., China and Japan.
In deference to Chinese sensitivities, however, the Obama administration has so far failed to even acknowledge another trilateral alliance that started under President Bush, involving the U.S., India and Japan.

It is as if this concept has fallen out of favor with Washington, just as the broader U.S.-India-Japan-Australia "Quadrilateral Initiative" -- founded on the concept of democratic peace -- ran aground after the late-2007 election of the Mandarin-speaking Kevin Rudd as the Australian prime minister.
At a time when Asia is in transition, with the specter of power disequilibrium looming large, it has become imperative to invest in institutionalized cooperation and regional integration in order to help underpin long-term power stability.

After all, not only is Asia becoming the pivot of global geopolitical change, but Asian challenges are also playing into international strategic challenges.

But the Obama administration seems fixated on the very country whose rapidly accumulating power and muscle-flexing threaten Asian stability.

The new catchphrase coined by Deputy Secretary of State James Steinberg in relation to China, "strategic reassurance," signals an American intent to be more accommodative of China's ambitions.
China's primacy in the Obama foreign policy has become unmistakable.

Indeed, Obama's Asia tour is beginning in Japan and ending in China but skipping India entirely. But playing to India's well-known weakness for flattery, Obama is massaging its ego by honoring it with his presidency's first state dinner.

In fact, such a ritzy event fits well with Washington's current focus on promoting business interests in India, including big-ticket export items like nuclear reactors and conventional weapons.
Obama is committed to a strategic partnership with India, including developing close military ties. New Delhi has placed arms-purchase orders, according to the Indian ambassador to the U.S., worth a staggering $3.5 billion just last year.

But he also has signaled that such a relationship with India will not be at the expense of Washington's fast-growing ties with Beijing.

America needs Chinese capital inflows as much as China needs U.S. consumers -- an economic interdependence of such importance it has been compared to mutually assured destruction. Even politically, China, with its permanent seat in the United Nations Security Council and other leverage, counts for more in U.S. policy than India or Japan.

As the U.S.-China relationship acquires a wider and deeper base in the coming future, the strains in some of America's existing military or strategic tie-ups in Asia are likely to become pronounced.
Against this background, it is no surprise that Washington now intends to abjure elements of its ties with New Delhi that could rile China, including a joint military drill of any type in Arunachal or a 2007-style naval exercise involving the U.S., India, Australia, Japan and Singapore.

Even trilateral U.S. naval maneuvers with India and Japan now are out so as not to raise China's hackles.

In fact, Washington is quietly charting a course of tacit neutrality on the Arunachal dispute, just as its ally Australia has done rather publicly.
Despite the Obama administration bending over backward to ease its concerns, Beijing remains suspicious of the likely trajectory of U.S.-India strategic ties, including pre-1962-style CIA meddling in Tibet.

This distrust found expression in a recent People's Daily editorial that accused New Delhi of pursuing a foreign policy of "befriending the far and attacking the near."

But the mocking newspaper commentaries on India's power ambitions indicate that Beijing is also angered by what it sees as its neighbor's audacity in competing with it.
Left to fend for itself, New Delhi has decided to steer clear of any potential confrontation with Beijing.

But while seeking to publicly tamp down military tensions with China, the Indian government -- under attack at home for being "soft" on China -- has begun asserting itself at the political level.

While Obama declined to meet the Dalai Lama during his recent Washington visit, India is allowing the Tibetan leader to go ahead with his scheduled Arunachal tour -- a red rag to the Chinese bull.

It also has announced an end to the practice of Chinese companies bringing thousands of workers from China to work on projects in India.

And in a public riposte to Beijing's raising of objections to multilateral funding of any project in Arunachal, India has asked China to cease its infrastructure and military projects in another disputed region-Pakistan-held Kashmir.
Diplomatically, however, India cannot afford to be out on a limb.

The vaunted Indo-U.S. partnership has turned into an opportunity for Washington to win multibillion-dollar Indian contracts and co-opt India into strategic arrangements, without a concomitant obligation to be on India's side or to extend political help on regional and international matters.

Joint military exercises, for example, have become a basis to make India buy increasing quantities of U.S. arms so as to build compatibility and interoperability between the two militaries.

Even counterterrorism is emerging as a major area of defense sales to India.
With Obama pursuing a Beijing-oriented Asia policy, and with China-friendly heads of government ensconced in Australia, Japan and Taiwan, New Delhi's diplomatic calculations have gone awry.

Yet the present muscular Chinese approach paradoxically reinforces the very line of Indian thinking that has engendered Chinese belligerence -- that India has little option other than to align with the U.S.

Such thinking blithely ignores the limitations of the Indo-U.S. partnership arising from American policy's vicissitudes and compulsions.

Washington is showing through its growing strategic cooperation with China and Pakistan that it does not believe in exclusive strategic partnership in any region.
As was the case before the 1962 war, the China-India-U.S. triangle today is at the center of the Himalayan tensions.

The Obama team, however, has yet to propose establishing a trilateral initiative to help contain growing Sino-Indian friction.

Having declared that America's "most important bilateral relationship in the world" is with China, the Obama team must caution Beijing against crossing well-defined red lines or going against the self-touted gospel of its "peaceful rise."

The U.S. message should be that any military adventure -- far from helping fashion a Sino-centric Asia -- would prove very costly and counterproductively trigger the rise of a militaristic, anti-China India.
New Delhi, for its part, has to adroitly manage its relationships with Beijing and Washington in a way that it does not lose out.

A stable equation with China is more likely to be realized if India avoids a trans-Himalayan military imbalance, as well as security dependency on the third party that has emerged as the elephant in the India-China theater.

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Assessing the China Trip

The New York Times
President Obama has faced a fair amount of criticism for his China trip.

He was too deferential; he didn’t speak out enough on human rights; he failed to press Beijing firmly on revaluing its currency; he achieved no concrete results.

The trip wasn’t all that we had hoped it would be, but some of the complaints are premature.
The trip was a template for rising American anxieties about the rising Asian power.

President Obama went into his meetings with President Hu Jintao with a weaker hand than most recent American leaders — and it showed.

He is still trying to restore the country’s moral authority and a battered economy dependent on Chinese lending.

Yet the United States needs China’s cooperation on important and difficult problems, including stabilizing the global financial system, curbing global warming, persuading North Korea to give up its nuclear program and preventing Iran from building any nuclear weapons.
On the positive side, the two leaders hinted in a joint statement that there may have been enough agreement on climate change to give momentum to the Copenhagen negotiations.

An American government source said there also may have been some unannounced progress on North Korea.
But publicly, Mr. Obama pulled his punches on China’s exchange rate, saying only that Beijing had promised previously to move toward a more market-oriented rate over time.

Despite its indebtedness, the United States has the world’s largest economy; Mr. Obama should have nudged Beijing to move faster. We hope he did so privately.
We were especially disappointed that China made no discernible move to join with the United States and other major powers in threatening tougher sanctions if Iran fails to make progress on curbing its nuclear weapons program.

President Obama should have made clear in his private talks that the United States and Europe will act anyway if Beijing and Moscow block United Nations Security Council action.
It was also dispiriting that Mr. Obama agreed to allow China to limit his public appearances so markedly.

Questions were not permitted at the so-called press conference with Mr. Hu, and his town hall meeting with future Chinese leaders in Shanghai not only had a Potemkin air, it was not even broadcast live in China.

It’s obvious that the last thing Mr. Hu wanted was to get questions about issues like his brutal repression in Tibet and Xinjiang.

That doesn’t explain Mr. Obama’s acquiescence in such restrictions.
Mr. Obama did not meet with Chinese liberals.

In Shanghai, he spoke of the need for an uncensored Internet and universal rights for all people, including Chinese, and at the press conference he called for dialogue between Beijing and the Dalai Lama. He delayed a meeting with the Dalai Lama until after the China summit and should schedule it soon.
President Obama was elected in part because he promised a more cooperative and pragmatic leadership in world affairs. We support that.

The measure of the success (or failure) of his approach won’t be known for months, and we hope it bears fruit.

But the American president must always be willing to stand up to Beijing in defense of core American interests and values.

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Three Key Lessons from Obama's China Tour

President Obama meets with Chinese President Hu Jintao in Beijing

By Tony Karon

President Obama's trip to China yielded little Chinese cooperation on the Administration's key concerns, ranging from currency issues to Iran.

That's a sign of the shifting balance of power between two countries that have been locked in an uneasy embrace for more than three decades.

"I underlined to President Obama that given our differences in national conditions, it is only normal that our two sides may disagree on some issues," said China's President Hu Jintao.

"What is important is to respect and accommodate each other's core interests and major concerns."
China's concerns, of course, have dramatically expanded in recent years, as was emphasized by Beijing's anxiety over the implication for its own dollar-denominated wealth of U.S. budget deficits.

At the same time, Beijing is in no hurry to play the "other" global superpower rule vacated by the Soviet Union two decades ago.

Herewith, three key lessons to draw from the visit:
1. China's Star Has Risen and America's Has Ebbed, But the U.S. is 'Too Big to Fail'
As the Washington Post noted, when Bill Clinton visited Beijing a decade ago, the U.S. owed more money to Spain than it did to China.

President Obama's America owes China some $800 billion and counting. China's economy is humming again, while America's is likely to remain sluggish for years.

The sharp economic downturn, and the failure of the U.S. to impose its will in two very costly ongoing wars in Iraq and Afghanistan, have shrunk America's global leverage.

Today, far less powerful countries than China routinely decline to follow Washington's lead.

An ironic dividend of capitalism's Cold War triumph has been the emergence of new power centers in the world economy — Brazil, Russia, India and, of course, China.
Given its economic health and growing influence, Beijing is not simply able to rebuff U.S. demands; it is making its own demands of the U.S., in whose economy much of China's own wealth is tied up.

For example, U.S. officials traveling with President Obama faced detailed questions about how the U.S. planned to pay for health-care reform, with China increasingly alarmed at the ballooning deficit and the gloomy economic outlook.

The best thing going for the U.S. in its economic relationship with Beijing — which holds $800 billion in U.S. debt and some $2 trillion in dollar-denominated assets — is that for China, the American economy is simply "too big to fail".
While the U.S. currently needs Chinese help on a raft of economic and geopolitical issues, Beijing is less dependent on U.S. help, although it balks at any hint out of Washington of protectionist trade policies.

While some in Washington will criticize Obama for being too deferential and allowing the Chinese to stage-manage the visit to avoid any domestic discomfort, it is the shift in the real balance of power that has forced the U.S. to change its approach to China.
2. China Doesn't Want to Run the World, But It Has Interests That Differ from America's
Russia may be engaged in a geopolitical chess game with the U.S. aimed at recovering from the demise of its great power status, but China is different.

It pushes back against U.S. initiatives only when those are deemed inimical to its national interests. Iran is a good example.

Beijing's heavy investment in and reliance on Iran's energy sector make it extremely averse to serious sanctions or strategies that create political turmoil in Tehran.

While insisting on compliance with the non-proliferation regime, Beijing does not believe Iran represents an imminent nuclear weapons threat.

And its response to North Korea going nuclear suggests that a nuclear armed Iran is something it could live with.
Obama went to China arguing that its emergence as a major power gives it greater responsibility, as a partner to the U.S., in helping run the world and tackle such global challenges as climate change and Iran.

Indeed, there was a collective shudder in Europe's corridors of power at the idea of global leadership being concentrated in a "G2" partnership between Washington and Beijing.

They needn't have worried.

China's response to Obama could be read as: "Running the world is your gig, we're focused on running our own country, and ensuring security in our immediate neighborhood. We want harmonious relations with you, but don't expect us to do anything that we deem harmful to our national interests."

That means no serious sanctions against Iran, regardless of what deals are struck between Washington and Moscow, because China's national interests require growing Iran's energy exports.

3. Personal Chemistry Can't Change the World
The personal trust between President Ronald Reagan and Soviet leader Mikhail Gorbachev was indispensable in fostering the climate for a rapid, peaceful end to the Cold War.

Presidents Clinton, Bush and now Obama have all tried to cultivate personal relationships with their Chinese counterparts in the hope of smoothing a tricky relationship.

But the usefulness of personal chemistry in dealing with China has strict limits, for a simple reason: While the President of the United States is, in George W. Bush's words, "the decider," his Chinese counterpart is not.

He's not a figurehead, but executive power in Beijing is the preserve of a collective leadership in the form of the nine-man standing committee of the Politburo of the Chinese Communist Party — in which Hu is obviously the key player.

Some observers say this is why the Chinese try to avoid informal one-on-one meetings with their U.S. counterparts, preferring more formal exchanges of talking points cleared with the Politburo.

The problem of dealing with opaque foreign leadership structures is a recurring one for the Administration.

Obama met with Russia's President Dmitry Medvedev last week to discuss sanctions against Iran, but nothing will happen unless Prime Minister Vladimir Putin is on board.

And the Iranians themselves are even more complicated since the traditional balance of power between the government and the clerical leadership has been shaken up by the post-election turmoil.

President Obama's personal charm and charisma may be a national asset when dealing with many countries, but, through no fault of his own, China is not necessarily one of them.

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For blue skies, first clear the air on human rights

By Zhang Zuhua and Jiang Qishen
BEIJING -- On his trip to China last week, President Obama negotiated with our government on climate change and other issues such as economic recovery, currency regulation and denuclearization.

He noted at his town hall meeting in Shanghai that China and the United States lead the world in carbon emissions and that, unless these two countries can agree on what to do, the rest of the world is unlikely to do much, either.
Obama also spoke eloquently of American respect for free expression, rule of law and other human rights, declaring these to be "universal" values.

But at the same time, the president and Secretary of State Hillary Rodham Clinton have made it clear that they do not want to let human rights interfere with other major issues, such as climate change, on which they need Chinese cooperation.

Clinton made this point bluntly in Beijing in February, and Obama offered a concrete concession to China's rulers when he decided to avoid the Dalai Lama in Washington in October.
But this approach is misguided in several ways.

The Chinese government does not reciprocate when it is given things for free. It simply takes them and moves on.

Foreigners may not know this, but to people in China it is plain as day.
More important, human rights in our society are not an isolated item that can be set aside while all else moves forward.

Human rights are not just a humanitarian matter of helping a few dissidents get out of jail.

They are a systemic problem that is connected to openness, rule of law, popular supervision of government and other values Obama hailed in Shanghai.

Progress on many fronts will be easier if human rights are better observed.
Take climate change.

How will the world be sure that the Chinese government observes any pledges it makes on global warming? Through trust?
What happened at the Beijing Olympics last year should counsel caution.

Before the Games, Beijing promised "free demonstration zones" for Chinese protesters, then arrested and jailed the citizens who followed through.

Officials also pledged a schedule of progress toward pollution-free "blue skies," then "fulfilled" the pledge by shuffling their monitoring stations around.
The government promised more freedom to foreign reporters, but since the Olympics it has systematically stepped up its efforts at media control, especially of China's domestic reporters.

If promises are made about carbon emissions, how will we monitor compliance?

Would it not be better if the many Chinese people who are concerned about pollution were free to report what they observed?
Popular awareness of environmental problems has grown immensely in China in recent years. Chinese people do not like fetid air, foul water or the prospect of a cooked planet any more than anyone else does.

But the citizens who speak out on these issues are repressed.

Government officials, whose interests are often intertwined with the industry and commerce that is responsible for pollution, do not want complaints about the environment to be expressed publicly.
For example, Wu Lihong, a farmer in Jiangsu province, began reporting on the dumping of industrial waste into Lake Tai in the early 1990s.

The authorities told him to stop, and he would not. Today he is in prison, serving a three-year sentence on the absurd charge of extortion.

Last year, Tang Zhirong, in Hunan province, complained about the effluent of an aluminum processing facility and received an 18-month prison sentence for obstructing official business. Now out of prison, Tang remains under 24-hour surveillance.
Sun Xiaodi, in Gansu province, complained for years about pollution from a uranium mine and recently accused local officials of fraud.

In July he was sentenced to two years in a labor-reform facility for "illegally providing state secrets overseas" and "rumor-mongering." His daughter Sun Haiyan was sentenced to 18 months on the same charges.
Near Chengdu, in Sichuan province, a crowd gathered in early May of last year to protest the construction of a chemical plant in their neighborhood.

Chen Daojun, a freelance journalist who reported on the demonstration, is now in prison for three years for "inciting subversion of state power."
These are not isolated cases; there are many like them throughout China.

They are also the cases and the people whom Obama and Clinton set aside when they choose not to let human rights interfere with other matters.
In Shanghai, Obama did his best to speak directly to the Chinese people about universal values. (It was not his fault that he was given only limited time, with a prescreened audience, and was broadcast only locally.)

The president spoke of human rights as valuable for their own sake. And he is right.

But he also must see human rights as they relate to the challenges on which he wants to make progress with the Chinese government.

Over the long term, human rights have everything to do with the quality of the Chinese "partner" that the American people are seeking.

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Google, Yahoo zero in on Internet 'freedom' bill

Measure would limit business in 'repressive' foreign countries, like China
By John Letzing
SAN FRANCISCO (MarketWatch) -- Google Inc. and other Internet companies have zeroed in on a resilient effort by a Republican lawmaker to pass legislation that could restrict their ability to take a nuanced approach to operating in "repressive" foreign countries, according to third-quarter lobbying reports.
Google, Yahoo Inc. and a trade group that also includes Microsoft Corp. have focused lobbying efforts on the bill, dubbed the "Global Online Freedom Act of 2009."
Introduced by Rep. Chris Smith (R-N.J.), the legislation could upset the delicate balancing act required of companies trying to do business in countries such as China -- where surging economies and expanding Internet access may be paired with censorship and political repression.
Google has struggled to compete in China, where it lags behind local firm Baidu in terms of Internet search market share.
The legislation proposes an "Office of Global Internet Freedom," which would monitor any moves by U.S. companies to filter or limit their Internet search results in foreign countries.
In addition, if a company receives a user-information request from a foreign government for "other than legitimate law enforcement purposes," such as tracking down dissidents, the U.S. Attorney General could order the company not to comply -- potentially setting it up for an impasse with local authorities.
Google has modified its search service for Chinese users at the government's request before.

In 2006, for example, it began limiting search results there for those exploring topics such as the pro-democracy, Tiananmen Square demonstrations in 1989.
In addition, the company has been targeted by other foreign governments unhappy with the content it makes available online.

Google has argued that it's better to provide censored Internet search results in foreign markets, than no results at all.
A previous effort by Smith to pass similar legislation in 2006 met with resistance, and he subsequently penned a column in the National Review blaming Google's efforts in tandem with a firm run by powerful Washington, D.C.-based lobbyist Anthony Podesta.
According to public records, in the third quarter of this year Google employed Podesta's firm, Podesta Group Inc., to lobby House and Senate members on the legislation, which was re-introduced in May.
Podesta is widely recognized as a top D.C. powerbroker. His brother, John, was a chief of staff to President Bill Clinton. Podesta did not respond to a request for comment.
In addition, Google directly lobbied Congress, the Office of the U.S. Trade Representative, the Commerce Department and the White House on the bill -- often referred to as "GOFA" -- according to third-quarter reports.

Noble goals, big concerns
Google director of corporate and policy communications Bob Boorstin said in a statement that the GOFA legislation could be "improved to avoid impeding the spread of technologies around the world that promote free expression."
Boorstin added that the issues of censorship and free expression might best be addressed as part of "international human rights accords and trade mechanisms."
Yahoo became ensnared in a human rights debacle after it was sued in 2007 for handing personal information about pro-democracy users in China to local authorities, which helped lead to their imprisonment and torture.
Yahoo directly lobbied the State Department and Congress about the GOFA legislation in the third quarter, while also hiring Mehlman Vogel Castagnetti Inc. to take up the issue, records show.
Yahoo has pulled out of direct competition in China, though it retains an ownership stake in Hangzhou-based Alibaba Group. However, the GOFA legislation could apply to other countries where Yahoo does business.
A Yahoo spokeswoman said in a statement that, "While the goals set forth by the sponsors of GOFA are noble, the bill's scope could ultimately mean that companies will have to cease providing information services in a number of countries."
"Yahoo will continue working with Congress as it addresses this legislation," the statement read.
In the wake of intense scrutiny in the media and on Capitol Hill of their operations in markets such as China, Yahoo, Google, Microsoft and other companies formed the Global Network Initiative last year.

The group is dedicated to protecting "freedom of expression" in information technology, according to its Web site.
Still, Rep. Smith is pressing ahead.

His bill has been referred to two House committees, and is being co-sponsored by Democrats Brad Sherman (D-Calif.) and David Wu (D-Ore.), as well as two other Republicans.
Smith said in a statement that GOFA "is aimed at ending the collaboration between U.S. companies and brutally repressive regimes when there is concern that U.S. products will be used to put innocent, pro-democracy advocates in jail."
During his recent visit to China, President Barack Obama voiced support for open access to information, but stopped short of criticizing Beijing for censoring the Internet.
Microsoft, like Google, competes directly in the Chinese Internet market. The company began making its revamped search engine, Bing, available there last summer.
In 2006, Microsoft was criticized for deleting a politically-sensitive blog written by a China-based journalist.

A Microsoft spokesman deferred comment to the trade association TechAmerica - which also includes Google, and has lobbied on the GOFA legislation.
"We're opposed to the bill, but not its underlying principles," said Josh Lamel, TechAmerica's senior vice president, commercial policy and government affairs.

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Beijing's Post-Obama Crackdown

President Obama soft-pedaled human rights in Beijing this week, presumably in an effort to cajole China into better behavior.

The country's public-security apparatus has responded by proceeding with business as usual.
The wheels of Air Force One were barely off the runway when Beijing's security forces beat and seized human-rights lawyer Jiang Tianyong as he was taking his daughter to school yesterday morning.

Two of his colleagues told us he was still being detained at a police station as we went to press.
This is only the latest installment for Mr. Jiang, who has been harassed since he agreed to represent a Tibetan "living Buddha" accused of inciting unrest during the March 2008 riots.

Last year, the government suspended his legal license temporarily, and this year he has been effectively disbarred since June.
None of this dissuaded Mr. Jiang from talking about the true state of human rights in China.

On Oct. 29, he addressed a Congressional human-rights commission during a trip to the U.S.

He returned to China and was placed under house arrest, but he still tried to meet Mr. Obama Wednesday, according to a colleague.

The police escorted him back to his house. The U.S. embassy press office in Beijing said it was not aware of any invitation for Mr. Jiang to meet with the President.
Mr. Jiang's case isn't an isolated incident.

Over the past few months, the government has pressured human-rights lawyers to drop sensitive cases, denied them license renewals, or resorted to physical violence.

Democracy activists and other groups threatening to one-party rule have also come under increased scrutiny.
The Obama Administration has gone out of its way to not criticize China's human-rights violations in public, although Mr. Obama reportedly spoke strongly in private to the Chinese leadership on the topic this week.

That will be of little comfort to Mr. Jiang and the millions of Chinese who support what he stands for.

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An army for the afterlife

A visitor at the "Terra Cotta Warriors: Guardians of China's First Emperor"

A display at the "Terra Cotta Warriors: Guardians of China's First Emperor" exhibit

By Michael O'Sullivan
The world's strangest army is here.
Buried for more than 2,000 years until their accidental discovery by Chinese farmers in 1974, the world-famous terra cotta warriors -- a life-size militia of about 7,000 clay figures created to protect China's first emperor in the afterlife -- have arrived in Washington.

Well, 15 of the 1,000 or so that have been unearthed, along with more than 100 related artifacts from the grave site of Qin Shihuangdi (259-210 B.C.) in Shaanxi province.
On view through March 31 at the National Geographic Museum, the last stop on a four-city U.S. tour, "Terra Cotta Warriors: Guardians of China's First Emperor" is the first time this many of the figures have traveled to the States.

What's more, according to museum director Susan Norton, museum-goers here will be able to get within a few feet of the warriors, far closer than even at the original archeological site, where visitors look down on the burial pits from a distance.
The proximity makes for one powerful visual punch.

You can feel it the minute you step in the show's first gallery, which includes a single ghostly cavalryman and his horse.

That's it. No glass display cases. No clutter.

Norton calls it the show's first "wow moment," and it is. But it's not the last.

The show culminates in a 5,000-square-foot gallery holding eight terra cotta warriors in three groups: three officers, including one general; two archers; and two infantrymen and a chariot driver. It's the show's big payoff.
In between, what else will you find? And what should you look for?
After presenting the first two figures -- a teasing taste of more to come -- the exhibition briefly introduces the man who commissioned them, and his accomplishments.

The first ruler to unite China's warring kingdoms, and the first to begin construction on what would become known as the Great Wall, Qin Shihuangdi is also credited with standardizing China's weights, measures and currency.

There are several examples of period money on display, some that look nothing like what we think of as coins. But that's standard museum fare.
More dramatic -- and enigmatic -- is a suit of armor a little further on.

Made of limestone tiles wired together, the suit includes a 40-pound tunic and seven-pound helmet. Heavier by far than most men could wear, it was not meant for mortal soldiers. Or even terra cotta ones.

You'll notice that several of the clay soldiers are wearing their battle gear -- a terra cotta evocation of the lacquered leather that real soldiers wore.

But this suit of limestone armor, which would have been displayed on wooden racks in the burial pits, was left at the ready for someone else. Some spectral, disembodied soldier from beyond the grave.
Equally spectral is the gallery containing three disembodied clay heads.

Don't worry; they're not broken. For the most part, the heads were made to be detachable. The cavalryman at the entrance is a rare exception. But this trio of floating noggins lends the exhibition an appropriately spooky tone.
Spaced judiciously throughout the exhibition -- which, at 12,000 square feet, is double the museum's old space -- you'll also find several non-military statues: a stable boy, a civil official, a strongman and two musicians. (Hey, someone had to entertain the emperor in the afterlife.) Don't miss the strongman, which is among the coolest discoveries in "Terra Cotta." Built with an almost sumo-wrestler paunch, but missing his head, he's the most unusual of the 15 figures, no two of whom are alike.
A note about timing: Visitors should allow, on average, an hour to take in "Terra Cotta Warriors."

Yes, it can be done in 20 minutes, if all you want to see are the statues. And for those who read every label and look in every case, it wouldn't be hard to spend half a day.
Heck, it took 36 years to build -- and then bury -- these guys. Every minute you spend with them is worth it.

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John Woo exporting Hollywood values to China

"Red Cliff" is released in US theaters on Friday

Hong Kong filmaker John Woo

By Rob Woollard

LOS ANGELES — Fittingly for a director who has scored cinematic hits in Hong Kong and Hollywood, John Woo says his next film will depict Chinese and Americans working side-by-side successfully.
After tackling ancient history in "Red Cliff," released in US theaters on Friday, Woo is fast-forwarding to World War Two for his next film "Flying Tigers," about American pilots working in the Chinese Air Force.
The famous volunteer outfit -- notable for the menacing sets of jaws emblazoned on their aircraft -- fought against the Japanese throughout Asia.
"It's about an American volunteer team working with the Chinese airforce to fight with the Japanese in wartime and they worked together so well. They made a great contribution and they helped win the war," Woo told AFP at a recent press event in Beverly Hills to promote "Red Cliff."
"The whole story is about friendship between Chinese and Americans -- they worked together and won the war. And Chinese people are grateful for that; it's hard to forget what they did."
Reports in Hollywood have linked Tom Cruise to a complex project that Woo expects to be "very challenging."

After his experience in making "Red Cliff" however, Woo remains undaunted by the prospect.
The 2008 epic, which has been condensed from the four-hour two-part film released in Asia to a more manageable two and a half hours, remains the most expensive Asian-financed film in history.
At times Woo was directing more than 2,000 people on set including some 750 soldiers from China's People's Liberation Army hired as extras.
For Woo, "Red Cliff" was a natural progression after a career that saw him follow up his early Hong Kong crime classics such as "Hard Boiled" and "A Better Tomorrow" with mainstream studio hits like 1997's "Face/Off" and 2000's "Mission Impossible II."
"'Red Cliff' was a movie I wanted to make since I'd started working in Hollywood," Woo says.

"I'd learnt a lot from so many good people so I thought it's about time to bring what I learned from Hollywood back to Asia.
"There are so many young filmmakers in China and they are all eager to learn. They have a real passion for movies and they want to work on big-budget, Hollywood-type movies. So 'Red Cliff' was the perfect opportunity."
But while Woo exported Hollywood production values back to Asia for "Red Cliff," the project was mercifully free of the sort of studio interference that would have been the norm for a film of that size made in the United States.
"Let me put it this way: it's always easier making a movie like 'Red Cliff' in Asia," Woo explains. "Everything was so simple. In China, I just walked into the office and let them know that I want to make a movie called 'Red Cliff.' And they said 'Okay let's do it.'
"I had no need to take notes from anyone, I didn't have to take advice from anyone, no need for meetings. I just closed the door, worked with my team, did my own thing and made my own film," he said.
"I've learned so much about big-budget movies from working in Hollywood. But I never got used to the meetings and having so many people involved. It just takes so much longer to start a project, or even to make a decision."

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Chinese cyber-spying grows against U.S.

By Jim Wolf
WASHINGTON (Reuters) - China's government appears increasingly to be piercing U.S. government and defense industry computer networks to gather useful data for its military, a congressional advisory panel said on Thursday.
"A large body of both circumstantial and forensic evidence strongly indicates Chinese state involvement in such activities," the U.S.-China Economic and Security Review Commission said in its 2009 report to Congress.
The 12-member, bipartisan commission was set up in 2000 to analyze the implications of growing trade with China.
Beijing has begun to broaden its national security concerns beyond a potential clash across the Taiwan Strait and issues around its periphery, the 367-page report said.
China is the most aggressive country conducting espionage against the United States, focused on obtaining data and know-how to help military modernization and economic development, it added.
The amount of "malicious" computer activities against the United States increased in 2008 and is rising sharply this year, it said, adding, "Much of this activity appears to originate in China."
The Chinese Embassy did not immediately respond to requests for comment.
The commission said the Chinese government had placed many of its capabilities for computer network operations within elements of the People's Liberation Army.
"China's peacetime computer exploitation efforts are primarily focused on intelligence collection against U.S. targets and Chinese dissident groups abroad," it said.
The report cited conclusions of Northrop Grumman Corp, one of the Pentagon's top contractors, that implicated the Chinese government in extensive cyber activities against the United States.
Omitted was any thorough description of the techniques used for forensic analysis of such suspected cyber espionage.
A Northrop Grumman study was prepared for the commission and released in October.

It said Beijing appeared to be conducting "a long-term, sophisticated, computer network exploitation campaign" against the government and U.S. defense industries.

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Grumbling About China and the Renminbi

By Robert J. Samuelson
Wonder why President Obama’s trip this week to China didn’t go more smoothly?

Meetings between Obama and top Chinese leaders were reportedly stiff; the Chinese also limited domestic press coverage of Obama’s appearances.

The explanation is disarmingly obvious: huge disagreements separate the two countries that can’t easily be papered over.
Anyone doubting that ought to take a quick read of the latest annual report from the U.S.-China Economic and Security Review Commission, a group established by Congress in 2000 to examine the connections between the countries’ economic relations and broader issues of national security.

The Commission has typically been more suspicious of Chinese policies and motives than many American analysts. This year’s report is no exception.
The picture of China drawn by the Commission is of a rapidly-growing country that, through an undervalued exchange rate and systematic industrial policies, increasingly challenges the U.S. economy and is rapidly expanding and modernizing its military.

The commission cited estimates that China’s currency, the renminbi (RMB), is undervalued by 12 percent to 40 percent.

Despite a 4 trillion RMB ($586 billion) “stimulus” package announced in Nov. 2008—to offset the effects of the global economic crisis—China “is still pursuing an export-led strategy,” the report said.

At the end of September, China’s foreign exchange reserves totaled $2.27 billion.
Though the U.S.-China trade deficit in 2009 of $144 billion (through August) was down 17.6 percent from the same period in 2008, most of the decline reflected the deep U.S. recession and less demand from American consumers.

In fact, the report said, China’s share of the total (non-oil) U.S. trade deficit continues to rise and is now about 80 percent, up from 40 percent as recently as 2005.

The Commission echoed the criticism of many U.S. economists who argue that China’s large trade surpluses, reinvested in heavily in U.S. Treasury bonds, contributed to the present economic crisis.

The argument is that the reinvested dollars kept interest rates down and caused banks and other investors to shift funds into riskier mortgage-related securities with higher interest rates.
“If China continues to pursue huge trade and investment surpluses and to accumulate vast financial claims, it will hinder the necessary global economic adjustment, create excess manufacturing capacity, and lay groundwork for the next [economic] crisis,” the report warned.
Aside from trade policies, the report also alleged that China has stepped up its cyber attacks against U.S. private and government data networks.

It cited Defense Department estimates that “malicious” incidents against DOD systems had doubled since 2005, from 23,03l to 54,640 in 2008, and are on track to increase another 60 percent in 2009.

The Commission conceded that tracing the origins of cyber attacks is difficult and that many come from “”private hacking groups.”.

However, the report contended that the technical features and targets of some attacks pointed to heavy Chinese involvement.
On military matters, the Commission said that, supported by an expanding economy, China “has embarked on its largest naval modernization since the founding of the PRC [People’s Republic of China] in 1949.”

The main aim is to deter “Taiwan from declaring independence” and “to impede other nations—including the United States—from intervening on Taiwan’s behalf.”

In recent years, the report said, China had purchased or built 38 submarines, 13 destroyers and 16 frigates and has developed “advanced offensive and defensive weapons, such as anti-ship cruise missiles, land –attack cruise missiles, and sea mines.”

However, American officials believe that the United States retains naval superiority in the region.
The Commission’s powers are confined to investigations and recommendations to Congress.

Its recommendations this year included making more formal complaints to the World Trade Organization about Chinese trading practices and taking legislative steps to offset the effects of the undervalued RMB.

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Senators seek probe into China's yuan peg

By David Lawder

WASHINGTON (Reuters) - Expressing frustration over the Obama administration's light touch on China's yuan exchange rate, two U.S. senators asked the Commerce Department on Thursday to investigate alleged Chinese currency "manipulation."
Sen. Charles Schumer, a New York Democrat, and Sen. Lindsey Graham, a South Carolina Republican, said the department has legal authority to determine whether China's currency practices are a form of subsidy and if so, impose tariffs on Chinese imports.
The two lawmakers have attempted to pass punitive tariff legislation against China in recent years to pressure it into floating its currency, and Schumer threatened on Thursday to revive the effort.
"Commerce has authority under existing law to initiate investigations that can help U.S. industries and protect U.S. jobs, and we are urging the Department to use that authority," the senators wrote in a letter to Commerce Secretary Gary Locke.
A Commerce Department spokesperson was not immediately available for comment.
The letter comes as President Barack Obama returns from an extended trip to China and other Asian countries in which he urged China's President Hu Jintao to move to a more market-oriented exchange rate.
Hu ignored the overtures and instead dwelled on trade protectionism, which he said unfairly threatens access to U.S. markets.

DIFFERENT PRESIDENT, SAME STANCE
Schumer and Graham criticized Obama for taking essentially the same stance as the Bush administration did for years in failing to make a formal determination that China is manipulating the yuan.
The senators, U.S. manufacturers and labor groups say the yuan is pegged at an artificially low value against the dollar to give China a cost advantage in trade.
After U.S. Treasury Secretary Timothy Geithner said in January that Obama believes China was manipulating the yuan, the Treasury twice this year declined to formally label China a currency manipulator -- a step that could trigger negotiations and possible trade sanctions.
Instead, Geithner has spent much of the year praising China for its massive stimulus spending, which he credits with helping stabilize the world economy.
But Schumer told Geithner at a Joint Economic Committee hearing that he and Graham would "do some things legislatively" to resolve an "infuriating" deadlock over the yuan's value that has cost the jobs of hundreds of thousands of Americans.
"They are mercantilist in my opinion and they want to accumulate their wealth in reserves and while they occasionally give verbiage, they give the back of their hand to the world economy, even though they gain from it," Schumer said.

"And frankly, I am tired of us just shrugging our shoulders and walking away."
Geithner responded by saying that he believes that China understands the importance of moving toward a more flexible exchange rate and would do so, but he could not say when this would happen.
"It makes it harder for the financial system to work when you have a large country like that (China) tying its currency directly to the dollar. I think that's going to have to change and I think it will change over time, and my own sense is that it's not going to take that much time."
China began a program of increased yuan flexibility in July 2005 and steadily strengthened its value, from about 8.2 yuan to the dollar to around 6.8 by July 2008.

But the yuan has been held at roughly that level ever since that time, when the financial crisis significantly worsened.

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Obama's China visit leaves dissidents disappointed

Pro-democracy demonstrators hold up placards as they walk along a street toward China's liaison office in Hong Kong

Tibetans-in-exile take part in a candlelight protest against China at Boudhanath Stupa

By Francois Bougon

BEIJING — Although US President Barack Obama raised the thorny issue of human rights during his first visit to China this week, he left many political dissidents -- those who were not locked up -- disappointed.
Obama spoke about his belief in "universal rights" during a town hall meeting with Chinese youth in Shanghai on Monday and again Tuesday at a press conference with President Hu Jintao, but dissidents said it was not enough.
"At first, I had a lot of hope for human rights, for Tibet and for Xinjiang," said female Tibetan writer Woeser, who goes by only one name and is a vocal critic of China's policies in the Himalayan region.
"But President Obama only touched upon these issues, without insisting on anything. Even if he brought them up, he did it without force -- it was very disappointing," she told AFP.
Outspoken artist Ai Weiwei, who says he was beaten by police in August when he tried to testify at the trial of an activist investigating the collapse of schools in last year's Sichuan earthquake, said Obama could have done more.
"Many Chinese, especially the young, hope for a more open and just society -- this needs the support of foreign leaders," Ai told AFP.
Ai said the US leader should be aware that China's disrespect for the rule of law and human rights and its refusal to allow freedom of expression constitute a "threat" not only to the stability of China, but also the world.
"If he is not aware of this, then his visit will be a failure. Up until now I have not seen any signs of success," Ai said just before Obama left the country.
"I agree with some of the people who see his visit as a big Hollywood show. If he does not make a greater effort, the Chinese will become disappointed with these 'universal values' as well as with the United States."
Obama did not have any meetings with human rights activists or dissidents scheduled on his trip to Beijing when he met for solemn talks with Chinese President Hu Jintao.
A White House official travelling with Obama told AFP: "The president raised several dissident cases directly with President Hu on Tuesday."
As always ahead of major political events, Chinese authorities stepped up surveillance of the dissident community during Obama's visit from Sunday to Wednesday, detaining some activists and interrogating others.
"I have been under house arrest and have not paid much attention to this visit," Zeng Jinyan, wife of jailed rights activist Hu Jia, told AFP in an email.
When reached minutes before by telephone, Zeng had quickly hung up -- she said in the email that it was due to the police presence.
The Tibetan writer Woeser said that several police were also keeping an eye on her movements from the doorway of her Beijing apartment building.
According to the Hong Kong-based Information Centre for Human Rights and Democracy, more than 30 rights activists were either detained or under house arrest during the Obama visit.
Ai lamented the lack of reaction from Obama.
"You come to China and a lot of people are arrested due to your visit -- this is an issue that you cannot ignore," the artist said.
"You cannot say that you will talk about this next year or in two years because during this time these people will be sent to jail."
Rights lawyer Li Fangping, who was also under police surveillance and had a police escort while doing daily errands, was less critical.
"Of course I had expectations, but these issues are tied to the economic situation," Li said by telephone.
"He spoke of universal rights in Shanghai and Beijing, which could be seen as a way to promote these ideas."
Ahead of the visit, rights groups and dissidents had feared that Obama would sacrifice calls for improvements in China's rights record to make progress on major issues like climate change and the economic crisis.
They also regretted that China did not release any prominent dissidents from jail during the visit, which has been done previously as a gesture of goodwill ahead of trips by US leaders.

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Congress urged to combat China trade practices

By Paul Eckert
WASHINGTON (Reuters) - The United States must combat China's trade-distorting industrial and currency policies with U.S. trade laws and by using the World Trade Organization, a congressional advisory body said on Thursday.
China's trade policies that are aimed at piling up big surpluses contributed to the imbalances behind the global financial crisis that started in the United States in 2008, the U.S.-China Economic and Security Review Commission said.
"If China continues to pursue huge trade and investment surpluses and to accumulate vast financial claims, it will hinder the necessary global economic adjustment, create excess manufacturing capacity and lay the groundwork for the next financial crisis," the bipartisan commission said in its annual report to the U.S. Congress.
The fiscal stimulus plan that China has used to combat the crisis, which won praise in some circles, mainly supports more exports and "will only exacerbate overcapacity, aggravating the overall problem," said the 367-page report.
The annual report comes just days after President Barack Obama visited China and discussed trade and global economic imbalances and follows a spate of U.S. trade actions that have raised hackles among the Chinese.
Among 42 recommendations to the U.S. Congress, the commission suggests lawmakers press the Obama administration to pursue a mix of WTO cases, application of U.S. trade laws and pressure on Beijing to allow its currency to trade more freely.
"WTO cases, while important, are very industry specific, and fail to have an impact on the trade-distorting aspects of China's industrial policy or to deal with the underlying causes of the U.S.-China trade deficit," it said.
The U.S. Congress should "urge the administration to ensure that U.S. trade remedy laws are preserved and effectively implemented to respond to China's unfair or predatory trade activities," said the report.
Last week the U.S. International Trade Commission approved the 12th investigation this year into charges of unfair trade practices by China, backing a Commerce Department probe into whether China and Mexico are selling seamless refined copper pipe and tube in the United States at unfairly low prices.
That measure followed preliminary duties on $2.63 billion of steel pipe used by the oil and natural gas industry in the biggest U.S. trade case ever against China.

In September, the U.S. imposed import duties on Chinese tires under a special anti-surge measure that applies only to China and had never been used before.

RIFE WITH SUBSIDIES
Echoing U.S. manufacturers' complaints, the commission report said China's economy is rife with subsidies on land, water and energy that allow Chinese producers and foreign firms who relocate manufacturing there to sell at deep discounts compared to their American competitors.
Data released by the Commerce Department this month showed the U.S. trade deficit with China widened 9.2 percent in September to $22.1 billion, the highest since November 2008.
The U.S.-China Economic and Security Review Commission was set up in 2000 to advise the U.S. Congress on the economic and national security implications of the U.S.-China relationship.
In the security realm, the 2009 report called for close attention to what it said were China's increasingly aggressive espionage efforts to obtain U.S. technology for China's military and industry and stepped-up cyber warfare capabilities that posed a threat to U.S. computer networks.

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China ramps up espionage against US

By Shaun Tandon
WASHINGTON — China is sharply stepping up espionage against the United States as the rising Asian power grows more sophisticated in cyber warfare and spy recruitment, a report to Congress warned Thursday.
"China is changing the way that espionage is being done," said Carolyn Bartholomew, the chair of the US-China Economic and Security Review Commission.
In its wide-ranging annual report to Congress, the commission reported a steep rise in disruption and infiltration of websites of the US government and perceived Beijing rivals such as Tibet's exiled leader the Dalai Lama.
Colonel Gary McAlum, a senior military officer, told the commission that the US Defense Department detected 54,640 malicious cyber incidents to its systems in 2008, a 20 percent rise from a year earlier.

The figure is on track to jump another 60 percent this year.
While the attacks came from around the world, the commission said China was the largest culprit.

Some Chinese "patriotic hackers" may not receive official support, but the report said that the government likely planned to deploy them in a conflict to disrupt a foreign adversary's computers.
The commission found that China was the most aggressive nation in spying on the United States and was trying to recruit more Americans as spies.
The report said that while China historically tried to tap Chinese Americans -- believing, often correctly, that they would be sympathetic -- it was now turning to the Soviet model of seeking to bribe informants with cash and gifts.
It said that the Chinese were also expanding "false flag" operations, in which sources are deceived into thinking they are providing information elsewhere.
It pointed to the case of Tai Shen Kuo, a furniture salesman in New Orleans arrested last year after persuading two retired US military officials to give sensitive information by telling them it was headed to Taiwan, not mainland China.
"It's a new model for them. They tended to focus on sympathizers or on ethnic Chinese Americans and now they just go find some guy who retired," said the commission's vice chair Larry Wortzel, a former military attache at the US embassy in Beijing.
The commission also found that China has launched an effort to influence US think-tanks and academe by rewarding scholars with access and depriving visas to more critical voices.
"It becomes self-censorship. If you're in graduate school and want to become a China scholar, you need to go to China. And if you criticize the Chinese government on certain things, you won't get in," said Bartholomew.
"What it means is that we have a generation of China analysts who are being created who don't necessarily have the freedom or the ability to think through a broader range of questions," she said.
The commission also criticized China on its trade policy, recommending that the United States press Beijing to make its yuan more flexible and to turn to the World Trade Organization to fight what it termed predatory trade practices.
"Just look at the sheer statistics," Bartholomew said. "Two-hundred-and-sixty-eight billion dollars in 2008 was the US trade deficit with China -- you can't say this (trade policy) has been working."
President Barack Obama this week paid his first visit to China, which is now the top holder of the ballooning US debt.

His administration has sought cooperation with China on battling the global slowdown and declined to accuse Beijing of manipulating its currency.
The commission paid a field trip to Rochester in upstate New York, where it said core industries such as machine tools, auto parts and optoelectronics were struggling against Chinese competition that often enjoys state support.
"For 20 years we have watched China policy be controlled really by a handful of large multinational corporations. They're the ones who determine the interests," Bartholomew said.
"But there are a lot of constituency interests out there -- particularly small and medium-sized enterprises -- that are being hurt by the current US-China policy," she said.

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In Obama Interview, Signs of China’s Heavy Hand

By SHARON LAFRANIERE and JONATHAN ANSFIELD
President Obama spent part of his last morning in Beijing giving an interview to Southern Weekly, a newspaper in Guangdong Province known for its push-the-envelope approach to the government’s ever-present censorship.
But if the White House expected a hard-hitting article that showcased the United States’ commitment to press freedom, it must have been disappointed when the newspaper hit the stands Thursday.
Mr. Obama was quoted talking about basketball.

His other comments — about trade, bilateral relations and China’s rise — added virtually nothing to what he had previously said on his three-day visit.
Yet, as they did throughout the president’s visit, the government authorities appeared to monitor carefully how his words were transmitted to China’s public.

They were especially vigilant about Southern Weekly’s report, by some accounts, because Mr. Obama had turned down an interview request from CCTV, the state-run television network.
Southern Weekly’s publication was held up late into the night, said one of its journalists, who asked not to be identified for fear of retribution.
The page that contained the interview was missing from the edition delivered to Western news outlets in Beijing.
An employee of Southern Weekly’s reader services department said the Obama article delayed several pages in the front section past the deadline for Beijing delivery.

But there were scattered reports that the paper was not able to deliver even to newsstands in its hometown of Guangzhou, the provincial capital.
The weekly’s Web site did not display the interview with any prominence, and primary Internet portals were ordered to ignore it, Chinese journalists said.

“It is not like whatever Obama says is news,” said Yu Wei, a top editor of Sohu.com.
Michael Anti, a prominent Chinese blogger and an advocate of greater press freedom, said the White House should not have expected anything different.

“This result is no surprise to us,” he said in a telephone interview.

“Maybe Obama didn’t understand that all the high officials of the so-called free media are appointed by the party.”
Zhang Zhe, a reporter who attended the 12-minute interview on Wednesday, declined to answer questions about whether government censors were involved in either formulating questions for Mr. Obama or reviewing the paper.
The weekly’s editor in chief, Xiang Xi, said he was too busy to answer questions.

In an interview with China Business News, however, Mr. Xiang did not quite present himself as an independent journalist.
“Since Obama chose us, Southern Weekly must represent Chinese national interests,” he told the newspaper, which is based in Shanghai.
Southern Weekly apparently caught the White House’s eye because of its reputation for exposés on China’s social problems and its liberal bent.
But propaganda officials in the past few years have sought to install more loyal editors and have warned Internet news portals not to pick up sensitive stories from the weekly.
Moreover, this week showed that the Chinese authorities were determined to oversee the shaping of Mr. Obama’s public image here.

They rejected a White House request to nationally broadcast Mr. Obama’s town hall-style meeting Monday in Shanghai, and carefully screened and prepared questioners.

Mr. Obama’s news conference with President Hu Jintao on Tuesday was broadcast nationwide, but no questions were allowed.
China’s aggressive stage management might explain why Mr. Obama declined CCTV’s request for an exclusive interview.

Instead, he turned to Southern Weekly, a publication with 1.5 million readers that had not even sought an interview.
Mr. Anti said that for whatever reason, Southern Weekly forfeited the chance for a less sanitized encounter.

In the first three questions, Mr. Obama was asked how felt about his first visit to China, whether he still had time to play basketball and how he sees China-United States cooperation in the region.
“They just talked about nothing,” Mr. Anti said. “Just empty talk.”
Mr. Xiang, the weekly’s editor, portrayed it differently to the Shanghai newspaper.
“Obama didn’t avoid any questions or hedge in a politician’s tone,” he said.

“Of course, we didn’t hold back; we asked all the questions that should be asked.”

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Afghan minister accused of accepting bribe from China

Afghan Mining Minister, Mohammad Ibrahim Adel, has been accused of accepting a US$30 million bribe from the China Metallurgical Group Corp

WASHINGTON (AFP) — Afghanistan's minister of mines accepted a 30-million-dollar bribe to award a huge development project to a Chinese state firm, The Washington Post reported Wednesday, citing a US official.

The revelation comes the same week the Afghan government formed a major crime unit to tackle corruption, and just one day before Hamid Karzai is sworn in as Afghan president for a second term, with the United States pressuring him to rid the war-torn country of its endemic graft and cronyism.
The Post quoted an unnamed US official familiar with military intelligence reports that there was "a high degree of certainty" that an alleged payment of roughly 30 million dollars was made to Minister Mohammad Ibrahim Adel.
The payment, the US official said, took place in Dubai around December 2007 when the China Metallurgical Group Corp (MCC) was awarded a 2.9-billion-dollar contract to exploit the Aynak copper deposit in Logar province, one of the biggest copper deposits in the world.
Last year, Adel told AFP that Aynak has more than 11 million tonnes of copper valued at some 88 billion dollars, and is expected to bring the government 400 million dollars annually in fees and taxes, Adel said.
The bribery allegation, if proved true, would be a major blow to a country whose government is struggling for credibility among an impoverished population.
Mining is one of Afghanistan's few economic bright spots in a nation crippled by a growing Taliban-led insurgency.

Significant deposits of copper, iron, gold, oil and gas, and coal -- as well as precious gems such as emeralds and rubies -- are largely untapped, Adel has said.
Afghan and American officials were reportedly outraged at the contract going to MCC and complained that Adel did not give Western firms competing for the bid a fair chance.
And fears of further corruption have grown, with the ministry now reviewing offers for a major iron ore deposit mining project known as Haji Gak, in which MCC is the frontrunner, the Post said.
"This guy has done this already; we're in the same situation again," said the US official.
In an interview with the Post, Adel denied receiving any bribes or illegal payments during his three-year tenure as minister, and said MCC's compensation package -- including an 808-million-dollar bonus payment to Kabul -- was far larger than that of other firms.
"I am responsible for the revenue and benefit of our people," Adel said.
"All the time I'm following the law and the legislation for the benefit of the people."
US and Afghan officials have warned that incompetence and corruption have scared off potential investors.

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U.S.-China Trade: Prepare for Continued Imbalance

Barges wait to collect shipping containers at Victoria Harbour in Hong Kong

By Justin Fox

On Friday, as President Obama crossed the Pacific to begin his first trip to Asia, the Census Bureau released its monthly trade tally.

The headline was that the U.S. trade deficit grew to $36.5 billion in September, more than forecasters expected and the biggest such figure since January.

But the really dramatic number was that 60.5% of the deficit, or $22.1 billion, was with just one country: China.
Obama arrived in Beijing Monday, but don't expect anything to get resolved.

The U.S.-China economic relationship has become way too complicated and contradictory for simple solutions.
Within the U.S., the imbalance is mainly seen as the product of protectionist policies by China, in particular China's refusal to let its currency, the yuan, appreciate against the dollar.

There's certainly something to this — it's now universally agreed just about everywhere but China that a freely floating yuan would be worth significantly more than the 15 cents it currently goes for.

By keeping its currency's value artificially low, China makes its products cheaper in the U.S., thus encouraging imbalanced trade.
But when China linked its currency to the dollar in the early 1990s, it was out not to create trade surpluses but to carve out a bit of stability in turbulent global currency markets.

During the emerging-market currency crises of 1997 and 1998, China's success in keeping the yuan fixed at 8.3 yuan to the dollar was applauded in the West as a major contribution to averting financial chaos.

Since 2005, China has been willing to allow the yuan to appreciate a bit (the current exchange rate is 6.8 yuan to the dollar). It just hasn't been willing to do this on any but its own extremely conservative terms.
In China, meanwhile, it is fashionable to blame U.S. trade deficits on the debt-addicted ways of American citizens and their government.

There's an element of truth to this too. If the U.S. borrowed and spent less, its trade imbalances would be smaller.

But China has been enabling this profligate behavior for years by buying trillions of dollars in U.S. government debt and mortgage securities as part of its continuing effort to — you got it — keep the yuan from appreciating too much against the dollar.

It's a bit reminiscent of the seemingly endless wrangles in the late 1980s and early 1990s with Japan, which accounted for the bulk of the U.S. trade deficit in those days.

The trade deficit with Japan never shrank much in dollar terms, but it became smaller as a share of GDP starting in the mid-1990s, and was eclipsed by the trade imbalance with China in 2000 (in September the U.S. trade deficit with Japan was $4.1 billion, compared to $22.1 billion with China).

The issue was never resolved, but it ceased to seem so important. Could that happen with China?
Probably not. There are two crucial differences.

One is that much of today's U.S. trade deficit comes from U.S.-based corporations selling products at home that were partly or entirely made in China.

As a result, the trade relationship with China has become far more ingrained in the economic fabric of the U.S. than that with Japan ever was.

Some evidence: in the first nine months of 2009, the global economic slowdown cut the U.S. deficit with Japan 47% compared with the first nine months of 2008. The deficit with China dropped just 16%.

An even more important difference is that the stakes are higher with China.

Japan seemed like a fearsome economic rival a quarter-century ago, but it wasn't really a political rival and, with a population less than half that of the U.S., it was unlikely ever to surpass the U.S. as an economic power.

China, with its billion-plus population, seems destined to surpass the U.S. in economic clout, and it appears to have designs on rivaling the U.S. as a political and military power.

Which means there's no easy way out of the U.S.-China trade impasse.

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China Grapples With Pressure Over Currency Controls

An employee counts bank notes at a Bank of China branch in Changzhi. China is facing increasing pressure to ease controls on its currency.

By ANDREW BATSON
BEIJING -- A growing number of global leaders are urging China to look to its long-term interests and allow its tightly controlled currency to rise.

But they are encountering reluctance from a government still very much worried about the economy in the short term.
U.S. President Barack Obama and Dominique Strauss-Kahn, managing director of the International Monetary Fund, in Beijing on separate visits Tuesday, told Chinese officials that yielding to market pressures for a stronger yuan would help the global economy recover. Nonetheless, Chinese President Hu Jintao didn't announce any new commitment on currency policy to Mr. Obama, and other Chinese officials and economists continue to defend China's policy of keeping the yuan steady against the dollar.
The discussions highlight how China's heavily managed currency is once again at the center of debates over global economic policy, after being pushed to the background for a while by the financial crisis.

Though Mr. Hu, Mr. Obama and other world leaders have promised to cooperate in pulling the world economy out of its deepest slump in a generation, coordinating economic policies across very different countries remains no easy task.

High unemployment makes trade with China a volatile political issue in the U.S.—but similar pressures also make it difficult for China to yield to U.S. pressure on the currency.
A stronger yuan, which would make Chinese exports less competitive, is particularly unappealing for China in a year when exports are down about 20% and many manufacturers have closed. And Chinese leaders who have criticized the West's economic management may find it politically difficult to yield to demands on the currency.
On the other hand, China's economy has recovered faster than most.

Its de facto peg to a falling U.S. dollar—meaning the yuan has weakened sharply against other currencies—is generating complaints from European and Asian competitors that China has an unfair advantage.

And some economists worry the extra juice to the economy from the cheap yuan, in addition to huge government stimulus, risk new bubbles in real estate and stocks.
"You have to balance your needs in the short term with the long term," Mr. Strauss-Kahn said. Keeping the currency down may help exports in the short term, he argued, but it imposes other costs.

For instance, an undervalued currency encourages companies to invest in ways that may not be viable once the currency rises.

"If you have wrong prices, you make wrong decisions, especially concerning investment in the long run," he said.
"It's now time for China, having accumulated a lot of advantages from an undervalued currency, to look more forward to investment and to long-term stability," Mr. Strauss-Kahn added.

A stronger currency also would boost the purchasing power of Chinese households, he said, which would support the government's drive to make economic growth less dependent on exports.
Chinese officials frequently counter that big swings in the exchange rate can harm companies and disrupt the economy, which is a particular concern at a time when confidence is fragile.

They sometimes contrast the stability of the yuan's exchange rate—which makes it easier for firms to plan ahead—with the wild swings in the dollar's value.
"China keeping a basically stable exchange-rate policy is, in reality, good for the global economic recovery," Yao Jian, spokesman for China's Ministry of Commerce, told reporters Monday.

"If the request is to strengthen other currencies, while allowing the dollar to keep weakening, that's not very fair."
Chinese officials aren't totally closed to arguments for a stronger yuan.

In a statement many interpreted as a gesture to the growing concerns about the currency, the People's Bank of China last week said exchange-rate policy would take into account "changes in international capital flows and the trends of major currencies."
Still, many private analysts don't think a move on the yuan is imminent.

Authorities may feel freer to shift once exports are growing again and inflation has turned positive—changes that could come early next year.

In coming months, China will have to tell other members of the Group of 20 economies how it plans to boost consumer spending.
Although China's government publicly has grown more confident about the strength of its recovery, growth still remains heavily dependent on government stimulus programs.

"China needs the U.S. economy to recover strongly and renew its import growth. Otherwise, China will have a tough time sustaining its recovery," said Eswar Prasad, an economist at Cornell University.
That is one of the key reasons China is reluctant to lift its currency now.

World Bank chief economist Justin Yifu Lin, a former Chinese government adviser, has argued that if a stronger yuan snuffs out a recovery in China's export sector, it could weaken China's entire economy and have negative consequences for global growth.

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Microsoft Suffers a New China Setback

By Bruce Einhorn
How big of a defeat did Microsoft just suffer in China?

Some observers are saying a Chinese court ruling against Microsoft won’t hurt the company, since its piracy-depressed sales in China are tiny.

The Beijing court ruled on Monday that Microsoft had violated the intellectual property rights of Zhongyi Electronic, a Chinese company that designs fonts, by including the fonts in many Chinese versions of Windows.

Although Microsoft will be able to continue selling Windows Vista and Windows 7, it will have to yank earlier versions of the operating system.
Big deal, says one top tech analyst; there’s so much piracy in China, Microsoft barely sells anything in the country to start with.

“The majority of operating systems in the market today are illegal copies, and the ones that are Zhongyi-related have an even smaller share of the market,” Reuters quoted Edward Yu, chief executive of a China-focused technology research firm Analysys International, saying about the ruling.

“So I don’t think it will have much impact on Microsoft’s business.”
Yu’s a smart guy whose firm does a lot of good work.

Still, though, how do you measure the damage to the company’s brand and image in China as a result of this ruling?

Assume, for the sake of argument, that the court is wrong, Microsoft is right and the company did nothing wrong.

It still has suffered a big loss, as the court has muddied the waters: Microsoft more than any other American company has been pushing for China to crack down on software piracy, but now the software giant’s many critics can point to this ruling and say look, Microsoft violates IPR itself.

Microsoft will appeal, so there’s a chance a higher court will overturn this ruling.

In the meantime, though, Microsoft’s now in a weaker position in its endless fight against piracy in China.

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In China, Obama leaves more questions than he takes

By Dana Milbank

Listening to President Obama and his Chinese counterpart this week, it was hard to tell who was Hu.
One is the leader of a great democracy. The other is the head of a repressive regime.

But as the two men faced reporters in Beijing's Great Hall of the People, Obama deferred to the wishes of President Hu Jintao: They would not take questions.

In lieu of this rite of freedom, the two leaders exchanged platitudes.
"We reached agreement in many important fields," the communist leader assured everybody.
"Our two governments have continued to move forward in a way that can bring even greater cooperation in the future," the democratic leader reciprocated.
It was, to put it charitably, a low-key way of spreading American values.

A decade earlier, in that very same hall, President Bill Clinton criticized China's Tiananmen Square crackdown during a news conference with then-President Jiang Zemin.

President George W. Bush, no fan of the media, made Hu squirm at the White House three years ago when he insisted that they take questions from U.S. and Chinese journalists.
Obama, by contrast, didn't hold a news conference in China.

Instead, he answered questions in Shanghai from students, who were apparently members in good standing of the Communist Youth League (even so, the authorities declined to broadcast the session on state television).

Elsewhere in Asia, Obama eschewed the usual format for news conferences with the leaders of Japan and South Korea, instead allowing one reporter from each side to ask a question at each appearance.
Members of the White House press corps traveling with Obama were baffled: Even Bush, the great unilateralist, had been more willing to mix it up with journalists, foreign and domestic, while abroad.

After reporters complained to White House press secretary Robert Gibbs about a lack of communication, he issued a 61-word written statement worthy of the Politburo Standing Committee: "President Obama's visit to China has demonstrated the depth and breadth of the global and other challenges where US-China cooperation is critical," it began.
Other elements of Obama's Asian trip -- the bow to the Japanese emperor, the handshake with the Burmese prime minister -- have earned more attention, but Obama's reluctance to be challenged in public is more problematic.

It sends a message to the world that contradicts his claim to the Chinese students that he is a better leader because he is forced "to hear opinions that I don't want to hear."
Instead of facing questioners in public, Obama invited correspondents from each American television network to come to his hotel for a series of one-on-one interviews of about 10 minutes apiece.
For the president, this was a low-risk alternative.

Each reporter had to cover multiple topics, and that, by the White House's design, left little room for probing beyond the superficial.

Obama told Fox News's Major Garrett, for example, that the White House is "taking a look" at tax provisions to encourage businesses to hire, but he didn't offer any specifics.

He told CBS News's Chip Reid that he is "fine-tuning" his Afghanistan strategy, but he didn't say what it is.

He gave CNN's Ed Henry the news that he is "absolutely confident" that health-care legislation will pass, but he didn't say in what form.
Then there were the requisite human-interest questions that the TV morning-show hosts love. NBC News's Chuck Todd asked whether the president had lost weight.

"I'm eating fine and I'm sleeping fine," Obama reported. "My hair is getting gray."

Henry asked whether Obama would read Sarah Palin's book. "You know, I probably won't," the president answered.

In that sense, Obama's Asian tour continued a pattern he has developed at home.

He had five full news conferences at the White House during his first six months in office but has had none since July.

That puts him roughly on par with Bush, who had four full White House news conferences in the same time.

For Obama, who pledged to bring a new level of transparency to the presidency, that's hardly an impressive record.
Instead of subjecting himself to public inquisition, Obama has opted for the calm and cordiality of the tête-à-tête.

He had done an impressive 134 sit-down interviews as president before leaving for China, according to CBS News's Mark Knoller, and his four in China brought the tally to 138.
It's easy to see why Obama prefers this format. Consider some of the questions that have arisen during these sessions:
"You picked the Tar Heels to win the national championship, didn't you?
"You are very, very famous as a very cool man, but what don't you like about yourself?"
"Golf. What does it do for you?"
"How do you relax?"
"Have the girls had kids over after school?"
"Do you get to read them a story at night, tuck them in bed?"
With questions like these, even President Hu might start talking to the press.

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China says scrap UN Internet governance forum

Chinese people use computers at an internet bar in Beijing

SHARM EL-SHEIKH, Egypt (AFP) — China on Wednesday called for the abolition of the UN's Internet Governance Forum, blasting it as a powerless gathering where IT heavyweight countries dominate.
"Without any reforms to the IGF, it is not necessary to give it a five year extension," Chen Yin, head of the Chinese delegation, told the forum's fourth conference which wrapped up in the Egyptian resort of Sharm El-Sheikh.
Other participants including the United States, Japan and the European Union backed a extension of the IGF's mandate.
The UN Secretary General will decide whether to grant the five-year extension after he receives written submissions from delegates.
Richard Beaird, US government representative, said the forum "has proven to be a valuable venue for information sharing and international dialogue."
"The United States supports the continuation of the IGF beyond the initial five year mandate," he told participants.
The European Union added its voice in support of an extension.
"The influence of the IGF on policy making by the European institutions is considerable. The IGF has delivered on all issues listed in its mandate," Maria Hall, from the Swedish Ministry of Enterprise, Energy and Communications, told delegates.
But China's Chen said: "The IGF has a lot of duplication with what is being explored and studied in other organisations."
He alleged that the forum's development agenda has been given second priority after the demands of the world's IT heavyweights.
China is among countries which have come under criticism for online censorship and investing in sophisticated technology to filter and monitor Internet activities.
During a visit to China, US President Barack Obama on Monday pushed for an unshackled Internet and expanded political freedoms.
"I have always been a strong supporter of open Internet use. I am a big supporter of non-censorship," Obama said.
The IGF forum was set up after a World Summit on Information Society in Tunis in 2005 to bring together members of the global internet community to discuss the future of the Internet.
The Fifth Meeting of the Internet Governance Forum is scheduled to take place in Lithuania in 2010.

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Coal Towns Remain the Heartbeat of China's Economy

By LISA FRIEDMAN

DATONG, China -- The black metal gates clang shut, and about a dozen miners lean against the grate in blue overalls and headlamps fastened atop yellow hard hats.
The ride down feels endless, dropping nearly a thousand feet into the bowels of the Jing Hua Gong mine.

Once at the bottom, the elevator door opens and the men stoop and squeeze into a small locomotive.

Like a bleak Disney ride, the train chugs through the darkness, passing decades of standing coal seams, taking the miners almost 2 miles into the center of the mountain.
Amid the glowing reports of new wind farms and investment in solar photovoltaics throughout China, it's easy to forget that cities like Datong are still the heart of this country.

Located about 150 miles west of Beijing in Shanxi province, this city is the coal capital of China. The Jing Hua Gong mine on the city's outskirts produces about 4.5 million tons of coal each year -- in a country that produces more than 2.4 billion tons each year, according to the World Coal Institute.
Manufacturing, especially of energy-intensive goods like cement and steel, is the driver of China's explosive economic growth. Even in the midst of a global recession, the country's industrial production has continued steadily.
Nothing is small about this country's long sojourn with coal.

It accounts for more than 70 percent of China's energy consumption, and the country continues to develop it at a rapid pace.

According to the U.S. Department of Energy's Energy Information Administration, coal energy produced in China will double over the next 20 years or so.

Clean alternatives like wind, hydro, solar and nuclear are growing fast, but they will amount to less than a third of the country's total installed capacity by 2020.
The men wear no safety equipment, not an unusual sight in a country that experiences more than 1,000 mine deaths each year.

Now that China has smashed its "iron rice bowl" system of guaranteed lifetime employment, miners say that many even pay hefty bribes for the privilege of toiling six-hour rotating shifts deep below the Earth's surface.

We shut down, and 'the lights go out in Beijing'
They claim pride in helping to keep the nation's economic engine purring.

"If the coal mine shuts down, the lights go out in Beijing," says Gao Ailing, who said he has been working at the mine outside Datong 20 years.

Standing by the exit as men with streaked black faces trickle out, Gao says he's familiar with the global climate change policy debate.

He sees U.S. insistence that China cut back emissions as inherently unfair.

"America wants other people to do more, but it hasn't done anything itself," Gao says.
China definitely wants to do more.

Experts say about half of all the new housing being built worldwide is in China now, with U.S. State Department envoy Todd Stern noting that the country builds the equivalent of "two Bostons' worth of housing" each month.

That in itself, analysts say, is largely responsible for the doubling of cement production there in recent years.
Add to the mix a rapidly rising middle class yearning for dishwashers, microwaves, bigger TVs and cars, and analysts say China isn't leaving coal anytime soon.
"China is going to be a low-cost manufacturing hub for decades," said Deborah Seligsohn, a consultant in Beijing for the World Resources Institute think tank.

Shanxi province and other areas where coal is king -- and will be for the foreseeable future -- are "the other side of the energy story in China," acknowledged Julian Wong, who writes a blog called the "Green Leap Forward."
"Wind energy is developing fast, but coal-fired power is developing even faster," said Ailun Yang, Greenpeace China's climate director.
Still, changes are coming -- even to cities like Datong.

Once the filthiest city, Datong cleans up
Five years ago, Datong made it to the top of China's State Environmental Protection Administration's list of filthiest cities.

Though the city was ordered to clean up its act, its air only worsened. Toward the end of 2005, its pollution index hit 350: red-alert territory.
But on a recent day in August, the sky was clear, offering little hint of the unbreathable air of which Beijing residents had warned.
Residents and analysts say change has come about not out of concern about climate change, but because of international public opinion.

The government went on a rampage before the 2008 Olympics, forcing hundreds of coal plants, as well as steel, cement and petrochemical plants and others, to shut down in order to contain pollution.

The mines, too, went largely quiet in a countrywide effort to avert embarrassing accidents.

Yet to the surprise of many here, when the games left China, industry did not return with a vengeance.
"These few years, it's become much better," said Zhang Zhao, a taxi driver who said he used to work as a driver for one of the mines.
Meanwhile, Datong also is trying something new.

Already the gateway to 500-year-old Buddhist grottoes and a breathtaking monastery hanging on the wall of a nearby gorge, the city is busily renovating its old city, hoping to boost tourism in the region.
Seligsohn said the complete story of the slow transformation of Datong, while not based in concern for fossil fuel pollution, still underscores an important transformation that could fundamentally alter China's emissions trajectory.

State enterprise reform and the dash to shutter antiquated plants in the run-up to the Olympics are only part of the story, she said.
The other part is recent national policies, like the government's target to reduce energy intensity 20 percent by 2010 and a separate program that directs the country's 1,000 dirtiest industries to markedly improve efficiency.

Shutdowns continued past the Olympics
"The national policies are important, because it's keeping these things shut down," Seligsohn said.

"If it was just for the Olympics, things would have reopened the next day."
Whether Datong represents a sign that China is interested in rebalancing its economy and shifting away from dirty manufacturing in favor of service industries like tourism remains open for debate.

Wong, whose blog for the liberal Center for American Progress focuses on China's clean energy development, said it's a conversation Chinese leaders are just starting to have.
"That's certainly discussed and talked about. It's one of the strategies of moving toward a low-carbon society," he said.

"It's not going to happen overnight, and it's going to take a while for the transition to happen. But they're definitely thinking about it."
In the meantime, energy analysts and political leaders in both countries are paying attention to what can be done in the short term.
Energy efficiency is one answer.

All of China's heavy industries have strict targets to meet by next year in order for the country to reach its overall intensity target.
Qi Ye, the deputy director of the China Sustainable Energy Program in Beijing, said recently that that's not enough. A greenhouse gas intensity target, he argued, "will help promote renewable energy and reduce the use of coal."
China already has put $440 billion of economic stimulus money this year into greening up its energy supplies.

And under an announcement yesterday between U.S. President Obama and Chinese President Hu Jintao in Beijing, the two countries will start major cooperative efforts on energy efficiency, hybrid vehicles and at least four specific carbon capture and sequestration projects in China.
Meanwhile, not everyone in Datong is eager for change.

Standing outside his mud home with a group of neighbors, a man who identified himself only as Liang said he's hoping some of the closed mines reopen.

Originally from China's Inner Mongolia region, Liang came to Datong about 10 years ago to work in one of the area's smaller mines and works only sporadically.

He's eager, he said, to move into one of the hundreds of new apartment buildings springing up in and around the city.
He's not impressed by the seemingly cleaner air, either, telling a visitor, "You came at a good time. If you came during dry season, that would be another story."

As for the need to prevent catastrophic climate change, Liang said, "That's what the scientists say, but we're ordinary people. We don't care about those things. We want to work."

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Conern mounts as US bears costs of Afghan war while China reaps the profits

Sergeant O’Neill was injured in an IED (improvised explosive device) strike in Helmand Province

By Jeremy Page in Kabul

Thirty miles south of Kabul there is a complex of blue and white bungalows, ringed by a blast-proof fence, that bears testament to the new Great Game in Central Asia.
Inside, several hundred Chinese engineers are renovating the Aynak copper mine, rights to which were bought by the state-run Metallurgical Corporation of China (MCC) in 2007 for $3 billion.
Outside, however, it is US troops from the 10th Mountain Division who keep the Taleban away from one of the world’s largest untapped copper deposits.

To some, this is welcome co-operation between the US and China which, despite mutual suspicion, share an interest in ridding Afghanistan of militants and drugs.
To others it shows how China is poised to profit from Afghanistan’s abundant natural resources, while the US expends hundreds of lives and billions of dollars on fighting the Taleban insurgents.
The issue was thrust into the spotlight yesterday when Mohammad Ibrahim Adel, the Mining Minister, was accused of taking a $29 million bribe to award Aynak to MCC.

Mr Adel denies taking bribes — which industry insiders say were offered by several bidders.
Yet the allegation is damaging, as it feeds into a broader debate about the aims and cost of the war as President Obama winds up a visit to China.

It also follows publication of a damning report on Aynak by Jim Yeager, a former World Bank adviser, to Mr Adel, which said that the tender process was rigged against Western companies.
“Unless there is change in the process to make it open and transparent China will continue to gain undue influence on the Afghan economy and ultimately Afghan society as a whole,” said Mr Yeager.

“This will be harmful to everything America is trying to accomplish.”
Mr Adel denies that, too, and accuses Mr Yeager of losing his memory.

“This is like blind people describing a landscape,” Mr Adel told The Times. “There is nothing wrong with the tender process. This contract was evaluated by six ministers.”
There are others raising concerns.

Mr Yeager’s report was backed by Don Ritter, a former US congressman who has been involved in Afghanistan since 1979, and heads the Afghan- American Chamber of Commerce.

It also echoed recent testimony by Milton Bearden, a former CIA station chief in Islamabad, to the Senate Foreign Relations Committee.
“Below the noise level of military operations is the involvement of other regional players in what is developing into a modern version of a Central Asian Great Game,” he said.
“The other regional players are busily setting the stage for exploitation of Afghanistan’s natural resources, while the United States remains bogged down with the war. This should change.”
Some Afghan officials are also concerned that China will gain a stranglehold over a mining industry that should be the backbone of the economy.

MCC is also bidding for an iron ore deposit west of Kabul, and Sinochem, a Chinese state oil company, is bidding for oil and gas deposits in northern Afghanistan.
Industry insiders say that they are almost certain to win as their bids are inflated by subsidies from a Chinese Government hungry for raw materials.

MCC’s Aynak bid was far higher than any others, and included a commitment to build a railway and a power station, as well as schools, hospitals and even mosques.
Western companies say that they cannot possibly compete on a commercial basis.

And Afghanistan’s mining law, drawn up by US advisers, does not allow it to take into account Western governments’ expenditure on aid or security.
Mr Adel said that US special forces were helping local police to protect the mine, and the UN was responsible for de-mining the area.

“But my obligation is to find the company which gives more money to Afghanistan.”

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Obama's Beijing balancing act points to the new challenge for the west

There needs to be a real conversation about competing values. But the firewalls mean it cannot properly begin
By Timothy Garton Ash
To mark the anniversary of the fall of the Berlin Wall, Barack Obama goes to Beijing.

Europe is so then, China so now. And as global power shifts east, even the most powerful and eloquent leader of our time wrestles with the dilemmas of engagement.
Before going to China, Obama made two major concessions: not meeting the Dalai Lama (unlike his predecessors in the White House), and describing China as a "strategic partner", a label much desired by the leadership in Beijing.

In the short term he seems to have got very little in return, whether on Iran, Afghanistan or the exchange rate of the renminbi.

The contrast between Bill Clinton's freewheeling, open, mutually critical press conference with Jiang Zemin in 1998, and the frigid presentation of contrasting statements by Obama and Hu Jintao – with no journalists' questions allowed – is a measure of the distance travelled by China over America's wasted decade.

Poised to become the world's second biggest economy in 2010, and holding some $1 trillion of US debt, China increasingly feels able to set its own terms.
Yes, Obama did mention human rights and Tibet.

Yes, in that "town hall" meeting with students in Shanghai he did manage to elicit – from his own ambassador – a Chinese question, posted on the US embassy website, about the great firewall of China.

His reply was curiously contorted.

He's always been a strong supporter of open internet use, he said, and "I'm a big supporter of non-censorship". (An odd phrase. Why not say "free speech"?)

"This is part of the tradition of the United States," he went on, but immediately added: "I recognise that different countries have different traditions."

Then he sang the praises of Google, and repeated his opposition to restricting internet use and "other information technologies like Twitter". You felt him swaying on a tightrope, adjusting his balance with a long pole.
How this relationship plays out over the next 20 years will, of course, depend mainly on the realities of economic, military and political power.

China is on the up, but its own system has many internal weaknesses.

Diplomatically, the United States will have significant possibilities of balancing Chinese power by relationships with Europe (if we Europeans get our act together – starting today, with the appointment of credible people to the EU's two new top jobs), India, Japan and other regional powers.

A co-operative "strategic partnership" of all these powers is indeed the goal towards which we should work.
Yet beyond the hard power relations, there is an almost philosophical question about how we in the west engage with China.

There are, it seems to me, two basic approaches we could adopt.

As he swayed on his tightrope, the end of Obama's balancing pole pointed sometimes to one, sometimes to the other.

The first approach, which China's rulers like, is to say this: you have your traditions, your civilisation, your culture, your values; and we have ours. In a world of very diverse sovereign great powers, the only basis for international order is mutual respect. Inside our respective frontiers we do it our way, you do it yours. Only thus can we avoid Samuel Huntington's "clash of civilisations".
I think China's current rulers would be happy to settle for that.

Unlike in the Maoist period, and unlike some in the United States and Europe today, they are not missionary universalists. They do not claim that their Chinese model, evolved by trial and error, is necessarily good for anyone else.

That may yet come – partly because people in developing countries start asking for it – but for now the China model is made only for China.

By contrast, both the United States and the European Union tend to believe that other parts of the world both could and should become more like them.
China's commitment to non-interference in other states' affairs is not entirely consistent. Like the United States, China has a twin-track view of sovereignty: our own sovereignty is absolute, other people's is relative.

Thus, for example, China has gone to extraordinary lengths to dissuade western leaders, including Obama, from meeting the Dalai Lama in their own capitals, whereas a consistent doctrine of mutually respected sovereignty would surely say: "We don't tell you who you meet in your country, and you don't tell us who we meet in ours."

However, with the exception of what it regards as matters of vital national interest, China is not (yet) trying to tell other people how to run their own countries.
The other approach, which I support, is to start the search for a genuinely universal universalism, in a dialogue with China and other non-western emerging powers.

This could not be a purely western-defined universalism, with the implication that all the essential universal truths were discovered in the west some time between, say, 1650 and 1800, and all other countries simply have to follow suit.

Rather, it would be a universalism that says something like this: we hold these truths to be self-evident, but maybe you'd like to suggest some other ones. We say life, liberty and the pursuit of happiness; perhaps you'd like to make the case for harmony, security or trans-generational community. Then let us compare the aspirations, and the social realities, in the cool light of reason.
This is not a "dialogue among civilisations", a term that seems to imply that my values are determined by the "civilisation" of my birth or religion. It is certainly not a trade-off between "western values" and "Asian values".

It is an invitation to a genuine conversation about what all human beings have in common, and how they should best organise and live their lives.
The answers given in the west during and since what we call the Enlightenment seem to me the best anyone has found so far.

Yet even a brief immersion in the Confucian and Buddhist traditions suggests that there are things we could learn from them – and that there is a good deal of common ground.

So my idea of mutual respect is not: "You have your culturally determined values, we have ours, and ne'er the twain shall meet."

It is: "I'm going to make the strongest possible reasoned case for the universal values of the Enlightenment being the best for you as well as for us, but I'm also all ears for your response."
My limited experience of young Chinese, including members of the Communist party, suggests that they are very open to such a conversation.

But here's the catch. In order to have it, they must be exposed to our ideas, and to the evidence that supports those ideas, and we must be exposed to theirs.

One of the good things to come out of Obama's visit was an agreement to expand people-to-people contacts, including students travelling in both directions; but they will still remain a small minority.

The rest of the exposure will have to happen through various media, and above all through the internet.

So the free flow of information cannot be dismissed as simply a western value, contested in the east. It is a precondition for having this conversation at all.

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China: Self-Centered on the World's Center Stage

President Obama tours the Great Wall of China in Badaling, outside of Beijing, on Nov. 18, 2009

By Austin Ramzy / Beijing

President Barack Obama went to Beijing with a broad array of issues to put before China's leaders.

If there was one theme that linked them, it was that U.S.-China ties were no longer just about the U.S. and China; they were also about the rest of the world.
"The relationship between the United States and China has never been more important to our collective future," Obama said on Tuesday as he stood before reporters with Chinese President Hu Jintao.

"The major challenges of the 21st century, from climate change to nuclear proliferation to economic recovery, are challenges that touch both our nations and challenges that neither of our nations can solve by acting alone. That's why the United States welcomes China's efforts in playing a greater role on the world stage — a role in which a growing economy is joined by growing responsibilities."
China, for its part, has been reluctant to take up those new responsibilities.

The late paramount leader Deng Xiaoping once admonished his countrymen to "disguise their ambitions and hide their claws."

It was useful advice for a country trying to pull itself out of decades of war and chaos.

But now China's booming economy and resilience in the face of the global slowdown have left it in a prime position. It holds nearly $800 billion in U.S. Treasuries, making it Washington's biggest creditor.

But Beijing is still not confident in acting on the world stage for any interest besides its own.

A recent survey of Chinese élites by Pacific Forum CSIS, a Honolulu-based foreign policy research institute, found that more than 90% rejected a special leadership role for China and more than 70% said the greatest contribution the country could provide the world would be to provide for its own development.

While China has vastly expanded trade ties and investments in Africa, Central Asia and South America, its foremost goal is to ensure its access to natural resources.

In Afghanistan, China's $3 billion copper-mine investment is the country's largest single investment, but the stability of the war-torn region didn't merit a mention in Hu's 20-minute address.

Neither did appreciation of China's currency, the renminbi, which Obama called "an essential contribution to the global rebalancing effort."

Hu did, however, say that China and the U.S. "need to oppose and reject protectionism in all its manifestations in an even stronger stand," reinforcing China's view that recent U.S. tariffs pose a greater threat to the global economy than an undervalued renminbi, which has helped China prop up its exports sector even as global trade has slumped.

But while Obama leaves Beijing with little in the way of a diplomatic victory, Hu was able to win some acknowledgments from the U.S.

Obama said the U.S. considers Tibet to be part of the People's Republic of China.

While that is long-standing American policy, scholars could recall no point when a U.S. President has stated it publicly.

Territorial questions like Tibet remain top priorities for China, and Obama's mention of that issue was a key win for Beijing.

It's a sign that while China doesn't know how it wants to use its newfound clout on the global stage, it is learning how to get what it wants from the U.S.

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It’s Good Guys vs. Bad Guys on a China-Size Scale

Tony Leung stars in the epic film “Red Cliff,” which reunites him with the director John Woo.

By MIKE HALE
In a six-year stretch beginning in 1986, John Woo released a series of balletic, ultraviolent crime thrillers that would rank among the most influential films of the last quarter-century.

They took a hyperkinetic, Hong Kong style of action moviemaking out of the grind house and into the art house (and the suburban video store), from which it would eventually become the default mode for any number of big-budget Hollywood directors.
They also set the future course of Hong Kong cinema, taking it away from its martial arts roots and toward the realm of the operatic police procedural.
After “Hard Boiled” in 1992, Mr. Woo became a Hollywood director himself, making fast-moving but largely forgettable movies. (The best was probably the nukes-on-a-train story “Broken Arrow.”)

After “Paycheck” in 2003, he went dark as far as feature films were concerned.
Now he’s back, in two senses: back making movies in Asia and back in theaters with “Red Cliff,” a nearly two-and-a-half-hour historical epic set in the third century A.D. that reunites him with Tony Leung, one of the stars of “Hard Boiled.”

It would be nice to report that he’s also back on top of his game, but “Red Cliff,” while handsome and intelligent and perfectly easy to sit through, never really approaches the visceral tug of Mr. Woo’s Hong Kong hits.
Loosely based on the 14th-century Chinese novel “Romance of the Three Kingdoms,” which recounts events in the waning Han dynasty more than a millennium earlier, “Red Cliff” has one of the most familiar of war movie or western setups: the outnumbered good guys scheming to defeat a vastly larger force.
In this case, though, the good guys — a pair of small southern China kingdoms whose forces are led by the viceroy Zhou Yu (Mr. Leung) — number in the tens of thousands, and the bad guys, the Han army led by the megalomaniacal general Cao Cao (Zhang Fengyi), in the hundreds of thousands.
Mr. Woo, who can make romantic poetry out of a battle among 20 men in the confines of a teahouse, seems defeated, or at least defused, by this increase in scale.

The battle scenes, which involve vast fleets of mostly computer-generated ships, sky-darkening volleys of arrows and the heroic, self-sacrificial storming of ramparts, are no better or worse than what any number of competent Hollywood (or Chinese) directors can turn out.

And it’s not that this sort of large-scale action can’t be infused with feeling — Akira Kurosawa proved that it can in “Kagemusha” and “Ran” not long before Mr. Woo was making his breakout films.
Watching “Red Cliff,” you realize that Mr. Woo was always best as a miniaturist: the memorable action sequences in movies like “Bullet in the Head” and “Hard Boiled” are a series of tiny, split-second set pieces, a slide down a banister here, a glance between buddies there.

“Red Cliff” has a few similar moments, in the byplay between Mr. Leung and Takeshi Kaneshiro as a military strategist and in some of Mr. Leung’s (or his stunt double’s) battlefield acrobatics. But they’re just grace notes amid the grinding mechanics of deploying the troops and moving the story along. (That might not be the case in the five-hour version of the film released in Asia.)
One thing that hasn’t changed since 1992 is the reassuring presence of Mr. Leung, one of the world’s last true matinee idols.

His combination of Zen-like calm and wild expressiveness, centered in his pixieish eyes, serves equally well whether he is playing the tortured aesthete for Wong Kar-wai, the murderous bureaucrat for Ang Lee or the action hero for Mr. Woo. Not even body armor and an ancient helmet, let alone a cast of thousands, can contain him.
“Red Cliff” is rated R (under 17 requires accompanying parent or adult guardian) for death by arrow, lance and sword.

RED CLIFF
Directed by John Woo; written by Mr. Woo, Khan Chan, Kuo Cheng and Sheng Heyu; directors of photography, Lu Yue and Zhang Li; edited by Angie Lam, Yang Hongu and Robert A. Ferretti; music by Taro Iwashiro; production designer, Tim Yip; produced by Terence Chang and Mr. Woo; released by Magnet Releasing. At the Landmark Sunshine Cinema, 143 East Houston Street, between First and Second Avenues, East Village. In Mandarin, with English subtitles. Running time: 2 hours 28 minutes.
WITH: Tony Leung (Zhou Yu), Takeshi Kaneshiro (Kong Ming), Zhang Fengyi (Cao Cao), Chang Chen (Sun Quan), Zhao Wei (Sun Shangxiang), Hu Jun (Zhao Yun, a k a Zhao Zilong), Shidou Nakamura (Gan Xing) and Chiling Lin (Xiao Qiao).

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Obama bends knee to Chinese might

President Barack Obama at a state dinner at the Great Hall of the People

On a carefully orchestrated tour, his hosts' economic power has limited US options

By Clifford Coonan in Beijing
America used to take pride in speaking softly and carrying a big stick, but in China Barack Obama has had to speak softly and keep any stick he might feel like flourishing well out of sight.
Boxed in by ceremony, with any hint of controversy airbrushed out of his remarks by the regime's censors, with press conference questions banned and his interlocutors ruthlessly screened, he has struggled to get his message across.
Wearing a similar suit and tie to his host, President Hu Jintao, he has sometimes sounded practically confucian himself.

"Our relationship going forward will not be without disagreement or difficulty," he intoned yesterday.

"But, because of our co-operation, both the United States and China are more prosperous and secure."
He had to fly halfway round the world to say that?

So the closest to a breakthrough moment was when the President spoke of the values that inspire his nation.

"I spoke to President Hu about America's bedrock beliefs that all men and women possess certain fundamental human rights," he told reporters at the no-questions press conference in Beijing.
"We do not believe that these principles are unique to America but rather they are universal rights and that they should be available to all peoples, to all ethnic and religious minorities."
It has been a difficult trip for Mr Obama.

The power balance between the US and China has changed from what it once was.

China has taken a lead position in helping to bail out the world economy, and as America's largest foreign creditor, holding $800bn in US government bonds, it is keen to match its financial muscle with political influence.

And President Obama has had to swallow the medicine.
"China's partnership has proven critical in our efforts to pull ourselves out of the worst recession for generations," he said, admitting the uncomfortable truth.

And on issues such as the economy, climate change, energy and the nuclear threats posed by Iran and North Korea, the two sides found a measure of agreement.
While the Nobel Peace laureate has tried to persuade his hosts of the benefits of allowing greater press freedom, he has also had to be careful not to be seen to be trying to interfere in domestic politics, something the Chinese government finds intolerable.
At the same time, he has had to deal with domestic pressure to push Beijing on its yuan currency, Washington's biggest irritant at present: Americans believe the low value of the yuan, which makes Chinese goods cheaper abroad, is causing global imbalances and creating political difficulties at a time when American factories are closing their shutters at a rate not seen since the Great Depression.
America's unhappiness with the level of the yuan is matched by China's exasperation at growing protectionist sentiment in the United States, as Mr Hu pointed out.

"I stressed to President Obama that under the current circumstances our two countries need to oppose and reject protectionism in all its manifestations in an even stronger stand," he said.
He was referring to special duties of 35 per cent imposed on Chinese-made tyre imports in September, and a number of other tariffs on Chinese goods which have created tensions over trade in various sectors.
On the issue of Tibet, President Obama tried to have it both ways.

He pleased China by saying that the United States accepted that Tibet was part of China, but at the same time urged China to engage in dialogue with the Tibetan spiritual leader, the Dalai Lama.

Standing alongside Mr Hu, this took quite a lot of courage, as the Chinese despise the Dalai Lama as a "splittist" who is not to be trusted.
Mr Obama did not meet the Dalai Lama when he was in Washington in early October, but the spiritual leader has said he hopes they will meet after Mr Obama returns from China.
The two presidents also said they agreed on re-starting the collapsed six-nation effort to transform the Korean peninsula into a nuclear-free zone, which the Chinese said was essential to "peace and stability in north-east Asia".

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Cyberwarfare: The Issue China Won't Touch

By Simon Elegant / Beijing
U.S. President Barack Obama's trip to China has a dirty little secret: cyberwarfare.

It is an issue Beijing refuses to acknowledge exists, but it has the potential to torpedo military relations between the two nations.

Almost every other conceivable area of disagreement between China and the U.S. will have been raised during Obama's visit by one side or the other — even such highly sensitive issues as human rights and the unrest in Tibet and Xinjiang province.

But even if U.S. officials try to raise the issue of what they believe is a constant and growing campaign by China to infiltrate U.S. networks, steal secrets and hone Beijing's ability to wreak havoc in case of military conflict, the likelihood is that Chinese officials will simply deny that the problem exists, as they have done with great success in the past.

From the American point of view, there's unfortunately currently little Washington can do to change that state of affairs.

"At a fundamental level, the Chinese view cyberwar as an overt tool of national power in a very different way from the United States," says James Mulvenon, a Washington-based specialist on the Chinese military.

"The U.S. is still uncomfortable exercising that power, but the Chinese — and the Russians — are very comfortable with the deniability and using proxies, even though the actions of those proxies could have enormous strategic consequences."

Mulvenon and other analysts say China employs a constantly shifting mix of official and civilian or semicivilian groups (such as so-called patriotic hacker associations) as the foot soldiers — the "proxies" — in its cyberwar armies.

The technological challenges of tracing attacks on U.S. government and private-corporation computers are so enormous that Beijing can simply deny that any of the problems have originated in China.

So far, the Chinese have been able to get away with it, despite the fact that not just the U.S. is complaining.

In the past few years, sources ranging from the German Chancellor's office to government mainframes as far afield as New Zealand and Belgium have made loud public allegations that they had been the subject of cyberinfiltration from China, all to no avail.

"The scope and scale of the attacks has not abated despite the international opprobrium and outcry," Mulvenon says.

"It's a serious problem that at the moment we don't have a solution to, because our inability to attribute the source of the attack fundamentally undermines our efforts at deterrence. If you can't identify the attacker, you can't deter them."
That's a troubling situation for China's potential adversaries to find themselves in, particularly as, unlike in conventional military training, what China's hackers are doing is the real thing, not make-believe.

"The skill sets needed to penetrate a network for intelligence-gathering purposes in peacetime are the same skills necessary to penetrate that network for offensive action during wartime," notes a recent congressional report on China's alleged clandestine cyberattacks in the U.S. According to the report, released in October by the congressionally mandated U.S.-China Economic and Security Review Commission, that means that "if Chinese operators are, indeed, responsible for even some of the current exploitation efforts targeting U.S. government and commercial networks, then they may have already demonstrated that they possess a mature and operationally proficient CNO [computer network operations, or cyberwarfare] capability."

But even if Obama had raised this tricky issue with his Chinese counterpart, it is unlikely that his efforts would have brought about any change.

As the congressional report notes, the heavy emphasis on cyberwarfare is a key component in the Chinese military's strategic vision for defeating the technologically superior U.S. in any future conflict.

That means conducting so-called asymmetrical warfare, aimed at using the U.S.'s dependence on technology as a weapon: for example, targeting America's network of space satellites or developing missiles that could sink U.S. aircraft carriers.

For China's generals, though, of all the asymmetrical methods of attack available to them, cyberwar presents a uniquely effective — and cost-effective — means of neutralizing the U.S advantage.

"They recognized the importance as far back as the early '90s," says Mulvenon, "and they now have a major advantage, a weapon like no other that allows them to reach out and touch right into the continental United States."

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China stifles Obama charisma

In China, Obama's hosts stifled his public talents, keeping his message from the people with media censorship

By Stephen Collinson
BEIJING — Something got lost in transit in US President Barack Obama's visit to China -- the charismatic rhetoric and dominance of mass communication that took him from nowhere to the White House.
Obama built his political persona with soaring speeches on a grand stage and by reaching out to a vast grassroots network on the Internet.
But in China, Obama's hosts successfully stifled those prodigious public talents, keeping his message from the people with media censorship and smothering it in staid diplo-speak.
On previous foreign trips in his taxing first year in office, the president sent inspiring words winging to millions of satellite dishes in the Muslim world and sparked Obama mania in Europe.
But in China, it has been tougher to reach out to ordinary citizens.

His best attempt, a town hall meeting streamed on the White House website, suffered from what was largely a nationwide media blackout.
And Obama's talks on Tuesday with President Hu Jintao were followed by a dull public appearance, with both leaders reading out statements to the media stuffed with diplomatic code words.
The US president shuffled his papers on the lectern, scratched an eyebrow and looked across at Hu, as his host read out a long speech. The arid diplomatic translations made the occasion seem even more sterile.
Chinese officials several times warned the hundreds of reporters present, whom they referred to as "dear friends," that questions were banned. There was no chance for Obama to deploy his persuasive political personality.
Clearly, the raucous political dialogue seen in American elections and politics is alien to communist-ruled China where sites such as Facebook, YouTube and Twitter are heavily censored.
But it seems Obama is ready to play a "long game" on China policy, and is willing to take domestic media hits over a lack of progress now, in the hope of results later on.
Equally, the White House did not expect opportunities for Obama's populist politics offered elsewhere in the world, or that the US president could transform the political environment alone.
"I did not expect, I can speak authoritatively for the president on this, that we thought the waters would part and everything would change over the course of our two-and-a-half-day trip to China," said Obama spokesman Robert Gibbs.
Obama aides report that while his public persona may be out of view, the first-year president has emerged as a forceful negotiator with Chinese leaders, and is firing off questions about life here.
US Ambassador to China Jon Huntsman said Obama was "extremely effective" in private and a strong advocate for the country as a president "who talks about our traditions and is able to explain it to all those who are listening."
White House aides prefer not to dwell on the differences, and instead talk about how he is developing a relationship with China that will be invaluable for working on the world's most pressing problems.
Obama used his town hall meeting in Shanghai to issue a call for the unshackling of the Internet.
But Chinese authorities appeared to make attempts to stack the audience with students willing to follow the government line.
At least two of the four youths Obama picked to ask their own questions were later identified as Communist Youth League members.
The event did air on local television, but appears not to have had national exposure. Hopes that the official Xinhua news agency would stream it live did not materialise.
The state mouthpiece instead posted a running transcript of the meeting, erecting a barrier between Obama's personality and everyday Chinese.
Several Chinese bloggers praised Obama's efforts, and said his call to pull down the "Great Firewall of China" would provide valuable ammunition for Chinese web users.
"Obama's answer... is very interesting, because he is the first president who talks about this, and it will move and urge the Chinese government to think," said one blogger, known as Beifeng.
Another blogger, Zuola, also welcomed Obama's intervention -- which was sparked by a question submitted by email read out by Huntsman.
But he said the town hall meeting was simply a "game" played out under strict Chinese supervision.
"The Chinese government surely does not like those who are not in their control," he said.
Obama's trip to Shanghai only got covered in passing on the main evening news on state-run nationwide broadcaster CCTV on Monday, which devoted most of its time to Hu's trip to the Asia-Pacific summit.
The town hall meeting was not mentioned at all.

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China seeks North Korean port access for new scheme

By Ben Blanchard
BEIJING, Nov 18 (Reuters) - China wants expanded access to North Korean ports to help an economic revitalisation scheme for a landlocked and struggling northeastern province, and may pay to improve its poor communist neighbour's infrastructure.
Han Changfu, the governor of Jilin province, said on Wednesday that China is in talks with North Korea about using the North's ports to ship goods for the new Changchun-Jilin-Tumen pilot economic development zone.

'If both sides believe that it will be beneficial to use the ports, then we will do it,' Han told Reuters after a news conference in Beijing to unveil the project.
China already uses some North Korean ports to handle trade for its northeastern provinces. Trade between Jilin and North Korea reached $247 million last year, Han said.
In October, Chinese Premier Wen Jiabao pledged to strengthen bonds with isolated North Korea during a visit to Pyongyang, and the port proposal appears to be another step in that direction.
Wen also announced China would help build a new bridge at another part of the border.
While China has in the past few years poured billions of dollars into roads, railways and airports to boost the fortunes of its old industrial heartlands in the 'rust belt' northeast, neighbouring North Korea has been mired in poverty.
Years of economic mismanagement, natural disasters, the collapse of the Soviet Union and wide-ranging sanctions due to the North's nuclear programme have left the transport system in tatters and severely limited food, power and factory output.
Han said China could provide funds to help the North improve its infrastructure and hence access to the ports.
'We're also talking about cooperating in this area,' he added. He declined to say which North Korean ports China might use.
Relations between China and nuclear-armed North Korea, once described as being as close as 'lips and teeth', have soured in recent years, especially since Pyongyang held nuclear test blasts in 2006 and then this year in May.
China has been prodding North Korea back to broader talks involving six nations -- China, Russia, the United States, Japan and the two Koreas -- that it abandoned last December.
Beijing still provides energy and food aid, fearing that if North Korea collapses it could destabilise large parts of northeastern China, home to a large ethnic Korean population of its own.
Han brushed off concerns that instability in North Korea could affect the prospects of the new development zone.
'The border is stable and people-to-people exchanges are as normal,' he told reporters. 'We will continue to work with North Korea and together push the development of the region.'
Aside from North Korea, China hoped to make greater use of Russian ports too, and will seek out investment from South Korea and Japan especially, he added.

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Why China Isn't Willing to Get Too Tough on Iran

By Bill Powell / Beijing
China's government, as President Barack Obama by now no doubt knows, loves to talk about climate change.

But it's an issue that exists for Beijing at 30,000 feet, far from earthly, everyday concerns.

So, President Hu Jintao can play the Responsible Global Citizen by making vague commitments, as he did at the U.N. this fall, to reduce his country's carbon gas emissions by a "notable amount" at some point in the future, without actually doing anything that might disrupt China's economy. But he doesn't have the same luxury of deferring action on the increasingly urgent global concerns over nuclear developments in Iran and North Korea.
President Obama's own sense of urgency over Iran is pretty apparent.

Before arriving in Beijing, he conferred on the issue with Russia's President Dmitry Medvedev at the APEC Summit in Singapore, and warned that "time is running out" for Iran to accept a deal to send its uranium to Russia for reprocessing into reactor fuel.

The implicit message was clear: Unless Iran accepts the plan, the U.S. will press for further sanctions against Tehran, this time possibly seeking restrictions on investment in Iran's vital energy sector.
A U.S. push for harsher sanctions against Iran won't be welcomed in Beijing, for two reasons. First, for all the talk of China as the other half of a "G2" that will together with the United States set the world's agenda, Beijing has not yet embraced the idea that it has the power and responsibility to shape events far beyond its borders.

"Beijing is interested in domestic stability first, and stability on their frontier after that," says a senior east Asian diplomat based in Beijing.

"The notion that they are ready and willing to stand up and run the world with the U.S. now is very premature."

Adds Willem van Kemenade, an expert on the China-U.S. relationship at the Netherlands Institute for Security Studies, on the question of Iran sactions, "[China's] first instinct will be to look to see what the Russians do."
That's odd, on the face of it, because China's interests in Iran are very different from Russia's. Moscow is a huge energy exporter whose responses to Iran's nuclear program are primarily based on geopolitical calculations.

Under Prime Minister Vladimir Putin — who tells Mr. Medvedev what to do — Moscow is in the process of deciding whether accepting a nuclear-armed Iran fits with its own strategy of pushing back against U.S. global dominance.
Unlike Russia, China defines a harmonious relationship with the U.S. as being among its core interests.

But China now imports a growing share of Iran's oil output — Tehran is the China's third largest foreign supplier (behind Saudi Arabia and Angola), and Beijing has also significantly increased its investments in natural gas projects in Iran.

Being forced to choose between an expanding energy relationship with Iran and maintaining diplomatic accord with the U.S. is precisely the kind of dilemma that makes China's leadership assume the foreign policy equivalent of the fetal position.

Thus, Hu Jintao's public remarks Tuesday afternoon after meeting Obama: "We both stressed that to uphold the international nuclear nonproliferation regime and to appropriately resolve the Iranian nuclear issue through dialogue and negotiations is very important to stability in the Middle East and in the Gulf region."
Got that? No talk about "time running out."

It's all about "dialogue and negotiations'' (even if Iran's been talking to the West for years about its nuclear programs, and just rejected the best offer it had gotten yet).

The template China would like the U.S. to follow in responding Iran is that used in dealing with North Korea — the topic that will dominate conversation in Seoul, Obama's next stop.
Unlike Iran, North Korea is already a nuclear-armed nation, and it says it continues to reprocess plutonium to build more bombs. (The U.S. estimates Pyongyang has eight to ten nukes so far.) China has used its leverage to get North Korean dictator Kim Jong-il to rejoin negotiations over its nuclear program after a lengthy hiatus, and Obama is eager to engage — to Beijing's enormous relief.

"Kick the can down the road" is its guiding principle in nuclear diplomacy, whether in its backyard (North Korea) or further afield (Iran).

China, first and foremost, wants stability on its border, and not even North Korea going nuclear did much to change that equation.

China also needs Iran's energy exports, and anything that mucks that up — such as tougher sanctions — is unlikely to interest Hu.
For now, Hu has what he wants in respect of North Korea — both Pyongyang and Washington willing to resume talks.

Keeping the Iran nuclear stalemate off the boil won't be as easy.

Obama said on Tuesday that if Iran failed to assure the outside world that its nuclear intentions were "peaceful," there would be "consequences." For the record, that's not a phrase the Chinese came anywhere close to using.
Three times in the last four years, Beijing has voted for limited sanctions against Iran at the U.N. And right now, insists senior administration adviser David Axelrod, "there is more unity then there has ever been in dealing with Iran."

But such unity is based on the U.S. emphasizing diplomacy rather than ratcheting up pressure on Tehran.

How long it will last is one of the questions President Obama will have to worry about on his long flight home.

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China’s Anti-Google Model Endangers 10% Growth

By William Pesek
Nov. 18 (Bloomberg) -- If China, now the third-biggest economy, is so mighty, why do its leaders fear the Internet?
I never thought I would be asking this question 11 years after Bill Clinton’s visit to Beijing. There, I watched the former U.S. president mix it up with local students after a speech carried live on television in China. George W. Bush, his successor, enjoyed similar transparency in a 2002 visit.
Not Barack Obama.

His forum with students in Shanghai this week ran into China’s other Great Wall -- censorship. Call it the anti-Google model. Its persistence is a bigger problem than China’s leaders and many investors realize.

It makes 10 percent growth harder to achieve.
At 8.9 percent, its economy is just about there. As impressive as it is, though, China’s boom isn’t driven by healthy doses of fresh job growth at startup companies. It’s fueled by massive government stimulus, lax lending and China’s undervalued currency.
That’s fine for the moment, considering the global economy is in crisis.

The question is how China thinks it can compete in an information-based global economy while censoring search engines provided by Google Inc. and Yahoo! Inc.

Sadly, this story cuts both ways. The quest for the almighty yuan often has companies conspiring with China to control information.

Criticism Works
That gets us to the most important moment yet of Obama’s five-city Asia tour: Telling China’s leaders that criticism is a vital part of being a competitive nation and that he disagrees with censorship of cyberspace.
The media looked elsewhere. Oh no, Obama bowed to Japan’s Emperor Akihito! Oh no, he didn’t get a climate-change deal in Singapore! Oh no, he didn’t get a currency deal with China! The key moment was largely ignored.
“Unrestricted Internet access is a source of strength, and I think, should be encouraged,” Obama said, adding that the criticism he gets in the U.S. “makes me a better leader because it forces me to hear opinions that I don’t want to hear.”
If only China’s leaders allowed the nation of 1.3 billion to hear more critical opinions.

Why they don’t is clear enough. Free expression would mean doing more to fight corruption; rounding up and jailing fewer dissidents; offering greater rights and protections to workers; and demanding that companies stop raping the environment.

Greater Openness
Greater openness would put more pressure on local governments to perform.

It would force public officials to slow the acceleration in the gap between rich and poor. It would nudge executives to improve corporate governance, and stimulate debate about whether a weak yuan does more to hold China back than propel it forward.
Yes, messy stuff all around that most leaders would prefer to avoid. And yet progress on these fronts and more are needed for China to reach its potential. The key is accountability, and that’s just the problem.
The cult of GDP prevails in China.

The deal is this: We will make you richer, you won’t question the government. Hence the importance of 10 percent gross domestic product growth. It’s the Communist Party’s plan for survival and it has worked masterfully. Ever since joining the World Trade Organization in 2001, China hasn’t looked back.
Nor has it looked forward enough under President Hu Jintao.

Sure, China has been savvy about doling out billions of dollars to developing nations and scoring energy contracts. Yet it hasn’t evolved very much in terms of coping with the Internet and the cheap yuan.

Weight of Technology
Clinton’s Beijing debate on live TV in 1998 convinced many that technology and the Internet would change China.

The idea was that its leaders would wilt under the sheer weight of technology. In reality, China is having its way with the Internet. On June 4, the 20th anniversary of the Tiananmen Square crackdown, China even blocked Twitter Inc.
China is among the oldest civilizations, and you would be hard-pressed to find anyone who thinks China isn’t a rising superpower.

Obama finds himself treading carefully with a nation that holds almost $800 billion worth of U.S. debt. And yet so much time and energy goes into controlling what is said about China, and counterproductively so.
The undervalued yuan, meanwhile, is becoming a bubble all its own to complement the nation’s frothy asset markets and $2.3 trillion of reserves. The yuan is giving China an economic advantage that is fueling hard feelings globally in the short run and dimming longer-term prospects.
The quality of growth matters as much as the quantity. A stronger currency would increase the purchasing power of Chinese consumers, accelerating the shift from exports to domestic demand-led growth. It would boost pressure on companies to become more globally competitive and create more incentives for entrepreneurs to do their thing.
Those would-be innovators need unfettered access to information to hone their skills.

By not allowing it, China’s leaders are hurting the private sector’s development and the nation’s, too.

Bravo to Obama for highlighting this most self- inflicted of economic wounds.

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Little harmony from Obama’s China visit

By Edward Luce and Geoff Dyer in Beijing

It took Barack Obama 30 minutes on Tuesday to whizz through the Forbidden City in Beijing following what was characterised as a candid three-hour discussion between the US president and Hu Jintao, his Chinese counterpart.

At the end of his chilly tour, Mr Obama exited through the Gate of Continuous Harmony.
Mr Obama will doubtless be treated to the customary barrage of disharmony by conservative critics back home about having soft-pedalled in public on the human rights criticisms that normally arise during a US presidential visit to China.

But US officials insist that in private Mr Obama had “pulled no punches”.

Jeff Bader, Mr Obama’s senior Asia adviser, said Mr Obama gave Mr Hu the most frank talk on human rights he had heard in his 30 years of dealing with US-China relations.
At their joint appearance in the Great Hall of the People following their meeting, both leaders gave the impression that there had been sharp disagreements on a wide range of issues – in addition to Tibet, which Mr Obama finally raised, having hitherto gingerly sidestepped the troubled province.
Reading from separate statements, Mr Hu emphasised the need to “oppose and reject protectionism in all its manifestations”, which was code for having brushed off US complaints about China’s large trade surpluses.

Mr Obama referred to the need to move beyond the dollar-renminbi peg, which the Americans see as a form of Chinese mercantilism – again, signalling there had been little progress.
“I underlined to President Obama that given our differences in national conditions, it is only normal that our two sides may disagree on some issues,” said Mr Hu, his hands firmly grasping the lectern.

“What is important is to respect and accommodate each other’s core interests and major concerns.”
It may take months, even years, to judge whether Mr Obama’s approach of friendly strategic engagement with China will bear fruit in the form of more substantive Chinese help in helping America tackle what one US official called the “global headline issues”, such as climate change, nuclear weapons proliferation and global economic imbalances.
Both countries eschew the term “G2”, for fear of offending other players.
But in practice Tuesday’s lengthy joint statement, which covered everything from clean energy to space technology, marked the attempted launch of a G2 global steering committee between the world’s largest democracy and the world’s largest autocracy.
“There are really only two countries in the world that can solve certain issues,” said Jon Huntsman, the US ambassador to China and former Republican governor of Utah, whose fluent command of Chinese has already gone down well with his hosts.

“So the meetings really have been aimed at co-ordinating like never before on the key global issues… There wasn’t a single issue that was left out.”
Much like the lengthy statements that the US and USSR produced during their rare bouts of detente, however, a great deal of continuing disharmony could be read between the lines.

In addition to the lack of progress on China’s dollar link, the two sides evidently failed to reach common ground on the bulk of Mr Obama’s agenda.
These included Afghanistan, which Beijing sees as a pointless war and which Mr Obama is about to intensify with a new surge of troops.

“There is a modest level of willingness to be more helpful on Afghanistan but they [China] are never going to be fully invested in it,” says Andrew Small, a researcher at the German Marshall Fund.
Likewise, there seemed to be little meeting of minds on Iran, where Mr Obama on Tuesday promised “consequences” should Tehran fail to comply with international demands but on which Mr Hu was largely silent.

“China wants to see more dialogue on the Iran issue,” said Jin Canrong, international relations professor at Renmin University.

“We need more time to see if this approach is going to work.”
Both sides put a brave face on climate change.

But their announcements of a series of new clean energy initiatives, from carbon capture research to a project on electric cars, could not paper over the fact that both had sharply downgraded prospects of a big deal on climate change in Copenhagen next month at the Asia Pacific summit in Singapore last weekend.
In his concluding remarks, Mr Obama said: “The United States welcomes China’s efforts in playing a greater role on the world stage – a role in which a growing economy is joined by growing responsibilities.”

It remains to be seen whether China genuinely agrees with the second half of that statement.

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China pushes solar, wind power development

Applied Materials' plant in China will construct crystalline silicon panels such as these mounted on a solar array in California.

By Julie Schmit
ANAHEIM, Calif. — The world's solar companies gathered here recently amid the nation's largest solar market under a brilliant sun – and the looming shadow of China.
China leads the world in making solar cells, the key component in solar panels, many of which are exported to the U.S.
But China is setting itself up to do more than just manufacture components for renewable energy, such as wind and solar. It's also spending heavily to build its own domestic market as it attempts to battle its greenhouse gas emissions, electrify its nation of 1.3 billion people and curb its massive pollution problem.
The buildup of a huge market in China for renewable energy is luring global manufacturers and research teams to China, energy executives say.

That's causing concern in some corners that China – not the U.S. – will emerge as the hub of the new industries, leaving the U.S. as dependent on foreign nations for solar panels, wind turbines and other green-energy equipment and technology as it is on the Mideast for oil.
"The Chinese government has recognized that these industries are the 21st century's industries of importance, and it wants to be the Silicon Valley of renewables," says Alan Salzman, CEO of U.S.-based VantagePoint Venture Partners, which specializes in clean energy and clean tech investments.
He says the U.S. hasn't been as clear or as determined as China, a stance echoed by Energy Secretary Steven Chu in testimony before a Senate committee last month.
While China spends about $9 billion a month on clean energy development, the U.S. "has fallen behind," Chu said.

He noted that the world's largest turbine-making company is headquartered in Denmark, that 99% of batteries for America's hybrid cars are made in Japan and that the U.S. has lost most of its solar cell manufacturing industry.
Although Chu said he remained confident that the U.S. can "make up the ground," China is shaping up as a formidable competitor.
China's government has set ambitious targets for renewable energy, which is scheduled to account for 15% of its fuel by 2020.

Race for investments
The U.S. has no national target.

Two dozen states have their own – some more aggressive than China's – but they don't carry the cachet of a national standard, says Denise Bode, CEO of the American Wind Energy Association.

That has hindered the U.S. in attracting wind manufacturers and investments, she says.
"This is a footrace as to whether we attract them or China does," Bode says.
Already, China has made rapid gains in building up its domestic renewable-energy industries.
This year, it's expected to install more new wind-generation capacity than any other country, a spot occupied by the U.S. last year, says the Global Wind Energy Council, a Brussels-based trade association.
By 2013, China is expected to become the world's biggest producer of wind energy, the council estimates.

Recently, it eclipsed everyone in wind-turbine-making capacity, up from "nothing" five years ago, says Steve Sawyer, the trade group's secretary general.
China is muscling up on solar, too.

Within five years, it's expected to be the No. 1 solar market, says Steven Chan, strategy chief for China's Suntech Power Holdings, the world's biggest maker of solar panels. Suntech plans to open its first U.S. manufacturing plant next year in Arizona.
One big reason China can move so fast?

Once its central government decides on a policy, it can execute quickly through the nation's handful of state-owned utilities, Chan says. In the U.S., there are thousands of electric utilities and a barrage of regulatory and environmental hurdles to starting new projects.
"China is pushing harder on solar now than anywhere in the world," says Mark Pinto, chief technology officer for the U.S.-based Applied Materials.

"In China, nothing is too fast. They've got the land, the need and fast decision-making."
Applied is the biggest maker of equipment to make solar panels. Last month, it opened the world's largest solar research facility – in China.
"If the manufacturers are in China, that's where we need to go," Pinto says.

U.S. firms have stakes there
Other companies have also stepped up profiles and investments in China, including:
•Duke Energy, a leading U.S. power company. It signed agreements this fall with two Chinese energy firms to co-develop energy technologies, including solar and coal-fired plants to capture and store carbon emissions.
Rather than sell to the Chinese market, Duke expects the alliances to provide, among other things, rich testing ground for new technologies that can be later deployed in the U.S., lowering costs for Duke customers, says David Mohler, Duke chief technology officer.

"China has such incredible scale and ability to move quickly," Mohler says. "We will be able to bring new technology to market faster."
One example: Duke is spending $17 million to study the capture of carbon produced at its new coal gasification power plant in Edwardsport, Ind.

While Duke is studying the technology in the U.S., "in China, they're already doing it," says Mohler. "My team of engineers can go over there and learn from them."
•Arizona-based First Solar. In September, it signed a deal in China to build the world's largest solar farm, roughly the size of Manhattan. Once completed by 2019, it'll produce enough electricity to power 3 million homes, First Solar says.
•Vestas, the Denmark-based world leader in wind-turbine manufacturing. It started investing in manufacturing plants in China in 2005 and in the U.S. two years later. Vestas CEO Ditlev Engel says that the U.S. and China are both strong wind markets but that China has been more committed.
China's wind industry is growing so fast that 70 new competitors to Vestas emerged last year, vs. "not many" in the U.S., Engel says. "There's been a lot of uncertainty in the U.S.," he says. "People have waited to invest."
Little of China's wind-turbine equipment is exported, but that's poised for change.

Recently, a consortium of Chinese and American companies announced plans for a 36,000-acre wind farm in West Texas. The farm, to be one of the biggest in the U.S., will use wind turbines made in China, the companies say.
Earlier this month, Sen. Charles Schumer, D-N.Y., urged the Obama administration to block any federal stimulus money from helping to finance the $1.5 billion project unless it relied on American-made turbines.
Over time, Chinese manufacturers will drive turbine prices down, as they have solar panel prices, predicts Sawyer of the Global Wind Energy Council. Panel prices have plummeted about 50% in the past 18 months, in part because of Chinese competition.
Some energy executives argue that lower prices drive adoption of renewable energy, creating higher-value jobs in America, such as for installers to put up solar panels and engineers to manage systems.
"The more you lower the cost of solar panels, the more total jobs you get," says Jeffery Wolfe, CEO of the nationwide installer GroSolar.

It buys Chinese panels because they're less expensive and of comparable quality to U.S.-made panels, he says.

'The crunch is on'
China doesn't look like a poster child for green energy.

More than 70% of its energy comes from coal, which produces more carbon than other fuels. Pollution is rampant. But industries and economies have been transformed before, and new leaders have emerged, says venture capitalist Salzman.
He points to biotechnology firms such as Genentech and Amgen, which have grown into innovation leaders in the drug industry. Likewise, data communication usurped telecommunication, and new entrants such as Google challenged old giants such as AT&T, Salzman says.
"In the transformation of clean technology, it's up for grabs whether the giants will be American or Chinese or from other countries," says Salzman.
The U.S., under the Obama administration, has stepped up its renewable energy investments. The government is pouring $80 billion in stimulus funds to spur development of electric vehicle batteries, increased use of renewables, energy efficiency measures and smart grids.

'Jury is still out'
The U.S. isn't too late, "but the crunch is on," says Mark Fulton, Deutsche Bank Asset Management's head of climate change investment research.
While China will be one of the world's largest markets for green energy, the "jury is still out" as to whether it'll be the center of innovation for the industry, concluded a September report by the China Greentech Initiative, a consortium of dozens of U.S. and Chinese companies, including Cisco Systems and Westinghouse.
China faces challenges.

Up to 30% of its wind capacity wasn't connected to the grid in 2008, the Greentech Initiative report said, in part because of lack of transmission lines.

State-owned Chinese companies with locks on local markets may limit innovation, the report noted. And while China's government is plowing big money into the market, other sources of capital tend to be fewer than in developed nations, the report said.
Yet, Pinto and others say China sits on the cusp of an opportunity it may not have had before.
China's companies have historically been successful because of their low-cost manufacturing of existing technology rather than from innovation of new technologies.
Now, China needs all the new, cleaner energy it can produce as fast as possible.
By 2025, 350 million Chinese – almost the population of the USA – will migrate from rural areas to cities not yet built, says Duke's Mohler, citing research projections. They'll need electricity.
"This time, China has gotten in on the ground floor," Applied Materials' Pinto says.

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The Invasion of the Chinese Cyberspies (And the Man Who Tried to Stop Them)

By Nathan Thornburgh/Washington

It was another routine night for Shawn Carpenter.

After a long day analyzing computer-network security for Sandia National Laboratories, where much of the U.S. nuclear arsenal is designed, Carpenter, 36, retreated to his ranch house in the hills overlooking Albuquerque, N.M., for a quick dinner and an early bedtime.

He set his alarm for 2 a.m.

Waking in the dark, he took a thermos of coffee and a pack of Nicorette gum to the cluster of computer terminals in his home office.

As he had almost every night for the previous four months, he worked at his secret volunteer job until dawn, not as Shawn Carpenter, mid-level analyst, but as Spiderman--the apt nickname his military-intelligence handlers gave him--tirelessly pursuing a group of suspected Chinese cyberspies all over the world.

Inside the machines, on a mission he believed the U.S. government supported, he clung unseen to the walls of their chat rooms and servers, secretly recording every move the snoopers made, passing the information to the Army and later to the FBI.

The hackers he was stalking, part of a cyberespionage ring that federal investigators code-named Titan Rain, first caught Carpenter's eye when he helped investigate a network break-in at Lockheed Martin in September 2003.

A strikingly similar attack hit Sandia several months later, but it wasn't until Carpenter compared notes with a counterpart in Army cyberintelligence that he suspected the scope of the threat.

Methodical and voracious, these hackers wanted all the files they could find, and they were getting them by penetrating secure computer networks at the country's most sensitive military bases, defense contractors and aerospace companies.

Carpenter had never seen hackers work so quickly, with such a sense of purpose.

They would commandeer a hidden section of a hard drive, zip up as many files as possible and immediately transmit the data to way stations in South Korea, Hong Kong or Taiwan before sending them to mainland China.

They always made a silent escape, wiping their electronic fingerprints clean and leaving behind an almost undetectable beacon allowing them to re-enter the machine at will.

An entire attack took 10 to 30 minutes.

"Most hackers, if they actually get into a government network, get excited and make mistakes," says Carpenter.

"Not these guys. They never hit a wrong key."

Goaded by curiosity and a sense that he could help the U.S. defend itself against a new breed of enemy, Carpenter gave chase to the attackers.

He hopped just as stealthily from computer to computer across the globe, chasing the spies as they hijacked a web of far-flung computers.

Eventually he followed the trail to its apparent end, in the southern Chinese province of Guangdong.

He found that the attacks emanated from just three Chinese routers that acted as the first connection point from a local network to the Internet.

It was a stunning breakthrough. In the world of cyberspying, locating the attackers' country of origin is rare.

China, in particular, is known for having poorly defended servers that outsiders from around the world commandeer as their unwitting launchpads. Now Chinese computers appeared to be the aggressors.

If so, the implications for U.S. security are disturbing.

In recent years, the counterintelligence community has grown increasingly anxious that Chinese spies are poking into all sorts of American technology to compete with the U.S.

But tracking virtual enemies presents a different kind of challenge to U.S. spy hunters.

Foreign hackers invade a secure network with a flick of a wrist, but if the feds want to track them back and shut them down, they have to go through a cumbersome authorization process that can be as tough as sending covert agents into foreign lands.

Adding in extreme sensitivity to anything involving possible Chinese espionage -- remember the debacle over alleged Los Alamos spy Wen Ho Lee? -- and the fear of igniting an international incident, it's not surprising the U.S. has found it difficult and delicate to crack these cases.

In Washington, officials are tight-lipped about Titan Rain, insisting all details of the case are classified.

But high-level officials at three agencies told TIME the penetration is considered serious.

A federal law-enforcement official familiar with the investigation says the FBI is "aggressively" pursuing the possibility that the Chinese government is behind the attacks.

The law-enforcement source says China has not been cooperating with U.S. investigations of Titan Rain.

China's State Council Information Office, speaking for the government, told TIME the charges about cyberspying and Titan Rain are "totally groundless, irresponsible and unworthy of refute."

Despite the official U.S. silence, several government analysts who protect the networks at military, nuclear-lab and defense- contractor facilities tell TIME that Titan Rain is thought to rank among the most pervasive cyberespionage threats that U.S. computer networks have ever faced.

TIME has obtained documents showing that since 2003, the hackers, eager to access American know-how, have compromised secure networks ranging from the Redstone Arsenal military base to NASA to the World Bank.

In one case, the hackers stole flight-planning software from the Army.

So far, the files they have vacuumed up are not classified secrets, but many are sensitive and subject to strict export-control laws, which means they are strategically important enough to require U.S. government licenses for foreign use.

Beyond worries about the sheer quantity of stolen data, a Department of Defense (DOD) alert obtained by TIME raises the concern that Titan Rain could be a point patrol for more serious assaults that could shut down or even take over a number of U.S. military networks.

Although he would not comment on Titan Rain specifically, Pentagon spokesman Bryan Whitman says any attacks on military computers are a concern.

"When we have breaches of our networks, it puts lives at stake," he says. "We take it very seriously."

As cyberspying metastasizes, frustrated network protectors say that the FBI in particular doesn't have enough top-notch computer gumshoes to track down the foreign rings and that their hands are often tied by the strict rules of engagement.

That's where independents--some call them vigilantes--like Carpenter come in.

After he made his first discoveries about Titan Rain in March 2004, he began taking the information to unofficial contacts he had in Army intelligence.

Federal rules prohibit military-intelligence officers from working with U.S. civilians, however, and by October, the Army passed Carpenter and his late-night operation to the FBI.

He says he was a confidential informant for the FBI for the next five months.

Reports from his cybersurveillance eventually reached the highest levels of the bureau's counterintelligence division, which says his work was folded into an existing task force on the attacks.

But his FBI connection didn't help when his employers at Sandia found out what he was doing. They fired him and stripped him of his Q clearance, the Department of Energy equivalent of top-secret clearance.

Carpenter's after-hours sleuthing, they said, was an inappropriate use of confidential information he had gathered at his day job.

Under U.S. law, it is illegal for Americans to hack into foreign computers.

Carpenter is speaking out about his case, he says, not just because he feels personally maligned--although he filed suit in New Mexico for defamation and wrongful termination.

The FBI has acknowledged working with him: evidence collected by TIME shows that FBI agents repeatedly assured him he was providing important information to them.

Less clear is whether he was sleuthing with the tacit consent of the government or operating as a rogue hacker.

At the same time, the bureau was also investigating his actions before ultimately deciding not to prosecute him.

The FBI would not tell TIME exactly what, if anything, it thought Carpenter had done wrong. Federal cyberintelligence agents use information from freelance sources like Carpenter at times but are also extremely leery about doing so, afraid that the independent trackers may jeopardize investigations by trailing foes too noisily or, even worse, may be bad guys themselves.

When Carpenter deputized himself to delve into the Titan Rain group, he put his career in jeopardy.

But he remains defiant, saying he's a whistle-blower whose case demonstrates the need for reforms that would enable the U.S. to respond more effectively and forcefully against the gathering storm of cyberthreats.

A TIME investigation into the case reveals how the Titan Rain attacks were uncovered, why they are considered a significant threat now under investigation by the Pentagon, the FBI and the Department of Homeland Security and why the U.S. government has yet to stop them.

Carpenter thought he was making progress.

When he uncovered the Titan Rain routers in Guangdong, he carefully installed a homemade bugging code in the primary router's software.

It sent him an e-mail alert at an anonymous Yahoo! account every time the gang made a move on the Net.

Within two weeks, his Yahoo! account was filled with almost 23,000 messages, one for each connection the Titan Rain router made in its quest for files.

He estimates there were six to 10 workstations behind each of the three routers, staffed around the clock. The gang stashed its stolen files in zombie servers in South Korea, for example, before sending them back to Guangdong.

In one, Carpenter found a stockpile of aerospace documents with hundreds of detailed schematics about propulsion systems, solar paneling and fuel tanks for the Mars Reconnaissance Orbiter.

On the night he woke at 2, Carpenter copied a huge collection of files that had been stolen from Redstone Arsenal, home to the Army Aviation and Missile Command.

The attackers had grabbed specs for the aviation-mission-planning system for Army helicopters, as well as Falconview 3.2, the flight-planning software used by the Army and Air Force.

Carpenter and other network-security analysts believe that the attacks are Chinese government spying.

"It's a hard thing to prove," says a network-intrusion-detection analyst at a major U.S. defense contractor who has been studying Titan Rain since 2003, "but this has been going on so long and it's so well organized that the whole thing is state sponsored, I think."

When it comes to advancing their military by stealing data, "the Chinese are more aggressive" than anyone else, David Szady, head of the FBI's counterintelligence unit, told TIME earlier this year.

"If they can steal it and do it in five years, why [take longer] to develop it?"

Within the U.S. military, Titan Rain is raising alarms.

A government alert obtained by TIME details what a source close to the investigation says was an early indication of Titan Rain's ability to cause widespread havoc.

Hundreds of Defense Department computer systems had been penetrated by an insidious program known as a "trojan," the alert warned.

"These compromises... allow an unknown adversary not only control over the DOD hosts, but also the capability to use the DOD hosts in malicious activity. The potential also exists for the perpetrator to potentially shut down each host."

The attacks were also stinging allies, including Britain, Canada, Australia and New Zealand, where an unprecedented string of public alerts, two U.S. network-intrusion analysts tell TIME, also referred to Titan Rain-related activity.

"These electronic attacks have been under way for a significant period of time, with a recent increase in sophistication," warned Britain's National Infrastructure Security Co-Ordination Center.

Titan Rain presents a severe test for the patchwork of agencies digging into the problem.

Both the cybercrime and counterintelligence divisions of the FBI are investigating, the law-enforcement source tells TIME.

But while the FBI has a solid track record cajoling foreign governments into cooperating in catching garden-variety hackers, the source says that China is not cooperating with the U.S. on Titan Rain.

The FBI would need high-level diplomatic and Department of Justice authorization to do what Carpenter did in sneaking into foreign computers.

The military would have more flexibility in hacking back against the Chinese, says a former high-ranking Administration official, under a protocol called "preparation of the battlefield."

But if any U.S. agency got caught, it could spark an international incident.

That's why Carpenter felt he could be useful to the FBI.

Frustrated in gathering cyberinfo, some agencies have in the past turned a blind eye to free-lancers--or even encouraged them--to do the job.

After he hooked up with the FBI, Carpenter was assured by the agents assigned to him that he had done important and justified work in tracking Titan Rain attackers.

Within a couple of weeks, FBI agents asked him to stop sleuthing while they got more authorization, but they still showered him with praise over the next four months as he fed them technical analyses of what he had found earlier.

"This could very well impact national security at the highest levels," Albuquerque field agent Christine Paz told him during one of their many information-gathering sessions in Carpenter's home.

His other main FBI contact, special agent David Raymond, chimed in: "You're very important to us," Raymond said.

"I've got eight open cases throughout the United States that your information is going to. And that's a lot."

And in a letter obtained by TIME, the FBI's Szady responded to a Senate investigator's inquiry about Carpenter, saying, "The [FBI] is aggressively pursuing the investigative leads provided by Mr. Carpenter."

Given such assurances, Carpenter was surprised when his FBI handlers stopped communicating with him altogether.

Now the federal law-enforcement source tells TIME that the bureau was actually investigating Carpenter while it was working with him.

Agents are supposed to check out their informants, and intruding into foreign computers is illegal, regardless of intent.

But two sources familiar with Carpenter's story say there is a gray area in cybersecurity, and Carpenter apparently felt he had been unofficially encouraged by the military and, at least initially, by the FBI.

Although the U.S. Attorney declined to pursue charges against him, Carpenter feels betrayed. "It's just ridiculous. I was tracking real bad guys," he says.

"But they are so afraid of taking risks that they wasted all this time investigating me instead of going after Titan Rain."

Worse, he adds, they never asked for the passwords and other tools that could enable them to pick up the investigative trail at the Guangdong router.

Carpenter was even more dismayed to find that his work with the FBI had got him in trouble at Sandia.

He says that when he first started tracking Titan Rain to chase down Sandia's attackers, he told his superiors that he thought he should share his findings with the Army, since it had been repeatedly hit by Titan Rain as well.

A Sandia memo that Carpenter gave TIME shows that he and his colleagues had been told to think like "World Class Hackers" and to retrieve tools that other attackers had used against Sandia.

That's why Carpenter did not expect the answer he claims he got from his bosses in response to Titan Rain: Not only should he not be trailing Titan Rain but he was also expressly forbidden to share what he had learned with anyone.

As a Navy veteran whose wife is a major in the Army Reserve, Carpenter felt he could not accept that injunction.

After several weeks of angry meetings -- including one in which Carpenter says Sandia counterintelligence chief Bruce Held fumed that Carpenter should have been "decapitated" or "at least left my office bloody" for having disobeyed his bosses -- he was fired.

Citing Carpenter's civil lawsuit, Sandia was reluctant to discuss specifics but responded to TIME with a statement: "Sandia does its work in the national interest lawfully. When people step beyond clear boundaries in a national security setting, there are consequences."

Carpenter says he has honored the FBI's request to stop following the attackers. But he can't get Titan Rain out of his mind.

Although he was recently hired as a network-security analyst for another federal contractor and his security clearance has been restored, "I'm not sleeping well," he says.

"I know the Titan Rain group is out there working, now more than ever."

IMF chief again urges China to let yuan rise

BEIJING, Nov 17 (Reuters) - China should let the yuan rise sooner rather than later, the head of the IMF said on Tuesday.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, reiterated that a stronger yuan was one part -- but not the most important part -- of a package of measures needed to help rebalance China's economy.
Asked at a news conference when Beijing should let the currency appreciate, he replied: "The sooner the better".
China has kept the yuan pegged around 6.83 per dollar since July 2008, following a 21 percent rise over the previous three years, to help its exporters weather the global economic crisis.

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'Obamao' artwork tests limits of free speech in China

A vendor sells "Obamao" merchandise

By David Ng

Anyone who has been following President Obama's visit to China this week has no doubt heard of "Obamao" -- the graphic superimposition of Obama's face on the body of Chairman Mao that has found its way onto T-shirts and other souvenir items around the country.
The phenomenon, which was first reported during the summer, has reached a cultural tipping point this week, as Obama makes his way through the country as part of his first tour of Asia as president.

Everyone -- NBC as well as Gawker -- has weighed in on "Obamao."

On Friday, the Christian Science Monitor reported that the Chinese government had gone so far as to ban the image by threatening to shut down vendors selling the popular T-shirts. Apparently, the government fears the image will offend the visiting president.
I find it is somewhat ironic that the Chinese government is cracking down on an image of Obama just as Obama himself publicly urged the country to embrace the freedom of speech.

As reported this weekend in The Times, Obama spoke recently in Shanghai about "free expression, worship, political participation and access to information," which the president termed "universal rights."
"They should be available to all people, including ethnic and religious minorities, whether they are in the United States, China or any nation," he said.
Obama also stated that unrestricted access to the Internet "should be encouraged."
His words apparently have fallen on deaf ears -- at least within the thick walls of the Chinese Communist party.

Various reports today confirm that a CNN reporter was detained by Chinese security guards for displaying the "Obamao" T-shirt on camera.

Emily Chang, who is a Beijing-based reporter for CNN, said she and her crew were held for two hours, eventually meeting with Chinese police before being released.
So much for free speech in China. And so much for consistency too: The offending "Obamao" image already has been widely reported on in state-run media, including the English-language China Daily.
Unlike with the Obama-as-Joker poster in the U.S., the designer of "Obamao" is well-known. Liu Mingjie created the digital image during the summer and has sold T-shirts and other items bearing his creation at his store in Beijing.
Liu told China Daily in September that he's working on "Obamao" underwear for the holiday season. We'll see how far he gets.

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Obama's message censored in China

Chinese newspapers emphasised the US president's positive comments

By Michael Bristow
Beijing -- China has tried to neutralise US President Barack Obama's attempt to speak directly to ordinary Chinese people.
Officials have used their control of the media to make sure citizens receive only a censored version of the US president's comments.
In a question-and-answer session on Monday in Shanghai, Mr Obama praised China and urged it to adopt certain universal rights and freedoms.
But in news reports about the session, Chinese media outlets largely ignored the criticism and played up the positive comments.

Climate change
Mr Obama's success in his own country is largely based on his ability to present his charismatic personality to ordinary people through an unfettered media.
In China the Communist Party stands in his way. It regularly censors the country's media and a presidential visit is no different.
In an article about the question-and-answer session, China's state-run news agency, Xinhua, said Mr Obama was "upbeat" about Sino-US ties.
The report noted that the US president's talk to students on Monday covered a wide range of topics, including cultural exchanges and climate change.
But it did not say that Mr Obama had urged China's leaders to welcome the free flow of information - particularly on the internet.
A similar upbeat note was struck by the state-run China Daily. "There's room for both of us," it quoted Mr Obama as saying in a front-page headline.
Television news bulletin were sometimes even more circumspect with their reporting of Mr Obama's first full day in China.
The main national television news show on Monday evening hardly mentioned the visit by Mr Obama to China.
It was the seventh item on the 1900 programme -- coming after a long report on the funeral of a former vice-premier who has long since slipped from memory and an item on a Chinese writing museum.
The short report on Mr Obama was not broadcast until 20 minutes into the bulletin and lasted just a minute. It did not show the US president meeting with Chinese students in Shanghai.
But some media outlets did go further than others -- the Beijing News was one.
It reported Mr Obama's comments on the benefits of allowing people to communicate freely using the internet.
Free access to the internet "allows people from across the world to ensure their own governments are responsible" it told its readers.
Internet chat rooms had even more leeway to comment on Mr Obama's question-and-answer session with the handpicked students.
"His words were like shaking hands with a guest, but what matters is our national interest," said one internet user.
"We have to bear in mind that while we're shaking one nice hand, we should be prepared for the other hand -- which might hit us."
Another internet user complained about Mr Obama's comments on individual rights and freedoms being "universal".

"American presidents are hypocrites," he said.

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China’s Growing Military Might

By TIM HSIA
Soldiers prepared for a military parade to mark the 60th anniversary of the People’s Republic of China.
When I entered West Point in 2000, there was a growing fascination about all things Chinese — the language, culture and history.

The end of the Cold War had left the United States military scrambling to find a mission and direction, and China, with its economic potential and political variance with American values, seemed a possible competitor.

One instructor emphatically told a group of cadets in my class that he believed we would see the advent of China as an economic and military powerhouse within our military careers.
During my sophomore year, I began studying the Chinese language and also applied to participate in a foreign academy exchange program.

The program would entail following Chinese cadets at their military academy, and vice versa. But part of the program was nixed because of the spy plane incident in April 2001, which strained diplomatic and military relations.

The spy plane episode seemed, briefly, to give credence to those who believed that China’s rise could spark conflict with American interests.
But the events of 9/11 deflated much of the campus’s Sino-fascination, and the environment quickly changed as instructors and cadets began focusing on the wars in Afghanistan and Iraq. Cadets who were required to take language training leaned toward studying Arabic for Iraq. Across the Army as a whole, the wars drastically changed the way the military trains, favoring counterinsurgency techniques over conventional tactics.

Front-line demands have also altered how the defense budget is spent on weaponry. In the current conflicts, there has been a preference for pilotless aerial vehicles over improved conventional weapon systems such as field artillery.
The People’s Republic of China recently celebrated its 60th anniversary, and the parades marking the event displayed how significantly China’s economic and military capabilities have grown since 9/11.

China’s economic interests are worldwide, and can be seen even in war zones where the United States military is operating.

China has acquired oil rights in Iraq. Chinese firms have also begun several engineering projects in Afghanistan. Even incidents such as the brief confrontation between a United States naval vessel and five Chinese ships in March are brushed aside within an American military that has its energies focused on Afghanistan and Iraq.
When the wars in Afghanistan and Iraq end, the United States military will probably view China in a much different light from the way it did prior to 9/11.

China will no longer be a curiosity.

China’s economic rise and defense spending will be a cause for concern for some in the military. For Japan, America’s strongest ally in the region, the prospect of the Chinese economy eclipsing that of Japan could move toward reality.
Will the economic interests between the United States and China take priority over security issues?

Are Chinese and United States security interests more convergent then divergent?
Have the wars in Iraq and Afghanistan, to the detriment of the military, taken its focus away from a possibly more potent adversary — China and its fast-growing military capabilities?
The answers to these questions will inevitably affect the average soldier: will training be modeled after the experiences in Iraq or Afghanistan, or will it mean a shift back toward more conventional military training?

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China has become the biggest risk to the world economy

Far from taking over as the engine of growth from an exhausted West, China is making matters worse. Its "beggar-thy-neighbour" policies continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession.
By Ambrose Evans-Pritchard
President Obama said before going to China this week that Asia can no longer live by shipping goods to Americans already in debt to their ears
"The inherent problems of the international economic system have not been fully addressed," said China's president Hu Jintao.

Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.
While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. "I'm more worried about deflation," he said.
By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – "stealing American jobs", says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.
Western capitalists are complicit, of course. They rent cheap workers and cheap plant in Guangdong, then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.
At some point, American workers will rebel.

US unemployment is already 17.5pc under the broad "U6" gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression.

A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.
President Obama said before going to China this week that Asia can no longer live by shipping goods to Americans already in debt to their ears.

"We have reached one of those rare inflection points in history where we have the opportunity to take a different path," he said. Failure to take that path will "put enormous strains" on America's ties to China. Is that a threat?
It is fashionable to talk of America as the supplicant. That misreads the strategic balance. Washington can bring China to its knees at any time by shutting markets. There is no symmetry here.

Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.
If provoked, the US has the economic depth to retreat into near autarky (with NAFTA) and retool its industries behind tariff walls – as Britain did in the 1930s under Imperial Preference. In such circumstances, China would collapse. Mao statues would be toppled by street riots.
Mr Hu sounded conciliatory last week.

China is taking "vigorous" steps to cut reliance on exports, still 39pc of GDP. "We want to increase people's ability to spend," he said.

Beijing is indeed boosting pensions and extending health insurance to the countryside so that people feel less need to save, but cultural revolutions take time.

All we have seen so far are "baby steps", says Morgan Stanley's Stephen Roach.
The reality is that much of Beijing's $600bn stimulus has been spent building yet more plant and infrastructure so that China can ship yet more goods, or has leaked into property and stocks.
Credit has exploded. Allocated by Maoist bosses for political purposes, it has become absurd. China is rolling as much steel as the next eight producers combined. It is churning more cement than the rest of the world. Fixed investment is up 53pc this year.

Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

Pivot Asset Management said lending has touched 140pc of GDP, "well beyond" levels that have led to crises in the past.

With the revolution's 60th birthday out of the way, the central bank has begun to tighten. New yuan loans halved in October. So be careful.

Pivot said a hard-landing in China could prove as traumatic for world markets as the US sub-prime crash.
The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains.

The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.
My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China's investment bubble; and Europe's banking cover-up.

I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.

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China's Blunt Talk for Obama

Regulator Says U.S. Policy Puts Global Recovery at Risk as President Arrives in Beijing
By JONATHAN WEISMAN, AARON BACK and ANDREW BROWNE
BEIJING -- China's top banking regulator issued a sharp critique of U.S. financial management only hours before President Barack Obama commenced his first visit to the Asian giant, highlighting economic and trade tensions that threaten to overshadow the trip.
Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to "massive speculation" that was inflating asset bubbles around the world.

It has created "unavoidable risks for the recovery of the global economy, especially emerging economies," Mr. Liu said. The situation is "seriously impacting global asset prices and encouraging speculation in stock and property markets."
Early Monday, a spokesman for China's Ministry of Commerce added further criticism of the Obama administration, targeting recent measures by Washington against Chinese exports. "We've always known the U.S. and the West as free market economies. But now we're seeing a protectionist side," the spokesman, Yao Jian, told a monthly press briefing.

Mr. Yao also rejected criticism of China's currency policy, saying the yuan's exchange rate has little to do with trade imbalances with the U.S. and that China should keep the exchange rate stable.
The Chinese comments signaled that Mr. Obama -- on the third leg of a four-country Asian tour -- can expect blunt talk from Chinese leaders on the economy.

The issue could complicate his broad agenda in China that also includes efforts to extract new commitments on climate change and to encourage them to take a more active role to defuse nuclear threats in Iran and North Korea.
Before heading to China, Mr. Obama underscored the urgency of his agenda on Iran by joining Russian President Dmitry Medvedev in warning Tehran that "we are now running out of time."
The trip has already had some hiccups.

Wrangling between the administration and Beijing over Mr. Obama's town hall meeting with university students in Shanghai on Monday was intense, with China wanting to screen the audience and its questions, and the U.S. wanting a freer exchange.
Administration officials wound up emphasizing that the president would take questions not only from the audience but also from e-mails sent to the U.S. embassy.

The event was to be broadcast live over the White House's Web site, whitehouse.gov, and the Chinese also agreed to broadcast it live locally on Xinhuanet, a site run by China's government-run news agency.
Differences over global economic management have been bubbling ahead of Obama's arrival on Sunday night.

Chinese leaders previously expressed nervousness that the U.S. may be ready to sacrifice China's economic interests to haul itself out of the worst recession since World War II.

China is the largest creditor to the U.S. It frets that huge U.S. budget deficits will weaken the dollar and slash the value of China's massive foreign-currency holdings, which hit $2.273 trillion at the end of September, the latest figure available.
Beijing's suspicions of U.S. intentions have been exacerbated by trade quarrels under the Obama administration.
These intensified in September, when U.S. decided to hit Chinese tire exporters with tariffs. The U.S. has since targeted Chinese steel pipes with tariffs, a decision that China denounced as "abusive protectionism."
The U.S. is now moving ahead with investigations into the alleged "dumping," or selling at below-market prices, of coated paper from China and Indonesia, and of certain phosphate salts from China.

China has started its own investigation into imports of some U.S. cars.
Mr. Liu's comments suggest that currency could emerge as a thorny issue during Mr. Obama's visit.
China is particularly affected by the U.S. policy to keep interest rates at near-zero because it has kept its own currency, the yuan, largely pegged to the dollar.

Key trading partners like the U.S. and European Union have urged China to let its currency appreciate, and multilateral agencies like the World Bank and International Monetary Fund have said a stronger yuan would help avoid risks of asset bubbles, in part because that would make it more expensive for outsiders to buy Chinese assets.
Some leaders of the Asia-Pacific Economic Cooperation summit in Singapore on Sunday pressed for language on currency to be in the forum's final communiqué. But disputes between the U.S. and Chinese delegations over emphasis forced all currency language to be dropped.
Before the president's departure on the Asia trip, Jeffrey Bader, the National Security Council's senior director for East Asian affairs, said that it is "an integral part of U.S. policy that China move to a market-based approach to currency."
White House officials say the administration has worked hard to ensure a smooth transition in relations with China. "The relationship is off to a good start," Mr. Bader said.
Mr. Bader noted that previous presidential transitions have been rocky at best.

The Bush administration's first foreign-policy crisis was triggered by the emergency landing of a U.S. spy plane on a Chinese island after it collided with a Chinese fighter jet. And the Clinton administration had to adapt its policy after Bill Clinton campaigned against what he had called "the butchers of Beijing."
"China is an essential player on the global issues that are the center of our agenda, global economic recovery, climate change, energy, North Korea, Iran," Mr. Bader said.
He acknowledged a traditional degree of mistrust between the two nations, which he said Mr. Obama will focus on in Shanghai and Beijing.

Ben Rhodes, another NSC official, said Mr. Obama's emphasis on trade and an export-driven recovery for the United States will be especially strong in China.
The U.S. president has made a tonal shift on trade since his departure, emphasizing trade as a jobs issue for the moribund U.S. labor market.

That is a striking rhetorical change from his campaign for president, when he questioned the economic value of trade agreements.
In the one major policy address of his trip, Mr. Obama treated China gingerly before a Japanese audience in Tokyo's Suntory Hall on Saturday. "I know there are many who question how the United States perceives China's emergence, but as I have said, in an interconnected world, power does not need to be a zero-sum game, and nations need not fear the success of another," he said.

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Obama Walks China’s ‘Great Firewall’

By ROBERT MACKEY
While some American Twitter addicts reacted with real and feigned outrage on Monday to President Obama’s confession, during a forum with Chinese students in Shanghai, that he does not personally update the @BarackObama feed — which more than two million people follow on the social network — observers in China were more interested in what he said next: that he disagrees with China’s censorship of the Internet.
Here is video of Mr. Obama’s complete reply to a question on Internet restrictions in China that he said “was generated through the Web site of our embassy” and selected by a member of the American press corps:
For readers who will not — or cannot — watch the video, the two-part question read aloud by Ambassador Jon Huntsman was:
“In a country with 350 million Internet users and 60 million bloggers, do you know of the firewall?” And second, “Should we be able to use Twitter freely?”
Internet users in China refer to the government filtering of Web sites as “the great firewall.”
After a joking aside about Twitter — “Well, first of all, let me say that I have never used Twitter… My thumbs are too clumsy to type in things on the phone.” — the president began his argument against censorship this way:
I am a big believer in technology and I’m a big believer in openness when it comes to the flow of information. I think that the more freely information flows, the stronger the society becomes, because then citizens of countries around the world can hold their own governments accountable. They can begin to think for themselves. That generates new ideas. It encourages creativity.
And so I’ve always been a strong supporter of open Internet use. I’m a big supporter of non-censorship. This is part of the tradition of the United States that I discussed before, and I recognize that different countries have different traditions. I can tell you that in the United States, the fact that we have free Internet — or unrestricted Internet access is a source of strength, and I think should be encouraged.
After mentioning the role the Web can play in government and politics, Mr. Obama added:
So I’m a big supporter of not restricting Internet use, Internet access, other information technologies like Twitter. The more open we are, the more we can communicate. And it also helps to draw the world together.
Mr. Obama’s complete remarks at the forum can be read or viewed in their entirety on the White House Web site.
Chris Hogg, a BBC correspondent in Shanghai, suggested that it was significant that this question was not asked by one of the students in the room — who were, apparently, carefully chosen and generally asked questions in line with state policy — but came from an anonymous Internet user writing on the Web site of the American Embassy.
The president asking his ambassador to read out a question on Chinese censorship in this forum seemed to be just as clearly staged as the moment last summer when he called on Nico Pitney of The Huffington Post at a news conference, saying that he knew that he had a question for him from the Iranian blogosphere.

It seems quite possible that Mr. Obama wanted — in a forum that the White House streamed live, with Chinese translation, on its Web site — to both address and push at the boundaries of the Chinese system of state censorship of the Internet.
China Digital Times, which monitors the Chinese Web from Berkeley, reported that some Chinese bloggers saluted the president’s effort to address online censorship.

One Twitter user, @philfenghan, wrote: “I will no[t] forget this morning, I heard, on my shaky Internet connection, a question about our own freedom which only a foreign leader can discuss.”
But at the same time, observers in China reported that the event was not easy to see.
As Reuters reported, the forum “was carefully orchestrated by the local government and was not carried live by national broadcasters. It could only be viewed on some Shanghai news channels, select international media and certain Web sites.”

Reuters noted that this contrasted with a question-and-answer session with Chinese students during President Bill Clinton’s visit in 1998, which was carried live by the national broadcaster CCTV.
A blogger for The Wall Street Journal covering Monday’s event live from inside the country wrote: "I don’t know about others out there, but the Internet connections in Beijing aren’t making this easy. Maybe it’s just the WSJ bandwidth, but the whitehouse.gov feed is erratic and the Shanghai TV feed not working. And we still can’t find anything at all on Xinhuanet."
Live video of the event was supposed to be streamed live by Xinhua, the Chinese state news agency, but well into the question period, The Journal’s blogger reported a second time: “Xinhua still not broadcasting this. What’s up with that?”
Xinhua did, however, publish an accurate Chinese translation of both the question on Internet freedom and of Mr. Obama’s response in text form on its Web site — and the English-language version of the People’s Daily Online had a short, paraphrased report of his remarks on the Internet, which most Western reporters took to be the most important part of the event.
According to Mark MacKinnon, a correspondent for the Canadian newspaper The Globe and Mail who was monitoring the coverage of Mr. Obama on China’s main television news program, the state broadcaster made his arrival in Beijing after the forum only the seventh item in its report and just “showed footage of him getting off a plane in Beijing,” with “no footage at all from Shanghai.”
Close observers of China writing in English on Twitter after the event were somewhat divided about whether the president’s response was tough enough.

Zhao Jing, a Chinese blogger (and former New York Times employee) who writes under the name Michael Anti, concluded:
Obama, on Monday in Shanghai, says: “I am a big supporter of noncensorship” (which is good) plus an hour of nothingness.
But Adam Minter, an American writer in Shanghai, was disappointed:
Here’s what bothers me about Obama’s town hall: “I’m a big supporter of non-censorship” is a mealy-mouthed way to say “I oppose censorship.”
It seems worth noting as well that in the days leading to the event, the Xinhua news agency’s report on the questions flowing in for President Obama via the Web — “Chinese Netizens Welcome Obama’s Visit With Thousands of Questions” — seemed to marginalize the importance of Internet communication by highlighting the odd or trivial questions submitted in advance of the forum:
Whether Obama likes the well-known Chinese dish Kung Pao chicken and whether he can use chopsticks are also on the question list.
“How much wine can you drink for once? Will you play the Truth or Dare game after drinking?” another netizen asked.

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Will China's Consumers Save the World Economy?

Customers shop at a supermarket in Shanghai.

By Michael Schuman / Xi'an
A Wuling minivan dealership on the outskirts of the western Chinese city of Xi'an provides hope for the future of the global economy.

On an ordinary Wednesday morning, customers steadily stream into the showroom, briefly open and close the doors to the displayed minivans, manufactured by a joint venture between General Motors and two Chinese carmakers, and then march over to the front desk to plop down their money.

While salesmen in the U.S. struggle to move cars off their lots, Xu Zhanrong, the deputy general manager of the Xi'an dealership, can barely keep the Wulings in stock.

Sales are up some 40% this year, Xu says, with about 50 customers a day driving off with new minivans.

"From what I see, people are changing very dramatically," Xu says.

"Before people thought: I only buy what I need. Now people are starting to spend for a better or more comfortable life."
Xu's words should be music to the world's ears.

As debt-laden consumers in the U.S. retrench, increasingly wealthy Chinese consumers could become one of the most important sources of growth for the global economy.

Shoppers in China are opening their newly stuffed wallets wider than ever. Passenger car sales surged 76% in October from a year earlier, while overall retail sales jumped 16.2%.

Such spending has contributed to China's robust recovery from the global economic crisis. Gross domestic product grew a hefty 8.9% in the third quarter from a year earlier.
There is reason to believe such eye-popping spending can continue.

As more regions of China's vast hinterland join in its amazing economic boom, more and more of the country's 1.3 billion people can afford cars, refrigerators and flat-panel TVs items not too long ago considered luxuries for a fortunate few.

Chen Baogen, Xi'an's mayor, says his city of eight million had lagged behind towns on the export-oriented coast, but now incomes are growing to the point where consumption is taking off.

In the first nine months of 2009, retail sales in the city increased by 19%, well above the 14.8% growth posted in China's cities nationally.

"Xi'an has reached a very important development stage," Chen explains. "Incomes are just at the first point when people can buy homes and cars."
Yet whether or not they will buy remains an open, and crucial, question.

Even though Chinese are becoming wealthier, they are actually saving a greater percentage of that new wealth.

Cornell University economist Eswar Prasad figures that China's average urban household saving rate reached 28% of disposable income in 2008 — 11 percentage points higher than in 1995.

As a result, the role consumer spending plays in China's economy continues to head in the wrong direction.

Private consumption accounted for a mere 35% of GDP in 2008, down from 46% in 2000. China's ratio stands at about half that in the United States, and even trails the level in comparable emerging markets, such as India, where the share is 57%.

What those figures tell us is that Chinese consumers may be spending more, but not nearly enough to ensure sustainable growth for the Chinese economy down the road.

"The consumer revolution already has been happening, but it could be much, much better," says Yuwa Hedrick-Wong, an economic advisor to MasterCard Worldwide.

The problem, says Hedrick-Wong and other economists, is that the average Chinese still faces too much uncertainty about the future to spend more freely.

China's social safety net systems remain weak, forcing Chinese families to squirrel away large sums to care for elderly parents, pay rising medical bills and prepare for retirement.

Aware of the problem, the Chinese government has been taking steps to beef up welfare programs to alleviate the financial burden faced by Chinese families and loosen their purse strings.

Beijing, for example, is undertaking a three-year, $125 billion program to build hospitals and clinics to extend healthcare to 90% of the population.

Along with these very long-term efforts to boost consumer confidence, the government has also implemented short-term measures to spur on spending.

Car sales this year have been boosted by tax breaks and China's own "cash-for-clunkers" program.

Xu Zhanrong's Wuling minivan sales have been helped along by a special 10% rebate offered on certain vehicles to residents of rural areas, who make up a majority of Xu's customers.

Yet economists say Beijing's measures aren't going far enough.

Huang Yasheng, professor of political economy at the MIT Sloan School of Management, says that the government needs to do much more to accelerate the income growth of poor Chinese if consumer spending is to play a bigger role in the economy.

The average Chinese, he says, doesn't have as much cash to spend as many people think.

Actual household income per capita is only about half of GDP per capita, compared to 80% or more in other major economies, placing "a cap," Huang says, on consumer spending.

The problem is that income growth among rural dwellers and migrant workers badly trails that of residents of the major urban centers creating a mass of 900 million people who still tend to be very heavy savers.

Huang suggests that China needs to act aggressively to boost rural incomes, by, for example, extending banking systems deeper into the countryside to give farmers better access to credit to start small businesses.

MasterCard's Hedrick-Wong argues that China should also open up service industries now dominated by large, state-owned companies, such as finance, to allow new entrepreneurs to flourish, creating more jobs with higher wages.
Such efforts will take years to bear fruit, however time the global economy may not be able to afford.

Economists agree that China and the United States must alleviate the imbalances that contributed to the current crisis if the world economy is to find renewed, and healthier, growth. China saves too much and spends too little, leading to giant surpluses and hard currency reserves, while the U.S. saves too little and spends too much, creating giant deficits and debt. Unless China can transform its citizens from savers to spenders, the reform of the entire world economic system could suffer.

"I don't see any evidence" that China's economy is rebalancing, MIT's Huang says. "It's always difficult to get consumption to grow in a limited period of time."

Greater consumer spending in China could have a big impact as well on the world economy. Cornell's Prasad figures that if China can increase growth of private consumption to 20% a year (much higher than the trend of nominal GDP growth of about 15%), global GDP growth would get a meaningful 0.25% boost.
With so much on the line, the subject of "rebalancing" will likely get top billing during U.S. President Barack Obama's November visit to China.

President Hu Jintao and the rest of China's top leaders clearly agree with Washington that the country's consumers need to spend more.

Pressure from Obama to speed that process along by, for example, continued improvements in China's social safety net, might be met with nods of approval.

But Obama will only be able to press Beijing so hard.

China's policymakers are still wedded to supporting the country's valuable export industries. Any suggestions from Obama that would result in a drastic shift of the economy away from exports and towards heavier reliance on domestic spending will be less welcome.

The most sensitive of these issues may be China's currency regime.

Obama will probably try to cajole Beijing into allowing the yuan to appreciate, thus making Chinese exports less competitive. But economists doubt China's leaders will take drastic steps to reform its currency system anytime soon.
But perhaps there is reason for optimism, thanks to Xi'an residents like Lu Bo, shopping one recent evening for a new fridge at a Suning appliance store.

The 32-year-old, who works as an salesman in the air-freight department at China Eastern Airlines, says his salary was reduced by a third last year when his company was hit hard by the financial crisis, but that hasn't stopped him from spending.

With China's future so bright, he doesn't worry too much about saving for the future.

"Judging from my job, my life, I think everything will become better and better," Lu says. And maybe for the entire world economy as well.

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The Great Wallop

By NIALL FERGUSON and MORITZ SCHULARICK
A FEW years ago we came up with the term “Chimerica” to describe the combination of the Chinese and American economies, which together had become the key driver of the global economy.

With a combined 13 percent of the world’s land surface and around a quarter of its population, Chimerica nevertheless accounted for a third of global economic output and two-fifths of worldwide growth from 1998 to 2007.
We called it Chimerica for a reason: we believed this relationship was a chimera — a monstrous hybrid like the part-lion, part-goat, part-snake of legend. Now we may be witnessing the death throes of the monster.

The question President Obama must consider as he flies to Asia this week is whether to slay it or to try to keep it alive.
In its heyday, Chimerica consisted largely of the combination of Chinese development, led by exports, and American overconsumption.

Thanks to the Chimerican symbiosis, China was able to quadruple its gross domestic product from 2000 to 2008, raise exports by a factor of five, import Western technology and create tens of millions of manufacturing jobs for the rural poor.
For America, Chimerica meant being able to consume more and save less even while maintaining low interest rates and a stable rate of investment.

Overconsumption meant that from 2000 to 2008 the United States consistently outspent its national income. Goods imported from China accounted for about a third of that overconsumption.
For a time, Chimerica seemed not a monster but a marriage made in heaven. Global trade boomed and nearly all asset prices surged.

Yet, like many another marriage between a saver and a spender, Chimerica was not destined to last.

The financial crisis since 2007 has put the marriage on the rocks. Correcting the economic imbalance between the United States and China — the dissolution of Chimerica — is now indispensable if equilibrium is to be restored to the world economy.

China’s economic ascent was a result of a strategy of export-led growth that followed the examples of West Germany and Japan after World War II.

However, there was a key difference: China made a sustained effort to control the value of its currency, the renminbi, which resulted in a huge accumulation of reserve dollars.
As Chinese exports soared, the authorities in Beijing consistently bought dollars to avoid appreciation of their currency, pegging it at around 8.28 renminbi to the dollar from the mid-1980s to the mid-’90s.

They then allowed a modest 17 percent appreciation in the three years after July 2005, only to restore the dollar peg at 6.83 when the global financial crisis intensified last year.
Intervening in the currency market served two goals for China: by keeping the renminbi from rising against the dollar, it promoted the competitiveness of Chinese exports; second, it allowed China to build up foreign currency reserves (primarily in dollars) as a cushion against the risks associated with growing financial integration, painfully illustrated by the experience of other countries in the Asian crisis of the late 1990s.

The result was that by 2000 China had currency reserves of $165 billion; they now stand at $2.3 trillion, of which at least 70 percent are dollar-denominated.
This intervention caused a growing distortion in the global cost of capital, significantly reducing long-term interest rates and helping to inflate the real estate bubble in the United States, with ultimately disastrous consequences.

In essence, Chimerica constituted a credit line from the People’s Republic to the United States that allowed Americans to save nothing and bet the house on... well, the house.
Nothing like this happened in the 1950s and 1960s.

At the height of postwar growth in the 1960s, West Germany and Japan increased their dollar reserves roughly in line with the American gross domestic product, keeping the ratio stable at about 1 percent before letting it move slightly higher in the early 1970s.

By contrast, China’s reserves soared from the equivalent of 1 percent of America’s gross domestic product in 2000 to 5 percent in 2005 and 10 percent in 2008. By the end of this year, that figure is expected to rise to 12 percent.
The Chimerican era is drawing to a close.

Given the bursting of the debt and housing bubbles, Americans will have to kick their addiction to cheap money and easy credit.

The Chinese authorities understand that heavily indebted American consumers cannot be relied on to return as buyers of Chinese goods on the scale of the period up to 2007. And they dislike their exposure to the American currency in the form of dollar-denominated reserve assets of close to $2 trillion.

The Chinese authorities are “long” the dollar like no foreign power in history, and that makes them very nervous.
Yet there is a strong temptation for both halves of Chimerica to keep this lopsided partnership going.

Despite much talk of the need to reduce global imbalances, the biggest imbalance of all persists. This year, America’s trade deficit with China will be around $200 billion, the same as last year. And China has again intervened in the currency markets, buying $300 billion to keep its currency and hence its exports cheap.
United States policy makers, meanwhile, seem equally willing to prolong America’s addiction to cheap money as long as economic recovery seems so fragile, regardless of the effect on the dollar’s exchange rate with other currencies. (When American officials insist that they favor a “strong dollar,” it’s usually a sure sign that they want the opposite.)

And why would Americans want to discourage the Chinese from buying yet more dollar-denominated securities? With trillion-dollar deficits as far as the eye can see, the Treasury needs all the foreign buyers it can get.
The reality, however, is that an end to Chimerica is in the American interest for at least three reasons.

First, adjusting the exchange rates between the currencies would help reorient the American economy — primarily by making American exports more competitive in China, the world’s fastest-growing economy.
Second, an end to Chimerica would lessen the potentially dangerous reliance of American economic policy on measures to stimulate domestic purchasing. American fiscal policy is clearly on an unsustainable path, and the Federal Reserve’s negligible interest rates and the printing of dollars are artificially inflating equity prices.
Finally, renminbi revaluation would reduce the risk of potentially serious international friction over trade.

The problem is that as the dollar weakens against other world currencies — notably the euro and the Japanese yen — so does the renminbi, magnifying China’s already large advantage in global export markets.

The burden of post-crisis adjustment falls disproportionately outside Chimerica.

Unless China’s currency is revalued, we can expect an uncoordinated wave of defensive moves by countries on the wrong side of Chimerica’s double depreciation.

Already we are seeing the danger signs.

Last month Brazil imposed a tax on “hot money” — large, volatile flows of foreign investment that may exit an economy as quickly as they appeared — to try to slow the appreciation of its currency, the real.

A number of Asian economies last week intervened to weaken their own currencies relative to the dollar. Similar currency games were a feature of the worst economic decade of the 20th century, the 1930s.
Historically, as production costs and income levels in countries have risen, their currencies have adjusted against the dollar accordingly. From 1960 to 1978, for example, the deutsche mark appreciated cumulatively by almost 60 percent against the dollar, while the Japanese yen appreciated by almost 50 percent.

The lesson is that exporters can live with substantial exchange rate revaluations so long as they are achieving major gains in productivity, as China still is.
To be sure, China’s central bank has suggested that it might be willing to switch from the dollar peg to some form of exchange-rate management, taking account of “international capital flows and movements in major currencies.”

But, like the recent Chinese comments about replacing the dollar as the premier international reserve currency, this may be no more than rhetoric.
During his visit to China this week, President Obama must resist the temptation to respond to these overtures with rhetoric of his own.

This is not the time for big speeches, but for subtle diplomacy.

Right now, Chimerica clearly serves China better than America. Call it the 10:10 deal: the Chinese get 10 percent growth; America gets 10 percent unemployment. The deal is even worse for the rest of the world — and that includes some of America’s biggest export markets and most loyal allies.

The question is: What can the United States offer to make the Chinese abandon the dollar peg that has served them so well?
The authorities in Beijing must be made to see that any book losses on its reserve assets resulting from changes in the exchange rate will be a modest price to pay for the advantages they reaped from the Chimerica model: the transformation from third-world poverty to superpower status in less than 15 years.

In any case, these losses would be more than compensated for by the increase in the dollar value of China’s huge stock of renminbi assets.
It is also in China’s interest to kick its currency-intervention habit. A heavily undervalued renminbi is the key financial distortion in the world economy today.

If it persists for much longer, China risks losing the very foundation of its economic success: an open global trading regime.
And this is exactly what President Obama can offer in return for a substantial currency revaluation of, say, 20 percent to 30 percent over the next 12 months: a clear commitment to globalization and free trade, and an end to the nascent Chinese-American tariff war.
For as long as the People’s Republic has existed, the United States has been the principal upholder of a world economic order based on the free movement of goods and, more recently, capital.

It has also picked up the tab for policing the oil-rich but unstable Middle East.

No country has benefited more from these arrangements than China, and it should now pay for them through a stronger Chinese currency.

Chimerica was always a chimera — an economic monster. Revaluing the renminbi will give this monster the peaceful death it deserves.

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World Out of Balance

By PAUL KRUGMAN
International travel by world leaders is mainly about making symbolic gestures.

Nobody expects President Obama to come back from China with major new agreements, on economic policy or anything else.
But let’s hope that when the cameras aren’t rolling Mr. Obama and his hosts engage in some frank talk about currency policy. For the problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways.
Some background: Most of the world’s major currencies “float” against one another. That is, their relative values move up or down depending on market forces.

That doesn’t necessarily mean that governments pursue pure hands-off policies: countries sometimes limit capital outflows when there’s a run on their currency (as Iceland did last year) or take steps to discourage hot-money inflows when they fear that speculators love their economies not wisely but too well (which is what Brazil is doing right now).

But these days most nations try to keep the value of their currency in line with long-term economic fundamentals.
China is the great exception.

Despite huge trade surpluses and the desire of many investors to buy into this fast-growing economy — forces that should have strengthened the renminbi, China’s currency — Chinese authorities have kept that currency persistently weak.

They’ve done this mainly by trading renminbi for dollars, which they have accumulated in vast quantities.
And in recent months China has carried out what amounts to a beggar-thy-neighbor devaluation, keeping the yuan-dollar exchange rate fixed even as the dollar has fallen sharply against other major currencies.

This has given Chinese exporters a growing competitive advantage over their rivals, especially producers in other developing countries.
What makes China’s currency policy especially problematic is the depressed state of the world economy.

Cheap money and fiscal stimulus seem to have averted a second Great Depression. But policy makers haven’t been able to generate enough spending, public or private, to make progress against mass unemployment.

And China’s weak-currency policy exacerbates the problem, in effect siphoning much-needed demand away from the rest of the world into the pockets of artificially competitive Chinese exporters.
But why do I say that this problem is about to get much worse?

Because for the past year the true scale of the China problem has been masked by temporary factors. Looking forward, we can expect to see both China’s trade surplus and America’s trade deficit surge.
That, at any rate, is the argument made in a new paper by Richard Baldwin and Daria Taglioni of the Graduate Institute, Geneva.

As they note, trade imbalances, both China’s surplus and America’s deficit, have recently been much smaller than they were a few years ago. But, they argue, “these global imbalance improvements are mostly illusory — the transitory side effect of the greatest trade collapse the world has ever seen.”
Indeed, the 2008-9 plunge in world trade was one for the record books.

What it mainly reflected was the fact that modern trade is dominated by sales of durable manufactured goods — and in the face of severe financial crisis and its attendant uncertainty, both consumers and corporations postponed purchases of anything that wasn’t needed immediately.

How did this reduce the U.S. trade deficit? Imports of goods like automobiles collapsed; so did some U.S. exports; but because we came into the crisis importing much more than we exported, the net effect was a smaller trade gap.
But with the financial crisis abating, this process is going into reverse. Last week’s U.S. trade report showed a sharp increase in the trade deficit between August and September. And there will be many more reports along those lines.
So picture this: month after month of headlines juxtaposing soaring U.S. trade deficits and Chinese trade surpluses with the suffering of unemployed American workers. If I were the Chinese government, I’d be really worried about that prospect.
Unfortunately, the Chinese don’t seem to get it: rather than face up to the need to change their currency policy, they’ve taken to lecturing the United States, telling us to raise interest rates and curb fiscal deficits — that is, to make our unemployment problem even worse.
And I’m not sure the Obama administration gets it, either.

The administration’s statements on Chinese currency policy seem pro forma, lacking any sense of urgency.
That needs to change.

I don’t begrudge Mr. Obama the banquets and the photo ops; they’re part of his job. But behind the scenes he better be warning the Chinese that they’re playing a dangerous game.

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China Detains Activists as Obama Arrives

BEIJING (AP) -- Police detained dozens of activists and petitioners in Beijing and elsewhere in China as President Barack Obama arrived on his first state visit to the country, friends, family members and a human rights group said Monday.
International rights groups have urged Obama to raise human rights concerns during a four-day trip to China that began Sunday night and will include a meeting with President Hu Jintao.

China frequently conducts crackdowns on dissent ahead of major events, such as last year's Olympics and this year's National Day celebrations.
Activist Zhao Lianhai, who organized an online support group for parents whose children were sickened by tainted milk last year, was taken away by police from his home late Friday night, his wife, Li Xuemei, told The Associated Press.
Officers also confiscated his computers and other equipment during the raid. Li said they returned the following day with documents for her to sign that said Zhao had been ''criminally detained'' for ''provoking an incident.''
Chen Jianfang, a petitioner from Shanghai who traveled to Beijing with 200 others, said the group wanted to welcome Obama and draw his attention to China's human rights violations.

But several dozen of her companions were rounded up by Beijing police when they arrived at the government's petition office Monday, she said.
''They are detaining people everywhere, even if they are only petitioning normally at the state petition office and are not holding any banners or shouting any slogans,'' she said.
Chen said that most of the petitioners have had their homes destroyed and their land taken away without getting fair compensation.
A Hong Kong-based rights group said that more than a dozen activists in Beijing, Shanghai and elsewhere in the country had been detained or placed under house arrest in a bid to muffle their criticism during Obama's visit.
The activists were openly warned against ''making trouble'' during Obama's visit, according to China Human Rights Defenders.
In a statement, the group urged Obama to raise concerns about the practice during his upcoming meetings with Chinese leaders, and to demand the immediate release of those detained in connection with his visit.
''While the government touts its future leaders in letting President Obama meet with a select few students in Shanghai, it is silencing those true leaders who speak out for justice, human rights and the rule of law,'' China Human Rights Defenders said.
Obama held a town hall-style meeting with a group of college students Monday in Shanghai where he emphasized that freedom of expression and other rights were universal values. He flew to Beijing later in the day.

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