China proves to be an aggressive foe in cyberspace

By Ellen Nakashima and John Pomfret
One day in late summer 2008, FBI and Secret Service agents flew to Chicago to inform Barack Obama's campaign team that its computer system had been hacked.

"You've got a problem. Somebody's trying to get inside your systems," an FBI agent told the team, according to a source familiar with the incident.
The McCain campaign was hit with a similar attack.
The trail in both cases led to computers in China, said several sources inside and outside government with knowledge of the incidents.

In the McCain case, Chinese officials later approached staff members about information that had appeared only in restricted e-mails, according to a person close to the campaign.
American presidential campaigns are not the only targets.

China is significantly boosting its capabilities in cyberspace as a way to gather intelligence and, in the event of war, hit the U.S. government in a weak spot, U.S. officials and experts say. Outgunned and outspent in terms of traditional military hardware, China apparently hopes that by concentrating on holes in the U.S. security architecture -- its communications and spy satellites and its vast computer networks -- it will collect intelligence that could help it counter the imbalance.
President Obama, who is scheduled to visit China next week, has vowed to improve ties with the Asian giant, especially its military.

But according to current and former U.S. officials, China's aggressive hacking has sowed doubts about its intentions.
"This is the way they plan to thwart U.S. supremacy in any potential conflict we get into with them," said Robert K. Knake, a Council on Foreign Relations fellow.

"They believe they can deter us through cyber warfare."
Chinese officials deny that and dismiss American concern as a Cold War relic.
"Allegations that China is behind, or 'likely behind,' cyberattacks or cyber espionage against the United States are more frequent and more sensational," said Wang Baodong, the spokesman at the Chinese Embassy in Washington.
With 360 million people online in China, Wang added, "China is more than ever integrated with and reliant on the Internet. As the U.S. serves as the hub of the international information highway, attacking the U.S. in cyberspace equals attacking one's own cyberspace assets... What's the logic?"
Nonetheless, U.S. officials and experts of all political persuasions in the Pentagon, on Capitol Hill, in private industry and in think tanks are convinced that China is behind many of the most egregious attacks.

A senior Air Force official estimated that, as of two years ago, China has stolen at least 10 to 20 terabytes of data from U.S. government networks -- the larger figure equal, by some estimates, to one-fifth of the Library of Congress's digital holdings.
Nuclear weapons labs, defense contractors, the State Department and other sensitive federal government agencies have fallen prey.

What experts do not know is exactly what has been stolen or how badly U.S. systems have been exposed.

"Given the intrusions into defense industry networks, multibillion-dollar weapons systems... may have already been compromised," said James Mulvenon, a China expert with Defense Group Inc.
Experts point to the late 1990s as the start of this undeclared war.

Since then, cyber intrusions have run the gamut, including stealing files on political dissidents from the offices of Rep. Frank R. Wolf (R-Va.) in 2006, disrupting the e-mail network of the defense secretary's office in 2007 and staging a spyware attack on electronic devices used by then-Commerce Secretary Carlos M. Gutierrez and his delegation on a December 2007 trip to Beijing.
Wolf said that the offices of 17 House members have been targeted. "Not a week doesn't go by when there's not a Chinese attack on our government," he said.
One day last spring, Capitol Hill security officials removed two computers from a congressional office that deals with foreign affairs. "There's a bug in your computer," one agent told an astonished staffer. "From China."
Director of National Intelligence Dennis C. Blair said in February that Russia and China were able to "to target and disrupt elements of the U.S. information infrastructure" and that China was "very aggressive" in cyberspace.
Another problem is China's ability to leave behind malicious sleeper code that can one day be activated to alter or destroy information.

In April, then-National Counterintelligence Executive Joel F. Brenner reported that the Chinese had penetrated "certain of our electricity grids" with malicious code and that "our networks are being mapped"
One challenge in countering the threat, experts say, is that the Chinese often contract out such work to experts in industry and academia and possibly even to freelance hackers, allowing officials to argue that while an attack might have originated from an Internet service provider in China, no one could prove it came from the government.
The Chinese People's Liberation Army has publicly embraced such outsourcing.

In 2002, the PLA created information warfare units, comprising operators and analysts from the commercial sector and academia, according to a new report by defense contractor Northrop Grumman for the U.S.-China Economic and Security Review Commission, a congressionally chartered body.
A year later, China's Academy of Military Sciences published an account of a trial project in the Guangzhou Military Region to establish information-warfare militia units using local telecommunications companies as a source of talent, funding and technology.

Subsequently, the academy directed the PLA to make creation of such units a priority.
"Information warfare is not just a theology," said Ming Zhou, a China specialist with VeriSign iDefense, a security intelligence firm.

"They can integrate it into nation-state interests."
Some U.S. cyber policy experts such as James A. Lewis, a senior fellow with the Center for Strategic and International Studies, acknowledge that the problem cannot be solved without international engagement.

At the same time, Lewis said, "I'm not going to get upset about China spying on us, because we spy on them."
"The only thing I'm going to get upset about," he said, "is if we don't do better than them."

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For items made in China, a tougher sell overseas

Visitors roam through 12 million square feet of showroom floor at the Canton Trade Fair in Guangzhou, China, where tens of thousands of goods are showcased inside seemingly endless lanes of stalls.

U.S. orders have been hurt by the economic crisis, so the Asian nation's manufacturers are targeting emerging markets such as Latin America.
By David Pierson
Reporting from Guangzhou, China -- With 190,000 foreign buyers roaming 12 million square feet of showroom floor, Sandy Wang hoped there would be plenty of new orders for her company's steel-toe work boots and leather loafers.
But despite recent signs of an uptick in global trade, Wang's booth at the Canton Trade Fair saw little action.

There were plenty of lookers, she said, but few takers.
"Things will never be the same again," said Wang, whose orders from the United States dropped 20% in the last year. "We're all very worried."
As President Obama prepares for his trip to China this weekend, the recovering Chinese economy could complicate his push to "rebalance" the global economy.
The U.S. would like the Chinese government to allow its currency to appreciate, a move that could help U.S. companies ship goods to China. But China has resisted letting the yuan rise and hurt China's exports by making them more expensive.
At one of the world's largest trade fairs last week, exhibitors said they were adjusting to doing business in a world where the ubiquitous "made in China" label has been humbled by the economic crisis.
Many said they were targeting new markets such as Latin America to make up for the diminished role of U.S. consumers. Others spoke of having to drop prices or use cheaper materials to stay competitive.
It has been a difficult time for China's light manufacturers -- the mostly private enterprises that for years have produced the nation's bread-and-butter exports such as clothes, shoes and household items.
Lower demand has exposed their vulnerability to foreign markets.

And when Chinese policymakers discuss the nation's continuing economic development, they speak of shifting away from being the cheap factory floor of the world. The future, they say, is in value-added products.
"Light manufacturing is still very important, but it is a little anachronistic," said Ben Simpfendorfer, chief China economist for the Royal Bank of Scotland. "It's less relevant than it was a decade ago."
Between 2002 and 2008, the share of China's light-industrial products fell from 45% to 30% of the nation's total exports, according to Dragonomics, a Beijing research firm.

Exports of heavy industrial goods such as steel and chemicals grew from a 29% share to 40% in the same period. The remainder was made up of electronic goods.
The 52-year-old Canton Fair has, in more recent times, been considered a barometer for the health of China's light manufacturing industries, which make the everyday goods that fill the shelves at Wal-Mart, Target and Sears.
There may be no better place than the semiannual event in Southern China to witness the scope of the Chinese manufacturing machine.

Tens of thousands of goods are showcased inside seemingly endless lanes of stalls, including velvet yarmulkes and a leather massage chair that plays the theme song from the movie "Titanic."
At the end of the three-week session, exhibitors hidden among the rows of sneakers, handbags and throw pillows said it would be difficult to return to the heady days before the financial crisis.
In dollar terms, China's exports from January to September decreased about one-fifth compared with the same period last year, Global Trade Information Services said.
But manufacturers said they were seeing some improvement in orders as retailers replenished their inventories for Christmas. The demand for factory labor has also rebounded.
Chinese exports fell 13.8% year over year in October, the slowest decline of any month this year and an improvement from the September decline of 15.2%.

The exchange rate has helped Chinese exports but it has reignited calls for China to adjust its currency. The yuan is tightly controlled by the central government and widely agreed to be undervalued.
Although this has hurt competing exporters -- mainly in Europe and Japan -- it has given many foreign buyers more purchasing power.
"Everything is cheaper for us now," said Raphaelle Emery, a buyer for a French handbag wholesaler at the Guangzhou trade fair. "We can look for something trendy and original. We don't have to just buy anything."
Many producers are turning to emerging markets such as Latin America and Africa, where competition among Chinese manufacturers is not as fierce as it is in the U.S. or Europe.
Octavio Acevedo, a buyer for a Colombian chain of shoe stores, said Chinese manufacturers were learning to adapt.
"They have many more Spanish speakers," said Acevedo, who has been traveling to China on business for five years.

"Before, you'd call to ask what shoes we should buy, and they'd tell us they didn't know anything about our market. Now they do."
Many aren't waiting for a return to the heyday in exports earlier this decade.

Economists have been clamoring for Beijing to reform its economy so that it can rely more on Chinese consumers. Household consumption accounts for 35% of China's economic output. In the U.S., household consumption is responsible for 70% of the nation's output.
Simon Cheng of Xiamen Funchain Garments Co. makes board shorts and athletic pullovers for Wal-Mart and Sears, but orders have been down since the financial crisis began.

The lesson Cheng took away was to diversify.

He's now looking into South American and Australian markets. But his biggest leap was when he opened his own retail store in China.
"We have to balance things," Cheng said from his booth at the trade show. "We can't rely on the U.S. forever."

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China Lauds IPhone App That Spreads State Views

Chinese state-owned news outlets are increasingly offering iPhone apps as the country looks for new ways to project its official political views abroad.
By Owen Fletcher

China's film and TV regulator late Tuesday praised the growth of an iPhone application from state broadcaster CCTV as the country looks for new ways to project its political views abroad.
The free iPhone app, one of a growing number from Chinese state-owned news outlets, has gained 500,000 users in the month or so since it went online and is adding 2,000 new users each day, the State Administration of Radio, Film and Television said in a statement on its Web site. The CCTV app has shown "favorable performance" and proven especially popular during broadcasts of major events, such as a high-flown military parade held in Beijing last month, the statement said.
Users of the app could be either in or outside of China, where the iPhone officially went on sale last month, but the regulator said the numbers showed CCTV was growing quickly overseas.
Other Chinese state media have launched iPhone apps in recent weeks as well.

The China Daily, the state English paper, has streaming apps for both video and print news. And stories from Xinhua, China's official news agency, can be viewed in an app from U.S. company CNewsCo that also airs content from the U.S. branch of CCTV and from local broadcaster Shanghai Media Group.
The apps are being made for other mobile phones too.

CNewsCo offers a version of its app for the BlackBerry, and China Daily recently said it had also made app software for the Symbian, BlackBerry and Windows Mobile platforms.
Apple itself gave the CCTV iPhone app a plug at the handset's official launch event last month.

In a speech at the event, Greg Joswiak, Apple's vice president of iPod and iPhone marketing, called the app the first for CCTV on any mobile device as the broadcaster's logo appeared on a big screen behind him.
The government statement also said promotion of the CCTV app on Apple's Web site in China was helpful for its user growth.

The Apple site includes the CCTV and China Daily products on a list of recommended apps.
The plugs are likely Apple's first for state-run media in an authoritarian country.

In 1984, the iconic American company ran a popular commercial for its new Macintosh computers that said the machines would show users "why 1984 won't be like '1984,' " a reference to the George Orwell book about a society ruled by a mind-controlling regime.
China is investing heavily to expand the overseas reach of its state-owned news outlets, which air official Chinese political views strongly at odds with mainstream Western views.

The Dalai Lama, for instance, is frequently attacked as a dangerous separatist in Chinese state news reports, while the exiled Tibetan figure is seen more as a saintly religious activist in the West.

The first section of CCTV's major evening news broadcast is always dry footage of top leaders meeting with officials from other countries or with smiling farmers in rural Chinese areas.

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China Faces Pressure Over Currency

By WILLIAM MALLARD
SINGAPORE -- China is coming under new pressure from Pacific Rim countries to let its currency rise amid rising concerns about the damage weakness in both the yuan and dollar could inflict on Asian economies, even as Washington reiterated support for the falling dollar.
The finance ministers of the 21-member Asia-Pacific Economic Cooperation grouping, which includes the U.S., China and Japan, "agreed that flexible prices, including exchange rates and interest rates" are important to achieving "sustainable global growth," according to a draft of their concluding statement.
Meanwhile, U.S. Treasury Secretary Timothy Geithner, speaking in Tokyo on Wednesday before joining fellow APEC finance ministers for their meeting Thursday in Singapore, said "it's very important for the U.S. and the economic health of the U.S. that we maintain a strong dollar."

Mr. Geithner cited its importance for the economic health of the U.S. and confidence among "investors around the world."

Despite his comments, the dollar sagged to a 15-month low against a basket of major currencies Wednesday.
APEC's expected call for currency flexibility, generally viewed as code for a rise in the yuan, comes as China's central bank made a rare change to the official language of its exchange-rate policy, giving a nod to concerns about the declining dollar and surging capital inflows.
The People's Bank of China said in a quarterly report it will take into account "changes in international capital flows and the trends of major currencies" in exchange-rate policy.
It's not clear how the new wording might change the PBOC's policy of essentially pegging the yuan to the sliding dollar -- which hurts the export-reliant economies of many other Asian nations.

Over the weekend, the International Monetary Fund said the yuan was "significantly undervalued."
However, the sensitivity of the currency issue will probably keep APEC leaders from focusing too much attention on it at their summit in Singapore.
"We all know that boils down to the renminbi's exchange rate," said Kazuo Kodama, press secretary for Japan's Foreign Ministry, referring to the Chinese currency.
Such discussion "should be done quietly, behind the scenes, between the U.S. and China," Mr. Kodama told reporters.

"I don't think [the yuan] will be raised in the APEC process."
Washington's claims to back a strong dollar are falling on increasingly skeptical ears as many Asian central banks regularly sell their currencies for dollars to prop up the U.S. currency.
Thai Finance Minister Korn Chatikavanij said his country's central bank has bought some $15 billion so far this year and that the persisting weakness of the Chinese yuan will likely require further intervention by Asian central banks.
"We're building up effectively greater level of U.S. dollar reserves," Korn told Dow Jones in an interview.

"I'm convinced that in the long term the dollar is more likely than not to decline in value, so we're building up assets that are declining in value over time. That's not healthy."
But Thailand's Mr. Korn said, "There is not much you could do to correct what is reality. The fact is when you've got that much debt... the only effective way of repaying that debt is basically devaluing your currency."
The U.S. budget deficit in the first three months of the fiscal year 2009 was $485.2 billion, exceeding the previous full-year deficit of $455 billion and triple the fiscal 2007 deficit of $161 billion.
Some Asian governments are concerned about the inflow of speculative money into their currencies.
Late Tuesday, Taiwan's financial regulators said it was banning foreign investors from parking funds in time deposits on the recommendation of the central bank.
"We are not imposing any capital controls, at least for now," Spencer Lin, the head of the central bank's foreign-exchange department said Wednesday.

Another senior central bank official, who declined to be named, said some foreign institutional investors have put unusually large amounts of money in time-deposit accounts.

Mr. Lin said foreign investors "should buy stocks or bonds" instead, as the use of time deposits suggests speculation in the New Taiwan dollar.

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Indian town venerates Dalai Lama

Devotees flocked to a festive Tawang for the Dalai Lama's visit

By Sanjoy Majumder

Tawang -- Perched high up in a remote corner of north-east India, Tawang is every bit the frontier town.
Maroon-robed Buddhist monks rub shoulders with ethnic Tibetans, Nepalese and Indians in the town's busy market.
Soldiers in olive green stroll down, relaxed and unarmed.
But underneath the surface of apparent calm is a sense of tension and heightened expectation.
The Tibetan spiritual leader, the Dalai Lama, who is revered here as no other, is in town.
"For us, this visit is very special," says Guru Rinpoche, the abbot of the 300-year-old Tawang monastery, seen by many as one of the last vestiges of Tibetan Buddhism.

The Dalai Lama found refuge in Tawang

Emotional bond
"We have a very close bond with him," he adds.
The Dalai Lama has a special, emotional bond with Tawang.
Fifty years ago, he arrived here after fleeing Tibet on foot and slipping across the border into India.
The monks at the monastery protected him and India gave him refuge.
But his visit this time has been strongly opposed by China which has described it as an attempt to foment Tibetan separatism.
It is easy to see why China is uncomfortable.
At his first public rally at a vast open ground festooned with Tibetan prayer flags, the crowds began pouring in from the early hours of the morning.
Ethnic Tibetans, entire families had travelled several days to come here, some crammed together on the back of pick-up trucks.
They bowed their heads in veneration as the Dalai Lama walked into a grand welcome, with pipes playing in the background and monks leading the way.
"For us the Dalai Lama is like a God, so I don't think China has any right to object to his visit," said one man at the rally.
"We are all Indians and we have always been Indians, so China's claim is absurd," said another.
The India-China border is only 35km from Tawang

Humiliating war
But Tawang -- with its proximity to Tibet -- has immense strategic value.
China has never recognised India's control over the entire state of Arunachal Pradesh, including Tawang.
It sees it as an extension of Tibet and therefore believes it should be part of China.
It was also here that the Chinese army invaded in 1962 and inflicted a humiliating defeat on India, in a short, bloody war.
Entire border villages emptied out as the Indian army retreated.
One of those who had to flee with his family was Pasong, a shepherd who is now in his 90s.
As he warms his hands over a fire in his little home in Tawang, he searches for words as he tries to remember what happened.
"There were so many Chinese soldiers," he tells me.
"Everyone was running, even the Indian soldiers had to leave. We were all very frightened."
The India-China border is only 35km (22 miles) from Tawang. The drive is breathtaking but backbreaking over the rugged terrain and the dirt tracks which pass for roads.
There is a strong Indian military presence but even they find it hard to drive up.
"The roads are very bad compared to the ones across the border," one soldier that we meet says.
Over the past few months, there has been an increase in tension here.
There have been reports of Chinese military incursions into Indian territory and an Indian military build-up.
Several local villagers say that since September the roads have been closed periodically to allow military convoys to move.

Indian mind games
At 4,785 metres (15,700 feet), the Bumla Pass is India's last border outpost.
The air is thin and temperatures well below zero.
Amid signs proclaiming "India-China Friendship", the border commander, Dalbir Singh and his men from the Sikh Regiment look out at Chinese positions through binoculars.
"Over there you can see their watchtower," he points out.
The soldiers are unarmed because even the simplest move can lead to a misunderstanding.
The border here was drawn up in 1914 by the British but never recognised by China.
Dalbir Singh tries to show me where India ends and China begins but it is hard to tell the difference. There's just a series of jagged peaks with the border somewhere in between.
Even though everything appears calm, there is a sense of unease beneath the surface.
After 10 minutes, we are asked to leave and head back down the mountain.
Back in Tawang, the Dalai Lama has finished the first of several prayer meetings he is due to hold. The crowds disperse slowly, their faces flushed with excitement at having seen him in person.
Despite the bitter memories of 1962 and the sharp diplomatic exchanges over the past few months, no-one here is in the mood for another confrontation.
But India is not averse to playing mind games -- and allowing the Dalai Lama to visit Tawang is just one of them.

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Chinese media builds up anti-India rhetoric

By D S Rajan
As the media war of words between China and India gets shriller and people's attitudes harden, the leadership in both countries need to mange the tensions with finesse and sagacity

The Dalai Lama began his visit to Arunachal Pradesh on November 8.

The official comment regarding the visit made in advance by the Chinese foreign ministry spokesperson (November 4) did not blame India; it only criticised the exiled spiritual leader for trying to 'sabotage China's ties with other countries' while at the same time positively evaluating the significance of the recently held meeting between the prime ministers of the two countries in Thailand for bilateral ties.
In contrast, latest comments by some scholars in China's government-controlled English and Chinese language media seem to indicate rather a new trend -- connecting the visit with New Delhi's motives.
The closest occasion when the Chinese comments came to connect the Dalai Lama's 'separatist activities' to India last time was a month ago ('Dalai Lama Goes Further Traitorous Road', China Tibet Online, October 22).
The allegation at that time was that the 'Dalai Clique closely cooperates with India, whenever border negotiations are held or the Indian side maliciously speculate over the border dispute.'
The Chinese media now appear to be taking the level of criticism to the next stage, attributing motives on the part of the Indian government for supporting the Dalai Lama's activities; the methodology used, however, looks subtle as they are mostly using Chinese scholars in this regard, avoiding direct comments as much as possible.
Anti-India media rhetoric in China began on the day of the Dalai Lama's arrival in Tawang.

A report entitled 'Do not use the Dalai Card Against China', published by Huanqiu (the Chinese language edition of Global Times, November 8), declared Tawang as Chinese territory and expressed China's opposition to the Dalai Lama's 'splittist' activities being carried out under the 'protection given by India'.
It quoted an unidentified scholar as having given a warning that 'if India does not abandon its political manipulation of the Dalai Lama, the Chinese government, facing pressure from the people, will be forced to resort to measures for striking a blow to Indian interests'.
Interpreting various statements made in India and the US, it found that the two countries are behind the Dalai Lama's visit to 'Southern Tibet'.
A subsequent write-up captioned 'India Covets Dalai Lama's Visit' (People's Daily Online, November 9), reproduced by Huanqiu, quoted an analyst as saying that 'India may have forgotten the lesson of 1962, when its repeated provocation resulted in military clashes and India is now on this wrong track again'.
It then highlighted comments made by Chinese researcher Professor Hu Shisheng from the ministry of state security-affiliated China International Centre for Contemporary International Relations, that the visit is taking place at a 'critical moment' under India's encouragement and New Delhi's strategy is to weaken China's ability in solving the 'Southern Tibet' issue under the principles of 'nationality and religion'.
According to Huanqiu, the scholar further observed that India is utilising the visit for making that issue sharper and sharper, so that China has to speed up a solution to the issue, 'in accordance with the Indian formula', to which Beijing has to give a clear response. (Remarks: As translated, the original Chinese language report slightly differs with People's Daily's English version).
Another article in Huanqiu (November 9) captioned 'Indian circles are glorifying Dalai Lama's visit to Southern Tibet', quoted Colonel Dai Xu of the Chinese air force, a frequent writer on India, as saying that 'the people in China are against India's manipulation of and open support to the Dalai Lama's traitorous actions as well as letting him say that 'Southern Tibet' is India's territory. India's attitude is a 'political' challenge to China'.
As another Chinese signal to link India with the visit, references have been made in the Chinese language media, based on Indian media reports about the deployment of the Brahmos supersonic Cruise missiles by India, as a measure to ensure the security of the Dalai Lama during his visit.

Huanqiu (November 9) again referred to remarks made by Colonel Dai Xu that if true, such deployment is an 'unprecedented military provocation' against China.
The Chinese media are also exploiting the opportunity of the Dalai Lama's visit to Arunachal Pradesh to reassert China's territorial claims over 'India-occupied Southern Tibet'.
Huanqiu (November 9) has carried the opinions of Liu Hong of the China Tibetology Research Centre that the Dalai Lama, by saying that a majority of Arunachal Pradesh belonged to India prior to the Sino-Indian war and the Chinese army occupied it later, indeed 'sold out' his nationality and religion to India.

Liu added that prior to 1959, the exiled leader never recognised 'Southern Tibet' as Indian territory.
Huanqiu went on to say that Tawang, lying east of the McMahon Line, remains the 'greatest focal point' of the Sino-Indian border issue.

'The British pushed the "traditional and customary line" between China and India to the north, and reached a McMahon Line; India, after 1947, occupied Tawang in 1951 as well as 90,000 sq kms of territory in the south in 1953, made the McMahon Line as marking the border in 1954, set up the state of Arunachal Pradesh under central control in 1986 and since then is taking steps to legalise its occupation,' Huanqiu further charged.
The Chinese media outbursts noticed prior to the meeting of the two prime ministers in Thailand were dominated by the use of harsh words like 'consequences for India of a potential conflict with China' and 'the desire of India to start an immediate war with China'.
On November 4, the People's Daily described the 'consensus' reached by the two leaders during that meeting 'as just like a gentle breeze, clearing up all the suspicion and misunderstanding that have hindered bilateral relations over the past decades'.
It sounded as if there will be no more mudslinging of India by the Chinese press.

Now comes the counter current, disproving such expectations. Media references from the Chinese side now to the 1962 war, 'striking a blow to Indian interests', 'military provocation from India' etc. have vitiated the atmosphere once again.
There could be a rehash from Indian public opinion, bringing the situation back to square one. One can see there is an upsurge already in Indian and Chinese nationalisms and the attitudes of the two peoples get sharpened on issues like that involving territory, affecting public sentiments.
The latest Chinese media pronouncements signal that Beijing does not yet take a benevolent view of India's intentions vis-a-vis China.

In particular, it seems to be unhappy with India continuing to host the Dalai Lama and the functioning of the Tibetan 'exiled government' on Indian soil.
Notable in this connection is its recent characterisation of the 'exiled government' as an 'overseas separatist group', which remains a 'source of turbulence for China.' (United Front Department official Zhu Weiqun to the German Focus magazine, October 5).
China's message at this juncture to India seems to be that the Dalai Lama factor has emerged as a bilateral issue equal in importance to that of the boundary question.

Premier Wen Jiabao's remarks some time ago that the 'Tibet Issue' is a 'sensitive' one between China and India may have echoed the same already.
For New Delhi, it is important to assess what the latest Chinese media stand would mean for overall Sino-Indian relations.

As the boundary issue and the Dalai Lama factor get more and more intertwined, there is a possibility of further complications arising in bilateral ties.
An urgent necessity for both sides therefore may lie in their ability to handle the mistrust that may grow further with finesse and sagacity.

It is hoped that the leaders of the two nations will continue to show mature statesmanship in addressing frictions as they arise; that may especially include media diatribes against each other.
New Delhi and Beijing should miss no opportunity on this account, as friendship between the two nations is very important for the stability and prosperity of 21st century Asia.

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Yahoo Lands on China’s ‘Vulgar Content’ List

China listed Yahoo China as a “vulgar content” offender because of user-generated content on a defunct section of its site. Above, an image from Yahoo’s recent ad campaign.

By Loretta Chao and Sue Feng
The China Internet Illegal Information Reporting Center has released the latest list of “vulgar content” offenders. This time, Google escaped mention — but Yahoo China and a popular real-estate portal, Soufun, did not.
The list referred to user-generated content on a section of Yahoo China’s Web site called “Yahoo Space,” which is not currently in operation.

But a subsequent notice released today by the center said remnants of the “vulgar” content from Yahoo Space could still be found in other parts of Yahoo’s portal.
The Web sites “didn’t continue to follow the government’s call to effectively crack down on vulgar content and information on the Internet, and relaxed supervision of their Web sites, which ultimately led to the appearance of a lot of vulgar content, which is against social morals and does harm to the physical and mental health of the youth,” the center said in a notice.

“Such behavior… has led to the anger of our public and should be strongly condemned.”
The public condemning of these sites follows a similar notice earlier this year that implicated Google for allowing pornographic content to show up in its search results.

The company was ordered to temporarily disable some of its services as a result.
An Alibaba spokesman said the company operates according to the laws and regulations of each country it operates in.
Yahoo gave Alibaba control of China Yahoo, also known as Yahoo China, as part of a 2005 deal in which Yahoo paid $1 billion for a 39% stake in Alibaba Group, making it the Chinese company’s biggest single shareholder.

But under Alibaba’s watch, Yahoo’s share of China’s search market revenue shrunk to just 6% in the second quarter, compared with 21% four years ago.
Though the stake in Alibaba has been financially lucrative for Yahoo, its brand has suffered.

In August, Alibaba restructured Yahoo China by stripping out a portion of its business to add it to sister company Taobao.com, and reducing its Yahoo China staff in Beijing.

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The Rift that Began in Tiananmen Square

When Deng Xiaoping met with Mikhail Gorbachev in May 1989, neither communist leader could have predicted that the events simultaneously transpiring in Tiananmen Square would ricochet around the world -- all the way to the Berlin Wall.
BY CHEN JIAN and JEFFREY A. ENGEL

The world changed in 1989.
At the start of the year, the globe's strategic map looked much like it had since the end of World War II. Communist leaders in China and the Soviet Union held power. Their American counterparts, skeptical of recent calls for change throughout the communist world, prepared for a reinvigorated Cold War of unknown duration and ferocity. Meanwhile, Europe prepared for another year divided along fault lines imposed by conquering armies nearly a half-century before.
A year later, communism would be dead in Eastern Europe and dying in the Soviet Union itself. China would be once more in the grip of hard-liners wary of reform, and once more on the precipice of isolation. Washington would be looking to capitalize on its Cold War victory. Europe would soon be rejoined. The future -- our 21st-century present -- would be at hand. And no one had seen it coming, least of all perhaps China, where the first of 1989's cracks in communism would begin.
Following decades of enforced deprivation, justified by the quest for ideological purity, Chinese leader Deng Xiaoping and his ruling cadre sought to change their country, but without simultaneously losing the communal zeal and nationalism that had largely defined China since its 1949 revolution.

More immediately, they sought some means of managing the social and political transformation sure to result from their economic reforms, believing only strict government control could ensure that the mayhem and violence of China's recent past did not reappear.
In March 1989, dismayed by the growing power of reform movements throughout the Soviet-dominated half of the communist world, Chinese Communist Party officials met to discuss "the unrest in Eastern Europe," concluding that "every effort should be made to prevent changes in Eastern Europe from influencing China's internal development."

What was undermining communist rule abroad, they worried, might infect their own country. In 1989, they proved right to worry.
By April, Chinese masses were demanding change to a degree unseen in a generation.

Students began to march in favor of reform. Others quickly followed their lead. From the hinterland, protesters surged into the city.

While Chinese officials debated, the crowds continued to grow in size and enthusiasm. By May 15, more than 500,000 people filled Tiananmen Square. Just two days later they would number more than a million.
When Deng saw protesters filling the very central square of his capital promising that "turmoil was imminent," he knew it was time to act.

The government's official mouthpiece, the Renmin Ribao (People's Daily), had in late April castigated the protesters.

The editorial, derived from Deng's own words, read: "Under the banner of democracy," the protesters "were trying to destroy the democratic legal system... This was a planned conspiracy, a riot, whose real nature was to fundamentally negate the leadership of the Chinese Communist Party and to negate the socialist system."

According to Deng, they were stirring forces that they could not hope to control and that could not therefore be tolerated.
But on the morning of May 16, Deng arrived in high spirits at the Great Hall of the People, located at Tiananmen Square. He was there to meet Mikhail Gorbachev, the first head of the Soviet Union to visit China in 30 years.
The meeting went well.

While defending Beijing's stand in the Chinese-Soviet split, Deng acknowledged that, like Moscow, Beijing also "had made some mistakes" in the Chinese-Soviet polemic leading to the split.

The thrust of Deng's presentation, though, was not about the past but about the present and the future.

Gorbachev seemed to echo Deng's opinion, saying that the Soviets were very pleased to see that a new and promising phase in relations between the two parties and countries.

Their strategic consensus to enhance Sino-Soviet relations, would strengthen both countries' positions in managing domestic challenges, while also enhancing their positions in international affairs.

Furthermore, the session also meant that for the first time since the late 1950s and early 1960s, the international communist movement would not be burdened by the animosity and mutual exclusion of two of its most important members.
But the 1989 envisioned by Deng and Gorbachev was not to be.

Four days after the Deng-Gorbachev summit, the Chinese Communist Party's leadership, headed by Deng, responded to the hundreds of students holding a collective hunger strike by imposing martial law in Beijing.

When the student protest persisted, force was employed to crush it. On June 4, People's Liberation Army (PLA) soldiers fought their way into Tiananmen Square, leading to an unknown number of civilian deaths.
The events of Tiananmen Square shocked the whole world.

Ironically, it was the rapprochement between Beijing and Moscow that exposed the crackdown to a global audience, as hundreds of journalists and cameramen who reported on Gorbachev's visit stayed to cover the students' demonstrations.

They showed, often on live television, how bloody violence was used.

The scene of one young man standing alone in front of the PLA's tanks was broadcast repeatedly, often moving the global audience to tears.

This was a defining moment in 20th-century history, a moment that would begin to slowly drain international Communism of any moral strength that it once might have possessed.

It was the beginning of the end.
The effects of the Tiananmen tragedy ricocheted throughout the entire communist bloc, especially in the Soviet Union and the Soviet bloc countries of Eastern Europe.

In Moscow, Gorbachev, in spite of his disapproval of the CCP leadership's behavior, tried to avoid criticizing Beijing directly (though the impact of the Tiananmen crackdown indirectly restricted his ability to influence and control developments in the Soviet Union, and he was even less willing and likely to resort to force in dealing with activities related to the disintegration of the Soviet Union).
In almost every East European country, the pro-democracy movements grew rapidly in the following summer and fall of 1989.

These opposition movements took the opportunity of international Communism's deepened legitimacy crisis to wage new offensives against the Communist authorities in their own countries.

The Communist leaderships were all facing difficult dilemmas -- they could neither afford to take a totally defensive attitude toward the pro-democracy movements nor dare resort to violent means.
During the following summer and fall, Eastern Europe experienced great unrest, eroding the political foundation and undermining legitimacy of every Communist regime there, culminating on Nov. 9 and 10, 1989.

In Germany, the uprising masses brought down the Berlin Wall and with it the symbolic divide between the East and the West.

By December -- with the execution of Romania's Communist dictator Nicolae Ceausescu -- the communist bloc in East Europe had virtually collapsed.
Somehow, the Chinese Communist regime survived the shock waves of 1989.

After a three-year period of stagnation, Deng used a dramatic tour of southern China in the spring of 1992 to regenerate the "reform and opening-up" project, initiated by Deng and the CCP leadership in the late 1970s.

What has followed, as is well known today, is China's rapid economic growth -- despite continuous stagnation in the country's political democratization -- in the last decade of the 20th century and entering the 21st century.
Twenty years after the Tiananmen tragedy and the fall of the Berlin Wall, we have gained some perspective on those events, their causes, and their immediate consequences.

Still, China's story in 1989 -- how China shaped the specific course of that year's events and helped define the immediate aftermath -- remains full of questions.

In China itself, 1989 has been a "forbidden zone" in the press, scholarship, and classroom teaching. After 20 years, it remains inconceivable for scholars to access Chinese archival sources and many other key documents related to 1989.
The impact of this fateful year continues to play a role in defining the trajectory of China's development.

The Chinese experience of 1989, and the Tiananmen tragedy in particular, remains a knot that must be untied and a barrier that must be removed in China's continuous advance toward modernity.

Without doing so, the legitimacy narrative of the Chinese "communist" state will always be burdened by its fundamental inability to justify itself.

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'Wall Protests' for Obama’s Eyes

Chinese netizens take aim at their government's online controls.
People use computers at an Internet cafe in Beijing, June 3, 2009.
By Luisetta Mudie

HONG KONG—Twenty years after the fall of the Berlin Wall, Chinese netizens have lodged protests on a commemorative site against Internet controls in their country, with some calling for the attention of U.S. President Barack Obama, who travels to Beijing next week.
“Mr. Obama, help us KO the bloody GFW. Yes, you can! Thank you very much,” wrote a user called “Trigant” on the microblogging service Twitter.
The “GFW” denotes what Internet users call “the great firewall of China”—an elaborate system of virtual blockades aimed at preventing users from accessing content the authorities want to keep off-limits.
The tweet appeared as Chinese users flocked to post comments on www.berlintwitterwall.com, a commemorative site set up by a Berlin-based company to solicit online comment for Monday’s anniversary.
“Mr. President, Welcome to Eastern Berlin!” tweeted another user, “orangeking.”
Site available, and then not
Many of the messages posted on the Berlin Wall site also bore the keyword “obamacn,” used by Twitter users to comment on Obama’s Nov. 15-18 state visit to China, during which he will hold talks with his Chinese counterpart Hu Jintao.
The site’s organizers said last week that the site was unavailable in China using normal Web browsing methods.
Another Twitter user, evilboyeb, commented: “It’s not a straightforward thing, to look to the U.S. President to help us in our struggle for democracy.”
“What’s more, if we place so many expectations on a foreign president, then it just goes to show what a pitiful state we are in: we can see the huge amount of pressure we live under and also the sincerity of people’s desire for democracy,” the Tweet continued.
On Monday, a high proportion of posts to the Berlin Twitter Wall site were still visible in Chinese.
Twitterer “mcchina” wrote: “20 years ago, the Berlin Wall came down. When will the wall that oppresses the Chinese people fall?”

Great Firewall
Many comments linked the fall of the Berlin Wall to the wall of government blocks, filters, and surveillance software used to limit what Chinese Internet users can see online.
“There is still a wall in China—GFW,” wrote user “gongchengshiw,” in a commonly used reference to China’s Great Firewall. “I hate it!!! We are not... free.”
Another user, “lianyue,” made a dry reference to China’s insistence that its diplomatic partners subscribe to Beijing’s view of what constitutes Chinese territory—including Tibet, Xinjiang, and Taiwan:
“I affirm that there is only one China, and that the Berlin Wall is an integral and indivisible part of its territory.”
“When Obama comes to China he will see a banner saying ‘Welcome to East Germany!’”
The Obama administration, which recently imposed trade tariffs on imports of Chinese goods, has been seen as taking a softer line on Beijing’s human rights record ahead of the presidential trip.
Obama didn’t meet the exiled Tibetan spiritual leader, the Dalai Lama, on his recent visit, as his predecessor did.

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Battles Over A New Wall

By Ed Flanagan
BEIJING – Twenty years after the toppling of the Berlin Wall, another "wall" is facing intense public scrutiny in China.
The so-called Great Firewall of China, the online filtering and surveillance program run by the communist government’s Ministry of Public Security, is alive and well and censoring freedom of expression for millions of Chinese.
But over the past few months, Chinese discontent with the Great Firewall has bubbled over with increasing frequency and fervor.
Chinese netizen's ire was recently sparked by the Green Dam censoring software that was proposed last summer and the blocking of popular social media pages like Facebook and Twitter during the Uighur riots in Xinjiang in July.
The censorship during the Uighur riots caused such consternation online, it sparked one bitter Chinese Twitter user to mournfully tweet that day, "Today, two ‘140s’ were killed in China – 140 people in Xinjiang and 140 character micro-blogging service Twitter."
It is perhaps fitting then that the Great Firewall should find its opposition in another online medium: Twitter.

The Berlin Twitter wall
The most recent incident occurred late in October when organizers for the Culture Project Berlin, a non-profit organization in Germany that promotes art and culture, created an online "Berlin Twitter Wall" where German tweeters were encouraged to share their memories of the tumultuous times surrounding the fall of wall 20 years ago.
However, when organizers also asked tweeters to write about, "which walls still have to come down to make our world a better place," the global response was sudden and overwhelming.
The site was soon flooded by over a thousand comments from China complaining about the infamous Great Firewall.

Chinese netizens, who circumvented the government’s usual blocking of Twitter by using proxy servers, had suddenly transformed the online memorial site into a protest against 21st century forms of censorship.
Chinese censors were relatively slow to respond to the swift outpouring of anger, taking a couple days before finally blocking the website hosting the Berlin Twitter Wall.

By then though, the damage had been done. Prior to the blocking, Carsten Hein, a director of the project estimated around 1,500 of the around 3,300 comments posted on the page were in Chinese.
Showing the resourcefulness and the doggedness of China’s netizens, even after the site was blocked, posters in China were still visiting the website and leaving messages on the Twitter wall.
One user wrote, "Mr. Hu Jintao, Tear Down the Great Firewall!" putting a twist on President Ronald Reagan’s famous words to his Soviet counterpart Mikhail Gorbachev in 1987 imploring him to "Tear down this wall!"
Another poster, appealed to President Barack Obama to take action during his visit to China later this month writing: "Mr. Obama please ask Mr. Hu to tear down the GFW, insure Chinese people use Internet free."

Shifting plates of change
The outpouring on the Berlin Twitter Wall are representative of how over the past 20 years, the Internet has not only unequivocally changed how the world communicates, but how it perceives freedom of expression.
For China though, perhaps the more interesting storyline is the quiet, but increasingly frequent clashes that occur between two large, disparate groups that make up of China’s social, economic and political bedrock: China’s youth and its government.
In the 20 years since the fall of the Berlin Wall, China internalized the shocking collapse of Communism in Eastern Europe and its own scary brush with democracy with the Tiananmen Square protests the same year.
In the past two decades, economic prosperity and the incremental opening of personal freedoms has silenced the calls for greater democratization that was at the center of the 1989 student movement in China.

Today’s Chinese youths have largely shifted their focus on improving their social and financial condition and are mostly passive about expressing any misgivings they may have with government restrictions on individual freedom.
To that point, China’s public security minister, Meng Jianzhu, recently held a press conference calling for even greater security over the country’s Internet network.
The idea of even tighter control seems shocking when one considers that Internet access in the vast Xinjiang region was effectively cut off for months after the Uighur riots this past summer.
Still, things like the Berlin Twitter Wall and the outrage over the proposed Green Dam censoring program show that when China’s censorship mechanisms impinge on the freedoms now expected by China’s youth, the two societal plates push against each other and with increasing frequency, the government is being pushed back slightly.
It is likely that today will be just another day here in China and one shouldn’t expect mass demonstrations calling for the toppling of China’s Great Firewall anytime soon.
But, 20 years after the fall of the Berlin Wall, the spirit of those heady days still resonates here and burns bright deep behind China’s other Great Wall.

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In China's Growth Story, Credit as Villain?

By MARK GONGLOFF
The bull case for global financial markets hinges partly on belief in a bulletproof Chinese economy. But China is vulnerable to the same Kryptonite that has hurt countless other economies: credit.
Fresh evidence of China's strength is expected this week, when the government is due to release data on trade, retail sales, industrial production, consumer and producer-price inflation, money supply and fixed-asset investment.

Economists expect the inflation and trade measures to fall from a year ago; they expect other measures to rise by fat double digits.
China has supplied most of the world's economic growth in the past three years, according to the International Monetary Fund.

While the U.S. and other developed nations are expected to expand sluggishly for years to come, China's economy is widely expected to keep rising at this year's 8% growth rate or better.
Most of China's growth this year has been unsustainable, driven by stimulus.

China's money supply has risen 29% in the past year. At the government's behest, banks have increased their lending by nearly $1.4 trillion, or 32%, during that time.
That flood of borrowed cash has been channeled into new infrastructure and production capacity. These investments will account for up to half of China's gross domestic product this year, according to some estimates.
A key question is whether China needs all of this investment.

Analysts at the London hedge fund Pivot Capital Management say that China already has enough idle steel-production capacity, for example, to match the steel output of Japan and South Korea combined.
Meanwhile, the ratio of investment to GDP is rising, suggesting China's investment is less and less efficient, says Edward Chancellor at Boston asset-management firm GMO.
The combination of soaring investment and dwindling returns was seen in Japan in its asset bubbles in the 1980s and in the "Asian Tigers" just before their crises in the late 1990s, he says.
These data are hard to measure and subject to much debate.
China's economy may turn out to be strong enough to merit all of this investment. But any hiccup in growth raises the risk that these investments become bad debts.

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BYD Electronic shares fall after charger recall

* Shares drop more than 4 pct over Nokia recall of chargers
* Could tarnish BYD Electronic's reputation - Credit Suisse

HONG KONG, Nov 10 (Reuters) - Shares in BYD Electronic, the battery making arm of BYD Co, fell more than 4 percent on Tuesday after Nokia said it would replace 14 million cellphone chargers made by the Chinese company.
The stock fell 4.4 percent to a low of HK$6.70 shortly after the market opened, underperforming a 1.3 percent gain by the benchmark Hang Seng Index .HSI.
Nokia said BYD would cover the costs of recalling the chargers, which it says could give users an electric shock.
Credit Suisse downgraded the stock to "underperform" from "neutral".
Although the recall would have a limited financial impact on BYD Electronic, it would cast doubt on the company's reputation and ability to manufacture phone chargers, it said in a research report.
The charger business is estimated to contribute only about 5-6 percent to the company's top line this year.
The stock has risen 62 percent since the start of October, significantly outperforming the market and its rivals.
"We believe such a gain is unwarranted and that investors should use this opportunity to take profit," Credit Suisse said.
Shares of BYD Co, which have soared more than eightfold since it said billionaire investor Warren Buffet would buy a stake in the company, were unaffected by the latest news, up 1.2 percent in early trade in Hong Kong.

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China's 'Most Dangerous Woman' Gets a New Forum

Hu Shuli, former editor in chief of Caijing magazine

By Austin Ramzy / Beijing

The journalist Hu Shuli has often been called "the most dangerous woman in China." And she may become even more so.

As the pioneering editor of China's most influential business magazine, she managed to publish groundbreaking stories on official ineptitude and financial malfeasance despite China's tight control of the media.

She may be on the verge of even greater freedom after cutting her ties with the owners of her magazine.

On Monday, Hu announced that she was resigning from Caijing (Finance and Economics), the publication she built into one of China's rare voices of journalistic autonomy.

Instead, she and a core group of reporters and editors are going to form a new magazine.
Hu's Beijing-based bimonthly, with a circulation of 200,000, had a reputation for groundbreaking coverage of stories like the 2003 outbreak of SARS and shady dealings in China's financial markets.

Her connections and feel for the permissible limits of sensitive issues have been credited with helping Caijing score repeated "edge balls," the Chinese term for a Ping-Pong serve that's within the lines but just barely.

"We always try to find a way to [publish] something," Hu told TIME in a 2008 interview.
Hu, 56, had been dueling with the magazine's publishers, the Stock Exchange Executive Council, over the distribution of revenue.

She had been at loggerheads with the owners, who have recently been accused of taking a more conservative approach to the news and trying to rein in some of the magazine's more aggressive reporting.

While the 11-year-old magazine had been a cash cow for the media group, it had received a smaller share of the revenues, according to current and former staffers.

"The parent company milks it for a huge chunk of their revenue," says a former staffer. "She's been cash-strapped trying to do new projects."

Hu's departure follows the walkout last month of more than 60 members of the magazine's sales and advertising departments.

For several weeks, Hu had been negotiating with Caijing's publishers over issues including retention of Caijing's name.

The new publication she's expected to form will be called Caixin, according to the Wall Street Journal, which first reported the news of Hu's resignation.
Managing editor Wang Shuo also said he was leaving the magazine.

Staffers were told on Monday that they had until Wednesday to decide whether they wanted to leave to join Caixin, which will be a weekly magazine.

The extent of the exodus of Caijing staffers is unclear, although people close to the magazine indicate a strong support for Hu's move and confidence that the new venture would be built on the independent model of the old.

"We were told that we will be doing the same thing, just with a different name and a different office," says one staffer.

"We will continue to do reporting, talk with sources and continue to find stories. It's just that there will be a change of ownership."

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Specter of knockoffs at big China trade fair

This man at the Canton Fair in Guangzhou walks past an advertisement board featuring fake iPods
By William Foreman

Guangzhou, China -- Thousands of foreign buyers flock to this southern city at this time of year for China's biggest trade show.

They search for factory owners who will make their products cheaply and won't rip off their clever designs.
Then, they slip across town to malls loaded with fake Prada purses, phony Rolex watches and pirated Tod's loafers -- all sold at a fraction of the original's price.
"I've been in these stores where when you ask for knockoffs, they take you into a back room with shelves lined with fake handbags," said a footwear buyer from Milwaukee, who identified herself only as Kathy because she feared problems with customs.

Piracy problem
The shopping shows how the piracy problem is much more complex than it is usually portrayed. It's not just about creative foreign companies struggling to keep unscrupulous Chinese copycats from stealing their ideas.

Often, the foreigners behave in a way that encourages the theft of intellectual property.
"Many buyers come here and talk about intellectual property rights, but then they'll show you their rival's product and ask if you can copy it," said Alyn Wong, a sales representative for a luggage company in the eastern province of Fujian.

"It seems kind of contradictory. But that's the way the market works."
Wong was surrounded by colorful backpacks with the slogan "Love-Take Off-Good" in her company's booth at the Canton Fair, a semiannual event that for five decades has been China's biggest trade fair.

The show offers a head-spinning variety of goods -- everything from saxophones, fishing lures and hammers to espresso cups, toothbrushes and motorcycles.

Attendance is back up
Attendance at the show plunged last year at the start of the global financial crisis.

But in a possible sign of the economy's recovery, the number of visitors started to bounce back at its 15-day autumn session, which ended Wednesday, organizers said.

The event attracted 188,170 foreign buyers -- a 13.7 percent increase from the session last spring, they said.
Although there's a thick atmosphere of giddy dealmaking and browsing at the fair, there's also a palpable sense of paranoia.
Most exhibitors won't allow photographs of their goods for fear the pictures will be used to copy their products.

Chinese citizens aren't even allowed to attend unless they have a special pass as an exhibitor, translator or domestic buyer -- a process that involves an arduous background check.
During the middle of the fair, U.S. Commerce Secretary Gary Locke spoke about intellectual property rights at a conference in a hotel across the street from the huge fair complex.
"If innovators fear that their inventions or ideas will be stolen, then one of two things will happen: They'll either stop inventing, or they'll decide to create their inventions elsewhere," he said.
His speech focused on what China needed to do to combat piracy. Tougher laws and more crackdowns were needed, he said.

His message: It is mostly China's problem.
But most of the shoppers strolling around the warren of tiny boutiques at the Guangzhou Baiyun World Leather Trading Center were foreigners.

They were haggling and snapping up an eye-popping array of fake designer goods in the three-story mall, about a half-hour taxi ride away from the Canton Fair.

Shops with names like Ladybug, Teli and QQ Bear were full of bags emblazoned with the Gucci, Coach and Prada logos.
"Our business always picks up during the Canton Fair," said a store owner whose business card identified him only as Mr. Chen. "The foreigners do like to buy knockoffs."

Fakes in garbage bags
The shops place all the purchased goods in nondescript black plastic garbage bags that don't have store logos on them. The shoppers all look like they got lost while taking out the trash and ended up at the mall.
In one shop, three uniformed officers with the People's Armed Police shopped for Louis Vuitton bags.
"This is fake leather, isn't it?" one said to a sales clerk.
"No way. Do you think we'd dare sell fake leather to someone like you?" she replied.

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China trades goods, influence for satellite launches

* China in satellite launch deals with developing nations
* Deals believe to be mostly barter-type exchanges
* U.S. restrictions block most commercial satellite launches
By Doug Young
HONG KONG, Nov 9 - Excluded from much of the lucrative satellite launching business by technology transfer restrictions, a resource- and influence-hungry China has found its niche: building and launching satellites for developing nations.
In the last three months, China signed deals to build and launch satellites for Pakistan, Laos and Bolivia, said Philip Balaam, Asia regional sales and marketing director for Arianespace, one of the world's few commercial satellite launchers, which is 30 percent owned by France's EADS.

Earlier this year, China also signed a deal to launch a satellite for Nigeria to replace one it built and launched for the African nation in 2007, but which later ran into technical issues.
China also launched a satellite for Venezuela in 2008, but that, too, may be having problems, Balaam said on Monday.

Neither the Chinese or Venezuelans have confirmed any difficulties with that programme.
China's approach to the satellite business differs from the mainstream in another respect -- its use of barter arrangements.
"We think each case is different, but in some cases it looks like an exchange of satellite capacity for raw materials or natural resources, or for political consideration," Balaam said.
"If you look at Venezuela or Bolivia, these are countries that may have difficulty buying their own satellites, so China enables another path to get there."
The approach would be consistent with similar moves by China in recent years, where it provides economic assistance and other less tangible considerations in exchange for political influence and access to resources to feed its industries.
China has been virtually locked out of the more lucrative satellite launch business for money-paying Western companies by U.S. laws that ban the transfer of sensitive technology to China.
A string of cases drew headlines in the 1990s when Hughes Electronics Corp and Boeing's Satellite Systems were accused of illegally sharing sensitive space technology with China stemming from their involvement in several launches.
The pair later agreed to pay a $32 million civil penalty arising from the allegations.
France-based Arianespace has its order books filled for the next three years and is not too concerned about competition from China, despite recent reports that Beijing may be lobbying the Obama administration to ease some of the restrictions, said Airianespace Chairman Jean-Yves Le Gall.
"China's satellite launches are probably about three-quarters the cost," said Le Gall, admitting his figure was an estimate. "It would be a newcomer. But because of the quality of our sevice, we'd continue to be in a good position."
Balaam said the deals signed so far by China had not been put out for public tender.
"It's competition in the margins," he said.

"These are nations that may not have come out onto the open market looking for a satellite, but they found one through a deal with China. It's not full-frontal competition, but more a marginal thing."

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Big Risks in China's Yuan Policy

By ALAN WHEATLEY
BEIJING — Exactly a year after it unveiled a stimulus package worth 4 trillion yuan and switched to an easy monetary policy, China is basking in the success of its aggressive response to the global financial crisis.
The government’s 8 percent growth target for the year — derided by some prominent economists as fanciful well into 2009 — is in the bag. And the solid consensus is that growth will be stronger, possibly a lot stronger, in 2010, when China is set to overtake Japan as the world’s second-largest economy.
China is contributing more to global growth than is the United States, the euro zone or Japan, and its surging imports have limited the slide in global trade, the World Bank says.
“There’s an inexorable shift toward East Asia, particularly toward China,” said Vikram Nehru, the bank’s chief economist for the region.

“China is becoming a central part of the global economy.”
China, in short, is riding high. But could it also be riding for a fall?
After all, the imbalances at the heart of China’s mode of development — too much investment, too much saving, too little consumption — seem to fit the dictum of the late American economist Herbert Stein to a T. “If something cannot go on forever, it will stop,” Stein’s Law says.
Exhibit 1: the prolonged U.S. credit binge that begat the crisis.
As was the case with the United States, the overarching risk for China is that it keeps policy too loose for too long. Yet Finance Minister Xie Xuren again signaled over the weekend that China was in no hurry to shift gears.
“There are still many uncertain factors in the current global economic recovery, so all countries should maintain the continuity and stability of macroeconomic policy,” Mr. Xie said at a Group of 20 meeting in Scotland.
Another huge wave of bank-financed investment is guaranteed for 2010 because the government is only halfway through its two-year stimulus package. You do not start building a railroad and leave it half-finished.
The boom in capital spending has worked as intended.

Investment contributed 7.3 percentage points to the 7.7 percent increase in gross domestic product over the first nine months.
China has vast infrastructure needs, but there can be too much of a good thing. Bank lending has grown by a third in the past year to finance the investment spree. Mr. Stein would be raising his eyebrows.
“It is now time to begin slowing the pace of rapid credit growth,” said Tarhan Feyzioglu of the International Monetary Fund’s office in Beijing.
Central banks usually apply the brakes to ward off inflation. Not in this case. China’s underlying price pressures are mild.
“In China the potential risk is that excess investment and excess credit growth could lead to excess capacity and eventually nonperforming loans, which would weaken the financial system,” Mr. Feyzioglu said at a conference in Beijing.
The related danger in China — and in much of Asia, incidentally — is that plentiful credit will bring a scramble for assets, especially property and equities.
“We see a high risk that policy makers may be unable to tighten aggressively, making an asset price bubble likely in our opinion — and magnifying any negative consequences a few years down the road,” said Mingchun Sun, Nomura’s chief China economist.
That prospect highlights Beijing’s dilemma.

While China can steer the housing market by tweaking down payment and mortgage rules, its hands are largely tied on monetary policy: Because it insists on holding down the value of the yuan — $1 brings about 6.8 yuan today — China in effect takes its cue from America’s zero interest rate policy, even though its economy is much stronger.
So the way China manages its exchange rate is shaping up as the most decisive — and divisive — policy issue in the year ahead.
“It’s a difficult subject, I know, but one must ask the question at any rate as to whether or not China has grown up sufficiently to let its currency find its own level against the international currencies, particularly the dollar,” said Simon Linnett, vice chairman of the investment bank NM Rothschild & Sons.
U.S. officials have resumed their campaign for a stronger yuan.

The protectionist drums are beating louder in America about underpriced Chinese imports of everything from steel to tires.
And significantly, Brazil broke ranks over the weekend by declaring China’s quasi-fixed exchange rate to be a problem.
China retorts that it cannot risk allowing the yuan to climb as long as its exports are fragile. And raising Chinese interest rates before U.S. rates go up would be to suck in speculative money, making it even harder to soak up excess liquidity, officials contend.
Their argument is understandable but unconvincing.

For the longer China waits, the more capital inflows it will attract in any case because of its strong economic fundamentals and in anticipation of an eventual rise in the exchange rate.
“There’s still a lot of money to come from Western investors into markets like China,” said Anthony Bolton, president of investments at Fidelity International.
So how will it play out?
Alicia Garcia-Herrero, chief economist for emerging markets at the Spanish bank BBVA, reflects a widespread view that China might let the yuan resume its climb from the middle of next year.
But she envisages only a minimal rate of climb. And with inflation under control, the central bank will not be under pressure to tighten significantly.
“That means policy will be too expansionary,” said Ms. Garcia-Herrero, who is based in Hong Kong. “2010 will be a year of good news, but you will be building up problems for 2011.”

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Hype belies challenges ahead for China-Africa ties

* Africa faces competition from low-cost Chinese companies
* Migrant influx could stoke tension over jobs
* African countries may have unrealistic aid expectations
By Ben Blanchard
SHARM EL-SHEIKH, Egypt, Nov 9 (Reuters) - Relations between China and Africa may never have been better, with China offering the continent $10 billion in loans, but a host of knotty questions like a trade imbalance pose a big challenge.
Beyond the bonhomie, competition from nimble and low-cost Chinese firms, a feeling that China's capacity to give is endless and an influx of migrants to Africa from the world's most populous nation could sour the tone of ties.
At a just finished summit in the Egyptian resort of Sharm el-Sheikh, Chinese Premier Wen Jiabao promised Africa $10 billion in concessional loans over the next three years, and praised the long and deep friendship between China and Africa.
Yet kind words alone cannot smooth the path ahead.

According to a recent white paper by the Rockefeller Foundation, only 15 of Africa's 53 countries run a trade surplus with China.
"The real challenge is that trade is lopsided and the expansion has mainly benefited a handful of states, mostly the resource-rich ones, and the challenge now is to spread it a bit further," said Adrian Davis, the China head of Britain's Department for International Development.
Egyptian Investment Minister Mahmoud Mohieldin said he was concerned about the trade imbalance with China, adding that Egypt imports from China 11 times the amount it exports.
"We need to deal with this particular issue," he told Reuters on the sidelines of the summit.
"We need to encourage more investments from the Chinese side and more cooperation in the investment front... The second way to deal with the issue of the trade imbalance is to encourage more of the trade in services," he added.
Others worry about a lack of long-term planning by African nations when presented with the kinds of huge Chinese investment in natural resources like oil, timber or minerals which grab headlines worldwide.
"Once the natural resources run out, then what happens to us?" said one senior African diplomat based in Beijing. "We need to think longer than the next 25 or 30 years."

NO STRINGS?
Another problem is the need to temper African expectations about exactly how much help China, the world's third largest economy but still a developing one, can actually give.
"I do think there's a need to be realistic about what China can provide," said Chris Alden, an Africa expert at the London School of Economics.
"Sheer size of the economy does not mean it doesn't retain very serious domestic development challenges. For African states, it would behoove them to recognise the limits of what China can offer."
Even Wen sought to put the relationship in perspective.
"In terms of energy development, China is not the largest importer of energy and resources from Africa. China's imports of Africa's energy and resources only account for 13 percent of Africa's total exports," he told reporters.
"China's investments in oil and gas in Africa is only 1/16 of the total investment here."
China likes to trumpet that the aid it gives is "without strings", suggesting it does not come with the conditions sometimes demanded by Western donors, such as a need to respect democracy and human rights.
But that is a misunderstanding, said Duncan Innes-Ker, Beijing-based China analyst for the Economist Intelligence Unit.
"The concept of no-strings-attached Chinese money is bandied about an awful lot," he said. "Let's be absolutely clear -- Chinese money comes with strings, like a large number of Chinese workers."

MIGRANT TENSIONS
The boom in trade between China and Africa has brought with it an influx of Chinese workers to the continent, either to build infrastructure projects, or to set up businesses.
While in many areas this has benefited Africa, for example by providing much needed investment or access to cheap consumer goods, it has not been without problems.
In Algeria, tensions spilled over in August in a suburb of the capital, when about 100 local residents and Chinese migrants fought a mass brawl using knives and bludgeons in a flare up of anger against Chinese migration.
While such incidents have been rare so far, experts say the Chinese government needs to pay closer attention to this issue.
"You have Chinese entrepreneurs, private sector, state-owned companies, all spread out throughout the continent," said Chin-hao Huang, a researcher with the Stockholm International Peace Research Institute, who writes on China-Africa relations.
"Some have pointed to Chinese taking away jobs from African merchants. I think this is something the Chinese government is going to have to consider very carefully going forward."

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The 'Beijing Consensus' Won't Last

The Party is just pioneering a new way to fail.

By GORDON G. CHANG
Last month, Beijing began blocking access in China to a German government-funded Web site devoted to the Berlin Wall.

The collapse of European communism last century, now symbolized by the breaching of that barrier 20 years ago today, apparently makes Chinese leaders uncomfortable.

This obsessive censorship suggests China may be fragile, not the incipient superpower it appears to be.

And if the modern Chinese state is in fact weak, is communism viable anywhere?
By far, the most successful of the five remaining communist states is China.

Since 1978, when Deng Xiaoping launched China's reform era, the combination of semimarket economics and hardline governance has worked so well that many think it constitutes a replicable model, sometimes termed the Beijing Consensus.

Although Chinese leaders deny they are setting a pattern for others, Vietnam's communists have adopted essentially the same growth formula and created a "miracle" of their own.

During China's three-decade reform era, the country averaged stunning 9.9% annual growth; in Vietnam's doi moi, or renovation, period beginning in 1986, the economy has expanded at an impressive 7.1% a year.
Economic reform in these two communist-bloc states has, in many ways, strengthened their ruling parties by creating prosperity.

Yet resulting growth is fundamentally transforming these nations. They are, for instance, not "totalitarian" anymore.

These states no longer direct every individual, deciding where he works and lives or determining what he does with his time.

Privatization creates property, and property gives rise to both the instinct to protect it and the desire to acquire more, impulses seen in every peasant and middle-class homeowner.

Economic reform is the engine of social change, making these once-conformist societies colorful, sassy and dynamic.
As well as defiant.

The Hong Kong-based China Labor Bulletin and other publications report 127,000 "mass incidents" in China in 2008, a marked increase from previous years.

Vietnam's government also seems to be beset by a general upswing in dissidence.

Leaders in these reforming societies should brush up on Tocqueville, who noted that peasants in prerevolutionary France detested feudalism more than their counterparts in other portions of Europe, where conditions were worse.

Discontent was highest in those parts of France where there had been the most improvement. Moreover, the French Revolution followed a rapid economic advance.

Communist leaders should not take comfort from the fact that Tocqueville was writing about 18th century France.

We saw these same trends play out in late-20th century Thailand, South Korea and Taiwan, all of which shed authoritarian governments.
Senior communists now face the dilemma of all reforming authoritarians: Economic success endangers their continued control.

They may try to be more coercive—the favored tactic of Chinese President Hu Jintao—but they are bound to fail.

"No one fears the government any more," a prominent businessman in Shanghai told me this spring. And the Chinese people are not just losing their sense of apprehension.

Perhaps the most interesting trend in China is the constant ridicule of its leaders on the Internet and in daily conversation.

Because the pronunciation of "river crab" is similar to that of "harmonious" in the latest Party "harmonious society" campaign, the image of that creature, often wearing three wristwatches—a homonym for the "Three Represents," a campaign introduced by Jiang Zemin—has become a country-wide symbol protesting censorship and mocking ideology.

As the Chinese nation moves forward, the standing of officialdom declines.
The same thing happened to Soviet leaders, and they reacted by trying to make themselves relevant.

In 1961, the Soviet Communist Party formally gave up the concept of class struggle and declared itself to be "a party of the whole people."

The Chinese, interestingly, are following the same path now with Jiang Zemin's Three Represents and Mr. Hu's "harmonious society" principles, moving away from promoting proletarian revolution.

These notions, however, are subordinate to Beijing's concept of "the primary stage of socialism." China's current capitalist-oriented policies, according to this theory, are only intended to bring about the conditions that will eventually—and inevitably—lead to the perfect state of pure communism.
This ideological construct is laughable, but Beijing takes this idea and others like it seriously, reinvigorating Marxist instruction throughout schools and universities in recent years.

All these conceptual contortions, although ingenious, merely serve to delegitimize ruling parties in the eyes of citizens who have no use for theoretical formulations.

Because their ideas have been discredited, reforming communist rulers can maintain their rule only by continually delivering prosperity, yet that task is made more difficult by ideological constraints.
China experienced growth in the last three decades primarily because of the creation and development of the private sector, but the Party of Public Assets—a literal translation of the name of the Communist Party of China—cannot privatize remaining state enterprises.

To do so, Chinese theoreticians reason, would undermine the ideological underpinning of one-party rule.

That must be one of the reasons why renationalization of the economy is a key feature of Beijing's stimulus plan adopted a year ago.

Such a program is consistent with Marxist thinking, but the sidelining of private enterprise is bound to retard growth in future years.
China's leaders seem unconcerned about reversing progress. After all, they criticize Mikhail Gorbachev for reforming too quickly, which is one of the superficial lessons they draw from the Soviet Union's demise.

But Chinese officials and ideologues forget that change, once started, cannot be planned, ordered or controlled.
Beijing is clearly taking a different route to rejuvenation than Moscow's.

Nonetheless, just because Chinese theoreticians reject Gorbachevism doesn't mean they will succeed. It is just as likely that they are pioneering a new way to fail.

As Harvard historian Ross Terrill notes, China can drive off the cliff gradually as well as at full speed. That's especially true because, as the Communist Party tries in a period of rising expectations to slow the pace of change, the Chinese people are demanding more of it.
Two decades ago, it was stagnant economies that killed communist systems.

Next time it will probably be vibrant economic development and unprecedented social change that lead to their end.

For communism, there are no enduring survival strategies.

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China's 40 Richest

By Russell Flannery
Shi lai yun zhuan. The Chinese expression, which means "a new moment has arrived, and luck has changed," captures well the improved fortunes of the country's 40 wealthiest businesspeople.

Buoyed by rising stock prices, the combined wealth of China's 40 Richest has doubled to $106 billion, from $52 billion a year ago, though still below the 2007 record of $120 billion.

The top 40 are all billionaires, up from 24 last year.

China's richest person, BYD's Wang Chuanfu, is also the year's biggest gainer, up $4.7 billion to $5.8 billion.

Last year's No. 1, Liu Yongxing, comes in second with a net worth of $5.5 billion, $2.5 billion more than a year ago.

They are among 28 who added at least $1 billion to their fortune.
Strong markets also helped propel several of the eight newcomers into the top ranks, including Liu Zhongtian, No. 8, whose aluminum products maker China Zhongwang raised $1.3 billion in an April initial offering, and Zhang Zhirong, who listed his Glorious Property Holdings in October.

There are also five returnees who climbed back into the ranks after a year or more absence, including Yan Cheung, who reclaims her bragging rights as one of a handful of self-made female billionaires in the world.
Seven of the 13 dropoffs, including steel tycoon Li Zhaohui and real estate magnate Huang Rulun, slipped out of the ranks despite adding to their fortunes.

A total of nine (including Li and Huang) still qualify as billionaires. Two notable dropoffs who don't: Xiaofeng Peng, whose LDK Solar stock has fallen 59% in the past year, and Wong Kwong Yu, last year's No. 2.

The founder of Gome appliance retailer, Wong is under investigation, reportedly for stock manipulation and other crimes.

TAKING PROFITS
In the past 12 months the Hong Kong and Shanghai stock indexes have jumped 44% and 56%, respectively, leading to high company valuations.

Good time to sell? At least some of China's richest entrepreneurs think so, having recently cashed in some of their shares.

TYCOON	STOCK	ESTIMATED DISPOSAL($MIL)
Chen Fashu	Zijin Mining	$390
Chu Lam Yiu	Huabao Int'l	300
Zhang Zhirong	Glorious Property	210
Chen Yihong	China Dongxiang	100

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North Korean army cashes in on exports to China

By Blaine Harden

SEOUL: North Korea's military has grabbed nearly complete command of the state-run economy and staked out a lucrative trade in mineral sales to China to make money for its supreme commander, Kim Jong-il.
As it deepens its dominance over nearly every aspect of daily life, the Korean People's Army is also deploying soldiers to stake first claim on all food harvested in the isolated, chronically hungry country, analysts say.
The army has earned hundreds of millions of dollars selling missiles and weapons to Iran, Pakistan, Syria and other nations.

But its two nuclear tests, the most recent of which took place in May, have triggered United Nations sanctions that are choking off arms sales.

So the army has come up with a new business model, taking over the management of state trading companies to rapidly increase sales of coal, iron ore and other minerals to China, trade data and analysts say.

The potential profits are huge: China is one of the world's most voracious consumers of raw materials, and while it has been critical of North Korea's nuclear program and missile tests, it has vastly increased its economic ties with Pyongyang.
Mr Kim is increasingly skimming off a significant slice of Chinese mineral revenue to fund his nuclear program and to buy the loyalty of elites, according to North Korea, Inc, a recent report by the US Institute of Peace, a Washington group funded by the US Congress.
The report echoes the views of analysts in South Korea, Japan and the US, who say the military has elbowed out other ministries and the Korean Workers' Party to take control of exports that earn hard currency.

The military is also sending trucks to state farms to haul away as much as a quarter of the annual harvest for its soldiers, analysts say.
''The military is by far the largest, most capable and most efficient organisation in North Korea, and Kim Jong-il is making maximum use of it,'' said Lim Eul-chul of the Institute for Far Eastern Studies in Seoul.
North Korea is perhaps the world's most secretive and repressive state, but it makes no attempt to hide the ubiquitous role the military plays in the daily lives of its 23.5 million people.

Soldiers dig clams and fire missiles, pick apples and build irrigation canals, market mushrooms and supervise the export of knock-off Nintendo games. They also guard the country's 3000 co-operative farms, and help themselves to scarce food in a hungry country.
''The army is the people, the state and the party,'' the Government has declared. All references to the word ''communism'' were removed from the constitution this year and replaced with the word ''songun'', which means ''military first''.
South Korean and Western estimates are that the Government devotes about a third of its budget to military spending.

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New Friction and Vast Agenda Await Obama on China Trip

By IAN JOHNSON
BEIJING -- When President Barack Obama arrives in Shanghai for a four-day China visit, he will be accorded all the normal pomp and circumstance: He'll mingle with top leaders and ordinary people, local media will be filled with stories, and speeches will be rife with words like "vision" and "partnership."
But the greeting won't be as warm as those he has received in other parts of the world, where he frequently has been seen as a transformative figure.
That is because Mr. Obama -- who arrives Nov. 15 during an eight-day tour of the region -- will be largely continuing previous administrations' policies on China.

He will also face new friction over long-term problems, and he and his hosts will have to contend with a range of global issues that have overtaken the summit agenda.
Mr. Obama follows an administration that is widely credited with success here. The Bush team -- building on progress made during the Clinton administration -- deepened trade, expanded exchanges and resolved conflicts peacefully. "Little Bush," as the Chinese call the 43rd U.S. president, was widely liked.
"China was about the only thing [the Bush administration] did in international affairs that was a true success story," says David Shambaugh, a professor of international relations at George Washington University.

"So Obama comes in and he inherits a very solid working relationship."
Since taking office, however, the Obama administration has limited some Chinese imports to the U.S., leading to what appears to be tit-for-tat responses from Beijing.

China is especially sensitive to trade spats because it relies on exports for much of its economic growth.
That has dented Mr. Obama's popularity here, as has the view that Mr. Obama has failed to do enough to overhaul the U.S. financial system -- a concern for China because it is the largest holder of U.S. government debt.
A decade ago, most issues discussed at China-U.S. summits were limited to three issues: human rights, nuclear nonproliferation and trade.

Now, the list of topics has grown to include almost every problem facing the world, from clean energy and the war in Afghanistan to African development and fixing the world economy -- all of which are expected to have a place in talks between Mr. Obama and his Chinese counterpart, President Hu Jintao.
"For the first time in the history of our relationship, global issues are at the top of the agenda," says Kenneth Lieberthal, a fellow at the Brookings Institution in Washington who was a special assistant on Asian affairs to former President Bill Clinton.

"This is new territory for us."
It is a change that analysts on both sides see as potentially problematic.

Chinese officials and analysts note that the U.S. still has an arms and high-tech embargo on China -- hardly something one does with a true partner, they say.

"Obama wants us to become strategic partners or friends but we aren't either of those," says Yan Xuetong, a professor of international relations at Tsinghua University. "We are business partners who share material interests rather than common values."
Mr. Shambaugh of George Washington University says the recent push to make China a global partner may be part of a 30-year pattern of unrealistic expectations followed by disappointment.

"We are hoping for too much out of China," Mr. Shambaugh says. "We have very different political systems and value systems."
That is reflected in the fact that although relations are arguably better than ever, most of the issues on the table are also as intractable as ever.
The U.S., for example, is likely to at least hint that China should revalue upward its currency, the yuan. China is likely to politely decline.

Both sides will agree that nuclear weapons shouldn't spread, but are unlikely to agree on concrete measures to deal with North Korea, Iran or Pakistan.

And as for a climate deal, both will want to wait for next month's summit in Copenhagen before committing to anything.
All of this will make Mr. Obama's trip less than epochal.

Shi Yinhong, a professor at People's University in Beijing and longtime observer of U.S.-China ties, adds another factor is at work too: size. China, like the U.S., is a continent-sized country that is relatively insular.
"China is different," Mr. Shi says. "Foreigners rarely make a big impact here."

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Defying China, Dalai Lama visits Indian town near Tibetan border

His Holiness the 14th Dalai Lama greets people upon his arrival in Tawang

The Dalai Lama and thousands of pilgrims gather for five days of prayer in the monastery town of Tawang. The visit to a disputed region tests China-India ties.
By Mark Magnier
Reporting from New Delhi -- Ignoring Chinese protests, the Dalai Lama traveled to a disputed part of India near China's Tibetan border today as thousands of pilgrims braved cold weather to catch a glimpse of their spiritual leader.
The Dalai Lama, who was sharply criticized by Beijing before the visit, expects to spend five days praying and instructing Buddhist worshipers in the monastery town of Tawang in the northern Indian state of Arunachal Pradesh.

His last visit there was in 2003.
China has accused the spiritual leader of making the trip to further the movement for an independent Tibet, a region that accounts for about one-sixth of Chinese territory.
"He is always involved in activities that undermine the relations between China and other countries as well as ethnic separatist activities," Chinese Foreign Ministry spokesman Ma Zhaoxu said in a regular news briefing this month in Beijing. "The Dalai Lama is a liar."
Although Beijing has leveled similar accusations for decades, its charges have become more pointed since deadly anti-government riots broke out in March 2008 across the Tibetan plateau.
Past visits by the Dalai Lama to Tawang have merited little response from China, said Vijay Kranti, editor of Tibbat Desh, a newspaper for the Tibetan exile community in India.

China's reaction this time has made it into a bigger deal than it otherwise would be, he said.

"The Dalai Lama's best advertising agency is Beijing," Kranti said.
Tawang is significant politically and religiously.

Not only has it been at the heart of a border dispute between India and China since their 1962 war; China briefly occupied the town during the conflict before pulling back to the current demarcation.
The town of 39,000 is also the site of one of Tibetan Buddhism's largest monasteries and a place where the Dalai Lama took refuge 50 years ago when he fled Tibet ahead of pursuing Chinese soldiers.
Residents of Tawang, many from the Monpa tribe, maintain close links with Tibetans in China, adding to China's distrust, and the sixth Dalai Lama, enthroned in October 1697, came from Tawang.
And Beijing, which often blames domestic instability on outside instigators, is fearful the current Dalai Lama, age 74, might name a successor from this area.
Kranti said while China has cranked up the rhetoric in advance of this visit, India has pushed back, a welcome development.
"By saying he's got every right to go and is an honored guest, India is sending a message to China, standing up a bit more to Chinese hegemony," he said.
In recent months, relations between the two Asian giants have become strained as India and China, both enjoying rapid economic growth and vying for regional influence, have sparred over visa policy, trade and border issues.

Few of these issues are new, however.
"In actual substance, I see no development," said Salman Haider, a former Indian foreign secretary. "But the atmospherics are certainly undesirable. It shows an edginess has crept into the bilateral relationship."
Indian news media cite frequent cases of Chinese soldiers firing weapons into India and leaving Chinese-brand cigarette packs and the word "China" painted on rock faces on Indian territory.
Although the 1962 conflict between the two giants, which China essentially won, spotlighted the border dispute, the roots of their differences involving about 56,000 square miles of Arunachel Pradesh stretch back nearly a century.

India recognizes the so-called McMahon Line, a border drawn by India's British rulers in 1914, which China does not.

China also occupies a part of Kashmir claimed by India.
In recent years, eager for regional stability, China has resolved most of its land-border disputes with other neighbors.

Despite meeting 13 times, however, India and China have not made much progress, in part because this area under dispute is far more populous and culturally sensitive than those shared with Russia and others.
Adding to recent distrust, China tried to block part of an Asian Development Bank loan to India that included projects for Arunachel Pradesh. And China accuses India of discriminating against Chinese workers with its visa policy.
The two countries have tried in recent weeks to lower the temperature given their shared interests.

Late last month, Chinese Premier Wen Jiabao and Indian Prime Minister Manmohan Singh held a side meeting during an Asian regional conference.
India, in an apparent effort to placate China, refused to grant permits to foreign journalists hoping to travel to the restricted region to cover the Dalai Lama's trip.
Both sides have significant domestic problems they'd prefer to expend their time and resources on, even as their economic links have grown stronger. Bilateral trade has expanded by 50% annually over the last five years to reach $51.8 billion in 2008.
"Neither side can afford this," Haider said.

"China is aspiring to a global role, expanding rapidly and sees Asia as an extension of its bailiwick. Similarly with India, we have enough on our plate without trying to pick quarrels."

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iPhone disappoints in China launch: analysts

Posters promote Apple iPhones at a store in Beijing

A Chinese vendor offers a 'high imitation' iPhone at a shop in Beijing

SHANGHAI (AFP) — The official launch of Apple's iPhone in China has been disappointing at best for mobile operator China Unicom, with the grey market still booming and competitors offering worthy alternatives, experts say.

Unicom unveiled Apple's iconic handset in Beijing on October 30, but the few hundred people who braved the cold wind and rain to snap up the iPhone paled in comparison to hordes seen in New York in 2007 or Tokyo and Hong Kong last year.
Vendors and experts say the high price, disabled WiFi and wide range of other options has so far dogged sales in the world's biggest cell phone market of nearly 720 million users.
Unicom said last week that it had sold 5,000 units in the first weekend, but has released no figures since.
"The market was obviously expecting more, based on what happened with the debut of iPhone" in other countries, Bertram Lai, a Hong Kong-based analyst with CIMB-GK Securities, told AFP.
"The introduction of a more expensive, less usable iPhone with fewer functions is not going to be very exciting for the market."
Unicom, the country's second-largest mobile operator by subscribers, is offering a number of contract deals that bring the price of the iPhone down -- but it still costs more than 500 dollars, out of range for most consumers.
Without a subscription, the handset can cost up to 1,000 dollars.
iPhone's WiFi functions have been disabled to comply with Chinese government regulations -- another downside for tech-savvy buyers who know they can easily find fake and smuggled versions that will offer them more complete options.
Liu Dongping, the Shanghai-based business director for vendor Quickway Industrial Corp. Ltd., said he had sold dozens of Unicom iPhones so far, but called the lack of WiFi a "critical problem".
"Unicom's iPhone has got a lukewarm response from the market so far," Liu said, also pointing to the limited gaming software available on the handset.
"Most customers who are interested in buying iPhones are high-end customers. They are smart enough to understand how quality varies with price and model."
Unicom has high hopes for iPhone, and has said it wants to sell five million handsets over three years to boost its revenue per user, but analysts are not so sure it can meet that objective.
China Mobile -- which boasts 508.4 million subscribers as opposed to 142.8 million for Unicom, according to company data -- offers its own OPhone smartphone, powered by the Google-backed Android operating system.
"In terms of functionality, you have (instant messaging system) QQ on the OPhone and access to the China Mobile app store," which has 100,000 applications customised for Chinese users, Lai said.
"I think that's a very strong competitive force against the iPhone," he said.
China Mobile's 3G standard is not compatible with iPhone, but owners of smuggled handsets can still use them with China Mobile SIM cards on the carrier's 2G network -- another hurdle for Unicom to overcome, he explained.
Wang Guoping, a Beijing-based analyst for Galaxy Securities, sounded a more optimistic note for Apple, saying that since the Unicom launch, the price of smuggled iPhones had surged, showing sustained customer interest in the brand.
"Smuggled iPhones beat Unicom's in terms of cheap price and WiFi, but Unicom may be able to compensate with better after-sale customer service and maintenance," Wang said.
"It's very hard to say how sales will be in the future -- we just have to take a wait-and-see attitude."

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China's Africa investments under harsh spotlight

China has dangled a near open cheque book to Africa's major oil producers in a bid to guarantee supplies

Guinea's military rulers are the latest on the continent to receive a pledge of a massive infusion of Chinese cash

By Joelle Garrus

BEIJING — As Chinese firms pour billions of dollars into mining, energy and infrastructure deals in Africa, Beijing is turning a blind eye to rogue regimes that stand to reap the benefits, observers say.
Guinea's military rulers are the latest on the continent to receive a pledge of a massive infusion of Chinese cash -- at least seven billion dollars over five years in the mining sector from China Investment Fund (CIF).
Kissy Agyeman-Togobo, at IHS Global Insight, said the deal "could provide Guinea's junta with financial independence from traditional Western donors in the wake of security force brutalities... in which over 150 people died".
It "once again throws up the question of China's oft-criticised approach of dealing with dubious regimes, particularly at this sensitive time when Guinea's relationship with the international community hangs in the balance".
In September, troops opened fire at a public rally in Conakry held in protest against junta leader captain Moussa Dadis Camara ahead of presidential elections planned for January. The regime says 56 people were killed.
From oil in Sudan, Angola and Nigeria to bauxite in Guinea, China has been pouring money into natural resources not only in Africa but also around the globe, with other investments in Peruvian iron and Mongolian copper.
The investment spree is designed to gain access to resources to fuel China's hectic economic growth.

Beijing says investments like the CIF one -- announced less than two weeks after the bloodshed in Conakry -- are strictly private.
But a recent report by the US-China Economic and Security Review Commission, a panel of experts chosen by Congress, suggested that Hong Kong-based CIF was in fact part of a nebulous group of companies with links to the state.
"There is evidence that several of its key personnel have ties to Chinese state-owned enterprises and government agencies... and possibly China's intelligence apparatus," the commission said.
But Syetarn Hansakul, a Singapore-based analyst for Deutsche Bank, said she was not convinced that the ruling Communist party was pulling strings on deals made abroad by Chinese firms.
"The government explicitly said, 'We need to build up energy resources and reserves'," Hansakul told AFP.
"When they receive a broad mandate like that... naturally companies think 'We need to secure (resources)'. But they choose the countries where they invest.
Barry Sautman, an associate professor of social science at the Hong Kong University of Science and Technology, said China did not deserve to be singled out for investments made with controversial regimes.
In Sudan, "China is certainly not alone in developing the oil industry", Sautman said, noting that it was linked to projects in which India's ONGC and Malaysia's Petronas, both state-owned firms, held major stakes.
Both firms, in addition to China's PetroChina and Sinopec, have been accused by US non-profit organisation Investors Against Genocide of "helping to fund the genocide in Darfur" in western Sudan.

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Bar Funds for China-Backed Wind Farm, Senator Says

By Kim Chipman and John Duce
The Obama administration should bar a $1.5 billion wind-farm project in Texas from receiving U.S. government stimulus funds because most of the power turbines would be made in China, Senator Charles Schumer said.
“The idea that stimulus funds would be used to create jobs overseas is quite troubling,” Schumer, a New York Democrat, wrote in a draft of a letter he said yesterday he would send to U.S. Energy Secretary Steven Chu.

“I urge you to reject any request for stimulus money unless the high-value components, including the wind turbines, are manufactured in the United States.”
U.S. Renewable Energy Group, a private-equity firm based in Washington, and Cielo Wind Power LP, a closely held company in Austin, Texas, said last week they formed a joint venture with China’s Shenyang Power Group to build the 600-megawatt wind farm.

The 36,000 acre-project marks the largest Chinese-American investment in U.S. renewable energy, the companies said.
A-Power Energy Generation Systems Ltd. of China, Shenyang’s largest shareholder, is set to supply turbines for the farm, the companies said.

Calls made to A-Power’s offices in Beijing and Shenyang went unanswered today.

‘Furious’ About Aid
Democratic senator Schumer said he was “furious” when he learned that $450 million in U.S. economic recovery aid may be used to help build the wind farm and create as many as 3,000 jobs, mostly in China.
“I don’t care if the Chinese invest here and create jobs here: It’s where the jobs are that I care about,” Schumer told reporters yesterday in Washington. “I think if you told the other 99 senators about this the vast majority would agree with me.”

Renewable Energy
Cielo President Walt Hornaday said the project will boost hiring in the energy industry and benefit people in Texas.

He also said international joint ventures are “essential to the development of low-cost renewable energy” in the U.S. and that the project can’t happen without help from the U.S. economic stimulus package.
“Without this incentive, wind projects will wait in the sidelines for energy prices to come back to the levels we saw a few years ago,” Hornaday said in a statement. “This could be next year or this could be next decade.”
The Texas venture will be funded by Chinese banks as well as take advantage of financing through the U.S.’s $787 billion economic stimulus law, Cappy McGarr, managing partner of U.S. Renewable Energy Group, said at a news conference in Washington last week.
Spokesmen for U.S. Renewable Energy Group weren’t available to comment.

Tax Credit
An Energy Department spokeswoman, Stephanie Mueller, said any application for the Texas project to benefit from a tax credit program under the stimulus would have to be “evaluated by the Energy and Treasury departments to determine eligibility.”
“But no application has been received to date,” she said in a statement.
President Barack Obama is preparing to meet later this month with Chinese President Hu Jintao.

Energy will be a top issue as both countries say they want to bolster cooperation on clean-energy technology and help clear the way for a new global treaty to fight climate change.
The countries remain at odds over how far developed and developing nations should go in attempts to curb greenhouse-gas emissions blamed for global warming.

Legislation to curb carbon emissions has passed the U.S. House and is being debated in the Senate.

Climate Bill
Democratic senators including Sherrod Brown of Ohio sent a letter to Obama in August saying it would be “extremely difficult” to support a climate bill that doesn’t include a tariff on products from countries such as China that don’t impose limits on global warming pollution.
Schumer said he would pursue legislation if necessary to prevent stimulus funds from being used for the Texas project, though he said he’s “hopeful” the Obama administration will “change the policy.”
He said it was “counterproductive” for the U.S. to invest federal funds in Chinese companies. Energy Secretary Chu and other administration officials have said the U.S. is in danger of falling behind China in a competition to dominate the global market for clean-energy technology.

China’s Head Start
“China is fast emerging as one of our main rivals in the race to build the technology that can help us achieve energy independence,” Schumer said yesterday in a statement.

“We should not be giving China a head start in this race at our own country’s expense.”
The Obama administration has not been tough enough in negotiations with China on a wide range of issues, including trade, according to Schumer.

“They don’t play fair,” he said yesterday, referring to China.
“One of the many reasons we had the financial collapse that we had is because China manipulated its currency,” Schumer said.

He said the U.S. should be “a lot tougher” on China.
The Alliance for American Manufacturing, a Washington-based coalition of steel companies and the United Steelworkers union, also have criticized the wind energy project.
“Why aren’t American firms building this clean-energy project?” the group asked in a Nov. 2 statement.

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Remote Indian state readies for Dalai Lama visit

Young Buddhist monks at the Tawang monastery, the second largest in Asia, watch other monks put up a banner in preparation of the visit of Tibetan spiritual leader the Dalai Lama in Tawang, in the northeastern Indian state of Arunachal Pradesh, Thursday, Nov. 5, 2009. The Indian government refused Thursday to allow foreign journalists to cover the visit to the northeastern state at the heart of a long-running border dispute with China. China has also strongly opposed the visit of the Tibetan spiritual leader, who lives in exile in India and whom it accuses of advocating independence from Chinese rule for his native Tibet.

TAWANG, India (AP) — Buddhist monks and nuns spruced up their monasteries and hung up welcome banners Friday in anticipation of the Dalai Lama's visit to this remote Indian town near the Tibetan frontier.

China has strongly protested the Dalai Lama's visit starting Sunday to the Indian state of Arunachal Pradesh, which lies at the heart of a long-running border dispute between the two Asian powers.

The visit also brings the Tibetan spiritual leader to the edge of his Himalayan homeland, which China controls.
Regardless of the political tensions, the residents of Tawang see the visit as a rare opportunity to host the Buddhist leader.
Buddhist monks painted roofs Friday while nuns scrubbed the floors of monasteries. Young monks climbed scaffolding to hang up multicolored banners with pictures of the exiled Tibetan spiritual leader, who last visited in 2003.
"The air is filled with a religious and festive fervor," Lama Lopon, one of the head priests of the main Tawang Monastery, told The Associated Press.
The Dalai Lama is scheduled to lead a three-day prayer session in Tawang for 20,000 followers from the region and the neighboring Himalayan countries of Bhutan and Nepal.
On Thursday, India effectively barred foreign journalists from covering the event, in an apparent effort to ease Chinese anger by reducing news coverage of the trip.
China and India claim vast swaths of each other's territory along their 2,175-mile (3,500 kilometer) border, which has remained largely peaceful since a border war in 1962.

Over the last few years, officials from the two countries have conducted 13 rounds of talks to resolve the dispute over the border but have made scant progress.

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China a tougher sell for West on trouble-spots

By Chris Buckley
BEIJING (Reuters) - U.S. President Barack Obama will be seeking China's backing over North Korea and Iran when he visits this month, but Beijing appears increasingly assertive about what Western pressure it accepts or rejects.
Obama's summit in China in mid-November is sure to cover trouble-spots where Washington hopes Beijing will throw more of its growing political and economic weight behind efforts to defuse disputed nuclear programs or diplomatic standoffs.
China has bowed to such demands before, reluctantly backing limited U.N. sanctions against Pyongyang and Tehran, while resisting tougher steps it saw as unwarranted or a threat to bilateral ties.
Such diplomatic haggling, with China accepting some Western demands while protecting its bilateral ties with targeted states, will not change.

But recent signs suggest China may now be more willing to stand its ground.
China's continued economic growth and rise in diplomatic stature during the global financial crisis, and uncertainty over policy in Washington, had emboldened Beijing, said Andrew Small, a fellow at the German Marshall Fund in Brussels, who has studied China's ties with the "rogue states."
"Several years ago, China's position was much more externally driven. Foreign pressure and U.S. lobbying was much more important," Small said of those ties.
"The U.S. is still a big factor, but they're finding they can be more assertive without putting relations with the U.S. in jeopardy."
Obama was likely to find bargaining for China's support over nuclear programs in North Korea and Iran more drawn out, said Shi Yinhong, a professor of international security at Renmin University in Beijing.
"China will become more self-confident about handling pressure from the U.S.," said Shi. "It will still cooperate, but there's less a sense that concessions on these issues define the bilateral relationship."

SHORING UP TIES
Beijing charted more of its own course most clearly with its communist neighbor, North Korea.
Last month, Premier Wen Jiabao courted its secretive top leader, Kim Jong-il, with a visit and President Hu Jintao hosted one of Kim's confidantes and invited Kim to visit.
China remains worried about North Korea's atomic weapons and wants to revive nuclear disarmament talks, said John Park, an expert on ties between the two countries at the United States Institute of Peace in Washington D.C.
But recently China has focused more on healing bruised ties with the North, driven by a belief that Pyongyang appears set on keeping its small nuclear arsenal for a long time, and that U.S. policy remains uncertain.
"I think the Chinese did an assessment and realized that the U.S. approach is ineffective, so they had to recalibrate policy toward North Korea," Park said.
The resulting "massive injection of political capital from China" may embolden North Korea, which held its second ever nuclear test in May, he added.
Obama may also appeal to Beijing for stronger backing to international efforts aimed at Iran's nuclear ambitions.
China has backed U.N. resolutions pressing Tehran to cooperate with international demands it open its nuclear activities to U.N. inspectors.
But Obama may find Beijing less willing to give ground, even if Iran rejects a proposal that would send its enriched uranium abroad for processing into nuclear fuel, reducing worries that Tehran could use the material for nuclear weapons activities.
Tehran says its nuclear facilities are for peaceful ends.
In a sign China remains intent on preserving energy and trade ties with Iran, Premier Wen Jiabao last month hosted the First Vice President of Iran, Mohammad Reza Rahimi, telling him that bilateral cooperation was a priority.
Iranian oil made up nearly 12 percent of China's crude imports last year.
China has increasingly come to believe Western-backed sanctions have made drawing Tehran into effective negotiations harder, said Jin Liangxiang, a researcher at the Shanghai Institute for International Studies who studies the Middle East.
"On Iran, the Chinese simply can hide behind the Russians who have made it clear that they won't support tougher sanctions," Bonnie Glaser, an expert on China at the Center for Strategic and International Studies, wrote in an email response to questions.
Even if Russia swings behind any new sanctions, China would go along only if it could insulate its stake in Iran, said Small.
"The bottom line is that in any one of these cases, China has never completely dropped anyone," he said of Iran, North Korea and other states facing Western pressure.
"Economic issues now dominate relations with Washington, so China feels a bit more leeway on the security and foreign policy issues."

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China Paper, Phosphate Harm U.S. Producers, ITC Says

By Mark Drajem
A U.S. trade commission ruled today that Chinese glossy paper and phosphates are harming domestic producers, escalating trade tensions ahead of President Barack Obama’s visit to China this month.
The rulings, which may lead to tariffs on the imports, were announced one day after the U.S. imposed preliminary duties of as much as 99 percent on certain Chinese steel-pipe imports. China called the pipe tariffs “discriminatory’’ and said it would start its own anti-dumping probe of American cars.
The disputes may test relations between the U.S. and the biggest foreign buyer of its debt ahead of Obama’s visit on Nov 16. The two nations, which have $409 billion in commerce, have swapped complaints about steel, poultry and tires as the worst economic crisis since the Great Depression spurred countries to protect jobs.
The rulings today are “particularly untimely” for Obama’s trip and may have a “negative impact on the U.S. trade ties with its major Asian trading partners,” Asia Pulp & Paper, a unit of Indonesia’s Sinar Mas Group that makes paper in China, said in a written statement.
U.S. producers said it showed the Obama administration is willing to confront the crush of Chinese imports.
“The domestic paper industry cannot afford to continue to lose more market share, more profits and more jobs to unfair competition,” said John Cappy, president of Appleton Coated LLC, one of the companies that brought the complaint on coated paper.
The latest trade dispute between the U.S. and China began with Obama’s decision in September to impose tariffs on Chinese tires imports. China responded by challenging the action in a complaint to the World Trade Organization.

Being Harmed
In the rulings today, the independent U.S. International Trade Commission decided that U.S. makers of glossy paper and some phosphates used in detergent are being harmed by Chinese imports.

The commission rejected a request for tariffs on Chinese-made fasteners, such as nuts and bolts, ruling that U.S. producers such as Nucor Corp. haven’t been harmed by those imports.
The rejection of some complaints may bolster ties, said Joanne Thornton, senior vice president of Concept Capital, a Washington-based business advisory company.
“As we see a couple of these determinations going negative, that may be positive for the president going to China,” Thornton said in an interview. “It shows this isn’t a one-way juggernaut.”
The paper and phosphate rulings send the cases to the Commerce Department, which will decide whether to impose tariffs by examining whether the products are dumped or subsidized.

Magazines and Brochures
U.S. producers of glossy paper such as closely held NewPage Corp. are asking for 100 percent tariffs on $317 million of imports from China and Indonesia.

The paper is used in magazines and brochures, and a similar case was thrown out by the ITC in 2007. The companies say the current petition is warranted as they continue to shutter plants because of competition from low-cost imports.
U.S. makers of detergents and food additives asked for tariffs of 189 percent on Chinese imports on four types of phosphate salts used in detergents, animal feed, fertilizer, food and other cleaning solutions.

The ITC panel today decided to continue the cases against three types of products, and rejected them for sodium tripolyphosphate, which accounted for about half of the $32 million of those imports in 2008.
Nucor, the second-largest U.S.-based steelmaker by sales, asked for duties on imports of fasteners such as nuts and bolts.

Nucor says producers in China and Taiwan are dumping their product in the U.S. at below-market prices and are benefiting from illegal government subsidies.

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US slaps import penalties on Chinese tubular goods

Dumping occurs when a foreign company sells a product in another market at less than normal value

Construction steel being unloaded at a building site in Shanghai

WASHINGTON (AFP) — The US Commerce Department has imposed anti-dumping tariffs of up to 99 percent on imports of Chinese tubular goods in a move Beijing condemned Friday as an "abuse of protectionism."

The department said Thursday it has "determined that Chinese producers/exporters have sold OCTG (oil country tubular goods) in the United States at prices ranging from zero to 99.14 percent less than normal value."
The duties will be imposed based on individual companies' dumping rates, the Commerce Department said, adding that OCTG imports from China were valued at an estimated 2.6 billion dollars in 2008.
Dumping occurs when a foreign company sells a product in the United States at less than normal value.
The Chinese commerce ministry said that China "firmly opposes the abuse of protectionism and will take measures to seriously protect the interests of the domestic industry."
It called the US tariffs "discriminatory" steps that would "have a serious impact on the Chinese steel industry's exports."
But the United Steelworkers (USW) union hailed the move as "an overdue message for thousands of American laid off workers that trade laws are being enforced."
The US announcement came just 10 days before President Barack Obama is due to make his first official visit to China on November 15-18 and is the latest in a series of punitive tariffs the United States has imposed on Chinese goods.
USW president Leo Gerard said the OCTG anti-dumping measures were "promising" for US producers reeling from nearly half of the domestic industry's 6,000-strong workforce currently laid off.
"China's government and exporters are being told we are fed up with their cheating on our fair trade laws and penalties for these transgressions are long overdue," he said.
Several US companies and the USW had petitioned the Commerce Department to examine Chinese underpricing of the tubes, which include a variety of steel and iron products.
The union's vice president, Tom Conway, said the US government's moves "gives reason to believe there will be a callback of laid-off American pipe workers who can share in the recovery of this industry once the unfairly-traded Chinese import inventory is de-stocked."
In September, the United States announced it would slap duties on Chinese-made tires to protect local US industry, sparking the first major trade spat of Obama's presidency.
The Commerce Department said then it would impose duties of as much as 31 percent on Chinese carbon or alloy tubular steel products used in oil and gas wells, following claims they were backed by unfair subsidies.
That announcement drew a quick and angry response from Beijing.
"China is highly concerned over this matter. We strongly oppose such trade protectionist moves," a commerce ministry spokeswoman told AFP at the time.
The Commerce Department said Thursday it had assessed that several Chinese companies were selling the tubes at 36.53 percent less than their normal value, and fixed the same tariff rate.
"All other Chinese producers/exporters will receive a preliminary dumping rate of 99.14 percent," the department said.

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Beyond India vs. China: The Dalai Lama's Agenda

Tibetan spiritual leader the Dalai Lama appears during the launch of his biography at the Norbulingka Tibetan cultural institute on the outskirts of Dharamsala, India

By Ishaan Tharoor

In early April 1959, with some 50,000 Chinese soldiers scouring the mountains in search of him, the Dalai Lama escaped from Tibet into northeastern India.

Beijing blamed him for fomenting an uprising among Tibetans, which the People's Liberation Army was then quashing.

While foreign spies and correspondents filled up sleepy hill stations on the Indian side, the Dalai Lama took refuge in an old monastery, guarded by a detachment of Indian solders and a sect of six hundred shaven-headed Buddhist monks.

His brief sojourn at the 400-year-old monastery in the town of Tawang would be the first stop in a life of exile in India.

This weekend, the Dalai Lama returns to Tawang — and Beijing is no less irked by his presence there now than it was six decades ago.
China claims the region where Tawang sits and the area surrounding it as a southern extension of Tibet, which Beijing rules; India has long maintained that the land, which comprises its northeastern state of Arunachal Pradesh, is an inalienable part of its territory.

Tensions over the border dispute have flared recently, raising the specter of a budding rivalry between the two Asian giants who fought a brief, wintry war in 1962.

Reports of troop buildups and border incursions have spiraled. A visit to the state by Indian Prime Minister Manmohan Singh in mid-October to campaign in local elections was cited by Beijing as an act of provocation.
Now, the Dalai Lama's trip, which his camp insists is simply to deliver teachings to his faithful, is further stoking Chinese ire.

On Nov. 3, a Chinese foreign ministry spokesman blasted the Tibetan leader in exile for his "separatist" activities. "The Dalai Lama often lies and often engages in acts to sabotage China's relations with other countries," said Ma Zhaoxu.

New Delhi, sensing trouble, has barred foreign journalists from covering the event.
Ever since fleeing Lhasa, the Dalai Lama has lived as a guest on Indian soil, free to do as he pleases provided he refrains from directly antagonizing China.

This is not the first time he has journeyed to Tawang from his seat in the north Indian town of Dharamsala.

But, in the wake of riots in the Tibetan capital of Lhasa last year and amid the present frostiness over the Sino-Indian border, the visit has assumed a deeper political dimension.
The monastery at Tawang is one of the largest and oldest of the dominant Tibetan Gelupga sect and is near the home of Tsangyang Gyatso, the 6th Dalai Lama, born in 1683 — a leader particularly beloved by the Tibetans.

As the present Dalai Lama (the 14th) ages, rumors grow that his successor may be tapped from this historic cradle of Tibetan Buddhism in a bid to pre-empt Beijing, which is almost certain to select its own Dalai Lama once the current one passes.
In Chinese eyes, the prospect of the Dalai Lama ginning up emotions and support in Tawang poses a challenge to its own vision of dominion over all of Tibet.

The boundary separating Arunachal Pradesh from Tibet — dubbed the McMahon Line — was drawn up by the colonial British and officials from Lhasa in 1914, an act of map-making that China to this day refuses to recognize.

According to Beijing, Tawang and its surroundings were under the suzerainty of the Qing dynasty after its armies extended China's frontiers to Tibet and Central Asia in the 18th and 19th centuries.

If Tibet is Chinese soil — something that New Delhi has officially recognized — then, the argument goes, Tawang and its monastery ought to be as well.
But the facts on the ground, experts argue, do not fully support Beijing's claim.

"China is trying to impose this idea of a coherent nation-state," says Gray Tuttle, professor of Tibetan studies at Columbia University in New York.

"But it is basing its claim on a pre-modern cultural world where there was nothing like a modern state."

Not only was Chinese control over Tibet thin until the 1950s, but Tibetan rule over Tawang was nominal as well.

Beyond the appointment of certain abbots in monasteries and the occasional payment of tax to Lhasa, the people living here "did not see themselves as part of a broader empire, let alone a Chinese one," says Dibyesh Anand, an authority on the region and a professor of international relations at Westminster University in London.
Moreover, the ethnic group that inhabits this remote, mountainous part of the world, know as the Monpa, has always stood somewhat apart from the Tibetans of the plateau, despite sharing their religious and cultural outlook.

In the days when political power was concentrated in Lhasa, Tibetans would look down upon the Monpa almost as if they were a tribe of southern barbarians.

But after the Chinese invasion of Tibet in 1950, the group on the margins found itself at the center of a hotspot, faced with the task of aiding compatriots fleeing the brutal Chinese crackdown in 1959.

As a result, the Monpa in India aren't particularly keen to swap nationalities. "They all fear China for what it did during the Tibetan uprising," says Anand.
Still, as New Delhi asserts its sovereignty over Arunachal Pradesh, many locals complain of poor governance.

Like other parts of India's periphery, development has been woeful: roads in the rugged terrain are poor and in many places non-existent, the school system is dysfunctional, and some state officials corrupt.

The Indian military often monopolizes the region's functioning infrastructure for its own deployment and strategic ends, leaving the Monpa again sandwiched on the edge of latter-day empires.
The Dalai Lama's visit, says Anand, should be seen not as a gesture of defiance toward China nor a validation of democratic India, but as an act of solidarity with a community that looks to him for guidance.

For years he has pushed for dialogue with China and quietly sought autonomy for Tibet, but this purported "Middle Path" of peaceful advocacy has made little progress and has frustrated many younger Tibetans living in exile from their homeland.

Now, suggest observers, the Dalai Lama may be thinking more of shoring up the Tibetan diaspora as it looks toward an uncertain future.

"With him getting older, it makes sense to try to establish a long term support network for Tibetans in exile," says Tuttle.
Meanwhile, border tensions around the monastery where the Dalai Lama found asylum 60 years ago continue to simmer.

As neighbors and growing world powers, India and China are bound to have their differences, but, say analysts, it is in both countries' interests to move away from the icy, uncompromising positions where they are now entrenched.

The possibilities for trade between India's northeast and China's southwest have barely been explored.

"Indians and Chinese need to be more confident in their history," says Anand. "This is history, as you see in Tawang, which was more complicated, fluid and relaxed."

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Chinese activist risks jail with letter to Obama

In this photo taken Wednesday, Nov. 4, 2009, Chinese dissident Yang Zili smiles during an interview at a local cafe in Beijing, China. Zili, recently freed after eight years in jail said Thursday he is seeking U.S. President Barack Obama's help in gaining medical parole for two friends jailed with him in 2003 for forming a political study group

By ALEXA OLESEN

BEIJING — Thousands of people will send letters to President Barack Obama this year. Few besides Yang Zili are likely to risk jail by doing so.
A Chinese dissident recently freed after eight years in prison, Yang said Thursday that he is seeking Obama's help in gaining medical parole for two friends who were jailed with him for forming a political study group.
The letter is among a number of appeals beginning to emerge ahead of Obama's arrival in China Nov. 15, with most seeking freedom for detained activists and a stronger line from the administration on human rights concerns.
Yang's appeal, made in an open letter, could result in him being re-arrested because the terms of his parole ban him from political activities. But Yang said he felt an obligation to help his friends, who are ill, and Obama may be able to raise their cases with Chinese leaders during his trip to Beijing next month.
"I have no choice but to take this risk because I feel I have a responsibility to help them," Yang said in an interview.

"If I don't make an appeal that is particularly on behalf of these two people, they might just slip through the cracks."
Yang, Zhang Honghai, Xu Wei and Jin Haike were jailed in 2001 for taking part in the New Youth Study Group, an informal group of young professionals and academics that met privately to discuss democratic reform.
The harsh sentences given to the group, known as the "four gentlemen of Beijing," were a sign to many that China's intolerance of political dissent remained entrenched despite dramatic moves to reshape and liberalize the country's economic system.
Yang and Zhang were released in March, but Jin and Xu are still serving the final two years of their 10-year prison terms.
"They are both seriously ill. One has mental problems, and the other has been very sick ever since he had an appendectomy that went badly," Yang said.
In the letter, e-mailed to the U.S. Embassy with a copy given to The Associated Press, Yang urges Obama to persuade President Hu Jintao to give the men amnesty or medical parole.

He says the study group did nothing illegal.
"As the latest recipient of the Nobel Peace Prize and the president of the greatest democratic country in the world, you have tremendous influence with the Chinese government and its people," said the letter, which was co-signed by Zhang.
"Whether or not this letter is effective depends on how much Obama cares about human rights in China," Yang said.
Many Chinese — especially political activists and religious dissenters — are eager to see whether Obama will take a stand on human rights during his first trip to China as president.
U.S. Secretary of State Hillary Rodham Clinton angered activists in February when she said during a trip to Beijing that the United States would not let its human rights concerns interfere with cooperation with Beijing on global crises.
Other letters to Obama include one released Thursday by the China Support Network, a U.S.-based rights organization.

It called on Obama to help secure the release of several jailed lawyers and scholars, including outspoken writer Liu Xiaobo.

Chinese police took Liu away Dec. 8, a day before the publication of a document he co-authored calling for more robust civil rights and an end to the Communist Party's political dominance. He has yet to be formally charged.
"Do we want a Reaganesque 'Tear down this wall' speech? It would be a step in the right direction," the group's director John Kusumi wrote, referring to President Ronald Reagan's famous remark in Germany shortly before the Berlin Wall came down in 1989.
Beijing activist Qi Zhiyong, who was crippled by gunfire during the June 4, 1989 military crackdown on democracy protesters in Tiananmen square, said Wednesday he was planning a different kind of statement.

Qi said he will go to police headquarters in Beijing on Friday to protest Obama's visit because the trip will likely result in him being put under house arrest.
Chinese authorities routinely round up dissidents ahead of politically sensitive anniversaries such as June 4 or when foreign dignitaries visit to prevent them from demonstrating or meeting with foreign delegations.
"His arrival is a great inconvenience for many of us activists and petitioners and other people because we will end up waiting for it while under house arrest or being detained and locked up," said Qi.

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America Needs Human Rights in China

Beijing's abuses affect many issues the U.S. holds dear.
By SOPHIE RICHARDSON
"Don't they know they need us?" So wrote a Chinese human-rights activist friend of mine, expressing frustration at the Obama administration.

Since taking office, President Obama and Secretary of State Hillary Clinton—both of whom mustered some criticism of China's rights record while they were candidates—have said that human rights shouldn't "interfere" with other issues in the U.S.-China relationship, knuckled preemptively under Chinese pressure not to meet the Dalai Lama, and generally behaved as if the United States has no power in the bilateral relationship.
The Obama team seems to think that such an approach will elicit greater cooperation from China.

This is a miscalculation that demoralizes China's small but vibrant human-rights community and gives the government leeway to crack down harder.

As President Obama prepares for his first trip to China later this month, he needs to rethink his approach.
Beijing is clearly moving backward on human rights.

Since Mr. Obama took office, the Chinese government has disbarred human-rights lawyers, rolled back key legal reforms, imprisoned critics and further tightened Internet and press censorship.

It has tried to unilaterally impose new filtering software on all computers sold in China—ostensibly to block pornography but probably to control political discourse too.

It has executed Tibetans suspected of taking part in March 2008 protests, despite concerns about due process, and "disappeared" dozens of Uighur men and boys in the wake of the July protests in Xinjiang.
The human-rights deterioration in China directly affects the U.S. and other Chinese trading partners.

For example, the domestic press was prepared to write about a widespread case of tainted milk in June last year, but due to the ban on bad news during the Beijing Olympics, the story wasn't published until September.

By that point, tens of thousands of children, including some outside China, were sickened, and the U.S. Food and Drug Administration issued a general alert against processed foods from China.

This had echoes of the SARS outbreak, which Beijing tried to handle by stifling all news of it. While the profusion of domestic Chinese media outlets in recent years implies a trend toward greater openness, the reality is that the government can and does continue to restrict expression, regardless of the consequences.
Given China's importance to efforts to fight climate change, the Obama administration has expressed unprecedented interest in China's environmental practices.

But hopes for real environmental change will go unfulfilled if the Chinese government does not provide more transparent information about pollution and environmental degradation, and does not improve its tolerance of whistleblowers and environmental activists.

It is precisely these people who should be sought out by U.S. government, because they would be instrumental in actually enforcing any agreement on the ground.
The crackdown has an impact on businesses operating in China, too.

Executives of Australian mining giant Rio Tinto were jailed in July on grounds of violating state secrets laws and are still behind bars.

While the charges were downgraded in August to "industrial espionage," the fact that they were initially accused and held for a month under the state secrets law still is worrying.

The contents of the state-secrets law are classified, making it impossible to know how to avoid violating it, especially in a commercial context.

A "state-secrets" charge cannot be challenged in open court—and can be applied retroactively.
Nor is this the only threat to foreign businesses posed by China's legal system.

Jude Shao, an American businessman arrested in China in 1998 on charges of bribery and tax evasion, was unable to speak to a lawyer until his trial commenced more than two years after his arrest.

After a trial without due process, he was sentenced to 16 years in prison, 10 of which he served before being released on parole. It is manifestly in the interest of the global business community to press for systemic legal reform.
Ironically, the most vigorous—and effective—defense of human rights to date from the Obama administration emanated not from the White House or the State Department, but from the U.S. Trade Representative and the Department of Commerce.

When the Chinese government announced in June its intention to install Internet filtering software on all personal computers, these two agencies publicly objected not just on pragmatic policy grounds that to do so would be incompatible with World Trade Organization rules, but also that it would threaten "freedom of expression, and the free flow of information."
These incidents demonstrate that basic, universal human rights—such as the right to freedom of speech and assembly—are inextricably linked to trade and security issues.

It is profoundly shortsighted not to try to make progress on both.

Without the right to speak one's mind peacefully in public, and without the right to seek redress through a legal system that considers all who come before it equal, the potential for serious unrest remains high.

The state-run press has quickly mobilized sometimes virulent and violent anti-American sentiment, clearly illustrating the relationship between the uncensored flow of information and the full spectrum of U.S.-China relations.
As President Obama himself told the United Nations General Assembly in September, democracy and human rights are not "afterthoughts," but are instead "essential to achieving" America's core economic and security goals.

The president needs to explain publicly that the protection and promotion of human rights in China is not a millstone in the larger bilateral relationship, but part of the fundamental premise. Without it, all major goals in U.S.-China relations will remain elusive.

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WTO 'could challenge internet censorship'

Reuters

• WTO 'could intervene if online trade affected'
• Study advises filtering, not blanket censorship
• 'Disproportionate censorship' could be overturned

INTERNET censorship is open to challenge at the World Trade Organization (WTO) as it can restrict trade in online services, a forthcoming study says.
A censorship case at the WTO could raise sovereignty issues, given the clear right of member states to restrict trade on moral grounds -- for example, by blocking access to child pornography websites.
The study could hold implications for the Australian government, which is planning to introduce a national web filter against "unwanted material".
But a WTO ruling could set limits on blanket censorship and compel states instead to use more selective filtering, according to the study, to be published this week by European think-tank ECIPE.
"Many WTO member states are legally obliged to permit an unrestricted supply of cross-border internet services," Brian Hindley and Hosuk Lee-Makiyama wrote in the report.
Many countries censor the internet for political or moral reasons. China has developed one of the most pervasive systems, in Cuba all unauthorized surfing is illegal, and the Australian Government is planning a mandatory filter for national rollout.

Business impact
Internet use is particularly strong in Asia. China, with 298 million people online, overtook the US in numbers of internet users in 2008, the study said.
It noted that search engine Baidu, which follows official rules on censorship, has overtaken global leader Google in the Chinese market.
Baidu has 64 per cent of the 2 billion yuan ($322.4 million) internet search market in China, while Google has 31.3 per cent.
Back in 2002, Baidu had 3 per cent and Google 24 per cent, the study said.
There have even been reports that the authorities rerouted requests for Google.com and other international search engines to Baidu's site.
In Japan, where Google might face similar linguistic entry barriers to China, it has more than 90 percent of the market.

WTO intervention
WTO rules allow members to restrict trade to protect public morals or public order, but those measures must be necessary and disrupt trade as little as possible.
The study argues that a strong case can be made against disproportionate censorship that disrupts commercial activities by more than necessary to achieve the goals of the censoring government.
Proportionate censorship would mean selective filtering rather than arbitrary and entire blockages or permanent bans.
Some states might argue such filtering would impose an impractical burden, but others, such as China with its "Golden Shield" -- known in the West as the "Great Firewall of China" -- already have well-staffed infrastructure in place for selective censorship.
"There is a good chance that a panel might rule that permanent blocks on search engines, photo-sharing applications and other services are inconsistent with (WTO services) provisions, even given morals and security exceptions," it said.
The full study will be published on www.ecipe.org this week.

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U.S. and EU File Case Over China's Tariffs

By JOHN W. MILLER
BRUSSELS -- The U.S. and the European Union filed a formal complaint at the World Trade Organization over China's steep export tariffs on strategic raw materials, further ratcheting up pressure on China's trade policies.
At issue are levies and quotas China imposed two years ago during the commodity boom, as part of an attempt, only marginally successful, to stem the rising flow of key industrial minerals from the country.
It is the latest volley amid rising trade tensions among the world's three major trading blocs, as President Barack Obama prepares for a visit to China this month.

This year, the WTO has ruled against Chinese restrictions on distribution of Western music and movies; against the EU over subsidies for commercial aircraft; and received a Chinese complaint over EU antidumping measures.
Overall, the number of new antidumping measures -- tariffs enacted to discourage imports of goods being sold below cost -- rose to 281 in the year to June 2009, a 27% jump from a year earlier. The biggest target: China.

The recession is "making everything more and more complicated," says Fredrik Erixon, an analyst with the European Centre for International Political Economy, a Brussels think tank.

"It's the result of one country becoming a trade giant in only 10 years, and two other trade giants having trouble adjusting to that fact."
As Chinese manufacturers have made increasingly sophisticated consumer goods, such as iPods, cellphones and computers, they have grown dependent on cheap and accessible minerals.
The 2007 quotas and export tariffs, some as high as 95%, came as economies were scrambling to get minerals. There is little evidence that the tariffs worked as export volumes continued to rise, though slightly, after they were imposed.
Still, EU and U.S. officials say the policy offers an unfair cost edge to Chinese companies.
Analysts say the current regime is likely to be found illegal.

A ruling against China would force Beijing to drop the tariffs or face retaliatory trade sanctions.

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China's oil and mineral deals in Africa

(Reuters) - China has become a major investor in African energy and mineral resources, which it needs to feed its booming economy.
Here are some of the assets Chinese firms have bought or are trying to purchase and deals reached in Africa in recent years:
August 2009 -- State-owned oil firm China National Offshore Oil Corporation (CNOOC) confirmed it was bidding for Kosmos Energy's stakes in the Jubilee oilfield offshore Ghana, which could be worth between $3 billion to $5 billion.
July 2009 -- CNOOC and Sinopec Group, parent of Sinopec Corp, agreed to purchase a stake in an oil block offshore Angola from Marathon Oil for $1.3 billion. Angolan state firm Sonangol later exercised a pre-emption right, blocking the Chinese purchase.
June 2009 -- Sinopec Group bought Swiss oil explorer Addax Petroleum Corp for $7.2 billion, gaining access to high-potential oil blocks in West Africa and Iraq.
June 2009 -- State-owned Nonferrous Metal Mining Corp (CNMC) pledges to invest $400 million in Zambia's Luanshya Copper Mines after formally taking over running the mines.
April 2009 -- China granted Niger a $95 million preferential loan for the SOMINA uranium mining operation, a joint venture between China National Uranium Corporation and the Niger government. Their mine is due to come on line in 2010.
January 2009 -- China Union signed a $2.6 billion contract to develop Liberia's Bong iron ore deposits, estimated at 300 million tonnes of low-grade ore. The first iron ore pellets are expected in mid-2010.
June 2008 -- Top Chinese oil and gas firm CNPC struck a $5 billion deal with Niger's government to pump oil from the Agadem block within three years, and lay a 2,000-km pipeline to export it. CNPC also said it would build a 20,000 barrels per day oil refinery, Niger's first.
June 2006 -- Sinopec Group acquired some offshore blocks in Angola for about $1 billion.
April 2006 -- CNOOC bought a stake in a Nigerian deepwater oil field for $2.7 billion.
July 2005 -- China and Nigeria signed an $800 million crude oil sale deal between Petrochina International and the Nigerian National Petroleum Corporation (NNPC) to supply 30,000 barrels of crude oil per day to China.
December 2004 -- Sinopec and the Nigeria Petroleum Development Company agree to drill for oil in the Niger delta.
October 2004 -- Sinopec secured a 50 percent interest -- shared with state firm Sonangol -- in Angola's Block 18.
July 2004 -- Algeria grants three exploration blocks to China's top two oil groups CNPC and Sinopec in a licensing round.
Jan/Feb 2004 -- Total Gabon signed a contract with China's Sinopec to sell Gabonese crude oil to China.
Before 2004 -- CNPC had a 40 percent interest in Sudan's 300,000 bpd Unity fields in the south. It also had a large share in the Melut Basin fields.

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Statoil Sells U.S. Oil Interest to Chinese Company

By Cyrus Sanati
Statoil, the Norwegian energy giant, said Wednesday that it had sold a partial interest in some of its American energy development leases to the China National Offshore Oil Corporation, known as Cnooc.

It is the first time that a Chinese company would take an ownership interest in energy assets in the United States.
The deal could open the way for more Chinese investment in American oil fields if the United States government approves the deal.
Statoil, through its American-based subsidiary, is a major player in the Gulf of Mexico, winning many leases over the years from the United States government to explore and develop the region.
Energy companies seldom develop a lease alone and usually form partnerships with others to share the risks. So when time came to develop four of its leases in the region, which Statoil acquired from the United States government in 2007 and 2008, the company solicited bids from rivals.
Cnooc, the Chinese state-controlled offshore oil conglomerate, apparently outbid several major oil companies, winning the partial interest in the fields, according to people close to the situation.
The deal was struck on Thursday, according to a presentation of Statoil’s third-quarter financial results on Wednesday.

Cnooc will now gain a 20 percent stake in the Tucker energy lease and 10 percent stakes in the Cobra, Krakatoa and Logan leases, a Statoil spokesman told DealBook. Further details on the deal, including the price Cnooc paid for the interest, were not disclosed.
The interest that Cnooc is acquiring is quite small, but it is significant because a Chinese state-owned company would own it.

Only four years ago, Cnooc’s $18.5 billion bid for the American oil company Unocal collapsed under pressure from Congress amid concerns about American oil assets falling under the control of the Chinese government.

Since then, the Chinese have been wary of bidding on American energy assets and have concentrated their investments on undeveloped fields in Africa, the Middle East, South America and at home.
The deal needs to be approved by the Minerals Management Service, which controls American oil leases. A spokeswoman for the service told DealBook that it had no record of Statoil’s applying for a lease transfer to Cnooc. Furthermore, the service said it could not transfer a lease to a company that had not been approved to do business in the Gulf of Mexico.
To be approved to do business, a company must be incorporated in the United States. That means Cnooc would need to create an American subsidiary and be approved by the Minerals Management Service before the transfer would be considered.
Despite the obvious hurdles, a Statoil spokesman told DealBook that his company had “no concerns” about the chances of government approval.
The deal may be just small enough to gain approval.

The failure of the Unocal deal may now be seen as a Chinese effort to acquire too much too fast. If the Statoil deal goes through, the Chinese may now try to gain a foothold in the American energy infrastructure by slowly building up their presence through similar lease-sharing agreements.

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As allies die in battle, China moves in to do business

By Bronwen Maddox
Will it be China that finally pays the huge bills for repairing and rebuilding Afghanistan and Iraq — and reaps the rewards?

It’s looking that way: as the US and Britain look for an exit from the battle zones, China is digging in.
From its point of view, the wreckage of other governments’ half-completed wars offers a chance to strike deals on terms that look cheap on all but the most apocalyptic views of the course of those conflicts.

To some involved in development on the ground, that has benefits, if China will risk money where others fear to tread. But to many in Washington, it looks as if China is winning the benefit of the struggles of the US and its allies.
This week, China National Oil Corporation finally secured its place in Iraq. Together with BP, it signed the first big oil deal since the 2003 invasion. China’s oil companies set up a presence in Iraq soon after the invasion.

Those observing their deliberations say that they were not indifferent to the security of their employees compared to Western companies — and were very keen not to be thought indifferent — but had the clear competitive advantage of being able to take a more relaxed approach to the legal uncertainties of title to Iraq’s oil revenues.
As it happens, that extra tolerance was not necessary, as BP’s part in the deal shows. For all the public protests that greeted the sale, the Baghdad Government had finally addressed some key questions that had stymied investment.
But China’s willingness to contemplate a rougher environment underpinned its presence during the worst turmoil, analysts say.
The Afghan copper mine deal struck two years ago, and just now getting under way, has come during an even worse stage of violence.

But some analysts think it will prove extremely lucrative for China — the source of continuing controversy.

In November 2007, the China Metallurgical Group won the right to develop the Aynak copper field south of Kabul, in a former al-Qaeda stronghold.

China’s bid of $3 billion came with a pledge to build a coal power plant and the country’s first freight railway. Analysts reckon the field is one of the world’s largest undeveloped copper reserves.

In the words of one senior Obama official, US geological surveys of Afghanistan’s untapped riches are “a good reason why it should not be considered a poor country”.
Senior Afghan officials, including the Ambassador to the US, have said that bidding was above board and that the Chinese company won partly because it could start work earlier.

But US and Canadian companies have complained at the secretive process, suggesting that it was tilted towards China.

Analysts suggest that the deal undervalues the mine. Chinese officials have not commented on allegations of bias, but say that their project will bring infrastructure and jobs soon, despite insecurity.
As President Obama weighs up whether to commit more troops, he has demanded that President Karzai should show cleaner, more open government than in the past.

Even in the unlikely event that Karzai responds fully, Obama will still face criticism at home that while China has contributed little so far to Afghan security, it is reaping the rewards of others’ blood and money.

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Schumer Seeks to Block Stimulus Money for Chinese-Backed Texas Wind Farm

By TOM ZELLER JR. AND KEITH BRADSHER
Senator Charles E. Schumer, the New York Democrat, is calling on the Obama administration to block the use of stimulus funds for a utility-scale wind farm in West Texas that would make use of turbines manufactured largely in China.
As Green Inc. reported last week, the $1.5 billion wind venture — announced by a coalition of American and Chinese companies — was planning to seek $450 million from funds set aside in the economic stimulus package for clean-energy development.
The rest of the financing would come from Chinese commercial banks, and the turbines themselves would be manufactured by A-Power Energy Generation Systems of Shenyang, China.
“The idea that stimulus funds would be used to create jobs overseas is quite troubling,” Mr. Schumer wrote, according to The Associated Press, in a letter to be sent Thursday to the energy secretary, Steven Chu.
Mr. Schumer plans a news conference on Thursday afternoon, in which he will urge the Obama administration to block stimulus money from financing the proposed wind farm.
Organizers of the project have estimated that more than 2,000 manufacturing jobs would be created in China as a result of the project, while a little over 300 would be created in Texas.
The purpose of the stimulus program, Mr. Schumer was quoted by The A.P. as saying, “was to jump start the economy to create and save jobs — American jobs.”
China’s reputation for blocking foreign access to its own burgeoning clean-energy sector has been fueling anger over the planned project in Texas.
China has vexed multinational corporations and American officials by imposing not just a 70 percent “local content” requirement for wind projects on its own turf, but by steering virtually all wind contracts issued by the national government to Chinese-owned companies, even when foreign companies meet the 70 percent requirement by opening factories in China.
It set even higher local-content requirements earlier this year for solar-power projects.
World Trade Organization rules allow governments to set high local-content thresholds for what are deemed demonstration projects, and China has labeled its solar projects in particular as such; with as few as 10 megawatts, they are tiny compared with the 600-megawatt and 1,200-megawatt coal-fired plants being built across the country.
The Chinese government has further shielded itself from challenge by never signing the trade organization’s agreement extending free-trade rules to government procurement.

But this means that the United States government also does not have to follow W.T.O. rules in deciding whether to include Chinese companies in its own government spending programs, according to Alan Wolff, the chairman of international trade practice at Dewey & LeBoeuf, a Washington law firm.
“If this is government procurement, we don’t owe the Chinese anything” under the W.T.O. rules, said Mr. Wolff.
China did ease its prohibition on local content requirements for wind turbines in a bilateral commitment to the United States government last week, when Chinese and American trade officials met in Hangzhou, China, as part of the U.S.-China Joint Commission on Commerce and Trade.
And China’s top economic planning agency, the National Development and Reform Commission, has moved to remove local-content regulations in the renewable energy sector and has concluded several deals to import equipment.
But Western renewable energy companies have remained skeptical that they will see much change given the way Chinese officials have mentioned in speeches for months the importance of raising the market share of Chinese-owned companies.

And Western executives complain that the same Chinese officials continue to show preference for domestic companies when awarding contracts.

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China trade outweighs corruption fears for Africa

* China trade, aid bringing vital spending to Africa
* Beijing aware of corruption risks, trying to control them
* Lack of transparency biggest concern, campaigners say

By Emma Graham-Harrison
BEIJING, Nov 5 (Reuters) - China's ties with Africa have been a magnet for critics worried about corruption and human rights on a continent struggling with both, but its investments are bringing more growth than risk for countries starved of trade.
Two-way trade flows have ballooned tenfold since 2000, to $107 billion last year, as China builds infrastructure, sells cheap goods and buys much-needed energy and mineral resources.
These deals have drawn criticism from activists and politicians, often Western, who say China is stripping Africa of raw materials while shoring up corrupt and oppressive regimes.
But African and Chinese businessmen and academics say Beijing is filling a yawning need for key infrastructure, and Chinese firms are also shaking up moribund markets where Western companies were doing little to develop local economies.
"We always talk about trade being more important than aid," said Adrian Davis, the China head of Britain's Department for International Development (DFID), which works with Beijing to support development in Africa.
"This is money going into Africa... We are investing in health and education, but Africa also needs physical infrastructure which we in the West haven't been doing."
China's critics also say they are concerned about what it is funding, and how, as roads, stadia and government buildings built with Chinese cash spring up around the continent -- some of them aid, some of them trade, but many something in between.
Beijing entwines business and assistance more closely than Western governments, using infrastructure to pay for resources and often disbursing donated funds through the Commerce Ministry.
This makes it hard to put a figure on handouts, and the only official number for Africa covers all spending from 1949 to 2006.
"We put everything into a very big basket called economic cooperation; investment, humanitarian assistance, contracts. So it is difficult to figure out what belongs purely to aid," said He Wenping, an Africa expert at an official Beijing think-tank.

CUTTING OUT CASH
But Beijing is aware of the risk to its reputation and market access if projects are derailed by sleaze and its bankers have used their trade-aid model to curb dangers, experts say.
Bypassing host governments and paying Chinese firms directly to build a road or hospital, which is handed over when completed, cuts opportunities for the most predatory graft that often left other aid projects unfinished.
"The Chinese say: 'We will take your gold and put in so many schools, we will take your copper and put in a railway line'," said Kwaku Atuahene-Gima, a Ghanian citizen who is Professor at the China Europe International Business School.
"If that happens, that is a more effective way of developing the system than giving loans and aid money that go into the pockets of politicians and other people who squander it."
One Chinese firm has been caught up in a large African graft probe this year.
Activists say they are more concerned about the secrecy that surrounds China's investments than the actual deals.
"There is no inherent problem with offering access to oil or other resources in return for infrastructure, but complex, opaque deals bring a huge risk of corruption," said Diarmid O'Sullivan, corruption expert at resource activist group Global Witness.

A DIFFERENT IDEOLOGY
China, which has pulled hundreds of millions out of poverty under a one-party central regime, is sceptical of the Western emphasis on democracy and transparency as key to prosperity.
The money it gives in aid or in return for resources usually comes with no strings attaching it to human rights or governance standards, in line with Beijing's long-standing pledge of "non-interference" in the affairs of other nations.
Critics say this undermines efforts to force bad governments to clean up. But those efforts have met with limited success.
"Major Western governments and institutions haven't been able to contribute to a quantum leap in controlling corruption," said Fredrik Galtung, chief executive of Tiri, an NGO that seeks practical ways to improve integrity.
"The continent is littered with international projects... that didn't deliver anything. Look at the billions Nigeria borrowed -- and look at its electricity supply," he added, referring to the West African state's notoriously patchy flow of power.
Many in China and Africa see greed, double standards and fear about losing influence and market share in their former colonial strongholds behind Western criticisms.
They point out that Chinese firms invest far more in other parts of the world, with the same labour and environmental standards, but those operations are far less scrutinised.
"It is only around Africa because the vested political interests are so much larger. I think that's the realpolitik view of why this hostile stance has developed," said Martyn Davis, head of Stellenbosch Univerity's Centre for Chinese Studies.
Major western firms today -- like Chinese counterparts -- still do business in countries with oppressive governments and have been caught up in multi-million dollar bribery scandals.
U.S. oil companies including Exxon Mobil have invested in Equatorial Guinea, a tiny West African state where petrodollars help prop up a regime recently criticised by campaign group Human Rights Watch for "corruption, mismanagement, and callousness toward its own people".
This year KBR Inc, the former engineering subsidiary of Halliburton Co. pleaded guilty to charges that it paid $180 million in bribes to Nigerian officials in a decade-long scheme to secure $6 billion in contracts.
"Just because another competitor has arrived doesn't warrant this spectre of the Chinese resource monster stomping all over Africa you see in the media," said one Western banker in Africa

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China's Mystery Lady

The troubled times and varied ambitions of Madame Chiang Kai-shek.

The Last Empress

By Hannah Pakula
Simon & Schuster, 787 pages, $35

By MELANIE KIRKPATRICK

There was a time in the history of modern China when one of Mao Zedong's favorite proverbs, "women hold up half the sky," could have been amended to the singular: "A woman holds up half the sky."

That woman, Soong May-ling, was the wife of Mao's bitter rival and better known by her married name, Madame Chiang Kai-shek. To virtually everyone in her orbit, she was simply "Madame."
In 1937, when Chiang Kai-shek's influence as the leader of China's Nationalist government was at its peak, Life magazine called Madame the "most powerful woman in the world."

Liberty magazine described her as "the real brains and boss of the Chinese government."

Clare Boothe Luce compared her, without a hint of hyperbole, to Joan of Arc and Florence Nightingale.

Ernest Hemingway, who had lunch with Madame in 1941 in the wartime capital Chongqing, called her the "empress" of China.

That's the appellation that Hannah Pakula has appropriated for the title of her entertaining, though overlong, biography, "The Last Empress."
Soong May-ling was born in Shanghai in 1898, the youngest of what came to be known as the "fabled" Soong sisters.

The girls were educated in the U.S.—Madame majored in English at Wellesley—and all married well.

Ai-ling became the wife of financier H.H. Kung; Ching-ling's husband was Sun Yat-sen, the founder of the Republic of China; and May-ling in 1927 wed Generalissimo Chiang Kai-shek, the man who would soon unify a fractious China but ended up losing the country to the Communists and decamping to Taiwan in 1949.

The usual rap on the sisters is that Ai-ling loved money, Ching-ling loved China and May-ling loved power.
To judge from "The Last Empress," that's about right, though Ms. Pakula is not without empathy for her subject.

In her telling, the young May-ling was a woman in search of herself in a traditional society that valued women only as wives and the mothers of sons.

Back home in Shanghai after Wellesley, Ms. Pakula writes, May-ling was "part society belle, part would-be reformer," attending all the chic parties and using her charm to raise funds for the YMCA and other charities.

But May-ling "had not been given a Western education in order to spend her afternoons at the mah-jongg table."

She decided to re-invent herself by hooking onto the star of Chiang Kai-shek.
Madame had a ruthless streak, and Ms. Pakula describes how she managed to "compartmentalize" her mind, overlooking facts that she would prefer not to face when they stood in the way of a cherished goal.

In the case of her marriage, Madame, a staunch Methodist, had to convince herself (and her mother) that Chiang, who already had two wives when they met in 1926, was free to marry her. (Chiang obliged by sending his second wife to America and denying the validity of his first marriage.)

During their life together, Madame overlooked the generalissimo's numerous faults as a military and political leader, such as his preference for fighting the Communists instead of the invading Japanese and his tendency to ignore the suffering of the Chinese people, who ultimately revolted against him.

She overlooked, too, the immense corruption of his Nationalist Party, whose fortunes were based in part on the opium trade.
Over time, Madame became Chiang's closest foreign-policy adviser and translator.

She took care to soften the messages delivered by Washington emissaries during World War II, many of them seeking a level of support in the war against Japan that Chiang was unwilling to provide.

"The Last Empress" is also the story of how Americans went ga-ga over Madame during the war.

Her eight-month visit to the U.S. in 1943 to raise aid for her homeland would be the envy of any modern-day PR person.

She wrote countless articles, addressed both houses of Congress, and wowed crowds at Madison Square Garden and Carnegie Hall.

Her greatest achievement was as a propagandist, persuading Congress and the American public that her husband could deliver a democratic China.
Ms. Pakula doesn't stint on stories about Madame's opulent lifestyle—the diamond buttons, trunkloads of furs and scores of servants.

"The Last Empress" also offers examples of Madame's "near-hypnotic effect on men," including FDR's 1940 challenger for the presidency, Wendell Willkie, with whom Ms. Pakula believes she had an affair.

It may have been true love, but then again, maybe not.

Willkie's friend, Mike Cowles, reports that Madame once told him that if Willkie had won the presidency in 1944 (she believed that he would be nominated again), then "he and I would rule the world. I would rule the Orient and Wendell would rule the Western world." Ah, romance.
"The Last Empress" has one almost-unforgivable fault: a canvas so vast that it dwarfs its subject.

The book's subtitle is "Madame Chiang Kai-shek and the Birth of Modern China," but it really ought to be phrased the other way around.

There are chapters-long digressions about Sun Yat-sen, warlords, the Japanese, the Communists.

Ms. Pakula writes like a dream, and her narrative is certainly a pleasure to read; anyone who wants to learn about China in the first half of the 20th century will find "The Last Empress" a good guide. But it is really two books in one.
Ms. Pakula also ducks the central question about Madame: Was she a Dragon Lady, interested mainly in increasing her power and enriching her family's fortunes? Or did she, like her left-wing sister Ching-ling, love China and believe that the best way to show that love was to save her country from the evils of communism?

Was she "God's masterpiece," as the family minister described her at the time of her death in 2003 at the age of 106? Or was she "the most evil woman to wield power" in the 20th century, as one Taipei paper put it?

After nearly 800 pages, "The Last Empress" doesn't say. Madame Chiang Kai-shek remains as enigmatic as ever.

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Chinese Internet startups get crimped on crowded Web

By Melanie Lee and Huang Yuntao
BEIJING (Reuters) - Entrepreneurs are finding the road to Internet riches in China increasingly rough, facing a thicket of regulatory issues, stiff competition and a frontier mentality that leads to frequent underhanded practices.
Chinese Internet startups have evolved since the early days that produced such local legends as search leader Baidu and online commerce giant Alibaba.com, which have trumped global giants Google and eBay in the world's largest Internet market with more than 300 million users.
But the country's Web 2.0 phase has become much more complex, cluttered with companies trying to find their niche in everything from social networking, to gaming and video sharing -- many armed with big bucks and support from venture capital firms.
The fast changing landscape means it is now harder to enter the market given the intense competition and pattern of bigger firms copying lucrative ideas, said founders of several start-ups at one of China's top Internet shows in Beijing.
Halls of the conference this week were crowded with ranks of entrepreneurs eagerly handing out business cards, each hoping to imitate the success of such industry icons as Baidu founder Robin Li or Alibaba founder Jack Ma.
Most of the biggest online categories, such as search, retail and auctions, are already dominated by the biggest names, while niche areas are also crowded with players looking for the next big thing, said Edward Liu, chief executive of Beijing Fastweb, a start-up that provides fast data transfer over the Internet.

FERTILE GROUND
Less developed areas, such as sites and applications for the mobile Internet, are more fertile ground for new ideas, but are also quickly cluttered with companies old and new alike looking to make a buck.
"In 3G and mobile Internet there is a chance for success. The other sectors in the traditional Worldwide Web, they have dominant players already and it's hard to break their dominance," said Vincent Xu, president of PPS, a video streaming website.
"My personal opinion is that there isn't much space in the industry anymore," he added.
Ever-shifting regulations by opaque government agencies also create problems.

That element came into focus earlier this week, when online game operator NetEase said it had been ordered to stop operating a popular video game, the apparent result of a governmental turf war.
"We need better guidelines, instead of ultra strict restrictions, we need rules that allow enough flexibility and innovation" said Liu.
And even when someone finds a formula for success, keeping that success can be difficult in a rough-and-tumble world where companies are often acquired or their ideas are simply copied outright.
"It's always the case in China, that's the way of doing business, if you start something popular it may get copied. But you live with it," said Leon Lee, vice president of Chinese mobile Internet firm KongZhong.
Then there's the issue -- sometimes good and sometimes not -- of getting bought outright.
"There are plenty of chances to make money in the tech industry, but the risks of getting bought up is always there," said Zhao Wenxiang, co-founder of tiny mobile Internet start-up Hesine with around 10 employees.

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U.S., EU, Mexico Ask WTO to Probe Chinese Raw-Material Curbs

By Jennifer M. Freedman

Nov. 4 (Bloomberg) -- The U.S. and the European Union asked World Trade Organization judges to investigate Chinese export restrictions on raw materials such as magnesium and zinc, their third joint complaint against the Asian nation.
Officials from the U.S. and the EU, along with Mexico, asked the WTO to determine the legality of the curbs on materials that are “critical” to manufacturers and workers, the U.S. Trade Representative’s office and the EU said in separate e-mailed statements today.

The materials at issue also include bauxite, coke, manganese, silicon carbide and yellow phosphorus, which are used by the steel, aluminum and chemicals industries.
The request comes more than four months after the U.S. and EU filed a request for consultations at the WTO, setting off a period of discussions with China aimed at resolving the dispute.

The EU, the U.S. and Mexico, which filed a request for talks on Aug. 21, “tried to resolve this issue through consultations, but did not succeed,” said Debbie Mesloh, a USTR spokeswoman in Washington.
The complaint accuses China of using special taxes intended to discourage the export of 20 metals or chemicals as a way to provide domestic manufacturers with inexpensive access to those raw materials.

Trade tensions between China on the one hand and the U.S. and the EU on the other have grown as the economic crisis crimps exports and sparks job cuts.
Export restrictions, which have multiplied in recent years because of surging prices for raw materials, discourage companies from being more productive and competitive, according to the European Commission, the EU’s trade authority.

Such curbs drive up prices and choke off supplies of raw materials, which affects a broad range of finished products including airplanes, semiconductors, detergent and steel, the commission says.
The panel requested today focuses on a specific batch of measures and products, said the EU, adding that “further legal action cannot be ruled out if these concerns are not effectively addressed.”
The WTO’s dispute settlement body will consider the request for the establishment of a panel at its Nov. 19 meeting, the USTR said.

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China's military making strides in space

Pedestrians walk beside a J-10 fighter jet displayed in front of Aviation Industries of China (AVIC) in Beijing

Chinese students walk past a Chinese made space rocket on a poster in Beijing

A man (R) visits an exhibition on Chinese forces at the Military Museum of Chinese People's Revolution in Beijing

WASHINGTON (AFP) — China's military has made dramatic progress in space over the past decade and the goals of its program remain unclear, a top American general said.

Citing Beijing's advances in space, General Kevin Chilton, head of US Strategic Command, said it was crucial to cultivate US-China military relations to better understand China's intentions.
"With regard to China's capabilities, I think anyone who's familiar with this business -- and particularly our history in this business over the years -- would have to be absolutely amazed at the advancement that China has made in such a short period of time, whether that be in their unmanned program or the manned program," Chilton told reporters in a teleconference, referring to Beijing's space program.
"They have rapidly advanced over the last ten years," he said from Omaha, Nebraska.
"Where they're heading I think is one of those things that a lot of people would like to understand better, what their goals and objectives are. But they certainly are on a fast track to improve their capabilities," he said.
Chilton's comments came after a top Chinese air force commander, Xu Qiliang, called the militarization of space a "historical inevitability" and said that the country's military was developing offensive and defensive operations in space.
The Chinese commander's remarks, reported by state media on Monday, marked an apparent shift in Beijing's opposition to weaponizing outer space.
Chilton acknowledged that space had become an arena for military rivalry, with an increasing number of countries pursuing space-based weaponry -- including Iran and North Korea.
"Clearly, I think what we've all come to understand is that space is a contested domain. It used to be looked at like a sanctuary. And clearly that's not the case today," the air force general said.
Asked about the Chinese commander's remarks, Chilton said that Beijing's space program "is an area that we'll want to explore and understand exactly what China's intentions are here, and why they might want to go in that direction and what grounds might accommodate a different direction."
A Republican member of Congress adopted a tougher tone, criticizing China for pursuing space weapons and for shooting down a weather satellite in 2007.
"Despite public declarations to the contrary, Beijing's continued investment in anti-satellite technologies and yesterday's revelation by a senior Chinese military official, demonstrate a clear intent to pursue offensive space capabilities," Representative Michael Turner of Ohio said in a statement.
When President Barack Obama visits China in a tour of Asia this month, he should "pressure Chinese officials to provide greater transparency regarding their intentions for the development, test, and deployment of anti-satellite weapons," Turner said.
In January 2007, China shot down one of its own weather satellites in a test seen by the United States and others as a possible trigger of an arms race in space.
Turner said Obama should make clear to Beijing that further anti-satellite tests would be "irresponsible and unacceptable."
Chilton said a visit last week to Strategic Command headquarters by General Xu Caihou, China's second-ranking military officer, marked a promising step in efforts to promote more dialogue with Beijing.
"I think maybe through dialogue we can better understand what their broader objectives are. I think that's one of the most encouraging things about the visit we had last week," he said.
US defense analysts have warned that the American military will soon lose its dominance on the high seas, in space and in cyberspace as China and other emerging powers obtain sophisticated weaponry and missiles.

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China starts building first aircraft carrier

A Chinese Navy submarine

TAIPEI (AFP) — Taiwan said Wednesday that its giant neighbour China has started building its first aircraft carrier, a move analysts have said could raise military tensions in the region.

The head of Taiwan's National Security Bureau told parliament construction of the carrier had begun, Lin Yu-fang, a legislator of the ruling Kuomintang party, told AFP.
However, the security chief, Tsai Teh-sheng said the carrier's construction "has not been smooth" and that the Chinese navy may struggle to put it into service by 2012 unless it makes a manufacturing breakthrough soon.
"This is the result of an evaluation not only from (Taiwan's) National Security Bureau... but also from the Chinese communists," Tsai said, according to Lin.
Taiwanese military experts expect the People's Liberation Army to take at least 10 years to have its first operating carrier group complete with carrier-based fighters and other warships.
"Once they complete the ambitious project, it will have a serious and far-fetched military impact on the region," said Wung Ming-hsien, professor at Taipei's Tamkang University.
"And by that time, the United States, Japan, and Taiwan will need to overhaul their military strategies."
A carrier group would potentially double the military threat posed to Taiwan by China by allowing the Chinese to approach from directions other than across the Strait, he said.
Two weeks ago Taiwan's defence ministry said in its annual report that China had continued its military build-up against the island despite warming ties, tipping the military balance in the Taiwan Strait with more than 1,300 ballistic and cruise missiles targeting the island.
Ties between China and Taiwan have improved significantly since the China-friendly politician Ma Ying-jeou became the island's president last year, vowing to adopt a non-confrontational policy towards the mainland.
But China still regards Taiwan as part of its territory awaiting to be reunified by force if necessary, although the island has governed itself since 1949 when a civil war ended.
The United States has repeatedly urged China to be more transparent about its rapid military buildup, warning of a shifting balance of power in the Asia-Pacific region that could cause misunderstanding.

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Disney Plans Get a Cold Reception Online

Mickey and Minnie are coming to Shanghai.

By James T. Areddy and Ellen Zhu

Walt Disney won’t make Shanghai the happiest place in the world.
That’s the early reaction from a surprising number of netizens, or Chinese Internet users, to confirmation early Wednesday that plans for Shanghai Disneyland have the green light to proceed.

Of the posts streaming into tianya.cn, a major portal, early Wednesday, the negative views were solidly outweighing positive views.

A survey on eastday.com suggests a lack of enthusiasm too.
The Burbank, Calif., entertainment giant and the Shanghai government announced that they have central-government approval to build mainland China’s first Disney theme park and resort, which means contracts to build can now be hashed out.
It’s a long-awaited, multibillion-dollar project that could mean tens of thousands of jobs for the east coast city plus a big footprint for Mickey Mouse and crew in the world’s most populous nation.

Shanghai Securities estimates a theme park would offer a boost to the local services sector in the form of up to 12 million visitors each year.
But not everyone is welcoming the jamboree.
On Chinese-language blogs, Shanghai residents worry about their taxes (in the country’s most expensive city), throngs of visitors on top of the city’s 20 million residents, cultural invasion just when China is standing up, plus the government’s priorities in a developing nation.
One even sees an attempt by the U.S. to shift the financial crisis to China.

“As a Shanghai native, I firmly oppose the building of the Disney park in my hometown,” says one post on eastday.com, a news portal run by the Shanghai government.

Billions of yuan “for a ‘happy land,’ which is completely useless to the national economy and people’s livelihood. It’s doomed to be a loss-making deal.” The post adds that foreigners are too broke to visit, and Chinese can’t afford it.
In response to the question, “What do you think a Disney theme park would bring to Shanghai?” about 40% said more weekend fun, 30% said they would go if it weren’t too expensive and almost 20% said they wouldn’t attend because there are too many things to do already in Shanghai.
Still, about 11% said Disneyland will fulfill a childhood dream.
“There are so many places that need money in Shanghai,” screams another. “Is the Disney park really necessary?” the poster asks.
A writer calling himself EPO67 on tianya.cn draws attention to Shanghai’s race track, which, after it opened in 2004, became central to the downfall of top officials in the city during a massive corruption scandal.

“We built a Formula One track. What benefits have we got? It just received money from Chinese to let some foreign cars race. It’s a huge waste of land resources as well,” EPO67 writes.
As rumors swirled this week about the Disney-Shanghai deal, some of the criticism had made it into mainstream media.

“A lot of netizens think that time is ripe for China to build its own cultural aircraft carrier rather than spend a huge amount of money to bring an American Mickey Mouse version to China,” said Economic Information Daily, a newspaper published by the Xinhua News Agency.

Another predicted, “Shanghai Disneyland is likely to become a ‘chicken rib’ [an expression for something insignificant]. The heyday of American culture is over. There is not much the 80-year-old Mickey Mouse could do now,” said the story, quoting Internet posts.
Of course, not everyone is negative.

Tianya quoted one person saying, “Is there anything wrong with the Disney Park resolving the employment problem for thousands of people in Shanghai?”

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Could China's Economic Policies Trigger Another Crisis?

A view through a bus window in Beijing on April 1, 2008

By Bill Powell / Shanghai

Just before the global financial crisis exploded, the conference halls in China were alive with the rhetoric of economic reform.

Hardly a week went by without some think tank or ministry in Beijing toasting the 30th anniversary of China's great opening to the world and outlining what the next phase of China's historic development would entail.

At a time when experts and policymakers everywhere were decrying "global economic imbalances," China would do its bit to rectify them.
That meant attacking the problem at the root.

Just as the U.S. saved too little while consuming too much, China saved too much and consumed too little. The result was a lopsided international trade scorecard.

China ran huge current account surpluses — peaking at 10% of GDP in the first half of 2008 — and as a result accumulated a massive load of foreign exchange, which it turned around and loaned, mostly to the U.S. government, which enabled Americans to go on borrowing and spending.

China, policymakers said, intended to break this unhealthy cycle.

Then a not-so-funny thing happened on the way to rebalancing: the worst economic crisis since the Great Depression.

The Chinese response to sharp declines in manufacturing and exports has been cheered for its effectiveness.

Government stimulus spending and loose credit powered the country's economy to an 8.9% growth rate in the third quarter, and the most recent Purchasing Manager's Index (PMI), a widely watched gauge of economic sentiment released on Oct. 30, rose for the eighth straight month.

It now shows "sustained expansion in industrial activity," says Jing Ulrich, managing director at JPMorgan in Hong Kong.

At the same time, the U.S.-China economic relationship is not as lopsided as it was a year ago, at least by some measures.

The U.S. savings rate has increased to about 4% of GDP (from zero at the recession's onset), and China's current account surplus has fallen from 10% of GDP to about 6.5% of GDP.

Both are improving for the same reason: shell-shocked consumers in the U.S., where the unemployment rate is 9.8% and rising, have snapped their wallets shut. Now that it's pouring, they have started saving for a rainy day.
It's the Chinese side of the equation, many economists believe, that remains unaddressed.

Far from making the promised progress on needed structural reforms, China has either stood pat in the past year or has probably regressed in terms of taking steps that would reorient its economy toward consumption and away from savings and investment.
One obvious example, which will be front and center when U.S. President Barack Obama makes his first visit to China on Nov. 15, is the exchange rate of Beijing's currency, the renminbi (RMB). After allowing it to rise against the dollar by about 15% earlier this decade, China has since the onset of the crisis kept the RMB's value tightly pegged at about 6.8 to $1.

Economists differ on how greatly undervalued the RMB is.

The International Monetary Fund and World Bank contend that it's about 15%-25% below where it would be if it were allowed to float freely. Virtually all agree that it needs to move higher, both for China's sake and the sake of its trading partners.

An undervalued currency reduces real household income in China by raising the cost of imports while subsidizing Chinese producers who sell their products overseas. As the dollar has declined in value in the past year, so has the RMB — making Chinese goods cheaper in the international marketplace.

In other words, China's peg has helped it maintain its share of global export markets at the expense of other countries who let their currencies float. That's exactly the opposite of what needs to happen if rebalancing is to occur.
Ominously for Beijing, the value of the RMB may be one of the few things the fractious American political class seems to agree on.

Recently, Paul Krugman, the Nobel Prize–winning economist and columnist for the New York Times — and a steadfast Obama cheerleader — wrote a column ripping Beijing for its "outrageous" currency policy.

He was followed late last week by Martin Feldstein, a former chief economic adviser to Ronald Reagan, who made a similar argument in the pages of the Financial Times.

Both noted that the RMB-dollar peg is badly hurting economies in Europe and East Asia and that if Obama raises this issue in Beijing (as he surely will), he'll have tacit backing from a lot of precincts.
Does Beijing care?

In its response to the financial crisis — the depth of which absolutely stunned Chinese policymakers — China desperately pushed every familiar button to keep its economy from succumbing the way the developed world's did.

It has thrown buckets of practically free money at state-owned banks, which in turn loaned it out to mostly state-owned companies in a wide range of industries.

Banks also loaned money to real estate developers, who have added inventory to what were already overbuilt residential and commercial markets in several major Chinese cities.

And now the government has turned around and acknowledged that the mind-bending surge in bank lending — by June of this year, total lending exceeded the amount for all of 2008 — has done nothing to rebalance China's economy between consumer and producer.

In fact it's done the opposite: late last month, the National Development and Reform Commission, an important policymaking body, conceded that it must start implementing rules aimed at reducing overcapacity in several key industries, including steel and petrochemicals.
It isn't just indiscriminate bank lending that has retarded moves toward rebalancing.

Outright government subsidies to businesses have increased in the past 12 months. Everything from bicycle makers to textile producers to chemical companies have seen their export subsidies rise because their markets worldwide were shriveling, and a panicky Beijing was spooked by the prospect of massive unemployment if factories shut down.

"By transferring wealth from households to boost the profitability of producers, China's ability to grow consumption in line with growth of the nation's GDP is severely hampered," says Michael Pettis, a finance professor at Peking University's Guanghua School of Management.

Indeed, although China is also subsidizing some consumer purchases and retail sales in China were up about 15% in the first nine months of 2009, consumption as a percentage of GDP remains today about where it was a year ago: at about a third of China's economy.
U.S. Federal Reserve Chairman Ben Bernanke has long let it be known that he thinks the imbalances between the U.S. and China contributed to the financial breakdown of the global economy.

China's excess savings were sloshing around and needed a home, and profligate America was more than willing to borrow those savings.

On Oct. 19, Bernanke gave a speech in which he said that while personal savings in the U.S. is now rising, the government had to get its own accounts in better order.

He then pointedly noted that "policies that artificially enhance incentives for domestic savings and the production of export goods" have got to go in order "to reduce the risks of [future] financial instability."
That message was aimed at Beijing.

It's one that will be reinforced when Obama arrives in China in two weeks.

The only question is, will anyone in the Chinese leadership — who may believe the headlines about what economic magicians they've been for the past year — be listening?

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Is China a strategic rival of U.S.?

The Chinese war with Vietnam in 1979

By Tom Evans

• China wants global economic dominance
• China on the brink of overtaking Japan as the world's second biggest economy
• China holds as much as $2 trillion in U.S. dollar denominated assets

1: China today, say many analysts, is in a comparable position to U.S. at the beginning of the 20th century... an emerging power that the dominant global power of the time is trying to downplay. Then it was Great Britain vs. the United States. Now it is the United States vs. China.

2: China's rapid economic expansion continues to outpace growth in the United States, 8.9 percent in the last quarter versus 3.5 percent in the United States giving Beijing huge economic leverage.

3: China is on the brink of overtaking Japan as the world's second biggest economy and could overtake by some estimates (PricewaterhouseCoopers) the U.S. economy in overall size (though not GDP a head) by 2025 and be 130 percent bigger than the U.S. economy by 2050.

4: China is the world's biggest exporter, recording a trade surplus in the last 12 months of $250B. The United States is the world's biggest importer, with a trade deficit of $575B over the last year.

By one reckoning, one in every eight dollars of the U.S. trade deficit is due to just one company, Wal-Mart, which is the biggest single importer of Chinese goods into the U.S.

5: China is the world's largest creditor nation, holding as much as $2 trillion in U.S. dollar denominated assets. The United States is the world's largest debtor nation.

Some say that gives Beijing huge leverage over the U.S. economy either by giving it the ability to abruptly sell its U.S. assets which could cause the dollar to plunge on the global foreign exchanges (note the U.S. did this to Britain during the Suez crisis in 1956 forcing Anglo-French forces to withdraw from Egypt) or by enabling Chinese companies to buy huge swathes of the U.S. economy (witness Chinese efforts to profit from the wreckage of the U.S. auto industry).

6: China's breathtaking economic expansion has led to a voracious demand for raw materials around the world and the rapid expansion of China's presence in countries as far apart as Venezuela.. Sudan.. Guinea.. and Myanmar.

Human rights groups say China is propping up repressive regimes in order to secure its access to critically important raw materials, including much sought after "rare earth" minerals which are a key component in consumer electronics such as cell phones.

7: China is also a strong influence in the economies of some solidly Western countries that have huge mineral resources, such as Australia which is a big exporter of iron ore (and which is growing rapidly on the back of China's economic expansion) and to some extent even Canada which has valuable oil shale and other raw materials.

8: A huge flood of cheap Chinese manufactured goods and textiles is swamping the global economy, destroying traditional manufacturing jobs in Europe and North America, leading to increasing demands for protectionism in Western economies amid charges the Beijing government is subsidizing its own industries, protecting businesses with trade barriers, and keeping the Chinese currency artificially low, which depresses the price of Chinese exports in the global market place and makes them even more competitive.

Cheap Chinese goods are also swamping Beijing's trading partners among emerging nations, snuffing out local efforts to grow their own manufacturing industries and break away from resource dependent economies.

9: China is reinforcing its offensive to achieve global economic dominance by establishing large industrial (and military) spy networks in Western countries (the U.S. regularly arrests and convicts Chinese spies) and using hackers to break into Western companies' computer networks to steal sensitive information.

Even the Russians are reportedly accusing the Chinese of stealing technology and using reverse engineering techniques to build a new generation of fighter planes.

10: China is already the dominant economic and political player in the economies of South East and North East Asia, in a way that reminds some of Japan's efforts to create a Greater East Asia Co-Prosperity Sphere before the Second World War to shut out U.S. influence.

Beijing is a strong supporter of a proposed Asian "European Union" that critics say would cement Chinese dominance in Asia.

11: China has already become a key global power, directly involved in major international disputes such as the showdowns with North Korea and Iran, and using its position on the U.N. Security Council and its economic leverage to influence events in countries regarded as areas of vital Chinese importance.

It is also now the dominant regional player in north east Asia, recently hosting a summit in Beijing with the Japanese and South Korean leaders.

12: China is growing more confident about using its rising power in border disputes with countries in its immediate vicinity... from the fight over an ill-defined border with India in the Himalayas.. to territorial disputes over island chains in the Pacific with Asian neighbors such as Vietnam, Japan, and the Philippines.. to being more aggressive at challenging U.S. warships sailing in international waters off the Chinese coast (China says its suzerainty extends 200 miles to the edge of its exclusive economic zone, not 12 miles as recognized by other countries).

China in the past has never backed away from border wars... Note the war in Korea in 1950-53, the war with India in 1962, and the war with Vietnam in 1979.

13: Beijing is engaging in a massive military modernization program, designed to reduce the number of soldiers in its army while expanding its ability to project power by air and by sea. China is reportedly building its first aircraft carrier and is developing ballistic missiles that are designed to target the decks of U.S. aircraft carriers, the principal means by which the United States exerts military influence in the Asia -- Pacific region (as witnessed by past American efforts to influence Chinese behavior in the Taiwan Strait).

Taiwan says China now has 1,500 missiles targeting its territory, an increase from 800 two years ago.

14: China is building port facilities in countries such as Myanmar, Sri Lanka, and Pakistan -- all of which to its rivals look like an attempt to pave the way for a major growth in Chinese naval capabilities in the Western Pacific and the Indian Ocean in a way that not only challenges U.S. naval power but also the national security of India which has now embarked on its own naval buildup.

Australia is also paying attention to China's military modernization, announcing plans to double the size of its submarine force from 6 boats to 12 with much longer ranges.

15: China remains a totalitarian one party state, dedicated to preserving the Communist Party's grip on power while allowing no alternative political centers of power, suppressing political dissent (think back to Tiananmen Square 20 years ago when China smashed pro-democracy protests even as the Soviet Union collapsed), and crushing separatist movements on its own territory in such places as Tibet and Xinjiang.

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China has converted me to the importance of the EU

By Geoff Dyer
China can do strange things to your politics.

I know foreigners who purr about the efficiency of authoritarian bureaucracy and others who search Confucian texts for new political ideas.

In my case, China has converted me to the importance of the European Union.
Sitting in Beijing, it is all too easy to feel that Europe is becoming irrelevant, as the US and a rising China stitch up the global agenda.

The Chinese have become quite adept at playing one European government against another. When Beijing cancelled a summit with the EU last year to punish Nicolas Sarkozy for meeting the Dalai Lama, the response from other EU capitals was an awkward silence.

The European Council on Foreign Relations claims Beijing treats the EU with “diplomatic contempt”.
So David Miliband’s argument last week that Europe needs a big name to deal with China and the US struck a chord - even if I am not so keen on his image of a EU president “stopping the traffic in Beijing” (we get quite enough of that already, thanks, Mr Miliband).

And when I mentioned last week to a Chinese academic that Jean-Claude Juncker of Luxembourg was a serious candidate for the post, his look can only be described as incredulous.
That said, it is probably a good thing that Tony Blair does not now seem likely to get the job.

The EU’s standing in Beijing would be helped by having a leader with the heft of Blair. But the job also occasionally requires standing up to Beijing in defense of values that Europe holds strongly or to push back against divide-and-rule tactics.

Judging by an op-ed he wrote a couple of weeks ago after a visit to China, Blair is not the man for this role. He gushed about how ‘a new Cultural Revolution is taking place” and warned about the dangers of “disorder”.

I found myself thinking, a little cheekily, that Blair has internalized his conversations with Chinese politicians, only to read: “We should understand how the country looks to China’s leaders from the inside.”
As it happens, the UK does have a couple big hitters who know how to strike the right balance. Chris Patten was a hate-figure in Beijing in his Kong Kong days, when he wanted to expand elections, but he built up good personal ties as an EU commissioner.

Lord Mandelson is anything but a China-basher, but with an audience of Communist Party officials in Beijing last month, he managed to talk about human rights in the sort of direct language that foreign politicians rarely use in China and which some Chinese actually appreciate. If Gordon Brown wants a Briton who can boost European leverage in Beijing, he has been backing the wrong man.

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China syphilis boom driven by economy

GENEVA (AP) — China has seen a tenfold increase in syphilis cases over the past decade, as migrant workers made enough money in the country's economic boom to hire more prostitutes, a senior Chinese health official was quoted as saying Tuesday.
The sexually transmitted disease re-emerged in China during 1980s after being virtually eradicated for two decades, and cases are now growing by 30 percent a year, Chen Xiangsheng said in an interview in the World Health Organization's monthly bulletin.
Last year, 278,215 cases were officially reported, said Chen, the deputy director of China's National Center for Sexually Transmitted Diseases Control.
"We know that the resurgence of syphilis was driven by prostitution, migration of workers and poor health controls," he was quoted as saying by WHO.
"The areas with higher syphilis prevalence are usually places where the economy is booming but where there is also greater economic inequality, such as the southeastern coastal areas," he added.
Syphilis, a bacterial infection that causes rashes and sores, is easily treated with antibiotics, but if left untreated can damage the heart and the nervous system.
Chen told WHO that China is still developing policies for preventing and treating sexually transmitted diseases.
One problem is the stigma and perceived high cost of visiting sexual health clinics, he said. Another is the difficulty of reaching prostitutes who don't work in brothels.
He said promoting condom use, particularly among high-risk groups, would help prevent the spread of syphilis and other sexually transmitted diseases such as HIV.

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Business interests force China to political action in Africa

The bauxite factory of Guinea's largest mining firm, Compagnie des Bauxites de Guinee (CBG), at Kamsar, a town north of the capital Conakry.

It is becoming increasingly difficult for China to stay politically neutral in Africa as its economic interests grow.

By Pauline Bax and Mark Schenkel
As night falls over Conakry, the capital of Guinea, the street lights only come on in the neighbourhood of Manquepas (which translated means ‘no lack’).

In the other neighbourhoods, children do their homework by the candlelight of a petroleum lamp. Night watchmen read the Koran in the light from the sign for a petrol station. Grocers light their shop fronts with a neon light fed by a battery.
But in future, say the Chinese, everything will be different.

The whole capital of Guinea will have electricity. Taxi drivers will no longer have to take six passengers at once in their rickety Peugeots, the capital will have a metro system.

There will be flood control dams, new government offices, a fleet of passenger aircraft. Guinea will finally become modern, or so the Chinese promise. In exchange for that, all it has to do is supply raw materials like bauxite, oil and iron ore to China.
China is saving the developing countries, according even to the military junta in power in Guinea. On 9 October the Guinean minister of mining, Mohamed Thiam, announced the junta is on the verge of signing a treaty with China. It involves an investment plan worth 7 billion US dollars – one of the largest raw materials deals in Africa.
Shortly before the news was announced, soldiers in the African country shot dead 157 demonstrators.

Foreign criticism of this massacre and the threats of sanctions that followed put the military rulers under such pressure that the treaty was used in order to show the population that Guinea has no need for the West whatsoever.
But the situation in Guinea is precarious. Observers say that ethnic tensions between factions in the military could result in a war that will also have serious consequences for neighbouring countries like Sierra Leone and Liberia.

A more honest partner
The instability in Guinea shows that it is becoming increasingly difficult for China to maintain its traditional policy of political and diplomatic non-intervention in Africa, says Mohamed Jalloh on the telephone from Dakar, Senegal.

He is an analyst there for the Brussels-based think-tank International Crisis Group.

China has invested so much in Africa in the past years that it can no longer avoid taking a more active diplomatic role, says Jalloh.

“Not because China is suddenly more concerned about human rights or democracy, but out of enlightened self-interest. China benefits from a minimum level of stability in Africa, in order to secure the raw materials required for its rapidly growing economy.”
The Chinese presence in Africa extends beyond the recent hunt for raw materials.

In the1960s the communist regime presented itself as a leader of the developing countries from the idea that Africa and China were similar and had the same opponents.

Beijing extended no-interest loans and provided economic aid to about twenty African countries, including Guinea. Unlike the West, it refrained from direct political interference however.
Many Africans feel that China is a more honest partner than the rich countries, which they feel are simply meddlesome.

“I think it would be a good thing if African countries could do business with China on the basis of equality," says Baffour Ankomah, editor-in-chief of the weekly New African.

"After years of Western involvement, Africa is now like a woman being pursued by two suitors. It can now itself choose which of the two men makes her happiest.”
But according to Western governments and human rights organisations, China can no longer stand aloof from corruption, election fraud and repression in those African countries where it has its foot in the door.

The US Department of State said in a reaction to the negotiations between China and Guinea it was concerned.

“We think it is important to be alert to human rights in countries with which you do business,” said a spokesperson.

Chinese UN peace-keepers in Sudan
At the same time China is realising that stability is important for securing its economic interests. “Everything seems to indicate that China is less ready to take risks,” wrote analyst Philippe de Pontet in the weekly African Business.

“Chinese companies have not yet withdrawn from unstable countries, but they have clearly taken a more reticent attitude.”
The unrest in Guinea also threatens a neighbouring country like Liberia – where China invested 2.6 billion dollars this year in iron ore mines, the largest foreign investment in Liberia’s history.
The most prominent change to China’s Africa policy of the past years took place in Sudan.

For years human rights activists have condemned Beijing for supplying arms to the regime in Khartoum, which is held responsible for the genocide in Darfur. Sudan supplies oil to China.

In 2007, Beijing voted in favour of a peace-keeping mission in Darfur led by the United Nations and the African Union, a move that surprised many. China even sent UN peace-keepers.

The new approach reportedly was entirely due to the Olympic Games in Beijing.

China was in danger of reputation damage when celebrities like American actress Mia Farrow dubbed the games the ‘Genocide Olympics’.

Critics see the sending of peace-keepers as a small sacrifice in order to be able to continue China’s policy in Sudan.

Beijing still supports African countries in their opposition to the international arrest warrant for Sudanese president Bashir.

But according to Jalloh of the Crisis Group, the Sudan case shows that China more often feels compelled to take on responsibility. “It is a start.”
Observers take a similar view of China’s military involvement elsewhere in Africa.

Beijing sends an estimated sixteen hundred peace-keepers – more than four other permanent members of the UN Security Council. Only a few dozen US peace-keepers operate throughout Africa.

Good for China’s reputation and an exercise for the People’s Liberation Army, or good for stability in Africa? Both, perhaps. Just like the three Chinese frigates that fight piracy off the coast of Somalia.

Behind the scenes
These days Chinese ambassadors from Liberia to South Africa encourage their fellow countrymen to learn the local language, in order to prevent tensions with local workers.

In Zambia local mine workers have already rebelled against the tough Chinese working conditions and against being elbowed out by Chinese labourers.

In an interview with the Financial Times last year the ambassador to South Africa tried to soften the impression that China is keeping Zimbabwean president Robert Mugabe in power. “We are not happy with what is happening in Zimbabwe,” said Zhong Jianhua. He felt that the Western condemnation of Mugabe only had an "adverse" effect however.
Critics say this is all for show. Behind the scenes the negotiations on economic cooperation are simply going ahead.
In Guinea the Chinese government explicitly denied involvement in the controversial raw materials deal.

Huo Zhengde, ambassador in Conakry, told French radio station RFI a week and a half ago that Beijing does not play a role “in any way whatsoever.”

According to the magazine Africa Confidential, there was concern when Guinea suddenly publicly announced the negotiations that had been secret until then. China feared a diplomatic situation like that which arose earlier concerning Sudan, the magazine writes.
Ambassador Zhengde stressed that the talks with the junta are being held by the China Investment Fund (CIF) from Hong Kong – a private company.

This is true on paper, but in practice it emerges that the CIF is intertwined with the Chinese government in many aspects.

China often uses these kinds of constructions, whereby Beijing can deny that it is involved in controversial deals but in fact remains in control.
Jalloh wonders how long China can maintain this aloof approach.

“If Guinea collapses, China will once again have to participate in a UN mission to secure its investments in the country.”

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Reality bites at China's "win-win" African dream

By Ed Cropley
JOHANNESBURG, Nov 3 (Reuters) - Trade between China and Africa has boomed since a bullish summit three years ago, but some promising investment and development projects have hit snags and delays.
As a result, both sides are likely to take a more sober and realistic view of their relationship when leaders meet in Egypt on Nov. 8-9.

WHAT WAS ALL THE HYPE ABOUT?
Chinese officials are quick to remind outsiders that ties with Africa date back as far as the 1400s and the Ming dynasty admiral Zheng He, and were shaped more recently by the common struggle against colonialism.
Over the last 20 years, the focus has shifted from politics to commerce, with Africa and its vast untapped energy and mineral resources increasingly providing the raw materials for China's economic boom.
In 2006, more than 30 African leaders went to Beijing for the a Forum on China-Africa Cooperation (FOCAC) that formalised the shift in African trade and investment policy away from the United States and Europe.
Promises of lavish aid and assistance also served notice to the International Monetary Fund and World Bank that they were no longer the only sources of development finance open to Africa.
The set-up was touted as a "new strategic partnership" that would finally end poverty in Africa. It would provide China with raw materials, while Chinese cash and companies would build an African version of China's infrastructure revolution.

AND HAS IT LIVED UP TO IT?
When Beijing talks "strategic", it means a very long time -- certainly well beyond the annual reporting cycles of listed Western companies. As such, it will not be judging the success or failure of a venture on the outcome of its first three years.
That said, problems with infrastructure-for-minerals deals in Nigeria and the Democratic Republic of Congo (DRC) have delivered a reality check to both sides: China has realised working in Africa is tough, and Africa has started to worry about simply swapping perceived exploitation by the West with perceived exploitation by China.
"The last FOCAC was the high-water mark, on both sides, of starry-eyed optimism about China-Africa engagement," said Tom Cargill of London's Royal Institute of International Affairs.
"The Chinese government has realised doing business in many of these countries is a lot more complicated than previously thought, and African countries have realised China is a big and important country -- but ultimately just another country."

WHAT ARE THE PROBLEMS?
Lack of progress has been most notable in Nigeria, Africa's biggest prize due to its 36 billion barrels of oil reserves.
Deals struck with President Olusegun Obasanjo, who left office in 2007, are being reviewed amid concerns about graft and national interest, and there is precious little on the ground to show for the promises of Chinese-built roads.
China has fared better in Angola, which rivals Nigeria as Africa's top oil producer, but in September Luanda blocked the sale of a stake in an off-shore block to two Chinese firms, suggesting it does not want to be too reliant on any one buyer.
"There is an increasing wariness in some African capitals of replacing one kind of dependent relationship, and all its baggage, with another," said Antony Goldman of political risk firm PM Consulting.
Chinese companies building roads and other infrastructure have also been criticised for bringing their own labour and not passing on skills and know-how to Africans.
African manufacturers also complain about pressure from cheap Chinese imports, which have nevertheless gone down very well with African consumers.

BUT CHINA IS STILL BIG IN AFRICA, RIGHT?
Despite the hiccups, trade between Africa and China has grown at 30 percent a year, climbing to $107 billion in 2008 to eclipse the United States for the first time.
According to the South Africa-based Centre for Chinese Studies, implementation of FOCAC pledges is "fairly advanced" in Angola, DRC, Mozambique, Uganda and Tanzania.
China is also moving into areas such as agriculture -- it has lent Angola $1 billion for farming -- and many African leaders still see working with Beijing as the best way of getting things done.
"The Chinese bring Africa what it needs: investment and money for governments and companies. China invests in infrastructure, builds streets," Rwandan President Paul Kagame told a German newspaper last month.

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China calls foul over tell-all sports memoir

Yuan Weimin signs his memoir in Nanjing

Yuan Weimin's book includes details of secret deals to get Beijing chosen to host the 2008 Olympic Games. Some have branded him a traitor, while others applaud his candor.
By Barbara Demick
Reporting from Beijing -- Yuan Weimin was the toast of China's sporting scene from the early 1980s, when he coached the women's gold medal volleyball team, to 2001, when as head of the Chinese Olympic Committee, he helped bring home the biggest prize of all -- Beijing's selection as host city for the 2008 Summer Games.

Now the 70-year-old retired cadre is being denounced by some as a traitor, accused of spilling state secrets and disrupting Chinese harmony.
The offense lies between the covers of his memoir, "Yuan Weimin: Winds and Clouds of the World of Sports," published this month in Beijing.
In the book, so far only available in Chinese, Yuan writes about a deal he says was cut during a cloak-and-dagger meeting in a Geneva hotel room eight years ago in which China promised to support the candidacy of Belgian Jacques Rogge as head of the International Olympic Committee in return for his support of Beijing's Olympic bid.
It was all kept hush-hush because Rogge, as a European representative, couldn't publicly endorse Beijing when two European cities -- Paris and Istanbul -- were also contenders, Yuan writes.
"We had a mutual understanding that we all understood clearly, even if it was not in writing," says Yuan, who credited ancient Chinese military strategies for shaping the tactics.
Yuan drops other tidbits from the backroom discussions of China's Olympics bid, including how the nation sought to deflect criticism of its human rights record.

He also writes of fears during the 2000 Sydney Olympics that Chinese athletes (no names here) would be disqualified for doping, and of a women's volleyball coach arranging for the Chinese team to lose a match in the 2002 world championships to avoid facing a tougher opponent.
It is fairly mild stuff by the standards of tell-all-memoirs: no sex, no shoe boxes stuffed with cash.

But it is making a splash in China just the same because it is so unusual for anybody from the inner sanctum of the Chinese sporting world to break the code of silence that usually prevails over sensitive subjects.
"I haven't seen many tell-all books come out after the Olympics, not in any country, much less in China," said David Wallechinsky, the author of several books about the Games.
Although the Chinese government has not taken action against Yuan or the publisher, a nongovernmental organization, the Chinese Assn. for the Promotion of Olympic Culture said last week it would file a civil lawsuit against Yuan's publisher, Beijing Fonghong Media Co., to prevent publication of any copies beyond the 200,000 in print in China.
"The book contains content which is far from the truth and... its publication can be considered as leaking of state secrets," the association said in a statement last week.
The association's head, He Zhenliang, a Chinese member of the International Olympic Committee, is accused by Yuan of having nearly scuttled Beijing's Olympic bid by supporting a South Korean candidate, Kim Un-yong, to head the IOC instead of Rogge.
The Swiss-based International Olympic Committee also rejects Yuan's allegations.
"Any insinuation that deals would have been made is absolutely false," the IOC said in a statement released last week.
The book's publication has stung many Chinese sports fans, one of whom wrote plaintively on a sports Internet bulletin board: "Even if some of the things he said were true, did he have to reveal them?"
But the influential Southern Metropolis Daily and several other major Chinese newspapers have applauded Yuan's candor.
"This is the first time that somebody in the high ranks told the inside story of the Chinese sports world," said Xu Jicheng, a prominent basketball commentator who was deputy director of media operations for Beijing Olympics organizing committee.

"I think he picked the right time. Since the Olympics, Chinese people are more confident and I think we are ready to listen with an open mind."
Yuan declined an interview request, saying through his publisher that he preferred to maintain a low profile. At a news conference this month in his hometown of Nanjing, Yuan told Chinese reporters he didn't want to cause controversy.
"The purpose of this book is to tell the truth. It's just about the truth and nothing more," he said.
Yuan's revelations cover only the bidding process for the Olympics because he was not around for the Games themselves.

He was sacked as sports minister at the end of 2004 in the midst of an audit into his financial dealings -- perhaps one reason for a streak of animus that runs through the book -- and replaced by a Communist Party apparatchik with no sporting experience.
In the memoir, Yuan writes that he differed with other Chinese officials about how to handle critics who said the Olympics should not be hosted by a one-party nation.
Many Chinese officials, he says, wanted to use overseas Chinese groups as proxies to counterattack, while Yuan thought the Olympic committee needed to tackle the issue directly.
"My opinion was that we should talk about human rights ourselves," he writes.

"Even if only a few simple words, it would show we have the courage to talk about it and not avoid the facts."
Wallechinsky, the author, said he is disappointed that Yuan's memoir does not go farther in spilling secrets of China's winning Olympic bid.
For example, he wonders whether the officials who submitted the winning bid to host the 2008 Games had been sincere in their representations during the bidding process that China would improve its human rights situation.
"After Beijing was selected, as soon as the ink on the contract was dry, the International Olympic Committee ceded control of the Games to the Communist Party of China," said Wallechinsky.
Wallechinsky noted, however, that if Yuan divulged how that happened, "he would have to leave China immediately."

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China chief says space arms inevitable

Visitors view Chinese-made rockets at the Beijing Military Museum

BEIJING (AFP) — A top China air force commander has called the militarisation of space an "historical inevitability", state media said Monday, marking an apparent shift in Beijing's opposition to weaponising outer space.

In a wide-ranging interview in the People's Liberation Army (PLA) Daily, air force commander Xu Qiliang said it was imperative for the PLA air force to develop offensive and defensive operations in outer space.
"As far as the revolution in military affairs is concerned, the competition between military forces is moving towards outer space... this is a historical inevitability and a development that cannot be turned back," Xu told the paper.
"The PLA air force must establish in a timely manner the concepts of space security, space interests and space development.
"We must build an outer space force that conforms with the needs of our nation's development (and) the demands of the development of the space age."
Superiority in outer space can give a nation control over war zones both on land and at sea, while also offering a strategic advantage, Xu said, noting that such dominance was necessary to safeguard the nation.
"Only power can protect peace," the 59-year-old commander said in the interview given to coincide with this month's 60th anniversary of the founding of the PLA air force.
China has long stated that it supported the peaceful uses of outer space and opposed the introduction of weapons there.

Beijing has also sought to establish an international treaty to control the deployment of weapons in space.
In January 2007, China surprised the world by shooting down one of its own weather satellites in a test seen by many, including the United States, as a possible trigger of an arms race in space.

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China Dismisses Minister of Education

By MICHAEL WINES
BEIJING — Facing rising criticism over the quality of schools and a crush of jobless college graduates, China’s legislature announced Monday that it had removed the minister of education after six years on the job and replaced him with a deputy.
The minister, Zhou Ji, had become a prime target for critics of China’s education system, which has stumbled during a breakneck expansion that was intended to raise literacy rates and build a world-class university system.
His dismissal also follows a corruption scandal involving a university in the capital of Hubei Province, Wuhan, where Mr. Zhou had been mayor and, before that, president of another university. Mr. Zhou has not been publicly linked to the corruption charges, which remain under investigation.
The government-run Chinese-language press reported Mr. Zhou’s removal Monday largely without comment in articles summarizing the work of the standing committee of the National People’s Congress, the national legislature whose delegates are largely elected by Communist Party leaders and the military.
Mr. Zhou’s dismissal was described more fully in the government’s English-language newspaper, China Daily, which said the education system “has been plagued with problems, such as underfunding of primary and secondary schools and poor standards in higher education.”
Many of those problems arose well before Mr. Zhou became education minister in 2002, but he was widely criticized for moving too slowly to correct them.

When all 3,000 delegates of the National People’s Congress voted in March to retain or replace cabinet-level ministers, Mr. Zhou drew 384 no votes — last place among the 72 ministers who were considered.
But there had been no hint that the government was considering replacing Mr. Zhou. Indeed, he met two weeks ago with the Russian prime minister, Vladimir V. Putin, during Mr. Putin’s visit to Beijing, a strong indication that he was in good standing with China’s top leaders.
Late Monday, the prestigious Chinese Academy of Social Sciences stated on its Web site that Mr. Zhou would join the organization, further indicating his departure was unrelated to corruption charges.

Still, columnists in some Chinese newspapers suggested Monday that Mr. Zhou’s departure offered the government a chance to address a broader corruption of the academic process, in which excellence and the search for truth had been subverted by politics and the search for a fast buck.
Both basic and higher education have been hindered by corruption, from the selling of degrees and stellar test scores by administrators to cheating among students.
Mr. Zhou’s replacement, Yuan Guiren, may offer a preview of the troubled ministry’s new direction. Mr. Yuan, 59, earlier was president of Beijing Normal University, known among educators as one of the most progressive institutions in a nation where higher education is tightly bound by ideological and political restraints.
Determined to match or exceed the performance of developed nations, China’s government has poured billions of dollars into education in the last decade.

The results are remarkable: Higher-education enrollment has more than tripled since 2000, and China today awards more college degrees than the United States and India combined. Annual awards of doctoral degrees rose sevenfold between 1996 and 2006.
But critics say the quality of teaching has suffered, and in recent years universities have become more politicized as Communist Party officials began to view a senior academic position as a ticket to career success.
Elementary and secondary education have dramatically raised literacy rates and attendance, but schools are hamstrung by financing problems.

Dalai Lama Accuses China of Misleading World About Tibet

Tibetan spiritual leader the Dalai Lama speaks during a press conference in Tokyo, Japan, 31 Oct 2009

By Akiko Fujita
Tokyo -- Tibetan spiritual leader the Dalai Lama speaks during a press conference in Tokyo, Japan, 31 Oct 2009
Exiled Tibetan spiritual leader the Dalai Lama has criticized Chinese leaders for misleading the world about the situation in Tibet. His comments came in an address to foreign journalists in Tokyo.
The Dalai Lama came to Japan to take part in panel discussions with scientists but the exiled Tibetan leader did not shy away from the political spotlight. In an address to foreign correspondents in Tokyo, the Tibetan spiritual leader criticized what he called Chinese government propaganda regarding Tibet. He said Beijing was fooling the world into thinking the situation between the Tibetan people and the Chinese had improved.
"Please go to Tibet and see if things are really good as the Chinese government says," said the Tibetan spiritual leader. "Then tell us that our view is wrong. Then we will apologize - no problem."
The Dalai Lama's criticism came in response to a question from the Xinhua agency -- the official news agency of the Chinese government.

The reporter suggested that Tibetan culture had become popular among the Chinese -- that both sides were learning to co-exist peacefully.

The Dalai Lama dismissed that notion and suggested that was the image Chinese government was trying to sell to the world. He said they had done so by censoring anyone who questioned them.
"People should have full knowledge of reality whether good or bad," he said.

"For that reason transparency is very essential. That is lacking in all these authoritarian governments. Particularly in the People's Republic of China."
Tensions between the Tibetan people and Chinese government led to violent clashes in March last year.

The unrest in the Tibetan capital, Lhasa, began with demonstrations that marked the 49th anniversary of Tibet's failed uprising against China. But it turned into an anti-government protest with Tibetans attacking Chinese migrants and shops.

The Chinese government has said more than 20 people died in the riots, but Tibetans argue that number was much higher.
In his address Saturday, the Dalai Lama said Chinese police never tried to stop the violence.
Beijing has accused the Tibetan spiritual leader of instigating the violence in Lhasa, but he has denied those allegations.
Two Tibetans were executed earlier this week for their roles in the riots.

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As US looks for exit in Afghanistan, China digs in

This April 2007 photo provided by James Yeager shows a delegation from the state-owned Chinese company, China Metallurgical Group Corporation, visiting the site of a copper mine in Aynak, a former al-Qaida stronghold southeast of Kabul, Afghanistan. The mounds behind the group, called "outcrops", signal the large quantity of copper that lies below. Yeager says a handful of Afghan officials dominated a secretive selection process that gave MCC improbably high marks over firms from the U.S., Canada and other countries, to develop a mine to tap one of the world's largest unexploited copper reserves

By RICHARD LARDNER

WASHINGTON — At a former al-Qaida stronghold southeast of the Afghan capital, a state-owned Chinese company is at work on a $3 billion mine project to tap one of the world's largest unexploited copper reserves, a potential financial boon for an impoverished country mired in war.
The promise of a bright future at Aynak, however, cannot conceal the troubling reality of how business is often done in Afghanistan, according to critics of the Kabul government's decision to reject bids from competitors in the U.S., Canada and other countries.
The bidding process unfairly favored China, they allege, and epitomized the back-room deals and abuse of power that has turned Afghans against their government and undercut the U.S. military effort there.
Corruption and graft long have been ingrained in Afghanistan's public institutions. Yet the extent of this corrosion has taken on new significance as the White House considers expanding the U.S. commitment to a war unsupported by a growing number of Americans.
Widespread fraud in Afghanistan's presidential election in August has raised doubts about how quickly a stable and credible government can be installed.

A U.N.-backed commission threw out nearly one-third of President Hamid Karzai's votes, setting the stage for a Nov. 7 runoff.
In his recent assessment of the situation in Afghanistan, the top U.S. commander warned that unchecked corruption has led alienated Afghans to support the Taliban-led insurgency.
Afghan officials insist the Aynak bidding was handled openly and honestly, and will create thousands of jobs. But several U.S. geologists and Western businessmen who watched the process closely disagree.
James Yeager, an American geologist who advised Afghanistan's minister of mines, says a few Afghan officials dominated a secretive selection process that gave the winner, China Metallurgical Group Corp., improbably high marks over its foreign competitors.
Said Tayeb Jawad, Afghanistan's ambassador to the United States, said the bidding process was above board. He said he pushed for the U.S. bidder, Phelps Dodge, to be awarded the Aynak rights, but that China offered to start work right away while Phelps wanted to wait until the country was safer.
"We can't afford to give the mining rights to a company that will sit on them for the next 10 or 15 years," Jawad said.
China Metallurgical, better known as MCC, has a poor track record with mining projects in other countries, according to Yeager and other critics.

In neighboring Pakistan, for example, where MCC operates a copper mine, there's been little benefit to the local economy. But that information was ignored during the deliberations, they say.
The Aynak deal was awarded to the Chinese late 2007, but the project is only now getting under way.

Before copper can be hauled from the ground, China must make a substantial investment to build a power-generating station, roads and a railway to move the metal.
Yeager and Larry Snee, a former U.S. Geological Survey official who also has worked in Afghanistan, contend that MCC probably will steer most of the jobs to Chinese workers.
"Of course, the Afghans are going to benefit," Snee said. "But will they get all they deserve?"
China needs huge quantities of raw materials to feed its rapid economic growth and energy demands.

It is well positioned to become the dominant force in Afghanistan's potentially lucrative minerals sector, said Don Ritter, president of the Afghan-American Chamber of Commerce in McLean, Va.
"In what direction do (Afghanistan's) mines and minerals develop?" Ritter said.

"Do they go the Eastern model, where everything is done behind a closed door? Or, is there an open, transparent competition, where the money is laid on the table without undue influence?"
Yeager has distributed a 78-page report on the Aynak contract in which he contends that M. Ibrahim Adel, Afghanistan's minister of mines, and his associates shut out legal, financial and technical experts who could have helped them on the decision.
Yeager doesn't accuse Adel or anyone else from benefiting personally by awarding the work to MCC. But the final decision, Yeager says, was dictated by bureaucrats concerned with dollar amounts and personal preferences.
A spokesman for Adel said by e-mail that Yeager may have had a stroke while he was in Afghanistan, and that possibly compromised his understanding of what happened.
Yeager says his health was fine while he was in Afghanistan between 2006 and 2007. "That's just to discredit me," he said. "These are the games they play."
One of the losing competitors for the contract was Hunter Dickinson, a global mining company based in Vancouver, Canada. Robert Schafer, Hunter Dickinson's chief of business development, said an Afghan official told him that its bid had been shown to the Chinese while the proposals were being evaluated.
Schafer said he "wasn't surprised at all" to learn that MCC won.
Wang Baodong, a spokesman for the Chinese Embassy in Washington, did not address the allegations. He said China is committed to pursuing economic, trade and investment projects in Afghanistan that benefit both countries.
China has contributed little to improving security in Afghanistan, yet with the Aynak deal, stands to gain from the sacrifices made by the U.S. and NATO in troops and money.
"The world isn't fair," said Robert Kaplan, a senior fellow at the Center for a New American Security in Washington.

"A worse outcome to staying and helping the Chinese would be withdrawing and losing a great battle in the war against radical Islam."

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The Price Of Corruption

By Gady Epstein
BEIJING - Recently I had the rare pleasure of interviewing a coal mine boss, one of Chinese society's favorite villains, about China's real Public Enemy No. 1, corruption.

Lian Zuqian is on the losing end of a state takeover of private coal mines in Shanxi Province, which I wrote about this week, and I took the opportunity to ask him about running a mine in a notoriously corrupt industry.
"The inspection teams who went to check the coal mines, they asked for money. If you didn't give them money, they would close down the mine," Lian says.

"How much you paid depended on the title. The bureau chief and the office director and the staff all have different prices."
The organized nature of such rent-seeking, complete with a price schedule, is hardly surprising. Some Chinese reporters take payoffs not to report on deadly coal mine accidents, and the rule there is that the bigger the news outlet, the bigger the pay-out.

Lian asked me if I too was a corrupt journalist. One of his relatives chimed in that in Shanxi, journalists "go to a coal mine by taxi and come back by Mercedes Benz."
"Shanxi is the most corrupt place in China," Lian says.
On that distinction, Shanxi has no shortage of competition.

Corruption is so pervasive in China that it does not tear at the fabric of governance--it is the fabric.

In Chongqing in southwestern China, Party Secretary Bo Xilai has carried out a police action on such a huge scale that it sounds like a Hollywood movie: Top law enforcement officials and potentially thousands of police officers allegedly worked in concert with the mafia, or formed a core element of the mafia that controlled the jurisdiction of 32 million people.
In Shanghai three years ago, in a rare takedown of a sitting Politburo member, Party Secretary Chen Liangyu and several other officials were arrested and later sentenced to long prison terms on corruption charges.

The arrest last year on stock manipulation charges of one of China's richest men, Gome founder Huang Guangyu, has led this year to the detentions and expulsions from the party of several high-ranking current and former Guangdong Province officials, including a senior anti-corruption cadre.
In any of these cases, the question is not whether investigators will find corrupt officials, it is how far up or down or sideways in the bureaucracy will they go in making arrests.

The party knows from the top on down that corruption is a chronic and thorough affliction of the one-party state, and has long assigned many authorities to the task of curing it.
But many of the highest-profile crackdowns, including former General Secretary Jiang Zemin's against the Beijing party secretary in 1995, Chen Xitong, and current General Secretary Hu Jintao's against Chen in Jiang's power base of Shanghai, are viewed less as cleanup efforts than as factional maneuvers to undermine enemies and consolidate power.
The Chongqing crackdown was one of the most publicized in years.

Many were shocked the local party chief was able to take on such entrenched corruption. People assumed, perhaps correctly, that Bo had some ulterior motive for moving on the Chongqing mafia: Maybe he was trying to impress Beijing so that he could move up in the party hierarchy; maybe he was uprooting a faction that rivaled or threatened his own.

The notion that a leader in government simply would see wrong and try to right it, Robert F. Kennedy-style, exists in Camelot, not China.
Whatever Bo's motives were, the deeper problem is that Chongqing was no anomaly.

There are other cities and towns in China where it is hard to distinguish between the mafia and the government, where illegal gambling houses operate with impunity and loan sharks enforce their debts with machetes. And where factory and mine owners pay protection money to stay in business.
Lian estimated that corruption accounted for 20% of his operating costs in the coal mine business, and that figure is likely higher, he said, for the owners of illegal mines.

The ultimate cost of corruption is in those mines that cut corners on safety and get away with it until the next deadly accident.

The official count is that 50,000 miners died in Chinese coal mines this decade, and the real number is probably much higher (keep in mind the journalists paid for their silence).
The state consolidation of the coal industry in Shanxi is ostensibly an effort to improve safety. The government has taken on a class of entrepreneur, the coal boss, that is widely hated for profiting so much from a business that kills so many.
But who made the evil coal boss possible? Who allowed and even rewarded the operation of unsafe mines?

Those who hate the coal boss need to take a hard look at the system that created him.

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Dalai Lama says China overpoliticizing his travels

Tibetan spiritual leader Dalai Lama has arrived in Tokyo for a week-long stay

By ERIC TALMADGE

TOKYO — The Dalai Lama, Tibet's spiritual leader, said Saturday that China was overpoliticizing his travels and claimed his decisions on where to go were spiritual in nature, not political.
The Dalai Lama, on a visit to Tokyo, said he believed the Chinese government saw him as a "troublemaker" and had read too much political meaning into his frequent travels abroad.
"The Chinese government considers me a troublemaker, so it is my duty to create more trouble," he quipped.

"The Chinese government politicizes too much wherever I go. Where I go is not political."
Despite strong criticism from China, the Buddhist leader, who lives in exile in India, recently visited Taiwan, which Beijing considers part of its territory.
Beijing has also strongly opposed his planned visit next month to India's northeastern state of Arunachal Pradesh, which is at the heart of a long-running border dispute with China.

He is scheduled to visit the Tawang Buddhist monastery in the state on Nov. 8.
"I am surprised the Chinese government is negative about my visit," he said. "If it creates some problems, that is sad."
Beijing opposes most activities of the Dalai Lama, whom it accuses of advocating independence from Chinese rule for his native Tibet.
Last month he visited Taiwan, his third trip there, to bless the survivors of Typhoon Morakot, which left nearly 700 people dead after it hit the island on Aug 8. He visited disaster areas in southern Taiwan, comforted survivors and held a prayer meeting for typhoon victims attended by 15,000 people, according to his official Web site.
The Dalai Lama did not shy away from criticizing China at his news conference Saturday, saying it lacks freedom and transparency, and is not trusted by its neighbors.
He encouraged people to visit Tibet and decide whether Tibetans under Chinese government rule are happy and thriving.
"Go see for yourself," he said. "If we are wrong, we will quit all of our activities."
Tibetans attacked Chinese migrants and shops in the regional capital, Lhasa, and torched parts of the city's commercial district in anti-government riots in March 2008.
Chinese officials say 22 people died, but Tibetans say many times that number were killed.
The violence in Lhasa and protests in Tibetan communities across western China were the most sustained unrest in the region since the late 1980s.

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In China, Objections To Google’s Book Scans

By SHARON LaFRANIERE
BEIJING — A long-running dispute over Google’s efforts to digitize books has spread this month to China, where authors have banded together to demand that their works be protected from what they call unauthorized copying.
Two Chinese writers’ groups claim that Google has scanned Chinese works into an electronic database in violation of international copyright standards.

The organizations are urging China’s authors to step forward and defend their rights.
“Google has seriously violated the copyrights of Chinese authors. That is an undeniable fact,” Chen Qirong, a spokesman for the China Writers’ Association, said by telephone. The group says it represents nearly 9,000 writers.
Google has sent a representative to Beijing to meet on Monday with officials of the China Written Works Copyright Society, which manages Chinese copyrights. The company insists it has fully complied with copyright protections.
Google’s ambitions to digitize millions of books, in most cases without first seeking permission from publishers or authors, has been contentious in the United States and elsewhere for more than four years.
But most Chinese authors learned of Google’s efforts only this month, after writers’ groups were notified of a potential class-action settlement between Google and American authors and publishers.

Some Chinese authors discovered that Google had obtained their works from libraries in the United States and scanned them into its database.
The settlement would allow Google to create a vast library and bookstore where the full text of the digitized books would be available in the United States. For now, the books appear only in the company’s Book Search service, which allows people to read short snippets of copyrighted texts or, if the company has obtained permission, longer excerpts.
“We take the view, backed up by international copyright law, that no copyright is violated in this process since the amount of text displayed is so small and it’s purely for information,” said Courtney Hohne, a Google spokeswoman, in an phone interview from Singapore.

“In fact, it’s comparable to a quotation from a book in a review or our Web search results, both of which are perfectly legal.”
Ms. Hohne said it was virtually impossible for Google to discover who holds the rights to all of the millions of books on library shelves. Waiting for copyright holders to surface would doom any effort to create a comprehensive electronic index, she said.

If a copyright holder does object, Google removes the snippets or even all reference to the book from the search engine, she said.
The Chinese groups see it differently. “It is as if you have something nice in your living room and Google takes it and puts it in its living room,” said Zhang Hongbo, deputy director general of the Chinese copyright society. “We are definitely opposed to using our works without our permission.”
The class-action settlement, if approved, would create a registry of copyright holders and allow them to share in revenue generated through online book purchases or subscriptions to the database.
Mr. Zhang said Chinese authors didn’t like the proposed settlement either. “We think that reconciliation is extremely unfair,” he said. “We don’t accept it.”
The settlement is currently being rewritten, in part because of opposition from the Justice Department.
Marybeth Peters, the top copyright official in the United States, told Congress in September that the settlement could put “diplomatic stress” on the government because it would affect foreign authors whose rights were protected by international treaties. The governments of France and Germany oppose the deal.
A few Chinese authors have suggested that Google has not only scanned in their works, it has published selections of them online without obtaining permission. No such cases could be immediately confirmed, and at least a few authors appeared to be mistaken about whether their books could be viewed.
Ms. Hohne said more than 50 Chinese publishers had allowed parts of 60,000 books to be read online at books.google.cn.

Typically, publishers have agreed to allow Google to show about 20 percent of the book and link to sites where readers can buy it, she said.

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China Transfer Policy Caused Riots

By Stuart Biggs
Rebiya Kadeer, president of World Uyghur Congress, speaks during a press conference in Tokyo, 30 Oct 2009

Rebiya Kadeer, the exiled Uighur activist, said violence in Xinjiang in China that left 192 people dead in July may have stemmed from the forced movement of Uighur women to mainland China to work in factories and hotels.

Kadeer, the head of the Washington-based World Uighur Congress, said China has transferred as many as 300,000 women to work in areas outside Xinjiang under a government program to assimilate ethnic minorities.
“Beautiful girls are sent to work in hotels and bars. Others are sent to factories where they have no freedom and no contact with their families,” Kadeer said at a press conference in Tokyo today.

“The media talks of providing economic opportunity but the reality is these women are miserable.”
China’s government accuses Kadeer of orchestrating the clashes between ethnic Uighurs and Han Chinese in Urumqi, capital of China’s westernmost Xinjiang province. Kadeer has repeatedly denied the claim and says the government is suppressing human rights and religious freedom in Xinjiang.
“I’m not an enemy of the Chinese people, I’m not even an enemy of the Chinese government,” she said.

“I’m only asking one thing from the government, to give the Uighurs a chance to live their lives in peace.”

Prison Time
Muslim Uighurs, who make up less than half of Xinjiang’s population of 20 million, complain of discrimination by the Han, China’s dominant ethnic group, and unfair division of the region’s resources. The Han make up more than 90 percent of China’s 1.3 billion people.
The landlocked region, about three times the size of France, has China’s second-highest oil and natural gas reserves and was its biggest cotton producer.
Kadeer, a mother of 11 children, was once ranked as China’s 34th-richest person with a fortune of $25 million, according to the Shanghai-based Hurun Report, and was on China’s top political body for people who aren’t members of the Communist Party.
She spent six years in prison after criticizing the government for its policies in Xinjiang.

Under pressure from the Bush administration, China released Kadeer in 2005 and she moved to Washington, to head an organization of exiled Uighurs.

Discrimination
“They say the economic development has happened, but the benefits have gone to the Republic of China,” she said.

“We can’t write books or poetry ourselves. Our children can’t study, our people can’t get jobs.”
Kadeer is visiting Japan for the third time, giving speeches at universities and non-profit groups to coincide with the publication of her biography in Japanese.

An earlier visit after the Xinjiang riots in July prompted criticism of Japan’s government by China.
Taiwan’s government banned Kadeer from visiting in September citing what the government said were security concerns.
The Dalai Lama, the exiled religious leader of Tibet, which borders Xinjiang, is also in Japan this week. He visits the country about twice a year to give speeches to religious groups on Buddhism. He’s scheduled to hold a press conference in Tokyo tomorrow.
Riots broke out in Tibet in March last year leaving as many as 200 people dead, according to the Tibetan government-in-exile. China’s government said 19 people died.
“Some time I want to discuss the issues with him because our fate is the same, but there is no plan to meet him in Japan,” Kadeer said.

“What is happening in East Turkestan is the same as what’s happened in Tibet over the last 60 years,” she said, using the Uighur name for Xinjiang.

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US admiral concerned about China military buildup

The aircraft carrier USS George Washington anchors in the Hong Kong water Thursday, Oct. 29, 2009. The aircraft carrier is in a Hong Kong harbor after a week-long joint military exercise with South Korea. USS George Washington Commanding Officer David Lausman said the carrier plans to stay in Hong Kong for several days

By JEREMIAH MARQUEZ

HONG KONG — A U.S. Navy admiral expressed new concern Friday over China's military buildup and urged Beijing to be clearer about its intentions.
With China's military growing at an "unprecedented rate," the U.S. wants to ensure that expansion doesn't destabilize the region, Rear Adm. Kevin Donegan told reporters on a visit to the Chinese territory of Hong Kong.
Donegan referred to China's expanded weaponry.

His remarks echoed the concerns of other U.S. military leaders who have said the growth in China's military spending — up almost 15 percent in the 2009 budget — raises questions about how Beijing plans on deploying its new power.
"When we see a military growing at that rate, we're interested in transparency and the understanding of the uses of that military," said Donegan, commander of the USS George Washington aircraft carrier strike group, a key part of the U.S. Pacific Fleet.
Donegan's comments come as a top Chinese general visits the United States on a mission to strengthen trust between the two militaries and dispel U.S. concerns about the growth of the People's Liberation Army.
Xu Caihou, the PLA's second-highest ranking officer, told President Barack Obama on Wednesday that ties between the two countries' militaries play "an important role in enhancing strategic mutual trust and deepening their pragmatic cooperation," according to Chinese media reports.
China has boosted military spending by more than 10 percent annually for almost two decades, and the official figure of $71 billion this year is thought by many analysts to represent only a portion of total defense spending. It still amounts to only a fraction of U.S. defense spending.
China says much of the increase is used to improve salaries and living conditions for soldiers, but it has also been adding sophisticated new warships, submarines, fighter jets and other weapons systems to its arsenal.

PLA leaders have also said they are considering building an aircraft carrier, but such a development is thought to be years, if not decades, away.
Donegan acknowledged the possibility of a Chinese aircraft carrier, but also said he was concerned with anti-access weapons. This class of weapons includes missiles and submarines that can threaten U.S. forces in the region and prevent them responding in the event of a crisis.
"I am absolutely concerned," Donegan said.
He went on to say, "When a navy is doing that, we just want to make sure it's transparent enough so those in the region understand what they're doing."
At the same time, Donegan described positive exchanges between the two militaries that he said he hoped would continue, including a visit by five Chinese army generals aboard the George Washington during its call in Hong Kong this week.
Ties between the two militaries have been repeatedly roiled by China's objections to U.S. arms sales to Taiwan, claimed by Beijing as its own territory, as well as Chinese efforts to disrupt Navy surveillance missions off its shores.
A series of confrontations involving vessels from the two navies has raised concerns over China's rising determination to defend what it sees as its territorial interests in the South China Sea, where the U.S. has long operated as the major international power.
Donegan said the Navy would continue to operate in international waters — something that could come in defiance of Beijing's claims it has the right to bar surveillance work inside its exclusive economic zone.
"We are going to continue to operate in the South China Sea and international waters and not in territorial seas of another country," he said.
The visit of the George Washington, considered the crown jewel of the U.S. Pacific Fleet, is its first to Hong Kong in its 17-year history.

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China's "Henry Ford" drives Geely onto global stage

By Alison Leung and Fang Yan
SHANGHAI (Reuters) - Li Shufu, the founder of China's Zhejiang Geely Holdings, has much in common with Henry Ford, from a childhood on the farm to a scrappy determination to build a car-making behemoth from nothing.
If discussions underway between Geely and Ford Motor Co are successful, he may have another link with the great industrialist -- ownership of Ford's Volvo unit.
Li's Geely, which means auspicious or lucky in Chinese, has captured the imagination of car buffs worldwide with its dark-horse bid for the well-known but money-losing Swedish brand being sold by Ford.
"Li is a man full of ideas," said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.
"Some of those ideas have worked. But the Volvo deal could turn out to be a big disappointment even if it wins the bid, as cross-border auto deals have seldom led to happy marriages in China and elsewhere."
Born in 1963, Li comes from eastern China's Zhejiang province just south of Shanghai, known for churning out some of China's best and brightest entrepreneurs.
A mechanical engineer by training, Li disdains such high-brow activities as golf and lives in a modest apartment in Beijing, said Lawrence Ang, executive director of the publicly traded Geely Automobile.
Now one of China's richest men, Li's trajectory began modestly.

After graduating from high school, he used a small graduation gift to buy a camera and open a photo studio in his village.
He put earnings from that business into an operation salvaging gold from discarded appliances before moving into the a refrigerator parts business in 1984.
Motorcycles were next, as he took over an ailing state-run firm in the mid-1990s and turned it into China's best-known domestic brand.

He later moved into cars, and built his company into China's largest privately held automaker, aiming to sell 250,000 vehicles this year.
Like Henry Ford, who the Economist magazine compared him to, Li's focus is on the mass market with models such as the Free Cruiser and Geely Kingkong, which sell for as little as 40,000 yuan ($5,859). In contrast, Volvo's top of the line XC 90 sells for up to $205,000 in China.

SURGING STOCK
Hong Kong-listed Geely Automobile has seen its stock soar more than eight-fold since 2006, including a more than four-fold jump this year alone on high hopes for the Volvo bid, strong sales in the world's largest car market and a major investment by Goldman Sachs.
But Li's apparent early distaste for politics -- a mainstay in China and key to doing business there -- also cost him along the way. His lack of political savvy and government connections almost kept him out of the auto business altogether due to China's complex licensing and permitting requirements.
"He has always wanted to make cars, but the government did not issue him a license until 2000," said Ang.
Since then he has become more practiced at navigating China's political waters, and now serves as a member of the Chinese People's Political Consultative Conference, a largely ceremonial political advisory body.
Li, who has said he sleeps in his company's Hangzhou headquarter most nights, is now pressing forward with the Volvo bid just months after another Chinese company, Tengzhong Heavy Industrial Machinery, inked a deal to buy GM's line of gas-guzzling Hummer vehicles amid the global auto restructuring.
He does so, however, with a modesty that would not have come easily to Henry Ford.
"Volvo is like a mysterious, beautiful woman," he told the Wall Street Journal in April.

"We just look at her from far away, amazed. We don't dare get close to her. We're just a bunch of farm boys."

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China blocks 'Berlin Wall' Twitter page

BERLIN (AFP) — China has blocked a website inviting users of microblogging site Twitter to comment on the fall of the Berlin Wall amid a deluge of protests at Beijing's Internet censorship, organisers said Thursday.

The site was meant to be a place for people to share memories of the night the Berlin Wall was yanked down 20 years ago, but quickly morphed into a forum for protest against what users described as "The Great Firewall of China."
Of the roughly 3,300 comments left on the virtual wall, around 1,500 have been in Chinese, said Carsten Hein, coordinator of the "berlintwitterwall.com" project.
The site "has not been freely accessible since Monday evening Beijing time," he added, citing "several current sources."
According to the China Digital Times, one user wrote: "Mr Hu Jintao, please tear down this Great Firewall," in a twist on the famous 1987 Berlin speech by then US President Ronald Reagan who implored his Soviet counterpart Mikhail Gorbachev to "Tear down this wall."
Another said: "My apologies to German people a million times (for taking over this site). But I think if Germans learn about our situation, they would feel sorry for us a million times."
One apparently bemused German user wrote on the site: "The Berlin Wall speaks Chinese!"
The hugely popular Twitter site allows users to post a short message of no more than 140 characters which can then be read by other followers of the service.
China regularly cracks down on online content it deems unhealthy, which includes pornography and violence but also information critical of the government.
In June, the government was forced to backtrack on an order to install Internet filtering software on all computers sold in China after it triggered a huge outcry at home and abroad.
China has at least 338 million Internet users, more than any other country in the world, according to state media.

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French luxury preens on website in China

Over the last four years French luxury outlets in China have tripled to around 1,600

PARIS (AFP) — France's creme de la creme luxury firms, hit by a drop in sales on traditional markets, on Thursday launched a China charm offensive, with a 3D website that gives a peek at the best France has to offer.

Launched in Paris and Beijing by the Comite Colbert group of 70 luxury firms, the 250,000-euro website developed over two years (www.cColbert.fr) shows off top-end products as well as the best of the French lifestyle.
The launch came as consultants Bain et Company said luxury goods are expected to slump 16 percent this year on the US market, 10 percent in Japan and eight percent in Europe -- but see a 12 percent hike in China.
"This is the first such internet site," said the Comite Colbert's Elisabeth Ponsolle des Portes. "3D previously was used for video and film but not on a website."
Users can watch a ballet performance, drool over patisseries, check out Paris hot spots and see the latest watches, perfumes and scarves.
"Luxury is not just about money but about culture and education," said the president of the Comite Colbert, Francoise Montenay.
"Products can be more or less expensive and you have to learn to distinguish between a very good product and a less good one."
Underlining the importance of the stakes, a number of leading luxury goods makers attended the launch of the site in Beijing, including Cartier, Hermes, Lanvin, Yves Delorme and Gien.
The website is hosted by China's biggest portal sina.com and will be available for six months.
In 2005, Comite Colbert companies registered 4.5 percent of their turnover in China, Hong Kong and Macau.

That figure has gone up to eight percent on average, for some, up to 25 percent.
Over the last four years French luxury outlets in China have tripled to around 1,600, with 45 new boutiques due to be opened in 2009-2010, including 38 in mainland China.

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EU denounces China's execution of two Tibetans

BRUSSELS (AFP) — The European Union on Thursday condemned China's execution of two Tibetans, voicing concerns over how their trials were conducted.
"The European Union condemns the recent executions of two Tibetans, Mr Lobsang Gyaltsen and Mr Loyak," the Swedish EU presidency said in a statement on behalf of the 27-nation bloc.
"The EU respects China's right to bring those responsible for the violence to justice but reaffirms its longstanding opposition to the use of the death penalty under all circumstances," the EU statement said.
"The EU reiterates its concerns about the conditions under which the trials were conducted, especially with regard to whether due process and other safeguards for a fair trial were respected," the EU presidency added.
The European Union has called for death sentences handed down on several other Tibetans to be commuted.
China said Tuesday that the two Tibetans had been executed for their role in deadly ethnic unrest that rocked the Himalayan region last year, the first known use of capital punishment over the violence.
Fierce anti-China protests erupted in Lhasa and spread across Tibet and adjacent areas with Tibetan populations in March last year, embarrassing the government in Beijing as it prepared to host the Olympic Games.
Beijing blamed the Dalai Lama -- the exiled Tibetan spiritual leader seen by authorities as a separatist bent on independence -- for inciting the unrest. He, however, insists he only wants greater regional autonomy for Tibet.
China has said "rioters" were responsible for 21 deaths, while its security forces killed only one "insurgent."

But the exiled Tibetan government has said more than 200 Tibetans were killed in the subsequent crackdown.

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Morgan Stanley battles over China derivatives

By Robert Cookson and Sundeep Tucker in Hong Kong
Morgan Stanley has been dragged into a risky Chinese court battle over a hedging contract with a local company in the latest stand-off between foreign investment banks and mainland enterprises over loss-making derivatives deals.
The case comes at a sensitive time for global banks, with Beijing seeking to clamp down on the over-the-counter derivatives markets after a raft of state-owned companies made disastrous bets on currency and commodity movements.
Although the sums involved are small – relating to renminbi-dollar hedges worth just tens of millions of dollars – a legal battle in China could be prolonged and subject Morgan Stanley to financial and reputational risks, lawyers said.
But Morgan Stanley may have calculated that the status of its counterparty – China Haisheng Juice Holdings – as a private company makes a lawsuit less risky than taking on a state-owned Chinese enterprise with the backing of the government and courts.
The investment bank now faces two court battles, one each in England and China, over the same set of contracts.
In London, Morgan Stanley remains in pursuit of the $26m it alleges it is owed after Hai-sheng failed to post collateral relating to the hedges.
At the same time Haisheng is suing the US investment bank in Xi'an, Shaanxi province, where it is based, for allegedly mis-selling the hedging contracts. The China case is proceeding because the English High Court this month dismissed Morgan Stanley’s plea that its dispute with Haisheng only be heard in England.
The little-noticed judgment centred on the nature of the “exclusive jurisdiction” clause in the parties’ financial contract.

The clause, which specified that any litigation should take place in England, applied only to Morgan Stanley International, the judge said, leaving Morgan Stanley Asia Limited – the subsidiary that advised on the hedges – exposed to Chinese legal action.
The High Court ruling has set a precedent that could trigger further showdowns in China between mainland companies and foreign banks, legal experts said.
Lawyers said that the ruling would force many global investment banks to tighten the wording of their derivatives contracts.

“Institutions will not want to end up in a jurisdiction they had not anticipated at the outset,” said Paul Browne, of law firm Simmons & Simmons in Hong Kong.
Morgan Stanley has suffered a number of recent challenges relating to its China business.

Earlier this year, the US SEC started a probe into the bank’s former China property head over possible violations of the US foreign corrupt practices act relating to mainland property deals while one of its former investment bankers was convicted in Hong Kong last month for insider trading while advising Beijing-based Citic Resources.
Court actions in China over derivatives deals are rare, in part because many western institutions choose to re-negotiate contracts or settle out of court.
Court documents show that China Haisheng, which is listed in Hong Kong and domiciled in the Cayman Islands, alleges that Morgan Stanley Asia Limited “made misleading statements and failed to draw the attention of China Haisheng to any of the disadvantages and pitfalls inherent in the transaction”.
Morgan Stanley, which denies the allegations, declined to comment. China Haisheng did not respond to requests to comment.
Sasac, the Chinese government body that supervises more than 150 state-owned enterprises, last month declared its support for legal efforts by some of those companies that want to break loss-making oil derivatives contracts with foreign institutions.

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In China, too, a health-care system in disarray

More than 300 million Chinese lack health insurance, and authorities have been trying to fix the system.

Despite recent reforms, 300 million lack insurance -- and gaps in care quality grow

By Steven Mufson
BEIJING -- Shen Baohou, 72, who once worked for a hydropower station in Sichuan province, has a serious heart problem, and he -- and his children -- are paying for it dearly.
Doctors have operated twice on Shen to implant stents at a cost of more than $15,000, about five times China's per capita income.

Under China's health-care system, the government pays 60 percent of his hospital expenses and virtually nothing for the medications and oxygen he has needed since.
"I am retired and have little pension every month. So I cannot afford the treatment fee at all," he said, adding that, luckily, his children could afford to help him out.

"Without them, I don't think I could have had the operation."
China's health-care system is in disarray, a side effect of the market reforms that have spurred private enterprise and rapid growth since 1980.

Before then, state-owned companies offered cradle-to-grave care, part of a system based on danwei, or work units, that provided health, education, pensions and other benefits.

But as the economy has grown more diverse, an increasing number of Chinese have had to fend for themselves, with only a porous government insurance program to help.
As U.S. lawmakers engage in a tense debate over health-care reform, Chinese authorities, too, are attempting to fix their system.

Over the past five years, the government has tried to provide coverage to more of its 1.4 billion people. But even people covered by a minimal health insurance program are often left with big hospital bills and must pay for most outpatient services and medication.

More than 300 million people do not have any health insurance.
In a country once committed to erasing class differences, the gap in the quality of care has been steadily growing, too. Peking University People's Hospital, for example, has computerized charts, GE scanners, top-flight doctors and a deluxe ward where the wealthy can pay extra for private suites.

But community clinics in most cities or rural areas tend to be understaffed and poorly equipped.
"We go to clinics for colds, but we don't trust the doctors because they are all being paid by the drug companies and so they over-prescribe," said Helen Ye, a Beijing resident who works for a U.S. company.

"So most Chinese people, if they don't feel really sick, do home treatment and try to cure themselves."
China's State Council is eager to improve the situation but can't decide how.

The government currently fixes the prices of all medical services, and doctors are treated -- and paid -- like public officials. But that has contributed to a shortage of doctors as many talented Chinese choose better-paid professions.
Some experts say more private spending and investment would improve the system.

Gordon G. Liu, a professor of economics at Beijing University's Guanghua School of Management, said he would let people with means spend more money on care, which he said would increase the availability of care by giving doctors incentives to work harder and by luring more Chinese into the medical profession.
Even poorer people would benefit because there would be more care overall, Liu said. He also proposed opening the way for foreign investment from companies such as Kaiser Permanente in building hospitals in China.
But other experts say that approach would be unfair to the poor, who might be neglected by doctors seeking rich patients.

They say inequality in China is bad enough these days, as scores of millions of people live on a couple of dollars a day while tens of millions of wealthier Chinese buy luxury cars, Louis Vuitton bags and nifty electronic goods.
The State Council has asked health-care experts to run pilot projects in cities and report back in three years.
Some will free up hospital doctors to work at community or for-profit clinics without losing their jobs. Some will stick more closely to the government-run model, in which doctors' salaries and fees are fixed.
"It's very interesting to see politics in China. Sometimes they are very old-fashioned and sometimes so liberal, even more than in the U.S.," said Liu, who has taught at the University of North Carolina.

"This time it said, 'Since you guys are debating, let's do an experiment and see which way works better.' I tell my colleagues that what you're doing is very consistent with your 'scientific development philosophy' rather than being like a dictator telling us what to do, like in the past."

Out-of-pocket costs
With the end of civil war and the Communist victory in 1949, life expectancy in China increased --- except during Mao Zedong's Great Leap Forward, a disastrous economic plan that resulted in the starvation of millions from 1959 to 1962.

Between 1963 and 1980, life expectancy at birth increased by an average of one year every year, from 50 to 67.
Until the economic reforms, Chinese workers received health care from their work units, which funded the care out of operating income.

The Chinese National Petroleum Corp., for example, once had more than 50 hospitals for its 1.5 million workers. But many state-owned companies suffered financial problems as their workforces aged and retired and as younger, healthier workers increasingly went to work for private enterprises.
In 1994, the State Council overhauled the failing system by putting urban workers in citywide insurance pools, which now include about 200 million people.

Hospitals were severed from industrial enterprises. Instead, employers contributed 6 percent of wages and employees 2 percent to cover hospital, clinic and pharmaceutical costs.
Nonetheless, according to Health Ministry statistics, out-of-pocket expenses dramatically outpaced increases in per capita income and national health expenditures.

According to the World Bank, 71 percent of Chinese had access to state health facilities in 1981; 12 years later, the figure was 21 percent.

In 2005, individuals' out-of-pocket expenses for health care were more than 100 times what they were in 1980.
In 2003, the government gave more money to rural medical cooperatives and offered farmers a subsidy of $12 a year for insurance if they chipped in $3.

The voluntary program covers 25 to 30 percent of hospital costs and little outpatient care, but Liu said 850 million people have enrolled in it. Over the next three years, the government plans to increase its contribution by about half.
In 2007, the government extended coverage to urban workers' families, which had been without public coverage since the 1994 collapse of the work-unit system.

Children, the elderly and the unemployed all qualified for the same $12 government subsidy, but because health costs are higher in cities than in rural areas, they must contribute more than $30 a year. About 120 million people have signed up.
Some cities and provinces provide additional subsidies, and companies and individuals can buy private insurance policies.
But the government's programs for city dwellers are still based on residency, and experts say greater flexibility is needed for China's increasingly mobile population.

A case in point
Zhang Honghong, a 34-year-old editor at a Beijing publishing house, is an example of the system's successes and shortcomings.
In addition to the government program, Zhang is covered by a commercial health insurance policy that her employer bought.

For treatment of a recent bout of pneumonia, she had to pay the first $300 in costs, and insurance covered 90 percent of the next $750.
Zhang wants her aging father to move to Beijing to live with her, but the insurance program in his city won't cover expenses incurred elsewhere. "So, my father dares not to stay in Beijing long," she said.
Zhang has a 3-year-old son, who has had several colds this year. He wasn't sick enough to be hospitalized, which would have been covered by the government plan. Instead, he ran up a $200 bill last month. That brought his medical costs for the year to about $600.
"Thank God I only have one child so I can afford his medical bill," Zhang said.

"I feel it's a little bit expensive for us. But what can we do about it? I bargain everywhere but in the hospital."

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iPhones everywhere in China ahead of launch

A young woman arranges 3G mobile phones in Beijing

A man walks past a display of iPhone accessories in a Shanghai shop

A cyclist passes a billboard advertising Apple products in Beijing

SHANGHAI (AFP) — At a Shanghai electronics market, row after row of iPhones -- real and fake -- are on display, as vendors cash in ahead of the official launch this week of Apple's trendy smart phone in China.

"The 'high imitation' iPhones sell much better than the smuggled ones," said one 20-something salesman, sitting behind his small counter piled high with handsets.
His candid words are not good news for mobile operator China Unicom, which on Friday will officially start selling the iPhone in the world's biggest cell phone market, more than two years after the gadget's US launch.
Unicom and Apple announced a multi-year deal in August to offer the touch-pad iPhone here in a bid to turn around weak performance against rivals China Mobile and China Telecom by attracting customers with high-end tastes.
Unicom says it hopes to sell five million handsets in three years, but experts and customers question how realistic that goal is when tech-savvy consumers have been snapping up cheaper fake and smuggled models for months.
Shaun Rein, head of the Shanghai-based China Market Research Group, said two million of China's nearly 720 million mobile phone users are already using authentic iPhones purchased here or abroad, and demand may already be met.
"When the iPhone came out in the United States in 2007, there was a huge demand here, and a lot of people were going to the United States, buying handsets, cracking the code and selling it here," Rein said.
"Almost everyone who wants an iPhone already has one."
On top of that estimate, countless more Chinese are using fake iPhones that are virtually indistinguishable from the real thing, some of which come pre-loaded with the popular QQ instant messaging system as an added bonus.
Hai Bin, a 32-year-old employee at an auction website, said he was doubtful the official handset would make much of a mark in China.
"I've had the iPhone since 2008 -- one of my friends bought it in Hong Kong when he was on a business trip," he said.
"I don't think China Unicom's launch is meaningful -- the prices of stand-alone iPhones they offer are much higher than smuggled ones for a start."
China Unicom, the country's second-largest mobile operator by subscribers, said earlier this month that it would offer eight iPhone subscription packages costing between 126 and 886 yuan (18.5-130 dollars) a month.
But in China, most people use pre-paid mobile packages, in part because subscription contracts require an employer guarantee or government documents such as a residence permit that can be hard to get in major cities, Rein said.
Unicom will also sell stand-alone handsets, but at a high price, with the cheapest at 4,999 yuan, according to Beijing-based high-tech consultancy BDA -- totally out of range for the average Chinese consumer.
A survey on popular web portal sina.com, which had attracted 120,739 respondents by the weekend, said just 2.1 percent were willing to pay that much.
China Unicom received more than 10,000 advance orders for the iPhone during the week-long October 1 holiday, but BDA cautioned that not all orders would be converted into actual sales.
The company, contacted repeatedly for comment on the price issue, did not respond.
Beyond the hefty price tag, the first batch of official iPhones will come without WiFi -- an important selling point both in China and globally.
"If Unicom offered the 'complete version' and the WiFi function was not disabled, people might want to buy them. But with WiFi disabled, there will not be many buyers," Hai said.