Garlic prices soar in China amid flu fears

A shopper buys garlic at a wholesale market in Hefei, China, on Nov. 27. Rumors that garlic helps defend against the H1N1 virus have sent prices of garlic rocketing in recent months.

A shopper buys garlic at a wholesale market in Hefei, China, on Nov. 27.

By Calum MacLeod
BEIJING — Wrapped up in earmuffs and a heavy jacket to fight the Beijing winter, Liu Zhan shows little sign of soaring wealth.

Until he removes his gloves — and reveals a large gold ring.

At the Chinese capital's biggest vegetable wholesale market, other traders call him "Millionaire Liu."
The pungent root of that nickname is stacked in bags on and around Liu's haulage truck.

Garlic prices have jumped so high in China that the crop has outperformed gold and stocks to be the country's best performing asset this year.
As H1N1 swine flu continues to worry China's leaders — who are rolling out a nationwide vaccine program — its people seek a more traditional remedy.

Just as some Chinese turned to turnips to prevent the SARS virus in 2003, garlic has emerged as a swine flu fighter in 2009.
"Garlic kills bacteria, and I eat at least half a bulb each day," says Liu, 43, whose prices have leapt from just five cents a pound in February to almost 55 cents today.
Although Chinese government experts have cautioned consumers about the lack of scientific proof for garlic's flu-killing powers, its supporters remain adamant.

"Garlic can definitely help prevent swine flu," claims Li Jingfeng, chairman of the Jinxiang Garlic Association in eastern China's Shandong province.
Self-promoted as China's "hometown of garlic," Jinxiang county grows a quarter of all garlic in China, which in turn provides more than a quarter of global output, says Wang Hao, marketing manager for the China Garlic website.

Jinxiang, whose name means Gold Village, has enjoyed its best-ever sales year, says Li.
"Next year, the price will be even higher, but our American and European buyers still think it's cheap, as garlic sells for $6.60 for a pound in their countries," he says.

A windfall for U.S. producers
The Chinese price hike has been a boon to U.S. garlic producers, says Bill Christopher, owner of Christopher Ranch in Gilroy, Calif., the largest U.S. garlic producer.
"There's a lot less Chinese garlic being shipped over here, and what is being shipped is being shipped at prices three times more than last year," Christopher says.

"There's a bit of a world shortage and of course that raises the price."
Chinese garlic usually accounts for 90% of the U.S. import market, which supplies more than half of the bulbs consumed in the nation, Christopher says.

This year, the Chinese have shipped about half the usual 200 million pounds of garlic, and the price has tripled since last year, from about $8 to $24 for a 30-pound box.

For U.S. producers, whose higher quality bulbs sell for $40 to $50 a box and are marketed to restaurant chefs, prices have risen 15% to 20%, he says.
The cost of U.S. garlic rises every year, in part because of ongoing water shortages in California, "but (this year) that's more than going to be offset by increases in the sale price due to the Chinese not shipping as much garlic," Christopher says.
H1N1 only partly explains the garlic fever, Li says.

Rising prices in 2006 sparked a rush to plant garlic that created a market glut over the next two years. Falling acreage and bad weather combined to leave suppliers in the driver's seat this year, he says.
The real winners appear to be speculators such as Shao Mingqing, a jobless 22-year-old who borrowed money to buy 100 tons of garlic in September, then made a $59,000 profit selling in October, the state-run China Daily reports.

He now drives a $26,360 Toyota, it says.
The volatile nature of the garlic market is typical of a cyclical product, says Chen Shuwei, an analyst at Beijing Orient Agribusiness Consultants.

"There is a lot of money in China, but private businessmen don't have many avenues for investment as state-owned companies control many large industries. But it's easy for them to enter a sector like garlic and make some short-term profits.
"Their money may head to another product soon," he warns.
While Beijing closely watches potential bubbles in key industries such as real estate, the pricey bulb remains a minor concern, Chen says.
"The price of garlic is rising, and Chinese people need it for their daily cooking, but the rise does not have a big impact on household consumption, and matters less than key crops like corn and wheat," he says.

Sticker shock
The soaring costs still raise eyebrows on China's streets.

"How can it be this expensive?" asks Zhao Wenjing, a Beijing nurse buying garlic Monday.

"I haven't cooked for a long time, but I heard some doctors said it could prevent H1N1, so I came to buy some, although I don't actually like the smell," says Zhao, 26.
Unlike some Chinese business booms, the garlic surge might help American businesses, at least in the short term. Garlic growers in the USA have long complained about their Chinese competition.
"Chinese garlic's major price bump is a boon for California growers looking to recoup business that has been lost to cheaper Chinese garlic," reads a blog post on the site of a major California grower

China's rise erodes Western bargaining power

US President Barack Obama has been urged to stop soft-pedalling Beijing.

Briton Akmal Shaikh was executed in China on Tuesday despite pleas from British leaders

By Robert Saiget
BEIJING — Surging economic and diplomatic clout has given China the confidence to ignore old world powers like Britain, which failed to halt its first execution of a European since the 1950s, experts say.
In recent weeks, Beijing has jailed a prominent dissident for 11 years for subversion despite a Western outcry, taken a firm line that led to a tepid global climate change pact and refused to budge on the value of the yuan.
"We've entered a new phase, a phase in which there is less leverage for foreign governments to exert on China in the area of human rights," Joshua Rosenzweig, a Hong Kong-based manager of rights group Dui Hua, told AFP.
"In the past, China would make concessions on human rights when it needed something from the West... now more often than not, it is the foreign governments that need something from China."
In the past, China conceded on rights issues as a trade-off to secure its membership of the World Trade Organisation, the right to host the 2008 Olympic Games and gain greater international recognition on the whole, Rosenzweig said.
Today, Western governments are calling on Beijing to help prop up the flailing world economy and resolve thorny diplomatic disputes such as the standoffs over the controversial nuclear programmes of Iran and North Korea.
Already the third biggest economy on the planet, China is set to overtake Germany as the world's top exporter and also holds the largest foreign exchange reserves, at a whopping 2.27 trillion dollars, including 800 billion in US Treasury bonds.
"Chinese leaders are most reluctant to make concessions when they are seemingly being criticised or under open pressure," said Joseph Cheng, a professor of political science at the City University of Hong Kong.
"This sensitivity has become strengthened probably due to the Chinese leadership's perception of its rising status in the world as well as domestic nationalism. These have prompted the Chinese authorities to stand firm and respond in a high-handed, hardline manner."
Repeated Western appeals for the release of the dissident Liu Xiaobo instead led to a tough jail sentence -- and a stern rebuke from Beijing, which denounced the "gross interference" of foreign governments in its affairs.
In the Shaikh case, Britain issued repeated top-level calls for clemency and asked that the condemned father-of-three, who reportedly had bipolar disorder, be reviewed.
But China executed the 53-year-old and defended capital punishment as a way to deter would-be drugs criminals.
It also warned Britain not to "create new obstacles" to their relationship, already frayed over the troubled Copenhagen climate talks, which a British minister said had been "hijacked" by Beijing.
Rights activists also urged the global community to remain vocal in calling for improvements in China's human rights record, criticising Western governments for recently going too soft on Beijing.
"This demonstrates that the international community has really not been raising these issues at a sufficient level to impress on the Chinese government that this is an important concern," Roseann Rife, Asia Pacific deputy director for Amnesty International said after Shaikh's execution and Liu's jailing.
"Since the Beijing Olympics, they (China) have gotten away with increased repression of human rights defenders, they have gotten away with cracking down on freedom of expression.
"This is what happens if you don't raise your voice."
In an editorial this week in the New York Times, exiled dissident Wei Jingsheng, who spent more than 15 years in prison in China, urged US President Barack Obama to stop soft-pedalling Beijing.
"The case of Liu Xiaobo presents an opportunity for President Obama to save face and stand up to the hardliners' untoward arrogance," Wei said.
"If the United States doesn't push back, the hardliners will push on, with negative consequences across the whole spectrum of issues, from trade and currency valuations to global security and climate change."

China sees dissident's ideals as threat

The government is wrong to jail Liu Xiaobo for advocating peaceful change. But freedom and democracy are subversive and cannot be locked away forever.
Los Angeles Times
A Beijing court last week convicted activist Liu Xiaobo of subversion and sentenced him to 11 years in prison for advocating freedom, democracy and rule of law.

This week, the Chinese government executed Briton Akmal Shaikh for heroin trafficking, despite a plea for clemency by the British government on grounds that he was mentally ill.

The two cases are unrelated, except insofar as they illustrate China's immunity to international appeals to respect human rights.

And yet, even as the country's growing economic and political clout has made it more confident in global affairs, it has become no less fearful of challenges from within.

Rising China is no more willing to brook dissent these days than its smaller neighbor, Vietnam, which is putting pro-democracy activists on trial, or than the Islamic government of Iran, which has been confronting street demonstrations for months.

In the last two years, the Chinese government has cracked down on Internet sites, lawyers, consumer advocates and human rights activists, particularly after the collapse of poorly constructed schools in the Sichuan earthquake and the tainted milk scandal in 2008.

Liu is a brave democracy advocate and no stranger to jail; he was sent to prison for 21 months after the Tiananmen Square protests in 1989, and to a labor camp in 1996 after demanding clemency for others still imprisoned.

This time, the government seized on his pro-democracy articles published on foreign websites and his role in coauthoring Charter 08, a manifesto for political reforms.

The document, signed by 300 Chinese intellectuals and activists when it was published on Dec. 10, 2008, calls for expanded freedoms of religion, assembly and speech.

"We should end the practice of viewing words as crimes," it says.

It also calls for a new constitution ensuring an independent judiciary, direct election of local and national officials based on "one person, one vote," and respect for human rights.
The Chinese government's unfortunate response was summed up in a speech by the vice minister of public security, published Monday, in which he lashed out at "hostile forces stirring up chaos" and advocated "preemptive attacks" against challenges to Communist Party control. The government is wrong to jail Liu for his beliefs.

It is wrong to brand Liu a subversive, when he is a peaceful dissident advocating peaceful change, not the overthrow of the government.

But perhaps it is right about one thing: The ideals that Liu espouses so effectively do pose a threat to the Communist Party's monopoly on power.

Freedom and democracy are subversive, and cannot be locked away forever.

Trade Panel Rules for U.S. Steelmakers Against Chinese Imports

A U.S. trade panel ruled that imports of so-called oil country tubular goods from China have injured U.S. manufacturers. Above, workers load steel pipes at a yard in Shenyang, China.

By HENRY J. PULIZZI

WASHINGTON -- The U.S. International Trade Commission sided with U.S. steelmakers in a case over Chinese steel Wednesday, voting that U.S. industry has been damaged by a flood of imports of subsidized steel from China.
In the ITC's largest-ever steel case, all six commissioners voted in the affirmative that imports of so-called oil country tubular goods from China have injured U.S. manufacturers.

The commission will provide details of its decision later Wednesday.
The ruling, which will likely result in duties on future imports of Chinese steel pipes, adds more tension to the U.S.-China trade relationship.

Ties between Washington and Beijing are already frayed by the Obama administration's imposition of duties on Chinese tire imports and China's criticism of U.S. moves as protectionist.
Imports of oil country tubular goods, which are largely used in the energy sector, have surged in recent years to around $2.8 billion, prompting U.S. steelmakers and the United Steelworkers union to petition for relief.
Last month, the Commerce Department imposed countervailing duties on the steel pipes ranging from 10.4% to 15.8%.

The ITC's decision Wednesday allows the government to finalize those duties. The commission will make a separate decision on antidumping duties next spring.
In the case, brought by U.S. steel manufacturers and the United Steelworkers union, the domestic industry has framed its case in terms of potential job losses -- thousands of steel workers have been laid off or had their mills closed.

In China, job losses have been few, as Chinese mills continue to operate despite weakened world demand.
Chinese steelmakers don't dispute the losses of thousands of U.S. steel jobs, but they say the U.S. industry could have avoided the problems.
James Durling, the attorney representing Chinese steelmakers at the ITC hearing, said U.S. steelmakers are feigning injury to protect their market from competition.

He said the mass layoffs could have been averted by tapping into the more than $3 billion in operating profits made during the boom, roughly from 2006 to late 2008.
The case was filed by Maverick Tube Corp.; United States Steel Corp.; TMK IPSCO; V&M Star LP; Wheatland Tube Corp.; Evraz Rocky Mountain Steel; and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.
"The steel pipe workers of my state have quite simply had the rug pulled out from under them due to one of the most inexcusable floods of dumped and subsidized products in history," Sen. Sherrod Brown (D., Ohio) testified.

China's thing about numbers

The Economist
How an emerging superpower dragged its feet, then dictated terms, at a draining diplomatic marathon

AMID the alphabet soup and baffling procedures of last month’s climate-change conference in Copenhagen, it was easy to forget the overall aim: to move from a world in which carbon dioxide emissions are rising to one in which they are falling, fast enough to make a difference.
How fast is enough?

A fair measure is carbon and other greenhouse emissions in 2050; if by that date they are only half their 1990 level, most people agree, then things would be on the right track.

Another widely accepted calculation: if developing countries are to grow a bit between now and then, rich countries would need to slash emissions to a level at least 80% below what they were in 1990.
Many prosperous states have duly accepted that target; and in recent years the expression “80% by 2050” has become a familiar, if optimistic, touchstone for discussions about climate change—both in the rich world and among most other parties to the UN Framework Convention on Climate Change (UNFCCC).
When drafts of a last-ditch agreement began circulating on December 18th, which should have been the meeting’s final day, the “80% by 2050” formula was still in place.

But, hours later, it vanished.

By this stage, efforts to find consensus among almost 200 delegations had given way to bargaining sessions among smallish groups of countries behind closed doors.

When the fruits of that back-room trading were presented to the world by Barack Obama, the numbers were conspicuous by their absence.
So too were a number of other conditions that Europeans and others would have liked, such as a date for peak emissions.

“Why?”, a cluster of journalists asked Lars-Erik Liljelund, the Swedish government’s point man on climate, in the early hours of Saturday December 19th.

Why would a pledge that applied only to rich nations, and to which all those nations seemed to agree, have vanished from the final document?

After maybe ten seconds of what-can-I-say silence came the flat reply: “China don’t like numbers.”
This is not entirely true.

President Wen Jiabao’s speech to the conference that morning included a lot of numbers.

There had been 51% growth in China’s renewable-energy output over the three years to 2008; China had planted 20m hectares of forests between 2003 and 2008; developed countries had produced 80% of emissions over the past 200 years; and so on.

The numbers that China had resisted were those that could be read in any way as commitments. It had insisted on stripping all figures, even ones that did not apply to China, out of the text that finally became the Copenhagen accord.
In their zeal to avoid being pinned down, the Chinese went further.

They secured the removal of language contained in early drafts that spoke of a Copenhagen deal as a step on the road to a legally binding treaty.

As the world’s largest emitter (without which any agreement is dead), China was in a strong position, and it took full advantage.
Such was the messy denouement of ten days of largely fruitless UN-guided negotiations, in which China did nothing to push things along.

Indeed, some suspected China of doing something worse than just folding its arms.

The atmosphere was poisoned, early in the meeting, by the leaking of a draft (one of several texts circulated by the Danish chair) that favoured the rich world; various parties thought the Chinese were the leakers.
On the final day, tension rose when President Obama was obliged to conduct negotiations with comparatively junior Chinese delegates.

At one point, Mr Obama expected to meet his Chinese opposite number one-on-one but instead found himself with the leaders of South Africa, Brazil and India as well.
All that said, China also gave some ground.

It satisfied the Americans on one sticking-point: the principle of “monitoring, reporting and verification” of actions promised by developing countries.

Unless China, in particular, can be shown to live up to its promises, it will be very difficult to get a climate bill through America’s Senate.

To Mr Obama’s relief, the accord allows for an international role in such monitoring, which China and India had been resisting.

This is not just an academic point; China has pledged a reduction, of between 40% and 45% by 2020, in the level of its “carbon intensity”—the amount of carbon emitted in proportion to output.

It is hard to tell how big a change the Chinese promise represents from business as usual; but it has an impressive ring.
Among the accord’s other features were a new system for recording pledges on emission reduction and other actions; a review of those commitments, due in 2015; and an as yet undefined mechanism for North-South technology transfer.

And there is money on the table: an initial promise of $10 billion a year, for three years, from developed countries to help poorer states mitigate climate change and adapt to it.

Some of this money will go to towards implementing a “REDD-plus” deal on deforestation, an issue on which real progress was made.

Part of the rich-to-poor transfers will flow through a “Copenhagen Green Climate Fund”, which some poor countries prefer to the World Bank.
The process will, in theory, accelerate.

Rich countries vowed to mobilise $100 billion a year by 2020 for more ambitious adaptation-and-mitigation projects in the poor world.

The UN is supposed to set up a “high-level panel” to work out the details of who gets what. Maddeningly vague?

Almost everybody admitted that the deal was not nearly as ambitious as they would have liked. According to most climate models, the commitments made in Copenhagen fall a long way short of what would be needed to keep global warming to 2°C.
Still, it was widely held to be better than nothing—though, in the final moments, nothing nearly triumphed.

On the evening of December 18th heads of state claimed victory as they drove off to the airport; but their offstage bargains were unlikely to make much difference without a nod, at least, from the whole meeting.

So the bigwigs left it to more junior negotiators to present the result of their horse-trading to the world’s grumpy, exhausted delegates.
When it was introduced to a conference plenary in the small hours of Saturday morning, a few countries—notably Cuba, Venezuela, Bolivia and Nicaragua—tried to thwart any such benediction.

They insisted that, as it had not been drafted by any official procedure, the deal struck by hand-picked leaders was just a “miscellaneous document” of no practical consequence.

The accord would throw Africa “into the furnace”, added Lumumba Stanislaus Di-Aping of Sudan, who spoke for the “G77 plus China” group of developing nations, and compared the rich countries’ heartlessness to Hitler’s genocide.
Such rhetoric proved self-defeating; more passion was expended on countering it than could be mustered for the accord itself.

“I call on my brother from Sudan to rethink his conclusions and get hold of his emotions,” said Dessima Williams of Grenada, representative of the Alliance of Small Island States, as she accepted a deal that fell far short of the islanders’ hopes.

After more than three hours of back and forth, the British energy and climate-change minister, Ed Miliband, called for an adjournment just as Lars Lokke Rasmussen, the Danish prime minister, who was chairing the session, seemed to be accepting that the accord would founder.
Only after more hours of back-room wrangling did a restarted plenary, with a new chair, get the accord adopted after a fashion.

Thanks to rapid gavelling, the world’s delegates found they had decided to “take note” of the leaders’ agreement—a formula that was held both to permit the deal to come into effect and to allow some nations to renounce it.

A bid to reinsert the notion of a future binding treaty was firmly quashed by China, India and Saudi Arabia.

The next step is for the nations signing up to the accord to do so, and to affix to it any commitments they are making, which is due to happen by February 1st.
At that point, it appears, various steps to implement the accord and distribute the money that it speaks of can begin.

How that implementation will fit into the ongoing UN talks—the next full conference will be in Mexico on November 29th—is, as yet, unclear.

Equally uncertain is the degree to which it can breathe new life into market mechanisms for helping poor countries, and how the promised verification regime will actually build trust.
At some stage documents with numbers, and even long-term aspirations, will become necessary again, and the nation that invented the abacus will have to overcome its aversion to arithmetic.

Is China Reducing Use of the Death Penalty?

Akmal Shaikh, a Briton whose family says he suffers from mental illness, was executed by China for drug-smuggling

By Austin Ramzy /Beijing
The international furor over China's execution of a British man convicted of heroin-trafficking has drawn attention to the country's harsh criminal-justice system.

The execution has sparked a diplomatic row between China and the U.K., but global condemnation will do little to provoke reform.

China is the world leader in the use of the death penalty — Amnesty International documented some 1,700 judicial killings in China last year, but the true total could be as much as three times that — and Beijing makes no apologies for its hard line.

In a statement issued after the execution, a Chinese court said drug crimes were "serious criminal offenses" demanding harsh punishment.
Yet, while China often complains that criticism by foreign governments amounts to outside interference in its internal affairs, there are signs that the rapidly modernizing country is curbing its use of the death penalty of its own accord.

The reforms are modest, to be sure, but some observers see them as a rare bright spot amid an overall bleak trend for human rights in China.
Such progress came too late to save Akmal Shaikh, who on Dec. 29 became the first European to be executed in China in 50 years when he was given a lethal injection in the northwestern city of Urumqi.

The 53-year-old Brit was convicted of smuggling 4 kg of heroin into China from Tajikistan. Shaikh's family had pleaded unsuccessfully for Chinese courts to take into account his history of mental illness.

The human-rights group Reprieve documented numerous incidents of erratic and delusional behavior by Shaikh, including his recording of a song, entitled "Come Little Rabbit," that he apparently believed would lead to world peace.

Reprieve says that drug traffickers preyed on Shaikh's hopes of becoming a pop star to dupe him into carrying drugs on a flight to Urumqi in September 2007.
The British government made dozens of appeals on Shaikh's behalf.

Prime Minister Gordon Brown said he was "appalled and disappointed" that requests for clemency were denied and that he was "particularly concerned that no mental-health assessment was undertaken."

The U.K. Foreign Office also summoned China's ambassador.

China's Foreign Ministry rejected the criticism. At a briefing Tuesday spokeswoman Jiang Yu called complaints "groundless" and said China expressed "resolute opposition."

She added that the U.K.'s response threatened to undermine the countries' bilateral relations.
In the past the Chinese government has cited the need for deterrence and public support of the death penalty to justify its broad use of capital punishment.

In online forums on Chinese websites, opinion over the Shaikh case tends to back the official stance.

"We should stick to the Chinese law no matter what, instead of bending under the pressure from Western countries," wrote a commentator in a chat room on Tianya.com. "Otherwise, we would only damage the dignity of China's judicial system."
Indeed, the case will have little effect on how China views on the death penalty.

"While there's some role for international opinion and international engagement with China on capital punishment, I think that the primary motive force for change and progress in the area of capital punishment in China is going to be internal," says Joshua Rosenzweig, Hong Kong–based manager of the Dui Hua Foundation, a U.S. human-rights group.
And there are signs of change.

In 2007 China's Supreme People's Court resumed reviewing all death-penalty cases following public anger at a number of questionable convictions, among them the case of a man who was sentenced to 15 years in prison for murdering his wife — who later turned up alive.

In the first half of 2008 the Supreme People's Court overturned about 15% of the death sentences that were forwarded to it, an official told the state-run China Daily newspaper.
Rosenzweig says the resumption of high court reviews is "probably the biggest area of progress in China in the past few years."

According to a Dui Hua Foundation estimate, the number of prisoners executed annually may have fallen by as much as half from the 10,000 a year cited by a National People's Congress delegate in 2004.

Even with such a decline China still puts to death more people than the rest of the world combined — about 70% of the global total in 2008, according to Amnesty International.
The exact number is guarded as a state secret. Some scholars are urging more openness.

Chen Guangzhong, a professor at China University of Political Science and Law in Beijing, wrote an article in the prominent Chinese publication Southern Weekend earlier this month arguing that the government should make execution statistics public.

"Despite its sensitivity (the death penalty) is an area that has been able to be discussed to a certain extent within the Chinese media by legal experts," says Rosenzweig, "which is one reason why I think that's where the force for progress will come, from within China."
That's of little comfort to the family of Akmal Shaikh.

On Wednesday they expressed "grief at the Chinese decision to refuse mercy" and thanked "all those who tried hard to bring about a different result," according to a statement released by Reprieve.

But China's willingness to at least discuss the death penalty offers the slim hope that it in the future it will become less of a source of anger and dismay at home and abroad.

Economists Warn of a Climate Trade War

In the wake of the failed climate change summit in Copenhagen, countries are talking about imposing carbon tariffs on imports.
By Markus Becker and Christoph Seidler
John Kerry was on a roll. At the Copenhagen climate summit, the former US presidential candidate delivered a fiery speech that was mostly directed at China.

If the US has to accept binding targets for reducing their greenhouse gas emissions, then Beijing must do the same, Kerry told his audience.

Workers in the US should not "lose their jobs to India and China because those countries are not participating in a way that is measurable, reportable and verifiable," he said.
This was an expression of the old fear in industrialized countries that aggressive action on climate change could lead to local economic disadvantages.

Environmentalist politicians and academics have long been calling for the establishment of a global emissions trade.

It is a simple and captivating idea for many: Each state gets a certain amount of CO2 allowances. Those who want to emit more must buy emissions rights from other countries that emit less CO2. Ideally, poorer countries would automatically make money, and rich countries would at the same time have a financial incentive to reduce their CO2 emissions.

However, such a system would only work if all states participated—and industrialized countries for years have feared that just won't happen.

In particular, large emerging economies like China and India could blow off climate protection and give their businesses competitive advantages in the global market.

The failure to reach an international climate change agreement in Copenhagen has done little dampen such worries.

Kerry and Sarkozy Threaten China and India
Now, Western politicians are getting more open with threats to make the most CO2-intensive imports more expensive—with the help of punitive tariffs.

If the West protects the environment, Senator Kerry said in Copenhagen, then climate sinners will not "dump high carbon intensity products into our markets."

Kerry's thinly veiled threat: In this case, "I speak for the United States."

According to a report in the New York Times, the Americans even tried to accommodate the possibility of unilateral penalties in the final document out of Copenhagen, but without success.
Yet such sentiments in Europe are getting louder, particularly in Paris.

French President Nicolas Sarkozy has repeatedly called for EU punitive tariffs on products from big emitters, should no agreement come from Copenhagen.

Now that this has occurred, the question is how serious Sarkozy is about the issue.

He had said that the French were working together with Germany on such plans.

A German government spokesperson said Berlin was examining ways in which locational disadvantages for business could be prevented.
The response sound reserved, but was still much more positive than earlier statements made by government officials in Germany.

Previously, the Germans had always categorically rejected Sarkozy's punitive tariff idea. Even in July, Matthias Machnig, then a state secretary in the Environment Ministry, described Sarkozy's proposals as "eco-imperialism."

China Will Remain the Workbench of the World
Experts, however, warn strongly against eco-punitive tariffs.

Ottmar Edenhofer, environmental economist at the Potsdam Institute for Climate Impact Research (PIK), sees them as more of a threat than a realistic option.

Measured by the carbon dioxide emissions incurred in the production of goods, China is undisputedly the world's largest emitter of CO2. Punitive duties would hardly change that.

"An adjustment of tariffs would likely never be high enough to substantially alter the demand in the West for goods from China," says Edenhofer.

"China will remain the workbench of the world."
Punitive tariffs would therefore have almost no environmental impact, but would come with enormous risks.

On one hand, the decrease in imports from China would likely weaken the US economy.

"In addition, the Chinese could respond with counter-measures, of course," says Edenhofer told SPIEGEL ONLINE.

China could—in theory—squander US Treasury securities and make the country's economy vulnerable.
Such a conflict would hardly be in the interests of either of these big global powers, since their economies are so closely intertwined.

For example, China is currently financing the US twin deficits of a giant budget hole and a gap in the current accounting—the result of the United States importing far more goods and services than it exports.

China, however, has a huge trade surplus.

"Cooperation between the US and China is the only way," says Edenhofer. "A trade war is the last thing they need at the moment."
The climate summit in Copenhagen has shown, Edenhofer says, that the world still has to find its new geopolitical balance.

"China steered away from the concert of the developing countries and presented itself in Copenhagen as a confident, cool negotiating world power," says the economist.

Beijing has proven that it can derail a global agreement on climate protection.

According to Edenhofer, "the showdown between the US and China has only just begun."

Legal Obstacles to Climate Tariff
Added to the economic risks of punitive tariffs are the legal problems.

Environmentalists often complain that the World Trade Organization (WTO) has disqualified ecological tariffs as unjustified obstacles to trade.

This is mainly due to an iron-clad principle of international trade law: equal treatment.

"Identical goods must be treated equally," Christian Tietje, international law expert from the University of Halle, told SPIEGEL ONLINE.
It is irrelevant whether a cell phone was produced in an environmentally friendly, but more expensive manner in Germany—or in a less ecological and less expensive manner in China.

This also applies to climate protection.

The lawyer says that solving the problem with extra taxes is "highly problematic in terms of international trade law."
A classic WTO dispute case from the 1990s shows just how high the barriers to trade tariffs in the name of environmental protection can be.

The United States had imposed an import ban on shrimp from countries that were not concerned enough about protecting sea turtles. The basis for this was an American nature conservation law called the Endangered Species Act.
The Americans argued that the animals could be protected only through the use of certain nets with special exits for the turtles. Fishing fleets that did not use these should therefore be subject to the boycott.

India, Malaysia, Pakistan and Thailand brought a complaint to the WTO—and initially won.
A WTO court declared that the US measures were not justified—after all, the US had not made enough of an effort to conclude agreements to protect the turtles with the states concerned.

The WTO would only have allowed a boycott only after serious and appropriate negotiations had been held and had failed.

Wiggle Room in Trade Law
In the case of climate change, Tietje argues that this situation has not yet been reached—despite the debacle at the Copenhagen summit.

"The serious efforts have not yet completely failed," he says.

There is, after all, a final document and the timetable for further negotiations.

They will begin in 2010 at the ministerial level in Bonn, and later go back to the heads of state and government in Mexico.
Some international lawyers, however, see a window of opportunity with targeted interventions in the world trading system to bring the worst polluters to reason—or at least bring them back to the negotiating table.

When it comes to a few particularly environmentally damaging products such as steel, it is possible to imagine punitive tarrifs, says Thomas Cottier, head of the World Trade Institute in Berne.

"Legally speaking, this is possible," he says. That would mean tariffs would be reduced, for example, for environmentally-friendly-produced goods.
"We are coming into a phase, where individual countries can try it out, and see how far they can or want to go," Cottier told SPIEGEL ONLINE.

Wiggle room in trade law is not as tight as it is often claimed. The use of such measures is "more a political question."
It is clear, however, that the possible environmental penalties would be directed mainly against developing countries.

This is not unproblematic.

The industrialized world must now ask itself the fundamental question of what products they want to continue to produce abroad—where the price of labor may be low, but the price the environment pays is often too high.

Britain Steps Up Dispute With China After Execution

By Reed V. Landberg
Dec. 30 (Bloomberg) -- U.K. Prime Minister Gordon Brown’s government escalated a diplomatic dispute with China after the execution yesterday of a British national caught smuggling heroin, the third rift between the two nations this year.
Foreign Office Minister Ivan Lewis said yesterday he was “sick to his stomach” at China’s decision to put Akmal Shaikh to death without considering evidence he suffered from mental illness.

Brown said he condemned the execution “in the strongest terms.”
Earlier this month, Brown’s government singled out China for holding back an agreement in Copenhagen aimed at curtailing global warming, and in April ministers protested the Beijing administration’s crackdown on anti-government protests in Tibet.
“Any acceptance of Brown’s request for clemency would be tantamount to an interference in our judicial independence and authority,” said Fudan University’s professor of jurisprudence, Wang Mingliang, in comments distributed via Xinhua.

“Are we meant to absolve him of the death penalty just merely because he’s an Englishman?”
China’s attitude may have been hardened by memories of two wars fought with Britain over the drugs trade and what is widely seen as more than a century of humiliation that followed.

China was forced to accept imports of opium in the 19th century to help redress a balance of payments deficit caused by purchases of tea by foreign merchants.
“Drug trafficking is a grave crime worldwide,” the Chinese Embassy in London said in a statement.

“Given the bitter memory of history and the current situations, the public has a particular and strong resentment towards it.”

Old Wounds

Britain won the deep-water harbor of Hong Kong in the first Opium War in 1842, and together with French troops sacked the Summer Palace during the second war in 1860.

The Chinese government released a feature film titled ‘The Opium War’ in 1997 to commemorate Hong Kong’s handover.
A Chinese foreign ministry spokeswoman in Beijing, Jiang Yu, suggested Britain was risking its relationship with China by pressing the issue.
“We are extremely disappointed by the comments made by the U.K. and we urge the U.K. to take appropriate action to ensure that Sino-British ties aren’t harmed,” the Chinese spokeswoman said at a briefing yesterday.
U.K. businesses are the biggest European investors in China, with projects worth more than $15 billion at the start of 2009, according to the government’s business department in London.

Lethal Injection
Shaikh’s execution is the first of a European Union national in China in more than 50 years, according to Reprieve, a charity that campaigns for death row prisoners globally.

China carried out more executions than the rest of the world combined last year, Amnesty International says.
Shaikh, a father of five, was killed by lethal injection, Xinhua reported. The sentence was carried out in Urumqi, the capital of China’s westernmost Xinjiang province.
Shaikh was arrested with 4 kilograms (8.8 pounds) of heroin in September 2007, according to a statement by Reprieve. The group said he was suffering from delusion and being manipulated by a drug gang.
British criticism of the decision turned on the Chinese government’s refusal to consider evidence Shaikh was depressed and suffering from bi-polar disorder.

‘Unjustified Death’
“Mental illness is punishment enough, and it is truly shocking that Mr. Shaikh did not receive a psychiatric assessment and treatment and so suffered an unjustified death,” Marjorie Wallace, chief executive of the mental health charity Sane, said in a statement on the organization’s Web site.
The execution followed repeated attempts to have Shaikh examined by a doctor to assess his mental health, Reprieve said.
“China’s refusal to even allow a proper medical evaluation is simply disgusting,” said Reprieve’s director, Clive Stafford Smith.
At his last appeal hearing, Shaikh’s 50-minute testimony was “rambling and often incoherent” and “greeted with incredulity and sometimes mirth by court officials,” Reprieve said.

The charity also published e-mails that it said were from Shaikh and illustrated his mental instability.
“Our specific concerns about the individual in this case were not taken into consideration despite repeated calls by the prime minister, ministerial colleagues and me,” Foreign Secretary David Miliband said in the U.K. government’s statement.

“These included mental health issues and inadequate professional interpretation during the trial.”

Bad Blood
On Dec. 19, after negotiators at United Nations-sponsored talks on climate change in Copenhagen dissolved without a legally binding agreement to cut pollution, Brown said, “Never again should we let a global deal to move towards a greener future be held to ransom by only a handful of countries.”
While Brown didn’t name China in the remark, U.K. Climate Secretary Ed Miliband the next day singled out the Chinese government for holding up the talks in an article for the Guardian newspaper.
The British government also sparked China’s ire in April when it urged restraint amid protests in Tibet.

China mulling naval base in Gulf of Aden

China has sent four flotillas to the Gulf of Aden since the end of last year

Chinese naval vessels in its anti-piracy mission have been allowed to dock and resupply at a French naval base

BEIJING (AFP) — A top Chinese naval official has proposed setting up a permanent base to support ships on an anti-piracy mission in the Gulf of Aden, raising the idea that China could build foreign bases elsewhere.

In an interview posted on the defence ministry website, Yin Zhuo -- an admiral and senior researcher at the navy's Equipment Research Centre -- said such a base would bolster China's long-term participation in the operation.
"We are not saying we need our navy everywhere in order to fulfil our international commitments," Yin said.
"We are saying to fulfil our international commitments, we need to strengthen our supply capacity."
Yin's proposal, posted on Tuesday, came after a Chinese cargo ship and its crew of 25 were rescued from Somali pirates on Monday, following the payment of a 3.5-million-dollar ransom to their kidnappers.
China has sent four flotillas to the region since the end of last year, with the first escort fleet spending 124 days at sea without docking, Yin said -- a length of time that added to the challenges of the operation.
Since then, Chinese vessels have been allowed to dock and resupply at a French naval base. The United States, European Union and Japan all have supply bases in the region, he said.
"If China establishes a similar long-term supply base, I believe that the nations in the region and the other countries involved with the (anti-pirate) escorts would understand," he said.
"I think a permanent, stable base would be good for our operations."
Any decision to establish such a base would have to be decided by the ruling Communist Party and its Central Military Commission, Yin said.
Yin added he was aware that Chinese naval ships in the waters near the Gulf have aroused suspicions, but believed other nations understood Beijing's intention was to counter pirates.
As the world's largest importer of crude oil, China is reportedly interested in establishing naval bases in Bangladesh, Cambodia, Myanmar, Pakistan, Thailand and the South China Sea to protect its sea transportation lines.
Thanks to China's booming economy, its defence budget has maintained double-digit growth over much of the last decade fuelling a robust military modernisation plan.

Indian Army reworks war doctrine for China

By Rajat Pandit
NEW DELHI: The Army is now revising its five-year-old doctrine to effectively meet the challenges of a possible 'two-front war' with China and Pakistan, deal with asymmetric and fourth-generation warfare, enhance strategic reach and joint operations with IAF and Navy.
Work on the new war doctrine -- to reflect the reconfiguration of threat perceptions and security challenges -- is already underway under the aegis of Shimla-based Army Training Command, headed by Lt-General A S Lamba, said sources.
It comes in the backdrop of the 1.13-million strong Army having practised -- through several wargames over the last five years -- its 'pro-active' war strategy to mobilise fast and strike hard to pulverise the enemy.
This 'cold start strategy', under a NBC (nuclear-chemical-biological) overhang, emerged from the 'harsh lessons' learnt during Operation Parakram, where it took Army's strike formations almost a month to mobilise at the 'border launch pads' after the December 2001 terrorist attack on Parliament.
This gave ample opportunity to Pakistan to shore up its defences as well as adequate time to the international community, primarily the US, to intervene. The lack of clear directives from the then NDA government only made matters worse.
"A major leap in our approach to conduct of operations (since then) has been the successful firming-up of the cold start strategy (to be able to go to war promptly)," said Army chief General Deepak Kapoor, at a closed-door seminar on Tuesday.
The plan now is to launch self-contained and highly-mobile 'battle groups', with Russian-origin T-90S tanks and upgraded T-72 M1 tanks at their core, adequately backed by air cover and artillery fire assaults, for rapid thrusts into enemy territory within 96 hours.
Gen Kapoor identified five thrust areas that will drive the new doctrine.

One, even as the armed forces prepare for their primary task of conventional wars, they must also factor in the eventuality of 'a two-front war' breaking out.
In tune with this, after acquiring a greater offensive punch along the entire western front with Pakistan by the creation of a new South-Western Army Command in 2005, India is now taking steps -- albeit belatedly -- to strategically counter the stark military asymmetry with China in the eastern sector.

There is now "a proportionate focus towards the western and north-eastern fronts", said Gen Kapoor.
Two, the Army needs to 'optimise' its capability to effectively counter 'both military and non-military facets' of asymmetric and sub-conventional threats like WMD terrorism, cyber warfare, electronic warfare and information warfare.
Three, the armed forces have to substantially enhance their strategic reach and out-of-area capabilities to protect India's geo-political interests stretching from Persian Gulf to Malacca Strait.
"This would enable us to protect our island territories; as also give assistance to the littoral states in the Indian Ocean Region," said Gen Kapoor.
Four, interdependence and operational synergy among Army, Navy and IAF must become the essence of strategic planning and execution in future wars.

"For this, joint operations, strategic and space-based capability, ballistic missile defence and amphibious, air-borne and air-land operations must be addressed comprehensively," he said.
And five, India must strive to achieve a technological edge over its adversaries.

"Harnessing and exploitation of technology also includes integration of network centricity, decision-support systems, information warfare and electronic warfare into our operational plans," he added.
Apart from analysing the evolving military strategy and doctrines of China and Pakistan, the Army is also studying the lessons learnt from the US-launched Operation Enduring Freedom in Afghanistan in 2001 and Operation Iraqi Freedom in 2003 and their relevance to India.

Viet Nam condemns China's 'law on island protection'

Sify

Vietnam has protested a new Chinese law aimed at protecting the nation's islands, including the disputed Spratly and Paracel Islands in the South China Sea, local media reported Wednesday.
'Vietnam has time and again affirmed its sovereignty over the Paracel and Spratly archipelagos,' Vietnam News quoted government spokeswoman Nguyen Phuong Nga as saying.
'All activities of other countries, including the promulgation of legal regulations relating to these archipelagos and Vietnam's Exclusive Economic Zone and continental shelf, are of no legal value.'
Nga made her comments in response to queries about Vietnam's reaction to the passage of a law on sea island protection approved by the Chinese National People's Congress Standing Committee Dec 26.
According to the law, China is to strengthen the protection of the ecosystem, the rational utilisation of natural resources and sustainable development on the country's islands.
The law bans all construction projects, tree felling and tourism activities on uninhabited islands. It also prohibits activities that could damage coral and coral reefs.
The new law puts China's State Oceanic Administration and its branches in charge of monitoring compliance.
China claims more than 6,900 islands, each having an area of over 500 square metres and more than 10,000 smaller islets, including the Paracel and Spratly Islands.
China has occupied the Paracel Islands since 1974, when its troops overwhelmed a South Vietnamese garrison occupying the islands.
Both Vietnam and China are signatories to the 2002 Declaration on the Conduct of Parties in the South China Sea. It commits the parties to resolving the islands' status through negotiations and provides for freedom of navigation.
Vietnam and China generally enjoy close relations, but the conflict over maritime resources is a persistent source of tension.

Each country submitted maritime territorial claims to the UN Convention on the Law of the Sea in early May and rejected the other's claims shortly afterward.
The South China Sea is believed to contain substantial undersea oil reserves.

Ruling Due on Steelmakers' Claims Against China

Vendors play cards as they wait for customers at a steel market in Wuhan, Hubei province December 23, 2009.

By ROBERT GUY MATTHEWS

The U.S. International Trade Commission is set to rule Wednesday on U.S. steelmakers' claims that they have been severely injured as a result of $2.8 billion of subsidized Chinese steel being dumped into the U.S.
It is the biggest steel case ever to come before the ITC, given the billions of dollars in dumped steel.

If the ITC finds in favor of the U.S. industry, the result is a likely imposition of duties on future imports of Chinese steel pipes and tubes used by energy companies.
ITC commissioners declined to comment on the coming ruling, as did steel companies.

The U.S. Commerce Department this fall ruled that Chinese steel pipe and tube producers were dumping subsidized steel into the U.S. and imposed preliminary duties.

A finding from the ITC, a commission made up of three Democrats and three Republicans, that U.S. industry was harmed could result in imposition of future duties, which would hobble competition in years to come.
The ruling comes at a time of heightened tension between the U.S. and China over trade.

The Obama administration in September imposed punitive sanctions on Chinese tire imports; Beijing responded by launching probes into alleged dumping of some U.S. exports into China.
In the steel case, brought by U.S. steel manufacturers and the United Steelworkers union, the domestic industry has framed its case in terms of potential job losses -- thousands of steel workers have been laid off or had their mills closed.

In China, job losses have been few, as Chinese mills continue to operate despite weakened world demand.
Chinese steelmakers don't dispute the losses of thousands of U.S. steel jobs, but they say the U.S. industry could have avoided the problems.
James Durling, the attorney representing Chinese steelmakers at the ITC hearing, said U.S. steelmakers are feigning injury to protect their market from competition.

He said the mass layoffs could have been averted by tapping into the more than $3 billion in operating profits made during the boom, roughly from 2006 to late 2008.

Three Hurdles for China in the Year of the Tiger

A Hong Kong apartment in the center tower is among the world's costliest.

By JOHN FOLEY

For China, 2009 was a momentous year. The People’s Republic turned 60, and Beijing staved off economic disaster with a staggering 4 trillion renminbi ($585 billion) stimulus package.

The stage is set for an eventful 2010. China’s economy is poised to become the world’s second largest. But all may not go well.
There are three broad concerns for the coming Year of the Tiger on the lunar calendar: inflation, protectionism and inequality.
One type of inflation has already arrived.

As a result of some $1.5 trillion of government-mandated bank lending in 2009, combined with speculative capital flowing from abroad, the prices of financial assets like stocks and property have exploded.

Beijing clocked a record land-sale price in 2009 and Hong Kong a record apartment price.

The first batch of stocks on Shenzhen’s new growth-stock market doubled on their first day of trading. The second batch, just over a month later, tripled.
While asset prices soar and the cost of basic commodities like oil and iron ore remain high by historic standards, retail prices are barely increasing.

Many central banks and governments face this confusing situation, and none of them have an obvious solution.

A rise in policy interest rates could take cash out of consumers’ and producers’ pockets, slowing growth to a crawl. In Beijing, that sounds like political suicide.
In the semi-controlled Chinese economy, the authorities have turned to restrictions on lending to try to reduce the monetary pressure. But that may not succeed.

The strong links between banks and local governments mean new loans don’t always go to the most productive channels.
Next year’s lending target is 25 percent less than 2009’s. But perhaps two-thirds of the disbursed money will go to sustain half-finished infrastructure projects, leaving little for new business investment.
If tighter policy slows growth too sharply, the government could decide that inflation of any sort is the lesser evil. But monetary instability carries its own political and economic risks.
Protectionism could be another problem.

Trade skirmishes surfaced in 2009: the United States slapped tariffs on Chinese tires, and China did the same on American and Russian steel.

Those are special cases, but the low exchange rate for China’s currency can be considered an unfair export subsidy which lures American consumers into overspending.
Some economists are already arguing that Chinese currency inaction justifies tariffs for the sake of balancing trade.

Disgruntled politicians in Washington could join in, especially if the American unemployment rate, already at 10 percent, keeps rising. They could claim that Chinese production threatens to accelerate global warming.

True or not, trade restrictions would severely disrupt China’s still export-dependent economy.
The third risk, inequality, is the least visible but the most dangerous. It’s a genuine issue.

The mix of fast-rising asset prices with wages that are hardly budging must be widening the gap between owners and the property-poor proletariat.

The reported unemployment rate of 4 percent ignores an estimated 150 million migrant workers, while fewer than 70 percent of graduates have jobs.
The biggest worry for policy makers is that an idle and unequal populace will create unrest.

A recent survey by the Zhejiang Academy of Social Sciences cited in the South China Morning Post found that 96 percent of respondents “resent the rich.”

It is no accident that Xinjiang province, which saw riots in 2009, has one of China’s biggest wealth gaps.
The available measures suggest China is becoming more unequal at an alarming rate.

In 1983, China’s Gini coefficient, a measure of economic inequality, was 0.28, roughly the same as Sweden, Japan and Germany. By 2007, the Asian Development Bank estimated China’s Gini coefficient of 0.47 — closer to Argentina and Mexico.

That pace of acceleration is virtually unheard of.
China could probably address each of these three problems, one at a time.

Inflation can be micromanaged through a controlled bank system. Protectionism can be quelled with diplomacy, unrest with force.

The last 30 years — in which China’s sustained growth has exceeded anything recorded — is a triumph of mind over matter.

But if all three challenges arrive at once, the Year of the Tiger could prove fierce indeed.

China's scope for clever job creation

By DANIEL H. ROSEN
While everyone is glad to put 2009 behind them, 2010 could be an even tougher economic year for China.

To climb out of the global contraction, Beijing has engineered a property bubble characterized by oversupply in commercial real estate and unsustainable price gains for residential property.

The consequences of this will bite in the new year.
To soak up and justify this excess, China's leaders are trying to stoke demand by accelerating the already epic urbanization trend, reducing constraints on migration and urban registration.

The leadership is betting on the connection between accelerated urbanization and consumption, too.

In 2008, 43% of China's population was considered urban, versus an average of 79% for Latin America, 73% in the euro area and 82% in the U.S: China still has a long way to go.
By front-loading this urban growth, China will bolster prices for upstream raw materials like iron ore and aluminum in the near term and keep construction companies busy.

But many people are concerned that China's urban factories already are overbrimming with overcapacity in almost all sectors, and boosting urban migration will just aggravate overproduction, which will spill into world markets.
If China is already suffering overcapacity in everything, then indeed swelling the urban population would just exacerbate problems.

But it isn't. In fact, there are huge swaths of economic activity and employment simply missing from the Chinese marketplace.

Policies that address the reasons for this can create tens of millions of new jobs in traditional and new sectors in the years ahead, adding to domestic consumption and diverting the country from a collision course with its trading partners.
Consider three sectors: healthcare, manufacturing white collar, and education.

Healthcare: China has 1.6 doctors per thousand people; the U.S. has more than 23. Not that China wants to replicate everything about U.S. healthcare, but given rising pathology and mortality due to aging baby boomers, changes in diet, lifestyle, longevity and environmental contamination, filling this shortfall is critical.

Reaching the U.S. ratio would mean adding almost 30 million doctors, not to mention multiples of the current low numbers of supporting staff—nurses, palliative-care specialists, hospital administrators and hundreds of other subspecialties comprising the modern healthcare sector.

Manufacturing White Collar: For all its storied manufacturing-sector prowess, China's goods makers skimp on R&D, quality control, brand management, financial planning, environmental-health safety and almost every other white-collar position that turns a manufactured commodity into a branded product and generates intangible value for the firm: value that makes up a third or more of assets in most Organization for Economic Co-operation and Development firms.
While China Inc. may have overcapacity on the assembly line, it has extraordinary undercapacity in the business functions that turn a $10 generic toaster coming out of a Chinese factory into a $75 Braun-branded toaster sold at retail in the U.S. or Europe.
China would need at least 60 million more white-collar workers to be comparable with the U.S. on this score. Given the different development levels, we might cut that in half, but 30 million missing office-worker bees is a lot of jobs.

Education: The missing-jobs number is also huge in education. China has 10 teachers per thousand people, as opposed to 22 in the U.S. Basic education for urban migrant-workers' children is a critical task if accelerated urbanization is to generate more prosperity and not just worsening income inequality, social tension and developmental problems like crime and an underclass. China currently needs another 16 million teachers to reach the ratio in the U.S., as well as attendant teacher-trainers, guidance counselors, school administrators, and other related employees.

Of course there are reasons why these jobs don't already exist.
In the case of healthcare and education, Beijing has chosen to save resources or transfer them to state-owned enterprises rather than make sufficient public expenditures, while simultaneously preventing private enterprises from investing in these areas as businesses.

There are some low-price private hospitals and clinics in China, but with limited resources and market shares.

In manufacturing, the cost of capital to build up white collar employment for private and SME firms is typically two-to-five times that of the low nominal rates heavier state-owned enterprises enjoy.

And when they are able to build a brand and their own intellectual property, poor enforcement of regulations and intellectual-property protection jeopardizes their ability to recover their investment.
These three sectors just scratch the surface of new job potential: China is far from suffering "overcapacity in everything."

The problem is that what is overcapacity doesn't create many jobs.
Steel, aluminum, cement, plate glass and upstream petrochemicals together create just 14 million jobs in a labor pool of 780 million, which is fewer than the number of service-sector jobs in Guangdong Province alone.
China's consumption-urbanization policy thinking is the right way to go, but only if policy simultaneously addresses the biases in the financial sector that starve job-creating sectors while larding other industries with capital.

What China needs to make its urbanization strategy the solution rather than an unsustainable bubble machine, to put it simply, is affirmative action for labor-intensive industries.

Afghanistan: Dying For China

A delegation from the state-owned Chinese company, China Metallurgical Group Corporation, visited the site of a copper mine in Aynak, a former al-Qaeda stronghold southeast of Kabul, in 2007.

The Beijing headquarters of the China Metallurgical Group Corporation, known as M.C.C.

By MICHAEL WINES
KABUL, Afghanistan — Behind an electrified fence, blast-resistant sandbags and 53 National Police outposts, the Afghan surge is well under way.
But the foot soldiers in a bowl-shaped valley about 20 miles southeast of Kabul are not fighting the Taliban, or even carrying guns.

They are preparing to extract copper from one of the richest untapped deposits on earth. And they are Chinese, undertaking by far the largest foreign investment project in war-torn Afghanistan.
Two years ago, the China Metallurgical Group Corporation, a Chinese state-owned conglomerate, bid $3.4 billion — $1 billion more than any of its competitors from Canada, Europe, Russia, the United States and Kazakhstan — for the rights to mine deposits near the village of Aynak.

Over the next 25 years, it plans to extract about 11 million tons of copper — an amount equal to one-third of all the known copper reserves in China.
While the United States spends hundreds of billions of dollars fighting the Taliban and Al Qaeda here, China is securing raw material for its voracious economy.

The world’s superpower is focused on security. Its fastest rising competitor concentrates on commerce.
S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute, an independent research organization in Washington, said that skeptics might wonder whether Washington and NATO had conducted “an unacknowledged preparatory phase for the Chinese economic penetration of Afghanistan.”
“We do the heavy lifting,” he said. “And they pick the fruit.”
The reality is more complicated than that.

The Chinese bid far more for the mining rights to the Aynak project and promised to invest hundreds of millions more in associated infrastructure projects than other bidders.

It is a risky venture that has not yet proved to be economical, and it has already been dogged by allegations of bribery.
But the Aynak investment underscores how China’s leaders, flush with money and in control of both the government and major industries, meld strategy, business and statecraft into a seamless whole.

In a single move, Beijing strengthened its hold on a vital resource, engineered the single largest investment in Afghan history, promised to create thousands of new Afghan jobs and established itself as the Afghan government’s pre-eminent business partner and single largest source of tax payments.

An Odd Global Pairing
Afghanistan is not the only place where the United States and China find themselves so oddly juxtaposed in the post-9/11 world.

China is investing more in extracting Iraqi oil than American companies are.

It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan and volatile parts of Africa.
But it is in Afghanistan where China’s willingness to take risks for commercial and diplomatic gain are most striking.
China Metallurgical Group, often called M.C.C., will build a 400-megawatt generating plant to power both the copper mine and blackout-prone Kabul.

M.C.C. will dig a new coal mine to feed the plant’s generators. It will build a smelter to refine copper ore, and a railroad to carry coal to the power plant and copper back to China.

If the terms of its contract are to be believed, M.C.C. will also build schools, roads, even mosques for the Afghans.
The sweeping agreement has some experts rubbing their eyes in disbelief.

“It’s almost as if the Chinese promised too much,” said one international expert who, like some others interviewed, refused to be identified for fear of alienating the Afghans or the Chinese.
But even if elements of the agreement fall through, the Chinese have already positioned themselves as generous, eager partners of the Afghan government and long-term players in the country’s future. All without firing a shot.

Nurzaman Stanikzai was a mujahedeen in the 1980s, using American-supplied arms to help drive the Red Army from his homeland.

Today he is a contractor for M.C.C., building the Aynak mine’s electric fence, blast wall, workers’ dormitories and a road to Kabul.
“The Chinese are much wiser. When we went to talk to the local people, they wore civilian clothing, and they were very friendly,” he said recently during a long chat in his Kabul apartment.

“The Americans — not as good. When they come there, they have their uniforms, their rifles and such, and they are not as friendly.”
American troops do not, in a narrow sense, protect the Chinese. The United States Army stations about 2,000 troops in Logar Province, where Aynak is located.

But an Army spokesman said they generally patrolled well south of the mine area and had not provided direct security for Chinese investors or mine workers.
The Afghan National Police, which does protect the mine, was largely built and trained with American money.

The 1,500 guards the police have posted in and around Aynak are special recruits not drawn from the main force, according to Maj. Gen. Sayed Kamal, who heads the National Police.
But the conclusion is inescapable: American troops have helped make Afghanistan safe for Chinese investment.

And there is no sense that either government objects to that reality.

As diplomats and soldiers alike stress, the war in Afghanistan was never motivated by commercial prospects.

Had an American company won Aynak, some Afghans noted wryly, critics inevitably would have accused the United States of waging war to seize the country’s mineral wealth.

Moreover, if China succeeds in developing Aynak and generating revenue for the Kabul government, that helps achieve an American goal.
“To the extent that the Chinese bring Afghanistan up to speed and start paying a billion dollars a year in royalties,” a Western government official who has followed the Aynak project said, “that would mean that Afghanistan is on a firmer ground to start paying for its own security.”

China Stays Out of War Effort
The Chinese, meanwhile, have rebuffed requests to join the Afghan war effort, saying that national policy forbids military action abroad except as part of a peacekeeping force.

Instead, China’s foreign policy is based on commerce.

Its state-owned companies have been snapping up energy and mineral resources worldwide for years now, often by overwhelming competitors with lavish offers.
In 2006, for example, another state-owned goliath known as C.M.E.C. swept bidding for one of the world’s largest known iron ore deposits, in Gabon, by offering to build a 360-mile railroad to the nearly inaccessible mine site, two hydroelectric dams to power the mine and a deepwater ocean port to export the mined ore.
Such splurges are both national strategy — China’s goal is to control long-term access to critical commodities — and a matter of necessity if Beijing is to keep its industrial empire running.

With 700 to 1,000 steel mills to feed, China is the world’s largest importer of iron ore. Similarly, China already imports 40 percent of the world’s copper.
If the Aynak venture differs from those in the past, both international and Afghan experts say, it is because it appears to be as much a strategic coup as a commercial one.

Opportunity in Southwest Asia
The United States views Southwest Asia mostly as a security threat.

China sees it as an opportunity. Decades of military cooperation with Pakistan, which shares India as a rival, have flowered into an economic alliance.

A Chinese-built deepwater port in Gwadar, Pakistan, on the Gulf of Oman, is expected eventually to carry Middle Eastern oil and gas over the western Himalayas into China.

Afghanistan, which borders both Iran and Pakistan, drew scant attention from China until the middle of this decade.
Aynak’s riches had been known since Alexander the Great’s armies forged copper there 2,300 years ago.

When the Soviet Union invaded Afghanistan in 1979, its geologists took core samples and mapped the Aynak deposit, but were never able to begin mining.
The Soviets were succeeded by Osama bin Laden, who used Aynak as a training camp while planning the Sept. 11, 2001, attacks on the United States.

After the American-led invasion of Afghanistan, Afghan geologists rescued the Soviet surveys of Aynak and hid them until exploration could resume.
That exploration — a detailed overflight of much of the country by American surveyors in middecade — showed Afghanistan to be far richer in oil, natural gas, iron, copper and coal than anyone had imagined.

Aynak, in particular, was judged a world-class copper deposit, not just huge but of unusually rich quality, and the government chose it as the first major mineral concession to be auctioned to developers.
To minimize corruption, the Afghan government decided, on the advice of American advisers, to ask the World Bank and a Colorado geological consulting firm to help oversee the bidding.

A report last month in The Washington Post quoted an American official as charging that the Chinese swayed the bid with $20 million or more in bribes to the mining minister, Muhammad Ibrahim Adel, who was recently dismissed from the Afghan government in part because of the allegations. Mr. Adel has denied the charge.
Foreign experts say that the possibility of bribery in Afghanistan, one of the world’s most corrupt nations, can hardly be ruled out.

But they also say that the Chinese bid was so clearly superior to others that any bribe money may have been incidental to the outcome.
“This was not a backroom deal. This was not Adel, sitting in Beijing, cooking this up,” said one of several international experts interviewed for this article. “This was thoroughly vetted by the governments of the day.”
A. Rahman Ashraf is a veteran geologist and senior adviser on mining to Afghanistan’s president, Hamid Karzai. Mr. Ashraf intervened in 2002 to stop Aynak’s mining rights from being sold under the table to a Korean bidder.
“Our wish was that this process must be very transparent,” he said of Aynak, “because this is the first time. If it is not transparent, then nobody comes to the others.”
China won the bid, he said, for good reason: it offered a package deal, from power plants to railroads to smelters to coal mines, that no other bidder could match.

And it promised to staff the entire venture with Afghan laborers and managers — many of whom must be trained from scratch in a country with little mining expertise.
“After five years, it’s only Afghan engineers,” he said. “Only in administration do the Chinese stay.”
Indeed, outside experts here say, the striking aspect of China’s Aynak venture is the degree to which it left competitors in the dust.

Increasingly, the world’s richest remaining mineral deposits are in hostile territory — malarial jungles, combat zones, unstable nations that possess mineral riches but no realistic way to get them to market.
With government money and backing behind them, China’s state-run giants take risks in places that even the largest private behemoths will not tolerate, and they can add sweeteners — from railroads to mosques — that ordinary mining firms are ill equipped to provide.
“The Chinese have sort of raised the bar. They’ve taken it beyond the scope of just an extractive operation,” the Western official said.

“The Chinese are willing to step up and take a long-term strategic approach. If it takes 5 or 10 years, at least they have a beachhead.”
The wild card, of course, is that no outsiders can know how much of China’s Aynak venture is in fact brilliant strategy, and how much is merely a potentially ruinous business deal by an overzealous corporation.

Beijing’s corporate strategy is as opaque as it is overwhelming.
China Metallurgical, a Fortune Global 500 company that has so many subsidiaries that they are mostly identified by numbers, is a signal example.

The corporation reports to the top level of the Chinese government. Big foreign investments like the one at Aynak require blessing at an equally high level.

M.C.C. has huge and productive investments around the world. Yet hardly all those ventures are successes.

An M.C.C. copper mine in Pakistan is widely said to have serious environmental problems. A Pakistan lead mine has been dogged by conflict, including a suicide bombing that killed 29; residents accuse the company’s Chinese work force of stealing local jobs.

In Papua New Guinea, 14 Chinese workers at an M.C.C. nickel mine were injured in May in a pitched battle with local people who rioted over what they called intolerable working conditions.
That bid in 2006 for the iron mine in Gabon?

Four years after C.M.E.C. struck its deal, the bargain appears to be unwinding over hints of corruption and global objections to a dam that would destroy Kongou Falls, one of central Africa’s most treasured waterfalls.

Was Too Much Promised?
Not surprisingly, that record leads skeptics to suggest that in Afghanistan, M.C.C. may have overpromised and, later, will underdeliver.
In interviews here, some experts said that M.C.C.’s Aynak bid was so munificent that the company might be forced to renegotiate lavish payments of copper royalties to the Afghan government.

Others predicted that the company would be forced to shift parts of the vast project, like the yet-to-be-built railroad, to international donors.
Still others said the company’s initial environmental efforts already badly lagged behind the promise in its winning bid to strictly adhere to the Equator Principles and World Bank benchmarks — the gold standards for environmentally sensitive projects.
China Metallurgical is not talking.

Its officials not only refused to be interviewed for this article, but also sought to prohibit a journalist even from photographing the mine site from afar.
But the company clearly is undeterred.

The Afghan government is seeking bids for its second great mineral project, a behemoth called Hajigak that is said to contain 60 billion tons of iron ore.

There are seven finalists — all companies from India and China. M.C.C. is one of them.

Apple Censors Dalai Lama IPhone Apps in China

By Owen Fletcher

Apple appears to have blocked iPhone applications related to the Dalai Lama in its China App Store, making it the latest U.S. technology company to censor its services in China.
Those apps, which appear in most countries' versions of the App Store, do not currently appear in the Chinese version.

Another app related to Rebiya Kadeer, who like the Dalai Lama is an exiled minority leader reviled by China's authorities, is unavailable in the China App Store as well.

The apparent censorship comes after carrier China Unicom launched iPhone sales two months ago, making regulatory approval of the phone's contents in the country necessary for the first time.
"We continue to comply with local laws," Apple spokeswoman Trudy Muller said in an e-mail when asked about the missing apps.

"Not all apps are available in every country".
At least five iPhone apps related to the Dalai Lama are unavailable in the China store.

Some of those apps -- named Dalai Quotes, Dalai Lama Quotes and Dalai Lama Prayerwheel -- display inspirational quotes from the Tibetan spiritual leader.

Another, Paging Dalai Lama, tells users where he is currently teaching. A fifth app, Nobel Laureates, contains information about Nobel Prize winners including the Dalai Lama.
Test searches done on four out of five iPhones displayed at the Apple Store in Beijing this month returned no results for the term "Dalai."

The apps also did not appear for searches done with a computer on iTunes after switching the country selection in the program to China. One of the iPhones at the Apple Store did display the Dalai Lama apps, though it was unclear why.
Chinese officials condemn the Dalai Lama as a dangerous "splittist" seeking to separate Tibet from China, and have called him a "devil with a human face."

The Dalai Lama fled Tibet in 1959 after Chinese troops crushed an uprising in the capital city of Lhasa, solidifying Chinese control there. The religious figure remains widely revered by Tibetans.
Kadeer, an exiled leader of China's Uighur minority group, gets similar treatment by Chinese officials and state media.

An iPhone app named 10 Conditions, based on a documentary about her life, also did not appear in test searches of the App Store in China.
Apple lets developers choose in which countries' versions of the App Store to sell their products, but it is unlikely that the Kadeer and Dalai Lama apps are unavailable in China by the choice of their makers.

The app about Kadeer was submitted to the App Stores in all countries, James Boldiston, the app's developer, said in an e-mail.

Other developers said they could not recall if they had excluded China, but most had other apps for sale in the China store, showing that in other cases they had included the country.
"Given that Apple has cooperated with China before (by not distributing games), it's of course very likely that it's Apple, not the developers, that are preventing certain apps from appearing," said one China-based app developer, who asked not to be named, in an e-mail.

Games were not sold in the China App Store before recent months.
Boldiston and other developers of the missing items said Apple had not told them their apps were unavailable in China.
"I didn't know the app had been pulled, and wasn't informed," said James Sugrue, who designed the Dalai Quotes app.

"Apple reserve[s] the right to do this sort of thing, and while from a censorship point of view I disagree with this, I can understand why they did," he said.
Apple joins other U.S. technology giants including Yahoo and Google that have come under fire for complying with Chinese government demands on sensitive political issues.

Human rights advocates criticized Yahoo when Shi Tao, a Chinese journalist, landed a 10-year prison sentence in 2005 partly because of e-mail evidence gained from his private Yahoo account.

Yahoo said it was obeying Chinese law by handing the evidence to authorities.
Google has been criticized for offering a censored version of its search engine for China at Google.cn, which blocks pornographic and some politically sensitive search results. Google has similarly said it must follow local laws and regulations.
Chinese authorities previously took aim at Apple last year during the Beijing Olympics, when the U.S. iTunes Music Store was blocked in China after it started selling a new collection of songs about Tibet. The U.S. iTunes Music Store and App Store are both currently accessible from Beijing.
The Chinese iPhone also appears to be subject to the country's set of Internet controls known by critics as the "Great Firewall."

Searching the App Store for "Falun Gong," the name of a spiritual sect banned in China as a cult, caused iPhones in the Beijing Apple Store to display a results loading screen indefinitely, though no Falun Gong apps appear to be offered in any countries.

In contrast, searches for other terms quickly returned a results page.
Other iPhone apps that might be seen as sensitive by Chinese authorities are still offered in the China App Store. Apps that, for instance, show YouTube videos or let users update their Twitter accounts remain available even though YouTube and Twitter are blocked on the Internet in China.

China Finds Huge Fraud by Officials

By DAVID BARBOZA
SHANGHAI — Chinese officials misused or embezzled about $35 billion in government money in the first 11 months of the year, according to a national audit released this week.
The announcement is the latest indication of how widespread corruption has become among government agencies and how difficult it will be for Beijing to root it out.
The National Audit Office, which carried out the examination, did not disclose the size of the budgets reviewed this year.

But the agency, which is based in Beijing, said that it surveyed nearly 100,000 government departments and state-owned companies, and that more than 1,000 officials were facing prosecution or disciplinary action because of the audits.
Auditors said government officials engaged in everything from money laundering and issuing fraudulent loans to cheating the government through the sale or purchase of state land or mining rights.
“Criminals are now more intelligent, and covert,” Liu Jiayi, the director of the National Audit Office, was quoted as saying in the state-run news media.
Prime Minister Wen Jiabao hailed the work of the auditors on Tuesday and called on them to monitor government projects and prevent waste.
But analysts say the Communist Party faces significant hurdles in trying to curtail corruption. Every year Beijing announces new anticorruption drives, new laws and new policies aimed at dealing with the problem.

But every year the scale of fraud seems enormous, particularly in a country where the average person earns less than $50 a week.
In 2005, for instance, the National Audit Office reported finding about $35 billion worth of government funds misused or embezzled. That was the last year the office gave a national figure covering its audits, according to its Web site.
Experts say the audits revealed one thing: many in government are finding ways to steal public money.
“The huge crackdown reflects the seriousness of corruption in China’s government,” said Zhu Lijia, a professor of public policy at the Chinese Academy of Governance in Beijing.

“Even the National Audit Office should be supervised. In the past few years it was the N.A.O. that decided whether to publish or hide some statistics.”

Outcry follows China's execution of Briton said to be mentally ill

'I condemn the execution of Akmal Shaikh in the strongest terms and am appalled and disappointed that our persistent requests for clemency have not been granted,' Prime Minister Gordon Brown says.
By Janet Stobart
Reporting from London -- China's execution of British citizen Akmal Shaikh on drug dealing charges early Tuesday has provoked an outcry of revulsion around Britain.
Chinese ambassador Fu Ying was summoned to the British Foreign Office today for a terse 45-minute meeting with Foreign Office minister Ivan Lewis.

A statement said the ambassador was called " to hear of the government's regret that Akmal Shaikh's mental health had been ignored by the Chinese judiciary despite repeated interventions by those with an interest in his case."
British officials say that over the last few weeks a flurry of pleas that China consider the mental stability of the 53-year-old prisoner were ignored by the Chinese government and judiciary.
"I had a difficult conversation with the Chinese ambassador today," Lewis said, after the morning meeting.
He said he told the ambassador that "the execution of Mr. Shaikh was totally unacceptable," adding that "China had failed in its basic human rights responsibilities in this case, in particular China's court had not considered the representations made about Mr. Shaikh's mental condition."
Shaikh's family had repeatedly said his behavior clearly showed he suffered from bipolar disorder.

They were backed up by independent assessments from social workers in Poland, where Shaikh had lived for two years before his ill-fated trip to China in September 2007, where he was caught carrying nearly 9 pounds of heroin into the country.

He was executed in Urumqi, in China's far northwestern Xinjiang province, the first European to be executed in China in half a century, activists say.
British government leaders made 27 separate pleas for clemency or commutation of the sentence in recent weeks, they said, including at an eleventh-hour meeting Sunday with Ying, the Chinese ambassador.
After the execution, Prime Minister Gordon Brown said: "I condemn the execution of Akmal Shaikh in the strongest terms and am appalled and disappointed that our persistent requests for clemency have not been granted. I am particularly concerned that no mental health assessment was undertaken."
Shaikh's daughter Leilla Hornsell, interviewed recently by the BBC, said her father had been approached by drug smugglers in Poland who convinced him he could be a pop star in China singing for world peace, and gave him a suitcase to carry into China.
"They recorded a song, and he can't sing, and the song itself is very, very bizarre, but they convinced him that they're going to take him to the clubs in China and make him a huge pop star," she said.
In a statement on behalf of the family, the legal human rights charity Reprieve said his relatives were "saddened, stunned and disappointed at the news of the execution."
Amnesty International said: "Under international human rights law, as well as Chinese law, a defendant's mental health can and should be taken into account... It's simply not enough for the Chinese government to say, 'We did the right thing, trust us.' "