Chinese Edge Toward Supercomputing Record

By JOHN MARKOFF
A Chinese supercomputer has ranked as the world’s second fastest machine, surpassing European and Japanese systems and underscoring China’s aggressive commitment to science and technology.
The Dawning Nebulae, based at the National Supercomputing Center in Shenzhen, China, has achieved a sustained computing speed of 1.27 petaflops — the equivalent of one thousand trillion mathematical operations per second — in the twice annual ranking of the world’s fastest 500 hundred computer.
The newest Top 500 ranking is scheduled to be made public on Monday at the International Supercomputer Conference in Hamburg, Germany.
The Chinese machine is actually now ranked as the world’s fastest in terms of theoretical peak performance, but that is considered a less significant measure than the actual computing speed achieved on a standardized computing test.
The world’s fastest computer remains the Cray Jaguar supercomputer, based at the Oak Ridge National Laboratory in Tennessee, used mostly for nuclear weapons simulation. Last November it was measured at 1.75 petaflops.
In the previous year’s ranking, the Chinese had the fifth fastest computer, a system that was based at a National Supercomputing Center in Tianjin, China. That machine has now dropped to seventh in the rankings.
The U.S. continues to be both the dominant manufacturer as well as the nation with the most supercomputers on the Top 500 ranking.

This year, the U.S. had 282 of the world’s fastest 500 computers, an increase from 277 last November.

However, the Chinese appear to be intent on challenging U.S. dominance.

There had been some expectation that they would make an effort to complete a system based on Chinese designed components in time for the June ranking.

The Nebulae is based on chips from Intel and Nvidia.
The new system, which is based on a microprocessor that has been designed and manufactured in China, is now expected later this year.

A number of supercomputing industry scientists and engineers said that it is possible that the new machine will claim the title of world’s fastest.
“The one development that is really clear is that the Chinese are pushing at the high end,” said Horst Simon, associate laboratory director for computing science at Lawrence Berkeley laboratory.
“I wouldn’t be surprised if by the end of this year they surpass the scientific computing power of the EU countries combined and have a computer system with an achieved performance to reach the number one position on the Top 500,” said Jack Dongarra, a computer scientist at the University of Tennessee and one of the researchers who has organized the Top 500 ranking.
The U.S. designed the first machines that were defined as supercomputers during the 1960s and has rarely been dislodged from his controlling position as technology leader.

In 2002, however, the Japanese Government’s Earth Simulator set off shockwaves in Washington D.C. when that system briefly claimed the number one position on the Top 500 list.
The U.S. began investing heavily in the computing systems which are used for scientific and engineering problems ranging from climate simulation to automotive design.

The U.S. broke the petaflop barrier in 2008 and is now preparing to launch another sustained push to build systems capable of computing at what is known as exascale performance — one thousand times faster than today’s fastest systems.

The goal is to reach that technology generation sometime between 2018 and 2020.
“Computational scientists in various areas, such as climate, nuclear energy, combustion, advanced material CO2 sequestration etc., have made the case that they need an exascale system to advance their fields,” said Dr. Dongarra.

China's Korea crisis

The Washington Post

CHINA HAS BEEN treating its neighbors, and the world, to a demonstration of why its rising power is not necessarily to be welcomed.

Though it has become undeniable that its neighbor and client, North Korea, committed an act of war by sinking a South Korean warship in March, Beijing continues to shield the loathsome regime of Kim Jong Il.

An authoritative investigation by a multinational commission has produced fragments of the torpedo fired by the North's submarine, yet Chinese officials continue to pretend they don't know the facts of what happened.

Their public statements are limited to empty calls for "restraint."
A visit last week to Beijing and Seoul by Secretary of State Hillary Rodham Clinton served, at least, to put China on the spot.

Ms. Clinton rightly pressed the Chinese leadership to consider the commission's 400-page report.

She spoke publicly about the need for "a strong but measured response" to the incident as well as cooperation on the future direction of North Korea, which some experts believe may be unraveling.
China's best response came Friday when Premier Wen Jiabao, on a visit to Seoul, reportedly told President Lee Myun-bak in a closed meeting that Beijing would not protect the North if it concluded that the North was responsible.

South Korean officials took that as a hint that China might not oppose Mr. Lee's plan to seek a U.N. Security Council resolution condemning the Kim regime.

Yet China has offered no sign that it will take any action of its own to pressure the North, though it has far more leverage than any other country.

Indeed, President Hu Jintao hosted Mr. Kim this month -- and probably committed to supply him with more aid -- even after the naval attack.
In the short term China's behavior has benefited the United States.

Watching Beijing defend the indefensible probably helped the Japanese government settle a dispute with the Obama administration over a U.S. base on Okinawa.

It has shown South Koreans as well as people throughout Asia why the United States remains an indispensable guarantor of security in the region.
Still, an end to the crisis between the Koreas will require a more responsible approach by China. Abstaining from a Security Council resolution is not enough; Beijing must act decisively to restrain Mr. Kim from further provocations.

The events of the past week are a sign that China cannot prop up a criminal client state and also be regarded as benign in its growing power.

Sooner rather than later, it will have a choice to make.

Unrest May Signal New Phase in China Economy

By KEITH BRADSHER

The strike at the Honda transmission factory in Foshan has shut down four auto plants as well.

FOSHAN, China — Add another entry to the list of worries for the global economy and financial markets: labor unrest in China.

Rapidly rising industrial wages are beginning to allow China’s workers to share in their country’s rising prosperity.

The question is whether these gains can be maintained and even increased without disrupting supply lines to companies around the world, and without discouraging much future investment by Chinese and global companies alike.
The biggest eye-opener for multinationals in China recently has been a nine-day-old strike at a sprawling Honda transmission factory here in Foshan, about 100 miles northwest of Hong Kong.
The strike, which has forced Honda to suspend production at all four of its joint venture assembly plants in China, has shown that Chinese authorities are willing to tolerate work stoppages at least temporarily, even at high-tech operations on which many other factories depend.
Chinese policy makers are trying to let wages rise to create the foundations of an economy driven by domestic demand, without derailing the export machine that has produced the world’s strongest economic growth over the last three decades.
Even before the strike, manufacturers and buyers of low-cost products were already actively seeking alternatives to China, like Vietnam and Cambodia, said Richard Vuylsteke, the president of the American Chamber of Commerce in Hong Kong.
“They’re looking very seriously, and we’re seeing that in apparel and footwear,” he said. “A lot of our members are seeing appreciating wages.”
Honda has been making increasingly generous offers — or perhaps desperate offers — to settle the strike.

The company has already offered increases in total compensation of close to 50 percent, according to crumpled-up copies of the offer provided by striking workers.
Roughly half of the 1,900 workers are recent hires from high schools and vocational schools who are paid training rates of just 900 renminbi, or $132, a month, pay slips showed.

More experienced workers at the three-year-old factory earn up to 1,500 renminbi, or $220, a month.
Honda’s offer would raise total compensation for trainees to $202 a month, including benefits like a new food allowance; older workers would get slightly smaller raises.

The strikers rejected the offer because nearly half of the raises consisted of increases in benefits that might be revoked later.

The strikers are demanding an extra 800 renminbi a month, or $117, all in cash.
Takayuki Fujii, a Beijing-based spokesman for Honda, said Saturday evening that negotiations were continuing, but he declined to provide details.
There were signs on Saturday that the Honda strike was beginning to test the government’s patience.

After two days of allowing surprisingly extensive coverage by state-controlled media, the authorities imposed a blanket ban on domestic coverage, reverting to their usual policy of hushing up labor disputes.
Local newspapers had no mention of the strike this morning, and many references to the strike had disappeared from Chinese Internet sites. But there was no sign of police at the factory or one of its dormitories.
Labor advocacy groups say that they hear of frequent strikes in China, with work stoppages occurring somewhere every day. But strikes are typically hushed up and are often resolved in a day or two by the authorities, either with the police or through pressure on employers and workers to resolve their differences.
Honda is not alone in facing intense pressure to raise wages.

Foxconn, a giant electronics manufacturer near here in Shenzhen, said on Friday that it would raise wages by about 20 percent after being deeply embarrassed by a series of suicides by workers this year and criticism of working conditions.
The overall effect of wage increases on China’s competitiveness is not entirely clear, because of incomplete national data on average wages and productivity.

Nicholas Lardy, a specialist in the Chinese economy at the Peter G. Peterson Institute for International Economics, said that Chinese productivity was rising so quickly that actual labor costs per unit of production appeared to be flat.
One surprise of the strike here is that it involves laborers whose wages appear to have already roughly doubled in the last five years: blue-collar workers in export factories in the Pearl River delta region around Hong Kong.
By contrast, the wages of young college graduates have actually declined in recent years as China has rapidly expanded its universities and built new ones, creating a surplus of more highly educated workers.
The president of a big Chinese corporation, who insisted on anonymity because of the sensitivity of labor issues, said that his company paid 4,000 renminbi a month a decade ago for recent graduates with computer science degrees, which is $585 at current exchange rates, and only 3,500 renminbi now.
If anything, conditions are growing worse for new college graduates, not better.

A survey in Beijing released earlier this month by the Communist Youth League Beijing Committee and the Beijing Youth Stress Management Service showed that a fifth of new college graduates with bachelor’s degrees and a tenth of graduates with master’s or doctoral degrees were willing to work for free in their first jobs because they despaired of finding paid work.
The government has tried to respond to the glut of college graduates by ordering state-owned enterprises to hire large numbers of them and try to find tasks for them to do.

But these enterprises are increasingly expected to be profitable and have not absorbed all of the graduates, with the result that big cities in China have growing numbers of unemployed or low-paid college graduates.
These graduates are typically the only child in a family because of China’s one-child policy, and their families have frequently invested much or all of their savings in their educations.
Partly because so many young Chinese now go to university and partly because of a declining birth rate, the number of young Chinese available for factory work is falling far short of the demand from employers.

That is producing higher wages for blue-collar workers and giving them leverage to demand even more, as the Honda strike shows.

Trampled in a Land Rush, Chinese Resist

By MICHAEL WINES and JONATHAN ANSFIELD

The Laogucheng neighborhood in Beijing is being demolished.

BEIJING — When China’s land boom excited a frenzy of popular resistance late last year — including headline-grabbing suicides by people routed from their homes — Chinese policy makers finally proposed a solution: rules to protect citizens from unchecked development and to fairly compensate the evicted.

Today in Laogucheng, a dingy warren of apartments and shops slated for redevelopment on Beijing’s far west side, the fruits of that effort are on vivid display: a powerful developer is racing to demolish the neighborhood before the rules are passed.

And about 700 gritty homeowners are adamantly refusing to move until they get the fair deal they hope the rules will provide.
“This is a limbo period,” one holdout, Tian Hongyan, 49, said after a stroll amid the rubble of his half-bulldozed neighborhood.

“And during it, we’re seeing even more sudden and violent demolitions occur around the country.”
China is not a good setting for a Frank Capra tale, but people do have influence over their autocratic masters.

Top officials are worried that the property rush — which has led to soaring prices for urban real estate and low prices for old homes and farmland seized for development — is enriching local governments and well-connected developers at the expense of ordinary people and social stability.
Protests like those in Laogucheng — including self-immolations and deadly standoffs — have forced officials to at least consider measures to make it harder to seize property and turn it over to developers without fully compensating those who live on it or use it.

Effective confiscation of land nominally owned by the state, but farmed or lived on by the poor, has been a major source of unrest for the past two decades.
In a provisional move, state media revealed this week, China’s cabinet issued an “emergency notice” in recent days demanding that local governments hold officials accountable for “vicious incidents” and, by the end of June, publicize “reasonable” standards of compensation.
But the question is whether that and the newly proposed regulations will be tough enough, or come soon enough, to make much of a difference.

For those living in Laogucheng, the chances of a happy ending still seem remote.
The country’s property boom has spawned new cities, remade older ones and — not incidentally — helped float the buoyant economy that is a bedrock of Communist Party legitimacy. But its benefits are spread unevenly.
In Beijing, local officials plan to demolish about 60 areas like Laogucheng this year alone, mainly to erect high-rise complexes and greenbelts. That plan affects more than 180,000 residents, and has set off several ugly clashes.
Redevelopment plans elsewhere total scores of billions of dollars: a single city, Chongqing, last month unveiled plans to invest one trillion renminbi ($146.4 billion) in 323 projects.
Local governments have powerful incentives to stoke sales, for they control much of the land, and need land profits more than ever to finance new projects.
In China’s 70 biggest cities, government land-sale revenues leaped 140 percent in 2009, to $158.1 billion.

Land sales provide up to 60 percent of local government revenues, by one semiofficial estimate — and much more by some private ones.
The losers have been ordinary citizens, ousted from their homes with cut-rate compensation and scant legal recourse.

The existing loophole-ridden land rules, dating from 2001, give developers wide leeway to clear property.
Two years ago, China’s appointed legislature, the National People’s Congress, approved a law to strengthen individual property rights and ordered new rules written to regulate urban land.

But that effort stagnated in the legislative affairs office of the State Council, China’s cabinet.
“They face resistance from interest groups — from people in the government and from developers,” Shen Kui, the vice dean of Peking University’s law school, said in an interview.
Without updated rules, local governments pick renewal sites at will, then leave negotiations with residents to developers, demolition companies and low-level “demolition and relocation offices.” They frequently low-ball home-purchase offers, cut off utilities and even hire gangs of thugs to terrorize homeowners.
Powerless to stay and too poor to move, many Chinese have rebelled.

“Nail houses” — homes sticking out on tracts of cleared land, whose owners resist eviction — are common. So are tales of corruption and other abuses.
But public anger did not move the government to action until last November, when workers in Chengdu came to raze a garment factory and home and found the owner’s former wife, Tang Fuzhen, atop its roof.

After Ms. Tang doused herself in gasoline and set herself on fire, her death created a national sensation.
A few weeks later, Mr. Shen and four fellow Peking University law professors dispatched a plea to the National People’s Congress to overhaul the land rules.

The state press took note, and days later, State Council bureaucrats not only resurrected the long-stalled plans to write new land rules, but also invited the professors and others to weigh in at closed-door meetings.
As word of the proposal spread nationwide, more than 13,000 people flooded a State Council Web site with comments on the draft.

In Mr. Shen’s office in Beijing, petitions from people around the country were piled from the floor to his desktop.
Angry parents wrote from Fuzhou, a southeastern city where officials were seizing a new primary school to make way for a new central business district.

A plea arrived from Changshu, a Yangtze River delta city where developers sought to raze the villas of 800 relatively well-off homeowners, to make way for new villas.
Mr. Shen called the decision to finally write new rules a rare legal breakthrough.

The latest draft requires developers and officials to consult homeowners, pay market rates for homes and put off demolition until sales and relocation details are settled — and, sometimes, approved by two-thirds of homeowners.

It also would prohibit governments from forcibly seizing homes, in a process akin to condemnation in the United States, without specific “public interest” purposes.
Serious gaps remain.

The draft covers only urban property, leaving out rural city outskirts where local governments have reaped huge profits — up to 100 times the value of a home — by converting commercially zoned countryside to city land.
“The regulation is one key step for now, but it’s not nearly enough,” said Wang Liming, a People’s University vice president and legal adviser to the legislature.

He and other legal experts advocate new laws over land expropriations and planning to prevent abuses.
But despite the current draft’s loopholes, “if it’s really implemented, there will be some progress,” said Xu Zhiyong, who leads a nonprofit legal group that works on land issues.
It is a big if.

Since the public comment period ended in February, China’s bureaucracy — always opaque at best — has been silent on the rules’ future.
Some scholars say central government officials appear torn between addressing a threat to stability and reining in an engine of economic growth.

Regulators also could be preoccupied with other measures to curb property prices, they said, and waiting for prices to stabilize before issuing new rules.
And as in past years, lobbying against the new measures remains intense.

“The obstruction and opposition is quite formidable,” said Mr. Shen’s principal co-drafter, a Peking University law professor, Wang Xixin.

“Much of it derives from the local levels.”
For their part, local officials seem less concerned about reining in abuses than about mollifying those they evict.

In Hangzhou, the Chinese city that made the most money from land sales last year, officials at a recent government forum “naturally were very worried about being condemned by citizens,” Mr. Shen said.

But they also told him that even new regulations would allow them to designate land for redevelopment under a vague “public interest” clause.
“They basically said that what needed to be demolished would still be demolished,” Mr. Shen said. “The main issue for them was how to carry out equitable compensation.”
He and others charge that developers and officials are seizing the moment before tougher rules are imposed.

Qiu Feng, an editorial writer, said in The Beijing News last month that local governments were “clinging to the mentality of catching the last bus, using even cruder means to organize demolition and relocation on an even greater scale.”
Still, the prospects of reform have energized people on the brink of eviction, and pressured at least some local governments into making changes.

Cities like Hangzhou are introducing a policy of “homes waiting for people,” so that officials and developers can immediately resettle the displaced in affordable housing, regardless of outstanding disputes.
In mid-April, Beijing formed a committee under a vice mayor to supervise demolitions. Two outlying villages scheduled for urbanization this year will test models for sharing revenues from the developments with villagers.
But not Laogucheng.
More than two months past the March 20 deadline set by local officials and developers, more than half of its 1,200 homeowners are hanging on for a better settlement, impervious to cajoling, threats, and even assaults by window-smashing thugs.
Last December, just after the Peking University professors publicized their appeal, dozens of Laoguchengers marched to city and district government offices, demanding a fairer deal.

In a more convivial protest, they lit fireworks in the crumbling alleyways the night of March 20.
But neither local officials nor developers want to fan Laogucheng’s hopes.

“They think when the new regulation comes up, the relocation plan will change,” an official answering the phone at the district demolition and relocation office, who gave only her surname, Li, said this month.
“But in fact, the company has been informing them that the relocation plan won’t change at all,” she said. “Because this project has already begun.”

Consensus over renminbi revaluation has crumbled

By Robert Cookson and Peter Garnham
Only a month ago, currency traders were in broad agreement: the Chinese government was finally about to submit to international pressure and revalue the renminbi.
But over the past month that consensus has crumbled.

In the forwards markets, traders have swung from predicting a modest revaluation over the coming three months to predicting almost no appreciation.
Meanwhile, traders have slashed their expectations for a move over the longer term: 12-month forward contracts were on Friday implying a revaluation of about 1.3 per cent – compared to the 3.2 per cent rise expected a month ago.
“In the forward market a Chinese revaluation has now largely been put off the table,” says Flemming Nielsen, analyst at Danske Bank.
The market’s change of heart has been driven by the eurozone debt crisis, which has caused the euro to fall against the dollar.
The renminbi has been in effect pegged to the dollar since July 2008, and so it has strengthened 13 per cent against the euro this year.

That has threatened to wipe out the slender profit margins found among the many Chinese companies that export to the eurozone.

Indeed, the euro hit a low of Rmb8.2894 against the renminbi this month, its weakest level since 2002.
“The fall in the euro has underscored to China the dangers of revaluing against the dollar even as other currencies whip about,” says Ben Simpfendorfer, China economist at RBS, who estimates that Europe accounts for a quarter of all Chinese exports.
The strength of the renminbi against the dollar matters because it is the key financial variable that underlies trade between China and the US, two nations that have been dubbed “Chimerica” for their mutual financial dependence.
The US has long pressed China to rebalance its economy away from exports and towards domestic consumption by adopting a stronger currency.
At the annual US-China summit in Beijing this week, Tim Geithner, US Treasury secretary, took a conciliatory tone towards his hosts and did not press them in public about the exchange rate.
His silence has been interpreted by some analysts as a sign of US confidence that China will soon allow the renminbi to start appreciating, possibly as early as the G20 heads of state meeting in late June.
Others believe Mr Geithner was simply being pragmatic: creating a fuss would have been counter-productive.
Mr Simpfendorfer expects the renminbi to start strengthening at an annualised 3 per cent rate from the end of the third quarter, with the renminbi starting to “loosely” track a basket of currencies.
But for that to happen, it would need to be clear that the European debt crisis had been brought under control, he says.

“If events in Europe were to snowball from here, and euro/dollar to plunge, then the odds of appreciation would be even further reduced.”

Expectations of a renminbi appreciation are not universal. There is a contrarian view that when the renminbi moves against the dollar, it will fall.
It all comes down to the strength of the dollar and the weakness of the euro, says Jim Walker, head of research boutique Asianomics and former chief economist at CLSA.
Mr Walker believes that when China shifts its currency regime, it will adopt a basket of currencies against which the central parity will be managed according to domestic economic conditions and international exchange rate movements.
The dollar would have the biggest weight in the basket but the euro would play a “substantial” role, he says. According to the mechanics of the basket, further euro weakness would require the renminbi to fall, not rise, against the dollar.
“To expect a currency regime change that would entail the renminbi revaluing against the strongest, and largest, currency in its basket makes no sense at all,” Mr Walker says.
The vast majority of analysts, however, believe China wants to avoid a devaluation against the dollar at all costs, since it would infuriate the US and could trigger a cascade of competitive devaluations among other Asian nations.
An increasing number of emerging countries, including India and Brazil, have started to put pressure on China to strengthen its currency.
Foreign criticism is expected to rise in the coming months, especially ahead of the G20 meeting and the US mid-term elections in November.
But perhaps the most compelling reason to expect China to implement a change in its currency regime is not outside pressure, which Beijing has repeatedly said it will ignore, but because it will help fight domestic inflation.
Rising price pressures were highlighted by Chinese policymakers earlier in the year as the country’s main problem.
Furthermore, a significant rise in the renminbi could slow the pace of Chinese reserve accumulation in China and lessen the problem of how to deploy its massive stockpiles.
Last year China raised concerns over loose fiscal and monetary policy in the US, while just this week the State Administration of Foreign Exchange, which manages Beijing’s $2,447bn of reserves, denied it was considering cutting its exposure to the eurozone.
Neil Mellor, at Bank of New York Mellon, says in the first quarter, Safe had to allocate an average of $4bn in new reserves every week. “At some point they have to address the reserve issue, it’s a real headache,” he says.
“The only way to fix it is to allow the renminbi to float freely or introduce a large one-off revaluation of the currency.”

China changing its tune

Country may abandon neutrality, join in condemnation of N. Korea
BY MATTHEW LEE

South Korean soldiers are on the lookout Wednesday at a guard post in Gangneung, South Korea. North Korea threatened Wednesday to block all cross-border traffic and blow up any South Korean loudspeakers blasting propaganda northward, as tensions rose over the sinking of a warship

ELMENDORF AIR FORCE BASE, Alaska -- China may soon abandon its cautious neutrality and join the international condemnation of North Korea's role in sinking a South Korean warship, senior American officials said Wednesday.
Speaking after strategic talks this week in Beijing, U.S. officials predicted that China will gradually endorse the view that North Korea should be held accountable for the March 26 torpedo attack.
On a visit to South Korea this weekend, Chinese Premier Wen Jiabao is likely to express regret for the deaths of 46 South Korean sailors in the incident and signal that China will accept the results of an international investigation blaming North Korea, the U.S. officials said.

They spoke on condition of anonymity because of the sensitive nature of the discussions.
Wen is also expected to leave open the possibility of backing action against North Korea at the United Nations Security Council, although it's not clear how far Beijing is prepared to go in rebuking its historic ally.
"China won't pressure North Korea. That could lead to a crisis," said Gong Keyu, deputy director of the Asia-Pacific Research Center at Shanghai's Institute for International Studies.

"But if China keeps doing nothing, some countries may come to doubt our influence in the region and question whether Beijing is a responsible international player."
For now, Beijing appears to be buying time in hopes of an outcome that won't require it to take a clear-cut stance that could cripple relations with either Korea, with whom Beijing works to maintain a balance in ties.
On Wednesday, a vice foreign minister said the cause of the March 26 sinking in which 46 South Korean sailors died had yet to be determined and called for dialogue in place of growing confrontation.
Earlier Wednesday, in Seoul, U.S. Secretary of State Hillary Clinton said the world must respond to the "unacceptable provocation" represented by the sinking of a South Korean warship, as Pyongyang engaged in blistering rhetoric against Seoul and Washington.
Clinton said that "the international community has a responsibility and a duty to respond" to the sinking.

China tries to balance fallout of Korean tensions

By CHRISTOPHER BODEEN
BEIJING — Rising tensions over North Korea's alleged sinking of a South Korean warship are providing an unwelcome reality check for Pyongyang's chief ally, China.
Only months ago, Beijing was reaping kudos for sponsoring six-nation talks on dismantling North Korea's nuclear programs.

These days, it's looking increasingly isolated for failing to back U.S. and South Korean calls to get tough on Pyongyang in the face of what investigators say is overwhelming evidence the ship was struck by a North Korean torpedo.
The ship sinking and rising tensions put Beijing in an uncomfortable position, forcing it to choose between traditional communist ally North Korea and close trading partner South Korea.

Beyond that, the situation is squeezing China between playing the responsible power it says it wants to be, and protecting a loyal buffer state reviled by the world.
For Beijing, none of the options look good.
"China won't pressure North Korea. That could lead to a crisis," said Gong Keyu, deputy director of the Asia-Pacific Research Center at Shanghai's Institute for International Studies.

"But if China keeps doing nothing, some countries may come to doubt our influence in the region and question whether Beijing is a responsible international player."
Senior U.S. officials speaking after strategic talks this week in Beijing predicted that China will gradually endorse the view that North Korea should be held accountable for the March 26 torpedo attack.

They spoke on condition of anonymity because of the sensitive nature of the discussions.
For now, however, Beijing appears to be buying time in hopes of an outcome that won't require it to take a clear-cut stance that could cripple relations with either Korea, with whom Beijing works to maintain a balance in ties.
On Wednesday, a vice foreign minister said the cause of the March 26 sinking in which 46 South Korean sailors died had yet to be determined, and called for dialogue in place of growing confrontation.
Beijing regards the destruction of the corvette Cheonan as "extremely complicated" and is "carefully and prudently studying and examining the information from all sides," Zhang Zhijun told reporters.
Chinese officials have been no more forthcoming in private, telling diplomats that the result of the international investigation blaming North Korea that was announced last week was inconclusive, according to people with knowledge of the discussions.

They say Beijing has also faulted Seoul for rejecting North Korea's demand that it be allowed to send its own investigators to the South.
Yet the pressure on Beijing seems likely to only grow.

On Friday, Premier Wen Jiaobao travels to South Korea for a three-way summit with his Japanese and South Korean counterparts, and the incident is expected to feature prominently.
Meanwhile, South Korea's plan to bring the issue before the U.N. Security Council would force Beijing into a hard decision on whether to use its veto power to quash the discussion.

Doing so might preserve relations with Pyongyang but could be disastrous for Beijing's hopes of being seen as a rising, responsible regional and world power.
"They're in a quandary," said Yoon Deok-min, a professor at South Korea's Institute of Foreign Affairs and National Security.
"Protecting Pyongyang — this is an extremely difficult stance for Beijing to take. Internationally, this will translate into China defending what's been clearly declared as a provocation," Yoon said.
Beijing's apparent tolerance of North Korean provocations is predicated on its overweening aversion to any steps that could seriously destabilize the regime in Pyongyang and bring chaos and refugees to its northeastern border.
Even state-sponsored academics in Beijing say that fear of a North Korean collapse — and the loss of an important buffer between China and U.S. troops based in South Korea — serves as cover for Pyongyang to act out.
"Some say China has almost been hijacked by North Korea," Gong said.

"The little brother is always hiding behind China's back and every time he makes trouble, China gets pushed out there to deal with it."
The uniqueness and sensitivity of the Beijing-Pyongyang relationship was displayed during a rare visit to China by the eccentric and reclusive North Korean dictator Kim Jong Il, just weeks after the Cheonan's sinking.

Beijing closed highways to cater to his aversion to air travel and played along with increasing farcical attempts to keep his presence in the country a secret.
During the visit, Kim is believed to have secured crucial Chinese investment and economic assistance to prop up his impoverished communist state, already suffering from earlier U.N. sanctions and a cutoff of South Korean aid.

That economic lifeline will be all the more vital following South Korea's decision Monday to sever many economic links with the North.
Yet despite its status as chief ally, Chinese officials and academics say Beijing has only limited influence with the hard-line communist regime.

Past attempts to sweet talk Kim into reforming his dysfunctional command economy have yielded little, and repeated efforts to persuade him to return to the stalled nuclear talks have won only vague affirmations of the process.
Renewed negotiations look even more unlikely now, with South Korea saying a satisfactory resolution of the Cheonan issue must come first.

That deprives Beijing of what had been a signature issue showcasing its avowed role as a responsible regional power able to bring the feuding sides together.
Given the bind it's in, Beijing would ultimately like to see the Cheonan crisis resolved through talks between the two Koreas, leaving China and the United Nations out of it, Gong and other analysts said.
Should the situation on the peninsula deteriorate, however, Chinese inaction could carry a high diplomatic price, said Steven Kim, a Korea expert at the Asia-Pacific Center for Security Studies in Hawaii.
"I think there will be increasing international scrutiny and criticism of China and this will have negative impact on China's reputation as a responsible stakeholder and as a honest broker," Kim said in an e-mail.

The dark side of China’s enduring dream

By David Pilling
“They were 16 years old, on the loose in one of China’s most chaotic boomtowns, raising themselves with no adults in sight... They missed their mothers. But they were also having the time of their lives.” Factory Girls, Leslie T. Chang
Not everybody is having the time of their life.

This week, a 19-year-old worker at the Foxconn electronics plant near the sprawling factory city of Shenzhen in southern China became the fourth employee in two weeks, and the ninth this year, to leap to his death.

Two more failed in the attempt.

The spate of suicides, coupled with an undercover investigation into conditions at the Foxconn plant by Southern Weekly, a Guangzhou-based newspaper, has shone a spotlight into the darker crevices of China’s factory system.

Last week, nine professors of social science wrote an open letter to Foxconn in which they questioned the very sustainability of China’s role as the workshop of the world.
Few people have heard of Foxconn, in spite of the fact that the Taiwanese company employs an army of 300,000 workers at the Longhua plant where the suicides occurred.

But most have heard of Apple’s iPad, just one of dozens of electronic devices churned out by Foxconn staff.

They also know about Sony, Dell and Nokia, some of the companies whose game consoles, digital cameras, mobile phones and computers are assembled by the company under contract.

Foxconn workers – who earn roughly $75 for a 60-hour week – are well acquainted with these brands, though few, if any, can afford them.
The Southern Weekly sent a 22-year-old reporter undercover to work at the Foxconn plant just north of Shenzhen, the city conjured into life by Deng Xiaoping, whose 1992 southern tour declared China open for international business.

In addition to the factory floors, where many employees – wearing identical white coats and white caps – sit or stand at their workstations for 12-hour shifts, the city-sized complex has dormitories, shops, restaurants and even its own fire brigade.

Now it has a suicide hotline.

Southern Weekly’s reporter found staff dulled by the monotony of repetitive tasks, even walking and eating to the rhythm of the rumbling machines.
Factory Girls, Leslie Chang’s brilliantly reported book about female migrants, also makes grim reading at times.

Many factories treat their employees as fodder, refusing to employ people because they are too short, too ugly, too old – 30 is over-the-hill – or simply come from the “wrong” province.

They rush through orders, even if that means workers are not properly trained on machines that can – and sometimes do – slice off a finger.

They demand employees work long hours, though most are only too happy to do so because of the overtime pay they receive.

They often keep back a month of pay, lest their workers find a boyfriend, or a better job, in another factory.
But that is not the entire story.

Some 200m migrants have left the countryside in search of a better life. They cannot all be deluded.

In the specific case of Foxconn, it is true that the recent spate of suicides marks a sharp rise from last year.

But given the plant employs 300,000 – and assuming reported numbers are accurate – suicide rates are significantly lower than outside the factory.

China has a particularly high suicide rate for women.
More generally, average wages have been outstripping inflation for years and working conditions have been improving.

In 2008, southern Guangdong province, of which Shenzhen is a special zone, began a campaign to weed out shoddier plants, forcing the closure of half its toy factories. (Many moved inland to poorer provinces.)

In March, Guangdong became the latest to raise the minimum wage, by 20 per cent.

In theory, though probably not in practice, that could alleviate the pressure to work endless overtime.
Labour activists would argue, with some justification, that these are incremental improvements from a Dickensian base.

But one side of the migrant experience that emerges very strongly from Ms Chang’s book is a sense of prevailing optimism in the possibility of upward mobility.

Recent waves of migrants have grander ambitions than those who came before them.

Many flit from job to job, continually searching for something better, or putting their savings into property and start-up ventures (or pyramid schemes).
To be sure, that sense of possibility is double-edged. Migrants often get cut by reality.

Internet chat also suggests there is growing anger at the perception that much personal wealth is the fruit of corruption, not hard work.

Nevertheless, research suggests that a belief in the Chinese dream of upward mobility is still alive.

In Myth of the Social Volcano, a book based on extensive polling, Martin King Whyte, professor of sociology at Harvard University, found “an optimistic expectation that the rising tide of economic development is lifting all boats”.

Chinese people showed a faith in their ability to improve their own lives often surpassing respondents in capitalist countries, including the US.

That sense of possibility – still generously lubricated with double-digit growth – suggests factories will retain their allure for some time yet.

Re-Sourcing China's Resources

How to profit from Australia's—and other Western—policy foibles.
By JOSEPH STERNBERG
There's a reason for all those grins you may be seeing in China's resource industry these days. Beijing has built a resources strategy on the premise that the market is a fickle supplier and the best way to ensure the world's fastest-growing economy gets the resources it needs is to secure its own supply chain from the earth's crust on up.

Wouldn't you know, the capitalist West now is giving China reason to think it was right, superficially at least.

And China happens to be perfectly situated to capitalize on it.
In Australia, Prime Minister Kevin Rudd proposed this month a 40% tax on the "excess profits" of that country's miners.

The predictable result: Miners are warning that if the measure passes they'll invest less in Australia, with worrying implications for supply.

The paranoiacs in China worried about hostile Western governments strategically switching off the resources spigot. Who would have guessed that all along, the greater threat to the supply was simple policy ineptitude?
Fortunately from China's perspective, the threat turns out to be not as severe as you might think.
In the short term, Chinese steelmakers have particular reason to rejoice, because Mr. Rudd has just made common cause with them against his country's own mines.

The logic of taxing "excess" profits is that companies are exploiting their market position to extract a return greater than that needed to incentivize "sufficient investment to meet the demand."

Which is precisely what steelmakers have claimed was going on in the iron-ore market, where spot prices have been climbing while the old system of negotiating annual pricing contracts broke down.
China never believed BHP Billiton CEO Marius Kloppers when he said things like "Commercial market mechanisms will ensure that developing nations' [read: China's] raw material demand is met, that suppliers obtain sufficient investment to meet the demand and that new deposits of raw materials are discovered."

To credit that argument would force the admission that China's own chronically overheated demand was pushing up iron-ore (and, by extension, other mineral) prices.

More convenient to complain that oligopolistic miners were profiteering off the weak negotiating position of a fragmented Chinese customer base.
To the very limited extent China and Mr. Rudd are right about this, utopia beckons for Chinese steel.

China need not worry about supply since Australian mining would continue much the same as before. Except that prices would fall, since why would any miner charge more simply for the privilege of sending a bigger tax payment to Canberra?

Thus would a tax intended to transfer Australia's mineral wealth to Australia's citizens instead transfer mining companies' shareholders' wealth to China in the form of lower resource prices.
Over the longer term, of course, Australia's customers face a nontrivial risk of pinched investment and stagnating supply.

But even this isn't an unremittingly gloomy picture for China.

Perhaps this finally will be China's chance to wear down the political opposition to its resource investments in countries like, say, Australia—and get them at a good price.
With respect to the valuation of mining assets, Canada shows where Australia is headed.

Ottawa in 2006 changed its tax law in a way that, inter alia, hikes rates on many resource companies to 31.5% starting next year, from zero.

Average valuations among companies affected by the move plummeted by 35% in two days after the announcement.
Why so cheap?

In tax-happy Canada, as in Mr. Rudd's Australia, the most willing resource investors will be those for whom the precise economic rationale of a mine is secondary to the basic interest in securing the minerals.

That tends to rule out many Western investors and mining companies beholden to decadent shareholders, and less demand for ownership leads to a lower price.

Already, U.S.-based Peabody Energy cut its bid for Queensland's Macarthur Coal by 7%, citing the tax plan.
But Chinese companies buck those norms.

They have not invested in resources in Africa, Central Asia, Latin America or elsewhere because it was excessively profitable. They do it to guarantee supply, and because they have ample spare cash to spend.

For them, low valuation brought about by policy risk can be an opportunity, not a warning.

Again Canada's oil industry is instructive.

Canadian mining executives complained falling valuations would make them cheap sitting ducks for foreign acquisitions.

In moved the Chinese, among others, with cumulative investments of more than 5 billion Canadian dollars ($4.6 billion) since April 2009.
Politics would be the main impediment to a similar move on Australia.

In December, Mr. Rudd's treasurer, Wayne Swan, said: The government will "carefully consider cases where a proposed investor is also a buyer of the same resource, in particular where the proposal involves potential control over pricing and production."

Meaning Chinese resource investments will face an uphill climb.
Then again, that was before Mr. Rudd's tax grab depressed job-creating capital investment in one of Australia's key industries.

Imagine a speech five years from now in which a future prime minister says his government will approve a major Chinese mining deal for the sake of employment.

Beijing's smartest central planners couldn't have concocted such a clever scheme to wedge their way into Australia's mining industry.

What Did China Get for Backing Iran Sanctions?

By Tony Karon

US Secretary of State Hillary Clinton meets with Chinese President Hu Jintao at the Great Hall of the People in Beijing, China
.A week after announcing a uranium-swap agreement with Turkey and Brazil, Iran on Monday formally submitted the proposal to the International Atomic Energy Agency (IAEA) in Vienna — and in doing so, as Tehran sees it, put the proverbial ball back in the court of the U.S. and its allies.

But Washington preempted Iran's latest gambit the same day, by announcing a new package of U.N. sanctions to be presented to the Security Council with the all-important backing of China. Beijing had previously been the key obstacle to adopting new sanctions, insisting that such measures would be counterproductive and demanding that all sides go the extra mile to find a solution through dialogue.

Judging by their reactions until now, the Chinese might have been expected to respond to the Turkey-Brazil-Iran proposal by demanding that any discussion of sanctions be postponed until the potential of the confidence-building mechanism had been tested.

Instead, it backed the U.S., saying the onus was on Iran to do more to satisfy international concerns over the intent of its nuclear program.

So what changed?

Analyst Peter Lee points out that the Chinese are claiming, through commentaries in official publications, that Beijing extracted a significant price for its support.

Not only has Beijing watered down the sanctions to be adopted by the Security Council in order to ensure they don't restrain China from expanding its already massive economic ties with Iran; Chinese analysts also claim that, in the course of a protracted series of negotiations with Washington, their government also won undertakings from Washington to exempt Chinese companies from any U.S. unilateral sanctions that punish third-country business partners with the Islamic Republic.
"China believes that normal economics and trade should not be punished because of the Iran [nuclear] question nor should those countries that maintain normal, legal economic relations with Iran be punished," wrote a commentator in the influential Chinese paper Global Times.

The piece argued that China had, in fact, secured U.S. agreement that in any follow-on sanctions adopted by the U.S. and its European partners, China's considerable interests in Iranian energy, trade and financial sectors would be protected.

A key U.S. congressional committee on Tuesday announced that it was postponing by a month the passing of a package of unilateral sanctions, citing progress made at the U.N.
The follow-on sanctions are widely viewed as more important than those adopted at the U.N., which are too limited to change Iran's behavior.

And if China's cooperation at the U.N. will have earned it exemption from any of the unilateral measures imposed by the U.S. and its major allies, that will be good news for the Iranian economy, in which China is emerging as the major foreign stakeholder, and also arguably for Chinese companies sewing up investment in the country's energy sector.
While the U.S. has thus far dismissed the deal Iran reached with Brazil and Turkey as a "ploy" designed to avert new sanctions, China has been more enthusiastic, stressing that dialogue remains the route to resolving the standoff.

"The Security Council discussing the Iranian nuclear issue does not mean the end of diplomatic efforts," said Foreign Ministry spokesperson Jiang Yu on Tuesday.

"We value and welcome the agreement reached among Brazil, Turkey and Iran on Tehran's research reactor."

And she expressed the hope that the new proposal would soon result in a formal agreement with the International Atomic Energy Agency.
Although the Iranians were taken by surprise by China's support for Clinton's sanctions announcement, Lee argues that Iran may recognize that Beijing's intervention may have been helpful under the circumstances.

Curiously enough, in a speech on Wednesday, President Mahmoud Ahmadinejad tore into Russia for backing the U.S. position, warning that it would be considered a "historic enemy" if it supported efforts to pressure Tehran — but he appears to have avoided attacking China's support for the same sanctions package.

Summit Shows Superpowers' Shifting Dynamic

By ANDREW BROWNE, ANDREW BATSON And AARON BACK

BEIJING—The most wide-ranging dialogue in the history of modern U.S.-China relations ended with some accord on contentious issues of currency and trade, but underlined a fundamental shift in the relationship between Washington and a newly assertive Beijing.
Although China offered few major concessions in two days of discussions at the annual Strategic and Economic Dialogue, which ended on Tuesday, the U.S. praised the outcome.
China pledged to gradually reform its currency-exchange rate, but without offering any timetable.

On Beijing's drive to promote "indigenous innovation," which foreign companies fear is a protectionist ploy, China held out hope of a resolution within the World Trade Organization—repeating a pledge it had made before.

And Beijing promised to "work together with the U.S. and other parties" to resolve the crisis over allegations that North Korea torpedoed a Southern patrol vessel, but it gave no specifics.
"This is progress," said U.S. Treasury Secretary Timothy Geithner, referring to China's response to American complaints about "indigenous innovation" policies that threaten to exclude foreign companies from a government-procurement market worth billions of dollars each year.

"It does not fully resolve our concerns, but it gives us a set of basic principles on which to move forward," he told a closing ceremony at the Great Hall of the People.
The optimistic language reflects an upturn in what is arguably the most important bilateral relationship in the world, but also masks U.S. frustration with China's engagement on several fronts.

The Obama administration's early expectations for an all-embracing and energetic partnership, with the potential to address global challenges such as climate change and reshape the world economy, has been tempered by plodding progress on key issues.
Pressure is likely to grow on Mr. Geithner to secure more than just soothing words from Beijing on the yuan.

U.S. lawmakers may allow China more latitude given the sovereign-debt crisis in Europe and the fall in the value of the euro, which have combined to damage Chinese exports to its largest market.

But lawmakers who say China is weakening its currency to benefit exporters are likely to press for it to be formally declared a currency manipulator if there is no movement by Beijing.
U.S. Secretary of State Hillary Clinton alluded Tuesday to tensions in the relationship, citing China's furious reaction to U.S. arms sales to Taiwan, which China regards as a renegade province, and to President Barack Obama's meeting with the Dalai Lama.

Beijing accuses Tibet's spiritual leader of fomenting independence for the Himalayan region.
"In an earlier era we might have experienced a lasting setback," she said. "This dialogue… helped put us rapidly back on a positive track."

Chinese Vice Premier Wang Qishan had a similar spin: "We are now able to manage the differences and problems arising in the course of our relationship in a more rational and mature manner," he said.
The choreographed theater surrounding the dialogue, which involved some 200 U.S. officials, illustrated China's new sophistication in managing its public image.

Without any significant compromise, the Chinese government garnered plaudits from top U.S. officials and signaled to a domestic audience its new importance in global affairs.
For its part, Washington's gestures of gratitude were partly designed to give cover to Chinese officials as they prepare to give real ground on issues such as the currency-exchange rate.
Instead of openly prodding China over issues such as currency, U.S. officials are pursuing patient diplomacy, offering China wide latitude to set its own timetable.

In part, this reflects the reality that Chinese officials are less likely to budge if they are seen by a domestic audience to be caving to American pressure.
Iran illustrates the opportunities and the limits of the collaboration.

Even though Washington won Beijing's agreement on a draft United Nations sanctions resolution against Iran this month, it did so only after watering down its original proposal to suit China, making it appear that China was a reluctant follower and sending an ambiguous signal to Tehran about Chinese resolve.
In Beijing, the gap between Chinese and U.S. strategic interests was on stark display over North Korea.

On Tuesday, Mrs. Clinton said the U.S. and China must "work together to address the crisis provoked by the sinking of a South Korean ship," referring to North Korea's torpedoing of a patrol vessel in March.
Chinese State Councilor Dai Bingguo wouldn't be drawn out, offering only stock phrases of concern.

"Relevant parties should proceed on the basis of safeguarding the overall interest of peace and stability in the region and calmly and appropriately handle the issue and avoid escalation of the situation," he said.
Later, Vice Foreign Minister Cui Tiankai went slightly further, offering to "work together with the U.S. and other parties and continue to stay in close touch on the situation in the Korean peninsula."

China has yet to comment on the findings last week of an international investigation that the Cheonan corvette was sunk by a North Korean torpedo.
Whatever differences were aired behind closed doors at the dialogue were papered over in public remarks.

Mr. Geithner gave a positive assessment of China's response to virtually the entire list of prominent complaints that the U.S. brought to the meeting.
He singled out China's commitment to submit a revised offer to join the WTO Agreement on Government Procurement by July, a move that would apply international standards to the Chinese government's purchases from the private sector, including foreign companies.

China missed a similar self-imposed deadline in 2009 after the first Strategic and Economic Dialogue in Washington.
The U.S. State Department announced a list of 26 specific results from the dialogue, which ranged from training for maritime search and rescue operations to a safety accord for nuclear reactors to a conference on illegal logging.
U.S.-China relations started to mend in April after a one-hour telephone call between Messrs. Obama and Hu, which was followed by Mr. Hu's trip to the U.S. to attend a nuclear-security summit.
Both sides have made concessions.

The U.S. Treasury department delayed a crucial decision on whether to label China a currency manipulator just prior to Mr. Hu's April trip to Washington.

The Obama administration is planning to ease controls on some high-tech exports, a move long sought by China.
Leaders of the U.S. delegation went out of their way to add a homey touch to their serious business in Beijing.

On Sunday, Mr. Geithner played basketball with Chinese high school students before he and Mrs. Clinton sat for a joint interview on the Chinese-language Phoenix TV channel.

The host, Chen Luyu, teased Mr. Geithner by asking him whether he is really "one of the best looking guys in the administration," and got Mrs. Clinton to talk about her and her husband's taste in movies (she likes romance, he likes action).
After the dialogue, said Eswar Prasad, a professor at Cornell University and former head of the China desk at the International Monetary Fund, "both sides can claim victory for having raised their concerns clearly and making progress on issues their respective domestic constituencies care about."
On the yuan's exchange rate, President Hu Jintao on Monday went no further than to repeat a longstanding pledge to gradually implement reform.

Some in the U.S. argue that Beijing, by keeping the yuan pegged to the dollar, weakens its currency to aid Chinese exporters, to the detriment of U.S. manufacturers.

Yet Mr. Hu's comment was sufficient to elicit a warm response from the U.S. side.

China's Assistant Finance Minister Zhu Guangyao said that Mr. Geithner had characterized Mr. Hu's comments on the yuan as "very, very, very" encouraging and important.

There was no immediate confirmation from the U.S. side on the accuracy of Mr. Zhu's portrayal.

Mr. Geithner has been at pains to argue that exchange-rate reform is in China's own interest, and up to China to decide.

Whether China makes a move, he said on Tuesday, "is, of course, China's choice."

US fears Chinese aggression in Pacific

By Kathrin Hille in Beijing

The commander of US forces in the Pacific has warned that China’s military is asserting the country’s territorial claims in regional waters more aggressively.
“There has been an assertiveness that has been growing over time, particularly in the South China Sea and in the East China Sea,” Admiral Robert Willard told the Financial Times.

He said China’s extensive claims to islands and waters in the region were “generating increasing concern broadly across the region and require address”.
The admiral’s remarks come after complaints by Japan’s government about aggressive behaviour from a Chinese coastguard vessel in contested waters and a Chinese military helicopter in international waters.
Some of China’s neighbours have been watching the People’s Liberation Army’s modernisation and efforts at expanding the PLA navy’s reach with unease.

Defence experts see this expansion as one factor behind a developing arms race in south-east Asia.
Admiral Willard said the US viewed China’s growing influence in Asia as positive. But Beijing needed to be more transparent, not only with the US but also with its neighbours, about the part of the PLA’s capabilities that could be viewed as aggressive.
He was speaking before talks with Ma Xiaotian, deputy chief of general staff of the PLA, the first meeting between senior US and Chinese military officers since Beijing suspended bilateral military-to-military dialogue in January over US arms sales to Taiwan.
“US-China military dialogue is officially still in suspension,” said Admiral Willard, who visited Beijing at the invitation of Hillary Clinton, secretary of state, in the context of the Strategic and Economic Dialogue, a series of high-level bilateral exchanges that concluded on Tuesday.
But he interpreted the fact that Beijing had agreed to his presence as a sign that it viewed some high-level exchanges as beneficial.
“What was very striking yesterday was my impression of the very advanced, sophisticated and mature dialogue that’s occurring across a wide range of subjects between China and the US,” he said.

“That is in contrast with a very immature military to military relationship that we see great value in improving, and we hope that that would become evident to China as well.”
The admiral said he had not been a party to discussions with China about North Korea, which had been led by Mrs Clinton.

Military observers in Beijing said they believed the issue had been on the agenda on his meeting with Gen Ma.

Admiral Willard said: “China has a role in this as a direct result of the relationship that they maintain with the North Koreans. At the same time, the broader international community has a role to play in this, and we think the UN ultimately has a role to play in this in support of the aggrieved party, South Korea.”

China Aims to Stifle Tibet’s Photocopiers

By SHARON LaFRANIERE

BEIJING — The authorities have identified a new threat to political stability in the restive region of Tibet: photocopiers.

Fearful that Tibetans might mass-copy incendiary material, public security officials intend to more tightly control printing and photocopying shops, according to reports from the Tibetan capital, Lhasa.
A regulation now in the works will require the operators of printing and photocopying shops to obtain a new permit from the government, the Lhasa Evening News reported this month.

They will also be required to take down identifying information about their clients and the specific documents printed or copied, the newspaper said.
A public security official in Lhasa, who spoke on the condition of anonymity, said the regulation “is being implemented right now,” but on a preliminary basis.

The official hung up the phone without providing further details.
Tibetan activists said the new controls were part of a broader effort to constrain Tibetan intellectuals after a March 2008 uprising that led to scores of deaths.

Since the riots, more than 30 Tibetan writers, artists and other intellectuals have been detained for song lyrics, essays, telephone conversations and e-mail messages deemed to pose a threat to Chinese rule, according to a report issued this week by the International Campaign for Tibet, a human rights group based in Washington.
“Basically, the main purpose is to instill fear into people’s hearts,” said Woeser, an activist who, like many Tibetans, goes by one name.

“In the past, the authorities tried to control ordinary people at the grass-roots level. But they have gradually changed their target to intellectuals in order to try to control thought.”
Ms. Woeser said she was also a target of the authorities for her views.

She lost her job in Lhasa after her book “Notes on Tibet” was banned in 2003. She now lives in Beijing, but she said she was carefully watched by the authorities.
China’s leaders contend that their only goal is to guarantee stability, ethnic unity and better living standards for Tibetans.

Officials say that as long as separatist leaders are kept firmly in check, continued economic development will win Tibetans over to Chinese rule.
But the International Campaign for Tibet’s report contends that the authorities are not merely punishing separatists, but also dissidents of all stripes who dare to criticize the government and defend Tibetans’ cultural and religious identity.

A 47-year-old writer named Tragyal was arrested in April after he published a book calling on Tibetans to defend their rights through peaceful demonstrations, the report states.

His current whereabouts is unknown, it said.
A popular Tibetan singer, Tashi Dhondup, was sentenced to 15 months at a labor camp in January after he released a new CD with a song calling for the return of the Dalai Lama, the Tibetan spiritual leader, according to the report.

He had been arrested on suspicion of “incitement to split the nation,” the report states.
The Dalai Lama fled to India in 1959 after a failed uprising against the Chinese authorities.

He says he supports greater autonomy for Tibet but not secession. China says the Dalai Lama’s goal is an independent Tibet.
The authorities in Tibet apparently see printing and photocopying shops as potential channels through which unrest can spread.

One Chinese print shop operator in Lhasa, who is of the majority Han ethnicity rather than Tibetan, said that her husband had been summoned to a meeting last week on the new requirements.
“You know sometimes people print documents in the Tibetan language, which we don’t understand,” said the woman, who gave her last name as Wu. “These might be illegal pamphlets.”
Tanzen Lhundup, a research fellow at the government-backed China Tibetology Research Center, which typically follows the government line on Tibet, said in an interview that “the regulation itself is not wrong.” But he said that it should have been put before the public before it was put in place.
“They have never issued such a regulation before,” he said. “On what grounds do they want to issue it? I think citizens should be consulted first.”

China Falls Victim to Greek Deficit Contagion

By Michael Pettis
China is under growing pressure from Asia, Europe and the U.S. to revalue its currency.

Until recently, it even looked like we were about to embark on a sustained process of yuan revaluation fairly soon.
The Greek crisis may have changed that.

The 15 percent slide in the euro’s value against the yuan over the past six months has eroded Chinese competitiveness in the market of its largest trading partner: the European Union.

More importantly, many trade-deficit countries in Europe -- such as Greece, Portugal and Spain -- are having difficulty financing themselves.

Without net capital inflows, these countries can no longer run current-account shortfalls.
Not surprisingly, concerns in China about euro weakness have fueled calls for caution in any decision to realign the currency.

The yuan has already strengthened significantly in trade-weighted terms and the potential contraction in demand from China’s main trading partner could put serious pressure on Chinese exporters even before a yuan revaluation.
One school of thought says to allow more yuan appreciation might create a drag on the economy, just as the Chinese government is trying to wean itself off a massive, and perhaps toxic, dose of investment.

China will probably be hurt by the impact of the Greek crisis, and it should try to limit the pain.
The reasoning sounds plausible and even responsible, but it might only exacerbate the problem for China over a longer horizon by increasing trade tensions, which historically have been especially damaging to surplus countries.

Shift Burden
China plays a huge role in the global balance of payments. The Greek crisis and the larger European response will adversely affect existing trade.

Limiting the damage for China necessarily means shifting the brunt of the adjustment to other countries.

Something similar happened in 1930 when the U.S., the leading trade-surplus nation at the time, foolishly used the Smoot-Hawley Tariff Act in an attempt to protect itself from the trade consequences of a collapse in the ability of European trade-deficit countries to finance themselves.

U.S. protective measures implicitly required other deficit countries to absorb the full brunt of the impact, and this caused them to retaliate with tariffs, currency depreciations and import quotas.
What does all this have to do with Greece?

For the foreseeable future, the major trade-deficit countries in Europe are going to find it very difficult to attract net new financing.

At best they will be able, with official help, to refinance part of their existing liabilities.

New Capital Inflows
If they can’t attract net new capital inflows, they can’t run current-account deficits.

There must be an equal, obverse reaction in the global balance of trade if there is a contraction in these large trade gaps, now equal to two-thirds that of the U.S.

Either the trade surpluses of Germany and other European surplus countries must shrink by the same amount, or Europe’s overall surplus must expand by the same amount.
We will probably see a combination of the two, but a weaker euro -- as well as credit contraction, rising unemployment and a German reluctance to reverse policies that constrain domestic consumption -- will push most of the adjustment abroad via an expanding European current-account surplus.
If Europe’s current-account surplus grows, there must be a trade adjustment elsewhere.

Either the current-account surplus of countries such as China and Japan must contract by the same amount, or the current-account deficits of countries such as the U.S. must grow (or some combination of both).

Trade Wars
Should China resist a contraction of the current-account surplus by postponing a yuan revaluation, lowering real interest rates (which have already declined this year), slowing credit contraction, and otherwise trying to maintain exports -- let alone grow them -- most of the adjustment will be shifted to countries that don’t intervene in trade directly.

The most obvious are current-account-deficit countries.
This would cause a sharp increase in their current-account deficits, but these countries are likely to resist by intervening in trade themselves.

Unlike many other countries, the U.S. has limited ability to use interest rates or currency intervention to affect trade, so it must use tariffs.

As happened in the 1930s, this would probably set off higher tariffs in other countries that couldn’t regain export competitiveness through currency intervention.
The Greek crisis is forcing a much more rapid adjustment in trade than the world is easily able to absorb.

As in the 1930s, each country seems eager to pursue policies to avoid adverse trade effects, but these policies can only work by pushing the burden of adjustment onto other, equally unwilling, entities.
The only way to overcome a beggar-thy-neighbor crisis is if the major trading powers -- the U.S., China, Japan, Germany and the EU -- work out a plan in which the adjustment process is slowed as much as possible and the burden is shared.

Is it possible for them to come up with something fair and equitable? Perhaps not, but unless they try, the world will adjust much more painfully.

U.S. Businesses Back More Trade Action vs. China

By JAMES T. AREDDY
SHANGHAI—American companies are becoming more comfortable with the U.S. Congress taking a role in trying to level the playing field for businesses in China, said Thomas J. Donohue, chief executive of the U.S. Chamber of Commerce.
In an interview Monday, Mr. Donohue said that not since before China joined the World Trade Organization in 2001 have his members been so concerned about "backtracking" by China on opening its economy to U.S. companies -- or so receptive to proposals from Washington to address how companies are affected.
U.S. companies "are not sure how hard they want to work to keep Congress from challenging China," Mr. Donohue said.

Fueling a more activist atmosphere in Washington, he said, is jostling ahead of November mid-term U.S. Congressional elections where "China is a target."
Mr. Donohue said he conveyed the Washington-based Chamber's concerns last Friday to Chinese Vice President Xi Jinping, saying that he told the official "there is a protectionist bent in the Congress."

The two spoke on the eve of the two-day Strategic and Economic Dialogue that started Monday in Beijing, where U.S. officials including Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner are pressing similar points.
During a speech Monday in Shanghai, Mr. Donohue also referred to his talks with Mr. Xi.

He said he told the Chinese official that while most of the Chamber's members in China are profitable, "there are growing concerns whether China is backtracking," according to a summary of the speech.
In particular, Mr. Donohue said he cited industrial and indigenous innovation policies in China that "seem designed to force technology transfer and restrict foreign competition."

A number of business groups have criticized the policies, even as Beijing has watered down some elements of the plan.
In the interview, Mr. Donohue said Mr. Xi was "quick to assure me these were areas of importance and current discussions."

However, he said, the Chinese official's comments were "90%" about Europe's recent financial problems and also touched on other geopolitical issues of concern to Beijing, including Korea, Taiwan and Tibet.
To some analysts, the European crisis has taken the heat off China to revalue its currency upward, since the common currency's recent fall against the dollar has also made the euro weaker against the yuan, making European goods more affordable in China. The European Union is China's largest trade partner.

Mr. Donohue said a yuan revaluation against the dollar would be a "good thing to do" but pushing Beijing on this front isn't his central objective.

"I don't think it would have a huge effect on trade volumes," said Mr. Donohue.
But an adjustment "could forestall some of this business in the United States," he said, referring to things like pressure for import tariffs against China to level the playing field.

China, North Korea give Japan a couple reasons to keep US Marines on Okinawa

Democracies need to hang together, as Prime Minister Yukio Hatoyama discovered in deciding not to reduce the American military presence.

A Chinese Navy submarine attends an international fleet review last year to celebrate the 60th anniversary of the founding of the People's Liberation Army Navy off Qingdao in Shandong Province.

By Clayton Jones
Officially a pacifist nation, Japan struggles with living in a tough neighborhood.

In just the last two months, North Korea has sunk a South Korean naval ship while China's warships conducted naval exercises near Japan without informing Tokyo.

One Chinese military helicopter even buzzed a Japanese ship.
Such aggressive actions by these two authoritarian regimes in the Far East were a strong reminder for a democratic Japan that it still needs the deterrence of US forces on its soil, even 65 years after the end of World War II.

So on Sunday, its prime minister, Yukio Hatoyama, backed down from a campaign promise to drastically cut the American military presence in Japan.

He cited "political uncertainties" in East Asia. US Marines will now remain in the southern island of Okinawa.
President Obama had to play diplomatic hardball with Mr. Hatoyama to win this concession, a sign of how much Japan is struggling with remaining under the American wing for its defense even as it faces a China that insists on Japan paying due deference to its rising power.
Tokyo has plenty of practical reasons to bow to Beijing.

Its trade with China recently exceeded that with the US. The Chinese navy is snatching up Russian submarines, using its naval base on Hainan Island to patrol Asian waters in an attempt to keep the US Seventh Fleet in check.

China is winning over Southeast Asian nations and can influence the future of North Korea's nuclear-weapons and missile programs.
But practical does not always mean ideal.
Japan's real strength, as with America's, resides in the values of being a democratic nation.

My father, who served in Japan as a US Naval officer during the American Occupation, helped oversee the revival of Japanese democracy.

I later witnessed it in full force as a news correspondent in Tokyo. He and I often talked about the progress of Japan in becoming a "normal" country.
Japan's heart lies with the West even if Japan Inc. looks toward the giant market of China.

If it succumbs to Beijing's threats and manipulations, it would be throwing away its postwar modern ideals.
Not all Japanese accept this.

That is why most of them prefer that Okinawa bear the brunt of the US military presence rather than distribute that burden around the country.

And many Japanese leaders think their country of 130 million people can soon have enough military might without US help to stand up to a China with 1.3 billion people.

They ignore America's stabilizing role in a region fraught with tensions and historic enmities.
Japan has plenty of time to sort out its relationship with China.

The US military will remain dominant in Asia for decades.

Meanwhile, Japan's leaders can better educate their people about the importance of defending democratic ideals in a part of the world that still needs them.

Those ideals are the enduring strength of a nation.

Beijing plans curbs on number of foreigners working in China

Beijing is planning to introduce its first-ever immigration laws in an effort to control the increasing number of foreigners coming to China to work.
By David Eimer in Beijing
With more and more people from overseas attracted by the economic opportunities available in China, the new law is expected to divide potential immigrants into different categories such as skilled and unskilled labour, according to the government's Xinhua news agency.
In 2007, almost 2.9 million foreigners were registered with the Ministry of Public Security as working legally in China.
That number is rising rapidly. Last year, there were 152,000 foreign resident workers in Shanghai alone, a 14 per cent increase on 2008.
The People's Republic of China has never before limited immigration, other than for health reasons, including a ban that was recently lifted on HIV positive immigrants.
However, China's buoyant economy has resulted in a sharp rise in the number of illegal immigrants from bordering countries like Vietnam and Laos since the onset of the global financial crisis.
Vietnamese are especially valued by the factory owners of southern China, because of their willingness to work for wages of 450 yuan (£45) a month, less than half of what a local would get, and the ease with which they can assimilate into Chinese society.
Illegal immigrants from impoverished North Korea can also be found working on farms and building sites in northeast China, and there is increasing demand among the new urban middle class for Filipino nannies, who are prized for their ability to speak English with their charges.
China was once a huge source of economic migrants to other countries.
Now, the rise in the number of foreigners coming to work in the country is a reflection of how quickly it is moving up the global economic chain.
"Judging from the history of western developed countries, inward migration flows often reveal the appeal of a nation," said Zhang Jijiao, a migration expert with the Chinese Academy of Social Sciences.
While there is no timetable as yet for the introduction of the new immigration law, foreign residents will be included in China's next national census in November for the first time in an effort to monitor their numbers.

Breaking down the wall with China

It is more than 200 years since Lord Macartney's trade embassy was rebuffed by the Chinese emperor Qianlong, but to judge by the scenes at an executive training centre outside Beijing last week the cultural chasm that separates China from the West remains as deep and wide as ever.
The Great Wall of China was originally built to keep out nomadic tribes from the northern steppe regions
By Peter Foster
Next to the Great Wall a group of Chinese and European business managers sit in the shade of some chestnut trees engaged in a game designed to test creative and team-building skills.
An instructor hands them a pile of 30 picture cards and asks them to number them from one to 30 using the cryptic clue hidden in each.
"This one is easy," shouts a Frenchman named Frank, seizing a picture of Pope Benedict and waving it in the air, "the answer is '16'. That one is obvious."
Not to the Chinese in the group it isn't, none of whom have the first idea who the Pope is, but it evidently doesn't occur to the Europeans to explain.
Soon the Frenchman is engaged in a voluble discussion with his fellow "long-noses" – a Brit, a Belgian and an Italian – over the best strategy for completing the task while their Chinese colleagues look on, faintly bemused.
It takes several minutes before it dawns on the Europeans that they will need the assistance of their Chinese counterparts to finish the game since half the cards are made up of Chinese characters or cultural references.
"This one is '30'," says a Chinese delegate once the rabble has died down, before going on politely to explain: "These are the characters from a saying of Confucius: 'san shi er li', which means 'At 30, I stood firm'."
By the end of the allotted time China and Europe are working brilliantly together, but the opening exchanges, everyone agrees, are a salutary illustration of the kind of "dialogue of the deaf" that often afflicts the Western interactions with China.
Whether around the tables of high diplomacy or the boardrooms of fractious European and US joint-ventures, the scope for misunderstanding remains vast.
For these managers, the modern emissaries of Western trade taking part in an EU-China managers exchange programme (METP), the game provides a lesson in how easy it is to get off on the wrong foot in China, but equally the results that co-operation can bring.
"I was quite uncomfortable with the way some of the Europeans were behaving," reflected Darren Steele, a 34-year-old IT engineer for the oil and gas industry who is married to a Chinese woman.
"They certainly didn't seem to have any appreciation initially of how we were appearing to the Chinese side."
European self-confidence – or arrogance, depending on your point of view – is nothing new to the Chinese.
Carl Crow, a US adman who wrote about his experiences doing business in China in the 1930s in 400 Million Customers recalls losing count of the number of export managers on trips round the world "for the sole purpose of discovering how many points of superiority he and others of his nationality enjoy over the people of the country he is visiting".
To a degree, the Chinese make allowances, but only to a degree.
"We expect Europeans to express their opinions forcefully," says Ran Maoqi, executive vice-president of Maipu, a Chengdu-based Chinese technology company, "but we also know they shout them out just as loudly even when they are wrong.
"We Chinese don't like to lose face, so we wait and watch carefully before saying what we think. The annoying part is when the Europeans ignore or shout over us even when we are right."
The METP scheme, which sees 50 managers from each country "buddy up" for a year, learning each others' languages and foibles to foster greater understanding, has arguably never been more needed than it is today.
After two decades in which Western corporations have played a long game, keeping their differences with China to themselves, the fundamental disagreements are now increasingly spilling into the open.
"In the 10 years since the establishment of the EU Chamber of Commerce in China, I have seldom seen market sentiment among members so bleak or pessimistic," wrote the chamber's outgoing president Joerg Wuttke last month.
"After 30 years of progressive market reforms, many foreign businesses in the country feel as though they have run up against an unexpected and impregnable blockade," he said in an article headlined China is beginning to frustrate foreign business.
US business, traditionally more circumspect than its European counterparts when it comes to complaining openly about China, has also started to complain publicly about the rising tide of back-door Chinese protectionism.
This week sees the latest round of the US-China Strategic & Economic dialogue in Beijing during which US commerce secretary Gary Locke has already promised to raise a "whole host of trade-barrier issues".
For believers in free trade, perhaps more worrying than the surface ripples of today's trade disputes are the much more fundamental differences between the Chinese and the West that these disagreements point up.
Ian Bremmer, president of the Eurasia Group political risk consultancy, said in an interview this month that Chinese protectionism was now forcing many Western corporations to reassess whether the country will really bear long-term fruit.
"The world's largest and second-largest economies now have economic systems that are fundamentally incompatible," he said, adding that in the past 12 months there had been a "sea-change" in how the US private sector views China.
"Google has gone public, but most other multinationals haven't," he added.
"We have a lot of corporate clients, and I'd say only about 25pc of the major ones have strategies for China that I think are sustainable over five years."
According to popular history, Lord Macartney got short shrift from the Emperor in 1793 because he refused to kowtow, but modern scholarship argues the real reason was the economic systems of Imperial China and the West could never work together.
It is a divide that endures to this day and one which might never be bridged – even if the modern brand of trade ambassadors to China going through their paces at the Great Wall last week do learn how to bend a little at the knee.

A Swinger's Case: China's Attitude Toward Sex

By Austin Ramzy / Beijing
Ma Yaohai, a 53-year-old college professor, smokes as he talks to journalists at his home in Nanjing, China.
Ma Yaohai is a man who stands up for his beliefs.
That has caused problems for the former computer science teacher, because one of his beliefs is in the virtues of group sex, which is against the law in China.
On May 20, Ma was sentenced by a Nanjing court to a three-and-a-half year prison term for the crime of "group licentiousness."
But he maintains he did nothing wrong, and his case has provoked broad public debate in this rapidly changing nation about sexuality and the lines between government control and personal freedom.
Prosecutors say the 53-year-old Ma, who divorced in 2003, began pursuing group sex in 2007. According to authorities, he used online chat groups to set up 35 meetings over a two-year period, half of which he participated in.
Some, they claim, even occurred in the small apartment belonging to his mother, who has Alzheimer's disease.
Police tracked down the group and Ma was arrested last year, along with 13 other men and eight women, for organizing group sex sessions.
His co-defendants all pleaded guilty; 18 were sentenced to jail terms of up to two-and-a-half years, while three were released without punishment.
Ma, however, remains defiant.
While he admits to organizing and participating in swingers' clubs, he says that because the activities occurred between consenting adults behind closed doors, he shouldn't be punished.
"Marriage is like water: you have to drink it. Swinging is like a glass of fine wine: you can choose to drink it or not," he was quoted as saying by the government's official paper China Daily.
"What we did, we did for our own happiness. People chose to do it of their own free will and they knew they could stop at any time. We disturbed no one."
Ma's is a view that some in China share.
While experts estimate the number of Chinese participating in group sex at under 100,000 — a tiny figure in a country of 1.3 billion — some commentators have argued that the practice shouldn't be prohibited.
"If there is no victim, then I think the government shouldn't interfere," says Li Yinhe, a prominent sexologist in Beijing. "It's a private matter."
Comments posted online show a mixed opinion.
Many are critical of Ma's behavior. "You led a 22-person orgy. You have destroyed ethics and morality," writes one person on a Chinese microblog service at sohu.com.
"This behavior has caused social chaos. People like you should be punished severely."
But others argue that China shouldn't regulate the behavior of consenting adults in the privacy of their own homes.
"What Teacher Ma did violates society's ethics and morality, but it's his private life," another person wrote on a bulletin board at xici.net.
"Moreover, everyone was an adult, and everyone was a voluntary participant. What crime is there in that?"
The debate over Ma's conviction and sentencing reflects larger uncertainties about sexuality in China.
While conservative laws remain on the books, Chinese society is stumbling toward a more liberal attitude about sexuality.
Pornography is banned, for instance, but the blocks on adult-oriented websites have inspired some Chinese users to acquire specialized software to circumvent the government's system of web censorship.
Shops filled with sex toys, often called "adult health stores," are common in every Chinese city. People who have enthusiastically documented their promiscuity in writing have found wide readerships on the Internet.
It's common for prominent and wealthy men to indulge in affairs, so much so that every story of a fallen corrupt official is inevitably paired with tales of his pampered mistresses.
At least 90% of high-level cadres convicted of graft also kept mistresses, according to a report by Chinese prosecutors in 2007.
Prostitution, too, is as ubiquitous as it is illegal, with most cities playing host to brothels poorly disguised as hair salons.
Earlier this year, Beijing sexologist Li proposed that the 1997 law banning "group licentiousness" should be dropped.
"If the nation's laws interfere with this sort of activity of people in private, then it seems like the participants' bodies aren't their own, they're the government's," she wrote on her blog.
While China's legislature didn't act on her suggestion, there are signs that official views toward group sex are moderating.
In the 1980s, people convicted of the now defunct crime of "hooliganism" — which prohibited several types of sexual activity including group sex —could be executed, Li says.
While Ma's supporters are critical of his conviction, the first under the "group licentiousness" law in two decades, they know that in the past his punishment could have been far worse.