Warning on China, U.S. Feed Spat

By CHUIN-WEI YAP

Distillers dried grain, a co-product of ethanol production used as animal feed, is stored at the Mid Missouri Energy ethanol plant in Malta Bend, Mo.

BEIJING—An investigation that China launched Tuesday into U.S. exports of an animal feed is "surprising and could be disruptive to trade," the U.S. Grains Council said in a statement Friday.

The council is an influential lobby for the U.S. farm industry, and the statement was its first riposte to Beijing since China opened the antidumping probe into a rising tide of Chinese imports of U.S. distiller's dried grains (DDG), a byproduct of corn-ethanol production that is used for animal feed.
"China's unusual market and supply volatility over the last two years has resulted in new global trade flows," council president Thomas Dorr said.
"As trade flows change, it should perhaps not be surprising there would be an adjustment period in response to unprecedented demand."
China's imports of DDG from the U.S. rose more than five times this year, reflecting a price advantage the U.S. exporters enjoyed around mid-year and sharply higher Chinese feedmeal demand.
China imported more than 3.1 million metric tons of U.S. distiller's dried grains this year, up from 652,000 tons last year, the state-backed China National Grain & Oil Information Center said in an estimate Thursday.
The value of the trade in the first 11 months of the year jumped nearly eight times to $694 million, the center said.
In 2008, China imported "not even 10,000 tons" of DDG, it said.
Beijing's probe comes a week after the U.S. said it was requesting consultations with China at the World Trade Organization to end hundreds of millions of dollars of Chinese subsidies to boost wind-power production.
Bilateral trade tensions have sharpened this year, with chicken, steel and tires among a range of commodities that have attracted a series of tit-for-tat punitive import taxes.
"The mission of the U.S. Grains Council is to keep markets open and support the free flow of goods," Mr. Dorr said, adding that China is an important trade partner and market for the U.S.
The U.S. farm lobby has sought to promote DDG among Chinese feed mills as an alternative to corn for feeding pigs, chicken and cattle.
U.S. farm interests see Chinese consumers as a ripe sales target for DDG as an alternative to corn.
Unlike corn, DDG for use in animal feed isn't subject to China's import quotas or its rules on genetically modified food.
China's demand for feedmeal and corn is likely to continue growing sharply next year, reflecting a higher proportion of meat in consumer diets and a rise in large-scale hog farms that increasingly supplant backyard pig-rearing, Deputy Agriculture Minister Wei Chaoan said Thursday.
Even as Beijing demands full self-sufficiency for key grain products, feedmeal demand is expected to rise by about 4.5 million tons next year, he said.
The U.S. became China's largest corn supplier this year, after China broke a 15-year run of self-sufficiency to turn net importer in June.

Main Victims of Mines Run by Gangsters Are Peasants

By KEITH BRADSHER
BAISHAZHEN, China — Peasants like Song Zuokai may be the main victims of the industrialized world’s hunger for rare earth minerals from southern China, which has helped feed a brisk illegal mining trade.
Almost as soon as gangster miners began quarrying the bamboo-topped hillsides of red clay here five years ago, the once-clear streams became rank, muddy and undrinkable as they flowed past the tile-roofed, walled compound where Mr. Song, an 81-year-old rice farmer, has lived his entire life.
Mr. Song recently described how his nearly destitute family had been forced to dig a well inside their farmhouse.
As he spoke he cut long strips of bamboo to tie cords of firewood, using a heavy steel knife with a handmade wooden handle.
The water from the new well flowed fresh and clear at first, he said.
But now even that well smells of the powerful acids that the miners use in dirt pits to process rare earth minerals needed in the West for sophisticated products ranging from iPhones to giant wind turbines.
Plants soon die when irrigated with water from the local streams.
Government officials have come several times in the last few years and levied fines of $100,000 or more on quarry operators in villages around Baishazhen and seized their equipment.
But each time, Mr. Song said, the mines have quickly reopened.
The latest crackdown has seemed more serious.
The Guangdong provincial ministry of land and resources, responsible for regulating the industry here, issued a statement on Oct. 19 to announce that it had closed a group of mines in this general area and would not allow them to reopen.
Mr. Song said that government inspectors had indeed come earlier in the year to seize and destroy all equipment at the mine a half mile upstream from his lifelong home.
But since then, a group of villagers has quietly resumed mining again at night, over the strong objections of fellow villagers, Mr. Song said.
The mining faction has beaten up a few of their local critics, he added.
Mr. Song was willing to risk their wrath by talking openly because he said he had despaired of finding other ways of spreading word of how his community was being poisoned by rare earth mining. (The New York Times informed provincial authorities that Mr. Song and visitors that he guided to an illegal mine had been threatened by a gangster.)
Like many residents of these hills, Mr. Song does not speak Mandarin Chinese or even Cantonese, the dominant tongue in Guangdong Province.
The villagers here speak almost exclusively Hakka, making them part of a linguistic minority.
Young people not involved in rare earth mining have left the impoverished village either to find jobs elsewhere or flee the environmental destruction and intimidation here.

Skype could be designated illegal in China

BEIJING, Dec 31 (Reuters) - China will crack down on what it called illegal Internet telephone providers, according to a circular from the Chinese government seen on Friday that could potentially affect Internet calling service Skype.
The statement, from the powerful Ministry of Information and Industry Technology, did not mention any carriers by name.
It called for a crackdown "on illegal VoIP (voice over Internet protocol) telephone services" and said it was collecting evidence for legal cases against them.
Skype, partly owned by web retailer eBay Inc , has been growing in popularity among Chinese individuals and businesses to make cheap or free international phone calls.
The circular, dated Dec. 10, did not say what amounted to illegal services and did not name any VoIP providers it considered to be breaking the law.
Spokespeople for the ministry and the ministry's office gathering information for the campaign did not answer telephone calls on Friday.
Skype could not immediately be reached for comment.
The move appeared to be aimed at protecting three government-controlled Chinese phone carriers -- China Telecom , China Unicom and China Mobile -- which provide the bulk of China's telephone services.
The Hong Kong-based South China Morning Post on Thursday quoted an unidentified ministry official as saying VoIP services could only be provided by the big three Chinese operators.
Spokespeople for China Telecom and China Unicom did not answer phone calls on Friday.
A spokeswoman for China Mobile, reached in Beijing, referred calls to the firm's Hong Kong office.
Attempts to reach the Hong Kong office were not successful.
VoIP calls allow users to make international calls for much less than commercial providers, or even for free if both parties are using VoIP.
Many businesses that use VoIP services to cut down on their international telephone costs could lose access to the cheaper alternative.
Skype, which has about 124 million users worldwide, hopes to raise about $1 billion in an initial public offering expected next year.

Shanghai Schools’ Approach Pushes Students to Top of Tests

By DAVID BARBOZA

Discipline issues are rare at the middle school linked to the Jing’An Teachers’ College in Shanghai. The city is thought to have China’s best schools.

A teacher instructed students in class at the middle school associated with Jing’An Teachers’ College in central Shanghai.
SHANGHAI — In Li Zhen’s ninth-grade mathematics class here last week, the morning drill was geometry. Students at the middle school affiliated with Jing’An Teachers’ College were asked to explain the relative size of geometric shapes by using Euclid’s theorem of parallelograms.
“Who in this class can tell me how to demonstrate two lines are parallel without using a proportional segment?” Ms. Li called out to about 40 students seated in a cramped classroom.
One by one, a series of students at this medium-size public school raised their hands.
When Ms. Li called on them, they each stood politely by their desks and usually answered correctly.
They returned to their seats only when she told them to sit down.
Educators say this disciplined approach helps explain the announcement this month that 5,100 15-year-olds in Shanghai outperformed students from about 65 countries on an international standardized test that measured math, science and reading competency.
American students came in between 15th and 31st place in the three categories.
France and Britain also fared poorly.
Experts said comparing scores from countries and cities of different sizes is complicated.
They also said that the Shanghai scores were not representative of China, since this fast-growing city of 20 million is relatively affluent.
Still, they were impressed by the high scores from students in Shanghai.
The results were seen as another sign of China’s growing competitiveness.
The United States rankings are a “wake-up call,” said Arne Duncan, the secretary of education.
Although it was the first time China had taken part in the test, which was administered by the Organization for Economic Cooperation and Development, based in Paris, the results bolstered this country’s reputation for producing students with strong math and science skills.
Many educators were also surprised by the city’s strong reading scores, which measured students’ proficiency in their native Chinese.
The Shanghai students performed well, experts say, for the same reason students from other parts of Asia — including South Korea, Singapore and Hong Kong — do: Their education systems are steeped in discipline, rote learning and obsessive test preparation.
Public school students in Shanghai often remain at school until 4 p.m., watch very little television and are restricted by Chinese law from working before the age of 16.
“Very rarely do children in other countries receive academic training as intensive as our children do,” said Sun Baohong, an authority on education at the Shanghai Academy of Social Sciences.
“So if the test is on math and science, there’s no doubt Chinese students will win the competition.”
But many educators say China’s strength in education is also a weakness.
The nation’s education system is too test-oriented, schools here stifle creativity and parental pressures often deprive children of the joys of childhood, they say.
“These are two sides of the same coin: Chinese schools are very good at preparing their students for standardized tests,” Jiang Xueqin, a deputy principal at Peking University High School in Beijing, wrote in an opinion article published in The Wall Street Journal shortly after the test results were announced.
“For that reason, they fail to prepare them for higher education and the knowledge economy.”
In an interview, Mr. Jiang said Chinese schools emphasized testing too much, and produced students who lacked curiosity and the ability to think critically or independently.
“It creates very narrow-minded students,” he said.
“But what China needs now is entrepreneurs and innovators.”
This is a common complaint in China.
Educators say an emphasis on standardized tests is partly to blame for the shortage of innovative start-ups in China.
And executives at global companies operating here say they have difficulty finding middle managers who can think creatively and solve problems.
In many ways, the system is a reflection of China’s Confucianist past.
Children are expected to honor and respect their parents and teachers.
“Discipline is rarely a problem,” said Ding Yi, vice principal at the middle school affiliated with Jing’An Teachers’ College.
“The biggest challenge is a student who chronically fails to do his homework.”
While the quality of schools varies greatly in China (rural schools often lack sufficient money, and dropout rates can be high), schools in major cities typically produce students with strong math and science skills.
Shanghai is believed to have the nation’s best school system, and many students here gain admission to America’s most selective colleges and universities.
In Shanghai, teachers are required to have a teaching certificate and to undergo a minimum of 240 hours of training; higher-level teachers can be required to have up to 540 hours of training.
There is a system of incentives and merit pay, just like the systems in some parts of the United States.
“Within a teacher’s salary package, 70 percent is basic salary,” said Xiong Bingqi, a professor of education at Shanghai Jiaotong University.
“The other 30 percent is called performance salary.”
Still, teacher salaries are modest, about $750 a month before bonuses and allowances — far less than what accountants, lawyers or other professionals earn.
While Shanghai schools are renowned for their test preparation skills, administrators here are trying to broaden the curriculums and extend more freedom to local districts.
The Jing’An school, one of about 150 schools in Shanghai that took part in the international test, was created 12 years ago to raise standards in an area known for failing schools.
The principal, Zhang Renli, created an experimental school that put less emphasis on math and allows children more free time to play and experiment.
The school holds a weekly talent show, for example.
The five-story school building, which houses Grades eight and nine in a central district of Shanghai, is rather nondescript.
Students wear rumpled school uniforms, classrooms are crowded and lunch is bused in every afternoon.
But the school, which operates from 8:20 a.m. to 4 p.m. on most days, is considered one of the city’s best middle schools.
In Shanghai, most students begin studying English in first grade.
Many middle school students attend extra-credit courses after school or on Saturdays.
A student at Jing’An, Zhou Han, 14, said she entered writing and speech-making competitions and studied the erhu, a Chinese classical instrument.
She also has a math tutor.
“I’m not really good at math,” she said.
“At first, my parents wanted me to take it, but now I want to do it.”

India Digs In Its Heels as China Flexes Its Muscles

By JIM YARDLEY

Prime Minister Manmohan Singh of India in New Delhi on Dec. 16 with Prime Minister Wen Jiabao of China, the last of five leaders representing the permanent members of the United Nations Security Council to visit India in recent months.

President Dmitri A. Medvedev in Agra, India, last week.
NEW DELHI — It has been the season of geopolitical hugs in India — with one noticeable exception.
One after the other, the leaders of the five permanent members of the United Nations Security Council have descended on India, accompanied by delegations of business leaders, seeking closer ties with this rising South Asian giant.
The Indian media, basking in the high-level attention, have nicknamed them the “P-5.”
Prime Minister David Cameron of Britain got a warm reception last summer.
Then President Obama wowed a skeptical Indian establishment during his November visit.
President Nicolas Sarkozy of France signed nuclear deals in early December, while President Dmitri A. Medvedev of Russia departed last week with a fistful of defense contracts after winning praise for Moscow as a “special partner.”
The exception to the cheery mood was the mid-December visit of Prime Minister Wen Jiabao of China.
Mr. Wen did secure business deals, announce new trade goals and offer reassurances of friendly Chinese intentions.
But the trip also underscored that many points of tension between the Asian giants — trade imbalances, their disputed border and the status of Kashmir — are growing worse.
And the Indian foreign policy establishment, once reluctant to challenge China, is taking a harder line.
“The Wen visit has widened the gap publicly between India and China,” said Ranjit Gupta, a retired Indian diplomat and one of many vocal analysts pushing a harder line toward China.
“And it represents for the first time a greater realism in the Indian establishment’s approach to China.”
India aspires to membership on the United Nations Security Council, and China is now the only permanent member nation that has not explicitly endorsed such a move.
But what has rattled Indian leaders even more is their contention that China is being deliberately provocative in Kashmir as it grows closer to Pakistan, China’s longtime ally and India’s nemesis.
China has also been expanding its diplomatic and economic influence around South Asia, stepping up its involvement in the affairs of Sri Lanka, Nepal and the Maldives.
Mr. Wen’s visit was supposed to help address those tensions at a time when India is starting to draw closer to the United States.
Among Chinese leaders, Mr. Wen is perceived as a friend of India, and his 2005 visit was regarded as a breakthrough after he and Prime Minister Manmohan Singh agreed on a broad framework to address the border dispute.
For decades since fighting a brief border war, the two countries had argued over the boundary lines, with China making claims to Arunachal Pradesh, an eastern Indian state, and India claiming portions of Tibet that abut Indian-controlled Kashmir.
The 2005 deal fostered optimism that some sort of quid pro quo compromise could be reached, enabling the two countries to concentrate on trade.
And trade took off: it has risen tenfold to almost $60 billion, with Mr. Wen setting a new goal of $100 billion.
But Indian leaders now complain that trade is far too lopsided in China’s favor and say that Indian corporations face too many obstacles in entering the Chinese market.
Mr. Wen promised to help Indian corporations sell their products in China, but Indian officials are skeptical.
Meanwhile, China infuriated India by starting to issue special stapled paper visas — rather than the standard visa — for anyone in Indian-controlled Kashmir traveling to China on the grounds that Kashmir is a disputed territory.
China later objected to including a top Indian general responsible for Kashmir in a military exchange in China. In response, Indian officials angrily suspended all military exchanges between the countries.
Indian officials had thought Mr. Wen might reverse the stapled visas policy on his trip, but he instead only called for more diplomatic consultations.
Indian commentators have noticed that articles in the Chinese state-run media have renewed Chinese claims that the disputed border between the nations is roughly 1,240 miles in length — even as India puts the length at about 2,175 miles.
The difference roughly represents the border between Indian-controlled Kashmir and Tibetan China.
By omitting this section, the Chinese are questioning the status of Indian-controlled Kashmir, a position that buttresses Pakistan’s own claims, several Indian analysts have argued.
The most visible evidence that these problems were deepening came in the joint communiqué issued by the two nations at the end of Mr. Wen’s visit.
China typically demands that nations voice support for the one-China policy, which holds that Taiwan is an inalienable part of China.
In past communiqués, India has agreed to such language, but this time it was omitted, a clear sign of Indian irritation.
“It has been in every communiqué, but the Chinese didn’t even bring it up,” said a senior Indian official, speaking on the condition of anonymity.
“I think they knew if they had brought it up, they knew we would have demanded some movement on the stapled visa issue and the Kashmir issue.”
The senior official added: “They must understand that there is a prospect of the relationship really going south. They will have to somehow moderate their stand on Kashmir. And they will have to take concrete steps to address the trade imbalance.”
India and China still cooperate on climate change and international trade policy, and some pro-China Indian diplomats grumble that the "positive" aspects of the relationship are too often overlooked by media organizations and strategic analysts pushing for a harder line.
China’s state-run media outlets recently broadcast images of a new tunnel being completed through the Himalayas near the Indian border.
These reports looked to some like boasting about the country’s engineering prowess.
In India, they were presented as a warning that China was building its infrastructure ever closer to India.
At the same time, India is watching warily as China pursues hydro projects that could affect the downstream flow of the Brahmaputra River in India.
Some Indian analysts note that tensions with China have increased in lockstep with the warming trend between India and the United States.
During his visit, Mr. Obama spoke of a “defining partnership” between India and the United States and encouraged India to play a bigger role not only in South Asia but also in East Asia, China’s backyard.
Mr. Singh, in fact, had just finished a trip to Japan, Malaysia and Vietnam as part of India’s “Look East” policy to build trade and diplomatic ties in the region.
“Our challenge will be to build our own leverage,” the senior Indian official said.
“That is why the relationships with the United States, with Japan, with other Southeast Asian parties, all that will become even more important.”

India vs. China in 2010

By Tripti Lahiri

Economists and western political leaders love to compare India and China, and it’s an understandably irresistible comparison: They’re both rising Asian economies with more than a billion people, and neighbors to boot.
On India Real Time we’ve done a little of that ourselves from time to time.
If you’re pressed for time we can sum it up like this: China has more of everything (except poor people.)
If you’re not, here are five blogs that stacked India and China up against each other on different indicators in the past year.

1. Warren Buffett: The billionaire from Omaha so far has appeared to be leaning a bit more towards China, at least in terms of investments.
Mr. Buffett’s company, Berkshire Hathaway Co., holds a sizeable stake in Chinese battery and auto-maker BYD Co.
And Mr. Buffett visited in September, along with Bill Gates, hoping to convince Chinese billionaires to give away more of their wealth to charity.
The love is returned, with a Chinese man having paid a record $2.1 million to have a one-on-one lunch with the investing wizard.
Mr. Buffett has said that he’d like to invest in India but his plans have been stymied by caps on foreign holdings in insurance.
However, India can at least look forward to hosting him in the new year.
The billionaire announced at a shareholders’ meeting this year, in response to a question from a young Indian-American, that he plans to visit India in 2011, perhaps in March.

2. The big-ticket event: India hosted the Commonwealth Games in October, China hosted the Asian Games in November.
Of course, China’s already hosted the Olympics—and how—so it hardly seems fair to compare the two.
But we did anyway.
The news coverage of the Indian Games was rife with words like “delays,” “corruption,” “shambles” (we’re pretty sure that was the British press) and “filthy” until the opening night extravaganza quelled criticism for a bit.
China, it appeared, had lovely, shiny venues ready to go about five months ahead of the event, so it could spend the final days flicking away little specks of dust from its Games merchandise.

3. Their middle classes: According to a report on Asia’s middle classes this year, India still has about 650 million people living on under $2 dollars a day measured in 2005 purchasing parity dollars.
China now has less than 100 million living on that amount.
Yet there was a time, as recently as the 1990s, when the two countries had similar numbers of poor.
China has just done a better job of lifting people from that bracket into the middle class, and not just onto the next rung —the $2 to $4 range, where a majority of India’s middle class folks fall.
The majority of Chinese now fall in the “mid middle class” category that can spend $5 to $10, a group whose numbers appear to have quadrupled between 1995 and 2007.
But don’t blame the slower rate of reduction in poverty on India’s political system, says John Lee of the Sydney-based think-tank Center for Independent Studies.

4. The economy, stupid: China is still a much bigger economy than India, even though the two countries have roughly similar numbers of people.
At a Hindustan Times conference on India, Shashi Ruia, chairman of Essar Group, compared the two countries on steel production, car production and trade.
As we already said, China does more of everything.
The gap is undoubtedly glaring on roads, electricity production, trains and other infrastructure.

5. Surfing: India’s and China’s online populations belong to different worlds, judging by their Google searches.
India appears to be firmly embedded in the English-speaking western world, looking for products like Nokia and applications like Facebook, Yahoo! and YouTube, although when it comes to films, it’s all Bollywood. China seemed to be the reverse—relying largely on Chinese applications but much more likely to seek out Hollywood films.
They did have this much in common though: outré pop star Lady Gaga.

China cracks down on Internet phone services

By Fran Wang

China has pledged to restrict Internet phone services; a move that could affect thousands of businesses and individuals
BEIJING — China has pledged to restrict Internet phone services -- a move that could affect thousands of businesses and individuals making cheap calls via web-based communications companies such as Skype.
"We are carrying out with relevant authorities a campaign to crack down on illegal Voice over Internet Protocol phone services", the Ministry of Industry and Information Technology said in a circular posted online earlier this month.
In the brief notice, which did not offer details on the crackdown or a timetable for shutting down 'illegal' services, the ministry listed a telephone hotline for citizens to report any violations.
The ministry declined immediate comment when asked for clarification of the policy by AFP on Thursday.
The Beijing Morning Post on Thursday however quoted vice-minister Xi Guohua as saying only state-owned major Chinese telecommunications operators were licensed to provide Internet phone services linking telephones and computers.
Xi said communications between computers (PC-to-PC) remain open to all service providers in China, which has the world's biggest Internet population at 450 million.
That means some PC-to-phone services provided by firms including Skype, which are popular in China due to their low rates as compared with those of the country's major telecoms firms, could be banned under the ministry's new rules.
For example, Skype users pay just 0.19 yuan (three cents) per minute to call a landline number in the United States, while the same call on China Unicom would cost at least 2.4 yuan per minute.
UUCall, a homegrown Skype-like service which calls itself "the first Chinese Internet phone brand", was shut down in October 2009 on suspicion of operating illegal web phone services, the report said.
It resumed business in February after moving its domain name to Hong Kong, it added.
Xi said China Telecom and China Unicom had licences to provide PC-to-phone services in four cities on a trial basis.
He added the government was considering an expansion of the programme.
Critics said the government move was meant to protect state-owned telecom operators, who are reluctant to promote the cheap service because it will marginalise their existing -- lucrative -- international call services.
"Overall this is to take further strong measures to protect the interests of state-owned monopolies," Kan Kaili, a professor at the Beijing University of Posts and Telecommunications, told AFP.
Such policies "clearly hurt consumers' interests and can easily spark public anger," he said.
On web portal Netease.com, users were already starting to complain, in comments posted under a report on the MIIT regulations.
"What benefits people is not legal. I really want to curse out loud," one angry user said.
The move may also be aimed at stemming phone scams under which thieves use web-based phone services to defraud consumers, changing the call origin number to pose as bankers, police or government officials, some Chinese reports said.
Kan speculated that the government also could be attempting to block VoIP services such as Skype that are difficult to monitor due to their high encryption levels.
Officials at Skype, which was founded in 2003 and now has 23 million users worldwide, were not immediately available to comment on the issue.
Skype -- which channels voice, video and text conversations over the Internet -- was hit by a major outage last week that left millions of users unable to use the service, due to technical problems.

In China, Car Buyers in a Backup

By KEITH BRADSHER

An auto show in Guangzhou this month. Industry analysts say that the Chinese auto market will continue to expand in 2011.
GUANGZHOU, China — Li Bo, a 28-year-old lawyer, was one of three friends who put down deposits of 50,000 renminbi, or $7,500, in May at a car dealership to each buy a popular model, the Audi Q5, which sells for the equivalent of $72,000, including taxes, in China.
Mr. Li and one friend are still waiting for their cars; the other paid an additional 38,000 renminbi, or $5,700, to the dealership and got his Q5 within a week, Mr. Li said.
“We’re very upset,” Mr. Li said.
“There are just too many people ordering.”
One of the uncertainties in the auto industry lies in how much longer Chinese authorities will allow the country’s remarkable sales boom to go on and whether China will export a flood of cars if the authorities do clamp down.
Automakers have been struggling for years to keep up with demand in China, as sales have climbed at a pace never seen in a major auto market.
The number of cars and light trucks sold in China was one-tenth of that in the United States in 2000.
This year, sales in China have been more than 50 percent higher than in the depressed American market.
The result has been traffic jams in the largest Chinese cities, particularly Beijing.
And that has elicited an unexpectedly strong response from policy makers.
The Beijing municipal authorities announced last week that they would cap the number of new car registrations at 240,000 a year, just a third of the sales pace this year.
The finance ministry announced separately this week that on Saturday it would restore the sales tax on cars with small-displacement engines to 10 percent, its level before the global downturn. (The tax had been 5 percent in 2009 and 7.5 percent this year; through the downturn, the tax has remained as high as 40 percent for sport utility vehicles and sports cars with the most powerful engines.)
Auto executives and industry analysts say that the market will continue to expand in 2011.
But they forecast that the growth rate is likely to fall to 10 percent after averaging 25 percent a year for the last decade.
Slower growth is not all bad for the auto industry.
Automakers have been running their factories almost around the clock, paying costly overtime and deferring maintenance.
Sudden spurts in sales, like an increase of 34 percent this year, have made it hard for manufacturers to plan how many factories they should build and how quickly.
“Stable growth is much better for us,” Toshiyuki Shiga, the chief operating officer of Nissan, said at a news conference at the Guangzhou auto show, which closed on Monday.
The biggest question in the car industry is whether more cities will follow Beijing’s example and impose restrictions on car registrations.
Shanghai has restricted registrations for many years to prevent its ancient streets from becoming overwhelmed.
As a result, it has one-third as many registered vehicles as Beijing, even though the populations of the two cities are similar.
That leaves Guangzhou, the sprawling commercial hub of southeastern China, as potentially the country’s largest single market in the coming year.
With Toyota, Honda and Nissan all operating joint ventures in the city, Guangzhou has nearly caught up with Shanghai as the largest car manufacturing hub in China.
Gridlock is not yet a crippling problem in Guangzhou, or in many smaller cities across the country.
City leaders are leery of discouraging car sales.
“At the current time, Guangzhou does not have plans to follow Beijing’s new limit on the issuance of car license plates in 2011,” said Chen Haotian, a vice director of the city’s powerful Development and Reform Commission.
“Our city has a very good subway system, which should help to alleviate big traffic jams.”
Guangzhou had severe traffic jams a decade ago, but moved more quickly than Beijing to build a subway network that opens 30 kilometers, or 20 miles, of new lines each year.
Traffic flows more smoothly in the city than in Beijing, although Guangzhou still had to impose restrictions on who could drive, based on license plate numbers, during the Asian Games, which just ended.
Beijing represents a little less than 5 percent of the Chinese car market.
While sales in Beijing looked as if they would plummet next year, growth in Guangzhou and smaller cities should make it possible for the Chinese car market to continue expanding, analysts said.
“China will still achieve 8 to 10 percent growth in 2011 because most of the incremental car sales are coming from second- and third-tier cities where traffic congestion is not yet a major concern,” said Michael Dunne, an independent automotive analyst specializing in China.
General Motors executives are also forecasting 10 percent growth over all next year in China.
They contend that people across China want to be able to go where they want, when they want, without being confined to public transportation schedules.
“There’s strong, latent demand for mobility,” said Kevin E. Wale, the president of G.M.’s China operations. “The last few years have been phenomenal years for growth.”
Slower growth in auto sales could also lead the fast-growing Chinese automotive industry to outrun demand. Many experts, and even some government officials, predict that trade tensions will swiftly accompany the eventual emergence of overcapacity in the auto industry.
One worry is that China may start discriminating in favor of domestic automakers and against joint ventures that are producing cars with international brands.
China already limits foreign automakers to 50 percent stakes in manufacturing joint ventures.
“If regulatory restrictions on car registrations become widespread, it may tempt the Chinese to game domestic auto sales as they have renewable energy,” another sector in which China has adopted domestic content rules and other restrictions on multinationals, said Paul Bledsoe, a former Clinton White House climate official who is now a senior adviser at the Bipartisan Policy Center, a research group in Washington.
There are some signs that China may accept that trade tensions are inevitable.
Chen Lin, a commerce ministry official, said in a speech at a conference in September — before China began clamping down on domestic car sales — that the Chinese car industry would have overcapacity by 2015 and would need to develop large-volume exports by then.
“We think trade frictions are a very natural thing, as long as we are determined to go global,” he said.
“Trade friction is unavoidable, given the future.”

King Coal: Reigning in China

By GEORGE F. WILL
Cowlitz County in Washington state is across the Columbia River from Portland, Ore., which promotes mass transit and urban density and is a green reproach to the rest of us.
Recently, Cowlitz did something that might make Portland wonder whether shrinking its carbon footprint matters.
Cowlitz approved construction of a coal export terminal from which millions of tons of U.S. coal could be shipped to Asia annually.
Both Oregon and Washington are curtailing the coal-fired generation of electricity, but the future looks to greens as black as coal.
The future looks a lot like the past.
Historian William Rosen (who wrote "The Most Powerful Idea in the World," about the invention of the steam engine) says coal was Europe's answer to the 12th-century "wood crisis," when Christians leveled much forestation to destroy sanctuaries for pagan worship and to open up farmland.
Population increase meant more wooden carts, houses and ships, so wood became an expensive way to heat dwellings or cook.
By 1230, England had felled so many trees it was importing most of its timber and was turning to coal.
"It was not until the 1600s," Rosen writes, "that English miners found their way down to the level of the water table and started needing a means to get at the coal below it."
In time, steam engines were invented to pump out water and lift out coal.
The engines were fired by coal.
Today, about half of America's and the world's electricity is generated by coal, the substance that, since it fueled the Industrial Revolution, has been a crucial source of energy.
Over the past eight years, it has been the world's fastest-growing source of fuel.
The New York Times recently reported ("Booming China Is Buying Up World's Coal," Nov. 22) about China's ravenous appetite for coal, which is one reason coal's price has doubled in five years.
Half of the 6 billion tons of coal burned globally each year is burned in China.
A spokesman for the Sierra Club, which in recent years has helped to block construction of 139 proposed coal-fired plants in America, says, "This is undermining everything we've accomplished."
America, say environmentalists, is exporting global warming.
Can something really be exported if it supposedly affects the entire planet?
Never mind.
America has partners in this crime against nature, if such it is.
One Australian company proposes to build the Cowlitz facility; another has signed a $60 billion contract to supply Chinese power plants with Australian coal.
The Times says ships -- all burning hydrocarbons -- hauled about 690 million tons of thermal coal this year, up from 385 million in 2001.
China, which imported about 150 million tons this year, was a net exporter of coal until 2009, sending abroad its low-grade coal and importing higher-grade, low-sulfur coal from, for example, the Powder River Basin of Wyoming and Montana.
Because much of China's enormous coal reserves is inland, far from coastal factories, it is sometimes more economical to import American and Australian coal.
Writing in the Atlantic on China's appetite for coal and possible aptitude for using the old fuel in new, cleaner ways, James Fallows quotes a Chinese official saying that the country's transportation system is the only serious limit on how fast power companies increase their use of coal.
One reason China is building light-rail systems is to get passenger traffic out of the way of coal trains.
Fallows reports that 15 years from now China expects that 350 million people will be living in cities that do not exist yet.
This will require adding to China's electrical system a capacity almost as large as America's current capacity. The United States, China, Russia and India have 40 percent of the world's population and 60 percent of its coal.
A climate scientist told Fallows that stabilizing the carbon-dioxide concentration in the atmosphere would require the world to reduce its emissions to Kenya's level -- for America, a 96 percent reduction.
Nations with hundreds of millions of people in poverty would, Fallows says, have to "forgo the energy-intensive path toward wealth that the United States has traveled for so many years."
In his new political science treatise ("Don't Vote -- It Just Encourages the Bastards"), P.J. O'Rourke says, "There are 1.3 billion people in China, and they all want a Buick."
So "go tell 1.3 billion Chinese they can never have a Buick."
If the future belongs to electric cars, those in China may run on energy currently stored beneath Wyoming and Montana.

China's rare earths export cut raises trade concerns

By James Regan
A worker drives a skip loader while working at the site of a rare earth metals mine at Nancheng county, Jiangxi province in this October 31, 2010 file photo. China's Commerce Ministry said on December 29, 2010 it would not issue more export quotas for foreign companies as it did last year and the first set of volume totalling 14,446 included those for foreign firms.
SYDNEY -- China has raised fresh international trade concerns after slashing export quotas on rare earths minerals, risking action from the United States at the World Trade Organization.
China, which produces about 97 percent of the global supply of rare earth minerals, cut its export quotas by 35 percent for the first half of 2011 versus a year ago, saying it wanted to preserve ample reserves, but warned against basing its total 2011 export quota on the first half figures.
The U.S. Trade Representative's office was "very concerned" about China's export restraints on rare earths and had raised its concerns with China, a spokeswoman said on Tuesday.
A European Commission spokesman said the European Union "notes the latest quota figures and expects China to respect its recent assurance of a guarantee of rare earth supplies to Europe."
U.S. makers of high-tech products such as Apple Inc's iPads, along with Japanese companies have been scrambling to secure reliable supplies of the minerals outside of China as Beijing steadily reduces export allocations.
Japan's Sony Corp said China's move to cut export quotas was a hindrance to free trade and that it would work to reduce its reliance on Chinese supplies.
"At this point in time there is no direct impact on our company. But further restrictions could lead to a shortage of supply or rise in costs for related parts and materials," Sony said in an email statement in response to questions from Reuters.
"We will watch the situation carefully."
Sony, maker of Bravia brand flat TVs, Vaio PCs and the PlayStation 3 videogame console, will look for ways to cut its use of rare earths, including developing alternative materials, Sony spokeswoman Ayano Iguchi said.

A BOON TO SOME
China's move, however, came as a shot in the arm for some companies.
Lynas Corp, which owns the world's richest known non-Chinese deposit of rare earths, jumped over 10 percent even though it will be at least a year before it is capable of mining any material from a new lode in Australia.
Other rare earths companies, including China Rare Earth Holding Ltd, Arafura Resources, Alkane Resources and Greenland Minerals and Energy Ltd also gained between 8 percent 10 percent.
"Export quotas continue to be a tool for the Chinese government to limit the export of China's strategic resource," Lynas Executive Chairman Nick Curtis said in a statement.
"The growth in the Chinese domestic market coupled with a decrease in production of rare earths in China is a likely cause for the tightening of export regulations," said Curtis, whose company is aiming to start production in about a year and has already forged supply contracts with Japanese traders.
World demand for rare earths at present is about 110,000 tonnes a year, with China accounting for about 75 percent of total demand with the remainder split between Japan, the United States and Europe, in descending order.
Demand for rare earths is set to more than double to 250,000 tonnes by 2015, according to industry estimates.
"Concerned parties should not estimate full-year quotas for rare earth minerals just by looking at the first set of quotas," China's Ministry of Commerce said.
Final quotas will take into account domestic production and demand both at home and abroad, according to the ministry.


DEALS FOR SUPPLY
Prices have surged for these minerals, also used in making fluorescent light bulbs, since authorities in Beijing slashed their rare earth exports by 40 percent this summer, saying China needed them for its economic development.
Last week, Hitachi Metals Ltd signed a joint venture with U.S.-based Molycorp Inc to help ensure a steady supply -- an announcement that sent its shares up 15 percent in a single trading session.
That followed word earlier this month that Sumitomo Corp agreed to invest $130 million in Molycorp to secure a seven-year supply of the materials.
Since debuting in late July at $14, Molycorp's stock price has nearly quadrupled.
Molycorp owns a rare-earth mine in Mountain Pass, California, which is scheduled to resume production next year after a 10-year hiatus.
Japan's trade minister, Akihiro Ohata, told reporters on Tuesday he believed Japan would still be able to secure enough rare earth supplies in 2011 even after China's quota cuts, but said the situation would need further study.
Ohata's comment was based on the assumption that the expected amount of imports in the first half of 2011 would be roughly equal to the average of imports for the first and second halves of 2010, a spokeswoman for the ministry said.
Hyundai Mobis, South Korea's top automotive parts maker and a major supplier to Hyundai Motor, said that the quota would have an impact on the two companies, as rare earth is used in electric motors for hybrid vehicles, and as Hyundai Motor is increasing its hybrid vehicle sales.
A spokesman for Hyundai Mobis added that the two companies have been preparing measures to cope with rare earth issues, including diversifying imports.

China's spats call into question 'peaceful rise'

BEIJING (AP) — China's high-profile feuds with the United States, along with territorial spats with Southeast Asian neighbors and Japan, showed a more muscular foreign policy in 2010 that called into question Beijing's promise of a "peaceful rise."
China's leaders bristled against outside pressure like never before, but they now seem to be dialing back that combativeness.
Beijing is working to ease tensions with the United States ahead of a high-profile visit by the president to Washington next month, and is working to maintain steady economic growth and reassure the region that it is a constructive player.
A more aggressive China could still emerge, but the country's leaders — wary of taking risks and obsessed with economic growth — don't appear prepared for that just yet.
"Beijing is tactically adjusting to a disastrous diplomatic year," said Michael Green, a top Asia adviser during the George W. Bush administration.
While Beijing has feuded with countries from South Korea to Norway, its ties with Washington — considered China's most important foreign relationship — have been especially troubled over the past year.
The United States and China have deeply intertwined interests, but Washington also regularly criticizes Beijing's massive trade surplus, its human rights record at home and economic policies that U.S. lawmakers say cost American jobs.
Early this year, the sides sparred over a $6.4 billion U.S. weapons sale to China's rival Taiwan, President Barack Obama's meeting with exiled Tibetan leader the Dalai Lama — reviled for what Beijing says is a drive for the Himalayan region's independence — and Google's decision to stop censoring its search results in China.
China froze military-to-military contacts with the United States in response to the Taiwan arms sales, although those ties are now improving.
Beijing will host U.S. Defense Secretary Robert Gates next month for a long-delayed visit.
Also in January, Chinese President Hu Jintao will be feted in Washington by Obama — replete with a state dinner he was denied during the Bush administration.
In the longer term, China must deal with more active U.S. diplomacy in Asia, a sharp contrast with what some believe was a Bush-era neglect of the region.
Beijing expressed particular annoyance over Washington's courtship of Southeast Asian nations, such as Vietnam — and Secretary of State Hillary Clinton's assertion that the U.S. has a stake in the countries' territorial disputes with Beijing.
Beijing, in contrast, has seen ties in the region deteriorate in recent months.
When a South Korean warship was torpedoed in March, killing 46 sailors, China refused to endorse the findings of an international panel that blamed longtime Chinese ally North Korea.
Just weeks later, China hosted North Korean leader Kim Jong Il, alarming citizens in the South.
Nor did China criticize the North after it shelled a South Korean island in November, killing four and sending tensions on the Korean peninsula soaring.
As a result, Seoul, whose biggest trading partner is China, proceeded to ignore Beijing's calls for restraint, staging massive military drills, and its suggestion of emergency nuclear consultations with the North.
Ties with traditional rival Japan also hit their roughest patch in five years over the detention of a Chinese fishing boat captain accused of ramming a Japanese patrol boat.
Beijing appalled Tokyo by demanding compensation and an apology even after winning the captain's release.
Public opinion surveys in South Korea and Japan have registered levels of worry about China's military not seen in years.
Farther afield, Beijing unleashed a flood of invective and froze some contacts with Norway following the Nobel Committee's decision there to award its Peace Prize to imprisoned Chinese dissident writer Liu Xiaobo.
Then, just before Christmas, China parried with the Vatican over the right to appoint bishops, ending an unspoken arrangement that had largely kept the peace between the sides for the past five years.
Can China turn things around in 2011 and blunt impressions that the government is throwing its weight around?
Officials continue, at least, to pay lip service to the promised peaceful rise — a slogan meant to allay concerns that China would follow the familiar rising powers that come into conflict with the established powers.
China's leadership has also judged that avoiding friction with other countries is the best way to keep the economy humming.
"Peaceful development is the only right path. The more developed China is, the more it needs to strengthen cooperation with the rest of the world and the more it needs a peaceful and stable international environment," China's top diplomat, state counselor Dai Bingguo, wrote in a year-end commentary.
As it tries to make good on that promise, look for more efforts from Beijing to boost "soft power," including perhaps continuing the expansion of its state media's overseas presence and pouring more resources into Confucius Institutes to teach Chinese language and culture.
A milder tone in the state-controlled media would also be an indication that Beijing wants to smooth things over.
China is also expected to increase its participation in United Nations peacekeeping missions and Gulf of Aden anti-piracy patrols as a way to ease worries over rising Chinese military capabilities.
Yet the pressure of a domestic audience that seeks a harder line may be hard to resist.
Officers in the People's Liberation Army have grown more outspoken in their criticism of the West and Japan, sentiments that dovetail with rising nationalism.
China's weathering of the global financial crisis has also boosted the government's willingness to demand a greater voice in international institutions.
China eclipsed Japan this year as the world's second biggest economy after three decades of blistering growth that put overtaking the United States within reach.
The restiveness of minority areas in Tibet and Xinjiang and a looming leadership transition also push leaders toward hardline positions.
And for decades to come, Chinese will continue to cast their country's rise as a struggle for pre-eminence with Washington.
"The U.S. will never allow China to challenge its leadership and will try to 'contain' China's rise," analysts Zheng Jie and Zhong Feiteng wrote in a regional security report for the Chinese Academy of Social Sciences released this week.

Nobel laureate Liu celebrates 55th birthday in prison

Liu was sentenced to 11 years in prison on Christmas Day last year on subversion charges
BEIJING (AFP) — Jailed Nobel peace laureate Liu Xiaobo marked his 55th birthday on Tuesday in a prison in northeast China, prompting renewed calls from rights advocates for his immediate release.
Liu was sentenced to 11 years in prison on Christmas Day last year on subversion charges after co-authoring Charter 08, a bold petition calling for political reform in one-party Communist-ruled China.
He was named the peace prize winner in October, sparking fury in Beijing, which equated the Oslo-based Nobel committee's decision with encouraging crime.
A ceremony in Liu's honour was held in the Norwegian capital on December 10.
The Chinese Human Rights Defenders, an activist network based in Hong Kong, said it wanted to "take this opportunity to wish Liu Xiaobo a happy birthday and to once again call for his immediate and unconditional release".
The group recalled in a statement that Liu was spending his first birthday at the remote Jinzhou prison in the northeastern province of Liaoning, but had not been free to celebrate in the past two years.
In 2009, he was in a Beijing detention centre following his sentencing, and in 2008, he was under police surveillance outside the Chinese capital.
Rights groups have said that family visits to Liu at the prison have been suspended, despite the fact that a monthly visit is guaranteed under Chinese law.
Liu's wife Liu Xia remains under house arrest at her Beijing home, and CHRD said her phone and Internet connections remained blocked.
AFP attempts to reach her by telephone on Tuesday were unsuccessful.
CHRD called for those restrictions on Liu Xia to be lifted.
"There is absolutely no legal basis for any of the measures taken against her by Beijing officials," the group said.
"CHRD is concerned that Liu Xia may continue to face illegal house arrest for an extended period of time, and we reiterate our call for an immediate end to her persecution."
Liu's lawyer Shang Baojun told AFP that he too was unable to reach Liu Xia.
"I can't get hold of her. I contacted her family last week. She's still in her house in Beijing -- she's well, but there's no new news," Shang told AFP by telephone

China's Real-Estate Frenzy

Rising property prices and a torrid pace of lending are signals of an inflationary bubble.
By HUGO RESTALL

A salesman shows off property to a potential buyer at the Shanghai Real Estate Trade Fair And Exhibition.
Last week I sold an apartment in Beijing for more than 2.5 times what I paid for it five years and three months ago.
When I asked the buyer why he was optimistic about real estate, he explained that land was limited in Chinese cities and government policies would keep the market going up.
So far that argument has proven right.
Understanding government policy has long been the key to making money in China's property and stock markets.
The atmosphere at the Beijing tax and land bureaus brought to mind California during the gold rush.
It's impossible to say definitively that a market has strayed into bubble territory until after the collapse.
But prices rising out of the reach of average buyers is one indicator.
Housing prices in the U.S. peaked at 6.4 times average annual earnings this decade.
In Beijing, the figure is 22 times.
If the froth is confined to housing, as it was more or less in the U.S., China can muddle through.
But it is not. Consider the problem of leverage.
Those who doubt that Chinese housing is in a bubble often point to the lack of leverage.
And it's true that on paper Chinese banks only lend a prudent amount to buyers, so that if the market falls by a third, they will still be "above water."
Many buyers, such as the one who bought my apartment, pay in cash.
Even given the probability that banks sometimes break the rules, it's clear that leverage as traditionally understood doesn't drive Chinese home sales.
But there is still plenty to be worried about, because the leverage comes from elsewhere.
Real estate is just the preferred way to store wealth.
There are no property taxes, so an empty apartment doesn't cost a lot to maintain.
Registered in the name of a family member, it also doesn't attract a lot of attention from the authorities who try to track down income, not all of it legal, that is not reported for tax purposes.
The wealth itself comes from the credit machine that drives China's investment-led economy.
Fixed-asset investment grew 23.5% this year, and it is forecast to grow 20% next year.
After 2008, Beijing paid lip service to the need to rebalance the economy in favor of consumption instead of investment.
Meanwhile it doubled down on investment, with a stimulus package for 2009, equivalent to 15% of GDP, that was made up mostly of bank loans.
The torrid pace of lending continued this year.
Pushing loans out the door throws off large amounts of cash to the managers and cadres involved, which they then use to buy apartments.
For instance, local governments depend on the revenue from land redevelopment, and the officials then take a cut and buy property.
As long as the music keeps playing, everyone keeps dancing.
In the past, when China could depend on growing export markets, technocrats in Beijing were able to keep speculative frenzies in check with periodic crackdowns.
Moreover, with ample supplies of cheap labor, the real economy was unlikely to overheat.
The main tools to regulate growth were administrative: government orders to banks to stop lending and to companies and local governments to halt projects.
And that's what Beijing is still trying, increasing banks' reserve ratios and cutting lending quotas.
But this time nobody is listening.
Local governments and banks have set up off-balance sheet vehicles to conceal loans and keep the spending boom going.
Fitch Ratings estimates that not only did banks exceed the central bank's 7.5 trillion yuan ($1.1 trillion) cap on lending for this year, they made an additional three trillion yuan of these shadow loans.
When a government loses control of monetary policy, inflation follows.
A few months ago, only the scariest "China bears" predicted 6% inflation for next year; now the People's Daily is admitting it may reach those levels "in some months."
The nonindependent People's Bank of China, staffed by reform-oriented technocrats, is being allowed to raise interest rates a few basis points.
But allocating credit on the basis of its cost threatens the whole political economy.
The state-owned companies have become accustomed to negative real interest rates.
If the price of capital rises, many of the Communist Party elite will face a crunch.
China's real-estate game could have longer to run.
Due to the high savings rate, banks are liquid and the national debt is relatively small.
Beijing could double down again on investment and weather the inflation for another year perhaps.
But it's not a good idea.
Most of the Chinese economy operates on the basis of price signals, yet the government continues to regulate it as if it were still planned.
The longer Beijing waits to start using interest rates to run monetary policy, the bigger the bubble will get.
And the bigger the reckoning when it ends.

China’s Military Surprises

By Jason Miks

Surprising reports on aircraft carriers, missiles and stealth fighters underscore China's growing military strength.
In a year in which the region’s news was frequently dominated by questions over whether China had abandoned the path of a ‘peaceful’ rise, it was perhaps inevitable that 2010 would be rounded out with a few bits of news that underscore China’s growing military prowess.
I’ve written before about the common misconception when comparing Chinese and US military power that China somehow needs to go toe-to-toe with the United States to be considered a regional threat.
It doesn’t – the risk of a bloody enough nose over, for example, the Taiwan Strait, would be enough to make US forces at least wary about whether and how to intervene in a conflict. (And as I blogged about earlier this year, they might have only a few days to come to Taiwan’s rescue in the event of a Chinese invasion of the island, at least according to one simulation).
So how would China be able to deny US ships access to the Taiwan Strait area?
One way is the use of Anti-Ship Ballistic Missiles, a weapon discussed by Diplomat correspondents Toshi Yoshihara and James Holmes.
As they note, missiles,‘being relatively cheap and easy to mass produce, offer an excellent chance of evening the odds… A long-range cruise missile costs as little as $500,000 – a pittance for China – while a single US cruiser is worth around $1 billion. To put it another way, one US aircraft carrier would literally buy 10,000 missiles.’
And, according to China analysts Andrew Erickson and Gabe Collins, China is further advanced along this path than many had expected.
Erickson emailed me a copy of a new report he has just published that states: ‘Beijing has successfully developed, tested, and deployed the world’s first weapons system capable of targeting a moving carrier strike group (CSG) from long-range, land-based mobile launchers. The Second Artillery, China’s strategic missile force, already has a capability to attempt to use the DF-21D against US CSGs in the event of conflict, and therefore likely expects to achieve a growing degree of deterrence with it.’
The report also notes the significant potential in terms of firing distance of the mainland-based missiles, which bring targets well past the first island chain and Taiwan – including the US Navy base in Guam – within range.
There is a caveat to this.
The report quotes Admiral Robert Willard, Commander of US Pacific Command, as stating that China likely sees its missiles as having the equivalent of initial operational capability (IOC).
What does this mean?
In effect it means that although China likely has the capacity to deploy the system, it will require a degree of fine-tuning through testing, meaning it’s not clear how the system might actually perform under combat conditions.
Still, as the report notes, although it’s hard to exactly equate definitions of operational capability between different countries’ services, this approximated status is still a significant advance on ‘Initial Threat Availability’, which is typically when a system has been tested successfully, but hasn’t been deployed.
Providing a few more specifics on what all this could mean in terms of when and by whom the missiles could be operated by, Mark Stokes, executive director of the Project 2049 Institute, emailed me with his take on some of this: ‘One could quibble about how close an ASBM is to IOC. The key question to ask is whether or not Second Artillery and General Armaments Department (GAD) authorities have officially certified the space and missile industry's design (literally,‘set the design’or dingxing for short). My impression is that the goal was to do so before the end of the year. Afterwards, the missile would still need to continue with testing, both for purposes of ensuring a small initial batch is OK, and then for Second Artillery unit operational test and evaluation.
‘There's still some question regarding which brigade has been designated to be the first unit equipped. Two new Second Artillery units in Guangdong are possible candidates (52 Base's 96166 Unit and 53 Base's 96219 Unit). Over the last three or four years, a dozen or so officers from the initial ASBM brigade — whichever one it is — likely have been preparing tactics, techniques, and procedures, developing simulation systems, and working closely with industry to ensure stable follow-on logistics support, and surveying launch sites, and so on. Second Artillery engineering units probably have been doing lots of tunnelling work in preparation for initial deployments as well.’
Interestingly, Erickson’s report also quotes Willard as commenting on whether the ASBM is a greater threat in terms of access denial than submarines (Willard says not).
This brings me to another development reported on this past week, namely that China may be in a position to launch its first aircraft carrier next year – a year before many analysts had expected.
As Reuters notes: ‘(The) launch of the ex-Soviet aircraft carrier Varyag, for training and trying out technology, will be a step toward building and operating aircraft carrier group.’
I asked James Holmes for his take on the significance of the reported ‘launch’, and he first took issue with the report’s use of that word.
‘It’s a squishy term’, he told me.
‘The ship is in the water and thus was ‘launched’long ago. So I would assume they mean they plan to start sea trials next year… As the article notes, this won't make the ship fully operational, if indeed they intend to use it as more than a training platform’.
So how much of a surprise was this?
An ‘expected’ surprise, perhaps.
‘The Chinese have a pattern of springing things on us, so the timing comes as little surprise to me,’ Holmes said, noting also that as the ship's air wing isn't particularly large, it will by no means signal a Chinese rise to parity with US carriers.
Still, Holmes also added that if Willard’s suggestion that the ASBM has reached initial operating capability is true, and the Second Artillery can provide fire support from the land hundreds of miles offshore, the PLA Navy ‘may not need carriers comparable to ours, ever’.
US Navy Commander James Kraska of the Center for Naval Warfare Studies told me that China’s aircraft carrier plans are perhaps better understood as symbolic rather than militarily practical advances.
‘The aircraft carrier is unimportant militarily for the time being at least; it is important as a symbol of China's economic, technological and military ascendancy,’ he told me when I asked him about the report.
‘China has mastered and implements a comprehensive approach to nurturing and managing the image of its power – the carrier is a trophy or exhibit that helps to round out Beijing's image, especially in Asia, which is a maritime theatre… (and helps) show countries that China can come between US Naval power and American allies. The Seventh Fleet, long dominant in the region, now has to contend with a serious rival.’
Kraska adds, however, that China may have come to the carrier ‘party’ a little late, and compares the aircraft carrier with the battleship, which itself yielded to the carrier as the most powerful capital warship.
So what replaces the carrier?
‘Most likely, fast attack submarines,’ Kraska says.
And here he says there’s little comfort for the US and allies.
‘China is mastering Air Independent Propulsion (AIP) technology that’s reportedly quieter than US Los Angeles-class fast attack submarines’, he told me.
‘And China is building them at a faster rate than the United States, widening the gap in numbers each year’.
Throw in the speculation this week that China might also be developing its own stealth fighter, and it’s clear there’s plenty for the US and its allies to mull over in the coming year.

Chinese ‘carrier killer’ missile operational

By Kathrin Hille in Beijing

A new Chinese anti-ship missile that will significantly alter the balance of military power in the Pacific is now operational, according to a senior US commander.
Admiral Robert Willard, the top US commander in the Pacific, said the Chinese ballistic missile, which is designed to threaten US aircraft carriers in the region, had reached “initial operational capability”.
His remarks signal that China is challenging the US ability to project military power in Asia much sooner than many had expected.
The US and other countries in the Pacific region are increasingly concerned at the speed with which China is developing its naval power.
Japan, for example, recently decided to refocus its military on the potential threat from China.
“So now we know – China’s [anti-ship ballistic missile] is no longer aspirational,” Andrew Erickson, an expert on the Chinese military at the US Naval War College, said in response to Adm Willard’s comments to the Asahi newspaper.
Defence analysts have called the Dongfeng 21 D missile a “game changer” since it could force US aircraft carriers to stay away from waters where China does not want to see them.
These include the Taiwan Strait where a potential conflict could develop over the self-ruled island which China claims.
The land-based missile is designed to target and track aircraft carrier groups with the help of satellites, unmanned aerial vehicles and over-the-horizon radar.
Aircraft carriers and their accompanying ships are unable to defend themselves against such a threat.
Aware of the missile’s development, the Pentagon has already started considering ways to counter the new threat, including a new concept for more closely integrated navy and air force operations.
In September, Robert Gates, US defence secretary, said the development of such a missile would force the Pentagon to rethink the way carriers are deployed.
“If the Chinese or somebody else has a highly accurate anti-ship cruise or ballistic missile that can take out a carrier at hundreds of miles of ranges and therefore in Asia puts us back behind the second island chain, how then do you use carriers differently in the future than we’ve used them in the past?,” Mr Gates asked.
The second chain of islands runs from the Bonins along the Marianas, Guam and Palau, forming a north-south line east of Japan and the Philippines.
This line defines what China sees as its “near seas” – waters in which the US navy now frequently operates and are home to US naval bases and allies such as Japan and South Korea.
Earlier this year, Adm Willard noted that China’s ASBM was undergoing extensive testing and was close to deployment.
Observers believe China started production of missile motors last year and that the Chinese military is preparing a nuclear missile base in the southern city of Shaoguan for their deployment.
Defence analysts have also linked several missile flight tests this year to the new weapon, but no conclusive evidence has been available to date.
Adm Willard’s latest comments appear to remove any doubts.
The term “initial operational capability” as used by the Pentagon indicates that some military units have started deployment of the weapon and are capable of using it.
“Beijing has successfully developed, tested, and deployed the world’s first weapons system capable of targeting a moving carrier strike group from long-range, land-based mobile launchers,” said Mr Erickson.
Adm Willard said the new Chinese weapon was still not fully operational and would probably undergo testing for “several more years”.
The key remaining step is a comprehensive test of the entire system at sea, which is much more difficult than test flights over land.
China also needs to deploy more satellites to ensure seamless tracking of a moving target at sea.
But defence experts caution that the weapon would immediately be a threat to US carriers because China could make up for a lack in accuracy by launching larger numbers of missiles.

Sitting Out the China Trade Battles

By KEITH BRADSHER

A wind power generator in 2005 in the Nanhui district of coastal Shanghai. G.E. produced generators for the project.

Gamesa of Spain has a wind turbine factory in Tianjin, China.
No American company would seem to have more to gain than General Electric from the Obama administration’s decision on Wednesday to accuse China, in a World Trade Organization case, of providing illegal subsidies to Chinese wind turbine makers.
Like other multinationals, G.E. acquiesced a few years ago to the Chinese government’s demand that it build a large wind turbine factory in China — only to then watch its market share plummet as China’s state-owned power companies steered contracts to homegrown wind turbine manufacturers.
And now G.E. faces growing competition from those Chinese upstarts in its home market, the United States — even as a crucial G.E. wind turbine patent is about to expire.
But with so much to potentially gain from the administration’s W.T.O. case, what was G.E.’s reaction?
Total silence.
The company said it would have no comment on the matter.
G.E.’s silence is part of a broader Western corporate reluctance to criticize Chinese policies, particularly in public.
So eager are multinationals for continued access to the world’s fastest-growing market that they are loath to cry foul even amid evidence that China may be flouting international trade laws.
That reticence has long characterized foreign companies’ dealings with the ascendant China.
But last winter and spring, there were signs of a new willingness by American and European multinationals to speak out.
Google said in March that it would shut down its China-based Internet search engine, rather than continue allowing Chinese censorship.
The leaders of big companies like G.E., as well as the German giants Siemens and BASF, voiced concerns in early summer about access to the Chinese market.
It briefly seemed that Western companies might take a more coordinated and more assertive position.
But that season of outspokenness seems to have passed, and virtually no companies are now willing to discuss the Chinese trade barriers publicly, executives and lobbyists in Beijing, Hong Kong and Washington said.
“We’re seeing a lowering of the volume — that doesn’t mean the concerns have gone away, but the volume has come down,” said Christian Murck, the president of the American Chamber of Commerce in China.
China’s solid rebound from the global economic downturn, compared with continued malaise in the West, has made the Chinese economy look like a much better place for Western companies to pursue near-term opportunities — instead of fighting drawn-out trade and regulatory battles.
It can take up to three years for a W.T.O. case to wend its way through a dispute resolution panel and any appeals.
Moreover, assurances from Chinese leaders that they will give equal treatment to foreign enterprises, although not yet backed up with specifics, have also persuaded some foreign companies that conditions will eventually improve.
This has eroded whatever fragile consensus that had been starting to form in favor of speaking out against Chinese policies.
In fact, corporate leaders like G.E.’s chief executive, Jeffrey R. Immelt, have taken a more conciliatory public stance toward China in recent months, saying that they would fine-tune their competitive tactics to adapt to Beijing policy.
Experts on Chinese business culture say that Chinese regulators like to see such statements.
“It’s communicating, ‘I understand my place’ — that’s very Confucian,” said Judy Lam, a lawyer at Rutter, Hobbs & Davidoff in Los Angeles who specializes in deals spanning the Pacific.
The statements show, she said, that “the big American giant” is “willing to suck it up — that will win them points.”
After the Obama administration announced its decision to pursue the trade case, the Chinese Ministry of Commerce denied in a brief statement on Thursday that the country’s wind energy policies had violated W.T.O. rules.
Many countries help their clean energy industries, usually by subsidizing consumers who buy solar panels and other renewable energy equipment.
Beijing’s approach to clean energy subsidies has drawn criticism from trade experts because it is based on helping manufacturers localize production in China and begin exports.
And yet, no Western company was willing to file a trade case.
It was the United Steelworkers, an American labor union with no sales to lose in China, that complained in September to the Obama administration, which opened a formal investigation in October.
G.E. and other American clean energy companies have avoided taking positions on that investigation.
The only big company to step forward and strongly endorse it has been SolarWorld, a German company with solar panel manufacturing sites in Oregon and California, but not in China.
The United Steelworkers’ trade case alleges dozens of violations by China.
The Obama administration filed a W.T.O. case on only one of those issues on Wednesday, and said that it was still investigating the rest but needed more time to do so, partly because it had not yet been able to gather all the information it needed.
“The pace and content of our investigation will depend in part on the role played by stakeholders, including manufacturers and service providers in the green technologies sector, in sharing evidence and other relevant information,” said Nefeterius Akeli McPherson, a spokeswoman for the Office of the United States Trade Representative.
A Washington lobbyist for a wide range of corporations said that with sales barely growing in the United States and Europe, Western companies were particularly dependent on China for growth and inexpensive manufacturing.
Retail sales in China are climbing nearly 15 percent a year.
“At the end of the day, they have to make their numbers,” said the lobbyist, who insisted on anonymity because of the wariness of companies he represents.
The lobbyist added that many companies also feared retaliation by Chinese regulators.
Chinese laws are often just a few pages in length, even on complex industrial or financial subjects.
That leaves broad discretion to regulators on enforcing regulations that may help some companies and penalize others.
Regulators also have the authority in every industry to approve foreign investments, and even demand a say in details like what equipment will be purchased by foreign investors for their factories.
Regulators have long used their involvement in the minutiae of corporate management, and their ability to delay even minor decisions, as a way to discipline companies for taking stances at odds with Chinese policy.
“They have shown themselves to be retaliatory, and it really has the intended effect,” said a Western lawyer who advises many multinationals in China, and who insisted on anonymity because he said that he feared retaliation.
American policy makers almost never have the same discretionary powers to reward or penalize companies based on their cooperation or lack of it.
Some executives in China working for Western multinationals advocate taking a tough line in their negotiations with Chinese officials.
But they say that the reluctance of other companies to take public positions means that united action is difficult.
A result, one senior Western executive said in an e-mail, is “everybody eating bitterness in solitude.”

Beijing Takes On the Vatican

By Gordon G. Chang
“May the birth of the Savior strengthen the spirit of faith, patience and courage of the faithful of the Church in mainland China, that they may not lose heart through the limitations imposed on their freedom of religion and conscience,” Pope Benedict said at the end of his traditional Urbi et Orbi—to the city and to the world—message on Christmas.
After years of accommodation, Beijing in recent months decided to attack the Roman Catholic Church, and the pontiff, who had the world stage to himself on Saturday, used the opportunity to strike back.
Beijing forced a confrontation with Benedict last month by first ordaining a bishop in the state-controlled Catholic Patriotic Association without the Pope’s approval.
Then, this month Chinese authorities, without sanction from the Holy See, both engineered the election of an illegally ordained bishop to head the bishops’ conference and selected a bishop recognized by the Vatican to lead the patriotic association.
Rome was livid, maintaining that these actions had “unilaterally damaged the dialogue and the climate of trust.” It praised those faithful who refused to participate in the “illicit ceremonies,” as the Catholic News Agency termed them, and asked China’s Catholics to support those who had to take part against their will.
The Vatican condemned the forced participation as a “grave violation of their human rights, particularly their freedom of religion and of conscience.”
There is, as a practical matter, no freedom of religion or conscience in China.
There is, however, an officially recognized Catholic patriotic association, which does not recognize the authority of the Pope, but most Chinese Catholics choose to pray in illegal “house churches.”
That’s also true for Protestants, who largely shun the Communist Party’s organization for them.
Beijing claims that 23 million Chinese worship in the official Christian organizations, but they are vastly outnumbered by as many as 107 million house-church participants.
However many Christians there may be, the atheistic Party is playing a losing hand.
Unsanctioned, illegal churches have spread across the Chinese heartland, some of which even operate openly under the eyes of nervous officials.
The world’s largest security services, surprisingly, seem unable to deal with this affront to authority.
“It’s no problem if the government doesn’t like Christians or house churches,” said Zhang Fei to London’s Telegraph. 
“God is in charge of us, not the government.”
Miss Zhang’s government, however, thinks that is precisely the problem.
And indeed she and the 1,000 other members of her congregation in Beijing pose a challenge to Chinese officials. 
The fact that the 25-year-old manager can continue to pray in the center of Communist power—instead of toiling away in some labor camp in a remote province—highlights the inability of officialdom to deal with religion.
The Beijing Municipal Civil Affairs Bureau can close down the Association on Music in Korean Dialect and the Beijing Association on Roast Duck Technology, but it is having trouble coercing Miss Zhang and her co-religionists.
That inability would seem anomalous for what has been called the world’s most successful authoritarian regime.
But the reason is simple: by now, religion has spread far too widely across China.
These days, it is no longer confined to poor backwaters; it has taken hold in the country’s great cities.
Beijing simply cannot incarcerate 100 million fervent Christians—as well as untold numbers of devout Buddhists, Muslims, Daoists, and others.
China’s people do not believe in communism any more, and in its place they are taking up religion.
I know that as a fact. 
Two years ago my neighbor went to China, but not exactly for a sightseeing vacation.
He and a dozen members of his northern New Jersey congregation went to an inland Chinese province—so that they could smuggle in Bibles and pray with house-church Protestants in five-hour Sunday services.
One of my mother-in-law’s students, who became a priest in Hong Kong, devoted his life to going to neighboring Guangdong Province to surreptitiously tend to the Catholic faithful there.
China’s Christians, whether they go to official services or the unsanctioned ones, do not see themselves as enemies of the state.
Yet deeply insecure Chinese officials view them as such.
The cadres, therefore, are creating enemies for the Communist Party, just as they did with, among others, Falun Gong practitioners, Buddhist Tibetans, and Muslim Uighurs.
And that gets us back to the Pope.
China’s Communists devoted years of effort to understanding why the Soviet party failed.
Among other reasons, they focused on the role of the charismatic Pope John II.
Now, Beijing’s rulers think they can antagonize his steely successor with impunity.
Historical trends, many believe, point to the Chinese owning this century.
I think that’s a gross misreading of events, but, in any case, Beijing rulers will certainly fail if, while enjoying their moment of hubris, they create more adversaries than they can deal with.

An Odyssey Through Wartime China

By STEPHEN MILLER

Frank Bessac with the Dalai Lama in New York in 2009.











In Mongolia in 1946, where he was a relief worker.
In 1949, as the Chinese revolution extended its gains to the steppes in the western part of the country, Frank Bessac escaped via a nearly 2,000-mile journey through deserts and mountains to Tibet.
He became one of the last westerners to meet the Dalai Lama in his summer palace in Lhasa.
During the epic trek, shrouded in secrecy and Cold War high jinks, the trek's leader, Douglas MacKiernan, became the first Central Intelligence Agency officer killed in the line of duty.
Mr. Bessac, who died Dec. 6 at age 88, was by turns an agent in China with the Office of Strategic Services, a U.S. wartime intelligence agency, a relief worker in Mongolia, and a cultural anthropologist with a special interest in nomadic tribes of the Asian steppes.
A college student in California when World War II began, Mr. Bessac was drafted into the Army in 1943.
He was sent to learn Mandarin at Cornell University, where he was recruited by the OSS.
He was parachuted toward the end of the war into China, where he "executed daring missions," he wrote in a memoir, and helped keep tabs on the emerging conflict between Nationalist and Communist factions. (He also headed a relief effort on behalf of the U.S. State Department, delivering food aid to Mongolian pastoralists who were the victims of drought.)
In 1947, Mr. Bessac won a Fulbright scholarship to study Mongolian and Classical Chinese.
Fascinated by the freedom of sheep-herding nomads, Mr. Bessac pledged himself a knight of Ghengis Khan while visiting a purported tomb of the Mongol emperor.
He soon got a bigger taste of nomadism than he expected.
Footloose for some time, he journeyed in 1949 to Urumqi, in the far Northwest of China, where he met Mr. MacKiernan, vice consul of the U.S. consulate.
Mr. MacKiernan was also, he soon revealed, a CIA officer whose mission included watching the Soviet border.
As the People's Liberation Army took Urumqi, the two Americans escaped with four White Russians and a string of horses, leaving a cache of burned consular documents behind.
They briefly joined with forces led by the anti-Chinese leader Osman Bator, then at the urging of Mr. MacKiernan set out for Tibet.
"Doug was a man who played with many mirrors," Mr. Bessac wrote in his memoir.
He said that Mr. MacKiernan never revealed his mission, though he stayed in contact with Washington with a hand-cranked radio.
Mr. Bessac endured privations and severe weather during which he traversed the Taklamakan Desert, known as "White Death."
The party scaled the Kunlun Mountains to the Tibetan Plateau.
Skeletons of horses and men littered the trail.
The group subsisted on partly-cooked game and raisins.
Mr. Bessac developed signs of scurvy.
"To see a camel, with wild frenzied eyes devour a large chunk of bloody flesh is a horrible sight," he wrote in his memoir.
"The thing I will remember most about the Tibetan mountains was the wind, the screaming, penetrating wind," he later wrote.
On April 29, 1950, the party arrived at the Tibetan border and tragedy struck.
A Tibetan border guard—for reasons unclear—shot dead Mr. MacKiernan and two of the Russians.
An uninjured Mr. Bessac and the other Russian were marched as prisoners to Lhasa. (With the luggage was a grisly sight—a bag holding the slain mens' heads.)
They were treated better after encountering a courier with a message from the government that the party was to have been let into the country.
When he reached Lhasa on June 11, Mr. Bessac made a final entry in the trip log: "Good to be here—Oh God."
At Lhasa, Mr. Bessac met briefly with the Dalai Lama, but the two were forbidden to converse owing to the Dalai Lama's youth.
"We grinned at each other during the entire time of the 'interview,'" Mr. Bessac wrote in his memoir.
He spent several weeks in Lhasa, recovering and soaking up the sights including giant monasteries, Buddhist pilgrims prostrating themselves, icons of Buddhas and gods illuminated by butter lamps.
At the end of July, Mr. Bessac left Llasa and journeyed through the Himalayas by river, mule and airplane to New Delhi, and then to the U.S.
The Tibetan foreign office sent with him letters to the U.S. government pleading for arms to repel an expected invasion.
But it was too late.
Tibet was invaded by Chinese forces the next month.
(He also befriended Heinrich Harrer, a German adventurer who wrote of Mr. Bessac in "Seven Years in Tibet" that "he was tall as a bean pole and completely dwarfed his little Tibetan pony.")
Life magazine ran an as-told-to feature that November that included photos of the punishment of the Tibetan border guards, who were lashed and put in stocks.
Mr. Bessac later earned a Ph.D. in anthropology from the University of Wisconsin, and headed the Department of Anthropology at the University of Montana.
His field research concerned land reform in Taiwan.
Mr. Bessac wrote that he was frustrated that the CIA refused to declassify files related to Mr. MacKiernan's Tibet mission.
In 2008—nearly a half century later—the CIA acknowledged Mr. MacKiernan was the first officer killed in action.
Mr. Bessac's path crossed with the Dalai Lama's one last time.
In 2009 at a banquet at New York's Waldorf-Astoria Hotel, the Dalai Lama greeted the wizened explorer by affectionately bumping foreheads with him.