The Coming Collapse of China: 2012 Edition

I admit it: My prediction that the Communist Party would fall by 2011 was wrong. Still, I’m only off by a year. 
BY GORDON G. CHANG

In the middle of 2001, I predicted in my book, The Coming Collapse of China, that the Communist Party would fall from power in a decade, in large measure because of the changes that accession to the World Trade Organization (WTO) would cause.
A decade has passed; the Communist Party is still in power. But don’t think I’m taking my prediction back.
Why has China as we know it survived?
First and foremost, the Chinese central government has managed to avoid adhering to many of its obligations made when it joined the WTO in 2001 to open its economy and play by the rules, and the international community maintained a generally tolerant attitude toward this noncompliant behavior.
As a result, Beijing has been able to protect much of its home market from foreign competitors while ramping up exports.
By any measure, China has been phenomenally successful in developing its economy after WTO accession — returning to the almost double-digit growth it had enjoyed before the near-recession suffered at the end of the 1990s.
Many analysts assume this growth streak can continue indefinitely.
For instance, Justin Yifu Lin, the World Bank’s chief economist, believes the country can grow for at least two more decades at 8 percent, and the International Monetary Fund predictsChina’s economy will surpass America’s in size by 2016.
Don’t believe any of this.
China outperformed other countries because it was in a three-decade upward supercycle, principally for three reasons.
First, there were Deng Xiaoping’s transformational “reform and opening up” policies, first implemented in the late 1970s.
Second, Deng’s era of change coincided with the end of the Cold War, which brought about the elimination of political barriers to international commerce.
Third, all of this took place while China was benefiting from its “demographic dividend,” an extraordinary bulge in the workforce.
Yet China’s “sweet spot” is over because, in recent years, the conditions that created it either disappeared or will soon.
First, the Communist Party has turned its back on Deng’s progressive policies.
Hu Jintao, the current leader, is presiding over an era marked by, on balance, the reversal of reform.
There has been, especially since 2008, a partial renationalization of the economy and a marked narrowing of opportunities for foreign business.
For example, Beijing blocked acquisitions by foreigners, erected new barriers like the “indigenous innovation” rules, and harassed market-leading companies like Google.
Strengthening “national champion” state enterprises at the expense of others, Hu has abandoned the economic paradigm that made his country successful.
Second, the global boom of the last two decades ended in 2008 when markets around the world crashed. The tumultuous events of that year brought to a close an unusually benign period during which countries attempted to integrate China into the international system and therefore tolerated its mercantilist policies. Now, however, every nation wants to export more and, in an era of protectionism or of managed trade, China will not be able to export its way to prosperity like it did during the Asian financial crisis in the late 1990s.
China is more dependent on international commerce than almost any other nation, so trade friction — or even declining global demand — will hurt it more than others.
The country, for instance, could be the biggest victim of the eurozone crisis.
 Third, China, which during its reform era had one of the best demographic profiles of any nation, will soon have one of the worst.
The Chinese workforce will level off in about 2013, perhaps 2014, according to both Chinese and foreign demographers, but the effect is already being felt as wages rise, a trend that will eventually make the country’s factories uncompetitive.
China, strangely enough, is running out of people to move to cities, work in factories, and power its economy.
Demography may not be destiny, but it will now create high barriers for growth.
At the same time that China’s economy no longer benefits from these three favorable conditions, it must recover from the dislocations — asset bubbles and inflation — caused by Beijing’s excessive pump priming in 2008 and 2009, the biggest economic stimulus program in world history (including $1 trillion-plus in 2009 alone).
Since late September, economic indicators — electricity consumption, industrial orders, export growth, car sales, property prices, you name it — are pointing toward either a flatlining or contracting economy.
Money started to leave the country in October, and Beijing’s foreign reserves have been shrinking since September.
As a result, we will witness either a crash or, more probably, a Japanese-style multi-decade decline.
Either way, economic troubles are occurring just as Chinese society is becoming extremely restless.
It is not only that protests have spiked upwards -- there were 280,000 "mass incidents" last year according to one count -- but that they are also increasingly violent as the recent wave of uprisings, insurrections, rampages and bombings suggest.
The Communist Party, unable to mediate social discontent, has chosen to step-up repression to levels not seen in two decades.
The authorities have, for instance, blanketed the country's cities and villages with police and armed troops and stepped up monitoring of virtually all forms of communication and the media.
It's no wonder that, in online surveys, "control" and "restrict" were voted the country's most popular words for 2011.
That tough approach has kept the regime secure up to now, but the stability it creates can only be short-term in China's increasingly modernized society, where most people appear to believe a one-party state is no longer appropriate.
The regime has clearly lost the battle of ideas.
Today, social change in China is accelerating.
The problem for the country's ruling party is that, although Chinese people generally do not have revolutionary intentions, their acts of social disruption can have revolutionary implications because they are occurring at an extraordinarily sensitive time.
In short, China is much too dynamic and volatile for the Communist Party's leaders to hang on.
In some location next year, whether a small village or great city, an incident will get out of control and spread fast.
Because people across the country share the same thoughts, we should not be surprised they will act in the same way.
We have already seen the Chinese people act in unison: In June 1989, well before the advent of social media, there were protests in roughly 370 cities across China, without national ringleaders.
This phenomenon, which has swept North Africa and the Middle East this year, tells us that the nature of political change around the world is itself changing, destabilizing even the most secure-looking authoritarian governments.
China is by no means immune to this wave of popular uprising, as Beijing's overreaction to the so-called "Jasmine" protests this spring indicates.
The Communist Party, once the beneficiary of global trends, is now the victim of them.
So will China collapse?
Weak governments can remain in place a long time.
Political scientists, who like to bring order to the inexplicable, say that a host of factors are required for regime collapse and that China is missing the two most important of them: a divided government and a strong opposition.
At a time when crucial challenges mount, the Communist Party is beginning a multi-year political transition and therefore ill-prepared for the problems it faces.
There are already visible splits among Party elites, and the leadership's sluggish response in recent months -- in marked contrast to its lightning-fast reaction in 2008 to economic troubles abroad -- indicates that the decision-making process in Beijing is deteriorating.
So check the box on divided government.
And as for the existence of an opposition, the Soviet Union fell without much of one.
In our substantially more volatile age, the Chinese government could dissolve like the autocracies in Tunisia and Egypt.
As evident in this month's "open revolt" in the village of Wukan in Guangdong province, people can organize themselves quickly -- as they have so many times since the end of the 1980s.
In any event, a well-oiled machine is no longer needed to bring down a regime in this age of leaderless revolution.
Not long ago, everything was going well for the mandarins in Beijing.
Now, nothing is.
So, yes, my prediction was wrong.
Instead of 2011, the mighty Communist Party of China will fall in 2012.
Bet on it.

Beijing Launches Its Own GPS Rival

By JEREMY PAGE

Visitors looked at a model of the Beidou satellite-navigation system in Shanghai in May. The system started providing positioning services Tuesday.

BEIJING—China has begun operating a homegrown satellite navigation service that is designed to provide an alternative to the U.S. Global Positioning System and, according to defense experts, could help the Chinese military to identify, track and strike U.S. ships in the region in the event of armed conflict.
The Beidou Navigation Satellite System started providing initial positioning, navigation and timing services to China and its "surrounding areas" on Tuesday, Ran Chengqi, a spokesman for the system, told a news conference.
He said China had so far launched 10 satellites for the Beidou system, including one this month, and planned to put six more in orbit in 2012 to enhance the system's accuracy and expand its service to cover most of the Asia Pacific region.
The system isn't as believed to be as accurate as the U.S. GPS.
Nonetheless, China has made significant advances in the field thanks to a spate of satellite launches since 2009, according to a paper by Eric Hagt and Matthew Durnin published in the Journal of Strategic Studies in October.
"Although China still has a long way to go before it has continuous real-time tactical coverage, even of a regional maritime environment, it now has frequent and dependable coverage of stationary targets and at least a basic ability to identify, track and target vessels at sea," they wrote.
"Based purely on capabilities, with a space-based reconnaissance system as the backbone, China is clearly acquiring greater ability not only to defend against intruding aircraft carriers but to project force as well." China's Ministry of Defense didn't immediately respond to a request for comment.
Beidou—which means Big Dipper in Mandarin—is run by the China Aerospace Science and Technology Corp., one of the main state-owned contractors for the Chinese space program, which is largely controlled by the Chinese military. 
China began building Beidou in 2000 with the goal of creating its own global system—called Compass—with 35 satellites, by 2020.
The only other operational global system apart from GPS is Russia's Glonass, although the European Union's Galileo system is due to be completed by 2020.
Beidou, like GPS, will provide free civilian services that can be used in conjunction with commercially developed applications for use by drivers in private cars, monitor commercial trucks and ships and assist in natural disasters.
It has the added advantage of supporting SMS messages, according to Mr. Ran.
He didn't mention potential military applications at the news conference, a transcript of which was provided by the information office of China's State Council, or Cabinet.
But the system will also give the Chinese military an alternative to GPS, which was developed by the Pentagon and is still controlled by the U.S. government.
The U.S. could, in theory, disable or deny access to the system by others in the event of a conflict, although it says it never has done so in the past.
Military experts see Beidou as part of China's efforts over the last 15 years to develop capabilities designed to deny or hinder U.S. naval access to waters around its shores in case Washington tries to intervene in a conflict—over Taiwan, for example, which Beijing sees as a rebel province.
The South China Sea is another potential flashpoint as tensions have been rising this year between China and neighboring countries that also claim territorial waters there.
Beijing has repeatedly accused the U.S. of meddling in the issue and has warned it to cease surveillance operations in the area.
This year, China confirmed for the first time that it was developing an antiship ballistic missile that the Pentagon says may already be basically operational and eventually capable of hitting a moving aircraft carrier up to 1,700 miles, or 2,700 kilometers, from China's shores.
Beidou could be used in conjunction with other satellites, drones and related technology to help track U.S. ships, position its own submarines and other vessels, and guide antiship ballistic missiles towards their targets, according to military experts.
It also gives China a significant tactical advantage over neighbors with whom it has territorial disputes, including India, which is developing its own regional satellite navigation system but doesn't expect to complete it for several years.
China still lags behind the U.S in terms of how long, and how accurately, it can monitor any part of the globe from space: GPS, which was launched for civilian use in 1995, now consists of 30 satellites and can be accurate to within less than 10 meters, or 33 feet, although the U.S. military has access to more precise readings.
Mr. Ran said Beidou was accurate to within 25 meters and would reduce that to 10 meters by the end of next year. The Chinese military may also have access to more accurate data, but because China has fewer satellites, it cannot monitor the same spot for as long as the U.S.
China's plans to develop a satellite positioning system are thought to date back to 1983 when Ronald Reagan announced plans to build space-based missile-defense systems in what became known as his "Star Wars" speech.
Beijing's plans gained momentum after its military leaders noted the importance of GPS for U.S. forces during the first Gulf War in 1991.
Five years later, Chinese military commanders were frustrated when they couldn't locate two carrier groups that the U.S. deployed near Taiwan after China fired missiles into the sea off the island's coast in a failed attempt to influence the outcome of an election there, according to several defense analysts.
China launched the first two satellites of an experimental system called Beidou-1 in 2000 and made it available to civilians in 2004, but the service wasn't popular as its associated devices used to access the system—called terminals—were relatively large and much more expensive than GPS ones.
The system has been used, however, to coordinate the movement of Chinese troops, to help border guards patrol in remote areas, and to track fishing vessels in the South China Sea, according to Chinese state media. In 2007, China launched the first satellite of its second-generation system, called Beidou-2, which is thought to use cheaper terminals and, unlike its predecessor, doesn't require a ground station.
Mr. Ran said Beidou was now being used by more than 100,000 clients in China and had been used to help track government vehicles in the southern province of Guangdong, and to assist disaster-relief work after an earthquake in the western province of Sichuan in 2008.
He said it was compatible with the world's other major global satellite navigation systems, and encouraged Chinese and foreign enterprises to help develop terminals that could use the Chinese network.
A preliminary version of the system's Interface Control Document, which allows foreign and Chinese entities access to its basic technical data, was made available on the system's website, beidou.gov.cn, from Tuesday, he said.

China Unlikely to Ride to Europe's Rescue Soon

By ALAN WHEATLEY
VENICE — The sign in a boutique selling glass hand-crafted on the Venetian island of Murano betrays an uncertain grasp of English.
But the owner is very sure who is to blame for the tough times confronting the 700-year-old local glassmaking industry.
“Everything in this shop is not made in China,” the sign proclaims.
A few doors away, imported Murano look-alikes sell for much less.
To the untrained eye, they appear identical.
With Europe drowning in debt and flirting with recession, China’s influence can only rise more.
Euro zone governments would love Beijing to plow more of its $3.2 trillion in foreign-exchange reserves into their bonds.
China is also likely to chip in with a loan to the International Monetary Fund to provide a financing backstop in case Italy and Spain are shut out of the bond markets.
The $3.5 billion acquisition last week by China Three Gorges of the Portuguese government’s stake in the utility Energias de Portugal is also a sign of things to come.
Financiers turn instinctively to fast-growing China as they try to flush out buyers for assets going on the block as European governments, banks and companies pay down debt.
But despite expressions of interest by Chinese leaders in diversifying the country’s overseas asset base away from government paper, analysts do not expect a sea change in China’s traditionally cautious approach to expanding in Western markets.
Africa and Asia are likely to remain China’s top targets for now.
“There are going to be opportunities, but we’re not going to see China buying up Europe,” said Thilo Hanemann, research director at the Rhodium Group, an investment advisory and strategic planning firm in New York.
There are many reasons for the wariness.
Lengthy delays in obtaining the approval of regulators in Beijing put Chinese companies at a disadvantage in mergers and acquisitions when the seller wants a quick deal.
Chinese companies may lack the management skills to integrate overseas acquisitions.
And perhaps most important, their prospects are much brighter at home than they are in Europe.
“If you compare the rates of growth in China and in Europe, are you sensible buying into a brand that’s seen its best years of growth?” said Edward Radcliffe, a partner in Shanghai with Vermillion, a merger and acquisition advisory boutique that focuses on cross-border China deals.
Still, he said that some larger Chinese groups, both state-owned and private, had started to explore opportunities in Europe and the United States.
The 27-member European Union is China’s biggest export market.
But foreign direct investment in the European Union by China has badly lagged, totaling $8 billion by the Union’s reckoning or $12 billion on China’s count — less than 0.2 percent of total foreign direct investment in the Union, according to Rhodium.
The firm has kept its own tally since 2003, but its total of $15 billion through mid-2011, though greater than the official data, is still small.
Mr. Hanemann said he was sure 2012 would see deals in Europe in technology and consumer products to enable Chinese companies to climb the value ladder and build their domestic market share.
“Ultimately, Chinese companies have to become true multinationals, like Japanese and Korean firms before them,” he said.
“Over the longer term, there’s no reason to believe that China is going to take a different path.”
But he was skeptical about whether most Chinese companies would be able to seize the opportunities that were likely to crop up in the coming year.
To do so, they would have to manage public perceptions in Europe and obtain quick regulatory approval at home.
“There are a lot of deals that the Chinese cannot take on,” Mr. Hanemann said.
“If the Chinese government sees a company making a bid for troubled assets that risks provoking a political backlash in Europe, I think they’d step in to make sure there’s no embarrassment for the Chinese side.”
The failure of Chinese companies to buy Saab, the Swedish carmaker that was declared bankrupt last week, was a telling example of the difficulties facing Chinese investors, Mr. Hanemann said.
But the picture is not black and white.
After all, Volvo, another Swedish carmaker, was acquired by a Chinese company from Ford Motor in 2010.
Christine Lambert-Goué, managing director in Beijing at Invest Securities China, said that Chinese companies were not looking mainly for outright acquisitions but for brands, patents and technology that would bolster their positions at home.
“Companies are only ready to pay for assets from Europe that will enable them to gain market share in China,” she said.
Investment in Europe will take off eventually, but a deteriorating political climate represents an obstacle in the short term, said Jonathan Holslag of the Brussels Institute of Contemporary China Studies.
The European Union, like the United States, is talking tough about Chinese “state capitalism” and is devising a more assertive trade policy to counter what it sees as a playing field tilted against foreign companies.
For its part, Beijing smells protectionism in response to its growing economic clout.
“The European Union is disappointed with the reluctance of Beijing to open its economy further, whereas Beijing complains about Europe being too reluctant to share its knowledge or to allow Chinese investors to expand their presence in important sectors like infrastructure,” Mr. Holslag said.
And if Europe fails to snap out of its economic malaise, the risk is that a super-competitive China will be made a scapegoat.
“The more governments are confronted with high unemployment figures, the more we will start to see China as a challenger rather than as a savior,” Mr. Holslag said.

The Spirit of Wukan

Can a small farming town's remarkable protest against corrupt officials spread across China? 
BY RACHEL BEITARIE

WUKAN, China – Peasants do not have a good record facing off with the Communist Party.
Rural standoffs usually end with the arrest of the ringleaders and an increased security presence for the remaining residents.
Yet on Thursday afternoon, Dec. 22, residents of the embattled village of Wukan scored a major achievement in their 11-day stand-off with local government, securing the release of one of the village's three detained leaders; the other two were released today.
On Wednesday, a deputy party secretary of Guangdong Province arrived to negotiate with village leaders, promising to grant all of their initial demands: release of three elected representatives of Wukan who were detained two weeks ago; return of the body of Xue Jinbo, a village leader who died in police custody; and direct negotiations with the temporary committee, a interim governing body chosen by villagers, whose members were earlier denounced by the government as criminals.
"It is totally unprecedented that a high-level official will come to talk with protesting farmers," one activist who came to witness events told me on Tuesday night.
In September, residents of Wukan accused local officials of embezzling more than $110 million dollars of money owed to them for selling more than 80 percent of the villager's arable land to developers, and marched on the county seat.
Significantly, compared with the tens of thousands of other protests that happen across China each year, local officials fled Wukan on Dec. 11, leaving the town in the hands of the village community.
Their success puts them in a risky position, as the Wukanese have challenged not just the local authorities but a basic assumption behind Communist Party rule: that the Chinese people, and especially the rural masses, need authoritarian rule to prevent the country from descending into chaos.
Ten days into life without police or party officials, Wukan was almost peaceful -- save for the array of police forces that surrounded the town.
Still, the gumption of the Wukanese may be a new model for activism in communities across China.
After initial destruction of property at local government offices, Wukan's temporary committee announced this to be a nonviolent protest.
The deserted police station is still locked and intact, as are the houses of local elites and families of officials, most of whom have left the village.
Villagers refrained from looting and instead focused on bringing food into the village through back roads, away from security forces that massed outside.
They coordinated mass rallies, making protest signs, and cooked for the hordes of journalists who descended on the village.
One Western reporter compared the atmosphere in Wukan to that of the Paris Commune; a veteran Hong Kong journalist reminisced about Beijing in the spring of 1989, before the crackdown on Tiananmen.
He described then an almost intoxicating sense of unity and generosity, where cab drivers drove protestors for free and thieves vowed to switch professions, buoyed by a feeling that all was good and possible in the fleeting moment.
But can the spirit of Wukan last?
The small farming village of 13,000 thousand embodies social changes brought about by more than 30 years of economic reforms in China.
The first generation of migrant workers that left their villages to work in the cities is now retiring from factory work.
Many of them have returned to their villages to open small businesses or work their families' fields.
But they have found a harsh truth: Local governments, relying ever more heavily on land sales to generate income and wielding unchecked power over their citizens, have left rural residents with few ways to support themselves.
In Wukan, the protest was supported by a group of returnees, mostly in their thirties and forties, who had moved back to the village over the past few years planning to settle back into rural life -- but who have been unsettled by the pervasive corruption.
Yang Semao, 43, head of the temporary committee, came back to the village in June after a few years working in the boomtown of Shehzhen, about 100 miles away.
"When I returned it became clear to me that things are getting worse here," he says.
Many of the villagers had lost much of their land in the deal, while high inflation eats away at their savings. "Until few months ago, it was each person to himself here," says another recent returnee, Jiang, who gave just his last name for fear of government reprisal for speaking to reporters.
"Some of us petitioned but we weren't very organized. Now we think it's better if we act together. We become more organized, more united, with each day that passes."
But it's not only the older crowd.
The most effective young activist in Wukan is probably a 20 year old surnamed Zhang, the village's videographer.
He spent two years at a vocational school in a nearby city where he taught himself to use a video camera, with the goal of becoming an independent filmmaker.
When protests started in September, he returned with his camera.
Zhang's footage of police violence and his friend's eye-catching protest banners distributed to journalists on compact discs and posted on Chinese microblogs brought Wukan to the world's attention.
While the Wukan movement made global headlines, local news was suppressed by Chinese government censors.
Some Chinese netizens, however, have still found ways to spread news from Wukan around the country, using different Chinese characters for the village's name.
Some posts were forwarded thousands of times before being deleted by censors.
Despite government warnings and increased surveillance on dissidents during this last week, more than a dozen activists made their way through police checkpoints and into the village, sneaking in on side roads and helped by sympathizers from other villages.
Some of them had earlier this year participated in the still ongoing campaign against the house arrest of the blind legal activist Chen Guangcheng and his family, a cause célèbre most recently taken up by film star Christian Bale.
Veteran activists tweeted about the scene to the outside world, offering advice to the villagers.
Still, there were tensions between the two groups: Dissidents wanted to make this protest the start of a wider movement for broader social change across China, while most Wukanese stressed that they only wanted resolution of their local issues, and that they maintained trust in the Communist Party.
Surprisingly, even though Wukan's leaders called for an end to the protest and the roads around the city have been opened, the village still enjoys autonomy.
Whether this is the start of a softer approach by the Chinese government to rural unrest, or just a way to quiet things in Wukan until the media loses interest, remains to be seen.
Zheng Yanxiong, a mid-ranking official, best captured the mood in a speech that went viral over the Chinese Internet.
Zheng reproached Wukan for seeking help from the foreign media instead of the government, and dismissed claims of police violence as false.
In a moment of probably unintentional honesty, he said: "As villagers get smarter, they become harder to manage."
If this intelligence spreads it could be difficult indeed.

A Village in Revolt Is a Harbinger for China

By MICHAEL WINES

BEIJING — China’s state-run media have had a field day this autumn with Occupy Wall Street, spinning an almost daily morality play about capitalism gone amok and an American government unable or unwilling to aid the victims of a rapacious elite.
Occupy Wukan is another matter entirely.
The state press has been all but mute on why 13,000 Chinese citizens, furious over repeated rip-offs by their village elite, sent their leaders fleeing to safety and repulsed efforts by the police to retake Wukan.
But the village takeover can be ignored only at Beijing’s peril: There are at least 625,000 potential Wukans across China, all small, locally run villages that frequently suffer the sorts of injustices that prompted the outburst this month in Wukan.
“What happened in Wukan is nothing new. It’s all across the country,” said Liu Yawei, an expert on local administration who is the director of the China program at the Carter Center in Atlanta. 

Residents of Wukan rallied to demand the government take action over illegal land grabs and the death of a local leader on December 15.
A second analyst, Li Fan, estimated, in an interview, that 50 percent to 60 percent of Chinese villages suffered governance and accountability problems of the sort that apparently beset Wukan, albeit not so severe.
Mr. Li leads the World and China Institute, a private nonprofit research center based in Beijing that has extensively studied local election and governance issues.
On paper, the Wukan protests never should have happened: China’s village committees should be the most responsive bodies in the nation because they are elected by the villagers themselves.
Moreover, the government has built safeguards into the village administration process to ensure that money is properly spent.
Village self-administration, as the central government calls it, is seen by many foreigners as China’s democratic laboratory — and while elections can be rigged and otherwise swayed, many political scientists say they are, on balance, a good development.
Actually running the villages, however, is another matter.
Village committees must provide many of the services offered by governments, such as sanitation and social welfare, but they cannot tax their residents or collect many fees.
Any efforts to raise additional money, for things like economic development, usually need approval from the Communist Party-controlled township or county seats above them.
In practice, the combination of the villages’ need for cash and their dependence on higher-ups has bred back-scratching and corruption between village officials and their overseers.
China’s boom in land prices has only broadened the opportunity for siphoning off money from village accounts.
And the checks and balances — a village legislature to sign off on major decisions, a citizens’ accounting committee to watch over the village books — have turned out to be easily manipulated by those who really hold the power.
“Land sales are where the big money is,” Edward Friedman, a political science professor and a China scholar at the University of Wisconsin-Madison, said in a telephone interview.
“Every level can see how much better the level above it is doing. And each one wants to live at least that well. The system has within it a dynamic which makes people feel it’s only fair that they get their share of the wealth.”
The opportunities to get that share are vast, apparently.
In 2003, a candidate for village committee chairman in Laojiaotou village, in Shanxi Province, spent two million renminbi — then about $245,000 — to campaign for an office that paid 347 renminbi a month, the Chinese journal Legal News reported at the time.
In interviews this month, leaders of the Wukan protest said it was common knowledge that local government and Communist Party officials had spent millions of renminbi to buy potentially lucrative posts.
They maintained that Wukan’s village committee stayed in power in part by threatening any challenges to its continued rule.
None of those allegations could be quickly confirmed.
One verified statistic, however, is compelling.
Of the nine members of Wukan’s village committee, five had held their posts since the committee system itself was set up under Mao Zedong’s successor, Deng Xiaoping.
The same was true of the village’s Communist Party secretary, Xue Chang, who had held office since 1970 before being replaced amid Wukan citizen protests in September.
Though a village in legal terms, Wukan is bigger than most such entities.
It sits in urban Guangdong Province, abutting a natural harbor on the Pacific Ocean that is ideal for development.
Many details of the practices that incited Wukan’s protests are murky.
Even before the residents chased their village committee leaders from town on Dec. 11, the village committee’s accounting ledger had been taken away, ostensibly for an audit.
Leaders of the protest contend, however, that the village committee sold off or granted long-term leases to nearly 60 percent of the village’s 11 square miles over an 18-year period beginning in 1993.
The sales were said to include roughly four-fifths of the village’s 1.5 square miles of farmland and much of its forests.
Just how the land was sold remains unclear.
Under Chinese law, such sales are supposed to require approval of the villagers, who collectively own the land and are supposed to share in the proceeds.
But the approval process is vague; in practice, most decisions are left to the elected village committee or an appointed village legislature that acts on behalf of the residents.
The sales also required approval by Donghai township, the level of government just above Wukan.
In some cases, officials in Lufeng, the county seat whose territory includes Wukan, were also involved in setting up sales.
The land went to hotels, homes, factories, power companies and even private funerary temples.
One wealthy villager, Chen Wenqing, gained a business interest in Wukan’s harbor and a 50-year lease on a large tract of land used as a pig farm.
A plan this year to sell Mr. Chen’s farm and an equal amount of villagers’ farmland to developers of a luxury housing and retail project was the final straw, though, mobilizing villagers to protest.
Beyond seeking a public accounting of that project and others like it, angry residents called for democratic elections to replace village officials, many of whom have been in power for decades.
Villagers say they have no idea where the proceeds from any of the sales or rentals went.
“From 1993 onward, not one time were we told,” said Lin Zuluan, a protest leader.
“No voting, no compensation, nothing. We didn’t even know what was going on.”
Mr. Lin said that most residents, unfamiliar with the workings of a village system, had no idea of their rights. That seems plausible; one recent academic study concluded that three in four residents of villages that had been surveyed had no information about village finances.
In Wukan, villagers did sense that something was wrong, and had complained vigorously — between July 2009 and last March, seven times to Guangdong Province officials and five times to officials of Lufeng, the county seat.
But none of those complaints appear to have been addressed.
It took a de facto revolt by Wukan’s residents to force Guangdong Province officials to step into the crisis, calling the villagers’ grievances legitimate and promising to address them.
Wukan’s village committee chief and its party secretary are under investigation, a move that probably will end in stiff punishment.
The state-run press has hailed the Guangdong response as a model of government responsiveness and a template for handling public grievances in the future.
Yet some observers of Chinese governance are less sanguine.
In their view, Wukan’s uprising highlighted systemic defects in China’s local governments, and only a housecleaning — not an isolated slap on the wrist — will address them.
The trouble, they say, is that almost nobody benefits from a housecleaning — not village leaders or township and county officials enriched by land sales and other corrupt deals.
And not higher officials whose influence is only diminished if they get rid of lower-level supplicants.
“What will change things is if you change the incentives by which make you make your money,” said Mr. Friedman, of the University of Wisconsin-Madison.
Allowing peasants to own and sell their land — and not a village committee — would suggest a serious effort to break the corruption cycle, he said.
So would breaking up the cozy network of village and local government officials who stand to benefit from land sales.
For the moment, at least, those sorts of reforms do not appear to be in the cards.
“The vested interests in the present system are very strong,” he said.
“And I don’t think there’s a Deng in the office who has enough clout to change things.”

Oil interests push China into Sudanese mire

By Andrew Higgins

JUBA, South Sudan — At a restaurant along the River Nile offering crocodile and ostrich meat, officials of the world’s newest — and desperately destitute — nation hosted a lunch this month for Liu Guijin, China’s visiting envoy for African affairs.
Liu’s visit to Juba, the dirt-track capital of South Sudan, which split from Sudan in July, came at a tense time: Sudan had just bombed a refugee camp, armed militias were mining roads, and troops were clashing in disputed border areas.
The Chinese envoy, however, came here mainly to talk about oil.
The Chinese “are very worried,” said Stephen Dhieu Dau, South Sudan’s minister of petroleum and mining, who attended the lunch with Liu.
“Their wish is to see the continuation of production and the flow of the crude. This is their concern.”
China, which gets nearly a third of its imported crude oil from Africa, has invested billions of dollars in the past 15 years to pump crude from this war-scarred land.
But the division of what until five months ago was a united country has pushed Beijing into a political minefield in defense of its assets, straining China’s “just business” insistence that it doesn’t get involved in the internal affairs of foreign lands.
China’s involvement revolves largely around the interests of a single company, the China National Petroleum Corp., or CNPC, a state-owned giant that, in its quest to match the global reach of Western oil majors and to feed China’s appetite for fuel, has dragged usually risk-averse Chinese diplomats into one of Africa’s most poisonous feuds.
Across Africa, China is getting tugged into local affairs.
In Zambia, China’s involvement in mining — and its close ties to the incumbent president — dominated a September presidential election.
China’s man lost.
A multibillion-dollar, energy-linked Chinese loan to Ghana caused political ructions there.
Leaders in Chad, meanwhile, have been struggling in recent weeks to tamp down public anger over a sudden boost in the price of gasoline produced by a new CNPC refinery near the Chadian capital.
China’s entanglement in foreign nations’ quarrels, however, is perhaps deepest in the desert and bush that flank the Nile.
Here, CNPC straddles both sides of a murderously volatile fault line: between Muslim Arabs in the north and black, often Christian Africans who inhabit the south.
Most of the oil lies in the landlocked south, but the only way to get it to market is through Chinese-built pipelines that pass through the north to a Chinese-built terminal on the Red Sea.
When CNPC first took a stake in oil fields here in 1996, China placed all its chips on a brutal regime in Khartoum, selling arms and providing diplomatic cover as President Omar Hassan al-Bashir battled to crush southern rebels.
With these same rebels now running ministries in Juba, China is rushing to hedge its bets, offering Khartoum’s foes in the south a package of development aid and low-interest credit that hasn’t been announced but that officials here say could be worth as much as $10 billion.
“During the struggle of the people of South Sudan, China took the side of the government in Khartoum,” said Pagan Amum, the secretary-general of the Sudan People’s Liberation Movement, or SPLM, a rebel outfit during the civil war that is now South Sudan’s ruling party.
“But that is history, a troubled history, and we will not allow ourselves to be hostages of the past.”
Amum, who got invited to China last month, said that he raised this “difficult past” during a banquet in Beijing at the corporate headquarters of CNPC and that he was assured that the company wants to “sort things out, to heal” and work closely with Juba.


Pursuit of energy 
In the vanguard of China’s pursuit of energy and profit overseas, CNPC began looking abroad nearly two decades ago, just as Chinese industry’s appetite for oil started to overtake domestic production.
Since then the company has invested in ventures from Peru and Venezuela to Iraq and Kazakhstan.
But nowhere has CNPC poured in so much money and caused itself — and the Chinese government — so many headaches as in Sudan.
China imported more than half the oil it consumed last year, with Africa its biggest source after the Middle East.
The country’s largest African supplier by far was Angola, but most of that oil was simply purchased, not produced, by Chinese companies.
In the Sudan region, by contrast, CNPC — the dominant partner in foreign consortiums operating there — actually pumped the oil from the ground.
Chinese customs figures show that China imported 92 million barrels of crude from Sudan last year — or 70 percent of Sudan’s total oil exports as reported by the then united country’s Central Bank.
CNPC, thanks in part to its expansion overseas, now ranks as one of the world’s biggest energy companies. Its listed subsidiary, PetroChina, which trades on the New York Stock Exchange, has a market capitalization just behind that of ExxonMobil, America’s biggest oil company.
Though largely motivated by profit, CNPC won strong state support for its push into Sudan by presenting this and other investments abroad as a boost to China’s energy security: They reduce China’s dependence on Western oil majors that dominate production in Angola, Nigeria and elsewhere.
But they’ve also left Beijing struggling to juggle often-irreconcilable interests.
“They want to be close to us and close to Khartoum. But Jesus said you cannot serve two masters,” said Dau, South Sudan’s petroleum minister.
“They have to make a choice. They have to be honest and say who is right. That is what the Bible says.” China has tried to stay neutral but gets sniped at by both sides.
“It’s a dilemma for China,” said Cui Shoujun, director of the International Energy Research Center at Renmin University in Beijing.
China “tries to balance the south and the north but hasn’t come up with an effective way to do this.”
Amid escalating tension across a new international border, Amum, the head of South Sudan’s ruling party, traveled to the Ethiopian capital, Addis Ababa, last month for talks with officials from Khartoum on pipeline tariffs and other issues.
The African Union mediated the negotiations, but China played an active role behind the scenes trying to calm tempers.
When discussions broke down and Sudan threatened to disrupt pipeline deliveries, Amum got a call on his cellphone from China’s ambassador in Juba.
The ambassador, Amum said, “is very powerful” and wanted to ensure that oil keeps flowing.
“We talked about threats to our national interest and their national interests,” Amum said.
The Chinese Embassy declined to comment.
The Foreign Ministry in Beijing then issued a stern public warning that “China thinks it is crucially important... to keep normal oil production.”
Sudan, though a close friend of Beijing for years, still held up China-destined oil shipments for several days. Liu, China’s Africa envoy, rushed to Juba and then Khartoum, warning that oil has to keep flowing “because the consequences of stopping... will be disastrous to everyone.”
Oil tankers are now being loaded normally again, but the underlying dispute is far from solved.
As the talks with Khartoum collapsed, South Sudan’s Petroleum Ministry summoned CNPC and its partners from Malaysia and India to a shabby hotel conference room in Juba to confront another nettlesome issue: the rewriting of oil contracts.
The ministry says it doesn’t want the companies to suffer financially but does want them to pay attention to matters that the old, Khartoum-drafted contracts largely ignored: protection of the environment, respect for human rights and social responsibility.
CNPC officials in Juba, citing the sensitivity of the talks, declined to comment.


Western firms retreat 
The deals South Sudan wants reworked date to when CNPC first plunged into Sudan, taking over fields originally developed by the U.S. company Chevron, which, alarmed by mounting violence, had pulled out. Shortly after this, Washington in 1997 imposed economic sanctions on Sudan, which it declared as a “sponsor of terrorism and a relentless oppressor of its minority Christian population.”
As Western companies retreated, CNPC advanced, boosting production and investing in a pipeline to the Red Sea that, in 1999, allowed the first oil exports from Sudan.
Stories spread of atrocities linked to CNPC’s oil wells, including accounts of Chinese-supplied helicopters gunning down villagers as the Sudanese military moved in to clear and secure oil-producing areas.
Not all of the accounts were true, but CNPC, steeped in the secretive ways of China’s ruling Communist Party, which appoints the company’s boss, mostly ignored pleas from outsiders for information and access. By the time Sudan and southern rebels signed a peace accord in 2005 to end Africa’s longest civil war, “China was the devil in the minds of many people here,” said Alfred Sebit Lokuji, an expert in local development at Juba University.
China also came under withering fire from Western human rights activists, who accused it of complicity in Khartoum’s depredations in the western Darfur region and in the south.
They called on investors to boycott PetroChina, CNPC’s listed subsidiary, and dubbed the 2008 Olympic Games in Beijing “the genocide games.”
When the International Criminal Court in The Hague indicted Bashir on war-crimes charges in Darfur in 2009, Zhou Yongkang, a member of the Communist Party’s Politburo Standing Committee and a former CNPC boss who had led the company’s 1990s expansion into Sudan, visited Khartoum to attend the opening of a Chinese-built refinery.
He declared himself an “old friend of the Sudanese president.”
Amum, the SPLM secretary-general, said he was assured by CNPC’s boss, Jiang Jiemin, during his trip to Beijing that “if anything bad happened, it was not from them but from the government of Sudan. They said they were not involved in human rights violations.”
CNPC in Beijing declined to comment.


China shifts gears 
As independence for South Sudan became increasingly likely, China shifted gears, opening a diplomatic mission in Juba and reaching out to the SPLM.
CNPC also set about mending fences, funding a computer center at Juba University.
When Sudan split in July, the oil company began moving staff members from Khartoum to Juba, setting up offices, a dormitory and a canteen in a cluster of prefabricated huts at a Chinese-run hotel.
China’s embassy is in the same compound.
Newly relocated CNPC staff members are shocked by Juba’s primitive conditions.
A poster on their office wall warns of “Five Major Hazards” — a list of diseases endemic in South Sudan. But, one staffer noted, at “least they sell beer,” unlike in Khartoum, where alcohol is banned.
South Sudan, which gets 98 percent of its revenue from oil pumped by CNPC-led foreign operators, has tried to woo Chevron, Halliburton and other U.S. oil companies but found no takers, leaving China as its only real economic partner.
“Reality makes us work with people who are not our friends,” said Lual Deng, a southerner who served in Khartoum as petroleum minister before the country split.
“We would prefer Western companies, but they are not coming.”
China’s money hasn’t opened all doors.
Nihal Bor, the chief editor of the Citizen, a local newspaper, recalled how a Chinese diplomat stopped by ahead of an August visit to Juba by Foreign Minister Yang Jiechi and offered to pay for the publication of “an interview” with Yang trumpeting Beijing’s friendship.
But there was a snag: The paper would not get to see the minister, only to publish an embassy-scripted “interview” in return for cash.
“We are not that desperate,” said the editor, who declined the offer.
Amum, the ruling party’s head, though, thinks China’s deep pockets offer the best hope for development in a country bigger than France but with only a few dozen miles of paved roads.
China, he says, can help not just the oil industry, but also mining, agriculture and infrastructure.
“There are no hard feelings,” Amum said.
He has learned how to use chopsticks.

China Activist Given 10 Years' Jail for Subversion

By GILLIAN WONG

Chen Xi will not appeal against the conviction
BEIJING -- A Chinese court sentenced a veteran dissident who organized a pro-democracy activist network to 10 years' imprisonment Monday for inciting subversion, his wife said, the second heavy punishment for a dissident in recent days.
The stiff sentences come near the end of a year in which the Chinese government has used various means to silence dissent, from lengthy imprisonment to months of disappearances, in a crackdown aimed at preventing Arab Spring-style uprisings.
A court in the southern city of Guiyang found Chen Xi guilty of the charge of "incitement to subvert state power" for 36 essays he wrote and posted online, his wife said by phone.
Chen maintained his innocence but will not appeal the verdict, Zhang Qunxuan said.
"This is utterly absurd," Zhang said.
"Chen Xi told the court it did not take into consideration the things he has written as a whole, and has interpreted his words out of context. But they have power and they don't listen."
"The court said he was a repeat offender and also that this is a very serious crime," she said.
Chen was active in the 1989 Tiananmen Square pro-democracy protests and was sentenced to three years in prison, and several years after that, he was jailed for 10 years on charges of counterrevolutionary offenses, Zhang said.
His sentence comes three days after another veteran activist, Chen Wei, a dissident in the southwestern city of Suining, was sentenced to nine years' jail for the same offense.
The lengthy sentences against the two, who are not related, are in line with the Chinese government's long practice of punishing heavily veteran activists who have refused to give up despite decades of harassment. This appears to have worsened after anonymous online calls urged Chinese to imitate the uprisings of North Africa and the Middle East earlier this year.
"The fear factor — the government's panic over sparks of the Arab uprising — is no doubt driving the severe punishment of its critics," said Renee Xia, international director of Chinese Human Rights Defenders. "But suppression of views and expression will not address the root causes of social unrest."
Other recently jailed veteran dissidents include Liu Xianbin, a democracy activist who has previously spent a decade in prison and was given another 10 year sentence in March.
On Christmas day in 2009, Liu Xiaobo was sentenced to 11 years in prison for co-authoring Charter 08, which called for an end to single-party rule and advocated democratic political reforms.
In Chen Xi's case, the subversion charge is also likely aimed at punishing and silencing him for his work with the Guizhou Human Rights Forum, a network of activists that organized human rights and pro-democracy activities in the southern Chinese region.
"The arrest and sentencing of dissidents is essentially motivated by a logic of information control, that the government wants to prevent the exposing of the real human rights situation on the ground," said Human Rights Watch Asia researcher Nicholas Bequelin.
"Therefore people who report those kinds of news are generally the ones who get arrested."
Several of the members of the network have served prison sentences for related activities, according to the Chinese Human Rights Defenders.
Chen Xi was arrested Nov. 29 and charged in the southern province of Guizhou.
Calls to the Guiyang Intermediate People's Court, where the trial was held, rang unanswered Monday.
The Chinese government has held these trials during the Christmas period to limit the criticism it receives for the heavy punishments being handed down, Bequelin said.
"It does work really well because there's no diplomatic activity around Christmas," he said.
"By the time the diplomats get back to their desks, the sequence of events has moved on already. Therefore it does ensure the government receives less criticism for this."

Hidden Dragon: The Chinese cyber menace

By John Leyden

Cybercrooks and patriotic state-backed hackers in China are collaborating to create an even more potent security threat, according to researchers.
Profit-motivated crooks are trading compromised access to foreign governments' computers, which they are unable to monitise, for exploits with state-sponsored hackers.
This trade is facilitated by information broker middlemen, according to Moustafa Mahmoud, president of The Middle East Tiger Team.
Mahmoud has made an extensive study of the Chinese digital underground that partially draws on material not available to the general public, such as books published by the US Army's Foreign Military Studies Office, to compile a history of hacking in China.
His work goes a long way to explain the threat of cyber-espionage from China that has bubbled up towards the top of the political agenda over recent months.
The first Chinese hacking group was founded in 1997 but disbanded in 2000 after a financial row between some of its principal players led to a lawsuit.
At its peak the organisation had about 3,000 members, according to Mahmoud.
The motives of this so-called Red Hacker group were patriotic, defending motherland China against its enemies.
The hacking the US Embassy and the White House over the accidental bombing of the Chinese Embassy in Belgrade back in 1999 brought many flag-waving Chinese hackers together to, as they saw it, defend the honour of the motherland and fight imperialism in cyberspace.
This role was taken over by the Honker Union of China (HUC) after 2000, and the HUC later became the mainstay of the Red Hacker Alliance.
China’s so-called “red hackers” attack critics of the state and infiltrate foreign government and corporate sites – among other activities.
The phenomenon of patriotic hackers is far from restricted to China and also exists in Russia, for example. Russian hackers tend to make greater use of defacement and botnets to silence critics rather than spying.


Enter the Dragon 
Over more recent years, different groups – which are involved in cybercrime to make money rather than patriotic hacking – have emerged in China, some of which are affiliated with the Triads.
These groups are involved in running so-called bulletproof hosting operations, providing services for other phishing fraudsters and the like that ignore takedown notices that ethical ISPs would comply with -- as well as various botnet-powered scams, spam and paid-for DDoS attacks for hire.
"These firms did not target Chinese firms and were are therefore not prosecuted," Mahmoud explained. Over the years patriotic hacker groups and criminal hackers have forged alliances, a process facilitated by the Chinese government and in particular the Peoples' Liberation Army, according to Mahmoud.
One landmark event in this process was the defacement of Western targets and similar cyber-attacks following the downing of a Chinese jet by US warplanes in 2001.
These attacks promptly ceased after they were denounced by the People's Daily, the organ of the ruling Communist Party.
The Chinese government began to see the potential of cyberspace at around this time and established a PLA hacking corp, as Mahmoud described it, featuring hand-picked soldiers who showed talent for cyber-security.
Mahmoud said that despite the existence of this corps the Chinese often prefer to use "freelance hackers" for "plausible deniability".
"We can talk about hackers but it's better to talk about businessmen selling secrets. An entire underground industry has grown up to support cybercrime," he said.
There are various roles within such group including malware distribution, bot master, account brokers and "most importantly vulnerability researchers, whose collective ingenuity has been applied to run attacks against Western targets and to develop proprietary next-generation hacking tools", according to Mahmoud. Small groups, including the Network Crack Program Hacker (NCPH), that research gaping security holes and develop sophisticated malware strains are sponsored by the PLA. 
Western governments, hi-tech firms, oil exploration outfits and military targets have variously been targeted in a expanding series of so-called Advanced Persistent Threat (APT) cyber-attacks, commonly featuring Trojan backdoors, over the years.
These operations have been known as Titan Rain, Shady RAT and Night Dragon, among others.
"It's sometimes difficult to differentiate between state-sponsored and industrial espionage attacks but what's striking is that all these attacks happen between 9am and 5pm Chinese time," Mahmoud noted.
Gaining access to industrial secrets is part of a deliberate targeted government plan, Programme 863 [1], whose mission aim is to make Chinese industry financially independent of foreign technology.
It also has a military dimension.
"China sees cyberspace as a way of compensating for its deficiency in conventional warfare, for example by developing strategies to cripple communication networks," Mahmoud said.
"That does not mean China wants to fight. Inspired by the ideas of Sun Tzu [author of The Art of Warfare] China regards it as a superior strategy to break the enemy without having to fight."
North Korea is also developing expertise in cyber-warfare, running training schools [2] that resemble those run in China.
However there is little or no collaboration between the two countries, according to Mahmoud.
"The Chinese see their expertise in cyberspace as an edge they are not willing to share. That's why there is no collaboration with hackers outside the country."
The Wall Street Journal reported [3] last Tuesday that US authorities have managed to trace several high-profile hacking attacks, including assaults against RSA Security and defence contractor Lockheed Martin, back to China.
Information obtained during an attack on systems behind RSA's SecurID tokens was later used in a failed attack against Lockheed Martin.
"US intelligence officials can identify different groups based on a variety of indicators," the WSJ reports. "Those characteristics include the type of cyberattack software they use, different internet addresses they employ when stealing data, and how attacks are carried out against different targets. In addition to US government agencies, major targets of these groups include US defence contractors."
US investigators working for the National Security Agency have reportedly identified twenty groups of hackers, a dozen of which have links to China's People's Liberation Army.
Others are affiliated to Chinese universities.
In total, several hundred people are said to be involved in the attacks, some of whom have been individually identified.
The information has helped to strengthen the US's hand in diplomatic negotiations with China.
The data also provides a list of targets for possible counter-attacks.
Bloomberg reports [4] in a similar vein that China is engaged in an undeclared cyber Cold War against Western targets with the goal (unlike the Soviet-era Cold War) of stealing intellectual property rather than destabilising regimes or fostering communism.
Targets have included tech giants such as Google and Intel to iBahn, selected because it supplies Wi-Fi technology to hotels frequented by Western execs, oil exploration biz bosses and government and defence contractors.
Chinese hackers stand accused of stealing anything and everything that isn't nailed down from as many as 760 different corporations over recent years resulting losses in intellectual property valued in the billions.
 
Paper tiger, hidden Trojan 
Recent reports have painted a conflicting picture of Chinese cyber-warfare capabilities.
A recent report [PDF[5]] by The Office of the National Counterintelligence Executive (ONCIX), which was presented to Congress, named and shamed China for running cyber-espionage campaigns geared towards stealing the US's technology and economic secrets.
The report, straightforwardly titled Foreign Spies Stealing US Economic Secrets in Cyberspace, described China as the source of the majority of intrusions without blaming its government directly.
Some observers suggest that the US intelligence community has decided to publicly finger [6] China over cyber-espionage only after diplomatic efforts failed to yield a result.
China routinely and angrily denies any involvement in cyber-espionage, arguing that it is frequently victimised by these types of attacks itself, and most recently said that it wanted to help improve cyber-security defences across all nations.
Regardless of what's happening elsewhere we've frequently heard praise for the staffers of China's computer emergency response centres.
Over several years various businesses and teams in the country have been more pro-active and helpful in working with organisations, such as Spamhaus, in dealing with spam.
However evidence showing that Chinese denials over the use of hacking tools ought not to be taken at face value emerged unexpectedly earlier this year.
An extract from a propaganda film illustrated the use of custom tools to hack websites run by the banned spiritual movement Falun Gong.
The video named the PLA's Electrical Engineering University as the source of the utility.
Security experts who have visited China praise its universities.
HD Moore, the developer of Metasploit and chief security officer at Rapid7, said: "They are focused on defending China and malware research."
Moore, who toured computer science departments in universities in Beijing and elsewhere, found students frequently had an aptitude for malware analysis, and saw the potential for work in this area.
However those with expertise in exploit development were "few and far between", he said.
"Not that many people in China are doing penetration testing work either," he added.
A recent report [7] by the Australian National University concludes that China's cyber-warfare capabilities, at least, are actually mediocre at best.
Desmond Ball, a professor at the Australian National University, argues China's offensive capabilities are limited.
Local internet systems are notable for their deficiencies and vulnerabilities, he adds.
Information security experts, particularly with an intelligence background remain wary of China's capabilities. Prescott Winter, chief technology officer for the public sector at HP ArcSight and former NSA associate deputy director of national intelligence for information integration, said that China remains a major threat. "China is a major player in cyber-espionage. It has a well-constructed underground economy that is targeting intellectual property. Western governments are also at the front line," he said, adding that hackers often cause collateral damage when they access and ransack targeted networks.
Other former intelligence officials argue that the focus on China hides the greater truth that everyone is engaged in cyber-espionage.
"Every country (especially China, Russia, and even our allies), engages in industrial espionage against the United States and each other," writes [8] Marcus Carey, who worked for the NSA for eight years before joining Rapid7 as a security researcher and community manager.
"For these countries, cyber-espionage is likely just the tip of the iceberg, very much complementing the main areas of espionage being conducted in the physical world," he said.
"It’s much cheaper for foreign governments to 'borrow' research and development information and go straight into production, particularly in countries like China and India where there is a strong supply of industrial low-wage workers to crank out products. For this and other reasons, espionage is certainly not a new practice, rather the internet has simply made it more visible and traceable."
"The truth is, a good espionage program is vital to a country's success, as we saw during WWII and the Cold War. It is the responsibility of governing agencies to perform espionage against other countries, as well as helping their own citizens with counter-espionage and cyber defense strategies," he added.
Carey, paraphrasing baseball legend Mark Grace on cheating, concludes "countries that aren't engaging in espionage aren't trying hard enough!"


Hacknote 
Dexter fans may like to know that the Chinese characters for hacker transliterate to Dark Visitor.
A blog [9] of the same name is one of the best online resources keeping hype-free tabs on the Chinese cybercrime scene.

Links

1. http://www.most.gov.cn/eng/programmes1/200610/t20061009_36225.htm
2. http://www.dailynk.com/english/read.php?cataId=nk02900&num=7656
3. http://online.wsj.com/article_email/SB10001424052970204336104577094690893528130-lMyQjAxMTAxMDEwMjExNDIyWj.html
4. http://www.bloomberg.com/news/2011-12-13/china-based-hacking-of-760-companies-reflects-undeclared-global-cyber-war.html
5. http://www.ncix.gov/publications/reports/fecie_all/Foreign_Economic_Collection_2011.pdf
6. http://www.theregister.co.uk/2011/11/03/china_russia_cyber_spies
7. http://www.securitychallenges.org.au/ArticlePDFs/vol7no2Ball.pdf
8. https://community.rapid7.com/community/infosec/blog/2011/11/11/is-cyber-espionage-cheating
9. http://www.thedarkvisitor.com/

China’s criticism of U.S. policy turns personal

By Andrew Higgins

HONG KONG — Now it’s getting personal.
After months of sniping at American policy, China has turned its fire on Washington’s senior diplomat in this former British colony.
In an unusual public rebuke, the Hong Kong branch of China’s Ministry of Foreign Affairs accused U.S. consul general Stephen Young of breaching diplomatic norms and ignoring “solemn warnings” to keep quiet about democracy in what, since 1997, has been part of China.
The scolding by China’s top diplomat here follows a series of articles in Communist Party-controlled media denouncing Young — who served in Kyrgyzstan during a democratic uprising there in 2005 — as part of an American plot to spread disorder and keep China down.
“Wherever he goes, there is trouble and so-called ‘color revolution,’ ” said Wen Wei Po, a pillar of the Party’s still mostly secret political apparatus in Hong Kong.
The paper described Young — the son of a U.S. Army officer who fought in Korea and Vietnam — as coming from “an anti-China, anti-communist family.”
The consulate said Young has done nothing wrong.
“We categorically reject any assertion that the behavior of U.S. diplomatic and consular staff in Hong Kong has been anything other than appropriate and in keeping with long-standing diplomatic and consular law and practice,” a spokesman said.
Pro-Beijing groups in Hong Kong have long grumbled about the U.S. Consulate, but the intervention of Lu Xinhua, the foreign ministry’s senior official here, suggested a new push to curb what China views as American interference in Hong Kong and beyond.
Always prickly over alleged foreign meddling, Beijing has grown particularly jittery following this year’s “Arab Spring” and calls on the Internet for China to follow suit by launching a “jasmine revolution.”
Internet influence China’s push-back, both in Hong Kong and Beijing, has been unusually personal, with state-run media and, on occasion, government officials denouncing American diplomats by name, including former U.S. ambassador Jon Huntsman and his successor Gary Locke.
This, said Li Datong, a Chinese writer and former editor, reflected authorities’ alarm that the Internet has turned previously obscure U.S. envoys into prominent public figures whose remarks and actions get praised — and pilloried — on Web forums and micro-blogs.
“The propaganda department wants to eliminate the influences of the U.S. diplomats as much as possible,” said Li, who was fired as editor of Freezing Point, a weekly journal, after he published an article that partly defended the actions of imperial powers in the 19th century.
First to come under fire was Huntsman, who has since quit as ambassador to launch a now-sputtering campaign for the Republican Party’s presidential nomination.
Beijing was furious when Huntsman appeared in February outside a Beijing McDonald’s that online postings had designated as a venue for a “jasmine revolution” protest.
Huntsman said he was just out for a stroll with his family.
Police blanketed the area and roughed up foreign journalists. No protesters were sighted.
Huntsman’s successor as ambassador, Chinese-American Gary Locke, has faced at times vicious criticism. While winning plaudits from many ordinary Chinese for a modest, open manner that contrasts starkly with the imperious habits of many Party officials, state-run Guangming Daily in August published a lengthy screed denouncing him as a “wolf in sheep’s clothing” sent to Beijing to lull Chinese into neo-colonial submission.
“His Chinese blood makes Chinese people feel close to him,” said the paper, but “this has just exposed the evil purpose of the U.S., to use Chinese against Chinese and to instigate political turbulence in China.”
The intemperate tone apparently unnerved some officials as the article was deleted from the paper’s Web site after attracting widespread attention.


‘We’ll be watching’ 
In Hong Kong, China’s foreign ministry has now taken up the cudgels.
It has avoided personal abuse, leaving that to Party-controlled newspapers.
But, in a departure from usual custom, it has publicly lambasted America’s consul, Young, a 60-year-old State Department veteran.
The episode doesn’t appear to signal a dramatic deterioration in a relationship that is often bumpy but also indispensable to both countries.
China, for example, has allowed three U.S. aircraft carriers to visit Hong Kong this year and a fourth is expected soon.
But Beijing does seem determined to silence America’s voice in the political development of a territory that, for more than a century, played a big part in shaping China’s own political destiny.
Sun Yat-sen, the leader of China’s 1911 revolution against the Qing Dynasty, sheltered here, as did communist revolutionary Zhou Enlai and Tiananmen Square protest leaders when they fled Beijing in June 1989.
In a meeting with a small group of Hong Kong journalists, Lu, the foreign ministry official, warned outsiders not interfere in China’s internal affairs, singling out the U.S. consul for criticism over remarks earlier this month about local elections, the selection next year of a new chief executive and plans to introduce universal suffrage in 2017.
Young didn’t challenge China’s handling of Hong Kong since 1997 or side with any particular party, and noted only that “because the United States... supports this democratization process, we’ll be watching closely.”
Such comments, said Lu, could not be tolerated.
“This is something we resolutely oppose,” he said, adding that China has the right to protest and even expel diplomats who don’t follow internationally accepted rules.
“Chinese diplomats in America would never comment on next year’s presidential election,” he said.

UN Experts Denounce China's Secret Detention of Gao Zhisheng

By Lisa Schlein | Geneva

Gao Zhisheng, a human rights lawyer, speaks at a tea house in Beijing, China, April 7, 2010

U.N. human-rights experts are denouncing the continued secret detention of Gao Zhisheng, a prominent Chinese lawyer who was arrested in 2006.
Experts are renewing their appeal for Gao's freedom on the day that Chinese writer Chen Wei was sentenced to nine years in jail by a Beijing court for allegedly inciting subversive writing.
The UN experts say they are concerned at recent news that a Beijing court has withdrawn Gao Zhisheng's five-year probation and ordered him to serve a three-year sentence. 
His probation was to end this week.
Gao's whereabouts have been unknown for the last 20 months.
This is causing great concern in human-rights circles, including the U.N.'s top human rights official, Navi Pillay.
Her spokesman, Rupert Colville, says the high commissioner is very disturbed by the court's decision to extend Gao's probation with a three-year prison sentence.
"For the past 20 months, Gao has been subject to strict monitoring measures by the Public Security Bureau in what appears to be a form of house arrest in an unknown location," said Colville.
"The case is illustrative of a trend of secret detention and disappearances of human-rights defenders, which the high commissioner for human rights, Navi Pillay, and other U.N. human-rights bodies have already criticized on several occasions in recent years."
In 2005, Gao's license to practice law in China was revoked and his firm was shut down, allegedly for calling on the government to end abuse of religious groups.
He was subsequently arrested in 2006 because of his work as an advocate for human rights in China, and accused of subversion of state power.
Colville says the U.N. high commissioner has raised the specific case of Gao, along with a number of others, with Chinese authorities twice in the past seven months.
In response to a question, he tells VOA he does not see these appeals to the Chinese government as an exercise in futility.
He says every time the government responds to inquiries, the U.N. office receives a bit more information about Gao and about other cases of human-rights concern.
"So far as we are aware, in their responses -- and the government has responded quite often to these queries -- in their responses they never once mentioned that he was violating the probation rules," said Colville.
"So, therefore, that is why it is even more mysterious as to why just as his probation ends, suddenly his full sentence is imposed on him. We are also planning to urgently seek information from the government on his health conditions because there are unconfirmed reports concerning that."
Colville says Gao's continued detention is taking place just as a troubling new amendment is being proposed to China's criminal law procedure.
He says the amendment is likely to permit the legalization of secret detentions.
He says this will represent a major setback for civil and political rights in China.

Guangdong protests could alter China’s leadership shuffle

By Keith B. Richburg

Residents of a Chinese fishing village protest against what they say were illegal land seizures by local officials and build barricades to keep police and leaders of China’s authoritarian government out, a rare challenge of authority.
BEIJING — An uprising over land seizures in a fishing hamlet in southern Guangdong province has been defused, but Chinese analysts and others are watching to see whether the unrest could have a wider effect, perhaps on the future of a provincial chief who had been seen as a rising star in the Communist Party.
Wang Yang, the provincial party leader since 2007, has been seen as one of the country’s leading economic reformers, presiding over one of China’s most affluent, vibrant provinces that was the first to benefit from the liberalization policies begun in 1979.
Wang is considered a top candidate for one of the seven slots opening in 2012 on the all-powerful nine-member Politburo Standing Committee.
Wang also made significant concessions to end the two-week-long uprising in Wukan village, including an agreement that freezes the disputed land deals, releases jailed villagers from custody and reportedly sacks some local officials.
The uprising in Wukan, along with recent labor strikes and a protest in a coastal town called Haimen, is seen by some as a challenge to the Guangdong model at a time when Bo Xilai, the party chief in Chongqing and a rival to Wang, has been critical of the “liberal approach.”
For months, Wang and Bo have been engaged in a rare public debate over whose methods and models are best for China.
With its atmosphere of relative openness, including the country’s first publicly available provincial budget, Guangdong has been hailed by some as a template for others.
For his part, Bo has championed an approach that emphasizes efforts to reverse income inequality.
“Some people in China have indeed become rich first, so we must seek the realization of common prosperity,” Bo was quoted as saying in July.
A week later, Wang said in Guangdong that “division of the cake is not a priority right now. The priority is to make the cake bigger.”
Of the nine current standing committee members, only Vice President Xi Jinping and Deputy Premier Li Keqiang are expected to retain their seats, with Xi becoming party general secretary and later president of China, while all the other top positions remain at least publicly still unsettled.
Along with Wang, Bo is seen as a serious candidate for one of the seven remaining positions.


An unusual public rivalry 
The rivalry has spilled into other areas.
Wang had previously served as party chief in Chongqing, and when Bo took over the job, he immediately launched a crackdown on organized crime and the mafia, or triad gangs, which some analysts took as a slap at his predecessor.
Also, although Wang has experimented with allowing a relatively open news media and reforms, Bo has shifted to a “new left” stance, encouraging a “Red Culture” campaign that includes the singing of Communist “red songs” and operas, launching a “Red Twitter” microblogging site to promote Mao-era slogans, and ordering Chongqing’s television stations to broadcast patriotically themed programs.
Wang replied by saying people’s’ everyday problems could not be solved through political campaigns.
The unusual public rivalry was apparently so intense that Wang and Bo met in Beijing on Dec. 11 for an unusual display of unity and to sign a “cooperation agreement” between their two provinces.
Some analysts speculated that the open show of friendliness may have been orchestrated by senior-level Beijing leaders to end the sniping ahead of the 2012 leadership changes.
“This was really getting ugly,” said Cheng Li, an analyst of the Chinese leadership with the Brookings Institution in Washington.
“Their policy differences and ideological differences had come into the public domain. The Communist Party was really on the verge of a split between the so-called Chongqing model and the so-called Guangdong model.”


Reformists vs. ‘princelings’
Other differences exist between Wang and Bo, representing two of the competing power poles in the ruling party.
Bo, the son of the late former vice premier Bo Yibo, belongs to the group known as the “princelings,” the children of senior party officials from the Chinese Communist Party’s founding era, who are seen as having inherited their rank and privileges.
Wang, by contrast, came from a more modest background and joined the party when working in a food-processing plant.
Wang worked his way up through the Communist Youth League, making him a member of the “tuanpai” faction.
The two are also believed to have different patrons. Wang is believed to be backed by Chinese President Hu Jintao, himself a former Communist Youth Leaguer, who visited Guangdong three times since Wang became party chief.
Bo recently received public backing from Xi — a fellow princeling — who visited Chongqing for a two-day tour in December 2010, where he heaped praise on Bo for his accomplishments, including the red campaign and the war against the triads.
Analysts and others said the current unrest in Guangdong, if handled properly, might give a boost to Wang and other reformist members of the party’s ruling clique ahead of the leadership changes.
But if the unrest worsens or spreads, the reformers could find themselves challenged.
“Insofar as you think Wang Yang is a reformer, these people have a shrinking base from which to start,” said Dean Cheng, a China analyst with the Heritage Foundation in Washington.
“If Wang disappears from the scene or is rebutted, this allows [Bo] to step into the resulting space.”
Hu Deping, eldest son of the late reformist general secretary Hu Yaobang, said the problem of farmers’ land rights in this rapidly urbanizing country was “one of the most important issues” facing China now, and he said the problem was more pronounced in Guangdong, which began the reform process earliest.
“If the Wukan incident is solved well, it will definitely have a positive impact on the overall reforms,” said Hu, a senior party official who recently wrote a book about his father’s reform efforts in the 1980s.

Chinese scientist gets 7 years for stealing US secrets

Press Trust of India

Washington -- A Chinese scientist who admitted to stealing trade secrets worth USD 12 million from two US firms on organic insecticides and sending them to China and Germany has been sentenced to more than seven years in prison.
Huang Kexue, 46, has pleaded guilty to stealing secrets from Dow AgroSciences, where he worked from 2003 to 2008, and Cargill Inc.
Huang was sentenced by the US District Judge William Lawrence in the Southern District of Indiana.
He was sentenced to 87 months in prison.
Huang previously faced a maximum of 25 years in prison.
The case is the latest in a series of similar allegations about trade secrets being handed to Chinese companies. Huang was born in China but holds permanent resident status in the US.
Huang admitted in October that he stole secrets on a pesticide and a new food product and sent them to China and Germany, the BBC reported.
According to court papers, Cargill estimated the value of the information stolen at USD 12 million, while Dow gave no specific figure, beyond saying it amounted to millions of dollars.
In his plea, Huang admitted giving the information to a Chinese university, as well as the National Natural Science Foundation of China and the 863 Programme, a Chinese government initiative to develop and acquire high-level technologies.
"Huang used his insider status at two of America's largest agricultural companies to steal valuable trade secrets for use in his native China," said Lanny Breur, assistant attorney general for the US Department of Justice. The sentence came on the same day that the Wall Street Journal reported Chinese hackers had stolen information from the US Chamber of Commerce, focusing on the group's Asian policy team.
There have been growing concerns in the US that corporate trade secrets are being stolen and handed over to competitors in China.
Earlier in 2011, a Chinese engineer was found guilty of stealing secrets from Ford Motors to try and get a job with Chinese car manufacturers.
In 2010 another couple was charged with trying to sell secrets about General Motors' hybrid vehicles to China's Chery Automobile Company.
Business have repeatedly raised concerns about these issues, saying that not only do such moves hand sensitive information to competitors, they also given them an unfair advantage by saving them millions of dollars in research and development costs.

U.S. Headed For Cyberwar Showdown With China In 2012

By Loren Thompson

The new year is likely to bring a distinct shift in U.S. national security priorities, as the Obama Administration and Congress sharpen their response to China’s continuous assault on U.S. information networks.
Although intelligence-community analysts believe the most sophisticated intrusions are being executed by a relatively small number of agents linked to the general staff of China’s Peoples Liberation Army, the damage they are inflicting on U.S. security and economic competitiveness is judged to be extensive.
Thus far, China’s cyber campaign consists mainly of espionage aimed at stealing military secrets and intellectual property.
However, Gen. Keith Alexander, head of the Pentagon’s joint Cyber Command established to counter such campaigns, said in November that, “We see a disturbing track from exploitation to disruption to destruction.”
Alexander wasn’t talking just about the Chinese, but there’s little doubt among intelligence analysts that Beijing is the biggest and most persistent perpetrator of cyber crimes. 
The question is what to do about it.
To date, U.S. cyber efforts have been focused mainly on defensive measures, seeking to repel network intruders in a fashion that Alexander likens to the famously failed Maginot Line.
The National Security Agency and other U.S. security organizations are known to have developed their own network-attack capabilities, but former White House cyber-security advisor Richard Clarke has warned that it would be dangerous for the U.S. to step up its own campaign against Chinese networks while U.S. safeguards against retaliation are so weak.
Under the leadership of a few forward-thinking policymakers such as former Deputy Secretary of Defense William Lynn, the Department of Defense and intelligence community have greatly strengthened their information defenses and begun helping industry to protect critical infrastructure.
But insiders say the asymmetries between U.S. and Chinese society make it hard to cope with China’s cyber onslaught.
Not only is America a much more open and porous place, but U.S. agencies and private companies have a lot more information that’s worth stealing.
The U.S. is also well ahead of most other countries in moving both its security apparatus and commercial economy onto the Internet, which was not designed with security in mind.
Cyber experts say that Internet operations are intrinsically vulnerable to attacks by the kind of highly-skilled agents that China’s government employs, a problem that may be exacerbated as economic forces pressure federal agencies and corporations to outsource information resources to “the cloud.”
Not only is it easy to conceal the source of cyber attacks, but the Internet crisscrosses political boundaries in a manner that greatly diminished the effectiveness of traditional law-enforcement techniques.
As one former intelligence official told me, “If I think China is attacking me but it’s using the server for the Chicago municipal hospital system, what am I supposed to do – take down the server?”
Beyond issues of attribution and extraterritoriality, there is the simple reality that digital technology permits the compression of vast amounts of information into brief bursts of computer code.
U.S. officials speak of “terabytes” of information being stolen before intrusion was noticed, without any indication of where it went or how it might be exploited.
And while there is seldom a “smoking gun” that points to a particular Chinese perpetrator, it’s hard not to draw the obvious conclusion from the way the volume of cyber attacks drops off during the Chinese New Year holiday.
Despite obstacles to effective defense and deterrence, Siobhan Gorman of the Wall Street Journal reported on December 13 that the National Security Agency is increasingly confident about its ability to identify some of the key operatives in the Chinese cyber campaign.
Years of intensive investigation and computer forensics — not to mention its own probing of Chinese networks — has enabled the spy agency to assemble a rogues gallery of Chinese perpetrators.
The Obama Administration thus has the information it needs to confront China.
And it has the political incentives to do so too, because likely Republican presidential nominee Mitt Romney is focusing much of his foreign-policy rhetoric on Chinese economic transgressions such as currency manipulation and theft of intellectual property.
Both for reasons of policy and politics, now is a good time for Obama to turn up the heat on China over its cyber campaign.
Obama has not acted thus far, despite discussions with advisors who urged him to be more forceful with China.
This fits with the president’s pattern of carefully modulating communications to China, which has resulted in Beijing not being labeled a currency manipulator (although it clearly is) and Taiwan not being sold new fighters (although it clearly needs them).
It’s not that the White House fears China, just that it doubts confrontational tactics will produce positive results.
However, the scale and intensity of the Chinese cyber offensive has become too great for Washington to ignore, and Beijing shows no inclination to scale it back.
Beijing’s representatives routinely dismiss any allegations of Chinese wrongdoing as groundless, while insisting their country is the biggest victim of cyber crimes.
Whether the latter claim is true or not, analysts estimate the value of U.S. economic information being lost to Chinese intrusions each year in the tens of billions of dollars, and the number of illicit probes launched from Chinese Internet addresses against U.S. government sites numbers in the millions each month.
So in spite of his cautious and deliberative manner, Mr. Obama is nearly certain to act more forcefully in the year ahead.
Lurking behind the growing conviction that China must be confronted is the fear that if Beijing is permitted to continue its cyber campaign without serious negative consequences, it may be emboldened to undertake far worse offenses. 
The Stuxnet virus inserted into the industrial-process software of Iran’s nuclear weapons program last year is a sobering example of where cyber aggression may be headed.
Stuxnet is less of an espionage tool than a way of sabotaging targeted infrastructure, but it does so in a hard-to-detect manner that exploits commercial software utilized throughout the world.
If China and other potential perpetrators are not effectively deterred from pursuing such methods, America may find its security establishment and economy hobbled at the outset of a future conflict, with disastrous consequences for its ability to prevail.