EU courts Asia, banks on China

Global Geopolitics Net Sites
Monday, October 27, 2008

© Copyright 2008 Susenjit Guha. All rights reserved.

By Susenjit Guha

European Commission President Jose Barroso, who is also a former prime minister of Portugal, urged China, India and Japan to “be on board” at the Asia-Europe Meeting in Beijing over the weekend. “It’s very simple: we sink together or we swim together,” he said. Apparently exasperated at Europe’s traditional ties with the United States, he seemed eager for a new alliance. The need for a paradigm shift has come, to tackle the worst financial crisis to hit the globe in 70 years.

At the meeting of 40 leaders in Beijing, climate change and food security concerns were overshadowed by news of a continuing bloodbath of global stocks. Barosso urged countries to resist calls for economic nationalism and protectionism that would only hurt prospects for a recovery, and underlined the need to regulate the world’s markets.

German Chancellor Angela Merkel wanted more transparent markets, stricter supervision and closer international cooperation. French President Nicolas Sarkozy wanted more radical change, seeking to rewrite the rulebook for international capitalism at next month’s meeting of world leaders in Washington. He asked for assistance from Asian governments.

The International Monetary Fund failed to provide advance warning of the impending implosion in the financial markets, and has been slow at responding to requests from affected nations.

Laissez-faire has proved to be grossly unfair, as the Wall Street meltdown is not only melting the tar on Main Street, freeways and country roads in the United States, but has clogged narrow streets and roundabouts in teeming Asia as well.

And why is the European Union worried? European capitals are in the grip of Obamania, hoping for a real change in the United States – and the way it is perceived around the world – with the presumed election of Democratic presidential candidate Barack Obama next month. But Obamania does not guarantee European support for more troops for NATO engagements in Afghanistan and Iraq. Displeasure in Europe over U.S. unilateralism has been ratcheted up by the conduct of reckless financial institutions.

Positioned between the United States and the neighboring landmass of Asia, Europe needs to build bridges with the continent of the 21st century, Asia. As Barosso stressed at the ASEM meeting in Beijing, “We represent three-fifths of the world’s population and produce half of global GDP. Our combined action can and should make a real difference.”

Who other than China – even though Japan and India, the new kid on the block, were present – should take the lead in finding a solution to this crisis? With nearly US$2 trillion in currency reserves – more than Canada’s GDP – China is best positioned to step in. As Kim Eun Mee, professor of international studies at Ewha Women’s University in Seoul, South Korea, stressed, “Other ASEM nations have been calling for China to take a more leading role … to mediate a consensus among ASEM nations.”

Ahead of the Washington talks on Nov.15, China is being asked to ease its restrictions on banking, to prop up the strong yuan and to build a US$350 billion reserve firewall to protect the region’s currencies. Thailand wants this, and Citigroup Vice-President William Rhodes reiterated in the Financial Times that China was indispensable in solving this crisis.

But China’s leaders are wary of assuming so much responsibility at this stage of their country’s development, stressing that their first priority is raising the living standards of their own people.

Before the ASEM began, China, Japan and South Korea, along with 10 Southeast Asian nations, pledged a US$80 billion chest to stave off currency speculators, but no date was set for the launch of this fund.

The toxic sub-prime loan disaster has not hit China directly, but for the first time in five years growth has fallen to 9 percent as inflation creeps up. Exports, pivotal to China’s economic surge, will be affected as the U.S. and European economies continue to reel.

World leaders did their best to soften China up and bring Asia on board in an effort to introduce financial reforms at the Washington summit that would tackle the root causes of the crisis.

But judging by a commentary in the official newspaper, the People’s Daily, by Shi Jianxun, a professor at Shanghai’s Tongji University, not everyone in China was impressed. Shi stopped

short of explaining how a non-convertible yuan could help, but said the euro, British pound, Japanese yen and Chinese yuan should be the currencies used for trade between the European Union and Asia. He demanded a boycott of the U.S. dollar, lambasting the United States for protecting its own interests while other countries’ wealth drained away.

Awarding the Sakharov Prize for the defense of human rights to jailed Chinese dissident Hu Jia one day before the Beijing summit was meant to remind the Asian dragon that Europe will continue to play the rights card, even if it has to court the dragon’s wealth.

Asia does not have even an EU-style semblance of solidarity, which may mean the various Asian governments will adopt different views on tackling the crisis, rather than uniting behind a European initiative. Of course, China will have its own way of doing business, taking the best and the worst of all worlds.

Time will tell if the overtures of a humane capitalistic Europe will be able to smother China, which cannot escape this financial crisis in the long run.

About the Author:

Susenjit Guha is a writer and journalist based in Kolkata, India. He contributes a weekly commentary and analysis for UPI Asia and has written on Indian and global political issues for such online publications as Online Opinion (Australia) and Foreign Policy in Focus (USA) and M.J Akbar (India).

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China Threatens neighbors in South China Sea

Global Geopolitics Net Sites
Friday, October 24, 2008

© Copyright 2008 James Crickton. All rights reserved.

By James Crickton*

London: With the Olympics behind now, China has begun flexing its muscles to brow beat its neighbors to fall in line or face the music. Serious concerns have been expressed, especially by Vietnam, over the recent intense activities of the Chinese Navy in and around the disputed Paracel and Spratly islands in the South China Sea.

Chinese naval vessels have adopted threatening postures to mount pressure against Vietnamese oil exploration activities in and around the disputed islands for alleged violation of Chinese territorial waters. The Vietnamese Government, however, held that oil exploration was undertaken within their continental shelf and the EEZ. Exxon Mobil, which entered into a joint exploration agreement with PetroVietnam, had been forced to terminate their activity around Spratly islands following Chinese threats.

A Norwegian ship, hired by Vietnam, for oil exploration was intercepted by the Chinese naval ships and threatened to fire unless it leaves the disputed area in the South China sea region.
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CHINESE ECONOMY MONITOR—NOTE 2

Global Geopolitics Net Sites – Global Politics Online
Friday, October 24, 2008

Copyright © B. Raman – Chennai Center for China Studies
www.c3sindia.org

B.RAMAN

( What will be the impact of the global financial and economic melt-down on the Chinese economy? This question should be of interest to the
other countries of the South and the South-East Asian region. If the Chinese economy is badly affected, they too are likely to feel the
negative consequences of the down-turn in the Chinese economy. Keeping this in view, we have been brInging out a periodic “Chinese Economy Monitor” based on open information. This is the second in the series—B.Raman)

INCREASED UNCERTAINTIES, SAYS HU

At the start of the Asia-Europe Meeting (ASEM) Summit in Beijing on October 24,2008, President Hu Jintao of China said: “The fundamentals of the Chinese economy have not changed. However, the global financial crisis has noticeably increased the uncertainties and factors for instability in China’s economic development.We are now confronted with many difficulties and challenges in our economic endeavours.China must first and foremost run its own affairs well. In the light of the changing domestic and international financial situation, we will make our macroeconomic regulatory measures more proactive, focused and effective and make timely adjustments to our policies.We will vigorously expand domestic demand, especially consumer demand, maintain economic financial stability and the stability of capital markets, and continue to promote sound and fast economic and social development.”
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CHINESE ECONOMY MONITOR— NOTE 1

Global Geopolitics Net Sites – Global News Blog
Wednesday, October 22, 2008

Copyright © B. Raman – Chennai Center for China Studies
www.c3sindia.org

B.RAMAN

( What will be the impact of the global financial and economic melt-down on the Chinese economy? This question should be of interest to the other countries of the South and the South-East Asian region. If the Chinese economy is badly affected, they too are likely to feel the negative consequences of the down-turn in the Chinese economy. Keeping this in view, we intend brInging out a periodic “Chinese Economy Monitor” based on open information. Here goes the first Monitor in the series—B.Raman)

CITIC PACIFIC FACES ENQUIRY

The Securities and Futures Commission (SFC) of Hong Kong announced on October 22,2008, that it has undertaken an enquiry into the affairs of the Citic Pacific, the Hong Kong listed branch of the China International Trust and Investment Corporation, following a report submitted by the Citic Pacific to the Hong Kong Stock Exchange on October 20, allegedly admitting that two of its senior executives had entered into unauthorised foreign exchange forward contracts in Euros and Australian dollars, which have already resulted in a loss of US $ 104 million, with a possibility of further losses, which could run up to another US $ 200 million. Among those reportedly facing enquiry are a Finance Director of the Company and the daughter of the Chairman of the company, who occupied a senior position in the company. It has been reported that pending the enquiry she has already been demoted. Albert Ho, a member of the Hong Kong Legislative Assembly, has accused the company of concealing this information from the investors. The Citic Pacific has reportedly admitted that it became aware of this unauthorised transaction on September 7. According to Ho, the company did not mention this in a circular issued by it to the investors on September 12. The prices of the shares of the company fell by 55 per cent on October 21 and by another 10 per cent on October 22.—- Source Agence France Presse (AFP).

TOY INDUSTRY IN A CRISIS

2.Another toy factory in China catering to the US market went bankrupt on October 22 and closed down its production, rendering 900 workers jobless. The toy factory is called the Chong Yik Toy company. It is owned by a Hong Kong businessman and is based in Shenzhen in the Guangdong province. Some of the workers have alleged that they were not paid their salaries for the last four months. Some payments were made to them by the company as well as the local Chinese authorities at the time of the termination of their services. Last week, the Hong Kong listed Smart Union Toys factory in Dongguan in the Guangdong province closed down after terminating the services of 7000 workers. According to the Xinhua news agency, in the first seven months of this year, 3631 small scale enterprises producing toys mainly for the US market have closed down due to a decline in the demand for China-made toys from the US. These enterprises, which have closed down, constituted 52.7 per cent of all toy-making companies in China— Source “South China Morning Post” and AFP.

SHIPPING COMPANIES FACE DIFFICULTIES

3.After the aviation industry, the shipping industry is facing a crisis due to a decrease in demand for cargo space.Share prices of some major shipping companies, which haul bulk freight such as iron ore, coal and grains, have fallen by 50-70 per cent in the past few months.”The global economic slowdown will push some shipping lines into bankruptcy,” Marc Faber, a famed investor and editor of the “Gloom Boom & Doom” report, told AFP. Standard & Poor’s also said this week that the Asian shipping market has suffered double-digit declines on the US-Asia route in June and July, as well as being hit with higher operating costs. There are reports of idle vessels being put to anchor, and question marks over the many orders for new ships that were placed in brighter times, years ahead of expected completion dates. “Pain levels could be high for companies that agreed to pay 2007 top-dollar prices for dry bulk ships, or who agreed to pay high long-term charters,” said an article in the Far Eastern Economic Review this month. Container shipping was hit first earlier this year as demand for Asian-made goods in the US and Europe dropped off.In a chain reaction, Asian factories manufacturing electronics and consumer items for the US and European markets began lowering output, and the need for raw materials has declined.
Container shippers, bulk operators and port authorities across the region are reporting slowdowns. Malaysia’s Port Klang said it had been hit by a decline in cargo handling since the start of October, due to a retail downturn and lower vehicle sales in the US and Europe. The
Shanghai International Port has said that growth in cargo traffic dropped sharply to 9.9 per cent in the first half of 2008 on the “increasingly grave global economy and trade situation”. “Faced with the severe economic situation at home and abroad, the port industry has met with the most complicated operation environment in recent years,” it said. Hong Kong, which is sensitive to any drop in demand for toys, gadgets and clothes made in the factory-belt of China’s southern Guangdong province, said that after an increase of 6.7 per cent in container traffic in August, growth dropped suddenly in September to just 1.2 per cent. “Given the global gloomy economic outlook, Hong Kong is expected to face a much tougher export trade environment,” said Hong Kong Container Terminal Operators Association chairman Alan Lee.
In Taiwan’s seven harbours, volumes fell 2.23 per cent in the nine months to September, and in southern Kaohsiung city, business was down 1.76 per cent. “We are seeing a rapid decline in the volume of exports,” an official with the Japanese Shipowners’ Association said of the decline in demand. Shipping rates have been falling to levels s not seen since the Asian financial crisis in 1997-1998.A so-called capesize vessel, most commonly used to carry coal and iron ore, now costs under US$11,000 a day to hire, about half the charge in May.
Container shipping lines have said they expect cargo demand on the US-Asia route to fall by as much as eight per cent in 2008.
“It’s a safe statement that no carrier is operating profitably in the eastbound transpacific market today,” said Ron Widdows, chairman of the Transpacific Stabilisation Agreement – a forum of major shipping lines. However, the group said vessels are still running at 90 per cent capacity as firms cut costs by consolidating routes and returning chartered vessels, and take advantage of the downturn to lay up ships for repairs.Widdows said the industry was confident that government efforts to unclog global finance would be effective, restoring confidence and paving the way for a shipping recovery in late 2009.—- Source AFP

CONTAINER TRAFFIC DOWN

4. Shanghai’s port, one of the world’s busiest, has cut its container traffic target for the year by five per cent, blaming the global financial crisis and an economic slowdown.The Shanghai International Port Group’s handling volume is expected to reach 28.5 million twenty-foot equivalent units (TEU), less than its earlier target of 30 million TEU.Lower trade volume due to the weakening global economy, slowing domestic growth and natural disasters in China this year have affected the port’s container operations.China’s economy expanded by nine per cent in the third quarter, the lowest level in about five years as the global credit crisis put a dent in its booming economy.The port operator’s container throughput rose 10.4 per cent from a year earlier to 13.82 million TEU in the first half, sharply slower than the growth in 2007, when throughput jumped 20.4 per cent to 26.2 million TEU.In the first nine months of 2008, container processing in Chinese ports rose 14.9 per cent to 94.5 million TEU, 2.2 per cent lower than the first half, according to Ministry of Transport figures.— Source “Shanghai Securities News” and AFP.

MOVE FOR FINANCIAL WATCHDOG

5.Japan, China and South Korea will set up an Asian watchdog body to monitor the health of financial institutions in a bid to counter global economic chaos.They hope to have the first meeting in Tokyo next month and also invite other Asian nations including the 10 members of the Association of Southeast Asian Nations (ASEAN).It would serve as a regional version of the Financial Stability Forum, a panel that advises the Group of Seven major economies and exchanges information among them.Japan also hopes the meeting would discuss enhancing controls on the financial system.The move came as US and European leaders called for an emergency summit in November to discuss ways to restore the battered global financial sector. Japanese Prime Minister Taro Aso is also sounding out whether the South Korean and Chinese leaders can travel to Japan by the end of the year for an inaugural three-way economic summit. Japanese Government officials declined to comment on the reports. —Source “Yomiuri Shimbun” and the Kyodo news agency.

REAL ESTATE

6.China will exempt property transactions from stamp tax and value-added tax from November 1 to boost the ailing real estate market, state media reported on October 22, citing the Finance Ministry.

IMPACT ON SINO-INDIAN TRADE

My comment: The down-turn in the Chinese economy is likely to affect Sino-Indian bilateral trade which has galloped to a record US $ 30 billion and could affect Indian iron ore producers. Iron ore constitutes about 55 per cent of Indian exports to China. With the Olympics over and with the sluggish real estate market and a suspension of the construction of new factories, the demand for steel in China could come down.(22-10-08)\\

( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com )

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The Dragon, Emerging soft colonial power

Global Geopolitics Net Sites
Friday, September 19, 2008

© Copyright 2008 Malladi Rama Rao. All rights reserved.

By Malladi Rama Rao

The dazzling display at the opening and closing ceremonies of the Beijing Olympic Games may have reminded some of the Mao-era mass parades in The Tiananmen Square. But not to the people across the world who were glued to the TV sets what with their fire works, pyro-techniques, and more than 2000 beating drums with their hands and florescent drum sticks in perfect unison. And their verdict was unanimous: China has arrived though Tion Kwa, a Bernard Schwartz Fellow at the Asia Society in Washington DC prefers to dub it as a China’s synchronised anachronism.

According to him, it is not easy to think of such a display as being in line with modern norms. “The Chinese economy may be more market-oriented today than ever before, but, because the Communist Party is still in charge, China remains out of sync with those parts of Asia and the rest of the world where communism has long since come to be viewed as an anachronistic oddity”, Tion opines.

Of late, there have been many studies that have focused increasingly on the internal factors at play in China. One such study by Minxin Pei opines that there are several systemic risks in Chinese domestic politics. In his view unless these are addressed seriously, the survival of the regime may be at risk. Pei, who is Director of the China Programme at the Carnegie Endowment for International peace, goes on to say that the surging pace of the Chinese economy is blinding the world to its political risks.

We cannot be oblivious to another reality. It is that from Thailand to Myanmar and from Sri Lanka to Nigeria Chinese goods are being lapped up by the dozen every day. Simply because these are affordable at all ends of the scale. In Pakistan for instance, as the Lahore daily The Nation says, Chinese motorbikes, medicines, toys and shoes are forty to forty-five percent cheap. Stationery making units are on the verge of collapse because of availability of cheap Chinese imported and smuggled items like pencils, another Lahore daily the Daily Times reported on June 6.

In the El Dorado of the 21st century, United States, consumers looking for low prices have snapped up Chinese-made goods in recent years, Economic Policy Institute, a Left-leaning Washington think-tank says. Its finding that the US trade deficit with China cost 2.3 million American jobs between 2001 and 2007 may fuel debate about free trade ahead of November presidential elections.

New global order

More so because a professor of management and human resources at the Ohio State University has just published his new book asking Americans to be prepared for a new global order. “Hundreds of years ago China was one of the world’s leading powers and they want to be number one again”, Oded Shenkar writes in his book, “The Chinese Century: The Rising Chinese Economy and its impact on the Global Economy, The Balance of Power and Your Job” (Wharton School of Publishing).
These pundits are worried that China could one day pass the US as major economic power. Well their concern is understandable. But in their America centric pre-occupation, they are ignoring another reality. It is that China has taken a leaf out of colonial masters of yore in its single minded pursuit of geo-political, strategic, energy and economic goals. Politics, as a scholar once said, is built on two foundations: military and economic. The two interact and support each other. This is clearly brought out by the power play China is practising in Africa and Asia. Ian Bremmer, President of Eurasia Group, a political risk consultancy sums up the situation thus: ‘The go out strategy has paid remarkable dividends and will continue to do so at least in the short term’. There is a flip-side to the Chinese rise and its business deals with unstable regimes: Beijing has become a target of attacks from Pakistan to Iraq, Nigeria, Yemen and Mogadishu. The abductors are often faceless local groups with scores to settle with the authorities.

Like the gunmen in Southern Niger Delta, who had abducted five Chinese workers on Jan 5, 2007. “They did not want money but release of four prisoners of Niger Delta origin in the Nigerian jails, “according to a Reuters report of the day from Abuja.

The attacks on Chinese engineers and workers across Pakistan are well documented. From the turbulent FATA region bordering Afghanistan to Islamabad, Chinese have not been safe in the recent years. They are not a large community numbering around 5000 in all but they are present in all segments of the Pak economy from the lowly massage parlours in capital to mining, drilling and construction of telecom towers. The message by the Lal Majid clerics (June 23, 2007) is illustrative of the local mood.

While releasing seven Chinese women ‘picked up’ by the students of the Madrassa attached to the Masjid from a nearby massage parlour, the clerics said, ‘while we value friendship with China we will not allow even Chinese women to work as prostitute and damage the morale of Muslims ‘. The pickup and subsequent events had led to Chinese pressure on the military regime of the day to act against the mosque authorities.

That the Chinese are pususing what an Indian Leftist calls as Marwari capitalism is also clear from another aspect of Chinese involvement in Pakistan. Jiye Sindh Quami Mahaz is against China’s financial aid to construction of big dams like the Bhasha dam for instance. Several rallies in Sindh and the Northern Areas have not moved the Chinese investment agency to rethink its offer.

Economic carrots

Apparently, Beijing is concerned with the economic carrots Islamabad under General Musharraf had dangled. These ranged from a rail link parallel to the Karkoram high way ending at Havelian. That will be connected to Gwadar port, which provides the Chinese alternative sea route to foreign trade.

Like the earlier generation of colonialists, the Dragon today is ever willing to play with whoever suits its bill. For its ends matter. May be for it the adage precept is better than practice and the Gandhian concept of ends and means to end matter equally are dated. Consider how Beijing had dealt with LTTE and Colombo alike. Also how in Myanmar Chinese nationals carried out illegal gold mining in Laiza and Namsan Yang areas, some 80 km ( 50 miles) south east of Myitkyina, Kachin state. Yangoon Junta was forced to step in and ban all mining activity in the area since the second week of June, 2008.

China earned the wrath of local movement for justice in Northern Niger with its patronage of Niger government. Chinese companies supplied arms to the authorities as the trade off for the permission to undertake uranium mining. But faced with abductions, uranium mining was shut down (2007). China has supplied arms to several governments and rebels in Africa for mutual benefit. Take for instance China-Sudan ties. China buys two thirds of Sudan’s oil and in return sells arms with no concern whatsoever for Darfur imbroglio.

Human rights
Johannesburg’s publication, ‘The Weekender’ reports that Mugabwe regime is getting Chinese weapons. Foreign office in Beijing termed the report as a groundless rumour. , Professor Humphrey Moshi of the University of Dar-es-Salaam doesn’t appear to be a taker for the denial. This is clear from his advice to China: Give up engagement with rouge nations. His contention is that China’s engagement with such countries undermines human rights values. In his view,” Chinese investments will likely fuel conflicts as also delay the conflict resolution and mediation process’.

A close study of Chinese presence in Africa and Asia shows that the professor’s advice has no takers in Beijing. Because, as Drew Thompson says in a James Foundation report (Volume 4 Issue 24, December 07, 2007) its efforts are aimed at creating a paradigm of globalisation that favours China. His conclusion is based on his study of how Chinese interests in Africa expanded to spheres of influence and access to energy and raw materials through diplomacy, trade, aid and investment.

Observation
These observations are equally valid for Asia since China has adopted the same route in countries like Sri Lanka and Myanmar. What should however be of equal concern is China’s promotion of its own brand of economic development and reform, model amongst the Third World countries. Beijing has been encouraging friendly countries to send high level delegations to learn from Chinese experiments and experience.

Pertinent is the observation of George Friedman, the Stratfor expert. Says he: “The dramatic economic development has benefited the coast and left the interior—the vast majority of Chinese—behind. It has also left China vulnerable to global economic forces that it cannot control and cannot accommodate. This is not new in Chinese history, but its usual resolution is in regionalism and the weakening of the central government. Deng’s gamble is being played out by his successors. He dealt the hand. They have to play it. The question on the table is whether the economic basis of China is a foundation or a balancing act. If the former, it can last a long time. If the latter, everyone falls down eventually. There appears to be little evidence that it is a foundation. It excludes most of the Chinese from the game, people who are making less than $100 a month”.

About the Author

Malladi Rama Rao is an analyst and writer on the Indian political scene and geo-political and security issues of South Asia. He directs a Weekly Feature Service in English, Syndicate Features, in colloboration with his wife Vaniram. He is also the India Editor of Asian Tribune.

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