China Readings for October 8th

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

  • SEC Asks Judge to Order Deloitte Touche Unit to Court in Document Dispute – Bloomberg – Shanghai-based Deloitte Touche Tohmatsu CPA Ltd. should be ordered to appear in U.S. federal court for rejecting a Securities and Exchange Commission demand for documents related to an investigation of its former client Longtop Financial Technologies Limited, an SEC lawyer said.
    In a hearing today in Washington, SEC lawyer Mark Lanpher said D&T Shanghai, a unit of Deloitte Touche Tohmatsu Limited, has refused to respond to a court filing seeking documents that the regulator claims are “critical” to its probe of possible fraud at Longtop, a financial software maker based in Hong Kong.
    “We have an ongoing fraud. Time is of the essence,” Lanpher said, asking U.S. Magistrate Judge Deborah Robinson to approve a “show cause” order requiring D&T Shanghai to appear in court to explain why it hasn’t complied with a subpoena issued in May.
  • Foreign Public Opinion Dogs Chinese Plans | Via Meadia – China is famously resistant to lectures and harangues from foreign governments, but it is learning the hard way that making large investments abroad makes a country more vulnerable to foreign opinion.
  • Art Market: The China Factor – – With the fall auctions under way, Chinese collectors are bidding up their cultural heritage, setting new records nearly every week. 'Soon a Chinese ink painting is going to outsell Picasso.'
  • Richemont’s Shanghai Tang to Double Chinese Stores as Luxury Demand Climbs – Bloomberg – Shanghai Tang, the fashion boutique brand owned by Cie Financiere Richemont SA (CFR), plans to almost double its stores in China, its fastest growing market, as demand for luxury goods rises.
  • China Baby-Formula Maker Buying Arsenic Debt Shows Trust Risks – Bloomberg – A Chinese baby-formula maker selling imported Australian milk to safety-conscious parents invested in the risky debt of lead, arsenic and cadmium refiners, seeking higher returns for its cash.

    The uncollateralized investment, sold by a middleman known as a trust, promises to pay Ausnutria Dairy Corp. about double China’s benchmark savings rate. It’s an example of how companies are undermining government efforts to cool lending that has led to soaring property prices and inflation of 6.2 percent, near a three-year high.

  • United States Aims to Encourage Change in Myanmar – – The United States is considering a significant shift in its long-strained relationship with the autocratic government of Myanmar, including relaxing restrictions on financial assistance and taking other steps to encourage what senior American officials describe as startling political changes in the country.
  • China Readies New Microblogging Measures | China Digital Times (CDT) – From the South China Morning Post:

    Weibo, the Chinese version of Twitter, has become a mighty conduit for sharing information, expressing political views, challenging officialdom and spreading rumours. Efforts to quell those rumours are being seen by some observers as a bid to close an avenue of anonymous digital dissent on the mainland.

    The controls may include issuing licenses to those microblogging sites that “can effectively eliminate rumours”, Song said. “Just like a supermarket, the food safety watchdog would hardly allow the operation of a supermarket if it regularly sold counterfeit or poisonous food.”

    Leading mainland internet expert Professor Li Yonggang said the government might target bloggers with more than 50,000 or 100,000 followers for tighter control.

    As tighter control usually results in a withering of business, microblog operators are taking the issue seriously. A Guangzhou-based new media industry insider said a handful of top executives from various mainland microblog operators held a low-profile meeting in Guangzhou last month and discussed how to respond to the expected regulations.

  • Our one-sided trade war with China – The Washington Post – Just how many American jobs have been lost to subsidized Chinese exports is unclear. Economist Robert Scott of the Economic Policy Institute, a liberal think tank, estimates the number at 2.8 million from 2001 to 2010. A study by three academic economists concludes that imports from China account for about a quarter of lost U.S. manufacturing jobs from 1990 to 2007; that’s almost 1 million jobs. These are both large declines, but they are only a modest fraction of America’s present jobs shortfall. The recession cost 8.8 million payroll jobs.

    These numbers should frame our thinking about China’s economic policies. On the one hand, making the Chinese scapegoats for most of our economic problems is delusional. Their role in the financial crisis was modest. On the other hand, China’s predatory trade practices erode America’s industrial base and stymie the economic recovery. The Chinese do not believe in free trade or fair trade. They practice fixed trade — fixed to benefit them at others’ expense. What, if anything, can we do about that?

  • Guest post: China’s disappearing bank deposits | beyondbrics | News and views on emerging markets from the Financial Times – – In July this year, households and companies withdrew a total of Rmb1,100bn ($172.5bn) from China’s banks, equivalent to 2.5 per cent of GDP. In August, household deposits barely clinged to positive territory at Rmb26bn, despite receiving over Rmb188bn in new loans that month.

    Corporate deposits grew a bit more, but were still abnormally low. Although the September numbers are not out yet, Chinese press reports suggest that the deposits in the major state banks declined substantially in the first half of the month. Where did all the money go?

    The emerging consensus is that household deposits went to wealth management products (WMPs) to finance corporations. This makes great sense because households currently face over negative 3 per cent in real interest rates on their deposits, so they have high motivation to reallocate funds to WMPs, which offer higher yields.

  • World Affairs Journal – The Defector’s Tale: Inside North Korea’s Secret Economy – As a former subject of that court and one of few who can speak credibly about the inner circle of North Korea, I occupied a specific corner of the Royal Court Economy. As a “revolution fund” manager, I was hired to “catch the dollar in the air,” to raise hard cash through the international insurance system for Kim’s personal whims and his nuclear dreams. Externally I had a more bland identity—as the Singapore representative of North East Asia Bank.

    My position afforded me transcendent status and privileges by North Korean standards, and yet I found myself becoming ever more critical of the North Korean regime and ever more psychologically removed from my job and my commitment to the Kim Dynasty. Perhaps it was my exposure to the wealth of Singapore when I was stationed there. Or perhaps it was Kim Il-sung’s 1992 poem “A Song in Praise of the Bright Star,” in which he described his progeny as a new sun. Or perhaps it was Kim Jong-il’s own words: “Our people are a good people.” I understood exactly what he was saying: “You are obedient. You are passive. You are good slaves.”

  • Huaxi: the village that towers above China | World news | The Guardian – Until recently, Huaxi was a poor farming community, typical of eastern China. Now, thanks to the ambition of one man, it is a powerhouse symbol of the country's economic expansion, embodied by a giant 328m-tall tower
  • Jack Ma’s Talk At The Stanford China 2.0: The Rise Of A Digital Superpower Conference | DigiCha
  • Xiaomi, Makers of Chinese iPhone Clone, Mock Steve Jobs’s Death on Weibo | Tech in Asia – While we knew Lei Jun was content to make tasteless comments about Steve Jobs’s death before he had died, somehow we thought Jobs’s actual passing might stop him. We were wrong.

    Yesterday, the official Weibo account of Xiaomi — Lei Jun’s mobile phone company, which is making a very iPhone-like handset for the Chinese market — made a couple of tasteless tweets.

    First, in response to a photo someone else had tweeted with a picture of Jobs’s face loaded onto an iPad at one of the country’s Apple stores in an impromptu tribute, Xiaomi tweeted:

    Now people with iPads can load up that black and white headshot of Jobs to fullscreen and clasp it to their breasts.