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

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The Wall Street Journal has an excellent summary of the second quarter data that came out Monday. China’s Slowing Economy, An Illustrated Guide to the Second Quarter covers just about everything.

My Dealbook column this week discusses the data and state of the economy:

Last week’s column discussed the 2011 prediction by Li Zuojun, an economist at the Development Research Center of the State Council, that China would face a economic crisis in the summer of 2013. Xia Bin, a colleague of Mr. Li’s, said at a forum over the weekend that the G.D.P. fixation was misplaced and that China was already in a financial crisis:

“Arguments about whether China will grow at 7 percent or 7.5 percent are “pointless” because the economy is already in a financial crisis which may only worsen if the government doesn’t address the country’s crippling debt problem”…

It is now difficult for even the most bullish of China analysts to argue that the economy is not in very difficult straits that look to persist at least for several quarters. A hopeful argument may be that the almost uniform sense of existing or impending crisis will give Xi Jinping and Li Keqiang the levers they need to push forward the painful reforms.

We will know more by October when the Third Plenum meets. Even if the meeting passes an ambitious set of reforms it will still take several months or longer for those changes to flow through to the real economy, and implementation will likely be very difficult.

For those looking for historical support that the Party can enact another round of deep reforms, I highly recommend “Wealth and Power: China’s Long March to the Twenty-first Century,” an excellent new book from Orville Schell and John Delury. The book, excerpted here, goes a long way to explaining what drives the current leadership, and why betting against their resolve to reform may be risky in the medium to long-term.

But nothing destroys wealth like debt, and until China deals with its credit crisis the road to wealth is going to be very rocky.

Today’s Links:

THE ESSENTIAL EIGHT

China May Launch “Substantive” Economic Reforms -Caijing  original article–中国新一轮经济体制改革或将“实质性”启动-财经网–interesting timing of leak on day GDP data comes out, also discuss this in the Dealbook column // A new round of key economic reforms, with “substantial” elements, is brewing in China, as the new leaders are seeking ways to power a sustainable growth four months after they were officially in power, Caijing learned. “The restart of a new round of economic reforms will have a vital impact on the Chinese economy,” a source close to China’s top policy making agencies told Caijing, referring to a guideline expected to be announced at a plenary meeting of the Central Committee due this fall. Reforms in areas such as taxation, finance and energy, which are well-prepared, will first kick off, said the source.

Related: Central Gov’t ‘Set for Economic Work Conference’ – The central government is about to hold its semiannual economic work conference this week, a source from a government think tank who declined to be named said. The meeting will set the tone for economic policies for the next half year. The focus will remain on reform and structurally rebalancing the economy, the source said.

GlaxoSmithKline accused of ‘criminal godfather’ behaviour in China – Telegraph  GSK in major trouble in China, foreign head of China business has left the country, PSB looking at other firms too // GlaxoSmithKline behaved like a criminal “godfather” in China, dispensing some 3 billion yuan (£323m) in bribes since 2007, Chinese police said on Monday. // audio of PSB briefing

Related: [视频]葛兰素史克（中国）高管被立案侦查_新闻频道_央视网　Monday CCTV Evening News 3 minute report on Glaxo Smith Kline bribery case, including comments from one of the detained glaxo china execs…perhaps as much about going after an MNC as it is about trying to drive down pharma prices down // 央视网消息(新闻联播)：本台记者从公安部了解到，备受关注的葛兰素史克( 中国)投资有限公司涉嫌严重经济犯罪案件的调查已有初步进展，该公司梁宏、赵虹燕、黄红、张国维等四名高管已被警方以涉嫌商业贿赂和涉税犯罪采取刑事强制措施。本台记者近日奔赴长沙了解案情，面对面采访部分涉案人员。透过已经查明的案件细节，一个跨国药企的商业贿赂利益链逐渐清晰，将药价推向虚高的幕后黑手开始浮出水面。

Related: Pharma giant in bribery scandal|Society|chinadaily.com.cn the travel agency angle is not just used in pharma…lots of MNC HQs are probably checking their expenses again // Police are probing other officials and hospitals that may be involved. The case emerged after police found the annual turnover of Shanghai Linjiang International Travel Service had surged from millions of yuan to hundreds of millions of yuan in recent years with little travel business, and later discovered its cooperation with GSK since 2007. The travel service could not be reached by China Daily on Monday. The company’s Web page cannot be opened.

Related: GSK response to China investigation | 2013 | Press releases | Media | GlaxoSmithKline GSK shares the desire of the Chinese authorities to root out corruption. These allegations are shameful and we regret this has occurred.We will cooperate fully with the Chinese authorities in the investigation of these new allegations. We will take all necessary action required by the outcome of this investigation.In the meantime, we are taking a number of immediate actions. We are reviewing all third party agency relationships. We have put an immediate stop on the use of travel agencies that have been identified so far in this investigation and we are conducting a thorough review of all historic transactions related to travel agency use. We also intend to conduct a rigorous review of our compliance procedures in China.

Pettis: On China’s ‘Superficial’ Bulls And ‘Broken Clock’ Bears | Zero Hedge As China’s growth continues to slow and as its debt problems become obvious to even the most bullish, the stopped clock analogy is working overtime. How does it work? First, we must assume that there are only two possible positions one can take on China’s economy. The “bull” position is that China is in very good shape and is more or less doing everything right, even though (the remaining bulls have been adding lately) its economic growth must slow down a little. The “bear” position is that China must collapse within six months. Of course this is just dumb. There are other far more likely alternatives for China that involve neither perpetual double-digit growth nor collapse. For example, I have been skeptical about the sustainability of the Chinese growth model since at least 2006-7 but I have never argued that China would collapse, let alone collapse within six months.

Wealth Products Threaten China Banks on Ponzi-Scheme Risk – Bloomberg long piece on the WMPs // In May, among 2,255 maturing wealth products that disclosed performance, only four failed to deliver the highest expected yield, according to Benefit Wealth. All were linked to the performance of gold and foreign currencies. “The big question is not only how do banks meet their ever-growing obligations, but also how to make hundreds of millions of investors realize that these are not real deposits,” said Ye Linfeng, an analyst at Benefit Wealth. “Such false perception is devastating to banks, which essentially assume far more responsibility and liability than they should have and can possibly cope with.”

US outraged after Israel backs out of terror suit – Israel News, Ynetnews Congress, White House angry at Israel for decision to back out of trial against Bank of China for involvement in laundering of money for Hamas, Islamic Jihad. The reason: China conditioned Netanyahu’s state visit on Israeli promise not to testify in trial. Now, US threatening to subpoena Ambassador Oren

Related: Israeli prime minister Netanyahu gets flak for yielding to China – FT.com Benjamin Netanyahu faces a domestic political scandal with possible international repercussions after news emerged that his government withdrew a witness in a US lawsuit brought on behalf of terrorism victims after facing pressure from China. On Monday an Israeli government official and a lawyer representing the victims confirmed a newspaper report this weekend that the Chinese government threatened to cancel a visit by the Israeli prime minister to China in May if he allowed a former intelligence official to testify against Bank of China in a New York court.

China to Back Solar Panel Makers With 35 Gigawatt of Installs – Bloomberg  China, the world’s biggest maker of solar panels, plans to increase fivefold its installed solar capacity to more than 35 gigawatt by 2015 to support an industry faced with declining profits, slowing exports and a supply glut. The nation will add 10 gigawatt of solar-power capacity annually over the next three years, according to a statement from the State Council posted on the central government’s website today.

Related: 人民日报-国务院出台意见促进光伏产业健康发展 开拓国内应用　化解过剩产能 装机年增千万千瓦，鼓励发展分布式光伏发电 Page 1 People’s Daily Tuesday on the solar plan

Closer Look: Guangdong Officials Wisely Came Clean on Soil Pollution – Caixin  On July 10, land and resources officials in the southern province of Guangdong gave the local people’s congress a report on a survey of soil pollution in the Pearl River Delta region. This was the first time in China such information was made public. The report was astonishing. It said that 28 percent of the soil in the delta region was affected by heavy metal pollution. Equally astonishing to the public was the decision to release the data.

 

BUSINESS AND ECONOMY

China GDP Claims Don’t Matter–Derek Scissors In this context, it doesn’t much matter what the SSB says happened in the first half of the year. Most likely, the Chinese economy was very sluggish, an entirely predictable result of ugly policy choices in 2008–2009. But we can’t be sure of that, just as we shouldn’t have accepted the claims of a successful Chinese response to the financial crisis. What we can be sure of: more competition, financial deleveraging, restructuring away from heavy industry, and greater rights for farmers and workers would create an environment where China could say its economy is thriving, and it would be the truth.

China Slowdown Sends Ordos to Bust as Li Grapples With Credit – Bloomberg Ordos’s implosion stands at one extreme of a national slowdown that a government report yesterday signaled may deepen this quarter, with industrial output gains last month matching the weakest since the 2009 global recession. The challenge for Li’s administration is to assure growth is resilient enough for the world’s second-largest economy to weather busts in local finance and industries ridden by overcapacity. “Ordos is a warning to other places in terms of how to guide the local economy and in what not to do,” said Yao Wei, China economist at Societe Generale SA in Hong Kong. “The local governments are still not waking up to what they should do in this new environment.”

Bulls and bears duke it out on China | | MacroBusiness Above is a very interesting debate aired late yesterday on CNBC between Bill Smead of Smead Capital Management, Stephen Green of Standard Chartered, and Simon Warner of AMP Capital, assessing the implications of China’s latest second-quarter growth figures, which came in at 7.5%. //How are Snead Capital Management’s returns?

China’s Economy Depends on Its Politics – Bloomberg View  Western investment analysts have been reassuring their clients that China isn’t about to crash, that its leaders retain enough control to oversee much-needed reforms. The truth is, if Xi and Li are to succeed, they will have to surrender some of that control to their people.

China’s H1 fiscal revenue growth slows down – Xinhua | Total fiscal revenue stood at 6.86 trillion yuan (1.12 trillion U.S. dollars) in the first six months, according to data released by the Ministry of Finance on Monday. The pace was 4.7 percentage points lower than the same period of last year, and slightly lower than the country’s economic growth in the first half, said the ministry.

51城规划空港经济区 专家提醒谨防变相圈地_财经频道_一财网 据不完全统计，全国已有51座城市提出空港经济区的相关规划，不仅包括广州、郑州等一线城市和省会城市，一些三四线城市也在蠢蠢欲动。

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POLITICS AND LAW

Chinese Court Ruling Deals a Blow to the Labor-Camp System – NYTimes.com The case of Ms. Tang, popularly known as the “petitioning mama,” has been widely covered in the domestic news media. On Monday, even People’s Daily, the mouthpiece of the Chinese Communist Party, hailed the decision and demanded an end to re-education through labor. “All of society should remember the misfortune and hardship endured by a mother, and more importantly, the duty of the judicial system, which is to let the people experience justice and fairness,” it said.

新疆维稳形势严峻 派出所长25天高强度工作牺牲_新闻_腾讯网 Local police chief in Xinjiang dies on the job after working 25 days straight

李天一案受害人回应陪酒质疑 称性权利不可侵犯_网易新闻中心 Li Tianyi’s defense team making some nasty public accusations about the victim // 京华时报（微博）讯 针对媒体报道李某某轮奸案，李家人对涉案女子是否为酒吧陪酒员产生疑问一事，受害人杨女士昨天委托律师发布声明，称杨女士不接受对自己是“陪酒女”的质疑，而且任何女人都享有性的不可侵犯的权利。声明还称双方律师均已办理查阅案卷的手续。

未来基层治理“网格化”实验 – 经济观察网 － 专业财经新闻网站 Economic Observer on “Grid Management” // 导语：网格化管理系统在全但是，高科技和精密化的管控也引发了担忧：部分学者认为，如果分寸把握不好，有些地方政府会借此扩大权力边界，影响到公民自由和隐私。国“试点”的城市社区和乡镇陆续建成。这套更为精密的社会管理模式被视为社会管理创新的重大举措。

Chinese Whistleblower in Guangdong Suffers Ruthless Reprisal – chinaSMACK  Southern Metropolis Daily report – There’s an Uncle Qu in Guangzhou who exposes the personal use of government vehicles, and there’s also a part-time whistle blower in Huizhou that goes by the name “Uncle Ou of Huiyang”. Yesterday morning [July 8], at about 9:50am, Huizhou’s famous netizen “Uncle Ou of Huiyang” (real name Li Jianxin) went out by car. After he was hit and stopped by another car while in a remote industrial park in Huiyang District Yonghu Town, he was attacked by 3 men with acid and hacked with knives. In the end, a large area on his back was burnt, two of his fingers were chopped off, his wrists were injured, and his right eye was blinded.

Land in China: Über Touchy | Nomadically Curious Visual Thoughts In this first video, which could be looked at as on the positive side of the topic, people were deftly scared to talk to me because they didn’t want their local developers to know. Its hard to talk to people when they see you and intrinsically become scared. This was a bit ironic, with my primary “hard hitting” question being: What did you buy when you moved into your new house? You’d think this wouldn’t be a sensitive question, but the fact is: once there’s a camera, a foreign reporter and anything remotely to do with land, development, or relocations — everything becomes über sensitive. And while these questions don’t seem so sensitive to me, when subjects get scared you have to respect their lives and safety. Developers, governmental officials and Chengguan (城管) can make people’s lives miserable. And what do they really have to gain by talking to a foreign reporter? Not much.

 

FOREIGN AND DEFENSE AFFAIRS

Chinese probe reaches record height in space travel – Xinhua China’s space probe Chang’e-2 has flew to an outer space about 50 million km from the Earth, marking a new height in the nation’s deep space exploration, Chinese scientists said on Sunday. The probe, which is now “in good conditions”, reached the height at around 1 a.m. Sunday Beijing Time, the State Administration of Science, Technology and Industry for National Defence(SASTIND) said in a statement. Chang’e-2 will be able to travel to a distance as far as 300 million km away from Earth, according to calculations done by scientists from the Beijing Aerospace Control Center.

China launches experimental orbiter – Xinhua The orbiter was carried by a Long March II-C rocket. It will be used to conduct spacial scientific and technological experiments.

Move to nationalize 400 remote islands in the works | The Japan Times The government plans to establish a new council aimed at strengthening the administration of Japan’s 400 or so remote islands to ensure it has control over natural resources in the surrounding waters, the source said. The step might include islands that have no legal owners. Japan’s fringe islands define the limits of its territorial waters, and the government is keen to further protect those areas in light of China’s incessant maritime activities near Japan’s territorial waters.

‘They will come in and take us over’: Small tropical island of Ishigaki is latest flashpoint between China and Japan – The Independent He believes an increasingly assertive China, some 120 miles away, is picking a fight with Japan. “They’are waiting for our strength to weaken and then they will come in and take us over. The central government must show now that we are strong and can defend ourselves.” For now, the only visible sign that Tokyo is heeding that advice is the fleet of Japanese coastguard vessels crowding Ishigaki harbour. The boats have been sent to protect a group of goat-infested, uninhabited rocks known here as the Senkakus, about 100 miles away.

China Ships Pass Via Strait North of Japan as Tensions Run High – Bloomberg Five Chinese naval vessels were spotted heading east through the Soya Strait north of Hokkaido Island on July 13, Japan’s Self-Defense Force said yesterday. It was the first time Japan had confirmed such a passage though Chinese ships may have passed through unnoticed before, Takashi Inoue, a spokesman for the Self-Defense Forces, said by pho ne.The passage through the strait, also called La Perouse, followed Chinese naval drills with Russia and may exacerbate tensions running high over a territorial dispute and China’s growing military power.

The arch angle on booming Chinatown | Arts and Culture | Mail & Guardian More Chinese still make their way to South Africa. But the Chinese arriving now make up new waves of migration. While the 1990s saw Chinese arrive from big cities such as Beijing and Shanghai, the newcomers come from across the expanse of the Middle Kingdom — as one of China’s names for itself, Zhong Guo, translates into English. It’s the country cousins from the rural hinterlands who the Chinatown locals say are oblivious to the p’s and q’s of “polite white”. They blame these migrants for enforcing stereotypes that all Chinese hock and spit in the streets, string bedsheets across windows as curtains and shovel rice into their mouths and speak at the same time.

Ghana deports thousands in crackdown on illegal Chinese goldminers | guardian.co.uk Immigration authorities say more than 4,500 Chinese nationals have been repatriated after a series of swoops on illegal goldmines. The Guardian has learned that Ghana’s government, which depends heavily on China for billions of dollars in loans and as its major trading partner, believes Beijing may be retaliating, damaging relations between the two countries. “Of late we have seen a tightening of the visa regime at the Chinese embassy for Ghanaians. We don’t know whether this is a manifestation of our actions to deport illegal Chinese goldminers,” said Alhaji Inusah Fuseini, Ghana’s minister of lands and mines. // so has Beijing cracked down around Sanlitun?

PHL: China statement on territorial dispute ‘baseless’ | News | GMA News Online Foreign Affairs spokesman Raul Hernandez branded as “baseless” the statement of the Chinese Foreign Ministry that said “the Philippines’ claim that it had exhausted almost all political and diplomatic avenues for a peaceful settlement of dispute is completely not true.” The exchange of diplomatic barbs is the latest manifestation of longstanding territorial feud between Asian superpower China and the Philippines over South China Sea territories that have reignited in recent years by tense confrontations between Chinese and Philippine vessels in two disputed shoals – Scarborough and Ayungin – off Manila’s western coasts. // 菲外交部：已不可能就南海问题与中国继续双边磋商_资讯频道_凤凰网 top story on some news portals this AM // 中新社马尼拉7月15日电 (记者 张明)菲律宾外交部15日公开声称，菲律宾已“不可能”与中国就南海问题继续进行双边磋商。

 

HONG KONG, MACAO AND TAIWAN

Obama signs law backing Taiwan U.N. civil aviation bid | Reuters President Barack Obama on Friday signed legislation expressing U.S. support for Taiwan’s campaign to join the International Civil Aviation Organization (ICAO), a United Nations agency that promotes safe air travel, the White House said. Obama’s endorsement of the bill, which easily passed both chambers of the U.S. Congress in June, risks angering China, which claims sovereignty over Taiwan and generally opposes the island’s efforts to join international organizations.

Chinese think tank keeps distance from damning Taiwan corruption report | South China Morning Post The Chinese Academy of Social Sciences (CASS) was responding to earlier media reports that the Berlin-based corruption watchdog Transparency International had tasked a subsidiary of CASS to conduct a public opinion poll on corruption in Taiwan. “This information is mistaken,” the instution said in a statement on Sunday, adding that the research firm cited in the report, Cass Research Centre (CRC), was not its subsidiary. CRC was named in Transparency International’s report as the survey company for Taiwan.

 

TECH AND MEDIA

微信5.0会杀死自媒体吗? – 经济观察网 － 专业财经新闻网站 导语：很多自媒体都还是认为，微信5.0的“订阅号”其实还是挺“狠”的，“订阅号”制度推出后，信息阅读率会大幅下降，个人自媒体会死掉80%到90%。

Independent thinking “not encouraged” in China’s film schools | Radio Netherlands Worldwide The Chinese authorities have put an abrupt end to a training programme for aspiring independent filmmakers. And there’s still no official explanation why the 9th Edition of the Li Xianting Film School in Beijing was closed down a day before it was due to begin.

人民日报：不能无条件纵容《小时代2》《小时代3》的出现-时政频道-新华网 在中国社会物质文明日益发达的今天，文艺作品对于物质和人的关系的探索是必要的和有价值的，但探索如果仅仅停留在物质创造和物质拥有的层面，把物质本身作为人生追逐的目标，奉消费主义为圭臬，是“小”了时代，窄了格局，矮了思想。史学家钱穆说中国知识分子远从春秋时起，便以“在世界性社会性历史性里，探求一种人文精神，为其向往目标的中心”，知识的功能虽表现在知识分子身上，而知识的对象与其终极目标，则早已大众化。将理想生活和知识对象致力于人文之共同目标，一切的追求和发展，都是工具和阶梯。今天，中国许多知识分子“言必称西”，认为中国文化传统以大化小，是对个性和个体人发展的剥夺和压迫。但他们忽视了一个重要的常识：强调发展个性、发挥个体人的天赋特长的西方社会，对于个体的尊重和对于他者即社会大群体的尊重和奉献，通过宗教的层面上升到价值领域并获得共识、付诸实践

 

SOCIETY, ART, SPORTS, CULTURE AND HISTORY

China: End Discrimination, Exclusion of Children With Disabilities | Human Rights Watch Children with disabilities face significant hurdles in accessing education in China, and a substantial number of them receive no education at all, Human Rights Watch said in a report released today.

郑州街头讲英语流浪女系海归 曾在北京媒体工作_新闻_腾讯网 English-speaking homeless woman in Zhengzhou turns out to be a returnee, once worked for a TV station in Beijing…so much need for mental health services in China // 流浪女，能说地道的英语，曾在新加坡留学，在北京一家电视台工作过……最近，一名露宿郑州金水河岸的女子，引起广泛关注，她究竟为何流浪？

书法失落让中国人文素质全面失落（视频） – 经济观察网 － 专业财经新闻网站 Economic Observer on the decline of calligraphy // 导语：20世纪后50年代以来，由于书法的失落和消失，中国人民人文素质的全面失落，这是我们应该引起重视的很重要的问题。本期节目我们为你呈现“2013年中法软实力”系列论坛第二场演讲嘉宾中国国家画院副院长、著名书画艺术家曾来德在现场题为“书法与中国文化”的精彩演讲。

Chinese bride brawls in French lavender field – CHINA – Globaltimes.cn What should have been a scenic picture session in a lavender field in Provence in southern France erupted into a bitter brawl, as two young Chinese couples fought over a photobombing incident.  According to photos posted on Sina Weibo Thursday by a guide, two males are seen engaged in a fist fight, while two young women, one in a wedding dress, are grappling with each other to the side. The guide, who asked not to be named, told the Global Times one of the couples had just married. “It started because the young couple and their friends accidentally stepped into the newlyweds’ photo. The women began to argue first, and then the boyfriend and the groom joined in,” he said.

Hidden cameras found in abbot’s bedroom- China.org.cn Surveillance cameras have been found in the abbot’s room at Shaolin Temple, with one pointed at the abbot’s bed. An employee told yesterday’s Economic Observer they were discovered during renovation work. It’s not known who installed the cameras but the employee believed there could be a link with disputes over the temple’s growing popularity as a tourist attraction.

 

ENERGY, ENVIRONMENT, SCIENCE AND HEALTH

Shell deepens Chinese shale reach with Hunan tie-up  While Shell appears to be reaping the rewards of its early running in Chinese shale, other analysts said the major’s intentions over the Hunan tie-up were difficult to discern given its longstanding relationship with CNPC – the country’s dominant energy producer. “You could read [the agreement] in one of many ways – one of which is asking what Shell is up to,” said Simon Powell, head of Asian oil and gas at CLSA. “Is Shell’s PSC with CNPC not working and, therefore, they’re looking to go somewhere else? Or are they just trying to expand their footprint? I think the only thing you can say is it shows Shell’s intent, that shale in China is something that they’re going to pursue. You would think they would want to continue to pursue it with CNPC, but maybe they’re hedging their bets by getting into relationships with smaller state-owned enterprises,” Powell said.

 

BEIJING

Beijing beefs up flood safety |Society |chinadaily.com.cn Beijing is increasing safety inspections related to the predicted heavy rainfall in the capital to avoid a repeat of the flooding disaster during a storm last year that claimed dozens of lives. Tens of thousands of rescue personnel are making inspections in Beijing, especially around the mountainous areas in the suburbs and overpasses downtown.

北京地铁公交明年可能涨价 官方称正在研究-财经网 Beijing to raise public transit prices? // 央视网(记者祝娟 报道)日前，一项由北京市交通委员会开展的《北京交通运输业经济统计专项调查》正式进行，有消息称，这项年底出台的调查结果，将使北京市地铁公交涨价成为可能。针对这一传闻，北京市交委相关负责人表示，涨价目前尚在研究中，一切等调查结果出台后公布。

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