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Remember the new stimulus package that so excited people last Friday? It turns out much of it was not new, as MNI explains in China’s ‘Make-Believe’ Stimulus May Not Save 2012:

“This isn’t new stimulus — the stock market shouldn’t be overreacting to this sort of thing,” said Yi Xianrong, an economist with the Chinese Academy of Social Sciences, a leading government think tank.

Fan Jianping, another government economist, admitted in an interview in Monday’s China Securities Journal that many of the projects feature in the government’s 12th Five Year Plan, the economic and social development blueprint governing 2011 to 2015.

Even with the approvals, it is unclear when data will reflect any increase in investment activity. Official reports released Sunday and Monday suggest the economic bleeding is gradually worsening, while investment houses are continuing to cut their forecasts for growth this year.

I have started reading Harry Potter to our twins and so am always on the lookout for Unicorn references. FT Alphaville delivers one, in a discussion of the underwhelming stimulus–Is the 2012 China stimulus some kind of unicorn?

However, we stay with the view that monetary easing would have little impact to growth as the economy is in a liquidity trap. NDRC recently approved a large sum of infrastructure investment. Most of them were included in the 12th five-year plan, hence this should be viewed as planned projects pushed forward instead of new projects. Further, it is not clear how these projects will be funded.

Japan’s decision to acquire the Diaoyu/Senkaku islands has infuriated China.

Xinhua weighs in with Japan’s island-buying move severely violates China’s sovereignty, Premier Wen Jiabao vows “absolutely no concession” on Diaoyu Islands and the Ministry of Foreign Affairs of the People’s Republic of China declares that:

The Chinese government solemnly states that the Japanese government’s so-called “purchase” of the Diaoyu Island is totally illegal and invalid. It does not change, not even in the slightest way, the historical fact of Japan’s occupation of Chinese territory, nor will it alter China’s territorial sovereignty over the Diaoyu Island and its affiliated islands. Long gone are the days when the Chinese nation was subject to bullying and humiliation from others. The Chinese government will not sit idly by watching its territorial sovereignty being infringed upon. The Chinese side strongly urges the Japanese side to immediately stop all actions that may undermine China’s territorial sovereignty. Japan should truly come back to the very understanding and common ground reached between the two sides, and should return to the track of negotiated settlement of the dispute. Should the Japanese side insist on going its own way, it shall have to bear all serious consequences arising therefrom.

Given that next Tuesday, September 18th, is the 81st anniversary of the Mukden Incident, expect the release of a lot of anti-Japanese anger in China over the next few days. Protests are likely, though not in Beijing given the sensitive political environment. Economic retaliation is also probable, though at this point there is no reason to believe this will escalate further than it has in the past.

The Wall Street Journal has a good summary of the Xi Jinping situation in Chinese Mystery: Where Is Jinping?:

The bottom line is that there is no reliable information to go on,” said Kenneth Lieberthal, a White House official during the Bill Clinton administration and now with the Brookings Institution, a think tank. “Something is amiss—otherwise, they would have found an opportunity for him to be seen. But whether he hurt his back or there is some other problem is something that at this point there is no way to know with confidence.”

In Xi Jinping’s Absence Stokes Rumor Mills in China the New York Times suggests possible ailments:

Mr. Xi could appear publicly at any time and quash the speculation about his status. But for now rumors are replacing real information, with one of the most common being that he hurt his back playing sports. Popular Internet search sites have aggressively removed references to Mr. Xi and have even blocked searches for “back injury.” One well-connected political analyst in Beijing said Mr. Xi had suffered a mild heart attack but that it was not serious enough to prevent him from assuming China’s top positions. “They say it won’t affect the party meeting,” the analyst said.

This is the first time that the PRC leadership transition has really mattered to global markets. Uncertainty is always bad for for markets, and the political opacity is yet another reason that RMB will not supplant the US dollar any time soon. As for what is going on, I stand by my comments yesterday, that I am very skeptical of the accuracy and sources of the worst rumors, given security in Beijing, the current travels of top leaders Hu Jintao, Wu Bangguo and Wen Jiabao as well as the strong stock market performance Friday. The again, perhaps I am guilty of wishful thinking.

On to today’s links:

BUSINESS AND ECONOMY

Chart of the week: who makes China’s exports – local companies or foreign? | beyondbrics – While exports may be slowing, those of foreign-invested enterprises are shrinking particularly fast, contracting at an annual rate of 5 per cent in July. But this is not a new trend. As the chart below shows, foreign companies (which include Sino-foreign contractual joint ventures, Sino-foreign equity joint ventures, and foreign-owned enterprises) are declining as the engine of exports, from nearly 60 per cent in 2006 to just over 50 per cent this year. State-owned enterprises have been declining as a driver of exports for much longer – since before the mid-1990s. It’s local private enterprise that is taking up the slack. If the trend continues, private enterprises will be the main source of Chinese exports within three years.

China’s consumer confidence weakens slightly in August – Xinhua | English.news.cn – Chinese consumers, particularly those with bank cards, were slightly less confident in consumption in August, as inflation rebounded slightly in the month due to higher food prices, according to an index released Monday.

China plans slower growth in domestic consumption – Xinhua | English.news.cn – China aims to expand its retail sales of consumer goods to around 32 trillion yuan (5.05 trillion U.S. dollars) by 2015, with an average annual growth rate of 15 percent, according to the 12th Five-year (2011-2015) Development Plan for Domestic Trade released by the State Council, China’s Cabinet, on its website. The targeted growth in retail sales for the 2011-2015 period is 1.1 percentage points slower than that seen in the past decade when an average growth rate of 16.1 percent drove the country’s retail sales of consumer goods to 18.4 trillion yuan in 2011.

Iron Ore Climbs Most in Four Years on Subways-to-Railways Spend – Bloomberg – another short entry opportunity?// The commodity at the Chinese port of Tianjin rose 6.7 percent to $95 a metric ton, the largest one-day gain since December 2008, according to data from The Steel Index Ltd. Swaps to bet on, or hedge, the price in October exceeded $100 a ton for the first time in three weeks, according to Clarkson Securities Ltd., a unit of the world’s largest shipbroker.

FT Alphaville » Is the iron ore panic over? – Or is it just a dead cat bounce? Obviously we think it’s probably the latter, but in the interests of objectivity here’s the counter argument via UBS analyst Tom Price

American Manufacturing Is More About China Than The Domestic Housing Recovery – Business Insider – US manufacturing activity is very sensitive to China growth. Most of US manufacturing is high tech and heavy industry – airplanes, industrial tech and healthcare equipment – and not apparel or toys. Two-thirds of US exports are capital goods and industrial materials, which is closely linked to EM growth and commodity demand. In 2012, US Mfg ISM has softened with slowdown in China investment/construction activity, while US residential construction activity and job growth has improved.

Sound Financials Recharge China’s Fast Trains – Caixin Online – Four of the nation’s 14 high-speed rail lines have financially broken even since bullet trains started full-speed, intercity service in China two years ago, giving impetus to a Ministry of Railways expansion. Passenger ticket revenues have so far matched expenses – including debt payments – for the busy Beijing-Tianjin, Shanghai-Nanjing, Beijing-Shanghai and Shanghai-Hangzhou lines, a source at the National Development and Reform Commission (NDRC) told Caixin.

China on track to hit ambitious public housing target | Reuters – Construction of affordable housing is a crucial part of China’s spending this year, and its importance is heightened as China’s cooling trade sector forces the country to fall back on state investment to drive growth. China aims to start building 7 million such homes and complete construction of 5 million in 2012, compared with actual starts of 10.4 million units and completion of 4.3 million in 2011.。。China’s real estate sector directly affects more than 40 other industries, from steel to furniture, and its investment accounted for 14 percent of gross domestic product in the first half this year.

楼市风险涟漪： 外资基金筹谋撤离|楼市风险||外资基金_21世纪网 – 21st century business herald on foreign real estate funds quietly pulling out of china. any reason to think these guys are smart money compared to the chinese firms that are buying up land?// 的确有一些外资在悄然撤离中国楼市，尤其是外资房地产基金。”同策房产董事长孙益功此前对媒体表示。

首套房贷八五折退市 利薄之下银行转战小微_财经频道_一财网 – banks ending 15% rate discount on first mortgages, to protect profits?//

开发商拿地加快　“拐点说”再起 新华社——经济参考网 – economy reference news on real estate developers increasing their acquisitions of land, may be sign of “bottoming/turning point” for real estate market//

国务院印发国内贸易发展”十二五”规划 新华社——经济参考网 – State Council releases Internal Trade Development PLan, to spur domestic trade and consumption//《国内贸易发展“十二五”规划》根据《中华人民共和国国民经济和社会发展第十二个五年规划纲要》编制，主要阐明“十二五”时期我国国内贸易发展战略，提出发展政策导向，明确政府工作重点，引导市场主体行为，促进国内贸易又好又快发展。

China to raise gasoline, diesel prices – Xinhua | English.news.cn – The benchmark retail price of gasoline will be lifted by 0.41 yuan per liter and diesel by 0.46 yuan per liter, according to a statement posted on the website of the the National Development and Reform Commission

Buyers Dry Up in China as Economy Slows – WSJ.com – Notably, the import data also suggest further weakness in exports for a nation sometimes called the world’s factory floor, as a large portion of inbound shipments are used as inputs for finished goods that are then exported.Imports earmarked to be processed into finished goods for re-export fell by 1.5% from a year earlier, an indication that exporters are cutting back on new supplies in anticipation that the market for their wares will continue to deteriorate.

China Aug vehicle sales up 8.3 percent, pickup seen in autumn | Reuters – The market is likely to improve in September when the peak auto selling season begins, but even then the growth rate is expected to be far from the rapid expansion of three years ago, industry observers say.

Soybean Reserves Smallest in Four Decades After Drought – Bloomberg – more food inflation ahead in china//Crop prices surged to records this year as drought parched fields across the U.S., South America and Russia. The U.S. Department of Agriculture cut its forecasts the past two months and the Bloomberg survey indicates the agency will do so again tomorrow, leaving Brazil as the top soybean supplier for the first time. Feed costs are rising for meat producers including Tyson Foods Inc. (TSN), the largest in the U.S., and three United Nations agencies said Sept. 4 that swift action is needed to avert a food crisis.

 

POLITICS

Rumours swirl as China’s Xi vanishes – FT.com – “We know Xi Jinping is supposed to be the next leader [of China] but we have very little idea how he was chosen, which is quite amazing for such a significant position in world politics,” said David Zweig, a professor specialising in Chinese politics at Hong Kong University of Science and Technology. “Perhaps he’s got some health problems, but they don’t want to let the public know about it because they feel it’s important to present the image of a strong healthy leader taking China into the future.”

习近平身体无大恙，外界对北京情况过度解读 Boxun refutes the Xi rumor it first spread and then deleted, blames it on the last gasp of the leftists…//  针对几天来对习近平和北京情况的异常现象，外界有各种解读，“刺杀”传闻铺天盖地。博讯据可靠消息，习近平谢绝外事活动，主要是为筹备18大的准时召开，时间太忙。消息透露，习近平身体是有点状况，但很轻微，无大恙。 消息人士表示，近期各种传言，包括习近平的情况，薄熙来会被免于起诉等，是左派最后的疯狂，制造谣言。

贺国强活动报道集–时政–人民网  no official appearance for He Guoqiang since August 30

China’s Revolution Risk – Telegraph Ambrose Evans-Pritchard known for hyperbole. anyone else hear Cheng Li say this, or have a recording? // We all know by now about the simmering leadership crisis in China. The Bo Xilai affair has lifted the lid on a hornet’s nest. I had not realised quite how serious the situation has become until listening to China expert Cheng Li here at the Ambrosetti forum of the world policy elites on Lake Como. (My hardship assignment each year.) Nor had anybody else in the room at Villa d’Este. There were audible gasps.  The rifts within the upper echelons of Chinese Communist Party are worse than they were during the build-up to Tiananmen Square, he said, and risks spiralling into “revolution”.

人民日报-抗击非典 人民利益高于一切（科学发展　成就辉煌·十年回眸·重大事件亲历） – People’s Daily series on major events of last ten years. Today’s entry, on page 1, is the successful battle against SARS//

北京将集中查处封堵出入境游客夹带违禁出版物–新闻频道–中青在线 – beijing crackdown on foreign publications and tv broadcasts. sensitive time// 记者近日从北京市旅游委获悉，即日起至10月下旬，本市将集中对非法出版物进行集中查处。在打击游商兜售非法出版物的同时，将封堵出入境游客购买、夹带违禁出版物。

Commentary: Hu’s call for social equity crucial for China’s future – Xinhua | English.news.cn – Hu said China will phase in a system to ensure a system of social equity that features equal rights, equal opportunities and equal rules — a system that offers people equal access to development opportunities. Observers noted that Hu made the remarks ahead of the 18th national congress of the Communist Party of China (CPC), during which the new central leadership will be elected, and many believe his call for equity signals what will be a key aspect in China’s development for years to come. His words quickly made headlines in China’s major websites and prompted wide discussion, as social equity has become more important than ever as well as a key for tackling most of China’s current domestic challenges following the country’s decades of rapid development

 

FOREIGN AFFAIRS

Russian Farm, Chinese Farmer – NYTimes.com – OSTANINO, Russia — When a Chinese investor bought a farm outside this village a few years back, he was pleased enough to name it Golden Land. The soil was rich, the sunshine and rain bountiful. The land, deep in rural Russia, was also largely devoid of people. No more. Today, row upon row of greenhouses here teem with dozens of Chinese farmhands picking tomatoes. And in a season with a bumper crop of tomatoes, the foreman said he would happily have employed hundreds more.. Today about 400,000 Chinese migrants live in Russia, making up only a tiny portion of all immigrants in the country, most of whom come from former Soviet states in Central Asia. Chinese migration could well increase, however.

Publicity official calls for better use of China’s social media – Xinhua | English.news.cn – A senior Chinese publicity official has urged to use the country’s burgeoning social media as a means to amplify “positive voices” and address social concerns. In a recent meeting of the State Internet Information Office, Wang Chen, the office head, called on officials to make social media a focus of online publicity, guidance and management, and make it play a “greater and more positive role” in serving the country’s overall work. Wang, who is also the deputy head of the Publicity Department of the Communist Party of China Central Committee, said the fast development of social media has created opportunities for the government to engage with the public. However, the booming service has, at the same time, generated new challenges for the guidance of public opinions and the regulation of information dissemination order on the Internet, he said.

国家互联网信息办：推动社交网络健康发展 _互联网_科技时代_新浪网 – “healthy development” pressure on weibo and social networks increasing in runup to 18th party congress// 据新华社深圳9月9日电 国家互联网信息办公室日前在深圳召开会议，总结推广有关地区和部门积极运用微博客等社交网络服务社会、联系群众、引导舆论，推动社交网络健康有序发展的工作经验，要求全力做好迎接党的十八大网上宣传管理工作，为党的十八大胜利召开创造良好的网上舆论环境。

Facebook’s China problem – Fortune Tech – Facebook has no hope in China// Even if Zuckerberg did obtain permission to do business in China, there’s no guarantee consumers would sign up. The local market is dominated by competitors with diversified business models, like Sina (SINA) and Tencent, whose stocks are rising. On top of that, Beijing has a robust startup scene where entrepreneurs are turning out mobile applications and other digital products. I met one of its key players, Kai-Fu Li, for breakfast at the Opposite House, a modernist boutique hotel frequented by the tech investor crowd. The Taiwanese American was the founding president of Google China and now runs an early-stage Beijing venture capital fund and incubator called Innovation Works. “I thought Facebook’s window closed here a year and a half ago,” Li told me. He had met with Zuckerberg during a 2011 visit to Facebook headquarters. “It’s a lot more difficult now,” he says.

任正非：中国不开放就是死亡_文化头条_财经国家新闻网 – Huawei founder ren zhengfei says that if China doesn’t open up it will perish

 

SOCIETY AND CULTURE

Through a Thwarted Cinematographer’s Eye, China’s Cultural Revolution – NYTimes.com – Other images he made for the Heilongjiang Daily in northeast China have surfaced since the book’s publication, again uncovered by Mr. Pledge, who over the years has been sorting through cartons of Mr. Li’s negatives, meticulously kept in little brown envelopes. Some of that as-yet-unseen work will be part of a major photo exhibition opening at the Barbican Art Gallery in London on Sept. 13… Sim Chi Yin spoke with Mr. Li in his home in Beijing last month. Their conversation has been edited.

Jing Daily:Auction House China Guardian Makes High-Stakes Bet Against Sotheby’s & Christie’s – China’s oldest auction house, China Guardian, may only have a history stretching back to 1993, but in a little less than two decades the company has grown to become the fourth largest house in the world. With eyes now set on expansion outside of its mainland China home base, China Guardian is set to take on centuries-old international players like Sotheby’s and Christie’s at the upcoming autumn auction season in Hong Kong.

Phoenix TV building by BIAD-UFO, Beijing | Architecture | Wallpaper* Magazine: design, interiors, architecture, fashion, art – SW corner of chaoyang park// When China’s biggest private broadcaster, Phoenix TV, launches its new international media centre next month, viewers will feel a cultural shift – and not only because the opening marks the move of Phoenix HQ from Hong Kong to Beijing, the country’s political nucleus. The event will also bring an end to China’s dependence on foreign architecture

Ai Weiwei: ‘China’s art world does not exist’ | Art and design | The Guardian – A new London exhibition is putting the spotlight on contemporary art in China. I take issue with the whole notion

Panel discussion on “I, Ching,” a muscial about the life of Madame Mao – YouTube – Cecile Tang, considered one of the greatest Chinese language film directors of all time, began researching Jiang Qing’s story in the 1970s. She ultimately decided that this remarkable story might best be told through a musical. She wrote the play, the lyrics, and recruited others to help with music and choreography. I, Ching opens in the Los Angeles area on September 14, 2012.

 

ENERGY AND ENVIRONMENT

Sichuan’s Lost Pastures – Caixin Online – Deserts are conquering the once-verdant Zoige Natural Reserve in Sichuan Province, with a nearly five-fold increase of drylands since the 1990s

GM rice test researcher suspended from work |Society |chinadaily.com.cn – surprised still nothing in US press about this// BEIJING — A Chinese researcher involved in the controversial testing of genetically modified (GM) rice has been suspended from his work and put under investigation, the Chinese Center for Disease Control and Prevention (China CDC) reported on Monday evening.

人民日报-中国疾控中心要求美方提供论文研究详情（求证·后续） 论文第三作者被停职调查 – GM rice scandal makes page 4 of today’s People’s Daily, China requests data from US//

“加铝”、“加镁”、加盐、加糖、加色素 “掺杂掺伪”已成中药行业潜规则_财经频道_一财网 – contaminated chinese medicine may be rampant//

 

BOOKS

Amazon.com: Chinese Characters: Profiles of Fast-Changing Lives in a Fast-Changing Land : Angilee Shah, Jeffrey N. Wasserstrom, Pankaj Mishra – Chinese Characters is a collection, as Pankaj Mishra writes in his foreword, “to herald a new golden age of journalism about a ceaselessly fascinating country.” Contributors include a Pulitzer Prize winning journalist, a Macarthur Fellow, the China correspondent to a major Indian newspaper, and scholars whose depth of understanding is matched only by the humanity with which they treat their subjects. Their stories together create a multi-faceted portrait of a country in motion and an introduction to some of the best writing on China today

Out of Tibet | Danwei – The following is an excerpt from “Out of Tibet” by Alec Ash, a chapter in the new book Chinese Characters: Profiles of Fast-Changing Lives in a Fast-Changing Land, edited by Angilee Shah and Jeffrey Wasserstrom, published by the University of California Press.

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