The Sinocism China Newsletter For 09.12.12

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

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Chinese anger over the nationalization of the Diaoyu Islands continues to grow, stoked in part by a media and meteorological onslaught. China has sent ships to the disputed islands, newspaper front pages show China’s fury over the Diaoyu purchase, the PLA says it “reserves the right” to take action, four of China’s military regions have launched large-scale exercises (四大军区密集大规模军演 专家称系警告日本Shanghai has decided to rebrand an upcoming ‘Japanese’ Marathon and China now provides weather forecasts for the Diaoyu Islands:

Calling the move part of its official responsibilities, the China Meteorological Administration said in a statement that the Diaoyu Islands have been China’s inherent territory since ancient times and the surrounding sea areas have been part of the country’s traditional territorial waters.

So far these has been no explanation as to why the CMA did not provide these forecasts before yesterday…

Xinhua has officially refuted a rumor circulating online that it had issued a bulletin saying Japan and China had exchanged fire over the Diaoyu islands (新华网否认发布“中日军舰在钓鱼岛交火”消息). We should still expect that there will be no escalation to military hostilities as any clash with Japan would draw in the US, which China wants to avoid. But the propaganda and economic backlash may be just starting, and People’s Daily, coincidentally no doubt, tells us that:

China must accelerate upgrading and strengthening its nuclear deterrent and make it real and believable. China should change its past nuclear image, explore the possibility of using the nuclear deterrent to change China’s strategic environment peacefully but firmly and make China a large country that no country dare provoke easily.

In the midst of this dispute Japan has appointed a new ambassador to China. How do you say “tough job” in Japanese?

Meanwhile the World Economic Forum is underway in Tianjin. Premier Wen Jiabao was the star Tuesday and he signaled that China has ample policy room to meet China’s growth target:

“Be it monetary or fiscal, we still have ample strength,” Wen said yesterday at the World Economic Forum in the Chinese city of Tianjin. The government has 100 billion yuan ($16 billion) in a fiscal stabilization fund and “we will appropriately use that for preemptive policy and fine-tuning to propel stable economic growth,” he said.

Don’t bad things usually happen while the “global elite” discourse at Davos? Or maybe I am just upset I have not been invited….

Xi Jinping and He Guoqiang are still “missing” and Jeremy Page of the Wall Street Journal tells us that:

If he reappears within the next week or so, it is unlikely to affect the personnel changes at the 18th Communist Party Congress, when Mr. Xi is expected to take over President Hu Jintao’s most powerful post as general secretary of the party, they said. But if Mr. Xi is out of the public eye for much longer than that, his absence could influence the succession plans, possibly including negotiations over whether Mr. Hu should also step down this year as chairman of the Central Military Commission, which commands the armed forces, those people say.

The Pentagon understands economics better than most pundits and political hacks. In a new report the Defense Department says that China’s U.S. debt holdings aren’t a threat:

China’s holdings of more than $1 trillion in U.S. debt and the prospect that it might “suddenly and significantly” withdraw funds don’t pose a national security threat, according to a first-ever Pentagon assessment. “China has few attractive options for investing the bulk of its large foreign exchange holdings out of U.S. Treasury securities,” given their extent, according to the report dated July 20 and obtained by Bloomberg News.

On to today’s links:


Back-Scratching Developer Scales a Mountain – Caixin Online – Wanda seems to be one of the most politically savvy developers in China// The air is chilly on Mount Changbai even in summer, and heavy rainstorms can turn roads muddy and sometimes impassible. Under these conditions, construction workers have been racing against the clock to complete a 23 billion yuan resort in a heavily forested area about 30 kilometers from the west end of the mountain’s main road. At the center of the buzz is Dalian Wanda Group Co., one of China’s largest real estate developers.

China ‘harmonizes’ stock market ahead of party congress| – The previous gloom in the market radically changed after the authorities took action, said the newspaper, though some analysts reminded investors not to become giddy as the feel-good factor may be only temporary

Local Gov’t Debt Manageable, NDRC Official Says – Caixin Online – so who is right, as ursus sincae say much worse?// Credit risks associated with local government debt are still at a manageable level, an official at the National Development and Reform Commission (NDRC) says. “The ratio of local and central government debt to GDP is roughly 50 percent, which is lower than other European countries and the United States,” said Xu Lin, the NDRC’s director of finance.

China’s fiscal revenue rises 4.2% — Shanghai Daily | 上海日报 — English Window to China New – CHINA’S fiscal revenues grew 4.2 percent annually to 786.3 billion yuan (US$124 billion) in August, the Ministry of Finance said yesterday.The country’s central fiscal revenue dropped 6.7 percent annually to 376.5 billion yuan last month, while that of local governments rose 16.8 percent to 409.8 billion yuan, the ministry said in a statement.

Chinese property firms embark on land-buying spree| – Several large property enterprises in China with deep pockets bought land aggressively in the first half of this year, encouraged by the real estate market rebound, an industry expert says, adding that these enterprises could acquire even more land in the second half of the year.

China Slowdown Starts to Show in Labor Market – – A survey points to weaker employment growth at China’s manufacturers, with the service sector taking up some of the slack, in a sign that the nation’s economic slowdown is beginning to take a toll on the job market.Meanwhile, new loan data show tentative signs that government efforts to rekindle growth are beginning to have an impact.

Burberry profit warning chills luxury rivals | Reuters– I did a back of the envelope calculation about the aggregate size of 2008-09 monetary and fiscal stimuli in china and came up with 20-25 TRILLION rmb. if you assume 10-30% (an educated guess) of that 20-25T disappeared through corruption, you are talking about 2-7.5T RMB. Not all of that went overseas or into luxury goods, but a lot did. That scale of a corruption surge is not likely to be repeated, so the luxury sales growth from chinese buyers is not either. the government is now at a crisis point in dealing with corruption, and i dont think we should rule out its ability to make things a bit cleaner (it will never be clean). both points are bad news for luxury firms// British fashion house Burberry’s profit warning on Tuesday gave the clearest sign yet that a slowdown in China and Europe’s debt crisis is bringing a nearly three-year boom in demand for luxury goods to an end.

Taking a New Spin on Bridge Safety – Caixin Online – Catastrophic bridge failures have raised questions over the quality of recently-built structures, but many experts say overloaded vehicles have initiated most collapses

Why China’s Subway Boom Went Bust – Commute – The Atlantic Cities – Jin Yongxiang, a general manager at a Beijing subway consultancy, estimated to Caixin that “the liability of subway projects nationwide adds up to more than 1 trillion yuan,” or $158 billion. “From a macro perspective, that’s a huge debt burden.” To a Westerner, these numbers don’t seem too scandalous. Rapid transit systems in Europe and North America rarely make much more than 50 percent of their operating costs back in revenue, and new lines are built with the understanding that they will require subsidies to operate. //so why do so many pundits say China’s should make a profit? i get the subsidized losses mean citizens may be financially repressed argument, but do the critics spend a lot of time in Chinese traffic? People may be happy to deal with some financial repression IF it leads to alleviation of China’s massive traffic problems

China M&A: sights on Europe | beyondbrics – Chinese companies much prefer investing in Europe these days rather than the US, for a range of reasons from uncertainty over the upcoming US presidential election to the perception that Europe is just plain more willing to put itself on the block.Two reports on Chinese outbound mergers and acquisitions, released on Tuesday, show a significant shift toward investment in Europe, especially when it comes to non-resource investment.

Hong Kong CPAs under fire | China Accounting Blog | Paul Gillis – There is growing concern that the Securities and Futures Commission (SFC) suit against Ernst & Young in Hong Kong for failure to produce working papers could lead to the same delisting risk that U.S. listed Chinese companies face. I think that concern is misplaced. Hong Kong is not going to delist Chinese companies, but it might blow up its own accounting profession to keep them

Former Chinese Official Banked Stolen Funds in Singapore – Bloomberg – why pick on him, so many to choose from?// Li, who earned 3,000 yuan ($473) a month as section director at Poyang County Finance Bureau where he oversaw water projects, made a S$1.5 million investment in Singapore, claiming he was a general manager of a Chinese energy company when he applied for permanent residency in the city state, Tan said… Li is also separately accused by Chinese authorities of embezzling 94 million yuan, according to a report by the China Daily. Singapore and China don’t have an extradition treaty.

China New Loans Exceed Estimates as Wen Counters Slowdown – Bloomberg – China’s new lending was the highest of any August on record as the government tries to reverse an economic slowdown that threatens to cost jobs and undermine support for the Communist Party. New local-currency lending was 703.9 billion yuan ($111 billion) last month, the People’s Bank of China said today in Beijing. That was more than the 600 billion yuan median estimate in a Bloomberg News survey of 32 economists and 540 billion yuan in July.

人民日报-华西村里看“方向”(深化走转改 喜迎十八大·老党员话十年) – Huaxi Village gets page 1 People’s Daily love.



China’s Xi not seen in public because of ailment: sources | Reuters – China’s top leader-in-waiting Xi Jinping, who has set off a storm of rumors after not showing up at scheduled public events for over a week, is nursing an ailment, possibly a back injury suffered while swimming, sources said on Tuesday.

Chinese Puzzle: A Missing Heir Apparent and a Leadership Transfer Without a Timetable | World | – another sign 18th Party Congress scheduled for mid-October// The reservations agent at the Beijing International Hotel, a 909-room behemoth on the Chinese capital’s Avenue of Eternal Peace, was apologetic. “I’m sorry we don’t have any rooms,” she said, referring to the period between October 10-26. “During that time, the state has reserved everything.”

No sign of Xi Jinping-SMH Garnaut – There is a taste in the air that an era is coming to an end,” said intellectual Chen Ziming, who was an influential government adviser until the protests of 1989.“We had 30 years of Mao and 30 years of Den. It feels now like the latter days of Mao’s dictatorship.”..Accompanying the opacity, uncertainty and increasing cynicism, however, there is also optimism about future possibilities.”There is a surge in profound intellectual thought that is like the end of the 1970s and beginning of 1980s,” Mr Chen said, recalling the dawn of what many believe was China’s most vibrant era.

Rumours around the Politburo: Seriously questionable | The Economist – China is not only a nuclear-armed superpower today but also an economic and industrial behemoth. In a world where events and information move so much faster than they did in the days of Yuri Andropov and his head colds, simple questions about the condition and the whereabouts of a top leader deserve to be taken seriously.

Reading Deep Red – China Media Project – On the question of political reform, there is one important terminology in particular we should remain alert to if we hope to read, between the lines as it were, the larger political climate of the 18th National Congress: the “Four Basic Principles,” or sixiang jiben yuanze (四项基本原则). If this term continues to appear in the political report to the 18th National Congress, it is possible to say with some certainty that, barring shifts of a more dramatic nature, there is little hope or expectation for substantive political reform. By the same token, a strong showing in the political report for this buzzword would signal an unfortunate turnabout, a backsliding, on the issue of political reform. But the vanishing of the term altogether would be the most important signpost for political reform.

China in transition: Ascent of the bureaucrat – -no wonder China thinks the foreign media is biased//  Li Keqiang is one of the men the Communist party of China will present a few weeks from now as the country’s leaders for the next decade.



Deep-Water Oil Rigs as Strategic Weapons at Murphy on Piracy – This, at least, is how Wang Yilin, Chairman of the China National Offshore Oil Corporation (CNOOC), chooses to view them. He reportedly told an audience at CNOOC’s headquarters in Beijing in May that ‘large-scale deep-water rigs are our mobile national territory and a strategic weapon’.



CHINASCOPE – Study Times: Strengthening Control over Cyberspace – more going on than just censorship// Study Times, a magazine by the Chinese Communist Party Central Party School, recently published an article on the importance of control over cyberspace. The article started by emphasizing the damage that the WikiLeak incident caused, which demonstrated the significant impact that cyberspace can have on real human society. Then the author quoted the Obama administration’s strategy of saying that cyberspace is a nation’s important asset and key infrastructure// Original 学习时报_2012-09-03_科学技术_信息资源也是国家的“领土” –

WeChat Hits 200 Million Users –Sina investors may be underestimating the risk this poses to Weibo. People only have so much time in the day…// Referring to Tencent’s data, he shared that today, more than half of the users on QQ, the company’s huge IM service, are accessing it via mobile phones. Furthermore, he noted that Weixin (aka WeChat to international users), its Whatsapp-style messaging app, hit 100 million users in March earlier this year. That’s old news, of course – but in the six months since then it has doubled to a whopping 200 million users.

Huawei Said to Plan U.K. Investment of 1.2 Billion Pounds – Bloomberg – The announcement follows British politicians’ efforts to woo business from China and other countries while London hosted the Olympic Games. Huawei will increase its headcount in the U.K. to more than 1,500 by 2017, from more than 800 now, the Shenzhen, southern China-based company said in a statement today. It will spend $1 billion in direct investment plus $1 billion through procurement.

Huawei Plans Its Own Mobile OS and Processors to Lessen Reliance on US Firms – a’s Huawei is planning to develop its own mobile OS, according to none other than founder and CEO Ren Zhengfei. The telecoms firm and smartphone maker also plans to increase its line of high-end mobile processors – after recently debuting its MediaPad 10 FHD (pictured) with the company’s homegrown K3v2 Cortex-A9 1.4GHz quad-core processor. All of that ostensibly to reduce its reliance on US firms for software and CPUs. It sounds odd, but then that’s not too different from what Samsung is trying to do so as not to be too reliant on Android.



官员要读懂公众紧盯名表的深意 – 新华时政 – 新华网 – China Youth Daily on meaning of watch scandal,  how officials need to be careful since the people are watching. Thanks Weibo// 手表的尴尬,隐喻着当下官员的身份和形象尴尬。手表需要去妖魔化,更重要的是,要去除公众心中对官员的妖魔化想象——解决问题的钥匙,掌握在官员自己手中,公开了财产,消除了那个制度魔鬼,就去除了那个伤害着政府形象和官员形象的幽灵

China investigates whether children used in GMO golden rice trial | Reuters – now the western media and bridge blogs picking up on this. a big deal// China’s health authorities will investigate allegations that genetically modified (GMO) rice was tested on Chinese children as part of a Sino-U.S. research project, state media said on Tuesday. One Chinese researcher has been suspended by authorities while investigations are carried out.

中国乘客在塞班赴沪航班群殴_网易新闻中心 – another brawl on a china plane, with video

In China, the culture of bribery starts from childhood | Offbeat China – ever wonder why corruption in China is so hard to crash? A recent story of a primary school kid carrying two Gucci handbags as Teacher’s Day gifts may have the answer.//UPDATE, this post may be a hoax, per this analysis (Chinese)



南京垃圾发电项目引入民间评估 “社会风险评分”定生死|南京|垃圾发电|民间评估_21世纪网 – interesting approach in Nanjing to evaluating a possible waste incinerator/power plant. trying to avoid another round of environmental protests by getting citizen buy-in before starting. thanks Weibo// 核心提示:稳评小组的成立有着不寻常的背景。之前几年,国内多个城市曾相继发生因大型项目环保问题引发公众舆论强烈反弹的事件。

New Round of Shale Gas Bidding Offers Low Barriers – Caixin Online – Domestic firms, joint ventures have chance to explore and drill in 20 blocks around country as part of official efforts jump-start sector


Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is blocked by the GFW. You can also follow me on Twitter @niubi or Sina Weibo @billbishop.