The Sinocism China Newsletter For 10.09.12

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

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The US government has told Huawei to hit the highway.

The Permanent Select Committee on Intelligence (PSCI) has warned American Companies doing business with Huawei and ZTE to “use another vendor”, as detailed in the House Intelligence Committee Report on Huawei and ZTE (PDF, the unclassified version unfortunately). The PSCI report calls Huawei and ZTE ‘National Security Threats’ (New York Times), though the publicly presented evidence is thin:

The report included a classified annex, but several cybersecurity officials said they did not know whether the Congressional Committee had discovered evidence that the telecommunications firms had added “backdoors” making it possible to surreptiously gain access to the products…

But some analysts said that the report reflected a broader problem for Chinese industry. Duncan Clark, the chairman of BDA China, a telecommunications consulting firm in Beijing, wrote in an e-mail: “It basically reflects what I think is a growing challenge for Chinese companies as they seek to expand globally: they are bumping into a glass ceiling — how the Chinese government behaves and is perceived internationally.”

An FT report mentions other allegations of illegal behavior, including immigration and work visa violations:

the testimony and evidence of individuals who currently or formerly worked for Huawei in the United States or who have done business with Huawei also brought to light several very serious allegations of illegal behaviour that require additional investigation.

AllThingsD offers a reason why America is really worried about Huawei, whether or not there is a smoking “backdoor” or other evidence of network exploitation:

All told, it’s not as though there is no reason to be suspicious of Huawei, if only because the U.S. and its allies know too well from their own actions in recent years about the potential for electronic espionage, surveillance and warfare.

Huawei released the following statement on the Intelligence Committee Report:

The report released by the Committee today employs many rumors and speculations to prove non-existent accusations. This report does not address the challenges faced by the ICT industry. Almost every ICT firm is conducting R&D, software coding and production activities globally; they share the same supply chain, and the challenges on network security is beyond a company or a country. The Committee’s report completely ignored this fact. We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market.

The Chinese government is not happy and retaliation is likely forthcoming. Xinhua weighed in with Protectionism behind groundless U.S. accusation against Chinese tech firms, warning America that:

It is highly advisable that U.S. politicians stop their “China threat” rhetoric and adopt a rational view toward business activities of Chinese companies so as to help create a fair and discrimination-free market environment.  A favorable business environment will be conducive to the recovery of the U.S. economy.

And the Global Times asks why does US fear Chinese telecom giants?:

As the Sino-US competition becomes more intense, Washington will find more faults with China. Protesting alone will be of no avail. We have to show through concrete actions that any unfair treatment to Chinese companies will be met by similar losses to American interests.

In August the Economist had a cover package on Huawei with Huawei: The company that spooked the world and Chinese multinationals: Who’s afraid of Huawei?

Coincidentally, or not, Cisco on Monday announced that it was ending a sales partnership with ZTE (Reuters) due to a US probe of ZTE’s Iran business.

How might China retaliate? Whatever business Cisco has left in China is at risk, enterprise software vendors that sell to the Chinese government may come under pressure, and the alleged immigration issues cited in the US report will likely appear at US firms in China as well.

Coming on the heels of the CFIUS rejection of the Ralls wind farm, this Huawei/ZTE report will further irritate the US-China relationship. American businesses in China need to buckle up.

Romney adviser Robert Zoellick has an important essay in Foreign Policy–The Currency of Power:

Yet ever since the rise of “national security” as a concept at the start of the Cold War, economics has become the unappreciated subordinate of U.S. foreign policy. Today, the power of deficits, debt, and economic trend lines to shape security is staring the United States in the face. Others see it, even if America does not.

China sees it.

Today’s links:


China Housing Prices Rise at Slower Pace – – The average price of housing in September was 8,753 yuan ($1,384) a square meter, 0.17% more than the 8,738 yuan of August and moderating from August’s 0.24% sequential rise, according to a survey of property developers and real-estate firms released Monday by data provider China Real Estate Index System.

China banks pull out of IMF Tokyo meet amid island dispute: Xinhua | Reuters – and people seriously think the RMB will become a reserve currency when this kind of stuff is happening?// China’s state-owned banks will not attend the annual meetings of the IMF and World Bank to be held in Tokyo starting Tuesday, state news agency Xinhua said on Monday, the latest sign that a territorial dispute has strained ties between Asia’s two biggest economies.

China’s Services Industries Expand at Faster Pace, Survey Shows – Bloomberg – The purchasing managers’ index rose to 54.3 from 52 in August, HSBC Holdings Plc and Markit Economics said today. A reading above 50 indicates expansion.

For Stimulus Projects, a Capital Conundrum – – Caixin learned several big banks have given a cold shoulder to some of the latest infrastructure projects. An executive at one major, state-owned bank said his loan division hasn’t gotten involved because the central government hasn’t introduced any new, stimulus-loan-related incentives. One only has to look at the revenue shrinkage confronting local governments over the past year to understand the skeptics. For example, the most significant source of local government revenues – sales of land to property developers – has been declining since the nation’s real estate market started slowing in 2010.

Japan carmakers to cut China production by half: Nikkei | Reuters – Toyota and Honda plan to cut China production to about half normal levels by shortening working hours and slowing down the speed of production lines, the Nikkei said without citing a source.

Overseas tourism hits record – – “I didn’t buy any luxury products in Hong Kong this time because I have asked my friend, who went to France this holiday, to buy something for me, and most of the luxury products in Paris are much cheaper,” Yang Hua, a 32-year-old white collar worker from Beijing, who went to Hong Kong during the holiday, told the Global Times.

China inflation: friend not foe | beyondbrics– Gavekal Dragonomics, the China economic research consultancy, is arguing that inflation is “more a friend than a foe.”Gavekal points to the heavy deflationary pressures in heavy industry, which it says is the result of a “painful inventory destocking cycle, which in some cases has been worsened by order cancellations as growth has slowed across industries.” Gavekal’s Joyce Poon warns that this correction might go on for a while because the huge 2009-10 stimulus in China exacerbated overcapacity in numerous sectors.

China Retail Sales Growth Slows, but Consumers Still Confident – – Analysts said strong tourism data pointed to a shift in consumer spending toward leisure activities, helped by Beijing’s move to waive toll fees for cars which saw millions of holiday makers take to the roads.

World Bank cuts East Asia GDP outlook, flags China risks | Reuters – the World Bank, like many economists, still expects China to have a soft landing as seen from the bank’s revised 7.7 percent growth forecast for this year and 8.1 percent for next year.

JPMorgan Loss Proves System Too Complex, China’s Gao Says – Businessweek – “You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets,” he said. “That is not very good.”//Communist China Sovereign Wealth Fund head speaks the truth to capitalist America…

Holiday crowds show nation’s dilemma – People’s Daily Online – The increasingly better-off Chinese are demanding more quality products, better service and infrastructure. But these cannot be reached just with money in a short period of time. The public takes it for granted that China nowadays should be as orderly as any developed country. Massive traffic jams during the holidays can greatly frustrate Chinese.

China Voice: Holiday nuances expose China’s population pressure – Xinhua | – the government should grant longer paid leaves and make them more convenient for employees. Most Chinese workers have only five to 10 days of annual paid leave per year. In small private companies, even if workers have paid leave in name, it is often difficult in practise for them to get approval from bosses to actually stay away from work.

四大利空考验十月A股 新华社——经济参考网 –

China, US reach audit inspection agreement|Economy| – China has reached an agreement with the US authorities, allowing the latter to observe official auditor inspections in China, Securities Times reported on Friday.

Ineffective internal controls | China Accounting Blog | Paul Gillis – An interesting academic paper presents some information about ineffective internal control disclosures of U.S. listed Chinese companies. Three professors at the University of Hong Kong, Raymond Reed Baker, Gary Biddle and Neale O’Connor, wrote the paper.

Bronte Capital: Carlyle’s China problem: some questions for David Rubenstein –

国庆假期银联卡境内外交易快速增长-中国金融新闻网 – 本报北京10月8日讯 记者牛娟娟报道 中国银联今天发布了国庆长假期间银联卡交易数据。8天“最长黄金周”刷卡消费大幅增长。与去年国庆假期相比,银联卡境内跨行交易金额增长41%,境外交易金额增长33%

如何掌管娃哈哈“千亿帝国” 专访宗馥莉:我会想得更远_财经频道_一财网



Insight: Little Hu may play big role in China’s political future | Reuters – On the remote grasslands of northeastern China, a politician little known in the West has made a name for himself as a rising leader. Hu Chunhua is already talked of by some as a future president.

李光耀论中国未来_杂志频道_财新网 – 中国正以50年前无法想像的速度发展着。其内部主要挑战是文化、语言、不能吸引并整合他国人才,渐渐地,国家治理方面的挑战也会出现

贺国强:坚决查处薄熙来等案 决不姑息腐败分子_新闻_腾讯网 –

Over 660,000 officials punished in five years – Xinhua |– Anti-corruption bodies of the Communist Party of China (CPC) have punished more than 660,000 officials guilty of disciplinary violations in the past five years, senior leader He Guoqiang announced on Monday.More than 24,000 officials were transferred to the judicial system for suspected crimes, said He, head of the CPC Central Commission for Discipline Inspection.

China Quarerly-Cheng Li – The End of the CCP’s Resilient Authoritarianism? A Tripartite Assessment of Shifting Power in China – The essay concludes that if the CCP intends to regain the public’s confidence and avoid a bottom-up revolution, it must abandon the notion of “authoritarian resilience” and embrace a systematic democratic transition with bold steps towards intra-Party elections, judicial independence and a gradual opening of the mainstream media.



Washington does not accept Japan’s claims to Diaoyu Islands |China Daily Exclusive | – The report, published on Sept 25 by the Congressional Research Service, said the US recognizes only Japan’s administrative power over the Diaoyu Islands after the Okinawa Reversion Treaty was signed in 1971.

Senkaku (Diaoyu/Diaoyutai) Islands Dispute: U.S. Treaty Obligations – China likes this Congressional research Service report// U.S. Position on the Competing Claims: The United States cannot add to the legal rights Japan possessed before it transferred administration of the islands to us, nor can the United States, by giving back what it received, diminish the rights of other claimants. The United States has made no claim to the Senkaku Islands and considers that any conflicting claims to the islands are a matter for resolution by the parties concerned.Successive U.S. administrations have restated this position of neutrality regarding the claims, particularly during periods when tensions over the islands have flared, as in 1996, 2010, and 2012.

Chinese ships will continue Diaoyu patrols: FM spokesman – Xinhua | –

New Type 052D Destroyer a Significant Development for Chinese Sea Power – China Real Time Report – WSJ – The Type 052D’s emergence suggests that China’s naval shipbuilding capability is maturing further, with China State Shipbuilding Corporation (CSSC) ‘s new shipyard on Shanghai’s Changxing Island becoming a capable facility for constructing modern surface combatants. It offers further evidence that China can produce warships quickly using modular construction techniques and perhaps other advantages such as lower cost labor than its competitors can access.



7 Reasons Why The West Is Obsessed With Sina Weibo – Business Insider – weixin/wechat where it is increasingly at// Pretty much every story about China mentions Sina Weibo and Chinese “netizens”—the easiest barometers for westerners of public sentiment in China

Zhang Yimou splits with long-term collaborator|Culture|In-depth| – The falling out between film director Zhang Yimou and his producer Zhang Weiping, who have shared a partnership for 15 years, has shocked China’s movie industry, the Chinese-language China Economic Weekly reports.



Men look for less pretty wives|Society|News| – These men believe that pretty women are less able to help them either in career or in taking care of children. “I’ve seen too many pretty women. They are not suitable for being a good wife to me. I need to take care of and soothe a pretty girl instead. I will be too tired,” stated Dung, saying he especially can not accept a girl with her nails painted and with too much perfume.

Jews in WWII China: Life and Literature – YouTube – During World War II, Jewish communities thrived in Shanghai, Harbin, Tianjin, and the British colony of Hong Kong. I discuss these communities along with novels and memoirs set during this unforgettable time.



北京昨日遭遇严重空气污染 PM2.5数据全超标_新闻_腾讯网 – on the horrible pollution in beijing monday, no more pretending not a serious issue



China tests world’s fastest alpine railway – Xinhua | – in dongbei// Engineers with the railway project said the rail track built using cutting-edge technology can accommodate temperatures between 40 degrees Celsius below zero and 40 degrees Celsius above freezing. Trains will be able to run at an average of 350 km per hour on the line after safety tests are conducted.



The “I Ching”: A Biography (Lives of Great Religious Books): Richard J. Smith: Amazon – In this concise history, Smith traces the evolution of the I Ching in China and throughout the world, explaining its complex structure, its manifold uses in different cultures, and its enduring appeal. He shows how the indigenous beliefs and customs of Japan, Korea, Vietnam, and Tibet “domesticated” the text, and he reflects on whether this Chinese classic can be compared to religious books such as the Bible or the Qur’an. Smith also looks at how the I Ching came to be published in dozens of languages, providing insight and inspiration to millions worldwide–including ardent admirers in the West such as Leibniz, Carl Jung, Philip K. Dick, Allen Ginsberg, Hermann Hesse, Bob Dylan, Jorge Luis Borges, and I. M. Pei. Smith offers an unparalleled biography of the most revered book in China’s entire cultural tradition, and he shows us how this enigmatic ancient classic has become a truly global phenomenon.

The Useless Tree: The I Ching: A Biography – i will read anything Sam Crane recommends//Read a good book recently: Richard J. Smith’s The I Ching: A Biography.  Composed by an accomplished academic, it is written for a general audience.  Smith provides a concise and clear background to the text and how it emerged into “classic” status in China.  He goes into some of the numerology that various Chinese commentators have applied to the text, and he shows how the book’s influence spread throughout East Asia and, eventually, to the West.

China’s Security State: Philosophy,Evolution,and Politics: Xuezhi Guo: : Amazon – China’s Security State describes the creation, evolution, and development of Chinese security and intelligence agencies as well as their role in influencing Chinese Communist Party politics throughout the party’s history. Xuezhi Guo investigates patterns of leadership politics from the vantage point of security and intelligence organization and operation by providing new evidence and offering alternative interpretations of major events throughout Chinese Communist Party history. This analysis promotes a better understanding of the CCP’s mechanisms for control over both Party members and the general population. This study specifies some of the broader implications for theory and research that can help clarify the nature of Chinese politics and potential future developments in the country’s security and intelligence services.

Fractured Rebellion: The Beijing Red Guard Movement: Andrew G. Walder: Amazon

超越左右激进主义:走出中国转型的困局/萧功秦-图书-亚马逊 – 《超越左右激进主义:走出中国转型的困局》里的各篇文章环绕着一个中心问题,即超越左右之争,一方面,既反对激进的左的“文革”思潮回潮;另一方面,也反对简单化的西化自由主义,强调观察与分析中国问题时,要特别重视我们的历史经验与运用我们的常识理性,主张通过渐进的方式,通过发展公民社会与公民理性,在保持现存秩序的历史连续性的基础上,经由多元试错来寻找摆脱转型困局的最佳路径,实现向民主宪政体制软着陆。

曾向荣、李欣欣:萧功秦——新权威主义的孤独代言人_共识网 – a variant of Zhao Ziyang’s “new authoritarianism” might make sense for China today? // 2012年8月,学者萧功秦的第九本书——《超越左右激进主义——走出中国转型的困局》出版。在书中,西化自由派仍是萧功秦批判的三个对象之一,但时移世易,极左派思潮已经成为这位新权威主义代言者视野中最危险的敌人。

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