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

Subscribe Now

Google may have a declining consumer business in China but it still generates hundreds of millions of dollars a year selling ads on its global, ex-China networks to Chinese enterprises targeting foreign audiences. Google has a decent business from China even though the Chinese government does not trust Google and some in Beijing believe it is a tool of the US government that was instrumental in the 2011 Arab Spring. Last month’s increased transparency about censored keywords only reinforced Google’s position in the eyes of the Chinese government.

Chairman Eric Schmidt again displayed a level of public candor you rarely see from a foreign executive discussing China, and his comments to Foreign Policy’s Josh Rogin will only make Beijing more paranoid about Google. Schmidt declared that the Great Firewall of China will fall:

“I believe that ultimately censorship fails,” said Schmidt, when asked about whether the Chinese government’s censorship of the Internet can be sustained. “China’s the only government that’s engaged in active, dynamic censorship. They’re not shy about it.”

When the Chinese Internet censorship regime fails, the penetration of information throughout China will also cause political and social liberalization that will fundamentally change the nature of the Chinese government’s relationship to its citizenry, Schmidt believes…

The push for information freedom in China goes hand in hand with the push for economic modernization, according to Schmidt, and government-sponsored censorship hampers both.

“We argue strongly that you can’t build a high-end, very sophisticated economy… with this kind of active censorship. That is our view,” he said.

Coincidentally, the latest issue of Caixin Magazine has an essay by Zhou Hanhua, a researcher in the law department of China’s Academy of Social Sciences, arguing that China’s weak rule of law and Internet regulatory regime stifle innovation in the Internet sector–网络创新靠自由. In May James Fallows led a good discussion about China’s Internet controls and innovation in Is China’s Internet Actually ‘Slow’? And Does That Matter?. Zhou Hanhua would likely agree with what I wrote at that time, that “Internet control is a symptom of the political and cultural environment that stifles innovation, not the cause.”

But rumors of a dearth of innovation in China’s Internet industry are exaggerated. China actually has a remarkable amount of innovation, as Pando Daily’s Hamish Mckenzie astutely observes in China’s Surprising Internet Advantage Over the US.

Back to Google, Eric Schmidt’s comments about smartphones will also confirm suspicions held by Beijing:

Schmidt believes that smartphone technology can have a revolutionary effect on how people in the developing world operate and he is researching how smartphone use can help fight corruption and bad governance in poor countries.

Google’s Android has 70% market share in China’s booming smartphone segment, but the Android versions in China are mostly stripped of all connections to Google. It is not clear that Google will receive any direct benefit from Android’s proliferation in China, though certainly there is competitive value in the suppression of market share for Google competitors Apple and Microsoft.

The cover story of the latest Caixin asks how the economy will land–怎样着陆? Caixin tends to be bearish on the Chinese economy, but this is a nuanced article. The report says that the macroeconomy is having a soft landing but corporate profits are having a hard landing (宏观经济软着陆，企业盈利硬着陆), something Reuters also examines in China’s slowing economy claiming firms’ CEOs, profits.

The Caixin article concludes that while China may never return to its blistering growth rates, a crash is unlikely, the situation is better than it was in 2008 and in fact the bottom may not be far off. Do not expect the vocal China bears or most of the well-known financial blogs to give this article much play, as it strays from the dominant China’s Economy: Apocalypse Soon? meme.

China continues to make moves in the South China that unnerve its neighbors. It just appointed a Hawkish commander to head the South Sea Fleet:

A famously hawkish senior navy commander has been appointed as the political commissar of the South Sea Fleet of the Chinese Navy. Vice-Admiral Wang Dengping, previously the political commissar of the North Sea Fleet, will now oversee the fleet that patrols the disputed South China Sea waters.

Leading foreign affairs and military experts urged a Tougher line on South China Sea:

The country’s leading foreign affairs and military experts yesterday called on Beijing to take a tougher approach to mounting tensions in the South China Sea ahead of a key regional summit in Cambodia this week…China should rethink its current policies in handling territorial disputes and act more assertively to strengthen its sovereignty claims over the contested areas, according to panellists who spoke at the World Peace Forum in Beijing.

And China has big plans for the new Sansha city, as Sansha officials are discussing large-scale commercial development:

Situated on a cluster of islands off of Hainan Province, China’s newest prefecture-level city may soon be offering more than just sun, sand and controversy. An inside source said local officials in Sansha are weighing commercial development plans ranging from a tax haven status to building casino resorts.

Vietnam and the Philippines have repeatedly stated their opposition toward Sansha since the State Council moved to elevate the status of the city from county-level to prefecture-level on June 21.

Sansha officials are now flirting with plans to develop the area by building more ports, opening casinos and creating an offshore tax haven, said a source close to the former Administration Office for the Xisha, Nansha and Zhongsha islands…

Sansha is the country’s smallest prefecture-level city by population with less than 1,000 people and a land area of 13 square kilometers. However, it is the largest in administrative scope, with territorial waters that cover 2.6 million square kilometers.

Meanwhile, Hilary Clinton is visiting Vietnam.

Congratulations to my former MarketWatch colleague Dave Callaway on his new job as Editor in Chief of USA Today. This is a great move by Gannett and a real loss for Dow Jones.

Today’s links:

• 人民日报-认清西方新自由主义的实质
  page 2 people’s daily: recognize the essence of western neo-liberalism. the 2008 crash and the rot at the heart of the western financial system sure has given some of china’s theorists confidence…//
  在过去30多年里，在以金融资本为首的国际垄断资本的推动下，新自由主义被作为治疗各种经济问题的灵丹妙药在全球推广开来。但是，其导致的各种严重后果让人们对这套学说和政策的质疑和批评一直持续不断，此次国际金融危机的爆发和蔓延更使得对这种学说和政策的质疑和批评达到了一个新的高潮。
• No large stimulus needed – Li Daokui
  The global economy is still full of uncertainties. European countries are mired in their debt crisis, and the momentum of the US’ recovery has slowed. But despite this, China doesn’t need a new stimulus package, such as the 4 trillion yuan ($628 billion) used to boost the economy in 2008. What it needs is multi-faceted policy fine-tuning.
• 人民日报-抓稳定 促民生 强管理 新疆多举措夯实长治久安根基
  page 1 of people’s daily on building long term stability in xinjiang
• 人民日报- 挑战十年 中国精神（科学发展　成就辉煌·特稿） —— 十六大以来中国改革发展历程述评之三
• Study: Students not challenged in school – UPI.com
  Surveys suggest that U.S. students are not being challenged in school, especially in math and science, a report released Tuesday said.
• Without Question – Caixin Online
  The Chinese model of education teaches standard answers at the expense of creativity, putting young people at a disadvantage when they enter society
• Chinese Vitamin C Makers’ Price-Fixing Trial Set for Nov. 5 – Bloomberg
  China Pharmaceutical Group Ltd. (1093) and several other Chinese makers of vitamin C will face a Nov. 5 trial in the U.S. for alleged price-fixing, a federal judge said.
• Clinton Presses Vietnam on Rights Record – WSJ.com
  the main stumbling block to much closer US-Vietnam ties?
• Bucking Trend, U.S.-China Trade Gap Grows – WSJ.com
  Even as Beijing Closes Deficit With Rest of World, Its Surplus With America Is Rising, Exacerbating Problem for Obama
• The family fortunes of Beijing’s new few – FT.com
  Fears are growing that parts of China’s faltering economy are being run to profit a political elite
• China’s Power Families – FT.com
  This interactive graphic explores the business interests of China’s elite
• China reshapes role in rare earths, could be importer by 2014 | Reuters
  China, the world’s biggest producer of rare earth metals, is likely to turn an importer of the vital industrial ingredients by as early as 2014 as it boosts consumption in domestic high-tech industries rather than just shipping raw material overseas.
• China’s slowing economy claiming firms’ CEOs, profits | Reuters
  China’s slowing economy is hammering corporate profits and costing some CEOs their jobs as investors show little patience for companies that fall behind, even for a brand founded by a former Olympic star gymnast and revered sports hero.
• Sheldon Adelson’s Campaign Donations and Macau Casino Money : The New Yorker
  Sheldon Adelson is the casino mogul and philanthropist whose ten-million-dollar donation last month to a Super PAC supporting Romney was “by far the biggest gift to date,” according to Forbes. Then, two weeks ago, Adelson reportedly pledged ten million more, this time to 2012 campaign efforts involving the Koch brothers, “cementing a potent alliance of two of the biggest spending forces in conservative politics,” Politico reported. The end of that week brought a less glamorous headline: “Sheldon Adelson Denies Greenlighting A ‘Prostitution Strategy’ At His Macau Casinos.” That was a recap of the latest in a lawsuit working its way through Nevada courts, in which the former head of Adelson’s Macau operation has saddled Adelson with a range of lurid allegations involving Chinese triads, bribery, and criminal activity.
• 28省常委均现军人 验证党指挥枪原则_多维新闻网
  多维新闻】随着北京市党代会的闭幕，从2011年10月份开始的中国省级党委换届已经全部结束，新当选的402名省级党委常委中有28名戎装常委，他们是来自各省（区、市）的军方代表。他们大多是在上个世纪70年代入伍，有的常委还参加过对越自卫反击战，荣立军功。有分析称，地方党委常委中有一位来自军队的常委是中国的一项基本人事制度安排，体现了“党指挥枪”的政治原则。
• 政法改革启动 孟建柱角色凸显_多维新闻网
  北京时间7月9日，中国国务委员兼公安部部长孟建柱出访老挝，肯定中老两国在湄公河联合执法中所取得的成绩。5天之前，在公安部第一期对于1,400名市县两级公安局长集中轮训中，孟建柱也出现在培训一线，称“要对群众深恶痛绝的事零容忍，对群众急需急盼的事零懈怠”。对此有分析人士指出，自2月“王立军事件”、4月“陈光诚事件”以及近期的“李旺阳事件”后，孟建柱开始频频露面，显示其在政法系统内的地位不断上升、角色日益吃重，“或许将主导政法系统的改革，而其今后的政治仕途也或将水涨船高”。
• 建行30亿贷款身陷中江案_杂志频道_财新网
  建行向处于破产的中江集团贷款近30亿元。在其摇摇欲坠、其他银行已察觉抽身之时，建行为何继续增加贷款甚至发行理财产品为之输血？
• 正视邻避运动_杂志频道_财新网
  Caixin on properly handling China’s growing NIMBY movement
• Chinese link in missing-link breakthrough – Xinhua | English.news.cn
  For years, deep in an underground European laboratory, Chinese physicists have been contributing to one of the most ambitious scientific experiments ever attempted – a search for the missing link at the beginning of the universe.
  “How do we seize Higgs boson?” said Chen Guoming, a researcher at the Institute of High Energy Physics at the Chinese Academy of Sciences.
• China to Focus on Investment – WSJ.com
  Mr. Wen’s comments on Tuesday amount to an admission that with the country’s economic growth rate slowing, investment is the most powerful lever that Beijing can pull to support the economy.
  “Policies to stabilize growth include stimulating consumption and diversifying exports, but currently the main task is to promote reasonable investment growth,” Mr. Wen said in a statement posted on the central-government website.
• Muddy Waters Stigma Means $1 Billion Cost to Exit U.S. – Bloomberg
  China Development Bank Corp., the state-owned lender charged with strengthening the country’s competitiveness, is providing more than $1 billion to help smaller companies leave the U.S. stock market.
  The nation’s biggest policy lender has offered funding so Fushi Copperweld Inc. (FSIN), a Beijing-based wire maker listed on the Nasdaq Stock Market, can buy back its shares from the public, the company said last month. China TransInfo Technology Corp. (CTFO) said June 8 it would drop its U.S. listing with CDB financing. The bank has provided more funding than any other lender to help the nation’s companies exit the world’s biggest equity market, according to Roth Capital Partners, which specializes in emerging markets.
• The Man Who Stayed Behind in China Comes Into Focus – NYTimes.com
  The first American to join the Chinese Communist Party turns 91 next month, and a new documentary, “The Revolutionary,” describes how a kid from Charleston, South Carolina, ended up in a mountain cave playing gin rummy with Mao Zedong.
• Treating a Fabled Chinese River Like a Sewer – NYTimes.com
  It may be one of the most economically advanced areas of China, but when it comes to what it does with its sewage, Guangdong seems to be stuck firmly in the dark ages…According to an governmental report cited by China Daily on Tuesday, three-fourths of the industrial wastewater and domestic sewage that was generated in Guangdong last year was dumped directly into local rivers.
• China to Officials: No More Spending Public Funds on Luxury Goods – China Real Time Report – WSJ
  Hard times have fallen on Chinese bureaucrats. Already, they’ve been told to cut down on perks like restaurant meals, cars and expensive liquor. Now, their bosses say they’re to stop spending public money on luxury items altogether
• Smart Phone, Insulted Owner – Economic Observer News- China business, politics, law, and social issues
  When the EO asked Lei Jun about profit margins at his new venture, the MIUI smartphones, the former internet entrepreneur took offence and threw his phone on the floo
• David Callaway named EIC of USA Today – POLITICO.com
  USA Today will name MarketWatch editor David Callaway as its new editor-in-chief, POLITICO has learned.
• SnapPea – Android’s Best Friend
• Beijing Startup Goes Full Crazy on Web Design… By Keeping It Simple | PandoDaily
  Wandoujia’s site is beautiful. There is ample white space. There are no animations. The top third of the page has only about 15 clickable items, which is a long way from Google.com’s five, but it’s still tantamount to digital treason in China….Kai Lukoff (the white dude in the photo above), a Stanford-educated American who founded the blog TechRice and works at the Beijing startup as a product manager, told me Wandoujia’s clean design was one of the things he liked so much about the company when he first joined. “It’s unusual for a Chinese startup to have a design founder and to emphasize design in the way Wandoujia does,” he said.
• 中赫集团 SinoBo, new land king in Beijing
• 中赫夺得北京万柳地王 楼面价4.02万元/平-财经网
  new land king in beijing, 40k rmb/m, wanliu area of haidian, buyer is 中赫集团 SinoBo//
  7月10日下午，北京海淀万柳地区住宅用地正式挂牌出让，中赫置地最终以26.3亿元上限的价格获取该地块，去掉16400平方米的保障房面积，粗略估算，折合楼面价达4.02万元/平方米，该地块最终溢价率达40.9%。
• 360Buy Still Has No IPO Plans, Company Source Says – Caixin Online
  Leading online electronics retailer 360Buy has no plans to raise funds through an initial public offering or by selling stakes to private equity firms before 2013, a source inside the company has reiterated.
  The source said on July 3 that a financial assessment by PricewaterhouseCoopers showed 360Buy had net cash of almost US$ 1 billion by the end of 2011.
• Sansha Officials Discussing Large-Scale Commercial Development – Caixin Online
  With a jurisdiction covering nearly all internationally disputed territory in the South China Sea, local officials in Sansha are now said to be mulling economic plans
• 温州一河流受污染变“牛奶河”_图片频道_财新网
  pollution makes a wenzhou river look like milk. disturbing pics
• 人民日报国际论坛：为“准则”制定创造必要条件–观点–人民网
• Beijing’s Olympic Ruins – Jobs & Economy – The Atlantic Cities
  While being awarded the 2008 Summer Olympics allowed Beijing to construct new architectural icons and receive international accolades, its current reality is a collection of unused sports facilities with few if any plans for reuse.
• Bo Xilai scandal: China ‘offers immunity to Patrick Devillers’ – Telegraph
  Speaking to AFP on Tuesday, a spokesperson for Cambodia’s interior ministry, Khieu Sopheak, suggested Mr Devillers – who has not formally been accused of any crime in China or Cambodia – could receive legal immunity if he co-operated with the Chinese inquiry into Mr Bo and Ms Gu.
• China Seeks Closer Australia Ties
  A Chinese official called Tuesday for closer defense and economic ties with Australia and warned against what he said was a growing “Cold War mentality” in the United States.Chinese Vice Foreign Minister Cui Tiankai made a veiled criticism of Australia’s deepening military ties with Washington after attending annual talks on human rights in the Australian capital of Canberra.
• FT Alphaville » More slowdown news from China
  Do not be misled by the “big jump in surplus” headlines: as most reports on the subject will quickly point out, China’s trade figures for June are another signal of slowing growth. Export growth fell as expected, but import growth fell much more than expected (hence the big surplus). Many imports are destined to become exports, so a slowdown in imports points to falling demand for Chinese goods too. And the categories of imports bear this out, says Nomura’s Zhiwei Zhang
• The Hindu : Opinion / Interview : ‘Meaningful autonomy is the only realistic solution’
  Interview with the Dalai Lama
• The Hindu : News / National : Dalai Lama speaks of dilemma on spreading self-immolations
  EXCLUSIVE In his most detailed comments yet on the protests, which have brought fresh security restrictions across many Tibetan areas in recent months, the Dalai Lama, in an interview with The Hindu, described the self-immolations as “a very, very delicate political issue.”
• The Hindu : Opinion / Letters : Muddying the waters
  The Dalai Lama refused to call self-immolations wrong in an interview published by The Hindu on July 9. Then readers may ask him what compassion really means to him. His prayers for those self-immolators amount to encouragement of the violent deed.
• Education reform ending tradition of child monks – Xinhua | English.news.cn
  Tibetan child monks are being consigned to history as parents’ modernizing attitudes, as well as recent practical changes to the education system, are seeing more kids sent to public schools. Monasteries, though relegated to a lesser position in education, have found positives in the shift.
• Commentary: Japan playing with fire over Diaoyu Islands – Xinhua | English.news.cn
  Here comes a new episode in Japan’s farcical ambitions to “buy” the “Senkaku Islands,” or China’s Diaoyu Islands.
• Premier Wen says “stabilizing growth” is top priority – Xinhua | English.news.cn
  Premier Wen Jiabao said Tuesday that stabilizing economic growth is the most pressing matter currently facing China.
  Policies and measures to stabilize economic growth currently include boosting consumption, diversifying exports and promoting investment, Wen said while meeting representatives from research institutes and companies on Monday and Tuesday.
• China announces 3rd fuel price cut in two months – Xinhua | English.news.cn
  China will slash the benchmark retail price for gasoline by 420 yuan (66.46 U.S. dollars) per tonne and the price for diesel by 400 yuan per tonne starting from Wednesday, the country’s top economic planner announced Tuesday.
  The decreases, equivalent to 0.31 yuan per liter and 0.34 yuan per liter, respectively, mark the third fuel price cut in two months, as crude oil costs have continued to fall since China’s most recent price cuts in June.
• Death toll rises to 3 in Beijing scaffold collapse – Xinhua | English.news.cn
  The scaffold, erected around a sculpture inside an art workshop in the village of Xianrendong in Changping district, collapsed at 2:40 p.m., injuring 20 people, a district government official said.
• China to send 396-strong team to London Olympics – Xinhua | English.news.cn
  Li Changchun (C,front), a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee, poses for a group photo with members of the Chinese sports delegation to the upcoming London Olympic Games in the Great Hall of the People in Beijing, capital of China, July 10, 2012. Commissioned by President Hu Jintao, Li Changchun met with the Chinese sports delegation to the London Olympic Games in Beijing on Tuesday
• Eight Questions: Scott Kennedy, ‘Beyond the Middle Kingdom’ – China Real Time Report – WSJ
  China is so big and so complicated that most scholars have viewed it in glorious isolation.
  In “Beyond the Middle Kingdom,” a new collection of essays edited by Indiana University professor and China-hand Scott Kennedy, some of the world’s leading China scholars attempt to turn that around – exploring China in comparative perspective.
• Chinese bishop placed in isolation after quitting government post | World news | guardian.co.uk
  Shanghai’s auxiliary bishop Ma Daqin taken away shortly after announcing his resignation and confined at seminary

The best way to read this blog is to subscribe by email, especially if you are in China, as Sinocism is still mostly blocked by the GFW. The email signup page is here, outside the GFW. You can also follow me on @niubi or Sina Weibo @billbishop. Comments/tips/suggestions/donations are welcome, and feel free to forward/recommend to friends. Thanks for reading.

Digest powered by RSS Digest

Subscribe Now