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China CIC to Manage More of its Funds in House
Reuters reports on the China Investment Corp, the $300 billion sovereign wealth fund:
Lou Jiwei, the chairman of CIC, said the fund would steadily accelerate its overseas investments in 2010, the China Securities Journal reported, citing an article he published on Monday. It did not say where the article appeared.
“As of now, most of CIC’s overseas funds are managed by outside portfolio managers, but we will gradually increase in-house investment in more efficient developed markets in the future,” the newspaper paraphrased Lou as saying.
His comments follow a regulatory filing last Friday by CIC with the U.S. Securities and Exchange Commission detailing some of its investments in the United States. here
CIC said in its Form 13F filing that it owned equity stakes in more than 60 U.S. companies worth $9.63 billion at the end of 2009, including small holdings in Apple Inc (AAPL.O), Citigroup (C.N), Coca Cola Co (KO.N) and News Corp (NWSA.O).
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- February 8, 2010 10:55 PM
China Searches for 100 Tonnes of Melamine-tainted Milk
Investigators are searching for 100 tons of milk that’s been tainted with melamine and remains on grocery shelves. From BBC:
Two dairies were shut down at the weekend after they were found to be selling products using the powder, which should have been destroyed.
The melamine had been added to milk to artificially boost protein levels.
China Daily said the Ningxia Tiantian dairy was shut down on Saturday after it was found to have processed and repackaged 170 tonnes of milk powder in its products.
The powder should have been destroyed following the 2008 scandal but had been given to the dairy by another company as debt payment.
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- February 8, 2010 2:15 PM
Fareed Zakaria: U.S.-China Growing Pains
In the Washington Post, Fareed Zakaria writes that the recent tensions between China and the U.S. are merely political posturing. But he continues:
…There are two trends that could take a manageable situation and make it something more worrisome. The first is a growing perception in China that it is no longer as reliant on the West, and in particular the United States, as it was. In the 1980s, Deng Xiaoping brought China out of the cold by embracing America and opening up to foreign investment. This was different from the somewhat predatory, export-driven strategy of Japan and South Korea. But, the China scholar Minxin Pei argues, this was not an ideological conversion to free-market capitalism. Ravaged by the Cultural Revolution, Beijing desperately needed Western managerial know-how, technology and capital to develop its economy.
Today, China is awash in capital; it has many top-notch local companies; and this year for the first time, the primary engine of Chinese growth has been its domestic market, not exports. As China expands, that internal market will probably become its dominant concern.
A similar reality applies in foreign policy. Mao restored relations with the United States in some measure to buy himself an ally against the Soviet Union. China has needed the United States as a political ally ever since; Jiang Zemin’s fuzzy embrace of the United States was part of a strategy whose goal was concrete: membership in the World Trade Organization. Today, China commands respect across the globe. It is confident, even cocky, in bilateral and multilateral fora.
None of this is nefarious. But Beijing’s newfound arrogance is not joined with a broader vision. The country does not appear ready to play a global role. In international summits Beijing has been largely focused on pursuing its interests in a fairly narrow sense. At the April Group of 20 summit, for example, China participated actively on only one issue: to make sure that Hong Kong was kept off the list of offshore tax havens being investigated.
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- February 7, 2010 10:48 PM
After the Summer Olympics, Empty Shells in Beijing
A year and a half after the Olympics in Beijing, the impressive structures built for the event are left without a purpose. From the New York Times:
In 2008, the Chinese built a ball field — boy, what a ball field — known worldwide for its lattice-like architecture as the Bird’s Nest. Alas, after the 2008 Olympics, the ticket buyers haven’t come. Right now, the Bird’s Nest serves as a winter amusement park known as the Happy Ice and Snow Season. In April, a promoter may stage a celebrity rock concert to “establish China as a world leader for global peace and a healthier planet.” Or not.
After that, the government says it may build a shopping center there.
The accompanying photographs, shot at locales for the 2008 Beijing Olympics, succinctly depict the loneliness of where the long-distance runner once strode. In a week when the United States contemplates how long its future will be spent deep in debt, they also hint at how much its greatest creditor is pinning its own hopes of building wealth on dreams.
Two summers ago, China’s Olympic extravaganza was recognized worldwide, and especially here, as a barely disguised metaphor for this nation’s rise to worldwide importance. Eighteen months later, China is more important than its leaders could have imagined.
The Times also includes a slideshow of the buildings in their current incarnations.
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- February 6, 2010 6:39 PM
China Warns Locals to Settle Migrant Pay Disputes
The central government has warned local officials that they need to settle disputes with migrant workers over unpaid wages before the Lunar New Year holiday, which starts on February 14. From AP:
The rare urgent warning from the State Council comes as tens of millions of migrant workers return to their home villages from China’s booming cities to celebrate the Lunar New Year, which starts next weekend. The workers expect to collect pay, especially back pay, before returning home to families often expecting their financial support.
“Recently in a few places there have been mass incidents over migrant worker pay, especially in the area of construction,” said the warning, posted on the State Council’s Web site. It said officials found responsible for mass protests would be punished.
China’s Communist Party leaders fear mass protests as a major source of social instability, and government payments to prevent unrest are not uncommon.
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The order tells officials to step in and pay migrant workers for government projects, and even for private construction projects, where most disputes over back pay occur.
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- February 5, 2010 9:56 PM
China is Aiming at America’s Soft Underbelly: the Internet
The Christian Science Monitor interviews Mike McConnell, former director of National Intelligence, the authority over all US intelligence agencies, and of the NSA, which has recently teamed up with Google to probe cyber attacks:
Nathan Gardels: Defense analysts say that 90 percent of the probes and scans of American defense systems as well as commercial computer networks come from China. Is China the chief culprit?
Mike McConnell: I don’t know if it is 90 percent. Probably the best in the world in the cyberrealm are the United States, the Russians, the British, the Israelis, and the French. The next tier is the Chinese, but they are determined to be the best.
We are an open society. A virtual sieve for cyberpenetration…
The Chinese are exploiting our systems for information advantage – looking for the characteristics of a weapons system by a defense contractor or academic research on plasma physics, for example – not in order to destroy data and do damage. But, for now, I believe they are deterred from destroying data both by the need to export to the US and by the need to keep stable currency and stable global markets.
But what happens if we have a war? A capability for information exploitation could quickly be used for information attack to destroy systems on which the US depends. Every nation with advanced technology is exploring options to establish policy and rules for how to use this new capability to wage war.
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- February 5, 2010 3:13 PM
Chicken Parts Join Menu of U.S.-China Disputes
The Chinese government has announced that it will impose anti-dumping duties on chicken parts from the U.S. From Reuters:
The Chinese Commerce Ministry’s initial investigation showed that U.S. companies had dumped chicken products into the Chinese market, according to the ministry’s website (www.mofcom.gov.cn).
The preliminary tariffs were announced a day after Beijing requested a World Trade Organization ruling on European Union duties on shoes made in China in the latest case demonstrating China’s use of the WTO to keep markets open to the exports on which it depends.
The United States Trade Representative was muted in its response, saying it would consult with U.S. producers as it analyzed China’s move.
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- February 5, 2010 3:08 PM
Google Facing Many Risks in China Standoff
Reuters reports on the challenges facing Google since the company announced it would no longer operate a censored search engine in China:
Despite early reports suggesting Google had lifted filters on certain search results, the company insists it has made zero changes to its Chinese search engine and that it remains in dialogue with Beijing. Otherwise, executives have mostly been tight-lipped about the entire affair.
That guarded, restrained approach reflects the thorny legal issues surrounding the situation and the high stakes involved in its standoff with China, the world’s No. 3 economy and largest Internet market by users.
Many analysts believe the Chinese government would have no qualms shutting down an uncensored search engine. But experts on Chinese law warn that Google employees in China could also face prosecution for breaking the law.
China’s detention of four Rio Tinto employees including Australian Stern Hu in July on accusations of illegally obtaining commercial secrets amid contentious iron ore contract negotiations has underscored the risk when business matters cross into politically sensitive areas.
“If they have a lot of personnel in China and they suddenly decide to change what they’re doing in a way that was not permitted by the Chinese government, then that could lead to problems,” said Donald Clarke, a professor of Chinese law at George Washington University Law School, noting Google staff could be at risk of everything from arrest to harassment.
See also “Google Asks Spy Agency for Help With Inquiry Into Cyberattacks” from the New York Times.
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- February 4, 2010 9:48 PM
China’s Financial System: Red Mist
The Economist provides a Who’s Who of China’s financial system:
FROM being a rounding error a decade ago, the financial clout of China now trails only that of America. By market capitalisation, it has three of the four largest banks, the two largest insurance companies, the second-largest stockmarket and a lengthening list of investment funds. Yet who makes the decisions in China is barely understood. The government and the Communist Party are intimately entwined with the managers of China’s financial institutions. Working out who is really in charge is almost impossible.
Even attempting to do so takes you into sensitive territory. Disclosing information about how the Chinese government works risks violating nebulous secrecy laws or sacrificing business opportunities. Many China-watchers will only speak face to face, concerned about using e-mails or phone calls to discuss what, in the West, would be standard chatter about the status of bankers and their supervisors.
Almost all of the credit for Chinese companies is raised through its commercial banks. The country’s bank chiefs are powerful men whose careers have been meticulously managed. But none has the freedom of their peers in the West, not even those managing state-infested firms like Citigroup and RBS. Perhaps the only Western equivalents of a Chinese bank are the two American housing agencies, Fannie Mae and Freddie Mac—vast institutions with political mandates to expand credit, and protection from the consequences of their role in fostering bad debt.
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- February 4, 2010 9:31 PM
Eastern Promise
In The National, Howard French reviews The Dragon’s Gift: The Real Story of China in Africa:
The Chinese are drawn to Africa for the same reason that powerful foreigners have come since the start of the European slave trade in the early 16th century: resource extraction. Alongside their big infrastructure projects in countries like Nigeria, Angola, Gabon and Congo, Chinese have muscled their way into lucrative markets for oil, iron ore, copper and cobalt, and many other commodities.
China’s successes have produced one of the most unbecoming spectacles in the recent history of international relations: cascading howls of moral outrage in the West over Beijing’s “economic conquest” of Africa. The bill of particulars in this indictment is long, but the common thread is a sense of western superiority about China’s record on issues ranging from democracy and human rights to the environment, transparency and corruption.
The West’s tone of high dudgeon leaves little room for irony – yet if ever there was a situation filled with irony, the West’s new-found scruples toward Africa would seem to fit the bill.
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- February 4, 2010 9:24 PM
Changing China Tied to Rough Ride with U.S.
While some observers say too much is being made in the media of recent tensions between China and the U.S., Reuters reports that conflicting pressures make it difficult for the Chinese government to back down:
In past decades, a poorer, more cautious China greeted U.S. weapons sales to the disputed island with angry words and little else.
Not now, as China enters the Year of the Tiger in its traditional lunar calendar cycle of talismanic animals.
The Obama administration last week announced plans to ship $6.4 billion of missiles, helicopters and weapons control systems to the self-ruled island Beijing calls its own. China threatened to downgrade cooperation with Washington and for the first time sanction companies involved in such sales.
Beijing this week also condemned Obama’s plan to meet the Dalai Lama, the exiled Tibetan leader reviled by China.
China’s loud ire adds to signs the country is becoming surer about throwing around its political weight, growing along with an economy soon likely to whir past Japan’s as the world’s second biggest, though it will still trail far behind the United States.
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- February 4, 2010 12:36 PM
Charles Zhang (张朝阳)：Without Reform There is No Way Out
Charles Zhang (Zhang Chaoyang 张朝阳) is the Founder, Chairman and current CEO of Sohu, China’s second largest Internet portal and the first Chinese-language search engine. Widely recognized as one of China’s Internet pioneers, Zhang has been on the Forbes China Rich List and was named by Time Magazine as one of the 50 Cyber Elite. Born in Xi’an in 1964, Zhang received his doctorate from the Massachusetts Institute of Technology before launching the Internet company ITC, which later developed Sohu.
Zhang recently delivered the keynote speech at a media forum in Beijing organized by Sohu. From Reuters:
China will never have its voice heard on the international stage unless the government loosens its tight grip over the media and film industry, the CEO of the country’s No. 2 Internet portal said Wednesday.
Charles Zhang, the often outspoken chief executive of Sohu.com Inc, told a forum in Beijing that plans to create global Chinese media giants were doomed to fail if the government did not relax controls.
CDT has translated portions of his talk below:
I was a student and scholar of physics before age 30. Until now, I have been to many countries, and have been part of many things. I have many thoughts on a lot of subjects. So please let me spend some time to talk about this today.
In Year 2049, many of us who are sitting here today will still be alive, and we will have many children and grandchildren. By that time, will all Chinese be able to live happily and with dignity, and have a lot of face in front of Americans? And will China be respected by the world? This has everything to do with now, with every person. Between now and the happy life in 2049 there are still a lot of barriers; whether we can arrive at the glorious shore critically depends on the choices we make today being wise or stupid. By that time, if the rise of China and wealth becomes a delusion, our descendants will point their fingers at us and say: What has your generation done? How can you be this stupid?
Chinese are the most hardworking people in the world. Confucian culture requires us to be practical, striving forward in life, always moving upstream. With a little opportunity we can make wealth; with few resources we can flourish. Chinese government officials are the most hardworking officials in the world. Chinese society has a much lower tolerance for corruption than Russia, Brazil and India. The thirty years of market reform have given hardworking Chinese opportunities; workers in the Pearl River Delta and Yangtze River Delta have been working on production lines day and night with low salaries, and our Confucian leaders in every city and region also work day and night, under the competitive pressure of neighboring cities or regions and the pressure of being promoted, leading their subordinates, running on the road of accumulating wealth. The hardworking culture of the Chinese and the marketization of the manufacturing industry created the miracle of “Made in China.” The mid and lower stream of the world’s consumer product chain are almost monopolized by cheap Chinese products. This is the reason for our economic miracle over the last 30 years.
The accomplishment of the last 30 years is tremendous, and we are therefore overwhelmed by the celebratory feeling of this success, we even feel high. Now we cannot stop talking about the rise of the great nation, excitedly (such as the Global Times) collecting any piece of praise from westerners, whom we still worship as our superiors, as if the Middle Kingdom has returned to the ancient glorious order as the center of the world, worshipped by the surrounding countries. This is an illusion! Westerners still do not think too much of us!
In fact, we have only participated in the preliminary round of the economic games. Now we have entered the final game. Our opponent is the most powerful, most advanced country – the United States. If we still keep the current status, then the intellectual thesis is: hardworking Confucian spirit + incomplete market economy vs. individualism + fair and complete market economy. I think the answer is certain and depressing: We have no way to defeat America!
The problem comes from the incomplete market economy. Quality and excellence come from full competition. Innovation comes from fair competition. And the incomplete market economy is interrupting the competition every minute.
… In the field of media, newspapers and television stations within the Chinese system lack meaningful competition, and therefore have no credibility and respect. When the Wall Street Journal, or the New York Times point to something, the whole world pays attention, and believes them. Because there is no respectable media organization, China’s global communication power is very weak. The national media team organized by the government to promote China’s brand globally is doomed to fail and has no competitive strength, because they are not a product of market competition.
You may ask, what should we do?
The answer is obvious. Continue the marketization reforms with determination. Without reform there is no way out! Without full and fair market competition, there will be no quality, no excellence, no employment opportunities, no stability, and no real rise of China.
How do we do this practically? The problem is complicated, but the fundamental point is to limit the power of the government and to thoroughly pursue fairness. Only by realizing maximum fairness, can those talented individuals and organizations emerge, and the society can be filled with energy and creativity. Otherwise what we have developed will not be a full market economy, but the power-elite capitalism. The government should drop those actions which take profits from the society, but spend its main energy to protect fair competition.
　　
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- February 4, 2010 12:38 AM
Yang Yao (姚洋): The End of the Beijing Consensus
In Foreign Affairs, Yang Yao, Deputy Dean of the National School of Development and the Director of the China Center for Economic Research at Peking University, asks whether Beijing’s model of authoritarian growth, known as the Beijing Consensus, can survive:
Despite its absolute power and recent track record of delivering economic growth, the CCP has still periodically faced resistance from citizens. The Tiananmen incident of April 5, 1976, the first spontaneous democratic movement in PRC history, the June 4 movement of 1989, and numerous subsequent protests proved that the Chinese people are quite willing to stage organized resistance when their needs are not met by the state. International monitoring of China’s domestic affairs has also played an important role; now that it has emerged as a major global power, China is suddenly concerned about its legitimacy on the international stage.
The Chinese government generally tries to manage such popular discontent by providing various “pain relievers,” including programs that quickly address early signs of unrest in the population, such as reemployment centers for unemployed workers, migration programs aimed at lowering regional disparities, and the recent “new countryside movement” to improve infrastructure, health care, and education in rural areas.
Those measures, however, may be too weak to discourage the emergence of powerful interest groups seeking to influence the government. Although private businesses have long recognized the importance of cultivating the government for larger profits, they are not alone. The government itself, its cronies, and state-controlled enterprises are quickly forming strong and exclusive interest groups. In a sense, local governments in China behave like corporations: unlike in advanced democracies, where one of the key mandates of the government is to redistribute income to improve the average citizen’s welfare, local governments in China simply pursue economic gain.
More important, Beijing’s ongoing efforts to promote GDP growth will inevitably result in infringements on people’s economic and political rights. For example, arbitrary land acquisitions are still prevalent in some cities, the government closely monitors the Internet, labor unions are suppressed, and workers have to endure long hours and unsafe conditions. Chinese citizens will not remain silent in the face of these infringements, and their discontent will inevitably lead to periodic resistance. Before long, some form of explicit political transition that allows ordinary citizens to take part in the political process will be necessary.
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- February 3, 2010 10:31 PM
Obama Vows ‘Much Tougher’ Stance on US-China Trade
In a question and answer session with Senate Democrats today, President Obama vowed to take a tougher stance on trade with China but said he opposed becoming protectionist. From BBC:
At a meeting with Senate Democrats, Mr Obama was asked whether the US would cut ties with Beijing over ongoing trade disputes.
The president said he would continue to make sure that China and other countries lived up to abide by trade agreements, but warned it would be a mistake for the US to become protectionist.
“The approach that we’re taking is to try to get much tougher about the enforcement of existing rules, putting constant pressure on China and other countries to open up their markets in reciprocal ways,” he said.
“But what I don’t want to do is for us as a country or as a party, to shy away from the prospects of international competition.”
Watch the full video of Obama’s meeting via C-SPAN. A question about China is the first one asked:

See also “Currency Dispute Likely to Further Fray U.S.-China Ties” and “Who Needs Whom More?” by Philip Bowring, both from the New York Times.
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- February 3, 2010 10:10 PM
OECD: Inequality in China Leveling Off
A new report from the OECD on China says the inequality gap in China is not quite as bad as previously thought, the Wall Street Journal reports:
The OECD, in its economic survey of China published Tuesday, said more welfare spending in rural areas and increased migration to cities helped arrest a widening of the income gap. The Paris-based organization urged China to lower what is still a fairly high level of inequality by further boosting social programs and eliminating discrimination against rural residents.
The report is the OECD’s second major study of China, which isn’t a member of the organization. China’s economy is on pace to surpass Japan this year as the world’s second-biggest after the U.S. The OECD urged China to take a range of measures to liberalize its economy, such as freeing up interest rates to encourage banks to lend more to small companies, and privatizing state-owned enterprises. It also said that allowing the currency to appreciate would help the government manage the economy better.
China’s breakneck economic growth of the past three decades has pulled hundreds of millions of people out of poverty. But the incomes of people at the top have risen much faster than the rest, creating new divisions in a once-egalitarian society. Tensions between property developers and dispossessed farmers, and between factory bosses and their rural work force, are often a flashpoint for social conflict. That has pushed China’s government to narrow the gap, and officials have repeatedly said they will do more to boost incomes of the worst-off.
Read the full OECD report here.
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- February 2, 2010 9:26 PM