The improved ties have been highlighted by this week’s visit to Beijing by Israel’s military chief and a training mission to Israel by the Chinese paramilitary force that, among other things, polices the restive Tibetan and Muslim Uighur regions. Prime Minister Benjamin Netanyahu is expected to travel to China in the coming weeks.

[...] Chen told the official China Daily that China “attaches importance to the ties with the Israeli military and is willing to make concerted efforts with the Israeli side to deepen pragmatic cooperation.”

In a statement released by the Israeli military, Gantz mentioned a commitment to developing the relationship, including “joint courses that are scheduled to take place.” It did not elaborate.

Such comments are a remarkable turnaround from just a few years ago, when ties deteriorated after the failed arms deals.

In recent years, China has often found itself in the middle of tensions between Israel and Iran, which has bought Chinese military technology despite objections from the U.S. and other countries. For more on this, see a previous CDT post, “Beijing Steers ‘Tricky Path’ With Iran.” Read more about Chinese relations with Israel via CDT.

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What ails China’s lending environment, and why won’t an RRR cut fix it? MarketWatch’s Craig Stephens thinks banks might have a supply-side problem, battling higher funding costs as their expanding suite of wealth management products – and the higher returns they offer investors – squeezes their margins. But Bob Davis and Tom Orlik write in The Wall Street Journal that the problem lies on the demand side, that the government can no longer “turbocharge the economy as they have in the past” by pushing state-owned banks to churn out new loans because the system lacks an ample supply of borrowers willing to take them:

The hesitation to borrow runs across the Chinese economy, from massive state-owned steelmakers struggling with overcapacity to small exporters trying to figure out when the European crisis might abate.

“We don’t need any expansion of credit because we are playing it safe,” said Stanley Lau, managing director of Renley Watch Manufacturing Co., a Hong Kong watch exporter that manufactures in southern China.

“Because of growing uncertainty over the economy, a lot of businesses are reluctant to borrow and, instead, they have decided to put their project or expansion plans on hold,” a senior executive at one of China’s largest banks said.

Even beyond the steelmakers and manufacturers, the troubles plaguing China’s cooling property market don’t help banks’ lending prospects either. Average home prices in 70 Chinese cities fell again in April, as the government continues to demonstrate a commitment to a price correction that it began in 2010. And while property prices may rebound in the 4th quarter as supply begins to ease, one research analyst told China Daily, housing ministry official Zhang Xiaohong told local media on Friday that Beijing won’t reverse its course and that “There is still room for property developers to continue to adjust prices to boost sales volume, but there is no more room for property speculation.” For now, reports Robin Kwong in The Financial Times, developers can only continue to push their large inventories of unoccupied properties:

This dynamic is reflected in the plight of Number 8 Royal Park, a super-luxurious development in Beijing where liveried footmen have been chaperoning potential buyers to assay opulently decorated 520 sq m apartments. The developer is still holding firm on its price tag of over $10m, but sales appear to have stagnated. Staff are still urging clients to buy flats in the same two towers that were on offer a year ago.

The Globe and Mail’s Mark MacKinnon points out that the Chinese government’s handling of the housing market reflects not just an attempt at a market correction, but also a play for political preservation:

That bubble is now deflating, although some economists say the market is still overvalued and that falling property prices will not constitute the main drag on GDP this year.

“You can make a pretty strong case that it’s overvalued, the property market, so I personally don’t think there will be any reversal…I think they’ll hold the line,” said Alaistair Chan, China economist with Moody’s Analytics, who said this year’s forecast for GDP growth may end up around 8 per cent from their previous prediction of 8.2 per cent.

Just as important for China’s government, though, is that restricting property prices to try to keep them within reach of the rising middle class is seen as key to preserving political stability. For an authoritarian regime obsessed with maintaining a “harmonious society,” this has been a relatively dramatic year, with labour protests, self-immolations by Tibetan activists, continuing food inflation and a rare and colourful political scandal involving the murder of a British businessman that felled one of China’s most popular politicians – all ahead of an expected transfer of power at the top that is supposed to begin with the Communist Party’s national congress in October.

As a result, some property developers are settling in with what they have, and downgrading any ambitions of big acquisitions.

Wen Calls for Growth

Chinese Premier Wen Jiabao took time during his weekend trip to Wuhan to reiterate the government’s aim of fine-tuning the economy to support growth, according to The China Daily:

“The relationship between maintaining growth, adjusting economic structures and managing inflation, must be properly handled,” Wen said in comments reported by Xinhua News Agency. “We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth.”

The government, he said, will continue to carry out anticipatory adjustments and fine-tuning, boost domestic consumption and promote steady and relatively fast economic growth.

Even if he was only repeating the same long-deployed talking points, Chinese stocks rose today and Bloomberg News reports that Wen’s comments led analysts to speculate that the fine-tuning may become a little more heavy:

The shift in language suggests authorities are “seriously concerned about growth” and “ready to introduce further measures,” Bank of America Corp. said in a research note today. The government on May 12 cut banks’ required reserves for the third time in six months following data that showed trade, industrial production and lending were below forecasts in April.

“The April data has been a wake-up call for China,” said Alaistair Chan, a Sydney-based economist at Moody’s Analytics. “There will probably be some stimulus measures through monetary policy, more bank lending and infrastructure projects being brought forward.”

The Battle For Securities Reform 

Caixin catches up with Guo Shuqing, who took over the helm at the China Securities Regulatory Commission (CSRC) last October and has already begun to put his stamp on the job with a flurry of recent regulatory changes. The CSRC’s top priority, and “core challenge” of reform, Guo says, is in the arena of public listing:

Guo has said that a registration system for public listings is in fact not so different in nature from China’s current approval system. In the United States where a registration system is used, regulatory agencies conduct even stricter checks on companies than do their Chinese counterparts. The key is how to define the roles and responsibilities of the regulators, the exchanges and other intermediaries.

In this light, the recently released guidelines on share issue reform tackle the technical details but fail to address the underlying problems of the system. Rent-seeking can’t be eradicated without changing the vetting system. Take the newly appointed officers of the CSRC. As they become familiar with the job, and the temptations for corruption that come with it, won’t they also become less inclined to change the system? Based on the historic lessons at home and abroad, support of the top leadership is vital for a reformer.

Reforms are easier when the stock market is at a low ebb, but they will only get harder and harder. It will be a long-drawn-out war.

Is China Deleveraging?

The Wall Street Journal’s Tom Orlik writes that while China’s credit-fueled growth (which saw the ratio of credit to GDP rise to 173% by the end of 2011) may have saved China’s economy from the global financial crisis, the trend has begun to reverse amid an environment ripe with inflation, an overheated property market, among other things. It’s good for the ratio to come down and it should continue to come down, but this comes with consequences that Beijing can temper in a number of ways:

The government has options for responding. It could further lower the reserve requirement ratio, which would encourage firms to take on more loans as it lowers the cost of capital and signals that the government intends to keep demand on track—buoying confidence about future orders and profitability.

A further step would be to relax the floor on lending interest rates. China’s banks are currently allowed to lend at a discount of up to 10% to the government-set benchmark. People’s Bank of China governor Zhou Xiaochuan said in April that the next step in interest rate reform could be liberalizing the lending rate—suggesting the floor could be lowered.

Beijing also has room to ratchet up its own spending. There are signs that this is already underway. Investment funded from the state budget grew 29% year-on-year in the first four months of this year, partially offsetting a meager 4.2% increase for investment financed by bank lending.

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China criticized British Prime Minister David Cameron on Tuesday for meeting with the exiled Tibetan spiritual leader the Dalai Lama, saying it amounts to support for Tibet’s independence from Chinese rule.

The British government ignored Beijing’s objections in going ahead with Monday’s meeting in London, and doing so “hurts the feelings of the Chinese people,” meddles in China’s affairs and harms Chinese-British relations, Foreign Ministry spokesman Hong Lei said. He said Britain now needs to take actions to repair the damage.

“We are strongly discontented and firmly opposed to it,” Hong told reporters at a daily briefing. “We call on the British side to earnestly respond to China’s solemn demand, stop conniving at and supporting separatist attempts to achieve Tibetan independence, take practical measures to eliminate the terrible impact and take actions to preserve Chinese-British relations.”

Hong said his ministry lodged a protest with the British Embassy in Beijing and the Chinese Embassy in London delivered the same message to the British government.

According to Reuters, China has responded similarly in the past to political leaders meeting with the Dalai Lama:

China’s response echoed many previous statements about the Dalai Lama’s meetings with foreign political leaders, suggesting that China will confine its reaction to angry words.

British ministers believe that who they see is a matter for them,” said a British Foreign Office spokeswoman in London. “If they choose to see someone, it does not necessarily indicate they support that individual’s viewpoint.”

The Dalai Lama told reporters on Monday that China is beset by a moral crisis, widespread corruption and lawlessness, leading millions of Chinese to seek solace in Buddhism.

He was in London to receive the $1.7 million Templeton prize for his work affirming the spiritual dimension of life.

This recent source of tension comes after China dismissed claims of plots to assassinate the Dalai Lama. AFP adds:

China has accused the Dalai Lama of “deceiving the world” and “spreading false information” after Tibet’s exiled spiritual leader said he was warned of a plot by Chinese agents to assassinate him.

The Buddhist monk made the allegation in an interview with Britain’s Sunday Telegraph, saying he had been told that agents were planning to poison him using Tibetan women posing as devotees seeking his blessing.

“The Dalai Lama always engages in anti-China splittist activities globally wearing his religious cloak, spreading false information, deceiving the world and confusing the public,” Chinese foreign ministry spokesman Hong Lei said.

“His most recent statement is not even worth refuting,” he told reporters Monday.

Read more about the Dalai Lama and Tibet Protests via CDT.

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“A lot of journalists have done black jail stories,” she said, but hers “was probably the first” to get coverage on TV [Chan refers here to a 2009 report, not, as the story implies, one from March this year]. “It’s also the first time that we got a government official to respond to a question about the existence of black jails.” The official denied the black jails existed, “but it was on the record, Chan said, “so that was useful for human rights groups. And that could be one reason why there’s the perception that I’m a go-getter ….”

But Chan said she doesn’t consider herself the most hard-hitting reporter in China. She admires the many journalists who covered last year’s pro-democracy protests in China, and those who sneaked across the border when Tibetans set themselves ablaze in resistance — both stories she did not pursue. For all of April, she was stuck in Hong Kong, unable to report on the breaking story of blind dissident Chen Guangcheng ….

“I have to face the reality, which is I’m not going back to China any time in the near future, not the way that this has played out,” she said. “And I’m sure I’ll be back in China someday. It’s just a question of when.”

Chan wrote about her reporting and expulsion from China in a blog post at Al Jazeera English last Friday. China’s Foreign Ministry tried to present its own side of the story at a press conference earlier in the week, but has still not offered a clear explanation for the decision.

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Having achieved little and lost much in Iraq and Afghanistan, the White House and Pentagon in 2012 are turning their focus to the Asia-Pacific region. Top U.S. leaders seem to believe that the world’s oldest major democracy must confront the world’s oldest civilization and most populous country. Washington orphans engagement and upgrades containment. A tough line toward China may buttress President Barack Obama’s prospects in this November elections, but could also jeopardize long-term U.S. and world security. Washington risks becoming trapped in a self-fulfilling policy. Expecting and preparing for a confrontation with China, U.S. policies may push China to the very behaviors Washington would like to prevent, and toward a collision that no sane person could welcome.

[...]The fact is that nothing on the table between Washington and Beijing is worth fighting for. Neither trade disputes nor intellectual property rights can be resolved by war. Americans may abhor China’s policies toward dissidents who challenge Communist rule and toward minorities such as Tibetans and Uyghurs. But external pressures won’t alter those policies. Neither China’s posture toward Taiwan nor its treatment of human rights is likely to change because some U.S. Marines are ensconced in Australia. On the contrary, any signs that Washington wants to intimidate the Middle Kingdom will only sharpen nationalist and xenophobic tendencies. A relaxation of tensions with the U.S. would do more for freedom within China than confrontation.[...]

If American and Chinese leaders are smart, they will work to develop complementary interests. Both countries need clean energy, reliable food and water supplies, and better health care systems. Both need to reduce security threats from Northeast Asia (Korea) to South Asia (Pakistan). Neither Washington nor Beijing should act on the self-fulfilling expectation that conflict is inevitable. Each should do what it can to help all parties develop in harmony.

Click through to The Diplomat for Clemens’ full analysis. Also see prior CDT coverage of U.S-China relations.

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Two more Tibetans have set themselves on fire to protest China’s crackdown on rising Tibetan dissent in China’s Sichuan province.

Sources with contacts in the region tell VOA the Tibetans, both in their 20s, set themselves ablaze near a monastery in the Sichuan provincial city known as Aba to Tibetans and Ngawa to ethnic Chinese. Both later died.

[...]Beijing has described the protests as barbaric and terrorist acts. But Western advocacy groups and many governments say the protests are a direct response to ethnic Chinese indifference to Tibetan religious practices and cultural norms.

China also accuses pro-Tibetan exile groups of inciting separatism, and routinely refers to the Dalai Lama as a “splittist” (separatist).

As the recurring acts of self-immolation fuel an ongoing debate, the Dalai Lama, who retired from political power last year, has been reluctant to offer his input, and some Tibetans are finding their faith in the spiritual leader shaken. BBC correspondent Sue Lloyd-Roberts spoke with the Dalai Lama in Dharamsala about his reservations commenting on recent self-immolations:

“Now this is very, very sensitive political issue,” [the Dalai Lama] explains with due solemnity.

“If I get involved in that, then the retirement from political power is meaningless. Whatever I say the Chinese government they immediately manipulate.”

[...]“These [Chinese] leaders are very foolish, narrow minded, authoritarian sort of people,” he says.

[...]“They do not understand what is the real Tibetan feeling.”

He speaks with emphasis and anger. It is the most ungodlike behaviour I have ever witnessed from His Holiness, the 14th Dalai Lama, in 20 years of interviewing him.

He is fed up and so are his followers. But for decades, it was considered almost blasphemy to criticise the Dalai Lama and his policies. Not any more.

“I question the current policy and position of His Holiness not to face reality and then forcing Tibetans to commit suicide,” says 60-year-old Lhasang Tsering, a former president of the influential Tibetan Youth Congress.

Karma Chophel, a former speaker of the Tibetan parliament in exile, takes the warning further.

“Non-violence has not worked. Violence could now be the only option,” he says.

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While there is no lack of media commentary, scholarly examination of the subject is sparse. In a special digital issue of their academic journal, the Society for Cultural Anthropology has compiled recent work by preeminent Tibet scholars and cultural figures, in an attempt to find “ways of making sense of self-immolation.” The issue consists of 21 essays divided into six themes, including work by Tibetan historian Tsering Shakya on the changing forms of protest in Tibet; activist-blogger Woeser on CCP propaganda; and High Peaks Pure Earth blogger and translator Dechen Pemba on online documentation in a censored digital environment. An essay on artistic responses to self-immolation features a piece by Crazy Crab, author of the Hexie Farm political cartoon and frequent contributor to CDT. From the introduction to the collection:

Tibet has no history of self-immolation as sacrifice, religious offering, or political protest. Yet, in the last year alone, roughly thirty-five Tibetans have set themselves on fire. The overwhelming majority of self-immolators are inside Tibet, in the People’s Republic of China, and almost exclusively in northwestern Sichuan and southeastern Qinghai provinces (corresponding to the Tibetan regions of northern Kham and southern Amdo). In this special issue of Cultural Anthropology, we collectively ask why. Why are so many Tibetans resorting to the singular act of setting the body on fire? What combination of cultural, historical, political, and/or religious reasons inspire these acts?

 [...]As we compiled this issue over the last two months, the frequency of the self-immolations increased. Updating the numbers, however, did not necessarily put us closer to comprehending the acts. How does one write about self-immolation—an act that is simultaneously politically charged, emotionally fraught, visually graphic, individually grounded, collectively felt—and what does one write? How do we intellectually make sense of these self-immolations, and how do we do so while writing in the moment, but writing from the outside?

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The Wall Street Journal reports on the crackdown on the commenting function on microblogging sites in an effort to stop rumor-mongering:

The state-run Xinhua news agency called the measures a punishment for the companies for allowing the rumors to appear, “resulting in adverse impact.”

Xiao Qiang, a scholar of the Chinese Internet at the University of California, Berkeley, said the moves show online discussion is hitting closer to home for the Communist Party than in years past, when authorities used censorship to quash discussions about issues such as democracy or Tibetan independence. Now “it’s about internal politics,” he said. The crackdown is “a public acknowledgment of their insecurity about online public opinion.”

Separate Xinhua articles Friday and Saturday also announced the closure of 16 websites, the detention of six people for “fabricating or disseminating online rumors” particularly through microblogs, and the arrest of more than 1,000 other suspects since mid-February in a broader “Internet crime crackdown.”that Xinhua said focused on information related to firearms smuggling, drug smuggling and drug-related crimes and other offenses

The articles didn’t provide details on the arrests. The State Internet Information Office didn’t respond to requests to comment.

Tea Leaf Nation looks at the actual impact of the new rules on Sina Weibo and other microblogging services:

Something feels different: Fewer tweets, thinner commentary, and a greater profusion of movies, movie stars, TV shows, and other light fare on the trending topics board. To wit, current trending topic #2 on Sina Weibo: The Public Safety Department press office and Sina Weibo jointly present safe travel tips for Qing Ming Festival. Riveting!

It’s impossible to say when this chill will end. Sina and Tencent both maintain the comment suspension will cease promptly at eight o’clock on Tuesday morning, but one can easily envision a “trial extension” under thin pretexts. Huang Jinghao (@黄京皓), a close Weibo watcher, offers these predictions for a Weibo sans comments: “1. Official accounts won’t be greatly affected, and retweeting won’t be affected at all; 2. Celebrity accounts won’t be greatly affected, as fans will retweet their tweets no matter what; 3. The grassroots will be the most affected. Originally many friends would chat with you via ‘comments,’ now that is not possible.” He ends by asking, “Would you still use a Weibo … this boring, with only celebrities and official accounts?”

Some will simply say, “No thanks.” In targeting comments, censors may have found Weibo’s Achilles Heel (read: its best, most democratizing feature).

For more on this topic, see an earlier CDT post, “Weibo Comments Suspended in Coup Rumour Aftermath” and cartoons created by netizens in response to the order.

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Butter Lamp by Crazy Crab of Hexie Farm for CDT:

Read more about Hexie Farm’s CDT series, including a Q&A with the anonymous cartoonist, and see all cartoons so far in the series.

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Prime Minister Syed Yousuf Raza Gilani and China’s Executive Vice Premier, Li Keqiang expressed these views as they met on the sidelines of the Boao Forum.

The Prime Minister said Pakistan greatly values China’s economic assistance and wished to promote closer collaboration in agriculture, irrigation, energy, infrastructure development, railways and security sectors.

He expressed the satisfaction that Pak-China Joint Energy Working Group, which will meet soon, was an encouraging landmark in the relations of two countries. He said the five-year Economic Trade Relation Plan is targeting projects that would stimulate social development in Pakistan.

He sought cooperation from the Chinese side on the Iran-Pakistan gas pipeline project. He said Pakistan wanted to maintain friendly relations with all its neighbours including China, India and Afghanistan. He mentioned resumption of composite dialogue with India and said Pakistan wanted a peaceful and stable Afghanistan.

The two leaders also discussed territorial integrity, and both sides have agreed to uphold each others sovereignty. The Economic Times adds:

In his meeting with Li, Gilani assured him that “China’s friend is our friend, and China’s enemy is ours,” a comment apparently aimed at highlighting the rift in US- Pakistan relations.

Gilani said Pakistan considers China’s security as its own security and supports its position on Taiwan, Tibet and Xinjiang, the Chinese province bordering Pakistan Occupied Kashmir, (PoK) which experienced increasing attacks by militants, some of whom, Chinese officials say were trained in Pakistan.

Pakistan is committed to fighting terrorism in all its forms, Gilani said and assured Li that Pak-China friendship remained a cornerstone of Pakistan’s foreign policy. Strategic and defence cooperation was an important component of Pak-China partnership, he said highlighting the defence ties between the two countries.

See also Pakistan and China ‘Like One Nation, Two Countries’ via CDT.

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