China Curbs Property Speculators, Boosts Consumption

Dec. 10 (Bloomberg) -- China scrapped a tax break on property sales and extended subsidies for auto and home appliance purchases, seeking to cool speculation while sustaining a recovery in the world’s third-largest economy.

The State Council will re-impose a sales tax on homes sold within five years after cutting the period to two years in January, the cabinet said in a statement yesterday. The government will scale back some tax breaks for car buyers, while continuing to fund vehicle purchases in rural areas.

China’s property prices rose in November at the fastest pace in 16 months, a government survey showed today, reinforcing concern that record lending and a $586 billion stimulus package may lead to asset bubbles. The benchmark Shanghai Composite Index closed 0.5 percent higher as households-goods makers and some auto stocks gained. Property companies fell.

 There is a legitimate concern here that credit from the Chinese stimulus package may have fueled some incredible bubbles that are getting close to a bursting scenario. China has recently been suffering from cases of overcapacity in everything from steel to car production, and with every province vying to get its bigger share of the stimulus, a lot of bubbles have emerged in the property markets as well. There is little doubt that China is going into a property bubble right now, primarily fueled by the injection of so many funds into construction and the industries behind them, and while China has always been able to make the case that "there is eventual demand" given its huge rural population, the bubble may be growing too fast for reality to catch up. Putting these sales taxes back on the property markets will probably help to curb this, but the chances of it eliminating it are less than likely.

Boosting consumption is, of course, China's #2 goal now for as long as the tail of the fiscal crisis is considered to be where we currently are. The export market, accounting for over half of China's GDP, is now beginning to normalize with its domestic consumption due to helpful tax breaks on items such as automobiles. There is some speculation that a great many of these car purchases could be by local provincial governments, eager to make consumption appear high in their areas and get more funding, but reports from reputable China economy experts in the Wall Street Journal have recently cast doubt on such a wild scenario.

Read the full article here.

China closes file-sharing sites in crackdown

BEIJING — China has closed one of the country's largest file-sharing sites in what it says is a fight against copyright infringement, but could be seen as another measure aimed at controlling what content the country's Web users can find online.

The file-sharing site BTCHINA — a major source of overseas movies, television shows and games in the country — has been closed since Friday, and another site, VeryCD.com, was down Wednesday. A report in the Southern Metropolis Daily said other file sharing sites would be closed in the coming days.

It is almost always too easy in the west to cry foul of any operations on the Internet by the Chinese government to be manipulation of free speech and access to content. In truth, while it remains to be seen if this is a token act meant at appealing to angry foreign copyright lobbies, there is a good chance that this effort is sincere in accordance with the Communist Party desires to build up a legal society and a domestic consumer culture for the sake of stability.

Up until now, it has been and still is inexcusibly easy to acquire copyrighted content in China on any major websites. In terms of crackdown on actual filesharers, there have been very few attempts that are mostly for show. What differentiates this act is that the Chinese government appears to be going after a service rather than a scapegoat, which would imply a sea change in how they are viewing copyright infringement in their country.

In terms of a domestic consumer culture, an assault such as this on pirated content is an absolutely neccessary huge first step to take. By making everyone who uses the Chinese Internet take notice, the government will then proceed to target additional resources and start issuing threats to hosting companies that find themselves in violation of copyright. How effective this will be will remain to be seen, as even in the United States copyright law is frequently ignored in favor of the convenience and speed of illegal digital downloads. However with the ability to impose as high a sentence for copyright infringement as they please, this aspiration toward legal society via arbitrarily set punishments may be met with an ironic series of unprecedented court battles over individual and corporate rights. Though the path will be hard, such an act might just be what China needs to focus itself on legal reform and promote a prosperous domestic economy.

Read the full article here.

China's rise named decade's most read news story

LOS ANGELES (Reuters Life!) - The rise of China as an economic superpower was the most read news story of the past decade, surpassing the Iraq War and the attacks of Sept. 11, according to an analysis by a U.S.-based media tracking group.

The Global Language Monitor, which uses an algorithm to search printed and electronic media and the Internet for trends in word usage, said there was strong interest in the Asian powerhouse, which is the world's third biggest economy.
A dragon used in traditional Chinese dance is seen at a residential community in Hangzhou, Zhejiang province, September 13, 2009. he rise of China as an economic superpower was the most read news story of the past decade, surpassing the Iraq War and the attacks of Sept. 11, according to a U.S.-based media tracking group.

"It is with little surprise that its ongoing transformation has topped all other news stories in a decade bespotted by war, economic catastrophe, and natural disasters."

 Well I should hope that one isn't too surprised to hear that China reached the #1 spot, simply due to the fact that next to the search term "terrorism", there probably hasn't been as much of an influx of a type of people into world consciousness as there has been of this decade's entry of the Chinese. While all of these events are ongoing, one can really see tha while wars and terrorist attacks affect a localized population, China's economic rise has delivered a significant impact to many ordinary people's lives.

Another important thing is that when it comes to learning about China, it is doubtful that one could just hope to find all the information one would need on the subject in a single, or even a dozen, articles. It would take quite a lot of research, investigation, fact-checking, and comparison of various analysts opinions to just gain the slightest of understanding of what contemporary China is today on the world stage. This discounts the entire element of required history to learn even a bit of why China where it is today.

Finally, there is the huge cultural element. People are going to want to understand not only what China is and its history, but what the people are about and interested in. To learn this is a vast undertaking that will inspire many people to look into countless articles and even venture into foreign language areas to just get a sense of what 'Chineseness' is and how it is creating local culture and preparing to affect international trends as well. It is with little doubt that the Chinese are going to be sculpting a considerable amount of cultural identity in the coming decades, and people are going to want to understand it so they can be a part of it, and profit from it.

Read the full article here.

Straight talk about homosexual therapy

During a public forum over the weekend, Yi Huso posed a rhetorical question to his mostly gay audience, and then went on to answer himself.

"How do you know a person is gay?" said Yi, a research fellow at the HIV Center for Clinical and Behavioral Studies at Columbia University in New York and a visiting assistant professor at Renmin University of China in Beijing.

After pausing and staring at the crowd of people who were in same-sex relationships or wanted to hear what an expert had to say about the confusing signals around them.

"Maybe gays love chocolate?" he asked jokingly.

Though Yi tried to be relaxed during his talk but wanted to convey a serious point to his audience of mostly young people looking for guidance.

"Homosexuality was classified as an illness," he said during his speech entitled "The harm of sexual orientation conversation therapy" during the forum Saturday that was aimed at Beijing's gay community. "Why do some professionals continue to provide a cure for which has been judged not to be an illness?"

China has been a particularly surprising place in regards to many modern issues that are also afflicting their Western counterparts, but it is in the understanding of homosexuality as a state of being that they have proven themselves to be quite comfortable. While the idea is anything but mainstreamed in China, there is a growing consensus amongst the medical elite of the nation that there is absolutely no scientific mechanism by which one’s sexuality can be ‘deleted’ ‘cured’ or otherwise ‘changed’. Perhaps due to this longstanding ethos of ‘scientific development’ as a cultural phenomenon in China, there is now an increasing consensus that those who are educated and follow the scientific method cannot be told they are wrong.

Morality and social normality in China is anything but consistent across its provinces, and it is frequently from the top that what is moral and what is immoral is frequently decided upon. Insofar as homosexuality has not been a discussed topic, it has made it less defined as a negative or a positive. This state of neutrality has been relatively beneficial for the gay communities in China, who are not exactly sure they are in any way eager to follow the stratified and sub-culturized path of Western societies that celebrates, perhaps too overtly, the sexual dynamic of their relationships. Gay bars and other institutions have popped up with relative ease in major metropolitan areas, although their clientele are less rigidly defined than in the West. While a community may be emerging, it is if anything very sexually conservative in terms of societal behavior. This will probably help the Chinese gay community, as an overt celebration of alternative sexuality only puts it in opposition to the norm. It ought to be discussed why it is there is no ‘straight and gay pride’ parade in the west, when there is little if no reason not to have one for the sake of reducing tension between the two groups.

Yet of course, it is not all wonderful over in China, and the social consequences of being found out to be homosexual remain anything but good in the less liberal areas away from the cities. It is much more the issue of being exposed than of actually being homosexual that frightens many Chinese, and so long as they can continue their habits without being a nuisance to others or inciting a moral panic it will likely be relatively easy to engage in homosexual activity. If these campaigns against old ideas of homosexuality as a disorder or a social blight can be repaired, China will be well on its way to being a very sexuality tolerant country.

Read the full article here.

China Faults Wall Street Over Losses

BEIJING—A Chinese economic official blamed "fraudulent practices" at some international investment banks for large losses incurred by Chinese state-owned companies on derivative contracts, in the government's strongest criticism yet of the role played by foreign banks.

Li Wei, a vice chairman of the State-Owned Assets Supervision and Administration Commission, cited contracts tied to energy prices sold by banks including Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley, to aviation and shipping firms.

Mr. Li, writing in the latest issue of the Study Times, a newspaper published by the Party School of the Central Committee of the Communist Party, also criticized Citigroup Inc., along with Merrill Lynch and Morgan Stanley, for developing "extremely complicated" derivatives products. He said 68 state-owned enterprises incurred combined book losses of 11.4 billion yuan ($1.67 billion) on 125 billion yuan worth of derivatives investments by the end of October 2008. Foreign investment banks were the "chief culprits" behind the huge losses, he said.

Now while no one likes being blamed, lets be very straightforward here: our derivative system caused this failure and it was both of our own creation of it and of our own blind trust in it that led to the near destruction of the financial system in the fall of 2008. That Chinese counterparts were willing to sign up to participate in this complex market, as well as agree to put money down on an extremely overvalued commodity such as oil (whose high prices were heavily linked to grossly exaggerated profits for large government owned oil companies in both Russia and China alike), suggested that there was far, far too much optimism that this bubble would not burst.

Now to be fair, the way the bubble burst was so drastic, and so unlike anything almost anyone with a positive spin was predicting (and lets be further fair by pointing out that during a boom market, people are idiots and won't listen to the pessimists) that the losses were far more devastating than ever before. The fact that  companies gambled on put options for their cash earned from derivative trading on subprime mortgage loans, in turn based on inflated property values, onto a stock like oil that was clearly being driven up by potentially lucrative high prices, shows an extremely complicated, and downright risky, chain of actions for which the fault lies in the risk taking of individual companies such as China Eastern Air Holding Co. AND American companies like Costco Group.

We should remember that we are in this together, and I personally am surprised that the Chinese would take any of these risks. While it is one thing to develop trust with the individuals who are selling you potentially lucrative trade ideas, it is your own corporate responsibility to be objective when it comes to analyzing the potential dangers of risk that face your company's investment. In this case, almost anyone could tell you that it was 'extremely complicated'; that it was should have been reason for any company, Chinese or American, to step back and rethink their perspective.

Read the full article here.

Rethinking the Chinese Yuan’s Re-Peg to the Dollar

 “China may not have simply re-pegged to the dollar,” Keidel told us. “My analysis leaves open the real possibility that China has simply been following its ‘basket guidance’ with one huge exception: if basket guidance would tell it to devalue with respect to the U.S. dollar, it sticks with the dollar instead.”

Yes, he said “devalue.” Keidel notes that for a while – prior to July 2008 – China did seem to be following a policy of gradual appreciation against a basket of major currencies. The yuan was appreciating the dollar, and its gains partially matched the euro’s own appreciation against the dollar.

But investors’ rush to the relative safety of the dollar during the financial crisis pushed the dollar sharply up against the euro – the dollar rose 27% against the euro between July and November 2008. At that point, strictly following the basket rule would have meant pushing the yuan down against the dollar. And that would have looked a lot like Beijing dealing a blow to U.S. exporters just as the American economy was teetering on the brink of oblivion.

The last line of this article pretty much sums up the crux of the financial issues surrounding the state of the yuan: it absolutely, under no circumstances, wants to devalue itself against the dollar. If it does this, the tremendous export industry in China, which is by some estimates over 35% of its economy, would be dealt a massive blow across all regions. Yes, unsurprisingly, the Chinese government is doing what will protect domestic stability and, more importantly, preserve jobs.

Of course, the other side to this equation is that China needs the US economy to recover and start spending more. While there is much talk of the Chinese buying up our treasuries in record amounts, there is good reason for that: the more they buy of our debt, the more we can spend on their goods. Yet this system almost became horribly decoupled last year during the crisis, where a collapsed US (and most certainly EU) economy would have lead to a staggering termination of exports from China. The consequences of this would have been nothing short of enormous for China's internal stability. These factories are frequently manned by some of the most poor and otherwise disadvantaged groups of China's society; particularly dangerous is the massive 'floating population' of roughly 10 million migrant workers that is hard to keep tabs on.

So what the world is seeing in regards to the yuan is a simple protectionist act that is based on intense phobia of having the Chinese domestic export sector suffering loses in any shape or form. The yuan may well appreciate, but it will appreciate as soon as the dollar appreciates. What this means is that it is certainly likely China and the US will remain friends, simply because their destinies are now so intertwined. Other regional blocks such as the EU are going to find themselves in a lose-lose situation in regards to pushing either the US or China to get something done about the currency devaluation. Yet as the dollar continues to devalue, the treasuries the Chinese have bought will also continue a steady decline in net worth. If the Chinese have a stronger yuan than the dollar, they will begin to lose money on their treasury investments.

Strictly speaking, the Chinese have absolutely no reason to bow to any pressure to adjust this yuan-dollar relationship.

Read the full article here.

China says wants US talks with NKorea to succeed

BEIJING — China voiced hope Tuesday that a rare direct meeting between North Korean and American officials next week would result in Pyongyang returning to talks on dismantling its nuclear program.

President Barack Obama's special envoy, Stephen Bosworth, is to travel to Pyongyang next Tuesday to discuss restarting the six-nation talks, in the first one-on-one talks between Pyongyang and Washington since Obama took office in January.

"We hope the dialogue between the DPRK and the United States can be held and can be successful," Foreign Ministry spokesman Qin Gang told a news conference, referring to the country by the initials of its official name, the Democratic People's Republic of Korea.

North Korea pulled out of nuclear talks in April to protest international criticism of a long-range rocket launch. It then conducted its second-ever nuclear test in May and has pushed for direct talks with the U.S.

It is my hope that anyone who has read this article in conjunction now with the one I wrote last week will be able to put aside any 'China is buddy buddy with the North Koreans' argument. Admittedly, however, this possibility of establishing diplomatic relations with North Korea may not be the right path for the United States to take. The six party talks, convened by China itself (who frequently has to drag North Korea to the table with it), are a more than satisfactory method of interacting with North Korea. In fact, in one particular regard, that being the ability to bring in other nation's voices in the East Asia sphere, they are the better choice for pursuing diplomatic goals.

What might just well happen with the North Korean government in this case is that a particular power group within it, particularly Kim Jong-Il's, is trying to gain face as the right group to continue ruling in the event of his death and succession by his son. Considering how eager they were to have Bill Clinton come over in recent months, and the completely independent of China's input detonation (much to their fury) of nuclear devices, it is likely North Korea is anything but internally stable. It may well be in the United States interest to back off and see what might happen if the west left the regime alone.

Yet this goal, of internal reform or collapse, is exactly the opposite of what the Chinese seek to get out of this entire debacle with North Korea. They more than anything want the regime to remain stable there so as to protect their stability interests in Manchuria. There is nothing worse than coming to the aid of a collapsing regime's people when you are loathe to do it and have absolutely no interest in keeping them in your territory.

Read the full article here.