CHINA'S STRIDENT TONE RAISES CONCERNS AMONG WESTERN GOVERNMENTS, ANALYSTS

John Pomfret

The Washington Post, January 31, 2010

China's indignant reaction to the announcement of U.S. plans to sell weapons to Taiwan appears to be in keeping with a new triumphalist attitude from Beijing that is worrying governments and analysts across the globe.

From the Copenhagen climate change conference to Internet freedom to China's border with India, China observers have noticed a tough tone emanating from its government, its representatives and influential analysts from its state-funded think tanks.

Calling in U.S. Ambassador Jon Huntsman on Saturday, Chinese Vice Foreign Minister He Yafei said the United States would be responsible for "serious repercussions" if it did not reverse the decision to sell Taiwan $6.4 billion worth of helicopters, Patriot Advanced Capability-3 missiles, minesweepers and communications gear. The reaction came even though China has known for months about the planned deal, U.S. officials said.

"There has been a change in China's attitude," said Kenneth G. Lieberthal, a former senior National Security Council official who is currently at the Brookings Institution. "The Chinese find with startling speed that people have come to view them as a major global player. And that has fed a sense of confidence."

Lieberthal said another factor in China's new tone is a sense that after two centuries of exploitation by the West, China is resuming its role as one of the great nations of the world.

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WASHINGTON WORKS THE AF-PAK-INDIA TRIANGLE

Zahid U Kramet

Asia Times, January 30, 2010

LAHORE - The United States' Af-Pak special envoy, Richard Holbrooke, and US Defense Secretary Robert Gates have been running from pillar to post between Afghanistan, Pakistan and India to end the "war on terror" and bring some sort of stability to the South Asian region.

Until now they have not made much progress. The war persists. A troop surge in Afghanistan was seen as the solution. And, acceding to the requests of his counter-insurgency expert, General David Petraeus, and his commander in Afghanistan, General Stanley McChrystal, President Barack Obama sanctioned an additional 30,000 US troops to ramp up the approximately 100,000-strong coalition force already present in Afghanistan.

Obama's December 1, 2009, address at the West Point Military Academy charted a new course when he remarked, "These additional American and international troops will allow us to accelerate handing over responsibility to Afghan forces and allow us to begin the transfer of our forces out of Afghanistan in 2011 ... America has no interest in fighting an endless war in Afghanistan." In his State of the Union address this week, Obama reiterated his commitment to having US troops begin to leave Afghanistan in July 2011.

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EXIT AMERICA

Roger Cohen

The New York Times, January 29, 2010

NEW YORK — I see that Gore Vidal, in an interview with the British daily The Independent, has been predicting America’s demise with scurrilous relish, awaiting the day when it takes its place “somewhere between Brazil and Argentina, where it belongs” and China reigns supreme.

The United States, he suggests, can then bow from the stage, war-drained, broken by “madhouse” politics, to become “the Yellow Man’s burden.”

I think Vidal’s lost it, as the irrepressible Christopher Hitchens points out in a recent Vanity Fair piece entitled “Vidal Loco,” but I have to say the words of the grand old man of letters echoed in my head during a recent visit to China, especially as I watched footage of the coffins of eight Chinese peacekeepers killed in Haiti being returned to Beijing.

This was a big event in China to which national television devoted many hours. The flag-draped coffins of the Chinese United Nations personnel, greeted at Beijing airport by sobbing family members and solemn Politburo members, put me in mind of numberless flag-draped American coffins returning to Dover Air Force Base from far-flung wars.

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RECONFIGURING NABUCCO

Robert M Cutler

Asia Times, January 28, 2010

MONTREAL - With the entry of Iraq into the mix of potential suppliers of natural gas for the Nabucco pipeline to Europe and the proliferation of alternative supply lines beyond the Russian-sponsored rival South Stream pipeline, the "classical" variant of the Nabucco pipeline is undergoing significant modification, just as it moves closer to final realization.

The first catalyst of this development was the signing by the European Union and Turkey last July in Ankara of the Nabucco Intergovernmental Agreement (NIA), which in its own words "ensures the regulatory coherence of this project and makes it compatible with the legal requirements that apply within the European Union's internal gas market" as well as with "international law, European law and the law of Turkey".

This technical legal verification is necessary in view of the fact that gas transiting Turkey is subject to a domestic Turkish legal regime while the same gas transiting EU member states is subject not only to their national legal codes but also to EU community law.

The second catalyst was a multilateral meeting this month in Batumi, one of Georgia's port cities on the Black Sea and already home to important energy infrastructure. The meeting discussed a number of projects, but in the natural gas sector its attention was focused on the White Stream project. This proposes to bypass both Russia and Turkey by taking natural gas from the Caspian Sea basin across Azerbaijan and Georgia, then under the Black Sea, for delivery to the Balkan member-states of the EU, notably Romania, and further shipment westwards. (See Turkey risks gas bypass, Asia Times Online, March 20, 2009, and Azerbaijan and Turkey clash over energy, Asia Times Online, October 23, 2009).

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CHINA BOOSTS JAPAN

Hana R. Alberts

Forbes, January 27, 2010

Japan's exports increased in December for the first time in 15 months. Due to the strength of Asian demand, particularly from China, the news bolsters a more positive outlook for most of Japan's major auto- and electronics makers.

Total exports jumped 12.1% year-over-year to $60 billion, according to government figures, while shipments sent out to Asia, which account for more than 50% of Japan's total exports, climbed 31.2% to 3 trillion yen ($33.6 billion).

Buoying the overall jump, Japan's exports to China alone surged 42.8% to 1.1 trillion yen in the month. China last year beat out the U.S. to become Japan's biggest export market.

Japanese automakers in particular benefited from cash-rich Chinese consumers, whose purchases helped compensate for lackluster business in other parts of the world hit harder by the economic downturn.

Toyota Motor Corp. has been battered by two recalls, resulting in the suspension Tuesday of U.S. sales of eight of its models. But while its 2009 global sales dropped 13%, the world's largest automaker said this week it expects sales to rise 6% this year.

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SRI LANKA'S CRUCIAL VOTE: THE PRESIDENT VS. THE GENERAL

Amantha Perera

Time, January 26, 2010

Some people may celebrate Jan. 26, 2010, at Sri Lanka's first post–civil war presidential election — the island nation ended the 26-year-long conflict last May — but the advent of the poll has brought out deep tension, division and several alarming incidents of violence. "There is this foreboding sense that things could turn really bad," Keerthi Thenakoon, the chief executive of the election-monitoring body Campaign for Free and Fair Elections (CaFFE), told TIME. "It is like sitting on a dynamite pile that is giving off sparks."

The race between President Mahinda Rajapaksa and his challenger, the former army commander Sarath Fonseka, is unexpectedly close. Rajapaksa won the war against the Liberation Tigers of Tamil Eelam (LTTE), a brutal ethnic separatist group that once controlled much of northern and eastern Sri Lanka. But Fonseka, a hero in his own right in the same war, is a formidable opponent. He represents a patchwork coalition of opposition parties united in their antipathy to Rajapaksa, whom they say has disregarded the rights of the Tamil minority and indulged in blatant crony capitalism.

The opposition has even raised the specter of a military coup, warning that Rajapaksa will do anything to stay in power. At election rallies, some opposition speakers alluded to the People Power movement in the Philippines, born of outrage against the discredited 1986 election there. Rajapaksa's party dismissed those fears. "We don't need to use thuggery," says Susil Premajayantha, general secretary of the President's ruling United People's Freedom Alliance. "The people are behind us."

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CHINESE ECONOMY HEATS UP GLOBAL CRISIS DEBATE

AFP, January 25, 2010

DAVOS, Switzerland — Global leaders and bankers will be looking for firm signs at the Davos forum this week of China's determination to control the hot money pouring into its economy.

A year after China's Premier Wen Jiabao sternly lectured the United States and other western nations at the World Economic Forum for causing the international financial crisis, markets are now jittery over "asset bubble" warnings around his country.

With China and India two of the hottest economies around, comments by Chinese First Vice Premier Li Keqiang and top Indian cabinet member Kamal Nath will be seized upon at this year's forum which starts in the Swiss resort on Wednesday.

Chinese officials have already indicated that the focus of the speech by Li, a senior member of the Communist Party's ruling politburo, will be the financial crisis and reforms.

The world's major emerging economies, China and India have survived the storms of the past two years better than their Western rivals.

But the state of China's property and stock markets and its soar away growth -- 10.7 percent in the fourth quarter -- has heightened inflation fears which has already forced the Beijing government to cut back on bank lending to deter a consumer splurge on cars and property.

Inflation is also rising in India where increased manufacturing has spurred a new growth surge in recent months. India's central bank, the Reserve Bank of India, meets on Friday and is expected to drain some of the liquidity pumped into the financial system last year to encourage lending, analysts said.

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IN JAPAN, U.S. LOSING DIPLOMATIC GROUND TO CHINA

Martin Fackler

The New York Times, January 24, 2010

TOKYO — When Defense Secretary Robert M. Gates visited Japan’s new leaders in October, not long after their historic election, he pressed so hard and so publicly for a military base agreement that the Japanese news media labeled him a bully.

The difference between that visit and the friendly welcome that a high-level Japanese delegation received just two months later in China, Japan’s historic rival, could not have been more stark.

A grinning President Hu Jintao of China took individual photos with more than a hundred visiting Japanese lawmakers, patiently shaking hands with each of them in an impressive display of mass diplomacy.

The trip, organized by the powerful secretary general of Japan’s governing Democratic Party, Ichiro Ozawa, was just one sign of a noticeable warming of Japan’s once icy ties with China. It was also an indication that the United States, Japan’s closest ally, may be losing at least some ground in a diplomatic tug-of-war with Beijing.

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LOOKING AHEAD TO NORTH KOREA'S DEMISE

Donald Kirk

Asia Times, January 23, 2010

WASHINGTON - If there's one sure way to infuriate the North Koreans, it's to talk of "regime collapse" and "contingency planning". As far as Pyongyang is concerned, such speculation is proof positive of United States-led plotting of a "pre-emptive strike".

Against this background, one should not be surprised if the North Koreans see a study conducted by Rand Corporation analyst Bruce Bennett and Dartmouth College scholar Jennifer Lind as the most conclusive evidence to date that the planning is in an advanced stage. Considering Rand's contracts with the US defense establishment, one has to perceive the study as a scenario for an invasion of the North that would plunge the Korean Peninsula into a second Korean War.

Lind offers specific estimates of what it would take to seize North Korea's nuclear facilities and disarm the entire North Korean defense establishment as if the collapse of the North Korean regime were almost certain and the US had to lead the charge to fill the vacuum. The study offers a raft of figures on the exact number of troops needed to subdue North Korea - 400,000 seems to be the operative figure with six brigades of troops dispatched right away to address the "paramount problem upon the North Korean collapse" - "the prevention of loose nukes".

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ECONOMIES IN CHINA, INDIA RECOVERING FASTER THAN THOSE IN WESTERN NATIONS

Frank Ahrens

The Washington Post, January 22, 2010

The giant and emerging economies of China and India appear to be lurching toward recovery faster than their more developed Western counterparts, including the United States, although the recovery is not without potential pitfalls.

Beijing said Thursday that China's fourth-quarter gross domestic product (GDP) shot up a breathtaking 10.7 percent, well surpassing expectations and marking its fastest quarter of growth since 2007.

In India on Thursday, government officials said that fourth-quarter GDP is expected to decline slightly from the previous quarter but that even with the pullback, the nation's GDP will expand by at least 6 percent, which is more than twice what is expected in the United States. That follows a forecast Wednesday from the World Bank that India's economy will grow at a 7.5 percent clip this year and China's at a 9 percent rate.

By comparison, World Bank forecasters expect the recession-weary U.S. economy to grow only 2.5 percent this year, but that more than doubles expectations for stagnant Europe, where growth might have trouble surpassing 1 percent. The United States and Europe are struggling with the long-term prospect of 10 percent unemployment and rising deficits and national debts.

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CHINA’S GDP GROWTH ACCELERATES TO FASTEST SINCE 2007

Bloomberg, January 21, 2010

China’s growth accelerated to the fastest pace since 2007 in the fourth quarter, capping Premier Wen Jiabao’s success in shielding the nation from the global recession and adding pressure to rein in a surge in credit.

Gross domestic product rose 10.7 percent from a year before, more than the median forecast of 10.5 percent in a Bloomberg News survey, a statistics bureau report showed in Beijing today. Asset-price gains, particularly in property, are creating problems for the government to guide the economy, Ma Jiantang, who heads the bureau, told reporters after the release.

The report stokes speculation the central bank will start raising its benchmark interest rate and tighten restrictions on the nation’s lenders. The one-year swap rate, an indicator of future changes in borrowing costs, climbed and the People’s Bank of China guided three-month bill yields higher for the second time in two weeks.

“Today’s data suggest that tighter policy is just around the corner,” said Brian Jackson, a Hong Kong-based strategist on emerging markets at Royal Bank of Canada. “Policy makers will need to move soon to stop the economy from overheating,” he said, forecasting officials will end an exchange-rate peg and boost interest rates starting this quarter.

Stocks across Asia were mixed today, with Japan’s Nikkei 225 Average rising 1.2 percent at the close and Australia’s Standard & Poor’s/ASX 200 Index falling 0.8%. The Shanghai Composite Index was up 0.5 percent at 2:55 p.m. local time. The one-year swap rate, the fixed cost for receiving a floating rate for 12 months, rose three basis points to 2.32 percent.

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GATES: AL-QAEDA HAS ASSEMBLED A 'SYNDICATE' OF TERROR GROUPS

Craig Whitlock

The Washington Post, January 20, 2010

NEW DELHI -- Defense Secretary Robert M. Gates said Wednesday that al-Qaeda was using proxy terrorist groups to orchestrate attacks in India, Pakistan and Afghanistan as part of a broader strategy to destabilize the region.

In a press conference after two days of meetings with Indian officials, the Pentagon chief said al-Qaeda had formed a "syndicate" of terrorist groups with Taliban factions in Afghanistan and Pakistan, as well as Lashkar-i-Taiba, a Kashmir separatist network blamed for the 2008 Mumbai hotel attacks that killed 165 people.

"What we see is that the success of any one of these groups leads to new capabilities and a new reputation for all," Gates said. "A victory for one is a victory for all."

U.S. intelligence officials have said jihadi groups in the region are cooperating more closely than ever and that it has become increasingly difficult to sort out who, exactly, is responsible for many high-profile bombings, including the Dec. 30 suicide attack on a CIA base in eastern Afghanistan.

But Gates warned that it would be a mistake for the United States and its allies in South Asia to concentrate on eliminating a particular network while ignoring the others. "It's dangerous to single out any one of these groups and say if we could beat that group that will solve the problem," he said. "Because they are, in effect, a syndicate of terrorist operators."

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CHINA IN THE NEW DECADE

China International Business, January 19, 2010

This year is likely to be a turning point for the world economy, not just with the global financial crisis wearing off and the world economy needing to be rebuilt, but also as the starting point for the decade, or maybe even a century-long goal of fighting climate change, finding alternatives to waning natural resources, and integrating the Chinese financial system in with the rest of the world's. With China's place in the world economy growing every day, its input into global issues and developments will be profound.

CIB looks at four of the biggest issues concerning China, and how each of them might unfold over the next year and even decade.

RESOURCES: PEAK OIL

Though the argument that peak oil — the time when new oil discoveries can no longer keep up with oil demand — is fast approaching is still controversial, the argument that we are entering a time of greater resource shortages is not. As long as the basic formula of growing demand and shrinking resources remains true, commodity prices have an impetus pushing them forward.

As one of the world's major consumers of resources — particularly in construction inputs — what happens in the commodity markets in a large part happens to China. Over the past year high coal, iron ore and gas prices have grabbed headlines across China, and led to prolonged and intense negotiations with the largest providers of those resources. As late as last November the Chinese media was reporting that electricity producers had decided to forgo group negotiation of coal prices in exchange for one-on-one contracts – in other words the problem is as of yet unresolved. "It will be really difficult to have a ‘Chinese Price' next year [2010] as the three main producers of iron ore all expect increasing demand in China," notes Luo Bingsheng, vice president of manufacturer Chinasia.

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WATERY DATA: CHINA COUNTS THE DROPS

China RealTime Report, January 18, 2010

China, in its first-ever nationwide water resources survey will attempt to quantify just how much water it has, how much it needs and how much pollution is part of the flow.

China’s water supplies are meager and dwindling, threatened by waste, pollution and chronic drought. Global warming is blamed for shrinking the big Tibetan glaciers that feed most of China’s main rivers. All this is happening just as China’s wealth is increasing demand for more water – for irrigating food, propelling hydropower, and manufacturing of all types.

Compounding this, China’s leadership until now hasn’t had a clear picture of what’s actually going on with one of its most precious natural resources. One non-governmental organization, the Institute of Public and Environmental Affairs, has compiled a map of water pollution based on public records and some tips.

The figures in the two-year water survey project, announced last week, could be crucial to major choices about development. For example, cities in the arid north are investing in costly desalination projects, and massive canals to divert water form Yangtze River to the north.

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DARK ECONOMIC CLOUDS ON THE HORIZON FOR CHINA
While it may look to the world as if the growth of the eastern giant's economy is unstoppable, there are mounting concerns, says Heather Stewart

Heather Stewart

The Observer, January 17, 2010

Barely a week goes by without yet another stunning fact from the Chinese economy. Last Friday brought news that despite spending billions on the world's largest fiscal stimulus package to help escape the global downturn, China's vast foreign exchange reserves shot up by another 23% in 2009, to a stunning $2.4tn (£1.4tn) – almost twice the GDP of the UK. Official figures this week are expected to show that while the rest of the world was struggling to emerge from recession, Chinese growth was running at a rampant annual rate of more than 10% in the final three months of the year.

With China barely breaking stride during the Great Crash, and set to surpass sickly Japan as the world's second-largest economy by the end of 2010, it would be easy to see the turmoil of the past two years as setting the seal on the inexorable rise to dominance of the eastern giant.

However, dark clouds are gathering on the horizon. First, there are mounting fears over China's dramatic bounce-back – bubbles are inflating in the stock market and housing that could burst, with catastrophic results.

Capital controls protecting the currency from a financial exodus mean it's hard for domestic investors to send their surplus funds abroad – so with banks directed to pump up lending, cheap cash is pushing up asset prices at home. Bank lending in December was more than 95% higher than a year earlier, according to the People's Bank of China.

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SELLING SOUTH KOREA
Lee Myung-bak wants to move his country to the center of the world.

B. J. Lee

Newsweek, January 16, 2010
From the magazine issue dated Jan 25, 2010

For the first time in modern history, South Korea is laying claim to lead the club of rich nations. South Korea became the first member of the Organization for Economic Cooperation and Development—the group of 30 wealthy nations—to emerge from the global recession when it recorded 0.4 percent growth in the third quarter of last year. This year the OECD expects South Korea's GDP to expand by 4.4 percent, the highest growth rate of any of its members.

Now President Lee Myung-bak wants to turn the end of the economic crisis into an opportunity. He knows the crash has accelerated the decline of American might, as well as the rise of China and other emerging powers, and he aims to exploit the gap between them. His goal is to transform South Korea from a successful but self-involved economic power into a respected global soft power with the clout to mediate between rich and poor nations on global issues such as climate change and financial regulation. In particular, Lee is pushing to revive momentum on a global free-trade deal—stalled in large part due to hostility from poor nations—while defending the poor by pushing for more international supervision of the global financial system. At the same time, he is trying to establish South Korea as a leader in the fight against global warming by agreeing that the country will cut emissions by 30 percent by 2020—one of the most aggressive targets in the world—even though it is not obligated to do so because it is still considered a developing nation under the Kyoto Protocol. To many in South Korea, the selection of Seoul as the site of the November 2010 summit of the G20—the group of 20 leading economic powers—was an acknowledgment of how well it has managed the current economic and environmental crises. "The old order is being dismantled and replaced by the new order," Lee said from the Blue House in a televised New Year's speech. "We have to make our vision the world's vision."

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JAPAN-U.S. ALLIANCE TALKS

Asahi Shimbun

Japan's relationship with the United States is finally beginning to move forward, even though the issue over the relocation of the U.S. Marine Corps Air Station Futenma in Okinawa Prefecture remains a thorny problem.

This is how things stand four months after Prime Minister Yukio Hatoyama took office. In their meeting in Hawaii, Foreign Minister Katsuya Okada and U.S. Secretary of State Hillary Clinton agreed to start talks to deepen the Japan-U.S. alliance.

Clinton again urged Okada to implement the agreement to relocate the Futenma facility from Ginowan to the Henoko area in Nago.

At the same time, Clinton said the Futenma issue is very important but only "part of our comprehensive partnership," making clear her recognition of the need to promote cooperation between the United States and Japan in other areas.

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CHINA TRIES TO COOL DOWN

Robert M Cutler

Asia Times, January 14, 2010

MONTREAL - China has now entered, or is trying to enter, a cooling phase of the economic stimulus that, according to reliable estimates, accounted for as much as 95% of the country's economic growth through the first nine months of 2009.

Yet according to Caixin Media, a Beijing-based media group, commercial banks issued loans worth 600 billion yuan (US$88 billion) during the first full week of January, and this despite instructions from banking regulators and the People's Bank of China (PBoC) to the contrary.

That figure, reportedly a new high in years, may have been reached in anticipation of further moves this week (or possibly even triggered them) by the China Banking Regulatory Commission and other banking and financial agencies. The PBoC announced on Tuesday that, to reduce market liquidity and reduce risks, the reserve requirement ratio for banks would be lifted by a half of a percentage point.

A Bloomberg News survey of economists had judged that Beijing would not take this move before April. Last autumn, lending to such industries as steel and concrete was banned, but now efforts to tighten credit more broadly are becoming more concerted.

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CLINTON TRIES TO DEFUSE ASIAN TENSION

Mark Landler

The New York Times, January 13, 2010

HONOLULU — Secretary of State Hillary Rodham Clinton kicked off her travels this year, as she did last year, by flying across the Pacific rather than the Atlantic. But this time, her itinerary is more urgent. With tensions rising between the United States and both Japan and China, Asia has emerged as a diplomatic hornet’s nest, even beyond the perennial threat of North Korea.

Mrs. Clinton met with Japan’s foreign minister in Hawaii on Tuesday to try to defuse tension from a dispute over relocating an American military base on the island of Okinawa. The talks did not yield any breakthroughs, and afterward, it was clear the two sides were still far apart.

“We look to our Japanese allies and friends to follow through on their commitments,” Mrs. Clinton said at a news conference with Foreign Minister Katsuya Okada. Three times, she indicated that the Obama administration was not open to any compromise.

Mrs. Clinton also said it was premature to comment on China’s announcement late Monday that it had successfully tested its first land-based missile defense system — a move analysts said was intended to signal Beijing’s pique at the administration’s decision to sell weapons to Taiwan.

She said the United States had expected the test and played down speculation that it was a rebuke for American actions, like the sale of missile defense equipment to Taiwan.

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WILL CHINESE CONSUMERS KEEP BUYING CARS?

Hana R. Alberts

Forbes, January 12, 2010

China's car sales officially beat the U.S.'s for the first time in 2009. But like so many other success stories in China, from skyrocketing property prices to the viral spread of chain stores like Yum! Brands' KFC, does this trend have staying power?
Yes, according to a Credit Suisse study on Chinese consumer behavior released Tuesday.

Car ownership in China has more than doubled in the last five years, from 12% of households in 2004 to 28% in 2009, the report says. Based on a 40% increase in car ownership in Japan between 1970 and 1980, the report concludes that it's possible for China's percentage to top 50% by around 2015.

To be sure, last year an incenvitve program akin to the U.S.'s Cash-for-Clunkers initiative helped boost sales in China. But research shows the stimulus package wasn't the only factor fueling demand. In the sixth-annual iteration of its consumer survey, Credit Suisse polled 2,700 people in eight major cities about their incomes and spending habits.

Thirty-five percent of households said they "definitely will" or "probably will" buy a new car within the next few years. Moreover, survey respondents said they were willing to spend more on a car purchase than they have said they would in the past. In 2004, they budgeted an average of 130,000 yuan ($19,000) for a new car, while in 2009 they earmarked 185,000 yuan for the same purchase ($27,000).

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IN CHINA, FEAR OF A REAL ESTATE BUBBLE

Steven Mufson

The Washington Post, January 11, 2010

BEIJING -- With property prices soaring in key cities, many investors and bankers worry that China has the next great real estate bubble waiting to be popped.

The Chinese government is worried, too. On Sunday, the nation's cabinet, citing "excessively rising house prices" in some cities, said it will monitor capital flows to "stop overseas speculative funds from jeopardizing China's property market." It also said that any Chinese family buying a second home must make a down payment of at least 40 percent.

For investors, many of the usual bubble warning signs are flashing. Fueled by low interest rates, prices in Shanghai and Beijing doubled in less than four years, then doubled again. Most Chinese home buyers expect that today's high prices will climb even higher tomorrow, so they are stretching to pay prices at the edge of their means or beyond. Brokers say it is common for buyers to falsely inflate income statements for bank loans.

Some economists and bankers fear that they have read this script before. In Japan at the end of the 1980s and in the United States in 2008, residential real estate bubbles ended in big crashes, battered banks and slow recoveries. With China acting as a key engine of global growth, a bursting of the Chinese real estate bubble could be a pop heard round the world.

"It's definitely a bubble," said Beijing real estate broker Xu Xiangdong, a 24-year-old former nightclub cashier. "But it won't break because there is lots of support beneath the bubble because buying power is really strong."

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ASIA’S CHANGING POWER DYNAMICS

Brahma Chellaney

The Korea Herald, January 10, 2010

NEW DELHI -- At a time when Asia is in transition, with the specter of a power imbalance looming large, it has become imperative to invest in institutionalized cooperation to reinforce the region`s strategic stability. After all, not only is Asia becoming the pivot of global geopolitical change, but Asian challenges are also playing into international strategic challenges.

Asia`s changing power dynamics are reflected in China`s increasingly assertive foreign policy, the new Japanese government`s demand for an "equal" relationship with the United States, and the sharpening Sino-Indian rivalry, which has led to renewed Himalayan border tensions.

All of this is highlighting America`s own challenges, which are being exacerbated by its eroding global economic preeminence and involvement in two overseas wars. Such challenges dictate greater U.S.-China cooperation to ensure continued large capital inflows from China, as well as Chinese political support on difficult issues ranging from North Korea and Burma to Pakistan and Iran.

But, just when America`s Sino-centric Asia policy became noticeable, Japan put the U.S. on notice that it cannot indefinitely remain a faithful servant of American policies. Prime Minister Yukio Hatoyama`s government is seeking to realign foreign policy and rework a 2006 deal for the basing of U.S. military personnel on Okinawa. It also announced an end to its eight-year-old Indian Ocean refueling mission in support of the U.S.-led war in Afghanistan.

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FEARS REAL AND IMAGINED

Francesco Sisci

Asia Times, January 9, 2010

PART 1: The peace imperative

BEIJING - China's problems are not all internal. On the outside, China's rise has created plenty of fears, some small, some large.

Among the small fears are those commonly found among Americans who see China as a second wave of the Yellow Peril that scared the US in the 1980s, when it was thought that Japan would soon take over North America. In this new scenario, American workers see jobs migrating to China because of investment going there; at the same time, China has become America's largest creditor, one of the countries that, by buying US bonds, keeps the US afloat.

Thus China is seen as a modern version of Ebenezer Scrooge, Charles Dickens' caricature of early industrial development in England. It is a tale of one country stealing jobs and leaving common people unemployed while at the same time being the stingy financier bankrolling America's profligate debts, and possibly awaiting the occasion to call everything in and send the US into bankruptcy.

However, these are only small fears, no matter how acutely they are felt. These perceptions could easily be addressed and modified. After all, even Scrooge had a soft side, as all kids are reminded when reading A Christmas Carol.

Furthermore, clear minds know that present-day China is not 1980s Japan; job migration is not confined to China, it is a global and complex process: jobs also go to Mexico, Bangladesh, Africa et cetera. As for credit, China bankrolls the US, but it is the US that spends too much and saves too little. Besides, with so much credit in China's hands, the trouble is not with the US, the debtor, but with China, which cannot call in such an enormous debt without endangering Beijing's own financial and economic balance.

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THE PEACE IMPERATIVE

Francesco Sisci

Asia Times, January 8, 2010

BEIJING - In 2005, Zheng Bijian, then executive vice-president of the Central Party School, a former political adviser to Communist Party secretary Hu Yaobang, and for years right-hand man to President Hu Jintao, published an essay in the US detailing China's doctrine about its peaceful rise. [1]

The article argued that China would not seek hegemonic status in the world and would not engage in expansionist wars. It explained how historic Imperial China, although very powerful at times, never went out of its own political basin.

Zheng’s argument was a response to Western allegations that China, as it grew strong and powerful, would also grow aggressive, just as 19th-century Germany did, thus leading Europe and the world into the Great War of the early 20th century. Coming as it did from a person with such an illustrious background, it was a public political pledge: China in the future would not become aggressive, and if it did, anybody could turn this article against Beijing, making it lose face and essential international political capital.

According to Chinese political logic, then, this pledge was very significant: it was and remains a commitment about future policies, by which China's internal and international credibility and accountability may be gauged.

However, Western skeptics know full well that political pledges can be warped and turned upside down if political necessities arise. The real question then is, they argue, will China feel it necessary to put aside the pledge about its peaceful rise and engage in an aggressive foreign policy? What would the conditions be for such aggressive behavior? Would a unilateral declaration of independence by Taiwan tip the balance? How then can we believe that China is serious about its peaceful rise?

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AN ALLIANCE LARGER THAN ONE ISSUE

Joseph S. Nye, Jr.

The New York Times, January 7, 2010

SEEN from Tokyo, America’s relationship with Japan faces a crisis. The immediate problem is deadlock over a plan to move an American military base on the island of Okinawa. It sounds simple, but this is an issue with a long back story that could create a serious rift with one of our most crucial allies.

When I was in the Pentagon more than a decade ago, we began planning to reduce the burden that our presence places on Okinawa, which houses more than half of the 47,000 American troops in Japan. The Marine Corps Air Station Futenma was a particular problem because of its proximity to a crowded city, Ginowan. After years of negotiation, the Japanese and American governments agreed in 2006 to move the base to a less populated part of Okinawa and to move 8,000 Marines from Okinawa to Guam by 2014.

The plan was thrown into jeopardy last summer when the Japanese voted out the Liberal Democratic Party that had governed the country for nearly half a century in favor of the Democratic Party of Japan. The new prime minister, Yukio Hatoyama, leads a government that is inexperienced, divided and still in the thrall of campaign promises to move the base off the island or out of Japan completely.

The Pentagon is properly annoyed that Mr. Hatoyama is trying to go back on an agreement that took more than a decade to work out and that has major implications for the Marine Corps’ budget and force realignment. Secretary of Defense Robert Gates expressed displeasure during a trip to Japan in October, calling any reassessment of the plan “counterproductive.” When he visited Tokyo in November, President Obama agreed to a high-level working group to consider the Futenma question. But since then, Mr. Hatoyama has said he will delay a final decision on relocation until at least May.

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CHINA'S SPACE PROGRAM POISED TO SURGE

Peter J Brown

Asia Times, January 6, 2010

China's space program is poised to surge ahead at a brisk pace in 2010. In fact, over the next 12 months, China's activities in space may be such that when all is said and done, 2010 could well rank as one of China's top years thus far in terms of the total number and variety of missions launched.

Part of the reason for this is the sense, created by reports that two or three major Chinese space programs are running behind schedule, that China has some catching up to do. This might help to explain the rapid sequence of launches of the Yaogan VII and Yaogan VIII remote sensing satellites by China last month.

After 2009, which is best described as relatively uneventful with the exception of the successful completion of the Chang'e-1 lunar mission last March and the dual Yaogan launches, 2010 could prove to be exciting for observers of China's space program.

At the same time, a very important chapter will be unfolding behind the scenes, involving the China Aerospace Science and Technology Corporation (CASC, aka CASTC) and what amounts to an ongoing attempt to fundamentally change China's space technology industrial base.

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RISING CHINA AT COPENHAGEN

Simi Thambi

Institute for Defence Studies and Analyses, January 5, 2010

Twenty years ago, China was East Asia's largest oil exporter. Today, it is the world's second-largest importer. Now that China is the workshop of the world, its hunger for electricity and industrial resources has soared. Beijing's access to foreign resources is necessary both for continued economic growth and for the survival of the Chinese Communist Party. Thus, an unprecedented need for resources is now driving China's foreign policy. After three decades of near two-digit economic growth till 2009, China still has immense developmental needs, given that almost half of China’s estimated 1.3 billion citizens still live on less than $2 (PPP) a day. There is no doubting China’s justifiable right to development. But development is dependent on growth and growth is fuelled by energy which leads to green house gas emissions and sustainability problems. China faces a trade off between energy efficiency and growth.

Until recently China had pursued an inflexible stance with respect to climate change negotiations. Chinese negotiators argued along with the G-77 countries that it is unfair to compare among different countries ignoring their size in terms of population, China alone makes up one-fifth of the world's population and the per capita emission in China was low compared to the emission in the industrialized world. The PRC’s negotiators argued that China’s share of the global CO2 emissions that have accumulated in the atmosphere over the last 100 years is a mere 8 percent, whereas the industrial nations, whose greenhouse gas emissions have been building up for more than a century, bear the historical responsibility for climate change, a fact that should be borne in mind at climate negotiations. They also argued that approximately a quarter of the emission currently caused by China originate from the production of goods destined for export (Carbon leakage or Surrogate Emissions).

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2020 IS JUST TEN YEARS AWAY
India has come a long way since 2000, but there's a longer road to 2020.

Sanjaya Baru

Business Standard, January 4, 2010

With 2010 here, 2020 is not too far ahead. Remember all those Vision 2020 stuff? It was not just our homegrown futurologist Abdul Kalam but an entire expert committee of the Planning Commission and many others, including McKinsey & Co, that had come up with visions for 2020 and their road maps to the future.

The future is almost here! The year 2020 is just another 10 years away. Time to dust out those forgotten reports and find out what they had to say about where we need to go and how. The Planning Commission report was written by a large number of specialists under the leadership of former member SP Gupta.

Painting what the report called the “Best Case Scenario”, it said: “India 2020 will be bustling with energy, entrepreneurship and innovation. The country’s 1.35 billion people will be better fed, dressed and housed, taller and healthier, more educated and longer living than any generation in the country’s long history.”

Promising to wipe out “illiteracy and all major contagious diseases”, the report placed emphasis on the development of a non-farm rural economy and the rapid expansion of employment opportunities in the services and manufacturing sectors. “These developments”, it prophesied, “driven by the firm commitment of the government and a quantum expansion of vocational training programmes, will ensure jobs for all by 2020.”

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CHINA AND THE OTHER BRICS WILL REBUILD A NEW WORLD ECONOMIC ORDER
Five emerging nations – and booming countries across Asia – are set to overtake America and Europe

Ashley Seager

The Observer, January 3, 2010

As the past decade slips away, it is easy to remember it economically as one which began with the dotcom boom and ended with the "Great Implosion" that left Britain, the US and other industrialised nations struggling with the most painful recession in the postwar period.

But a deeper shift has been going on – the rise and rise of China and other key economies grouped under the banner of "emerging". Indeed, the growing political and economic muscle of China was highlighted by its recent intransigence at the Copenhagen climate talks, where it refused to be forced into any binding agreement to reduce its emissions.

While many economists have grown used to the idea that the US economy – still the world's biggest – is the locomotive of the global economy, it is China, helped by a huge fiscal stimulus from Beijing last year, which is roaring ahead and helping to drag the rest of Asia and countries such as Germany, which exports a lot of machine tools to China, out of recession too. China is one of the key reasons the world did not experience an even worse 2009 than it actually did.

China is not alone; other Asian countries that are booming include Thailand, South Korea, Malaysia and Taiwan. But in terms of sheer size and importance, key emerging economies now include Brazil, Russia and India. Together with China, these are known as the Brics, a term coined by Jim O'Neill at Goldman Sachs early in the Noughties to denote their growing economic importance.

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THE WORLD IN 2010: CHINA CONTINUES ITS UNSTOPPABLE ECONOMIC CHARGE

Alistair Dawber

The Independent, January 2, 2010

China and six other South-east Asian countries yesterday toasted the inauguration of the biggest free trade area in the world, when the Association of South East Asian Nations, or Asean-6, was formally launched.

Covering nearly 2 billion people in Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, along with China, Asean-6's stated aim is to eliminate tariffs on almost all traded goods between its members.

China, by far the biggest member, holds the whip hand in the bloc, with some voicing concerns that the country's manufacturers, who have become the engine behind the world's economy for a number of years, will force overseas competitors out of business. Indeed, four members of Asean have opted not to join the founding six countries in the free trade area. Vietnam and Cambodia, for example, are only due to join in five years' time.

The launching of Asean-6 further demonstrates China's growing and seemingly unstoppable rise as a global economic superpower, however, and even if 2009 was benign by Beijing's recent history, by Western standards growth in the world's most populous nation was breathtaking. The World Bank predicted in June that the planet's third biggest economy (behind the US and Japan) would grow by 7.2 per cent in 2009 (the Chinese themselves predicted a slightly more impressive 8 per cent), a marked improvement on the "disappointing" 6.1 per cent of GDP growth recorded in the first quarter of last year, which was China's worst three-month performance since 1990.

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DIPLOMATIC RETOOLING NEEDED IN FACE OF CHINA

Masami Ito

The Japan Times, January 1, 2010

First in a series

A little more than 60 years ago Japan was a battered, defeated nation.

The people marshaled their strength and wisdom, devoted themselves to rebuilding the nation, and in just a few decades Japan rose from the ashes as one of the leading countries of the world.

But recently, with the rise of China and other economies in Asia, Japan's position as a major power is growing increasingly shaky. In fields ranging from diplomacy to manufacturing to education to entertainment, Japan is now being challenged by emerging competitors.

In diplomacy, major players, particularly the United States, are closely watching China, which has been spreading its influence around the world in recent years. For Japan to maintain its place in the international community, it needs to shift from the old "follow the U.S." diplomacy to one that better balances its relationships with both the U.S. and China, analysts say.

China has succeeded in boosting its presence with double-digit increases in defense spending for 21 years in a row, and now its gross domestic product is just a step away from topping Japan's.

According to the International Monetary Fund, the U.S. led the world in 2008 with GDP of $14.441 trillion, followed by Japan at $4.910 trillion. China was right behind with $4.327 trillion. The IMF estimates that in 2010, China will surpass Japan in GDP.

Zhu Jianrong, a professor of international relations and Chinese political affairs at Toyo Gakuen University, said the U.S. is trying to develop a new "cooperating relationship" with China while maintaining its alliance with Japan.

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