JAPAN - LAND OF THE SETTING SUN

Martin Hutchinson

Asia Times, March 31, 2010

Japan announced this week that it was partially withdrawing its planned Post Bank privatization, so that the government would retain a third of the bank's shares. Meanwhile the latest Japanese budget shows a deficit of 10% of gross domestic product (GDP), at a time when Japanese public debt exceeds 200% of GDP.

Through two decades of economic malaise, I have remained optimistic that Japan would solve its problems and emerge into a new era of rapid economic growth. Alas, that enlarged red sun in the east may now be setting rather than rising.

For the 20 years since the Japanese bubble peaked in 1990, I have been generally bullish on the place. Labor productivity growth according to the Conference Board. That performance, comparable to the much vaunted US productivity growth (1.91% annually in the same period) and higher than that in Europe, showed that the prolonged economic stagnation was not adversely affecting the impressive Japanese economic strengths in manufacturing and technology.

The pro-business Liberal Democratic Party remained dominant in the Japanese political system - there was no move to socialism, although public spending and debt increased much too fast. China grew much faster, of course, but growth in the Chinese market offered valuable opportunities to Japanese companies, which were able to outsource much of their low-value-added manufacturing to the behemoth next door while retaining the design and research facilities domestically.

(...) [artículo aquí]

ANALYSIS: WHY SO MANY ARE POOR IN THIS RICH COUNTRY?

Debnath Guharoy

The Jakarta Post, March 30, 2010

Creating jobs is job No.1 for policymakers everywhere. Jobs not only keep the wheels of the economy turning, they are perhaps the biggest contributor to peace. Peace at home, peace in the country, peace around the world.

To give credit where it’s due, this government has made laudable progress on the employment front. The creation of jobs from investments in infrastructure development both at the national and local levels has not only helped weather the global storms, they have stimulated a positive environment keeping businesses confident. In turn, the Roy Morgan Consumer Confidence Index has steadily moved up to the all-time high of 124 points at the end of 2009. Not surprisingly, the Roy Morgan Unemployment Monitor hit an all-time low of 6.9 percent at the same time.

BPS, the country’s national statistics bureau, puts the current unemployment rate at 7.87 percent, as at August 2009. The difference in the two sets of numbers have logical explanations.

First, the Roy Morgan survey is conducted in 16 provinces that is home to 86 percent of Indonesia’s population, not 100. It could well be that unemployment in the sparsely populated provinces is much higher than the densely populated ones measured constantly by the continuous survey. The second, perhaps more relevant reason, is that the Roy Morgan monitor is pegged to those individuals 14 years and older who are actively “looking for a job”, not waiting for one to fall into their laps. Regardless of these differences , all measurements available reflect a steady downward trend in the jobless rate.

(...) [artículo aquí]

'CHIMERICA' HITS THE SKIDS

Harsh V. Pant

The Japan Times, March 29, 2010

LONDON — The idea of "Chimerica" was always too good to be true, but the rapidity with which Sino-U.S. ties have unraveled over the past few months has even surprised those who were cynical about Barack Obama's overtures to China to begin with.

The state of Sino-U.S. ties is so pitiful these days that even as the Chinese commerce minister openly warns the United States that it will suffer consequences if it levies punitive tariffs on Chinese imports, Chinese military leaders are contemplating the possibility of an eventual, all-out war with the U.S. over the status of global superpower.

The West, meanwhile, is souring on China. Gone is the talk of China as a responsible stakeholder in the international system. Instead, Google's withdrawal from China following a high-profile public spat is seen as symptomatic of the problems that China's rise generates for Western global norms. China's undervalued renminbi, for example, is no longer considered a trade problem solely for the U.S.

China has failed to play a constructive role in finding a solution to the North Korean and Iranian nuclear issues, much to the consternation of the West, and has made it impossible for the international community to resolve these dangerous flash points. There is growing fear that China may soon become the pre-eminent world power without showing even a patina of democracy.

China's rise was bound to be a challenge, but for a long time the West tended to put the onus on itself for China's behavior. It was deemed to be the West's responsibility to ensure that China was not alienated from the international system. Such assumptions have fallen by the wayside as China's ascent has continued unabated while the Obama administration signals that it is more interested in managing America's decline than in preserving its pre-eminence in the global order.

(...) [artículo aquí]

N. KOREA IN A STATE OF EMERGENCY AGAIN?

Park Sang-seek

The Korea Herald, March 28, 2010

Recently, the mass media has reported that a crisis situation in North Korea is looming again. The reports are based on unconfirmed information that North Korean leader Kim Jong-il may not live beyond 2013 and the United States, South Korea and China will soon meet to discuss the emergency situation which is likely to follow his death.

These reports are reminiscent of the aftermath of Kim Il-sung`s sudden death in 1994 and the subsequent development of U.S.-North Korea nuclear negotiations and the conclusion of the Geneva Framework Agreement. Some speculated at that time that the U.S. made significant concessions to North Korea, believing that the North Korean regime would soon collapse and then the North Korean nuclear weapons facilities would be dismantled and the light-water reactors to be provided for the North could be taken over by South Korea.

Some North Korea specialists warn that even if such a report is correct and the South Korean and U.S. government authorities jointly or separately have been preparing for such an emergence, the mass media and both government authorities should not talk about the issue openly. In order to understand the nature of the crisis situation, the term crisis situation (or state of emergency) needs to be clearly defined. Otherwise, we wont be able to tell whether the North is faced with a crisis or formulate the right strategy for the crisis.

The "crisis situation" can be defined broadly or narrowly. One scenario is that following the North Korean leader`s death or incapacitation, a single person (his son, Kim Jong-eun, or somebody else) or a collective leadership (composed of both the party and military elites) takes over power. These two leaderships will preserve the Kim Jong-il system, a totalitarian autocracy.

(...) [artículo aquí]

NEXT 10 YEARS COULD SEE THE INDIAN ECONOMY GROWING BY FOUR TIMES

Naresh Kothari

The Economic Times, March 27, 2010

India has come a long way since the economic reforms in 1991, moving from rates of 5% into the orbit of 7-9% growth rates. However, how many of us really know the scope and scale of this story and how it pans out over the next 10 years? At Edelweiss, we tried to estimate this growth, and the numbers are staggering.

We have assumed Indian gross-domestic savings at around 35%, an incremental capital output ratio of four as in the past decade, inflation of 4% and a marginal current account deficit of 2%. These assumptions lead us to a real GDP growth rate of 9% and a nominal growth of 13%.

By 2020, India’s GDP is likely to quadruple from the current $1.1 trillion to about $4.5 trillion. Per capita income is likely to triple from the current approximately Rs 50,000 to over Rs 1.5 lakh. The number of households with income of more than Rs 16 lakh will be over 18 million, while the number of middle class households (income between Rs 1.5 lakh and Rs 16 lakh) would grow by 50% to 180 million.

Number of deprived households (with income below Rs 1.5 lakh) is likely to be reduced by almost 25% to 100 million. Indian consumption is likely to increase 3.7 times to about Rs 113 trillion, with discretionary expenditure likely to increase significantly. According to our estimates, the education sector will grow 5.7 times, domestic pharma and healthcare six times, media and entertainment five times and organised retail 6.3 times. The automobile sector is likely to grow 4.8 times, while urban premium housing will grow 6.5 times.

(...) [artículo aquí]

TOYING WITH YUAN WON'T HELP US

Fan Gang

China Daily, March 26, 2010

Fundamental problems in the US economy need to be remedied; potential dangers for both nations loom if renminbi is revaluated

The renminbi exchange rate has once again become a target of the United States Congress. China-bashing, it seems, is back in fashion in the US.

But this latest round of disparagement appears stranger than the last. When the US Congress pressed China for a large currency revaluation in 2004-2005, China's current-account surplus was accelerating. Now China's current-account surplus is shrinking significantly due to the global recession caused by the US financial meltdown.

China's total annual surplus (excluding Hong Kong) now stands at $200 billion, down by roughly one-third from 2008. In GDP terms, it fell even more as GDP grew by 8.7 percent in 2008.

Back then, pegging the renminbi to the dollar pushed down China's effective exchange rate because the dollar was losing value against other currencies, such as the euro, sterling and yen. But currently, with the dollar appreciating against other major currencies in recent months, the relatively fixed rate between the dollar and the renminbi has caused China's currency to shore up.

Of course, there are now other sources of friction that did not seem as pressing five years ago. The US' internal and external deficits remain large, and its unemployment rate is extremely high. Someone needs to take responsibility, and since US politicians don't want to blame themselves, the best available scapegoat is China and its exchange rate, which has not appreciated against the dollar in 18 months.

(...) [artículo aquí]

ALTERNATIVES TO REVALUATING THE YUAN

Xiao Geng

China Daily, March 25, 2010

Editor's note: According to the author, it’s not the appropriate time to revaluate yuan in consideration of national interests of both US and China. But he suggests some structural and institutional reforms as alternative options.

The debate on how to correct the trade imbalance between the United States and China is focused on increase: How to increase US exports and savings and how to increase Chinese imports and consumption.

A big part of the debate, especially in the US, is focused on China's currency, which US leaders allege is undervalued. The Americans want China to revalue the yuan considerably in the hope that it would lead to an increase in US exports and employment.

Chinese leaders differ. They regard the US pressure to revaluate the yuan and Washington's protectionist measures as unfair and detrimental to China's development. They place emphasis upon structural and institutional reform to increase Chinese consumption and make domestic investment more efficient.

Why is there such a considerable gap between Chinese and US views?

The US demand for the revaluation of the yuan is based upon its short-term concern over China's large current account surplus and long-term worry over China's high growth, rapid urbanization and industrialization, low national debt and low fiscal deficits.

(...) [artículo aquí]

CHINA NEEDS ‘VERY CERTAIN’ RECOVERY FOR STIMULUS END, ZHOU SAYS

Bloomberg, March 24, 2010

China’s government needs evidence of a “very certain” recovery before it can roll back stimulus measures adopted during the crisis, central bank Governor Zhou Xiaochuan said.

“If you can be sure about the recovery, and then some of the extraordinary stimulus policies can gradually fade out,” Zhou said in an interview in San Jose, Costa Rica. “On the other hand, you should know that it’s not a W-shaped recovery,” with a renewed slowdown following the current rebound, he said.

China has yet to raise interest rates or allow its exchange rate to appreciate, keeping in place some of the extraordinary measures even as inflation and asset prices accelerate. Zhou’s concern about risks of a w-shaped recovery echo a warning yesterday by Harvard University Professor Martin Feldstein that there is a “significant risk” of a U.S. return to recession.

Policy makers need to see “quite definite evidence or statistical data to show it’s a good recovery,” said Zhou, who spoke late on March 23 after arriving in Costa Rica from Cancun, Mexico, where he attended an annual meeting of the Inter- American Development Bank.

“Under normal circumstances, China’s current growth and strong economic indicators may have triggered more aggressive tightening, but the special circumstance means the tightening may not come as fast,” said Peng Wensheng, head of China research with Barclays Capital in Hong Kong. “In general Chinese officials will be very cautious and they’d rather withdraw stimulus slower rather than quicker.”

(...) [artículo aquí]

GOOGLE CHINA: INSIDE THE FIREWALL, INFORMATION IS IN SHORT SUPPLY
Internet giant's move likely to put spotlight on methods Beijing uses to block content that is hosted overseas

Tania Branigan

The Guardian, March 23, 2010

Google's announcement in January that it was no longer willing to remove sensitive material from search results highlighted the issue of China's domestic internet controls.

But its decision last night to shift its Chinese-language service to servers in Hong Kong looks likely to put the spotlight on the methods Beijing uses to block content that is hosted overseas.

The censorship system works because it is twofold: it consists of controls on the content posted inside the country, and the "great firewall", which prevents mainland users from reading material hosted overseas.

While Google may have stopped censoring its results thanks to its move to Hong Kong, the Chinese government has not.

That is why, using google.com.hk from the mainland last night, searches for "Tiananmen student movement" in Chinese and "89 student movement" in English brought no results – just a message that is all too familiar to internet users in China: "The connection was reset."

In the last year, censors in Beijing have shut down thousands of domestic sites and blocked more of those hosted abroad. Social media appear to have been a particular target – YouTube, Twitter, Facebook and various blog platforms have fallen foul of the censors.

The great firewall is implemented by internet police in three ways. The first two are common tactics: blacklisting domain names and IP addresses, for example those belonging to groups such as Amnesty International. These methods are used by many countries around the world.

(...) [artículo aquí]

CHINA ACCUSES U.S. OF POLITICIZING YUAN AS TRADE SURPLUS SINKS

Bloomberg, March 22, 2010

China warned the U.S. against imposing sanctions over the value of the yuan, arguing that the exchange rate issue has been politicized and that a rise in protectionism threatens the global economic recovery.

Pressure on China to strengthen the yuan does “no good to anyone,” China’s Commerce Minister Chen Deming said at the China Development Forum in Beijing yesterday. China’s trade balance likely slipped into the red in March, although the yuan was stable, showing that exchange rate changes have a “limited” impact on trade, Chen said.

Tensions over China’s currency are mounting, with President Barack Obama facing increased calls from U.S. lawmakers to step up pressure on China for keeping its exchange rate artificially low. Chen yesterday warned that sanctions against China that amounted to protectionism would hinder growth and raise the risk of a “double dip recession.”

“No matter how tough both sides sound now, they’ll eventually come back to the negotiation table for a mutually beneficial solution” as any U.S. sanctions will be detrimental to both, Li Wei, an economist with Standard Chartered in Shanghai, said in a phone interview.

In March, China will probably record its first trade deficit since April 2004. The surplus had already narrowed to a one-year low of $7.6 billion in February after a 34 percent decline last year. The U.S. trade deficit was $37.3 billion in January, shrinking from a record $67.8 billion in August 2006 as American consumers slowed spending amidst the recession.

(...) [artículo aquí]

CHINA CAN'T DO IT ALONE

Bernardo M. Villegas

Manila Bulletin, March 21, 2010

Despite the increasing worries about a possible asset bubble bursting in China, the immediate prospects in this largest Asian economy continue to be bright. The domestic market is increasingly replacing exports as the engine of growth. Any danger of an asset bubble may still be five to ten years down the road.

It is possible that before 2010 is over, the U.S. and China will be the two largest economies in the world. In 2008, the U.S. had GDP of $14.4 trillion, Japan had $4.9 trillion while China posted $4.3 trillion. With the U.S. and Japan succumbing to the Great Recession of the last two years while China hardly experienced a blip, it is a certainty that China will surpass Japan in GDP in the course of this year. With the U.S. facing the possibility of a double-dip recession in the next year or so and Japan probably seeing a repetition of its lost decade in the 1990s, China will clearly outshine the G-2 of the last century. Given the widespread expectation that U.S. demand will stay subdued for a while, especially as regards consumer spending, the U.S. can hardly be expected to be part of the dynamic duo. A more likely partner of China in stimulating the world economy is its giant neighbor, India. In an IMF report that appeared last February 4, 2010, India's economy was cited as one of the first in the world to recover after the global crisis. To quote from the IMF report, "Prompt fiscal and monetary easing, combined with the fiscal stimulus already in the pipeline and the return of risk appetite in financial markets, have brought growth close to pre-crisis levels. Leading indicators suggest the output gap will continue to close. Capital inflows are back on the rise, and financial markets have regained most of the lost ground."

(...) [artículo aquí]

INDONESIA AND THE GLOBAL RISE OF ECONOMIC, POLITICAL POWER

Magda Safrina

The Jakarta Post, March 20, 2010

Despite the complication caused by some delays and coordination matters related to the official visit of the US President Barack Obama to Indonesia, which was later postponed to June this year, the essence of the visit itself signals an important message to Indonesia and to the rest of the world.

To Barack Obama, Indonesia is not only a childhood home where he spent four happy years with family and friends, but a source of political and economic power that he needs to keep his political and economic agenda moving forward.

How could Indonesia, a country that was overlooked for almost a decade as a global forum and global influence suddenly become so important to Obama and to the US, both from political and economic standpoints?

The importance of Indonesia as having the world’s largest Muslim population nation has often been discussed in media, particularly Indonesia’s strategic position in its relation to the Middle East conflict.

The fact that Indonesia has been praised by the US as the role model where democracy and Islam prosper harmoniously adds to the list of Indonesia’s political capital in the global forum.
Indonesia is the largest nation in ASEAN (Southeast Asian Nations), which comprises 10 Southeast Asian countries. Indonesia is also ASEAN’s largest economy with 2009 GDP at US$514 billion.

Indonesia is one of the founding nations of ASEAN together with Thailand, Malaysia, Singapore and the Philippines.

(...) [artículo aquí]

ROACH REBUFFS KRUGMAN CALL TO PRESSURE CHINA ON YUAN

Christopher Anstey and Susan Li

Bloomberg, March 19, 2010

Morgan Stanley Asia Chairman Stephen Roach said that Paul Krugman’s call to push China to allow a stronger yuan is "very bad" advice and that increased Chinese spending is a better way of reducing trade imbalances.

“We should take out the baseball bat on Paul Krugman -- I mean I think that the advice is completely wrong,” Roach said in an Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business,” which is raising U.S. savings, Roach said.

“I’m a little surprised at Steve for saying that,” said Krugman, the Princeton University professor and Nobel laureate in economics, in a telephone interview when asked to respond to Roach. “What I said is actually based on pretty careful economic analysis. We have a world economy which is depressed by China artificially keeping its currency undervalued.”

The debate between the two economists echoes verbal clashes between the nations, with Chinese leaders repeatedly saying that their yuan policy isn’t the cause of the U.S. trade gap. American lawmakers have urged the Obama administration to step up pressure on China for keeping its exchange rate unchanged, a stance criticized as providing an unfair advantage.

(...) [artículo aquí]

A CHINA-U.S. RECKONING

Nouriel Roubini, Rachel Ziemba and Adam Towle

Forbes, March 18, 2010

The fault lines in the U.S.-China relationship have been increasingly exposed in recent weeks, with rhetorical barbs exchanged on: trade; the treatment of foreign companies in China; strategic issues such as U.S. support of Taiwan and Tibet's Dalai Lama; responses to Iran's nuclear ambitions; and especially exchange rates. Domestic consensus in the U.S. on the need for action with regard to the renminbi (RMB) is growing. Chinese leaders, including Premier Wen Jiabao, have recently hit back at the U.S. for what they characterize as interference in China's security and economic affairs, and U.S. economic mismanagement.

Today we examine the quest for the new normal between the world's largest creditor and its largest debtor. Given the importance of the relationship to global trade, growth and security, we believe that the two countries will avoid a full-blown confrontation, but uncertain relations and tit-for-tat trade policies could constrain global growth.

The friction suddenly afflicting the world's most-watched bilateral relationship stems from a struggle on the part of both China and the U.S. to deal with the changing dynamics of global economic and political power and influence since the financial crisis. To some extent the financial crisis exacerbated ongoing structural changes that had elevated the role of emerging markets in the global economy and increased their influence in debates on financial regulation, trade and currency policy.

China's ample resources, together with its ability to encourage its banks to lend and its state-owned enterprises to spend, also allowed it to be opportunistic, adding sharply to its resource holdings and supporting cash-strapped countries and companies during the recession. Yet its leverage on U.S. policy seems overstated, particularly as China's willingness to diversify away from U.S. assets remains constrained by its desire for a stable economic policy. Moreover, its economic apparatus is stronger than its security position. In this environment, there is a risk that one or the other player might overplay its hand or badly misinterpret the intentions of the other.

(...) [artículo aquí]

IT’S CHINA’S WORLD WE’RE JUST LIVING IN IT
The middle kingdom is rewriting the rules on trade, technology, currency, climate—you name it.

Rana Foroohar and Melinda Liu

Newsweek, From the magazine issue dated Mar 22, 2010

Back when President Obama lived in Indonesia, in the late 1960s, China loomed as a malign force to the north, where communist cadres plotted to export their revolution to the rest of Asia. The Jakarta he'll visit later this month has an entirely different attitude toward the People's Republic. Local companies are doing deals in yuan, the Chinese currency, rather than dollars. If Jakarta gets in financial trouble, as it did back in 1997, it will be able to call on a $120 billion regional reserve fund, an Asia-only version of the International Monetary Fund due to be launched this month, bankrolled in part by China's massive foreign-exchange reserves. Asia's key economic and political issues are no longer being hashed out on trips like Obama's—between individual nations and the United States—but at summits that include only China, Japan, South Korea, and the Southeast Asian countries. "China has been instrumental in this shift in focus from 'Asia-Pacific,' which was largely about the U.S. and Japan, to 'East Asia,' which has China at the center," says Martin Jacques, author of When China Rules the World.

Fair enough: everyone understands that China deserves a big say in what goes on in its neighborhood. But what most people haven't noticed yet is that Beijing also wants to write—or, at least, help write—new rules of the road for the world. "China now wants a seat at the head of the table," says Cheng Li, director of research at the John L. Thornton China Center at the Brookings Institution. "Its leaders expect to be among the key architects of global institutions."

(...) [artículo aquí]

CAN THE U.S. TAKE ON CHINA IN ASIA?

Peh Shing Huei

The China Post, March 16, 2010

When U.S. Secretary of State Hillary Clinton declared to Association of Southeast Asian Nations (Asean) last year, "We're back," it was a clear signal that the Americans were looking to challenge China's rising influence in South-east Asia.

During the years the Bush administration left Asean on the far outfield of United States diplomacy, with Mrs. Clinton's predecessor Condoleezza Rice skipping Asean summits twice in three years, Beijing nudged its way to the centre stage.

Trade boomed. Confucius Institutes mushroomed. Generous aid was doled out by the Chinese government.

The prospect of a symbiotic "Chinasean" relationship seemed more likely than the other Sino-related diplomatic neologisms that mushroomed, from "Chimerica" (China + America) to "Chafrica" (China + Africa).

The question is this: Does the U.S. have the stamina and strength to take on Beijing?

(...) [artículo aquí]

CHINA'S WEN JIABAO REBUFFS U.S. ON LETTING YUAN APPRECIATE AGAINST DOLLAR

John Pomfret

The Washington Post, March 15, 2010

BEIJING -- Chinese Premier Wen Jiabao on Sunday lectured the United States, criticizing its call for China to let its currency rise against the dollar to boost U.S. exports, advising it to work harder to improve its financial system and directing it to change its foreign policy to improve relations with China.

Wen's comments -- during a news conference at the end of China's annual session of its nonelected legislature -- seemed to indicate that China would generally pursue a relatively tough line in its relations with the United States this year. The comments underscored China's increasing self-confidence on the international scene following its success at coping with the global financial crisis.

But Wen also continued to express caution about the course of domestic events, expressing concern about "the unsteady, uncoordinated and unstable development of the Chinese economy." China grew at 8.7 percent last year, the fastest of any major economy in the world, but it did so on the back of a massive stimulus package. Wen said China's economy faces many challenges including the possibility of a "double dip" recession if world growth doesn't pick up and, on the other hand, runaway inflation if it does.

Wen's statements on the currency issue appeared to close off the possibility that China would allow its currency, the yuan, to appreciate against the dollar anytime soon. On Thursday, President Obama, in rolling out a plan to increase American exports, called on China to adopt "a more market-oriented exchange rate [that] would make an essential contribution to that global rebalancing effort."

(...) [artículo aquí]

HUMAN RIGHTS SPOTLIGHT BACK ON CHINA

China RealTime Report, March 12, 2010

China is facing a choir of criticism on human rights, with three just-released reports from overseas highlighting poor conditions in the country.

The most-watched is the U.S. State Department’s 34th annual human rights report, released Thursday, which once again took aim at China.

“The government’s human rights record remained poor and worsened in some areas,” the report said, citing “severe cultural and religious repression” in Xinjiang, harassment of rights activists and public-interest lawyers, and controls on the Internet and free speech.

The U.S. report was issued just hours after China’s chief justice and top prosecutor each released work reports for 2009 on China’s courts and criminal justice system before China’s legislature during its annual meeting in Beijing. The reports, intended to highlight the progress of law and order in China, also prompted human-rights concerns among observers.

In another report, the U.S.-based Dui Hua Foundation said that, based on data from the Chinese prosecutor’s report, it estimated that as many as 1,150 people were arrested and nearly 1,050 indicted for “endangering state security” in 2009, a decrease from 2008 levels but still high compared to previous years. It said that China arrested more people on state security charges in 2008 and 2009 than IT had during the previous five year period. The significant increase in the use of such charges represents a worrying trend for human-rights activists.

(...) [artículo aquí]

BEIJING SEEKS A SHIFT IN GEOPOLITICS

Willy Lam

Asia Times, March 11, 2010

China's ongoing tussles with the United States over issues including Taiwan, Tibet and trade are in a sense nothing new. For more than two decades, Sino-US relations have periodically gone through rough patches over these and related causes of disagreement. What is new is China's much-enhanced global clout in the wake of the world financial crisis, which is coupled with a marked decline in America's hard and soft power.

More importantly, the Chinese Communist Party (CCP) leadership is gunning for a paradigm shift in geopolitics, namely, new rules of the game whereby the fast-rising quasi-superpower will be playing a more forceful role. In particular, Beijing has served notice that it won't be shy about playing hardball to safeguard what it claims to be "core national interests".

The pugilistic turn in China's Great Leap Outward is stated by several well-known academics and advisers to the Chinese government. According to the Li Wei, president of the high-profile China Institute of Contemporary International Relations (CICIR), there is a reawakened resolve on the part of Beijing to do whatever it takes to defend "core interests" such as Taiwan and Tibet. Referring to the country's new-look foreign policy since late last year, Li said: "We have become a more pro-active and much more mature [global player]."

(...) [artículo aquí]

DON'T HAVE YUAN FOR THE ROAD

William Daniel Garst

China Daily, March 10, 2010

China's central bank will keep the yuan's exchange rate relatively stable this year and deepen coordination with other countries on major policy issues. China opposes politicizing monetary issues, central bank governor Zhou Xiaochuan said on Saturday in response to growing foreign pressure to ease the yuan's exchange rate because it is hampering trade and could be slowing down global recovery.

China's swift rebound from the global financial crisis has fueled growing foreign hostility. At the beginning of this year, Nobel Prize winning economist Paul Krugman wrote in the New York Times that China's exchange rate policy "drains much-needed demand away from a depressed world economy". He argues that other countries were being victimized by China's "mercantilist" economic strategy and could respond by adopting protectionist policies.

I admire Krugman, for he is one of the few sane and intelligent voices left in the American media. In fact, my day in office usually begins with a cup of coffee and his blog on the Times website. But many of the criticisms of China, including Krugman's, look rather different when seen from inside the country.

Let's begin with some basic figures on China's exports (all from recent articles in the Economist) during the global downturn. In 2007, merchandise exports accounted for 36 percent of China's GDP; it plunged to 24 percent in 2009. Its surplus, too, fell from 11 to 6 percent of GDP. These sharp drops reflect the 14 percent decline in the country's exports through most of last year.

True, other countries have suffered greater setback in foreign trade - which perhaps helped China to overtake Germany as the world's second largest exporter last year. But their exports dropped largely because of two factors, both unrelated to China's exchange rate policy. First, declining incomes and greater job insecurity in wealthier economies have shifted consumer demand toward less expensive goods. Second, last year saw the end of the European Union and US quota on the import of Chinese textiles and footwear, which used to be a crucial provision of the long-standing Multi-Fiber Agreement. So even without a managed currency, China would have had a strong comparative advantage in these areas.

(...) [artículo aquí]

CHINA AND INDIA: THE PROVERBIAL HARE AND TORTOISE?

Chris Devonshire-Ellis

2point6billion, March 9, 2010

As India begins to prepare itself for a second wave of growth in the aftermath of what has indeed proven to be a difficult financial crisis for Asia, questions are now being asked as to the extent of competition India really brings to global markets when measured up against China.

In some respects, the rise of India has been greatly overshadowed by what has happened in China over the past twenty years. If the development in China had not occurred, then it would be India that would be considered the new darling of global growth. To some extent, that has enabled India to commence its own growth curves without the media attention that has been focused on China. In other ways, however, there is little doubt that the phenomenal growth of China has served to spur India into action, and to finally release the country from its moribund, 50-year hangover of independence from Britain.

While China has largely dominated headlines, India has begun to act. In fact, over much of the past decade, India’s growth patterns have mirrored China’s at an average of about 8 percent per annum until the financial crisis hit, albeit coming from a far smaller base. Currently however, India’s share of global trade is a little under 20 percent of China’s total. But with an economy about to break into the global top ten in terms of size – India currently is in twelfth position – the global community is both starting to take note of India’s rise and to appreciate the clout; as well as the opportunities such power brings.

(...) [artículo aquí]

THE ASCENT OF ASIA

John Llewellyn

Forbes, March 8, 2010

This is the first in a series of edited excerpts from Nomura's recent report, "The Ascent of Asia."

Asia has massive supply-side potential.

It's starting to exploit it. However, fully realizing that potential over the medium term will depend on achieving a sustainable pace and, more important, a sustainable structure, of demand.

Asia's policy makers would be wise to assume that, once the world economy recovers, they will not be able to count on strong export-driven growth. The U.S. and Europe have seen their imports from China increase seven-fold from 1998 to 2007. This has started to provoke protectionist sentiment: Western opposition to penetration of its markets by Asia is growing. Asia should instead plan on taking part in a global rebalancing of demand, whereby domestic demand grows faster in Asia, and slower in the West, than has been the case in recent decades.

Rebalancing is easier for continental-sized economies, which have large actual or potential domestic markets, offering economies of scale in production. The U.S. in the 19th and early 20th centuries, in the West, and India since its independence in 1947, in the East, are two pertinent examples of domestic-demand-led economic growth.

Viewed against this backdrop, China is an interesting anomaly. Given its continental dimension, China might have been expected to have experienced a domestic-led economic development broadly similar to that of the U.S. and India. Instead, it adopted the small-economy model of export-led growth. However, to the extent that China needs to accelerate the growth of domestic demand, it should indeed be able to pull itself up itself up by its own bootstraps.

(...) [artículo aquí]

INDIA'S STRATEGIC ROLE IN COUNTERING JIHADISM

Walid Phares

American Thinker, March 7, 2010

The confrontation in the Indian subcontinent among al-Qaeda, the Taliban, and their allies on the one hand, and the three democracies they target -- Afghanistan, Pakistan, and India -- on the other hand must be reevaluated in terms of international cooperation against the jihadi threat. A regional system should be established to integrate the struggle against all jihadi forces in the subcontinent. There needs to be a separation of the ethnic and territorial questions from the fight against terrorism. Once that distinction is made, the possibility of internationalization of counterterrorism will be high. Jihadists based in any country of the subcontinent must not be given legitimacy by any government on the ground of a local ethnic issue. Jihadi forces must be confronted collectively, while diplomacy and international mediations assist in solving the local problems.

India's particular role

The West can help all players in the subcontinent coming under internationalization of the struggle against jihadi terror. But India has enough international credibility to help the West and other democracies in building an international basis for this counter-jihadi platform. There are initiatives India can take within the third world and international organizations which can weaken jihadist propaganda against India's partners worldwide. India can help build this international platform because of its unique history in the non-aligned world so that the West and other democracies can in return help India fight its jihadi threats locally. India must play a strategic and international role in said campaign worldwide. Some of that role must be on a military and security level, but India can also play a significant role in diplomatic and political realms to consolidate the international campaign.

(...) [artículo aquí]

TOYOTA AND THE END OF JAPAN

Devin Stewart

Newsweek, From the magazine issue dated Mar 15, 2010

Japan was morbidly fascinated by the spectacle of Toyota president Akio Toyoda apologizing to the U.S. Congress for the deadly defects that led to the recall of 10 million of its cars worldwide. The appearance of the "de facto captain of this nation's manufacturing industry," as Japan's largest newspaper referred to Toyoda, seemed to symbolize a new bottom for a nation in decline. Once feared and admired in the West, Japan has stumbled for decades through a series of lackluster leaders and dashed hopes of revival. This year, Japan will be overtaken by China as the world's second-largest economy. Through it all, though, Japan could cling to one vestige of its former prestige: Toyota—the global gold standard for manufacturing quality.

And now this. Toyota is getting lampooned all over the world in cartoons about runaway cars. Japan's reputation for manufacturing excellence, nurtured for half a century, is now in question. Shielded by the U.S. defense umbrella after World War II, Japan focused its energy and money on building up only one aspect of national power: quality manufacturing. A foreign policy commensurate with Japan's economic strength was subordinated to industrial policies aimed at creating the world's best export factories. No matter how quickly Chinese and South Korean rivals grew, Japan could argue that its key competitive advantage was the quality of its brands. "Toyota was a symbol of recovery during our long recession," says Ryo Sahashi, a public-policy expert at the University of Tokyo. Now Toyota's trouble "has damaged confidence in Japanese business models and the economy at a time when China is surpassing us."

(...) [artículo aquí]

WEN JIABAO UNVEILS INCREASED SOCIAL AND RURAL SPENDING FOR CHINA

Jane Macartney

The Times, March 5, 2010

China congratulated itself today on its escape relatively unscathed from the global financial crisis but warned against complacency and vowed the poor would not be forgotten in its economic advance.

In his annual “state of the nation” address to the opening session of the National People’s Congress, the rubber-stamp parliament, Premier Wen Jiabao drew thunderous applause from the nearly 3,000 deputies when he said that China’s economy had been the first in the world to turn around.

But the premier’s two hour speech was imbued with his traditional conservatism rather than triumphalism.

"We must not interpret the economic turnaround as a fundamental improvement in the economic situation," he said, speaking from the stage in the cavernous Great Hall of the People. "There is insufficient internal impetus driving economic growth."

Mr Wen set easily achievable goals for 2010, the year in which China is set to overtake Japan to become the world’s second-largest economy.

His target for gross domestic product was 8.0 per cent – unchanged from previous years and generally regarded as the minimum China believes it needs to ensure sufficient economic growth to prevent widescale unemployment and social unrest. Economists say China’s economy could return to double-digit growth this year.

Underscoring the government’s determination to avert instability, he unveiled increases of 8.8 per cent on social spending and 12.8 per cent on rural outlays. Those exceed the increase of 7.5 per cent for the military as China tries to narrow yawning wealth gaps that have resulted in the widest income disparity since the launch of market-oriented economic reform 30 years ago.

The budget deficit would again be kept below 3 per cent of national income. Last year the deficit was just 2.2 per cent of GDP, despite its massive 4.0 trillion yuan (£400 billion) stimulus package that helped to ensure the economy grew by 8.7 per cent last year.

(...) [artículo aquí]

CHINA PLANS LOWEST DEFENSE BUDGET RAISE IN 10 YEARS

Bloomberg News, March 4, 2010

China plans to boost defense spending by 7.5 percent this year, the slowest pace of expansion in a decade, as the government seeks to allay concerns about the country’s growing military might.

The increase to 532.1 billion yuan ($78 billion) compares with a 14.9 percent rise in 2009. China’s defense budget had been expanding by at least 10 percent a year for the past 10 years.

“The Chinese government has always paid attention to controlling the size of our defense spending,” National People’s Congress spokesman Li Zhaoxing, a former foreign minister, told reporters in Beijing today. “China is committed to a policy of peaceful development.”

China’s military spending is second only to the U.S., which aims to spend $636.3 billion this year, and is more than double India’s budget of $32.1 billion.

“While this year’s increase is down a bit, we are still talking about an increase that is much bigger than Western nations and one that allows for a significant military build-up to continue,” Andrew Davies, director of Operation and Capability at Canberra-based Australian Strategic Policy Institute, said in a telephone interview.

China’s military spending in 2007 accounted for 2 percent of its gross domestic product, according to the latest figures from the Stockholm International Peace Research Institute. That compares with 2.4 percent for India, 0.9 percent for Japan and 3.5 percent for the U.S. China’s spending for 2010 announced today amounts to 1.8 percent of GDP.

(...) [artículo aquí]

INDIA’S DEFENCE BUDGET (2010-2011): WAKE UP CALL FOR DEFENCE MANAGERS

Arvin Kadyan

IDSA Comment, March 3, 2010

As per the Budget Estimates (BE) proposed for the year 2010-11, the total expenditure of Central government will be Rs. 11,08,749 crore, which is an increase of 8.6 per cent over total expenditure in BE of 2009-10. The Plan and Non Plan expenditure in BE 2010-11 are estimated at Rs. 3,73,092 crore and Rs. 7, 35,651 crore, respectively. While there is a 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over BE of 2009-10. The fiscal deficit has been projected as 5.5 percent of GDP in 2010-11 against 6.9 per cent during the preceding year.

The fiscal year 2009-10 was a challenging year for the Indian economy. The significant deceleration in the second half of 2008-09 brought the real GDP growth down to 6.7 per cent, from an average of over 9 per cent in the preceding three years. However, due to implementation of broad based counter cyclic policy package, the negative fallout of the global slowdown has been arrested. Although due to fiscal expansion and liberal monetary policy, the Indian economy is showing some signs of stabilization, unless there is consolidation of gains achieved during the last fiscal year the economy may take longer to revert to the high GDP growth path.

The Thirteenth Finance Commission has recommended a calibrated exit strategy from the expansionary fiscal stance of the last two years. As a part of the fiscal consolidation process, the Finance Minister in his Budget speech on February 26, 2010 proposed to reduce the domestic public debt-GDP Ratio. In the Medium Term Fiscal Policy Statement, the Government has proposed a rolling target for fiscal deficit in the next two fiscal years. It is proposed to bring down the fiscal deficit from 5.5 per cent of GDP in 2010-11 to 4.8 per cent in 2011-12 and to 4.1 per cent in 2012-13.

(...) [artículo aquí]

NEPAL: CAUGHT BETWEEN CHINA AND INDIA

Jyoti Thottam

Time, March 2, 2010

Nepal may be most famous for its majestic Himalayan peaks, but much of the country is a vast stretch of plains, the terai, that have long been underdeveloped and largely ignored by the two powers on either side. No longer. India has just launched a plan to spend $361 million over the next several years on roads and rail links in the terai, announcing the grants just before Nepali President Ram Baran Yadav made his Feb. 15 official visit to New Delhi. China, meanwhile, recently increased its annual aid to Nepal by 50% to about $22 million.

The money is certainly welcome in Nepal, which has the lowest per capita income in South Asia. But the jockeying for influence between China and India may be undermining Nepal's fragile democracy, as the country's 24 political parties trade charges of being pawns of one or the other. Even a tiny royalist party, supporters of Nepal's deposed King Gyanendra, have gotten into the act, staging a rally in Kathmandu on Feb. 22 that shut down the capital for a day. Meanwhile, the parties are debating complex constitutional issues, including a proposed federal system of 14 ethnicity-based states. Nepal's interim constitution will expire on May 28, and if its politicians cannot agree on a new one by then, the constituent assembly will be dissolved, new elections will be called and and, many observers fear, the country will enter a period of deep uncertainty. Says Nihar Nayak, a researcher with the New Delhi-based Institute for Defence Studies and Analyses: "They are moving toward a political crisis."

(...) [artículo aquí]

HOW TO AVOID GETTING BURNED IN CHINA AND INDIA
Foreign companies need to structure and manage their strategic partnerships carefully, according to columnists Anil K. Gupta and Haiyan Wang

Anil K. Gupta and Haiyan Wang

Business Week, March 1, 2010

The recently concluded Danone-Wahaha feud holds important lessons for any company on how to structure and manage strategic partnerships in markets such as China and India.

In the late 1990s, France's Groupe Danone entered into several joint ventures with Hangzhou-based Wahaha Group to pursue opportunities in China's beverage market. Although Danone held a 51% ownership stake in the JVs, it assigned only a handful of managers to work in them. As a result, its control over and visibility into their operations and finances appear to have been extremely limited. Real control rested with Zong Qinghou, founder and chairman of the Wahaha Group and, by all accounts, a brilliant entrepreneur. The feud surfaced in 2007 when Danone alleged that Zong's independently owned companies had been manufacturing the same products with the same trademarks as the JVs, selling them through the latter's sales and distribution channels. The dispute ended in October 2009 when Danone agreed to sell its stake to Wahaha at a 21% discount to the book value.

In emerging markets such as China and India, regulatory requirements and lack of local knowhow often compel companies to work with local partners without the ability to hold complete or even a dominant ownership stake in the local operations. Thus, the question is not whether Danone should have entered into the JVs in the first place. Rather, the relevant question is whether Danone could have been smarter at structuring and managing its partnership with Wahaha.

(...) [artículo aquí]