SOUTH KOREA TELLS NORTH KOREA TO STOP RAISING TENSION

Heejin Koo

Bloomberg, January 30, 2009

South Korea told North Korea to stop raising tension on the Korean peninsula after the communist nation said it is scrapping all military and political agreements with the government in Seoul.

“Creating and raising tensions in South-North relations is not beneficial for the Korean peninsula, northeast Asia or for world peace,” Unification Ministry spokesman Kim Ho Nyoun said in Seoul. “We urge North Korea to return to dialogue.”

North Korea accused South Korea of pursuing confrontational policies that are pushing the two nations to “the brink of war,” according to a statement carried by the official Korean Central News Agency today.

The North Korean announcement comes less than two weeks after it threatened “strong military steps” in response to South Korea’s confrontational policies and about two months after North Korea imposed border restrictions with South Korea.

North Korea also said it is canceling an Agreement on Reconciliation, Non-Aggression, Cooperation and Exchange with South Korea and nullified the military boundary in the West Sea.

“All the agreed points concerning the issue of putting an end to the political and military confrontation between the north and south will be nullified,” the reunification committee in Pyongyang said, according to the official news agency.

Kim Jong Il’s regime has repeatedly called South Korean President Lee Myung Bak a “traitor” and a “sycophant to the U.S.” It has demanded South Korea stop civic groups from launching balloons loaded with so-called propaganda leaflets criticizing Kim.

(...) [artículo aquí]

WILL CHINA BE ABLE TO WEATHER THE STORM?

Pablo Bustelo

January 29, 2009

English translation of an Op-Ed in El País (Negocios), Madrid, January 25, 2009 (this version, with updated figures, is slightly different from the one published in the newspaper).

The international crisis is beginning to have adverse effects on China, whose economy – which, according to the data recently released, became the third largest in 2007, surpassing Germany – has grown until now very rapidly, contributing considerably to global expansion. Let’s simply recall that China’s GDP growth was 13% in 2007, the highest rate – with difference – in the world. China was responsible of 17% of global growth, measured in purchasing power parity, between 2000 and 2007, a proportion similar to the one of the EU, whose economy is five times greater, and even larger than the percentage of the US, which has a GDP four times greater.

The provisional figures for 2008 suggest that China’s GDP increased around 9% in 2008, a still very considerable rate. However, the quarterly rates, which surpassed 10% in the first and second quarters, were 9% in the third and only 7% in the fourth. The forecasts for 2009 vary between the 8% of the official estimate and the 6% of the Economist Intelligence Unit, with the 7.5% of the Word Bank in between.

Do we really have indications that China might decelerate its growth to half – from 13% to 6% - in only two years, between 2007 and 2009? This would be certainly bad news, partly because China has been, along with the US and the EU, a main engine of the world economy and partly because it is widely acknowledged that, below 8%, growth might not be enough to create the required jobs and, hence, to maintain social and even political stability.

(...) [complete article here, PDF file]

CHINA'S EUROPE TOUR OVERSHADOWED BY US RELATIONS

François Godement

EU Observer, January 29, 2009

EUOBSERVER / COMMENT - We are on the eve of a five-country tour (including Brussels) of Europe by Chinese Premier Wen Jiabao. The event looks like a hastily put together trip after China's last minute no show at the annual EU-China summit on 1 December in Lyons. Wen's trip offers plenty to gossip about for foreign policy pundits, since it glaringly skirts around France, whose president had been earlier pilloried by Chinese officials for meeting with the Dalai-Lama in his capacity as EU chair.

But we have a world crisis on, so there is not a peep in the media about Wen's peripatetic dealings with the EU and five European countries, including Germany, the UK and Switzerland. Instead, public attention has focused on the new US Treasury Secretary Timothy Geithner's confirmation hearing in the Senate, and specifically on one sentence in the 102 page-long document he submitted for that hearing: "President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency."

Time will show whether this snippet of a sentence is really a harbinger for Sino-American relations. It is in fact mitigated by another sentence: "The question is how and when to broach the subject in order to do more good than harm." Indeed. But that's not the issue for Europeans. The point is that, as the global financial crisis charges on, the world's economic axis is still perceived to lie between Washington and Beijing, not between the US and Europe, and even less between China and Europe.

Imbalances, not just numbers, are what matters. There is wide-spread agreement that the huge capital imbalance between China and the US was the first contribution to the bubbles that burst last year. Economists may differ on where to put the blame - the insatiable US preference for spending over saving, or the equally boundless Chinese policy of saving over spending. Whatever the cause, it is the resolution of this imbalance which is the priority to solving the crisis. Eurozone countries as a whole haven't had such a role in this crisis, and so they don't matter as much in the solution. The China-US "Strategic Economic Dialogue" is paramount. And this is true even if our own trade and economic interests will be deeply influenced by the form of the solution to come.

(...) [artículo aquí]

GEITHNER GETS IT WRONG ON YUAN

Sungjoon Cho

Asia Times, January 28, 2009

The Barack Obama administration has certainly brought some change to United States policy. Sharply departing from a more engaging China policy, Treasury Secretary Tim Geithner rattled the ground by declaring during his confirmation hearings that China was "manipulating" its currency, the yuan, and vowing that the US would employ "aggressive" means to remedy this.

Not only are the grounds of such a claim insecure, but the timing and the manner of his comments are highly inappropriate. The US should not attempt unilaterally to search for and then destroy economic weapons of mass destruction.

The accusation on China's currency manipulation is not new. Geithner's predecessor, Hank Paulson, implied a certain connection between the current financial meltdown and global imbalances caused by China's foreign exchange policy. In a similar tone, Representative Sander Levin, who chairs the sub-committee on trade within the House Ways and Means Committee, has recently proposed suing China before the World Trade Organization (WTO) for its alleged currency manipulation.

Yet, a closer scrutiny tends to find such claims barely persuasive. As of November 2008, China's share of US exports was only 5.4% and its share in US imports 19.1%. It is too extensive and inferential to argue that China's currency policy, no matter what it may be, has caused the massive US trade deficit.

Former Federal Reserve chairman Alan Greenspan observed a few years ago that even a 20% revaluation of the yuan would not dent the US trade deficit. He was right: since 2005, the value of the yuan has risen by about 20% and there is no sign that it has helped reduce the US trade deficit.

(...) [artículo aquí]

US TO DECIDE IF CHINA IS CURRENCY MANIPULATOR IN SPRING

AFP, January 27, 2009

WASHINGTON (AFP) — President Barack Obama's new administration said it will determine in the coming months whether China is manipulating its currency, setting the stage for a new burst of trade friction.

White House spokesman Robert Gibbs said the administration had not decided its policy on the perennial controversy of the yuan's value, despite a stir caused by Treasury Secretary Timothy Geithner last week.

According to Gibbs, Geithner "was restating what the president had said during the (election) campaign," when he observed in congressional testimony that Obama believes China is manipulating its currency.

"I think it's safe to say this administration will determine in the spring what that means."
The Treasury Department issues twice-yearly reports on global currency policies. The next one is due in April, and a finding that China is "manipulating" its currency to gain a trade edge could trigger US sanctions.

Under the former administration of George W. Bush, the Treasury stopped short of that designation despite furious complaints in Congress that China does indeed artificially weaken the yuan's value to boost its exports.

(...) [artículo aquí]

INDIAN ECONOMY TO DECELERATE, BUT NO NEED TO PRESS PANIC BUTTON

The Economic Times, January 26, 2009

China has just declared the GDP estimates for the fourth quarter and the outcome was not very encouraging. The Chinese economy, which is now world’s third-largest, (in nominal terms) grew by just 6.8% during the December ’08 quarter. This is a sharp deceleration from 9% growth in the previous three months and 13% expansion in whole of 2007.

The news would come as a rude shock to many economic observers and investors. China’s economy was supposed to experience only a mild slowdown and thus cushion the global impact of a recession in North America, Euro zone and Japan. The latest estimates from Chinese statistics bureau have now put cold water on this hope. Simultaneously, it has highlighted the head winds being faced by the emerging economies. The world’s attention will now be focussed on India, the developing world’s second-biggest economy.

The question every one will be asking is how vulnerable is the Indian economy? Certain leading indicators such as exports and manufacturing output is clearly showing that Indian economy slowing down. But how severe can it get?

To get an answer to that we have to look at the expenditure side of the India’s economy. In an economy gross domestic product (GDP) is nothing but the sum total of good and services produced in that economy in a given year.

(...) [artículo aquí]

¿PODRÁ CHINA CAPEAR EL TEMPORAL?

Pablo Bustelo

El País (Negocios), 25 de enero de 2009

La recesión internacional está empezando a tener efectos adversos en China, cuya economía -que se convirtió el año pasado en la tercera mayor del mundo, adelantando a la de Alemania- ha crecido hasta ahora a tasas muy elevadas, contribuyendo mucho a la expansión global. Baste recordar que en 2007 el PIB de China aumentó el 11,9%, la tasa más alta, con diferencia, del planeta. A China se debió nada menos que el 17% del crecimiento global entre 2000 y 2007, proporción similar a la de Estados Unidos, cuya economía es cuatro veces mayor, e incluso superior al 16% correspondiente a la UE, que tiene un PIB cinco veces superior.

Las cifras provisionales para 2008 sugieren que el PIB de China aumentó alrededor del 9%, una cifra todavía muy alta. Sin embargo, las tasas trimestrales superaron el 10% en el primer y segundo trimestre, fueron del 9% en el tercero y de apenas el 6% en el cuarto. Las previsiones para este año varían entre el 8% de la estimación oficial y el 6% de la Economist Intelligence Unit, pasando por el 7,5% del Banco Mundial.

¿Hay realmente indicios de que China pueda ver desacelerarse su crecimiento a la mitad -del 12% al 6%- en apenas dos años? Tal cosa sería ciertamente grave, en parte porque el país ha sido, junto con Estados Unidos y la UE, locomotora del mundo y en parte porque se considera que, por debajo del 8%, el crecimiento podría ser insuficiente para crear el empleo necesario y, por tanto, para mantener la estabilidad social e incluso política.

(...) [artículo aquí] [versión con datos actualizados, PDF]