People's Republic of China Nov 22, 2009

[Karan Dixit]

BEIJING — An underground network of Christian missionaries that usually works with North Korean refugees says it has helped smuggle nearly two dozen Muslim Uighurs out of China following last summer's deadly ethnic violence and the subsequent government crackdown.

http://www.google.com/hostednews/ap/art ... AD9CCK4M80

[Philip]

Chinese chickers! See how the Chinese use their whores to drug unsuspecting foreign officials and get their secrets.

Sex, Spies, and Audiotape: What to Watch Out for on Your Official Trip to China By Matthew Little
Epoch Times Staff Created: Dec 3, 2009 Last Updated: Dec 3, 2009

Ian Clement, Deputy Mayor of London talks to media and guests at the opening of London House ahead of the Beijing 2008 Olympic Games on August 7, 2008 in Beijing, China. (Paul Gilham/Getty Images)

OTTAWA—Ian Clement said he should have known better when he traveled to the Beijing Olympics in 2008 as London’s deputy mayor. He had been briefed by Britain’s intelligence service, but he didn’t listen.

“They told me about honeytraps and warned me that the Chinese secret service often use women to entice men to bed to get information. I didn’t think for one minute that I would fall for it,” Clement admitted to the Mirror newspaper last week.

Clement said the attractive Chinese woman he met at a party likely drugged his drink. After he’d passed out, she went through his room, collecting information about London’s operations and business dealings.

Indeed, Mr. Clement should have known better. Just a few weeks before his Olympic trip, the story of another U.K. government staffer caught with his pants down in China was splashed over the British media. That man, an aide to the British prime minister, also fell victim to a honeytrap. He woke after a night with a Chinese woman to find his blackberry stolen, a theft that security experts said jeopardized U.K. parliamentary email servers.

Honeytraps and Wiretaps
“Foreign officials should always be careful when they visit China. The authorities may influence them in a certain way and they may also ensnare them in a trap. They should always be careful,” says former Chinese diplomat Chen Yonglin.

Before defecting in Australia, Chen was the consul for political affairs in the Chinese Consulate in Sydney. His main responsibility was to monitor Chinese political dissidents in Australia.

Sex and money are often used as bait, he says. The honeytrap is a favorite tactic Chinese intelligence uses to try to catch an official in a sex scandal. In this scenario, the official or staffer is approached by a beautiful Chinese vixen who proceeds to seduce him. She may ransack his hotel room, search through his laptop or cell phone, or use video of the indiscretion as blackmail.

Chen says while he was in office one Australian official on a visit to China was detained by the authorities after he was caught having sex with a girl who was not yet 16 years old. They released the man, keeping evidence of his affair, after he “offered to work for the regime, similar to an agent,” Chen says.

“Publicly he tried to speak for the regime,” Chen says, including by arguing the regime’s stance in Australian media.

“[Officials] should be cautious around Chinese officials,” warns Chen. “They may be trapped by money or the promise of some benefits from Chinese top officials. They should be very careful while enjoying the entertainment offered by the Chinese government.”

Another former Chinese official specifically warned Canadian officials visiting China in an interview he gave to the Canadian Press in 2005. Guangsheng Han made headlines that year when he tried to defect to Canada. In Shenyang, a city of nearly 8ight million, Han spent 14 years as head of the Public Security Bureau and another five years with the Judicial Bureau.

This week he told the Epoch Times that the Chinese regime is zealous about gathering intelligence and Chinese hotels—including hotels owned by foreign companies—are staffed with national security agents. Unwary officials can expect that their luggage will be secretly searched and any documents copied.

Warning from CSIS
Like the Brits, Canadian intelligence is aware of the risk and warns Canadian officials visiting China, but those warnings are often ignored, says former Canadian Security Intelligence Service (CSIS) agent Michel Juneau-Katsuya, who used to head up the agency’s Asia-Pacific desk.

“Definitely CSIS will give them a briefing, but we are not really sure they pay attention to CSIS. They are often extremely naive and believe that CSIS [agents] have seen too many James Bond movies.”

Juneau-Katsuya says Chinese intelligence will likely be more careful when dealing with high-level officials like heads of state because of the extra security and media attention, but will “deploy their entire arsenal of surveillance and electronic monitoring” for middle or lower-ranking officials and their staff.

“I am quite sure that anybody and everybody who will be there will have what we call the ‘fully equipped room,’” he says.

“You can be sure that every single conversation, they will try to monitor it. They will have every single person on this delegation with people assigned to follow them, to make sure they don’t meet with the wrong people or whoever, and who knows, perhaps collect some dirt along the way.”

But besides looking for useful information, Chinese intelligence agents are also looking for sympathetic politicians and well-placed staff who can be either coerced, bribed, or simply charmed into helping the Chinese regime achieve its foreign policy objectives.

If they do identify a likely target, Juneau-Katsuya said that Chinese diplomats will then approach them in Canada later to court them.

“They will definitely try to develop what is referred to as soft power.”

The aim of all the intelligence-gathering is to gain influence, he said. The Chinese have long known “that control is not the ultimate power. Influence is much greater—it demands less energy and allows you to do much, much more.”

Winning 'Friends' and Influencing Policy
David Harris, a terrorism expert and former chief of strategic planning for CSIS who is now director of the international and terrorist intelligence program at Insignis Strategic Research in Ottawa, says the Chinese efforts to influence our officials run deep, and can be long-term.

“There is a great deal to be concerned about in having dignitaries go to China. Chinese intelligence is notorious for stopping at nothing to secure information from foreign dignitaries or from trying to extort and pressure information out of people. Efforts at blackmail are hardly unknown.”

Harris says efforts to influence officials and bureaucrats can be undertaken years later, when a junior special assistant or secretary may have risen to a position with access to sensitive information, or has gained the ability to hire other agents into their department.

“It’s terribly important that officials in China conduct themselves with circumspection and discretion. You can also assume that all meeting rooms, where officials are, will be wired for sound or video.”

The regime’s favorite and most effective way to collect intelligence is through flattery, said Harris, and establishing what might appear to be a genuine and sincere lasting friendship. Chinese intelligence agents are masters of psychology and manipulation techniques. Their files on prime targets can go back decades and they look for vulnerabilities that can be exploited.

National Interest
“The vulnerabilities can range from issues of money, debt, greed, sexual habits and orientations—anything that would permit openings. So if someone has a taste for business, then of course business propositions can come their way,” said Harris.

The payoffs can be monumental, he says. For example, a private briefing to a state leader might reveal that country’s fallback positions in important trade negotiations. With that knowledge, the Chinese can push their advantage to the maximum at a potential cost of billions to the other side.

Besides winning economic advantage, the regime hopes to sway or significantly influence other country’s foreign policy as it relates to China. Some of the bureaucrats and others who fall under Chinese influence become unconscious agents of the regime, he says. Others may act knowingly.

“People think bureaucracy is regulated and regimented, reliable, but if you can gain influence over a director general who travels in the delegation, then policy options can be narrowed in favor of China very early on in the policy development and decision-making stage of government.”

That scenario is most dangerous, he says, because someone high in government or the bureaucracy coming under strong Chinese influence compromises the decision making process of another state from within.

Harris says he’s heard of cases where policy decisions become widely known among the ranks of those close to China before they are even finalized in Canada. When pressed for more details, he said he was not prepared say more due to security concerns. “I can’t go beyond that but it is not surprising, of course.”

In the end, the only lasting solution according to Harris and Juneau-Katsuya is that officials and their staff are well aware of the risks and keep their own interests firmly in mind.

“It is extremely disturbing to see some former senior politicians, diplomats, and others who have made cozy perches for themselves in China,” says Harris.

We should also keep delegations as small as possible to limit vulnerabilities, he says. And beware the so-called “friend of China” tactic.

He said the sometimes a high-ranking Chinese official or other well-placed person will warmly declare some foreign official or business person to be a “a friend of China,” but it would be “stunningly naive” to take that at face value.

“If that kind of thing happens, people need not feel flattered—they can properly feel used and manipulated. ... You have one country to which you owe loyalty in law and policy, and you better decide which one that is.”

http://www.theepochtimes.com/n2/content/view/26027/

[Hari Seldon]

^^^Hmmm... that explains Sri Kevin Rudd's buttkissiness towards PRC, perhaps. Maybe it can also explain the inexplicable behaviour of some of our desi commie brethren, eh?

Also, Sri Mirwaiz Umar farcrook's visit could cost him much, who knows. Add also the sudden PRC love sprung in the hearts and farts of the Nepalese maoists, the ULFA kamandus in Burma etc and a lot gets explained easily.

[Stan_Savljevic]

Hold on, subversion and propaganda is a part of every communist regime's official machinery. The Soviets had a far-reaching propaganda machinery than the hoi polloi could be aware of. Mitrokhin archive and the following youtube video will list many of them:
Soviet Subversion of the Free World Press (~90 minutes)
Interview with Yuri Bezmenov (*1939 +1997), KGB defector and former Novosti employee
http://www.youtube.com/watch?v=o_xdBnFP ... BA&index=0
{Did nt someone post this here already?}
But that could nt prevent the Soviet regime from falling down, did it?! When make-believe becomes a lil too much, the whole charade comes crashing down on its own damn weight. Karma will take care of beatches, so take the popcorn, as they say .

[Karan Dixit]

TAIPEI (Reuters) - Taiwan's China-friendly ruling party lost a county vote to the opposition on Saturday in elections seen as a first test for President Ma Ying-jeou's policy of engagement with Beijing.

http://ca.reuters.com/article/topNews/i ... 1N20091205

[Hari Seldon]

Is China Now Facing an African Backlash?

In recent years China’s Africa policy has attracted fire from many quarters outside the African continent—governments, NGOs, the media and academics. African governments, on the other hand, appeared to have welcomed the Chinese presence and underlined its benefits, often compared to their negative experience with the Western and even the Soviet presence, occasionally termed “colonialism” and “imperialism.” Africans, with the possible exception of some opposition groups, have failed to criticize the so-called Chinese “model.”

Not anymore.

interview Libyan foreign minister Musa Kusa gave to the newspaper Asharq Al-Awsat last month (full text here). Here are some of the minister’s more interesting comments:

We have a positive opinion of the Chinese because they aided the liberation movement in Africa; we consider this to be great work undertaken by China and we hope to continue in the same path. We are also aware of the importance of China as a strong country contributing to international balance, but not at the expense of the people…

When we look at the reality on the ground we find that there is something akin to a Chinese invasion of the African continent. This is something that brings to mind the effects that colonialism had on the African continent from the creation of settlements to the dispersal of African communities.

{Yup, only the new age slave trade is yet to start inn right earnst. That will complete the cycle of history for the African continent.}

Therefore we advise our Chinese friends not to follow in this direction i.e. bringing thousands of Chinese workers to Africa under the pretext of employment, for at the same time as this Africa is suffering from unemployment. Therefore we invite the Chinese to contribute to solving the problem of unemployment in Africa. And so perhaps the Chinese can train the African workforce, thereby creating a labor market that could include thousands of African workers, rather than bringing in Chinese workers who are provided with farms and homes in Africa, for this is something that we consider to be re-settlement.

Advise? invite? You asked for it, fools! As for Yindia, after suffering 800 yrs of phoren rule, at least we have learnt some of the hard lessons well enough to not forget in 60 yrs.

But more seriously, how come the WSJ is printing this BS? The sheer hatred subversion and propagandu against lily-white CPC by the running dogs of western imperialism is crossing all boundaries of decency and getting to intolerable levels now. Expect umbrellas of umbrage out in Kolkata any moment now....

[sanjaykumar]

That is nothing, let more Chinese settle in Africa, they will find China is a long way from Aaafricaa hehehe.

[Victor]

Has any one checked out microsoft bing, the chinese verision has whole of arunachal being shown as undisputed part of PRC.

That's OK, it's for drone consumption onlee. The Bing version meant for India shows the correct border not only for Arunachal Pradesh but J&K also, the first I have seen from a western source.

[Avinash R]

Hold on, subversion and propaganda is a part of every communist regime's official machinery. The Soviets had a far-reaching propaganda machinery than the hoi polloi could be aware of. Mitrokhin archive and the following youtube video will list many of them:
Soviet Subversion of the Free World Press (~90 minutes)
Interview with Yuri Bezmenov (*1939 +1997), KGB defector and former Novosti employee
http://www.youtube.com/watch?v=o_xdBnFP ... BA&index=0
{Did nt someone post this here already?}
But that could nt prevent the Soviet regime from falling down, did it?! When make-believe becomes a lil too much, the whole charade comes crashing down on its own damn weight. Karma will take care of beatches, so take the popcorn, as they say .

Something interesting to read on the topic of waishi or friendship with foreigners in china

Friendship. It means different things to different people. One
kind describes the diplomatic relations between states. Another
deals with the feelings between individuals. The first kind of
friendship is hard work; it must be structured and scripted down
to the smallest detail. The second is spontaneous, haphazard, and
voluntary. But in China the boundaries between the two have
been blurred by dint of a strenuous, state-sponsored drive to nur-
ture "friendship' between Chinese and foreign individuals as an
important instrument of foreign policy. Such efforts are called wai-
shi, or "foreign affairs/7 the goal of which is to try to manage the
way China is seen by the outside world, not only by foreign gov-
ernments but also by the public. The head of the waishi system in
government is China's top leader, and virtually every government
agency, municipal authority, and state enterprise has an office des-
ignated to deal with foreign affairs. Friendship is not something
the Communist Party is willing to leave to chance.

In some ways this is not unusual. The Soviet Union had a simi-
lar system for dealing with foreign guests. But what is perhaps re-
vealing about the Chinese effort is the way that foreigners are de-
scribed in the training manuals given to waishi operatives. These
books are designated as "internal," or secret from the foreigners
they are intended to help influence. However, several of them
have been obtained by Anne-Marie Brady, the author of Making
the Foreign Serve China, an impressively researched recent book.1
The rules of engagement contained in the training manuals are
intricate and all-pervasive. They stress that intimacy is forbidden
and that making friends with foreigners is "work." One phrase
that keeps cropping up is nei wai you bie, "foreigners and Chinese
are different." There are also quoted injunctions from Zhou Enlai,
Mao's urbane premier, to the effect that making "friends" with
foreign journalists required thorough research and investigation,
because waishi workers needed to "know your enemy and know
yourself." Adding to the sense that waishi workers were somehow
crossing an elemental divide was the illustration on the cover
of one manual from the mid-1990s: a handshake. One hand was
smooth and the other covered in thick black hair.

In the same book, a waishi aficionado, Zhao Pitao, summed up
the mission of foreign affairs workers: "To make friends with for-
eigners is the effective way to strive for international sympathy
and support. It is an important task of foreign affairs work."

One way to cultivate "friendship," the handbooks say, is to cre-
ate feelings. This can be done in a number of ways, one of which
is to find things in common. This does not have to involve poli-
tics. It can be children, gardening, sports, almost any subject. But
whatever form it takes, eliciting some sense of commonality is es-
sential to the creation of favorable feelings. "Feelings are the re-
sponse of people to objective events. They are an important moti-
vation for human activity. In order to work on people, we first of
all need to establish feelings," says one passage in a waishi book
called Zhou Enlai's Diplomatic Art.

Other ways to nurture feelings included convincing foreigners
that they are special. At times, this resulted in a form of theater. In
the late 1970s and early 1980s a frequently used device was a kind
of charade that involved some small item — a discarded sock, a
used razor, or a pack of postcards — that a foreigner had left be-
hind in a hotel room. Shortly after the foreigner had checked out,
someone (usually a local waishi official) would jump into a car
and rush after the foreigner's taxi or bus, flag it down, and hand
over the item to the embarrassed but thankful visitor.

In the late 1980s foreigners who exhibited friendship would be
given privileges. This often involved the deployment of China's
most powerful chimera: its population. The foreigner would be
either charmed by the adulation of crowds or seduced by the ex-
clusivity of a one-in-a-billion reception. Examples of the former
variant in this genre included the "spontaneous" crowd of tens
of thousands that hailed Craig Barrett, the then CEO of Intel, in
the southwestern city of Chengdu. They surrounded him in the
streets chanting "Ying-te-er, Ying-te-er" ("Intel, Intel"), until Barrett,
by his own admission, began to feel like Elvis Presley. Later, In-
tel approved the chip-packaging-plant investment that Chengdu
had been angling for. Edgar Bronfman, who was then chairman
of Seagram, had a similar experience in a remote village by the
Yangtze River in 1998. His beverage company had promised to
invest in a $55 million orange orchard that would help transform
the local economy4 After he debarked from a cruise ship that
had taken him downriver, he saw thousands of peasant farm-
ers thronging the hillsides, clogging the streets, and waving from
rooftops. The feelings engendered in Bronfman were so strong
that when Seagram was later bought by Vivendi, a media com-
pany, he insisted that the orange orchard be kept as a special unit,
even though it was about as far from the core business as can be
imagined.

Sometimes it is exclusivity rather than popular adulation that
is employed. The foreigner can see the multitudes about him as
he is ferried around town in a limo with a police escort but is
kept separate from the hoi polloi, in the manner of a mandarin
in a sedan chair. More rarefied gradations of exclusivity are re-
served for people like Rupert Murdoch, the magnate who controls
News Corporation. During the years he has been trying to crack
the China market, he has gained access to the inner sanctums of
Communist power. He has had dinner with the most powerful
men in the country inside Zhongnanhai, which is guarded just as
fiercely as the old, imperial Forbidden City ever was. He has also
enjoyed the virtually unique privilege of addressing a lecture hall
full of future leaders in the Central Party School. The theme of his
speech — the efficacy of an open media — contrasted neatly with
the fact that the school is strictly off-limits to both Chinese and
foreigners unless they have secured prior approval.

Yet the privileges granted, the warmth, the closeness, and the
respect are all calculated to achieve utilitarian aims. That these
friendships are nothing more than temporary arrangements for
mutual benefit is evident in example after example. Yet no case is
clearer than that of Edgar Snow, an American journalist and au-
thor who became acquainted with Mao when the future chairman
was the leader of a guerrilla force based in Shaanxi. The follow-
ing passage, recorded in Snow's unpublished diaries, shows just
how powerful the waishi principle of "creating feelings" by mak-
ing foreigners feel special can be. It describes the arrival after an
arduous journey of Snow and George Hatem, a Lebanese doctor
who was also to become a firm "friend of China," at the Commu-
nists' revolutionary base.

The bands and troops fell behind us and marched up the main
street to the accompaniment of slogans shouting, "Welcome
American comrades! Hurrah for the Chinese comrades! Hur-
rah for the world revolution!" etc and posters and banners
of welcome decorated the walls of the town, some written in
English, some in Latin-hua and many in Chinese. It was the
first time I had been greeted by the entire cabinet of a govern-
ment, the first time a whole city had been turned out to wel-
come me. The effect pronounced on me was highly emotional.
Had I been called up to make any kind of speech I would have
been unable to do so.5

Snow was to become China's most famous postrevolutionary
friend. His book Red Star Over China was to become a bestseller in
the United States, and Mao, who called him "friend Snow," had
Snow stand beside him on top of Tiananmen Gate on National
Day. But it was inevitable that the time for payback would come.
When it did, Beijing took its payment in the most valuable cur-
rency that a journalist has to offer: his credibility. Unlike many
other "friends of China," Snow lived in the United States. He was
given a special invitation to come back in i960, when China was
in the midst of the famine caused by Mao's industrialization poli-
cies. Beijing hoped that the man who had done more than any-
one else to further the image of the Communists in the eyes of
foreigners would return to write another book supporting the re-
gime. Mao wanted him to reinforce the claims that there was no
trace of famine in China and that the rumors of mass starvation
reported in the media were rubbish.

Snow was escorted around the country by George Hatem, who
had stayed on in Beijing after the revolution as part of a coterie
of professional "friends of China." When Snow's book The Other
Side of the River: Red China Today came out, it contained the white-
wash the Chinese were looking for. Snow declared that he saw no
starving people in China, though "isolated instances" of starva-
tion might exist and there was undoubtedly considerable malnu-
trition. "Mass starvation? No," he said. In fact, an estimated thirty
million were dying of hunger.

The waishi phenomenon is interesting on different levels. It can
be looked upon as an aspect of public diplomacy or as an exer-
cise in social psychology. But I find it absorbing for what it sug-
gests about the Chinese government's attitude toward the outside
world. Why did the state feel the need to stage-manage personal
friendships, and why did Beijing wish to discourage real friend-
ships based on genuine feelings? Perhaps it had something to do
with the "patriotic education" that Chinese schoolchildren are
taught and the antiforeign propaganda that sometimes surfaces in
state newspapers. In both cases, the foreigners portrayed were not
people who were friendly to China. Rather, it was as Chairman
Mao said on top of Tiananmen Gate as he declared the founding
of the People's Republic on October 1, 1949: 'The Chinese have
always been a great, courageous and industrious nation; it is only
in modern times that they have fallen behind. And that was due
entirely to oppression and exploitation by foreign imperialism
and domestic reactionary governments . . . Ours will no longer be
a nation subject to insult and humiliation. We have stood up."

Over the past decade or more, Beijing has allowed the Chinese
much greater freedom to make real friendships with foreigners,
and of course the personal bonds formed have been as intimate,
trusting, and loyal as anywhere else on earth. Yet the state contin-
ues to try to use its people to contrive an image of China in for-
eign minds. The most recent example of this is a new set of hand-
books published by the state to teach people how to make a good
impression on foreigners when the Olympic Games are hosted in
Beijing in 2008. The books urge scrupulous politeness, high stan-
dards of personal hygiene, and the creation of "warmth" toward
visitors.

[RayC]

Avinash R,

What is the link for the washi info?

[kmkraoind]

Avinash R,

What is the link for the washi info?

Link

[Avinash R]

Avinash R,

What is the link for the washi info?

Link

Correct and RayC check mail

[joshvajohn]

Tibetan singer Tashi Dondrup arrested over 'subversive' CD
Chinese authorities have arrested a popular young Tibetan singer, accusing him of composing subversive songs.

Tashi Dondrup was detained yesterday afternoon while in hiding in the western city of Xining, capital of Qinghai province, where he had taken refuge after the authorities banned his music.
http://www.timesonline.co.uk/tol/news/w ... 943997.ece

[abhishek_sharma]

Americans push back on START treaty

http://thecable.foreignpolicy.com/posts ... bout_china

Now, the GOP's leader on the House Foreign Affairs Committee is throwing one more hot-button issue into the mix: China. Ileana Ros-Lehtinen, R-FL, has introduced a bill that seeks to pressure the administration to take China's nuclear arsenal into account before deciding to cut stockpiles with Russia.

After stating that China "is the only declared nuclear weapons country under the Nuclear Nonproliferation Treaty (NPT) that is expanding its nuclear arsenal," and quoting several government reports to explain that China is expanding its strategic missile technology and capability, Ros-Lehtinen's bill goes on to say that it would be "premature and potentially damaging to the national security interests of the United States to hold negotiations on any nuclear arms control agreement" before the administration's Nuclear Posture Review is completed, which will be sometime next year.

The GOP's own resolution actually states that China has about 40 nuclear-tipped missiles that could reach the continental United States today, and could only amass about 100 over the next 15 years.

[Karan Dixit]

Taiwan elections hint at unease over closer China ties


http://news.bbc.co.uk/2/hi/asia-pacific/8398607.stm

[Arihant]

Taiwan elections hint at unease over closer China ties


http://news.bbc.co.uk/2/hi/asia-pacific/8398607.stm

Much of the political commentary associated with last weekend's Taiwanese elections suggests that there are two ways the Taiwan scenario will play out:

(1) The opposition DPP under Tsai Ing-Wen wins the next presidential elections. The DPP will necessarily tone down its anti-China rhetoric and adopt a more centrist image to achieve this, but the core of DPP's support base will ensure that slow but sure steps are taken to continue the process initiated under KMT's Lee-Teng Hui's presidency (he has since parted ways with the KMT and now heads the pro-Taiwan Taiwan Solidarity Union) and continued under President Chen Shui-Bian to achieve a Republic of Taiwan.

(2) Ma Ying-Jeo and the KMT scrape through for a second term, but with their wings seriously clipped. The rapid moves being made towards taking Taiwan into China's fold will necessarily stop to ensure the KMT's political survival.

It's a win for India under both scenarios. Now would be a good time to seriously start engaging with Taiwan - both the ruling dispensation (although the likely gains are limited) and the opposition.

[Hari Seldon]

India protests Chinese using 'Made in India' tag for drugs

Am sure there's a dossier demarche in there somewhere...

[Gagan]

X posted
Nepal: Surkhet Air Strip for Indian Air Force, Target Tibet

How will China react to the fresh agreement made in between the Government of Nepal and India that allows the Southern neighbor, China’s arch rival, to construct an Air Base for the Indian Air Force in Surkhet?

The Jana Disha Daily, the Maoists’ Party mouth piece dated December 7, 2009, claims that in the consultative meeting held between the representatives of the Government of India and Nepal, December 4-7, 2009, Kathmandu, the Nepali side has provided a clear go-ahead signal to India to construct the Air-Strip for the Indian Air Force.

It was earlier reported that India has already built air-strips deep inside Bhutan and an air-strip in Surkhet of Nepal will serve the Indian security interests in a much more enhanced manner, say experts.

As per the agreement the government of Nepal will have to allocate some ten hectares of lands in the area to construct the Air Strip.

...

“The very idea of constructing an air belt in Surkhet is basically not a Nepali brain. Instead, it is the Indian mind to build an air strip right inside Nepal from where the Indian regime, should an imaginary war with China becomes a reality by 2012 as claimed by Bharat Burma, an Indian defense analyst, could pounce upon Tibet that adjoins the Nepalese border”, claim Nepal’s analysts.

Surkhet is close to the tri-junction, Kalapani, where China meets India in Nepali territory.
Nepal’s defense analysts claim that the Indian Army can strike the heartland in Tibet as and when India and China go to war.
How China reacts to this "benevolent" Nepal, gesture made in favor of India will have to be watched.

[abhishek_sharma]

China’s Economic Power Unsettles the Neighbors

http://www.nytimes.com/2009/12/10/world ... karta.html

[Karan Dixit]

China’s Economic Power Unsettles the Neighbors

http://www.nytimes.com/2009/12/10/world ... karta.html

It looks like there is a possibility of an alliance to counter the Chinese hegemony. People in the East are gradually becoming aware of ill intention of Chinese regime.

---

Arihant,

I was more excited about prospects of a Taiwan friendly party coming to the power.

[ppatil]

Found this on a popular website I frequent.

China's economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585bn.

But doubts remain whether such strong growth can be sustained by public spending alone.

Secret behind 8% growth rate Watch from 1:15 onwards if you are impatient.

[youtube]0h7V3Twb-Qk#t=1m15s[/youtube]

[VinodTK]

China coughs, India sneezes

[NRao]

X posted
Nepal: Surkhet Air Strip for Indian Air Force, Target Tibet

How will China react to the fresh agreement made in between the Government of Nepal and India that allows the Southern neighbor, China’s arch rival, to construct an Air Base for the Indian Air Force in Surkhet?

Chinese built ports in Pakistan, Sri Lanka, Mynmar. Help to Bangla Desh. Maoists in nepal.

And, how will China react ................................ !!!!!!

Do we care?

[Philip]

India shouild relentlessly "bat on regardless" protecting its own interests.As for the actual strength of the PRC economy,read this insightful article.I must add that during the disastrous Cultural Revolution,the Chinese wanted to show that their steel production was fantastic,so what they did was to cannibalise as much steel as they could,dumping all manner of useful artifacts and machinery as scrap and producing absolute junk quality steel that could not be used.Production figures were all that mattered by the commissars in charge.

In like manner today,the Chinese are keeping their billion+ people employed on any projects that will prove catastrophic,like its building industry,fastest speed train,etc.Many of these skyscrapers are completely empty,as the video clip has shown.So China has wasted its cement,steel,etc. on worthless edifices in its own version of the Dubai bubble.The Chinese bubble will inevitably burst and when it does China will resort to war and invasion to divert its people's attention and loot from other lands.

http://blogs.telegraph.co.uk/news/peter ... a-volcano/

Peter Foster
Peter Foster moved to Beijing in March 2009. He was formerly the Daily Telegraph's South Asia Correspondent based New Delhi from 2004-2008. He is married with three children. China: a glacier or a volcano?

By Peter Foster World Last updated: December 11th, 2009

5 Comments Comment on this article

The rise of China is the most-read news story of the last decade, according to new research published by Texas-based Global Language Monitor.

You won’t be surprised to hear that for someone who earns his crust writing about China’s rise, this is gratifying news.

It’s also mildly surprising. In the news trade China is essentially a ‘glacier’ story – huge, unstoppable but moving in increments that only become discernible over time. Everyone registers China’s growing importance, but too often the drip-drip nature of the story keeps off the top of the news agenda.

And yet according to this research – based on tracking keywords on news and social networking sites – China’s rise has easily trumped what you could call ‘volcano’ stories: spectacular, erupting events such as Michael Jackson’s death, Barack Obama’s meteoric ascendancy to the presidency or the south Asian tsunami.

The research begs the question (and this not from the purely selfish perspective of the China hack interested in keeping his job) whether, in ten years time, a similar survey would find China still top of the news tree.

You might think, given China’s inexorable rise and the strains that is going to put on the emerging new world order, that China’s position as a story of global prominence is a no-brainer, but it’s worth remember that similar things were written about Japan in the late 1980s and early 1990s.

At that time papers like the Washington Post were seriously reviewing books entitled “The Coming War with Japan”, just as they are now reviewing “When China Rules the World” by Martin Jacques, but in the even the story never quite panned out.

(As an anecdotal measure of this, when I moved to New Delhi to open a new bureau for The Telegraph in 2004 – at the time ‘rising India’ was the new zeitgeist story – the bureau’s budget was allocated a cost-code number that had previously been used by the staff bureau last closed by the Telegraph. It’s identity? You guessed, Tokyo.)

China’s sheer size will protect it from going the way of the Japan story – sucked into a deflationary morass – although bearish economists are already drawing comparisons between China’s investment-dependent economy and Japans in the 1980s.

Even so, some of the wilder takes on the China story – Western fears of its rising military, the actual ability of Chinese consumption to drive the world economy, China’s calls for the end of dollar hegemony – are presented with an imminence that is not justified by the numbers.

For all the hype and rapid progress of the last decade, the China story is still a relative glacier when you measure it in terms of growth in per capita incomes or numbers of aircraft carriers.

Of course, plotting scenarios for the China story over the coming decade is a favourite pastime of the China press corps, but it is an invidious business.

I think most people living here, based on the track record of the last 30 years, expect that China will continue its rise upwards. There will be some sharp peaks and troughs along the way – a property crash here, a riot there – but history will look back on a gradual embracing of economic and political reform. This is the ‘glacier’ scenario.

But there always remains the wild card of more extreme upheaval – the ‘volcano scenario’ – a fact which the Communist Party of China is well aware and explains its paranoid attitude to a population which has little apparent appetite for revolution.

I have just finished reading a wonderful book – Red China Blues by Jan Wong, a Canadian-Chinese journalist who arrived in China in 1972 as a starry-eyed student Maoist and is gradually disabused of her beliefs.

She returns in the mid-1980s to cover China for Canada’s Globe and Mail and gives a gripping account of the Tiananmen Square protests and the subsequent massacre which takes up a large chunk of the second half of a deliciously self-knowing memoir.

What is striking in her account is how quickly those protests materialised.

Little more than a year before the PLA was gunning down students in the streets, Wong was interviewing pro-democracy activists like Wang Dan and finding them curiously out-of-touch and with only the fringiest of fringe support.

You could draw comparisons with today’s Charter 08 pro-democracy petitioners whose leader, Liu Xiaobo, remains in prison a year after his arrest facing a 15 year jail sentence. They are tiny minority.

It is, therefore, as hard to see a ‘colour revolution’ suddenly materialising in China in 2009 as it was for Jan Wong in 1988, but then history reminds us that events can move very quickly in China.

In 1989 it was high-inflation and the petty restrictions of the Party that under-pinned the protests.

Today all seems rosy – incomes are rising and personal freedoms have expanded greatly – but it’s still possible to construct a perfect-storm scenario that is not beyond the bounds of possibility.

Imagine: the year is 2012 and the world has entered a Great Depression. As in 1929, the stockmarket rallies of 2009 and 2010 have turned out to be horrible bear rallies.

After short-term success in avoiding financial catastrophe in 2008, the world’s governments are now drowning in debt.

The rising corporate profits that propped up those bear-rally stock markets were a chimera generated only by short-term cost-cutting that merely put millions out of work and dried up consumption even further. The hoped-for recovery in world demand never appeared.

As a result, the Chinese property and stock markets have also crashed, along with Chinese manufacturing (bloated with stimulus-driven overcapacity) triggering a power-struggle over the succession of a mortally weakened Hu Jintao.

The dollar has tanked, putting a massive dent in China’s forex reserves and China’s economic stimulus has unraveled, exposing a jobless recovery in which half of China’s (by then) 8m graduates a year can’t find jobs. (This is already a problem for third of China’s 6m graduates this year)

A disgruntled Chinese middle class (who’ve lost their shirts in property and stocks bubbles) start to openly question the fragile social contract between them and the ruling party who respond – typically – with further draconian controls on the press and internet. The people are further enraged.

As in Urumqi this year, when Han protestors took to the streets demanding the resignation of the local party boss, the people take to the streets en masse demanding reforms from the Party while, behind the gates of Zhongnanhai the arguments of 1989 over how best to respond play out all over again.

The students and middle classes are joined by thousands of ordinary workers who – though they might not quite put it in these terms – are fed up with the continuing falling share of wages to GDP, the rampant corruption, pollution and land-grabbing and the failure of a much-vaunted (but under-resourced) health care plan to deliver real social security.

It all seems highly fanciful – and is highly unlikely – but when you see how the Party is behaving at the moment, you could be forgiven for wondering if, when they look into the darker corners of their crystal balls, they don’t fear something akin to this.

[yogi]

Ancestors of Chinese came from India: Study

[gaurav]

India shouild relentlessly "bat on regardless" protecting its own interests.As for the actual strength of the PRC economy,read this insightful article.I must add that during the disastrous Cultural Revolution,the Chinese wanted to show that their steel production was fantastic,so what they did was to cannibalise as much steel as they could,dumping all manner of useful artifacts and machinery as scrap and producing absolute junk quality steel that could not be used.Production figures were all that mattered by the commissars in charge.

In like manner today,the Chinese are keeping their billion+ people employed on any projects that will prove catastrophic,like its building industry,fastest speed train,etc.Many of these skyscrapers are completely empty,as the video clip has shown.So China has wasted its cement,steel,etc. on worthless edifices in its own version of the Dubai bubble.The Chinese bubble will inevitably burst and when it does China will resort to war and invasion to divert its people's attention and loot from other lands.

http://blogs.telegraph.co.uk/news/peter ... a-volcano/

I hope what you say is true considering the high tension steel cables for ‘man made marvel’, Bandra-Worli link had to be imported from China. Well, the difference between Dubai and China is there is a billion Chinese to consume their excesses. As for the empty infrastructure, I saw the same phenomenon in Pudong many years back, when I went there a year ago, the whole place was occupied. Having said that, I don’t mean they have no overcapacity issue. What I mean is they are able to absorb the impact due to a larger economy base. Sooner or later, the bubble will explode, prices will correct and the building will be occupied. The same happens in all economies especially now in the US. I actually like their high-speed rail system, US is now pushing this after the Chinese endeavor. Imagine lower cost intercity travels at a fraction of the cost of an air ticket with the same time taken. I was shocked that all these infrastructure and trains were made in China, although I suspect most of it is licensed technology.

Another thing, one has to understand whose steel they are wasting? Whose cement? Whose energy? What they are wasting is only their manpower which is in surplus. All those steel, cement and energy input is bought with dollars. They earn the dollars by selling their manpower. The best thing to do now is to buy resources and build as much as you can with these green pieces of paper. Some may be left empty awaiting future consumption, but a great portion will be used.

[abhishek_sharma]

Harry Reid demands that China fix its economic policies

http://thecable.foreignpolicy.com/posts ... c_policies

In the letter, sent to Chinese and U.S. officials Wednesday, Reid lashes out at China on two issues, its still-inflexible currency and its failure to do more to protect intellectual property rights.

"There is widespread agreement that China's currency policy is a major source of imbalance in our relationship-- indeed, in the global economy. The de facto peg is set at a level that for many years has not reflected economic reality," Reid wrote. "Your currency policy is not in the long-term interest of China: it creates inflationary pressure, promotes over-investment, and feeds asset bubbles within China. In short, it is one of the most serious economic problems in the world today."

On intellectual property, Reid gets downright accusatory.

"High levels of intellectual property piracy in China have led many in the United States to believe that there may be a Chinese policy to undermine American competitiveness in sectors where we are strong, while simultaneously benefiting from open access to the U.S. Market," he scolds. "Rampant intellectual property theft in China will not be resolved merely by a press release or a new policy pronouncement. China needs to take steps and make progress on a continuous basis."

[abhishek_sharma]

China's soft power hits the brick wall of economics

http://drezner.foreignpolicy.com/posts/ ... nomic_wall

China has long claimed to be just another developing nation, even as its economic power far outstripped that of any other emerging country.

Now, it is finding it harder to cast itself as a friendly alternative to an imperious American superpower. For many in Asia, it is the new colossus.

“China 10 years ago is totally different with China now,” said Ansari Bukhari, who oversees metals, machinery and other crucial sectors for Indonesia’s Ministry of Industry. “They are stronger and bigger than other countries. Why do we have to give them preference?”

To varying degrees, others are voicing the same complaint. Take the 10 Southeast Asian nations in the Association of Southeast Asian Nations, known as Asean, a regional economic bloc representing about 600 million people. After a decade of trade surpluses with Asean nations that ran as high as $20 billion, the surplus through October totaled a bare $535 million, according to Chinese customs figures, and appears headed toward a 10-year low. That is prompting some rethinking of the conventional wisdom that China’s rise is a windfall for the whole neighborhood.

Vietnam just devalued its currency by 5 percent, to keep it competitive with China. In Thailand, manufacturers are grousing openly about their inability to match Chinese prices. India has filed a sheaf of unfair-trade complaints against China this year covering everything from I-beams to coated paper.

[SSridhar]

In ageing China, a change of course - Washington Post
Excerpts

Looming population crisis forces officials to rethink one-child policy, but couples hesitate . . .

They learned the lesson so well that when Shanghai government officials, alarmed by their city's low birthrate and aging population, abruptly changed course this summer and began encouraging young couples to have more than one child, their reaction was instant and firm: No way.

More than 30 years after China's one-child policy was introduced, creating two generations of notoriously chubby, spoiled only children affectionately nicknamed "little emperors," a population crisis is looming in the country. . . . while the number of residents 60 and older is predicted to explode from 16.7 percent of the population in 2020 to 31.1 percent by 2050. That is far above the global average of about 20 percent.

Written into the country's constitution in 1978, China's one-child policy is arguably the most controversial mandate introduced by the ruling Communist Party to date. Couples who violate the policy face enormous fines -- up to three times their annual salary in some areas -- and discrimination at work. . . . In July, Shanghai became the first Chinese city to launch an aggressive campaign to encourage more births. . . . The response has been underwhelming, family planning officials say.

[archan]

In ageing China, a change of course - Washington Post
Excerpts

Looming population crisis forces officials to rethink one-child policy, but couples hesitate . . .

They learned the lesson so well that when Shanghai government officials, alarmed by their city's low birthrate and aging population, abruptly changed course this summer and began encouraging young couples to have more than one child, their reaction was instant and firm: No way.

Goes to show that taking away people's fundamental rights for decades may have after effects not thought of when the laws get enforced. Correcting mistakes committed over decades may take decades. Freedom is always a good idea, even if it slows down growth.

[SSridhar]

A voice of reason & sanity on China passes away - Ms. Mira Sinha Bhattacharjea

[ramana]

A voice of reason & sanity on China passes away - Ms. Mira Sinha Bhattacharjea

She has awesome guidelines for china watchers:

A voice of sanity and reason on China

Sandeep Dikshit

For generations of China watchers, Mira Sinha Bhattacharjea was an objective interpreter of the tumultuous events which unfolded in the Peoples’ Republic.



Mira Sinha Bhattacharjea — 1930-2009

Mira Sinha Bhattacharjea was one of the world’s leading scholars on China, a political scientist who skirted the minefield that her subject’s often fraught relations with India laid before her peers with integrity, wit and an objectivity of consideration rare in the field of Sinology.

Taking to academia at a time when India was recovering from its traumatic war with China in 1962 and emotions ran high, Mira Sinha, as she was known prior to her marriage to veteran journalist Ajit Bhattacharjea, was capable of being objective even in the most trying of circumstances. And though it may be tempting to conclude that with her passing, an era of balance in Indian analyses of China has come to an end, the tradition of scholarship she pioneered has more than a few adherents within academia, the media and also government, thanks in large measure to the work of the Institute of Chinese Studies which she helped to found.

Born in 1930 and selected for the elite Indian Foreign Service in 1955, Mira Sinha’s first posting was to the Indian Embassy in Beijing. She worked there for nearly four years when she fell victim to a bizarre government rule of those times that forced women officers to quit if they got married. She resigned from the IFS – the service to which her first husband also belonged – and soon began teaching post-graduate courses on Chinese politics at Delhi University.

In a conversation with The Hindu, one of her students, former foreign secretary Shiv Shankar Menon, recalled the trying circumstances under which she set up the Department of Chinese Studies at Delhi University in the 1960s. Sinophobia was at its peak “There were four of us in one batch and there were more teachers than students. But she persevered and even at times when Sino-Indian ties went through tremendous emotional upheaval, she retained her capability of being objective. To do so consistently is a tribute to her calmness, grace and dignity.”

A founder member of the China Study Group and the Institute of Chinese Studies, of which she was the first director, Mira Sinha Bhattarchjea was consulting editor of the journal, China Report. After retiring from Delhi University in 1995, she continued as an emeritus fellow of the ICS. She was the author of numerous scholarly papers, a book, ‘China, the world, and India’, and co-editor of ‘Security and Science in China and India’ along with Manoranjan Mohanty and Giri Deshingkar. Besides China, Mira was also a scholar of Gandhi and was working on a major work on the Mahatma at the time of her death.

She would often warn of the dangers of viewing China through the British colonial construct. “Why stick to the 19th century concept that we must always be at loggerheads with our neighbours and that we need some sort of buffer state? If we don’t change our attitude, we will just become the tools of the Americans,” she wrote. She was a regular contributor to Frontline over the years.

Never one to discount the boundary dispute, she also took a swipe at the boundary-centric news reports covering high level Sino-India summits to the exclusion of everything else. “No matter how the outcome of the recent visit of Chinese Premier Wen Jiabao is assessed, it would be difficult to deny that the centrepiece of the summit was the festering boundary problem. In fact, judging by the substance and thrust of the three political documents signed, this appears to have been the real purpose of this visit, as indeed it seems to have been of every prime ministerial meeting since 1954,” she wrote in Frontline in 2005.

With the border dispute still being sorted out, Mira believed that the “economic prospect” would play an important diversionary role and would help “advance the process forward on this most knotted problem of boundary settlement.”

In perhaps the only clear headed analysis of how the boundary talks have made progress including what amounted to a no-war pact, she pointed out the achievements so far — a stated and shared agreement on the nature of the problem, reaching a single comprehensive settlement covering the entire stretch, wrapping this up in a package that should shape the form and nature of the future relationship and an agreement not to use force by any means, which can be interpreted as amounting to a no-war pact. Both sides have also largely demilitarised the borders and set in place a border management system to encourage easy cross-border movement of goods and people.

Mira Sinha recognised the strong national emotions over the border dispute but felt the time had come to change the images and fears of the ‘other’ in the public mind. She incisively examined even the blandest of statements and pointed out the “unexpected bonus” from the agreement to open an additional point for border trade via Nathu La in Sikkim. “This agreement appears to be politically innocent but actually has great political significance. It masks the diplomatic achievement of the seemingly impossible. It is being interpreted as a confirmation of the existing realities, namely, that Sikkim is part of India as Tibet is of China though both will continue to assert that this is not so. That is the way of diplomacy and there is no way of simplifying this,” she wrote.

During her last visit to the ICS, when the media was generating hysteria over the alleged increase in the number of Chinese “incursions”, she expressed dismay over the “madness of looking at things by the hour,” reminiscences Dr. Alka Acharya. “Her passing away has dealt a blow to the voice of sanity on India-China relations.”

(Mira Sinha Bhattacharjea died in New Delhi on December 13 after a brief illness. She is survived by her husband, Ajit Bhattacharjea, and her daughter, Namita Unnikrishnan.)

I think her advice is to take the long view and look beyond borders and buffers. And not get taken by the breaking news hysteria.

[Nihat]

Which makes perfect sense , China has to be accomodated as a friend of the future , there is absolutly nothing to gain from a Cold war with them in the future. Borders will solve themselves is we look at the broader picture of Indo-China Raletionships.

And military development is an essential part of that relationship , a nation of with robust armed forces capability will command China's respect.

[Atri]

4-nation pipeline inaugurated to bring natural gas to China from Central Asia

BEIJING: China’s relentless efforts to woo Central Asian countries and build bridges with Muslim nations paid off in a big way as Chinese president Hu Jintao on Monday inaugurated a 1,833 km long four-nation gas pipeline that will bring natural gas to China from Turkmenistan.

The pipeline will enable Turkmenistan gas to flow through central Uzbekistan and southern Kazakhstan to the Chinese border region of Xinjiang before it is moved further to major user cities of Shanghai, Guangzhou and Hong Kong.

Speaking at a function attended by heads of four nations, Hu said the pipeline will also carry goodwill and friendship among the four nations and bring benefits to all of them.

Three of these four countries- Uzbekistan, Kazakhstan and China-are members of the Shanghai Cooperation Organisation. China has played a key role in building SCO as a regional political club and has offered massive financial support to some of its members. (India and Pakistan have observer status in SCO).

At the ceremony, Hu said China wants to develop further coordination with Turkmenistan, Kazakhstan and Uzbekistan in order to build the second line of the project besides ensuring safety and efficiency in the operation of the existing one. He called for a long-term, stable, secured and reliable partnership in the field of energy.

The pipeline is also a result of hard work by engineers from the four countries who have set a high standard of safety, efficiency and quality in construction, he said.

"The project has truly realized the balance of interests among energy exporters, transporters and consumers," Turkmen President Berdymukhamedov said in an interview with the Chinese media.

[Philip]

Judge China not by what it says,but by what it does.There have been many Sinophiles in our country,who advocate eternal friendship with China and wish India to accept China's hegemony and suzerainity over Asia.This if followed,will result in India beiunbg truly relegated to "turd" class status internationally,as the western powers imagiine themselves to be first and will grudgingly acknowledge the Chinese and Japanese to be secone,while India will be allowed to lead the pack in the rear! If we behave like a "turd" class nation,we will be treated as one.China needs to be taught that India is an equal and not a vassal inferior nation.Unfortunately,the "Middle Kingdom" mentality of the Chinese and their boorish manners-as we have amply seen in recent months,inspire little confidence thyat they truly mean peace with India on equal terms.The Chinese attitude seems to be,"what is mine is mine and what is yours is also mine if I can grab it from you."

[SSridhar]

Which makes perfect sense , China has to be accomodated as a friend of the future , there is absolutly nothing to gain from a Cold war with them in the future.

It is a two-way street. The way India reacted this time sent a good message across to everyone.

[SSridhar]

India asks China to be sensitive to Indian concerns, especially terror
Excerpts

In a significant speech at Sichuan, India’s ambassador to China S Jaishankar said on Monday, “What are Indian expectations of China at this stage? I would sum it up as displaying sensitivity on what matters most to Indians, while accepting that we cannot agree on all issues just yet.”

India’s straightforward articulation of fundamental issues is part of its new policy towards China — intended to be more realistic and less romantic.

In fact, India is now attempting to speak to China in its own language. The use of the term “harmonious” in the ambassador’s speech is no coincidence: China has peddled its own “harmony” concept, derived from the Confucian “shijiedatong”, while explaining its own precipitous rise would not entail military conflict. That’s the message India is giving China now.

The ambassador said, “There are two sharp realities about the relationship... we are seeing the parallel but not congruent rise of China and India which makes an already complex matrix even more dynamic.”

[Jarita]

Judge China not by what it says,but by what it does.There have been many Sinophiles in our country,who advocate eternal friendship with China and wish India to accept China's hegemony and suzerainity over Asia.This if followed,will result in India beiunbg truly relegated to "turd" class status internationally,as the western powers imagiine themselves to be first and will grudgingly acknowledge the Chinese and Japanese to be secone,while India will be allowed to lead the pack in the rear! If we behave like a "turd" class nation,we will be treated as one.China needs to be taught that India is an equal and not a vassal inferior nation.Unfortunately,the "Middle Kingdom" mentality of the Chinese and their boorish manners-as we have amply seen in recent months,inspire little confidence thyat they truly mean peace with India on equal terms.The Chinese attitude seems to be,"what is mine is mine and what is yours is also mine if I can grab it from you."

Hear! Hear!

[ramana]

Se we need opposing viewpoints o PRC. The policy was always dominated by appeasers(post 1948) with flashes of defiance (Sumdrong Chu).

We need both sides to develop a comprehensive policy not subject to whims and fancies of occupants of GOI. And this should not be just confined to Foreign Policy expertise. It has to be a full spectrum of interests: economic, strategic, religious and cultural.

[SSridhar]

Can PRC sustain its cost advantage in years to come ?
Interview with Prof. Raef Lawson, Professor-in-Residence, and Vice President of Research, IMA (Institute of Management Accountants, US)
Excerpts

Does the Chinese manufacturing sector really possess a cost competitive edge in all sectors, or is it a myth? Is scale the only reason for the Chinese competitive cost structure?

I do not believe that the Chinese manufacturing sector possess a cost competitive edge in all sectors. There are numerous reasons besides scale for the Chinese competitive cost structure, including massive government in infrastructure, the rapidly increasing productivity of the average Chinese worker, and investment by Chinese companies and the Chinese government in R&D.

As Chinese manufacturing costs increase (as they are), foreign companies looking for low cost manufacturing will increasingly turn to countries such as India and Vietnam with lower manufacturing costs. However, there will remain reasons for companies to locate facilities in China. These include, among others, a desire to be close to and to sell to the growing domestic China market, access to R&D facilities in China, and the need to be close to existing partners’ facilities.

Is cost advantage felt more in commodity-oriented products, or do they fare better in the value-added products, as well?

The dynamics of the situation are changing. China currently is much stronger than India in mass manufacturing and logistics. In contrast, India is much stronger than China in software and information-technology services. However, China is making great efforts to move up the value chain, towards producing value-added products and leaving commodity-oriented products to countries with lower labour costs.

Chinese firms are making great efforts to acquire technology through a variety of means, including purchase, partnership with foreign entities, or in-house development. The Chinese government has also adopted policies aimed at forcing foreign companies to share their technology with local companies. Through these efforts Chinese companies are becoming better able to compete with value-added products.

Can China sustain its cost advantage in the years to come?

I view China as making a similar journey as that made by Japan after the World War II. At the end of that war, Japanese firms focused on making low-cost, generally low-quality merchandise. Over time the emphasis changed to making high-quality goods at an acceptable price. China is now transitioning from making low-quality commodity products to making goods that will compete with goods made by western companies. Thus the Chinese “Famous Brand” initiative, in which the government is promoting the development of domestic brands that can become international ones.

So, in this context, while China cannot permanently sustain its cost advantage in producing commodity-type goods over other countries with lower labour costs, that is not essential to the path to development that it is pursuing. With its massive investments in infrastructure, education, and R&D, China is preparing the way for this transition.