Archive for February, 2009

Sunday, February 22, 2009

China´s Energy Strategy, Commodities, and Montana

Rio Tinto, a mining group with an increasing stake owned by Chinalco (if Canberra agrees), itself owns a 50 percent share in the American joint-venture Decker via Rio Tinto North America (Rio Tinto Energy America, RTEA), according to Politics, Peaks, and Valleys, a blog from Montana. The blog is critical of Rio Tinto´s coal bidness for ecological reasons. Across the Chinalco stake in Rio Tinto, politicpeaksvalleys.com links its regional story to China´s energy strategy.

There are more direct links between China´s energy strategy and the United States of course. In 2007, Minnesota governor Tim Pawlenty hoped to reopen an abandoned mine for supplies to China, and America has generally become a growing supplier of raw materials. Given the high degree of mechanization, the positive effects on the job markets are limited. More numbers on America´s raw material business with China can be found over there.

Currently, demand for such exports is going down anyway, in the wake of the global economic crisis.

As for secretary Clinton´s visit to China, politicpeaksvalleys.com may have to be more critical of her after her visit than before.

In particular, her rhetoric toward China is stressing human rights issues that didn’t hear a peep for eight years, as the country’s harsh crackdown on minorities in its western half continued unabated, much to the dismay of Buddhist, Christian, and Muslim minority groups there.

Clinton did stress ecological issues – these may actually become major elements of America´s future cooperation with China. But human rights were hardly at the center of her agenda.

Related: At least 73 miners killed in Shanxi Coal Mine Explosion, BBC, Febr. 22

Saturday, February 21, 2009

Hirche retires

Tough childhood

Tough childhood

Walter Hirche, Liberal Democrat (FDP), resigned his post as Lower Saxony’s minister for economic affairs and deputy prime minister on February 18. He had announced his departure in January. His successor is Philipp Rösler.

The Nordwestzeitung in Oldenburg says that as a child, Mr Hirche was beaten up because of his Saxonian dialect (he was born in Leipzig). Later, he only missed an airplane crash by missing the plain plane.

This is what Saxonian sounds like.

Saturday, February 21, 2009

Zeng Jinyan barred from meeting Gao Yaojie

Prof. Gao Yaojie (高耀洁), a gynecologist physician from Henan and an AIDS relief worker, had planned to meet up with Zeng Jinyan. Prof. Gao is in Beijing on invitation by Hilary Clinton who is on her first visit to China as US foreign secretary.

Zeng Jinyan was stopped by the state security police when leaving her home and was forced back into her flat.

Zeng Jinyan and Hu Jia visited Prof. Gao in Henan in 2006. Prof. Gao has been to Beijing before. In February 2007, after a period of house arrest at her home in Henan, she was in the capital for visa matters. Wang Longde, vice-minister of health until that year, and the health ministry’s disease control section’s manager Hao Yang paid her a visit on behalf of then vice premier Wu Yi.

Friday, February 20, 2009

May Your Weekend…

… be as amusing, entertaining and recreational as this happy gathering in Luchun County.

— from an old Chinese or Irish blessing

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And be careful before you jump to conclusions: only the lads on the FIRST photo are members of a government inspection team. Those on the FOLLOWING three pictures are reportedly teachers.

Friday, February 20, 2009

At the Crossroads: China’s Development

The Chinese stimulus package – 4,000 billion RMB to be spent within two years – was passed with the goal of maintaining economic growth at 8%.

An article by John Garnaut at the Sydney Morning Herald (“Don’t miss the first signs of China’s economic recovery”):

Construction and heavy industry are the third and most powerful engine of the Chinese economy. These developers and steelmakers can make and break the Australian economy, at least in the short term, and they were at the front of China’s economic train when it crashed.

To be fair, Garnaut is aware of the weaknesses, too. He also refers to consumption, the “weakest engine” of China’s economy, and to the cause of this weakness: The problem is not that Chinese households save too much, as is often asserted, but that they have too little income in the first place.

Construction and heavy industry may be the global corporations’ greatest business opportunities in China, and “Bao Ba” (保八), maintaining economic growth at 8%, is also the goal of Beijing’s 4,000 billion Yuan stimulus package. But there are misgivings among academics, and maybe also among China’s leaders.

After all, the 11th Five-year-plan, passed more than three years ago, states that change is needed in the relationship between economic structural adjustments and the ways of economic growth.

Two paragraphs, both from last year, referring to China’s small and medium-sized businesses, might illustrate the problems with growth and investment.

Paragraph One:
China’s small and medium businesses are quickly becoming China’s innovators of tomorrow. Internationally, innovation in many countries is taking place in garage workshops and factories of small to medium sized companies. In China, this is also fast becoming the rule.
globalreporting.org, News 2008

Paragraph Two:
– SME [Small and medium-sized enterprises are] potentially the most dynamic sector of economy
– In China > 10 million SME representing 99% of total enterprises
Due to their small size and lean structures, SME are potentially more dynamic than big enterprises, which make them particularly important for job creation
— But SME are also more vulnerable, lacking often access to capital and to funding sources *)
OECD, Taiwan/Korea, October 2008
(Powerpoint presentation)

Professor Huang Yasheng (黄亚生) at Massachusetts Institute of Technology (MIT) argues that an assessment of China’s economic achievements and drawbacks needs to go beyond the superficial data on gross domestic product (GDP) and foreign direct investment that satisfy most researchers. His recent book, Capitalism with Chinese Characteristics, describes how peasants started to become business people – what looked collective was in fact private enterprise. That was before the Tiananmen massacre. In 1989, a generation of policymakers who had grown up in the countryside, led by Zhao Ziyang, were swept away by city boys, notably the president, Jiang Zemin, and Zhu Rongji, his premier, writes the Economist in a review of Professor Huang’s book. And the rural economy until 1989 was more capitalist than China is today, writes the magazine. I’m not sure if the book itself goes exactly that far.

In an interview with the BBC’s Chinese service on February 11, Huang pointed out that every additional percent in GDP added less to employment and family incomes in China. He is one of those who argue in favor of adjustments, rather than blind growth. And in an interview with Nanfang Daily (published online on February 15), he asks why the Chinese economy is unable to create more white-collar jobs, points out that China is still a low-technology country with little administrative efficiency, and comes back to the question of investment and growth. India’s investment only amounts to 50% of China’s, he says, but still creates still economic growth that amounts to 80% of China’s economic growth.

I should actually read the book. Professor Huang looks like a great iconoclast of Chinese economic orthodoxy – and probably more so, of Western economic orthodoxy. He stops at nothing:

Yes, India’s labor rules are rigid, but they can’t be changed because of political resistance, labor unions and so on. From an economist’s point of view, they would need change, but when I discussed this with human resource and technology development people, they said that this labor legislation actually advanced technological progress, because it limited exploitation of labor – so it has both advantages and disadvantages. Of course, in my view, the disadvantages outweigh the advantages, because what a country like India needs most is simple production work […..] At the high costs [for production factors] as they are in India, only people with a lot of confidence in their future, under circumstances where returns on investment are really high, will turn into developers.

(It should be mentioned that using India as an example for China – in whatever way – may count as a pretty thought-provoking… umm, yes, provocation.)

_______

*) The presentation doesn’t mention corruption, which of course also hampers small business more than big business. This unpleasant issue is often politely left out in researchers’ discussions and therefore often catches new arrivals in China by surprise.

Thursday, February 19, 2009

Chinese Ship Lost in Sea of Japan after Russian Navy Operation

On Wednesday, a Russian FSB border control department spokesman admitted that one of its ships had fired more than 500 rounds at a fleeing Chinese freighter with a crew of ten Chinese and six Indonesians. Eight sailors are reportedly missing or dead. Originally, Russia had presented the incident as a “rescue” operation. The owner of the Sierra Leone-flagged ship was Tongyu Shipping Zhejiang, which had leased the vessel, named New Star, to Hong Kong’s J-Rui Lucky Shipping Company.

Chinese government’s spokeswoman Jiang Yu said on the apparently routine Thursday press conference that China had called on Russia to “to spare no effort to help search for the missing crew members and quickly find out the causes of the incident”. She didn’t comment further.

The New Star had apparently left the Russian Far Eastern port of
Nakhodka without permission, after an unresolved dispute about the quality of a rice consignment, and smuggling allegations.

According to Shanghai Daily, the shooting took place in international waters.

Thursday, February 19, 2009

This isn’t on This Day in History

super snooper

Todays statistics are taking me by surprise

What makes Hermit’s old historical review of the EP-3 incident so popular today? It isn’t April Fools’ Day yet, is it?

Thursday, February 19, 2009

Chinalco: Shopping on the Commodity Market

Aluminium Corporation of China (Chinalco), China’s plans to invest 19.9 19.5 bn US Dollars in the Rio Tinto Mining Group. Xiao Yaqing, president of Chinalco (and its party secretary), Rio Tinto Group’s chairman Paul Skinner, and its chief executive Tom Albanese, signed an agreement on investment in London on February 12. Rio Tinto has headquarters in London and in Melbourne; Rio Tinto plc (UK) and Rio Tinto Limited (Australia) are separate legal entities but have been managed as a single economic unit since December 1995.

The new partnership with the Chinese company “will benefit from Chinalco’s strong relationships within China, which Rio Tinto believes will continue to be the main driver of growth in commodity markets over the longer term,” Albanese said.
He said the Chinalco relationship will also help Rio Tinto to seek project funding from Chinese financial institutions. (china.com)

Chinalco’s president is as much a politician as a business cadre. Xiao Yaqing was reportedly to move up to a position as the State Council’s vice secretary-general. Bloomberg reports Xiao’s departure today, but doesn’t mention his next destination.

According to its own website, Chinalco was established in 2001 when twelve Chinese aluminium companies were consolidated. Chinalco’s latest investment into Rio Tinto may double its stake to 18%, when you include convertible bonds also bought by Chinalco, according to the Financial Times Germany on February 13. According to the paper, negotiations between Rio Tinto and its Australian rival BHP had failed in November – BHP cited its misgivings about Rio’s debts as a reason for withdrawing its bid.

Rio Tinto is optimistic that the Australian government will approve the deal. It also says that 2,000 jobs could be at risk if approval isn’t granted, but trade minister Simon Crean says that preserving jobs wouldn’t be the deciding factor.

The fact that Chinalco is state-owned politicizes the matter.

“This is an economic question about giving another government a stake in Australian resources, our biggest wealth generator,” Opposition Nationals Senator Barnaby Joyce said in a phone interview from St. George in Queensland state. “This is not being parochial about foreign investment, it is about the ownership of Australian resources being handed to another government.” (Bloomberg)

And the Australian Workers Union sees Rio Tinto’s reference to job cuttings as blackmailing.

The accusation is no answer to the question who then should invest in Rio instead, and in fact, the union’s national secretary apparently sees no reason why the government would block the deal. But it seems to me that this marriage, made in heaven or not, does raise some protectionist questions. China is following a long-term strategic interest. What is Australia’s long-term interest in this matter?

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