China Challenges

Fat Hong Bao

The South China Morning Post reports:

A survey by the People's Daily and sohu.com showed more than half of parents were planning to hand out more than 1,000 yuan in hong bao, or red packets, this year. And 58 per cent of those polled said they expected their children to each receive more than 1,000 yuan from family and friends.

To read more:  http://china.scmp.com/chimain/ZZZA8KEKRGE.html

The Next Outsourcing Wave

Do you think outsourcing more work to Asia threatens America's economic future? If yes, please read my article at the American Thinker here:

http://www.americanthinker.com/articles.php?article_id=5198&search=Schwarz

Google and the Great Firewall

Google is taking a a lot of heat for its decision to "c" here in China. 

See Slate for more details:

http://www.slate.com/id/2134899/

The Impact of China

Industry Week has an interesting special report:

For manufacturers struggling to map their future in a global economy, where the signs and landmarks shift with dizzying speed, the question of the moment is this: What will be the impact of China?

To read more: 

http://www.industryweek.com/WhitePapers/WhitePaper.aspx?WhitePaperID=51

Beijing and Iran

Mr. Ian Bremmer in the IHT explains the tough position Beijing is in over the Iranian nuclear issue.  He writes:

Weeks ago, Chinese officials pledged to veto any U.S. or European attempt to impose UN sanctions on Iran. But since Ahmadinejad began to ratchet up tensions and the West responded with threats of its own, China has kept its intentions to itself. Beijing's role in the conflict matters because, as a permanent member of the Security Council, China can veto any UN sanctions proposal.  Beijing has good reason to use that veto. In 2004, Iran agreed in principle to sell China 250 million tons of liquefied natural gas over 30 years, a deal valued at $70 billion. China already imports 14 percent of its oil from Iran. Sinopec, a Chinese energy company, hopes to develop Iran's enormous Yadavaran oil field. China must consider its dependence on Iranian energy when it decides how it will ultimately vote.

To read more: http://www.iht.com/articles/2006/01/24/opinion/edbremmer.php#

McKinsey and Outsourcing

After reading the recent BusinessWeek cover story about outsourcing, I recalled this piece of research.

A 2003 study by the respected McKinsey Global Institute (MGI) showed that offshoring creates wealth for Americans as well as for China or India, the country receiving the jobs. According to their research, for every dollar of corporate spending outsourced to India, the American economy captures more than three-quarters of the benefit and gains as much as $1.14 in return.

True, some hardworking Americans will lose their jobs, but this painful reality doesn't weaken the case for open markets and free trade policies. Given the benefits of offshoring, the logical response is to make our labor force and economy more flexible and able to cope with change.

"Unlimited Funds" for Marxist Ideology

While millions of Chinese families struggle to put food on the table and make ends meet, we have this story in the SCMP:

After more than two decades of capitalist market reforms, Communist Party leaders have pledged "unlimited" funds for reviving Marxism on the mainland.

Sources say the programme will also involve turning the country into the global centre for studying the ideology.

Beijing will summon 3,000 top Marxist theorists and academics from across the country to the capital to compile 100 to 150 Marxism textbooks, with each work requiring contributions from at least 20 to 30 scholars.

Between 100 million and 200 million yuan has been earmarked for the programme, with more than 1 million yuan to be allocated to funding the compilation of each textbook. The project would also see a massive investment of human and financial resources go towards building more research institutes, training more theorists and producing more academic papers, the sources said.

To read more: ($$ required)

http://china.scmp.com/chimain/ZZZ05DSJRGE.html

Yamaha's Duel-Use Exports?

Japan's Yamaha is caught in a controversy over duel-use exports to China.  The Japan Times reports:

Police searched Yamaha Motor Co.'s headquarters in Iwata, Shizuoka Prefecture, and other places Monday, looking for evidence the company illegally exported remote-controlled helicopters to China that could have military uses, investigative sources said.

To read more:

http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nn20060124a2.htm

Oil Politics

The Saudi King is in Beijing for talks with Communist leadership.  Mr. Brian Bremner at BusinessWeek explains:

If you're wondering what he's doing there, consider this: Not long ago, China was a net exporter of oil, but it now imports about 40% of its crude, thanks to falling output at its big northeastern oil fields. By 2025, China likely will import 75% of its oil, the U.S. Energy Dept. estimates, and the Saudis are a key Chinese supplier. So good relations with them are a huge priority for China, while the Saudis want to build ties to Asia to offset U.S. influence.

To read more:

http://www.businessweek.com/bwdaily/dnflash/jan2006/nf20060123_8985_db039.htm

Economic Synergies

Mr. Micheal Vatikotis makes some interesting points about the complex relationship between India and China. He writes:

Superficially, India and China make more logical partners than protagonists. Both economies are booming so that trade and investment synergies are proliferating. India's hi-tech companies are flocking to China, where there are opportunities for applying research and innovation in cost-effective ways. China's manufacturers see in India a potentially vast market for appliances, cars and the steel that is used to make them.

To read more:

http://www.iht.com/articles/2006/01/23/opinion/edvatik.php#

The View from Ground Zero

Are some Westerners pushing the "c" word too much against Beijing?  Some Internet insiders say yes.  BusinessWeek reports:

Gary Wang doesn't quite see what all the fuss is about. Wang is the founder of Toodou, a Shanghai startup that lets Chinese post podcasts and video blogs.

While free-speech advocates in the U.S. attack Microsoft, Yahoo!, Google, and others, Wang says the situation doesn't appear nearly so grim at Ground Zero of the "c" battle.

Limits on expression are "getting more and more relaxed," he says. "The trend is becoming more open, more tolerant."

To read more:

http://www.businessweek.com/technology/content/jan2006/tc20060123_908885.htm

Rare Earths Monopoly

According to the IHT, China has effectively cornered the market for an obscure group of minerals that are vital to high-technology industry.  Mr. David Lague writes:

China now supplies about 95 percent of the world's consumption of "rare earths," according to international mineral industry experts. Rare earths are a class of minerals with properties that make them essential for applications including miniaturized electronics, computer disk drives, display screens, missile guidance, pollution control catalysts and advanced materials. In 1994, China's share of the market was 46 percent, according to industry statistics.

To read more:

http://www.iht.com/articles/2006/01/22/business/rare.php

Many Dialects

AsiaOne reports:  China will never be able to get all its people to speak Mandarin, according to a senior education official. 

But the fact that more than half of its 1.3 billion population can speak the national language is a 'tremendous success', said Mr Zhang Shiping, vice-director of the Education Ministry's language planning department.  He cited China's huge population and lack of resources as barriers to success despite a 50-year campaign of teaching Mandarin.

To read more:

http://www.asiaone.com.sg/./st/st_20060123_366664.html

"Embarrassing" Situation

China has trying to enter a new stage of economic development.  Melinda Liu at Newsweek explains:

Certainly, China has become almost obsessed with technological innovation, which will hasten the country's move up the development food chain—and away from the "embarrassing" situation of having to export 800 million shirts to pay for a single imported airplane, as one domestic newspaper recently put it.

Already scarce arable land is disappearing as rapacious real-estate developers gobble up farmland. Though China is desperate for energy, the country uses power inefficiently. Experts estimate that the country uses three times as much energy per unit of GDP as the United States, and nine times more than Japan.

To read more:

http://www.msnbc.msn.com/id/10965510/site/newsweek/

High-Risk Ventures

Are you thinking of setting up a joint venture in China?  Before you make your move, consider the story of American Mr. Terry Petty in the Standard.  The Hong Kong newspaper says:

Petty, an American investor, had forged a venture with the son of a local Communist Party official to open a machine shop in the industrial outskirts of China's most cosmopolitan city, Shanghai. But after two years of internal disputes, the venture had disintegrated. The local man was urging Petty's people to sign a contract selling him their stake and surrendering full control. They would not go along.

To read more:

http://www.thestandard.com.hk/news_detail.asp?we_cat=9&art_id=9900&sid=6238951&con_type=1&d_str=20060116

Historic Error

Chinese Premier Wen Jiabao made some interesting comments late last week.  He explained that land grabs by officials eager to cash in on China's booming economy are provoking mass unrest in the countryside and amount to a "historic error" that could threaten national stability.

To read more:

http://www.iht.com/articles/2006/01/20/news/china.php#

Mother Nature Strikes

Just as millions of Chinese are trying to return to their hometowns for the Lunar New Year, Mother Nature is not cooperating.  Authorities sent in armed police to help control some 100,000 passengers stranded at Beijing train stations after snowfalls in central China paralysed a key section of the nation's railway grid, media reported on Saturday.

To read more:

http://www.gulfnews.com/world/China/10013217.html

Price War Pain

The price war in the Chinese car market is starting to hurt.  Kandy Wong in the South China Morning Post reports:

Car sales in China jumped 30 per cent last year but manufacturers' profits dropped by half, according to figures released by the State Passenger Cars Association.

Industry sources say China's carmakers, which have notched double-digit profits for the past few years, now faced the reality of a squeeze on margins from tighter competition.

To read more: ($$ required)

http://biz.scmp.com/bizchina/ZZZSDEY6SGE.html

Malaise over China?

Yale Global Online has a new article called 'Why the US Malaise Over China?'  The introduction to the article says:

US-China relations have become wide-ranging, complex, and mature, and Beijing is touting its commitment to peaceful development. Nevertheless, there is pervasive unease in America about China's impact on American vital interests. China scholar and former National Security Council official Kenneth Lieberthal explains five fundamental issues that exacerbate America's sense of malaise about an increasingly robust China.

To read more:

http://yaleglobal.yale.edu/display.article?id=6842

Transformational Outsourcing

Slowly a new side of outsourcing is starting to emerge. Contrary to the claims made by many American liberals, it is not only about cutting jobs and moving them to a developing country like China or India. Describing a new concept called "transformational outsourcing" in a special report on the Future of Outsourcing, BusinessWeek explains:

Many executives are discovering offshoring is really about corporate growth, making better use of skilled U.S. staff, and even job creation in the U.S., not just cheap wages abroad. True, the labor savings from global sourcing can still be substantial. But it's peanuts compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.

To read more: http://www.businessweek.com/magazine/content/06_05/b3969401.htm

Diplomats Redeployed

More American diplomats will be redeployed to developing countries, and towards China in particular.  This news comes just days after Washington began a foreign language initiative aimed at training more military, intelligence and diplomatic officials to be fluent in "critical languages," with Mandarin near the top of the list.

To read more:

http://www.iht.com/articles/2006/01/19/news/diplo.php#

Advantage: China

In an effort help millions of poor children, Newsweek International reports that a new “quota law” in India has many private universities worried that they will lose their financial viability and academic integrity.  Similar to the debate over affirmative action raging at many American universities, this sensitive issue involves complex questions over fairness, academic standards, and helping students from less privileged backgrounds.

To read more from Newsweek:

http://www.msnbc.msn.com/id/10855425/site/newsweek/

Social Unrest Incidents hits 87,000

Irene Wang in the South China Morning Post reports:

The number of disturbances to public order on the mainland rose 6.6 per cent last year to 87,000, the Ministry of Public Security announced yesterday, highlighting the rise in social unrest.

Ministry spokesman Wu Heping said that compared with 2004, there had been an 18.9 per cent rise in crimes that interfered in government business and a 13 per cent rise in mass gatherings that disturbed social order. Cases of "provocation and stirring up trouble" were up 11.8 per cent.

To read more: ($$ required)

http://china.scmp.com/chimain/ZZZA6XDKRGE.html

China's Iran Test

A Financial Times editorial says:

Iran's decision to defy western advice and press ahead with a uranium enrichment programme that could provide the fissile material for nuclear weapons is turning into an important test of China's behaviour as a rising world power.

To read more:

http://news.ft.com/cms/s/2471ddce-8890-11da-a05d-0000779e2340.html

Keeping Up with the Chens

The Christian Science Monitor has an excellent article about the pressures of life in today's fast-paced China.  Mr. Robert Marquand writes:

In some ways, China's money culture is spawning more avaricious - and unchecked - competition. There is a more intense game of keeping up with the Chans, but with no cushions like Rotary clubs, churches, or other civil or volunteer structures. Some 40 percent of wealth is controlled by 10 percent. Young people are getting diplomas in record numbers, but unemployment is 10 percent for those under 30. "Underemployment" is far higher.

Andrew Hu, educated at the University of Washington, says Chinese now have the same problems with stress and expectations as Westerners. "It's our dream to have an easy life," he says. "But we can't because we have to take care of a family and compete with other people in our jobs. The pressure not only comes from family, but other people. We see people with a new car and we say we need a new car."

To read more:

http://www.csmonitor.com/2006/0118/p01s02-woap.html

Bird Flu: Only $10 Million

More than 120 countries pledged $1.9 billion to a global fund to fight bird flu during a conference in Beijing, with the Middle Kingdom vowing to contribute $10 million.

For rapidly growing economy that recently reporting having more than $800 billion in foreign currency reserves, are the Communists leaders being a little too stingy?

With the human death toll currently at six, China faces the very real threat of a major bird flu outbreak that could do serious damage to its economy.   

No Borderless Utopia

How will the Internet change modern China in the years to come?  Consider this view in the Boston Globe by Mr. Christopher Shea:

. . . forget all that talk about a borderless utopia and about blogs dissolving dictatorships-or at least tamp it down. When it comes to the Internet, ''The story of the next 10 years will be one of rising government power," says Tim Wu, a former marketing executive for a Silicon Valley company who now teaches law at Columbia.

To read more:

http://www.boston.com/business/technology/articles/2006/01/15/sovereignty_in_cyberspace/?page=full

Too Much Foreign Cash

If some Western politicians get their wish and the Chinese yuan continues to rise versus the dollar, Beijing's economic challenges will be much more complex.  Many Westerners fail to realize Beijing's billions of dollars foreign currency reserves would suddenly become worth fewer yuan.  Mr. David Lague at IHT explains:

Even the official news media are beginning to question the wisdom of this policy after China's central bank, the People's Bank of China, announced Sunday that foreign exchange reserves had increased almost $50 billion in the fourth quarter last year to reach a record $819.9 billion.

To read more:  http://www.iht.com/articles/2006/01/16/business/yuan.php

Considerable Obstacles

Mr. Thomas Lifson at the American Thinker has more on the situation in  Panlong Village in Guangdong Province near Hong Kong.  He says:

Those who predict a straight-line path to world economic and political power for China fail to understand the considerable obstacles along the way. Nothing is assured. 

To read more:

http://www.americanthinker.com/comments.php?comments_id=4211

Economic Reality versus Journalistic Hype

If you think China is going to power ahead of America in the near future, you should read this article at YaleGlobal Online.  They explain:

Every day, countless commentators prophesize the ascendance of the world's next superpowers, China and India, the two "Asian giants" shaking off their ancient slumber and rising to the call of the 21st century.

According to popular punditry, their place in the firmament of globalization's success stories is already guaranteed.

Yet economist Pranab Bardhan argues that a much more complicated picture belies the rosy visions of optimists. In China, rural and urban inequality grows at alarming rates, stirring unrest amongst those hundreds of millions who remain impoverished.

In fact, China, responsible for only 6 percent of world trade, has actually lost manufacturing jobs in the past ten years.

To read more:

http://yaleglobal.yale.edu/display.article?id=6407

China's Short-Term Focus

Mr. Mortimer Zuckerman at US News, in my view, gets many things right about China.  He writes:

It is often assumed that China will maintain its export lead because millions of university graduates will give it an edge in world trade. It is not that simple. These new graduates will help domestic output but not exports, at least to the same degree. Why?

Only an estimated 10 percent are expected to be qualified enough to work for multinational companies, which hire about 70 percent of China's top graduates and account for more than half of China's success in exports and 85 percent of its high-tech exports. The Chinese export boom, in other words, has more to do with foreign firms relocating their production within China than with China's own businesses undercutting foreign producers.

According to George Gilboy, writing in Foreign Affairs, Chinese firms tend to focus on short-term gains and limit commitments to research and development of new technologies. Chinese companies make most of the goods sold in China, but as Gilboy points out, "They have yet to lay the domestic institutional foundations for China becoming a technological economic superpower."

To read more:

http://www.usnews.com/usnews/opinion/articles/060123/23edit_3.htm

Columbus versus Zheng

The controversy surrounding Chinese explorer Zheng He continues to grow.  The NY Times explains:

At issue are the seven voyages of Zheng He, whose ships sailed the Pacific and Indian oceans from 1405 to 1432. Historical records show that he explored Southeast Asia, India, the Gulf and the east coast of Africa, using navigational techniques and ships that were far ahead of their time.

But a small group of scholars and hobbyists, led by Gavin Menzies, a former British Navy submarine commander, argue that Zheng He traveled much farther than most Chinese and Western scholars say.

To read more:

http://www.iht.com/articles/2006/01/16/news/map.php#

One China, Many Regions

Mr. David Lague in the IHT notes the distinct regional differences in today's China.  He writes:

For political purposes, the Communist Party insists that China is basically homogenous, with 95 percent of its people belonging to the Han ethnic group and united by a written language and common culture. Critics dismiss this characterization. Geographical differences in attitudes like the ones toward the iPod in cities along China's booming coastal zone reinforce what demographers, anthropologists and many Chinese have long known: There is no "one China."

For merchants, and therefore for advertisers, there are many Chinas, perhaps as many as there are countries in Europe, specialists say. To succeed in China, advertisers need to take into account wide regional variations in language, temperament, income, culture, climate, diet, demographics and history, they say.  Although the Chinese share a common written language, linguists identify eight major spoken-language groups that are mutually unintelligible.

To read more:  http://www.iht.com/articles/2006/01/15/business/chiads16.php#

China's Service Economy

The Economist has a story the challenges many service businesses face in China.  They explain:

A shortage of well trained people—a complaint of almost every foreign multinational—is also holding back services growth. Many Chinese employees, even qualified graduates, think rigidly rather than creatively and do not challenge authority or ask questions. That may be appropriate in a factory, but not when the client wants to find a clever way to win this contract or that licence.

As long as planned-economy thinking sees services as only an adjunct to manufacturing, China will create fewer jobs in services than it could. Despite its rapid growth, China has shed 15m manufacturing jobs since 1995 and will lose more as basic production moves to even cheaper countries, such as Vietnam. Services could create enough opportunities for the 10m-15m Chinese who are joining the workforce each year. But to fulfil their potential, service industries need more respect and attention from policymakers.

To read more:

http://www.economist.com/business/displaystory.cfm?story_id=5389400

Lazy Men's Clubs

Xinhua has a story in the Shanghai Daily about lazy, rich guys.  They write:

The idle rich, or those who want out of the rat race, are seeking an idyllic getaway life in the countryside, joining what they call "lazy men's clubs."

"I want to quit the fierce competition and I don't want to make more money," said Li Jianneng, former director of the Guangzhou City Administration of Parks and Gardens. In his 40s, he is now a member of a "lazy men's club" - an emerging national phenomenon.

To read more:

http://www.shanghaidaily.com/art/2006/01/16/236254/Idle_rich_opt_for_rural_life_of___039_lazy_men__039_.htm

Overseas Investment is Falling

Despite soaring exports and high GDP growth, foreign direct investment is actually falling in China.  On Friday, the Shanghai Daily reported:

Overseas direct investment in the Chinese mainland fell last year for the first time since 1999, a spokesman for the Ministry of Commerce said in Beijing yesterday.   

Overseas investment received during the year dropped 0.5 percent to US$60.3 billion, according to spokesman Chong Quan. He did not provide a figure for contracted overseas investment, or spending pledged for the future.

Last year 44,001 overseas-funded enterprises set up operations in China, up 0.77 percent year on year, the ministry said.

To read more:

http://www.shanghaidaily.com/art/2006/01/14/236075/China__039_s_overseas_funding_falls_off.htm

China's Alan Greenspan, Mr. Zhou

My new article is now posted at the American Thinker:

In February, after 18 years as America’s top banker, Dr. Allan Greenspan will step down as Chairman of the Federal Reserve. While many economic observers are very interested in the views of incoming Chairman Ben Bernanke, they often overlook another central banker - in Beijing – who will have a major impact on the global economy in the years ahead. 

Few in the West will recognize the name Zhou Xiaochuan, the governor of the People’s Bank of China, but he has the twin tasks of managing the Middle Kingdom’s fast growing economy while at the same time satisfy international critics, who are demanding further appreciation of the Chinese yuan. 

To read more:

http://www.americanthinker.com/articles.php?article_id=5155

Inside the Trade Numbers

Mr. Nicholas Lardy makes some important points about China's growing trade surplus in Business Week.  He explains:

About 55% of all exports are from foreign-owned companies or joint ventures. That share has been growing about 1 or 2 percentage points annually in recent years but may be stabilizing now.

It looks like foreign capital coming into China in 2005 is going to be down slightly -- the first time in many years that it will have fallen. That may mean the share of foreign-produced goods won't grow as fast as it has in the past.

But even if you take out all the foreign-owned exporters, Chinese domestic companies have been growing their exports. Their share has been declining, but many companies are exporting more and more.

And a lot of people don't recognize that about half of all the goods produced by foreign companies in China are sold in China. The auto sector is the best example -- 95% of the autos sold there are made by foreign companies or JVs.

To read more:

http://www.businessweek.com/bwdaily/dnflash/jan2006/nf20060113_8659_db053.htm?chan=gb

Opening Peoples' Minds

Mr. Howard French of the New York Times has this interesting Letter from China:

In the end, Beijing will not prove any more capable of stopping people from thinking and communicating their thoughts in real time about matters that are important to them, especially not in the age of the Internet.

To read more:

http://www.iht.com/articles/2006/01/12/news/letter.php#

For more on this topic, check out this Business Week story:

http://www.businessweek.com/bwdaily/dnflash/jan2006/nf20060113_6735_db053.htm?campaign_id=topStories_ssi_5

Year of the Dog?

For many years, my family in America has enjoyed raising many Alaskan sled dogs and in the winter time we often take a ride around our farm on a sled.

In a few weeks, Chinese people everywhere will celebrate the Lunar New Year and start the year of the dog.  Just as millions of Chinese are preparing to return to their hometowns, we have this story:

A Chinese official denied Thursday media reports alleging that about 1,000 dogs had been mass killed in Guangzhou, capital city of south China's Guangdong Province.

To read more:

http://www.keralanext.com/news/?id=506004

Scare the Heck Out of Us

The Dinocrat blog makes some good points about China's weak financial system.  It says:

China has $400 billion, give or take 50%, in bad loans on the books of its banks. The country’s bad loans, whatever the precise number, are equivalent to a vast amount of the country’s foreign exchange reserves. China has no idea what the true number is.

China decided to revalue its GDP upward by 17% in one fell swoop the other day. So China’s GDP is $1.65 trillion, or maybe $1.9 trillion, or maybe $8.1 trillion (PPP, via Economist). Again, it is evident that China has no idea what the true number is.

To read more:

http://www.dinocrat.com/archives/2006/01/11/chinas-cooked-books-scare-the-heck-out-of-us/

Innovation and National Pride

At a science and innovation conference in Beijing, the SCMP quotes Chinese Premier Wen:

"We should complete several symbolic projects to promote the country's international standing and boost the Chinese people's national pride," Mr Wen said, without giving specifics. Symbolic projects would likely include the country's Shenzhou space programme and its plans for lunar missions.

To read more:

http://china.scmp.com/chimain/ZZZQ09DKRGE.html

Pleasing the Master

With Big Brother constantly looking over your shoulder, it is difficult to be a foreign Internet company in China these days.  Moral conficts are everywhere.  BusinessWeek explains:

Microsoft maintains it had no choice. "We only remove content if the order comes from the appropriate regulatory authority," says Brooke Richardson, group product manager for MSN. Getting a phone call from the government is one part of the picture.

To read more:
http://www.businessweek.com/technology/content/jan2006/tc20060112_434051.htm?campaign_id=rss_tech

Patent Compexities

There are many hidden costs to China's poor enforcement of intellectual property rights. Elaine Wu makes an important point in today's South China Morning Post:

Since China joined the World Trade Organisation, patents have been extended to 20 years from 15. But when it comes to suing those who infringe a patent, companies are only getting a fraction of the damages they ask for.

Douglas Clark, a partner at Lovells law firm who specialises in intellectual property in China, said average compensation was about 400,000 yuan.

"Probably, the big issue now is that damages are very low," he said. "It doesn't discourage people from infringing."

With such small compensation, companies often have to weigh whether it is worthwhile patenting their products since they are required to make their method public. Some just opt to keep their research and development in Japan or the US.

Sorry, no link available.

Falling Corporate Confidence

Despite its huge trade surplus with West, the Shanghai Daily reports that corporate confidence is actually falling in the Middle Kingdom.  In fact, it has been falling since the second quarter of last year, they explain:

Corporate confidence in China's business climate fell in fourth-quarter 2005 because of concern over government efforts to scale back investment in overheated industries.

China's Business Confidence Index dropped 2.2 points from the previous quarter to 125.4 points and declined 5.4 points from the last quarter of 2004, the National Statistics Bureau said yesterday.

The index, based on a survey of 19,500 companies around the country, has been dropping since the second quarter of last year. It rates business confidence on a scale of zero to 200, with rankings above 100 in the positive zone.

To read more:

http://www.shanghaidaily.com/art/2006/01/12/235679/Business_confidence_dips_over_austerity_effort.htm

Baucus Backlash

Congress is at it again. An AP story says Democratic Senator Max Baucus warned Chinese officials Tuesday that Beijing is risking a protectionist backlash in Washington if it doesn't take steps to cut its $200 billion trade surplus with the United States.

To read more: http://www.msnbc.msn.com/id/10786754/

40 Million Bachelors

As many as 10 million female fetuses may have been aborted in India over the last 20 years as families try to secure a male heir, according to a study published Monday in The Lancet, the British medical journal.

A report in the International Tribune says in China, where a one-child policy is strictly enforced, prenatal sex selection has resulted in an estimated 40 million bachelors.

With China's traditional preference for boys, I wonder how many female fetuses have lost their opportunity for life in the Middle Kingdom in the past twenty years?

To read more:

http://www.iht.com/articles/2006/01/09/news/india.php#

Expat "Nightmare" in Hong Kong

Coming just days after the conservative Heritage Foundation awarded Hong Kong the top spot in its 2006 Index of Economic Freedom, the local government is debating a  “anti-racism” bill that would require companies to justify their offers of generous "expatriate packages" to foreign employees.

Under the proposed legislation, firms will have to prove the foreign recruit has expertise not readily available in Hong Kong, and permanent residents will not be able to receive such special terms.

The move, outlined by government officials on Tuesday, will force a rethink of long-standing hiring practices before 1997 when the city was a British colony. A local recruitment expert described the law as a "nightmare" and said it would make Hong Kong a less attractive place to do business.

Links:

http://www.heritage.org/research/features/index/countries.cfm

More from the SCMP: ($$ required)

http://www.scmp.com/topnews/ZZZ7SKRJRGE.html

Ideological Allies

Look at the good friends Beijing has these days.  Bolivian President-elect Evo Morales  met with Chinese President Hu Jintao and called China an "ideological ally," a day after he invited the communist country to develop Bolivia's vast gas reserves.

At the same time, North Korean leader Kim Jong Il has traveled to China on a rare trip outside his country, a South Korean military intelligence official said Tuesday.

To read more:

http://www.msnbc.msn.com/id/10780438/

http://www.washingtontimes.com/world/20060110-122729-4662r.htm

Falling Housing Prices

This comes via the China Economic Review:

Shanghai, once one of the world's hottest housing markets in the past few years, has suffered a near stop in home sales, inducing developers to slash prices and realtors to close shop by the thousands, the Los Angeles Times reported. Recent homebuyers were suing and banks faced a surge in non-performing loans. The city's 20 million people made up less than 2% of China's 1.3 billion population, Morgan Stanley Chief Asia Economist in Hong Kong Andy Xie said, but Shanghai accounted for 20% of the country's property value.