WP: Five myths about China’s power

As China gains on the world’s most advanced economies, the country excites fascination as well as fear — particularly in the United States, where many worry that China will supplant America as the 21st century’s superpower. Many ask how China has grown so much so fast, whether the Communist Party can stay in power and what Beijing’s expanding global influence means for the rest of us. But to understand China’s new role on the world stage, it helps to rethink several misconceptions that dominate Western thinking.
WP         

Telegraph: Davos 2012: China and Africa to be centre of world trade

Stephen King, group economist at HSBC, has predicted a return to the world economy of 1,000 years ago - with the centre of world trade centred on China, India, Indonesia, and the east coast of Africa.
Telegraph            

Project Syndicate - Stephen S. Roach: China’s connectivity revolution

Long the most fragmented nation on earth, China is being brought together like never before by a new connectivity. Its Internet community is expanding at hyper speed, with profound implications for the Chinese economy, to say nothing of the country’s social norms and political system. This genie cannot be stuffed back in the bottle. Once connected, there is no turning back. The pace of transformation is breathtaking. According to Internet World Stats, the number of Internet users in China has more than tripled since 2006, soaring to 485 million in mid-2011 – more than three times that in 2006. Moreover, China’s rush to connectivity is far from over. As of mid-2011, only 36% of its 1.3 billion people were connected – far short of the nearly 80% penetration rates seen in South Korea, Japan, and the United States. Indeed, with the cost of connectivity falling sharply – China’s mobile users are expected to surpass PC users by 2013 – and, with urbanization and per capita incomes also rising sharply, it is not unreasonable to expect China’s Internet penetration rate to cross the 50% threshold by 2015. That would be the functional equivalent of adding about three-fourths of all existing Internet users in the US.
Project Syndicate             

FT – Book Review – Nick Lardy’s Sustaining China’s Economic Growth after the Global Financial Crisis

In 2004, Beijing announced a big shift in the country’s economic model. No longer would it rely on investment and exports. Instead, consumers would lead the way. As Premier Wen Jiabao said later, growth had become “unsteady, unbalanced, unco-ordinated and unsustainable” – a danger to China and the world. But something went wrong. Despite repeated pledges and policies to achieve rebalancing, the Chinese economy swerved in the opposite direction. Nicholas Lardy, an economist who began writing about China when Mao Zedong ruled four decades ago, examines in his latest book why, and what can be done to fix it. That China needs fixing might seem odd. While other nations are mired in crisis, the Chinese economy expanded by 9.2 per cent last year and the government is in rude fiscal health. Lardy shines a light on the cracks. His book is a useful corrective to both the triumphalism increasingly heard in Beijing and the predictions of imminent collapse heard abroad. But it is dense. Introducing one chapter, he candidly warns it is “dry and technical yet important” – a fitting description of the book as a whole.
FT           

AP: Caterpillar post 60% jump in Q4 profit on steep global sales increase

Caterpillar Inc. said Thursday that its fourth-quarter profit jumped 60 percent, boosted by pent-up demand for new equipment and continuing growth in developing countries. The performance of the world’s largest maker of construction and mining equipment is an indicator of the strength of the global economy. Along with strong fourth-quarter earnings, Caterpillar issued rosy guidance, saying that it expects the global economy to grow faster this year and construction activity to continue to improve in most parts of the world. Caterpillar sees China’s economy growing by 8.5 percent in 2012, with more construction and rising demand for commodities bringing more machine sales.
AP          

WSJ – John Bussey: In fog of warfare, a message to business

When their grandkids ask today's CEOs, "What did you do in the Great Class War, Granddaddy?" it will be enough to be able to answer: "Well, sweetie, I didn't get flattened." Tuesday night's State of the Union address offered much to business, but it also showed that companies will be something of a battleground across which the forces of 2012 populism—from the left and the right—will wage their campaigns, tank treads grinding, artillery pounding. It's "class warfare," says Daniel Loeb, founder of hedge fund Third Point, after the speech. He says he and his CEO counterparts are "sick and tired" of getting hammered for "engaging in the capitalist system." "I can't get a voice in D.C.," grumbles Barry Silbert, chief executive of SecondMarket, which focuses on alternative assets. Populism is "good politics, but it is bad economic policy," adds Daniel Yergin, the chairman of advisory firm IHS CERA, speaking Wednesday at a gathering of The Wall Street Journal CEO Council. No speech aimed at working America would be complete without a shot at China. Mr. Obama said he would create a new office to investigate "unfair trading practices in countries like China." But Mr. Obama leaned on a thin reed in underscoring his tough line: a tariff, pressed by the United Steelworkers union, that the administration invoked on Chinese tire imports in 2009. Mr. Obama said that "over a thousand Americans are working today" as a result. The tire industry, on the other hand, says the tariff got passed along to consumers as higher tire prices and retailers got hurt. Manufacturers say few jobs were affected, since imports lost from China were replaced by imports from other countries. After the speech, the U.S.-China Business Council, a trade group, said the tariff hasn't had "any positive effect" on jobs. The U.S. has booked more than $700 million in revenue from the tariff. Passed along to consumers, even in part, that's a stiff price to pay for those 1,000 jobs.
WSJ (SN)              

Economist: China -The paradox of prosperity

For China’s rise to continue, the country needs to move away from the model that has served it so well.
Economist         

WSJ – Mike McConnell, Michael Chertoff, William Lynn Oped: China's cyber thievery is national policy—and must be challenged

It is more efficient for the Chinese to steal innovations and intellectual property than to incur the cost and time of creating their own.
WSJ (SN)             

CSM: China's economy may surpass US before 2020

China's economy is now nearly half as big as the U.S. economy. Its economic growth figures suggest that China could become bigger sooner than previously thought.
CSM        

Reuters: China source of hope and worry for Davos regulars

When the global economy nearly choked on toxic debt three years ago, China and its massive investment stimulus was hailed as a savior that helped avert a disaster. Fast forward to 2012 and business and economic elites gathering in Davos have a more sober take on the Asian juggernaut, now seen as a source of hope and opportunity but also possible unpleasant surprises. The world's second-largest economy is still expected to grow this year at a clip that would make most of the world jealous, but concern that Beijing may mismanage a soft landing gets mentioned in the same breath as other risks, such as the deepening of the euro zone crisis or weak U.S. recovery. "There is a mix of hope and concern. People worry on two fronts. One is that China is still far too export dependent and that makes it very vulnerable," said Nariman Behravesh, chief economist at IHS Global Insight about the prevailing mood of discussions about China in Davos. "The second worry is the housing situation. It is tricky because there are very few countries that were able to deflate a housing bubble without creating some other damage." Most economists expect China to grow at 8 percent or more this year, slowing from 9.2 percent in 2011 but in keeping with Beijing's aim to steer the economy away from double-digit export-led growth to more sustainable expansion. Armed with the world's biggest foreign reserves, deep fiscal pockets and a room for credit easing, Beijing is uniquely placed to cope with possible European recession and downbeat markets. But the relatively low-key Chinese presence at the annual gathering of the rich and powerful, mainly because it coincided with the Lunar New Year public holiday, may also be a sign that China's focus is on domestic challenges.
Reuters                                

Reuters: Cooling China worries some multinationals

Slowing growth in China is emerging as a concern in some of this quarter's earnings reports from U.S. multinationals that have long relied on strong growth in China and other emerging markets to drive their profits. Though China's economic growth is still well above that in other economies, its efforts to cool that growth -- for example, by restricting credit -- are now translating into weaker sales at some U.S. companies that do business there. The trend is not yet widespread and companies are quick to stress the many advantages of China's market, but the commentary this earnings season has taken a more cautious tone. 3M Co's Asia-Pacific sales rose 3 percent in the latest quarter, weaker than in recent results, reflecting softer demand in China. "The Chinese government successfully slowed activity to stem inflation," 3M Chief George Buckley said on a conference call with analysts. "Our China team anticipate continued below-trend growth in the first half of 2012." The maker of Post-It notes, Scotch tape and components for consumer electronics reported net earnings of $954 million, or $1.35 per share, beating estimates by 4 cents a share. One weak spot was the company's display and graphics segment, hurt by what 3M called "deteriorating" demand for consumer electronics. The business showed its largest sales declines in Asia Pacific. Another global manufacturer, Eaton Corp, singled out China as one of several factors behind its sales miss. The maker of electrical control systems and auto and truck components reported a disappointing quarterly profit on Thursday, saying U.S. customers delayed major projects, Europe's economies hurt sales, and tight credit dampened China sales of electrical equipment. "They had to slow growth down because inflation was taking off very quickly," Chief Executive Sandy Cutler said in an interview, adding Brazil and India have also slowed and that China's leaders are "now talking about easing credit, and it's likely to take some time for the easing (to take effect)." U.S. companies have received an earnings boost in recent quarters from emerging economies at a time when many U.S. end-markets were struggling or growing only feebly. Recent economic data, however, hinted U.S. economic growth may be a bit faster than was expected a few months ago. Friday's report is expected to show U.S. GDP accelerated to a 3 percent rate in the fourth quarter, from 1.8 percent in the third. Eaton shares were down 2 percent at $48.54 and 3M was up 1.2 percent at $87.55 on Thursday afternoon.
Reuters                                

MW: China’s yuan set for more international role

Big changes could be underway for China’s currency this year, as Beijing moves forward with plans to free up its forex rules and increase the use of the yuan in its trade with the world. Unnerved by the financial crisis in the euro zone, Chinese policy makers are contemplating a new approach that won’t be immediately obvious in the currency charts, according to one analyst. Economist Intelligence Unit’s Asia economist Duncan Innes-Ker in London said the consensus in Beijing is tilting towards efforts to accelerate the internationalization of the yuan — a reform that would also entail a gradual appreciation of the Chinese currency and would bring forward the eventual end of China’s managed foreign-exchange regime. “What you saw last year was the Chinese trying to diversify their foreign-exchange reserves [which are] being savaged by what’s going on in the euro area,” said Innes-Ker. The shift seems to have garnered momentum around the middle of 2011, he said, with an expanded international role for the yuan backed by the Ministry of Finance and the People’s Bank of China, and with the Ministry of Commerce — which has traditionally supported a weak currency to help exporters — apparently losing clout.
MW       

Businessweek: China's next boss has some capitalist cred

Xi Jinping, likely China's next President, ran a province that’s a showcase for private enterprise in the People's Republic.
Businessweek

NECN: Joe Biden: ‘We’re not the job creators’

Vice President Joe Biden says middle class jobs once shipped to China at an alarming rate are now on their way back to the United States.   “There's a new demand for highly trained new workers, in new fields, in new technologies, in new capabilities.  And that's why we're here today,” he told workers at Safran USA and Albany International. The two companies recently relocated to one Rochester, New Hampshire facility and formed a partnership with a local community college to train workers for the hundreds of high tech manufacturing jobs they’re bringing to the region.  They used a department of labor grant to pay for it and the white house hopes other companies follow the lead.   “We're committed to boost the trend,” said Mr. Biden.  “We're not the job creators.  The biggest way to do that is to shed the policies of the last ten years that have encouraged investment to go abroad.” The Obama administration has put forward several policies to close tax loop holes for companies that off shore jobs and give incentives to ones that bring them back.  A seemingly strategic proposal in an election year that's all about the economy but Mr. Biden says, “There's nothing ideological about that.  That's totally consistent with trade practices and it makes ultimate sense.”

NECN  

China Daily: Profits of China's industrial businesses up 28.3%

China's industrial enterprises reported a profit increase of 28.3 percent in the first seven months year-on-year to 2.8 trillion yuan.

China Daily: Terra Firma lands in China

One of Europe's largest private equity companies is set to enter the Chinese market.

Terra Firma Capital Partners Ltd, which is based in London and manages $30 billion of assets, received regulatory approval from the Chinese authorities earlier this month to open an office in Beijing.

The company, which is chaired by Guy Hands, one of the best-known figures in the private equity industry, is looking to make major investments in China, particularly in sectors such as social housing, agriculture and new energy.

Shi Bo, who will head the operations in Beijing as chief representative, said the company is looking for major investments between 300 million euros ($443 million) and 500 million euros.

China Daily: More cities get housing purchase limits

More than 20 second- and third-tier cities have decided to impose limits to cool prices.

WSJ – China Realtime Report: China’s hardliners take aim at a new target

Here comes the hard line again.

Back from their working break at the summer resort of Beidaihe—and with no major decisions about the economy materializing in the wake of the those meetings–the Chinese Communist Party leadership has evidently decided that it’s high time to reaffirm its control over society.

And this time, there’s a new target: the social media.

After weeks of taking jabs to the chin from an angry microblogging public, leading forces in the Party have decided to punch back. Politburo member Liu Qi visited the Beijing offices of Sina.com’s popular microblogging service Weibo earlier this week and impressed upon the staff there the need for “the Internet’s healthy development”—code words for staying away from topics which attack the rule of the Communist Party or hold officials up for public ridicule.

It’s not clear why the Party leadership took so long to issue this warning to Weibo. If there were previously any doubts in Beijing about the threat the service poses to the government’s ability to control public discourse, they would have been eviscerated weeks ago with the unprecedented outpouring of rage on the site over the July 23 high-speed train collision near the city of Wenzhou.

Of course, the Wenzhou accident illustrated how Weibo functions as a safety valve for some in society, and so refraining from interfering might have been seen as the smart choice, lest outrage at further media controls spill from cyberspace into the streets. Weibo also provides Party overseers with a good sense of what netizens are dissatisfied about—a pulse-taking when the conversation gets political.

The most likely explanation, however, is that the upper echelons simply could not agree on how to manage a situation where indignation at the authorities appeared so forcefully. Bogged down in Beidaihe trying to sort out a consensus on economic matters, leaders were probably wavering then over what could and should be done in the wake of the Wenzhou train tragedy.

WSJ – China Realtime Report: Latest threat to Chinese culture: Lady Gaga

China’s Communist Party, it seems, isn’t into threesomes — or Lady Gaga.

China’s Ministry of Culture last week released a list of 100 banned songs (in Chinese), its third such list.

Making unsurprising appearances on the list are recent hits like Katy Perry’s “Last Friday Night (T.G.I.F.),” an homage to a drunken night of partying featuring “skinny dipping in the dark” and a “ménage à trois.” Also featured are pop sensation Lady Gaga’s “Judas,” a song that pays tribute to the biblical apostle who betrayed Jesus and has also offended its fair share of those in the West, and “Hair,” in which she sings of hoping to “die living just as free as my hair,” a concept that doesn’t exactly dovetail which Beijing’s emphasis on social harmony.

But less obvious are Owl City’s syrupy “Honey and the Bee” (“I fell in love with you, like bees to honey”), a slew of seemingly innocuous songs by the U.K.’s Take That, or the 1999 Backstreet Boys hit “I Want It That Way.” Perhaps the government just got wind of the boy band’s ballad a few months ago, when a video was posted to YouTube featuring a trio singing it in Chinese.

Others who made the list include Britney Spears, Beyonce, Canada’s Simple Plan as well as several Taiwanese, Japanese, Hong Kong and Malaysian artists.

DealBook:Canada Halts Trading in Sino-Forest of China

Canada’s top securities regulator on Friday accused a Chinese forestry company of fraudulently inflating its revenue and exaggerating the extent of its timber holdings.
The regulator suspended trading for 15 days in shares of the company, Sino-Forest, which trades on the Toronto Stock Exchange. But its directive came amid some confusion. The Ontario Securities Commission at first took the very unusual step of ordering five directors and officers of Sino-Forest to resign — only to rescind that demand just hours later.

Wendy Dey, a spokeswoman for the regulator, said that the order against the executives, which included Allen T. Y. Chan, the chairman and chief executive of Sino-Forest, was reversed after the commission determined that it could not force their resignations without holding a hearing.

Chris Nicholls, a professor specializing in securities law at the University of Western Ontario, said that he could not recall the commission previously trying to remove corporate officials without a hearing. “But that’s probably because they can’t do it,” he added. “Clearly there was some mistake.”