Humorous article warning: "Google v China"

The Daily Mash take a humorous look at the recent Google v China fight. The impact of Google's new tough stance will be interesting to watch. I suspect Google were not making much money anyway so this is not such a large loss although it is evidence that globalisation is not always a one way street.

Limited tex provided due to bad language and subversive nature of the text.

GOOGLE AND CHINA IN BATTLE TO ENSLAVE YOU [Daily Mash]

THE last great battle of our time was underway last night as Google and China began fighting for control of every living thing on the face of the Earth.

A fragile truce between the world's two biggest powers collapsed as Google accused China of reneging on a deal which would see the search giant control North and South America and those parts of Africa where people can afford netbooks.

Google said China was planning to use Great Britain as a launch pad for a transatlantic invasion instead of simply turning the country into a gigantic pork farm and round-the-clock abattoir.

China is now mobilising the four million troops of the People's Liberation Army, while Google is understood to be upgrading YouTube to allow for faster streaming of those strangely hypnotic, homemade pop videos.

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Professor Henry Brubaker, of the Institute for Studies, said: "It's very evenly balanced. China has millions and millions and millions of people, whereas Google has things like Chrome, Street View and access to every piece of personal information that has ever existed despite what they keep saying in their relaxed, open-necked shirt, hacky sack-playing manner."

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China Crisis goes Mainstream

Whilst I have been banging on about the unfolding crisis in China only now has the mainstream press sat up and taken notice.

The FT as always leads from the front with quality articles on the subject. In fact, the number of column inches in today's paper shows that they have taken up the challenge with gusto.

Here are some links to the juicy bits. Regular readers will be aware of most of these issues or ready. The trigger for these articles comes from the confirmation of a rapid fall in growth that has been clear from the anecdotal evidence for months.

Asian Financial Crisis Deepens [FT]

Asia’s largest economies showed stark new evidence on Thursday of contagion from the global financial crisis as China reported its slowest growth in seven years and Japan’s central bank admitted it faces two years of contraction and deflation.

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China said its economy expanded by 6.8 per cent in the fourth quarter compared to the same period the year before, confirming the rapid cooling that has seen the rate of growth fall by nearly half over the past 12 months. For the year as a whole, the economy grew 9 per cent, down from the revised 13 per cent growth rate in 2007.

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Fearing social unrest if the economy slows too quickly, China has unveiled a huge fiscal spending plan and has significantly eased monetary policy.

One essential aspect of any recovery is the need for Asian countries to use their large surpluses to lessen the damage. This does appear to be happening but Asia and the West must not reply on Asian consumers to increase spending to save us. In all likelihood saving rates will be flat or even rise in this recession.

Only by spending can Asia save itself [FT]

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China, a country that has become accustomed to double-digit growth, may now be flirting with contraction. Indicators such as electricity usage suggest a sudden, juddering slowdown. Even the imaginative massaging of China’s official state statisticians has not been able to hide a slowdown in their analyses.

These nations cannot simply wait for the crisis to end. As long as they are built to export, they will siphon off whatever demand the deficit countries can whip up. This helps keep their customers in crisis. It is in Asia’s interests that it should correct its imbalances by increasing consumption at home. This should not be a bitter pill for the region to swallow, especially when the alternative is a prolonged world recession.

The key issue I have tried to highlight in previous posts is China's reliance on trade which I believe is far more important than commentators seem to suggest. The domestic market is simply not developed enough to take up the slack. This appears only now to be sinking in (and China's economy with it).

Region pays dear for its dependence on trade flow [FT]

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China appears to be giving the matter due attention. It is also suffering an external shock, compounded by the consequences of overly successful efforts at cooling an economy that was rampaging along at 13 per cent only a year ago. By the fourth quarter of last year, growth had fallen back sharply to an annualised 6.8 per cent.

Beijing has changed tack rapidly. It is now promising to spray $586bn through stimulus measures. In response, bank lending surged in the fourth quarter, raising hopes that public funds are seeping into the real economy. Authorities in both Washington and London must be watching enviously. As Andy Rothman, China strategist at CLSA Asia-Pacific Markets, says, new bank lending has been engineered by "the world's most liquid financial institution, the Chinese Communist party". Even retail sales have held up, rising more than 20 per cent last year.

Amazingly, some policymakers in Beijing are now worried that provincial and municipal leaders may use the stimulus package as cover to pour their own money into pet projects. The concern is that, in six months or so, authorities may have the headache of tackling inflation once again. That may be the most optimistic thing anybody has said in months.

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Are poor transport networks a brake on China's growth?

Another artice from the recent "Doing Business in China" series in the FT.

In my research where I control of transportation networks odd results are thrown up due to the geography of China and the differences in quality of network across provinces especially for rail.

Whilst certainly true that poor transport networks can act as a brake on growth, I would imagine that China is in a much better position that the perceived competition from India or more recently Vietnam where transport is certainly in a worse state than China. The investment in transport in China in recent years has been enormous and whilst a lot remains to be done China is well on the way.

It is interesting to note how the way the road network operates leads to an increase in bribes and theft. Regulations clearly make this worse than it needs to be.

Missing links [FT]

Distribution and the moving of goods remains one of the biggest headaches for almost every company looking to sell products across China.

The principal reason is the uneven development of the country’s transport sectors, with extremely high spending in some regions and sectors – above all, on the country’s expressway network – but poor overall co-ordination.

The outcome has been not just a hugely fragmented transport industry, with barely any logistics companies offering nationwide services, but also one of the world’s most expensive logistics sectors, with transport and related costs accounting for more than twice the share of gross domestic product as in the US, and about four times as much as in Europe.

On the plus side, provinces across China have spent enormously on developing an expressway network – from having less than 10,000km a decade ago, the country’s total length has grown to 78,000km, second only in total length to the US.

This roll-out is set to continue under a master plan that during the next three decades should see every city with 200,000 or more inhabitants linked into the network.

Ports have also seen heavy spending, especially around China’s main export manufacturing locations: at Shenzhen in Guangdong province, around the Lower Yangtze Delta region centred on Shanghai and at Tianjin, Qingdao and Dalian in the north and north-east.

And the country has some of the world’s biggest and most modern airports, notably at Beijing, Pudong in Shanghai and Guangzhou.

With these three elements in place, China has an excellent infrastructure for importing inputs and materials and exporting finished products – by air, if necessary, as well as by ship.

The country also has some excellent regional networks but its transport shortcomings are exposed when a company tries to move goods from one part of the country to another – links between provinces and major cities remain surprisingly poor.

The most obvious weakness is the country’s rail network, whose total length has barely grown in the past five years.

China’s transport shortcomings can be attributed to a lack of central co-ordination and the large number of competing bodies involved in overseeing the transport and logistics sectors.

Railways, aviation and road each fall under separate ministries or central government commissions: the Ministry of Commerce is responsible for licensing various logistics and other transport services; the National Development and Reform Commission, the state’s main planning body, aims at co-ordinating transport policy but has to fight turf wars with the other local and state entities; and China’s customs and State Administration for Industry and Commerce (the latter with both central and local arms) are also involved in regulating the movement of goods.

Throw in a decentralisation of administrative power that has taken place in the past two decades, and it is unsurprising that while China’s richest regions have successfully been able to fund their own infrastructure programmes, central officials have struggled to impose their will in getting different parts of the country to work together.

Making things worse are a series of additional factors that seriously hinder the movement of goods, and make the whole process a lot more expensive.

First, is that road haulage is an intrinsically more expensive and inefficient way of moving large volumes of goods long distances than railways.

Second, are road charges. China now has 70 per cent of the world’s mileage of toll roads, according to the China Supply Chain Council, which local governments have to levy in order to fund their road-building projects.

And then there is local protectionism, with provinces or cities discriminating against transport and logistics firms from other parts of the country.

The consequence of these factors are multiple changes of goods from one trucking company to another, multiple payment of fees at provincial and city borders, and lots of trucks making empty return journeys.

Such practices, of course, all encourage the demanding of bribes, create opportunities for petty theft, make the tracking of goods all but impossible and – arguably most important of all – build in long delays.

The good news is that improvements are coming. Expenditure on railways has been lifted. This summer saw the opening of a high-speed rail link between Beijing and Tianjin, and at the start of the year work began on a 1,300km high-speed route from Beijing to Shanghai, scheduled for completion in 2013.

Plans have also been announced to increase the total railway length to 120,000 km by 2015 (advanced from an original target of 2020) – a credible figure given that expenditure has been raised to more than £23bn a year, up from an average of less than £9bn a year in the first five years of this decade.

And there are also signs that the central government is looking to exercise tighter control over both planning and funding, and an opening of the logistics sector to greater foreign participation, which between them should both lower barriers between provinces, raise managerial standards and see increased investment in the soft side of the transport industry.

Nonetheless, given the time that it will take for the planned new rail lines to come into operation, a continuing shortage of experienced logistics managers, and the almost certain continued prevalence of local protectionism, distribution is going to remain one of the main obstacles to companies doing business in China – whether Chinese or foreign – for at least a decade.

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Inefficient operation: the real "China" problem

I have always wondered why China appears to have such poor energy efficiency numbers. The basic thinking was that China's power plants were using old technologies and no environmental regulation so what do you expect.

I never liked this answer. There had to be something else. This following article tells us that it is not technology but the operation of this technology.

This article provides a far better answer.

MIT report debunks China energy myth [MIT news]

A detailed analysis of powerplants in China by MIT researchers debunks the widespread notion that outmoded energy technology or the utter absence of government regulation is to blame for that country's notorious air-pollution problems. The real issue, the study found, involves complicated interactions between new market forces, new commercial pressures and new types of governmental regulation.

China's power sector has been expanding at a rate roughly equivalent to three to four new coal-fired, 500 megawatt plants coming on line every week, said Edward S. Steinfeld, associate professor of political science at MIT.

After detailed survey and field research involving dozens of managers at 85 power plants across 14 Chinese provinces, Steinfeld and his co-authors, Richard Lester (professor, nuclear science and engineering and director of the MIT Industrial Performance Center) and Edward Cunningham (doctoral candidate, political science) found that in fact most of the new plants have been built to very high technical standards, using some of the most modern technologies available. The problem has to do with the way that energy infrastructure is being operated and the types of coals being burned.

New market pressures encourage plant managers to buy the cheapest, lowest quality and most-polluting coal available, while at the same time idle expensive-to-operate smokestack scrubbers or other cleanup technologies. The physical infrastructure is advanced, but the emissions performance ends up decidedly retrograde.

Understanding the realities of China's energy infrastructure and management is crucial, Steinfeld said, for gaining leverage over the whole gamut of global energy-related challenges. China's electric power sector is vast -- second only to America's in size -- and globally unparalleled in terms of the speed of its growth. "To a significant degree, our planet's energy and environmental future is now being written in China," he and his two co-authors wrote in a recent MIT Industrial Performance Center working paper (PDF available). Findings from the research have also recently been published in The China Economic Quarterly and an additional paper is currently under review at Energy Policy.

Steinfeld, who has been working in China since the late 1980s and has been carrying out this research project there since 2005, said that at present the Chinese government lacks reliable data on how the nation's powerplants are built and operated. Officially available data tend to be collected haphazardly and often by local authorities who have a vested interest in the outcomes. The survey work conducted by Steinfeld and his colleagues represents a first-of-its-kind effort by outsiders to collect unbiased, objective data of this sort at a national level.

One of the most surprising findings was that "the kinds of technology currently being adopted in China are not cheap. They're not buying junk, and in some cases the plants are employing state-of-the-art technology."

The findings suggest that emissions levels from Chinese powerplants, he said, "depend almost entirely on the quality of the coal they use. When they're hit by price spikes, they buy low-grade coal." Lower-grade coal, which produces high levels of sulfur emissions, can be obtained locally, whereas the highest-grade anthracite comes mostly from China's northwest and must travel long distances to the plants, adding greatly to its cost. Contrary to what many outsiders believe, the Chinese state has substantially improved its ability to implement and enforce rules on technology standards. It has been slower, however, to develop such abilities for monitoring the day-to-day operations of energy producers.

In some respects, the situation is more amenable to change than many people had assumed, Steinfeld said. With expanding regulatory capacity and increasingly sophisticated efforts to regulate through market-friendly pricing mechanisms, reformers could achieve change relatively quickly, he said. "At least the technology -- the physical infrastructure of China's energy system -- is not an impediment," he said. Indeed, it can ultimately prove a key asset for achieving better environmental outcomes.

Since coal quality is one important leverage point, "some new regulatory efforts probably need to be focused on the mines and coal markets," Steinfeld suggested. "That's the kind of question that this research begins to allow you to address."

The three co-authors of the study are members of the Industrial Performance Center's China Energy Group. The research was supported by Shell, the MIT Energy Initiative, and the MIT Sloan School of Management China Program.

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Zero Profit in China

An interesting article from Far Eastern Economic Review (thanks to China Game and Paul Midler for the HT and writing the article).

The arguments expounded in this article are fairly sound and provides a number of interesting insights. First, that economics is a long term game, second, that profits are not the only motives of individual firms (at least in the short run). Finally, he points out that many foreign economists (including myself) predicted non-performing loans would cripple the banking sector. Whilst I think this is still a potentially serious problem I think Midler makes a good point in this article.

This discussion on over supply and copyright issues is also interesting.

It is worth reading in full.

Why Profit Zero Works in China [Far Eastern Economic Review]

Profit zero scenarios are a product of Chinese business history. Back when state-owned factories acted in place of a social welfare program, manufacturing’s primary goal was not profitability, but job creation. Throughout the 1980s and into the 1990s, when the planned economy failed to stimulate enough job growth to approach full employment, the Communist Party looked to private industry, and entrepreneurs who could put people to work garnered a degree of political clout with government officials. Profitability was important, but it took a back seat to the achievement of political aims. Manufacturers consequently found themselves motivated to sign cross-border agreements with foreign companies.

While one benefit was the acquisition of new technologies, even more important was the opportunity to learn how business was done in a market-driven economy. It was in this environment that Chinese companies willingly gave up short-term profit opportunities. Some manufacturers viewed their first big contracts the way a college graduate looks at an unpaid internship—a sacrifice made with the understanding that it would pay off later. Labor in China was already cheap, and factories willing to forgo a profit margin made themselves even more attractive. With prices held artificially low, importers rushed into the market.

On the banking sector:

Of course the opportunity for profit zero would not have been made possible without help from the banking sector. Chinese banks loaned money to manufacturers for years without pressuring them to make payment, and, while foreign economists suggested that nonperforming loans would cripple the economy, China ultimately proved the value of a profit-zero strategy. Some of the bad lending that went on was occasionally the result of corruption, but the average loan made to a manufacturer was legitimate. Industry in China has long been in the habit of building production capacity well in advance of any actual need. Importers hesitated to place orders unless they saw a factory that at least on the surface looked capable. Manufacturers and bankers understood that a shining new factory was like a billboard. In most economies, an entrepreneur must prove a need for a capacity expansion before money is lent.

An excellent article.

Plane Crash and China's "quality fade"

Looks like the issue of China's "Quality Fade", where Chinese manufacturers systematically lower the quality of their products to cut costs and boost short term profits, may have reached the extent where many lives are at stake.

Whilst it might be fine to reduce the metal content of some random manufactured product when you apply quality fade to aviation fuel you are asking for trouble.

Can the crash of BA's 777 really be the fault of Chinese fuel suppliers?

China Game comment.

Boeing 777 Crash: Investigators Looking At Fuel From China [China Game]

“Sources close to the investigation [say] British Airways engineers have been collecting fuel samples from every flight emanating from China. The sample collection, plus comments from the AAIB indicating the aircraft had “adequate” fuel remaining on board at the time of the crash, is believed to point toward suspicions of a heavier-than-fuel contaminant being present. Theories propounded by crew include the possible presence of water in the tanks that, having become frozen during the intense cold-soak period of the flight, partially melted and formed a slush that could have partially blocked the fuel lines.

This is China Games hypothesis. Sounds like a good conspiracy story but we shall see.

Of course I suspect a scheme like quality fade, and the scenario goes something like this: If it costs, let’s say, $200k to fuel an airliner for a long-haul flight, and someone on the ground is in the position to replace just 1% of it with water, that would create an opportunity to “save” $2,000. It doesn’t sound like much, but it might be four months of a manager’s salary. Not only that, but worth keeping in mind that there are thousands of flights operated out of the airport each month.

If there was a small amount of water in the tanks, it would have settled to the bottom (the fuel systems draw from the top is my understanding). So, water would not reach any fuel lines until towards the end of the flight. If the tanks were 10% full and 1% of the volume was water, it might not have ever mattered. The thing is that aircraft do not fill the tanks completely. If fuel is cheaper in London than it is in China, they may have loaded with just enough to get them to Heathrow. Or thereabouts. Right.

Who knows. Maybe it will turn out to be about something else. Or, maybe it turns out to be the fuel, but we never learn about it. China just made fresh some news about a JV with Boeing in Shanghai. Both China and Boeing want to see the cause as having to do with neither the country, nor the manufacturer. I find this latest development interesting and blogworthy.

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Chinese Military: Hacking and Transparancy

Two stories on the state of the Chinese military. The "Pentagon hacking" story is a good gauge of how quickly China is converging on the technological frontier. What begins with the military will spread, via knowledge spillovers, to industry.

The speed of Chinese technological development should not be underestimated.

China to Report Military Spending to UN

China said Sunday it will provide the United Nations with information on its military spending and arms deals for the first time in more than a decade, taking a step to address international concerns about the secrecy surrounding its defense spending and operations.

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China says spending for its People's Liberation Army, the world's largest standing army with 2.3 million members, grew 17.8 percent this year to about nearly $45 billion. It was the largest annual increase in more than a decade.

The Pentagon estimates China's actual defense spending may be much higher, because the official budget does not include money for high-priced weapons systems and some other items.

Although China does not currently provide information about its arms deals, several overseas organizations monitor the transactions.

The Stockholm International Peace Research Institute, which tracks the volume of arms transfers but not their financial value, said the three largest importers of Chinese arms in 2006 were Bangladesh, Pakistan and Iran, which accounted for nearly 75 percent of China's arms exports.

China is also a major arms exporter to Sudan, and has faced criticism from human rights activists who say Chinese weapons have been used in attacks in Darfur.

Chinese military hacked into Pentagon[FT]

The Chinese military hacked into a Pentagon computer network in June in the most successful cyber attack on the US defence department, say American ­officials.

The Pentagon acknowledged shutting down part of a computer system serving the office of Robert Gates, defence secretary, but declined to say who it believed was behind the attack.

Current and former officials have told the Financial Times an internal investigation has revealed that the incursion came from the People’s Liberation Army.

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“The PLA has demonstrated the ability to conduct attacks that disable our system...and the ability in a conflict situation to re-enter and disrupt on a very large scale,” said a former official, who said the PLA had penetrated the networks of US defence companies and think-tanks.

China's Global Influence

This article is a nice little summary of China's spreading influence around the world and gives a good impression of the sheer size of China's demand for raw materials and its increasing use of investment, especially in Africa, to ensure continued supplies of raw materials to satisfy the increases in demand for consumer goods.

None of these trends will be reversing soon. An increasingly ferocious global grab for resources could be on the cards with the EU, US, Russia and China all piling in.

This article has a very dramatic journalistic style but it has some interesting statistics. My bold.

China's Influence Spreads Around World [WIBW News]

KARRATHA, Australia - For nearly three decades, Chinese peasants have left their villages for crowded dormitories and sweaty assembly lines, churning out goods for world markets. Now, China is turning the tables.

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The reason: China.

For years, China's booming economy touched daily life in the West most visibly through the "made-in-China" label on everything from clothes to computers. But now, economic growth is giving rise to something more that can't be measured just by widgets and gadgets — a shift in China's balance of power with the rest of the world.

China's reach now extends from the Australian desert through the Sahara to the Amazonian jungle — and it's those regions supplying goods for China, not just the other way around. China has stepped up its political and diplomatic presence, most notably in Africa, where it is funneling billions of dollars in aid. And it is increasingly shaping the lifestyle of people around the world, as the United States did before it, right down to the Mandarin-language courses being taught in schools from Argentina to Virginia.

China, like the United States, is also learning that global power cuts both ways. The backlash over tainted toothpaste and toxic pet food has been severe, as has the criticism over China's support for regimes such Sudan's.

To understand why China's influence is increasingly pushing past its borders, just do the math.

When 1.3 billion people want something, the world feels it. And when those people in ever increasing numbers are joining a swelling middle class eager for a richer lifestyle, the world feels it even more.

If China's growth continues, its consumer market will be the world's second largest by 2015. The Chinese already eat 32 percent of the world's rice, build with 47 percent of its cement and smoke one out of every three cigarettes.

China's desire for expensive hardwood to turn into top-quality floorboards for its luxury skyscrapers has penetrated deep into the Amazon jungle. For example, in the isolated community of Novo Progresso, or New Progress in Portuguese, one of the biggest sawmills was started by the mayor with financing from Chinese investors.

China accounts for 30 percent of the wood exported from logging operations in remote towns across Brazil's rain forest, where trucks carry the finished product hundreds of miles along muddy roads to river ports, said Luiz Carlos Tremonte, who heads an influential wood industry association. Many Chinese purchasers now travel to Brazil to clinch deals, and are almost always accompanied at business meetings by friends or relatives of Chinese descent who live there.

"Ten years ago no one knew about China in Brazil; then the demand just exploded and they're buying a lot," Tremonte said. "This wood is great for floors, and they love it there."

The Bovespa stock index in Brazil has climbed more than 300 percent since 2002, riding the China wave.

China is buying coal mining equipment from Poland and drilling for oil and gas in Ethiopia and Nigeria. It has poured hundreds of millions of dollars into Zambia's copper industry. It is the world's biggest market for mobile phones, headed for 520 million handsets this year. The list goes on.

Along with looking to other countries for goods for its people, China is also going far and wide in search of markets for its products.

In war-torn Liberia, where electricity is hard to come by, Chinese-made Tiger generators keep the local economy humming. Costlier Western brands, favored by aid agencies and diplomats, are beyond the reach of small business owners such as Mohammed Kiawu, 30, who runs a phone stall in the capital, Monrovia.

A used Tiger generator costs around $50, he said over the steady beat of his generator. "But even $250 is not enough to buy a used American or European generator. They are not meant for people like myself."

The Chinese generators are more prone to break down, Kiawu said. When the starter cable snapped on one, he replaced it with twine. But by making items for ordinary people, he predicted, China "will take control of the heart of the common people of Africa soon."

China is having to make up for decades of economic stagnation after the communist takeover in 1949.

When Chinese leader Deng Xiaoping began dabbling in economic reforms in 1978, farmers were scraping by. By 2005, income had increased sixfold after adjusting for inflation to $400 a year for those in the countryside and $1,275 for urban Chinese, according to China's National Bureau of Statistics.

"The Chinese don't want war — the Chinese just want to trade their way to power," said David Zweig, a professor at the Hong Kong University of Science and Technology. "In the past, if a state wanted to expand, it had to take territory. You don't need to grab colonies any more. You just need to have competitive goods to trade."

If China stays on the same economic track, it would become the world's largest economy in 2027, surpassing the United States, according to projections by Goldman, Sachs & Co., a Wall Street investment bank. And unlike Japan, which rose in the 1980s only to fade again, China still has a huge pool of workers to tap and an emerging middle class that is just starting to reach critical mass. Many development economists believe China still has 20 years of fairly high growth ahead.

But the transition to a larger presence on the global stage comes with growing pains, for China and the rest of the world.

As Beijing plays an ever bigger role in the developing world, some Western countries fear it could undermine efforts to promote democracy. In its attempt to secure markets and win allies, China is stepping up development aid to Africa and Asia. Chinese President Hu Jintao pledged last year to double Chinese aid to Africa between 2006 and 2009, promising $3 billion in loans, $2 billion in export credits and a $5 billion fund to encourage Chinese investment in Africa. China has also promised Cambodia a $600 million aid package and agreed to loan $500 million to the Philippines for a rail project.

But China also extends aid to states such as Myanmar, Zimbabwe and Sudan whose human rights records have lost them the support of the West. Actress Mia Farrow has labeled next year's Beijing Olympics — a point of pride for China — the "genocide Olympics" because of China's support for Sudan, at a time when the West seeks to punish it for its military actions in Darfur. China buys two-thirds of Sudan's oil output.

"In some ways, it will be integrating us into a new international order in which democracy as we've known it or the right to open organized political activity is no longer considered the norm," said James Mann, author of "The China Fantasy," a book about China and the West.

China is also facing some of the unease that powers before it have encountered. In Africa and Asia, some complain that massive China-funded infrastructure projects involve mostly Chinese workers and companies, rather than create jobs and wealth for the local population. And Moeletsi Mbeki, a political commentator and brother of South African President Thabo Mbeki, likens the trade of African resources for Chinese manufactured goods to former colonial arrangements.

"This equation is not sustainable," Mbeki said at a recent meeting of the African Development Bank in Shanghai. "Africa needs to preserve its natural resources to use in the future for its own industrialization."

The backlash is also coming on the consumer front, with Chinese goods earning a dubious reputation for quality. In the United States, there is a furor over the standard of Chinese imports. In Bolivia, vendors peel off or paint over any indication that their wares were "Hecho en China," Spanish for "Made in China."

A woman selling bicycles in El Alto, a poor city outside the capital, La Paz, insisted they were made in Japan, South Korea, Taiwan or even India. With some prodding, she acknowledged the truth. "They're all Chinese," she said, declining to give her name lest it hurt her business. "But if I say they're Chinese, they don't sell."

Even those who benefit from China's growth express some wariness. Aerospace giant Boeing expects China to be the largest market for commercial air travel outside the United States in the next 20 years, buying more than $100 billion worth of commercial aircraft, U.S. trade envoy Karan Bhatia said in a recent speech.

"Right now, we're hiring every week," noted Connie Kelliher, a union leader. "Things couldn't be better."

Yet Boeing workers remain wary of China's ambitions to build its own planes. next year China plans to test-fly a locally made midsize jet seating 78 to 85 passengers. It also has announced plans to roll out a 150-seat plane by 2020.

"It's kind of a double-edged sword," Kelliher said. "You want the business and we want to get the airplane sales to them, but there's the real concern of giving away so much technology that they start building their own."

That's what happened to Western and Japanese automakers, which made inroads in the Chinese market only to see their designs copied and technologies stolen. Already, China's vehicle manufacturers are venturing overseas, exporting 325,000 units last year — mostly low-priced trucks and buses to Asia, Africa and Latin America.

"We're taking a bigger piece of the pie," said Yamilet Guevara, a sales manager for Cinascar Automotriz, which has opened 20 showrooms in Venezuela in the past 18 months, offering cars from six Chinese makers. "They ask by name now. It's no longer just the Chinese car. It's the Tiggo, the QQ."

China's biggest car company, Chery Automobile Co., just announced a deal with the Chrysler Group to jointly produce and export cars to Western Europe and the United States within 2 1/2 years.

Given the speed of China's ascent, it's perhaps not surprising that China itself is trying to calm some of the fears. Its slogan for the Beijing Olympics: "Peacefully Rising China."

Research Paper: Can China Promote Electronic Commerce through Law Reform?

This paper may be of interest to the guys over at China Law Blog as well as economists interested in network economics.

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"Can China Promote Electronic Commerce through Law Reform? Some Preliminary Case Study Evidence"

Contact: JANE K. WINN
University of Washington - School of Law
Email: jkwinn1@u.washington.edu
Auth-Page: http://ssrn.com/author=334081

Co-Author: YUPING SONG
Henan University of Technology - School of Law
Email: songyp_haut@sina.com
Auth-Page: http://ssrn.com/author=624756

Full Text: http://ssrn.com/abstract=901849

ABSTRACT: This article analyzes legislation recently enacted in China to promote the use of electronic commerce among Chinese businesses. It reviews the terms of regulations to promote the use of accounting software by Chinese firms, the electronic commerce enabling provisions of the 1999 Contract Law and the
2004 Electronic Signature Law in light of their relationship to China's economic development goals and their impact on Chinese businesses. It contrasts the success of the accounting software regulations with the limited impact of the Contract Law provisions and the dim prospects for the Electronic Signature Law. While law reform generally may be of limited use as a policy instrument to promote the use of electronic commerce technologies by Chinese businesses as long as the transition to a market economy remains incomplete, these case studies suggest that law reform based on an accurate understanding of the conditions Chinese businesses face has a better chance of success than legislation based on foreign models which in turn were based on conditions in developed market economies which differ significantly from those in China's transition economy.
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Scramble for a .cn domain name - 1RMB each

Perhaps we should get a domain name ending in .cn.

The government seem to want to encourage take up.

China Issues RMB1 cn Domain Name

For less than the cost of a bus ticket, people can register a website name under China's national domain name ‘.cn’.

China Internet Network Information Center (CNNIC), the country's domain name administrator, says the first-year registration fee for domain names ending in ‘.cn’ will be RMB1 (one U.S. dollar equals RMB7.74).

CNNIC is hoping the move will attract registrations from enterprises and netizens. Previously it cost between RMB80 and 100 to register a domain name in China.

People who register a domain name before May 31 will be charged only RMB1 for the first year, while subsequent years will still cost RMB80 to 100 a year, according to the CNNIC.

At the end of 2006, China had 1.8 million websites that ended in ‘.cn’, up 64.4 percent year on year. The 'CN' suffix is Asia's largest and the world's fourth largest, statistics from the CNNIC show.

In all there are 4.2 million registered domain names in China with most using the suffix .com or .net.

Observers said with 137 million netizens and more than 40 million enterprises huge potential remains for the development of domain names ending with ".cn".