His welcome-to-your-new-job call was cordial and formulaic enough, but in his published remarks, foreign minister Yang Jiechi was more forthright towards his new American counterpart, Hillary Clinton, telling her to be careful with sensitive issues that could strain ties between the two nations.
Yang didn’t mention the yuan issue by name (and that isn’t really in the Secretary of State’s purview), but his words came a day after prospective new Treasury secretary Tim Geithner said his boss believed China was a currency manipulator — an accusation immediately denied by Beijing, where there are fears that Geithner was signaling a change in U.S. policy.
This is shaping up as being the most immediate issue between Washington and Beijing, though Taiwan remains ultimately the most sensitive issue that Clinton and President Barack Obama will have to deal with.
Change has come to America in many respects; one is a willingness to say that China is manipulating its exchange rate.
The Bush administration studiously avoided the phrase. Tim Geithner, President Barack Obama’s nomination for U.S. Treasury secretary, said at his confirmation hearings that his boss believes that China is manipulating the yuan.
This is dangerous linguistic territory. Manipulation requires retaliatory action from the U.S. Congress. Geithner, whose comments came in written responses to Senate questions, added, “The question is how and when to broach the subject in order to do more good than harm.” Obama’s team will “forge an integrated strategy on how best to achieve currency realignment in the current economic environment.”
Geithner’s comments triggered a drop in U.S. Treasuries on concern that demand from China, the largest foreign investor in U.S. government debt, may wane. China held about $682 billion of Treasuries as of November, and overtook Japan as the biggest overseas owner of the debt last year.
Geithner is world-savvy and Obama does nothing without thought. Watch this.
Not much to say about the latest GDP figures, released today, which were in line with expectations. China’s economy grew by 9% last year, but the annual figure masks a rapid slowdown in the fourth quarter to 6.8%. It is also the slowest growth rate since 2001 and the first time growth has fallen into single digits since 2003.
So much for the numbers, but what of the future? Xinhua quotes government economist Wang Xiaoguang saying that the 6.8% fourth quarter growth rate was not a sign of a “hard landing,” just a necessary “adjustment” from previous rapid expansion: “This round of downward adjustment won’t bottom out in just a year or several quarters but might last two or three years, which is a normal situation.”
So expect more stimulus spending, easing of bank loan requirements and interest rate cuts. The was a sharp rise in renminbi bank lending in December (up 18.8 year-on-year, following a 17% rise in November; though the anti-inflation clampdown on bank lending a year back distorts the comparisons), which stirs some hopes that stimulus efforts are beginning to have an effect as the big state-run banks lend for infrastructure development.
The sentences in the melamine-tainted infant formula trials have been handed down, Xinhua reports. They are harsh, if not unexpectedly so.
The most prominent defendant Tian Wenhua, who was chairwoman of the Sanlu Group, the largest producer of baby milk powder, gets life imprisonment and a 20 million yuan ($2.9 million) fine. Now-bankrupt Sanlu was fined 50 million yuan.
Separately (the sentencing was spread across five courts in Shijiazhuang in Hebei province), two of the middleman involved, cattle farmer Zhang Yujun and milk trader Geng Jinping, received death sentences. Zhang Yujun was accused of running an illegal workshop in Shandong province, producing 600 tonnes of the fake protein powder –the largest source of melamine in the country. Geng Jinping was convicted of producing and selling toxic products to dairy companies from his milk production base.
The courts also jailed two other people for life and six, including three former Sanlu executives, for between five and 15 years for their part in the scandal, Xinhua says.
Apart from the 21 defendants who have been sentenced or tried, a further 18 have been arrested but it is unclear if or when they might be tried.
BBC reports that translations into Chinese of U.S. President Barack Obama’s inauguration speech were economical if not with the truth then at least with the words. While Xinhua posted the speech in full on its English language web site, the Chinese version omitted references to facing down communism and silencing dissent. One sentence the censors left out: “To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history,”
Couldn’t resist the tabloid headline, but the underlying story reveals more signs of why the anti-corruption drive is having such a hard time making headway.
Reports say two senior police officials in charge of the investigation in to Gome Electrical Appliances Holdings founder Huang Guangyu have been detained for allegedly taking bribes during the investigation. Huang, one of China’s richest businessmen, stands accused of alleged manipulation of the stock price of China’s largest consumer electronics retailing chain. (Background here.)
The two officials involved are Zheng Shaodong, assistant minister of public security and director of the ministry’s economic criminal investigation bureau, and Xiang Huaizhu, the bureau’s deputy director, have been detained, Xinhua reports, quoting ministry sources.
The anti-corruption drive against officials is making slow headway. One reason may be that that bureaucracy takes on officials who have a predisposition for breaking the rules. That is one conclusion that could be drawn from a China Daily report that 1,000 people taking civil service entrance exams have been caught cheating.
This Bystander acknowledges that he is stretching a point to make a point: the proportion of caught cheats is low, though how many others got away with it? This year saw a record number of applications — more than 750,000 for 13,500 places — civil service jobs seem more appealing with the downturn in private sector employment. But this does all seem redolent of a readiness to bend the rules when things become highly competitive that will be familiar to many who do business in China.
China Daily says 300 candidates were caught cheating while completing their papers. Another 700 were deemed to have done so on the basis of too-similar answers. Some of the cheaters used tiny earpiece receivers to pick up radio transmissions of the correct answers from accomplices outside the exam room. That high-tech approach has also shown up in the national college entrance exams taken by high schools and in which there is a 50% failure rate.
Last July, education authorities in eastern Zhejiang province uncovered a scheme in which a group of parents and relatives radioed in the correct answers to nine high school students sitting the tests by way of tiny earpiece receivers. The education ministry said that across the country, 2,645 people were found cheating in the college entrance exams, though that was 800 fewer than in 2007. Some 10 million students sit the tests.
Back to the civil service entrance exams: we were amused last month by another China Daily report of a candidate in Jiangxi province who was duped out of 12,000 yuan (1,760) by a con man who had provided him with a bogus cheat sheet for the exams. The candidate turned to the authorities for redress. Good luck.