“They didn’t ignore the girl, they just didn’t dare help her.”

...said one comment among many that said that Chinese law had helped create a fear of intervening.




It is a story that has deeply unsettled millions in China, posing troubling questions about whether three decades of headlong economic development has left nothing but a moral vacuum in its wake.
It begins last Thursday when a two-year-old girl totters into a narrow lane in a wholesale market in the thriving industrial city of Foshan in Guangdong Province and is hit by a small, white van. The driver pauses, and then pulls away, crushing the child for a second time under his rear wheels.
It is not the accident itself, but what happens next — or rather doesn’t happen – that has left millions of ordinary Chinese wondering where their country is heading.
One by one, no fewer than 18 passers-by are seen on closed circuit television ignoring the girl as she lies, clearly visible in the road, haemorrhaging into the gutter. Not a single one of them stops to help.

The first is a young man in a white T-shirt and trainers. He walks on past the prone form of girl who is by now bleeding profusely, without a second glance.
Next comes a cyclist who wobbles slightly to avoid the dying child and then pedals on, turning his head back momentarily, as if to check he really did see a child dying in the street.
As the pool of blood spreads, a third pedestrian comes by, clearly sees the bleeding girl, but steps out into the small lane to give her a wide berth.
All three could have moved the girl, later named by her parents as 2-year-old Yueyue, but none did, allowing another, larger vehicle following down the lane a few minutes later to run her over for a second time.
The pictures of the incident which happened last Thursday afternoon then show a succession of other cyclists and rickshaw drivers weaving round the girl, including a woman walking with a child who on seeing Yueyue visibly quickens her step, dragging her charge after her.
It is only the nineteenth passer-by, a 58-year-old street cleaner called Chen Xianmei, who drops her bag of rubbish and rushes to the bleeding child, attempting to scoop up her up, but finding her floppy and lifeless.
Mrs Chen, who is only 4ft 7in tall, then calls for the girl’s mother who comes rushing into view, taking up her child in her arms, who is now in intensive care in the military hospital in the city of Guangzhou.
Yueyue remains in a critical condition, a nurse told The Daily Telegraph by phone. Earlier doctors said she had suffered major head injuries and was breathing only with the assistance of a ventilator The story of Yueyue was the leading item across China’s online news portals as the copies of the CCTV highly distressing footage attracted more than a million viewings in a number of hours.
Many viewers reacted with dismay, citing the incident as further evidence that China had become a “world without morals”.
“Everyone is praising the rubbish-collecting granny for helping, but isn’t it normal to help someone who is wounded or dying?”, asked Johnny Yao on Weibo, the Chinese equivalent of Twitter, “This just shows how abnormal is the moral situation in this society! The sad Chinese, poor China are we even rescuable?”
Others blamed China’s compensation culture for the apparent show of callousness, recalling a famous 2006 judgment when a Good Samaritan who helped a woman get to hospital was wrongly ordered to pay her compensation.
“They didn’t ignore the girl, they just didn’t dare help her,” said one comment among many that said that Chinese law had helped create a fear of intervening.
However many others said there could be no excuse, and that the scenes in the video should “shake the soul of every conscientious person” in China.
“Even if the passers-by couldn’t rescue her, they could dial 120 and 110 [China’s emergency numbers] and help to stop vehicles, then the little Yueyue wouldn’t have been run over by the second car,” said another comment posted by 'Dull Baby’.
“What’s up with people these days? They make so many excuses to turn a blind eye. The society is so indifferent, so heartless.” Yueyue’s father, a man surnamed Wang who was shown weeping with his wife on television news bulletins, said he didn’t want to enter the moral debate, only pray for his child’s survival.
“Yueyue is so lovely, often amuses us. Sometime if I quarrelled with her mother and if her mother cried, she would tell us not to cry, she always tried to amuse us. I don’t have any thoughts now, I just hope my child will wake up and call me Dad again.”

China Used to Steal US Technology , Now US Corporations Give it to Them. For Freetrade of Course.

China's way, or


Here are three examples, provided by Senator Webb's office on how the Chinese use "freetrade"to extort US technology:

• General Electric has handed over aviation avionics technology to the state-owned Aviation Industry Corp. of China.
• Westinghouse Electric has provided some 75,000 documents in an initial technology transfer to gain a share in China's burgeoning nuclear power market.
• And Ford Motor Co. is ready to share proprietary technologies for electric vehicles in exchange for selling cars in China.

Sen. Webb's legislation would prevent U.S. firms from giving away technologies developed with U.S. taxpayer dollars.

Date published: 10/16/2011 Fredricksburg.com

THE UNITED STATES has a peculiar relationship with China. It is our political adversary, but as global financial players and trade partners, we are inexorably intertwined--largely to the U.S.'s disadvantage.

Among the things we have that China wants--besides our interest payments--is our technology, and when American companies want to do business in China, they are forced to share U.S. technologies as a prerequisite.

Sen. Jim Webb takes issue with that, and he has introduced legislation to prevent it. As the Virginia Democrat sees it, many of these technologies were developed in the U.S. with American tax dollars through various federal programs, making American taxpayers part owners. And we ought not be giving them away.

The legislation makes sense, especially given the economic relationship between the two countries. According to the U.S. Treasury Department, China is the largest single foreign holder of U.S. debt at 16 percent, or about $2.25 trillion of the total U.S. debt of $14.1 trillion. Moreover, China also enjoys a lopsided trade balance with the United States. In July, for example, the U.S. imported nearly $27 billion more in goods from China than it exported to China.

Given all that, must we give them our technology? The Chinese, of course, will be ticked should Sen. Webb's legislation pass and put various aspects of our trade diplomacy to the test. But the issue needs to be addressed.

China enjoys incredible benefits from its economic relationships with the United States. Getting our taxpayer-funded technologies just for the asking from private U.S. companies should not be one of them.

Sen. Webb's bill deserves swift and thorough consideration.

Pentagon Purchasing Counterfeit Electronics Parts from China

Senators want China to assist probe of counterfeit weapons parts

By Bill Gertz-The Washington Times1:14 p.m., Tuesday, June 14, 2011

China's government is refusing to assist Senate investigators probing Chinese firms that are selling counterfeit parts that have been found in high-tech U.S. weapons systems, the leaders of the Senate Armed Services Committee said Tuesday.

Committee Chairman Carl Levin, Michigan Democrat, and Sen. John McCain, Arizona Republican, told reporters that a panel investigation revealed that U.S. defense contractors and government agencies traced the sources of most fake defense parts to Shenzhen, in Guangdong province near Hong Kong.

China has rejected requests for committee staff to visit Shenzhen as part of the probe, Mr. Levin said, noting that investigators are meeting with U.S. officials in Hong Kong to seek help.

“The Chinese have said, well, even if this could be arranged, there would have to be a Chinese official present during the interviews,” Mr. Levin said. “That is a non-starter, somebody looking at our staff while they’re interviewing people who are relevant to an investigation.”

Trade in counterfeit parts “takes place openly in that city and in that province,” Mr. Levin said.

Mr. McCain said he hopes the Chinese will assist in the staff investigation.

A report by the Government Accountability Office published in March 2010 stated that the global supplier network used by the Pentagon provides 4 million parts worth $94 billion.

The parts include fasteners used on aircraft, missile guidance electronics, materials used in body armor and engine mounts.

“Counterfeit parts have the potential to cause a serious disruption to DoD supply chains, delay ongoing missions, and even affect the integrity of weapon systems,” the report said.

It noted that the problem is not limited to weapons systems but includes the National Aeronautics and Space Administration and the Energy Department, along with private-sector producers of software, commercial aviation, automotive parts and consumer electronics and “can threaten the safety of consumers.”

Mr. Levin said counterfeit parts that have “infiltrated” the defense supply chain include microprocessors bought by the Air Force for F-15 operational flight-control computers. Counterfeit microcircuits also were found on hardware of the Pentagon’s Missile Defense Agency.

“In January of 2010, the Commerce Department published the results of a survey of almost 400 companies and organizations in the Department of Defense’s supply chain,” Mr. Levin said.

“Those who were surveyed overwhelmingly cited China as the country suspected of being the source of the counterfeit electronic parts.”

Dale Meyerrose, a specialist with Harris Cyber Integrated Solutions, said the senators’ concerns are justified because threats to critical infrastructure from compromised supply chains are serious and endanger national security and public safety.

“Motivations behind these threats range from the criminally opportunistic driven by profit and greed to state-sponsored seeking an asymmetric advantage over our often superior military or industry entities,” he said.

Chinese officials this month criticized pending U.S. legislation that would continue a ban on Chinese military companies from bidding on U.S. weapons programs.

They told the state-run Xinhua News Agency that the measure is inconsistent with international trade rules and “a distorted reaction arising from U.S. wariness and bias about China’s growing national strength.”

“It shows that the United States worries that China is challenging its global hegemonic status,” the June 2 article said.

The House bill changes language from legislation enacted in 2006 blocking Chinese military companies from contracts by altering provisions that would allow the defense secretary to provide a waiver of the ban if a Chinese company’s products were needed to support U.S. national security.

Happy Easter from The Chinese Communists

Since Nixon and Kissinger toasted the Red Chinese, I have never understood how that was to benefit the US. I understand how it helped the big retailers become bigger,but aways at the expense of the small retail operators. I understand how it helped the banks and Wall Street who benefitted mightily from un-fair trade at the expense of American manufacturing jobs.I get how it helped the Chinese Communist Party and the Red Army.

Today, forty years after the China opening, a few dozen Christians cannot celebrate their faith on Easter. 1.5 billion Chinese and there is no room for a few dozen Chinese Christians to Celebrate Easter.

This video clip is in Spanish, but you will understand the Chinese police thugs rounding up men, woman, and children from a Public street and taking them away in busses.

China arrests Protestant Shouwang devotees

At least 20 Chinese Protestants have been arrested as they tried to gather for an Easter service in Beijing.Continue reading the main story

The worshippers, from the Shouwang church, were trying to hold an outdoor service because they own no premises.

In recent weeks, the police have arrested dozens of people from the church, which has about 1,000 members.

The authorities have also been carrying out a wider suppression of dissent - harassing foreign reporters and detaining lawyers and activists.

The most high-profile detainee, artist Ai Weiwei, was taken by police as he tried to board a flight earlier this month.

His family say they do not know where he is, whether he has been charged with an offence, or even whether he has been formally arrested.

Round-ups

China's constitution guarantees freedom of religion, but the Communist Party tries to control where people worship.

There are an estimated 70 million Christians in the country, about 20 million of whom attend government-approved churches.

The rest worship with unregistered groups known as "house" churches.

Such groups are broadly tolerated, but Shouwang leaders have annoyed the authorities in recent weeks by insisting on trying to hold services in the open.

The BBC's Damian Grammaticas in Beijing says police personnel were on every street corner in the area where the worshippers were due to meet on Sunday morning.

He says the authorities rounded up anyone suspected of being a member of the Shouwang church and loaded them on to buses to be driven to police stations.

One of the church's leaders Jin Tianming, who is under house arrest, told AFP news agency that between 20 and 30 members had been detained.

He said they had been taken to several different police stations.

About 100 Shouwang members were held earlier this month, and 12 of its leaders are under house arrest.

Bob Fu, of the US-based Christian China Aid Association, says the crackdown on Christian worship is wider than Beijing.

He says churchgoers in the southern city of Guangzhou have been refused permission to hold Easter services, and Christians in the northern city of Hohhot are facing repression.

"There is a very large house church in Hohhot. They were also under crackdown. More than a dozen of the leaders are now under criminal detention," said Mr Fu, who is a critic of Beijing's religious policies.

The authorities have not yet commented on the latest arrests.

China is Frightened of People Demonstrating

Heavy-handed reaction to China's 'Jasmine' protests

Chinese police and plain-clothes agents barricaded one of Beijing's main pedestrian shopping streets on Sunday in response to calls for a "Jasmine revolution".

Telegraph

Protest organisers had called for ordinary citizens to "take a stroll" yesterday at 23 sites across China, often busy areas in city centres, to express their displeasure at the country's lack of political reform.

"We invite every participant to stroll, watch or even just pretend to pass by," said a letter published on Boxun, a foreign-based website that is banned in China. "As long as you are present, the authoritarian government will be shaking with fear". It was the second weekend in a row that protests were planned.

But while there was little response to the call from the public, with at most a few hundred people milling around in Shanghai, the Chinese government has taken the threat extremely seriously.

In Beijing, the Wangfujing pedestrianised shopping street was occupied by squads of policemen with dogs, plain-clothes officers, and members of the People's Armed Police, a division of the army.

The local branch of McDonald's, the meeting point designated by the organisers of the protest, was shut down, with customers briefly locked inside.

Outside, street-cleaning trucks doused the street with water, which sent passers-by scrambling. The authorities closed off some of the street with blue construction site barriers, and harassed a number of journalists.

Reporters in Beijing have now been warned not to conduct interviews in the capital without prior permission. Broadcasts by CNN and the BBC have been blocked, and reporters from the BBC were bundled into a van by police and driven away from Wangfujing.

A number of human rights activists have been charged with "inciting subversion", a serious crime that can carry a hefty jail sentence. Ran Yunfei, Chen Wei and Ding Mao in Sichuan have all been arrested, as have Hua Chunhui in Jiangsu and Liang Haiyi in Harbin, according to Human Rights in China, a Non Government Organisation.

The Unravelling of American Empire in Arabia

How will America handle the fall of its Middle East empire?

By Peter Oborne Last updated: February 24th, 2011

TELEGRAPH

"2011 will mark the removal of many of America’s client regimes in the Arab world. It is highly unlikely, however, that events will thereafter take the tidy path the White House would prefer. Far from being inspired by Twitter, a great many of Arab people who have driven the sensational events of recent weeks are illiterate. They have been impelled into action by mass poverty and unemployment, allied to a sense of disgust at vast divergences of wealth and grotesque corruption."

Empires can collapse in the course of a generation. At the end of the 16th century, the Spanish looked dominant. Twenty-five years later, they were on their knees, over-extended, bankrupt, and incapable of coping with the emergent maritime powers of Britain and Holland. The British empire reached its fullest extent in 1930. Twenty years later, it was all over.

Today, it is reasonable to ask whether the United States, seemingly invincible a decade ago, will follow the same trajectory. America has suffered two convulsive blows in the last three years. The first was the financial crisis of 2008, whose consequences are yet to be properly felt. Although the immediate cause was the debacle in the mortgage market, the underlying problem was chronic imbalance in the economy.

For a number of years, America has been incapable of funding its domestic programmes and overseas commitments without resorting to massive help from China, its global rival. China has a pressing motive to assist: it needs to sustain US demand in order to provide a market for its exports and thus avert an economic crisis of its own. This situation is the contemporary equivalent of Mutually Assured Destruction (MAD), the doctrine which prevented nuclear war breaking out between America and Russia.
Unlike MAD, this pact is unsustainable. But Barack Obama has not sought to address the problem. Instead, he responded to the crisis with the same failed policies that caused the trouble in the first place: easy credit and yet more debt. It is certain that America will, in due course, be forced into a massive adjustment both to its living standards at home and its commitments abroad.

This matters because, following the second convulsive blow, America’s global interests are under threat on a scale never before seen. Since 1956, when Secretary of State John Foster Dulles pulled the plug on Britain and France over Suez, the Arab world has been a US domain. At first, there were promises that it would tolerate independence and self-determination. But this did not last long; America chose to govern through brutal and corrupt dictators, supplied with arms, military training and advice from Washington.

The momentous importance of the last few weeks is that this profitable, though morally bankrupt, arrangement appears to be coming to an end. One of the choicest ironies of the bloody and macabre death throes of the regime in Libya is that Colonel Gaddafi would have been wiser to have stayed out of the US sphere of influence. When he joined forces with George Bush and Tony Blair five years ago, the ageing dictator was leaping on to a bandwagon that was about to grind to a halt.
In Washington, President Obama has not been stressing this aspect of affairs. Instead, after hesitation, he has presented the recent uprisings as democratic and even pro-American, indeed a triumph for the latest methods of Western communication such as Twitter and Facebook. Many sympathetic commentators have therefore claimed that the Arab revolutions bear comparison with the 1989 uprising of the peoples of Eastern Europe against Soviet tyranny.

I would guess that the analogy is apt. Just as 1989 saw the collapse of the Russian empire in Eastern Europe, so it now looks as if 2011 will mark the removal of many of America’s client regimes in the Arab world. It is highly unlikely, however, that events will thereafter take the tidy path the White House would prefer. Far from being inspired by Twitter, a great many of Arab people who have driven the sensational events of recent weeks are illiterate. They have been impelled into action by mass poverty and unemployment, allied to a sense of disgust at vast divergences of wealth and grotesque corruption. It is too early to chart the future course of events with confidence, but it seems unlikely that these liberated peoples will look to Washington and New York as their political or economic model.
The great question is whether America will take its diminished status gracefully, or whether it will lash out, as empires in trouble are historically prone to do. Here the White House response gives cause for concern. American insensitivity is well demonstrated in the case of Raymond Davis, the CIA man who shot dead two Pakistanis in Lahore. Hillary Clinton is trying to bully Pakistan into awarding Davis diplomatic immunity. This is incredible behaviour, which shows that the US continues to regard itself as above the law. Were President Zardari, already seen by his fellow countrymen as a pro-American stooge, to comply, his government would almost certainly fall.

Or take President Obama’s decision last week to veto the UN Security Council resolution condemning Israeli settlements. Even America itself accepts that these settlements are illegal. At a time when the Middle East is already mutinous, this course of action looks mad.

The biggest problem is that America wants democracy, but only on its own terms. A very good example of this concerns the election of a Hamas government in Gaza in 2006. This should have been a hopeful moment for the Middle East peace process: the election of a government with the legitimacy and power to end violence. But America refused to engage with Hamas, just as it has refused to deal with the Muslim Brotherhood in Egypt, or to acknowledge the well-founded regional aspirations of Iran.

The history of the Arab world since the collapse of the Ottoman caliphate in 1922 can be divided schematically into two periods: open colonial rule under the British and French, followed by America’s invisible empire after the Second World War. Now we are entering a third epoch, when Arab nations, and in due course others, will assert their independence. It is highly unlikely that all of them will choose a path that the Americans want. From the evidence available, President Obama and Secretary of State Clinton are muddled and incapable of grasping the nature of current events.
This is where the British, who have deep historical connections with the region, and whose own loss of empire is still within living memory, ought to be able to offer wise and practical advice. So far the Prime Minister, a neophyte in foreign affairs, has not done so. His regional tour of Middle Eastern capitals with a caravan of arms dealers made sense only in terms of the broken settlement of the last 50 years. His speeches might have been scripted by Tony Blair a decade ago, with the identical evasions and hypocrisies. There was no acknowledgment of the great paradigm shift in global politics.

The links between the US and British defence, security and foreign policy establishments are so close that perhaps it is no longer possible for any British government to act independently. When challenged, our ministers always say that we use our influence “behind the scenes” with American allies, rather than challenge them in the open. But this, too, is a failed tactic. I am told, for example, that William Hague tried hard to persuade Hillary Clinton not to veto last week’s Security Council resolution, but was ignored. It is time we became a much more candid friend, because the world is changing faster than we know.

Greedy Engineering- GE to Transfer Top Aviation Technology to the Chinese

We have heard this lie before:


…"For the most part, Western aviation executives say the Chinese are simply too far behind in both civilian and military airplane technology to cause any real fears anytime soon — although it does put pressure on Boeing and Airbus to continue to innovate and stay technologically ahead of China"…

_________________________

G.E. to Share Jet Technology With China in New Joint Venture

By DAVID BARBOZA, CHRISTOPHER DREW and STEVE LOHR

Published: January 17, 20 NY Times

As China strives for leadership in the world’s most advanced industries, it sees commercial jetliners — planes that may someday challenge the best from Boeing and Airbus — as a top prize.

And no Western company has been more aggressive in helping China pursue that dream than one of the aviation industry’s biggest suppliers of jet engines and airplane technology, General Electric.

On Friday, during the visit of the Chinese president, Hu Jintao, to the United States, G.E. plans to sign a joint-venture agreement in commercial aviation that shows the tricky risk-and-reward calculations American corporations must increasingly make in their pursuit of lucrative markets in China.

G.E., in the partnership with a state-owned Chinese company, will be sharing its most sophisticated airplane electronics, including some of the same technology used in Boeing’s new state-of-the-art 787 Dreamliner.

For G.E., the pact is a chance to build upon an already well-established business in China, where the company has booming sales of jet engines, mainly to Chinese airlines that are now buying Boeing and Airbus planes. But doing business in China often requires Western multinationals like G.E. to share technology and trade secrets that might eventually enable Chinese companies to beat them at their own game — by making the same products cheaper, if not better.

The other risk is that Western technologies could help China play catch-up in military aviation — a concern underscored last week when the Chinese military demonstrated a prototype of its version of the Pentagon’s stealth fighter, even though the plane could be a decade away from production.

The first customer for the G.E. joint venture will be the Chinese company building a new airliner, the C919, that is meant to be China’s first entry in competition with Boeing and Airbus.

For the most part, Western aviation executives say the Chinese are simply too far behind in both civilian and military airplane technology to cause any real fears anytime soon — although it does put pressure on Boeing and Airbus to continue to innovate and stay technologically ahead of China.

G.E., which said it had briefed the commerce, defense and state departments on details of the deal, acknowledges that pairing up with a Chinese firm is a delicate dance. But because the commercial aircraft market in China is expected to generate sales of more than $400 billion over the next two decades, it is not a party the company is willing to miss.

Eventually, G.E. executives say, China will become a potent player in the commercial jetliner market, and the company wants to be a major supplier to the emerging Chinese producers.

“They are committed for the long term and they have every probability of being successful,” said John G. Rice, vice chairman of G.E. “We can participate in that or sit on the sidelines. We’re not about sitting on the sidelines.”

Mr. Rice also said that the Chinese joint venture partner — the aerospace design and equipment manufacturer Aviation Industry Corporation of China, or Avic — has supplied G.E. with some parts for jet engines for years. And he said he had personally known Avic’s president for a decade.

“This venture is a strategic move that we made after some thought and consideration, with a company we know,” Mr. Rice said. “This isn’t something we were forced into” by the Chinese government.

G.E.’s new joint venture in Shanghai will focus on avionics — the electronics for communications, navigation, cockpit displays and controls. G.E. will be contributing its leading-edge avionics technology — a high-performance core computer system that operates as the avionics brain of Boeing’s new 787 Dreamliner.

The joint venture has a ready customer in the C919’s builder, the Commercial Aircraft Corporation of China, which is also a government-owned enterprise. The plane will be a single-aisle airliner, carrying up to 200 passengers, intended to compete with Boeing 737s and Airbus 320s. Although the Chinese hope to begin deliveries in 2016, analysts say the schedule may well slip.

With or without the C919, the Chinese market for commercial airliners is already huge and growing fast — a big market for G.E. jet engines and other systems, as well as Boeing and Airbus planes. But if the C919 grabs any significant slice of that market, it would represent a new, expanded opportunity for G.E. The company has already been chosen to supply engines for the Chinese plane, through its long-standing partnership with Snecma of France. Though the world’s largest producer of jet engines, G.E. has trailed other suppliers of avionics in overall sales, behind Honeywell, Rockwell Collins and Thales, all of whom competed for the C919 business.

Several other American companies have also been chosen as suppliers for the C919 aircraft, providing power generators, fuel tanks, hydraulic controls, brakes, tires and other gear. The roster of United States suppliers includes Rockwell Collins, Honeywell, Hamilton Sundstrand, Parker Aerospace, Eaton Corporation and Kidde Aerospace.

In fact, the corporate competition for contracts on the C919 became a “frenzy,” said Mark Howes, president of Honeywell Aerospace Asia Pacific. The Chinese government, he said, had made it clear to Western companies that they should be “willing to share technology and know-how.”

But the G.E. avionics joint venture, analysts say, appears to be the deepest relationship yet and involves sharing the most confidential technology. And G.E.’s partner, Avic, also supplies China’s military aircraft and weapons systems.

G.E. executives would not comment on the details of the joint venture. But a person involved in the talks said the 50-50 venture is for 50 years. G.E., the person said, is putting in technology and start-up capital of $200 million. Avic will initially contribute $700 million, the person said, including the cost of a new research and development lab already under construction.

To address American government security concerns, the joint venture in Shanghai will occupy separate offices and be equipped with computer systems that cannot pass data to computers in Avic’s military division, G.E. executives say. And anyone working in the joint venture must wait two years before they can work on military projects at Avic, they added.

While Boeing and Airbus would probably rather not see their suppliers help the Chinese so much, both those companies must also constantly balance the risks and rewards of operating in China.

Boeing has subcontracted parts work to China for many years, and it is expanding a joint venture in Tianjin that makes parts with composite materials for several of its planes. And Airbus has built a factory that assembles A320s in the same city.

Boeing has “opted to accept the reality of both partnering and competing with China,” Boeing’s chief executive, W. James McNerney Jr., said in a speech last year.

Indeed, China’s push into the commercial aircraft industry will probably increase exports from American aviation equipment manufacturers for years to come, according to industry analysts. Whether China succeeds or fails, the state-owned companies will keep investing, generating sales for the suppliers.

The real concern lies further head, according to a study of China’s strategy included in a report published in November by a bipartisan Congressional advisory group, the United States-China Economic and Security Review Commission.

The group concluded that China’s huge state subsidies for its own industry, its requirements that foreign companies provide technology and know-how to gain access to the Chinese market, along with the close ties between its commercial and military aviation sectors all raise concerns and “bear watching.”

The big aviation equipment makers say that, by now, they are experienced at grappling with matters of technology transfer in China. In Cedar Rapids, Iowa, Kent L. Statler, an executive vice president for commercial aviation at Rockwell Collins, observes that his employees often ask whether the company is trading its future for immediate sales in China.

“I think you’re naïve if you don’t take into account that you could be standing up a future competitor,” Mr. Statler said. Any company in a global business is in a race, he added, and staying ahead is the only defense. “At the end of the day, our technologies and processes have to continue to improve,” Mr. Statler said. “It comes down to who can innovate faster.”

Chinese Butter for Euro Arms, New Thinking to "design a way forward" to Where?

It gets worse and worse with China. The latest is the suspicion that China will prop up the Euro to cleave a rift between the US and Europe on the transfer of strategic western technology to China. Chinese toxicity spreads.

Vice Premier Li Keqiang, during his recent visit to the UK, called on the EU to relax the restrictions of high-tech exports to China, as well as the lifting of the arms embargo and the recognition of China's full market economy status.

China's leaders know they can depend on the greed, incompetence, and stupidity of Western leaders. China intends to dominate and win. Watch for the next clue to slam our clueless leaders up the side of the head, Chinese naval bases in Africa and the Mediterranean.

____________________________________

Europe fears motives of Chinese super-creditor

The EU authorities fear that China's purpose in buying eurozone debt may be double-edged, intended to push up the euro exchange rate against the yuan and gain advantage for exports.

By Ambrose Evans-Pritchard 8:08PM GMT 13 Jan 2011

TELEGRAPH

Herman Van Rompuy, Europe's president, said during a visit to Downing Street that the Chinese may have "political" thoughts in the back of their minds for coming to Europe's help, and gave a strong hint that they are also engaging in currency manipulation.

"When they buy euros, the euro becomes stronger and their currency a little bit weaker. That is not neutral in regard to their competitive position. But I go no further in this topic. It could be too delicate," he said.

Mr Van Rompuy nevertheless welcomed the latest purchases of bonds from the eurozone periphery as a valuable gesture of support. "They invested even in some weak countries, so they are very confident in the solvency of some countries," he said.
China has emerged as the transforming force in the eurozone debt crisis over recent days, pledging to use part of its €2.87 trillion (£1.82 trillion) reserves to safeguard global stability. The question is whether the Communist regime is hoping to extract strategic concessions in exchange.

The footsteps of a giant creditor were clearly felt in Portugal's bond markets on Wednesday, and again on Thursday in Spain and Italy. Madrid sold €3bn of five-year debt at 4.54pc, a full percentage point jump from November but still below the danger level. Italy also enjoyed a benign auction.

The exact role of China is unclear. Chinese vice-premier Li Keqiang promised to buy Spanish debt during a visit to Madrid last week, reportedly up to €6bn (£5bn).
China was the secret buyer in a private placement of €1.1bn of Portuguese debt last week, according to the Wall Street Journal. Finance minister Fernando Teixeira dos Santos said China "may well have been" a key buyer in this week's debt auction.
China was not the only force at work. Traders say the European Central Bank (ECB) acted aggressively behind the scenes, calling some 20 dealers to buy Portuguese debt in the secondary market.

This created what amounted to a "short-squeeze" in Portuguese bonds just before auction, causing spreads to tighten dramatically and inflicting damage on market makers acting in good faith. City sources say this has caused some bitterness.
Charles Grant, head of the Centre for European Reform and author of a book on EU-China relations, said China's top goal is to secure an end to the EU arms embargo, imposed after the Tiananmen Square massacre in 1989. It rankles as humiliating treatment for a global superpower that has since changed profoundly.

The EU has refused to move on the sanctions until China ratifies the International Covenant of Civil and Political Rights, and China's arrest of Nobel peace dissident Liu Xiaobo has further complicated matters.

Yet Brussels has suddenly begun to shift gear. Baroness Ashton, the EU's foreign policy chief, said the embargo is damaging EU-China ties and called for new thinking to "design a way forward".

Mr Grant said Britain, France and Germany are all wary of giving ground, cleaving closely to US policy. Washington views China's growing military might as a strategic threat to the Pacific region. There have already been hot words over the South China Sea, and the Pentagon claims that China has an "operational" ballistic missile able to sink aircraft carriers at long range.

A WikiLeaks cable from the US embassy in Beijing last January cites the EU's mission chief, Alexander McLachlan, saying Spain had tried to curry favour with Chinese leaders, "seeking advantage at other EU states' expense". He said China was fully aware of Madrid's game but was exploiting intra-EU divisions to gain leverage.
China's second goal is to secure market economy status from the EU. This would make it much harder for the EU to impose anti-dumping measures against Chinese imports. As it happens, the EU has just lifted its punitive tariff on Chinese shoes.

Mr Grant said Beijing will not risk much cash to woo Europe. "They are very hard-nosed. They may splash some money around for goodwill but they are not going to waste the hundreds of billions that may be needed. Nothing short of meaningful action by Europe's leaders can genuinely stabilise the eurozone," he said.
China's sovereign wealth funds, including the central bank's exchange fund SAFE, have been severely criticised at home for losing money on US investment banks during the credit crisis, or on dollar losses from US Treasury debt. They will be careful about fresh risks in Euroland.

"It is debatable whether China would actually be willing to become buyer of last resort of the debt of a country close to default," said Julian Jessop from Capital Economics. "Chinese officials are acutely aware of past losses and will not want to be seen to risk their peoples' capital on a lost cause. Their actions frequently fall short of expectations raised by their words."

Simon Derrick, from the Bank of New York Mellon, said that China must find somewhere to recycle its fresh reserves or lose control of its own currency. It is already sated with US assets. Holdings are 65pc in dollars, 26pc in euros, 5pc in sterling and 3pc in the yen.

"They may start buying some emerging market bonds but basically the only place they can go is into euros, and buying €6bn of Spanish debt is a good investment if it helps protect their other euro assets," he said.

Mr Derrick said Beijing appears to take the view that the ECB's monetary policy is fundamentally more rigorous than the money-printing ventures of the US Federal Reserve. "The Chinese have made it clear that they don't see any meaningful shift in US policy."

In the global beauty contest, Europe's debt still looks less ugly than the main alternative.

China July-September surplus totaled $102.3 billion, double last year.

What is a current account surplus?

An imbalance in a nation's balance of payments current account in which payments received by the country for selling domestic exports are greater than payments made by the country for purchasing imports. In other words, imports (of goods and services) by the domestic economy are less than exports (of goods and services). This is generally a desireable situation for a domestic economy. However, in the wacky world of international economics, a current account surplus is often balanced by a capital account deficit, which is generally considered an undesireable situation. If, however, the capital account does not balance out the current account, then a current account surplus contributes to a balance of payments surplus.

Economic Glossary

China's current-account surplus widened in the third-quarter to slightly more than double its year-earlier level

By Michael Kitchen
LOS ANGELES (MarketWatch) -- China's current-account surplus widened in the third-quarter to slightly more than double its year-earlier level, the country's foreign-exchange regulator reportedly said in a statement Thursday. The July-September surplus totaled $102.3 billion, up 103% from the third quarter of 2009, according to several reports citing the State Administration of Foreign Exchange statement. The stated surplus represented 7.2% of gross domestic product, according to Dow Jones Newswires, and compared to the second-quarter surplus of $72.9 billion, which marked a 35% year-on-year rise.

North Korea is the Responsibility of China, Japan and South Korea

Let's face it, there would be no North Korean belligerence or threat of nuclear weapons without the role played by China in the region. Without Chinese economic support, Kim Jong-il would have disappeared years ago.

Without the criminal gang-related state of North Korea, there would be little reason or justification for US presence in the region. The South Koreans would have had us leave twenty years ago.

China allowed this sore to fester and at a minimum is guilty of benign neglect. North Korea is a problem for China, South Korea and Japan. Between the three of them they are holding $1.8 trillion in US debt. If they want us to solve the problem it is at least worth half of that, call it an even trillion. If they don't like the price, let them fix it themselves.

China- Japan and Rare Earth Elements

Islands row has China -Japan ties 'at ground zero'
John Garnaut, Beijing
October 21, 2010

The Age

A LEADING Japanese statesman who helped mend relations with China in the 1980s says China's ''diplomatic shock and awe campaign'' over disputed islands has reduced the relationship to ''ground zero''.

Yoichi Funabashi, editor-in-chief of the Asahi Shimbun, said consequences of China's aggressive response would have a larger impact in Japan than US president Richard Nixon's secret meeting with Chairman Mao in 1971.

''Japan and China now stand at ground zero, and the landscape is a bleak, vast nothingness,'' wrote Mr Funabashi, in a letter sent to dozens of high-ranking friends in China.

If China continues to undermine its own ''peaceful rise'' doctrine then ''Japan would discard its naivety, lower its expectations, acquire needed insurance and, in some cases, cut its losses'', he wrote.

In the 1980s Mr Funabashi worked to restore ties and send thousands of Chinese students on exchange programs to Japan.

Many Chinese commentators are also concerned that China's rising assertiveness is harming its relations across the region.

''The Asahi Shimbun is the best Japanese newspaper and its standpoint is neutral. This is why Funabashi's article is so shocking,'' wrote Wang Shuo, editor of one of China's leading news outlets, Caixin. Mr Wang posted Mr Funabashi's letter and his response on the Caixin website.

Tens of thousands of Chinese students took part in mass demonstrations in several cities over the weekend.

Some damaged Japanese cars and others brandished placards of racially inflammatory slogans.

The Chinese government has taken measures to contain those protests and has recently toned down its propaganda onslaught.

Chinese and Japanese diplomats are believed to be working to get their prime ministers and foreign ministers together for a peacemaking meeting on the sidelines of next week's ASEAN summit in Hanoi.

But Japanese anger appears unabated. Former prime minister Shinzo Abe this week likened China's growing territorial ambitions to those of Nazi Germany and Lebensraum - Adolf Hitler's philosophy that the German people needed more ''living space'' in which to grow.

''Perhaps the party's leaders, despite their fear of meeting the same fate as the Soviet Union, are unable to resist the call of the People's Liberation Army for a military build-up,'' Mr Abe said.

Professor Peter Drysdale, of the Australian National University, said the mainstream of Japanese politics was nevertheless working to rebuild relations between the two countries, given Japan's reliance on investments in, and exports to, China.

''The practical hardheads that understand this know that Japan is into China up to its armpits … and they are trying to sort this out,'' he said.

The dispute began in September when the Japanese coast guard arrested a Chinese fisherman in what it considers its territorial waters near the Senkaku Islands, north of Taiwan, for ''ramming'' Japanese ships.

China's diplomatic and propaganda machine went into overdrive when Japan renewed its detention of the captain of the ship. China repeatedly summoned Japan's ambassador to Beijing and implemented what the Japanese government says was an embargo on rare-earth exports from China to Japan.

Japanese Foreign Minister Seiji Maehara this week criticised Beijing's ''hysterical'' reaction to the dispute over the Senkaku Islands, which China calls the Diaoyu Islands.

A Chinese foreign ministry spokesman said he was ''deeply shocked that a foreign minister of a country could make such remarks''.

Point, Counter-point: Quirk's perturbed response to an EB thread on China

Said:

Love you guys but I would sure hate to have you on my team negotiating with the Chinese.

Going in assuming the other guy holds all the cards is hardly the way to compete. Sure the U.S. has problems but would you exchange them for those of the Chinese?

Buck up. As has been pointed out all the U.S. problems have been self-inflicted. Part of it by ideals most of the nation accepted for the last half century. Now the errors have been recognized. It won’t be easy turning this big mother around but it can be done. But that merely refers to U.S. problems. What about China’s problems?

Low-costs? There is already unrest building in China from a populace demanding better wages. Some business is already being moved back to Mexico, even in small instances, back to the U.S. As China’s economy grows, the cost competitiveness issue will grow.

People? If China changes to more a consuming nation than an export nation the people problem may mitigate. However, that would also tend to mitigate the problems we have with China. More, whereas the U.S. needs between 100,000 to 200,000 new jobs per month to keep up with population growth, the Chinese need 24 million per year.

Population Demographics
Certainly not good for China. By 2030, given the effects of China’s one-child policy, their population will be contracting and remember population growth is half the GDP equation. At the same time the U.S. population starts to get younger again (around 2030) Chinas will continue to get older. Few worker benefits causing their population to be one of savers rather than consumers.

Natural resources?
Why is China buying up oil, minerals, food? Because they don’t have many. But oil is fungible. As long as there is oil out there the U.S. will get their share.

Water? China has a lot of water resources in the south; however, because of population density most of it is highly polluted. In the north, the water table is disappearing. They now have to drill hundreds of feet to reach it. Because of their push towards urbanization, water is being diverted from the countryside to the cities. The per capita water usage in the cities is much higher (I think at least double) the per capita usage in rural locations. To equalize water availability in north and south will require a tremendous effort and cost. Water is already a point of conflict between China and its neighbors especially with regard to the rivers flowing out of Tibet.

What does China have that we actually need? Rare-earth metals? As has been pointed out here, ironically, the earth is rich with rare-earth metals. The reason the business has been ceded to the Chinese is the processing cost and the fact that the Chinese really don’t give a damn if their people are affected by the radioactivity often concurrent with that processing. Rare-earth metals, like many other things, a short term problem if the Chinese want to keep pushing.


Military
Will China catch up before they start going into decline. They increased military spending by 68% in 2009. Even at that, they spent only about a seventh of what the U.S. did. In order to increase military spending they will have cut back on other domestic spending including infrastructure.

Food
They import food. The north is constantly being hit by drought. Desertification is spreading rapidly in the northwest.

Pollution You don’t want to know.

Government/Finance
No doubt central control allows the government to set priorities and implement them quickly. That can be very efficient. However, consider the other side. A banking system that is opaque. A system stacked for business profit to the detriment of the worker. They have a protectionist policy towards foreign investment. (In my opinion something the U.S. could use more of.) However, I’m assuming there is a limit to how much foreign investors will put up with. And it appears bubbles (real estate) are not confined to democracies.

Alliances/New World Order
Possible but hardly to be assumed. Most of China’s alliances I have seen have been based on mutual self-interest and can quickly degrade or even disappear in the face of Chinese bullying. Recent examples where relations have soured somewhat, Australia and Japan. While most of the partners in that part of the world want the advantages offered by trade with China. Many of them also fear China becoming the key player there and continue to push for the U.S. to maintain a counterveiling force there.

A new world order? Tell that to Vietnam, Japan, South Korea. Is it better to have Israel or Iran as a strategic partner? Anyone who assumes all the nations of the Far East will automatically fall under China’s sway hasn’t paid attention to the national rivalries that have existed there for millennia.

The Chinese are close to the point where they will care less and less what we think or what we try to do. We are less and less relevant to them.

Less and less may be true. However, less and less is a relative term. We are still the big target on their radar and will be for decades.


The Chinese will do what they want, at a time and place of their choosing.

Up to the point where we stop treating them with a deference they don’t deserve.

Just wait and see, the Chinese are going to rally the third world and set themselves up as the new financial center providing the financing, the markets, the capital and the technology to a new world order.

The Chinese will not become a financial center until their banking system is completely overhauled. Marketing and capital systems? Probably, just because of commercial issues tied to the size of their economy. Not necessarily a bad thing.

Technology? They still have to prove it. Number of engineers? No doubt a strength. Innovation and technology? Not so much.

There will be a Chinese military and defense alliance as well.

Probably the least of my concerns.

China will undoubtedly be a major U.S. competitor over the next two decades. However, there is nothing inevitable about this becoming a Chinese century. How they progress vis a vis the U.S., in my opinion, will depend more on U.S. actions than on theirs.

Frankly, if India could ever get rid of their bureaucratic drag they have on their economy I could almost bet on them overtaking China.

China Credit Rating Agency Downgrades US from AAA to AA

Chinese rating agency strips Western nations of AAA status
China's leading credit rating agency has stripped America, Britain, Germany and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favour of the West.

By Ambrose Evans-Pritchard, International Business Editor
Published: 9:17PM BST 12 Jul 2010
Telegraph

Dagong Global Credit Rating Co used its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to "wealth creating capacity" and foreign reserves than Fitch, Standard & Poor's, or Moody's.

The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia.

Meanwhile, China rises to AA+ with Germany, the Netherlands and Canada, reflecting its €2.4 trillion (£2 trillion) reserves and a blistering growth rate of 8pc to 10pc a year.

Dominique Strauss-Kahn, chief of the International Monetary Fund, agreed on Monday that the rising East is a transforming global force. "Asia's time has come," he said.

The IMF expects Asia to grow by 7.7pc in 2010, vastly outpacing the eurozone at 1pc and the US at 3.3pc. Emerging nations hold 75pc of the world's $8.4 trillion (£5.6 trillion) of reserves.

Dagong rates Norway, Denmark, Switzerland, and Singapore at AAA, along with the commodity twins Australia and New Zealand.

Chinese president Hu Jintao said in April that the world needs "an objective, fair, and reasonable standard" for rating sovereign debt. Dagong appears to have stepped into the role, saying its objective was to assess countries using methods that would "not be affected by ideology".

"The reason for the global financial crisis and debt crisis in Europe is that the current international credit rating system does not correctly reveal the debtor's repayment ability," said Guan Jianzhong, Dagong's chairman.
The agency, known in China for rating companies, said its goal is to "correct the defects" of the existing system and offer a counter-weight to Western agencies.

Dagong appears to base growth potential on past performance but this can be misleading, especially in states enjoying technology catch-up. Japan was a high-flyer in 1970s and 1980s before stalling when the Nikkei bubble burst. It has been trapped in near perma-slump ever since.

China may start to face some of Japan's demographic problems by the middle of this decade when the working age population peaks.

The Western rating agencies put a high value on a long-established rule of law and government institutions that have proved resilient over many decades, or even centuries. China's political system may appear strong – as did the Soviet Union's – but only time will tell whether its foundations are brittle. The violent upheavals of the Cultural Revolution are still a very fresh memory.

China tightens, The Germans bore no gifts to Greece, The World turns

Will markets call EU bluff on Greek rescue?

Greek bail-out accord lacks substance and finance's poker players may soon call its bluff.

By Ambrose Evans-Pritchard, International Business Editor
Published: 9:49PM GMT 11 Feb 2010
Telegraph

The white smoke has at last emerged from the Bibliotheque Solvay in Brussels, but global markets do not like its odour. The Greek rescue plan agreed by EU leaders after a week of leaks is strangely thin, raising suspicions that Germany, Holland and the creditor states of Northern Europe still cannot agree on the terms of any bail-out.

The euro tumbled 1pc to a nine-month low of $1.36 against the dollar and Club Med debt yields jumped as investors read the summit text, searching in vain for details of debt guarantees or bilateral loans, or guidance on an EU eurobond. All they found was an expression of "political will".

"Euro area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. The Greek government has not requested any financial support," it read.

The 27 leaders never even discussed how they might shore up Greece or the rest of Club Med. German Chancellor Angela Merkel said she was not willing to broach the subject at all. The only relevant topic was whether Greece was complying with Treaty obligations, and how the country would slash its budget deficit from 12.7pc to 8.7pc this year – in a slump.

"They offered nothing," said Jochen Felsenheimer, a credit expert at Assenagon in Frankfurt. "It was just words without any concrete measures, hoping to buy time."

Whether the EU has time is an open question. Credit Suisse says Greece must raise €30bn (£26bn) in debt by mid-year, mostly in April and May. Greek banks have been shut out of Europe's inter-dealer markets, forcing them to raise money at killer rates. They are suffering an erosion of deposits as rich Greeks shift money abroad. This could come to a head long before April.

"Economically, we are in a very risky situation. Greece is close to default. We face systemic risk like the Lehman collapse and unless there is a bail-out for Greece, there will have to be a bail-out for the whole European banking system within two or three months," he said.

Yet they are damned if they don't, and damned if they do. "A Greek bail-out increases the risk of EMU break-up, because monetary union can only work if everybody sticks to the rules," Mr Felsenheimer said.

French banks have $76bn of exposure to Greece, the Swiss $64bn, and the Germans $43bn. But this understates cross-border links. There are large loans between vulnerable states. The exposure of Portuguese banks to Spain and Ireland equals 19pc of Portugal's GDP. Interlocking claims within the eurozone zone are complex. Contagion can spread fast.

Marc Touati, of Global Equities in Paris, said the "haemorrhage of Greece" must be stopped to prevent a domino effect. "We have to move fast, above all to keep Greece in the eurozone. If not, Spain, Portugal, and Italy will be next. It could reach France," he said.

French President Nicolas Sarkozy drew an explicit parallel with Lehman Brothers in his press conference with Chancellor Merkel, saying EU leaders had given a cast-iron pledge that no eurozone member would be allowed to fail, just as they promised during the financial crisis that no big bank would be allowed to fail.

Details can be thrashed out later, in this case by finance ministers next week. The talk is of a "coalition of the willing", a group of states acting outside the EU Treaty structure. Britain would not be obliged to help. The IMF would bring "expertise" but not set policy.

Each country will choose its own way of helping, perhaps using state banks or sovereign wealth funds to buy Greek debt. In Germany's case this might be KFW: for France in might be Caisse des Depots. The arm's-length solution is elegant but it does not hide the fact that such action amounts to a debt guarantee for a serial violator of EMU rules. It implicitly opens the door to bail-outs for a string of countries in crisis.

BNP Paribas said any rescue confined to Greece is doomed to fail. "The market would only concentrate on its next 'victim', which would be Portugal," it said. Put another way, investors will demand a similar guarantee for Iberian debt.

It is this worry over open-ended liability that made Germany hesitate. Such help would need approval by the German Bundestag – and some other national parliaments. If Germany finances an unpopular rescue that merely puts off the day of reckoning, or if Athens squanders the aid, the deal will come back to haunt Mrs Merkel.

There was an element of bluff in Thursday's accord, as if the EU leaders hope to muddle through with "constructive ambiguity", fingers crossed that their vague political pledge will never be tested. Bluff is a valid tool of statemanship, but in this case their bluff could be called very soon.

You Think the Real Estate Bubble Burst, Not in London and China

The London Real Estate Bubble Is Back—and It's Scary
By BRETT ARENDS WSJ

LONDON—The one-bedroom co-op apartment is only a short walk from Hyde Park, and it boasts high ceilings and a purely decorative balcony.

Yours for a mere $1.5 million. It seems quite a high price, especially for a property whose ground lease will eventually expire, leaving you with nothing.

If you're looking for something bigger, you can get a duplex with two bedrooms in the center of town ... for $3.3 million. And if you're willing to slum it a bit and cross the River Thames to the unfashionable South Bank, you can get a modern three-bedroom apartment with a genuine balcony, and views of the river, for $4 million.

Looking at the real estate listings here is like stepping back in time to that unreal, giddy world of three years ago—before Lehman, before subprime, before AIG. Back to a period when everyone was either rich or on their way, either from flipping condos or running hedge funds, and the only direction was up.

But these prices are now, and they contain an ominous message: The London real estate bubble, arguably the biggest one of all, still hasn't popped.

If history is any guide, it surely will. Burst bubbles typically fall a long way, in due course, and there is no reason to believe this one will be any different—despite the usual rationalizations you hear in this town today, and which you heard in, say, Florida in 2005 and Tokyo in 1988.

London real estate has actually bounced off the bottom in the last nine months. Prices are now down a mere 9% or so from their 2007 peaks, according to data tracked by mortgage giant Nationwide Building Society. The average home in London, including all those dreary outskirts that go on and on and on, is $436,000. That's even higher than it was as recently as 2006, when the bubble was in its late stages. In the fashionable center of town—where the properties cited at the top of this article are all located—the prices are astronomical.

Overall, British prices have only fallen about 12% from the peak. When compared to household incomes, they stand far higher than they did even in 1989, at the peak of the last property bubble.

This matters for everyone—including those who will never visit Britain and have no direct interest in the real estate market. That's because there's one big question hanging over the U.S. and world economy right now: "Is that it?"

In other words, is the crash over? Has the Great Recession come to an end? Are we now heading back, albeit slowly, to normal economic growth rates and rising assets? Or is this just the eye of the hurricane?

No one knows the answer for sure. (I don't either, but at least I admit it.) But London real estate prices are one of the most worrying signs that "That isn't it," and that there is a lot more bad news to come. The other shoe, to put it plainly, hasn't dropped.

Jeremy Grantham, chairman of Boston money firm GMO and a British expatriate, argues that the British property bubble may be the biggest since the infamous one in Japan 20 years ago. It's notable that when that bubble burst, prices fell from 1991 through 2005. They fell again last year. There were many false dawns along the way. Many assumed the crash was over the worst after the rout of the first few years .But the real damage came afterward, as prices kept sliding, year upon year.

People here will tell you that London is unique. Well, yes. But everywhere is unique.

A money manager this week explained to me that the London real estate market now functions as something of a global financial Laundromat: Properties are bought up by tycoons from Russia, the Middle East and elsewhere eager to get their money out of their own country. But so what? An overpriced market is still an overpriced market. Losing money on Mayfair apartments is no better than losing it to, say, a corrupt government.

Prices here were also buoyed by the hedge-fund boom. Perhaps that is back again. If so, it's something else to be worried about. Another speculative mania is the last thing we need.

But if London real estate is buoyed by the uniqueness of the town's economy, there is a disturbing degree to which the reverse is also true. This is a ridiculously expensive city to visit. I seem to hemorrhage money with every step I take. I was wondering, as I got out of a taxi the other night and severed the requisite two limbs to pay the fare, how I ever afforded to live here all those years.

The answer is, I couldn't—even though I earned a perfectly good salary. What made a difference was the money I made on my apartment, which doubled in value between 1997 and 2003. Two years after I sold it, in 2005, it had nearly doubled again. Remove this alchemy from the equation of ordinary Londoners, and the bars and restaurants and theaters would be a lot emptier.

Meanwhile, the British government is borrowing and spending on a huge scale to prevent an economic implosion. The national debt jumped by a fifth last year, surpassing 60% of annual output. In a sign of what is now driving economic activity, the average public-sector employee, according to official statistics, now earns about a fifth more than his private-sector counterpart.

The markets are certainly worried about the long-term implications of the U.K.'s spending binge. It costs twice as much to insure British government bonds against default as it does German or French bonds.

But if you looked at real estate prices, you'd never know it.

Write to Brett Arends at brett.arends@wsj.com

The Clash of Empires - China and The USA

The United States made a fundamental misjudgement that trade with China would necessarily bring freedom and democracy to China. To date that has not happened and trade with China, never free, has weakened the finances of the US, weakened US industry, and greatly increased Chinese power and stature.

It was an additional colossal error to have ever allowed a foreign government, especially China, to own and hold US sovereign debt. Think about it. Free trade of goods and services never ends in an unbalance. A country can export and bring in dollars by the boat load, but if they cannot buy US debt, they have to spend the dollars. Allowing China to hold US debt permitted the Chinese to export and not buy US products.

During this current period of financial and industrial decline, the US has stubbornly held onto a global military presence that is absurdly expensive and financially unsustainable. No place is that more apparent than in Asia.

We may not like what China is doing, but remember, we did this to ourselves. China would be nowhere without the foolish trade decisions made by our rulers and masters in Washington.

The maintenance of foreign US military bases since WWII should have ended long ago and will have to end in the future because we cannot afford it.

Trade, finance, and military spending are all related. It is time to rethink and remake the US in a way that will make us stronger, richer and safer for a lot less money.

____________________________






China's strident tone raises concerns among Western governments, analysts
By John Pomfret
Washington Post Staff Writer
Sunday, January 31, 2010; A01

China's indignant reaction to the announcement of U.S. plans to sell weapons to Taiwan appears to be in keeping with a new triumphalist attitude from Beijing that is worrying governments and analysts across the globe.

From the Copenhagen climate change conference to Internet freedom to China's border with India, China observers have noticed a tough tone emanating from its government, its representatives and influential analysts from its state-funded think tanks.

Calling in U.S. Ambassador Jon Huntsman on Saturday, Chinese Vice Foreign Minister He Yafei said the United States would be responsible for "serious repercussions" if it did not reverse the decision to sell Taiwan $6.4 billion worth of helicopters, Patriot Advanced Capability-3 missiles, minesweepers and communications gear. The reaction came even though China has known for months about the planned deal, U.S. officials said.

"There has been a change in China's attitude," said Kenneth G. Lieberthal, a former senior National Security Council official who is currently at the Brookings Institution. "The Chinese find with startling speed that people have come to view them as a major global player. And that has fed a sense of confidence."

Lieberthal said another factor in China's new tone is a sense that after two centuries of exploitation by the West, China is resuming its role as one of the great nations of the world.

This new posture has befuddled Western officials and analysts: Is it just China's tone that is changing or are its policies changing as well?

In a case in point, one senior U.S. official termed as unusual China's behavior at the December climate conference, during which China publicly reprimanded White House envoy Todd Stern, dispatched a Foreign Ministry functionary to an event for state leaders and fought strenuously against fixed targets for emission cuts in the developed world.

Another issue is Internet freedom and cybersecurity, highlighted by Google's recent threat to leave China unless the country stops its Web censorship. At China's request, that topic was left off the table at this year's World Economic Forum in Davos, Switzerland, Josef Ackermann, chief executive of Deutsche Bank and co-chairman of the event, told Bloomberg News. The forum ends Sunday.

China dismisses concerns
Analysts say a combination of hubris and insecurity appears to be driving China's mood. On one hand, Beijing thinks that the relative ease with which it skated over the global financial crisis underscores the superiority of its system and that China is not only rising but has arrived on the global stage -- much faster than anyone could have predicted. On the other, recent uprisings in the western regions of Tibet and Xinjiang have fed Chinese leaders' insecurity about their one-party state. As such, any perceived threat to their power is met with a backlash.

A spokesman for the Chinese Embassy in Washington said China's tone had not changed.

"China's positions on issues like arms sales to Taiwan and Tibet have been consistent and clear," Wang Baodong said, "as these issues bear on sovereignty and territorial integrity, which are closely related to Chinese core national interests."

The unease over China's new tone is shared by Europeans as well. "How Should Europe Respond to China's Strident Rise?" is the title of a new paper from the Center for European Reform. Just two years earlier, its author, institute director Charles Grant, had predicted that China and the European Union would shape the new world order.

"There is a real rethink going on about China in Europe," Grant said in an interview from Davos. "I don't think governments know what to do, but they know that their policies aren't working."

U.S. officials first began noticing the new Chinese attitude last year. Anecdotes range from the political to the personal.

At the World Economic Forum last year, Premier Wen Jiabao lambasted the United States for its economic mismanagement. A few weeks later, China's central bank questioned whether the dollar could continue to play its role as the international reserve currency.

And in another vignette, confirmed by several sources, a senior U.S. official involved in the economy hosted his Chinese counterpart, who then made a series of disparaging remarks about the bureau that the American ran. Later that night, the two were to dine at the American's house. The Chinese representatives called ahead, asking what was for dinner. They were informed that it was fish. "The director doesn't eat fish," one of them told his American interlocutor. "He wants steak. He says fish makes you weak." The menu was changed.

Tone with Europe, India
With Europe and India, China's strident tone has been even more apparent. In autumn 2008, China canceled a summit with the European Union after French President Nicolas Sarkozy met with the exiled Tibetan leader, the Dalai Lama. Before that, it had denounced German Chancellor Angela Merkel over her contacts with the Tibetan spiritual leader. And in recent weeks, it has engaged in a heated exchange with British officials over its moves to block a broader agreement at the climate conference.

At the Chinese Embassy, Wang differed on the climate issue. "China is strongly behind the idea of meeting the issue of climate change," he said, "but at the same time we think that there are some people who want to confuse the situation, and we feel the need to try to let the rest of the world know our position clearly."

China also suspended ties with Denmark after its prime minister met the Dalai Lama and resumed them only after the Danish government issued a statement in December saying it would oppose Tibetan independence and consider Beijing's reaction before inviting him again.

"The Europeans have competed to be China's favored friend," Grant said, "but then they get put in the doghouse one by one."

China's newfound toughness also played out in a renewed dispute with India over Beijing's claims to the Indian state of Arunachal Pradesh, which borders Tibet. Last summer, China blocked the Asian Development Bank from making a $60 million loan for infrastructure improvements in the state. India then moved to fund the projects itself, prompting China to send more troops to the border.

David Finkelstein, a former U.S. Army officer at the Defense Intelligence Agency who now runs the China program at the Center for Naval Analyses, said the new tone underscores a shift in China. "On the external front," he said, "we will likely see a China that is more willing than in the past to proactively shape the external environment and international order rather than passively react to it."

An example would be events that unfolded in December when 22 Chinese Muslims showed up in Cambodia and requested political asylum. China wanted to hold seven of them on suspicion of participating in anti-Chinese riots in the Xinjiang region in July.

Under intense pressure from Beijing, Cambodia sent the group home, despite protests from the United States. Two days after the group was repatriated, China signed 14 deals with Cambodia worth about $1 billion.

What the future holds
Whether this new bluster from Beijing presages tougher policies and actions in areas of direct concern to the United States is a key question, Lieberthal said. What China does after the United States sells Taiwan the weapons may provide some clues.

Even before the United States announced its plans Friday, at least six senior Chinese officials, including officers from the People's Liberation Army, had warned Washington against the sale.

Once the deal was announced, China's Defense Ministry said it was suspending a portion of the recently resumed military relations with the United States. China also announced that it would sanction the U.S. companies involved in the sale.

What happens next will be crucial. China quietly sanctioned several U.S. companies for participating in such weapons sales in the past. However, it would mark a major change if China makes the list public and includes, for example, Boeing, which sells billions of dollars worth of airplanes to China each year.

He, the vice foreign minister, warned that the sales would also affect China's cooperation with the United States on regional issues. Does that mean China will continue to block Western efforts to tighten sanctions on Iran? Bonnie S. Glaser, a China security analyst at the Center for Strategic and International Studies, said the answer will probably come soon.

France takes over the presidency of the U.N. Security Council on Monday and is expected to push for a rapid move in that direction.