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Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

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Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

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Xinhua Commentaries: “Exposing the Three Major Political Deficits of the U.S.”

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The CCP’s Performing Arts Troupes in the U.S.

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Shenzhen Becomes World’s First Friendship City with Berne of Switzerland

As Switzerland as a nation strengthens its ties with China, China’s Shenzhen has become the first Friendship City for its canton of Berne.
The free trade treaty between China and Switzerland took effect last summer. In late January this year, Chinese premier Li Keqiang visited Switzerland. Then in early February, the Swiss Treasury Minister reciprocated the visit in order to promote bilateral cooperation for the internationalization of the Chinese yuan. After two years of communication and preparation, the Swiss canton of Berne formally became a Friendship City with the city of Shenzhen, the most important industrial and economic city in southern China. Since it is the first Friendship City for Berne globally, the story was widely covered in Switzerland. Berne is the second most populous canton in the country. Its industrial structure bears high similarities with Shenzhen. Products include precision instruments, watches and clocks, medical and life sciences, finance, and technology.
Source: Radio Free Asia, February 20, 2015
http://www.rfa.org/mandarin/yataibaodao/junshiwaijiao/gr-02202015103128.html
Briefings | | |   Geo-Strategic Trend

Qiushi: The Dividends of Hegemony: America’s Source for Reaping without Sowing

Qiushi recently republished a Red Flag Manuscript article with the title, “The Dividends of Hegemony: America’s Source for Reaping without Sowing.” Two researchers, Yang Duogui and Zhou Zhitian, from the Science and Technology Policy and Management Institute of the Chinese Academy of Sciences were the authors. 

The article said, “Since 500 years ago, from Portugal, Spain, and the Netherlands to England, and then to the United States, state ‘hegemony’ has gradually developed from the traditional ‘territorial colonization’ into a modern ‘financial colonization.’ Today, for the U.S., as the world’s only superpower, financial colonization is its core secret for maintaining its hegemony power. For the Americans, financial hegemony has become the cornerstone for the United States to be able to obtain its hegemony dividend. It is the source for reaping profits without sowing.” 
The article summarized the following ten major ways and channels the U.S. uses to harvest its “hegemony dividends”: 1) Seigniorage. The author calculated that “assuming that all of China’s foreign exchange reserves are held in U.S. Treasury bonds and the interest spread between U.S. Treasury bonds and China Treasury bonds is one percent, then each year the United States will get about US$ 23-26 billion in seigniorage at a minimum from China’s economic development without paying any costs.” 2) International inflation tax revenue; 3) Earnings from [issuing] debts; 4) Overseas investment income; 5) Fee income from dollar transactions; 6) Unfair trade gains; 7) Currency manipulation of earnings; 8) Financial derivative gains; 9) Returns from big item Commodity futures; 10) Income from intellectual property.
Source: Qiushi Journal, February 6, 2015 
http://www.qstheory.cn/dukan/hqwg/2015-02/06/c_1114285652.htm

Briefings | | |   US-China Relations

Qiushi: State Owned Enterprises Should Return More Profits to the State

Qiushi published an article advocating that State-owned enterprises should provide “social dividends” by returning more profits to the State and by increasing the amount of funds used for public benefits. 

According to the article, the economy has been experiencing downward pressure. To increase fiscal revenue, state-own enterprises must increase their “social dividends” in addition to their taxes. The article made the following observations.
First, the profits submitted to the central government have not been expended properly. For example, in 2014, only 18.4 billion yuan (US$2.94 billion) went to pay for social security expenses, while 120 billion yuan ($US 19.19 billion) went back to the State-owned enterprises. More profits should be paid into the State coffers. 
Second, currently the maximum amount that enterprises submit to the State coffers is about 15 to 25 percent of their profits. In the West, about 30 to 40 percent of the profits are for dividends to be distributed to shareholders. 
Third, of 5,000 State-owned enterprises, only 799 are included in the national budget and are required to submit their profits to the State. Particularly, the highly profitable State-owned enterprises in the financial sector are not required to submit their profits to the State coffers at all. 
Source: Qiushi, February 17, 2015 
http://www.qstheory.cn/economy/2015-02/17/c_1114398141.htm
Briefings | | |   Economy/Resources

Eight Diseases in China’s Judicial System

According to Song Hansong, Director of the Office of Crime Prevention, China’s Supreme People’s Procuratorate, there are eight “chronic diseases” in the judicial system in China.

1.) Personnel working in the judicial system are crude, arrogant, overbearing, perfunctory, and not responsive.
2.) Procedures and rules are not followed in interrogations and when using residential surveillance. 
3.) Judges do not follow the law and listen to the views of the parties and the lawyers. They intentionally make things difficult, unreasonably delay the process, or unlawfully restrict the rights of the lawyers. 
4.) Illegal coercive measures are used to obtain evidence illegally and to confiscate property in spite of the legitimate interests of the parties. 
5.) In order to obtain a good performance evaluation, cases are handled in violation of the law and with fraudulent treatment. 
6.) investigators engage in ultra vires [activities beyond their legal power and authority] and in illegal economic and business activities. 
7.) Judges have ex parte communications with the parties and lawyers, disclose or inquire about the issues in the case, and intervene in the judicial process. 
8.) Judges take bribes and decide the cases on the basis of relationships and money. 
Source: Qiushi, February 15, 2015 
http://www.qstheory.cn/politics/2015-02/15/c_1114374295.htm
Briefings | | |   Government/Politics

Xinhua: U.S. NSA Installs Spyware on Hard Disks So They Can Eavesdrop on Most Computers Worldwide

Xinhua recently reported, in its International Section’s headline news, that the U.S. National Security Agency (NSA) has made a technological breakthrough. It is installing spyware that will be hidden in Western Digital, Seagate, and Toshiba Corp.’s hard disks enabling them to eavesdrop on most computers in the world. The report indicated that multiple Internet researchers and former agents have acknowledged this. 

According to the report, the Russian security firm Kaspersky Labs, headquartered in Moscow, exposed this spy action on the 16th [of February, 2015]. It further said, “Although Kaspersky Labs refused to disclose publicly the country that was taking this behind the scenes spy action, it said it is closely related to the ‘Stuxnet’ virus. The ‘Stuxnet’ virus was a cyberwar weapon developed under the direction of the U.S. National Security Agency and was used to attack Iran’s uranium enrichment facilities.” 
Source: Xinhua, February 18, 2015 
http://news.xinhuanet.com/world/2015-02/18/c_127506544.htm

Briefings | | |   US-China Relations

The Need to Accelerate China’s “Innovation-Driven” Transformation

On February 13, Finance (jingrongjie) magazine published an article on the need to accelerate China’s “innovation driven” strategic transformation. The article stated that China’s economic growth can no longer be sustained by going along with the use of cheap labor and the damage to the environment and resources. Only innovation can accelerate the transformation and the upgrading of China’s economy. 

The article stated that China faces several challenges.  
 
China’s innovation and competitiveness remain low. According to the 2013 National Innovation Index Report that the Chinese Academy of Science and Technology for Development issued, China holds the position of No.19 in the ranking of innovative countries, while the U.S., Japan, and South Korea are Nos. 1, 2 and 4, respectively. The intensity of China’s innovation is also low. The intensity of U.S. innovation is 3.35 percent, while, in 2013 China’s innovation intensity was 0.88 percent. The “window” for China’s technological development to "catch-up" is closing. When compared to the United States and other developed countries, even China’s strategic emerging industries are showing gaps as wide as in traditional industries. Further, China has experienced a severe brain drain; it ranks No. 1 in brain drain in the world. After completing their studies overseas, about 87 percent of those who major in science and engineering fields do not return to China X. 
Source: Finance (Jingrongjie), February 13, 2015 
http://opinion.jrj.com.cn/2015/02/13040118859863.shtml
Briefings | | |   Economy/Resources

The China Press: Financial Corruption May Shatter the Nation’s Foundation

On February 11, 2015, the US China Press (http://www.uschinapress.com/) first published an article titled, “Financial Corruption May Shatter the Nation’s Foundation.” Then on February 13, 2015, China Review News re-published the article on its website. The anti-corruption campaign in the financial sector just started in January of 2015. As of now, three bank presidents and a number of high level bank executives have been put under investigation. Mao Xiaofeng, the president of Minsheng Bank, is under investigation. The CCP Central Commission for Discipline Inspection has set up a new division focusing on investigating financial corruption.

According to the article, the financial sector has become a place for big and small tigers (corrupt officials) and their children and relatives to come together. After the downfall of Zhou Yongkang, Ling Jihua, and some other high-ranking officials, at least 70 listed companies became embroiled in the anti-corruption movement. Companies involved in nonferrous metals, coal, oil, and other resources accounted for about a quarter of these listed companies. The businesses in which these companies are involved are closely connected with high ranking officials. For example, China Minsheng Bank reportedly has a "Wives Club." A number of the wives of high ranking officials regularly get paychecks although they do not work at all. Ampang Insurance, the largest shareholder of Minsheng Bank, has been growing rapidly over the past 10 years. It has assets of more than one trillion yuan (US160 billion) with licenses in insurance, banking, funds, and security firms. Overseas, Ampang has acquired the New York City landmark, the Waldorf Astoria Hotel; Belgium’s Insurance Company, FIDEA; and Delta Lloyd Bank of Belgium. “Ampang’s explosive growth is beyond the scope of conventional economics. Even Warren Buffett who started from investments in insurance has been lagging far behind. Ampang owes the people an explanation. What panacea does it have that can enable it move so easily through the trials in China with such a Midas touch?”

The article concluded, “Financial corruption, which is more covert than industrial corruption, is also more dangerous. It does not bring any material wealth to society, but it can result in huge losses of state assets. It can produce a financial elite class, fragment society’s distribution patterns, cause social instability, and even lead to a financial crisis. This is not alarmist. Such things have happened in Indonesia and other countries.”

Sources: US China Press, February 11, 2015 and China Review News, February 13, 2015 http://opinion.uschinapress.com/2015/0211/1012895.shtml
http://hk.crntt.com/doc/1036/2/1/5/103621531.html?coluid=59&kindid=0&docid=103621531&mdate=0213074500

Briefings | | |   Government/Politics

China’s Food Security Problem

The Sun, a Hong Kong newspaper, published a commentary stating that food security has become a real threat to China. If the Sino-U.S. relationship went south, the U.S. could use the food weapon and "win over China without a war." 

"For the first time, the first government directive in 2015, titled, ‘The Opinion on Deepening Countryside reforms and Accelerating Agricultural Modernization,’ listed the potato as the fourth staple food for China. In the past, the list included only three staple foods: rice, wheat, and corn."

"At the recent meeting of the Central Financial and Economic Affairs Leading Group, Xi Jinping put food security in a prominent position. It was prior to energy security, which indicated that China’s food problem is more severe than what the outside world thought."  

"The North China Plain is the main production area for wheat, but the production of wheat has been decreasing year by year due to the contamination of underground water. Hunan Province is a main production area for rice, but its rice has become carcinogenic due to heavy metal pollution."

An earlier China Review News article on China’s food problem mentioned four challenges for China’s agriculture industry:
1. High Prices: The prices of major agricultural products in China exceed their international prices.
2. Increasing Costs: The costs of agricultural products keep increasing.
3. "The Yellow Line" for Subsidies: China’s commitment to the WTO means the country can no longer increase its subsidies to the agriculture industry.
4. "Red Light" on the ecological environment: In its agricultural decisions, China has to pay more attention to the ecological environment.

Sources:
1. The Sun Online, February 17, 2015
http://the-sun.on.cc/cnt/china_world/20150217/00674_001.html
2. China Review News, January 27, 2015
http://hk.crntt.com/doc/1035/9/3/0/103593027.html?coluid=151&kindid=11511&docid=103593027&mdate=0127102620

Briefings | | |   Economy/Resources