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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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China to Tackle Overcapacity

China’s State Council, the country’s cabinet, recently issued a document to tackle the overcapacity in a number of industries including cement, electrolytic aluminum, sheet glass, shipping, and steel.

The Guideline for Tackling Serious Production Overcapacity lists eight tasks in each sector: forbid expanding the capacity of new projects; clear up illegal capacity; eliminate outmoded capacity in an orderly way; promote mergers and the restructuring of enterprises; develop effective domestic demand; expand the international market and expand foreign investments and cooperation; make breakthroughs in technologies and strengthening enterprise innovation; facilitate innovation in government management and create a fair environment for improvement of the market mechanism.

Source: Xinhua, October 15, 2013
http://news.xinhuanet.com/2013-10/15/c_117726958.htm

Briefings | | |   Economy/Resources

Wan Gang: The Shocking Abuse of R&D Funds

On October 14, China Daily reprinted an article first published in Beijing Youth Daily about the abuse of R&D funds. On October 11, China’s State Council of Information Office held a press conference at which Wan Gang, China’s Science and Technology Minister, stated that the “dreadful problems” with research and development funding were shocking. 

The three year audit of the ministries under the State Council and the provinces revealed that out of several hundred audit reports that were done from 2007 to 2012, 39 involved “problem R&D funds.” The 39 audit reports showed that fraudulent practices could pass the approval processes, that programs could be developed without feasibility studies, that funds could be allocated even when there was no possibility of implementation, and that the completion of projects could be accepted without any inspection. 
 For example, the 13 institutions of higher education under the Shandong Province Education Department spent 943 million yuan (US$154.61 million) on R&D when they had no projects. From 2010 to 2012 the Transportation Ministry spent 186 million yuan (US$30.5 million) of 1,556 million (US$255.12 million) in R&D funds on salaries and subsidies to personnel, without complying with personnel regulations and pay standards. 
In recent years, China’s R&D expenditures have grown about 20 percent annually. In 2012, they accounted for 1.9 percent of GDP, reaching 1.024 billion yuan (US$167.89 billion) 

Source: Beijing Youth Daily reprinted by China Daily, October 14, 2013
http://www.chinadaily.com.cn/hqgj/jryw/2013-10-14/content_10314422.html

Briefings | | |   Information/Technology

China’s System Is a Trap that Lures All Officials to Commit the Crime of Bribery

On October 10, 2013, Chinaweekly.cn published an article on the prevalence of the bribery phenomena among Chinese officials. When a university professor and a deputy Party secretary of the Changsha Municipal People’s Congress were attending a seminar in Germany, the university professor said to the Party secretary, “According to German standards, we are all criminals.” The deputy Party secretary eventually quit his job because he realized that, just based on China’s own policies which the Chinese Communist Party Central Commission for Discipline Inspection had established, many Chinese have committed the crime of bribery.

China’s political system causes all officials from the bottom to the top to be trapped into either giving or taking bribes.  It is a hidden rule in China that bribery must be used to initiate projects and to obtain funds. The article concluded that, in order to prevent officials from committing crimes because of their jobs, China must first discipline the officials from the top so as to block any loopholes in the system.

Source: Chinaweekly.cn, October 10, 2013
http://www.chinaweekly.cn/bencandy.php?fid=63&id=6871

Briefings | | |   Grapevine

China’s Shortcut for Obtaining Core Technology from Foreign Countries: Mergers and Acquisitions

The debt crisis in the U.S. and Europe has given China new opportunities to merge and acquire foreign enterprises. According to China Review News on October 13, 2013, China has become one of the five largest capital exporting countries in the world. In 2012, Chinese investors invested directly in 4425 overseas companies located in 141 countries and regions with accumulated non-financial direct investments of US$77.22 billion, an increase of 28.6 percent over the previous year. In this new situation, China’s future cross-border mergers and acquisitions show the following trends:

  1. Since many countries view state-owned enterprises’ mergers and acquisitions as politically motivated commercial activities, more private enterprises are engaging in cross-border mergers and acquisitions.
  2. China’s demand for energy resources is growing rapidly. Of 45 types of bulk minerals that China needs for its development, by 2020, China will achieve self-sufficiency with only 6 of these types. China’s thirst for resources will drive China’s enterprises to get involved in cross-border mergers and acquisitions in more and more diverse industries (finance, IT, and tertiary industries) on a global scale, with the focus on oil, gas, mining, and chemical industries.
  3. In order to be effective in avoiding the high risks of the cross-border mergers and acquisitions, China has used and will continue to use the world’s leading professional intermediaries and foreign lawyers to provide consulting services throughout all of the acquisition processes.
  4. To merge and acquire advanced technology enterprises in developed countries is a shortcut to using legal means to obtain core technology from foreign countries. Therefore, China’s cross-border mergers and acquisitions will be mainly technology-oriented.
  5. To reduce acquisition costs, China will take full advantage of local capital in the foreign markets through the acquisition of listed companies for financing and will directly or indirectly attract investments in foreign capital markets.
  6. China will send its management teams to the merged companies overseas and will conduct post-merger cultural integration for the purpose of taking corporate control while maximizing the value of the acquired companies.  

Source: China Review News, October 13, 2013
http://www.zhgpl.com/doc/1027/9/3/7/102793724.html?coluid=53&kindid=0&docid=102793724&mdate=1013071942  

Briefings | | |   Economy/Resources

Global Times: Volume of Trade in Chinese Currency Is Growing Rapidly

Global Times recently reported that new trading participants pushed the RMB trade volume much higher in London. This significantly strengthened London’s position as one of the primary RMB offshore trading centers. Based on SWIFT data, London’s trading volume now represents 62 percent of the entire RMB trading activities outside Mainland China and Hong Kong. London won the market share mainly from Singapore and from the U.S., Switzerland and France. The daily RMB trade volume has reached US$5 billion, which is double last year’s number. HSBC currency strategist Wang Ju suggested that many central banks, private banks, hedge funds, and companies are showing a strong interest in the RMB. Data from the Bank for International Settlements (BIS) also demonstrated a rapid growth in RMB trading, which is quickly catching up to the volume of the Canadian dollar and the Swiss Franc.
Source: Global Times, October 10, 2013
http://finance.huanqiu.com/china/2013-10/4426449.html
Briefings | | |   Economy/Resources

China News: A U.S. Default Could be Worse than the Fall of Lehman Brothers

China News recently reported from New York that the United States has moved steps closer to a new “Fiscal Cliff.” The on-going two-party fight on the debt ceiling issue has pushed the world’s largest economy toward the edge of default. Many countries have issued warnings that the situation could, potentially, be worse than that of the Lehman Brothers bankruptcy in 2008, which triggered a global downturn. China and Japan are the two primary overseas creditors, holding US$2.4 trillion in U.S. government bonds. On numerous recent occasions, their government officials called for an immediate resolution of the debt crisis. Economists have predicted that, following a U.S. default, credit ratings will be lower, interest rates will be higher, the U.S. dollar will depreciate, bankruptcies will occur in the banking industry, and the stock market will go into free fall. The Chicago Volatility Index for futures has gone up by 22 percent since October 1 and the International Monetary Fund also warned of “serious damage” to the world economy.
Source: China News, October 10, 2013
http://www.chinanews.com/gj/2013/10-10/5357213.shtml
Briefings | | |   Economy/Resources

Li Keqiang: Moving the China-ASEAN Strategic Relationship One Step Forward

Xinhua reported that Chinese Premier Li Keqiang delivered a speech on October 9 at the 16th China-ASEAN (Association of Southeast Asian Nations) Leadership Summit. Li called for a long-term view of their strategic partnership and for strengthening two common political grounds: (1) Improve strategic mutual trust; (2) Deepen cooperation in economic development.

Li also pushed seven key areas of cooperation: (1) Actively work toward signing the Good-Neighborly Treaty of Friendship and Cooperation; (2) Start the process of improving the China-ASEAN free trade zone; (3) Speed up the infrastructure constructions of interconnectivity; (4) Strengthen regional financial and risk management cooperation; (5) Steadily improve maritime cooperation; (6) Enhance security oriented exchanges and cooperation; (7) Intensify cooperation in the areas of culture and technology.

Source: Xinhua, October 9, 2013
http://news.xinhuanet.com/world/2013-10/09/c_117641820.htm
Briefings | | |   Geo-Strategic Trend

Expert: In the Future China May Sell Aircraft Technology

People Daily reported that Turkish Defense Minister Yilmaz announced on September 26 that Turkey decided to choose the Chinese "Red Flag" -9 air defense system as the next-generation long-range air defense system. The total contract amounts to US$3 billion. This choice caused a big stir [in Western society]. The U.S. immediately expressed "serious concern." Sun Zhe, a professor at Tsinghua University, said in an interview that Chinese military trade has achieved a qualitative leap and the West needs to adjust its mentality. 

Some people believe that, as China is now able to sell the "Red Flag" -9 [missile], next it will be able to sell the F-10 [fighter aircarft]. In this regard, Sun Zhe said that we can see the trend in the trade of China’s military products. China has moved from the initial export of major military products only to Pakistan, and later to other countries. For example, it moved from Venezuela buying our small transport aircraft and the UAE purchasing our howitzer, to today’s Turkish intent to buy our Red Flag-9 anti-aircraft missiles. This shows the achievement of a qualitative leap. In this process, our military products are also improving along with the international rules. Western society may not be psychologically prepared for that yet. The West needs to adjust its mentality. China will become stronger. It will not just sell inferior goods. In the future it may even sell aircraft carrier technology to other countries. 

Source: People’s Daily, October 10, 2013

http://military.people.com.cn/n/2013/1010/c1011-23148983.html

Briefings | | |   Defense/Military