November 13, 2008
By: Peter Navarro
Years from now, China's embrace of a massive fiscal stimulus, announced this week, will be seen as a far more important marker of the country's emergence as an economic superpower than even the successful hosting of the 2008 Summer Olympic Games.
This two-year, US$600 billion fiscal stimulus - equal to a stunning one-sixth of China's entire gross domestic product - focuses primarily on the construction of economically critical infrastructure, such as rail and energy networks and politically critical infrastructure, like low-income housing and healthcare. The historic importance of China's "New Deal" is evident in at least five factors.
First, China's swift action aptly illustrates how this putatively communist country can flexibly embrace the kind of mainstream Keynesian economics that has kept the capitalist world (mostly) in prosperity since the end of the Great Depression. It's pitch-perfect fiscal policy.
Second, in a supreme irony, China has acted far more quickly and decisively than the United States, with the students now teaching their former mentors. Indeed, Chinese officials, many of them schooled in US universities, seemed to have grasped far more quickly than US officials like Federal Reserve chairman Ben Bernanke the futility of relying solely on interest rate cuts for rapid recovery.
In particular, businesses won't invest, no matter how low interest rates go, if the recession remains. Nor will lower interest rates entice consumers to buy big-ticket items such as cars and houses if they are worried about their jobs and shrinking stock portfolios. Chinese officials have grasped this point, even as European officials have thus far rejected fiscal stimulus and US officials continue to quibble over the size and timing of any package.
Third, China's fiscal stimulus package puts a powerful exclamation point on the tightly woven interconnectedness of the world's major economies. While China continues to run large trade surpluses with the US and Europe, it is equally true that exports to China by American, European and even Asian countries constitute an ever-increasing component of economic growth.
In this global trade, countries like Germany, Japan and the US provide sophisticated capital equipment for China's "factory floor". As China expands its infrastructure, companies like Hitachi and Caterpillar likewise benefit from increased sales to China.
Fourth, the focus of China's fiscal stimulus particularly on infrastructure illustrates a sophisticated understanding - seemingly lacking in the United States - of what is necessary to build a strong economy. In its next stage of development, China's rail system must far better serve the inland areas of China where large pockets of rural poverty and high unemployment persist, despite three decades of robust growth. In fact, while the coastal areas from the Pearl River Delta up to Dalian have prospered, much of inland China remains impoverished. Swiftly developing better roads and rail and a more reliable and extensive electricity grid and water system is just what the country needs.
Fifth, China's New Deal will act as a powerful stimulus for domestic demand. Today, the Chinese economy is far too heavily dependent on export-driven growth. By stimulating domestic demand, China will not only better insulate itself from the vagaries of global trade. Rising domestic demand should also help reduce trade frictions that have arisen because of the large trade surpluses China runs with Europe and the US.
Finally, China's fiscal stimulus may also prove to be the beginning of the end of China's willingness to finance the budget and trade deficits of the United States.
For almost a decade, China has recycled many of the dollars it has earned through its export trade back into the US bond market. This has kept interest rates low in America and allowed the American consumer to spend far beyond his or her means.
Now, however, China is going to need its foreign reserves and export earnings for domestic purposes. That should certainly mean fewer dollars available for recycling back to the US. In this way, China's fiscal stimulus may act as a significant constraint on America's own ability to successfully implement its own fiscal stimulus - even as China uses Keynesian policies to eclipse the US as the world's reigning economic superpower.
Peter Navarro is a professor at The Paul Merage School of Business at the University of California-Irvine, a CNBC contributor and author of The Coming China Wars. www.peternavarro.com.
Tuesday, November 18, 2008
Cashing in on China's Boom
November 20, 2008
By: Hu Yue
Foreign banks continue to fare well here on the back of the country's torrid economic growth
Sitting on piles of bad mortgages and unpaid credit-card debts and auto loans, several foreign banks have seen their profits plummet along with the broader economic downturn in the West. But the good news is that they still see China as a bright spot for expanding their business.
In the first three quarters this year, foreign banks in China earned 10.12 billion yuan ($1.48 billion) in profit, double the amount they made during the same period last year, said the China Banking Regulatory Commission in a statement on September 25.
The banking regulator said these institutions currently have an average ratio of non-performing loans of 0.52 percent of their total loans and that their capital-adequacy ratio averages 16.9 percent, underlining their healthy fundamentals, good asset quality, adequate capital provisions and sound liquidity.
Guo Tianyong, Director of the Research Center of the China Banking Industry under the Central University of Finance and Economics, told Beijing Review that foreign lenders have enjoyed buoyant business here largely because of China's economic boom in recent years and its strong domestic financial market, which has been growing exponentially.
Zhang Xi, a senior banking analyst at China Galaxy Securities Co. Ltd., agreed. She said a growing number of wealthy Chinese have ensured high returns for the foreign banks' wealth management and private banking services, which account for a big chunk of the banks' total revenues.
China's embrace of foreign lenders dates back to 1978 when the Japan Import and Export Bank was authorized to set up a representative office in Beijing. Ever since then, more and more foreign banks have penetrated China's market by extending their branch networks and product offerings and buying stakes in their Chinese counterparts, particularly after being offered broader access to lucrative retail renminbi services at the end of 2006.
A survey conducted by Pricewaterhouse-Coopers LLP (PWC) indicated that most foreign banks are expected to further tap into the world's fastest-growing major economy. In a poll of 42 foreign banks, the global consultancy said nine anticipated at least a 100-percent revenue growth in China this year, and many foresaw 40-50 percent annual revenue growth rates over the next few years.
The bullish growth predictions by overseas banks are based on confidence that more clients will be attracted to their deeper and more sophisticated product offerings and global client relationships, PWC said.
But as the financial crisis unfolds, many now fret that the foreign banks, after getting hit hard at home, may drag their feet in pushing into China in the face of a possible economic slowdown.
Zhang downplayed the concerns, saying China's banking system, one of the few in the world that have largely emerged unscathed by the financial chaos, remains stable and healthy, and therefore would maintain its appeal to foreign lenders.
Guo said the foreign banks' buoyant profit growth in China was likely to lose some steam as the crisis drained some of their financing sources at home, although it would remain much higher in most parts of the world. He added that the foreign banks would continue to value their China foothold. A case in point is Bank of America Corp., which has not sold its holdings in China Construction Bank Corp. as many expected, he said.
The worries are turning out to be truly unwarranted, because foreign banks have not bulked from the Chinese market, but continue to look to the country as a calm port in the storm. Since October, several foreign banks, including the Bank of East Asia Ltd. and Standard Chartered Plc, have added new branches to their banking networks in China.
Besides this, a growing number of foreign banks such as Citigroup Inc. and HSBC Holdings Plc, are making a push into the country's vastly under-serviced rural areas. HSBC said it would open about 30 branches in the countryside in the next few years, while the country has approved Citigroup's plans to establish two microcredit firms in the rural areas of Hubei Province in central China.
Guo said rural finance represents the future development trend of the banking sector in the long run and may become fresh growth points for both foreign and Chinese lenders.
Analysts say Chinese banks, particularly the "big four" state-owned banks, are now able to stand on their own feet after a few years of restructuring, but still need to improve their risk management, corporate governance and efficiency in a fully competitive market environment.
As foreign lenders spread across the country, they also face increasing competition in private banking and wealth management from China's large banks, which are eager to reduce their dependence on their traditional lending business and boost their fee income.
In the end, it will be a win-win situation that allows foreign players into the country's internal business cycle, Guo said.
"The arrival of foreign banks has benefited the local banking industry and customers with new services, managerial expertise and methodologies," Guo said. "They can also play a catalytic role in improving the corporate behavior of Chinese banks."
By: Hu Yue
Foreign banks continue to fare well here on the back of the country's torrid economic growth
Sitting on piles of bad mortgages and unpaid credit-card debts and auto loans, several foreign banks have seen their profits plummet along with the broader economic downturn in the West. But the good news is that they still see China as a bright spot for expanding their business.
In the first three quarters this year, foreign banks in China earned 10.12 billion yuan ($1.48 billion) in profit, double the amount they made during the same period last year, said the China Banking Regulatory Commission in a statement on September 25.
The banking regulator said these institutions currently have an average ratio of non-performing loans of 0.52 percent of their total loans and that their capital-adequacy ratio averages 16.9 percent, underlining their healthy fundamentals, good asset quality, adequate capital provisions and sound liquidity.
Guo Tianyong, Director of the Research Center of the China Banking Industry under the Central University of Finance and Economics, told Beijing Review that foreign lenders have enjoyed buoyant business here largely because of China's economic boom in recent years and its strong domestic financial market, which has been growing exponentially.
Zhang Xi, a senior banking analyst at China Galaxy Securities Co. Ltd., agreed. She said a growing number of wealthy Chinese have ensured high returns for the foreign banks' wealth management and private banking services, which account for a big chunk of the banks' total revenues.
China's embrace of foreign lenders dates back to 1978 when the Japan Import and Export Bank was authorized to set up a representative office in Beijing. Ever since then, more and more foreign banks have penetrated China's market by extending their branch networks and product offerings and buying stakes in their Chinese counterparts, particularly after being offered broader access to lucrative retail renminbi services at the end of 2006.
A survey conducted by Pricewaterhouse-Coopers LLP (PWC) indicated that most foreign banks are expected to further tap into the world's fastest-growing major economy. In a poll of 42 foreign banks, the global consultancy said nine anticipated at least a 100-percent revenue growth in China this year, and many foresaw 40-50 percent annual revenue growth rates over the next few years.
The bullish growth predictions by overseas banks are based on confidence that more clients will be attracted to their deeper and more sophisticated product offerings and global client relationships, PWC said.
But as the financial crisis unfolds, many now fret that the foreign banks, after getting hit hard at home, may drag their feet in pushing into China in the face of a possible economic slowdown.
Zhang downplayed the concerns, saying China's banking system, one of the few in the world that have largely emerged unscathed by the financial chaos, remains stable and healthy, and therefore would maintain its appeal to foreign lenders.
Guo said the foreign banks' buoyant profit growth in China was likely to lose some steam as the crisis drained some of their financing sources at home, although it would remain much higher in most parts of the world. He added that the foreign banks would continue to value their China foothold. A case in point is Bank of America Corp., which has not sold its holdings in China Construction Bank Corp. as many expected, he said.
The worries are turning out to be truly unwarranted, because foreign banks have not bulked from the Chinese market, but continue to look to the country as a calm port in the storm. Since October, several foreign banks, including the Bank of East Asia Ltd. and Standard Chartered Plc, have added new branches to their banking networks in China.
Besides this, a growing number of foreign banks such as Citigroup Inc. and HSBC Holdings Plc, are making a push into the country's vastly under-serviced rural areas. HSBC said it would open about 30 branches in the countryside in the next few years, while the country has approved Citigroup's plans to establish two microcredit firms in the rural areas of Hubei Province in central China.
Guo said rural finance represents the future development trend of the banking sector in the long run and may become fresh growth points for both foreign and Chinese lenders.
Analysts say Chinese banks, particularly the "big four" state-owned banks, are now able to stand on their own feet after a few years of restructuring, but still need to improve their risk management, corporate governance and efficiency in a fully competitive market environment.
As foreign lenders spread across the country, they also face increasing competition in private banking and wealth management from China's large banks, which are eager to reduce their dependence on their traditional lending business and boost their fee income.
In the end, it will be a win-win situation that allows foreign players into the country's internal business cycle, Guo said.
"The arrival of foreign banks has benefited the local banking industry and customers with new services, managerial expertise and methodologies," Guo said. "They can also play a catalytic role in improving the corporate behavior of Chinese banks."
Chinese Basic Scientific Knowledge on Rise
November 17, 2008
Xinhua News Agency
Scientific and technological awareness has been increasing among the Chinese people, according to a survey released on Sunday.
The survey by the Chinese Association for Science and Technology (CAST) reveals that people with basic science and technology knowledge account for 2.25 percent of the total population of 1.3 billion, compared to 1.6 percent in 2005 when a similar survey was last conducted.
The survey covers 10,080 people, aged between 18 and 69, from 31 provinces, autonomous regions and municipalities on the Chinese mainland.
Carried out from December 2007 to February 2008, the survey indicates 18.4 percent of the Chinese people understood scientific terms, 33.5 percent understood scientific methods and 59.4 percent understood the relation between science and society.
The respondents held that teachers, scientists and doctors are the most respected professionals and 40.1 percent of the parents hoped their children would become scientists.
As to the relation between scientific development and human resources, 82.8 percent of the respondents agree that "stimulating children's interest in science and technology will be conducive to the development of China's talents."
The Chinese people also have high expectations on future development of science and technology. The survey says that 81.9 percent of the respondents believe modern science and technology will bring the offsprings more opportunities for development.
Xinhua News Agency
Scientific and technological awareness has been increasing among the Chinese people, according to a survey released on Sunday.
The survey by the Chinese Association for Science and Technology (CAST) reveals that people with basic science and technology knowledge account for 2.25 percent of the total population of 1.3 billion, compared to 1.6 percent in 2005 when a similar survey was last conducted.
The survey covers 10,080 people, aged between 18 and 69, from 31 provinces, autonomous regions and municipalities on the Chinese mainland.
Carried out from December 2007 to February 2008, the survey indicates 18.4 percent of the Chinese people understood scientific terms, 33.5 percent understood scientific methods and 59.4 percent understood the relation between science and society.
The respondents held that teachers, scientists and doctors are the most respected professionals and 40.1 percent of the parents hoped their children would become scientists.
As to the relation between scientific development and human resources, 82.8 percent of the respondents agree that "stimulating children's interest in science and technology will be conducive to the development of China's talents."
The Chinese people also have high expectations on future development of science and technology. The survey says that 81.9 percent of the respondents believe modern science and technology will bring the offsprings more opportunities for development.
Sunday, November 9, 2008
China's 4 Trillion Yuan Stimulus to Boost Economy, Domestic Demand
November 9, 2008
Xinhua News Agency
China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.
This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing.
A stimulus package estimated at 4 trillion yuan (about US$570 billion) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake.
The policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan.
Commercial banks' credit ceilings will be abolished to channel more lending to priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
The decision was announced on Sunday by the State Council, or cabinet, after Premier Wen Jiabao presided over an executive meeting on Wednesday.
The meeting decided that credit expansion must be "rational" and "target spheres that would promote and consolidate the expansion of consumer credit."
With 100 billion yuan from current-year central government funds and another 20 billion yuan brought forward from next year's budget for post-disaster reconstruction, the fourth quarter is expected to see a total investment of 400 billion yuan across the nation.
The massive spending plan was expected to play a remarkable role in sustaining growth as 4 trillion yuan investment is an equivalent of one third of the nation's total fixed asset investment last year, according to Zhang Liqun, researcher with the Development Research Center of the State Council.
"With the deepening of the global financial crisis over the past two months, the government must take flexible and prudent macro-economic policies to deal with the complex and changing situation," said the meeting.
The meeting also announced that China will adopt "active" fiscal and "moderately active" monetary policies and map out more forceful measures to expand domestic demand, speed up the construction of public facilities and improve living standards of the poor to achieve "steady and relative fast" economic growth.
The active fiscal policy alone would not bear much fruit without the coordination of easing monetary policy. The two should work together to confront the economic complexity of home and abroad, said Yuan Gangming, researcher with the Center for China in the World Economy of Tsinghua University.
The policy change comes out in time as the global financial crisis begins to affect China's real economy. The adjustment is more resolute and timely as China draw lessons from the Asian financial crisis in 1998, said director of the Research Institute for Fiscal Science of Ministry of Finance Jia Kang. He noted the easing policy was expected to prevent big ups and downs in the economy.
He said the value-added tax reduction would encourage enterprises to invest more in the long run.
The macro-economic policy changes announced on Sunday are one of only a few major shifts during the 30 years since the beginning of reform and opening up in 1978.
The most recent modification was in December, when the government resorted to a combination of "tight" monetary policy and "prudent" fiscal policy to fight inflation.
With the monthly consumer price index, the main gauge of inflation, expected to drop further through year-end -- after plunging from a 12-year high of 8.7 percent in February to 4.6 percent in September -- the focal task of macro-economic control has shifted from beating inflation to sustaining economic growth.
The past three months have seen a series of stimulus policies: interest rate cuts, lower bank reserve requirement ratios, tax changes, higher credit quotas and the injection of central government funds to infrastructure construction.
The meeting decided that higher investment must be able to facilitate economic restructuring, promote growth potential by channeling investment to where it's most needed and spur private consumption.
Although the economy has maintained double-digit growth for years, fixed-asset investment and exports have dwarfed consumption as the two pillars of expansion. With global recession clearly in view, China must sustain itself by exploiting the domestic market to offset weaker demand abroad.
The meeting identified the ongoing world economic adjustment as "a new opportunity" for China to speed industrial restructuring, introduce advanced technologies and talents from abroad.
Despite challenges, China has a great potential to develop its domestic demand and a solid financial system, the meeting noted.
"As long as we take the right measures in a resolute and timely way to grasp the chance and rise to the challenges, we will surely secure steady and relative fast economic growth," the meeting noted.
Xinhua News Agency
China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.
This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing.
A stimulus package estimated at 4 trillion yuan (about US$570 billion) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake.
The policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan.
Commercial banks' credit ceilings will be abolished to channel more lending to priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
The decision was announced on Sunday by the State Council, or cabinet, after Premier Wen Jiabao presided over an executive meeting on Wednesday.
The meeting decided that credit expansion must be "rational" and "target spheres that would promote and consolidate the expansion of consumer credit."
With 100 billion yuan from current-year central government funds and another 20 billion yuan brought forward from next year's budget for post-disaster reconstruction, the fourth quarter is expected to see a total investment of 400 billion yuan across the nation.
The massive spending plan was expected to play a remarkable role in sustaining growth as 4 trillion yuan investment is an equivalent of one third of the nation's total fixed asset investment last year, according to Zhang Liqun, researcher with the Development Research Center of the State Council.
"With the deepening of the global financial crisis over the past two months, the government must take flexible and prudent macro-economic policies to deal with the complex and changing situation," said the meeting.
The meeting also announced that China will adopt "active" fiscal and "moderately active" monetary policies and map out more forceful measures to expand domestic demand, speed up the construction of public facilities and improve living standards of the poor to achieve "steady and relative fast" economic growth.
The active fiscal policy alone would not bear much fruit without the coordination of easing monetary policy. The two should work together to confront the economic complexity of home and abroad, said Yuan Gangming, researcher with the Center for China in the World Economy of Tsinghua University.
The policy change comes out in time as the global financial crisis begins to affect China's real economy. The adjustment is more resolute and timely as China draw lessons from the Asian financial crisis in 1998, said director of the Research Institute for Fiscal Science of Ministry of Finance Jia Kang. He noted the easing policy was expected to prevent big ups and downs in the economy.
He said the value-added tax reduction would encourage enterprises to invest more in the long run.
The macro-economic policy changes announced on Sunday are one of only a few major shifts during the 30 years since the beginning of reform and opening up in 1978.
The most recent modification was in December, when the government resorted to a combination of "tight" monetary policy and "prudent" fiscal policy to fight inflation.
With the monthly consumer price index, the main gauge of inflation, expected to drop further through year-end -- after plunging from a 12-year high of 8.7 percent in February to 4.6 percent in September -- the focal task of macro-economic control has shifted from beating inflation to sustaining economic growth.
The past three months have seen a series of stimulus policies: interest rate cuts, lower bank reserve requirement ratios, tax changes, higher credit quotas and the injection of central government funds to infrastructure construction.
The meeting decided that higher investment must be able to facilitate economic restructuring, promote growth potential by channeling investment to where it's most needed and spur private consumption.
Although the economy has maintained double-digit growth for years, fixed-asset investment and exports have dwarfed consumption as the two pillars of expansion. With global recession clearly in view, China must sustain itself by exploiting the domestic market to offset weaker demand abroad.
The meeting identified the ongoing world economic adjustment as "a new opportunity" for China to speed industrial restructuring, introduce advanced technologies and talents from abroad.
Despite challenges, China has a great potential to develop its domestic demand and a solid financial system, the meeting noted.
"As long as we take the right measures in a resolute and timely way to grasp the chance and rise to the challenges, we will surely secure steady and relative fast economic growth," the meeting noted.
China Plans 10 Major Steps to Spark Growth
November 10, 2008
Xinhua News Agency
China will take 10 major steps to stimulate domestic consumption and growth as it turns to an "active" fiscal policy and "moderately easy" monetary policy, an executive meeting of the State Council said on Sunday.
Here are the 10 major steps:
-- Housing: Building more affordable and low-rent housing and speeding the clearing of slums. A pilot program to rebuild rural housing will expand. Nomads will be encouraged to settle down.
-- Rural infrastructure: Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure drinking water safety. This part of the plan also involves expediting the North-South water diversion project. Risky reservoirs will be reinforced. Water conservation in large-scale irrigation areas will be strengthened. Poverty relief efforts will be increased.
-- Transportation: Accelerating the expansion of the transport network. That includes more dedicated passenger rail links and coal routes. Trunk railways will be extended and more airports will be built in western areas. Urban power grids will be upgraded.
-- Health and education: Beefing up the health and medical service by improving the grass roots medical system. Accelerating the development of the cultural and education sectors and junior high school construction in rural western and central areas. More special education and cultural facilities.
-- Environment: Improving environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas. Accelerating green belt and natural forest planting programs. Increasing support for energy conservation and pollution-control projects.
-- Industry: Enhancing innovation and industrial restructuring and supporting the development of the high-tech and service industries.
-- Disaster rebuilding: Speeding reconstruction in the areas hit by the May 12 earthquake.
-- Incomes: Raising average incomes in rural and urban areas. Raising next year's minimum grain purchase and farm subsidies. Increasing subsidies for low-income urban residents. Increasing pension funds for enterprise employees and allowances for those receiving special services.
-- Taxes: Extending reforms in value-added tax rules to all industries, which could cut the tax corporate burden by 120 billion yuan (about US$17.6 billion). Technological upgrading will be encouraged.
-- Finance: Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
These 10 moves are expected to have positive effects on cement, iron and steel producers amid a boom in infrastructure investment. Commercial lenders will benefit as loan ceilings are abolished, and medium-sized and small companies are likely to benefit from preferential policies.
Xinhua News Agency
China will take 10 major steps to stimulate domestic consumption and growth as it turns to an "active" fiscal policy and "moderately easy" monetary policy, an executive meeting of the State Council said on Sunday.
Here are the 10 major steps:
-- Housing: Building more affordable and low-rent housing and speeding the clearing of slums. A pilot program to rebuild rural housing will expand. Nomads will be encouraged to settle down.
-- Rural infrastructure: Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure drinking water safety. This part of the plan also involves expediting the North-South water diversion project. Risky reservoirs will be reinforced. Water conservation in large-scale irrigation areas will be strengthened. Poverty relief efforts will be increased.
-- Transportation: Accelerating the expansion of the transport network. That includes more dedicated passenger rail links and coal routes. Trunk railways will be extended and more airports will be built in western areas. Urban power grids will be upgraded.
-- Health and education: Beefing up the health and medical service by improving the grass roots medical system. Accelerating the development of the cultural and education sectors and junior high school construction in rural western and central areas. More special education and cultural facilities.
-- Environment: Improving environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas. Accelerating green belt and natural forest planting programs. Increasing support for energy conservation and pollution-control projects.
-- Industry: Enhancing innovation and industrial restructuring and supporting the development of the high-tech and service industries.
-- Disaster rebuilding: Speeding reconstruction in the areas hit by the May 12 earthquake.
-- Incomes: Raising average incomes in rural and urban areas. Raising next year's minimum grain purchase and farm subsidies. Increasing subsidies for low-income urban residents. Increasing pension funds for enterprise employees and allowances for those receiving special services.
-- Taxes: Extending reforms in value-added tax rules to all industries, which could cut the tax corporate burden by 120 billion yuan (about US$17.6 billion). Technological upgrading will be encouraged.
-- Finance: Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.
These 10 moves are expected to have positive effects on cement, iron and steel producers amid a boom in infrastructure investment. Commercial lenders will benefit as loan ceilings are abolished, and medium-sized and small companies are likely to benefit from preferential policies.
China Tests Its Mettle in Syria
Chris Zambelis
November 6, 2008
Solidifying the People's Republic of China's burgeoning relationships with the countries of the Middle East remains a top priority for Beijing. The impetus behind China's resurgent efforts to extend its influence within the Middle East stemmed from Beijing's pursuit of energy resources to sustain its rapidly expanding economy.
As the world's fastest-growing consumer of oil and third-largest net importer of oil, energy will continue to be the most important motivating factor shaping China's foreign policy toward the Middle East in the foreseeable future. The looming global economic downturn will also prompt China to seek out new consumer markets for Chinese-made goods amid rising consumer fears and shrinking global demand from developed markets.
The determinants of Chinese strategic thinking toward the Middle East, however, transcend the issues of energy security and market access, and in many respects have changed dramatically, especially since the Cold War. China is widely recognized as a rising power that is becoming increasingly confident in exerting its newfound leverage to assert its interests and shape geopolitics in its favor.
Consequently, China is keen on projecting its influence in the Middle East, a region where it was largely relegated to the sidelines amid the Cold War rivalry between the United States and the Soviet Union. Throughout much of the Cold War, China viewed the Middle East as an opportunity to showcase its revolutionary credentials by criticizing its more powerful Soviet rival, albeit from afar, for not doing enough to empower countries such as Syria and the peoples of the region (or, in some cases, for acting as an imperial power, in its view, on par with the United States and the West).
China's controversial decision to export intermediate-range ballistic missile systems and related technology to Syria and other states in the region in the late 1980s and early 1990s represented Beijing's first significant inroads as an actor in the Middle East with the potential to shift the balance of power on the ground. Moscow's refusal to augment Syria's missile capabilities with a long-range capability during the waning days of the Cold War drove Damascus to seek other partners to bolster its military capabilities.
Consequently, Chinese arms sales at the time contained an ideological component that sought to fill the void left by the decline of Soviet influence in Syria and the Middle East. Furthermore, a key factor behind the missile sales (and other arms sales) to Syria and other countries, however, was to fund the People's Liberation Army.
Beijing's move to supply Syria and other countries in the region with advanced missile capabilities prompted Washington to impose sanctions on China on the sale of computers and other areas under the auspices of the 1987 Missile Technology Control Regime (MTCR), which forced the Chinese to renounce their intentions to follow through with the missile sales to Syria. Despite Chinese and Syrian denials, serious questions remain regarding the full extent of China's support for Syria's missile programs.
Since the early 1990s, and especially amid China's rapid economic expansion, Beijing's approach towards Damascus has since experienced a marked shift in priorities and behavior, a shift shaped largely by China's efforts to present itself as a mature and responsible actor in international affairs.
China's increasingly diversified and booming economy also will allow it to depend less on weapons sales, especially if such sales threaten to undermine China's political and diplomatic position in the international arena, as was the case in its bilateral relationship with the United States in the early 1990s over its dealings with Syria. Despite this shift in Beijing's behavior, China remains a major supplier of arms to countries whose intentions have come under US and international scrutiny. This time, however, China is able to export arms from a position of strength to bolster its geopolitical objectives, as opposed to economic necessity.
Outside of the military realm, Beijing's influence has grown significantly in recent years, commensurate with its increasing economic power. Beijing's efforts to engage the region are also reinforced by a resounding welcome from both the state and popular sectors, as regional governments and publics are eager to see an end to what is widely viewed as a harmful US hegemony in the Middle East. These sentiments prevail even in countries that count the United States as a strategic ally. China's attempts to forge close and multifaceted ties with key Middle East states such as Syria, a country with modest oil reserves relative to its neighbors and a struggling economy, reflect the increasing complexity of China's foreign policy toward the region and show that Beijing's concerns extend beyond oil and markets - particularly in the case of Damascus.
Business as Usual
In accordance with Beijing's strategy toward the Middle East, Chinese Vice President Hu Jintao's January 2001 meeting with Syrian President Bashar al-Assad helped initiate a new chapter in Sino-Syrian relations that would lead to the expanded trade and closer bilateral ties both countries share today.
Furthermore, Assad's visit to Beijing in July 2004 marked the first visit by a Syrian leader since the establishment of relations between both countries in 1956. The Syrian leader's trip occurred against the background of the US invasion and occupation of Iraq and increasing US pressure on Syria for its alleged role in facilitating elements of the Iraqi insurgency. Syria was one of the first countries in the Middle East to recognize China, a milestone frequently touted by leaders in both China and Syria as a symbol of the enduring friendship shared by both countries. Since Assad's landmark 2004 visit to Beijing, high-level contacts between Chinese and Syrian dignitaries have become commonplace, especially contacts within the business sectors.
Reflecting the pattern of Beijing's relations elsewhere in the region, Chinese oil giants have invested hundreds of millions of dollars in Syria in recent years to modernize the country's aging oil and gas infrastructure, and have entered into joint ventures with Syrian energy firms in the areas of oil and gas exploration and oil refinement.
In a recent development, the China Petrochemical Corporation (Sinopec) announced its US$2 billion purchase of Canada's Tanganyika Oil Co Ltd, a firm with major operating interests in Syria's oil industry. Chinese investments in Syria also encompass the electricity, construction, telecommunications, agriculture, transport and tourism sectors.
In an effort to further boost Chinese investment in Syria, Damascus has proposed the creation of a Chinese Industrial Zone and a China Telecom Park. The bilateral trade volume between both countries reached $1.87 billion in 2007, up almost 33% from 2006, a figure that is expected to double by 2011. China has since become Syria's single-largest trading partner. To demonstrate the rapid expansion of Sino-Syrian trade relations, the bilateral trade volume in 2000 was only $174 million. Despite this impressive expansion in trade, the overall volume of Sino-Syrian trade remains relatively small compared with China's trade relations elsewhere in the region.
However, the steady upward trajectory of trade relations in recent years suggests that trade ties will continue to grow. While Syria welcomes Chinese investment, a growing Syrian trade deficit has also caused some Syrians to resent the growing "Made in China" imprint on their country, especially as cheaper Chinese-made goods squeeze out their Syrian-produced counterparts in the local markets mostly as a result of preferential trade agreements and excessive undervaluing of the yuan.
Culture and Soft Power
The rapid expansion of Sino-Syrian trade relations is augmented by a bilateral effort to foster closer cultural ties between both countries that go beyond business and diplomacy. The diplomatic discourses of both countries, for instance, regularly extol the virtues of their ancient and proud histories. Having endured colonialism, occupation and foreign interference in its domestic affairs, Syria and other developing countries in the region look to China with a sense of pride.
As a developing country in its own right, China has charted an independent path toward economic development and modernization that serves as a model worthy of emulation in the developing world, a point frequently touted by Beijing. For countries such as Syria, China's experience provides a viable alternative to the Western-led economic development models championed by the United States and former European colonial powers that once occupied the Middle East, models that are often viewed as neo-colonial institutions. China's case is also bolstered by the fact that it does not have a legacy of colonialism in the region.
Chinese cultural centers are also opening up across Syria, and Syrians are increasingly learning Chinese. China is also promoting Syria as a tourist destination for its citizens, a gesture that is welcomed in Damascus. Tourism revenue is a crucial source of hard currency for cash-strapped Syria. A steady stream of Chinese tourists traveling to Syria help to alleviate Syria's trade imbalance and is seen as a sign of goodwill by the Chinese toward Damascus.
Testing Ground for Chinese diplomacy
While China is eager to make its presence felt in Syria and the wider Middle East, it is careful not to overplay its hand, given that the region remains within the US sphere of influence. China is aggressive when pursuing investment opportunities and access to markets, but it is less amenable to undertaking other actions that could potentially increase tensions with the US.
China's approach to relations with staunch US allies such as Egypt are emblematic of its careful balancing act in its Middle East diplomacy. In the case of Sino-Egyptian relations, China knows its limits, and is content with expanding economic and cultural ties without appearing to directly threaten the strategic relationship Egypt maintains with the US. Beijing is well aware that it is in no position to match Washington's commitment to Egypt, not to mention contend with the fallout in US-Sino relations that would result through an effort to lure Cairo away from Washington.
While China is awash with cash, for instance, there are no indications that China has ever seriously considered outbidding the annual $2 billion military and economic aid package the United States provides Egypt. Despite persistent rumblings of budding Chinese-Egyptian military contacts, Beijing instead focuses on building business and cultural ties with Cairo.
However, the dynamics at play in the Sino-Syrian interface are far more complex. Syria is entangled in a web of rival interests and regional tensions and conflicts that are sure to affect China down the line, especially as China's footprint in the Middle East grows in the economic and political spheres. Given Syria's tense relationship with the US, Beijing's ties with Damascus raise a host of issues for China. Among others, Washington is likely to see expanding Sino-Syrian ties as a move meant to check US power in the Middle East, thus prompting a potential US response in Asia or elsewhere.
Syria is also at the center of the Arab-Israeli conflict. The current status of the Golan Heights, for instance, a region in southwestern Syria that was seized and occupied by Israel during the 1967 war, and unilaterally annexed in 1981, remains a serious obstacle to an Israel-Syrian peace agreement. Further complicating matters is the presence of over 18,000 Israeli settlers living among the approximately 20,000 Syrians who remained in the region following the Israeli occupation. The international community does not recognize Israel's claims over the Syrian territory. There is also is a strong consensus that any future Israeli-Syrian peace would require Israel to return the Golan Heights to Syria - an opinion openly supported by China.
The fall of the Soviet Union and the subsequent loss of military and economic support from Moscow left Damascus severely weakened in the face of its more powerful neighbors and with few viable options to emerge out of its regional isolation, save for its relationship with Iran. As a result, Syria is eager to court China as an ally. In fact, the Ba'athist regime in Damascus looks to China as a bulwark against US pressure against Syria, especially amid growing pressure from Washington over what it labels as Syria's links to terrorism, nuclear proliferation and related concerns.
Despite its controversial relationship with Israel, Syria's main rival in the region, China also remains a stalwart supporter of the Syrian and Arab stance when it comes to the plight of the Palestinians, as evidenced through its frequent condemnations of Israel's occupation of Palestinian land and vocal support for Palestinian self-determination.
Likewise, Syria is a vocal supporter of Beijing's "One China" principle that defines Taiwan as sovereign Chinese territory. A pillar of Chinese foreign policy in the Middle East and elsewhere is to shore up support for its "One China" policy in order to isolate Taiwan and undermine its relations with the US and other countries that recognize its independence.
Although virtually all of the oil consumed by Taiwan is derived from imports (approximately 900,000 barrels per day), 80% of which originate in the Middle East, the lure of Chinese investment and the prospects of forging close ties with an emerging global power such as China vastly outweigh any benefits Syria or other Middle Eastern countries may reap from recognizing Taiwan.
Damascus also expressed solidarity with Beijing over its handling of the riots in Lhasa, capital of the Tibet Autonomous Region, in March, labeling the Tibetan uprising as an act of "sabotage" that was intended to undermine Chinese unity and stability. In fact, both China and Syria see eye-to-eye when it comes to resisting efforts by the US and elements in the international community to chastise each when it comes to their respective human-rights records. Beijing and Damascus see such efforts as foreign interference in their respective domestic affairs.
In addition to its role in the Arab-Israeli conflict, Syria's relationship with Iran has also left the ruling Ba'athist regime isolated among its Arab neighbors and Turkey. Syria is also a permanent fixture in Lebanon's complex politics. Syria is also involved in a series of disputes regarding water rights and borders with Turkey. Syria has also been criticized for its role as a gateway for insurgents traveling to Iraq to fight US-led coalition forces. Making matters worse, Syria is also home to over 1 million Iraqi refugees who fled the violence and instability in Iraq. All of these issues directly involve the US or close US allies, thus forcing China to tread carefully in its dealing with Syria.
A View From Damascus
In an ideal scenario for Damascus, an emboldened China would serve to bolster Syria's position beyond the trade and diplomatic spheres. This would include closer cooperation in the defense arena to shore up Syria's antiquated military through the sale of advanced weapons platforms.
Although China has a history of arms sales and transferring sensitive military technology to Syria, to include missile technology, and to other countries in the region, there are no indications that Beijing is planning to provide Syria with advanced weapons platforms that would tip the regional balance of power in the foreseeable future.
Doing so would escalate regional tensions and draw China closer to the simmering conflicts in the region. While certain elements in China may relish an opportunity to respond in kind to sales of advanced weapons systems by the US to Taiwan and other American allies in Asia, a policy Beijing perceives as a bid to contain China, by arming opponents of the US in the Middle East, Beijing appears to be taking a measured approach when it comes to considering major arms transfers to Syria.
However, in late 2007 a series of reports surfaced alleging that China was prepared to sell both Iran and Syria its J-10 fighter jets. Ironically, the design of China's J-10s contains technology used in the development of Israel's Lavi fighter jets, technology which was sold to China after Israel ceased development of the aircraft due to financial constraints. On a related note, Syria is actively courting Russia in a similar vein to serve as a potential partner analogous to the role Moscow played during the Cold War, especially in the area of defense cooperation. Damascus has even gone as far as to invite Russian forces to establish a naval base in Syria.
At a minimum, Syria hopes that China will one day use its position as a permanent member of the United Nations Security Council to play a more constructive role in any negotiations between Syria and Israel over a comprehensive peace agreement, essentially serving as a counter to the US, which supports Israel. Syria would also like to leverage its growing relationship with China in a bid to improve relations with the US. Damascus also hopes that closer Sino-Syrian ties will entice Moscow to increase its stake in friendlier relations with Syria.
Conclusion
Sino-Syrian relations are poised to develop even further in the years ahead. China will continue to look to Syria, in addition to the rest of the Middle East, as a source of economic potential and as an opportunity to project Beijing's influence in the region. However, as China's interests in Syria expand, Syria's continued isolation and complex geopolitics will pose a series of challenges for Chinese diplomacy that warrant closer consideration.
Indeed, the Sino-Syrian relationship will force China to make hard decisions down the road. How China reacts to future regional and international crises involving Syria will also showcase China's value as a potential partner and ally for others looking to Beijing for support.
November 6, 2008
Solidifying the People's Republic of China's burgeoning relationships with the countries of the Middle East remains a top priority for Beijing. The impetus behind China's resurgent efforts to extend its influence within the Middle East stemmed from Beijing's pursuit of energy resources to sustain its rapidly expanding economy.
As the world's fastest-growing consumer of oil and third-largest net importer of oil, energy will continue to be the most important motivating factor shaping China's foreign policy toward the Middle East in the foreseeable future. The looming global economic downturn will also prompt China to seek out new consumer markets for Chinese-made goods amid rising consumer fears and shrinking global demand from developed markets.
The determinants of Chinese strategic thinking toward the Middle East, however, transcend the issues of energy security and market access, and in many respects have changed dramatically, especially since the Cold War. China is widely recognized as a rising power that is becoming increasingly confident in exerting its newfound leverage to assert its interests and shape geopolitics in its favor.
Consequently, China is keen on projecting its influence in the Middle East, a region where it was largely relegated to the sidelines amid the Cold War rivalry between the United States and the Soviet Union. Throughout much of the Cold War, China viewed the Middle East as an opportunity to showcase its revolutionary credentials by criticizing its more powerful Soviet rival, albeit from afar, for not doing enough to empower countries such as Syria and the peoples of the region (or, in some cases, for acting as an imperial power, in its view, on par with the United States and the West).
China's controversial decision to export intermediate-range ballistic missile systems and related technology to Syria and other states in the region in the late 1980s and early 1990s represented Beijing's first significant inroads as an actor in the Middle East with the potential to shift the balance of power on the ground. Moscow's refusal to augment Syria's missile capabilities with a long-range capability during the waning days of the Cold War drove Damascus to seek other partners to bolster its military capabilities.
Consequently, Chinese arms sales at the time contained an ideological component that sought to fill the void left by the decline of Soviet influence in Syria and the Middle East. Furthermore, a key factor behind the missile sales (and other arms sales) to Syria and other countries, however, was to fund the People's Liberation Army.
Beijing's move to supply Syria and other countries in the region with advanced missile capabilities prompted Washington to impose sanctions on China on the sale of computers and other areas under the auspices of the 1987 Missile Technology Control Regime (MTCR), which forced the Chinese to renounce their intentions to follow through with the missile sales to Syria. Despite Chinese and Syrian denials, serious questions remain regarding the full extent of China's support for Syria's missile programs.
Since the early 1990s, and especially amid China's rapid economic expansion, Beijing's approach towards Damascus has since experienced a marked shift in priorities and behavior, a shift shaped largely by China's efforts to present itself as a mature and responsible actor in international affairs.
China's increasingly diversified and booming economy also will allow it to depend less on weapons sales, especially if such sales threaten to undermine China's political and diplomatic position in the international arena, as was the case in its bilateral relationship with the United States in the early 1990s over its dealings with Syria. Despite this shift in Beijing's behavior, China remains a major supplier of arms to countries whose intentions have come under US and international scrutiny. This time, however, China is able to export arms from a position of strength to bolster its geopolitical objectives, as opposed to economic necessity.
Outside of the military realm, Beijing's influence has grown significantly in recent years, commensurate with its increasing economic power. Beijing's efforts to engage the region are also reinforced by a resounding welcome from both the state and popular sectors, as regional governments and publics are eager to see an end to what is widely viewed as a harmful US hegemony in the Middle East. These sentiments prevail even in countries that count the United States as a strategic ally. China's attempts to forge close and multifaceted ties with key Middle East states such as Syria, a country with modest oil reserves relative to its neighbors and a struggling economy, reflect the increasing complexity of China's foreign policy toward the region and show that Beijing's concerns extend beyond oil and markets - particularly in the case of Damascus.
Business as Usual
In accordance with Beijing's strategy toward the Middle East, Chinese Vice President Hu Jintao's January 2001 meeting with Syrian President Bashar al-Assad helped initiate a new chapter in Sino-Syrian relations that would lead to the expanded trade and closer bilateral ties both countries share today.
Furthermore, Assad's visit to Beijing in July 2004 marked the first visit by a Syrian leader since the establishment of relations between both countries in 1956. The Syrian leader's trip occurred against the background of the US invasion and occupation of Iraq and increasing US pressure on Syria for its alleged role in facilitating elements of the Iraqi insurgency. Syria was one of the first countries in the Middle East to recognize China, a milestone frequently touted by leaders in both China and Syria as a symbol of the enduring friendship shared by both countries. Since Assad's landmark 2004 visit to Beijing, high-level contacts between Chinese and Syrian dignitaries have become commonplace, especially contacts within the business sectors.
Reflecting the pattern of Beijing's relations elsewhere in the region, Chinese oil giants have invested hundreds of millions of dollars in Syria in recent years to modernize the country's aging oil and gas infrastructure, and have entered into joint ventures with Syrian energy firms in the areas of oil and gas exploration and oil refinement.
In a recent development, the China Petrochemical Corporation (Sinopec) announced its US$2 billion purchase of Canada's Tanganyika Oil Co Ltd, a firm with major operating interests in Syria's oil industry. Chinese investments in Syria also encompass the electricity, construction, telecommunications, agriculture, transport and tourism sectors.
In an effort to further boost Chinese investment in Syria, Damascus has proposed the creation of a Chinese Industrial Zone and a China Telecom Park. The bilateral trade volume between both countries reached $1.87 billion in 2007, up almost 33% from 2006, a figure that is expected to double by 2011. China has since become Syria's single-largest trading partner. To demonstrate the rapid expansion of Sino-Syrian trade relations, the bilateral trade volume in 2000 was only $174 million. Despite this impressive expansion in trade, the overall volume of Sino-Syrian trade remains relatively small compared with China's trade relations elsewhere in the region.
However, the steady upward trajectory of trade relations in recent years suggests that trade ties will continue to grow. While Syria welcomes Chinese investment, a growing Syrian trade deficit has also caused some Syrians to resent the growing "Made in China" imprint on their country, especially as cheaper Chinese-made goods squeeze out their Syrian-produced counterparts in the local markets mostly as a result of preferential trade agreements and excessive undervaluing of the yuan.
Culture and Soft Power
The rapid expansion of Sino-Syrian trade relations is augmented by a bilateral effort to foster closer cultural ties between both countries that go beyond business and diplomacy. The diplomatic discourses of both countries, for instance, regularly extol the virtues of their ancient and proud histories. Having endured colonialism, occupation and foreign interference in its domestic affairs, Syria and other developing countries in the region look to China with a sense of pride.
As a developing country in its own right, China has charted an independent path toward economic development and modernization that serves as a model worthy of emulation in the developing world, a point frequently touted by Beijing. For countries such as Syria, China's experience provides a viable alternative to the Western-led economic development models championed by the United States and former European colonial powers that once occupied the Middle East, models that are often viewed as neo-colonial institutions. China's case is also bolstered by the fact that it does not have a legacy of colonialism in the region.
Chinese cultural centers are also opening up across Syria, and Syrians are increasingly learning Chinese. China is also promoting Syria as a tourist destination for its citizens, a gesture that is welcomed in Damascus. Tourism revenue is a crucial source of hard currency for cash-strapped Syria. A steady stream of Chinese tourists traveling to Syria help to alleviate Syria's trade imbalance and is seen as a sign of goodwill by the Chinese toward Damascus.
Testing Ground for Chinese diplomacy
While China is eager to make its presence felt in Syria and the wider Middle East, it is careful not to overplay its hand, given that the region remains within the US sphere of influence. China is aggressive when pursuing investment opportunities and access to markets, but it is less amenable to undertaking other actions that could potentially increase tensions with the US.
China's approach to relations with staunch US allies such as Egypt are emblematic of its careful balancing act in its Middle East diplomacy. In the case of Sino-Egyptian relations, China knows its limits, and is content with expanding economic and cultural ties without appearing to directly threaten the strategic relationship Egypt maintains with the US. Beijing is well aware that it is in no position to match Washington's commitment to Egypt, not to mention contend with the fallout in US-Sino relations that would result through an effort to lure Cairo away from Washington.
While China is awash with cash, for instance, there are no indications that China has ever seriously considered outbidding the annual $2 billion military and economic aid package the United States provides Egypt. Despite persistent rumblings of budding Chinese-Egyptian military contacts, Beijing instead focuses on building business and cultural ties with Cairo.
However, the dynamics at play in the Sino-Syrian interface are far more complex. Syria is entangled in a web of rival interests and regional tensions and conflicts that are sure to affect China down the line, especially as China's footprint in the Middle East grows in the economic and political spheres. Given Syria's tense relationship with the US, Beijing's ties with Damascus raise a host of issues for China. Among others, Washington is likely to see expanding Sino-Syrian ties as a move meant to check US power in the Middle East, thus prompting a potential US response in Asia or elsewhere.
Syria is also at the center of the Arab-Israeli conflict. The current status of the Golan Heights, for instance, a region in southwestern Syria that was seized and occupied by Israel during the 1967 war, and unilaterally annexed in 1981, remains a serious obstacle to an Israel-Syrian peace agreement. Further complicating matters is the presence of over 18,000 Israeli settlers living among the approximately 20,000 Syrians who remained in the region following the Israeli occupation. The international community does not recognize Israel's claims over the Syrian territory. There is also is a strong consensus that any future Israeli-Syrian peace would require Israel to return the Golan Heights to Syria - an opinion openly supported by China.
The fall of the Soviet Union and the subsequent loss of military and economic support from Moscow left Damascus severely weakened in the face of its more powerful neighbors and with few viable options to emerge out of its regional isolation, save for its relationship with Iran. As a result, Syria is eager to court China as an ally. In fact, the Ba'athist regime in Damascus looks to China as a bulwark against US pressure against Syria, especially amid growing pressure from Washington over what it labels as Syria's links to terrorism, nuclear proliferation and related concerns.
Despite its controversial relationship with Israel, Syria's main rival in the region, China also remains a stalwart supporter of the Syrian and Arab stance when it comes to the plight of the Palestinians, as evidenced through its frequent condemnations of Israel's occupation of Palestinian land and vocal support for Palestinian self-determination.
Likewise, Syria is a vocal supporter of Beijing's "One China" principle that defines Taiwan as sovereign Chinese territory. A pillar of Chinese foreign policy in the Middle East and elsewhere is to shore up support for its "One China" policy in order to isolate Taiwan and undermine its relations with the US and other countries that recognize its independence.
Although virtually all of the oil consumed by Taiwan is derived from imports (approximately 900,000 barrels per day), 80% of which originate in the Middle East, the lure of Chinese investment and the prospects of forging close ties with an emerging global power such as China vastly outweigh any benefits Syria or other Middle Eastern countries may reap from recognizing Taiwan.
Damascus also expressed solidarity with Beijing over its handling of the riots in Lhasa, capital of the Tibet Autonomous Region, in March, labeling the Tibetan uprising as an act of "sabotage" that was intended to undermine Chinese unity and stability. In fact, both China and Syria see eye-to-eye when it comes to resisting efforts by the US and elements in the international community to chastise each when it comes to their respective human-rights records. Beijing and Damascus see such efforts as foreign interference in their respective domestic affairs.
In addition to its role in the Arab-Israeli conflict, Syria's relationship with Iran has also left the ruling Ba'athist regime isolated among its Arab neighbors and Turkey. Syria is also a permanent fixture in Lebanon's complex politics. Syria is also involved in a series of disputes regarding water rights and borders with Turkey. Syria has also been criticized for its role as a gateway for insurgents traveling to Iraq to fight US-led coalition forces. Making matters worse, Syria is also home to over 1 million Iraqi refugees who fled the violence and instability in Iraq. All of these issues directly involve the US or close US allies, thus forcing China to tread carefully in its dealing with Syria.
A View From Damascus
In an ideal scenario for Damascus, an emboldened China would serve to bolster Syria's position beyond the trade and diplomatic spheres. This would include closer cooperation in the defense arena to shore up Syria's antiquated military through the sale of advanced weapons platforms.
Although China has a history of arms sales and transferring sensitive military technology to Syria, to include missile technology, and to other countries in the region, there are no indications that Beijing is planning to provide Syria with advanced weapons platforms that would tip the regional balance of power in the foreseeable future.
Doing so would escalate regional tensions and draw China closer to the simmering conflicts in the region. While certain elements in China may relish an opportunity to respond in kind to sales of advanced weapons systems by the US to Taiwan and other American allies in Asia, a policy Beijing perceives as a bid to contain China, by arming opponents of the US in the Middle East, Beijing appears to be taking a measured approach when it comes to considering major arms transfers to Syria.
However, in late 2007 a series of reports surfaced alleging that China was prepared to sell both Iran and Syria its J-10 fighter jets. Ironically, the design of China's J-10s contains technology used in the development of Israel's Lavi fighter jets, technology which was sold to China after Israel ceased development of the aircraft due to financial constraints. On a related note, Syria is actively courting Russia in a similar vein to serve as a potential partner analogous to the role Moscow played during the Cold War, especially in the area of defense cooperation. Damascus has even gone as far as to invite Russian forces to establish a naval base in Syria.
At a minimum, Syria hopes that China will one day use its position as a permanent member of the United Nations Security Council to play a more constructive role in any negotiations between Syria and Israel over a comprehensive peace agreement, essentially serving as a counter to the US, which supports Israel. Syria would also like to leverage its growing relationship with China in a bid to improve relations with the US. Damascus also hopes that closer Sino-Syrian ties will entice Moscow to increase its stake in friendlier relations with Syria.
Conclusion
Sino-Syrian relations are poised to develop even further in the years ahead. China will continue to look to Syria, in addition to the rest of the Middle East, as a source of economic potential and as an opportunity to project Beijing's influence in the region. However, as China's interests in Syria expand, Syria's continued isolation and complex geopolitics will pose a series of challenges for Chinese diplomacy that warrant closer consideration.
Indeed, the Sino-Syrian relationship will force China to make hard decisions down the road. How China reacts to future regional and international crises involving Syria will also showcase China's value as a potential partner and ally for others looking to Beijing for support.
Sunday, November 2, 2008
China-Russia Pipeline Pact Boosts Energy Links
October 30, 2008
China Daily
A Sino-Russian pact on a pipeline from Siberia to supply oil to China's northeast was among the agreements witnessed by Premier Wen Jiabao and his Russian counterpart Vladimir Putin in Moscow on Tuesday.
Russian media reports said Moscow's agreement to move ahead on the long-delayed project was won with pledges of financial support from Beijing.
The pipeline, which extends from western Siberia to the Pacific coast, is to be connected to China from the Siberian city of Skovorodino, 70 km north of the Sino-Russian border. The cost of the pipeline spur has been estimated at $800 million.
Russian pipeline monopoly Transneft and China National Petroleum Corp (CNPC) agreed to build the spur to carry 15 million tons a year of oil (300,000 barrels per day) between the countries' trunk pipelines from 2009. This would be enough to meet 4 percent of China's annual demand.
Russia's top energy official, Deputy Prime Minister Igor Sechin, said Russian oil firms would receive "considerable" loans from China in return for increased oil supplies and that the exact amount would be determined by individual projects.
"Financing is required to realize major projects," Sechin told reporters after the signing ceremony.
Three industry sources close to talks reportedly said the countries were in talks to secure between $20 billion and $25 billion in Chinese loans in exchange for greater supplies of Russian oil.
Wen listed cooperation on resource development first among five proposals for economic cooperation with Russia.
"Energy cooperation is an important part of the China-Russia strategic partnership," said a statement issued after Wen's meeting with Putin. "The two sides support deepening cooperation in developing oil and gas resources."
Apart from the pipeline agreement, Xinhua reported, the two countries agreed to:
work jointly in oil production and processing, natural gas production and in chemical industries;
extend cooperation in nuclear energy, including the construction of Tianwan nuclear power plant in Jiangsu province, uranium mining, post-processing of spent fuel and the treatment of nuclear waste;
strengthen long-term cooperation in space technology to ensure the completion of the 2007-09 space cooperation program as scheduled;
promote cooperation in nanotechnology, energy saving, ecology and rational utilization of natural resources;
enhance cooperation in such areas as trade and project financing, and export credit insurance; and
further cooperate in the civil aviation sector, including joint manufacturing of large civilian helicopters.
Wen concluded his three-day official visit to Russia yesterday and left for Kazakhstan to continue his two-nation tour.
China Daily, Xinhua and agencies
China Daily
A Sino-Russian pact on a pipeline from Siberia to supply oil to China's northeast was among the agreements witnessed by Premier Wen Jiabao and his Russian counterpart Vladimir Putin in Moscow on Tuesday.
Russian media reports said Moscow's agreement to move ahead on the long-delayed project was won with pledges of financial support from Beijing.
The pipeline, which extends from western Siberia to the Pacific coast, is to be connected to China from the Siberian city of Skovorodino, 70 km north of the Sino-Russian border. The cost of the pipeline spur has been estimated at $800 million.
Russian pipeline monopoly Transneft and China National Petroleum Corp (CNPC) agreed to build the spur to carry 15 million tons a year of oil (300,000 barrels per day) between the countries' trunk pipelines from 2009. This would be enough to meet 4 percent of China's annual demand.
Russia's top energy official, Deputy Prime Minister Igor Sechin, said Russian oil firms would receive "considerable" loans from China in return for increased oil supplies and that the exact amount would be determined by individual projects.
"Financing is required to realize major projects," Sechin told reporters after the signing ceremony.
Three industry sources close to talks reportedly said the countries were in talks to secure between $20 billion and $25 billion in Chinese loans in exchange for greater supplies of Russian oil.
Wen listed cooperation on resource development first among five proposals for economic cooperation with Russia.
"Energy cooperation is an important part of the China-Russia strategic partnership," said a statement issued after Wen's meeting with Putin. "The two sides support deepening cooperation in developing oil and gas resources."
Apart from the pipeline agreement, Xinhua reported, the two countries agreed to:
work jointly in oil production and processing, natural gas production and in chemical industries;
extend cooperation in nuclear energy, including the construction of Tianwan nuclear power plant in Jiangsu province, uranium mining, post-processing of spent fuel and the treatment of nuclear waste;
strengthen long-term cooperation in space technology to ensure the completion of the 2007-09 space cooperation program as scheduled;
promote cooperation in nanotechnology, energy saving, ecology and rational utilization of natural resources;
enhance cooperation in such areas as trade and project financing, and export credit insurance; and
further cooperate in the civil aviation sector, including joint manufacturing of large civilian helicopters.
Wen concluded his three-day official visit to Russia yesterday and left for Kazakhstan to continue his two-nation tour.
China Daily, Xinhua and agencies
China Creates 9 Million Jobs In Three Quarters
October 27, 2008
Xinhua News Agency
The Ministry of Human Resources and Social Security said on Monday that the country created 9.36 million jobs in the first three quarters, and helped another 4.09 million laid-off workers be re-employed.
The Ministry's spokesman Yin Chengji said at a news briefing that by the end of September China had a registered unemployment rate of four percent, with about 8.3 million being unemployed. The unemployment rate was the same as what the country had at the end of last year.
Yin said the government has transferred 219,000 labors from areas, which were hit by a massive earthquake on May 12 in southwest China's Sichuan province, to other places for new jobs. Another 865,000 people were aided by the government to find jobs in places where they live.
The spokesman said the government would take further responsibility of creating jobs, by offering taxation, financing and other incentives for start-up businesses.
Further coordination with related governmental bodies will be made to increase employment of graduates from colleges and universities.
About 215 million workers joined the nationwide urban pension system, nearly 274 million participated in the basic medical care system, 122 million were in the unemployment insurance mechanism, 135 million were covered by the work injury insurance and 88 million were in the maternity insurance, the ministry figures show.
The government will start tryouts to establish a pension system in rural areas and expand the urban pension system to rural migrating labors, Yin said.
Xinhua News Agency
The Ministry of Human Resources and Social Security said on Monday that the country created 9.36 million jobs in the first three quarters, and helped another 4.09 million laid-off workers be re-employed.
The Ministry's spokesman Yin Chengji said at a news briefing that by the end of September China had a registered unemployment rate of four percent, with about 8.3 million being unemployed. The unemployment rate was the same as what the country had at the end of last year.
Yin said the government has transferred 219,000 labors from areas, which were hit by a massive earthquake on May 12 in southwest China's Sichuan province, to other places for new jobs. Another 865,000 people were aided by the government to find jobs in places where they live.
The spokesman said the government would take further responsibility of creating jobs, by offering taxation, financing and other incentives for start-up businesses.
Further coordination with related governmental bodies will be made to increase employment of graduates from colleges and universities.
About 215 million workers joined the nationwide urban pension system, nearly 274 million participated in the basic medical care system, 122 million were in the unemployment insurance mechanism, 135 million were covered by the work injury insurance and 88 million were in the maternity insurance, the ministry figures show.
The government will start tryouts to establish a pension system in rural areas and expand the urban pension system to rural migrating labors, Yin said.
China's Economy Can Be Steered Toward Soft Landing
October 29, 2008
By: Yu Yongding (China Daily)
China still enjoys a generally smooth economic development even as the international financial tsunami continues to engulf the whole world and its aftermath is yet to unfold.
Since July last year, the country has been plagued by rising inflation because of an overheated economy, with the CPI increasing to 8.7 percent in February year-on-year. To bring the intractable inflation under control, the central government adopted a tight currency policy. As a result, the CPI has shown a downward tendency in the past two months. Coinciding with the declining CPI is the slowdown of the country's gross domestic product (GDP), investment and trade surplus.
This should not cause us excessive worries. As early as four years ago when the 11th Five-Year Plan was drafted, the central government set an explicit goal of realizing a basic import and export balance in foreign trade in 2010. The macro-control has also promoted the country's economic restructuring although it slowed down the fast-running economy to a certain degree.
The current economic slowdown is only normal in its long-term development track. Since the 1990s, the country has experienced two economic development cycles, in which different development speeds alternated.
The deteriorating US financial crisis has affected China's exporting environment, thus unavoidably curbing its economic growth. However, with a well-operating fiscal performance and an astronomical amount of foreign reserves, we should have full confidence to curb any possible serious slide in our economy and bring it to a soft landing.
The country should still stick to a restrictive financial policy aimed at curbing inflation. We have no need to excessively worry that such a policy might hamper the country's economic development, if it can maintain a growth of no lower than 9 percent.
There was once a prevailing opinion among some economists at home that the appreciation of the yuan, China's currency, was the main culprit behind its year-long flying inflation. This is in essence a misconception about the relationship between inflation and currency revaluation. It is common sense that currency appreciation always helps stem inflation. It was precisely the misconception that caused many people to strongly oppose the country's move to appreciate the yuan in 2003 and 2004.
The current inflation is caused not by an appreciated yuan, but by an overheated economy and external pricing impacts. It is an indisputable fact that the appreciation of China's renminbi lowered the prices of imported oil, soybean and iron ores, thus helping contain inflation.
Some people also think that expectations about the yuan's appreciation caused the inflow of a lot of international hot money, which, in their view, would result in an excess of capital fluidity. As a matter of fact, any abrupt and large or marginal appreciation of the yuan would preempt possible chances for international speculative capital to flow to China.
Also, it is inaccurate to attribute the inflow of hot money in the past years to people's expectations about an appreciated yuan. Driven by its pursuit of a bumper return, a lot of international capital flowed to the country's rosy property industry in 2005 and 2006 and to its bullish stock market in 2006 and last year.
It is for sure that no international hot money would come to China only for the meager profits gained through expectations of a 3 percent appreciation of the yuan. Also, with a set of workable capital monitoring and management systems in place, any speculative international capital can be completely kept away from China's door.
In drafting a policy for the yuan's appreciation, the country's original goal was to promote a transformation of its economic structure and lower its economic dependence on external demands, but not to curb inflation. Under this established strategy, the country should not change its currency policy just because of the change of economic development cycles.
Any export increase through adhering to the yuan's low exchange rates is essentially to subsidize foreign countries, especially the US, through sacrificing the national interests. In the face of a devalued dollar and an aggravating inflation in the US, any attempt to pursue a rapid trade surplus growth is only for the interests of foreign trade sectors at the expense of the whole economy.
It is known that the country can stimulate domestic demands and increase public spending to offset any possible negative effects on its economic growth to be brought by the decline of trade surplus following the yuan's appreciation.
To reduce to a minimum the negative effects brought by an appreciated yuan, the country should further strengthen the capital control system. It is very necessary for the central bank to strengthen control and management on the movement of trans-national capital to stop excessive foreign capital entering the country's low-priced stock market. At the same time, we should also be on a high alert against any abrupt exodus of hot money, which would also cause strong impacts upon the national economy.
The author is former director of the Institute of World Economics and Politics under the Chinese Academy of Social Sciences
By: Yu Yongding (China Daily)
China still enjoys a generally smooth economic development even as the international financial tsunami continues to engulf the whole world and its aftermath is yet to unfold.
Since July last year, the country has been plagued by rising inflation because of an overheated economy, with the CPI increasing to 8.7 percent in February year-on-year. To bring the intractable inflation under control, the central government adopted a tight currency policy. As a result, the CPI has shown a downward tendency in the past two months. Coinciding with the declining CPI is the slowdown of the country's gross domestic product (GDP), investment and trade surplus.
This should not cause us excessive worries. As early as four years ago when the 11th Five-Year Plan was drafted, the central government set an explicit goal of realizing a basic import and export balance in foreign trade in 2010. The macro-control has also promoted the country's economic restructuring although it slowed down the fast-running economy to a certain degree.
The current economic slowdown is only normal in its long-term development track. Since the 1990s, the country has experienced two economic development cycles, in which different development speeds alternated.
The deteriorating US financial crisis has affected China's exporting environment, thus unavoidably curbing its economic growth. However, with a well-operating fiscal performance and an astronomical amount of foreign reserves, we should have full confidence to curb any possible serious slide in our economy and bring it to a soft landing.
The country should still stick to a restrictive financial policy aimed at curbing inflation. We have no need to excessively worry that such a policy might hamper the country's economic development, if it can maintain a growth of no lower than 9 percent.
There was once a prevailing opinion among some economists at home that the appreciation of the yuan, China's currency, was the main culprit behind its year-long flying inflation. This is in essence a misconception about the relationship between inflation and currency revaluation. It is common sense that currency appreciation always helps stem inflation. It was precisely the misconception that caused many people to strongly oppose the country's move to appreciate the yuan in 2003 and 2004.
The current inflation is caused not by an appreciated yuan, but by an overheated economy and external pricing impacts. It is an indisputable fact that the appreciation of China's renminbi lowered the prices of imported oil, soybean and iron ores, thus helping contain inflation.
Some people also think that expectations about the yuan's appreciation caused the inflow of a lot of international hot money, which, in their view, would result in an excess of capital fluidity. As a matter of fact, any abrupt and large or marginal appreciation of the yuan would preempt possible chances for international speculative capital to flow to China.
Also, it is inaccurate to attribute the inflow of hot money in the past years to people's expectations about an appreciated yuan. Driven by its pursuit of a bumper return, a lot of international capital flowed to the country's rosy property industry in 2005 and 2006 and to its bullish stock market in 2006 and last year.
It is for sure that no international hot money would come to China only for the meager profits gained through expectations of a 3 percent appreciation of the yuan. Also, with a set of workable capital monitoring and management systems in place, any speculative international capital can be completely kept away from China's door.
In drafting a policy for the yuan's appreciation, the country's original goal was to promote a transformation of its economic structure and lower its economic dependence on external demands, but not to curb inflation. Under this established strategy, the country should not change its currency policy just because of the change of economic development cycles.
Any export increase through adhering to the yuan's low exchange rates is essentially to subsidize foreign countries, especially the US, through sacrificing the national interests. In the face of a devalued dollar and an aggravating inflation in the US, any attempt to pursue a rapid trade surplus growth is only for the interests of foreign trade sectors at the expense of the whole economy.
It is known that the country can stimulate domestic demands and increase public spending to offset any possible negative effects on its economic growth to be brought by the decline of trade surplus following the yuan's appreciation.
To reduce to a minimum the negative effects brought by an appreciated yuan, the country should further strengthen the capital control system. It is very necessary for the central bank to strengthen control and management on the movement of trans-national capital to stop excessive foreign capital entering the country's low-priced stock market. At the same time, we should also be on a high alert against any abrupt exodus of hot money, which would also cause strong impacts upon the national economy.
The author is former director of the Institute of World Economics and Politics under the Chinese Academy of Social Sciences
Reform, Opening Up Lead to China's Sci-Tech Boom
October 22, 2008
Xinhua News Agency
MOSCOW -- China's science and technology have progressed in many areas since the country adopted the policy of reform and opening up 30 years ago, a Russian China expert said in a recent interview with Xinhua.
China has made tremendous scientific-technological achievements in the past 30 years, said Yakov Berger, a China expert with the Far East Institute of the Russian Academy of Science. "It began to explore the universe and make peaceful use of atomic energy. Above all, it reached leading world levels in these fields."
The invention of transgenic rice by Chinese scientists not only meets domestic demand, but also contributes to the solution of global food shortage, he said, adding China has achieved breakthroughs in health care and renewable energy exploration as well. Moreover, China has caught up with or even surpassed some developed countries in science and technology in terms of many indicators, Berger said, "For example, Chinese research results quoted by scientific-technological documents have increased significantly in recent years."
Meanwhile, China's investment in basic research grew from 1 percent of its gross domestic product (GDP) to 1.5 percent, and the number is expected to reach 3 percent in the future, he said, noting the percentage would be even higher in some high-tech sectors.
China is faced with the shortage of intellectuals during the development of innovative economy, as is the situation in Russia. However, China is nurturing scientific brains while putting research projects into practice, said Berger.
China is striving to be an economic and political world power in the coming decades, but to achieve that goal, it has to become a scientific powerhouse first, he said.
Unlike the early stage of its reform and opening up when its vast low-cost workforce contributed a great deal to China's economic miracle, science and technology has begun to play an increasingly important role in China's economic growth, said the Russian expert.
China used to manufacture simple goods with its cheap labor, but today it has increased the technical contents of these products, he said.
Berger noted a large number of core technologies are still under the control of Western countries, and in this regard China should take advantage of technological advances to change its mode of economic growth.
The 17th national congress of the Communist Party of China in October, 2007 set the goal of building an innovative nation, indicating a new mode of development for China, he said.
The Chinese leadership has realized the country has to narrow down the gap with the West in many key areas of science and technology so as to ensure a smooth economic and social transition in this century, he added.
On cooperation between Russia and China in science and technology, Berger said the two countries have great potential in this regard and scientists of both countries have interest in bilateral cooperation.
The two sides are carrying out fruitful cooperation in such areas as aviation, energy, environmental protection, gene engineering, biological medicine and energy conservation, which will further expand the basis of cooperation, he said.
China also maintains cooperation with many other countries and such interaction facilitates the advancement of science and technology in the world, he said.
Xinhua News Agency
MOSCOW -- China's science and technology have progressed in many areas since the country adopted the policy of reform and opening up 30 years ago, a Russian China expert said in a recent interview with Xinhua.
China has made tremendous scientific-technological achievements in the past 30 years, said Yakov Berger, a China expert with the Far East Institute of the Russian Academy of Science. "It began to explore the universe and make peaceful use of atomic energy. Above all, it reached leading world levels in these fields."
The invention of transgenic rice by Chinese scientists not only meets domestic demand, but also contributes to the solution of global food shortage, he said, adding China has achieved breakthroughs in health care and renewable energy exploration as well. Moreover, China has caught up with or even surpassed some developed countries in science and technology in terms of many indicators, Berger said, "For example, Chinese research results quoted by scientific-technological documents have increased significantly in recent years."
Meanwhile, China's investment in basic research grew from 1 percent of its gross domestic product (GDP) to 1.5 percent, and the number is expected to reach 3 percent in the future, he said, noting the percentage would be even higher in some high-tech sectors.
China is faced with the shortage of intellectuals during the development of innovative economy, as is the situation in Russia. However, China is nurturing scientific brains while putting research projects into practice, said Berger.
China is striving to be an economic and political world power in the coming decades, but to achieve that goal, it has to become a scientific powerhouse first, he said.
Unlike the early stage of its reform and opening up when its vast low-cost workforce contributed a great deal to China's economic miracle, science and technology has begun to play an increasingly important role in China's economic growth, said the Russian expert.
China used to manufacture simple goods with its cheap labor, but today it has increased the technical contents of these products, he said.
Berger noted a large number of core technologies are still under the control of Western countries, and in this regard China should take advantage of technological advances to change its mode of economic growth.
The 17th national congress of the Communist Party of China in October, 2007 set the goal of building an innovative nation, indicating a new mode of development for China, he said.
The Chinese leadership has realized the country has to narrow down the gap with the West in many key areas of science and technology so as to ensure a smooth economic and social transition in this century, he added.
On cooperation between Russia and China in science and technology, Berger said the two countries have great potential in this regard and scientists of both countries have interest in bilateral cooperation.
The two sides are carrying out fruitful cooperation in such areas as aviation, energy, environmental protection, gene engineering, biological medicine and energy conservation, which will further expand the basis of cooperation, he said.
China also maintains cooperation with many other countries and such interaction facilitates the advancement of science and technology in the world, he said.
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