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• U.S. Treasury: China Still Not a Currency Manipulator {yawn}
• Photo: Stick, by Mark Hobbs
• Chen Guangcheng’s “Suffering Beyond Imagination”
• Video: A Story of Invisible Water
• Leadership Limits Purge in Bo Scandal
• Hu Xijin: The Deep End
• The Daily Twit (@chinahearsay Twitter feed) – 2012-05-25

U.S. Treasury: China Still Not a Currency Manipulator {yawn} Posted: 25 May 2012 11:10 PM PDT If you want a good example of what "Standard Operating Procedure" or "SOP" means, you can't go wrong with the U.S. Treasury's semi-annual Report to Congress on International Economic and Exchange Rate Policies, also known informally as the "China Currency Manipulation Report." Well, I'm the only one who calls it that, but for good reason. For the last decade, issuance of the report has been accompanied by a lot of needless speculation, hand wringing, concern trolling, and China bashing about the value of the RMB. It's just another opportunity for the media to find something worthless to write about, excuse for "telegenic" politicians like Senator Chuck Schumer to get on television, and "event" around which lobbyists can flog their positions and raise money. And oh yeah, it's good for bloggers too, particularly during relatively slow news weeks. All of this goes like clockwork, beginning with the report itself. Despite the speculation about whether or not the U.S. will come down hard on China and label it a currency manipulator, it almost never happens. Last time was during the Clinton Administration. There are several reasons for this, some of which have varied over the years. At the end of the day, though, the simple fact is that the U.S. government does not see this as a winning issue for them politically and recognizes that the consequences of labeling China a currency manipulator would not only harm U.S.-China relations, but would also piss off a great many large U.S. corporations (i.e. campaign contributors) that import products from China. So the Obama Administration doesn't want to change the status quo, and doesn't. Indeed, true to form, the latest report comes to the following conclusion on Topic #1: Based on the appreciation of the RMB against the dollar since June 2010, the decline in China's current account surplus, and China's commitments in the G-20 and the U.S.-China Strategic & Economic Dialogue to move more rapidly to a more market-determined exchange rate system, Treasury has concluded that the standards identified in Section 3004 of the Act during the period covered in this Report have not been met with respect to China. Nonetheless, the available evidence suggest the RMB remains significantly undervalued, and we believe further appreciation of the RMB against the dollar and other major currencies is warranted. Treasury will continue to closely monitor the pace of RMB appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth. Unfortunately for President Obama, this is an election year, and China bashing is a can't-lose political strategy that has already been adopted by Republican challenger Mittford Worthington Romney III, who is well aware of his own reputation as a plutocrat. One good way to establish populist credibility is to complain about China and the value of the RMB, which Romney has done, stating that he will label China a currency manipulator on his first day in office. I'm not so sure Romney can even do that procedurally, but it doesn't really matter since no one believes that Romney would actually do it if elected. Indeed, he is an "Old School Republican," meaning that he is looking out for the interests of the private sector, which for the most part does not want to rock the U.S.-China trade boat. Lucky for Romney, the campaign allows him to make a lot of noise on the issue without having to actually make a tough decision. All this noise puts Obama in a tough spot, right? He wants to look tough on China, but he can't upset the multinationals. What to do? Well, the other part of currency report SOP is to release it on a Friday. Since the D.C. weather is pretty nice, folks will be scrambling to get out of town, and hopefully not too many will pay attention to the report at all. (Success or failure depends on whether the Sunday politics shows in the U.S. cover the issue or prefer to go with in-depth coverage of the latest Obama birth certificate news.) But it's not just the timing. You'll notice in that language above that while Treasury doesn't go so far as to label China a currency manipulator, the report does maintain that the RMB is undervalued and that the U.S. government will be keeping a close eye on the situation. This is called "having your cake and eating it too." President Obama keeps his big fundraisers happy, while at the same time can claim to be tough on the Chinese, pushing back against Romney criticism. Isn't this fun? You may have noticed something missing in this post and in the media coverage of this issue in general: a discussion of whether the RMB is actually undervalued. Why is that? Well, the media would rather focus on the politics of this, as opposed to the more complex economic issues, which are not nearly as fun to talk about. Moreover, once you dig down into the numbers, particularly if you look at what has happened over the past decade as the RMB has been allowed to float upward a bit, the case for an undervalued RMB doesn't look so strong anymore. I think the only folks still talking about a significant revaluation are Chuck Schumer, U.S. labor unions and Fred Bergsten. The Report states that: Because inflation in China has been higher than in the United States, the RMB has appreciated more rapidly against the dollar on a real, inflation-adjusted, basis, appreciating 12.5 percent since June 2010 and about 40 percent since China initiated currency reform in 2005. The Report also claims that the RMB is still undervalued anywhere from 3 to 23%, depending on the model used. That second number used to be 40% not too long ago, so we've come a long way. The Treasury is quite clever using that range, isn't it? It's broad enough that the administration can still say that the RMB is undervalued, and yet gives it a great excuse not to push for any policy solutions beyond bilateral talks. For D.C., that's a win. If you are looking for some scintillating reading this weekend (e.g. while you're in the bathroom), you might want to give the Report's China section a try. In addition to the discussion of the RMB, the Report has a decent summary of China's top macroeconomic and trade issues. However, if you're looking for important, substantive, breaking news on U.S.-China bilateral relations, the issuance of this Report no longer qualifies. © Stan for China Hearsay, 2012. | Permalink | No comment | Add to del.icio.us Post tags: currency manipulation, RMB, U.S. Treasury

Photo: Stick, by Mark Hobbs Posted: 25 May 2012 11:16 PM PDT Stick © Samuel Wade for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us Post tags: Download Tools to Circumvent the Great Firewall

Chen Guangcheng’s “Suffering Beyond Imagination” Posted: 25 May 2012 10:43 PM PDT Largely silent since his departure from China, Chen Guangcheng has begun to speak out in interviews about his detention and escape, reiterating his hopes for an investigation of the Linyi local government and his fears for those he left behind. Talking through an interpreter to CNN's Anderson Cooper, Chen was reluctant to discuss his four-year prison term or subsequent confinement in Dongshigu, but asked that the latter be referred to as "illegal detention", rather than the more innocuous "house arrest". "It's hard for me to describe what it was like during that time," he said, "but let's just say that my suffering was beyond imagination." He also highlighted the role of Guo Yushan in his escape, but made an apparent attempt to defuse recent disagreement over who deserved credit, and once again expressed concern for family and supporters still in China. "There's one thing I want to mention that may be a surprise to many people," Chen said. "When a group of people come together and accomplish something, they often fight for credit. In my case, all those people who went to Shandong to pick me up, when the news broke, they were fighting for risk instead of credit. They were all trying to claim responsibility to make others safer." Chen, who's blind, fears the Chinese government may retaliate against acquaintances who helped him, he said. "Of course, I'm very worried. We can see their retribution against my family since my escape has continued and been intensified," Chen said. The full interview is available at CNN.com. Foremost among the reprisals is the prosecution of Chen's nephew, Chen Kegui, for attempted murder. Local authorities have rejected his family's choice of lawyers and appointed their own to defend him: an echo, Chen Guangcheng says, of his own treatment in 2006. Chen's family are now fighting this decision. From Josh Chin at China Real Time Report: In the most recent development, Liu Fang, the wife of Mr. Chen's nephew, Chen Kegui, has written a letter to local authorities demanding that her husband be allowed to meet with the lawyers she has commissioned to represent him. The letter comes a few days after Mr. Chen's brother, Chen [Guangfu], escaped guards in the family's home village near Linyi in Shandong province to consult with lawyers in Beijing about his son's case. Chen Kegui faces a charge of attempted murder for slashing local officials with a kitchen knife after the officials burst into the home of his father a few days after Chen Guangcheng escaped. Lawyers and family members argue Chen Kegui was acting in self-defense and say the attempted murder charge is wildly excessive. Liu's letter is translated in full at China Real Time. Chen Guangcheng also discussed his nephew's case in an interview with Reuters: "My older brother escapes house arrest and comes to Beijing in search of a lawyer for my nephew," Chen said in the interview. "This is an extremely normal thing, and the most basic right of a Chinese citizen. If even this right cannot be ensured then I think development in the construction of China's legal system over the past few decades has already been undone by law-breaking officials within the political system," he said …. Chen described the harassment and abuse of his family and supporters as "obviously a violation of China's constitution, and is despicable." "The Chinese Foreign Ministry has said more than once that I am a free person. Did I do anything wrong by leaving my home? If other people helped me leave … this is something that should be praised. Why then when I leave do they break into my home to beat people, detain them," he said. © Samuel Wade for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us Post tags: Chen Guangcheng, Foreign Ministry, house arrest, illegal detentions, lawyers, legal rights, linyi, Shandong Download Tools to Circumvent the Great Firewall

Video: A Story of Invisible Water Posted: 25 May 2012 10:35 PM PDT A 16-minute documentary by Lynn Zhang and Shirley Han Ying kicks off an Asia Society China Green series on China's South-to-North Water Diversion project. The filmmakers follow a group of farmers who have spent many years and all their savings petitioning against water pollution from a nearby chemical plant, which they say poisoned their pear orchard. The film features interview segments with Ma Jun of the Institute of Public and Environmental Affairs on China's water "time bomb". Groundwater extraction lowered the water table in Hebei by 130 feet between 1996 and 2006, and with inadequate supplies, there is not enough clean water to reclaim the polluted. The real extent of the problem is unknown, Ma says: while 90% of the shallow groundwater flowing through the cities is thought to be polluted, no complete data exists. Local officials did eventually come up with a solution of sorts for the farmers' plight: they confiscated the land on which the orchard had stood. The film ends on an optimistic note regarding the South-to-North Water Diversion project. In addition to long-standing doubts about its practicality, however, severe droughts in southern China have raised questions about the core assumption underlying the scheme. © Samuel Wade for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us Post tags: hebei, land grabs, Ma Jun, south-to-north water diversion project, water pollution, water shortage Download Tools to Circumvent the Great Firewall

Leadership Limits Purge in Bo Scandal Posted: 25 May 2012 10:49 PM PDT The downfall of Bo Xilai has threatened a political purge of his allies that could expose corruption and wrongdoing among the highest echelons of power in China ahead of the once-a-decade transition of leadership at the 18th Party Congress. But now that Bo has been dismissed from his Party positions and is being investigated for corruption and other discipline violations, the Party appears to be closing ranks to limit the damage from the scandal, according to a report from Reuters: Hu urged the party to close ranks at a meeting of about 200 officials early this month at a Beijing hotel, declaring the downfall of Bo – China's biggest political scandal in two decades – to be an "isolated case", the three sources said. The sources' comments represent the first confirmation of speculation that Hu recently intervened to prevent a wider rift in the party and to resist pressure from some elements for a wider purge of the populist Bo's policies and supporters. Bo, former party chief of Chongqing city, was suspended from the party's top ranks in April after his wife became a suspect in the murder of British businessman Neil Heywood. Before the scandal broke, Bo had been seen as a candidate to join China's new top leadership team to be unveiled this year. "It's been settled that this will be dealt with as a criminal case, not a political case," said one of the sources, a retired official. "The central leadership wants to focus on ensuring a stable environment for the 18th Party Congress, so the guiding policy is to end all the rumors and contention." Many of those rumors centered around the powerful Standing Committee member Zhou Yongkang, an ally of Bo's, who is in charge of the nation's security and law enforcement. Recent reports have suggested that Zhou was also going to be purged from the Party for his support of Bo, and a group of retired Party officials penned an open letter calling for Zhou's immediate resignation in the wake of the Bo scandal. However, in recent days, Party media have reported on his official appearances, thereby hinting that he has not completely lost favor. From Bloomberg: Zhou Yongkang, China's top internal security official, met with "model" police officers from around the nation in Beijing today together with President Hu Jintao, Premier Wen Jiabao and Vice President Xi Jinping, the official Xinhua News Agency reported. Zhou, speaking at the meeting, said that public security agencies nationwide and most police officers understand the complexity of current domestic and international situations, as well as the "special importance" of maintaining social stability this year, according to Xinhua. And from the BBC: …Late last week the Communist Party's mouthpiece, the People's Daily, reported on its front page that Mr Zhou had made a trip to visit the western region of Xinjiang. The stories seemed to signal that he might still be wielding power and had not been sidelined himself. Then it was announced Mr Zhou had been picked, unanimously, to be a delegate representing the western region of Xinjiang at the Communist Party Congress due to happen this autumn in Beijing. The Congress is where the new generation of leaders will be confirmed in post. [...] The fact that Mr Zhou will definitely be at the Congress seems to be a sign that he is now in the clear, and China's leaders may have papered over their differences, if indeed they had any. Meanwhile, the retired officials who wrote the open letter calling for his resignation have been called in for questioning, AFP reports. Read more about Bo Xilai, Zhou Yongkang, and the upcoming 18th Party Congress via CDT. © Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us Post tags: Download Tools to Circumvent the Great Firewall

Hu Xijin: The Deep End Posted: 25 May 2012 11:08 AM PDT Global Times Chief Editor Hu Xijin has attracted colorful commentary to his Weibo account since he first said hello in March 2011. On March 22 he posted a preview of his editorial on a changing, rising China: China's reform and China's rise have simultaneously been plunged into the deep end. These are two separate zones, not just one. They both are impacting the future of the Chinese people. We cannot attend to just one; both must be taken into account. China is groping for stones in the midst of the great river of human history. China was pushed into this river. There is no escape route from reform, nor is there an escape route from ascendance. The only way out is to move towards the other shore. "Retweeted" 577 times and left with 487 comments as of May 14 (a few retweets have since disappeared), Hu's post has its supporters and detractors. But as often happens on his Weibo, the detractors here are more vocal. Deng Bolun has translated select comments. Read the original post and all of the comments on Weibo. PinchHim: What does "rise" mean? Is it the ability to face off with the U.S. military? Based on this standard, the 200-some small- and medium-sized countries never have and will never rise. They'll never cross the river, will they? China's rise won't be marked by a military rise, but the rise of human rights. If there is no rise of human rights, China won't withstand a single blow in a military face-off. 把掐他："崛起"是什么意思？ 有能力与美国军事对峙才叫崛起？按照这个标准，世界上二百多个中小国家，从来没有，也不可能崛起，它们是不是永远过不了河了？中国的崛起，标志不是军事崛起，而是人权的崛起。没有人权的崛起，中国在任何军事对抗中都将是不堪一击的。 FutureOfFutureOfFreedom: The officials aren't even willing to publicly announce their personal wealth. What's the use of reform! 自由未来的未来：官员连个人财产都不敢公布，改革有嘛用！ SillyLittleWeasel: Groan. Editor Hu wants to outline an even scarier future for those of us who can't afford to see a doctor or buy a house. He tells us, "You're all very happy now." 傻瓜阿狸：哼哼，胡编想给看不起病，买不起房的我们勾画一个更可怕的未来。告诉我们，你们现在很幸福。 DesertPoplarHy: What is the opposite shore like? Like North Korea or Taiwan? 沙漠胡杨hy：对岸是什么样的。是朝鲜还是台湾？ SunJianguoOk: Where is the opposite shore? What's there? Does it have the human rights, freedom and constitutional democracy that other earthlings enjoy? Solid policy comes from deliberation; a country's nature and fundamental structure are very important. Ours needs to be reconstructed. A foundation must be lain for long-term development. The one-party system is definitely not going to work. Peaceful, rational and good-intentioned competition must be allowed! Oppose civil war, palace coups, brutal in-fighting and disgusting internal conflict! China will go toward a civilized rebirth! With freedom lighting the way! 孙 建国ok：对岸在哪儿？对岸有什么？有地球人都有的人权，自由，宪政民主吗？具体的政策出于商讨，国家的性质与基本架构很重要，需要建立重构，以为未来长 远发展奠定基础。一党制肯定不行了，要允许和平理性善意的竞争！反对内战，宫廷政变，残酷内斗，恶性内讧！中国走向文明新生！自由照亮前路！ JiaoChengJun: I completely disagree with the notion that Chinese reform has gone into the "deep end." The concept is vague, it confuses everyone. Just say it. Should China Westernize? Should it have a separation of powers? Should multiple parties rotate through power? Why are you so talkative?! You should just ask the people. 焦成君：非常不同意中国改革进入到什么'深水区'的提法。概念模糊、让百姓糊涂。就直说吧，中国要不要全面西化、要不要三权分立、要不要多党轮替不就完了吗还啰嗦个啥！下面就该问问百姓吧。 UnmatchedHunger: Mr. Hu's ass-kissing garbage talk. Two deep ends? Reform and rise don't happen simultaneously? So-called logic and complexity are just fig leaves to coverall you lackeys! Grope your mom's stones and cross the river, there's obviously a bridge! 盖世太饿：胡氏舔菊废话体。两个深水区？改革和崛起没有交集？所谓理性、复杂都你们这些狗奴才的遮羞布！摸你妈的石头过河，桥明明就在那！ MaoMaoLovesFreedom2010: The masses crossed the river long ago. It's just you and your master that still pretend to be holding on to the river stones as a matter of life and death! 毛毛爱自由2010：人民群众早就过河了，就你和你主子还假装摸着石头死活不放手呢！ YuZhengzhi: The only way out is for the Chinese Communist Party to pocket its pride and stop making empty calls for "serving the people." Instead it should accept accountability to the people by realizing competitive elections for People's Congress representatives, then gradually establishing a civil society of freedom, democracy and rule of law. 余正之：唯一的出路就是中国共产党放下架子，不是空喊"为人民服务"这样的假话，而是接受人民的监督，先推进实现人大代表公开全民竞争选举，逐步建立自由、民主、法治的公民社会。 DukeOfHarmony: Sh*t, ten years into reform we were told we're in the river, 20 years later we were told we're still in the river, and 30 years on we're still told we're in the river. It's getting deeper and deeper! If we keep going, won't the entire population be "reformed" into the sea? How come we never make it to shore? 大公大同：靠，10年了告诉我们在河里，20年了告诉我们还在河里，30年了告诉我们仍然在河里，还越来越深！继续下去，是不是把全国人民"改革"进大海里啊？怎么老是上不了岸？ GraceLHY: Editor Hu's style is my favorite. Every character is a Chinese character. Each sentence is disconnected from the next. He wrote 140 characters but said absolutely nothing. None of it resembles the Chinese language~ 雍容LHY：胡总这种风格我最喜欢了，每个字都是汉字，每一句都和另一句没关系，写了140字还是啥都没说，全不像汉语~ Pekinggdq: The problem is you'll never reach the other shore. pekinggdq：问题是你永远到不了对岸. © Anne.Henochowicz for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us Post tags: Deng Bolun, Global Times, Hu xijin, sina weibo, weibo Download Tools to Circumvent the Great Firewall

The Daily Twit (@chinahearsay Twitter feed) – 2012-05-25 Posted: 24 May 2012 08:59 PM PDT RT @danwei: Is the U.S. causing trouble for Confucius? http://t.co/0pKVDXXW -> Moutai opens retail stores to boost profits and combat fake liquor http://t.co/3uIpr8pQ -> Kindergarteners in E China exposed to UV lamps http://t.co/6aRkTNGB As a punishment? I'm confused. -> RT @caixin: Trading Platform for State-Owned Property Rights Launched http://t.co/BUEm1xYM -> China Media Project: Rigid thinking beggars China's "soft power" http://t.co/QP20uWce @cmphku -> Foreign auditors unfazed by new rule http://t.co/JHEmdRZ1 -> Reuters: China Auto Rental cancels $138 mln U.S. IPO http://t.co/qRvWYLoH -> NY Times: Alibaba Said to Seek Billions to Buy Back Yahoo Stake http://t.co/ojOYTgr7 -> Beijing to test hospital reform http://t.co/Ouxl7cGS -> NY Times: China's Once-Hot Economy Is Turning Cold http://t.co/k1E5NcNu @keithbradsher -> Reuters: China's new privatization plan faces push-back risk http://t.co/3CAr61oC -> Xinhua: Fund set up to fight child abduction http://t.co/tyx04EsC -> RT @Techinasia: http://t.co/S3Ms2E2I Shareholders Approve Privatization, Ready to Delist in June http://t.co/RC12qrHJ -> China Integrated Energy Inc. Completes Independent Investigation http://t.co/7cgMZwSB -> Eric Jackson: Why Alibaba Group Will Be A $150B Company By 2016 http://t.co/TY8SVKMX -> FT: Guest post: the case for US tariffs on Chinese solar panels http://t.co/XPqlVVgU -> Tea Leaf Nation: Lessons From China's Online Hatred http://t.co/8tSP5Fhq @tealeafnation -> RT @cnbusinesswatch: The China challenge—— Why do mergers and acquisitions so often fail in China http://t.co/DDkLtBQ1 -> Xinhua: China renews crackdown on pirated publications http://t.co/520VmnHE ->