WIKILEAKS: WEST WANT TO CRUSH CHINA BY WAR, BUT CANNOT DO IT DUE TO CHINA'S STRENGTH; WEST ARE NO LONGER WORLD'S OVERLORDS

WikiLeaks: Hillary Clinton's question: how can we stand up to Beijing?

Australia's ex-PM Kevin Rudd advised US secretary of state to welcome Beijing onto world stage but keep force as a last resort

"China's relatively strong economic position in the wake of the global financial crisis has intensified that trend. As has Chinese hubris that it can call the shots and determine the playbook under which it operates without disclosing the same to foreign firms.

"We may want to consider ways to toughen up our talking points and enhance the use – or perception of likely use – of other real 'sticks' in order to achieve market-opening, job-creating objectives. This will require some consideration of just how much disruption in our economic relations we are willing to countenance if we must carry through on threats."

The Guardian

4 Dec, 2010

Hillary Clinton revealed America's deep anxiety over China's growing economic power and hold on US finances by asking Australia's then prime minister: "How do you deal toughly with your banker?"

The question, at a lunch with Kevin Rudd last March and reported in a US Department of State cable, underscores the evolving and often difficult relationship between the world's superpower and an increasingly mighty China. It is the largest holder of US treasury bonds, with around $870bn. Tensions are also highlighted in an economic dispatch, written by the US ambassador to Beijing last January, warning of a "rough" year for relations between the two countries and accusing China of hubris.

His remarks presaged increasing tensions between the two countries over their currencies and fears of protectionism. The United States is pushing China to allow significant appreciation of the yuan, which it says is substantially undervalued, while Beijing is unhappy at the US Federal Reserve's loosening of monetary policy through quantitative easing.

Another cable from last year quotes a senior Chinese official predicting that the midterm elections in America would increase pressure for protectionism in the US and expressing fears about the Fed "printing lots of money".

According to the note of Clinton's lunch with Rudd in Washington: "The secretary affirmed the US desire for a successful China, with a rising standard of living and improving democracy at a pace Chinese leaders could tolerate… The secretary also noted the challenges posed by China's economic rise, asking: 'How do you deal toughly with your banker?'"

Rudd responded by calling himself "a brutal realist on China", arguing for a policy of "integrating China effectively into the international community and allowing it to demonstrate greater responsibility, all while also preparing to deploy force if everything goes wrong". He described Chinese leaders as "subrational and deeply emotional" on Taiwan, a frequent source of tension with the US.

In the January memo, Jon Huntsman, the US ambassador to China, argued: "Whereas 2009 was a year to build the US-China relationship, 2010 will be a year that tests it.

"Ten per cent US unemployment coupled with our huge trade deficit with China, China's increasing use of industrial policies to restrict market access, and an undervalued RMB [yuan], will bring greater tension to bilateral ties. The Google case adds fuel to the fire."

Clinton made a speech about internet freedom shortly after Google announced it would no longer censor results in China, to the anger of Chinese leaders. Officials said the speech was planned before the Google case emerged.

Huntsman said: "The Chinese continue to signal intense displeasure with US positions on issues from the Dalai Lama to Taiwan arms sales and internet freedom, which they then cite as reasons why they may not co-operate with the US on other issues."

The ambassador stressed that China's economic growth offered "enormous" opportunities for the US to create growth and jobs and talked of possible options for increased co-operation.

China has overtaken Japan to become the world's second-largest economy and Huntsman noted that this offered a huge potential market for US goods and services. He listed possible "carrots" to dangle in front of Beijing, including a re-examination of export controls.

Set beside that, he warned: "USG [US government] complaints about discriminatory policies – absent a credible threat of retaliatory action or other leverage – are falling on increasingly deaf Chinese ears.

"China's relatively strong economic position in the wake of the global financial crisis has intensified that trend. As has Chinese hubris that it can call the shots and determine the playbook under which it operates without disclosing the same to foreign firms.

"We may want to consider ways to toughen up our talking points and enhance the use – or perception of likely use – of other real 'sticks' in order to achieve market-opening, job-creating objectives. This will require some consideration of just how much disruption in our economic relations we are willing to countenance if we must carry through on threats."

Despite tit-for-tat tariff impositions, both countries have been cautious about damaging an economic relationship valuable to both sides. Huntsman suggested highlighting possible congressional action on "hot button issues" like the valuation of the yuan and carbon tariffs on Chinese imports. Last month the US House of Representatives passed by an overwhelming majority a bill calling for tariffs to be imposed on countries with artificially low currencies.

The US treasury secretary, Timothy Geithner, has postponed his report on whether China is a currency manipulator, due last month. Geithner has since said that he believes that Beijing is committed to allowing the yuan to increase in value.

The dispatches also show Chinese concerns that domestic politics in the US could derail the economic relationship this year.

In a meeting last November, vice-minister Liu He "described the trade conflicts as 'terrible', with the small number of disputes having huge political and social impact in both countries.

"He believed that American labour unions and the upcoming midterm [2010] US congressional elections both increase pressure for trade protectionism in the US."

Liu also told Robert Hormats, the state department's under-secretary for economics, energy and agricultural affairs, that he was "a little worried" about the US economy and the Federal Reserve "printing lots of money". The concern about quantitative easing has since returned to the forefront of economic discussions.

Another official at the meeting expressed concern that future inflation could erode the value of China's dollar holdings.

CHINA AND LATIN AMERICA - PARTNERSHIP FOR A NEW WORLD

Brazil's huge new port highlights China's

drive into South America

Investments guarantee Chinese access to soy, oil and other badly

needed resources

The Guardian

Wednesday 15 September 2010

The 'super port' in Sao Joao da Barra is the largest port

investment in Brazil and will have capacity for the largest

ships in the world. Photograph: Douglas Engle/Australfoto

Blades slicing through the morning heat, the helicopter

rose from the tarmac and swept into a cobalt sky, high

above Rio's Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic

rainforest and fishing boats that bobbed lazily in the

ocean below. Then finally, 80 minutes on, the destination

came into view: a gigantic concrete pier that juts nearly

two miles out into the South Atlantic and boasts an unusual

nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up

by dozens of 38-tonne pillars, this vast concrete structure

is part of the Superporto do Acu, a £1.6bn port and

industrial complex that is being erected on the Rio

coastline, on an area equivalent to 12,000 football

pitches.

Reputedly the largest industrial port complex of its type

in the world, Açu is also one of the most visible symbols

of China's rapidly accelerating drive into Brazil and South

America as it looks to guarantee access to much-needed

natural resources and bolster its support base in the

developing world.

When Acu opens for business in 2012, its 10-berth pier will

play host to a globetrotting armada of cargo ships, among

them the 380-metre wide ChinaMax – the largest vessel of

its type, capable of ferrying 400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of

barrels of oil are expected to pass along the "Highway"

each year on their way east, where they will alleviate

China's seemingly unquenchable thirst for natural

resources.

"This project marks a new phase in relations between Brazil

and China," Rio's economic development secretary, Julio

Bueno, said during the recent visit of about 100 Chinese

businessmen to the port complex, which is being built by

the Brazilian logistics company LLX and should receive

billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America,

is part of China's "going out strategy" – an economic and,

some say, diplomatic push for Chinese companies, many of

them state-run, to invest abroad, snapping up access to

minerals, energy and food by pouring the country's colossal

foreign reserves into overseas companies and projects.

China is expected to overtake Japan as the world's second

largest economy this year and may already be the world's

greatest energy consumer. Now it is set to become Brazil's

top foreign investor, with its companies plowing $20bn into

the country in the first six months of 2010, compared with

$83m in 2009. A recent study by Deloitte predicted that

Chinese investments in Brazil could hit an average of about

$40bn a year between now and 2014, with companies throwing

money at sectors ranging from telecommunications,

infrastructure and farming, to oil, biofuels, natural gas,

mining and steel manufacturing.

"Relations with Brazil in all areas have entered a new

era," Qiu Xiaoqi, China's ambassador in Brazil, recently

told the state news agency Xinhua.

The surge in China's South American spending is not just a

Brazilian phenomenon. Ecuador has already signed around

$5bn of bilateral deals with China this year, including

$1.7bn to help build a hydro-electric dam and $1bn

investments for oil exploration and infrastructure

projects. That compared with Chinese investment of just

$56m in 2009.

Chinese companies have sunk $1.4bn into mining operations

in Peru this year, while in April Hugo Chávez announced

that the Chinese, already major sponsors of Venezuelan oil

exploration, had agreed to open a $20bn credit-line for the

"Bolivarian revolution".

Michael Klare, author of Rising Powers, Shrinking Planet, a

book about the growing tussle for global resources,

described today's China as "the shopaholic of planet

Earth".

"The Chinese authorities understand that to sustain the

country's continued growth, they will have to ensure that

its industries are provided with adequate supplies of

energy, minerals, and other basic raw materials," he said.

But the "going out" strategy went far beyond business

transactions, he added.

"They seek to fashion a multipolar world in which no single

power – read the United States – plays an overwhelmingly

dominant role. To this end, they seek to bolster ties with

rising regional powers like Brazil and South Africa."

In Sao Joao da Barra, the city nearest to Acu and one of

Rio state's poorest regions, the Chinese presence is being

felt even before Brazil's Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water

and Mandarin interpreters for visiting Chinese dignitaries.

Sao Joao da Barra's town hall, meanwhile, has started

offering free Mandarin lessons to locals interested in

working with the wave of Chinese guests that is

anticipated.

"You should see a 10-year-old boy saying, 'I understand …

the Chinese are coming and when the Chinese industries come

I want to work for them and if I speak Mandarin I'll have a

competitive advantage on the others'," beamed Eike Batista,

the billionaire entrepreneur behind the superport and one

of the most vocal cheerleaders for Chinese advances into

Brazil. "[It is] wonderful."

Leonardo Gadelha, LLX's CFO, said during a recent tour of

the port: "This is part of a Chinese strategy of going to

the market more and more. They are already a very

considerable presence in Africa and we are now going

through this moment in Brazil."

The Highway to China lay "in the middle" of this blossoming

relationship with China, he said, adding: "We are betting

that … this will continue growing."

Not all Brazilians, or indeed western governments, share

such enthusiasm.

"There are many in Washington who worry about China's

growing presence in Africa and Latin America and claim that

this poses a threat to America's long-term strategic

interests," said Klare, noting, however, that the US'

"fixation" with Afghanistan and the war on terror meant

there had been virtually no reaction.

In Brazil meanwhile China's arrival has prompted cries of

neo-colonialism. "The Chinese have bought Africa and now

they are trying to buy Brazil," the prominent economist

Antônio Delfim Netto complained in a recent interview with

the Estado de Sao Paulo newspaper, warning that it was a

"grave mistake" to allow a foreign state to buy "land,

minerals [and] natural resources" from another sovereign

power.

Batista, Brazil's richest man, rejected such criticism,

saying: "The association between Brazil and China is a

two-way highway." Chinese companies such as Wuhan Iron and

Steel had committed to helping build a $5bn steel mill at

the port complex, rather than always shipping out primary

resources to process at home, he pointed out. "You want to

get three tonnes of raw iron ore, [so] produce one tonne of

steel in Brazil," he said. "That philosophy is sinking in

and is great for both sides."

Neither would Chinese companies be allowed to flood the

complex with hordes of foreign workers as had happened in

Africa, said Gadelha, the CFO.

"If it was up to them they would bring lots of Chinese

workers as they are used to doing," he admitted. "[But]

Brazil's legislation is very strict in this sense."

Batista suggested that rather than complaining about

China's courtship of Brazil, western powers should urge

their own companies to pay more attention to the region

themselves.

"In the last 15 years or so the [American and European]

CEOs have stopped coming here and that is why they are a

little bit behind," he said. "We are pushing European

companies and saying: 'You're not really understanding what

is happening in Brazil'."

"Don't put Brazil in the same bag as our neighbours," he

added. "We are not Central America. We are not Venezuela.

We are not Argentina."

============================

Beijing's deals

Brazil In November 2009 Brazilian energy giant Petrobras

signed a $10bn loan deal with China's Development Bank. As

part of the deal Petrobras will guarantee the supply of

200,000 barrels of oil per day to China over the next 10

years. Chinese companies and state banks pumped around

$20bn into Brazil in the first half of this year

Venezuela Hugo Chávez, pictured, unveiled a $20bn credit

line from China's Development Bank to fund the "Bolivarian

revolution" in April

Ecuador The country has already signed around $5bn of

bilateral deals with China this year, including $1.7bn to

help build a hydro-electric dam and $1bn investments for

oil exploration and infrastructure projects. In 2009 direct

Chinese investment in the country was just $56m

Peru Chinese companies invested $1.4bn in mining operations

in Peru during the first four months of this year, making

China the country's second largest trade partner

CHINA AND LATIN AMERICA - PARTNERSHIP FOR A NEW WORLD

Brazil's huge new port highlights China's drive

into South America

Investments guarantee Chinese access to soy, oil and other badly

needed resources

The Guardian

Wednesday 15 September 2010

The 'super port' in Sao Joao da Barra is the largest port

investment in Brazil and will have capacity for the largest

ships in the world. Photograph: Douglas Engle/Australfoto

Blades slicing through the morning heat, the helicopter

rose from the tarmac and swept into a cobalt sky, high

above Rio's Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic

rainforest and fishing boats that bobbed lazily in the

ocean below. Then finally, 80 minutes on, the destination

came into view: a gigantic concrete pier that juts nearly

two miles out into the South Atlantic and boasts an unusual

nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up

by dozens of 38-tonne pillars, this vast concrete structure

is part of the Superporto do Acu, a £1.6bn port and

industrial complex that is being erected on the Rio

coastline, on an area equivalent to 12,000 football

pitches.

Reputedly the largest industrial port complex of its type

in the world, Açu is also one of the most visible symbols

of China's rapidly accelerating drive into Brazil and South

America as it looks to guarantee access to much-needed

natural resources and bolster its support base in the

developing world.

When Acu opens for business in 2012, its 10-berth pier will

play host to a globetrotting armada of cargo ships, among

them the 380-metre wide ChinaMax – the largest vessel of

its type, capable of ferrying 400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of

barrels of oil are expected to pass along the "Highway"

each year on their way east, where they will alleviate

China's seemingly unquenchable thirst for natural

resources.

"This project marks a new phase in relations between Brazil

and China," Rio's economic development secretary, Julio

Bueno, said during the recent visit of about 100 Chinese

businessmen to the port complex, which is being built by

the Brazilian logistics company LLX and should receive

billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America,

is part of China's "going out strategy" – an economic and,

some say, diplomatic push for Chinese companies, many of

them state-run, to invest abroad, snapping up access to

minerals, energy and food by pouring the country's colossal

foreign reserves into overseas companies and projects.

China is expected to overtake Japan as the world's second

largest economy this year and may already be the world's

greatest energy consumer. Now it is set to become Brazil's

top foreign investor, with its companies plowing $20bn into

the country in the first six months of 2010, compared with

$83m in 2009. A recent study by Deloitte predicted that

Chinese investments in Brazil could hit an average of about

$40bn a year between now and 2014, with companies throwing

money at sectors ranging from telecommunications,

infrastructure and farming, to oil, biofuels, natural gas,

mining and steel manufacturing.

"Relations with Brazil in all areas have entered a new

era," Qiu Xiaoqi, China's ambassador in Brazil, recently

told the state news agency Xinhua.

The surge in China's South American spending is not just a

Brazilian phenomenon. Ecuador has already signed around

$5bn of bilateral deals with China this year, including

$1.7bn to help build a hydro-electric dam and $1bn

investments for oil exploration and infrastructure

projects. That compared with Chinese investment of just

$56m in 2009.

Chinese companies have sunk $1.4bn into mining operations

in Peru this year, while in April Hugo Chávez announced

that the Chinese, already major sponsors of Venezuelan oil

exploration, had agreed to open a $20bn credit-line for the

"Bolivarian revolution".

Michael Klare, author of Rising Powers, Shrinking Planet, a

book about the growing tussle for global resources,

described today's China as "the shopaholic of planet

Earth".

"The Chinese authorities understand that to sustain the

country's continued growth, they will have to ensure that

its industries are provided with adequate supplies of

energy, minerals, and other basic raw materials," he said.

But the "going out" strategy went far beyond business

transactions, he added.

"They seek to fashion a multipolar world in which no single

power – read the United States – plays an overwhelmingly

dominant role. To this end, they seek to bolster ties with

rising regional powers like Brazil and South Africa."

In Sao Joao da Barra, the city nearest to Acu and one of

Rio state's poorest regions, the Chinese presence is being

felt even before Brazil's Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water

and Mandarin interpreters for visiting Chinese dignitaries.

Sao Joao da Barra's town hall, meanwhile, has started

offering free Mandarin lessons to locals interested in

working with the wave of Chinese guests that is

anticipated.

"You should see a 10-year-old boy saying, 'I understand …

the Chinese are coming and when the Chinese industries come

I want to work for them and if I speak Mandarin I'll have a

competitive advantage on the others'," beamed Eike Batista,

the billionaire entrepreneur behind the superport and one

of the most vocal cheerleaders for Chinese advances into

Brazil. "[It is] wonderful."

Leonardo Gadelha, LLX's CFO, said during a recent tour of

the port: "This is part of a Chinese strategy of going to

the market more and more. They are already a very

considerable presence in Africa and we are now going

through this moment in Brazil."

The Highway to China lay "in the middle" of this blossoming

relationship with China, he said, adding: "We are betting

that … this will continue growing."

Not all Brazilians, or indeed western governments, share

such enthusiasm.

"There are many in Washington who worry about China's

growing presence in Africa and Latin America and claim that

this poses a threat to America's long-term strategic

interests," said Klare, noting, however, that the US'

"fixation" with Afghanistan and the war on terror meant

there had been virtually no reaction.

In Brazil meanwhile China's arrival has prompted cries of

neo-colonialism. "The Chinese have bought Africa and now

they are trying to buy Brazil," the prominent economist

Antônio Delfim Netto complained in a recent interview with

the Estado de Sao Paulo newspaper, warning that it was a

"grave mistake" to allow a foreign state to buy "land,

minerals [and] natural resources" from another sovereign

power.

Batista, Brazil's richest man, rejected such criticism,

saying: "The association between Brazil and China is a

two-way highway." Chinese companies such as Wuhan Iron and

Steel had committed to helping build a $5bn steel mill at

the port complex, rather than always shipping out primary

resources to process at home, he pointed out. "You want to

get three tonnes of raw iron ore, [so] produce one tonne of

steel in Brazil," he said. "That philosophy is sinking in

and is great for both sides."

Neither would Chinese companies be allowed to flood the

complex with hordes of foreign workers as had happened in

Africa, said Gadelha, the CFO.

"If it was up to them they would bring lots of Chinese

workers as they are used to doing," he admitted. "[But]

Brazil's legislation is very strict in this sense."

Batista suggested that rather than complaining about

China's courtship of Brazil, western powers should urge

their own companies to pay more attention to the region

themselves.

"In the last 15 years or so the [American and European]

CEOs have stopped coming here and that is why they are a

little bit behind," he said. "We are pushing European

companies and saying: 'You're not really understanding what

is happening in Brazil'."

"Don't put Brazil in the same bag as our neighbours," he

added. "We are not Central America. We are not Venezuela.

We are not Argentina."

============================

Beijing's deals

Brazil In November 2009 Brazilian energy giant Petrobras

signed a $10bn loan deal with China's Development Bank. As

part of the deal Petrobras will guarantee the supply of

200,000 barrels of oil per day to China over the next 10

years. Chinese companies and state banks pumped around

$20bn into Brazil in the first half of this year

Venezuela Hugo Chávez, pictured, unveiled a $20bn credit

line from China's Development Bank to fund the "Bolivarian

revolution" in April

Ecuador The country has already signed around $5bn of

bilateral deals with China this year, including $1.7bn to

help build a hydro-electric dam and $1bn investments for

oil exploration and infrastructure projects. In 2009 direct

Chinese investment in the country was just $56m

Peru Chinese companies invested $1.4bn in mining operations

in Peru during the first four months of this year, making

China the country's second largest trade partner

CHINA AND LATIN AMERICA - PARTNERSHIP FOR A NEW WORLD

Brazil's huge new port highlights China's drive

into South America

Investments guarantee Chinese access to soy, oil and other badly

needed resources

The Guardian

Wednesday 15 September 2010

The 'super port' in Sao Joao da Barra is the largest port investment

in Brazil and will have capacity for the largest ships in the world.

Photograph: Douglas Engle/Australfoto Blades slicing through the

morning heat, the helicopter rose from the tarmac and swept into a

cobalt sky, high above Rio's Guanabara Bay.

It powered north-east over deserted beaches, dense Atlantic

rainforest and fishing boats that bobbed lazily in the ocean below.

Then finally, 80 minutes on, the destination came into view: a

gigantic concrete pier that juts nearly two miles out into the South

Atlantic and boasts an unusual nickname: the Highway to China.

Dotted with orange-clad construction workers and propped up by dozens

of 38-tonne pillars, this vast concrete structure is part of the

Superporto do Acu, a £1.6bn port and industrial complex that is being

erected on the Rio coastline, on an area equivalent to 12,000

football pitches.

Reputedly the largest industrial port complex of its type in the

world, Açu is also one of the most visible symbols of China's rapidly

accelerating drive into Brazil and South America as it looks to

guarantee access to much-needed natural resources and bolster its

support base in the developing world.

When Acu opens for business in 2012, its 10-berth pier will play host

to a globetrotting armada of cargo ships, among them the 380-metre

wide ChinaMax – the largest vessel of its type, capable of ferrying

400,000 tonnes of cargo.

Millions of tonnes of iron ore, grain, soy and millions of barrels of

oil are expected to pass along the "Highway" each year on their way

east, where they will alleviate China's seemingly unquenchable thirst

for natural resources.

"This project marks a new phase in relations between Brazil and

China," Rio's economic development secretary, Julio Bueno, said

during the recent visit of about 100 Chinese businessmen to the port

complex, which is being built by the Brazilian logistics company LLX

and should receive billions of dollars of Chinese investment.

This new phase of engagement with Brazil and South America, is part

of China's "going out strategy" – an economic and, some say,

diplomatic push for Chinese companies, many of them state-run, to

invest abroad, snapping up access to minerals, energy and food by

pouring the country's colossal foreign reserves into overseas

companies and projects.

China is expected to overtake Japan as the world's second largest

economy this year and may already be the world's greatest energy

consumer. Now it is set to become Brazil's top foreign investor, with

its companies plowing $20bn into the country in the first six months

of 2010, compared with $83m in 2009. A recent study by Deloitte

predicted that Chinese investments in Brazil could hit an average of

about $40bn a year between now and 2014, with companies throwing

money at sectors ranging from telecommunications, infrastructure and

farming, to oil, biofuels, natural gas, mining and steel

manufacturing.

"Relations with Brazil in all areas have entered a new era," Qiu

Xiaoqi, China's ambassador in Brazil, recently told the state news

agency Xinhua.

The surge in China's South American spending is not just a Brazilian

phenomenon. Ecuador has already signed around $5bn of bilateral deals

with China this year, including $1.7bn to help build a hydro-electric

dam and $1bn investments for oil exploration and infrastructure

projects. That compared with Chinese investment of just $56m in 2009.

Chinese companies have sunk $1.4bn into mining operations in Peru

this year, while in April Hugo Chávez announced that the Chinese,

already major sponsors of Venezuelan oil exploration, had agreed to

open a $20bn credit-line for the "Bolivarian revolution".

Michael Klare, author of Rising Powers, Shrinking Planet, a book

about the growing tussle for global resources, described today's

China as "the shopaholic of planet Earth".

"The Chinese authorities understand that to sustain the country's

continued growth, they will have to ensure that its industries are

provided with adequate supplies of energy, minerals, and other basic

raw materials," he said. But the "going out" strategy went far beyond

business transactions, he added.

"They seek to fashion a multipolar world in which no single power –

read the United States – plays an overwhelmingly dominant role. To

this end, they seek to bolster ties with rising regional powers like

Brazil and South Africa."

In Sao Joao da Barra, the city nearest to Acu and one of Rio state's

poorest regions, the Chinese presence is being felt even before

Brazil's Highway to China is complete.

Keen to impress, LLX staff at the Açu port lay on hot water and

Mandarin interpreters for visiting Chinese dignitaries. Sao Joao da

Barra's town hall, meanwhile, has started offering free Mandarin

lessons to locals interested in working with the wave of Chinese

guests that is anticipated.

"You should see a 10-year-old boy saying, 'I understand … the Chinese

are coming and when the Chinese industries come I want to work for

them and if I speak Mandarin I'll have a competitive advantage on the

others'," beamed Eike Batista, the billionaire entrepreneur behind

the superport and one of the most vocal cheerleaders for Chinese

advances into Brazil. "[It is] wonderful."

Leonardo Gadelha, LLX's CFO, said during a recent tour of the port:

"This is part of a Chinese strategy of going to the market more and

more. They are already a very considerable presence in Africa and we

are now going through this moment in Brazil."

The Highway to China lay "in the middle" of this blossoming

relationship with China, he said, adding: "We are betting that … this

will continue growing."

Not all Brazilians, or indeed western governments, share such

enthusiasm.

"There are many in Washington who worry about China's growing

presence in Africa and Latin America and claim that this poses a

threat to America's long-term strategic interests," said Klare,

noting, however, that the US' "fixation" with Afghanistan and the war

on terror meant there had been virtually no reaction.

In Brazil meanwhile China's arrival has prompted cries of

neo-colonialism. "The Chinese have bought Africa and now they are

trying to buy Brazil," the prominent economist Antônio Delfim Netto

complained in a recent interview with the Estado de Sao Paulo

newspaper, warning that it was a "grave mistake" to allow a foreign

state to buy "land, minerals [and] natural resources" from another

sovereign power.

Batista, Brazil's richest man, rejected such criticism, saying: "The

association between Brazil and China is a two-way highway." Chinese

companies such as Wuhan Iron and Steel had committed to helping build

a $5bn steel mill at the port complex, rather than always shipping

out primary resources to process at home, he pointed out. "You want

to get three tonnes of raw iron ore, [so] produce one tonne of steel

in Brazil," he said. "That philosophy is sinking in and is great for

both sides."

Neither would Chinese companies be allowed to flood the complex with

hordes of foreign workers as had happened in Africa, said Gadelha,

the CFO.

"If it was up to them they would bring lots of Chinese workers as

they are used to doing," he admitted. "[But] Brazil's legislation is

very strict in this sense."

Batista suggested that rather than complaining about China's

courtship of Brazil, western powers should urge their own companies

to pay more attention to the region themselves.

"In the last 15 years or so the [American and European] CEOs have

stopped coming here and that is why they are a little bit behind," he

said. "We are pushing European companies and saying: 'You're not

really understanding what is happening in Brazil'."

"Don't put Brazil in the same bag as our neighbours," he added. "We

are not Central America. We are not Venezuela. We are not Argentina."

============================

Beijing's deals

Brazil In November 2009 Brazilian energy giant Petrobras signed a

$10bn loan deal with China's Development Bank. As part of the deal

Petrobras will guarantee the supply of 200,000 barrels of oil per day

to China over the next 10 years. Chinese companies and state banks

pumped around $20bn into Brazil in the first half of this year

Venezuela Hugo Chávez, pictured, unveiled a $20bn credit line from

China's Development Bank to fund the "Bolivarian revolution" in April

Ecuador The country has already signed around $5bn of bilateral deals

with China this year, including $1.7bn to help build a hydro-electric

dam and $1bn investments for oil exploration and infrastructure

projects. In 2009 direct Chinese investment in the country was just

$56m

Peru Chinese companies invested $1.4bn in mining operations in Peru

during the first four months of this year, making China the country's

second largest trade partner

NOAM CHOMSKY SPEAKS AT PEKING UNIVERSITY

Chomsky: "What is challenging the US
is not China’s development, but its independence."

Global Voices Online

On 13 August, Noam Chomsky delivered a speech at the Peking University in Beijing. Chomsky, one of the leading public intellectuals of our age, is famous for his political activism and contributions to linguistic and philosophy. The talk, titled Contours of World Order: Continuities and Changes, was mostly about two dominant threats facing humanity: nuclear wars and environmental degradation.

While Chomsky has re-emphasized his criticisms on the United States, he has also expressed his opinions on China. In Chomsky’s view, emerging countries like China and India still have a long way to go to challenge the America. Of particular concern is the environmental cost of China’s development model, and the many internal and social problems that China has to tackle. This week, the Southern Metropolitan Daily publishes an interview with Chomsky. An excerpt of the interview is translated below.


SMD: Most Chinese have accepted globalization. In the past three decades, especially after China joined the World Trade Organization (WTO), many Chinese have benefited tremendously. But it seems that you see globalization in poor lights.

Chomsky: China’s economic achievement has little to do with globalization. It is related to trade and export. China has gradually become an export-oriented country. No one, myself included, is opposed to exports. But this is not globalization. In fact, China has become a factory in the Northeast Asian production system. If you look at the whole region, you will find it very dynamic. China’s export volume is enormous. But there is something we have overlooked. China’s export relies heavily on the exports of Japan, Korea and the US. These countries provide China with high-tech components and technologies. China is just doing the assembly, and labelling the final products as ‘Made in China.’

China has developed rapidly by following wise policies. But while millions of people were lifted out of poverty, costs such as environmental degradation are high. They are merely transferred to the next generation. Economists will not worry about them, but these are costs that someone needs to pay for ultimately. It may be your children or grandchildren. These have nothing to do with globalization and the WTO.


SMD: Do you think the rise of China will change the world order? Will China play the role that the US is playing now?

Chomsky: I don’t think so; neither do I hope so. Do you really hope to see a China with 800 overseas military bases, invading and overthrowing other governments, or committing terrorist acts? This is what the America is doing now. I think this will not, and cannot, happen on China. I do not wish it to happen neither. China is already changing the world. China and India together account for almost half of the world’s population. They are growing and developing. But relatively speaking, their wealth is only a small part of the world. Both countries still have long ways to go and face very serious domestic problems, which I hope will gradually be solved. It is meaningless to compare their global influences with those of rich countries. My hope is that they will exert some positive influences to the world, but this has to be watched carefully.

China should ask itself what role it wishes to take in the world. Fortunately, China is not assuming the role of an aggressor with a large military budget, etc. But China does have a role to play. It is am enormous consumer of resources, and there are pros and cons. For example, Brazil will benefit economically if it exports to China. On the other hand, its economy will also be damaged. For countries with abundant resources like Brazil and Peru, one problem is their reliance on exports of primary resources, which is not a good development model. To change their mode of development, they first need to solve their domestic problems and transform themselves into producers, not just exporting primary products to other producer countries.


SMD: Is the success of China a challenge to Western democracies?

Chomsky: Let’s make a historical comparison. Was the rise of the United States a threat to democratic Britain? The United States was founded on the slaughtering of indigenous population and the slave system. Is this model suitable for other countries? Do you want China to learn from this model? It is true that the US has developed into a democratic country which is strong in many respects, but its democracy is not developed from this model, which any rational person would not want to imitate.

China is developing, but there is no evidence to prove that its internal development is causing a threat to the West. What is challenging the US is not China’s development, but its independence. That is the real challenge.

You can tell from every day’s headlines that the current focus of US foreign policy is Iran. The year 2010 is called ‘The Year of Iran.’ Iran is portrayed as a threat to US foreign policy and the world order. The US has imposed harsh, unilateral sanctions, but China has not followed suit. China has never followed the US lead. Instead, it supports UN sanctions, which are too weak to matter. A few days before I left for China, the US States Department warned China in a very interesting way. It said China has to bear international responsibilities, i.e. follow US orders. This is China’s international responsibilities.

This is standard imperialism, which is that other countries have to act according to our requests. If not, they are irresponsible. I think officials from the Chinese Foreign Ministry must laugh when they hear this. But this is the standard logic of imperialism. In fact, Iran becomes a threat because it does not follow US instructions. China is a bigger threat, as it is a big problem when a major power refuses to obey orders. This is the challenge that the US faces.

ON THE USA's CONTINUING FEARS AND HOSTILITY TO CHINA

US anti-China rhetoric at danger level

By Benjamin A Shobert
Asia Time Online
22 June 2010

WASHINGTON - The US-China Congressional Committee (USCC)
this month held its most recent hearing on US-China
relations, specifically on "China’s Past and Future Role in
the World Trade Organization" (WTO). As Commissioner
Patrick Mulloy stated at the opening, "The purpose of
today’s hearing is not to second guess what Congress did 10
years ago. Its purpose is to look at the arguments made in
favor of China’s WTO entry by proponents and to consider
the results."

Considering the political environment in Washington, where
recent days have been marked by the most serious
bi-partisan efforts of the past decade to introduce
legislation that would impose new trade barriers on
Chinese-made goods, and increase pressure for

an upward revaluation of the yuan against the US dollar,
Mulloy’s comments are particularly meaningful.

The nature of politics in Washington can lull policymakers
to sleep: rhetoric over China's rise has been slowly
growing increasingly negative as a more specific set of
grievances over the past five years have coalesced. Most
advocates for economic integration with China have grown
used to (and perhaps even weary from) those who seem
fixated on the loss of opportunities related to China's
ascent.

But voices that were once easy to dismiss are now, in the
middle of an ongoing economic setback that at its best is
labeled a "jobless recovery", are becoming more politically
powerful, and insiders in Washington are beginning to sense
that this time it might actually have significant impact on
the economic relationship between the two countries.

During last week's USCC testimony, Senator Charles Schumer
(Democrat, New York) provided in written testimony a very
specific insight into the grievances of many Americans and,
as a consequence, the powerful politicians who represent
them: "China's policy of large-scale intervention in the
exchange markets and the significant undervaluation of its
currency also subsidize Chinese exports to the United
States and, at the same time, make US exports to China more
expensive. Thousands of US factories have been shuttered
and millions of jobs have been lost or displaced over the
past decade as a result."

He went on to share that, "There is no question that this
is what one might call a 'put-up or shut-up' moment for US
lawmakers. American jobs and wealth are flowing out of the
US, across the globe to China and other countries with
cheap labor, lax environmental standards, and no
compunction about flouting WTO rules to gain an unfair
competitive trade advantage. This has got to stop."

It would be a mistake to overlook the senator's comments,
or to simply mark them up to the traditional politics of
organized labor and Schumer's relationship with them. This
week, during a separate congressional hearing of the House
Ways and Means Committee, Republican Congressman Dave Camp
(Michigan), asked whether "enough was doing to push China
... on its egregious economic barriers" specific to its
currency manipulation, the country's "Indigenous
Innovation" policies, and ongoing intellectual property
compliance with WTO rules.

What both provide is, at the base of their comments, a
critical insight into the inner-workings of Washington's
political class. Whatever the heritage of those ideas,
which for several decades have knit together the two
countries, they are under strain as never before. To the
extent both sides of the aisle hold similar frustrations
about China's economic policies, DC will find a way to vent
the intensifying political pressure.

What remains to be seen is the form this political pressure
will take: on the table appears to be a handful of likely
options, most likely of which may be a set of
countervailing duties imposed on China for its currency
practices, the remedy presented by Schumer in his Currency
Exchange rate Oversight Reform Act of 2010 (S.3134). During
this week's House Ways and Means Committee hearing on
"China's Trade and Industrial Policies", chairman Sandy
Levin (Democrat, Michigan) said simply but forcefully " ...
China must change its ways". Straight-forward words
certainly, but important coming from an influential
congressman long known for his reputation of urging caution
and balance in America's relationship with China.

It would appear that, if politicians like Levin can win the
day, Washington's approach to China will incorporate more
than just a single-minded emphasis on the country's
currency policies. Specifically, Levin appears to be
working for a compromise that would take into account the
whole of Beijing's economic policy, what he and other
policy-makers understand to be a form of national
mercantilism.

As Levin stated, "There are other policies in China that
place US companies and workers at a disadvantage, often in
clear violation of China's WTO obligations. They are part
and parcel of the overall trend in China's approach to
trade ... the selective use of tax rebates to stimulate
certain exports; export restrictions on raw materials;
trade-distorting subsidies, discriminatory product
standards ... weak laws and weak enforcement of labor and
environmental laws; state-owned enterprises that
discriminate against US companies. All of these policies
have a common thread: they have the purpose or the effect
of tilting the playing field to favor Chinese companies and
against US companies, workers and farmers."

Senator Debbie Stabenow (Democrat, Michigan), provided in
testimony to the USCC panel her plan to introduce the
"China Fair Trade Act, legislation that will prevent
Federal taxpayer dollars from being used to purchase
Chinese products and services until they sign on to and
abide by the WTO Agreement on Government Procurement, which
will allow American companies to export into their
government markets." This sort of move, while it remains
uncertain as to whether it will be advanced in the House,
does represent the sort of escalation between two countries
that tends to indicate a looming conflict over trade that
could, given the present economy, too easily get out of
hand.

During last week's USCC hearing, Congressman Tim Ryan
(Democrat, Ohio), a long-time critic of China's currency
policy and one of the first to propose legislation
attempting to address the matter, echoed the concerns of
his colleagues but perhaps most importantly hinted at
deeper concerns which are too often glossed over by those
who suppose such critics want to simply hit rewind on the
global economy: "Several years ago, progress toward further
market liberalization began to slow and it became clear
that some parts of the Chinese government did not yet fully
embrace key WTO principals."

Against the backdrop of a general economic frustration in
the US, it is easy to miss that much of what lies beneath
Washington's concerns is not simply Beijing's economic
policy but a more general and caustic concern that how
China was anticipated to evolve and embrace global rule
sets and overall liberalize is not happening, which begs
the political question of whether the sacrifice American
workers are perceived to have made by opening their markets
to China has, in fact, been worth it.

Understanding what Washington is currently obsessed with
talking about, and separating it from what is actually
likely to get acted upon, is not an easy task. This
realization is essential when evaluating the likelihood of
actions such as those suggested by Schumer, Stabenow, or
Ryan to be implemented. Specific to the matter of China's
presence in the WTO, Alan Wolff, chair of the Committee on
Comparative Innovation Policies at the National Academies,
provided to the USCC during last week's hearing a reminder
that "The United States believed that bringing China into
the WTO would foster domestic economic reforms within
China, which would ultimately create a functioning large
and growing market for US goods and services ... Large US
headquartered multinational businesses shared this vision.
They saw China as a major market and a major source of
supply for all other markets including the United States."

This sentiment is perhaps the most powerful counterweight
to the building political frustration in Washington;
specifically, the interest of American business remains in
many ways to maintain the status-quo with China. Changes in
Beijing's currency will have the immediate effect of
changing costs for outbound exports from their
Chinese-based subsidiaries, possibly forcing costly
production relocations, and the even more dire possibility
of the Chinese market growing additionally difficult to
access and sell into.

It has been quite literally several decades since the
interests of the working class and the ownership class have
been so front and center in Washington as they are now. The
still-powerful pro-business lobby will push back against
bills like those mentioned earlier, but unless the American
economy begins to show additional life, even organizations
like the critical Business Roundtable may be ineffective at
limiting a political retaliation against China.

During last week's testimony, this was communicated most
eloquently by James Bacchus, formerly a two-term chairman
of the Appellate Body of the WTO and a former Special
Assistant to the United States Trade Representative in the
Executive Office of the President. "I worry when I hear
other Americans describe China as a 'threat' to the United
States," he said. "I am reminded at such times of the
warning of Thucydides in his history of the Peloponnesian
War - that a belief in the inevitability of conflict can
become one of the main causes of conflict. Trade disputes
between the United States and China are inevitable.
Conflict is not."

The recent USCC hearing on China's WTO compliance was
ostensibly about just that, but it quickly became the
tapestry for a broader conversation that is taking place
within Washington about whether China's growth has come at
too great a cost for Americans, and whether its policies
and practices will ever embrace the rough outlines of what
the US recognizes as a politically liberal environment.

This debate is growing in intensity, and holds the
potential to redefine the contours of the two countries'
relationship in ways that may prove as foundational as
China's first timid entry into free-market reforms in the
early 1980s. The stakes, for Chinese and Americans, have
not been any higher than they are now for decades.

Benjamin A Shobert is the managing director of Teleos Inc
(www.teleos-inc.com), a consulting firm dedicated to

OBAMA AND HILARY LEAD THE EMPIRE IN UNDERHAND DIVIDE AND RULE BETWEEN ARAB WORLD, IRAN AND CHINA

China feels US-Iran fallout

By Peter Lee
Asia Times Online

The question of the day in Washington is will the People's
Republic of China veto further United Nations Security
Council sanctions against Iran over Tehran's nuclear
program?

Informed opinion says "no".

China has exercised its veto only six times in 30 years on
the council. In matters core to national priorities, like
punishing countries such as Guatemala and Macedonia for
their ties to the Republic of China (Taiwan) and protecting
the interests of Pakistan, it has acted alone.

However, on broader geopolitical issues, in recent years it
has vetoed resolutions only when joined by at least one
other Security Council member.

France and the United Kingdom are lined up solidly behind
the United States on Iran's nuclear program, which some say
is geared towards making a nuclear bomb, a charge Tehran
consistently dismisses.

Russia this year is interested in improving ties with the
US and Europe and has moved toward support of sanctions. No
Russian veto, no Chinese veto, says the conventional
wisdom.

On the other hand, chances of China voting for sanctions
are slim. A press report covering Chinese Foreign Minister
Yang Jiechi's visit to Paris at the beginning of February
says it all: "China Says Iran Sanctions Hinder Diplomacy."

Abstention is, therefore, China's most likely course.

Beijing's reaction might be expected to be a dismissive and
a resigned shrug: a symbolic vote, another toothless round
of sanctions, more political kabuki, and eventually
business as usual.

However, China's expected non-vote will be accompanied by
new feelings of unease and anger, reflecting Beijing's
growing suspicion that an important motivation for the Iran
sanctions, and the escalation of Iran tensions in general,
is Washington's desire to employ the issue as a wedge
against China.

In past years, China could regard US sanctions against
authoritarian regimes with a certain amount of complacency.
The George W Bush administration's heavy-handed approach
dismayed and divided natural allies of the US and drove its
targets deeper into China's embrace.

However, the Obama administration has decided to supplement
brute power with smart power. It apparently promotes
divisive international initiatives only when the splits in
international opinion and alliances are expected to go
America's way.

China first got a taste of the smart-power approach in
December at the Copenhagen climate summit. The US linked
the release of billions of dollars of climate adaptation
aid to vulnerable developing countries with China's
acceptance of a satisfactory transparency regime. Its
delegation passed the message to smaller nations that
China's intransigence was standing between them and
billions of dollars of much-needed assistance.

Despite the treaty debacle, the geopolitical results for
the Obama administration were encouraging. The European
Union sided with the US. According to an internal Chinese
report, a good number of Group of 77 nations were, for the
large part, influenced by the American position but did not
openly confront China. China cobbled together an alliance
with the emerging economies of Brazil and India and,
despite a concerted "blame China" effort by the US and the
UK, was able to limit the political damage.

However, it was a sobering experience for Chinese
diplomats. The report concluded "A conspiracy by developed
nations to divide the camp of developing nations [was] a
success."

Now, the Obama administration is picking on the regionally
and globally unpopular government of Iran, thereby exposing
China as the regime's lone international supporter of note.

The US has worked to bring the EU and Russia to its side.
The EU, at least, is now an enthusiastic ally. Relieved to
be dealing with a judicious and consultative American
president, it no longer sees the need to accommodate a
greater role for China on the world stage.

Russia has joined the American team (with sub voce
reservations), reportedly in response to the Obama
administration's concessions on shelving plans for a
missile defense shield in Eastern Europe.

The State Department has also worked with the Gulf states
to gain their support for a policy of putting Iran in its
place.

As far as the China issue is concerned, America's direct
solicitation of China's Security Council vote involved
Obama passing the word to President Hu Jintao that China's
interests would suffer if diplomatic pressure failed,
Israel attacked Iran's nuclear facilities, and the price of
oil went up.

It is unlikely that the Israel attack card was persuasive
to the Chinese leadership, and did little more than
convince them that Washington was using it as an excuse to
justify an extension of US influence in the Middle East.

A pre-emptive attack by Israel to nip Iran's nuclear
ambitions in the bud is unlikely.

Despite Tel Aviv's brave talk of its ability and
determination to launch a raid independent of US approval,
even a resounding success would probably only slow down the
program a few years while earning the undying enmity of the
Iranian people and the Muslim world toward Israel ... and
the United States, which would have to provide Israel with
flight privileges over Iraq to stage the attack.

American assertions that the Iranian nuclear program will
spark a ruinous arms race in the Gulf no doubt elicited
similar skepticism from China, with the unspoken
observation that, since most of those arms would be
supplied by the US and EU, the onus for (and profits of) an
arms race would probably fall to the West.

American efforts to wedge the Arab states away from China
are more likely to attract Beijing's attention and concern.

James Phillips of the Heritage Foundation spun US Secretary
of State Hillary Clinton's current trip to the Middle East:

Clinton will be looking to the Arabs to "act as a
counterweight [to Iran] on China and help unlock its
Security Council vote.

The US is hoping to use these discussions with the Arabs as
a way to encourage China to look at its long-term economic
interests," Phillips added. "The Arabs could let the
Chinese know that it will hurt them economically with the
Arab countries in the long run if China clings to this
pro-Iran position.

United States protestations that all this diplomatic
maneuvering directed at China is justified by the need to
exhibit international unity on Iran ring hollow.

Invocation of the Israeli attack and the Gulf states arms
race bogeymen notwithstanding, the primary justification
for the current spasm of concern over Iran's nascent
nuclear activities is the dreaded Western "impatience",
which appears very similar to the manufactured impatience
that sent the coalition of the willing charging into Iraq
in 2003.

The stated remedy for this impatience, the UN sanctions, is
unlikely to work.

Russia cares enough about its relationship with Tehran to
make sure anything that gets through the Security Council
will not be particularly catastrophic.

On February 11, Deputy Foreign Minister Andrey Ryabkov made
this memorable statement: "We do not think sanctions will
work, but we understand that it is impossible to get by
without them in certain circumstances."

With early reports that a massive government presence
marginalized Green Movement demonstrators on the February
11 anniversary of the Iranian revolution of 1979, regime
change in Iran is probably off the table, too.

Even if a new regime came to power, Iran's national
commitment to nuclear power - and the perceived nuclear
weapons threat to the region - would probably remain
unchanged.

By conventional geopolitical logic, China would seem to
have the right idea: more jaw-jaw and engagement or, as it
called for in a recent editorial, "patience, patience and
more patience."

But US policy seems to be moving in the opposite direction,
stoking the crisis instead of lowering the heat.

So what's China's takeaway from the Iran crisis?

Absent an immediate, credible threat of an Israeli attack
on Iran, the US is rushing the international community
toward "crushing sanctions" on Tehran that, if carried out,
would result in disruption of Iran's energy exports.

If this were to actually occur, the big loser in the Iran
crisis would be China.

As a Chinese analyst told Reuters: "Fully going with
Western expansion of sanctions on Iran so they restrict
Iran's energy exports would amount to disguised sanctions
against China, and China certainly won't agree," Wang Feng,
a researcher at the Chinese Academy of Social Sciences told
the Global Times, a Chinese newspaper published on
Thursday.

Reportedly, the US had advised China it would dispatch
Hillary Clinton to visit Iran's enemies in the Persian Gulf
and ensure that, if sanctions disrupted the supply of
Iranian oil, Saudi Arabia and its associates would ensure
that China's petroleum needs would continue to be met.

It is unlikely that China's vision of its energy security
involves relying on the US's good offices to deal with the
consequences of a US-imposed policy that it rejects and had
no voice in formulating.

In any case, the prospects for an oil-price Armageddon are
unlikely. Given free-market realities and the greed of oil
producers inside and outside the Gulf, the world would
suffer as much as China if Iranian crude disappeared from
the market.

For Beijing, the biggest concern is its perception that
Europe, Russia and the Gulf states are signing on to an
anti-Iran initiative that could impact China's interests in
such a major way without accommodating China's priorities.

From Beijing's point of view, China is the main superpower
stakeholder in the Iran crisis.

So it is asking why isn't it being consulted? Indeed, why
aren't its critical interests given priority, instead of
subjecting it to moonshine about an Israeli attack, an arms
race in the Gulf and lectures about its geopolitical
interests?

China is not a threat to the international order, but it is
its most independent and uncontrollable element. There are
growing signs of a shared consensus in the West that
reliance on China as a stabilizing financial, economic and
geopolitical factor must be reduced.

The past few years have been good to China's competitors
-especially India - and bad for China's allies - Pakistan
and Iran.

By accident or design, the Obama administration's decision
to heat up the Iran controversy has driven another wedge
between China and the US, the EU, the Gulf states and even
Russia.

The issue for China is whether the purpose of America's
Iran campaign is to isolate Iran ... or to isolate China?
This is a consequence of China's participation in the
security initiatives that the US chooses to organize to
protect and promote its own and loyal allies' interests.

China responded to the escalation of the Iran nuclear
crisis with a remarkable lead editorial in the Global
Times, the international affairs organ of People's Daily,
the government mouthpiece,.

The editorial, with the eye-catching title "Iran and the
West: Neither Should Think of Taking China Hostage",
painted China as the victim of the standoff. In an effort
to be even-handed, both Iran and the West are criticized
for their intransigence.

Nevertheless, both the West and Iran are unheeding at this
time. They both believe that only if they are unyielding,
then the other side will back off. This unenlightened
attitude even extends to their attitude toward China. Both
sides believe that all that's needed is to put pressure on
China, then China will, without considering its own
interests ... lower its head to them ... This thinking is
unrealistic.

The use of the loaded term, "lower its head", conjuring
images of the humiliating kowtow, instead of a more neutral
term such as "support one or the other" is an indication
that red lines are being drawn.

The fact that China's main worry is the West, and not Iran,
is unambiguously conveyed in the editorial's conclusion.

Recently in Western public opinion has been a call to use
the Iran issue to isolate China. This is extremely
superficial ... China is a big country and its interests
must be respected. China's dilemma must be sympathized
with. China's proposal opposing sanctions must be
understood. The big powers must cooperate and negotiate on
the Iran issue ...

China is a great country. If anyone seeks to compel her, to
injure her, they will certainly pay the price. Pretty
strong stuff.

The editorial is a clear indication that China considers
itself the target - or at least intended collateral damage
- in America's anti-Iran campaign. It makes the case that,
if the Obama administration sincerely cared about its
relationship with China, Washington would back off from the
sanctions campaign and allow negotiations to continue.

But that doesn't look like it's going to happen.

Sanctions will probably go ahead, with China either
abstaining or throwing in a tactical "yes" vote to postpone
an overt breach, and Washington will obtain another point
of leverage against China in the Persian Gulf.

If that happens, China will have to think about adjusting
to a new world situation in which the West seems less
interested in bargaining for its support or respecting its
interests.

Peter Lee writes on East and South Asian affairs and their intersection with US foreign policy.

WEST WERE PLAYING DIRTY TRICKS AT COPENHAGEN, CHINESE LEAKED PAPER REVEALS

China's fears of rich nation 'climate conspiracy' at Copenhagen revealed

'Conspiracy to divide developing world' will make future talks harder, says leaked government report

The Guardian

Rich nations furthered their "conspiracy to divide the
developing world" at December's UN climate summit in
Copenhagen, while Canada "connived" and the EU acted "to
please the United States", according to an internal
document from a Chinese government thinktank obtained by
the Guardian.

The document, which was written in the immediate aftermath
of Copenhagen but has only now come to light, provides the
most candid insight yet into Chinese thinking on the
fraught summit.

"It was unprecedented for a conference negotiating process
to be so complicated, for the arguments to be so intense,
for the disputes to be so wide and for progress to be so
slow," notes the special report. "There was criticism and
praise from all sides, but future negotiations will be more
difficult."

The authors - all members of a government environmental
research institute - were not part of the Chinese
negotiating team, but their paper was commissioned by the
environment ministry and circulated internally to the
minister, vice-ministers and department chiefs in the days
after the conference. The ministry currently plays only a
marginal role in climate policy making but many of the
paper's observations were echoed by China's chief climate
negotiator, Xie Zhenhua, in a recent speech given at
Beijing University.

The authors were downbeat about the prospects for
international talks and China's position within them.
"China, which was in the conference spotlight, played an
active and constructive role, but was also under huge
international pressure. It is predictable that our country
will face a tougher challenge in future climate talks," it
says.

Analysing international reaction to Copenhagen, the paper
lists a selection of responses from the UN
secretary-general, the Chinese foreign minister, the
European commissioner, prominent NGOs and major media
organisations, including the Guardian. It was written
before the publication of the most strident criticisms of
China's tactics by Mark Lynas, climate change adviser to
the Maldives, and the UK climate and energy secretary, Ed
Miliband.

Contrary to those views, the paper argues that the primary
goal of China's negotiators was not to spoil the summit,
but to resist a deal from rich nations that would put an
unacceptable burden on China and other developing
countries.

In their evaluation of the outcome, the officials' top
point is that "the overall interests of developing
countries have been defended" by resisting a rich nation
"conspiracy" to abandon the Kyoto protocol, and with it the
legal distinction between rich nations that must cut carbon
emissions and developing nations for whom action is not
compulsory.

The internal report acknowledges that unity among China's
traditional allies in the developing world became harder to
maintain in Copenhagen. "A conspiracy by developed nations
to divide the camp of developing nations [was] a success,"
it said, citing the Small Island States' demand that the
Basic group of nations - Brazil, South Africa, India, China
- impose mandatory emission reductions.

The paper is scathing about the US-led "umbrella group",
which it says adopted a position of inaction. Canada, it
says, "was devoted to conniving" to convince the world that
its pledge of a 3% emissions reduction between 1990 and
2020 is significant, while having no intention of meeting
its Kyoto protocol target of 6%.

There are no comforting words for the European Union, which
used to pride itself on playing a leadership role in
climate talks. "Copenhagen was a setback for the EU", the
authors say, in part because Europe "suggested the
abandonment of the Kyoto protocol in order to please the
US." The ministry has not responded to the Guardian's
request for a comment on the leaked paper.

The authors note that the Copenhagen accord which emerged
from the summit was not legally binding and lacked a global
target for emissions. But it says that overall the accord
was a "step forward", noting progress on a consensus to
limit global warming within 2C, progress on the funding by
rich nations of climate change adaptation measures in
poorer nations and a "last minute" compromise by developing
nations on the verification of their carbon pledges.

Lynas, who was present at many of the key negotiating
sessions, said: "It's astonishing that this document
suggests the Chinese really believes the absurd conspiracy
theory that small island states were being played like
puppets by rich countries. The truth is that the small
island states and most vulnerable countries want China and
its allies to cut their emissions because without these
cuts they will not survive. Bluntly put, China is the
world's No1 emitter, and if China does not reduce its
emissions by at least half by mid-century, then countries
like the Maldives will go under."

He added: "I think these claims of conspiracy are just a
bullying tactic, to force more progressive developing
countries back into line in case they too start demanding
more serious action by China."

Speaking last month, China's chief climate negotiator, Xie
- who also serves as vice-minister of the National
Development and Reform commission which controls China's
climate policy - also referred to the pressure from small
island nations. "The rich nations were completely trying to
make conflict among developing countries," he said.

He also described the "international fight on climate
change" as a contest for economic development space and
stressed that the way forward for China was to put more
effort into building a low-carbon economy. "Countries with
low-carbon industries will have a developmental advantage,"
said Xie. "Some people believe this is a global competition
as significant as the space race in the cold war. "

The concluding section of the leaked document proposes a
series of constructive initiatives. In what appears to be a
bid by the environment ministry to play a greater role in
carrying out climate-related policy, the report suggests
amending air pollution control laws to include greenhouse
gas emissions.

The official US version about what happened at Copenhagen
is also harsh. Todd Stern, the state department climate
change envoy, said this week that the summit "a snarling,
aggravated, chaotic event." But America attributes the
difficulties to a central divide between those countries -
led by China - insisting rich countries bear the entire
burden of reducing greenhouse gas emissions and the
position held by the US that rapidly emerging countries
must also take action. Stern suggested the divide had not
been bridged. China, along with India, South Africa and
Brazil, had been "ambiguous" in its follow-up commitments
to the accord.

Tom Burke, the influential environmentalist and a founder
of E3G consultants, said: "There was indeed a lot of work
done to get developing nations to put pressure on China.
[But] it was not a conspiracy of any kind unfortunately as
Britain was acting entirely alone on this front. Neither
our EU allies nor the US mounted any kind of diplomatic
effort. Pretty well everyone in Copenhagen, not just the
developed countries, complained about China's blocking
tactics."

CHINA CONTINUES TO RENATIONALISE; 'THE SECOND-COMING OF STATE OWNED ENTERPRISES'

What's yours is mine in China's coalfields

The Australian
January 25, 2010

NOWHERE is renationalisation more blatant than in the rich
coalfields of Shanxi.

Yet there's money lying beneath this unalluring mix. Loads
of it. Taiyuan is scattered with Bentley showrooms, Rolex
boutiques -- in fact, all the luxury brand names from New
York, London, Paris, Hong Kong and Shanghai. And the locals
like to talk about money.

"When a Shanxi businessman goes to Beijing to look for
houses, he doesn't just look at one apartment -- he looks
at the entire side of the building," a Shanxi executive
said in Taiyuan last week.

Most of the money has come from coal, the black gold that
fuels China's power stations and its steelmaking blast
furnaces, processing Australia's iron ore. Fortunes have
been built on the back of the province's mine workers, and
with their blood: there were 2631 deaths in China's coal
mining sector as a result of mine accidents last year, but
the figure was down by 20 per cent on 2008.

Shanxi is changing. Once home to thousands of small and
mid-sized mines and mining companies, now the government is
taking over again. Shanxi's coal sector is a high-profile
symbol of renationalisation: the second coming of
state-owned enterprises.

Tens of thousands of state-owned enterprises were pulled
apart in the 1980s to allow capitalism to develop. But now
the country's leadership is becalmed as it heads into its
last two years in power after years of only incremental
economic reform.

China's ruling politico-corporate complex has also been
emboldened by the opportunities of the global financial
crisis, which saw more than $US1.5 trillion pumped into the
economy, most into state-run companies.

The crisis has also been used to step up plans for
consolidation in eight key industries: the aim of this is
to have a smaller number of large companies which China
wants to be able to compete with large foreign
multinationals as well as expanding globally.

It's not just on a national level. In Shanxi, home to 30
million people, seven provincial coal miners have been
allocated a slice of the private sector at a bargain price.

In Shanxi close to 2000 small mines have been forceably
reclaimed, officially for efficiency, health and safety and
environmental concerns. These are real concerns: the
government attributes the fall in deaths to small mine
closures and says 70 per cent of fatalities are at small
mines. But one miner owner says he instituted the extra
safety and environmental controls but was still forced to
sell to the government at a loss of 5 million yuan
($833,000).

Businesses from the wealthy province of Zhejiang and its
famously rich capital Wenzhou are the biggest single source
of investment in Shanxi's coal sector.

"Wenzhou, one of the regions with the most active private
economy, has only 4.5 per cent GDP growth in the first half
of last year, far below national level," Xia Yeliang, a
professor at Beijing University, says.

"One of the reasons is Wenzhou's private entrepreneurs have
invested in about 600 coal mines in Shanxi with 200 billion
yuan, which face mergers now.

"It has severely hit Wenzhou's economy. The
renationalisation will have irrevocable impacts on China's
economy. It will have a profound negative effect on wealth
distribution and future development of China, and it must
be stopped now."

Lawyers claim their clients are getting only about 30 per
cent of the real value of the business in the forced sale
of coal mines. The provincial government has appointed its
own valuer, but lawyers have claimed this is against the
law. Mines are effectively being bought back for the price
of exploration licences handed out during the first decade
of the century and this does not take into account capital
spending and commercial contracts, says Zhang Yucheng, a
lawyer at national Chinese law firm Dacheng Law Office.

Last year China depended entirely on government funding to
achieve its 8.7 per cent growth. It was a tough year for
businesses in China -- recent government figures showed 20
per cent of small businesses went broke between November
and May and a further 20 per cent went close to collapse --
but China's state-owned enterprises got richer.

Last week the state press reported that China's SOEs were
expected to generate 750 billion yuan in profits and
achieve sales revenue of 12 trillion yuan in 2009.

In the first 11 months of 2009, the 131 SOEs under the
direct supervision of the State Assets Supervision and
Administration Commission (SASAC) posted 3.4 per cent
year-on-year growth in profits to 710.9 billion yuan on
revenues of 11.1 trillion yuan. "China will continue to
push ahead with the restructuring of its SOEs next year and
will encourage state-owned companies to pursue mergers and
acquisitions across different regions and countries," SASAC
director Lo Rongrong says. "We will also back private
enterprise investments in state-owned entities."

Initially, aggrieved mine owners, unaware of their legal
rights, were loath to take on the government. But now
China's biggest law firm, Dacheng, has taken on the case
for a group of mine owners.

"The Shanxi government has no right to handle the ownership
of private coal mines. It violates the Chinese
constitution, contract law and mineral resource law," Zhang
says.

"The transfer deal price should be assessed according to
market value."

The law firm is pushing for the appointment of an
independent arbiter to reassess the valuation of the mines
and says the Shanxi government has breached a number of
laws and regulations.

This is an interesting case in a country with no private
property rights.

sainsburychina@gmail.com - Michael Sainsbury