George Koo

For Chinese Scientists, America is the Land of Opportunity to Go to Jail.

2013-05-15T21:37:00.003-07:00

A similar version has been posted on China-US Focus.
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The recently concluded (non)case of the government vs. Dr. Bo Jiang bore a striking resemblance to the scandalous Wen Ho Lee affair that occurred in 1999 and strongly suggests that racial profiling and bigotry is still alive and well, at least in Virginia.

On March 16, Dr. Bo Jiang, a citizen of China boarded a plane at Dulles International bound for Beijing. He was accosted and escorted off the plane by FBI agents, put in jail and charged with lying to the law enforcement officials and possible violations of Arms Export Control Act.

About 7 weeks later, on May 3, the prosecution dropped all charges against Dr. Jiang. But before he was allowed to leave the US for Chengdu China he had to plead to a misdemeanor charge of “misuse of government equipment” in exchange for time already served in jail. The plea was so the government did not have to admit that they made a mistake.

In 1999, Dr. Lee, the then Los Alamos scientist, was accused of being a spy for China by the New York Times, fingered by then Energy Secretary Bill Richardson, thrown into solitary confinement for ten months. Lee was then released with an apology from the presiding judge for prosecutorial misconduct.

In the most recent case, Congressman Frank Wolf (R-VA) was instrumental in the arrest of Jiang and he was quite proud of his role as the self-appointed spy catcher. After Jiang’s arrest, the Congressman held a press conference on March 18 and issued a press release in praise of his own role in this affair.

Wolf is a well-known, long time critic of Peoples’ Republic of China. On March 7, he held a press conference expressing alarm at security violations at NASA-Langley. According to him, anonymous whistleblowers had told him of a Chinese national with unauthorized access to NASA’s secrets.

Wolf on March 7 already knew about Jiang but was setting the stage for the drama to come. He did say, “It is my understanding that this Chinese national is affiliated with an institution in China that has been designated as an ‘entity of concern’ by other U.S. government agencies.”

At the March 18 conference, Wolf revealed that Jiang was “trying the leave the country on a one-way ticket.” At the airport, the federal agents had asked what electronic media he had with him. Jiang admitted that he had a cellphone, a memory stick, an external hard drive and a new computer. A search of his luggage found other media items not mentioned by Jiang and that discrepancy too became grounds for suspicion.

At this point, Jiang could have explained that his work visa in the US was expiring and his contract was not being renewed. He bought a one-way ticket back to China because he wasn’t planning to come back. There was nothing sudden about his flight to Beijing.

He could have pointed out that the work he did as a NASA contractor was unrelated to national security and he had no access to data and technology related to national security.

But no one was interested in what the suspect had to say. Fortunately for Jiang, he then got a break. The court appointed Fernando Groene as his defense counsel. An experienced former federal prosecutor, Gorene accepted the appointment because he was outraged by the injustice of Jiang’s case.

“It’s all about a witch hunt,” he said to the media shortly after taking the case. The mills of justice ground on for a few more weeks before the prosecution confirmed that Jiang had been telling the truth, namely his computers contained no data or files that violated national security regulations.

Groene was quick to praise the prosecution for being fair minded after seeing that they had no case. Of course, this did not mean that Jiang received an apology from Wolf, FBI or anyone representing the federal government.

He experienced first hand the adage, “you can’t fight city hall.” Jiang had to accept a guilty plea to a misdemeanor charge for the time served—a misdemeanor of misusing government equipment that most federal employees would also have been found guilty of.

There were, of course, no offers of compensation for his 7 weeks of incarceration or damages to his reputation, dignity and personal privacy.

After the case was over and Jiang had gone back to China, attorney Groene gave additional color surrounding this case.

NASA could hardly ignore the agitation from the Congressman with the power of funding oversight. In response, NASA had earlier conducted an internal investigation of the allegations against Jiang and found no substantiation. This was duly reported back to Wolf but he would hear none of it.

A dissatisfied Wolf then wrote letters on March 13 to the US Attorney’s office and FBI insisting that they investigate further, leading to the ensuing fiasco

Jiang’s implied sinister connection with an “entity of concern” alluded by Wolf was apparently the school in Chengdu Jiang attended for undergraduate training. Groene pointed out that the Chengdu school had a sister college relationship with the College of William & Mary and the president of William & Mary is none other than Robert Gates, former Secretary of Defense in Bush and Obama administrations.

If anyone has violated federal regulations, Groene concluded, it was Congressman Wolf for disclosing confidential personal information on his website.

Groene is a naturalized American citizen from Cuba. He is proud to be an American and grateful to be in the land of opportunities but he is concerned over the erosion of our civil liberties as exemplified by the arbitrary law enforcement action against Jiang.

There are other conclusions to be drawn from this latest case of racial profiling against ethnic Chinese.

Obviously the US does not have enough scientists that can meet the requirements for security clearances and are thus qualified to do work involving national security. To get around this problem, Government agencies such as NASA have been parceling out work that are unrelated to national security to contractors who can hire scientists that do not hold security clearances. This was the case with Jiang, a Chinese citizen without permanent resident status.

Such a separation obviously does not satisfy Congressman Wolf and his ilk and thus Bo Jiang becomes a cautionary tale for any ethnic Chinese scientists working in the US.

Whether it’s in Silicon Valley, universities, government laboratories or major corporations, if you are ethnic Chinese, not only your conduct has to be absolutely law abiding, you also have to stay as far away as possible from being tainted by any hint of wrongdoing. Others might routinely “misuse” government equipment but not you if you’re Chinese.

During the Wen Ho Lee era, John Deutsch was the then head of CIA. He was reprimanded for routinely downloading confidential files to his laptop and regularly taking it home--a clear case of violating government regulations and gross misuse of government equipment. But he was not ethnic Chinese and therefore he did not have to cop a plea nor spend a day in jail.

Contrary to popular myth, justice in America is not blind but is on the side of the government. Even if you are innocent, once arrested you are in trouble. As Wen Ho Lee demonstrated then and Jiang now, downloading while Chinese can be dangerous to your wellbeing.

The French Also Wants RMB Swap Business

2013-04-12T18:09:00.001-07:00

No sooner than Bank of England having proudly announced that London will be the newest swap center for RMB, China's currency and the only one in Europe, Bank of France expressed the intention of becoming the RMB swap center for the Eurozone.

Noyer, governor of Bank of France, expressed confidence that RMB will soon become one of three major international currencies next to the dollar and euro.

To my knowledge, China has entered into bilateral swap agreements with about 20 trading nations. You can follow my observations in reverse chronological order starting with this blog.

How will Washington deal with end of the world?

2013-03-10T17:58:00.001-07:00

Recently, a large asteroid had a close encounter with earth while a meteor actually exploded over Russia damaging property and causing some injuries.

These closely occurring natural events served to bring public attention to the big what-if question. Namely, what if a large heavenly body were hurtling on a collision course with earth? How can we earthlings forestall such an inevitable threat to extinction?

The scientific experts on talk shows assured the public that by being watchful of the heavens, we could calculate the trajectories and anticipate possible collisions as much as 20 years away.

With the technology already available on earth, this would be plenty of time to design suitable propelling force that would meet the celestial body with just the right glancing blow to nudge the object off the original course resulting in eventual fly by without a collision.

I am not so sanguine and can easily imagine a scenario with a less happy outcome. For example, let us imagine that …

Dr. Alphonse Keen, a PhD psychologist and amateur astronomer was the first to spot an asteroid heading for earth. He reasoned that the public might not take the threat to heart if they were told that the collision was 20 years away. To make sure of the sense of urgency, he said the collision was 10 years away.

Other scientists working to confirm the findings quickly exposed the wrong projection to the immense relief of governments and people around the world. Suddenly they were given an extra decade to solve this problem and the feeling of urgency were perceptibly lessened.

The fundamentalists declared that they would pray to God to avert the end of the world. They expressed faith in God’s will be done.

The Libertarians insisted that it’s not up to the government to solve the world’s problem.

Leaders on both sides of the aisle after failing to reach consensus decided that the issue could be safely deferred until the next session of Congress, and then the next….

The White House decided to take the matter to the UN. The response from the General Assembly was that this was a matter for the Security Council. Other members of the Security Council pointed out that the US, as the sole super power and technological leader, must take the leading role and assemble the task force to repel the asteroid.

The American representative to the UN expressed the dismay that the US does not have a budget for such an undertaking. The EU representative indicated that they too are broke. China and India rejected any suggestion that contribution to the save the world project be levied according to population.

In the meantime a rising chorus of naysayers began to make their views known. They questioned the accuracy of the orbital calculations. They pointed out that asteroids have never collided with earth within human knowledge and why should it now?

Some expressed confidence the earth will weather any collision. Others concluded that it was all a grand conspiracy formulated by the same folks that created the myth of global warming.

In the meantime, a handful of super rich convened a secret meeting to discuss the construction of a space platform large enough to host a significant sampling of the human race and thus preserve the species. The platform would have to sustain life for possibly decades until the aftermath of the collision subsided and earth became habitable again.

The trillion dollar financing was no challenge and all the technical details were fully examined and quickly addressed except one. Namely, the elite gathering could not agree on which of the human DNAs to be selected and ferried to the space platform.

The proceedings of the meeting was never publicly disclosed and thus the human race was spared of the sordid details of the clash of selfish and bigoted minds on the project that ultimately never got off the ground.

What happened in the interim 20 years before collision day, I leave for Hollywood's fertile imagination.

India gets into the currency swap game

2013-03-08T07:43:00.004-08:00

India and Bhutan recently announced a currency swap agreement amounting to $0.1 billion to "further economic cooperation."

This swap agreement allows the Royal Monetary Authority of Bhutan to withdraw tranches in dollars and euros as well as rupees.

The same piece goes on to say that in May 2012, the Royal Bank of India had announced intention to enter currency swap agreements to the aggregate total of $2 billion with SAARC member countries -- Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.

The piece did not say whether Bhutan is the first or only member country to have accepted the invitation. The Bhutan central bank gave a clear and comprehensive explanation of the advantage of the swap agreement from Bhutan's point of view.

China has been entering into bilateral swap agreements with a large number of countries involving significantly larger amounts. These agreements involve their respective local currency and is a way of avoiding exposure to and cost of having to convert to dollars before settling their trade accounts.

Singapore just doubled their swap agreement with Bank of China to a total of 400 billion yuan or $48.2 billion. Singapore will be the third offshore centers (along with Hong Kong and Taiwan) to include the Renminbi in their foreign currency exchange market. London is expected soon to become the fourth offshore center to include the Chinese currency.

I have been tracking China's swap agreements as shown on my blog.

China Hackathon* is Harmful to American National Interest

2013-02-26T21:48:00.001-08:00

This piece, co-authored with Professor L. Ling-chi Wang, was submitted to New America Media and an edited version was posted on their website on Tuesday, February 26, 2013. China's Global Times posted a version on March 6, 2013 and US edition of China Daily on March 13, 2013.
*We coined a term, hackathon, to connote on the one hand the alleged rampant hacking activity from China and on other the endless stream of accusations from the western media that seemed to preclude any possibility that hacking could come from elsewhere in the world.
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Recent reporting of alleged hacking from China rapidly reached a crescendo. Led by the New York Times sensational disclosure of Chinese hacking since January 30, every publication of note or little note all seemed to have one or more stories on cyber attacks emanating from China.

They were immediately followed by another headline-grabbing release of the Mandiant Report on February 18, setting the stage for an announcement from the White House on February 20 that the administration was determined to protect American businesses and punish the perpetrators at home and abroad.

Is this an orchestration for a new policy initiative? Or, is this just a reinforcement of Obama’s “pivot to Asia” and “Trans Pacific Partnership,” two major initiatives aimed clearly in response to the so-called “Rise of China”?

Since the nascent art of hacking and counter measures of cyber security are subjects too esoteric and beyond the comprehension of most except those skilled in the craft, the media focused on the more lurid details taken from the so-called Mandiant Report.

The report alleged that most of the cyber attacks levied against corporate America came from a 12-story building in Pudong Shanghai that belonged to a particular department of People’s Liberation Army.

Since the issuer of the report is in the business of selling their services to safe guarding company networks from cyber attacks, presumably it is in their interest to portray the attackers as menacing and sinister as possible. The PLA certainly fits the bill.

However, shortly after the Mandiant Report broke the news, articles that presented contrary points of view began to appear. The most comprehensive belonged to Jeffrey Carr, a cyber security expert in his own right, who pointed out that there are more than 30 nations with the capability to run “military grade network operations” necessary to mount the kind of sophisticated attacks found in the report. According to the U.S. National Intelligence Estimate, Russian, Israel, and France are among the leading countries in cyber hacking activities.

Carr concluded that Mandiant was too quick to identify China as the culprit without performing rigorous analysis to eliminate other competing hypotheses and comparing its cyber espionage activities with those of other countries.

Two days after the New York Times article, the US edition of the World Journal, an ethnic Chinese daily, reported that 7 of the IP addresses identified by the Mandiant report as coming from the PLA office in Shanghai were actually from Hong Kong including one from the Hong Kong University of Science and Technology.

This was not surprising since hacking can come from anywhere in the world and easily misdirected to appear to come from somewhere else. What was surprising was that this finding came from a little noted ethnic paper and not from the major media stars.

Maybe Al Gore did not invent the Internet but it is an inconvenient truth that the US defense agency did and the Americans have since led the development and use of the Internet. As the world’s most advanced economy, the US has invested heavily and become most dependent on networks in the cyber space and thus most vulnerable to attacks.

The US also led in the development and use of weapons in cyber warfare. For example, the American developed Stuxnet worm has been credited with causing the centrifuges to spin out of control in the Iranian nuclear enhancement facility. Being the first known to use cyber attack in peacetime and in the absence of any international treaty and protocol, the US has lost the moral high ground to define appropriate conduct in cyber space.

This is of course not the first time that the US is reaping the consequences of what they sowed. The US has been the first (and to date) only country to use the atomic bomb. Since then, the US has had to devote decades of diplomatic efforts to promote nuclear non-proliferation and now live in fear of nuclear weapons falling into the hands of rogue nations or terrorists.

The next Pandora’s box that the US has already opened and soon will be trying to close shut is the use of drones for transnational surveillance and assassinations of terrorist suspects without due process. Friends and foes alike have seen the cost effective capability of a drone in rendering destruction and killing and all are rushing to develop their me-too ability.

The day is nigh when the Americans will be troubled by the prospects of encountering drones of unfriendly intentions controlled by someone holding a grudge against America. Then the US will once again have to expend much diplomatic efforts proselyting the idea of “do as I say and not as I do.”

From time to time, China has been trying to tell the US that they do not hold any grievances against the US. In typically understated ways, China has let the US know that China possesses silent running submarines, stealth planes and missiles capable of downing communication satellites. China even went out of their way to make sure that American intelligence got a full picture of China’s nuclear weapon technology as suggested by nuclear scientist Daniel Stillman of the Los Alamos National Laboratory. Latest airshows in China are displaying a large array of drones being made in China.

China appears to be practicing a porcupine defense strategy, i.e., peaceful intentions but beware of the ability to retaliate in kind. Some have suggested that the alleged PLA hacking has been deliberately sloppy, thus leaving visible trails to let the US know that China has cyber warfare capability.

Cyber espionage and warfare are serious problems here to stay. The U.S. needs to develop effective, long-term counter measures and thoughtful and balanced diplomacy. Singling out China as the sole villain without critically examining what other nations are doing, including us, is counterproductive, potentially misleading and in the long run, harmful to our national interests and world peace.

Senator George Mitchell Advocates Ideals before Military Might

2013-02-19T22:08:00.001-08:00

Senator George Mitchell, former majority leader and special envoy to Ireland and Middle East spoke recently in Palo Alto before a joint dinner meeting of Silicon Valley National Association of Corporate Directors and Financial Executives International. More than 200 attended his lecture, basically dealing with his views of the state of the world.

He related to us that at one of his talks, someone in the audience pointed out that tens of thousands of Syrians have been killed and their blood was on Obama's hands for not intervening. Senator Mitchell's retort was to ask the questioner why he was not as vocal in demanding American intervention in Congo where at last count more than 5 million have died. His implication was that conflicts around the world were invariably more complicated than simply the number of fatalities.

Among his remarks, he made a strong case for the importance of the US to lead by ideals and not by military might. Military power, he said should always be in support of ideals and never ahead of principles.

Given his advocacy, I took the opportunity to ask him where he thought the use of drones for surveillance and eradication was leading us (and the world). I tactfully added that I thought here was a case of military prowess leap frogging principles.

He said technological advances tend to lead and principles of conduct follow, after such advances have been put to practice. He gave as an example, the US development and use of nuclear weapons and then subsequently lead in the effort to establish nuclear nonproliferation. He could see that other nations will follow the US lead and eventually also deploy drones. Hopefully, he said, we will have established strong guidelines on appropriate practices by that time.

Alas, I found his tepid reply disappointing. I expected him to say something along the lines that this is another Pandora's box the US has opened and will bear heavy responsibility for consequent damage to world peace and security.

Caterpillar's Latest Stumble in China

2013-01-26T21:43:00.000-08:00

Recently Caterpillar announced having to write off $580 million investment in ERA Mining, a Chinese mining equipment company Caterpillar acquired less than a year ago. Reason given for the charge to earnings was the discovery of "deliberate, multi year co-ordinated misconduct" at the Chinese entity--in other words, somebody cooked the books.

This would not be the first time the Peoria multinational has stumbled in China.

Around 17 years ago, Caterpillar proclaimed amidst great fanfare that they have a formed a JV with Shanghai Diesel to make Diesel engines for the China market and for export.

At the time, the Chinese regulations did not allow for foreign entities to own majority controlling interests in ventures in a pillar industry. But Caterpillar insisted and persisted in their negotiations until they came away with controlling interest in a 55/45 JV.

Then Caterpillar informed their US based suppliers that to continue their business relationships with CAT, they would need to supply from China as well.

One of CAT's major supplier, a Wisconsin company, proceeded to retain me to help them find a manufacturing base and a Chinese partner that would become a qualified supplier to the Shanghai JV.

The entire process from identifying potential partners to signing MOU to drafting the letter of intent to completion of the feasibility study and sitting down to serious negotiations took a little over one year.

For a variety of reasons my client found China's way of doing business, especially getting around the then notorious triangular debt dilemma* daunting and was wavering about making the final commitment.

By then the CAT/Shanghai JV was coming apart which in effect took my client off the hook. The need to supply CAT from China became moot and they decided to backed away from investing in China.

While we were visiting China conducting various due diligence work, we invariably stopped in Shanghai to pay our respects to CAT and thus I had an up-close view of how the CAT JV was failing.

As the majority owner, CAT provided most the senior management team. At the time, CAT in the U.S. was on strike and thus CAT had plenty of idle executives to send to Shanghai.

As we toured the new JV plant under construction, we noted the presence of many American executives, each one with a young bi-lingual Chinese assistant in tow. The senior Chinese official accompanying us on the plant tour, confided to me that it was going to be very difficult for the JV to break even with such a costly top heavy structure.

Our host also told me privately that the CAT management insisted on hiring only bi-lingual graduates and engineers, which meant many skilled and competent professionals could not be employed because of their lack of English fluency. Conversely, he said that English proficiency did not equate to proficiency in their technical discipline.

Within a year of our last visit of the JV, CAT renegotiated and reversed the equity split giving the majority control back to their Chinese partner. That reversion was too late to save the venture and CAT eventually shuttered the JV and wrote off the entire investment.

The Shanghai JV failed because CAT insisted on the American way and made no attempt to localize their practice. The latest failure was apparently due to careless or insufficient due diligence before making the acquisition. One of the principals of ERA Mining was an American living in China and one time president of the American Chamber of Commerce.

Did the patina of American ownership cause CAT to take too much for granted?

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* In the mid 1990's China underwent a severe credit crunch and cash flow was reduced to a trickle. Companies delayed paying their bills, sometimes with IOUs and other times with all sorts of in-kind payments. The sales force frequently were charged with collection as well as getting sale orders. It was not an environment for the queasy.

Lessons learned from Sandy Hook

2012-12-16T11:42:00.000-08:00

Almost immediately after the massacre at Sandy Hook Elementary School took place, even before most of the horrible details became known, a spokesman from the gun lobby jumped in to declare the obvious. Namely, it's the fault of gun control advocates that caused this incident.

If the teachers were carrying firearms and fully capable of defending themselves from the armed intruder, they could have resisted and not get shot in cold blood.

Obviously from now on, part of the requirement to become qualified teachers must include training to handle firearms competently and that such training is incorporated as part of their certification process.

Every teachers' college and other universities that train teachers needs to establish a coordinating office with the National Rifle Association to ensure getting qualified instructors on campus and make sure the student teachers know how to shoot straight before they graduate.

Of course just knowing how to fire a handgun won't be sufficient against bad guys (and I am not being sexist because the shooters have been guys) using automatic assault weapons. The teachers must be comparably equipped and competent with automatic machine guns as well.

The only way to a safe American and safe schools is for teachers to wear bulletproof vests and carry assault weapons. That's the only way the bad guys will know that if they show up in our schools, we will shoot back.

The freedom to bear arms shouldn't be limited to bad guys and teachers. It's never too early to teach our young ones of the virtues of having a gun in their backpack. Child molesters will think twice if they might face a child with a gun in his/her pocket.

Just think how different it would have been if the Sandy Hook teachers and the children were properly armed and ready to defend themselves against the intruder.

While we are arming our schools, let's also stop buying all them foreign made guns and rifles. Americans tamed the West with the gun and America can do it again. Let's use America's world renown ingenuity to now design a gun just for teachers, with a sensor that instantly identifies bad guys and shoots them dead on sight.

Let's buy America and create jobs here. Let the American love for the gun renew our industry and rejuvenate the economy. Amen. God Bless America.

Xi Jinping's first press conference as leader of China

2012-11-16T09:27:00.001-08:00

Immediately after being elected general secretary of China Communist Party's Central Committee, Xi Jinping spoke at a brief press conference. Video record of his entire address including bilingual English translation can be seen here.

Xi made virtually no reference to foreign policy in his speech. Only his concluding paragraph touched near the subject: Just as China needs to learn more about the world, so does the world need to learn more about China. I hope that you [referring to the media] will continue your efforts to deepen mutual understanding between China and the world.

There was no mention of external threats and adversaries and reference of global instability. Instead, Xi made it very clear where the priority and responsibilities lie and best summarized by his remarks in the body of his speech:

Our people have an ardent love for life. They wish to have better education, more stable jobs, more income, greater social security, better medical and health care, improved housing conditions, and a better environment.

They want their children to have sound growth, have good jobs and lead a more enjoyable life. To meet their desire for a happy life is our mission. It is only hard work that creates all happiness in the world.

Let the world, especially the U.S., take note. Xi is not rolling up his sleeves to duke it out with the West. He is going to have his hands full on China's many domestic issues. Not least, he said,

Under the new conditions, our Party faces many severe challenges, and there are also many pressing problems within the Party that need to be resolved, particularly corruption, being divorced from the people, going through formalities and bureaucratism caused by some Party officials.

Obama should take a new approach to China

2012-11-14T19:25:00.001-08:00

While there are numerous difficult hurdles facing Obama’s next administration, China does not have to be one. All it takes is a fundamental change in its approach regarding China and the bilateral relationship.

The first step to resetting the bilateral relationship is to recognize the campaign rhetoric on China for what it was: nonsense. Both candidates felt obliged to savage China for our ills but the voters saw through the political ruse and did not pay any attention.

Who’s the currency manipulator? We are. No one can be expected to keep up with our printing presses run by the Fed. Even so, the renminbi has appreciated by about 32%, since it was taken off the peg to the dollar.

Let’s also not talk about outsourcing jobs as if companies are committing grand larceny. Private enterprises make rational decisions. They send the work to China or elsewhere because it makes economic sense. When it ceases to make sense, the work comes back as some have.

Adding an import duty on goods invariably backfire as has been the case with the much talked about 30% duty on auto tires made in China. A few hundred jobs may have been preserved but all American consumers ended up paying significantly more for their tires and most of the tires were still foreign made, just not from China.

Raising tariffs also prompts retaliation. In a tit-for-tat, China raised tariffs on American chicken which may have cost as many jobs on Tyson’s assembly line as the gains at the Goodyear plant. Time and again, nobody wins in trade wars.

China has an apparent huge trade surplus with the US and we hold that against China as well. But why should we object to being able to buy our iPad and stuffed animals at a much lower price than if made in the US?

Furthermore, as many economists have pointed out the trade surplus is not exactly what we say it is. For example, the added value of China labor in an iPad is about 2% of the total cost. Many of the components and assemblies are made in Japan, Korea and Taiwan and even some in the US but China gets all the “credit” for the import value.

It’s not as if enjoying a trade surplus when doing business with the US is some extraordinary aberration. The US has a trade deficit with 98 countries because this is the way our American economy works.

One of the first principles of the Chinese classic, Sun Zi’s Art of War, is to know your counterparts, be they friend or foe, before engagement. Perhaps it’s time that we take a look at how China regards this bilateral relationship to gain the more solid understanding of what actions to take.

The Chinese public continued to be fascinated by the presidential election. Apparent exercise of democracy in action made the people in China wishful that some would rub off in China.

The financial tsunami of 2008 and aftermath had shaken the Chinese confidence in America’s ability to manage its finances and has cause them to diversify their hard currency holdings and to make the renminbi more accepted as an international currency. The trauma however has not changed China’s regard of the US as a vital economic partner.

It simply is not in China’s national interest to consider the US a hostile competitor. China has its own laundry list of internal challenges and do not need the distraction of external confrontations.

For more than a decade the leaders of Beijing have been talking about the urgency of combating graft. Endemic corruption saps the economy and more importantly erodes the legitimacy of those in power. While success in overcoming corruption is problematic, it will be the foremost preoccupation of the incoming leaders.

Secondly, even though the US has a serious unemployment problem; it pales by orders of magnitude to the one Beijing has to face. Just finding jobs for the approximate 8 million college graduates every year is beyond American comprehension.

Although Obama’s pivot to Asia defused accusations during the campaign for being soft on China, he needs to review the consequences of this policy.

Occupying foreign lands may have been a western tradition, but it is not for China. In early 15^th century, the Chinese had the world’s mightiest navy and could have colonized the many places Admiral Zheng He and his sailors visited, but they did not.

It is not in the Chinese DNA to compete with the US for world hegemony. However, if China’s sovereignty is being tested by US activity in Asia, China will not quietly stand by. Rather than enhancing stability, the American increase military presence has encouraged Japan, Philippines and Vietnam to be more energetic in contesting the islands off China’s coast.

In response, China raised the stakes by establishing the Sansha City on one of the Paracel Islands in the middle of South China Seas. The city will own an enlarged runway, a desalination plant and other related infrastructure for future tourism. The city along with a military garrison will administer over 200 islets and sand bars along with two million square km of water.

Sansha, in midst of South China Seas, enjoys significant logistical advantage over the nearest US marines in Australia. Such asymmetrical arrangement is the only basis that China would counter unfriendly acts from America--in other words, relatively modest investment by China that would offset considerably more investment by the US.

China has no appetite to match US military might on a dollar for dollar basis.

It’s time the US reexamine the concept of strategic ambiguity in dealing with China. It simply has not worked. Sometimes friendly, sometimes hostile, sometimes cajoling and sometimes imposing has merely led to a permanently rocky relationship. Both the US and China can better deploy their energy on other issues than managing the ups and downs of the bilateral relationship.

With the incoming new generation of leaders, Obama should try a new approach: be transparent. Lay all the cards on the table and agree on those issues the two countries can work together and put others on hold—an approach Deng Xiaoping would applaud.

The US can’t really afford to allocate money it doesn’t have to build up a military presence that would only increase tension in Asia. With China, cooperation trumps confrontation.

An edit version has been posted on China-US Focus.

Jack Perkowski is well known investor in China. Read his careful debunking of Obama's complaint about China's alleged unfair subsidy of its auto industry.

About Peng Liyuan, wife of Xi Jinping

2012-11-13T04:40:00.001-08:00

If Peng Liyuan, the next first lady of China, is a representative of what the new leadership is like, there is hope for China. South China Morning Post provided a lengthy profile on her with two interesting video clips.

The first clip of nearly 12 minutes long was produced (with English subtitles) to raise awareness of young children with HIV in China. She starred as the visiting dignitary (ambassador for children with AIDs) to a remote Anhui village with many orphans, shunned by society because they are HIV carriers and in many cases became orphans because their parents died of AIDs. This video was produced in 2006. In this documentary, Ms. Peng held the children, played with them, taught them songs and generally showed what a loving mother can be like to kids that have not experienced much joy in their young lives.

The second clip show she singing in a national day celebration and was filmed in 2011.

The videos showed a warm and selfless human being and that bodes well for China.

What's Next for America?

2012-11-09T12:40:00.000-08:00

The US presidential election is finally over. Now comes the hard part: having to deal with reality.

Over six billion dollars had been spent by the two political parties during the long arduous campaign. Almost none of it were used to explain how each candidate propose to solve the really, really hard challenges confronting the next administration.

Both Romney and Obama seemed to lack the confidence that American voters can stomach bad news or be told the harsh reality. Instead each tried to outdo the other in bombastic platitudes, grandiose promises and deceptive innuendos.

Now the American public will hold their collective breath (and nose) to see if Obama and the Congress can hammer out a solution that will keep the economy from going over the fiscal cliff. The campaign gave no hint on how that will be done.

The candidates always conclude their speeches with "God bless America." Whether God will or not, it seems to me, will depend on attributes heretofore rarely sighted in Washington: statesmanship and bipartisanship.

There is a more to Huawei’s trouble with Congress than meets the eye.

2012-10-24T08:45:00.002-07:00

Huawei’s debacle with US Congress raises troubling questions at many levels. Huawei will be paying a heavy price for a colossal failure to communicate across the two cultures, but this story is more than about just one company.

Huawei initiated the dialogue by inviting a Congressional investigation of its company operations. The House Select Committee on Intelligence responded but did not give Huawei officials the desired endorsement. Instead, the House Committee specifically recommends that the US government and private sector entities do no business with Huawei on the ground that their equipment constitutes a national security risk--a devastating hit on Huawei’s reputation that could hurt Huawei’s business around the world.

Based on the company’s past engagements in the US market, Huawei should have anticipated a hostile reception. Its past attempts to make a minority investment in a floundering 3Com and an acquisition of a relative start-up were stymied by the US government as a perceived threat to the US national security.

The company is said to have spent hundreds of thousands of dollars on consultants and Washington lobbyists to help Huawei deal with the Congressional committee. Apparently these advisors did not appreciate the rather formidable built-in bias Huawei needed to overcome. Drawing from their investigative report, it is clear that the Committee began on the presumption that Huawei represents a real threat to national security. Nothing in the eleven-month investigation changed their minds.

Just the mere possibility that cyber espionage can take place via Huawei equipment was enough to brand Huawei a risk to national security. To overcome the bias, Huawei would have had to prove that Huawei equipment could never host cyber attack against the US, obviously not a stand Huawei could take credibly.

By way of mitigating the Committee’s concern, Huawei offered to have all their equipment thoroughly tested and certified by an independent laboratory before the equipment could be introduced into the US market similar to the arrangement accepted by the government of Great Britain. The Congressional Committee rejected Huawei’s proposal for the following reasons: (1) The US market is too large for any testing to be sufficiently comprehensive. (2) The testing only applies to the configuration being tested but the configuration could be altered subsequently during installation or later upgrades. (3) Such a certification can even encourage a false sense of security and reduced vigilance. In other words, there was no way for Huawei.

The Committee asked Huawei to provide information on their contracts, pricing practice for their products and services and scope of their operations and, recognizing the sensitive nature of the information being sought, offered to receive such information under a confidentiality agreement. Apparently, Huawei did not have the confidence that Congress could keep information confidential and refused to comply. Thus the Committee concluded that Huawei might be selling “at least some of its products in the United States below the costs of production,”--a huge leap indeed based on information the Committee did not get.

The Huawei officials also failed to established empathy with the House Committee—to put it mildly. Given a Congressional body with no understanding of China or at least none that they would admit to, empathy may have been too much to aspire. The Committee could not even make a distinction between state owned enterprises (SOEs) and privately owned ones. Somehow in their minds, a large successful private enterprise must be connected to the Chinese government, and a sinister connection at that.

They insisted on wanting to know about how Ren Zhengfei, Huawei’s founder, was able to leave his SOE employer to start his own company, as if that was unheard of, while actually in the late ‘80s and early ‘90s, people in China were leaving SOEs in droves. How was Ren invited to attend the 12^th National Congress, the Committee asked? Huawei’s answer should have been: Jiang Zemin began to recognize the important role of entrepreneurs in China’s economy and selectively honored them by inviting some to the national confab.

The House Committee’s conclusion on Huawei, as its report readily admitted, was based on hypotheticals and not on specific illegal acts committed by the company. The hypotheticals are easy to conjure. However, the only known successful cyber attack the world knows for certain is the deployment of American made Stuxnet worm on the Iranian centrifuges. Certainly Americans have the bona fides to imagine how cyber attacks can be done.

The Internet is populated with screaming accusations from network security consultants—undoubtedly looking for work—pointing to China as the source of rampant cyber attacks, thus providing cover for Congressional paranoia. The Committee does claim to have smoking guns describing Huawei wrongdoings but these are classified and not available to the public.

In a way, this is reminiscent of the Cox Committee’s investigation in the late 1990’s on the alleged espionage activities of Chinese in America. The unclassified part of the Cox Committee report painted a lurid picture of Chinese espionage running amuck in America. Tens of thousand storefronts in America registered to Chinese entities were cells and every ethnic Chinese was a potential spy for China. The Cox Committee also assured the public that they had smoking guns though consigned to the classified section of the report and not available to the public.

By now the smoke from the Cox Report has largely dissipated and the only concrete result was the arrest of Los Alamos scientist, Dr. Wen Ho Lee. He spent nine months in solitary confinement before the presiding judge apologized to Lee and threw out the case. The legacy of the hysteria created by the Cox Committee investigation is a lingering suspicion of the loyalty of Chinese Americans and the erosion of the idea that US Congress behaves honorably.

Sadly, politicians have continued to find profit in taking pot shots at China. The incumbent President Obama, a Nobel Peace laureate no less, proclaimed a military pivot to Asia, and thus encouraging conflict in the waters around China, to show that he is not soft on China. His opponent, Romney, promises to declare a trade war against China on the day he takes office—if elected. Members of Congress regularly take the floor to blame China for all the economic woes in America. None of the American leaders of any stature have spoken about the importance of getting along with China.

Bashing China has no apparent down side for American politicians unless and until the bilateral relations between the two most powerful nations spiral out of control leading to tragic consequences. The challenge for the incoming leaders of Beijing is to strike a balance between being more transparent to ameliorate American feelings and reassuring its own constituents that China’s sovereignty is not being compromised by American demands. It will be up to the American people to punish mindless China bashing by voting the offenders out of the office and encourage leaders that recognize the importance of promoting mutual trust between the two nations.

What’s at stake is the future peace and prosperity of the world depending on China and the US getting along without rancor.

_______________________________

A shorter version appeared in China-US Focus.

American Cover Up of Japan's WWII Atrocities by Unit 731

2012-10-21T23:34:00.000-07:00

Those accused of committing war crimes in World War II were tried in Nuremberg and Tokyo. Sometime after the conclusion of those war crime trials, in December 1949, 12 Japanese physicians and military officers were tried for their crimes against humanity. The trial was held in Khabarovsk, Russia and the testimony described acts of horror and brutality beyond imagination. Americans are unaware of these crimes because General Douglas MacArthur, at the time in charge of occupation of Japan, suppressed the findings.

I was recently reminded of this part of WWII history when I came across an 8-page article published on June 5, 2001 in The Japan Times about the trial of Unit 731. This biological research unit was established in Harbin by Japan's military hidden behind a wall and a veil of secrecy. No outsiders knew what was going inside the camp.

Most of the information in this blog is derived from the article in Japan Times, generally recognized as the equivalent New York Times of Japan. The following passages taken verbatim from the article give some "color" to the accusation of war crimes:

The crowds (at the trial) heard about doctors who subjected their victims--termed "logs"--to all kinds of experiments: injection with animals' blood, exposure to syphilis, hanging upside down until death, surgical removal of their stomachs with the esophagus then attached to the intestines, amputation of arms and reattachment on the opposite side. Some 10,000 people were reported to have died in Japan's 26 known killing laboratories in China, Japan and other occupied countries.

Unit 731's physicians, preparing to fight in the Soviet Union or Alaska, would experiment on victims in the bitter Harbin weather, where winter temperatures can fall into the minus 40s Celsius. Guards would strip a victim, tie him to a post outdoors and freeze his arm to the elbow by dousing him with water, researchers say. Once the lower limb was frozen solid, doctors would test their frostbite treatment, then amputate the damaged part of the arm. The the guards would repeat the process on the victim's upper arm to the shoulder. Another test, another amputation. After the victim's arms were gone, the doctors moved on to the legs.

When the prisoner was reduced to a head and torso, orderlies would lug him elsewhere in the compound and use him for experiments involving bubonic plague or other pathogens. Virtually no one survived. Unit 731 found a ready supply of human guinea pigs: members of resistance movements, children who strayed too closed to the outer perimeter, a teenage girl found carrying a pistol, Mongolians, Koreans, Russians. Any non-Japanese, really, was a potential victim.

While Soviet officials deliberated on what to do with them (after the war), Gen. Douglas MacArthur secretly granted immunity to the physicians of Unit 731 in exchange for providing America with their research on biological weapons. Presented with evidence that downed US airmen had been victims of grotesque experiments, MacArthur suppressed the information.

MacArthur's action outraged Stalin and he ordered a trial of Unit 731 doctors then in Russian hands. The trial ended in 5 days and the accused were found guilty and sent to prison, none were executed. In 1956, except for one that committed suicide behind bars, rest were quietly sent back to Japan and released. Lt.-Col. Naito Ryoichi, one of the military doctors, founded Japan Blood Bank that later became Green Cross. General Ishii Shiro, leader of Unit 731, was never caught and tried; he died of throat cancer in his own bed in 1959.

As the Japan Times article pointed out, the Khabarovsk trial casts light on a wound that still festers in Asian international relations. Anger at Japan runs deep in both Koreas, China, the Philippines and other nations occupied in World War II to whom Japan has never paid reparations or issued a satisfactory apology.

The trial revealed that the Japanese military was planning to attack San Diego with kamikaze piloted planes loaded with fleas infected with bubonic plague. Hiroshima and Nagasaki intervened and the plan was never carried out. Had it been otherwise, American might think differently about the pains of WWII.

What's Next for House Committee on Intelligence?

2012-10-15T14:17:00.000-07:00

Fresh from their head-line grabbing investigation of Chinese Telecommunications companies Huawei and ZTE, Chairman Mike Rogers and Ranking Member C.A. Ruppersberger of House Select Committee on Intelligence (the spy kind and not related to IQ kind) announced that the Committee will next investigate how the Chinese acquisition of AMC Theaters will adversely affect national security.

AMC is the second largest chain of cinema theaters in North America with over 5300 screens. Each screen is a potential conduit for messages to corrupt our American youth, Chairman Rogers said.

Studies have shown that flashing subliminal messages at the moviegoers in between frames can induce involuntary purchase of soda pop and junk food. The Committee intends to ask Dalian Wanda, the acquirer, if the company intends to insidiously suggest to the American audience to gorge on chop suey.

The Committee also intends to ask Dalian Wanda as to its connection to the Chinese government and the PLA. Given that the company is based in the city where Bo Xilai was once mayor, we can presume the company has unsavory intentions and the Committee intends to find out what that is.

Dalian Wanda might offer to let an independent third party vet all the prospective projectionists before they are hired but that proposal will be rejected by the Committee. It will be too easy for the Chinese owner to slip in secret agents while the operating projectionists go on bathroom breaks and insert messages that turn the minds of American youth into mush. (Thanks to video games from Japan, the minds of American young people are already in a fragile state but that's a topic for another investigation.)

Chairman Rogers regrets that he did not initiate similar investigations when Wanxiang began to acquire auto parts companies in the US, including many in his home state of Michigan. Now Wanxiang USA is probably too big to tackle.

While the acquisitions saved many of those companies from going out of business and thus kept many employed, there is no telling what dastardly deeds that can be done to undermine the security of the US. For instance, spare auto parts could be manipulated to fail when put into American made cars and thus give Chinese cars an unfair economic advantage.

Sensors on the auto parts can be designed to send sensitive intelligence (the spy kind, not the smarts kind) back to Beijing and we wouldn’t even know it. For instance, the sensor could be telling Beijing that certain Senator is not at the office but his car is parked in his mistress’s garage.

As investigations by the Cox Committee have proven a decade or so earlier, every entity from China registered in the US is spying on us. If we begin on the presumption that the Chinese are up to no good, we will be able to sleep better at nights.

The House Select Committee on Intelligence (the spy kind not related to intelligence) intends to safeguard our national security. We stand on the premise that we don’t want the Chinese here and we don’t want Chinese investments here. They can take their American dollars and invest elsewhere.

This pseudo press release with tongue firmly planted in the cheek may seem ludicrous but is inspired by the actions of the House Committee on Huawei and ZTE and the pervasive paranoia currently afflicting American politics.

Let a Japanese Professor Explain the East China Sea Dispute

2012-10-04T21:56:00.000-07:00

It has come to my attention that a well respected scholar from Japan, Professor Yabuki, has spoken about the dispute involving the Diaoyu/Senkaku controversy. One fascinating pieces of information is that Japan's Ministry of Foreign Affairs has been hiding certain facts of the meeting in 1971 between Japan's Prime Minister Tanaka and China's Zhou Enlai. Non-disclosure has allowed Japan to insist on certain denials and perpetuate the difference in China's position vs. Japan's current position.

A Typical Wrong Headed American View of the East China Sea Dispute

2012-09-28T07:33:00.001-07:00

A young American entrepreneur based in Shanghai wrote an op-ed piece about the dispute between China and Japan over the islands in the East China Sea that is typical of American hubris and lack of familiarity with recent world history. Like most American pundits, Nance failed to address the US role complicit in creating the origin of the dispute in East China Sea.

According to the terms of unconditional surrender demanded by the leaders of the Allies and accepted by Japan to end WWII, Japan gave up any claims to the islands in dispute with China, Korea and Russia. Korea and Russia took possession but China was not allowed to do so by the US because of an altered geopolitical landscape after the War.

In 1972, when the US returned administrative control of Okinawa to Japan, which was already contrary to the terms of surrender, the US compounded the wrong by including Diaoyu/Senkaku islands as part of the package. Whether this was done deliberately or not is a debate for another occasion, but the US must accept responsibility for causing the lingering dispute.

If it was in the US national interest to overlook Japan's lot as the defeated nation then, surely it is in our national interest to reconsider what's good for America now. I believe what's right and good for America is to acknowledge and retract a mistake that was made then and that the US will not side with Japan on this issue now. Once that declaration has been made, I am convinced that the tension will die down quickly.

I wrote my views on this matter on an earlier post .

The US must stay out of East China Sea Dispute

2012-09-26T05:46:00.001-07:00

Further to my blog at the end of last month, Ignatius Ding, a noted Silicon Valley activist, has elaborated on the historical and legal perspective of the dispute between China and Japan, worth reading by all concerned Americans. This has been posted in the San Jose Mercury News.

The U.S. Must Avoid the Trap on East China Sea

2012-08-31T16:52:00.000-07:00

Recently a strange “issue advocacy ad” appeared in the Wall Street Journal paid for by the Tokyo Metropolitan government. The gist of the ad is to tell the American people that the Tokyo government intends to purchase certain islands in East China Sea and is seeking American “understanding and support.”

The islands in question are ostensibly to be purchased from some private Japanese owner so one would wonder why American support is worthy of such attention-grabbing ploy. It turns out that there is a lot more to this story than meets the eye and the person orchestrating this scheme is none other than Shintaro Ishihara, the governor of Tokyo.

Ishihara is a rabid right-wing nationalist previously known for giving America the middle finger salute in the ‘80s when he wrote the book, The Japan that Can Say No. He is despised by China and other Asian nations for prominently denying that the Nanjing Massacre and other WWII atrocities were ever committed by the Japanese imperial troops.

The string of islands Ishihara wants to buy are located north of Taiwan, referred to as Senkaku by the people in Japan and as Diaoyu by the people in China, Taiwan and the Chinese diaspora over the world. These islands are geologically connected to Taiwan and separate from the geological formation that makes up the Ryukyu (or Okinawan) island chain.

Japan claimed possession of the Diaoyu/Senkaku islands since 1894 when the islands were made part of the Okinawa prefecture. But China had, since the 14^th century, administered the islands as a part of Taiwan. These islands were ceded to Japan along with Taiwan in 1895 when the Qing forces lost the war with Japan.

At the end of WWII, according to the agreement struck by the leaders of the victorious Allies, Taiwan was returned to China and these islands should have been included. But for strategic reasons, the U.S. held onto these islands until 1972, at which time, the US handed these islands to Japan along with the Okinawan chain of islands.

There was no historical or geological justification for the regrettable American action. Instead, the action has directly led to the festering dispute between China and Taiwan on the one side and Japan on the other. Ishihara exploited this bone of contention to embarrass his own national government and raise the tension between China and Japan. The ad in the Wall Street Journal was his attempt to enlarge the dispute and bring the US into the boil.

Indeed, Ishihara has raised the temperature of the confrontation between the foreign affair ministries of China and Japan. Japan has had to recall its ambassador to Beijing and change to one less sympathetic to China. Cities in China raged with citizen protests, in some cases overturning Japanese branded police cars and smashing Japanese storefronts. Among the greater China, messages condemning Japan filled the Internet.

A group of activists from Hong Kong recently braved stormy seas to land at one of the islands to plant a flag of China. Their subsequent arrest by the Japanese coast guard was followed by immediate demand for release by the Beijing and Hong Kong governments. Prompt release without formal charges by Japan was then met with vocal disapproval from the Ishihara followers.

The American public needs to know that the Chinese reaction on these islands, whether from China, Taiwan or the diaspora around the world, is deeply rooted from a half century of humiliation suffered at the hands of Japanese imperialism. Since Japan has never formally apologized for the many atrocities committed by their imperial troops, the Chinese people cannot forget.

The squabble may seem trivial to the American policymakers but it is a tremendously emotional one for the Chinese people. Time and again it has been shown that it does not take much for the Chinese to react viscerally to any provocation instigated by Japan. There have been incidents of high seas chicken between fishing boats from China and Taiwan versus the coast guard cutters from Japan, each accusing the other for initiating the hostile bump and run. The incendiary nature of these incidents can quickly get out of hand, escalate into shooting conflicts and rage out of the control of either government.

The US State Department is aware of the sensitivity surrounding the islands but is playing the role of strategic ambiguity badly. The islands should never have been handed to Japan administratively. To this date, State Department spokesperson has to awkwardly demur when asked if the US security pact with Japan includes these uninhabited islands and avoid publicly stating as to which country is the rightful owner.

To make sure that the Diaoyu/Senkaku islands do not become a flash point for escalation into large scale armed conflict, the U.S. must inform Japan in no uncertain terms that America will never go to war over disputes of these islands. By unequivocally taking the US out of the ring, provocateurs like Ishihara will not find the dry flint needed to set the ownership issue aflame. This is an important first step to cooling down the emotions and allows diplomacy between China and Japan to find resolution.

An updated version was posted in New America Media.

Africa is too cozy with China to Suit the West

2012-07-22T23:02:00.000-07:00

On July 19, South African President Jacob Zuma opened the 5th Forum on China-Africa Cooperation, held in Beijing, with a warm and effusive address about China's relationship with Africa.

Zuma even cited Admiral Zheng He's visits to the African continent as the beginning of a beautiful friendship. Even though he was off by a few hundred years, Zuma was undoubtedly expressing admiration for the Chinese that came to trade for a few giraffes to take back to Beijing--unlike the Europeans that later came to rape and pillage and kidnap natives for the slave trade.

By simply altering the sequence of Zuma's speech, the Financial Times adroitly changed the tone of his speech into one that "warns" China that all was not well, implying that China was as guilty of exploiting Africa as the European predecessors. The Washington Post shamefully reprinted the FT piece without any revision.

We have been led to believe that major publications in mainstream media have a public responsibility to be accurate and objective. They are supposed to inform their readers and not to pander to known biases nor reinforce preconceived but erroneous notions.

In other words, their job is not to merely tell the reader what they think the reader wants to hear.

Fortunately, in this case President Zuma's speech has been posted in its entirety by the South African government so that the reader can compare what he actually said to how his speech was reported.

There were certain passages in Zuma’s speech that failed to be included in the Financial Times piece.

“We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain. This gathering (referring to the Forum) indicates commitment to mutual respect and benefit.”

Then Zuma went on to declare, “We certainly are convinced that China’s intention is different to that of Europe, which to date continue to attempt to influence African countries for their sole benefit.”

Zuma in the same speech then said, “Over the last decade, and partly because of China’s unrelenting support, the African continent has seen tremendous growth rates, making it one of the fastest growing continents and certainly the next growth pole. Furthermore, global growth estimates suggests that Africa’s growth will continue in an upward trend for years to come.”

Does the above sound like Zuma was complaining about China’s treatment of Africa?

Certainly not, according to what Zuma went on to say, “In particular, we take note of the infrastructure development China has assisted Africa with in the past several years.

“ African continent is now being seen as a major player in global affairs, and is becoming more attractive to investors and development partners.

“Indeed, this is proving to be Africa’s decade of change.”

President Zuma basically concluded his speech by calling on China to continue to be Africa’s partner in meeting future challenges.

Along with helping Africa build its infrastructure, China has overtaken the US as Africa’s biggest trading partner.

Unlike the US, China does not give foreign aid with or without strings. True to its policy of non-interference, China does not tell the African nations what to do, nor make suggestions on rectifying human rights abuses.

Ironically, a recent op-ed in the New York Times by a Zambian economist argued that foreign aid tend to line the pockets of corrupt dictators while trade and infrastructure investments were more likely to benefit the general population and thus empowering the populace to hold their government accountable.

The same economist reported that Secretary of State Hillary Clinton had warned Africa to be aware of new form of colonialism, an obvious but oblique reference to the presence of China in Africa.

It’s hard to know if Secretary Clinton truly believed that Africans would find her credible or if she were merely mouthing a party line that she knew her American constituents would want to hear.

The End of the Dollar is Neigh

2012-07-17T21:38:00.000-07:00

While Congress is wringing their collective hands over US Olympian uniforms that are made in China and incumbent president Obama and presumptive challenge Romney are mud wrestling over who has sent more jobs offshore, along comes another observation on the doom of the dollar. This article gives eleven reasons why the role of the dollar as a global reserve currency is about to end.

I have been tracking currency swaps that China has entered with other nations. The aforementioned article points out that China is not the only country making this trade provision that would by-pass the need to hold onto dollars.

No one in the mainstream media seems to be following this global trend of shying away from the dollar nor examining the consequence to the American economy when the value of the dollar plummets and inflation grabs the consumer by the throat.

Condemning Olympic Apparel Made in China: Another Tempest in a Teapot Brewed by Congress

2012-07-13T09:08:00.000-07:00

Congress is tackling yet another crisis of gargantuan proportions. They are upset that the spiffy outfits the American Olympic team will wear at the opening ceremony while designed by Ralph Lauren are (gasp) made in China.

Senate Majority Leader Harry Reid was outraged and declared that all the uniforms should be burned and just let the athletes wear singlets with hand painted logo of USA. Members of Congress from both sides of the aisle jumped in to castigate the Olympic Committee for failing to buy American.

A representative of the American garment industry pointed out that at about $1500 to outfit each athlete, the committee could easily have sourced the apparel from US makers.

What the person did not point out was that a made-in-the-USA outfit would have taken out the entire margin of the opening wear--a margin that the committee undoubtedly intended as part of their fund raising effort.

Just go on to the official website of the US Olympic Committee and one can see all kinds of “official” souvenir gear from berets to shirts and blazers available for fans to purchase. If the apparel were made in the USA and still affordably priced to sell, the committee would not raise much money, if any.

Unlike some countries, such as China, where Olympic participation enjoys state financial support, the US Olympians will go to London through donations and private sector fund raising efforts.

The US government, even if it wanted to, does not have the money to finance the Olympians. Members of Congress surely know all this.

Since much of what Americans wear are made in China, it shouldn’t surprise anyone. But when it became known that the Olympian garb was also from China, it was a no risk, no cost, no downside, and no brainer opportunity to take a pot shot at the Olympic Committee and vilify once again things made in China.

In the meantime, disaster looms as America hurtles towards the “fiscal cliff” at yearend. That’s when tax cuts expire and mandated government spending cuts begin.

While all the economists and pundits are certain that such a combination will result in the next economic disaster for the US, they are also certain that no one in Washington has the political courage or vision to enact anything meaningful that would stop the runaway train.

Such has the state of our democracy become: Terrifically adept at jumping into petty minutia but cowardly absent when it comes to tackling real issues confronting the future well-being of this country.

To conform to Senator Reid’s wishes, the standard bearer leading the US delegation into the opening ceremony in London should wear nothing (made in China), just a G-string with a made-in-USA label emblazoned to the extent possible.

Such a spectacle will convey several concurrent messages to the worldwide viewers: Washington kingmakers have no clothes and no statesmanship, and America is a poor country in more ways than one.

See another version in New America Media. The LA Times carried the astonished view of the controversy from China.

Ukraine is Next on Swap Deal with China

2012-07-08T05:55:00.000-07:00

Ukraine's central bank has entered into a currency swap deal with China. The deal at approximately yuan 15 billion is not big as size goes but a significant development in other aspects. Ukraine sees this deal as a commitment for close bilateral cooperation.

Ukraine is also about to conclude a swap deal with Russia and restart negotiation with Belarus. Other countries have announced bilateral currency swap deals not involving China. This is clearly a global trend to minimize exposure to holding American dollars.

My last blog on this subject picks up the thread on my tracking of China's currency swaps.

China's Latest Swap Agreement is with Brazil

2012-06-22T12:05:00.001-07:00

Some call this currency swap deal, between China and Brazil, to be the biggest one yet by China with a value of about $30 billion. The swap deal is part of a broad, long term bilateral cooperation between the two countries.

Since I have been keeping track, this is the first swap agreement China has entered with another member nation of BRICS, the others being Russia, India and South Africa.

Of course, while China has no formal swap agreement with Japan, their publicly announced agreement to settle their trade in their own currency and bypass converting into dollars is potentially a much bigger deal than the swap deal with Brazil just by virtue of the magnitude of their bilateral trade, well north of $300 billion annually.

Many have speculated on the significance of China's gradual introduction of the renminbi as an international currency.

Internationalization of the Renminbi

2012-06-13T08:59:00.000-07:00

Speaking of collateral damage, an interesting discussion of the gradual replacement of the dollar by the renminbi has come to my attention from, of all places, Australia. The author sees savings accounts denominated in dollars as "collateral damage" when the dollar is displaced by the renminbi.

When should you begin to stuff renminbi under your mattress? Now. When will you be glad that you did? The author thinks it could come as soon as 36 months. Maybe not says China central banker, but let the market decide.

I have been monitoring this situation since I wrote about the bilateral swap agreements and plan to continue to do so. See also my April post on related matter between the renminbi and the yen. Certainly China-Japan bilateral trade represents a significant part of global trade and the significance of settlement that by-passes the dollar has been published by several sources recently.

See this twit for a recent comprehensive explanation of the benefits of swap agreements: The BRIC Currency Swap Proposal Is A Global Game Changer http://read.bi/L221R5