(Reuters) – Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday.

The idea of a technical default — essentially delaying interest payments for a few days — has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.

But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.

Li Daokui, an adviser to the People’s Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.

“I think there is a risk that the U.S. debt default may happen,” Li told reporters on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”    [FULL  STORY]

(Reuters) – Hackers likely based in China tried to break into hundreds of Google mail accounts, including those of senior U.S. government officials, Chinese activists and journalists, the Internet company said on Wednesday.

The unknown perpetrators, who appeared to originate from Jinan in Shandong province, recently tried to crack and monitor email accounts by stealing passwords, but Google detected and “disrupted” their campaign, the world’s largest Web search company said on its official blog.    [FULL  STORY]

The US argues China’s currency policy unfairly favours its exporters.

North Korea will also be discussed, following its apparent attack on a South Korean warship.

Although not referring to North Korea directly, President Hu stressed that cooperation was needed to deal with “international hot spots”.

China is North Korea’s closest ally, and has so far refrained from openly criticising its actions.
Yuan ‘undervalued’
Continue reading the main story

We welcome the fact that China’s leaders have recognised that reform of the exchange rate is an important part of their broader reform agenda

Timothy Geithner US Treasury Secretary S Korea freezes trade with North

Meanwhile the currency is top of the economic agenda.

The US argues that the yuan is deliberately undervalued, giving Chinese exporters an unfair advantage in global markets.

“China will continue to steadily advance the reform of the formation of the… exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress,” President Hu said.     more …

HONG KONG — Foreign companies doing business in China are increasingly feeling as if the deck is stacked against them.
Enlarge This Image
Shiho Fukada for The New York Times

Workers pour liquid into sealed drums at a yellow phosphorus factory in Yunnan Province, China.

China has filed more than a dozen trade cases to limit imports, imposed a series of “buy Chinese” measures and limited exports of some minerals to force multinationals to move factories to China.

Foreign executives in China find themselves increasingly at odds with Chinese officials over these measures, which Westerners view as protectionist and intended to give an edge to Chinese companies. Surveys by Western chambers of commerce of executives show growing disenchantment in the last year and a sense that doing business in China, never easy, is growing harder.     more …

All requests for the google.cn website are now redirected to Google’s Hong Kong site, www.google.com.hk. The pullout has obviously damaged Google’s business prospects in China, but it is not clear how much, since the company continues to conduct research and development work in China, as well as serving mainland Chinese customers for the company’s numerous other

products, including mail, translation, online ads, and so on. At the same time, the Mountain View, California-based company could reasonably claim that it had stuck to its well-known “don’t be evil” slogan: the company’s leaders clearly chose principle over profit by pulling out of China, the world’s fastest-growing Internet market.

As for the Chinese government, it sought to force compliance with its policy of censoring the Internet; in this it has succeeded, at least in the short term, since Google’s unwillingness to cooperate with the censorship policy led to the company shutting the door, in spite of its arguably great importance to Chinese Internet users.
As of April 12, the Hong Kong site was freely available.   more …

But Yi Xiaozhun, a vice-minister in the commerce ministry, said he expected the currency to rise in the longer-term.

He accused other countries of trying to force its appreciation now.

There has been speculation that China is preparing to allow the yuan to appreciate before President Hu Jintao arrives in Washington next week.

Mr Yi was speaking at the Boao Forum for Asia, a gathering of senior officials and business figures from across Asia on the southern Chinese island of Hainan.

China’s commerce ministry is close to the country’s exporters, and reports suggest its officials have been lobbying hard against those inside the Chinese government who say the value yuan should now be allowed to rise.

Politicised debate

China, in effect, pegged its currency to the weakening US dollar in late 2008 when the effects of the global economic crisis started to be felt here .

That has given the country’s exporters an unfair advantage ever since, critics say, because when the value of the yuan is artificially low, their goods appear cheaper.

Some American politicians and academics… have politicised this argument
Yi Xiaozhun, Chinese commercy ministry vice-minister

Mr Yi says the crisis is not yet over, and so an increase in the value of the yuan now would hurt China’s economy.

He argues the biggest headache for China is that this is no longer simply an economic problem but has become the focus of relations between the two countries.

“Some American politicians and academics, because of hardship at home, have politicised this argument,” he says.

“They are blaming other countries, including China, for their own problems. This is unreasonable.”

The vice commerce minister refuses to be drawn on what is the appropriate exchange rate for the yuan and the dollar.     more …

The Wall Street Journal
March 24, 2010
By JOHN BOLTON

Google’s decision to stop censoring searches on its China-based servers, rerouting search requests instead to its uncensored Hong Kong facilities, is historic. Google has shown itself unwilling simply to be on the receiving end of whatever Beijing dishes out—and highlighted the growing importance of Hong Kong and Taiwan in shaping the decisions that foreign businesses in China must make.

When an enterprise of Google’s global dimensions and visibility reverses course in China and is no longer a passive, compliant subject of government diktats, it sends a message to enterprises world-wide: You can do the same. Submissive participation in the mainland Chinese market is neither inevitable nor unavoidable. Do not fear to assert your interests, and those of your present and potential Chinese customers.

For the most part, foreign companies doing business in mainland China previously assumed that their risks lay on the side of not complying with Beijing’s orders, however burdensome or threatening to profits or property interests, physical or intellectual. Leaving the Chinese market was unthinkable, and defying or contesting Beijing’s directions just as unthinkable.

View Full Image
DeSwaan
Bloomberg News

Outside the Hong Kong Exchange
DeSwaan
DeSwaan

Of course, as Google could envision, bucking this conventional wisdom is hardly risk free. Google may be mistaken about its own commercial interests and have to climb down in the near future—Chinese authorities are already filtering results from Google’s Hong Kong search engine for mainland users. Beijing’s rapid and angry response shows it fully understands the dimensions of this clash, and it may yet win, forcing Google back into censoring searches, or pushing it entirely from the mainland for being uppity.

The company announced starkly that “the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement.” That position shows how aggressively Beijing’s current leadership will act to control domestic information flows, and foreign businesses generally.    more …

China is accustomed to being accused of not providing accurate information. Jia Yong, a member of the National Committee of the Chinese People’s Political Consultative Conference National Committee (CPPCC), recently described these allegations as “groundless”.

Japan has consistently expressed concerns about China’s military spending. In light of Chinese President Hu Jintao’s 2008 promise that China “would not spark an arms race with its neighbors or pose a military threat”, Asia Times Online asked
several experts to assess the impact of the new defense budget on Japan. We put the question to them twice in somewhat different statements.

An immediate response came from Michael Green, Japan Chair and a senior adviser at the Center for Strategic and International Studies in Washington, DC.

“It is the nature of Chinese deployments and operations rather than the official number that is at issue,” said Green. “But the lower number doesn’t hurt China’s image!”     more …

Epocjh Times
Mar 14, 2010
By Wang Qian & Yu Lian
Sound of Hope Radio

A food processing industry veteran in China’s Hubei Province had a letter published last week exposing what he regards as severe food safety problems in China.

Published in the Wuhan Daily News on March 7, Li Deshou’s letter has since been widely quoted by many Chinese bloggers. He pointed out that food safety issues are terrible and widespread, and that authorities have to take immediate action.

Mr. Li, Chairman of the Grain Association in Guangshui City and Vice Chairman of the Grain Association in Suizhou City, has been in the food processing industry for 17 years and has been directly involved in selling rice.

He stated that almost all of the rice sold in Wuhan from Suizhou has been polished with soybean oil. “Polishing rice with soybean oil has become a common under-the-table practice for some unethical plants.”

Oil added to rice becomes rancid easily and can therefore cause harm to the human body if eaten. Some unethical processing plants even use industrial oil; the potential consequences of this practice can range from damage to the digestive and neural systems to death, according to Mr. Li’s letter.    more …