The economic proof is NOT in the Chinese pudding, but the fear is in Bernanke

For months now, Wall Street bulls have been saying any “slack” or “slips” in the U.S. economy could easily be picked up by China. Or India. Well, Monday’s Asian stock market tanking put paid to that theory. Jim Jubak provides analytical details:

The death of this belief in "global decoupling" is likely to have three effects:

• It will shift the harshest bear market action from the U.S. to overseas markets, as overseas investors discover that their economies are slowing, too.
• It raises the odds of a "bear market rally" in the not-too-distant future. Such a rally would leave the bear market intact and end in another painful market downturn.
• And though the death of this myth is essential to finding the bottom in the current bear market, the final end of the bear still depends on a recovery in the U.S. financial and housing sectors, which now looks unlikely until early 2009.

The danger of slowing economic growth is a months-old story to U.S. investors — one reason that the major U.S. market indexes are currently flirting with the 20% loss that defines a bear market. But it's something new for investors in overseas markets, many of whom thought that those economies would be immune to a U.S. recession.

Plus, as Jubak points out, Europeans, like Americans, are familiar with the ideas of stock markets and their vagaries. In China, especially, this is a novel concept; you’ll note that on Monday, the Chinese (and Indian) markets sank far more than the U.S. market on Tuesday (helped, albeit, by the Fed rate cut).

Meanwhile, expect the post-recession recovery to be weak. Says who? Jim Jubak?

No, Ben Bernanke. Now you know just how much panic, and gloom, was behind that rate cut.

Plus side? And, yes, there is one. At least we’re not getting Greenspan bullshit. Now, if Bernanke only can prove to have a pair of Paul Volcker cojones, we’ll be OK in the longer term.

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Cry me a river on China trade issues, John Edwards

Edwards does the Curly Shuffle on not wanting to talk about how he approved free-trade relations with China while he was in the Senate.

Last Thursday in Iowa, [Tom asked him whether he now regretted voting for the China trade deal and whether competition from Chinese workers is a major reason why American manufacturing workers are so hard pressed.

He replied, “I think America’s trade policy as a whole is why workers are suffering. I wouldn’t isolate any particular trade relationship or any particular trade deal.”

He added, “We need to enforce China trading responsibilities, which is not being done. They’re manipulating their currency. They’re sending goods into the United States that are not safe and are largely not being inspected. I think the president has a responsibility to enforce China’s trading obligations to the WTO (World Trade Organization) and that has not been done.”

Asked again whether he regretted his 2000 vote, he said, “Bringing them into the world trading community, subject to rules, makes some sense. But it doesn’t make any sense if you don’t enforce their responsibilities and don’t hold them accountable for their violations of those responsibilities.”

He then proceeded to denounce the Chinese for building up their military, for their too cozy relations with Sudan and Iran, and for “devastating the environment” by building one coal-fired power plant every week.

Weren’t all of these same complaints true at the time you voted for the free-trade deal, John?

No, don’t shake your head “No.” Don’t try to always change the subject to Iraq. Just nod your head up and down and say “Yes.”

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THIS is why “free trade” with China is a bum steer

Oh, sure, all the Democratic presidential candidates will bleat like angry sheep right now about slaves in Chinese factories, but what will they do about this:

China is still freeing people including children forced to work as slaves in illegal brick factories, two months after the scandal involving the brick yards was exposed, officials said Monday.

The scandal erupted in early June after Chinese media reported that children as young as 8 were abducted or recruited from bus and train stations with false promises of well-paying jobs and sold to kilns for about $65.

after Jan. 20, 2009?

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This one is for posterity and the "missing the point" chronicles

I wish the rest of the world would stop with setting their locks alight over Iran and nukes. Nukes aren’t chocolate chip cookies. Development takes time. Here is how Iran is going to work, if George doesn’t lose what’s left of his mind: Nukes will take longer to develop than the Bush administration can possibly last. As soon as there is a sane American president, the Mullahs will ditch Ahmedinejad and the overtures will start. Given the amount of time it takes to develop nukes, the least-bad option is to let the Iranians proceed. Not ideal, certainly nothing I would have settled for seven years ago, back when we had a President and a functioning State Department, but to the extent that George Bush has screwed up his Middle-East wet-dream, it’s probably the best we can hope for.

Sorry 'bout the reality.

Now – If you want to get nervous about something, I have something for you to think about that ought to give you a gut-check moment, if you are serious about national security, and it isn't just a convenient meme to parrot for political reasons....(You are serious about it, right?)

China is expanding it’s Navy. Right now, today, I do not consider China a threat militarily (economically is another story) because they don’t have any functioning modern aircraft carriers. They have two floating dilapidated recruiting centers and military themed amusement parks, purchased from the remnants of the Red Navy.

If that changes, teach the kids Mandarin. (That is probably not be a bad idea in any event, actually.)

I would guess that the Chinese will have carrier groups five full years before the Iranians can possibly have nukes. Aircraft carriers are one of the three things that define a superpower. A blue-water, high-seas navy that has a carrier group capability is the third prong of a superpower. China already has nuclear weapons, and they are holding the note on a lot of foreign debt, giving them nearly unchecked economic power, far more economic power than they would need to qualify. (In fact, economically, China is in what is known as "the Catbirds Seat.")

Rear Admiral James Kelly, the commander of US naval forces in Japan, said the strategic shift would see China developing a "blue water navy" capable of projecting Chinese power well beyond its shores.

He said the shift had become apparent in October last year when a Chinese submarine surfaced near a US carrier group in international waters off Japan.

Kelly was speaking in the Australian capital, Canberra, where he is on a visit to commemorate the 65th anniversary of the Battle of the Coral Sea in World War II.

Commenting on the expansion of Chinese naval power her said there was a heightened need for transparency between the world's navies "so we don't have a misinterpretation of something out on the high seas."

I don’t just find this news troubling. I mean, I find it extremely troubling. But I find the fact that the national security beat isn’t reporting this and I have to go to the international press to get real information even more troubling.

Those who control the flow of information are missing the lede all over the place these days. (Or ignoring it intentionally.) They ignore the compromised state of national security – in favor of titillation and fear.

If you think the DC Madam story is about sex, and that an Iranian nuke is the biggest threat we face…well…I’m not sure I even know where to start with your education. Both are mere distractions from the real story that is being ignored in favor of massages and mythical mushroom clouds.

[Cross-posted from Blue Girl, Red State]

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Harvesting organs from prisoners moves closer to home

As an update to the Mandarin's recent post on the Chinese government's practice of harvesting organs for transplant from prisoners, especially those imprisoned for merely practicing their religion, here is a recent headline from our own, more enlightened country:

South Carolina lawmakers may cut jail time for inmates who donate organs

COLUMBIA, South Carolina: Inmates in South Carolina could soon find that a kidney is worth 180 days.

Lawmakers are considering legislation that would let prisoners donate organs or bone marrow in exchange for time off their jail sentences.

A state Senate panel on Thursday endorsed creating an organ-and-tissue donation program for inmates. But legislators postponed debate on a measure to reduce the sentences of participating prisoners, citing concern that federal law may not allow it.

"I think it's imperative that we go all out and see what we can do," said the bills' chief sponsor, Democratic Sen. Ralph Anderson.

Well, this isn't the same thing as killing prisoners to harvest organs for a profitable transplant business, as in China. And, the Mandarin (who had his own kidney disease as a child) would love to see more people donate organs, but somehow the quid pro quo here just doesn't seem right. Does it?


Crossposted at The Mandarin.

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Religious freedom in China and the Falungong body snatcher

Well, not the whole body,... The headline reads, “Chinese army harvesting parts from Falungong inmates.” The article begins, “China's military is reportedly harvesting organs from prison inmates, mostly Falungong practitioners, for large scale transplants including for foreign recipients, a study said.”

Falungong is a new religion that originated about fifteen years ago in China. It appears to be a fairly harmless (as religions go these days) pastiche of various elements of popular Buddhism, emphasizing Qigong-style breathing exercises, healthy living, and meditation. Fà lún 法輪 is the Chinese translation of Sanskrit dharmacakra, “Wheel of the (Buddha’s) Law” and gōng 功 means, in this context, “exercise,” or “practice.” [For reasons known only to the Mainland geniuses who cooked up the currently-fashionable Pinyin Romanization scheme, “lun” and “gong” have the same vowel sound - both rhyme with “book”.]

The founder, or “revealer” as he prefers to be known, of Falungong – perhaps “the decider” was already taken by then – is a 55-year-old Chinese man named Li Hongzhi 李洪志. Depending on whom you believe, Li’s life from early childhood until his 1992 revelation of Falungong was spent either in almost forty years of intensive study and practice of esoteric Buddhism, or consisted of a ne’er-do-well childhood, followed by a tour as a trumpet player in an Army band and a later career as part-time security guard at a cereal factory.

Article 36 of the Chinese Constitution [English 中文 ] guarantees freedom of religion, unless its believers “disrupt public order, impair the health of citizens or interfere with the educational system of the state.” Whatever its merits or demerits as a religion, it appears that Falungong practitioners quietly doing breathing exercises in public parks have somehow fallen afoul of one of those exclusions.

For reasons that have not been adequately explained, membership in Falungong is now deemed a serious political crime. The religion is officially banned in China (except in Macau and Hong Kong) and its members subject to immediate arrest and imprisonment without due process of (Chinese) law.

According to the study cited in the article linked above, once the Falungong believers are locked up in military prisons, they are all “systematically subjected to blood tests to match their organs with recipients.” That information is stored in a database so that when rich foreigners come to China for transplant surgery, perhaps to bypass long waiting lists at home or because the surgery in Chinese military hospitals is much cheaper, they sometimes receive organs from what are demurely called “executed prisoners” in official press releases.

What the globe-trotting transplant shoppers may not know is that the execution may have occurred only a few minutes earlier in an adjacent operating room and the prisoner’s only crime may have been joining the wrong church.

When we give a country “Most Favored Nation” (MFN) status, it means we won’t assess a tariff on any of their goods that is higher than we assess against the hypothetical “most favored nation.” China’s MFN status was revoked by President Truman in 1951, after China invaded its sovereign neighbor Tibet, and incorporated it into the People’s Republic by force.

China decided to wait us out, doing nothing significant to improve conditions in occupied Tibet, while flagrantly abusing the international tariff system. By the early 1970s, with our legendary geopolitical short attention span, we provisionally reestablished China’s MFN status -- now renamed the more harmless-sounding “Normal Trade Relations” (NTR). In 1999, under a Republican Congress and a Democratic President, it was permanently restored so China could apply for membership in the World Trade Organization.

Bills to repeal China’s Permanent Normal Trade Relations (PNTR) status surface every few years in Congress. Repealing it would be a good way to curb the disgusting trade in organs from executed prisoners of conscience. On the other hand, it might also drive up the cost of organ transplants, Happy Meals and athletic shoes.

Ask your Senator or Representative how they would vote on a tough choice like that.

Crossposted at The Mandarin.

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Oh, lovely. China can shoot down satellites now.

The newspapers are reporting that China shot down one of its old weather satellites last week with a ground-launched missile, something only the US and the former Soviet Union had managed to do until then. The satellite was in orbit about 500 miles up.

As a grad student in Chinese Classics back in the early 1970s, the Mandarin learned an important lesson about China from an old professor. The professor, referring to the year the Mongols conquered China, said: “Remember, young Mandarin, in China, everything after 1280 is journalism.” China takes a very long view of history and the place of “the present” in history. What happened yesterday or last week may not ring the kind of alarm bells for them that we hear in the West.

So, keeping in mind that “too soon to tell” has a long fuse in China, there are a couple of worrisome points to consider. One is the threat from such a weapon in China’s active arsenal, and the other is the threat of future sales of that weapon to others. Iran comes to mind.

China’s military forces are large, but generally regarded to be poorly equipped, at least when compared to first-world forces like ours or Britain’s. A lot of our military advantage is based on advanced technology. A missile that can shoot down our spy or communication satellites would be an effective way to partially blind our theater forces and make the battlefield more level for the Chinese, with millions of infantrymen fixing their bayonets. Public information sources suggest the elliptical orbits of our recon satellites have maximum and minimum altitudes of about 600 and 160 miles respectively. So a missile like the one the Chinese fired is right in that ballpark.

China is thought to export about $1 billion in arms a year, though sophisticated weapons may not make up a large portion of that. Chinese weapons performed poorly during the Gulf war, which hurt their reputation. In the particular case of Iran, however, China has been a major supplier of missiles over the years, beginning with anti-ship cruise missiles like the NY-2 Silkworm in the 1980s and the newer C-801 and C-802 in the 1990s.

More disturbing have been China’s sales of ballistic missiles to Iran, including an export model (the M-11) of their famous Dongfeng 東風 (“East Wind”) series. Now, admittedly, these aren’t the ICBMs that had many of us early-cohort Baby Boomers hiding under our wooden school desks back in the late 1950s. They have a maximum range of less than 400 miles. The point is that Iran is a long-time client of China’s missile sales force, and with China’s demand for petroleum, especially motor gasoline, soaring, the banker in me sees an obvious deal lurking in there somewhere.

And, don’t forget that Pakistan has a long history of writing big checks for China’s latest models of export missiles as well, so the plot in that whole neck of the woods could definitely thicken.

As the new Congress settles down to business, it will also be interesting to see if this somehow percolates into the Congressional debate, but -- as the Mandarin said -- it is “too soon to tell.”

Unless of course, the Chinese missiles pop a couple of our GPS satellites and then millions of Americans in SUVs, wandering around lost and low on gas with their fancy $2,000 navigation units on the fritz, pull over at the next payphone and call their Congressmen to complain.


Footnote: The Mandarin just took a quick peek at the mainland Chinese-language blogosphere, and an unscientific impression was that the hits on “satellite” (卫星) and “missile” (飞弹) were dwarfed by the ongoing tizzy over a Starbucks cafe in the Forbidden City.

Cross-posted at The Mandarin.

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