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Year Zero: Say Hello to Chinese Stalinism!

Wilber W.
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China overtakes Japan as world's second-largest economy
The Guardian - ‎2 hours ago‎
http://www.guardian.c...­
• Japanese economy grew by just 0.1% in second quarter
• Figures seen as 'symbolic' shift in world power

China overtook Japan as the world's second-largest economy during the second quarter of this year, marking another milestone in the country's transformation from impoverished communist state to economic superpower.

With its red-hot economy growing at around 9% a year, some experts now expect China to outstrip the United States as soon as 2030, its financial strength carrying broad political implications.

Official data published today showed a faltering Japanese economy growing by just 0.1% in the three months to June, with GDP of $1.28tn (£826bn) eclipsed by China, which had economic output of $1.33tn.Although it is not the first time China has outpaced Japan in a single quarter, most economists now expect the emergent economy to end the year firmly ahead.

China's spectacular growth since Deng Xiaoping began to introduce free-market reforms three decades ago has seen it bounding up the world league of economic powers. Just 10 years ago, it was the sixth-largest in the world but has since outstripped Britain and France in 2005 and Germany in 2007. It overtook Germany as the world's largest exporter last year and also became the largest car market.

John Hawksworth, chief economist at PricewaterhouseCoopers, described the figures as a "symbolic" shift. He said: "Clearly it was inevitable, it was a just a question of when it would happen – just as it is pretty inevitable in the long run that it will be bigger than the US as well, because it has four times the population."

For now, China remains a distant second behind the US. The International Monetary Fund expects China's GDP to reach $5.36tn this year, while the US is expected to hit $14.79tn. The UK projection is $2.22tn. Japan is expected to have GDP of $5.27tn.

Nick Parsons, head of research at National Australia Bank, said the global financial crisis, which pitched more developed economies into recession, has underlined the shifting world power. "The Chinese economy has more than doubled in size in the past 10 years and will double in size again in the next 10 and I don't think the financial crisis has accelerated that change as much as it has cemented it," he added.

For Japan, the figures reflect the continued decline of a nation that has held the second spot since 1968, when it overtook West Germany, the result of a remarkable rise as a manufacturing and financial giant in the wake of the second world war.

But the "economic miracle" came to a juddering halt at the beginning of the 1990s when a property bubble burst. What followed was a lost decade in the doldrums and the country has never fully recovered. Today, it faces deflation, an ageing and shrinking population and only minimal growth.

Economists also cited the figures as evidence that the global recovery was still facing strong headwinds.

China's breakneck growth has not come without cost, causing huge social upheaval, including large-scale migration from the countryside to cities, which are growing at an unprecedented rate. Consultancy firm McKinsey reckons that China's urban population will almost double by 2025, when it will have 221 cities with populations of more than 1 million, compared with 35 in Europe. China has continued growing through the recession, in part owing to a $586bn stimulus package.

The headline growth figures also mask huge disparities of income in China, which has a population of 1.3 billion; the UN estimates that 300 million have been lifted from poverty since the reforms began, but while luxury boutiques spring up in Shanghai and Beijing, hundreds of millions still live in severe hardship, particularly in rural areas. Japan's people are still among the richest in the world, with GDP per capita of $39,700, compared with $46,400 in the US and just $3,600 in China.

The rapid advances in China have also led to environmental problems: in 2006, the country overtook the US as the largest emitter of greenhouse gases. This month, Beijing ordered more than 2,000 highly polluting, unsafe or energy inefficient plants to shut down within two months, underlining how the one-party regime can direct sudden change.

The growth of China has made it hungry for natural resources and energy, driving up the cost of commodities and raising the potential for conflict. It has been busy doing trade deals in Africa, Latin America and Asia, without the kind of human rights and reform demands often attached by the west. The US has already blocked an attempted takeover of an American oil firm by a Chinese state-controlled rival while Australia has prevented the Chinese buying mineral firms.

There are also concerns that the global economy has become unbalanced, with huge trade deficits between China and the developed world. China is said to make four-fifths of the world's toys and almost three-fifths of its clothing. Developed economies are hopeful that China will become a market for their goods and services as its consumer market grows, but at present it accounts for just 2% of UK exports. Critics in the US and Europe argue that China is benefiting unfairly because it keeps its currency, the yuan, artificially low, benefiting its exporters.

According to a different measure, using purchasing power instead of current exchange rates, China had already overtaken Japan.

Hawksworth said China's growth will begin to slow progressively to around 3.5% to 4% in 20 years' time. This is in part because of an ageing population, due to its one-child policy, as well as increasing pressures on wages and a growing reliance on domestic demand as exports slow. There have recently been a series of high-profile strikes at Honda and other factories in southern China, as workers demand better wages and conditions, while a series of suicides at Foxconn, which makes iPhones and other Apple products, has raised concern and led to higher pay.

But Hawksworth said the increasing political power that has come with China's economic growth was already apparent: "It is evident in a whole series of forums from Copenhagen and climate talks to the G20, that you can't really come to a sensible solution without giving considerable weight to China."
Wilber W.
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China's jump signals shift in global power
Financial Times
http://www.ft.com/cms...­
Published: August 16 2010 16:58 | Last updated: August 16 2010 16:58

By Jamil Anderlini in Beijing

To economists, China overtaking Japan as the world’s second largest economy in nominal terms is almost meaningless.

In more economically important purchasing power terms China overtook Japan almost a decade ago, and the exact moment when China’s nominal US dollar gross domestic product surpasses Japan’s has a lot to do with exchange rates and technical statistical revisions.

EDITOR’S CHOICE
Chinese economy eclipses Japan’s - Aug-16

Lex: Japan GDP - Aug-16Japan reviews GDP measurements - Feb-14UK near top of economic gloom rankings - Aug-10

Economists sound alarm over rising yen - Aug-15

Land of rising dividend payments - Aug-01


To illustrate the point, an economist will tell you that identical houses built in both countries using the same materials and labour today creates three times as much GDP in Japan as it does in China because everything in Japan costs a lot more.

But for all non-economists, China’s jump to the number-two spot – something that will happen this year if it has not already – is important because it represents a shift in global economic and political power.

It is also important to the Chinese government and how it relates to the rest of the world, as the success symbolised by its rise in the GDP rankings will bring greater scrutiny and an expectation Beijing will assume more responsibility on the world stage.

“China’s foreign policy has long been to maintain a low profile, but it is now the number-one exporter, the number-two economy and will be the number-one energy consumer by next year. All of these milestones mean China has fewer places to hide,” according to Arthur Kroeber, managing director of Dragonomics research consultancy. “The country is not quite ready for its new role and would like to put it off for as long as it can.”

China has become increasingly adept at translating its rising economic power into political and diplomatic influence, especially in regions such as Latin America and Africa where there is resentment towards western policies and interests.

As the owner of the world’s largest pile of foreign exchange reserves, Beijing has also publicly challenged the role of the US dollar as the main global reserve currency and has led the drive for more equitable representation on global bodies such as the International Monetary Fund.

But officials in Beijing insist China is still a developing country and cannot be expected to lead global initiatives or take difficult steps such as reducing carbon emissions or floating its currency to address trade imbalances.

They note China’s per capita GDP of about $3,600 (€2,800, £2,300) is less than a tenth that of Japan or the US and less than one sixth that of France and the UK.

Some outspoken Chinese experts also point to the poor quality of China’s growth compared with other countries.

“Since 2003, China’s economic growth has relied on two pillars: exports and real estate, and while the former brought China some benefits in terms of modernisation, the latter has caused many serious problems,” says Yi Xianrong, director of the Finance Institute at the Chinese Academy of Social Sciences, a state-backed think-tank.

“The growth in the real estate market is based on the mismanagement of land resources and property speculation, leading to skyrocketing house prices and a real estate bubble that must eventually be deflated.”

Mr Yi also points to China’s large income gap and the geographic imbalances between its relatively wealthy coastal regions and impoverished hinterland.

“When we talk about China’s economic power, we should be careful not to overestimate our strength. China’s rapid GDP growth will be meaningless if these imbalances remain unsolved,” he says.

But these serious problems and many others facing the Chinese leadership are largely invisible to the outside world, which sees only a fast-growing economy managed by an opaque and somewhat anachronistic authoritarian regime.

“An important question is whether China will accept the responsibilities that come with being a leading economic power even though it remains a middle-income country,” according to Eswar Prasad, a professor at Cornell University and former head of the IMF’s China division.

“From currency and trade policies to dealing with climate change, China's economic policies now have global implications and it needs to look beyond its narrow self-interest.”

Chinese economic boom has been 30 years in the making
China's economy has been growing at almost 10% since it embraced economic reforms and free-market principles
http://www.guardian.c...­

China's economy has been growing at three times the global average and it has claimed top spot in a number of economic league tables. Photograph: Xin Jun/EPA

China's rise to be crowned as the world's second-largest economy today is the latest milestone in a boom that has been running almost constantly since the country began the long process of embracing free-market principles more than 30 years ago.

The Chinese economy has been growing at an average of almost 10% – three times the global average – since Deng Xiaoping became leader and started to introduce economic reforms. In dollar terms, its GDP has jumped from $147.3bn (£94.55bn) in 1978 to $4.9tn in 2009. Even if Japan's own economy hadn't faltered in recent months, China was expected to expand by another 10% this year so it was always likely to overtake its eastern neighbour before 2011. Some analysts argue that China is underestimating its own growth, and may be powering ahead even quicker than thought.

China has recently claimed the top spot in a number of important economic league tables, as it drags the world economy out of the global downturn:

• The WTO has calculated that China became the world's biggest exporter in 2009, usurping Germany. This increased the pressure on China to revalue the yuan, a move it has proved reluctant to make.

• More cars are now made in China than any other country. In 2009, 13.79m vehicles were constructed in Chinese factories, comfortably exceeding Japan, with 7.93m, and the US, with 5.7m.

• China is also the biggest market for new cars. Sales of new passenger vehicles leapt by more than 50% last year, pushing up total sales to 13.64m. This saw it overtake the US, where sales fell by around a fifth to 10.43m.
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Con..

• Last month China became the world's largest energy user, after its appetite for power more than doubled in the last decade. Most of the demand comes from the nation's huge manufacturing operations, but its population are also using more energy as their standards of living improve, and more of them buy computers, cars and domestic appliances. According to the International Energy Agency (IEA), China consumed the equivalent of 2,252m tons of oil in 2009. China has refused to accept this, claiming the IEA's data is unreliable and stressing that it has made strides in energy efficiency.

• China's energy consumption means it has taken another unwelcome title: the world's biggest emitter of carbon. It appears that China overtook the US in 2007, according to information collected for the Copenhagen summit

• … but it is also spending billions of dollars on renewable energy sources. Analysts believe it doubled its wind generation capacity from 12.1GW in 2008 to 25.1GW in 2009, making it the world's largest wind market.

The latest data shows that the Chinese economy grew by 9.1% in 2009, despite most of the developed world suffering a painful recession. Its GDP is still just a third the size of America's, but economists believe the two will converge within a decade. Earlier this year, PricewaterhouseCoopers (PWC) said that a "seismic change" was underway in the world economy and that China would catch America by 2020, with India and Mexico leading the stampede of emerging economies.

Last year, the biggest economies were the United States, Japan, China, Germany, France, and the United Kingdom, in that order. By 2020, PWC believes the top six will read China, the US, India, Japan, Brazil, and Russia, with Germany in seventh place and the UK down in 10th.

John Hawksworth, head of macroeconomics at PWC, also predicted that China would be "some way ahead of the US by 2030".

China relaxed its strict communist economic policies after the pain caused by the Great Leap Forward – Mao's attempt to modernise China, which resulted in millions of deaths and derailed its economy for many years. This prompted the first wave of foreign investment into the country, since when the Chinese authorities have repeatedly intervened to rein in growth and battle inflation.

There have been problems – China's stock market crashed in 2008 after a speculative boom turned sour. Some analysts now believe that the country is about to suffer a property crash that will hurt its banking sector. Hedge fund manager Jim Chanos warned in April that the Chinese real estate bubble might burst later this year or in 2011. Construction is a major part of China's economy, and a property slowdown – or worse could knock its economic growth.

China Overtakes Japan as World's Second-Biggest Economy
Communist China is on course to overtake the U.S. as the world’s largest economy around 2020.
http://www.bloomberg....­
Bloomberg

China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower.

Japan’s nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said. Japan’s annual GDP is $5.07 trillion, while China’s is more than $4.9 trillion.

China led the world out of last year’s global recession with an economy that’s more than 90-times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free-market reforms in 1978. The country of 1.3 billion people will overtake the U.S., where annual GDP is about $14 trillion, as the world’s largest economy by 2027, according to Goldman Sachs Group Inc. chief economist Jim O’Neill.

China’s surpassing of Japan “is a marker of its increasingly dominant role in the global economy,” said Eswar Prasad, a senior fellow at the Brookings Institution and former head of the China division at the International Monetary Fund. “The resilience of China’s growth during the crisis enabled a number of other countries, particularly commodity-exporting economies, to ride on its coattails.”

The benchmark Shanghai stock index rose 2.1 percent at the 3 p.m. close today, climbing the most this month.

Tricky Comparison

China overtook the U.S. last year as the biggest automobile market and Germany as the largest exporter. The nation is the world’s No. 1 buyer of iron ore and copper and the second- biggest importer of crude oil, and has underpinned demand for exports by its Asian neighbors.

While China’s output was also larger in the fourth quarter of 2009, Japan’s GDP rebounded to exceed China’s in the first quarter, according to data compiled by Bloomberg News. According to IMF data using purchasing-power-parity calculations to adjust for exchange-rate differences, China overtook Japan in 2001.

Quarterly comparisons between China and Japan are “a little tricky because they do not take account of different seasonal patterns between the two countries,” said David Cohen, head of Asian forecasting at Action Economics in Singapore.

China’s economy is cooling as the government trims credit growth from last year’s record $1.4 trillion and discourages multiple-home purchases to cool surging property prices. July industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated. China Petroleum & Chemical Corp. said last month that its crude-oil processing increased at a slower pace in the second quarter as fuel demand faltered.

Property Collapse

The country’s property market is beginning a “collapse” that will hit the nation’s banking system, Kenneth Rogoff, a Harvard University professor and former chief economist of the IMF, said July 6.

Still, China is on course to overtake the U.S. as the world’s largest economy around 2020, PricewaterhouseCoopers said in a January report.

With China’s growth surging 10.3 percent in the second quarter from a year earlier and Japan expanding 2 percent, the “gap is going to widen” in future, said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. “It is not likely that Japan will retake the No. 2 spot given the likely growth rates.”

Four of the world’s top 10 companies by market capitalization are from China, including PetroChina Co., Industrial & Commercial Bank of China Ltd., China Mobile Ltd. and China Construction Bank Corp.

Agricultural Bank

Agricultural Bank of China Ltd. boosted the size of its initial public offering to $22.1 billion this month after selling more stock in Shanghai, making it the world’s largest first-time share sale. The IPO made the nation home to four of the world’s 10 biggest banks by market value, half a decade after the country’s first major state-owned lender went public.

China may be the biggest IPO market in 2010 as companies are likely to raise 500 billion yuan ($74 billion) in Shanghai and Shenzhen, PricewaterhouseCoopers forecast last month.
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Con...

Since introducing free-market policies, China has lifted 300 million citizens out of poverty, according to the United Nations. The country remains a developing nation, with its per capita gross national income ranked 127th in the world at $2,940 at the end of 2008, behind Angola and Azerbaijan, according to the World Bank.

Cultural Revolution

In the first three decades of Communist Party rule before Deng took power, China’s economy was hobbled by the chaos of the Great Leap Forward, a failed attempt to transform the agrarian nation into an industrial powerhouse, and the Cultural Revolution, a decade of political upheaval led by Mao Zedong’s Red Guards.

“China has a large population, a weak economic foundation, relatively few resources and a large poverty population, which remains our basic situation,” Ma Jiantang, head of China’s statistics bureau, said in January. “Therefore, while we take note of our expanding size of economy and enhancing economic strength, we should also have a sober understanding that China remains a developing nation.”

China’s future influence on the global economy will increase, said Shen at Mizuho. The country’s “double-digit” expansion will contribute a third of global growth this year, the Organization for Economic Cooperation and Development said in March.

“Japan had a huge impact on the global commodities market and foreign direct investment flows in the 1980s” as China is doing now, Shen said. “The major difference is that China’s population is 10-times bigger than Japan’s, its economy is still growing at above 9 percent per year, and Chinese investors are just beginning to invest abroad. You can imagine that China’s impact will be so much bigger.”

--Kevin Hamlin, Li Yanping. With assistance from Marco Babic and Sunil Jagtiani in Singapore, Russell Ward and Keiko Ujikane in Tokyo and Zhang Shidong in Shanghai. Editors: Stephanie Phang, Cherian Thomas

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net
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FT's Lex Columnist McLannahan on China, Japan
VIDEO http://www.bloomberg....­
http://www.mefeedia.c...­

Aug. 16 (Bloomberg) -- Ben McLannahan of the Financial Times' Lex commentary team discusses China surpassing Japan as the world’s second-largest economy last quarter. McLannahan talks with Melissa Long on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

HSBC's Neumann Interview on Japan and China Economies
VIDEO http://www.bloomberg....­

Aug. 16 (Bloomberg) -- Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc, talks about China surpassing Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower. He speaks with Erik Schatzker and Melissa Long on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

8/6 Stiglitz Interview on China's Economy
VIDEO http://www.bloomberg....­

Aug. 6 (Bloomberg) -- Nobel Prize-winning economist Joseph Stiglitz talked with Bloomberg's Rishaad Salamat yesterday about the outlook for China's economy. China’s economic growth eased to 10.3 percent in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation. Stiglitz also discussed the mainland's currency policy. Bloomberg's Susan Li also speaks. (Excerpt. Source: Bloomberg)

8/6 Li Speaks on China Banks
VIDEO http://www.bloomberg....­
Aug. 6 (Bloomberg) -- Bloomberg's Susan Li reports on Hong Kong billionaire Li Ka-shing’s views on Chinese banks. Li spoke yesterday at a press conference in Hong Kong after his biggest companies, Hutchison Whampoa Ltd. and Cheung Kong (Holdings) Ltd., reported earnings that beat analysts’ estimates. Victor Li, deputy chairman of Cheung Kong and Li’s son, also spoke about the property market. (Source: Bloomberg)

YouTube - FT's Lex Columnist on Japan's `Zombie Banks'



Economy Shrinks at Fastest Pace in 26 Years



AssociatedPress | 27 February 2009
The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession. (Feb. 27)

http://www.bloomberg....­
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Highest Rated Comments
arzoyan 2 months ago 44

What economy? its the organised robbery of immense humanity in a politically manipulated,corrupt, Market system of ARTIFICIAL SCARCITY to perpetuate poverty and exploitation for the private gain and greed of the OWNING/RULING CLASS. Capitalism in US or CHINESE modality ITS COMMODITY PRODUCTION FOR PROFIT as the only consideration in template of perpetual war,enviornmental destructions,animal cruelty and suffering, a social reality of increasing misery,suffering,fear and dehumanisation
Wilber W.
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Catalysts of Global Growth: China Rules; U.S., EU Close Behind (Part 2)
http://seekingalpha.c...­
http://seekingalpha.c...­

International trade and direct investment variables indicate that emerging markets are getting more important, but China is the only country that can claim importance as a catalyst. It does not dominate yet, since the United States and the EU (in general, and Germany, in particular) do still play an important role as well.

Conclusion: Emerging markets are indeed a force to reckon with when analyzing international economic and financial trends. It is impossible now to get your predictions and forecasts about market movements right when simply looking - like before - at what is going on in the United States and the European Union. The BRIC nations, and especially the number one, China, are playing a role. Based on the relatively higher growth of GDP in those countries, and their strong financial positions, we can expect a further increase in importance of these countries in global economic analysis.

Emerging market investments have thereby become clearly mainstream. Whoever will continue to treat them as a 'niche' component of a portfolio will end up with a growing tracking error compared to the global representative indices and difficulties understanding what is going on. The world has structurally changed, and this implies that we will have to adjust our investment approaches accordingly. But the same does not only apply to us, as investors. It also applies to these nations themselves. China cannot afford a 'splendid isolation' like policy when the world is treating it as a catalyst. We believe that the Chinese understand this and that recent decisions to allow at least some exchange rate appreciation vis-a-vis other major currencies is the beginning of a Chinese move towards a bigger role within the international economic order.

Erik L. van Dijk, principal at LMG Emerge.

LMG is an institutional investment consultant active in the Dutch and other Continental European Markets.


http://seekingalpha.c...­
Wilber W.
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Why China had growth during the recent Great recession

Analysis from a Chinese Government organ. worth taking a look at, but with a pinch of salt

G20 highlights "superiority" of China's economy
http://www.china.org....­
By John Ross China.org.cn, June 27, 2010



The dispute at the G20 summit between the U.S. and Europe over "economic stimulus" versus "deficit reduction" convincingly demonstrates China's system of macro-economic regulation. China has faced no similar dilemma. It has simultaneously carried out the world's biggest economic stimulus package, generating almost 12 percent annual GDP growth in the first quarter of 2010, while running a budget deficit which is entirely sustainable – under 3 percent of GDP compared with deficits of more than 10 percent of GDP in the U.S. and U.K., and levels approaching this in the other major European economies. China has therefore not had to face the choice between continuing fiscal economic stimulus measures and placing the priority on budget consolidation.

Studying the lessons of China's policy success is therefore urgent, given that the world economy now faces, at best, slow recovery or, at worst, the risk of a double dip recession under the combined impact of the Eurozone sovereign debt crisis and the constant downwards revision of US growth. Last Friday saw US growth in the first quarter of 2010 revised to an annualized 2.7 percent compared to the 3.2 percent initially announced.

To see why China's economic performance has been so successful, it is necessary to look at what has actually occurred during the international "Great Recession" – as opposed to myths about it. The chart below shows the changes in components of GDP in the countries that form the Organization for Economic Cooperation and Development (OECD) – essentially the developed economies – between the start of the international recession in the first quarter of 2008 and the latest available data. During that period OECD GDP fell by $1.04 trillion dollars in constant price terms. However $0.99 trillion of that, equivalent to 96 percent, was accounted for by a decline in investment. In contrast the decline in personal consumption expenditure was only $0.25 trillion; government consumption rose by $0.23 trillion and the balance of trade position of the OECD economies improved by $0.23 trillion. In short the Great Recession is dominated by a massive investment decline.

The reason China did not suffer any major investment decline is the same as the reason it has not run a significant budget deficit. China has a large state company sector, which accounts for about half the economy's investment. These companies are run in a market framework, and not subject to day to day government control.

Faced with the international financial crisis such state companies could therefore increase investment in line with the government's stimulus policies. Simultaneously China's largest banks are state owned. They therefore could be, and were, instructed to increase their lending to companies in a counter-cyclical fashion. Because of its direct grip on a large part of the economy's investment mechanism China could therefore launch a large scale stimulus package, preventing any decline in investment. This economic growth aided the private sector. Simultaneously, in a virtuous feedback loop, economic growth created tax revenues, meaning China did not have to run a significant budget deficit – China's fiscal revenue in 2009 soared by 11.9 percent, whereas the U.S., U.K. and other countries saw tax revenues collapse due to the recession.

Compare what happened in the U.S. and Europe. Here there is no significant state company sector. So when investment began to collapse the government was unable to reverse it. In the U.S. and Europe, prior to the crisis, the major banks were private and all the government could do was to plead with them not to cut lending but had no power to instruct them. Government pleas were ignored and the recession was worsened by a sharp fall in bank lending to companies. The consequence was severe recessions that led to a collapse in tax revenues producing huge budget deficits.

Faced with the fall in investment that followed from such trends all the US and European governments could do to attempt to offset it was to allow their budget deficits to expand rapidly to induce companies to invest by increasing government and personal consumption – increasing private and government consumption demand. These attempts to halt the investment fall by the indirect method of running budget deficit have been relatively ineffective, and therefore economic recovery has been extremely weak. The consequent collapse in tax revenues led to the budget deficits which have now produced moves by the European governments to sharply reduce them. While such deficits were ineffective in halting the investment decline nevertheless sharply reducing them, which will result in cutting both government and household consumer expenditure, may, as President Obama warned, lead Europe into a "double dip" recession.

It is because China's economic policies concentrated on sustaining investment that it experienced rapid economic growth with no significant budget deficit. Because the U.S. and Europe refused to directly address the question of declining investment they experienced both recession and huge budget deficits. The correct solution was pointed out a long time ago by Keynes when he said "a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment." China implemented this.

Why, therefore were the U.S. and Europe incapable of following China's successful economic policies or Keynes prescription? The answer lies in the differing economic structures of the countries. The U.S. and Europe lacked the large state owned company sector and state owned banks that made China's stimulus package possible. Because of this even if the US and Europe had wished to carry out policies to maintain investment, and therefore avoid recession, they had no effective instruments with which to achieve this. When the Chinese government therefore explained that China had achieved superior economic results faced with the financial crisis due to its superior economic structure they were therefore simply stating the literal truth.

The author is a columnist with China.org.cn. For more information please visit: http://www.china.org....­
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The Museum Of Tap Water, Beijing
http://www.npr.org/te...­



In 2001, Price says, an edict was issued that required Beijing to open 150 new museums by 2008. Hence a museum devoted to the fascinating history of ... tap water.

The museum is full of artifacts from the early days of Bejing's tap water system, which dates back to 1908. On display are coupons that people brought to water stations to receive water, and stethoscopes that were used to detect leaks in the pipes.

The irony of the whole museum, Price says, "is that Beijing's water is not safe to drink from the tap."
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Chinese artist Ai Weiwei says he is under house arrest
Prominent Chinese artist says under house arrest - 6 hrs ago
http://www.bbc.co.uk/...­
http://www.reuters.co...­
http://www.guardian.c...­
http://www.guardian.c...­
Artist most famous for in The UK for the current exhibit in Tate Modern involving thousands of hand made ceramic sunflower seeds has been detained under house arrest without charge. He was beaten up by Beijing police earlier this month for causing similar "embarrassment" to the Chinese state.

China has, over the last decade has moved into the forefront of modern art creation and artists like Weiwei are it's vanguard. An artist who is obviously proud of his country and his roots. Is this becoming a problem for the worlds largest Stalinist state?


One of China's best-known artists, Ai Weiwei, says he has been under house arrest at his home in Beijing.

He says the authorities want to prevent him holding a party to mark the forced demolition of his new Shanghai studio.

Mr Ai was initially invited to build the space, but it has now been declared illegal and will shortly be demolished.

The artist helped create Beijing's Olympic Bird's Nest stadium and his latest installation of sunflower seeds is showing at London's Tate Modern.

Born in 1957 in Beijing, the artist has played a key role in contemporary Chinese art over the last two decades, and has been highly vocal about human rights issues in the country.

Unmarked Van



Mr Ai had planned to hold a party at his $1.1m (£670,000) Shanghai studio on Sunday prior to its demolition.

But on Friday, he said that men he suspected were plain-clothes police officers told him he would not be allowed to travel to Shanghai.

A van without numberplates with more than 10 men inside was blocking the exit from his home at an artists' colony in Beijing, he added.

"I'm under house arrest to prevent me from going to Shanghai. You can never really argue with this government," Mr Ai told the Associated Press by telephone.

According to messages on his Twitter feed, Mr Ai has been told he will be under house arrest until midnight on Sunday.

"Please accept my deepest apologies," he tweeted to his guests in Shanghai.

He said that some people still planned to travel to his studio.



It is thought that the choice of crabs was a political statement as the Chinese name for river crab sounds like "harmonise", a euphemism often used by the Chinese authorities for censorship.

Shanghai had imposed a six-month moratorium on large-scale building and demolition projects during the World Expo, in a bid to improve air quality, but reports say these have resumed since the exhibition ended.

"Ai's studio did not go through the application procedures, therefore, it is an illegal building," Chen Jie, director of the urban construction department in Malu township, where the studio is located, is quoted as telling the Global Times.

Mr Ai's latest work is currently on display in London's Tate Modern gallery: a giant installation made up of millions of tiny replica sunflower seeds. Each seed was moulded, fired, hand-painted and fired again in the Chinese city of Jingdezhen over a two year period.

Sunflower seeds are a popular Chinese street snack but also hold another meaning for the artist.

During the Cultural Revolution, propaganda images showed Chairman Mao as the sun and the mass of people as sunflowers turning towards him.

"The seed is a household object but at the same time it is a revolutionary symbol," Mr Ai has said of his work.



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(Reuters) - Prominent Chinese artist Ai Weiwei said on Saturday he had been put under house arrest in connection with an argument with the government over the planned demolition of his studio in Shanghai.



"The police have announced that I am not allowed to leave my house," Ai told Reuters by telephone from his Beijing residence.

"It's to do with what's happening over my studio. They say that it has been illegally built and want to demolish it," he said, adding he did not know when that might happen.

"I expect my house arrest to end tomorrow evening," Ai said.

Some of Ai's supporters and friends plan to hold a "party" at the studio in Shanghai on Sunday to mark the demolition, but it was not certain if authorities would allow that to happen.



Beijing police could not immediately be reached for comment.



Ai is one of China's most famous contemporary artists. His career spans protests for artistic freedom in 1979, provocative works in the 1990s and a hand in designing the Bird's Nest stadium for the 2008 Beijing Olympics.

Ai's public comments, activities and art are some of the loudest, most flagrantly defiant forms of speech in China today, where government controls on the Internet and traditional media constrain civil society.

Ai has never been formally arrested, despite his occasional brushes with the law.

He gets away with being outspoken because of the prestige of his father, poet Ai Qing, because he picks his battles carefully and because his own art has brought wealth and fame overseas.

The Tate Modern in London is currently hosting a solo exhibition at its Turbine Hall of Ai's work, consisting of some 100 million individually made porcelain seed replicas, which visitors were originally invited to walk across.







Ai Weiwei, White House-1999
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