Courtesy if Sinocism.
China’s neighborly relations look increasingly disharmonious.
Reuters has a great look at ASEAN’s recent failed summit in ASEAN Way founders in South China Sea storm. Efforts to silence discussion of the South China Sea issue were not always subtle:
As Philippine Foreign Minister Albert del Rosario began to raise the sensitive issue of the South China Sea at one of last week’s Asian summit meetings, his microphone went dead….A technical glitch, said the Cambodian hosts. Perhaps something more sinister, hinted some diplomats who were frustrated by Chinese ally Cambodia’s dogged efforts to keep the subject off the agenda.
The Financial Times has a telling quote from a leading Singapore academic and former official:
The outcome was “a disaster” for Asean, said Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy at National University of Singapore….“This is clearly a warning signal to Asean that a new geopolitical struggle is breaking out between the US and China in south-east Asia,” he said.
Walter Russell Mead makes the point that:
It is more of a technical and procedural win for China than a substantive one. China’s neighbors will continue to work towards a multilateral approach on this issue, the United States will continue to support them, and China will still pay a diplomatic and political price for its stand.
China’s one party system probably does not create the right culture to build effective diplomacy, in spite of all the bromides to Sun Tsu and harmony.
Russia fired warning shots and then detained two Chinese fishing boats that had entered Russia’s EEZ. Pravda published a provocative but inaccurate piece claiming that the “sneaky Chinese” have territorial claims to nearly 20 countries and another Russian media report warns that China may go to war with Vietnam to shore up support.
Japan sent its ambassador back to China after instructing him “to inform Beijing accurately of Japan’s proposal to place the Senkaku Islands under state ownership”. On Tuesday the Global Times warned Japan about the Senkaku/Diaoyu issue and the dangers of another prime ministerial visit to the Yasukuni shrine:
A confrontation of public opinion may be more disastrous than hostilities between the two governments. Is Asia heading toward a dangerous public opinion showdown? If the Japanese government encourages such a trend within Japan, it may start a chain reaction. Room for negotiation in Asia will gradually be squeezed out.
China’s robust public opinion often imitates blundering words from Japan’s extreme public figures on the issues of the Diaoyu Islands and Yasukuni Shrine visits.
Asia is no longer in an era when governments alone can resolve public issues. Public opinion will be a prime factor shaping public policy. But if governments let public opinion off the leash, Asia will be ushered into an uncertain future when the possibility of war cannot be ruled out.
Contentious public opinion has diverted the attention of countries to territorial disputes. Development, also a core issue, has lost its appeal in public opinion. For now, diplomatic toughness between Asian countries is more or less just public posturing. But once a hostile situation is formed, it is difficult to reverse.
Japan mustn’t be shepherded by politicians such as Ishihara. Rationality must come back to Japanese politics, otherwise confrontation in Asia will spiral out of control.
Just bluster all around? Or potentially something much more dangerous, especially as China and Vietnam’s economies are sputtering?
The Variable Interest Entity (VIE) issue is back with the news that the SEC has opened a formal investigation of New Oriental Education. The announcement dropped EDU 34% on the day and dragged down most other US-listed China stocks, the majority of which also use VIE structures. There is no apparent accusation of fraudulent accounting, unlike with Ambow, another Chinese education company whose stock blew up last week on the resignation of the CFO and allegations of 2008 financial impropriety. Ambow and New Oriental are not sketchy reverse merger stocks; they had blue chip underwriters for their IPOs and PWC audits Ambow, Deloitte audits New Oriental.
Paul Gillis examined New Oriental’s problems in a post earlier today:
EDU announced the investigation in the same call as it announced its fourth quarter earnings. It said that Deloitte had not finished its audit of the accounts for the year ended May 31, 2012. Deloitte is in a real pickle here. They are already up to their eyeballs in trouble with the SEC, and if they sign off on these accounts they could be setting themselves up for more. Deloitte’s signoff, or refusal to do so, will be the first indication as to the seriousness of the SEC’s challenge to consolidation.
What are the risks that this spreads to other companies? It is tough to say, since we do not know specifically what the SEC is focused upon. If Deloitte refuses to sign off on the May 31 numbers, then I expect it spreads very quickly. If instead, it is a company specific issue (such as an allegation of lying to the SEC) then the problem may be contained to EDU.
It is starting to look like shorting almost anything China is 2012′s trading version of shooting fish in a barrel.
For fun, I posted to Twitter some pictures I took when I was in Beijing in 1989. I have a lot more, but the negatives are eluding me right now.
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Today’s links:
- South China Sea issue divides Asean – FT.com
- TODAYonline | World | ASEAN, neutral or neutered? Perfect neutrality is impossible, when some of its members are formal allies with one power, or receive large amounts of high-profile aid from another. But open and healthy dialogue about the fullest possible range of issues is critical for ASEAN-led dialogues to remain relevant.For this, each ASEAN member must be willing to keep the group’s interest as a whole in view, and not focus solely on its bilateral ties with China or America. Otherwise ASEAN will not only fail to be neutral, but be ineffective and indeed neutered.
- Iran arrests oil export decline as China buys more | Reuters Iran is set to arrest a slide in oil shipments in July as China increases imports to a record high to amount to more than half Iran’s crude exports, an industry report said.
- Gold-trading ring took in billions|Economy|chinadaily.com.cn Police in Central China’s Henan province rounded up 33 people suspected of illegal gold-futures trading in a case involving more than 5,000 investors and at least 380 billion yuan ($59.62 billion).
The suspects, who had been trading since October 2008, had never registered with industrial and commercial authorities, as required by the law, said Guo Congbin, director of Luoyang public security bureau, on Tuesday - China has territorial claims to nearly 20 countries – English pravda.ru They are silent about the “Iodo island” (the Chinese version is Suenchzhao. – Ed) in the East China Sea. The sneaky Chinese took the principle of dividing the Arctic as an example and now claim that the underwater ridge of this tiny piece of land is under close control of the Chinese. Since the Iodo is closer to Korea, in 2003 the Koreans built an uninhabitable marine research station there. From the standpoint of the international law, this rock in general should not be the subject of a debate.
- Tax revenue too high – People’s Daily Online However, despite their claim that they are abiding by the rules, local governments seem to be tightening the screw on businesses making it even harder for them to navigate the uncertainties…As the corporate sector holds the key to stable growth and job creation, a more predictable taxation system is a must.
- US stirs up conflict among Asian countries as part of rebalancing strategy – People’s Daily Online Stirring up tensions and conflict among Asian countries has been an important way for the Obama administration to implement its rebalancing strategy. Objectively speaking, there remain many unresolved territorial disputes in Asia, and certain neighboring countries are worried about and afraid of a rapidly rising China. U.S. policymakers have taken advantage of this situation to rebalance their national economic and security interests toward Asia.
- 赵紫阳大秘文集面世 学者料成禁书_多维新闻网 the collected works of zhao ziyang’s secretary bao tong go on sale in hong kong
- 赵紫阳在内蒙古-炎黄春秋 the yanhuang chunqiu essay on Zhao Ziyang–”Zhao Ziyang in Inner Mongolia”
- 炎黄春秋忆赵紫阳勤俭亲民_多维新闻网 latest issue of yanhuang chunqiu has essay about zhao ziyang
中国敢言杂志《炎黄春秋》2012年第七期再次刊登怀念前中共总书记赵紫阳的文章，称赞赵紫阳爱下乡与农牧民促膝谈心、不通知地方政府接待、睡会议室等故事，展现赵紫阳亲民、勤俭等形象。 - 中共五巨头齐现信访会 政法系统改革入深水区_多维新闻网 more from duowei on reforms to politics and law system
- South China Sea tensions deliberately stirred up with outside help – Globaltimes.cn The last major principle in the international law is promissory estoppel, which means y