China to crack down on scary stories

China has launched a crackdown on scary children's stories including the popular Japanese "Death Note" comic book series, state media said Saturday.
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Authorities are ordered to seize "illegal terrifying publications" from vendors ahead of China's Children's Day on June 1, the Xinhua News Agency and China Daily newspaper reported.

Communist authorities regularly launch sweeps to seize publications deemed pornographic or socially harmful. They are especially concerned about the influence of foreign books, movies and other pop culture on Chinese children.

One target in the latest crackdown is "Death Note," a Japanese series of comic books about a notebook that can kill people whose names are written in it.

The story "misleads innocent children and distorts their mind and spirit," said Wang Song, an official of the National Anti-piracy and Anti-pornography Working Committee, quoted by the China Daily.

"Death Note" publications have been seized in Shanghai and areas across central and southern China, the newspaper said.

China presses U.S. on food regulations

China appeared to go on the defensive Friday in response to rising concern about the safety of its food and drug exports, asking the United States to clarify its regulations on the use of antibiotics that turned up in Chinese catfish in three southern states.
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In a notice on its Web site, the General Administration of Quality Supervision, Inspection and Quarantine — China's main food safety regulator — said it had contacted its American counterpart about the use of fluoroquinolones.

In its statement, the quality inspection administration asked Washington to "deal with the problem in an objective, scientific and equitable way."

It also warned that the U.S. should not violate World Trade Organization's rules, which give countries the right to ensure food safety for consumers but not to manipulate health standards to protect domestic producers.

The Food and Drug Administration has not responded, the Chinese regulator said.

Mississippi, Alabama and Louisiana recently banned catfish from China after tests found traces of ciprofloxacin and enrofloxacin, both in the fluoroquinolone family. The antibiotics are used to treat tuberculosis, pneumonia and other illnesses in people and prevent infections in animals.

The Chinese regulator said the drugs are allowed in China, the EU and Japan — and said the FDA allows their use if below concentration levels of five parts per billion.

Officials from the Chinese agency refused to comment further on their statement, which mentioned only Mississippi and Alabama.

According to the FDA, fluoroquinolones have never been approved for use in aquaculture and any amount detected in fish tissue deems the product adulterated. Regulations against the antibiotics in food are intended to prevent bacteria from developing resistance to the drugs.

China is worried about the damage to consumer confidence in its products by a series of scandals involving tainted Chinese exports. Many of the tainted goods are produced by farmers and small factories, and a ban on their trade by importing nations would threaten jobs in a largely rural country with already high unemployment.

On Thursday, U.S. officials asked their Chinese counterparts to increase oversight of food and drug exports. The FDA also said it was stopping all imports of Chinese toothpaste to test for a deadly chemical reportedly found in tubes sold in Australia, the Dominican Republic and Panama.

The FDA also warned consumers not to buy or eat imported fish from China labeled as monkfish because it might actually be pufferfish, which contains a potentially deadly toxin called tetrodotoxin. Eating pufferfish that contains the potent toxin could result in serious illness or death, the FDA said.

Dozens of people have died in Panama after taking medicine contaminated with a chemical traced to a Chinese company. China also was the source of the toxic chemical in pet food that has killed an unknown number dogs and cats in the United States.

And China's former top drug regulator went on trial earlier this month accused of taking bribes to approve untested medicine, including an antibiotic that killed at least 10 patients last year before it was taken off the market.

The Chinese leadership has pledged to strengthen its safety controls.

"The Chinese government attaches great importance to food and drug safety. We are making efforts to improve the monitoring system of the safety of food and drug," Chinese Foreign Ministry spokeswoman Jiang Yu said at a regular briefing Thursday.

China Tries to Turn Down the Heat

A move to widen the currency trading band and hike interest and reserve rates is designed to cool the raging economy

China's $2.6 trillion economy has been throwing off alarming heat flashes for months now. Ordinary Chinese have yanked some $9 billion in bank savings this year to join the merriment at the Shanghai Stock Exchange, where the composite index has shot up about 50% so far, following a 130% gain in 2006. The smaller Shenzhen bourse is up roughly 100%.

It's party time on the mainland as money supply and loan growth rollick along at double-digit rates. Meanwhile, the country's export sector is smoking, and China is likely to make economic history for a developing economy when it reports a current account surplus this year approaching $400 billion, a mind-blowing number. China's gross domestic product also blew by market estimates and grew at an 11.1% annual rate during the first quarter.

"Do something—anything—"to cool things off has been near universal advice from economists and policymakers abroad. China responded after the markets closed on May 18 with a three-pronged approach to wrestle this beast to the ground. Most important, it widened from 0.3% to 0.5% the trading band within which the yuan is allowed to fluctuate on a daily basis against the dollar.

Skeptical China Watchers

The People's Bank of China also, as expected, raised interest rates. A key one-year loan benchmark goes up to 6.57% (from 6.39%), and the one-year deposit will be nudged up to 3.06% from 2.79%.

This makes the fourth round of credit tightening the central bank has executed since the late spring of 2006. It has also repeatedly raised the reserve requirements of cash that mainland lenders must park with the central bank.

In a statement posted on its Web site, the central bank described the move as a natural progression in the country's long-term goal of liberalizing its foreign currency market. "People's Bank has enacted a series of policies to develop the foreign currency market," the statement said. "At the same time, the Chinese economy has been developing rapidly and stably, financial reform has also made improvements."

Well, that's one take. The timing of these moves will hardly go unnoticed to skeptical China watchers. After all, Chinese Vice-Premier Wu Yi is leading a trade diplomatic mission to Washington beginning May 22. She'll be meeting with U.S. Treasury Secretary Henry Paulson to discuss trade imbalances, currency policy, intellectual property rights protection, and other issues that have turned relations acrimonious on economic matters.

Fear of a Bubble

"The increase in the trading band is obviously directed at the U.S.," says Andy Rothman in Shanghai, the China macro strategist at CLSA Asia Pacific Markets. However, "the move is so small that it won't generate any goodwill in Washington." The goal, he says, is not so much to slow down the economy but prevent it from overheating.

Yet there is more to the move than pre-summit theatrics. Beijing officialdom is genuinely anxious about the social blowback from a stock market meltdown (there are 70 million traders in China) or worse, a boom-then-bust economic scenario. Premier Wen Jiabao and PBOC Governor Zhou Xiaochuan have both expressed public concern about a potential equity market bubble in recent days.

In fact, Standard Chartered Senior Economist Stephen Green thinks the primary intent of the moves is to defuse the stock markets. And in a research note circulated soon after the PBOC announcement, he told clients: "We expect the market to fall next week—and if it proves resistant, Beijing will continue with a thousand small cuts until it does."

Big Incentives Remain

So will these moves do much to cool off China's hyper-growth? They certainly show that Beijing is serious and willing to take action. However, China's interest rates are still awfully low if you factor in inflation running about 3%. That means real interest rates are a bit over 3% in an economy still setting land-speed records.

On top of that, there is so much excess cash in China from export earnings, speculative inflows into real estate, and foreign direct investment that banks will still have a big incentive to lend and companies to borrow. Individual stock investors will still be tempted to bet on stocks, given the obvious math that a 3% inflation rate and 3.06% return on bank deposits is not the way to get rich in a hurry.

The widening of the trading band—though a step in the right direction—isn't going to have much impact on China's exploding trade numbers. On May 11, Green forecast that China's trade surplus would rocket up to $370 billion this year, vs. $217 billion in 2006.

Meanwhile the current account surplus, the widest measure of trade and capital flows, would hit $400 billion. That would compare with $249 billion last year.

Starting Somewhere

The reality is that the rest of the world will have to tolerate some large trade numbers during the rest of this decade and at the same time persuade Chinese leaders to stay on a course of phased-in reform of currency policy, full interest rate liberalization, and the lifting of capital controls. Beijing also has to shore up its social welfare programs so ordinary Chinese can feel more secure about their retirement and health care and perhaps spend more.

In the great scheme of things, today's moves were baby steps in that direction. Think of them as a minor scene in a marathon multi-act play. This economic drama is by no means finished.

China Society Issues (Part two): Wasteful practices squander China's wealth

China has been described as the largest poor country in the world, and at the same time, the most wasteful. This is true. The evidence is everywhere: people showing off their wealth, competing for material goods and wasting resources. Plates and plates of food are dumped without even being touched.

The country's expenditures are so out of balance that it has become a "super waster." In 2004, funds spent on vehicles for public officials surpassed 408 billion yuan (US$52.7 billion); 300 billion yuan (US$38.7 billion) was spent on eating and drinking; and another 300 billion yuan went for cadres' overseas travel expenses. These three categories alone consumed more than one-third of the national budget.

In Guangdong province, one official banquet reportedly cost 50,000 yuan ($6,400), not counting the free gifts which included Rolex watches for the guests. In the provincial capital of Guangzhou, the city government owns 172 vehicles for the use of 177 officials; the city's Science and Technology Bureau spends 158 million yuan ($20 million) per day; and its Industry and Commerce Bureau paid as much as 25,000 yuan ($3,200) for each of its desktop computers, according to a report in the New Express News.

The basic standard of cars provided for public officials include the Hyundai Sonata, Volkswagen Jetta, Honda Fit and even the Toyota Land Cruiser. Even well-to-do citizens cannot afford this type of car, which are paid for with public funds but treated as private property.

The fourth burden on the public purse is homes for officials. In Zhunger County, Inner Mongolia, a state-designated poverty-stricken area, the local government built nine villas for its leading cadres. In Puyang County of Henan province, both county government leaders and the heads of state-owned enterprises used public money to build mansions, the largest with an area of 600 square meters (6,400 square feet).

Even more serious is the wasteful approach to construction projects. There are huge numbers of needless "achievement projects" -- built to boost the prestige of local governments -- as well as projects that are suspended, postponed, or built according to the wrong specifications.

Chinese buildings last an average of only 30 years. By repeatedly building, tearing down and building again, China has become a world leader in construction waste. As an example of such folly, on February 12th, an 18-year-old stadium in Shenyang, Liaoning province was demolished to make way for a shopping mall. Neither the stadium's fame -- as the place where China won its first and only World Cup qualification, in 2001 -- nor the objections of football fans could save it.

There are innumerable examples of "black holes" in state investments. To mention just a few, the city of Xiang Fan in Hubei province invested 4 billion yuan ($500 million) in a chemical industry project without any outcome. The government of Heilongjiang province invested 560 million yuan ($72 million) in the Mudanjiang Gas Project, but due to irrational construction and chaotic management, the project had to be suspended. In Jilin province, the government invested several hundred million yuan in a chemical project, but after it was completed, its products could not be sold and 40,000 workers were laid off.

The Chinese people are among the world's most diligent. We are diligent, but not affluent. Waste has become the No.1 killer of China's wealth.

In order to curb this extreme wastefulness, I suggest revising the article on power abuse in the criminal law to make it applicable to heads of state-owned enterprises. Also, I suggest that an article prohibiting the waste of public funds be written into the criminal law. There should be detailed regulations proscribing the abuse of power and the wastage of public funds.

To curb waste, citizens must have avenues through which to report and expose it, including the media. The government needs laws and procedures protecting and encouraging ordinary people to report to the authorities concerning the misuse of public funds. Any citizen who has evidence of abuse of power, corruption, or misuse of public funds should be able to sue the guilty parties.

An accountability system should be established. Information concerning the expenditures of public bodies, including state-owned enterprises, should be made available to citizens through the Internet. Only the institution of procedures to ensure transparency and accountability can put a stop to this serious problem.