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Wednesday, February 1, 2012
China's Workers Are Targeted as Its Overseas Reach Grows
Assailants in Egypt released 25 Chinese workers kidnapped on Tuesday, even as tensions appeared to rise between China and Sudan over Chinese held by rebels there.
The abductions underscored a hard truth for Beijing: As China has extended its investment and presence into the world's trouble spots, its people have become targets.
Confusion continued to surround the kidnapping over the weekend of 29 Chinese workers by Sudanese rebels. Sudanese officials on Monday said they had freed 14 of the hostages, but on Tuesday Beijing asserted—and Sudanese officials later confirmed—that the 29 remain in the hands of Sudan People's Liberation Movement-North.
China's surge to become the world's No. 2 economy in recent years has sharpened its appetite for oil, iron ore and other raw materials. That has put China in a number of places other investors might fear to tread, from Pakistan and Libya to Egypt and Sudan. As a result, governments of unstable countries have come to rely on Chinese capital and know-how, making companies and officials from China sought-after partners. For insurgents and criminal gangs, the Chinese can be sought-after targets, raising questions about how well Beijing protects its citizens abroad.
"Because Chinese tend to work in enclaves in Africa, you have by definition a concentrated group of targets," says Harry G. Broadman, chief economist at PricewaterhouseCoopers and an expert on China-Africa trade. "So if you're in the hostage taking business that facilitates things."
Corporate China's appetite for risky investments stems from a drive to break into global markets largely unpopulated by western rivals. As a result, previous incidents in which Chinese personnel were kidnapped, or killed, haven't slowed China's efforts to invest and secure resources in troubled areas.
"This will be seen—by the government anyway—as part of the learning curve and the price to be paid in 'going global,' " said Deborah Brautigam, a professor at American University and an expert on China's business interests in Africa.
Citing an official at the Chinese embassy in Cairo, China's state-run Xinhua news agency said on Wednesday that 25 Chinese cement-factory workers in Egypt's northern Sinai region had been released unharmed after being kidnapped on Tuesday on their way to work. No further information was immediately available. Xinhua didn't further identify the kidnappers, though the Associated Press reported they were an al Qaeda-inspired group demanding the release of militants imprisoned after a 2005 bombing. It was unclear which company employs the workers.
Deeply insular tribal communities, including Bedouins, have been engaged in running battles with Egyptian security forces since the summer of 2010. But violence in the sparsely populated peninsula spiked after police voided Egypt's streets during the revolution last year. Many Bedouin leaders say they were forced into the smuggling and kidnapping business by a lack of job opportunities.
Meanwhile, in Sudan, the kidnapping of the Chinese workers appeared to be leading to a diplomatic rift between the two close allies. In an unusual move, the Foreign Ministry summoned Sudan's charge d'affaires in Beijing, Omer Eisa Ahmed, and "lodged urgent representations" over the matter, according to Xinhua. Vice Foreign Minister Xie Hangsheng told Mr. Eisa that he was "deeply shocked" by the abductions and said "the Chinese side urged the Sudanese side to keep in mind the overall situation of bilateral friendship and cooperation," Xinhua said. Calls to Sudan's Embassy in Beijing went unanswered.
The two countries on Tuesday continue to disagree on basic facts surrounding the incident, including the number originally kidnapped on Saturday.
Rabie Abdelaty, a Sudan government spokesman, attributed the discrepancy of the reports to miscommunications with personnel in the field. Sudanese forces continued their efforts to free the hostages on Tuesday, he said, but the task may have become more difficult after the rebels moved deep into mountainous territory. "We shall continue with the military operations until we rescue all of them," he said.
Beijing appears to be frustrated with the Sudan rescue operation. Citing China's Foreign Ministry, Xinhua said on Tuesday that personnel from the ministry and from the State-owned Assets Supervision and Administration Commission—which oversees China's biggest state-owned enterprises—have departed for Sudan to assist with rescue efforts. The Foreign Ministry didn't respond to requests for comment.
Analyst estimates from 2010 put the number of Chinese citizens working in Sudan at about 24,000, including both Sudan and South Sudan.
Long a major destination for foreign investment, China has begun to spend its own money abroad. Outward flows of foreign direct investment totaled $68 billion in 2010, according to United Nations data, more than triple the figure of three years before. China's workers also have gone abroad: 847,000 Chinese workers officially worked in other countries in 2010, according to Ms. Brautigam, with ut oabout 229,964 Chinese workers in Africa.
The past year's events have illustrated China's growing presence abroad, especially in places that traditionally have had trouble attracting foreign investment. In February 2011, China evacuated more than 35,000 of its citizens from Libya amid a national rebellion. Xinhua said in October that one Chinese oil worker in Sudan had been shot and killed and another had been wounded by unidentified assailants. Also in October, 13 Chinese sailors on a cargo vessel were killed on Thailand's portion of the Mekong River
China's government only in very limited circumstances uses its police or military to protect citizens outside China's borders, despite growing calls at home to be more aggressive. Sudanese military officials said on Tuesday that the Chinese camp attacked over the weekend was lightly guarded, though that claim couldn't be independently verified. A senior Chinese diplomat in Ethiopia said China's Foreign Ministry typically issues travel advisories for trouble spots, much like the U.S. State Department, and it's up to the individual companies to heed them.
That situation may be changing. In Sudan, a dozen armed Chinese private security contractors have joined more than 1,000 Sudanese troops in the current rescue effort, according to Sudanese military officials.
A potential diplomatic rift between the countries could be painful for Khartoum, which relies on Beijing for crude purchases as well as political protection for Sudanese President Omar al-Bashir, who is wanted by the International Criminal Court for alleged crimes against humanity in the Darfur region. Mr. Bashir denies the accusations.
Additionally, China has been instrumental in brokering a peace between Sudan and the newly independent South Sudan, and has worked in recent months as a mediator in resolving an ongoing oil transit dispute between the countries.
The Chinese workers are being held by an armed wing of the Sudan People's Liberation Movement, which serves as a key opposition force to Mr. Bashir's rule. Khartoum claims the rebels receive orders and funds from South Sudan, where a leading political party is also called the Sudan People's Liberation Movement. The rebels say they are independent of South Sudan's government.
Of the two nations' oil fields, most are located in South Sudan but supplies must travel by pipeline to ports in the north for export.
Russia, China oppose 'forced regime change" in Syria
(Reuters) - China and Russia have reiterated their opposition to the use of force to resolve the crisis in Syria, where escalating violence has killed thousands of civilians who oppose President Bashar al-Assad.
Arab and Western states urged the U.N. Security Council on Tuesday at act swiftly on a resolution calling for Assad to step aside.
The United States strongly backed the call by the Arab League and Qatar for "rapid and decisive action", which came as Assad's government forces reasserted control of Damascus suburbs after beating back rebels at the gates of the capital.
"China is firmly opposed to the use of force to solve the Syrian problem and resolutely opposes pushing for forced regime change in Syria, as it violates the United Nations Charter and the basic norms guiding the practice of international relations," Xinhua quoted Chinese Ambassador to the United Nations Li Baodong as saying to the Security Council.
The brief news report from Xinhua did not give other details.
China, along with Russia, has resisted a Western push for a Security Council resolution condemning the Syrian government's 10-month crackdown on pro-reform protests.
Russian Foreign Minister Sergei Lavrov said they would not support any action that would be imposed on Syria and would avoid taking sides in an internal conflict.
"The international community unfortunately did take sides in Libya and we would never allow the Security Council to authorize anything similar to what happened in Libya," Lavrov said in an interview with the Australian Broadcasting Corporation.
"Yes, we condemn strongly the use of force by government forces against civilians, but we can condemn in the same strong way the activities of the armed extremist groups who attack government positions, who attack administration in various provinces of Syria, who attack a police station and who terrorize people telling them not to come to jobs, not to come to hospitals, not to come to shops."
"KILLING MACHINE STILL AT WORK"
China and Russia have prevented the Security Council from approving any military intervention in Syria and vetoed a Western-backed resolution against Assad's government.
Arab League Secretary-General Nabil Elaraby called on the council to take "rapid and decisive action" by approving the resolution. Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani warned that Syria's "killing machine is still at work."
"Do not let the Syrian people down in its plight," Elaraby said.
Syrian U.N. Ambassador Bashar Ja'afari rejected the suggestion his government was responsible for the crisis, and accused Western powers of dreaming of "the return of colonialism and hegemony" in the Middle East.
Elaraby said Arab nations wanted to avoid foreign military intervention in the Syrian crisis, which has killed more than 5,000 civilians according to U.N. Qatari leader Sheikh Hamad emphasized the same point and suggested the council should use economic leverage instead.
"We are not calling for a military intervention," Sheikh Hamad said. "We are advocating the exertion of a concrete economic pressure so that the Syrian regime might realize that it is imperative to meet the demands of its people."
Lavrov said the policy of isolation and seeking regime change risked igniting a "much bigger drama" in the Middle East.
"The people who are obsessed with removing regimes in the region, they should be really thinking about the broader picture. And I'm afraid that if this vigor to change regimes persists, we are going to witness a very bad situation much, much, much broader than just Syria, Libya, Egypt or any other single country."
Beijing, which generally avoids taking action in the domestic affairs of other nations, has played a low-key role in the turmoil that has swept the Middle East and North Africa.
But it has also moved swiftly to normalize ties with governments that have been overthrown by popular revolts, such as in Libya.
Clinton told the Security Council on Tuesday the rest of the world faced a choice to "stand with the people of Syria and the region or become complicit in the continuing violence there".
"The evidence is clear that Assad's forces are initiating nearly all the attacks that kill civilians, but as more citizens take up arms to resist the regime's brutality, violence is increasingly likely to spiral out of control," she said.
China announces $2.5B fund for small businesses
BEIJING (AP) — China announced more help Wednesday for its struggling private business sector, unveiling a $2.5 billion fund to finance new small businesses and promising tax breaks and more lending for entrepreneurs.
The Cabinet announcement was one of the first concrete measures announced by the government following repeated pledges to help entrepreneurs who have been squeezed by a slump in U.S. and European demand and curbs on bank lending.
Entrepreneurs generate most of China's new jobs and wealth, but thousands have been driven out of business. The survivors have slashed payrolls, raising concern among China's communist leaders about possible unrest.
A Cabinet statement issued after a meeting led by Premier Wen Jiabao, the country's top economic official, said small companies were essential to helping China keep growth fast and stable despite the global downturn.
The government will create a 15 billion yuan ($2.5 billion) fund "primarily to support the start-up of small and micro-enterprises," it said.
It gave no details but also promised a cut in taxes and fees and said small businesses will be guaranteed a portion of government purchases of goods and services.
Beijing ordered the state-owned banking industry to lend freely to help China's economy rebound from the 2008 global crisis. But it clamped down on credit to preventing overheating after annual economic growth soared above 10 percent in 2010.
Economic growth fell to a 2 1/2-year low of 8.9 percent in the final quarter of 2011.
Two surveys released Wednesday gave mixed signals on manufacturing activity in January but both showed it largely unchanged.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index rose 0.2 points to 50.5 from December's 50.3 on a 100-point scale on which numbers above 50 indicate growth.
HSBC Corp. said its HSBC China Manufacturing PMI was little changed at 48.8 from December's 48.7, suggesting a "moderate deterioration."
The credit clampdown battered entrepreneurs as banks channeled their limited lending to politically favored government companies. Entrepreneurs turned to high-interest underground lenders. Thousands went bankrupt, leaving employees and suppliers unpaid.
The government responded in October by ordering banks to step up lending to small businesses, though it is unclear whether credit has increased.
Wednesday's statement promised to create more small-scale financial institutions to serve entrepreneurs and rural companies.
Tide of Yuan Ebbs in Hong Kong
HONG KONG—More yuan deposits than in any previous month flowed out of Hong Kong in December as more importers paid their mainland suppliers in the currency, taking advantage of efforts by Beijing to make it easier to move funds back to China.
Bankers cited overseas investors' reduced interest in holding the Chinese currency, given reduced confidence the yuan will keep rising, as another reason for the outflow.
Local banks, which used to have more yuan deposits than they could use, are now looking for more yuan funds to take advantage of lending opportunities to Chinese companies amid tight credit conditions on the mainland. Their cost of borrowing in the currency is rising as a result.
The yuan market in Hong Kong, China's laboratory for liberalizing its currency, has taken off since Beijing relaxed rules for the use of yuan in the city in July 2010. Deposits in yuan grew briskly, fueled by expectations that the currency will appreciate rapidly.
In recent months, however, the growth in yuan deposits in Hong Kong has almost halted as investors shifted to the safe-haven U.S. dollar as markets gyrated in response to the euro-zone debt crisis and U.S. credit-rating downgrade in August.
By the end of December 2011, yuan funds parked in Hong Kong totaled 588.5 billion yuan ($93.2 billion), down 6.2% from 627.3 billion yuan, or renminbi, in November, according to figures the Hong Kong Monetary Authority released Tuesday.
"I still see some clients reducing their renminbi positions, and investors in general are unwilling to bet more money on the Chinese currency, as they expect only a moderate appreciation for the currency this year," said Thomas Poon, head of business planning and strategy for HSBC Holdings PLC in Hong Kong.
More companies are also moving yuan funds back to mainland China, taking advantage of initiatives announced by Chinese Vice Premier Li Keqiang in August to broaden the means for yuan to be repatriated to China, part of an effort to internationalize the currency.
As the pool of yuan in Hong Kong shrinks, local banks, eager to stock up on the currency in case of a surge in demand for loans, are competing harder for the available funds. Their cost to borrow offshore yuan is rising.
In January, five lenders issued eight certificates of deposits with maturities from six months to a year, raising a combined US$330 million worth of yuan funds, 50% more than the amount of cash tapped with the same tools in December, according to data provider Dealogic. That compares with US$95 million worth of similar issues in November, Dealogic data showed.
Certificate of deposits are securities that banks and companies issue to raise short-term cash.
One bank that has tapped the yuan money market at a higher cost is Bank of Communications Co.'s Hong Kong unit. In January, it paid an interest rate of 3% for a 240 million yuan 12-month yuan-denominated CD. In April last year, it paid 0.7% for a larger 12-month CD, according to Dealogic.
"As long as corporate customers' renminbi loan demand continues to mount, banks' push for liquidity in CNH (offshore yuan) will remain in place in the long run," said Tommy Ong, head of wealth-management solutions at DBS Group Holdings Ltd.'s Hong Kong unit.
Hong Kong's yuan lending has started to pick up in the past few months. Outstanding yuan loans in Hong Kong ballooned to 30.8 billion yuan by the end of last year from 2 billion yuan early last year, according to the HKMA.
China to invest in agriculture innovation to boost food security
(Reuters) - China said on Wednesday it would boost agriculture innovation in an effort to increase food output, signaling that the world's most populous country is trying to tackle outdated farm and food infrastructure to feed its people.
China accounts for a fifth of the world's population with less than 9 percent of its arable land, and the cabinet suggested in a document that China's leaders were aiming to get serious about technology to ensure long-term food supplies.
The State Council, or cabinet, said in the first policy document of the year it would increase investment and subsidies for the agricultural technology sector this year to stabilize grain production, state media reported.
Technological innovation in the sector would "improve land yield, resource efficiency and labor productivity," the official Xinhua news agency said.
The No. 1 Document, as it is called, has for the past nine years focused on rural issues, including agriculture, water conservation, farmers' income, and land transfer issues.
The State Council said in this year's paper the government would encourage research focusing on areas including bio-technology, seed production and effective use of farmland, Xinhua reported.
It also said the government would seek to push banks to increase lending to rural areas and keep prices of agricultural commodities at "a reasonable level."
China has been battling persistent consumer inflation, which was largely driven by food prices, and hit a peak in July of 6.5 percent.
Agriculture experts had expected the State Council to set guidelines on seed cultivation and on implementing a program of promoting the application of genetically modified technology that was introduced in 2008.
The central government estimates that China's national grain consumption will reach 572.5 million tonnes by 2020. Although China is largely self sufficient in wheat, it is not in soybeans and corn.
In 2010, China returned to importing corn in earnest after years of blocking foreign grain, buying a record 1.57 million tonnes, up 18 times from the previous year because domestic production couldn't keep up with demand.
Some analysts say China's agricultural production growth lags behind the country's overall economic growth.
The country is expected to triple corn purchases this year, and rice imports are also expected to rise.
Tuesday, January 31, 2012
Global "great power politics" returns to Mideast
(Reuters) - With Russia sending warships to discourage foreign intervention in Syria, and China drawn more deeply into Iran's confrontation with the West, "great power" politics is swiftly returning to the Middle East.
After Russia pulled back from the region at the end of the Cold War, the United States and its Western allies faced few external rivals in attempts to influence events. But as the US withdraws from Iraq, emerging economic powers reshape the globe and are themselves sucked ever deeper into the Gulf by their energy needs, that era seems over.
"What we are seeing is the U.S. losing its ability to shape events in the region, even though it remains by far the pre-eminent military power," says Waleed Hazbun, director of the Centre for Arab and Middle Eastern Studies at the American University in Beirut.
"You're seeing others moving in to fill the gap."
In some ways, experts say, there are echoes of 19th and 20th century scrambles for resources, territory and influence.
"Bottom line: there will be more players in the sandbox," says Hayat Alvi, lecturer in Middle Eastern studies at the US Naval War College. "The Middle East has always been the venue for the "Great Game.".. Rising powers will see opportunities and advantages in engaging in (that), just like the colonial powers."
Whereas Moscow and Beijing remained largely on the diplomatic sidelines for the 1991 and 2003 Iraq wars and even last year's Libya campaign, they increasingly demand their voices are heard.
Both have signaled a clear intention to prevent any "regime change" intervention in Syria; but Russia's deployment of its flagship aircraft carrier and escorts to Syria's port of Tarsus this month drew a starker than usual line in the sand.
Whilst some Russian officials talked down the importance of the visit, saying it was preplanned, others said it was intended as a signal. The warships have since moved on, however, and as violence continues to escalate, Moscow is finding itself under ever greater pressure to abandon its one-time ally.
Meanwhile, the success of U.S. and EU sanctions against Iran will be almost entirely dependent on the extent to which China joins -- with growing signs Beijing views Tehran as a useful tool to divert US military force from Southeast Asia. India, too, looks reluctant to play along with the wider western strategy of attempting to strangle Tehran economically to push it from its nuclear program and is also seen as a rising regional player.
There are stark differences to the colonial era, however.
Outside players must contend with increasingly assertive local powers, particularly Turkey, Saudi Arabia and Iran itself, keen to fill the gap left by a U.S. pullback. To make matters more complex, the "Arab Spring" overturned long-held assumptions of stability and the control governments can exert on events.
"Things are becoming less manageable as the region degenerates into deepening socio-economic malaise," says Asher Susser, professor of Middle Eastern politics at Tel Aviv University, "Local trends are forcing external powers to pay attention and not vice versa."
GLOBAL PRIORITIES
Nevertheless, the more muscular regional approach of Moscow and Beijing in particular appears already increasingly tied to their wider global agendas.
Russia's support for Syria's Bashar al-Assad is seen largely as a move to defend its Cold War-era foothold in the country as well as block the road to future Libya-style intervention. With presidential elections due later this year, Prime Minister Vladimir Putin is seen keen to show himself facing down the West and making his mark beyond Russia's borders.
With both Moscow and Beijing facing an uptick in protest on their own territory in the last year, neither has any desire to watch another autocratic leader dragged from office. If the Kremlin allows passage of an Arab League proposal to the U.N. Security Council for Assad to yield power, it will do so only with great reservations and provision excluding military force.
With its own colossal energy reserves, Moscow has little need to keep the region's energy states on side. China's dependence on Middle Eastern oil and gas, however, is expected to rise further in the years to come, perhaps drawing Beijing ever deeper into its conflicts and politics whether it wants to be or not.
If the United States succeeds in its ambition to become more energy self-sufficient with new technology and greater domestic resource exploitation and pulls back from the region, some believe China could even become the pre-eminent external power in the Middle East -- perhaps in a growing rivalry with India, also pulled in by its energy needs.
In the shorter term, there are clear signs the face-off over Iran's nuclear program may also be tied into a wider growing geopolitical rivalry with the West. With Beijing increasingly concerned over the buildup of U.S. forces in its immediate neighborhood, some voices argue Iran plays a useful role in keeping US forces deployed elsewhere.
"The US strategic adjustment highlights the importance of Iran to China," said an editorial in China's English-language Communist Party-published "Global Times" on January 6 after Washington unveiled its new Asia-facing defense strategy. "Iran's existence and its stance form a strong check against the U.S. China should not treat Iran following US cultural, social and political values."
Chinese officials might be willing to use sanctions to negotiate better oil prices from Iran, but there seems relatively little prospect that they will stop buying even if Tehran's rival Saudi Arabia makes up the difference in output.
"Each time the West tightens the leash, Beijing quietly avails itself of the slack," says Thomas Barnett, a former strategist for the U.S. Navy and now chief analyst at political risk consultancy Wikstrat. "The more explicitly Washington bases its global strategic military posture on the perceived Chinese threat, the more Beijing will welcome - and even overtly encourage - these diversions."
REGION TIRED OF US DOMINANCE?
In Washington, Tel Aviv and elsewhere, there are openly discussed worries a more assertive China and Russia could prove "drivers of instability," extending a lifeline to regimes the West would rather see isolated and weakened.
For Israel in particular -- long a beneficiary of U.S. power in the region and already somewhat struggling to manage relationships with a more assertive Turkey and post-revolution Egypt less influenced by Washington -- that could prove an awkward dynamic.
Moscow and Beijing, however, say their aim is simply to secure peace and avoid conflict -- particularly important to a China desperate to maintain the flow of Gulf oil and avoid the kind of global economic shock a regional war would produce.
The West's actions in Iraq in particular, officials from both powers argue, did little to improve regional stability. A "pre-emptive" war in the Gulf, they say, could ultimately prove just as dangerous as a nuclear armed Iran.
With the "Arab Spring" in part a rejection of a US policy of backing autocratic "client states," some even in the US believe such arguments could play well amongst Middle East populations.
"The regional public is tired of the same superpower exerting its will on the region," says Alvi at the US Naval War College. "They might just set out the welcome mat to the Chinese."
But others say it is far too soon to write off the United States, at least as long as its military remains by far the most potent force in the area and the primary guarantor of security for many of its states.
"The entire issue of American decline -- globally and in the Middle East particularly -- is overblown and exaggerated," said Robert Satloff, executive director of the Washington Institute for Near East Policy. "The day I see Middle Easterners lining up outside the Chinese embassy for visas, sending their kids to Chinese universities or preferring that Chinese aircraft carriers -- and drones and missile defense systems etc -- protect their territory and assets, then we can have a serious discussion about decline."
Taiwan President Names Chen Premier to Tackle Slowest Growth in Two Years
Taiwan President Ma Ying-jeou named Sean Chen as premier, choosing an official who oversaw the island’s markets during the 2008 financial crisis to revive growth in an economy expanding at the slowest pace in two years.
Chen announced later yesterday that Christina Liu, head of the Council for Economic Planning and Development, would be finance minister. The appointments were part of a leadership transition after Jan. 14 elections saw Ma win a second term and the ruling Kuomintang party keep its majority in parliament.
Appointing Chen suggests that Ma’s main priorities in his next four-year term will be restoring growth and helping Taiwan’s export-driven economy weather the global economic downturn, said Ellen Shen, a Taipei-based fund manager at Union Securities Investment Trust Co. Taiwan’s economy expanded 1.9 percent in the fourth quarter, the slowest pace since the third quarter of 2009, the statistics bureau said yesterday.
The Taiex Index gained 1.5 percent to close at 7,517.08, the highest since Nov. 14, before Chen’s appointment was announced. The index has risen 5.8 percent since Taiwan’s Liberty Times reported on Jan. 16 that Ma may appoint Chen his premier.
“The global economic slowdown is the biggest challenge facing the new Cabinet,” Shen said. “Chen should be able to handle it, given his background in economy and finance.”
Slower Growth
The government’s challenges became clear after the statistics bureau released yesterday’s economic data, which showed the economy had entered a technical recession. The economy contracted 0.25 percent last quarter from the prior three months, shrinking for a second successive quarter, yesterday’s report showed.
The 1.9 percent growth rate for the last three months of 2011 was the slowest since a 1.41 percent contraction in the third quarter of 2009, according to data compiled by Bloomberg. The median estimate of nine economists in a Bloomberg News survey was for a 2.8 percent expansion.
Europe’s sovereign-debt crisis is hurting Asian exporters from Singapore to South Korea, and policy makers have either cut borrowing costs or refrained from further increases in recent meetings.
“Faltering external demand proved to be a considerable drag on investment, and hence GDP growth,” Raymond Yeung, a senior economist in Hong Kong at Australia & New Zealand Banking Group Ltd., said after the report. “But I don’t think the trend will continue in 2012. Political uncertainties have waned” after the Kuomintang’s re-election.
Victory Signal
Ma saw his victory as a signal that voters don’t want major policy or leadership changes in his second term, according to government spokesman Philip Yang.
“There’s continuity in the government,” Yang said. “Taiwan weathered the financial tsunami and Europe debt crisis better than a lot countries, recovering in a very short period of time.”
Chen has served as deputy finance minister and headed the Financial Supervisory Commission. Liu was chief economist at Chinatrust Financial Holding Co. before she became minister of the Council for Economic Planning and Development. She was also a member of the Cabinet’s tax reform committee between 2008 and 2009.
Chen also announced that Jiang Yi-Huah, the current interior minister, will be promoted to vice premier.
Campaign Promises
Ma won re-election after making campaign promises to push ahead with his policy of closer ties with China. He restored air, sea and postal links for the first time in six decades during his first term and signed trade agreements with the mainland.
The new parliament will take office today, while Ma and Vice President-elect Wu Den-yih, the outgoing premier, will take office on May 20.
Overseas sales, which are equivalent to about two-thirds of Taiwan’s economy, rose at the slowest pace in 26 months in December. Export orders, an indication of shipments in the next one to three months, fell last month for the first time since 2009 as demand from China and Japan declined.
Slowing overseas demand is already affecting Taiwan’s manufacturers and the nation’s job market.
HTC Corp., Asia’s second-largest smartphone maker, this month reported its first quarterly profit decline in two years. Nanya Technology Corp. and Inotera Memories Inc., Taiwan’s second- and third-largest memory-chip makers, reported their eighth quarter of losses as slowing demand for personal computers pushed down prices.
Heartland Return for Chinese Leader
MUSCATINE, Iowa—This small city on the Mississippi River has long boasted that Mark Twain briefly called it home in 1854. Now, residents realize they have a more unusual bragging point: Muscatine played a minor but memorable role in the ascent of Xi Jinping, the man expected to become China's top leader this fall.
Twenty-seven years ago, Mr. Xi, then an up-and-coming official in a pig-farming region in China, led an animal-feed delegation to Iowa. He toured farms, visited a Rotary Club and watched a baseball game. He spent two nights in the split-level home of a Muscatine couple, sleeping amid the Star Trek toys on display in the bedroom of their two boys, who were away at college. It is believed to have been his first trip outside China.
On Feb. 15, one day after he visits the White House for the first time, Mr. Xi, now China's vice president, plans to return to Muscatine and share tea with the people he met in 1985. His trip back to the American heartland appears intended to showcase what makes him so different from China's current leader, Hu Jintao—a confident, personable style and easygoing familiarity with the U.S.
Chinese leaders have staged photo opportunities in the U.S. before. Deng Xiaoping donned a cowboy hat at a Texas rodeo in 1979. But none has ever made such a clear attempt to demonstrate a long personal connection to America.
Over the years, Mr. Xi, who is 58 years old, has made periodic trips to the U.S. His daughter attends Harvard. He has had regular dealings with U.S. officials and business leaders, including Henry Paulson, the former Treasury Secretary. When Vice President Joe Biden visited China last August, Mr. Xi accompanied him to the western province of Sichuan and shared dinner with him at a local restaurant.
China is on the cusp of a once-in-a-decade political change. In October or November, Mr. Hu and six other members of the nine-man Politburo Standing Committee, the top decision-making body, are set to retire. The Communist Party's next generation of leaders, led by Mr. Xi, will take over at a time of slowing growth for the world's second-largest economy and mounting public pressure to address a raft of social, economic and environmental problems.
Mr. Xi's personality and relative popularity have raised hopes in some quarters, both inside and outside of China, that he will resume the kind of reforms that marked the 1990s but ground to a halt in the past 10 years. The U.S., for its part, is eager to see whether his ascent to Communist Party chief and president will lead to changes in the combative diplomacy that has alarmed many of China's Asian neighbors in recent years and prompted the U.S. to focus more on the region in its military planning and diplomacy.
Mr. Xi is the most prominent member of a group known in China as "princelings"—the sons of well-known revolutionary leaders, many of whom grew up together. His father, Xi Zhongxun, helped lead Communist forces to victory, was purged in 1962, then was politically rehabilitated and helped oversee economic reforms before his death in 2002.
That background distinguishes Mr. Xi from the man he is expected to replace. Mr. Hu, whose father ran a tea shop, had to clamber up through party ranks. Once in power, Mr. Hu promoted and relied on people from a similar background, including current Vice Premier Li Keqiang, whom he favored as his successor.
Mr. Xi "is a key figure among princelings. His father was a very popular figure," says Zheng Yongnian, an expert on Chinese politics at the National University of Singapore."That makes him more confident, while at a personal level he's much more knowledgeable about the West. I think he's confident that he can consolidate power much faster than Hu did."
Mr. Xi will have a greater familiarity with the West than any of his predecessors, including Mr. Deng, who studied in France in the 1920s and made a landmark visit to the U.S. in 1979 after diplomatic relations were re-established. Mr. Hu, like Mr. Xi, made his first foreign trip in 1985, but it was to North Korea, and he didn't visit the U.S. until shortly before he took power in 2002.
Mr. Paulson, who last met Mr. Xi in December, describes him as a "strong, confident leader" with an easy manner, good communication skills and an understanding of the U.S. that has been growing since his first Iowa visit.
After meeting Mr. Xi for the third time last year, Henry Kissinger, the former U.S. Secretary of State, said: "He's more assertive than Hu Jintao. When he enters the room, you know there is a significant presence here."
Mr. Xi's father is renowned within the party as one of its most capable and outspoken early leaders. After helping lead Communist forces to victory, he served as vice premier until he was purged in 1962 for supporting the publication of a book deemed critical of Chairman Mao Zedong. After his rehabilitation in 1978, he proposed and supervised the establishment of China's first special economic zone, in the southern province of Guangdong—an important step in the nation's emergence as a manufacturing powerhouse.
The senior Mr. Xi was a relative political liberal, speaking out in defense of a reformist party leader sacked in 1987 and condemning the violent 1989 crackdown on Tiananmen Square protesters, according to some people close to the party elite. That put him out of favor once again.
His roller-coaster political career made for a turbulent upbringing for his children. Xi Jinping was born into the relative luxury of a party leaders' compound in Beijing. He was just nine years old when his father was placed under house arrest, which lasted for most of the next 16 years.
At age 15, Mr. Xi was among millions of Chinese students sent to work in the countryside during the Cultural Revolution. He was sent to the northern province of Shaanxi, where his father was famous for having helped to lead Communist partisans in the 1930s. "Everyone knew who his father was, so they treated him well," says one person who knew the family well in the 1970s.
Mr. Xi didn't return home for seven years. He lived for much of that time, according to state media, in a traditional cave dwelling in the village of Liangjiahe, where he dug ditches and explored ways to collect methane gas from animal waste.
In an interview with a state-run magazine in 1996, Mr. Xi said that during his youth he had "borne a lot more hardships than most people" because of his background. He told another reporter he was forced to denounce his own father, and had himself been jailed three times.
Nevertheless, he applied repeatedly to join the Communist Party while he was in the countryside, according to a 2003 essay by Mr. Xi. After being rejected nine times because of his father, he was accepted in 1974. His applications to the prestigious Tsinghua University in Beijing were rejected twice. He was accepted after his father arranged for a note to be sent to the university saying his political problems shouldn't affect his son's education.
By the time Mr. Xi graduated in 1979 with a degree in organic chemistry, his father was back in the party elite. Mr. Xi got a job as a personal secretary to one of his father's old comrades in arms, Geng Biao, a vice premier and defense minister. That uniformed job would provide Mr. Xi with enduring connections to the military—something both Mr. Hu and his predecessor, Jiang Zemin, lacked.
Mr. Xi shed his uniform in 1982 and took a job as deputy Communist Party chief of Zhengding county, a pig-farming region in the northern province of Hebei. That is when he first met Terry E. Branstad, the current governor of Iowa, who visited Hebei in 1984 as part of a "sister-states" exchange. The following year, Mr. Xi led the animal-feed delegation to Iowa.
Sarah Lande of Muscatine worked for the exchange organization back then and hosted the delegation for dinner one evening. "Some people in town were wondering why we were hosting people from a Communist country," she recalls. At the dinner, she says, "we were inquiring about China, and they were asking lots of questions, too. I remember hogs were very important to them as they needed more lean meat at the time."
Mr. Xi's group came to inspect the greenhouse where vegetable farmer Tom Hoopes was growing seedlings for sweet potatoes. "I kind of explained to them what I was doing," Mr. Hoopes recalls. "Golly, I really don't remember much more than that."
Mr. Xi spent two nights at the four-bedroom home of Eleanor and Thomas Dvorchak. Ms. Dvorchak, who now lives in Florida, recalls that in the morning she would serve him tea—not coffee—before a car would pick him up for his daily rounds. When his translator was absent, she says, they struggled to communicate.
She says Mr. Xi gave them a bottle of Chinese spirits when he left. "Whoa, it was tough," she recalls of the drink.
Back in China, Mr. Xi rose steadily in the party. The Hebei job led to one as deputy mayor of the eastern port of Xiamen, working for another protégé of his father. After that came powerful posts leading Fujian and Zhejiang, two of China's most economically dynamic provinces, where he proved himself as a capable and business-friendly administrator.
While Mr. Hu was handpicked by Mr. Deng as a future leader 10 years before he took power, Mr. Xi emerged unexpectedly as heir apparent in 2007 through an informal vote within the party's upper ranks.
When Mr. Xi assumes the top leadership posts, he will be the first among equals on the standing committee. His main duties will be to maintain unity and forge consensus among its members.
It remains to be seen whether Mr. Xi will be more assertive than Mr. Hu in handling bureaucratic and business interests that oppose reform, or the hawkish generals who have shaped China's diplomacy in recent years.
Many Chinese regard him as a more likable figure than Mr. Hu, thanks in part to his easy smile and glamorous wife—famous folk singer Peng Liyuan—and common touch that some friends attribute to his years in the countryside.
Mr. Xi's visit to Iowa years ago apparently made a lasting impression on him. John Tkacik, a former U.S. diplomat, recalls Mr. Xi telling him in 1991 that he also had visited Oregon and California, but most enjoyed his home stay in Muscatine.
When Mr. Branstad, the Iowa governor, met Mr. Xi last year on a trade mission to China, the vice president immediately recalled his visit to Iowa, the governor said in an interview.
"The first thing he said was: 'I met you in your office in the state capital on April 26, 1985,'" Mr. Branstad said. "Then he named some of the people he met."
Late last year, Mr. Branstad wrote to Mr. Xi to invite him back to Iowa, suggesting a reunion with his 1985 hosts.
About two weeks ago, the Chinese consulate in Chicago informed the governor they were considering the invitation. A few days later, the Chinese ambassador in Washington flew to Iowa to help with arrangements. The Chinese Embassy in Washington and the Foreign Ministry in Beijing didn't respond to requests for comment.
Mr. Xi's return to Iowa is partly diplomatic theater. He will be the most senior foreign leader to visit the state since Nikita Khrushchev came to inspect American agriculture in 1959 on the first visit to the U.S. by a Soviet leader. Mr. Xi's trip is an opportunity to demonstrate the benefits of trading with China, which bought $627 million of Iowan exports in 2010, according to the U.S.-China Business Council.
Few people in Muscatine had any inkling of what had become of their long-ago visitor until they started getting calls about a reunion. Mr. Hoopes, the now-retired vegetable farmer, says that when he found out that one of the delegation was about to become China's top leader, it "just blew my mind."
Ms. Lande had traveled to China four times, but she hadn't followed Mr. Xi's career. She says she was surprised when the governor called her two weeks ago to tell her she might have a visitor.
Since then, she has been helping with preparations, including tracking down the people Mr. Xi met. She says the Chinese advance party had requested a photograph of the bedroom in which he slept. The Dvorchaks plan to travel up from Florida for his visit.
The reunion, Ms. Lande says, will be an informal affair, probably a teatime reception. "He only wants to meet with his old friends," she says.
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