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Vol. 1, No. 1 - February 12, 2014
Inside This Issue
China Forces New York Times Reporter to Leave Country
China's Lenovo Group Makes Deals to Buy IBM & Motorola
China's Loan Sharks Circle in Murky Shadow Bank Waters
Chinese Government Releasing PM 2.5 Data
China Sentences Legal Activist to Four Years in Prison
Go Figure!: An Intellectual Property Mouse
 
China Forces New York Times Reporter to Leave Country
Summary   Our Opinion
     

A New York Times reporter stationed in Beijing was forced to depart the country because the Chinese government refused to renew his visa. Other journalists working in China have recently encountered similar visa issues after publishing articles related to the wealth and corruption in the Communist Party’s elite. Some have argued that the U.S. should respond by kicking out Chinese journalists from the U.S.

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Topics:
• Media
• Corruption

 

"This case is just the most recent development in a long-brewing battle between the Chinese government and the foreign news organizations that dare to broach topics the Party would rather leave unaddressed. Expelling Chinese journalists from the U.S. could do more harm than good. Such action would be subject to various interpretations abroad. And it would heighten tensions between the two countries at the center of the world’s most important bilateral relationship. The better solution could be addressing this harassment in public forums, maintaining a public tally the violations, and making the harassment issue part of every bilateral discussion. In terms of the effect on coverage, although working on the ground generally provides the best material, the quality of news in China may suffer due to self-censorship. This may cause American journalism organizations to ask whether it is better to tell the hard-hitting stories from a distance rather than the soft-pedaled ones from within."

EM

Emily Metzgar
Senior Associate & Assistant Professor
Department of Journalism
Indiana University Bloomington
emetzgar@indiana.edu

 
China's Lenovo Group Makes Deals to Buy IBM & Motorola
Summary     Our Opinion
     

China’s Lenovo Group has announced its plan to buy IBM’s low-end server and Motorola. U.S. officials have been under discussion about whether or not this move could disrupt U.S. national security in areas such as industrial spying. The Committee on Foreign Investment in the United States (CFIUS) is reviewing this deal before it allows Lenovo to make the purchase.

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Topics:
Technology
M&A

 

"The U.S. government is unlikely to stop the sale of Motorola Mobility as Google is making an effort to recover some of its financial losses in its acquisition of Motorola Mobility. On the other hand, IBM is getting out of the equipment business to focus on services, which reflects a broader trend of U.S. firms thinking that equipment manufacturing is too difficult because of the competition from Asian firms. However, we are starting to see some high-end manufacturing return to the U.S. because of quality control problems abroad."

JH

Jeffrey Hart
Senior Associate & Professor Emeritus
Department of Political Science
Indiana University Bloomington
hartj@indiana.edu

 
China's Loan Sharks Circle in Murky Shadow Bank Waters
Summary     Our Opinion
     

China has been trying to crack down on loan sharks who hand out illegal, underground loans at high interest rates to vulnerable borrowers who are unable to access normal lending. Some interest rates have been as high as 100 percent or more annually. Some argue that this underground debt is becoming one of the biggest banking risks, making up 8% of China’s $9.4 trillion economy.

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Topics:
• Finance

 

"The shadow-banking sector at once fulfills an important role in and presents a large threat to China’s economy. Risk on its own is not a threat to financial markets; instead, it can be an important driver of economic growth. It is true that some businesses may fail, leading to defaults, but discovering the next Alibaba more than compensates for many failed ventures. On the other hand, defaults on these loans could have large effects on China’s economy. The activities of these banks are not transparent and the penalty for not repaying investors is unclear. As a result, these banks may have taken too much risk, not required sufficient collateral, etc. What may be unique to China is a speculation that these banks not only rely on individual investors, but also use government loans meant for safer investments. Defaults on these loans would compromise households' savings in state banks. If the government cannot secure these accounts, defaults could quickly grow into a crisis."

AM

Amanda Michaud
Senior Associate & Assistant Professor
Department of Economics
Indiana University Bloomington
ammichau@indiana.edu

 
Chinese Government Releasing PM 2.5 Data
Summary     Our Opinion
     

The Chinese government is releasing PM 2.5 data, which is an unprecedented degree of disclosure and a step towards government transparency. Since Jan. 1 2014, the government has required 15,000 factories to publicly report details on their air emissions and water discharges in real time.

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Topics:
• The Environment
• Transparency

 

"If the Party stays on this course, it will be a victory beyond simply cleaning up the air - it will help repair the perceived rift that has emerged between the Party and the people of China. In the eyes of the nation's leaders, the credibility of the Party is the nation's single most important asset. The disparity between the air pollution readings released by the U.S. Embassy and the readings released by the Chinese government has challenged such credibility. Another reason for the limited transparency was to protect coal producers, oil refiners, and manufacturers who, as a bloc, have prevented meaningful controls from taking effect. The government eventually released the data because the interests of those must be subordinate to the interests of the Party as a whole, creating an alliance between the Party and the people of China against those interest groups."

DW

David Wolf
Corporate Board Member &
Managing Director
Global China Practice
Allison+Partners
david.wolf@allisonpr.com

 
China Sentences Legal Activist to Four Years in Prison
Summary     Our Opinion
     

Xu Zhiyong (许志永), a prominent legal activist was sentenced to jail for four years. He was convicted of “gathering a crowd to disturb public order,” a charge that stemmed from his role organizing a grass-roots New Citizens Movement, which sought to give voice to public discontent over official corruption and social injustice.

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Topics:
• Law
• Human Rights

 

"English-language media coverage of the Xu Zhiyong trial extends a long-standing genre of journalistic and scholarly accounts of political reform efforts advanced by Chinese weiquan (维权) lawyers. However, there is nothing inherently political about the Chinese term “weiquan.” Translated literally as “rights-defense” lawyers, it is sometimes misleadingly translated as “human rights” lawyers, and is used to refer to lawyers engaged in political activism. In a nationwide survey of over 1,000 lawyers I conducted in 2009, exactly half identified themselves as belonging to the weiquan variety. However, only a miniscule proportion identified doing legal work that involves human rights, politically sensitive cases, or challenging the state as defining characteristics of weiquan lawyers. Media reports about the plight of activist lawyers such as Xu Zhiyong belie the reality that so-called weiquan lawyers are in fact garden-variety lawyers doing the mundane work of lawyers everywhere and only very rarely organizing and mobilizing in pursuit of political reform."

EM

Ethan Michelson
Senior Associate & Associate Professor
Departments of Sociology
Indiana University Bloomington
emichels@indiana.edu

 
GF
An Intellectual Property Mouse
IPChart
         
"China is a manufacturing giant, but an intellectual property mouse. Despite huge investments in R&D, becoming a leading contributor to science journals, and rapidly expanding its trove of filed patents and copyrights, China is still mainly an IP importer. Although China brought in over $1B in international receipts in IP fees in 2012, it paid out $17.5B in such fees to others. Comparing China's ratio of IP receipts to payments with the other 27 countries who had at least $2B in transactions in 2012, China ranks almost dead last, just ahead of South Africa."     SK

Scott Kennedy
Director &
Associate Professor, Political Science &
EALC
Indiana University
kennedys@indiana.edu