Wednesday, March 7, 2012

163 Chinese strategy: Conquest through Service; China’s Role as Lender Alters Obama’s Visit

Chinese strategy: Conquest through Service; China’s Role as Lender Alters Obama’s Visit

Conquest through Service means providing cheap manufactured goods to the US, even though the US does not pay for them (it exchanges them for $ Bonds which China will never be able to cash without crashing the $, so great is US net foreign debt).

The Twelve Civil Offensives is an ancient Chinese Classic along the lines of The Art of War. It's quite Machiavellian in its approach.

(1) Chinese strategy: Conquest through Service (the 12 Civil Offensives) - Reg Little
(2) The twelve Civil Offenses (twelve methods of civil offense)
(3) Yuan gaining currency beyond China
(4) Australia approves Chinese takeover of Felix Resources
(5) China’s Role as Lender Alters Obama’s Visit

(1) Chinese strategy: Conquest through Service (the 12 Civil Offensives) - Reg Little

The Beijing Games, Confucius and the Very Great US Depression


New Dawn No. 108 (May-June 2008)

Should they prove to be the success towards which the Chinese have been working, the 2008 Beijing Olympic Games threaten to mark a watershed in global history. They would put on display the world’s major ‘communist’ power with the world’s most successful ‘capitalist’ economy. This apparent contradiction is only clarified if understood as a product of the world’s original ‘Confucian’ civilisation.

The English language media will continue to highlight perceived ‘Communist’ China’s disregard of human rights and ‘Capitalist’ China’s share of the environmental challenges that accompany Western style economic development. Followers of the Games might more beneficially take a serious interest in ‘Confucian’ China’s civilisation.

At the same time they may need to weigh what one Western writer has identified as the dilemma of the Tibetan people, “trapped between an oppressive Beijing and a manipulative Washington.” They might also bear in mind that over a billion highly civilised and productive Han Chinese would protest strongly against the suggestion of Beijing’s ‘oppression’ and that the same Western writer has also stated that “China is viewed by Washington as a major threat, both economic and military, not just in Asia, but in Africa and Latin America as well.”

In reflecting on Confucian China, news of a planned $4.2 billion, 300 square kilometres Confucius City may help. Although some are already inclined to depict project plans for the Confucius City in a manner that suggests a recent inspiration to create a Chinese Disneyland, the Confucian renaissance in China has a serious and well-established foundation dating back at least two decades.

In fact, Mao Zedong’s library in 1949 was stocked almost exclusively with China’s great literary and historical works and the Criticise Lin Biao, Criticise Confucius political campaign in 1975 revealed a profound and active knowledge of the Sage’s influence. Positive official recognition of the importance of Confucian values probably dates, however, from the First International Conference on Confucian Studies in Qufu in 1987, jointly sponsored with Singapore’s now Mentor Minister Lee Kuan Yew, and the establishment of the Beijing based International Confucian Association in Beijing in 1994.

At the former there was open banquet discussion of the critical role Confucianism had to play in China’s future. Some years prior to the 1994 Conference, President Jiang Zemin had made an explicit semi-public statement about the importance of reviving classical learning from an early age.

Ignorance about the Confucian character of contemporary China is a product of the practice of ‘intellectual apartheid’. This once assisted in the building of Western empires and the projection of the Enlightenment’s ‘universal’ values. It now serves to keep those outside Asia ignorant of powerful forces shaping the global future.

As will be explained later, the influence of Confucius has pervaded all of East Asia. It goes far to explain the economic success of the region over the last half century. Naiveté about the character of this Confucian influence also goes far to explain the enfeebling of the American economy. ...

Living from 551 to 479 BCE, Confucius was primarily a teacher who emphasised personal and governmental virtue, correct family and social relations, justice and sincerity. Often the distinct Confucian forms of these values are poorly understood outside East Asia. While thought to be the author or editor of the Five Classics (of Changes, Poetry, Rites, History and the Spring and Autumn Annals), which long formed the basis of a Confucian education, modern historians do not usually regard him as the author of any specific documents. At the same time, The Analects, a collection of brief aphoristic statements compiled long after his death, is ostensibly a record of dialogues with his followers. The Song Dynasty Neo-Confucian Zhuxi edited The Four Books (The Analects, The Great Learning, The Doctrine of the Mean and the Works of Mencius), which then became the foundation of a Confucian education up to the end of the Qing Dynasty (CE 1644-1911).

While Confucianism was blamed for China’s weakness when confronted with foreign intruders and became an object of attack and antipathy in the early 20th century, there were a number of intellectuals who sought to define some form of New Confucianism as the 20th century progressed. As is often the case, the intellectuals missed the true renaissance of Confucianism in the second half of the century. This took place with great discretion and in an appropriately pragmatic manner and will be examined in more detail later.

The above brief outline should demonstrate that Confucianism and Chinese history and identity are one. The forms and practices may change but nothing ever happens in China, and to a lesser degree the rest of East Asia, without reference to and evaluation against a past Confucian history of at least four thousand years. Not surprisingly, the educated and knowledgeable can find in that history legitimisation for almost any action. It remains important, nevertheless, that it can be legitimised in such a context and that the legitimiser can show the credentials to undertake such a task. This ultimately is the capacity to reveal a profound knowledge of past history and comparable moral, political and other choices.

It is important to remark that Confucius explicitly dismisses any interest in the afterlife or any form of God-like authority. This ensured that China has rarely tolerated for long the use of spiritual organisation for political ends. It also freed the Chinese from the structures of faith, dogma and rationality that have been so important in the development of the West. In the process it focused human spiritual energies and fulfilment on the practical challenges of life in this world.

The 20th Century Confucian Renaissance

The 20th century Confucian Renaissance might be seen as having an unlikely and, to some, a less than noble origin. Yet few fully informed Japanese would in their hearts agree with this view. It might be traced back to when Nobusuke Kishi, charged as a war criminal and imprisoned for three years in Japan after the defeat and occupation of his country in 1945, recruited America’s Central Intelligence Agency to bankroll his political resurrection.

As recounted by Tim Weiner in Legacy of Ashes: A History of the CIA, Kishi had reached agreement by August 1955 in a meeting with the American Secretary of State, Foster Dulles, to help the United States fight communism. He undertook to wreck the ruling Liberal Party, rename it, rebuild it and run it, as the Liberal Democratic Party under his command – neither liberal nor democratic, but a right-wing club of traditional (Confucian) leaders rising from the ashes of imperial Japan, pledged to change the foreign policies of Japan to fit American desires.

While there can be no doubt that both sides have honoured their commitments and that both parties publicly continue to honour one-another as close allies, the long-run consequences have hardly benefited America. The American-Japanese alliance highlights the fundamental failings not only of America’s Central Intelligence Agency but also of the whole American leadership class since 1945.

To his credit and America’s shame, Kishi’s right-wing club of traditional leaders have been unbelievably successful in regaining much of what Japan lost in World War II, often at America’s expense. They have also, and this has been less beneficial to Japan, developed a strategic model that enabled successive Asian states to follow Japan and relocate American industry, skills, technology and productivity to Asia.

Japan is the major beneficiary of what is in reality an ancient Chinese strategy. It is a modern version of the three millennia old, Zhou Dynasty strategist Jiang Taigong’s 12 Civil Offensives – conquest through service. Kishi, by reading clearly American wishes and whims, managed to put the Japanese people at the service of the American people in a manner that created over time dependence and vulnerability.

The effectiveness of this strategy over the past half century highlights the failure of the American leadership and intellectual classes to identify and comprehend forces that have steadily eroded the strengths in which they take so much pride and on which they still rely so naively. Central to this failure has been an inability to think outside very narrow and rigid ideologies, as well as a lack of the type of moral fortitude and clear-headedness that is the central ethos of Confucianism and the only true defence against Jiang’s Civil Offensives.

In particular, it has been a failure to comprehend in any depth the social discipline and cohesion of East Asian communities, the character of virtue, justice and sincerity in the Confucian tradition, the strategic resourcefulness that has been accumulated over four millennia of history and the fact that little in the English language translates readily into Chinese or Japanese, or vice versa.

In fact, the Anglo-American communities, which have so transformed the global community over the past two centuries, are characterised over recent decades by almost unbelievable reflective and cerebral laziness, self-indulgence and ineptness. They have depended on stale ideologies like neo-liberalism, which have betrayed them, and relied on minority interest groups to provide what reflective and cerebral energy is left in their communities, looking askance when outcomes are not always to their liking.

{the above seems to refer to Jews - implicitly}

This highlights the major significance of the 2008 Beijing Olympic Games. They symbolise the renaissance of a civilisation that shares little with the West’s post-Enlightenment ‘universal’ values, and even less with the endlessly warring Abrahamic religions of Judaism, Christianity and Islam. The now rapid re-establishment of Chinese technological, economic and political superiority and leadership, which was lost to the West 200 years ago, simply highlights how inherently foolish and self-harming has been the West’s thoughtless indulgence of ‘intellectual apartheid’ over the past half century.

The Nature of Confucian Reality

Having said that neither Chinese nor Japanese cultural realities can readily be communicated across language barriers, a brief examination of several short passages from The Analects may help to illustrate why this is the case. Even so, the examination should be prefaced with a warning that it will unavoidably be inadequate, as it will need to be conducted solely in English.

This realisation comes most powerfully if one commits to learning in Chinese short passages from the Chinese classics. Only then does it become apparent how inadequate and misleading are even the best English translations. Generally, they are extremely lucky to avoid the appearance of a caricature.

The first lines of The Analects offer a good introduction to the problem, using an excellent translation by D.C. Lau:

The Master said, ‘Is it not a pleasure, having learned something, to try it out at due intervals? Is it not a joy to have friends come from afar? Is it not gentlemanly not to take offence when others fail to appreciate your abilities?’

The 44 words in Lau’s translation compare with 32 Chinese characters and lose something of the poetic coherence of measured and fulfilled authority of the original. More important is their extraction from the context of a culture that involved the frequent movement of educated ‘gentlemen’ in the pursuit or exercise of official duties in a widely dispersed political environment. In the English translation, the three question marks seem intrusive in a manner absent in the original Chinese and detract from the sense of a civilisation guided by educated convivial ‘gentlemen’ who are at ease with their own worth. One might question whether such a civilisation was as evident at the time of Confucius as it was later after his influence became the foundation of Han Dynasty (206 BCE-CE 220) administration. This does not, however, distract from the succinct power of these opening lines and their enshrinement of a mythology of a wise, experienced and gracious network of gentlemen whose existence offers reassurance about the proper order of the world.

Part 3 of Chapter 2 of The Analects contains a famous passage that identifies a major difference between Confucian and Western norms:

The Master said, ‘Guide them by edicts, keep them in line with punishments, and the common people will stay out of trouble but will have no sense of shame. Guide them by virtue, keep them in line with the rites, and they will, besides having a sense of shame, reform themselves.’

Here 51 words are used to translate 26 characters. More important, Lau uses the word ‘edicts’ where others have used the word ‘laws’. Whatever the better translation, both make it clear that the Confucian preference is to minimise government directives and maximise the use of social acceptance and expectation as a means of bringing harmony and order to society. In practice, this ‘rule by virtue’ rather than ‘rule by law’ plays out in many ways and has not always inhibited Chinese use of draconian Legalist practices. The central importance rests in the fact that ‘law’, however interpreted, has very different historical, cultural, political and practical implications in East Asia, compared to the West. Moreover, the text of The Analects is explicit in offering a powerful seminal reason for this.

Part 17 of Chapter 7 of The Analects contains another example of the power of words in translation, with Lau rendering it as:

The Master said, ‘Grant me a few more years so that I may study at the age of fifty and I shall be free from major errors.’

Here 27 words are used to translate 17 characters. Moreover, other translations and Chinese texts carry a meaning that is totally missing from the words above. These suggest that Confucius was musing on the benefits of a further fifty years to study and reflect on the Yijing or Classic of Changes. For whatever reason Lau has chosen to omit this Confucian reference and approval of the one Chinese classic of probably even greater influence than The Analects.In Confucian China this might have been of little moment when the Classic of Changes was both central and fundamental to Confucian teaching. With China’s decline, it fell into perhaps even more disfavour than Confucianism because it was identified with fortune telling and impractical superstition. As the next passage will seek to demonstrate, however, it did even more than the practical humanism of Confucius to shape Chinese thought and reality.

The Distinctive Power and Relevance of Chinese Correlative Thought

The significance of the Yijing or Classic of Changes can be illustrated by the writing of a contemporary Chinese-American academic, Chenshan Tian, who has been grappling with differences in Eastern and Western world views, ways of thinking and forms of scientific understanding. His book, with what for many will be the unpromising title of Chinese Dialectics: From Yijing to Marxism, focuses on explaining the fundamental difference between Chinese and Western Marxism. In passing, it makes the simple and profound observation that much Western thought, including scientific thought, has essentially been derived from and been limited by faith in God.

Tian writes that:

…the model of causality is made possible simply because God has created a world of things governed by laws of causation. God can be made responsible for the creation of such laws. Thus the ultimate explanation of the model, the world, the causal law and the motion may be traced to God as an infinite existence.

The model has developed to involve an ontology of Being and Nonbeing, a teleological order from beginning to end, and dualisms such as a final distinction between nature and human culture, time and space, mind and body, ontology and epistemology, and so on. It has also led to the development of principles of universalist theory and methodology, causal reductionism or simplistic determinism, abstract speculation and conceptualisation, categorical distinctions, and efforts to make objective statements about the world.

Tian suggests an intellectual world, derived from the Yijing, which seems much closer to the evident riddles of organic life, human behaviour and the nature of material and energy inherent in the quantum mechanics and relativity theories of modern physics. Tian’s perception highlights the presumption of the Western scientific establishment and its belief that it is engaged in the discovery of laws of nature, a Theory of Everything and God ordained mechanisms and conveniences designed to serve humanity.

From this alternative perspective the West’s science and rationality appear as a grand act of hubris. The full consequences of this are only now becoming clear as the world confronts mounting environmental and associated health and human well-being problems.

Paradoxically, this hubris has been derived from those prophets who sought to speak on behalf of an omnipresent, omnipotent and transcendent God, except that now the scientists, like religious prophets before them, have usurped the mantle of God themselves. Whether in religion or science, however, dogma has been used as a tool of political organisation and assertion, pushing rudely aside the spiritual and intellectual worlds of other peoples. Free markets, scientific truth and Western progress have too easily become merciless dogmas of conquest.

In contrast,Tian outlines a Chinese approach to human experience, sometimes labelled ‘correlative’. This establishes humanity more as a humble supplicant, patient worker and disciplined servant before the complex relationships, constant changes and fathomless mysteries that shape life, society and the environment. There are no vaulting theories of everything, losing touch with all but the self-promotion of their originators.

Readers may react in protest and rejection, dismissing these words with the scorn with which the West has imposed its ‘intellectual apartheid’ on other cultural traditions over the past two hundred years. But the marketplace is already dictating that a wide range of differences between Anglo-American certainties and Confucian-Daoist realities be treated with respect and a serious desire to understand.

Western thinkers are not yet ready to countenance the possibility that they may be well advanced in the process of becoming historical anachronisms. It remains inconceivable that they may face the imminent prospect of having to submit to the authority of the thought, culture and tradition of an unfamiliar civilisation.

The global marketplace, which Western physical and social scientists have done so much to create, may soon dictate this unwanted outcome of their endeavours. Problems inherent in contemporary Western civilisation are increasingly evident in an excessively aggressive and reductionist science, an overly self-indulgent corporate ethos and self-destructive political and financial cultures. The beneficiaries of an independent and profound wisdom culture in East Asia are finding more and more ways to turn these Western failings to advantage in the global marketplace.

The Trouble with the Beijing Games

The 2008 Beijing Olympic Games threaten to display to all the peoples of the world the spectacular economic success and achievements of the Chinese. They will also suggest to some of the more sensitive and observant the discreet but powerful forces of a unique and unrivalled civilisational force.

Clearly, some are most uncomfortable about Confucian successes, particularly as America confronts the prospect of what has already been called the Very Great US Depression. The erosion of a global financial system founded on the US Dollar, the exponential increase in the costs of the $3 trillion wars in Iraq and Afghanistan, the all-consuming demands of the American military-industrial complex, the self-indulgence of a corporate culture more focused on Washington influence than global competition and the hollowed-out and unproductive character of the US economy all contribute to highlighting the implications of this daunting renaissance in Asian civilisation.

The West is finding it very difficult to give up its studied neglect of the reasons for the regeneration and reinvigoration since 1945 of the communities shaped by Confucian civilisation. It is highly unlikely that even spectacular Chinese success with the 2008 Games will lead to a long overdue re-examination of the West’s stale ideologies or a recognition of the idiosyncrasies and inadequacies of what today passes for the West’s intellectual tradition. The fear of such humiliation will more likely prompt further self-destructive initiatives of the sort that have characterised 21st century America.

Professor John Fitzgerald remarked in his August 2007 RG Neale Lecture that the Australian Embassy in Beijing foreshadowed the emergence of today’s China as early as 1976. This helped inform a burgeoning trading relationship. It did little to encourage forward-looking education and other policies, however, despite efforts in the early 1990s by the recently elected Australian Prime Minister to build Asian language training into school curriculum. The task that remains to be completed grows more onerous by the day.

REG LITTLE was an Australian diplomat for over 25 years in Japan, Laos, Bangladesh, the United Nations, Ireland, Hong Kong, China, Switzerland, and the Caribbean, obtaining advanced language qualifications in Japanese and Chinese. Deputy or Head of Mission in five overseas posts, he served in Canberra as Director of North Asia, International Economic Organisations, Policy Planning and the Australia-China Council. He has participated in Conferences in Asia since 1987, has been a Founding Director of the Beijing based International Confucian Association since 1994 and has co-authored two books, The Confucian Renaissance (1989) in English, Japanese and Chinese, and The Tyranny of Fortune: Australia’s Asian Destiny (1997). His latest book is A Confucian-Daoist Millennium? Reg Little's website is

The above article appears in New Dawn No. 108 (May-June 2008)

(2) The twelve Civil Offenses (twelve methods of civil offense)

Civil Offense-Six Teachings (Tai Gong Six Teachings-Military Teaching Chapter 3)

King Wen asked Tai Gong:"What are the methods of civil offense?"

Tai Gong replied:"There are twelve methods of civil offense."

First, accord with what he likes in order to accommodate his wishes. This will feed his arrogance and invariably mount some perverse affair. We can then use the situation to our advantage and be able to eliminate him.

Second, be close with those he loves in order to fragment his awesomeness. When men have two different inclinations, their loyalty invariably declines. When his court no longer has any loyal ministers, the state will inevitably be endangered.

Third, covertly bribe his assistants, fostering a deep relationship with them. While they stand in his court physically, their thoughts and inclinations will be directed outside it. The state will certainly suffer harm.

Fourth, assist him in his licentiousness and indulgence in music in order to dissipate his will. Present him generous gifts of pearls and jade, ply him with beautiful women. Speak deferentially, listen respectfully, follow his commands, and accord with him in everything. He will never imagine you might be in conflict with him and unleash his treacherous ways.

Fifth, treat his loyal officials generously, but reduce your gifts to the ruler. When the ruler comes as emissary, delay him and do not listen to him. When he eventually dispatches other men, treat them with sincerity, embrace and trust them. The ruler will then again feel you are in harmony with him. If you manage to treat his formerly loyal officials very generously, his state can then be plotted against.

Sixth, make secret alliances with his favored ministers, sow discord between the ruler and his officials that are not in court. Make his talented people assist other enemy states. Get other enemy states to encroach upon his territory. Few states in such situation have survived.

Seventh, if you want to get his trust, you must offer generous gifts. To gather in his assistants, loyal associates and loved ones, you must secretly show them the gains, they can realize by colluding with you. Have them slight their work and then their preparation will be futile.

Eighth, present him with great treasures, and make plans with him. When the plans are successful and profit him, he will have faith in you because of the profits. This is what is termed ‘being closely embraced’. The result of being closely embraced is that he will inevitably be used by us. When someone rules a state but is externally controlled, his territory will inevitably be defeated.

Ninth, honor him with praise. Do nothing that will cause him personal discomfort. Display the proper respect accruing to a great power, and you will certainly be trusted. Magnify his honor; be the first to gloriously praise him, humbly embellishing him as a Sage. Then his state will suffer great losses.

Tenth, be submissive so that he will trust you, and thereby learn about his true situation. Accept his ideas and respond to his affairs as if you were twins. Once you have learned everything, subtly control him. Thus when the ultimate day arrives, it will seem as if Heaven wants him destroyed.

Eleventh, block up his channels of information. Among his subordinates, there is no one who does not value rank and wealth nor hate danger and misfortune. Secretly express great respect towards them, and gradually bestow valuable gifts in order to gather the outstanding talents. Accumulate your own resources until they become very substantial, but put up an external appearance of shortage. Covertly bring in wise knights, and entrust them with planning great strategy. Attract courageous generals, and augment their spirit. Even when they are more sufficiently rich and honored, constantly add to their riches. When your faction has been fully established, you will have attained the objective referred to as blocking his information channels. If someone has a state but his information channels are blocked, how can he be considered as having the state?

Twelfth, support his dissolute officials in order to confuse him. Introduce beautiful women and licentious sounds in order to befuddle him. Send him outstanding dogs and horses in order to tire him (through hunting). From time to time, allow him great power in order to entice him to greater arrogance. Then investigate the signs and plot with the world against him.

When these twelve methods are fully employed, they will become a military weapon, Thus when, as it is said, one all indications and signs. Once the proper signs are already visible, attack him.

(3) Yuan gaining currency beyond China

By Russell Hsiao

Oct 29, 2009

Since December 2008, China has signed 650 billion yuan (US$95 billion) in currency-swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Argentina and Belarus, in order to promote greater circulation and convertibility of the Chinese currency (also referred to as the renminbi).

Thailand is reportedly studying a possible currency swap agreement with China that would make it easier for their exporters to settle trade in the two currencies. According to experts, the increased regional use of the yuan for "invoicing, transaction and settlement purposes" could enhance its use as a "store of value".

The global financial crisis has prompted Beijing to hedge the weakening US dollar by encouraging the regionalization of the yuan as a settlement currency for trade and other current account transactions in Asia, and bypassing the use of the US dollar.

An article by People's Bank of China (PBoC) governor Zhou Xiaochuan on March 2009, which called for an international reserve currency to take the place of the US dollar, created a whirlwind of debate within China's policy circles, and the international community, about the future role of the yuan. While the regional use of the yuan is spreading, analysts have emphasized that it is "usually at the expense of the US dollar as transaction currency, not as reserve currency".

According to Zhang Yuyan, the head of the Institute of Asia-Pacific Studies at Chinese Academy of Social Sciences - one of China's leading government think tanks - "A favorable balance of trade with China is a prerequisite for surrounding nations to use the yuan as a reserve currency". China has replaced the United States as the main export market for Asian countries, and as the current pace of China's investments exceeds the growth in its savings there is a possibility that the current account surplus may become a deficit by 2010.

The use of the yuan in China's neighboring countries for transactions has been growing in recent years (for example in northern Thailand, northern Vietnam, Myanmar and eastern Russia) since it is cheaper and simpler for smaller traders to use than the US dollar. In order to monitor these transactions, the PBoC, Vietnam and Laos recently signed bilateral settlement cooperation agreements, which according to Su Ning, the new vice president of the Bank of China, will enhance the fledgling financial regulatory mechanisms in the sub-region.

Su made this statement on October 20 at the "China-ASEAN Financial Cooperation and Development Leaders Forum," held in conjunction with the Sixth China-ASEAN Expo that took place from October 20 to 24 in Nanning, Guangxi Zhuang Autonomous Region.

Su pointed out that China-ASEAN financial cooperation has made considerable progress in recent years, and by the end of 2008, China and Thailand, Philippines, Malaysia and Indonesia and other countries had signed currency-swap agreements with a net worth of more than $230 billion. The central banks of every ASEAN country reportedly sent a representative to attend the forum. The 10 ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Su stated that the PBoC's next step will be to encourage ASEAN countries' financial institutions to establish branches of operations in China, or invest in Chinese financial institutions, and therefore expand the scale of a fund for greater Asian bonds, and promote the development of an Asian bond market.

Xia Bin, president of the Financial Research Institute of the Development Research Center of the State Council - the Chinese government's executive branch - stated that "China is not pursuing the optimum target of complete internationalization of the yuan, but a suboptimal one: gradual regionalization of the currency". The push for the regionalization of yuan appears to be gathering steam ahead of the scheduled launch of the China-ASEAN Free Trade Area (CAFTA) on January 1, 2010.

Under the terms of CAFTA, there will be zero-tariff for 90% of the products traded between China and ASEAN countries and "substantial opening" in the service trade market. According to some estimates, the total trade between China and ASEAN members could reach $4.5 trillion once the FTA is launched. The launch of CAFTA will provide momentum for broader regional growth and may facilitate a decoupling from the West, as the yuan plays a more prominent role in the regional economy.

Prior to the financial crisis, the Chinese government did not appear to have a policy on the convertibility of the yuan. Yet the raft of yuan-denominated lines of credit extended to neighboring countries and bilateral local currency swaps that have been signed in recent months demonstrate a far-sighted Chinese stake in increasing the convertibility of the yuan. Moreover, CAFTA would serve as a platform to accelerate the regionalization of the currency.

Russell Hsiao is the editor of China Brief at The Jamestown Foundation.

(4) Australia approves Chinese takeover of Felix Resources

Fri Oct 23, 2009 4:10am EDT

By Denny Thomas

SYDNEY, Oct 23 (Reuters) - Australia approved Chinese firm Yanzhou Coal Mining Co's (1171.HK) $2.9 billion takeover of coal-miner Felix Resources Ltd (FLX.AX) on Friday, but said the local firm's assets must be run by an Australia-based company.

The deal is also conditional on listing the local unit on the Australian market and trimming Yanzhou's holding, but it does not change Australia's declared bias against takeovers of greenfield resource projects or major mining companies.

"I won't say this is a dramatic shift in government policy," said Ian Ramsay, a law professor of University of Melbourne.

"We are seeing government policy evolve in relation to foreign investment decisions and that is certainly the case in relation to investments by Chinese companies in Australian resources sector."

Chinese state-owned companies have been looking to buy up Australian mining assets to secure supplies of raw materials for its rapidly growing economy, the world's third largest.

But bilateral ties have been strained by Canberra's opaque and sometimes lengthy process for vetting foreign investments, with some high-profile deals falling through before a decision is reached or after strict conditions have been imposed.

"The government is looking for an acceptable middle ground. This does send a pretty positive message and I say this because these are not unduly onerous undertakings," Ramsay said.


The Australian government has stipulated that Yanzhou Coal must list the local unit on the Australian stock market by 2012 and cut its ownership to less than 70 percent, Assistant Treasurer Nick Sherry said in a statement.

Sherry said Yanzhou had already accepted these conditions, as well as promised to base the local unit's chief executive and chief financial officer in Australia.

Yanzhou further agreed to market coal produced at all of its Australian mines "on arms-length terms with reference to international benchmarks and in line with market practices."

Felix, which has mines in Queensland and New South Wales states, produced 4.8 million tonnes of coal in the year to June. Analysts expect the deal to boost Yanzhou's output by about 10 percent.

"With these undertakings provided by Yanzhou, I consider that this acquisition is consistent with Australia's national interest," Sherry added.

(5) China’s Role as Lender Alters Obama’s Visit

From: Date: 18.11.2009 03:21 PM


Published: November 14, 2009

When President Obama visits China for the first time on Sunday, he will, in many ways, be assuming the role of profligate spender coming to pay his respects to his banker.

People demonstrated Friday for the release of political prisoners in China in front of the American Consulate in Hong Kong.

That stark fact — China is the largest foreign lender to the United States — has changed the core of the relationship between the United States and the only country with a reasonable chance of challenging its status as the world’s sole superpower.

The result: unlike his immediate predecessors, who publicly pushed and prodded China to follow the Western model and become more open politically and economically, Mr. Obama will be spending less time exhorting Beijing and more time reassuring it.

In a July meeting, Chinese officials asked their American counterparts detailed questions about the health care legislation making its way through Congress. The president’s budget director, Peter R. Orszag, answered most of their questions. But the Chinese were not particularly interested in the public option or universal care for all Americans.

“They wanted to know, in painstaking detail, how the health care plan would affect the deficit,” one participant in the conversation recalled. Chinese officials expect that they will help finance whatever Congress and the White House settle on, mostly through buying Treasury debt, and like any banker, they wanted evidence that the United States had a plan to pay them back.

It is a long way from the days when President George W. Bush hectored China about currency manipulation, or when President Bill Clinton exhorted the Chinese to improve human rights.

Mr. Obama has struck a mollifying note with China. He pointedly singled out the emerging dynamic at play between the United States and China during a wide-ranging speech in Tokyo on Saturday that was meant to outline a new American relationship with Asia.

“The United States does not seek to contain China,” Mr. Obama said. “On the contrary, the rise of a strong, prosperous China can be a source of strength for the community of nations.”

He alluded to human rights but did not get specific. “We will not agree on every issue,” he said, “and the United States will never waver in speaking up for the fundamental values that we hold dear — and that includes respect for the religion and cultures of all people.” ...

Helene Cooper reported from Singapore, Michael Wines from Beijing, and David E. Sanger from Washington.

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