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Compass: China's external relations, trade and economy

Updated On: Jan 28, 2010

APV Compass is a twice-weekly feature. It points readers to usefulanalysis of recent issues in the Asia-Pacific.

 

TheEconomist, “China’s assertiveness at sea: Choppy waters”

 

The Economist reports on how China’s neighbors are fretting that, after years of a smiling charm offensive, the Middle Kingdom is beginning to bare its teeth. It cites two recent developments: a squabble between the Japanese foreign minister and his Chinese counterpart over the Chunxiao gasfield (Shirakaba in Japanese) and a feud with Vietnam over Chinese tourism development on the Paracels.

 

NewYork Times, “As China Rises, Conflict with West Rises Too”

 

Meanwhile, conflict is rising between East and West. Katrin Bennhold in the New York Times article summarizes the recent causes for concern: the Google-China row, tariff issues, and concerns over China’s “leverage” over the West.

 

TIMEMagazine, “Free Trade with China: ASEAN’s Winners and Losers”

 

TIME Magazine provides some anecdotal evidence about the winners and losers from the recently signed ASEAN-China free trade agreement. Among the winners: in ASEAN, palm oil producers and others on the low end of the production chain or with niche products (such as dragonfish farmers); for China, large manufacturers looking for lower labor costs. The losers: ASEAN industries that compete directly with Chinese ones.

 

TheEconomist, “Central Heating”

 

The Economist reports that the Chinese economy is “sweltering” as real GDP in the fourth quarter of 2010 grew by 10.7% year on year. Risesin retail sales in the past year have also reportedly been the largest in over two decades. Concerns now focus on China’s overheating economy as its 12-month rate of consumer-price inflation increased to 1.9% in December.

 

“Bottlenecks” are said to have appeared in the market while “some provinces report electricity shortages, and stocks of coal are low”, says Helen Qiao and Yu Song from Goldman Sachs. The labour market is also suggested to be declining leading to firms having to increase wages, which The Economist suggests combined with rapid growth in money and credit could lead to inflation.

 

Previously, government officials have been hesitant to increase the yuan, citing declining exports, inflation and low GDP growth. However inthe current economic climate, The Economist urges the government to appreciate the yuan against the dollar as inflation rises and GDP and exports undergo high growth, to battle overheating.