Category: Asia

WP: North Korea’s decreasing isolation

The Washington Post has an interesting article about closer ties between North and South Korean businesses and the South Korea’s increasingly positive attitude toward their brothers across the border. Some interesting points:


Despite U.S. Attempts, N. Korea Anything but Isolated
Country’s Regional Trade Boom Hints At Split Between Administration, E. Asia

North Korean housewares are the rage these days. The Lotte department store sold out its first shipment of North Korean pots and pans last December and followed up with a bigger sale in January, when another 7,000 pieces of cookware were carted off by eager shoppers. Lee, 39, is now working on the store’s largest North Korean venture yet: New lines of cutlery and frying pans go on sale within the next two weeks.

South Korea, China and Russia have increased their trade with the North, boosting its tattered economy. Fueled by imports of energy and manufactured goods, and exports of minerals, seafood and agricultural products, North Korea’s foreign trade increased 22 percent in two years, from $2.9 billion in 2002 to $3.55 billion in 2004; these levels are the highest since 1991, according to KOTRA, a South Korean government organization that monitors North Korean trade.

Analysts say North Korea may be calculating that if the United States increases pressure, Pyongyang’s other benefactors in Asia may be willing to mend fences, even after a nuclear test.
Continue reading WP: North Korea’s decreasing isolation

Two interviews discuss Japan’s war apologies

The Asahi, one of Japan’s three major daily newspapers, has two contrasting Q&A format opinion pieces regarding Japan’s recent problems with China and Korea that some people may find interesting. The first is with a German freelance journalist Gebhard Hielscher, who was formerly Far East correspondent for the daily Sueddeutsche Zeitung.

Q: What was your reaction to the recent outrage against Japan in China and South Korea?

A: My impression is that all along, Japan has been deliberately not trying to face the past, and hoping that these issues would go away. Japan has been more concerned about its relationship with the United States.

Running away from the issue of compensation to the two countries that were the main victims of Japan’s aggression, the Japanese have had it (protest) coming for all these years.

Our (Germany’s) main victims, aside from the Holocaust, were the Soviet Union and Poland, and we have done a lot for them. I always leave out the Israel issue because it is not part of the comparison: Japan did not commit a Holocaust. But what we did in Poland, which is colonize it, can be compared to what Japan did in the Korean Peninsula.

Germany didn’t pay direct reparations to Poland, or the Soviet Union, but the Allied Forces took a lot of industrial property out of Germany as a form of reparation. Also, Germany gave up 24 percent of its traditional territory to these two countries, the two biggest victims. We saw that as one way to pay our moral debt.

The intreview given as a response to Herr Hielscher, which disagrees from what I would consider a rather moderate position, and not the extreme nationalist stance that has been irritating everyone, is by Keio University professor Tomoyuki Kojima an expert on Chinese and East Asian affairs.

Q: Do you think Japan has compensated enough for wartime aggression, compared with Germany?

A: In terms of state-to-state compensation, I would say Japan has done more through the process of normalizing relations with many of its neighbors.

While there are countries that did not demand compensation, for those countries that did, we have paid compensation.

In the case of China, both Taiwan, with whom Japan normalized relations first, and mainland China, declared they would forfeit claims for reparations.

Taking the example of forced labor, a court has ruled that the former employer of forced laborers from China and Korea pay damages. But the same court did not rule on whether the state was liable, as that issue has been settled through bilateral negotiations.

In the case of South Korea, for example, Japan agreed in 1965 to provide grants and loans to the country. There is a problem that it was not clearly referred to as “compensation,” but in reality both sides agree that is what it was.

There are individual issues pertaining to the war that remain unresolved, and that is undeniable. Definitely Japan must do something.

But my view is that it is not worthwhile to simply consider Germany a model and criticize Japan for lack of atonement for the past.

Japan not yet totally cut off from East Asia

The Mainichi’s English language Waiwai feature reports that not all of Japan’s international relations have been damaged beyond repair by recent diplomatic gaffes.

One intrepid reporter braved the frontlines of China to find out.

“Welcome, I’m Nana!” one of the older-looking hostesses in a black dress greeted him in Japanese. “Is this your first visit?”

“Are you participating in a boycott of Japanese goods?” the reporter then asks her.

“What you say? Me no understand?” she replies.

“Never mind. Tell me, what do you think of the recent controversy over Japanese history textbooks?”

“You know, your eyes have got a horny glimmer,” she counters. “It means you wanna do ‘rabu-rabu’ with me, right?”

“Um, okay, let’s move on to a different subject. How do you feel about the prime minister’s making visits to worship at the Yasukuni Shrine?”

“Hey, listen, if you no take me out, I’m really pitiful,” she nags. “I don’t make money hanging around this bar. You Japanese men are all lechers, but I’m good at doing ‘etchi.’ How about I give you nice blow job and then ride you on top?”

And another conducted similar field research in Korea.

There he is introduced to a hostess named Ruby, who croons a currently popular Korean tune, a stirring melody entitled “Tok-do belongs to us.”

“This song used to be banned, but these days you often hear customers in Korea singing it,” she explains.

“Should I take that to mean you intend to declare war on me?” the reporter asks.

“Shhhhhs,” Ruby whispers. “Our ‘mama’ told us to avoid discussing political problems here at the club.”

“You know actually,” the reporter thinks out loud, “I’d like to make that generous cleavage between your breasts my territory for a little while. What do you say?”

Christopher Hitchens, full of dogshit

The new installment of Christopher Hitchens’ column in Slate describes North Korea in the typical Hitchens fashion: a dose of humor, erudite writing, high-brow cultural references, but in the typical pundit tradition has no real insights and at least two extraordinarily glaring mis-observations.

He claims that he “tries to avoid cliché” and yet still tells us that “North Korea is rather worse than Orwell’s dystopia.” Is there anything more cliché than comparisons with 1984? I would be a fool to disagree with his assertion here, but it is one that is horrifyingly obvious to anyone who has read even a single article about the situation in contemporary North Korea, and one which takes absolutely no imagination to make.

He also mentions that he has even been to North Korea, although his claim that “North Korea is almost as hard to visit as it is to leave” is quite false. While it is rather difficult for Americans to get tourist visas for the DPRK, urban-dwelling Chinese can enter quite easily, albeit restricted to certain tourist friendly zones. Actually it is quite easy for civilians (with the possible exception of US citizens) to book a North Korea tour through agencies such as Koryo Tours, based out of Beijing. This one company, and there are others, has one special tour listed per month, and advertises that they can arrange special ones for groups. The only caveat is that the government apparently bans journalists. Their website tells us:

On meeting with us at Koryo Tours’ office in Beijing we will require you to sign a form stating that you are not a journalist and that you will not publish anything about your trip. We are sorry to have to insist upon this but at the present time Journalists are not permitted to enter the DPRK, if you are a journalist and are interested in travelling to the DPRK then please let us know and we will be sure to let you know of any future opportunities.

Just because Christopher Hitchens can’t easily get a visa doesn’t mean that everybody else is so restricted.

But I save the best for last.

I was reduced to eating a dog, and I was a privileged “guest.”

So he’s been to North Korea, good for him. But has he ever been to South Korea? If he had, he would know that dog is not a meat of last resort in Korea, but traditionally eaten as a source of virility and considered a delicacy by many. How is somebody who knows so little about Korean culture writing about the region?

Teikoku Oil seeks rights to test-drill in disputed seas

From The Japan Times:

A Japanese oil company on Thursday requested test-drilling rights in the East China Sea, in disputed waters just a few kilometers from where China is preparing full-scale drilling.

Teikoku Oil Co. submitted an application to the Ministry of Economy, Trade and Industry to drill for oil and natural gas in three areas totaling 400 sq. km. Two of the areas lie flush against the Chun Xiao and Duan Qiao gas fields, where China’s drilling rigs are set up along the border of the exclusive economic zone claimed by Japan.

If Japan is going to piss off China by prospecting in contested waters, the least they could do is give the license to a company with a less offensive than than IMPERIAL OIL! If you look at any random Japanese article on this topic then you’ll see that ‘Teikoku Oil’ is written as ‘帝国石油’ – and that Teikoku(帝国) is the Japanese/Chinese word for Empire. It’s like they’re writing their China’s anti-Japan propaganda for them.

RMB Notes, part II

Pressure for revaluation of the RMB continues to mount on both the financial markets as well as on the Chinese government. Meanwhile, debate continues among economists, financial analysts, and currency traders as they remain vigilant for signs of an impending change in China’s currency policy.

The Financial Times’ Richard McGregor reports that yesterday for around 20 minutes the RMB traded 8.27 to the dollar, slightly higher than its set band of between 8.2760 and 8.8600. Although there was no confirmation as to whether the Chinese government was involved in any trades at this higher price, some observers took it as a sign that the government was testing the waters for a revaluation in the near future.

“…[T]he point is that they are ready to do it and could move at any time,” [Frank Gong, a strategist with JP Morgan in Hong Kong] said. He said the higher rate remained on trading screens for up to 20 minutes, a sign that the authorities may have been testing the market “to see how much ammunition they may need to keep everything under control”.

Beijing has been sending strong signals in recent weeks that it has completed all the technical preparations necessary to remove the US dollar peg and allow greater flexibility for the currency.

Congress is clearly worried about the harm an undervalued Yuan may do to politically sensitive sectors of the U.S. manufacturing industry. They have been especially concerned following the expiration of the multi-fiber agreement on January 1st of this year, motivated by fears that a surge of cheap Chinese textile imports would put more Americans out of work.

One response to this is Democratic Senator Charles Schumer’s proposed bill decrying China’s RMB peg as providing:

the People’s Republic of China with a significant trade
advantage by making exports less expensive for foreign consumers and by making foreign products more expensive for Chinese consumers. The effective result is a significant subsidization of China’s exports and a virtual tariff on foreign imports.

Schumer proposes a 27.5%* tariff on all Chinese exports to the U.S. unless Beijing agrees to revalue the RMB. Frighteningly, the bill survived a preliminary vote earlier this month and is scheduled for one final vote in July.

Passage of the legislation would unquestionably violate WTO regulations, though Fred Bergsten, Director of the Washington, DC basedInstitute for International Economics has suggested that one possible way around this restriction might be for the United States, along with other IMF member countries to seek:

…World Trade Organization authorization on the grounds that persistent currency manipulation represents both an illegal export subsidy and “nullification and impairment” of previously negotiated liberalization.

Whatever China’s decision, it will not be an easy one. (Anymore than Senator Schumer’s proposed quick fix be quick or a fix for U.S. industry and our widening trade deficit. But I digress.) Pegging the RMB to the dollar is a dangerous and double-edged sword. Although revaluation may ease international pressure on Beijing for now, it will likely create a set of new and equally difficult economic challenges both internationally and domestically.

The next post will examine some of implications of a currency revaluation and look at these problems in more detail.

*27.5% is the average undervaluation of the RMB cited in the text of the legislation.

RMB Notes

Hardly a week passes without at least one article on Chinese currency policy by at least one major newspaper. In the ongoing debate over maintaining, adjusting, or abandoning the RMB’s peg to the dollar, one commonly cited reason in favor or adjustment is the increasingly large flow of speculative capital into China.

Consider this report, posted yesterday and updated today by the Financial Times:

The World Bank on Wednesday said China should revalue the renminbi and abandon the dollar peg in favour of a link to a basket of currencies.

It warned that without revaluation, speculative capital flows could destabilise economies in the region.

Homi Kharas, the bank’s chief economist for the region, said there was no imminent risk of a financial crisis caused by currency speculators, like that in the late 1990s, but “very large volumes of money” flowing into the region threatened economic distortions.

And just how large are the “very large volumes of money” currently flowing into China? Because such flows are illegal, gathering accurate data is impossible. But it is possible to make reasonable estimations. According to China’s central bank and Reuters:

China’s foreign exchange reserves jumped $49.2 billion in the first quarter to a record $659.1 billion, the central bank said on Thursday, signalling persistent inflows of capital betting on a yuan revaluation.

China posted a trade surplus of $16.6 billion in the first quarter, compared with a trade deficit of $8.4 billion a year earlier. Foreign direct investment in China was $13.4 billion in the first quarter, up 4.5 percent on the year.

That left some $19 billion* in other transactions on the balance of payments, much of which analysts believe was speculative money inflows betting on a revaluation of the yuan.

One popular desitination for these speculative inflows is the property market. By converting U.S. dollars into RMB, and then investing in China’s booming real estate sector, a speculator doubles his chances of profit – once from the rise in property prices, and once again from the rise in the price of the RMB in dollar terms should the Chinese government revalue.

And just how booming is real estate in China, you ask? According to Brian Bremner and Frederik Balfour’s excellent article Businessweek Online:

New hundred-square-meter apartments in posh sections of Shanghai have doubled in value, to $550,000, since 2003. High-end properties in the Chinese megalopolis have shot up 20% during the past three months alone. It’s not just Shanghai. UBS Securities (UBS ) says overall urban land and property prices in China last year were up 70% over 2001.

Sounds pretty tempting, no?

Although figures on speculative capital flows and the latest global real estate boondoggle are a common sight in print and online, one thing I have yet to see addressed is exactly how speculators are moving into RMB positions given the supposedly tight controls on foreign exchange in China.

Exchanging small amounts of dollars for RMB and vice-versa is easy. Anyone who has travelled to China knows that this can be done at the airport (provided one holds on to those receipts!) or even through black market money changers.

But one can’t expect to purchace a prime piece of Shanghai property with the one thousand dollars worth of RMB purchased at the airport exchange desk. And even if one could purchase the property, and even if one were able to sell it for a profit, and even if the Chinese government did revalue the RMB, without a recepit for that new amount all that profit would be for naught, stuck inside China.

But if it were that easy for the Chinese government to stop speculative capital flows, there would not have been $19 billion worth of them in the first quarter of this year.

So how do they do it?

I was pleasantly surprised to see that the Mure Dickie and Richard McGregor of the Financial Times answered the question today in this article. Unfortunatly, it’s only accessable to FT.com subscribers, or in the print edition, but consider this fascinating introductory anecdote:

Using his permanent residency in France, Mr Hu set up an offshore company to buy property from a real estate business he established in China… The property did not actually exist. But the paper trail allowed Mr Hu to apply to [legally] bring 284,000 euros into China.

The Wenshou entreprenuer – who was unmasked last month by regulators – offers an example of the efforts that individuals and companies have been making to move funds into the renminbi amid widespread speculation that Beijing is moving towards a significant revaluation.

I still have no idea how Mr. Hu planned on getting his profits back out of China, but the story is interesting nevertheless. For anyone interested, the FT article goes on to list five other commonly used methds to, “bet on the renminbi despite China’s capital controls.” Here are three for your consideration (comments mine):

1) False trade accounting – Intentionally mark up the prices of your exports to bring in more dollars.

2) Money smuggling – Black market banks and corrupt officials serve your forex needs.

4) Increasing overseas leverage – Unless you’re one of the lucky few companies allowed to borrow abroad, forget about it.

Still not sure how they plan on changing back to dollars, but I suppose if the money is there, ways can be found.

*Forex numbers are online here, but for the life of me I can’t find balance of payments data, so don’t ask how Reuters came up with the $19 figure. If anyone cares to work out the math, it would be much appreciated.

Sino-Japanese memorial friendship tree cut down

On April 25 at about 9:20am a message was left by an employee of the’Aimesse Yamanashi’ Yamanashi prefectural industrial relations hall in Kofu city, Ozu-cho at the South Kofu police station stating that “the Sino-Japanese commemorative frienship tree in our grounds has been cut down.”

The commemorative tree was 12 centimeters across and 5 meters tall. It had been cut with a saw-like implement approximately 30 centimeters from the base.

The tree was a 17 year old maple, planted on May 25 1995 to commemorate 10 years of ‘friendship city’ relations between Kofu and Sichuan, China. There had also been a commemorative stone plaque by the tree, but it had been defaced with red spray-paint and knocked over.

Translated from Asahi newspaper, April 25 2005

Koizumi and pals offer olive branch to China

Koizumi apologizes once again to former colonies at an Asia/Africa development and aid summit in Jakarta BBC report

Addressing delegates, Mr Koizumi said: “In the past Japan through its colonial rule and aggression caused tremendous damage and suffering for the people of many countries, particularly those of Asian nations.

Yomiuri also reports quotes him as saying

「経済大国になっても軍事大国にはならず、いかなる問題も武力によらず平和的に解決するとの立場を堅持している」
Despite becoming an economic superpower, Japan will not become a military superpower, and whatever problems arise will adhere to the position of peaceful resolution without calling upon violence.

Perhaps Mister Koizumi will be able to make peace with China with the help of his new friends.

Jin-ken
Here is Prime Minister Koizumi with Japan’s twin mascots for human rights. The characters are ‘cleverly’ given names that both sound like real Japanese names and appropriate words. Mamoru Jinken (translates to ‘protecting human rights’) on the left and Ayumi Jinken (steps towards human rights)on the right.

Fascist wannabes in Japan fight back against Chinese protests

Japan Times report:

These fascist wannabes are the same guys who hire yakuza wannabes to drive around in silly trucks and forced a manga publisher to withdraw a piece of historical fiction that depicted the Nanjing Massacre. I really hope that the far more reasonable majority has the guts to stop paying attention to these morons.

On April 12, a man called a broadcasting company in Fukuoka saying there would be an explosion at the Chinese Consulate General in the city later in the day, Fukuoka police said.

The caller said he had planted 10 kg of explosives that would go off at 7 p.m., police said.

The consulate the same day also received a razor along with a letter of protest over the anti-Japan demonstrations in China, and a razor blade was also sent to another consulate in the city of Nagasaki, the Chinese Embassy said.

Police searched the consulate’s premises and found no explosives, and are investigating the case as a malicious hoax.

On Friday, an envelope containing harmless starch-like white powder was sent to the Chinese Embassy in Tokyo in an apparent anthrax threat, police said over the weekend.

Also that day, a mailbox doorplate and intercom at the Tokyo residence of Chinese Ambassador Wang Yi were found sprayed with red paint.