Obama’s Election Raises Questions for China

The victory of Democrat Barack Obama in the U.S. presidential election has raised questions about American policy toward China. During his campaign, Obama suggested his administration would back a foreign policy revolving around restoring America’s leadership, reforming international organizations, strengthening ties with allies, building peace in Asia, and combating global warming. His stance on China may change little from the Bush administration’s position.

An Obama letter to Taiwan’s leader last spring said he supports the “One China” policy. He also backs global trade and has several aides with diplomatic experience who know the importance of a pragmatic China policy. Nevertheless, Obama is expected to re-examine U.S. dealings with China, including the bilateral Strategic Economic Dialogue heavily touted by Bush. It’s unclear how Obama will handle human rights issues.

Serious Shakeup for Yangtze Delta SMEs

The Yangtze River Delta, one of China’s major economic growth engines, is undergoing a major business shakeup affecting numerous manufacturing and export enterprises. Company shutdowns started in late 2007 and accelerated this year, reflecting a deteriorating situation. Operational flaws, capital pressure and financial market losses have pushed a large number of small- to medium-sized enterprises, including some leading companies, to the verge of bankruptcy. Some firms expanded too fast, others turned inefficient, and still others borrowed too much at high rates.

The distress has cast a long shadow across the Delta’s legendary growth model and triggered fears that the current turmoil is a prelude to a collapse of traditional business, rather than a temporary adjustment. Caijing reporters took a close look at the woes facing companies across the region.

Graft Storm Over Foreign Investment Process

A deputy chief for foreign investment registration at the State Administration for Industry and Commerce (SAIC), Liu Wei, has been detained by Communist Party investigators, marking a new chapter for a corruption storm in Beijing. The probe earlier brought down Guo Jingyi and Deng Zhen, formerly senior officials at the Ministry of Commerce who were detained by party disciplinary inspectors due to their roles in approving foreign mergers and acquisitions. Liu was a link in the process and worked closely with Guo and Deng.

Guo’s case reflects what many see as the disappointing reality of foreign investment regulations, which are considered vague, lacking administrative power in some areas, and too restrictive in others. Foreign companies found loopholes in China’s regulations, leading to corruption. Now many will pay the price.

IMF Expects More Funding from China

In an interview with Caijing, International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn discussed the fund and its role in the wake of the subprime crisis. He said China should play a larger role in the global economic paradigm by injecting some of its US$ 1.9 trillion in foreign reserves into the IMF.

Strauss-Kahn wants increased funding for IMF because its capital growth has not matched international liquidity growth. He argues that IMF is too small for the global economy and should broaden its funding channel.

He also said that, in addition to being a “firefighter,” IMF should act as an “architect” by organizing a collaborative mechanism among governments and international institutions. Some have criticized IMF for failing to take measures to head off the world’s economic turmoil.

Graft Probe Targets Supreme Court Justice

Caijing has learned that the recent arrest and sacking of a vice president of the Supreme People’s Court of China, Huang Songyou, can be traced to a real estate investigation involving a high court official in Guangdong Province. Huang, 51, was ousted after six years in office by the Standing Committee of the National People’s Congress. He faces charges of bribery, corruption and a lack of moral integrity. Other details of the case were not released.

Earlier this year, Communist Party central discipline inspectors started probing Yang Xiancai, a former chief judge for Guangdong’s highest court. He was charged in connection with a controversial land auction in the province, which is still being investigated and could yield more arrests. Yang and Huang are close friends from the region.