More developments on China’s road to a new information flow
chart: the New York Times researcher in Beijing who has been in jail for 18
months appears likely to be released ahead of Hu Jintao’s visit to the United
States, and a guy in Shandong who posted an essay on the Internet saying people
have the right to use violent means to overthrow tyranny was sentenced to 10 years
in jail.

It’s tough for them, finding the right balance on these
issues. But as they are pushed inexorably down the information road, they are
still doing remarkably well at maintaining the dominance of the approved
view amongst ordinary people.

This weekend, I was in Shanghai reading a copy of the Hong
Kong Apple Daily from December of last year – the day after the massive street
rally calling for a timetable for "one man one vote" direct
democracy, to help non-government appointed legislatures withstand pressure to
sign up to the Beijing-approved "when the time is ripe" model. Good
graphics and photos and massive headlines in the traditional Apple Daily “hit
them between the eyes” style. A mainland guy aged around 30 looked at the paper
and at first was convinced it was a hoax, that such a thing could not possibly
take place in China-Hong Kong.

This guy is on the Internet all day and all night long. He is
plugged in and intelligent and he had no knowledge of this march and similar events
in Hong Kong. This is a true measure of Beijing’s success in
addressing the challenge of the Internet.

If any further proof was required that the monolithic state controlled planned economy is pretty much a thing of the past, the wonderful battle brewing between Nanjing Motor and SAIC in Shanghai is surely it. Here are two state-owned auto manufacturers battling it out over foreign intellectual property rights – the right to the designs and production of Rover and MG cars. As I understand it, SAIC bought the IP rights to the Rover 75 car before River collapsed later this year. Then Nanjing Motor bought the Rover factory. Who gets to produce the car?

Belgium, Slovakia and Malta were the only EU countries to
vote for anti-dumping duties to be levied against China-made shoes yesterday.
Of course, Italy, Spain, and the other major EU shoe producers only voted
against the proposal because they thought it wasn’t tough enough. And the vote
itself was only consultative: trade commissioner Peter Mandelson will introduce
sanctions of 4% against China in April and gradually raise them to 19.4%.

It was good that so many countries showed support for free
trade, but disturbing that the commission is going to go ahead with sanctions,
which were also imposed on Vietnam. Commissioner Mandelson in his comments
argued that footwear is not "the next textiles", referring to his last attempt
to salvage certain EU production that is headed slowly for extinction. But the
analogy rings true: here are two industries in which Chinese production is
cheaper and more efficient than that of the EU (or the US). The richer nations
have stifled competition from China for years with their global quotas. The yoke
came off in 2005, and Chinese shoes and underwear flooded into European and
American markets. Rich-country producers naturally cried for protection, and
they are getting their way.

The commissioner, thankfully, also acknowledged that
so-called dumping was not the only reason for the decreased competitiveness of
EU shoemakers. Asia has "natural and legitimate low-cost advantages", he said,
and besides, many European shoemakers have moved their production to Asia. But
he is still convinced that certain benefits the Chinese government bestows on
its shoemakers are unfair trading practices. Among these he lists "cheap
finance, tax breaks, non-market land rents, [and] improper asset valuation". These
will of course be challenged by the Chinese government and producers. As with
all protectionism, the final outcome will be higher prices for consumers, and
no real delay in the loss of jobs and production for countries who cannot
compete on the level.

There is a fascinating new concept out there in Chinese
politics right now – the "New Left". They take their cue to some
extent from the New Left in the West, partly from the leftist positions of old
New China.

China
is a victim of globalization. The government is selling China out by
letting foreign banks buy stakes in the state-owned banks. China should take a tough line on Japan and on Taiwan. China should boost its military
strength so it will not be bullied by the foreign devils. The state enterprises
should be strengthened, not shrunk. Public challenges to the party in the media
should be vigorously dealt with. The entrepreneurs are being mollycoddled and
the needs of the ordinary people are being neglected.

This is really the first time since the late 1980s that
Chinese politics has seen a clear ideological split, and it clarifies Hu Jintao’s
role by implication. If the “New Left” is in opposition to his policies, then
he must be a liberal reformer.

Hu is concerned and he is taking measures to deflect the New
Left. Appeasement, selective measures to counter criticism etc. But the main
thrust of his policies – reform – appears to be unwavering.

All this is highly unlikely to be the precursor of a
blow-out such as the one that ended the debate between reformers and a version
of the New Left in 1989. China
has changed. One difference is that hardly anyone cares about politics anymore.
“All the new bourgeoisie in Beijing are
interested in talking about is sex and trips to Bali,”
one friend told me.

Something over a year ago, with property booming all over China, the central government put out a directive to all points instructing them to take measures to cool things down. Shanghai obeyed, and issued new regulations to stem speculation, including tougher terms on mortgages and re-sales. The measures had an effect, and the Shanghai market is down maybe 40% off its highs, mortgage applications are down, re-sales are down, home decoration companies are suffering, furniture shops are quiet … the chain of impacted industries is long and threatens to drag down the GDP of the whole city.

The irony is that just about no other location in the country bothered to follow the central directive, so that while Shanghai property sags, prices in other parts of the country remain relatively perky.

The Shanghai government, I understand, has decided to take measures to support the market, and extraordinarily the measure it has decided upon is to do absolutely nothing. It will issue no directives, either positive or negative with regard to the property market, but just let things settle down.

The property market remains a hugely sensitive issue for the authorities. As one person told me, Chinese people are now used to the idea that stock prices can go down as well as up. But with property, they don’t yet have the psychological preparedness to handle the concept of price falls.

Overall, it feels to me like China property is, selectively, a buy.