Daily Sources 7/24

1. XINJIANG AUTHORITIES TO "HELP" DEFENDANTS BY ASSURING THEM THAT THEIR COUNSEL IS OF THEIR ETHNICITY, BUT NOT ESPECIALLY QUALIFIED TO REPRESENT CRIMINAL DEFENDANTS

Sky Canaves at China Journal reports that Xinjiang authorities plan to provide all Uighur defendants with legal representation free-of-cost. Further, they will use Uighur lawyers after providing them with quick legal training in criminal defense. It seems rather unusual to think that a lawyer could be quickly retrained into an entirely new specialty, but that appears to be the plan. Canaves notes that when human rights lawyers offered their services free in the aftermath of the recent troubles in Tibet, they were prevented from taking the cases and some subsequently lost their licenses to practice. Indeed, several human rights lawyers based in Beijing this year have yet to receive the renewal of their licenses to practice. These are capital cases. If those lawyers chosen are chosen for their ethnicity as opposed to their ability in the relevant field of law--and if those lawyers particularly interested in defending people suspected of having had their human rights abused are banned from practicing in general--it hardly seems like much of a benefit, but I suppose they will identify more closely with their (mostly) defenseless clients.

2. EICHENGREEN ARGUES CHINESE IMPORTS BEST WAY OUT OF GLOBAL CRISIS

Barry Eichengreen says increased Chinese imports is the best road out of the current financial crisis.

"China can purchase more industrial machinery, transport equipment, and steelmaking material, which are among its leading imports from the US. Directing spending toward imports of capital equipment would avoid overheating China’s own markets, boost the economy’s productive capacity (and thus its ability to grow in the future), and support demand for US, European, and Japanese products just when such support is needed most.

This strategy is not without risks. Allowing the renminbi to appreciate as a way of encouraging imports may also discourage exports, the traditional motor of Chinese growth. And lowering administrative barriers to imports might redirect more spending toward foreign goods than the authorities intend. But these are risks worth taking if China is serious about assuming a global leadership role."

Worth reading.

3. CHINA TO RAISE $2 BILLION FOR FINANCIAL BUSINESS EXPANSION IN AFRICA

Terence Poon and Aaron Back at the Wall Street Journal report that the China Development Bank has plans to raise $2 billion by November of this year for the China-Africa Development Fund. The funds will be used to finance the expansion of financial business ties to Africa.

4. SHANGHAI ADOPTS TWO CHILD POLICY IN ATTEMPT TO DEAL WITH AGING POPULATION

Sky Canaves at China Journal also notes that the city of Shanghai, faced with an aging population, has embarked upon a policy designed to encourage families to have two children.

"For several years, officials at various levels across the country have touted the possibility of allowing couples made up of people who grew up as only children to have two kids to have two kids. Such policies are gaining impetus as the first generation of women born under the one-child policy is now at the peak of its childbearing years. In 2004, Shanghai revised its family planning rules to specify the types of couples who would be eligible to have more than one child."

Evidently no one wants to use productivity gains to cover the costs of an inverted population pyramid just quite yet, meaning, I suspect, that the gains have been overstated (and not just in China).

5. CHINA MAY BE SET TO BECOME LARGEST CONSUMER OF GOLD

Sophie Leung at Bloomberg reports that China is set to overtake India as the world's largest consumer of gold, according to the World Gold Council.

"Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said."

"Total demand from India in the first quarter fell 83 percent to 17.7 metric tons, from 107.2 tons a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8 percent to 105.2 tons from 103.3 tons. Total Chinese demand for gold was six times that of India in the first quarter, the council said in May."

In the beginning of May, the Financial Times reported that some analysts were arguing that Beijing had embarked upon a policy of increasing the share of its reserves held in gold bullion as a diversification measure--see Daily Sources 5/7 #2.

6. BUITER CALLS BS ON CHINA, INDIA, BRAZIL, SOUTH AFRICA, AND AFRICAN UNION'S CALL FOR THE DEVELOPED WORLD TO PAY FOR CARBON EMISSIONS CUTS

Willem Buiter makes the rather important point that China and India received a great deal of benefit, directly and indirectly, from industrialism, though it was developed in the West. It is not clear that the West today should suffer for the poor policy choices of medieval to twentieth century China. Thus, the argument that the West should be responsible for the cost of carbon emission reductions in the developing world can be described as disingenuous--though it will have a lot of appeal to, well, the vast majority of people in the world. True, but the costs of inaction, should predictions be true, will fall just as generally upon the developing countries as it will on the rich. Very much worth reading, IMO.

7. UK 2Q GDP DOWN 0.2% FROM 1Q, DOWN 5.2% YOY

Laurence Norman at the Wall Street Journal reports that the UK Office for National Statistics announced today that UK GDP in the second quarter fell 0.8% from the first and was down 5.2% on the year.

"Output dropped 2.4% in the first quarter and was down 4.9% on the year. ... In the first half of the year, output fell 3.2%. The government had forecast a GDP decline of 3.5% for the whole year."

8. SPANISH UNEMPLOYMENT TO CLIMB TO 22% IN 2010 PER CITIBANK REPORT

Ed Harrison notes at naked capitalism that a recent report by Citigroup expects unemployment in Spain to climb to 22% in 2010 after having just hit 17.9%. He translates a Spanish article on the report:

"In the opinion of the experts at the company, the recovery will reach Spain later than elsewhere in Europe because of the extent of deleveraging facing the Spanish economy. Therefore, there remains a substantial possibility that unemployment will continue to rise, after the withdrawal of the effects of fiscal measures taken by the Government."

9. RUSSIA WILL SANCTION COMPANIES SELLING OFFENSIVE ARMS TO GEORGIA, PUTIN INDICATES MOSCOW IS READY TO PROTECT DOMESTIC STEEL INDUSTRY

Ellen Barry at the New York Times reports that:

"Dmitri O Rogozin, Russia’s envoy to NATO, said on Friday that Russian President Dmitri A Medvedev had issued a decree that would impose sanctions on any manufacturer who sells offensive weapons to Georgia, 'wherever he is, in the Arctic or Antarctic region or in the United States.'"

Meanwhile, Maria Kolesnikova and Ilya Khrennikov at Bloomberg report that in an address in Magnitogorsk, Prime Minister Vladimir Putin indicated that Moscow is prepared to protect the Russian steel industry.

"Metals companies in Russia may receive preferential treatment in supplying so-called natural monopolies, Putin said, using a phrase employed in the country to refer to state-controlled companies such as natural-gas provider OAO Gazprom.

'We could consider passing a special law on this,' he said."

10. ECUADOR SIGNS DEAL TO PROVIDE CHINE 3 MILLION BARRELS OF CRUDE A MONTH

Eduardo Garcia at Reuters reports that Ecuador has signed a deal to export 3 million barrels of crude oil a month (~ 100 kb/d) to China. Quito will receive a $1 billion advance payment in the first week of August.

11. FED CREATES INVESTORS ADVISORY COMMITTEE MADE UP ALMOST ENTIRELY OF REPRESENTATIVES OF BIG SPECULATIVE CAPITAL

Jesse's Café Américain links to the Federal Reserve Bank's press release announcing the establishment of an investors advisory committee, which will have no policy-making power, but a lot of extra access to decision-makers at the Fed. Jesse makes the point that no member of this committee meant to represent the interests of investors could plausibly represent most investors, but rather big capital. At least Goldman Sachs isn't on the list.