Meanwhile, back to China.

Important articles today on various issues related to China.

Goldman Sach's clever BRIC (Brazil, Russia, India, China) moniker has more to do with a new asset class for developed country investors than a monolithic block of countries representing a new power centre. This article exposes the truth that like the Communist bloc these countries are more different than alike. The article also underlines that Chinese growth still depends on demand from elsewhere. We warn that the transition to sustainable domestic demand in China will take time and create important dislocations.

Put a jaguar, a bear, a tiger and a panda together and you might get a good show but you won’t get a quiet life. http://blogs.ft.com/economistsforum/2010/01/sexy-term-that-helps-to-focus-attention/

In these thoughtful pieces in one of our blogroll sites http://www.eastasiaforum.org/ the authors stresses that sustainable Chinese growth will depend far more on domestic reform that will encourage consumers to spend more and save less than a simple currency adjustment. This of course begs the question whether the reforms can come in time to prevent trade measure against China because it is unlikely that Beijing will repeat Japan's mistake of allowing the currency to rise dramatically.

In this changing global order, China’s monetary policy has been the target of persistent criticism. Accepted wisdom conjectured that, if the RMB were allowed to float, it would appreciate substantially more, and this would reduce China’s high current account surplus as well as the US deficit. The RMB was fixed to the US dollar in 1997, and then later unleashed in 2005. Until 2005 China was criticised for fixing the value of the RMB to the US dollar. After that it was criticised for not allowing the RMB to appreciate enough. But the real objection was clearly directed towards the large current account surplus. http://www.eastasiaforum.org/2009/12/02/china%e2%80%99s-exchange-rate-policy-its-current-account-surplus-and-the-global-imbalances/

China’s current account surplus has been the subject of fierce debate in recent times, with politicians in the United States and Western Europe often criticising China’s rigid exchange rate regime. Their real focus, however, was probably not the exchange rate policy per se, but China’s growing trade and current account surpluses. It has been argued that, by artificially depressing the value of the renminbi (RMB), China took jobs away from its trading partners. http://www.eastasiaforum.org/2009/12/13/fixing-chinas-current-account-surplus/

Lex of the Financial Times reminds us how difficult it is to squeeze out bubbles created by excess credit creation without resulting in a dangerous fall. The words genie and bottle come to mind.

In their dreams monetary authorities tighten like Kaa, the Jungle Book python. Hypnotise the rank and file with assurances of a commitment to growth, while stealthily withdrawing various measures of support. Then, without anyone realising that the squeeze is actually on, the policy coils keep a firm grip on inflation. http://www.ft.com/cms/s/3/b7b99e06-0397-11df-a601-00144feabdc0.html

In the 'it takes knowledge of one to know one' the story of Russian-born co-Google founder Sergey Brin and Google's decision to call China's bluff.

At the annual meeting of Google shareholders on 8 May 2008, a motion was proposed from the floor which called for an end to the company's activities in China. http://www.independent.co.uk/news/people/profiles/sergey-brin-engine-driver-1869546.html

And in the 'leadership has responsibility' category this story about the death of a leading Chinese human rights lawyer.

Fears that one of China's top human rights lawyers may have died under torture in detention were growing yesterday after a policeman who knew about the details of Gao Zhisheng's arrest said he "went missing" in September last year. http://www.independent.co.uk/news/world/asia/did-the-chinese-security-forces-kill-gao-zhisheng-1869532.html

The Economist takes a deeper look at the challenge facing Google and other western companies in an authoritarian state. Frankly the question is not whether Google can change China -- not today, not tomorrow, not next year, but maybe in twenty years -- but whether we let China change us.

“WE’RE in this for the long haul,” wrote a Google executive four years ago when the company launched a self-censored version of its search engine for the China market. Now Google says it might have to pull out of the country because of alleged attacks by hackers in China on its e-mail service and a tightening of China’s restrictions on free speech on the internet. Its change of heart, as the company rightly points out, could have “far-reaching consequences”. http://www.economist.com/world/asia/displayStory.cfm?story_id=15267915&source=most_commented

Not sure that Japan's new leadership really understands how the balance of power works and the vacuum created by vacating a key role. China does.

THE Yomiuri Shimbun reports here, and Japanese diplomats have confirmed they believe it is true, that China is thinking about applying to take over Japan's refuelling mission in the Indian Ocean that was scrapped after the Democratic Party of Japan (DPJ) won power late last August. The mission was meant help in the international effort against al-Qaeda, by refuelling navies blocking gun-running and other shenanigans by sea. The DPJ argued that Japan's involvement breached its pacifist constitution. The issue became one of several straining ties between the United States and Japan, both of whom will wear forced smiles when they celebrate the 50th anniversary of their security alliance tomorrow. http://www.economist.com/blogs/banyan/2010/01/new_chinese_backyard?source=hptextfeature

Moving from China to the question of the stability of financial markets, this useful discussion of the risks of investors forgetting that market recovery does not equal economic restructuring particularly when so much of the global economy is in need of it.

Financial markets have failed to price in the remaining problems that bedevil a long-term economic recovery, PIMCO’s Mohamed El-Erian told CNBC. http://seekingalpha.com/article/182851-pimco-s-el-erian-markets-are-not-facing-reality?source=email