EU-DIGEST

"If the US Congress is responsible for punishing or shaming foreign regimes for evil acts, why are we not condemning China for its current actions toward the government and people of Tibet? Why are we not passing resolutions condemning the daily cyber attacks against U.S. commercial and governmental computer systems conducted by the Chinese? Why is there no bipartisan condemnation of the numerous shell corporations that have been formed in the U.S. with the fact concealed that these corporations are operatives of the Chinese military? (Now these corporations can contribute as they see fit to U.S. political races thanks to the recent U.S. Supreme Court decision.) No resolutions are in the works about China's manipulation of the value of its currency to the immediate detriment of the U.S. and other countries.

Oh, I forgot that China is the US banker. It allows us in America to continue down the road to our own economic ruin. Without China, our politicians would have to deal with our debt albatross without the option of pushing the pain onto future generations.

This may explain the resolution against the Ottoman Empire. It no longer exists. Congress can cloak itself with the halo of moral outrage without risking its catnip of borrowed money or campaign contributions."

China sold $34bn (£21.5bn) worth of US government bonds in December, raising fears that ­Beijing is using its financial ­muscle to signal that it has lost confidence in American economic policy.

US treasury figures for the period ending in December 2009 show that, following the sale, China is no longer the largest overseas holder of US treasury bonds. Beijing ended the year sitting on $755.4bn worth of US government debt, compared to Japan's $768.8bn. Since the sub-prime crisis that began on Main Street USA grew to engulf the global economy, China's leaders have repeatedly expressed concerns about US policy. December's $34bn sell-off made only a tiny dent in Beijing's total holdings of US assets, which amount to well over $1tn when stakes in American companies, as well as treasury bills, are taken into account.

But the news intensified concerns about China's appetite for bankrolling ever-widening American deficits. Premier Wen Jiabao told reporters last year: "We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I'm a little bit worried."

The meeting comes amid tension in US-Sino relations, with disputes simmering over US arms sales to Taiwan, claims of Chinese cyber-spying and trade deals.

China, which views the Dalai Lama as a separatist, has warned the meeting will undermine relations.

The US, while moving carefully on the issue, dismissed the fears as needless.

The oil and gas industry breaches, the mere existence of which has been a closely guarded secret of oil companies and federal authorities, were focused on one of the crown jewels of the industry: valuable “bid data” detailing the quantity, value, and location of oil discoveries worldwide, sources familiar with the attacks say and documents obtained by the Monitor show.

The companies – Marathon Oil, ExxonMobil, and ConocoPhillips – didn’t realize the full extent of the attacks, which occurred in 2008, until the FBI alerted them that year and in early 2009. Federal officials told the companies proprietary information had been flowing out, including to computers overseas, a source familiar with the attacks says and documents show.

The data included e-mail passwords, messages, and other information tied to executives with access to proprietary exploration and discovery information, the source says. While China’s involvement in the attacks is far from certain, at least some data was detected flowing from one oil company computer to a computer in China, a document indicates. Another oil company’s security personnel privately referred to the breaches in one of the documents as the “China virus.”

In an interview with the Financial Times published on its Web site, Nowotny said: "I think there is a strong need from the macroeconomic side to have changes in the exchange rate policy of China because economically it's very problematic for a country to have huge surpluses in the current account."

Referring to the comparatively high valuation of the euro, Nowotny said, "developments have not been disruptive up till now, but one has to observe this very carefully."

Google's clash with China is about much more than the fate of a single, powerful firm. The company's decision to pull out of China, unless the government there changes its policies on censorship, is a harbinger of increasingly stormy relations between the US and China.

The reason that the Google case is so significant is because it suggests that the assumptions on which US policy to China have been based since the Tiananmen massacre of 1989 could be plain wrong. The US has accepted - even welcomed - China's emergence as a giant economic power because American policymakers convinced themselves that economic opening would lead to political liberalisation in China.

If that assumption changes, American policy towards China could change with it. Welcoming the rise of a giant Asian economy that is also turning into a liberal democracy is one thing. Sponsoring the rise of a Leninist one-party state, that is America's only plausible geopolitical rival, is a different proposition. Combine this political disillusionment with double-digit unemployment in the US that is widely blamed on Chinese currency manipulation, and you have the formula for an anti-China backlash.

However, the firm appears to have limits on exactly who it wants to get its message out to, and users of lesser search engines are not on its radar.

The same search terms on Bing show no sponsored results on the main search page, though the shopping results do serve up some sponsored results. These included florists and valentines in China, though we suspect Google won't be availing itself of such services for a while.

The cupboard is equally bare over at Yahoo!, though a search on China does offer some sponsored links to holidays there. Something else we don't imagine Google top brass doing anytime soon.  Alternatively, it may be that Yahoo! and Microsoft have turned down the Google shilling to tell it to do its own shilling.

Meanwhile, China has played down the impact of its falling out with Google on the broader relationship with Washington. State news agency Xinhua, quoted Vice Foreign Minister He Yafei as saying: "The Google incident should not be linked to bilateral relations, otherwise that would be over-interpreting it."

Note EU-Digest: So far, apart from one protest by Foreign Secretary Hillary Clinton, the US has been silent about the incident. While the EU, who consider themselves the "keepers of the book on human rights" have not uttered an official word on the issue, except for a personal condemnation  by EU Commissioner Neelie Kroes. Unfortunately it seems that in this case the EU and US seem to apply the theory that" money speaks", even on such issues as Human Rights and Censorship.

The Chinese authorities are well aware of the risk of a bubble, and have taken a series of steps in recent weeks, including increasing banks' reserve requirements, to try and cool things down. "They've got very scared that they can't control it," says Mark Williams, senior China economist at consultancy Capital Economics.

Stephen Roach, chairman of Morgan Stanley, Asia, says, "There is good reason to believe that China gets it – and is about to take dramatic steps in rebalancing its domestic economy in a fashion that would provide a sustained and meaningful reduction in its current account surplus,"

But not everyone agrees. There have already been a series of protectionist moves against China since the downturn began. The US has invoked World Trade Organisation rules to slap tariffs on Chinese tyres, paper and steel products; the EU has done the same to exports of aluminium wheels and steel products, as their producers struggle to compete with the Chinese juggernaut. The chorus grows ever louder from politicians around the world calling for Beijing to allow the yuan to appreciate. Japan and the eurozone in particular are likely to feel that China is growing at their expense.

The woman to become the EU's top internet official has said she backs Google's threat to quit China over the government's web censorship. "We have to have freedom of speech, we have to have the possibility to put things on the net," Neelie Kroes said.

Google said earlier it would stop censoring search results in China and might shut down its China-based Google.cn site, citing attempts to break into accounts on its Gmail service used by human rights activists. Ms Kroes said these allegations, if proved, were "particularly worrying as targeting of human rights activists in China and elsewhere" violated fundamental rights such as the freedom of opinion.

Ms Kroes is currently the EU's antitrust commissioner and will likely switch to her new post next month if she receives the backing of the European Parliament later this month. EU lawmakers quizzed her at a three-hour hearing on Thursday.

She called for technology companies to take privacy concerns seriously, saying failure to do so could prevent people from using the internet frequently. Her predecessor threatened to regulate social networking sites like Facebook unless they tightened data storage and privacy standards.

A complex attack on the Google Gmail accounts of human rights activitists – apparently from hackers based in China – has now been indirectly blamed on Microsoft, after McAfee Labs announced last night that the attacks appear to exploit a little-known vulnerability in Microsoft Internet Explorer.

The Google Gmail attacks – which were paralleled by similar attacks on Adobe and a number of other IT companies – are the result of a complex targeted attack by hackers in China that stem from a new and little-known vulnerabiity in the Microsoft web browser.

In his analysis of the saga, George Kurtz, McAfee's chief technology officer, said that, in the company's investigation it discovered that one of the malware samples involved in this broad attack exploits a new, not publicly known vulnerability in Microsoft Internet Explorer.

"China will still strictly adopt a policy of openness and offer a good investment environment," Yao said. "We emphasize that foreign companies including Google should all follow international standards and respect local law and regulations and local culture and customs to shoulder social responsibility."

The loss of such a high-profile company would be an embarrassment to communist leaders, who want to make China a technology leader. But the ruling party sees control over information as critical to maintaining its monopoly on power.

U.S.-Chinese ties are periodically strained by disputes over trade, human rights and U.S. support for self-ruled Taiwan, claimed by Beijing as its own territory. But the two sides maintain dialogue in a series of forums and say they want constructive relations.

The White House applauded Google's announcement that it would stop censoring search results in China and might close its China-based Google.cn site after hacking attacks on its Gmail email service. But other companies appear unlikely to follow suit and challenge China's Internet controls.

Note EU-Digest: China should understand "it takes two to tango".

The European Parliament recently adopted a very broad resolution covering the death penalties and life imprisonment sentences handed down to Tibetans and Uyghurs by the Chinese courts. The resolution also called for "the reopening of sincere and results-orientated dialogue between the Chinese Government and the Dalai Lama's representatives, based on the 'Memorandum on Genuine Autonomy for the Tibetan People' and leading towards a positive, substantial and meaningful change in Tibet consistent with the principles outlined in the Constitution and laws of the People's Republic of China".

It added that "in order to ensure that Tibetans and Uighurs, China's two major ethnic minorities, can coexist peacefully with the great majority of the Chinese population, who are of Han ethnicity, it is essential to begin a frank, ongoing and mutually respectful dialogue. Strongly condemning the execution of the two Tibetans, Lobsang Gyaltsen and Loyak in Tibet, and nine Uighurs in East Turkestan the Parliament called upon China to "suspend all the other death sentences passed by the Intermediate People's Courts of Lhasa and Urumqi and to commute those sentences, in the case of persons duly found guilty of acts of violence."