The Chinese government is considering imposing a pro rata carbon tax on coal and fossil fuels such as gasoline, jet fuel, and natural gas, Finance Ministry official Su Ming has told the country’s state-run media.

For the past year, 20 experts from seven different government agencies have been investigating the development and implementation of a carbon tax, which has emerged as a preferred mechanism for curbing emissions in China’s energy intensive sectors.

Though the research findings are due out this summer, no details on the size of a tax or date for when it would take effect have been released.

Earlier this year, the government organizations responsible for the study – the China Environmental Culture Promotion Association and the China Institute of Development Strategy Studies – proposed rolling out the carbon tax in select provinces first as a “barometer” for monitoring the carbon intensity of economic activity.

Proponents of the plan favor an incentive structure that would reward producers for investing in cleaner technologies. Under the current market conditions, coal-fired power plant owners reap more profits by using cheaper, lower quality coal, which contributes greater emissions because it’s a less efficient fuel source.

Critics, however, point out that unless the tax rate is set appropriately high, firms would choose to pollute and pay the fee, instead of take steps to curb emissions.

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• China becomes world’s fifth-largest holder of gold

Speculations about China’s increasing appetite for gold were confirmed today as Beijing revealed its gold holdings to the IMF. China now holds 1,054 tonnes of gold and has overtaken Switzerland, Japan and the Netherlands to become the world’s fifth-largest holder of gold. Beijing’s increased gold purchase is believed to be part of a greater strategy to diversify China’s foreign  exchange reserves. As the world’s largest gold producer, China has the option to source gold supplies from local mines but might also refer to the open market for future purchases.

• Government funding for overseas oil acquisitions

China will provide funding for domestic oil companies’ bids for overseas assets, according to an industry official. Taking advantage of slumping energy prices, the strategy will be part of Beijing’s new oil and petrochemical stimulus package, which is scheduled for announcement within a week. The stimulus plan includes more loans and preferential tax policies for petrochemical companies as well as an increase in oil-product stock-piles and domestic demand.

• China’s textile industry to focus on brand-building

In an effort to revitalize its struggling textile sector, China announced plans to push for brand-building and higher value-added. Severely hurt by the decline in global demand, China’s textile industry now faces excess capacity, financing difficulties and job losses. While still concentrating on location-specific cost advantages, China’s also plans to build and promote 100 domestic textile brands strong enough to compete in the international market.

• China’s 60th anniversary naval parade

China on Thursday staged a parade of 52 Navy vessels and aircraft to mark the 60th anniversary of the People’s Liberation Army Navy. The parade, which was followed by naval delegations from 29 countries, demonstrated China’s growing naval power and included previously unseen nuclear-power submarines. A number of defence analysts in the U.S. and Europe see China’s naval build-up as a challenge to the U.S.–the world’s leading maritime nation. With a stronger Chinese navy, tensions might increase over the Taiwan Strait and disputed regions in the South China Sea.

Beijing authorities have announced that driving restrictions will be extended another year, as part of the city’s overall strategy to reduce airborne pollution and traffic congestion, according to reports from China’s state-run media. The plan hopes to take 930,000, or roughly 20%, of Beijing’s over 3.6 million vehicles off the road each weekday.

Starting Monday, April 13, cars will be banned from metro roads one day per working week, depending on the last digit of their license plate. There will be no restriction on weekend driving.

This measure represents the most strict action taken since lifting a ban that was put in place one month prior to and during the Olympics, wherein vehicles were prohibited from driving in Beijing every other day, as officials scrambled to achieve decent air quality and clear roadways for the competing athletes and attendees.

While pollution levels have not been as low as in August and September - Beijing achieved its lowest pollution levels in at least eight years under the alternating odd-even restrictions - the less harsh restrictions have not been entirely for naught. According to the Ministry of Environmental Protection air pollution data, the pollution index average was 82 between October 2008 and February this year, well below seasonal averages of previous years.

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I was not as bemused as some who stumbled across Treehugger’s April 1st story on China’s plans to build a green city, by veteran contributor and colleague of mine, Alex Pasternack. Knowing well that wit is Pasternack’s forte, today is April Fool’s Day, and the Center for Urban Misuse does not exist, I drank in the ironic hat-tip to China’s oft-circumlocutious, and increasingly vehicle-studded, path towards sustainable development.

Upon discovering an article on China’s government website entitled “China to be Painted White to Fight Global Warming“, however, I began to feel like someone led into a backroom closet of a Chinatown alley, surrounded by Louis Vuitton and Prada bags, i.e. hard-pressed to decipher what was real and what was fake.

 internet information center, a one-stop shop for the latest in the party line, and as such hardly the place to stage a prank. That, coupled with the story’s non-descript appearance, and typically scant public demonstrations of wry humor in China, initially convinced me that the story should be taken at face value. But as I read past the title, I became less certain. …..click here to read more

Beijing joined other governments around the world in cushioning against economic slow, announcing its $586 billion package plan for infrastructure (roads, airports); tax deductions for exporters; increased investment in health, education, environmental protection, and technology; and more generous subsidies for farmers and lower-income individuals.

Behind the announcement of this stimulus plan is Chinese apprehension over facing zero export growth. What this means to China is factory closures and massive layoffs. Exporters report that orders fell to 9% in the last quarter - the lowest in five years - and analysts predict growth will fall to zero, given current and project global demand. As an emerging economy, China feels pressured to create enough jobs to adequately employ millions of workers entering the economy each year. . . who expect steadily rising incomes and an improved standard of living.

“We must implement the measures to ensure a fast and stable economic development,” Premier Wen Jiabao was quoted saying at a government official meeting. “They are not only the needs of the development of ourselves, but also our biggest contribution to the world.”

Originally focused on fighting inflation, recent slows and global economic crises have forced the country to refine its target to include an added measure to ensure fast economic expansion. Recent actions to minimize damage by government officials has included cutting interest rates (three times thus far) and lifiting ceilings on sums that Chinese banks are able to lend. Chinese Premier Wen Jiabao's action plan includes:

• increasing investment and consumer spending
• maintaining export growth
• enhancing corporate competitiveness
• reforming financial industries
• improving the health development of the real estate industry

These efforts are aimed at increased “social spending” to better distribute wealth to poor, rural areas, and boost consumption.

 
For the second time in less than a month, China cut interest rates today, supporting efforts to strengthen domestic economic growth. The 0.27 percentage point cut brought the rate for one-year bank loans to 6.93 per cent and followed a reduction of the same size announced in mid-September.  China's consumer price inflation has fallenfrom a 12-year stint at 8.7% (February) to 4.9% (August). Its GDP is expected to fall to between 8 - 9% in 2009 after its more than five-year golden period of double-digit expansion.

Although these cuts were conducted in concert with those implemented by the US, Europe, and other members of the international community, the People's Bank of China (China's central bank) did not officially link its actions with its counterparts. Analysts showed “little doubt the timing was influenced by the international effort to counter the effects of the global financial crisis.”

Qu Hongbin, chief economist for China at HSBC hypothesized that China's reluctance to acknowledge a link between its actions and those of other central banks is a careful maneuver around directly developing policy to help Wall Street. He says, "The PBOC [is] fully aware of the global situation . . . but from the political point of view they have to be very careful."

Interestingly, despite the global economic crisis, China's finance industry has managed to shirk most of the negative impacts being felt around the globe. However, it's being reported that foreign and small Chinese banks are finding it increasingly difficult to sustain themselves in the domestic interbank market, caused by credit freezes and the subsequent overcautiousness displayed by wealthy local lenders.  "Chinese GDP is slowing but not slumping, " quoted Ben Simpfendorfer, chief China economist for RBS.

 
Li Changjiang, head of the General Administration of Quality Supervision, Inspection and Quarantine for China, has resigned for failing “to conduct a proper inspection in this case, and Li Changjiang bears responsibility for this. The State Council has accepted his resignation,” as reported by China Central Television. Serving since 2001, the resignation comes one year after the Chinese government issued promises to reform its quality control in response to a series of food and product safety issues. 

Improvements by way of random inspections, increased exchange with foreign quality inspectors, and an established national system for recalls were all introduced as a path forward for the country. These efforts to publish new regulations and procedures was its attempt to address waning customer confidence, and mitigate damaging effects to its export agreements.

Li reportedly stepped down with approval from China's Cabinet, and has been one of a handful of officials who have been held accountable for this debacle. In addition, one notable official being Wu Xianguo, Shijiazhuang's (city where Sanlu group is headquartered) top official, who was fired Monday for “failing to deal with the case properly,” according to Xinhua News.

Sec Treas Henry Paulson recently published an essay in CFR's Foreign Affairs magazine, which discusses leveraging trade as a platform to strengthen the SinoAmerican relationship. He writes hopeful that the next administration will engage China in a way that is responsive to its ”twin priorities” of “territorial integrity and economic growth.”

Paulson's theory revolves around the cornerstone that successful partnership will be better facilitated through pursuing issues and activities of shared interests:

The prosperity of both nations depends on the ability of each to achieve balanced economic growth on stable and vibrant trade and financial regimes, on diverse and dependable energy sources, and on sustainable progress that protects human health and the environment.

Paulson adds that the US’ engagement strategy is best served by working to improve understanding of China. Specifically, China's ongoing challenge of striking a balance between its ambitions to modernize/reform, and the stability of its nation. Being clear on Beijing's tendency to view its “international interactions primarily through an economic lens.”

Americans who worry that China might overtake the United States are worrying about the wrong thing. They should instead be concerned that Beijing may not make key reforms or that it will face significant economic difficulties down the road. Serious troubles in China's economy could threaten the stability of the US and global economies.

As the US does its best to manage current relations with China, it will be met with challenges when trying to steer the direction of its future. Paulson spells this out by saying that Washington needs to “understand China's perception of its self-interest, identify opportunities to persuade China that its interests and those of the United States often are the same, and narrow real differences whenever possible.”

As a means for a solution, Paulson advocates increasing emphasis on the SED, which has thus far proven successful as a communication channel between the two countries. Part of the reason for SED's success is that it is the first of its kind: an ongoing dialogue between the two that records and publicizes commitments made during sessions, which serves as a force function to hold each party accountable for its actions and promises.

Another unprecedented aspect of the SED is that it works to ensure that all levels of each government have direct interaction. There is cabinet-level representation from all ministries with responsibilities for various economic issues from both countries. Chinese ministers and US cabinet secretaries are involved in each session. Subject matter experts are given the opportunity to speak before high-level heads to provide accurate briefs and information to support the decision-making process. The discussions are fairly unstructured. All these aspects of the SED play into China's political decision-making process, which follows a team effort where its players are national ministries and officials.

An example that illustrates the success of the SED in facilitating breakthrough agreements is the recent conclusion of a bilateral air services agreement. Paulson explains that the agreement was originally bottlenecked by China's focus on developing its domestic aviation through limiting international aviation efforts. The SED provided a tabletop on which he was able to show Beijing that more access = more people = more goods. As a result, US passenger flights to/from China will enjoy increasing in frequency by more than double by 2012.

As the US works to further bridge partnership activities with China, Paulson encourages the country to re-package its agenda so that China favorably addresses its priorities. In doing so, he asserts that the Washington must work with Beijing to develop its financial sector in order to reduce personal savings rates/boost personal consumption, and find flexibility in its prices and exchange rate.  The growing surplus of an aging nation has forced China to turn to issue large quantities of RMB to quell it from appreciating too rapidly, which, in turn, has prompted inflation, exacerbating an already present issue of disparity of wealth between metropolitan cities and rural areas. If the US plays its cards right, this could be its “in,” allowing it to press on the following:

1. Mutual foreign investment — enable American banks, securities, and insurance companies to operate in China
2. Energy security — encourage China to move in the direction of a market-determined energy price
3. Trade practices – continue to promote the criticality of transparency and intellectual property rights

BBC news is reporting that multilateral trade talks in Geneva have ended without consensus. The epicenter of the rift blocking resolution was that of market access. While the US and EU push for greater access to provide services to the fast emerging economies of India and China, the two developing countries are instead focused on fighting growing disparities between their wealthy and poor populations by pushing for better access to US and EU agricultural markets.

In response to US complaints that India and China are being too restrictive with their markets and overprotective of their farmers, India's Minister of Commerce Nath responded by saying, “The US is looking at enhancing its commercial interests whereas I am looking at protecting the livelihood of farmers.” Chinese Commerce Minister Chen agrees, and backed him up by relaying that the US was “asking a price as high as heaven.”

Is Nath getting at something? Where are we drawing the line? Are we really prioritizing commercial opportunity over social responsibility? Can we really justify that the poorest populations of developing countries should help us recover costs in the face of a recession that is impacting the global community? Why aren't we applying more pressure on India's software industry, or China's manufacturing industry to be fairer about more evenly spreading things around?

And, it was reported that the US, India, and China were unable to agree on tariff thresholds for farm import rules that would buffer farmers from unforseen economic hardships like price drops and import surges. The US and EU would of course protest to eating these costs, meanwhile forking over top dollar for goods that have been hiked up in response to rising fuel and food prices, and overall inflation.

Interestingly, analysts of this BBC article are anticipating that this collapsed round of trade talks signals the beginning of the end of multilateral trade agreements. They instead expect that “nations may pursue dual agreements with partner nations, preferring to focus on their own requirements rather than a more common negotiating goal.” Is this really the case? Even less will be accomplished if everyone takes on a free-for-all attitude. It will be less about intentions or contributions and more about who you know.

. . . will provide an update and/or formal statement as trade ministers officially close the round.

After the US initiated two WTO cases* against it last year, China has since worked to develop a National IP Strategy, requiring China to “explore the possibility of establishing specialized IP courts to deal with IP-related civil, administrative, and criminal cases.” The strategy was developed by China's National Working Group for IPR Protection, which was established in 2005. The body is made up of 13 officials from 12 IP-related agencies and ministries, such as Commerce, State Intellectual Property Office, and Customs.

Released June 17, this new, unified system would help to more easily transfer administrative cases to criminal enforcement courts. The new strategy also seeks to realign jursidiction in order to appropriately address cases requiring specific, technical knowledge, such as with patents. Successful implementation of this strategy would result in:

• improved judicial interpretations
• refined litigation procedures
• beefed up subject matter expertise using expert witnesses and technical investigations
• improved patent standards policy
• mechanisms for compulsory licensing

This series of events validates the effectiveness of escalating trade malpractices to the WTO. So long as overarching governance systems are in place to provide check and balances, neutralizing the economic disparaties globally becomes an more approachable issue. Although time will tell whether this strategy truly addresses global concerns of Chinese IP policy and enforcement, steps are being made by the country to advance in the right direction. Engaging its more developed trade partners to share best practices in trade will provide a wider range of perspectives on the matter, while allowing countries like the US feel as though they are being heard.

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* The first case opened against China was in response to an absence of protecting and enforcing copyrights and trademarks, and the second on China's obstruction of trade of books, videos, music, and films.