ASIABIZBLOG

FT: All of Shanghai's purloined pension funds have been recovered, leading one to give serious consideration to the possibility that its gone for good.

In the 1980s, the Chinese government discredited Steven Mosher, a scholar of modern China and PhD candidate at Stanford University, and expelled him from the country. China's claims are immaterial -- it was clear that he was punished for documenting the horrors of the one-child policy.

China then threatened Stanford with excommunication: no funding, no exchanges. Stanford to its great and lasting shame did the unthinkable and expelled Mosher.

At the time, I hadn't yet decided whether to enter a PhD program in Chinese Studies. But I do remember some of my university instructors cautioning me to choose a topic wisely.

Mei Tzu-lin, whom I absolutely adored, was one of the few heroic figures I have ever met in academia. He asked me whether I intended to spend my scholarly life gallivanting through the Chinese countryside, adulterating my findings and conclusions out of fear of reprisal, or whether I was a scholar determined to search for the truth. I vaguely remember stuttering something, shocked by the profundity of his question.

In this essay, discovered on Howard French's fine blog, Carsten Holz provides an answer.

Pet food is a bit off topic, but I thought it would be a public service to include this link to an article on the purposeful introduction by Chinese manufacturers of melamine, a coal-based derivative, into the animal food chain. Evidently, melamine tests out as a protein, but costs far less to the seller than the addition of genuine proteins.

What harmful inedible substances have been introduced in China -- purposefully -- into food for the human population?

Chinese manufacturers generally add salt to food sold by weight, wherever possible: preserved fruit is an example. Salt is cheap, and its addition creates a heavier product. Less fruit can thus earn more. A trick of the trade. Salt is, of course, edible and, in fact, necessary in small quantities. So what, right? I guess we can stomach a little more than we need so the seller can make an extra buck (RMB).

Then there's the farmed frozen fish and shrimp originating in China, sold in bulk at the giant discount houses. Farmed salmon flesh dyed bright orange is really cool! "Wild" salmon, caught on the line in Alaska (which you may be able to source at your fishmonger) is naturally pink. Farmed salmon flesh would be grey, but for the dye. Ok, ok, it's probably an FDA-approved dye. But if the dye originates in China and the FDA isn't really watching...

Minor problems in the food chain, you say? Consider the adulterated baby formula which caused many deaths in China. Or the motor oil recently found to have been added to Chinese rice (for the same reason as the addition of salt: weight/additional profit).

Wheat gluten for pet food is the current topic of frightened discussion. But there has been little mention of the wheat gluten sold for human consumption -- generally, one would think, by Chinese and vegetarians outside of China. Surprise, surprise, surprise. It's a filler in many human foods worldwide. Of course, not all of that filler is sourced in China. But how do we know? And what about the Chinese diet itself?

China is one of the top exporters of food stuffs to the world. Do Chinese, eating primarily what is harvested and produced within China, and the rest of the world, who consume Chinese food exports, have something to be seriously concerned about?

UPDATE (May 3, 2007): China Food Mislabeled, U.S. Says

As we cautioned above:

Worried that the contaminant may continue to enter the United States and also seep into the human food supply through food additives, regulators have blocked all Chinese imports of wheat gluten and warned importers to screen nearly every other kind of food and feed additive entering the United States from China, including corn gluten and soy protein.

Last week, the F.D.A. and the Agriculture Department issued a joint warning to consumers saying that melamine has found its way into hog and chicken feed, encouraging producers to destroy the animals, even though there is no clear evidence that consuming meat from the animals is a danger to human health.

UPDATE (May 5, 2007): Counterfeit medicines from China containing toxic substitutes.

Washpost claims that Zhang Shuhong of Lee Der Industrial Co., Ltd., the leaded toy supplier to Mattel, has committed suicide. Zhang's colleagues claim, apparently over the telephone, his death by hanging in his factory. Terrible, if true. But, true? Please, can I be skeptical of this one, too? This report strikes me very wrongly. I have emailed the writer of the piece, asking for corroboration.

UPDATE (August 14, 2007): Oh, boy. Mattel Recalls 8.8 Million Toys.

What effect on Chinese factory owners? (Did I hear a black cackle out there?) I can see the headline in the Asian edition of News of the World (sorry, even I won't provide a link to that site): Lee Der led in lead, leading to loads of ledge leaping!

By the way, why has no journalist yet gently knocked on the door of the bereaved Zhang (Cheung) family to confirm his death? A phone call to a local PSB (Public Security Bureau) appears to be the only follow up done by any writer. And that, of course, we can count on. Right, all you China-based journalists?

Lead, again. The New York Times -- "everything that fits, we print" -- opines obliquely this morning on the subject of Chinese imports. Portions are intelligble. Let me endeavor to translate Times-speak to American English (I am not yet certified but well-acquainted with the slant of the handwriting.)

“That’s the price of doing business,” is the too-often-heard excuse from American companies that choose to overlook China’s loose business ethics and tight, verging on strangling, political controls.

We sit on this high moral perch of ours. (Stop whispering among yourselves about goings-on inside the Times!) American businessmen dealing with China -- look up at me as we speak to you! Gavel bangs. Guilty!. Gavel bangs. Order, we must have order! The convicted will now listen to our solution to the whole import safety megillah.

It is definitely not in America’s interest — economic, political or strategic — to erect a barricade against Chinese imports, which could spark a mutually destructive trade war. American businesses and the Bush administration must send a clear message to Beijing that it has to clean up its act or its export-led boom will falter.

Don't fight. Who wants a black eye? But everybody start yelling.

What China needs is an effective and transparent regulatory system to enforce product safety standards. The United States and other countries can help with technical advice and warnings about what would happen if Beijing refuses to take it. But the dangers are too immediate to wait.

Maintain the status quo. Let's get in there and continue to assist the competition to the American workforce do a better job than they're doing now, as we did elsewhere in Asia for the last 40 years. Golly, do you think lead in my gavel can cause brain damage?

Companies like Mattel may need to station their own full-time inspectors with their Chinese suppliers — and make clear that they’ll take their business elsewhere if those suppliers refuse to go along.

We don't care if Chinese are so darn smart they can evade just about any restriction placed upon them. Stop talking! Gavel bangs. We don't care if inspectors can be paid off. (Can they do that? Don't we have the Foreign Corrupt Practices Act of 1976?) Let's simply be straightforward about it and make another demand.

Unfortunately, the Bush administration, which disdains America’s regulatory system, has cut personnel and squeezed budgets at both the Food and Drug Administration and the Consumer Product Safety Commission, impairing their ability to monitor the quality of products made in China or, indeed, anywhere else.

It's Bush's fault.

There are some signs that China’s government may finally be getting the message. And for the sake of its own children, as well as America’s, China must establish an effective regulatory system and guarantee the safety of its own products. But American consumers can’t wait for that to happen. American businesses and American regulators have to provide the first line of defense.

America - it's up to you! Well, just industry and government, two major bees we've carried in our bonnet since time immemorial. Inspect everything. Help China. And to the masses of American consumers: you may continue buying whatever you please.

In New Zealand, high-levels of formaldehyde have been found in children's clothing imported from China. Calls are issued for Parliamentary investigations.

Just how does the formaldehyde find its way into the bloodstream? Curious, but I was unaware that Kiwis ingested woolens and cottons. Never saw them served at a bun-fight, have you?

Then, some dag comes along to report more formaldehyde can be found in food and drink, a by-product of aspartame, than in clothing.

Dieters of New Zealand, beware. Never, NEVER! sweeten your cardigan with NutraSweet.

[Editor's note: Many thanks to Miss Johnson from London for the tip.]

UPDATE (August 22, 2007): Now all in ANZ can sleep restfully. Thank goodness it's turning warmer.

"Chinese-made blankets containing high levels of formaldehyde have been recalled across Australia and New Zealand, the distributor said Wednesday, amid rising global concern over the safety of products from China."

A reference in passing to the origin of these condoms suffices to make this another "Uh-oh, Made in China" story. Check your wallets, boys. [Thanks once again to the eagle-eyed Miss Johnson From London for the onpass.]

The usual noises are heard, this time in Canada:

China's ambassador to Canada said importers share some responsibility for the recent recalls of Chinese-made toys found to contain excessive levels of lead paint. It is unfair to blame Chinese companies alone for this week's recall of 700,000 Chinese-made toys by Mattel Inc. (NYSE:MAT), Lu Shumin said Wednesday.

The Chinese toy manufacturers, most of them, are doing business with these foreign importers,' Lu said. 'They make toys according to the foreign importers' requests, according to their standard. So I think it is a mutual responsibility.'

In what has been termed an international public relations campaign, Chinese officials have disastrously turned, as is habit, to a longstanding tactic that will sink the dwindling reputation of Chinese products even further -- blaming the victim. Watch for increasing attacks of this sort -- including direct blame of the consumer himself. After all, the consumer was responsible for buying the product in the first place!

I wouldn't be surprised to see a decrease in the rate of growth in Chinese imports over the next year, simply due to this issue.

UPDATE (Sept. 11, 2007): Poll: American consumers overwhelmingly blame Chinese manufacturers, the Chinese government and, to a lesser extent, American companies.

UPDATE (Sept. 12, 2007): Bloomberg --

Mattel Inc., the world's largest toymaker, withdrew more lead-tainted products from China last week, bringing the value of recalled toxic and dangerous Chinese goods to $430 million since June 6, from $152 million a year earlier, according to figures compiled from U.S. Consumer Product Safety Commission data. The value of goods withdrawn from American shelves this year totals $1.08 billion.

UPDATE (Sept. 12, 2007): Why is this considered copying and this is not? Are they that dissimilar? How so?

A shameful kow-tow.

"Our reputation has been damaged lately by these recalls," Thomas Debrowski, Mattel's executive vice president of worldwide operations, told China's quality watchdog chief, Li Changjiang, in the Chinese capital.

Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys."

"But it's important for everyone to understand that the vast majority of those products that we recalled were the result of a design flaw in Mattel's design, not through a manufacturing flaw in Chinese manufacturers."

As of 1300 UTC on the date of this posting, the Mattel website does not display any such statement.

Beware, all ye who dare to accuse.

UPDATE (2100 UTC):

Even the Wall Street Journal, that supposed bastion of the free market ideal, and its interviewees miss the point entirely:

it also would also seem logical for Mattel officials to take a respectful stance toward Chinese officials, as 65% of its products are built there. Drew Thompson, the director of China Studies at the Washington-based think thank, the Nixon Center, says maintaining good government relations is crucial for companies that want to build a lasting corporate presence in the country. "It's incredibly important," Mr. Thompson said. "It's everything." Bates Gill, who has worked as a China specialist at the Center for Strategic & International Studies, agrees, noting that while it's important to maintain good governmental relations in most countries, it might be more so in a country like China. "The government has a lot of control over the full range of factors of production in China," Mr. Gill said. "From land usage, regulatory questions, licensing, labor, all of these inputs for profitable production in China are, you know, controlled and can be manipulated by state authorities. So you have to be cautious and make sure that those relationships are positive."

Why is it that, when discussing China, shameful bootlicking subservience under threat, a requisite of behavior before the ancient Imperial court, is tolerated by the most modern of businessmen and academics? Why is it blithely explained away, simply as an act of necessity, even of survival? Lord Macartney refused to bow to Qian Long:

In Peking Macartney refused to kow-tow, or make the nine prostrations, unless a magistrate of equal rank would kneel, and bow nine times before a portrait of George III. Both sides declined to yield. Finally, not in the palace, but in a garden, informally, the British minister obtained audience of the emperor, but in reality he was received and treated as tribute-bearer from a vassal state. Trade was opened at Canton, but the British foreigners agreed to obey the local magistrates. In a word, there was no "extra-territoriality" as yet. The foreigners' place of business was called a "factory."

[Note: If enough readers ask for it, I will find the incident in Macartney's journal of the trip, published ca. 1793.]

Bravo for that Brit! Who has the spine now?

Mattel's apology should be publicly and vociferously deplored, not simply for the craven act itself, then for its assuredly lasting after-effects upon other foreign firms, who will now find themselves pressured to act similarly, at pain of who knows what sanction.

I regret to say I can not commiserate with Mattel executives on their decision to cave. Instead, this is a lesson to all those who would foolishly place most of their eggs in one basket. I've been saying it for years, boys, China is a tough town. They play for keeps. Diversify or suffer. Or they're going to have you by the short and curlies. If they don't already.

The American Consumer Product Safety Commission has issued another set of product recalls involving leaded toys and jewelry from China. (Golly gee willickers, but don't they look so cute!)

In Bejing, Commerce Ministry spokesman Wang Xinpei on Thursday said: "Our attitude toward the toy problem has always been the same, that the problem is one in a thousand."

With several million products already recalled and many more likely to follow, that ratio may be somewhat erroneous.

The $64,000 Asia Business Intelligence question: which of the American companies involved in the recalls will be the next to suddenly appear with Chinese officials, apologizing deeply, humbly and profusely to the government, exporters, manufacturers, factory workers, transport carriers, freight forwarders, longshoremen and God knows who else in China?

Over the last few years, the American ardor for China has cooled. Even I need a sweater. In speaking with Americans, the topic often turns to China. My partner in conversation, whoever it may be -- home improvement contractor, local attorney, bank teller, teacher -- is now, as a rule, adamant that China is not a friend. Of course, that person may delight in friendships with individual Chinese, but to many Americans, China has become more than just an adversary. And I believe I am right in saying that Chinese are similarly disposed towards the U.S. A dreadful state of affairs.

China has become a focal lens for the distress, anger and helplessness that Americans can no longer tolerate directing inwardly. No longer do we read encomia touting the virtues of ancient Chinese philosophies practiced in modern life, the beneficially high rate of savings and lack of debt, the care and respect towards the elderly, the veneration of education, the tolerance for long hours and hard work.

Instead, we read only that Chinese are rapacious money-makers who intentionally employ toxic materials to improve profit, dirty spitting pedestrians who copiously litter with no sense of public morality, brutal authoritarians who control the freedom of speech, association and worship that Americans believe God gave Man, and the like.

Now, mind you, there is truth in both viewpoints. But, over the past few years, Americans have focused on the latter, seemingly in forbearance of all knowledge of the former. There should at least be balance.

Historically, Americans have always expected that the next generation would enjoy an improvement in the quality of life -- until my generation, who expect its decline. The American senses narrowing opportunity amid heightened competition. What can one truly eat from the communal pie that always seems to shrink?

The hackneyed phrase is "the American dream." It originally referred to the desire of lifelong tenants to own their own home. It now seems to be used to describe a paradigmatically American ideal of plenty, a cornucopia of whatever the individual would wish for himself. But for the American individual today, there is no boom, only the residual smoke of a bust. And someone must be held to blame. Why not China? They're enjoying -- so goes the thought -- an incredible run, and entirely at our expense.

Even long held American commercial tenets may go the way of the perpetual Republican vow to cut taxes. According to this WSJ poll, even the Republicans are beginning to sluff off the centuries old hallmark of "free trade."

By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president.

Incredibly, China obliquely takes its licks in this article devoted to American politics:

We're seeing a lot of jobs farmed out," said Mr. Pirtle, whose father works for General Motors Corp. Rankled by reports of safety problems with Chinese imports, he added, "The stuff we are getting, looking at all the recalls, to be quite honest, it's junk.

Mr. Pirtle's comment is sadly typical in American society today. If it's junk, why are we're buying it? If it's of poor quality, why have we eagerly exported the work to cultures where standards are different? If it's unsafe, why have we authorized a branch of the federal government, proven time and again to be incompetent or incapable in so many aspects of life, to perform tasks it can't even begin to complete?

The decisions Americans have made, as a people, over the past generation are more the cause of our predicament than anything manufacturers across the globe could have possibly done. We will have rid ourselves of what we value most before it is over. But, for the instant moment, we deny ourselves the serious critical look at our own ideas and actions, which require far greater correction than we demand of our neighbors.

The more prescient members at the National Party Congress are evidently thinking far outside the box. Outside the planet, it appears...

China's space communists would "carry out the regular activities of a Communist Party of China branch in space in the way we do on Earth," Yang Liwei, the first Chinese astronaut to fly into space, was quoted by Xinhua as saying on the sidelines of the national party congress. Yang said a party branch would have to await establishment of a permanent presence in space such as a space station, something China is decades from achieving.

[Kudos to Miss Johnson from London. Knightsbridge, perhaps?]

From the New York Times: China Agrees to Post U.S. Safety Officials in Its Food Factories.

Embedded, like Judith Miller in Iraq?

Michael O. Leavitt, secretary of health and human services, said he expected that Food and Drug Administration officials would eventually be embedded in China’s food safety bureaucracy to help train Chinese officials and keep records on their inspections.

Did Mr. Leavitt make use of the word "embedded" in conversation with the interviewing journalist, Steven Weisman? Or did Mr. Weisman himself choose that word, pregnant with negative connotation, while lacking a direct quotation from Mr. Leavitt?

China and the United States, seeking to ease the furor over the safety of food exports, signed an agreement Tuesday calling for a greater American role in certifying and inspecting Chinese food products, including an increased presence of American officials at Chinese production plants.

This should help, shouldn't it? English speaking inspectors in an entirely Chinese environment. Many thousands of factories to be monitored -- extraordinary cost of bringing American inspectors to China, housing and feeding them, etc...

This agreement will provide an opportunity to have our people here on a continuous basis with expertise so that we can work with our Chinese colleagues in helping to develop good practices,” Dr. von Eschenbach said.

People is plural, meaning at least two. But the precise number of inspectors was not actually specified.

American officials said that the agreement did not cover all the food products sought for tighter inspections, but that it could be expanded. It is to cover some preserved foods, pet food ingredients and farm-raised fish, all products that the United States has said were tainted.

But, wait! Only a few food groups would undergo any inspection at all.

One may conclude that this initiative has been a major failure, from conception to implementation, on the part of American food and safety officials. Can one, however, consider this a public relations success?

Plastic Easter eggs from China have been found to be contaminated with lead paint.

Why not make your own with non-toxic dye? Fun and educational for both you and the children.

Keep your eyes peeled for what looks to be an old scam decked out in sexier apparel. What appears to be a persuasive e-mail, purportedly from the Shanghai Representative of a Hong Kong machine-tool company, is making the rounds of some American attorneys. I and several other attorneys in the U.S. received them yesterday. (I have removed names and phone numbers.)

Dear Counsel,

I have previously sent you an email that was not acknowledged hence the need for me to forward this correspondence to you again; your urgent confirmation will be highly appreciated. If you are not in position to represent us at the moment kindly advise us immediately.

I am (Name), President/CEO of (Name) Co. Ltd., Hong Kong. We got your contacts from the United States Chamber of Commerce Directory through the Hong Kong Trade Development Council. (We) specializes in manufacturing fasteners, industrial parts, machine components, hardware kits and other general assemblies for virtual any finished goods delivered in retail-ready packaging to our customers.

The management of (Name) Co. Ltd., HK, requires your Debt Collection and Legal Services representation for our Customers in the United States. We are of the opinion that the ability to consolidate payments from customers in United States will reduce the high rate of outstanding payments and the penultimate reduction in the net book value of bad and doubtful debts as indicated in our current trading position. After a careful research, we have been able to establish that delinquents or past due accounts are settled when reputable and aggressive firm or professional(s) represents an organization in collection of debts or possible litigation that may arise thereof. In addition, it is our ultimate goal to employ your services for the eventual formation of our subsidiary office in your geographical business riding because over a long period of time, we have observed that the economy, environment and policies issues in your state (among the rest) are highly stable and conducive to business.

We understand that a proper Client Retainer Relationship will provide the necessary actualization and authorization and we are most inclined to commence talks as soon as possible. We are seeking for collection approach that is one of negotiation not confrontation as we wish to continue the cordial business relationship with our customers and we will expect these customers to be treated with due care; and properly attended to without losing them to our competitors. But, we shall NOT hesitate to be firm under certain constraints.

We are open to negotiation as per your working terms as regards benefits and commission.

On behalf of (Name) Co. Ltd., please accept my sincerest appreciation for your willingness to render your services to us as I look forward to your prompt response. Do not hesitate to contact us if you have any questions or concerns as we are very open to suggestions and advice towards this relation. Indicate your response to us by email (URL) or by fax (telephone number with an 852 prefix) stating Ref. No.: BMTC/ATT/US/08/03A.

Note the suspect indicia:

• Right off the bat, the writer offers a retainer!
• China is hot -- and now they're coming to me! (As I've written many times, try to avoid being sucked in by the purported sexiness of anything Chinese without applying first a skeptical attitude which constantly questions until satisfied.)
• The e-mail is fairly well-written, but with the errors one might expect from a Hong Kong Chinese with a good deal of education. That said, it reads as boilerplate written for a mass audience.
• The domain name of the e-mail leads to a fully developed and persuasive website of a company with ostensibly Hong Kong and Shanghai contact information. But the website whois information displays a Toronto administrator with a misleading e-mail address.
• The e-mail does not refer to me by name at all.
• The claim is made that the writer came across my name in the directory – a Chamber of Commerce directory -- in which I am not listed
• The personal e-mail of the “President” of this company is info@[domainname].com.
• The writer claimed that he had contacted me once before by e-mail, which he had not.

A barrister in Canada comments:

This sounds like a variation on a familiar scam that targets attorneys. From what I have heard, it goes something like this:
1. Attorney goes to do collection. The alleged debtor caves in and agrees to pay a settlement amount to attorney in trust.
2. Attorney receives a certified cheque to deposit into trust in satisfaction of debt.
3. Attorney then is to disburse settlement amount to client from trust funds. Attorney wires settlement amount to client.
4. Turns out the certified cheque is a forgery. Client disappears with money. Debtor also disappears. Attorney has to repay monies back into trust out of attorney’s own pocket.

This article, “Fraud Scam Alert," published in LawPro magazine, provides some background. [Editor's note: Kudos to the barrister...] The purported China affiliation may make this scam more appealing. In fact, since I do both “litigation and collection” work for Chinese businesses in the United States, and did not know early yesterday morning that other attorneys had received the same e-mail, I initially thought the request might be legitimate. But be advised -- do your due diligence first. If it smells bad, it stinks.

Amid concerns for terrorism during the Olympics, the cause of this explosion is as yet uncertain.

A woman on the bus is quoted as having said, "“车门刚刚打开，突然就闻到一股怪味，然后车厢当中一个座位烧起来了。”" [ Editor's translation: The door of the bus had just opened and suddenly I smelled a strange odor, and then a seat in the center of the bus burst into flame.]

Spontaneous combustion of a passenger or something more sinister? A trial run?

It is shocking enough that a Chinese national, rather than an American, won the commission to sculpt the body of Martin Luther King. Even more outrageous that the model of the sculpture is fashioned in Changsha.

But look at it! An aggressive, unsympathetic posture -- arms crossed! Not representative of the inspirational Reverend leader, but of a Communist war-hero. What a horror!

A powerful federal arts commission is urging that the sculpture of Martin Luther King Jr. proposed for a memorial on the Tidal Basin be reworked because it is too "confrontational" and reminiscent of political art in totalitarian states.

This commission should be taken away from the sculptor and awarded to someone who understands, in the American context, the value and meaning of the movement for equal rights and Martin Luther King's place in it.

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TODAY'S POST

This op-ed piece in the New York Times -- printed just days after the almost unfathomable suffering in Sichuan -- is more than just shocking. It is like a dagger in the spine.

Ostensibly a discussion of technological advances throughout Chinese history, which China has failed to employ for the benefit of its people, the author, Simon Winchester, turns to the real point of his essay in the penultimate paragraph:

China, in its headlong attempts to modernize, has often demonstrated a dismayingly cavalier attitude toward the well-being of its people: skyscrapers are built with little attention to safety standards and are invariably far from earthquake-resistant; huge dams — not least the monstrosity that has so ruined the Three Gorges of the Yangtze — are erected in a slapdash fashion; subways, like the system burrowing through the waterlogged alluvium beneath Shanghai, are built with incautious haste; freeway tunnels are bored through earthquake fault zones.

While all that is asserted in this paragraph may be true, it is a deliberate low blow coming at a time of extraordinary weakness. Does anyone deserve such haughty academic criticism when their sons and daughters, mothers and fathers, friends and lovers, are smote with undeserved disaster? Where is your heart, man? For what purpose, this op-ed? To influence policy?

[Listen to Melissa Block of National Public Radio report on-site from Sichuan here.]

The editorial staff of the New York Times needs a significant dressing down for its cruelty. If you agree, send an e-mail to Clark Hoyt, the public editor: public (at) nytimes.com

UPDATE (May 16, 2008)

Gordon Chang himself joins the fray. Shameful.

Chen Liang-yu (陈良宇) was Shanghai Party Secretary (上海市委书记) until removed in 2006 following an alleged scandal involving Social Security. [In Chinese.] Was the Social Security scandal the fundamental reason for his removal?. His swift rise to the Politburo in 2001 as a protégé of Jiang Zemin and the Shanghai faction preceded an even swifter fall following the presidency of Hu Jin-Tao in 2003.

Whether or not Chen Wei-li (陈维力) was a fundamental participant in his father's corruption or the innocent son of a guilty man, it is clear from this discussion that the simple fact of his family connection to the accused was an important bargaining chip upon which prosecutors relied to induce "a good attitude" (良好态度) in both men in the courtroom and most likely with the prosecution's investigation. [In Chinese.] If it is true that $400 million was appropriated from the Social Security program as alleged -- and, who knows, it may have been a lot more than that -- how much has been returned? Little mention {none...) has been made of that aspect of this case. Where did all those great gobs of money really go?

For some background on the scandal itself, see this page. [In Chinese.]

China's international reach for precious commodities extends as far as Cuba, lately earning the Minxia Non-Ferrous Metals Company a substantial Office of Foreign Assets Control (”OFAC”) fine. (Not this far more delightful Minxia.)

How is it that a Chinese metals dealer has been ordered to pay $1.5 million to the US Treasury?

Our story begins with a fairy tale island, white beaches nestled in lapping warm waves of a clear blue sea. [Ok, so my descriptive muse has overdone it a little...] Playboys and celebrities once danced to a Cuban Rhythm. They still drive 1959 Bel-Airs there, because that's the last year American autos could be imported. The American embargo of Cuba began in the depths of ancient time and, unbelievably, continues to this day, viz. the Cuban Assets Control Regulation (31 CFR 515), etc.

The excellent ExportLawBlog takes up the story:

Minxia Non-Ferrous Metals is a subsidiary of China Antimony Chemicals Co., Ltd., which, in turn, is a subsidiary of China Minmetals Non-Ferrous Metals Co., Ltd., which is, in turn, a subsidiary of the giant Chinese metal conglomerate China Minmetals Corporation. This climb up the corporate ladder may reveal what had OFAC in a snit about Minxia’s trades — namely, the $600 million joint venture between China Minmetals Corporation and Cuba to exploit Cuba’s large nickel supplies. China is one of the largest consumers of nickel which is a key component of stainless steel, and nickel is Cuba’s largest export — plenty there to get OFAC in a tizzy. In fact, the Bush administration announced a crackdown on nickel exports in July 2006, claiming that they constitute more than half of Cuba’s foreign income.

Sadly for the Chinese, if this was the cause of the fine, the Chinese interest in the nickel joint venture was recently bought out by Venezuela in what may not have been an arms-length, consensual transaction.

Make sure you click over to the ExportLawBlog page for this item to get the links, generously provided by its editor.

The scam I wrote about here has found success with at least three attorneys, one of whom may now be in the hole for $200,000:

Atlanta securities lawyer Gregory Bartko said he is the victim of an Internet fraud scheme that is apparently targeting law firms throughout the country and the banks where lawyers have their escrow accounts.

Read about it here. This article should be standard reading for any attorney doing business internationally.

The ABA has issued an ethics opinion dated August 5 and apparently unpublished, but procured by the New York Law Journal.

Asiabizblog will post on this shortly.

[Editor's note: Doug Jacobson has graciously provided the text of today's post. I recommend readers visit his International Trade Law News blog, well-written, informative and worth your time. Doug Jacobson is a partner in the Washington, DC office of the law firm of Strasburger & Price (www.strasburger.com) and serves as chairperson of the firm’s international trade compliance practice. Doug has extensive experience representing companies in a wide range of international trade regulatory and enforcement matters, including dual-use and defense-related export controls, trade sanctions, customs, Foreign Corrupt Practices Act and and antiboycott issues. Doug is also the founder and editor of the International Trade Law News blog (www.tradelawnews.com).

The Air Force did not like the idea of a Chinese national working on top-secret unmanned drone technology. The Department of Justice prosecuted the research student's professor, who had assigned him his work. The professor was convicted this month. What next? Our guest author today takes up the story from there.]

Attorneys for Convicted Professor File Motions for Judgment of Acquittal and New Trial

The attorneys for former University of Tennessee Professor J. Reece Roth, who was recently convicted of violating the Arms Export Control Act (AECA) and wire fraud, have filed motions for a judgment of acquittal and a new trial under Rules 29 and 33 of the Federal Rules of Criminal Procedure. Such motions are routinely filed by defendants who have been convicted in order to set up the legal issues for appeal, but are rarely granted.

Summary of Arguments for Judgment of Acquittal

Roth's Motion for Judgment of Acquittal is based on two grounds. First, defense counsel claims that the data generated by the contracts that Roth and his graduate students were working on was neither a “defense article” or “technical data” relating to a “defense article” as those terms are defined in Category VIII of the United States Munitions List (USML). Second, defense counsel contends that the evidence presented in this case was not sufficient to convict Roth for willfully violating the AECA.

The crux of the defense argument is that the certifications made by the Directorate of Defense Trade Controls (DDTC) regarding the classification of the data and other items that Roth was working on and exported to China were incorrect. For example, the Memorandum of Law in Support of the Motion for Judgment of Acquittal notes that the DDTC staff member that made the certifications initially determined that "none of the items which were subject to the Indictment were included on the USML and thus were not defense articles or technical data relating thereto." Specifically, counsel stated that the defense articles and technical data at issue in this case were not "directly related to an aircraft specifically designed, modified, or equipped for military purposes," the test for determining whether an item is subject to the jurisdiction of the ITAR or not.

Defense counsel noted that it "is fair to say there was less than unanimity in the proof regarding the particular defense article that the data and [defense article] fell within, although the jury was charged and returned a verdict premised solely on Category VIII."

In addition, Roth's counsel contends that the provision in the AECA that precludes judicial review of the "designation of items as defense articles or services" (22 USC 2278) does not exempt certifications from the State Department that particular articles or technical data are within USML Category VIII. In addition to discussing a few cases where the courts appeared to exercise judicial review of State Department certifications, counsel also noted that a "construction of section 2778(h) that would preclude judicial review of the adequacy of the evidence that an item constitutes a defense article would violate the Constitutional due process requirement that criminal statutes provide 'fair warning.'"

Finally, Roth's attorneys stated that the evidence presented in this case was insufficient to establish that Professor Roth acted willfully and with specific intent, the requirement for a conviction under the AECA and wire fraud statutes. For example, it was noted that in addition to there being considerable uncertainty as to whether the defense articles and technical data were defense articles or not, Roth's "efforts to comply with his inaccurate understanding of this complex regulatory scheme demonstrate a lack of understanding of the law that persisted throughout the time period in question."

Summary of Arguments for New Trial

In arguing for a new trial, Roth's counsel claimed that a new trial should be granted because the trial judge did not include in the jury instructions a proposed instruction on ignorance of the law and the file to include such an instruction "resulted in prejudice to the Defendant." The proposed jury instruction read as follows:

In order for the government to show that Defendant violated the Arms Export Control Act, it must prove beyond a reasonable doubt that Defendant knowingly and willfully violated the Arms Export Control Act. Defendant acted knowingly and willfully if he knew he was unlawfully exporting technical data on the United States Munitions List. An innocent or negligent mistake by the Defendant is insufficient to support a finding of a knowing and willful export. So if Defendant was ignorant of the requirements of the Arms Export Control Act or was aware of the requirements of the Act but believed that he was complying with those requirements, he did not act knowingly or willfully, and you must find him not guilty.

Citing several cases as precedent, defense counsel argued that because ignorance of the law is a defense to the AECA, the issue should have been put before the jury and failure to do so is grounds for a new trial.

Needless to say, the U.S. Government will present a different version of the law in their responses to Roth's motions. Assuming that these motions are not granted and the convictions are appealed by Professor Roth, the appellate decisions could lead to important legal precedent and clarification on these issues for companies and academic institutions subject to export controls.

Author's Note: Thanks to a loyal reader for providing copies of the motions filed by Roth's counsel.

The so-called Nigerian scam turned its attention to attorneys, as we reported in prior posts, at that time purportedly emanating from Hong Kong. Already, in the past year, several attorneys, in California and Georgia, are on the hook for six-figure debts.

This morning, I received another scam e-mail, this time purportedly from the China Luoyang Glass Company. There is such a company, but this e-mail without a doubt does not come from that company. How does one tell that an email business lead is a scam? In this case,

1) The English text appears to be too competent for a Chinese company located in Henan Province. Press releases may be sent out to be translated, but e-mail is generated in-house, and contains errors which are not seen in the e-mail below.

2) My name is nowhere stated. That is because this email was sent out as a mass e-mail to many potential suckers. Chinese who are contacting you personally will address you by name an e-mail.

3) The return e-mail address displays a domain name of aol.com. However, the company uses its own domain name for e-mail. Notice at the company's website that the "contact us" link spawns an e-mail with the company's own domain name as the target, i.e. abc@clfg.com.

4) The properties of the e-mail itself display the e-mail origin: an account called presiden@floyd.nswebhost.com. Hmmm..... Surely doesn't look like it came from the company.

Just five minutes of due diligence removes doubt. This is not a genuine business lead.

Luoyang Glass Company Limited, No. 9 Tanggong Zhong Lu, Luoyang City, Henan Province, China.

Attention: Counsel

Request for Legal consultation services.

This is an official requisition for your legal consultation services on behalf of Luoyang Glass Company Limited.

We are based in China and our activities are the production and sale of float sheet and flat glass and reprocessing of automobile glass. Other activity includes the exploration of minerals.

We got your contact information from your office site. We looked up your qualification and experience from your profile and we think that you are capable of providing legal services as requested.

Please accept my sincerest appreciation on behalf of Luoyang Glass Company Limited in advance, for your willingness to render your services. We look forward to your prompt response to our request.

Thank you.

From: Liu Yixiong

As we in the U.S. find ourselves inching ever closer to the nationalization of private banks -- despite Treasury denials -- let's take a break in the turmoil for some humor and at least an instance of successful self-preservation. Here is another example of the attorney scam with an Asian, about which I've written many times. Click this link to save it to your desktop and view it large enough to read it clearly.

The URL is linked to a server in Mumbai. Saitama is nowhere near Shanghai. The text is completely unpersuasive. DON'T visit the URL -- might be a malicious website. Many thanks to my colleague who sent it in.

Details have emerged in the CITIC Pacific forex scandal:

Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.

The unit of China's largest state-owned investment company has contracts committing it to buy as much as A$9.44 billion ($6.3 billion) of the currency, according to an Oct. 20 statement. That's more than quadruple Citic Pacific's market value yesterday and compares with 2007 net income of HK$10.8 billion ($1.4 billion).

More here.

As worldwide currency traders continued to deleverage risky positions -- with greater volatility and uncertainty than ever done before -- we will certainly see many more Chinese currency investments unwind with significant losses to major overseas investment subsidiaries.

What you know, but the Hong Kong subsidiary of China Railway Group has just announced currency trading losses of $278 million.

One of my fav blogs suggests that the Chinese Academy of Sciences (中国科学院) was the prime mover in the introduction of melamine into the Chinese food production industries. The Academy has issued a denial.

I know it has nothing to do with China, but it's just too funny to pass up.