The envoy, Vice Marshal Choe Ryong-hae, who serves as director of the general political bureau of the North Korean People’s Army, met in Beijing with Wang Jiarui, the head of the international department of the Chinese Communist Party, said Xinhua, China’s state-run news agency, in a report that gave no details of the talks.

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Li arrived in the Pakistan capital under extra-tight security on Wednesday on the second leg of his first official trip since taking office in March after a visit to Pakistan’s and China’s arch rival, India.

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“Unlike costlier meat products, where contamination and disease can drag down consumption, in the case of staple crops like rice, generally such problems can lead to more imports,” said Concepcion Calpe, head of the intergovernmental group on rice at the Rome-based United Nations Food and Agriculture Organization.

The situation represents an opportunity especially for Vietnam and Thailand, the world’s second- and third-largest exporters of the grain. Pakistan may benefit as well, analysts said, while India, the world’s largest rice exporter, isn’t likely in a position to boost sales significantly because China limits purchases from there due to quality concerns.

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The recommendations are from the private Commission on the Theft of American Intellectual Property, which is led by two figures who parted company with the White House on strained terms: Dennis C. Blair, Mr. Obama’s first director of national intelligence, and Jon M. Huntsman Jr., the former ambassador to China who left his post to run, unsuccessfully, for the Republican nomination for president.

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Health authorities worldwide must be on the lookout to detect the virus, the experts said, which could still develop the ability to spread easily among humans and cause a deadly influenza pandemic.

The new bird flu virus is known to have infected 130 people in mainland China since emerging in March, including 36 who died, but no cases have been detected since early May, Health Minister Li Bin told a meeting of the World Health Organization. One case was found in Taiwan in April, making a total of 131.

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However, the new Chinese leadership appears to be unmoved by such panicky calls for imprudent policy moves that could worsen the structural distortions in the Chinese economy.

This kind of patience has dampened the hopes of real estate developers, state-owned enterprises, and local governments. They desperately want Beijing to bail them out with new loans and fiscal spending, as happened in 2008-2009, when the Chinese government adopted a massive stimulus program that revived growth amid the global financial crisis but has since left behind huge excess capacity in manufacturing, unprofitable infrastructure projects, and significant increase in risky loans in the banking system.

Having learned its bitter lessons from the last round of ill-advised economic stimulus, the new Chinese leadership seems to prefer structural reform to quick fixes. If this is the case, they should take bold actions by capitalizing on the economic slowdown to push through the reforms that will fundamentally transform the Chinese economy.

Of the most urgent reforms China needs in order to sustain growth in the future is removing the massive overcapacity in its manufacturing sector. Because of overinvestment in steel, cement, automobile, and practically all other manufacturing industries, profitability in these sectors is either very low or negative. The result is an industrial landscape dominated by “zombie firms” – companies that should go bankrupt but continue to survive through bank loans and other government subsidies. As long as such firms remain in business, they will continue to sell their products below cost, creating a vicious cycle that destroys profitability for everyone. Needless to say, this situation will also create trade wars with the rest of the world because these firms will try to dump their products on the world market at any price. If allowed to survive, such “zombie firms” will prevent creative destruction, making it impossible for China to become a more innovative and dynamic economy.

To get rid of such “zombie firms,” the Chinese government must rely on market forces, not administrative measures. Traditionally, the National Development and Reform Commission (NDRC), the powerful agency in charge of industrial policy and investment approval, selects firms to be closed or merged. This process is fraught with politics. Targeted firms typically pressure the politicians in their jurisdictions to lobby the NDRC to keep them in business. As a result, many such “zombie firms” are spared. That is one of the reasons why excess capacity is a chronic feature of the Chinese economy.

A more effective way of killing “zombies” is to rely on market forces. Beijing should instruct its banks to stop making loans to such “zombies.” Cutting off their access to working capital will ensure their instant demise. Healthy private firms should be allowed to purchase the assets through an auction process. Of course, given the nature of the Chinese political economy, such an auction process will not be completely clean. But corruption is a small price to pay if this painful workout will destroy “zombies” and create dynamic and competitive private firms.

The same pro-market approach must be applied to the solution of the real estate bubble. At the moment, second and third-tier cities have a huge inventory of unsold apartments (largely because of their inflated prices). Such excess supply can be addressed by forcing the developers to sell at significantly discounted prices. At the moment, the State Council relies on ineffective administrative measures (such as restrictions on the number of apartments Chinese people can purchase) to keep housing prices down. A far more effective approach would be to instruct Chinese state-owned banks to call in the loans to overstretched developers. Those who cannot pay back their loans will have their property holdings liquidated. This process will allow the Chinese government to take control of tens of millions of housing units and sell them to ordinary people at steeply discounted prices. Such a move will kill two birds with one stone – deflating the housing bubble and solving the problem of affordable housing. One obvious concern is that this solution will force Chinese banks to recognize a huge sum of non-performing loans. But this should be no more than an accounting exercise because many of the loans made to real estate developers are for all practical purposes non-recoverable. 

In the short term, these two bold measures will likely further depress the Chinese economic growth. But they will make the economy healthier in the long run. Normally, most politicians would shy away from this politically risky strategy. Since the new Chinese leaders have declared that they would accept short-term pain in order to achieve long-term prosperity, they will have no alternative but to embrace such bold reforms.

Minxin Pei is a professor of government at Claremont McKenna College.

Qian Liwei

Since Obama was reelected last November and Xi became Secretary-General of Chinese Communist Party the same month and was elected President this March, it has been a consensus among policy makers as well as experts in both countries that a face-to-face summit as soon as possible between the two leaders is necessary and expectable considering the smooth power transfer in both countries and its strategic implication to the Asian-Pacific region and the whole world. A precise calculation concluded that the first opportunity of a Xi-Obama talk would be on G-20 summit in Russia this September and the second opportunity a month later at APEC informal summit in Indonesia. But the reason for an earlier meeting is more convincing from the perspective of both governments, not only because Xi’s predecessor, former President Hu Jintao met Obama for 13 times in different occasions during Obama’s first term, a record rarely seen even between U.S. top leader and his counterpart of American closest allies, but also Obama and Xi have been maintaining a couple of formal exchanges of communication in the past seven months, so an earlier meeting is definitely a reasonable decision which will satisfy all parties related. 

Just prior to the summit, President Xi will pay a state visit to Trinidad and Tobago, Costa Rico and Mexico which are all Latin American countries regarded geopolitically as the U.S. sphere of influence in. Xi’s incoming Latin American trip, an effort to extend Chinese economic and political presence in U.S. “backyard” will no doubt be closely watched by strategists and analysts, and may cause security concerns in the U.S. government. President Obama, recently trapped in political scandals, also has a very busy foreign journey plan, he’s expected to step on the African continent where Xi has just visited as his first diplomatic show in this March. 

With regard to the venue and the form of summit, both leaders will put protocol aside to focus on substance, as Washington Post noticed in its news report. Annenberg Retreat at Sunnylands, self-called “Camp David in the West”, is an ideal site for informal diplomacy. It has received seven U.S. Presidents in its history, and will largely facilitate a relaxed person-to-person communication, rather than a short greeting or corridor chat at an international conference.  It will also be instrumental to enhance mutual trust which is vital in case of emergency or contingency between the leaders of established power and rising power like U.S. and China as part of crisis management. A Xi-Obama relationship of mutual trust will gradually inject positive momentum to reduce the strategic trust deficit between the two countries. 

Although compared with the situation four decades ago when China and U.S. had hardly any official contacts, people-to-people exchanges have geometrically increased, high level diplomacy and summit of top leaders in particular, has been always at helm of bilateral relations.  Sino-U.S. ties are not managed from the bottom up, but instead from the top down, from the ice-breaking visit of President Nixon in 1972 to the settlement of bombing of Chinese Embassy in Yugoslavia in 1999, and to the EP-3 incident in 2001. A smooth power transfer in leadership in both countries, and especially in U.S., is of great importance to the stability and development of the Sino-U.S. relationship. It’s natural conclusion that top leader diplomacy has been playing and still playing an irreplaceable role in bilateral relations. 

An earlier Xi-Obama summit is also highly expected by Asian-Pacific nations and the rest of the world. With so called “pivot to Asia” strategy implemented, the region is witnessing a set of new security challenges and potential tensions that regional countries are worrying about. Although China and U.S. have reached the consensus that the Pacific is large and deep enough to accommodate both countries, in the perspective of neighboring countries any big moves of “two elephants” has great impact on them, and a stable, sustainable and predictable Sino-U.S. relationship is highly appreciated. Furthermore, an arrangement of economic-security dual leadership system is beneficial to most of the regional countries which are eager to take a free ride in trade as well as in security. 

Xi and Obama is believed to touch the issues of great importance at bilateral, regional and global level, such as trade relations, cyber-security, climate change, situation in Northeast Asia, Iran nuclear ambition, macro-economic policy coordination, etc. President Xi will no doubt mention the new type of big country relationship which he first put forward when visiting U.S. as vice President on February 2012. This concept was reiterated when he received American high officials Secretary of Treasury Jacob Lew, Secretary of State John Kerry and Chairman of Joint Chiefs of Staff Martin Dempsey who came to Beijing in March and in April. New type of big country relationship has been also repeatedly echoed by Obama and his high officials, and will also be the new direction and goal which both sides are trying to reach. 

Tom Donilon, Obama’s national security advisor, will be on his way to Beijing on March 26 for the purpose of arrangement of summit right before President Xi leaves for his Latin America trip. Donilon is expected to meet the Chinese leadership including Xi, and nail down the details of the summit with his Chinese counterpart. 

Shortly after the summit, the fifth round of Strategic and Economic Dialogue (S&ED) is to be held in Washington, D.C. in early June, specifics of fruits of cooperation are highly expectable. Unproved information is being circulated that Obama will be invited to visit China late this year or early next year. A more positive, mature and predictable Sino-U.S. relations based on mutual respect, reciprocal benefit and win-win will pave the way for the new type of big country relationship. 

Qian Liwei is Associate Research Fellow with China Institutes of Contemporary International Relations (CICIR)

Netting out the effects of all government’s one-off relief measures, the year-on-year rate of increase in the Composite Consumer Price Index (CPI), the underlying inflation rate in April was 3.9 percent, larger than the March level of 3.7 percent, mainly attributable to the increases in the prices of fresh vegetables.

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“There are solutions to helping the two countries maintain rapid growth in bilateral trade and investment,” Li said during an evening banquet at the China-India Commercial Summit.

China has great potential to add investment in India, Li said, and is committed to addressing the trade imbalance with India.

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