Sino-Japanese relations deteriorate over oil

Though the story has not been widely followed in the West, in Asia, the most recent fight over the Senkaku Islands/Diaoyu Islands has the potential to cause a broad list of problems in the region. There's an interesting overview of the history over at Daily Kos (h/t @MiroCollas). Until oil reserves were noticed in 1968, none of the current countries claiming ownership expressed much interest in the distant, uninhabited island.

Banging the drums of war over oil is nothing new and it's likely to be seen elsewhere in the world as easy drilling supplies become more limited. From China's perspective, it's hard to see how this is going to help them long term. The reasonably good will that they've built up in recent years can easily be washed aside. These particular islands are only one spot of many that are being contested, so other countries in the region (Vietnam, Philippines) will be watching closely.

The other aspect that should be a concern for China is the business side of this fight. China has too many mob outbursts like this against foreign nationals and businesses. As the cost of doing business in China rises, instability like this is not going to help. A few years ago it may not have mattered as much but now that the economy is softening, China ought to give it a lot more thought. Their business model is at risk when the government allows nationalistic mob violence.

From Japan's perspective, though they can share in the blame for provoking this crisis, they no longer need China the way they did ten years ago. Their businesses are being attacked and this latest violence can easily be used as an excuse to pack up and move to another location in the region.

A skirmish of some sort is a possibility as the article above suggests, though China has a lot to risk with military action. The last thing that government needs is losing factories and foreign investment. Countries have taken stupid action over oil (Iraq comes to mind) so China will have to decide between nationalism and foreign business. For a few decades, China's growth has been tied to foreign business so any change would be a radical departure for Beijing.

China may have the upper hand in this dispute for now due to its military and control over rare earth minerals but it would also come at a heavy cost. Is a long forgotten island worth disrupting the business model and damaging regional relations? Time will tell. Read the rest of this post...

Official government news agency in China calls out Romney

Hysterical. There's not much else to say when China's own state news agency calls out Romney like this.

While addressing a rally in the U.S. state of Virginia on Thursday, Romney, just as what he has done along his campaign trail, opened fire on China, claiming that it was Beijing's undervalued RMB currency that forced U.S. manufacturers out of job.

What is more sensational is that this millionaire GOP candidate has vowed to declare China a currency manipulator on the first day of his presidency if elected.

Yet it is rather ironic that a considerable portion of this China-battering politician's wealth was actually obtained by doing business with Chinese companies before he entered politics.

Ouch. Read the rest of this post...

China continues to deliver poor economic numbers

This year continues to be a rough year for China. The ghost towns are still there, demand for raw materials is sagging, the critical 8% growth rate is slipping and now exports are also slowing along with internal consumer demand.

Again, for almost any other economy many of the numbers would be impressive but in the case of China, the numbers are both disappointing as well as reason for concern. For years the economic growth has been the key to social stability so when the growth disappears, the future is much more in question. To date, China has refused to implement a second stimulus though as the numbers get worse, that may be necessary. It also may be too late.

What next?

Exports grew 2.7 percent year-on-year last month, below the 3 percent forecast in a Reuters poll, confirming President Hu Jintao's warning of the "grave challenges" posed by the world economy.

Data for imports was even worse, showing a fall of 2.6 percent on the year in August, compared with expectations for a 3.5 percent rise. The number will solidify market expectations for further stimulus and monetary easing to support growth as China heads towards a once-a-decade leadership change later this year.

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Dissident convicted on Yahoo! data released in China

Yahoo! and other Western businesses can say "it's just business" but there are human costs to their actions. A ten year prison sentence in China because a company turned over information is serious stuff. BBC:

Wang Xiaoning was freed early on Friday morning, his wife, Yu Ling, told the BBC by telephone.

Mr Wang, who was detained in 2002, served his 10-year sentence in a Beijing jail.

Yahoo drew widespread criticism for providing information linking him to emails and political writings.

Ms Yu said her husband was in "good health and fine spirits" but was not allowed to give media interviews under the conditions of his release.

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China's hard landing?

Somehow there are still a number of economists who can't (or don't want to) see that China is starting its hard landing. Believing in the next quarter, or the one after the next, is not facing the reality that all is not well in China. The economic growth is still well ahead of any Western country but that is completely irrelevant. China needs to maintain even higher growth in order to keep up with internal jobs demand or else things start to turn ugly.

The other problem that won't go away is that China needs buyers in the West and that market is not returning any time soon. China has the problem of 70% of its wealth concentrated in the hands of 1% so they do not have enough middle class buyers to fill in the gaps.

Each month another new sign shows problems and now it's more bad factory activity.

A key private sector indicator on Thursday - which showed Chinese factory activity slumped to a nine-month low in August against expectations of a modest seasonal pickup - throws up the question when the world’s second largest economy will finally hit a bottom.

The second quarter, during which growth slowed to 7.6 percent, was regarded by many economists as the bottom for Chinese economic growth. However, experts say this view may have been overly optimistic.

“(While) we still believe the Chinese economy will pick up steam in the fourth quarter, this idea that the bottom has already passed in May-June is optimistic,” Frederic Neumann, Co-Head of Asian Economics Research at HSBC told CNBC after the release of the data.

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Sands, hotel of Romney top donor, under fed money-laundering investigation

Reuters, via Political Carnival:

Las Vegas Sands Corp, controlled by billionaire Republican donor Sheldon Adelson, is the target of a federal investigation into possible violations of U.S. money-laundering laws, the Wall Street Journal reported on Saturday.

The Los Angeles U.S. attorney’s office is looking into the casino company’s handling of the receipt of millions of dollars from a Mexican businessman, later indicted in the United States for drug trafficking, and a former California businessman, later convicted of taking illegal kickbacks, the Journal said, citing lawyers and others involved in the matter… The Journal said there are no indications that actions by Adelson, who is the company’s chief executive officer and largest shareholder, are being investigated.

Gaius has written extensively on this topic, including this. Read the rest of this post...

Romney benefactor Sheldon Adelson and the Chinese mob

We've seen reports like this before (go here and read the paragraph starting "These days, Adelson's LVS").

But this one is quite recent, and includes additional documentation. From Think Progress (my emphasis and some reparagraphing throughout):

Things are getting awkward for Sheldon Adelson, the casino magnate who pledged to spend a “limitless” amount of money to get Mitt Romney elected.

Adelson’s latest woes stem from business practices surrounding his lucrative casino in Macau, the only Chinese city with legalized gambling.

The Macau operation has long been under scrutiny but a new in-depth investigation from ProPublica and PBS focused on allegations of improper, and perhaps in some cases illegal, business dealings by Adelson’s Las Vegas Sands company in China.

While focusing on the possibility that Sands violated the Foreign Corrupt Practices Act with a $700,000 payment to a Chinese associate, PBS also released documents that bolstered accusations of business ties between Adelson’s shop and Chinese organized crime figures.

The PBS report is here. There's more in the Think Progress article.

As you read, note that (a) the alleged ties are supported by documents; (b) tens of millions changed hands; (c) the men named are known to the U.S. government as Chinese mobsters; and (d) no one appears to be contesting the relationship.

PBS, first on the role of "junkets" in China:

William Weidner, president of Las Vegas Sands from 1995 to 2009, said he understood from the beginning that opening casinos in Macau meant dealing with “junkets” — companies that arrange gambling trips for high rollers.

Gambling is illegal in mainland China, as is the transfer of large sums of money to Macau. The junkets solve those problems, providing billions of dollars in credit to gamblers. When necessary, they [also] collect gambling debts, a critical function since China’s courts are not permitted to force losers to pay up.

Weidner said junkets are a natural result of China’s controls on the movement of money out of the country, channeling as much as $3 billion a month from the mainland to Macau.

“To Westerners, the junkets mean money laundering equated with organized crime or drugs,” he said. “In China where money is controlled, it’s part of doing business.”
Weidner resigned from the company after a bitter dispute with Adelson.

Now information on the ties between the Sands organization in Las Vegas and men with known mob ties. Note that "triad" is the term for "Chinese organized crime mob" according to PBS:

Nevada officials are now poring over records of transactions between junkets, Las Vegas Sands and other casinos licensed by the state, people familiar with the inquiry say. Among the junket companies under scrutiny is a concern that records show was financed by Cheung Chi Tai, a Hong Kong businessman.

Cheung was named in a 1992 U.S. Senate report as a leader of a Chinese organized crime gang, or triad. A casino in Macau owned by Las Vegas Sands granted tens of millions of dollars in credit to a junket backed by Cheung, documents show. Cheung did not respond to requests for comment.

Another document says that a Las Vegas Sands subsidiary did business with Charles Heung, a well-known Hong Kong film producer who was identified as an office holder in the Sun Yee On triad in the same 1992 Senate report. Heung, who has repeatedly denied any involvement in organized crime, did not return phone calls.

No one, including the Sands, is commenting, but the documents and money transfers are factual.

Sheldon Adelson runs a casino in a town (Las Vegas) that forbids doing business with organized crime. Sheldon Adelson is a making a good deal of money from deals in China that have raised serious questions about what, if any, role organized crime may have played in them.  And Sheldon Adelson's money is helping Mitt Romney run for president.

For more on Adelson, his cash cow in Macao, and his problems with the Foreign Corrupt Practices Act, click here.

Stay tuned to this investigation. Remember, there are two — violations of the Foreign Corrupt Practices Act, and violations of Nevada's anti-mobster laws.

This will be another interesting test of Rule of Law for those in the Big Boy Club.

Tick tick tick.

GP

To follow or send links: @Gaius_Publius Read the rest of this post...

Sheldon Adelson and "the gambling capital of the world": Using big Chinese bucks to buy American elections

This is one of those patented Maddow Show first segments. It starts one place, moves to another place, and suddenly ties everything together with a bang.

Macao is introduced at the 1:00 mark. Once you get past the athletes-and-smog reference, you're into the main part. If you really feel the need to speed along, start at 2:10 — but be sure not to miss China-U.S. population graph at 2:10.

That population ratio — 4:1 — is the key to the whole segment. 4:1 helps define the size of the gold mine Sheldon Adelson is working.

"Macao ... is the gambling capital of the world" (3:20; my emphasis). That's a whole lot of gold to work with.

Maddow's bottom line has to do with the risk of Adelson being prosecuted under the Foreign Corrupt Practices Act.

My bottom line is that the Chinese government is pumping money as fast as it can into the pockets of Las Vegas–and–Macao casino owner Sheldon Adelson. And with that money Adelson is buying as much U.S. election as he can.

Any guesses whether Obama and his seemingly White House–directed Justice Dept. will actually do anything like a meaningful prosecution. (Hint: Jon Corzine is still a free man, and last I heard, still an Obama fundraiser.)

Watch (to watch large in a separate tab, click here). Stay at least through the start of the interview at 12:00, though the interview with ProPublica is excellent.

A reminder:

• U.S. industrial policy — Enrich global billionaires at the expense of the American people (true for both parties).
  
  
• Chinese industrial policy — Enrich global billionaires to the benefit of the nation of China.

"Free trade" y'all. (I'll have more on this in a bit.)

Adelson is mining for gold the casino gambling jones of the whole of China. A good part of that gold is going straight to the 2012 election. And the Chinese know it.

Any guess what side-deals Adelson has with the Chinese government if Romney wins? Any bets how he says Thank you?

When foreign money buys your elections, you're a "client state" (look it up). This is what we did and do to our colonies. Now it's being done to us.

Spelling note just for fun.

"Macao" is the original Portuguese name and spelling, and the region (a peninsula and a small group of islands) was the location of the first Portuguese (and first western) settlement in China (mid-1500s under the Ming, a strong dynasty).

Later Chinese emperors became weaker and weaker vis-à-vis the west, and after the Opium Wars, Macao became first a wholly-controlled city (1864) and then a straight-up Portuguese colony (1887), similar to British-controlled Hong Kong and Singapore.

"Macau" is a more modern Portuguese spelling than "Macao" but both are used (my paragraphing):

The form "Macao" was the original Portuguese spelling, and has been retained in most European languages. ... [Thus] "Macao" is the traditional English spelling.

However since the handover of administration from Portugal to China in 1999, the government of Macau considers both "Macao" and "Macau" to be acceptable English spellings of the name, whereas in Portuguese "Macao" has long been abandoned and just "Macau" remains the official spelling.

So why do I stick with "Macao"? Because the sound "ao" and its nasal version "ão" are so common in Portuguese — and so lovely — that it marks the language for me. Plus the Portuguese, in their wisdom, haven't respelled any of those other "-ao" places (like Curaçao, Bilbao [which is admittedly in Spain, but Portuguese-sounding], or even Makawao, a Portuguese cowboy town on Maui).

Nor are the Portuguese respelling any of their liquid -ão words, like coracão (heart).

So I like the -ao in Portuguese, and I'm keeping it. Lord knows why the Chinese former-colony was respelled and not Curaçao, for example, but that's on them. As the wikipedia says:

The present Chinese name [of Macao is] 澳門, Àomén.

I'll switch to that spelling when the rest of the world does. In the meantime, we all know how to spell Adelson — m-o-n-e-y.

GP

To follow or send links: @Gaius_Publius
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China's economy "slows" to only 7.6% growth

As much as everyone in the West would like to see such growth numbers, for China, dropping below 8% is dangerous territory. The 8% mark for China is similar to the 150,000 jobs per month mark for the US. Dropping below 8% growth likely means not enough jobs to keep up with the population growth. Unlike in the (modern) US where people are mostly docile and peaceful even during times of economic problems, in China, it's not the same. Workers and those seeking work are much more likely to take to the streets.

Some economists (including some very clever economists) still see a soft landing for China though I'm reluctant to buy into that theory. It's possible things will go well, but as an interested observer of China's long and amazing history, I don't see it.

China's best export markets are not buying the way they used to buy and that business is gone for a while. Infrastructure development could have helped in many ways but building ghost towns at home and abroad is wasteful and indicates ongoing problems with corruption. (Not that the US doesn't have serious corruption problems.)

This year and into 2013 is going to be very challenging for China's leadership.

China's economic growth has slowed to a new three-year low, dampening hopes it can make up for US and European weakness, but analysts have said a rebound might be in sight.

The world's second-largest economy grew by 7.6% in the three months ending in June compared with a year earlier, down from the previous quarter's 8.1%. It is the lowest since the first quarter of 2009 during the depths of the global financial crisis.

China's slowdown could have global repercussions, especially at a time when the United States and Europe are struggling. Lower Chinese demand could affect Asian economies that supply industrial components to its manufacturing industry and exporters of oil, iron ore and other commodities such as Australia, Brazil and African nations.

Don't forget that Australia linked its economy to China a while back and has enjoyed an impressive export economy feeding raw materials to China. The Australian economy is now softening and exports are dropping.

If China doesn't have an export market, it doesn't need the same supply of raw materials. Shipping is also another sign of trouble and those numbers also show a sharp decline as does a dramatically reduced need for electricity.

There's still time though for the whining bankers to relocate to Asia so they can fully enjoy the freedom of playing in that market. Don't wait guys and don't bother to send a post card or come back when you need another round of handouts. Read the rest of this post...

China now building ghost towns in Africa

China has been building ghost cities at home for a few years, but now it's done the same in oil rich Angola as well. It must be nice to have that many billions to throw down the toilet like this.

Nova Cidade de Kilamba is a brand-new mixed residential development of 750 eight-storey apartment buildings, a dozen schools and more than 100 retail units.

Designed to house up to half a million people when complete, Kilamba has been built by the state-owned China International Trust and Investment Corporation (CITIC) in under three years at a reported cost of $3.5bn (£2.2bn).

Read the rest of this post...

Oldest known pottery found in China

What a fantastic find.

Pottery fragments found in a south China cave have been confirmed to be 20,000 years old, making them the oldest known pottery in the world, archaeologists say.

The findings, which will appear in the journal Science on Friday, add to recent efforts that have dated pottery piles in east Asia to more than 15,000 years ago, refuting conventional theories that the invention of pottery correlates to the period about 10,000 years ago when humans moved from being hunter-gathers to farmers.

The research by a team of Chinese and American scientists also pushes the emergence of pottery back to the last ice age, which might provide new explanations for the creation of pottery, said Gideon Shelach, chair of the Louis Frieberg Center for East Asian Studies at The Hebrew University in Israel.

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The consequences of cyber-warfare in Iran: US and StuxNet, Part 2

In yesterday's post I described the key facts that we now know about the Stuxnet cyber attack. We now know that Stuxnet was developed by the US and Israeli governments to attack the Iranian uranium enrichment plant at Natanz. What we do not yet know is what the consequences were and will be.

Available evidence strongly suggests that the Stuxnet attack delayed the Iranian nuclear program by many weeks if not months. The Iranian government has confirmed that the plant was affected by a cyber attack and the IAEA has reported a sudden increase in the rate at which replacement of certain centrifuge parts. But it is also clear that the attack did not permanently incapacitate the plant.

Even if the reports of damage are true, these do not mean that there actually is an Iran nuclear bomb making program as alleged or that it was damaged. The Natanz plant is a civilian plant monitored by the IAEA whose purported purpose is to enrich uranium for use in Iran's nuclear power program. According to the reports produced by the monitors, the enriched uranium produced at Natanz to date is only suitable for power generation and not for bomb making.

If Iran is in fact diverting material from Natanz to a weapons program they must have at least one other enrichment facility that is not publicly known, or be planning to withdraw from the nuclear non-proliferation treaties and use their civilian facilities to produce weapons grade uranium.

If the purpose of the attack was to prevent Iran from getting a nuclear bomb it has to be considered a predictable failure. It is hard to see how causing premature failure of a few centrifuges would stop anyone. Short of an actual invasion there is nothing the US can to to prevent Iran getting the bomb if they make it a national priority. Iran has far more wealth, expertise and technology available to it in 2012 than the US had when it built the first bomb in 1945.

The best that can be said for Stuxnet is that it has caused much less damage than a 'kinetic' attack. 'kinetic' being the euphemism that the military people engaged in this field have decided on for the old fashioned approach of bombs and bullets. They also refer to the field as 'cyber-engagement' rather than cyber-warfare and there is a good reason for that which I will get to in the next part. The response from Iran has been minimal and as far as we know, Stuxnet has not killed anyone.

Admitting responsibility for Stuxnet certainly does Obama no harm as far as domestic politics are concerned. The Stuxnet news gives the lie to Romney's debate claim: "Look, one thing you can know and that is if we reelect Barack Obama, Iran will have a nuclear weapon. And if we elect Mitt Romney, if you elect me as the next president, they will not have a nuclear weapon."

The difference between the Republican party approach to national security and the Obama administration policy is clear: Bush started two wars and failed to win either. Obama has ended the Iraq war and eliminated Bin Laden and Iran still does not have a nuclear weapon.

Equally clear is that what Obama is really offering is a competently executed version of the policy Bush attempted incompetently. Being better than the alternative does not mean a policy is good. While some of the comments on my first post claimed Stuxnet was 'terrorism' what the attack really amounts to is some petty vandalism and comes with some very significant costs.

Some of those costs are short term: Iran now has a pretty good excuse to leave the nuclear non-proliferation treaty and the US admission that it was behind Stuxnet is going to give Russia and China a lot of leverage in their attempt to change Internet standards to make it easier for governments to control. I will deal with both of those issues in future posts. First however I want to focus on the longer term problem: Stuxnet has opened up a Pandora's box.

I will deal with that issue in part 3. Read the rest of this post...

China seeks to create their own Goldman Sachs

Imagine how exciting it will be to have their own team of gamblers with even more government sponsorship and government money. The financial gambles and eventually losses will make Wall Street's losses look like a rounding error.

The current regime in China has consistently proven themselves to be experts at cooking the books so there's no question this will lead to a spectacular crash at one point in the future. Nothing fuels an ugly banking crash quite like a government open wallet. It's bad enough in the US system which is limited to deep government ties, but making those ties deeper is asking for trouble.

Fun times ahead in China if they follow through with this plan.

China is rolling out sweeping brokerage reforms to nurture future global investment banks that officials hope could eventually compete with the likes of Goldman Sachs and Morgan Stanley , a regulatory document showed.

The China Securities Regulatory Commission wants to allow domestic brokerages, which now get most of their money from trading stocks and underwriting new securities, to expand in futures and derivatives, asset management, private banking and private equity, according to a commission document distributed to securities firms earlier in the month.

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In another bad economic sign, China rejecting raw materials

The demand for raw materials in China has been slowing, but this takes matters to a new level. Defaulting is an extreme measure in a healthy economy so this does suggest problems ahead for China.

Chinese consumers of thermal coal and iron ore are asking traders to defer cargos and — in some cases — defaulting on their contracts, in the clearest sign yet of the impact of the country’s economic slowdown on the global raw materials markets.

The deferrals and defaults have only emerged in the last few days, traders said, and have contributed to a drop in iron ore and coal prices.

“We have some clients in China asking us this week to defer volumes,” said a senior executive with a global commodities trading house, who warned that consumers were cautious. “China is hand to mouth at the moment.”

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More signs of economic problems in China

Demand for raw materials from abroad has been slowing and real estate has been showing signs of cracking for a while. The next few months will be a difficult test for China, but with an economy as large as theirs that requires constant growth, it won't be easy. Any growth below 8% will be a sign of trouble, which means a high risk of social instability. At the moment, China is on a fine line and may fall below that growth level. Bloomberg:

China’s home prices fell in a record number of cities last month and car dealers posted inventory levels that foreshadowed deeper price cuts, adding to signs of slowing growth in the world’s second-largest economy.

Prices of new homes fell from a year earlier in 46 of the 70 cities tracked by the National Bureau of Statistics, the agency said today. Dealerships for Honda Motor Co., Chery Automobile Co., BYD Co. (1211) and Geely Automobile Holdings Ltd. had more than 45 days of inventory at the end of last month, according to an official from the government-backed China Automobile Dealers Association.

Goldman Sachs Group Inc. today joined banks including Citigroup Inc. and UBS AG in lowering its estimate for China’s second-quarter growth after weaker-than-forecast economic data released last week. The nation’s expansion may drop to a 13-year low this year, a Bloomberg News survey this week showed, as Europe’s debt crisis crimps exports and a campaign to rein in property speculation curbs domestic demand.

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China forcing Big Four audit firms to be run by Chinese

The global audit firms already have a bad reputation for doing whatever the client asks them to do (as long as the money is right - think Enron), so this is just a step in that direction. Time after time, this supposedly conservative and proper industry has glossed over or ignored serious problems on the books of shady businesses. Add this mix to what is widely considered to be one of the most corrupt countries in the world and you have a potentially devastating problem.

It's already dangerous enough for an outsider to invest in China, but this is worse. If I didn't know better, I might think that China wants to guarantee close ties to business so they can be more open to corruption. Surely that's not it, is it?

China released new rules for the world's top four auditing firms on Thursday that include a requirement for their local operations to be led by Chinese citizens within three years.

The rules released by the Finance Ministry said that Chinese operations of the Big Four global audit firms must be "localized" to comply with laws that will set requirements on the ages, experience and training of executives.

China said the four auditors — Deloitte Touche Tohmatsu, Pricewaterhousecoopers, Ernst & Young and KPMG — must comply with the new rules by the end of 2017.

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China slows down in first quarter

If you believe the government numbers - and you can't completely since they're always inflated - the Chinese economy grew at a slower pace to start the year than it has in the past three. Many observers have been following some of the more trustworthy numbers, such as steel and iron ore purchases which indicate construction activity (and which are now flat). The lower growth numbers are still impressive numbers, but not impressive enough if China wants to keep up with its struggle to provide enough jobs for incoming workers.

The other concern is that the first quarter numbers are the fifth straight quarter of declining growth. That is a trend that nobody likes to see. It may not mean the economy is on the rocks, yet, but it does suggest that the Chinese bubble is no longer expanding. There are still plenty of economists who suggest this is part of a soft landing, rather than a hard crash -- but soft landings rarely happen in the real world, as we all known too well. China, in particular, doesn't do easy transitions. More on the latest numbers. Read the rest of this post...

China sentences disabled activist to prison

Of course, the activist is disabled because of alleged abuse by the police before. China doing what China does so well.

Ni Yulan 51, was tried with her husband Dong Jiqin. Both were both arrested in April 2011. Dong was sentenced to two years in jail.

Ni’s daughter Dong Xuan said Ni attended her court appearance lying on a bed with an oxygen supply, according to a report in the Global Post. Ni is confined to a wheel chair and suffers other health problems that she says were caused by torture at the hands of police during two previous jail terms.

Ni had been an outspoken advocate for citizens forced to leave their homes to make way for development and provided what she argued was grossly inadequate compensation for the sacrifice. She lost her own home this way, so she camped in a tent in a public park for a time, The Global Post reported.

Great business partner though, right? Read the rest of this post...

Anonymous hacks government sites in China

It's a new trend for Anonymous that may stick around for a while. Al Jazeera:

On a Twitter account established in late March, Anonymous China listed the websites it said it had hacked over the last several days. They included government bureaus in several Chinese cities, including in Chengdu, a provincial capital in southwest China.

Some of the sites were still blocked on Thursday, with English-language messages shown on how to circumvent government restrictions. In a message left on one of the hacked Chinese sites, cdcbd.gov.cn, a home page for Chengdu's business district, the hackers expressed anger with the Chinese government for restrictions placed on the internet.

"Dear Chinese government, you are not infallible, today websites are hacked, tomorrow it will be your vile regime that will fall," the message read. "So expect us because we do not forgive, never. What you are doing today to your Great People, tomorrow will be inflicted to you," one of the messages read.

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Factory activity drops in China, again

Besides the latest story about ghost towns in China, yet another story of economic difficulties in China. The lack of demand for iron ore suggests a slowing manufacturing and building industry, which appears to be confirmed with the factory activity dropping. This may be one of the most challenging periods for China in decades.

China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed on Thursday.

The PMI, the earliest indicator of China's industrial activity, fell back from February's four month high, slipping to 48.1, within a whisker of the level that economists at HSBC consider a crucial level dividing decline from growth.

Slowing activity could mean a further relaxation of monetary policy to help underpin growth in the world's second biggest economy, but lingering inflation risks uncovered by the survey highlight the dilemma facing China's policy makers who are determined to keep a lid on prices.

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