It’s all smiles and handshakes when Wen Jiabao and Manmohan Singh meet, but the two emerging powers are competing for influence in South Asia - both diplomatic and economic. Via CDT, Japan Focus has a very in-depth article on the trade and economic ties between China, India and the region.:

  India, as the resident power of South Asia, considers the region its "near
  abroad," and does not want Beijing to intrude on to its turf. What unnerves
  India most is China’s eye on South Asia’s biggest prize: the Indian Ocean. While
  India would like to prevent China’s advance into its sphere of influence, it
  lacks the regional or international clout, diplomatically, militarily or economically,
  to stem Beijing’s march on South Asia or the Indian Ocean.
  China, however, has sought to calm Delhi. Prime Minister Wen Jiabao’s four-day
  visit to India on April 9-12 attests to growing efforts to woo Delhi. China’s major goal is to keep India from forging military and strategic alliances with the U.S. that might undermine Beijing’s goal of reunification of Taiwan. Well aware of India’s historic concerns for its territorial integrity, China deftly plays on India’s nationalist instincts and its visceral aversion to domination by foreign powers. China’s deft diplomacy is facilitated by the current U.P.A. (United Progressive Alliance) government of India that rests on a liberal-left coalition, many of whose members are more suspicious of western powers than of Beijing.

The Oil Drum notes that China’s south has received oil deliveries, and further evidence emerges that (as was widely noted last week) the shortage was caused by price controls, and ’solved’ by government intervention.:

Global prices have risen by about 30 per cent
this year but Chinese prices by about half that, leaving local refiners
such as Sinopec suffering large losses on sales of imported fuel.
A
Sinopec official in Beijing, speaking on condition of anonymity, said
Wednesday the company had been forced by the government to order its
refiners to produce fuel for the local market, even though it was not
profitable.

Simon picks up on this theme from another article, noting that the big refiners’ refusal to supply the market at a loss may have much bigger ramifications.:

One other interesting part of the article that is mentioned in passing but has greater significance:

..as
Sinopec and PetroChina have listed many of their business operations in
overseas securities markets, they are increasingly able to cite
"shareholder interests'’ as an excuse to defy government orders.

Maybe
market economics can triumph over Communism after all? The writer is
implying that Sinopec and PetroChina are using shareholder interests as
a fig leaf to ignore orders. What if, perhaps, they actually believe in
creating shareholder value and subverting Government orders is a means
to that end?

Indeed, one of the most frequent dreams/fears I hear from economists and analysts is that much of China’s semi-state sector is increasingly behaving according to market rationale not because of government pressure — but because the top-management has desire to do so.

While this doesn’t mean much while China continues to boom, a day may soon come when Chinese banks start to call in loans made to insolvent SOEs and refuse to endorse policy loans. If that happens, there could be a real shakeout with the next downturn.

This loosening of state control is hinted at in an article reproduced by Mark Thoma: a Business Week interview with economist Fan Gang.:

There has been some progress in the banking sector. There still is
political interference, but control of the banks has been centralized
[away from local governments]. As a result, the whole system is more
independent of the local politicians. The managements of local branches
aren’t appointed by local governments any more.
The reform has started — but maybe too late. The government
has injected money into the banks to float shares. To improve the
capital market, 20% to 30% of their shares have to be sold to the
public. But [more state injections are likely].

Also at the New Economist, another Business Week item on the costs of China’s energy subsidies on the environment. Mark Thoma notes.:

According to the World Bank, six of the world’s ten most polluted
cities are in China.  It is also a very inefficient user of energy
requiring 4.7 times as much energy to produce a unit of GDP than in the
U.S., a consequence of subsidized fuel in China leaving little
incentive to implement energy saving technology and lax environmental
regulation.  The energy subsidies and the lack of environmental
regulation contribute to the cost advantage enjoyed by Chinese
producers. And, according to BusinessWeek, China is becoming even less efficient in its energy usage.

As well as environmental concerns, but something that isn’t too distantly related, Martyn at the Peking Duck looks at a damning report on China’s healthcare system. Bingfeng notes that China is coming under pressure - from the public, media and branches of government - to rollback healthcare privatization. Bingfeng’s solution, one which I agree with, is to stay the course.:

The problems of the marketization, such as overcharge, unevenness,
etc. are the same ones of any industry going privatized, and they will
diminish over time as the industry has more money and players in and
services become more competitive. even health care sector has its
uniqueness, the therapy for the misplaced reform is to further advance
the marketization but not to halt it.
the public, mostly don’t
have that knowledge and vision, are proposing to draw back to the safe
and cozy position of government-take-care-of-all, and with the help of
mass media, their voices are without doubt reach the ears of top
policy-makers. in my view, the public opinons are an indispensable part
of the policy-making process but they are just counter-productive in
the health care reform.

On currency and central bank matters, Sun Bin offers a look into the composition of the yuan’s guidance basket.:

The fact that RMB is still so highly correlated to USD is still puzzling. Maybe PBC is smoothing out the transition, by adjusting the USD basket weight slowly from 100% down to the the target weight
of 50% or 43%. In other words, in July, USD might have still been the
sole content inside the basket, or RMB continued to peg to USD alone
for a few more days, until the peg is slowly loosened. If Jen’s implied
weight at 85% is correct (the average over the period), USD weight
might have decreased from 100% down to around 70-80% now.

Logan Wright, meanwhile, offers some sobering comments to those who put too much faith in People’s Bank of China governor Zhou Xiaochaun.:

I understand that all bureaucracies are beset by compromises, with
various agencies seeking out turf in conflicts that often produce
decisions that are essentially "satisficing" results that are "good
enough" but not utility-maximizing for all parties involved.
My argument in this debate is that China’s economic bureaucratic
institutions effectively lack autonomy, because there is no single
institution capable of fomulating its own goals regarding China’s
position and stance toward the international financial markets.
Instead, policymaking becomes concentrated in the State Council, and
political compromises emerge that essentially convey mixed messages to
the global marketplace….
The
PBOC, in contrast, has to respond to directions from the State Council,
even while attempting to win more turf for its own bureaucratic
empire.  The result, I believe, is that international economic policy
effectively loses credibility.