Chinese Premier Wen Jiabao has blamed the US for the Great Economic Crisis which among other things put 25 million Chinese out of work last year.

Wen didn’t actually cite the US during his Davos rant against “excessive expansion of financial institutions in blind pursuit of profit,” the utter lack of government oversight of financial institutions, and an “unsustainable model of development characterized by low savings and high consumption.”

But even Mo, Larry and Curley couldn’t have missed the reference.

Wen and Co. have been appalled to discover their supposedly safe holdings in the US financial sector weren’t so safe after all.

This includes more than a few bucks in Morgan Stanley, the cratered Reserve Primary Fund, Aunt Fannie and Uncle Freddie.

But when his blistering rhetoric fades, Wen knows he’s got a foot in the same potato sack we do. The 2 economies have to hop together, like it or not.

That’s because China enables our profligate spending in order to prop up its export-based economy.

China accumulates wealth by exporting just about everything to the US. It uses the money it makes to buy T-bills, which finances our trade deficit. This keeps US interest rates low, which lets US consumers buy more goods from China while preventing the Yuan from appreciating too quickly.

China now holds $2 trillion in US foreign exchange reserves according to the Wall Street Journal. Around the time Lehman tanked, it surpassed Japan as the largest foreign holder of Treasury bills.

That’s fine when it comes to US government-backed securities, but China did start pulling out of Fannie and Freddie in Q3 and Q4 2008, a move that forced the Feds to step in back in November and buy $600 billion in debt from the troubled organizations.

Someday, US taxpayers are going to feel that and it’s going to hurt.

In January, Russian cyber-militia knocked Kyrgyzstan off the grid for a week using a denial-of-service attack similar to the ones it leveled against Georgia and Estonia last year.

The attack targeted Kyrgyzstan’s 2 largest ISPs which provide over 80% of the nation’s bandwidth, according to Don Jackson SecureWork’s director of threat intelligence.

The cyber-attack overwhelmed key government Web sites and rendered emailing impossible, among other things.

At the time, neither Russian nor US officials would comment on the matter and Kyrgyz officials, ahem, couldn’t be reached for comment.

People wondered why would Russia cyber-bully an impoverished nation of 5.3 million that doesn’t mouth off to Vlad the Impaler or have a gas pipeline coursing through it, but now we have the answer.

Last week Kyrgyz President Kurmanbek Bakiyev announced he’s decided to shutter the US’ last remaining air base in Central Asia, just as the Big O was getting set to fire up the base in support of his plans to deploy 30,000 more troops to Afghanistan.

With Russian President Dmitry Medvedev glowering at his side, Bakiyev claimed the Americans were unwilling to pay more money for the use of Manas Air Base, and that locals were chafing at the military presence, established in 2001 to support the US-led invasion of Afghanistan.

“We have repeatedly raised with the United States the matter of economic compensation for the existence of the base in Kyrgyzstan, but we have not been understood,” he said.

Medvedev didn’t just call off the cyber-dogs though. Nice guy that he is, he agreed to loan the former Soviet Republic $2 billion, cough up $150 million in direct financial aid and write off $180 million in debt, according to the Washington Post.

The US pays Kyrgyzstan $150 million each year, 40% of which amounts to rent for the base.

We know why China’s State Council just announced a $120 billion, 3-year plan to improve its health care system.

Most Chinese don’t have health insurance, and the system requires payment at the time of care, so tens—maybe hundreds of millions have been doing without since China’s economy was, well, developing.

And to the extent possible in a society where free speech isn’t, people are becoming a bit testy about that.

Besides, China’s government knows that citizens who are one medical event away from economic ruin aren’t going to be aggressive consumers, which must happen if its suddenly wobbly domestic economy is to stabilize.

(It’s either that or wait for the Americans to start spending and wouldn’t you know it? After decades of Relentless Xtreme Profligacy, those quirky Americans have put both hands in their pockets and threw in some super-glue.)

China’s government desperately needed to do something in health care even if the Hang Seng was still hanging-10. In 2006 for example, China spent less than 1% of its GDP on health care.

That puts China and its second largest economy in the world, in 156th place out of 196 countries surveyed for health spending by the World Health Organization, which is what Larry Gottlieb would call a travesty of a mockery.

The $120 billion equals 3% of China’s 2008 GDP. By comparison, America spends 17% of a GNP that’s twice as large as China’s on health care.

Details of the State Council program are nearly as sparse as those in a similar announcement made last October. The plan includes building new public hospitals, tuning up existing ones and improving access using networks of outpatient facilities. Other than that, who knows?

There are also plans to expand health insurance to 90% of China’s citizens by 2011, or one year later than that promised in the October release.

Welcome to the First World boys and girls!

As discussed in a post earlier today, most drugs consumed by Americans are made in other countries, particularly China and India.

In China’s case, that didn’t happen by fiat. China’s rise to become America’s pre-eminent supplier of prescription and OTC drugs has resulted from explicit government policies, according to Guy Villax, chief executive of Hovione, a drug maker.

Villax shared a document with the New York Times revealing that Shanghai’s provincial government pays local drug producers $15,000 for each drug approval obtained from our FDA and $5,000 for those secured from European Union regulators.

The Chinese government strategy was hatched in the 1980s when it acquired enormous quantities of penicillin fermenters and helped finance production of the stuff on the cheap.

The move “(disrupted) prices around the globe and (forced) most Western producers from the market,” according to Enrico Polastro, an expert in antibiotics who spoke with the Times.

Penicillin is a building block for 2 classes of antibiotics. During World War II, the US military commercialized penicillin production and from that time until the 1980s, most US pharmaceutical companies made the stuff in the US.

The chairman of Cipla, the large pharmaceutical ingredient supplier says his company has become quite dependent on Chinese suppliers.

“If tomorrow China stopped supplying pharmaceutical ingredients, the worldwide pharmaceutical industry would collapse,” Yusuf Hamied told the Times.

Last year’s Heparin scare underscored the problem. In that case, Federal regulators deduced that the blood thinner was the cause of an epidemic of anaphylactoid reactions in dialysis centers.

The regulators determined that US Heparin supplies came from only 2 companies, Baxter International and APP Pharma. Soon thereafter, they deduced that Baxter was distributing a brew that had been contaminated by Chinese suppliers. The Feds promptly took Baxter Heparin off the market.

Problem was, APP got its Heparin from China too.

Improvised Explosive Devices cause most US troop casualties in Iraq and kill or maim thousands of civilians every year in that country and Afghanistan.

Once in awhile, US troops recover an unexploded IED and have look inside. To their dismay, they often find circuit boards, GPS devices and timers produced by US companies. 

Iran it turns out, has become adept at acquiring US-made materials that can be used to make IEDs, assembling them and transferring them to a bunch of nut cases in Iraq and Afghanistan.

“The schemes are so elaborate, even the most scrupulous companies can be deceived,” David Albright told the Washington Post. Albright is president of the Institute for Science and International Security and recently co-authored a report on the matter.

And despite one celebrated US government success in interrupting this deadly flow, Iran is still in business.

In 2004, Iranians operating out of 4 Dubai-based front companies including one with the innocuous moniker Mayrow General Trading began scheming to acquire bomb circuitry, according to Justice Department documents.

The companies all used the same managers and business addresses, yet their requisitions appeared legitimate and to be associated with benign projects. The network secured parts from US firms in several states.

In 2006, the Bush administration busted the operation. The Commerce Department subsequently restricted Mayrow’s ability to trade with US companies. Dubai officials helped uncover the operation and have collaborated with US officials ever since.

But months after the bust, the network reconstituted itself in Malaysia under the name Vast Solution. It was a simple matter of changing a few shipping routes and company names. The new enterprise was headed by an Iranian using the name Majid Seif.

Asian stock markets dropped faster than those in the G7 countries during 2008. Taiwan’s exports plummeted 42% during the year and South Korea’s fell by 17%. Even China’s dipped a bit.

Do we take these to be signs the Great Economic Crisis will end the Asian emerging markets boom once and for all?

Probably not, according to the Economist. In fact many Asian economies are likely to recover faster than ours.

Economists who predict long term trouble for emerging Asian economies argue that the boom was  fueled by three things—exports to American consumers, easy access to cheap capital and high commodity prices—and all 3 have collapsed. 

But claims that Asian economies rely on consumption in G7 countries are exaggerated. The Asian export surge since 2000 is almost totally explained by exports to the developing world. Exports to G7 countries has barely budged from 20% of the pan-Asian GDP since 2000.

And Asian companies are net importers of commodities, so they stand to benefit from the collapse in their prices.

Meanwhile Gerard Lyons, the senior economist at Standard Chartered, emphasizes that many emerging Asian economies do not face the structural problems confronting America’s economy.

He mentions in particular our overwhelming domestic debt, which might forestall growth for years and blunt the impact of fiscal stimulus programs like the one the Big O is about to unveil.

This is especially true of China. Many expect that nation’s GDP will drop to 7% in 2009, down from 12% in 2007 and its lowest growth in 20 years.

Thousands of factories have already closed in China, and the government rolled-out a major fiscal stimulus package just last month.

But China has debts amounting to only 18% of GDP, so its government can throw several more stimulus packages together if necessary. And these programs would help build domestic demand, thereby sheltering its economy once and for all from our capricious ways.

The Chinese government has pulled the plug on some Web sites it stopped blocking in the run-up to last summer’s Beijing Olympics.

Hong Kong-based Asiaweek reported for example that part of its Web site as well as those of the New York Times, the Voice of America and the BBC had been blocked for the last 2 weeks.

China’s Foreign Ministry spokesperson Liu Jianchao recently reasserted the government’s right to censor Web sites that were in violation of its law. Apparently there are laws prohibiting web sites from suggesting there are 2 Chinas for example.

“I hope that the Web sites in question will be able to self-regulate, and not do things that will violate Chinese law, and for the sake of both sides, develop conditions for Web site cooperation,” Mr. Liu wrote on the Foreign Ministry’s Web site.

Chinese officials tend to ramp up Internet censorship during periods of political or economic stress. The Great Economic Crisis of 08-09 has slowed even the vaunted Chinese economy, and some officials fret that rising unemployment might trigger social unrest.

China’s is not the only government that blocks access to certain Internet sites. Australia and Great Britain recently cut Internet distribution of child pornography for example, while Germany prohibits search engines from posting sites associated with Nazi activity.

But according to Rebecca MacKinnon, a specialist in Internet issues at Hong Kong University, China defines Internet crime far more broadly, imposes censorship far more capriciously, and offers no appeals process for sites that have been blocked.

In that thoroughly modern moment of desperation when your computer has frozen tighter than the credit market and it needs to be fixed like right now so you’ve dialed tech support, few things are as absurdly frustrating as an unintelligible foreign voice on the other end of the line.

But that happens quite frequently because companies can save 50-70% on call center costs by outsourcing the function to places like Bangalore and Manila.

Now Dell is offering an alternative. For $99 per year, new computer buyers can purchase a service package which comes with technical support based in North America, guaranteed.

And your call will be answered in 2 minutes or less.

Sans upgrade though, you’re likely to get someone from the Philippines, India or some other place that has a contract to provide technical support for Dell.

“We’ve heard from customers that it’s hard to understand a particular accent and that they couldn’t understand the instructions they were getting,” Dell spokesman Bob Kaufman told the Washington Post. “This (new plan) illustrates Dell’s commitment to customer choice.”

Lyn Kramer, who operates a call-center consulting business isn’t buying that, however. “Most people in the customer service world believe that if you have sold me a product, then support for that product should be free,” she told the Post.

Meanwhile Sharmila Rudrappa, a native of Bangalore and professor of sociology at UT Austin added the issue had nothing to do with racism.

“When things go haywire, you want assurance, you want familiarity, you want someone to hold your hand and say it’s OK…you don’t want…to have to work at understanding the person at the other end of the line.”

And since when did the accents of Nashville, Boston, and Nova Scotia become so easy to understand?

Looks like China’s Health Ministry was a bit off in reporting how many infants were poisoned by melamine-tainted milk last summer.

Chinese officials now admit that 294,000 babies—equivalent to the entire population of Corpus Christi—were stricken. That’s 5 times higher than government officials reported 2 months ago.

The Ministry also revised from 4 to 6 the number of infants that died as a consequence. 

Melamine is a nitrogen-rich byproduct of chemical processes used to make plastics. Early this year, criminals in Hebei province began adding the toxin to watered-down milk and baby formula in order to drive up apparent protein concentrations and increase profit.

In the run-up to last summer’s Olympics, government-controlled Internet portals squelched stories about the growing scandal. After that, the government tried to get in front of the story by detaining officials from complicit companies and replacing the head of its national quality control bureau. 

In October, the Health Ministry announced that 53,000 babies had been sickened.

The toxin causes kidney stones and rarely, kidney failure but there is little that can be done to treat the stones other than rest and vigorous hydration.

Xu Zhiyoung is trying to help families sue dairy companies at the heart of the scandal. The legal scholar told the Washington Post last week that the courts had yet to accept such cases, but he hadn’t given up hope.

“We speak not only for 160 families…but for all the victims who suffered from contaminated milk,” he told the Post. “This is a much bigger voice than one individual case.”

Much bigger indeed.

Right now in Iran, a powerful, tube-like drilling tool is being used to expose new sources of oil, the nation’s economic lifeblood.

The device was developed in America, which seems a bit counterproductive since the US government is pretty sure Iran funnels oil profits to terrorists.

But there’s something else about that driller. It’s powered by a radioactive chemical that could fuel a dirty-bomb big enough to spread radiation across several city blocks, according to experts interviewed by the Boston Globe.

The tool was developed by Schlumberger, a multinational oil services company with development labs in Texas and Connecticut, a CEO in Houston and a corporate registration in the Caribbean.

The actual location is the Netherlands Antilles, that well-known hub of international finance.

US embargoes prevent US companies from transferring just about everything to Iran, but legal loopholes allow multinationals to bypass the sanctions. It’s that simple. In fact no one believes Schlumberger violated any laws.

And the practice isn’t isolated, according to Victor Comras, an international trade specialist. Comras told the Globe that “a number of companies subject to US law have devised structures that allow them to circumvent US regulations.”

As a result, “it is getting harder and harder to make sanctions effective,” Michael Lynch told the Globe. The oil market analyst added, “it has gotten to the point where keeping the technology away from [Iran and other countries under sanctions] is almost impossible.”