The article discusses South Korea's plans to conduct another military exercise near the border with North Korea on Thursday. This follows South Korea carrying out an exercise in the face of North Korean threats earlier in the week. The new exercise will involve artillery units and aircraft at a South Korean training range. It comes after South Korea was attacked by North Korea in November, killing four people. The exercise is seen as South Korea flexing its military muscle in response to the November attack.

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OPINION:
Gen. Petraeus
Chinese production gets Hollywood star races the clock
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ASIA
VO L . X X X V N O. 82 (India facsimile Vol. 2 No. 143) Thursday - Monday, December 23 - 27, 2010
asia.WSJ.com
South Korea remembers attack, plans Thursday military drill
Farm wages
MICA (P) NO. 164/10/2010
trip Beijing’s
price battle
SK. MENPEN R.I. NO: 01/SK/MENPEN/SCJJ/1998 TGL. 4 SEPT 1998
BY ANDREW BATSON ensure the security of the
supply of major agricultural
BEIJING—To combat a products.” But farmers know
surge in food prices that is other factors are also at work.
worrying consumers and Zhang Zhongliang, who
economists, China’s govern- runs a pig farm on the south-
ment is reining in bank lend- ern outskirts of Beijing, says
ing and selling down reserves the average pay for his work-
of grain. But there is one ers has gone up 10% this year,
driver of higher food prices to about 2,000 yuan a month,
that will be harder to get un- and he expects to give the
der control: the steady rise in same kind of raises next year.
the wages paid to workers on “Wages are going up
and off the farm. around the country. This will
Managing inflation has be the trend for the next few
rapidly become China’s top years,” Mr. Zhang said.
economic priority, following Most of China’s farmers
two months of official figures supplement the income from
showing consumer prices ris- their family plots by working
ing much faster than ex- at urban factories or large
pected. A 21% rise in vegeta- farms like Mr. Zhang’s. With
ble prices, in particular, the job market bouncing back
helped push consumer-price strongly from last year’s
inflation over 5% in November downturn, the wages earned
for the first time in two years. by rural households are up
The government has em- 18.7% so far this year on a per
phasized the role that tempo- capita basis, according to offi-
Associated Press
rary food shortages play. cial data.
China’s top Communist Party Those rising wages are a
leadership, concluding their Please turn to page 16
annual economic-policy con-
A South Korean man holding a candle during a vigil held in Seoul just before the one-month anniversary of the North’s shelling of ference Sunday, called for Surge in the price of onions
Yeonpyeong Island, which killed four people. Seoul said it plans further military exercises Thursday, near the North’s border. Page 3 “doing everything possible to roils India ....................................... 5
Li seeks first Facebook’s chief meets
with China’s Web leaders
BY LORETTA CHAO Mobile Ltd., and a visit Mon- China to succeed on our
day with Robin Li, CEO of terms.”
Billionaire Li Ka-shing is BEIJING—Facebook Inc. Baidu Inc., at the Chinese “Before we do anything
exploring what would be Chief Executive Mark Zucker- search company’s headquar- there, I’m personally spending
Hong Kong's first IPO valued berg met with some of China’s ters. a lot of time studying it and
in yuan, as the city looks to top technology executives The trip appeared to be an figuring out what I think the
bolster its position as a during a visit to Beijing this effort by the 26-year-old U.S. right thing to do is,” he said,
global trading center for the week that was billed as a va- executive to learn more about adding that he spends an hour
Chinese currency. Page 17 cation, fueling speculation the Chinese market, rather a day studying Chinese. “It’s
about the social-networking than discuss any specific busi- such an important part of the
site’s ambitions to enter a ness proposals. But the visit world. I mean, how can you
market where it is blocked by came as the Facebook founder connect the world if you leave
Notice to readers censors. openly has discussed a desire out” China’s population of
Mr. Zuckerberg on to get into China, where the more than one billion people,
The Wall Street Journal Wednesday visited the offices government has blocked ac- he said.
Asia won’t publish Fri- of Sina Corp., a leading Chi- cess to the site since last year. Mr. Zuckerberg couldn’t be
day or Monday in obser- nese Web portal, and met At a talk this fall to aspir- Please turn to page 16
vance of Christmas and with its CEO, Charles Chao. ing entrepreneurs in Palo
Boxing Day. News and That followed a meeting Alto, Calif., Mr. Zuckerberg Online book seller Dangdang
updates are available at Tuesday with Wang Jianzhou, said he was hoping to figure set to expand ........................... 20
asia.WSJ.com. chairman of state-owned tele- out the “right partnerships Retailers tap Facebook
communications carrier China that we would need to do in profiles .......................................... 21

2. 2 * * THE WALL STREET JOURNAL. Thursday - Monday, December 23 - 27, 2010
PAGE TWO
What’s News— Inside
i i i
Business & Finance
n Billionaire Li Ka-shing is plan-
ning what could be the first yuan-
denominated IPO in Hong Kong,
for a real-estate investment trust
backed by property in Beijing. The
deal still needs regulatory ap-
proval from authorities on the
Chinese mainland. 17
n DP World said it sold 75% of
its Australian port interests to an
infrastructure fund managed by
Citigroup for about $1.49 billion
World News: Onion
to reduce debt. 29 prices are a political
n Sony started a streaming music
hot potato in India. 5
service in the U.K. and Ireland
that it plans to roll out more
broadly next year in a bid to catch
up to rivals such as Apple. 19
European Pressphoto Agency
n Japan offered a relatively up-
beat forecast of 1.5% economic
growth next year, showing its op-
timism reinforced by positive No-
vember trade data. 4
n The U.S. economy grew 2.6% in Russian President Dmitry Medvedev visited the Taj Mahal in Agra on Wednesday, a day after he and Indian Prime
the third quarter, slightly more Minister Manmohan Singh signed a series of agreements in areas ranging from nuclear energy to the development of
than previously thought, as firms fighter aircraft to give impetus to what they termed a special and privileged partnership.
boosted inventories, but consumer
spending was revised lower. 6 panding its offerings beyond me- nance, just days after calling off ments from secretly taped com- Capital: Japan shows
dia, but it warned the push could the sale of its controlling stake in plaints about the coalition by
n South Korea’s benchmark pressure margins. 20 the company. 25 members of its junior partner. 8
trials of escaping a
stock index ended at a three-year post-bubble funk. 4
high, helped by gains in automo- n American Airlines wants to de- n PPG Industries will pay $3.75 n Europe’s travel crisis eased
bile and shipbuilding stocks. U.S. lay the start of its new service to million to settle U.S. charges that but there were still substantial
stocks edged up, helped by the re- Tokyo’s Haneda airport by a a Chinese subsidiary illegally ex- airport and train delays amid
vision to economic growth. 23 month to avoid a slow period. 18 ported high-performance coatings forecasts of another dip in tem-
to a Pakistan nuclear reactor. 20 peratures in coming days.
n Deutsche Bank agreed to pay n Chinese filmmaker Zhang Yi-
$553.6 million and admitted crimi- mou is tapping Hollywood actor n A single trader has reported it n China fired back at the Vatican
nal wrongdoing to settle a U.S. Christian Bale to star in a movie owns 80% to 90% of the copper in after its criticism of Beijing’s reli-
probe over tax shelters. 29 about Japan’s occupation of Nan- LME warehouses. Such holdings gious appointments, calling such a
jing, underscoring the global am- are under scrutiny as commodity move harmful to the Catholic
n Directors of AIG are expected bitions of China’s film industry. 17 prices soar. 25 church’s development in China.
to confer Thursday to try to
choose a preferred bidder for its n Shanghai Pudong Development i i i n Thousands of Italian students
Nan Shan life-insurance business Bank and the U.S.’s Silicon Valley World-Wide protested against university bud-
in Taiwan. An announcement is Bank plan to set up a bank in get cuts as police blocked off large
expected next week. 24 China for small and medium-size n South Korea’s military sched- parts of central Rome.
tech firms. 22 uled another exercise to take Business & Finance:
n Former H-P chief Hurd is fight- place near the inter-Korean bor- n A top opposition figure in
ing to keep private the letter that n Foster’s said it is shuffling ex- der Thursday, after it was embold- Ivory Coast called for the interna-
Tokyo taxis join ranks
led to his resignation from the ecutives ahead of the expected ened by carrying out a military tional community to use force to of Wi-Fi hotspots. 18
company, which is the subject of a separation of the Australian com- drill in the face of North Korean oust Laurent Gbagbo from the
probe by U.S. regulators. 21 pany’s wine and beer divisions. 19 threats earlier this week. 3 presidency after the disputed elec-
tion. France urged its citizens to
n Online book retailer Dangdang n South Korea’s government said n The U.K.’s coalition govern- get out of the country amid grow-
is looking to fuel growth by ex- it still plans to privatize Woori Fi- ment suffered new embarrass- ing fears of civil war.
ONLINE TODAY
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1. N. Korea Backs Down, Holds
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3. Thursday - Monday, December 23 - 27, 2010 THE WALL STREET JOURNAL. 3
WORLD NEWS
Seoul flexes its muscle with new drill
BY EVAN RAMSTAD tion at the time of the attack. attacked by the North. learn details about North Korea’s straight lines, defying geographic
The new exercise will involve ar- However, South Korea appeared tactics in the Nov. 23 attack, which obstacles such as hills and roads. “It
SEOUL—South Korea’s military, tillery units and aircraft at a South to use the exercise as a public-rela- killed four people on South Korea- gives you the impression it was
emboldened after carrying out a Korean training range north of tions opportunity. Its military, stung controlled Yeonpyeong Island in the done hastily or that they were on a
military drill in the face of North Seoul near the border area known by criticism it responded weakly to Yellow Sea. tight deadline,” says Joe Bermudez,
Korean threats earlier this week, as the demilitarized zone. Though it the Nov. 23 attack, have been look- Satellite photos have shown that a Colorado-based analyst of North
scheduled another exercise to take involves just 800 troops of the ing for ways to flex its muscle. A North Korea took steps to avoid in- Korea’s military.
place Thursday near the inter-Ko- country’s approximately 600,000- new defense minister and other se- terception of radio communication As well, North Korea used a sur-
rean border. person military, South Korean offi- nior officers have warned North Ko- by the artillery groups that fired on prise tactic in which the firing of
Meanwhile, more emerged about cials said it was the largest exercise rea that further provocations will be the island, digging trenches to run different types of weapons from dif-
North Korea’s preparations for its they’ve staged in winter. met with strong counterattacks. cables between firing points and an ferent locations was coordinated so
attack last month on a South Korean The drill is the 48th major exer- The military invited news pho- underground control center. South that a high number of rounds
island, showing that the North had cise of the year for South Korean tographers to cover Thursday’s drill, Korean forces on the island and all landed at once in the initial volley.
held practice drills of the strategy it forces, a figure that doesn’t count another sign of the eagerness to along the border routinely monitor South Korean officials determined
used in the attack, and had taken small-scale test-firings of the kind demonstrate its capabilities. North Korean military radio. earlier that North Korea practiced
steps to shield its radio communica- that occurred Monday on the island Separately, analysts continued to The trenches run in nearly the tactic at least twice.
Collection Haute Joaillerie, L’Ame du Voyage.

4. 4 THE WALL STREET JOURNAL. Thursday - Monday, December 23 - 27, 2010
WORLD NEWS: ASIA
Japan sees end to downturn next year
BY TOKO SEKIGUCHI package,” said Mr. Shiraishi, who ex-
AND TAKASHI MOCHIZUKI Exports driven | Japan’s economic outlook pects 1.2% gross domestic product
growth in the next fiscal year.
TOKYO—Japan’s government Other reports released Wednes-
Wednesday offered a relatively up- day showed that new sources of de-
beat forecast of 1.5% economic mand will be needed to avoid two
growth next year, its optimism rein- quarters of contraction and a re-
forced by positive November trade newed recession. Both the govern-
data. ment and the Bank of Japan issued
The forecast for the year starting their December scorecards on the
next April compares with revised economy, and both left their
expectations for 3.1% growth for the guarded assessments unchanged.
current fiscal year, the first annual- “Japan’s economy is likely to
ized expansion in three years. But grow at a slower pace for some
recent indicators have pointed to a time, but is expected to return to a
slowdown over the past few months moderate recovery path thereafter,”
due to the end of consumer subsi- the central bank said in its report,
dies for energy-efficient autos and while the government said that the
appliances as well as the impact of economy “has been in a lull recently
the strong yen. and faces severe conditions such as
“We expect to be out of an eco- a high unemployment rate.”
nomic standstill from next year,” Economy Minister Banri Kaieda
said Hiroyuki Inoue, a deputy direc- also voiced caution, quoting Mr. Kan
tor in the cabinet’s economic office. as saying he was “very concerned”
“Policywise, this is a realistic goal.” about the current state of the econ-
Unemployment is expected to omy.
continue to fall slowly, with the job- Both the BOJ and the govern-
less rate forecast to decline to 4.7% ment have taken steps recently to
from 5%. Newly produced cars and a container ship are seen at an industrial port in Yokohama, south of Tokyo. stimulate the economy.
The government also expects de- The central bank announced
flationary pressures to lessen, but Annual GDP growth rate Exports, change from previous year “comprehensive monetary easing”
not disappear. It forecasts the con- 4% 60% measures in October, including low-
sumer-price index to be flat next ering its benchmark overnight lend-
year, compared with a 0.6% decline Forecast 40 ing rate to a range of zero to 0.1%.
2
for this year. Mr. Kan’s government, mean-
20
When he took office in June, 0 while, is pinning its hopes on a plan
Prime Minister Naoto Kan set a goal 0 to cut corporate taxes by five per-
of ending deflation by fiscal 2011, –2 centage points from the current 40%
but officials say the flat forecast for -20 rate, which would still leave the
consumer prices doesn’t mean the –4 -40 rates well above Asian rivals’ levels.
government expects to declare an However, given Japan’s bloated gov-
end to deflation next year. –6 -60 ernment debt load, which stands at
The Ministry of Finance said FY’07 ’08 ’09 ’10 ’11 ’07 ’08 ’09 ’10
nearly 200% of GDP, it will need to
Wednesday that Japanese exports Note: Fiscal years starting April 1 Sources: Japanese government (GDP); Ministry of Finance (exports); Reuters (photo) find the lost revenue from other
rose 9.1% in November due to solid sources.
demand from China, with the pace The government will unveil its
of growth accelerating for the first “Export growth seems to be ac- at HSBC Securities. But he added “I think the government’s out- budget for the coming fiscal year
time since February, in a positive celerating, and it’s possible it will that, given other economic prob- look is slightly optimistic probably this week.
sign for the country’s export-depen- continue to pick up down the road,” lems, the government’s growth fore- because they anticipate a stronger —Megumi Fujikawa
dent economy. said Seiji Shiraishi, chief economist cast may still be too ambitious. tail wind from the latest stimulus contributed to this article.
Tokyo shows trials of escaping post-bubble funk
Had the BoJ achieved 1% inflation bankers accountable for inflation,
[ Capital ] each year, prices would have risen Parallel tracks? shouldn’t they be held accountable
14%. After accounting for price for deflation, too?)
BY DAVID WESSEL Year-over-year change in consumer prices excluding food and energy,
changes, the Japanese economy Four, we don’t think deflation
Japan 1991-2010, U.S. 2007-2010.
has grown at a rate of only 0.9% is Japan’s big economic problem.
Federal Reserve over the past two decades. And, as 3% Japan suffers from a shrinking
Japan
Chairman Ben the Bank of Japan said this week, population, crippling regulation
Bernanke is under “The recovery seems to be 2 and disappointing productivity
attack for doing pausing.” Still, it predicted growth. Political gridlock is an
1 U.S.
too much to reduce hopefully that Japan will “return obstacle to fixing anything. BoJ
unemployment and to a moderate recovery path” as 0 medicine can’t cure those ills.
lift inflation. emerging economies and (Deflation may not be Japan’s big
His Japanese counterpart, commodity producers propel -1 problem, says the critic, but isn’t
Masaaki Shirakawa of the Bank of global growth. it the one problem a central bank
Japan, is under attack for doing In Japan, a little inflation -2 should be able to solve?)
too little. would be welcome. It would make 1991 ’92 ’93 ’94 ’95 2000 ’05 ’10 The Bank of Japan, with the
Japan is a puzzle—and not only inflation-adjusted interest rates 2007 ’08 ’09 ’10 benefit of hindsight, made some
to foreign visitors who wonder lower. It would make paying mistakes. It kept rates too low too
Sources: Statistics Bureau (Japan), Bureau of Labor Statistics (U.S.)
how a stagnant economy can feel Japan’s huge debts easier. It would long, helping to fuel a bubble. It
so prosperous. Academics wonder tend to cheapen the yen, aiding failed to act before deflation
how Japan avoided the exports. lot of monetary easing already, and business bank loans to direct infected its economy, showing that
deflationary spiral their theories American pundits, policy long before we were hit by the credit where it’s needed. But 10- it’s a lot easier to avoid deflation
predicted and, instead, suffered makers and economists ought to “Lehman shock,” as it’s known in year Japanese government bonds than to get out of it. And it moved
only a decade of low-grade be a bit humble about judging Tokyo, and the resulting plunge in are yielding less than 1.2%, already prematurely to tighten before the
deflation. Foreign central bankers Japanese policy. When the U.S. our exports. Our 2003-07 battle pretty low. We’re not sure massive economy was ready. The Fed
and market analysts wonder why was booming, it was easy for against deflation succeeded for a Bernanke-style quantitative easing learned from all that.
the Bank of Japan won’t do more. American experts to assert that if time. Measured against the size of would do much good. (Neither is Now the BoJ is being tested
Japanese politicians wonder if only Japan took their advice, our economy, our portfolio of Mr. Bernanke, says the critic, but again. The betting is that it’ll
they can force the central bank to everything would be fine. These bonds has increased more and is he figures doing something beats eventually follow the Fed and buy
be more aggressive. The ruling days, the U.S. is learning how hard larger than that of the U.S. or doing nothing.) a lot more bonds of some sort. It’s
party has an Anti-Deflation it is to climb out of a post-bubble Europe. (OK, says the critic, but so Three, much of Japan’s hard for an outsider to tell if it
League, and a band of funk. what? It’s not what you did in the deflation is beyond our control, believes it lacks the ability to
parliamentarians want to give the Although it’s hard to swallow past that matters. It’s what you’re they say. An already low inflation eradicate deflation or if it lacks
BoJ a target for inflation to press the notion that a central bank accomplishing now.) rate was pushed down by the will. But it’ll be tough for
it to create some. cannot thwart deflation, look at all Two, we’re doing a little more competition from China and other Japan’s economy to get much
Since 1997, the price level in this through the BoJ’s eyes. asset buying, even dabbling in emerging markets. (Perhaps, says traction if it can’t whip deflation
Japan has fallen more than 3%. One, they say, we have done a corporate bond, real-estate trusts the critic, but if we hold central now.