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China is in an interesting state right now. There were protests over the weekend, some violent, against the Japanese and against the Americans for not taking a firmer stand against the Japanese. Even Chengdu had protests, and that’s not a city known for being feisty. The peppers in the food make the women beautiful, I was told. Temperament never came up.

China and Japan have a complicated relationship, to say the least. Now, they are fighting over some islands in the South China Sea. It really doesn’t matter which side is right and which is wrong. What is more interesting to me is that this is happening while China is in the process of changing its national leadership. That would indicate some sort of turmoil or uncertainty that the government would rather not emphasize. Conflict with Japan is a perfect distraction.

China’s long-run economic fundamentals are incredible, but the near term isn’t so great. It’s suffering from the recessions in the US and Europe, and the people are anxious for some good times after years of hard work. And, of course, the recent stronger RMB relative to the dollar translates to higher prices in China. That isn’t making the people happy.