Every week, The Diplomat’s editorial team scours the web to find the best material on all things China. From Beijing’s relations with its neighbors and growing military might, to a rapidly evolving economy and amazing arts and culture, we present a diverse grouping of articles for your reading pleasure.

Here are our top picks for this week. What did we miss? Want to share an important article with other readers? Please submit your links in the comment box below!

The Rise of China’s Reformers – (Foreign Affairs) – “Most observers are gloomy about the prospects for serious economic reform in China. But they ignore a central lesson of recent Chinese history: reform is possible when the right mix of conditions comes together at the right time. And the very circumstances that facilitated the last major burst of economic reform in the 1990s are largely present today.”

China’s Military White Paper Plays Down Dispute With India – (The Times of India) – “China's military has issued a white paper blaming the U.S. for causing tension in the Asia-Pacific region and naming Japan as a troublemaker.  But the paper plays down the country's troubled relationship with India over boundary claims. It also reveals details of China's enormous military structure, with some of the information being released for the first time.”

How New and Assertive is China’s New Assertiveness? (International Security) – “There has been a rapidly spreading meme in U.S. pundit and academic circles since 2010 that describes China's recent diplomacy as “newly assertive.” This “new assertiveness” meme suffers from two problems.”

Investigators Look Beyond Birds For Origin of H7N9 Flu Strain – (NY Times) – “As investigators looked at the possibility of human-to-human transmission, there was mounting concern that the new virus may not originate in birds but in other animals and in environmental sources.”

Policies to Encourage Spending – (China Daily) – “Premier Li Keqiang called for better efforts to boost domestic consumption, as the State Council met to map out its policy focus in the coming months.”

Most significantly, on Monday China inked its first free trade agreement with a European country when Premier Li Keqiang signed an FTA with visiting Iceland Prime Minister Johanna Sigurdardottir.

Although the agreement was six-years in the making, it is difficult to believe that China was motivated by a desire to expand bilateral trade with Iceland, which was just US$424 million last year. As the Economist pointed out, Iceland’s entire population is just one-tenth of the population in the district of Beijing where Iceland’s embassy is located.

Instead China’s motivations for deepening relations with Iceland relate to its long-term strategy to gain access to shipping routes in the Arctic. Beijing is currently one of the three Asian powers (the other being Japan and South Korea) that is seeking permanent observer status at the eight-nation Arctic Council, whose membership is made up of Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States.

Iceland is already proving critical to advancing China and other Asian powers’ interests in the Arctic. On the same day that Iceland’s PM was in Beijing signing the FTA, Iceland President Olafur Grimsson announced a more inclusive “international assembly” to rival the Arctic Council—called the Arctic Circle—which will include nations without direct access to the Arctic but with an interest in the warming waters. The organization will hold its first meeting in Reykjavik, Iceland in October.

The driving force behind China’s interest in the Arctic is to reduce shipping routes to places like Europe, which will allow Beijing to increase its trade and investment with countries in the region. It is hardly waiting for the Arctic ice to melt, however.

A new survey released this week by private-equity firm A Capital estimated that China’s Mergers and Acquisition (M&A) investment in Europe was up 21 percent in 2012 year-on-year.. The firm calculated that at US$12.6 billion, Europe was the top destination for Chinese outbound M&A investment, accounting for a third of the country’s total and more than double what China invested in the U.S. By contrast, Asia was the destination for just 8 percent of China’s M&A investment in 2012, a 65 percent decline from the year before.

As A Capital founder and chief, Andre Loesekrug-Pietri, remarked in reference to the report, “The Chinese seem to have more faith in European industry than the Europeans themselves.”

This greater interaction is not without its tensions, however. Last month the EU imposed tariffs on Chinese steel which it claimed were necessary to counter state subsidies the Chinese government gives to domestic companies. The duties are expected to be as high as 44.7 percent.

This was not the first time the EU imposed anti-subsidy tariffs on China. In May 2011, the international organization levied a 12 percent tariff on Chinese paper products citing government subsidies for Chinese paper companies. The EU is also considering imposing similar tariffs on Chinese solar panels and bicycles, according to Bloomberg News.

There has also been considerable tension between the EU and China over EU companies’ access to China’s telecom market. In January it was reported that Brussels has been demanding a 30 percent stake in China’s domestic telecom market in return for ending an investigation into Chinese subsidy policies. Chinese diplomats also accused EU Trade Commissioner, Karel De Gucht, at the time of demanding that Huawei Technologies and ZTE Corp raise the price of their exports by 29 percent.

Apparently unhappy with how China responded to these demands, Reuters is reporting today that De Gucht will seek to persuade EU Foreign Ministers to agree to an investigation of the subsidies both Chinese companies receive. Such investigations are usually prompted by complaints filed by European companies. In this case the EU companies have refused to file such a complaint out of fear that China will respond by cutting them out of the Chinese market. De Gucht has therefore decided to take it upon himself to launch such an investigation.

This will give Xi Jinping and French President Francois Hollande a lot of talk about when Hollande pays a state visit to China at the end of this month. In announcing the trip on Monday, a Chinese Foreign Ministry spokesperson said Hollande would also meet with Premier Li and Zhang Dejiang, the chairman of the Politburo Standing Committee.

On Wednesday the Chinese Consulate in New York revealed the tragic news that a Chinese student was the third person killed by the bomb blast that rocked the Boston Marathon on Monday.

The name of the student was withheld by the consulate at the request of her family. Some media outlets have revealed the student’s name, but Boston University has dismissed the reports as incorrect.

While the name of the student has not been officially disclosed, what is known is that she was a bright 23-year-old graduate student who studied statistics at Boston University and dreamed of a career in finance.

Before the heartrending news broke of her death, a number of the girl’s friends and classmates were already busy searching for answers on Weibo. One posted a phone number and this plea: “Help us find her! We can’t find her!” Her father also expressed concern on Tuesday to the Shenyang Evening News: “We haven’t been able to contact her. Why didn’t she make a call to tell us she’s safe?”

News of the student’s death first broke, as many stories do in China, via Weibo. Liaoshen Evening News, in her hometown of Shenyang, posted a message that read, “Shenyang girl… was killed in the Boston bomb blast.”

In the hours after news of her death was widely reported by mainstream media, more than 10,000 messages appeared on her Weibo account under a picture she had posted of her breakfast from that morning, a bowl of fried Chinese bread. “My wonderful breakfast,” read the caption under the image.

Messages of condolence soon poured in: “An innocent victim of terrorist attack,” wrote Zhakutahetu_Dazhi. “I don't want to believe it is true,” wrote another.

The victim had gone to the race with two friends. One of them was another Chinese student named Zhou Danling, who was also injured but survived the explosion. Zhou is a graduate student in actuarial science at Boston University. Of Zhou’s condition, the consulate revealed by email on Tuesday that “She cannot talk now but can communicate with pen and paper.” According to a statement released by Boston University, a third student was unharmed.

At a press briefing on Tuesday, Foreign Ministry spokesperson Hua Chunying told reporters, “We extend our deep condolences and sincere regards to the victims and their relatives.”

Jonathan DeHart is assistant editor of The Diplomat.

One of the striking aspects of Xi Jinping’s first domestic outing in early April at the Boao Forum in Hainan with his full suite of power roles now (Party head, president and head of the military) was the highly abstract way in which he spoke. Attendees of the conference from the head of state level down, and the large number of journalists there, were most eager to hear what he might say about the recently increasingly truculent North Korea. But unlike the Australian Prime Minister, keen to stretch her wings now the country has a seat on the UN Security Council for two years, who explicitly referred to the DPRK, President Xi said nothing direct. His sole offering was a general reference to the need to preserve regional stability.

Initially, this was taken by analysts as a coded warning to the “little brother” in Pyongyang to step back and calm down. But an editorial in the Communist Party mouthpiece, the People’s Daily, by the end of the week seemed to put pay to this idea by forcefully pointing the finger at the United States, saying that it was provoking the DPRK, that it was playing politics in the region and that the onus was now on it to reengage and speak directly to the North Koreans rather than igniting war games around them.

Xi in his speech did refer to the “China Dream,” but in similarly vague language. Is this his gambit to try to capture and inspire the emotions of the Chinese people in ways which his predecessor Hu Jintao with his mechanical, dry talk of “scientific development” signally failed to do? And is the “China Dream” the preparation for a more viscerally nationalistic polity in Beijing, and one that will really start to cause problems both for the neighbors and further afield?

Perhaps we are imputing President Xi with too much ambition and influence too early. He failed to refer directly to the DPRK not because he didn’t want to, but because with the complex affiliations and feelings about this in the Party elite, he simply couldn’t. Speaking ambiguously in this context offers the best protection. And as a domestic move, dishing the Americans will always have more traction than turning on the DPRK – at least publicly.

On the China Dream too, before we get excited by taking this as evidence for an imminent onslaught of Chinese nationalism, we have to remember the domestic context. China Dream sounds bold and ambitious, but in the end, for the people Xi is really talking to, those in his own country, the China Dream is no more than something approaching the lifestyles that people in the West have been enjoying for the last half century. The China Dream in that sense is simply a snappier way of reduplicating the talk in the Hu period of “the building of a moderately prosperous society in all respects.”

All we can really learn from Xi’s talk is that in this period where China is so globally prominent, we have to get sharper at sifting apart the language aimed at domestic issues, and that which is really addressed to the outside world. China still behaves like it is a little surprised, and only slowly getting used to, its new international prominence. Most of the time, it acts like a country turned in on itself. People dream dreams for themselves, however, and rarely on behalf of others. And the dream that Xi has been talking about sounds more like it is focused on people trying to have a better life within, than a country about to embark on expansionist challenges to the U.S. or any other imperium that might surround it.

Kerry Brown is Executive Director of the China Studies Centre at the University of Sydney, and Professor of Chinese Politics. He was previously Head of the Asia Programme at Chatham House. He leads the Europe China Research and Advice Network (ECRAN) funded by the European Union (www.euecran.eu).

In an ordinary week, an agreement about the Diaoyu / Senkaku Islands, a disputed area that has triggered a series of standoffs between China and Japan in recent years, would have been big news.

Such an agreement was signed this week, albeit not between China and Japan –rather Japan and Taiwan, which also claims the islands as part of its territory, have reached a deal that will allow Taiwanese fisherman to use the majority of the Japanese-controlled zone around the islands.

Although the deal is framed as an interim agreement, delaying resolution of claims of ownership, it promises to change the dynamics of the East China Sea.  It removes the main source of friction between Taiwan and Japan but creates a variety of problems for the Chinese government, which fears both diplomatic isolation on territorial issues and a revival of Taiwan's diplomatic status. It could also signal an important strategic shift as China's eastern neighbors borrow an approach from the Philippines and Vietnam.

The deal has significant advantages for both Taiwan and Japan: it significantly expands the reach of Taiwan's fishermen, which is a boon for the island's economy, and starts the area on a road toward a sharing agreement such as those proposed by President Ma Ying-Jeou and former Vice President Annette Lu.  Japan will no longer have to deal with protests from Taiwanese fishermen, who have been a frequent cause of tension, and will pull Taiwan toward its side of the issue.

Immediate reaction from Beijing has focused on the issue of Taiwan's status.  Comments from the foreign ministry reminded Japan of a commitment to respect the "One China" policy, while the Global Times criticized Taiwan for ingratitude: "Although there has been no open cooperation between the mainland and Taiwan on the Diaoyu Islands issue, tacit understandings do exist. The strong stance from the mainland side in safeguarding the sovereignty of the islands has undoubtedly strengthened Taiwan's status in its negotiations with Japan."

For mainland observers, this was the second time in as many months Japan has acted to undermine its policy towards Taiwan – the last being a commemoration of the second anniversary of the Fukushima disaster during which Taiwan's representative was treated as an ambassador.

The agreement also deprives the mainland of a rare issue on which it can position itself as a defender of Taiwan's rights – until now, the mainland navy has gleefully stressed its willingness to protect Taiwanese fisherman from the Japanese Coast Guard, and Beijing has proposed the islands as an area for cooperation with Taiwan.

The islands no longer seem ripe for cooperation – in fact, the head of Taiwan's Coast Guard said on Wednesday that Taiwanese ships will help Japan to keep mainland trawlers out of the disputed area, raising the prospect of an embarrassing mainland China-Taiwan standoff.

But China also has reasons to worry about its own claim to the islands.  If Japan and Taiwan can come to a compromise, they may be able to cast the mainland as the unreasonable party standing in the way of resolution, thus winning international support.

Taken together with the Philippines' bid for international arbitration in the South China Sea, this agreement risks making China a territorial pariah.  Jerome Cohen, a distinguished expert on Chinese law, argued at a recent event that the two cases suggest a trend toward using international law as a "defensive weapon" by East Asian countries concerned about being overwhelmed by China.

Cohen said that Japanese officials have floated the idea of taking the case to the International Court of Justice in recent months – a move which seems pretty farfetched, as it would first require Japan to recognize that there is a dispute.  But, Cohen said, the threat of using international law may constrain China, which frequently cites its respect for bodies like the ICJ and UNCLOS in efforts to build its soft power – often contrasting its role in UN peacekeeping missions with the U.S.' willingness to fight wars without Security Council clearance.  However, appealing to international law would risk Japan's losing some or all of its claimed territory.  But this week's agreement suggests that such a calculus may appeal to Japan's current leaders.  It may be that they care more about keeping China from getting the islands than keeping them for Japan.

The SARs outbreak in 2002 – 2003 was a significant turning point in China’s development.  Initial attempts to cover-up the outbreak in southern China were partially blamed for the disease’s spread to the rest of the world via Hong Kong. Eventually, Beijing had to issue an embarrassing apology and change its methods of dealing with such health crises. During the outbreak though, SARs caused many people to leave the country, and indeed those of us in China in 2003 can vividly recall ubiquitous face-masks and an eerie lack of foreigners in cities such as Shanghai and Beijing.

Since then, bird flu and swine flu outbreaks have been dealt with a much greater degree of openness and professionalism.  The latest version of bird flu to emerge in China is known as H7N9. Fears surrounding its spread and distrust of official disclosure have already begun to weigh heavily on market sentiment in Shanghai.  Following the Tomb Sweeping Holiday in China, Shanghai markets opened down nearly 2% on Monday morning, which many attributed to the rising concern about H7N9. Although the market eventually rallied to close down just 0.6%, a brief look at the main gainers during the day shows a conspicuous number of pharmaceutical and biotech companies such as Zhejiang Shenghua Biok Biology, Jiangxi Changjiu Biochemical Industry, Guangzhou Pharmaceutical, Henan Taloph Pharmaceutical and Nanjing Pharmaceutical.  Clearly, the virus (and possible beneficiary companies in the event of its spread) was on the market’s “mind.”

The “river pigs” scandal near Shanghai has yet to be properly explained, but given a further discovery of dead ducks in a different river, and the ability of other flu viruses to cross species between birds and swine, it hasn’t taken long for people to begin (rightly or wrongly) drawing connections between the two phenomena. High feed prices have apparently made hog-rearing a profitless exercise for many farmers, and the pig carcasses could be related to the slaughtering of loss-making herds, although the question would then turn to why the farmers dumped the meat rather than sell it even at low prices.

At the time of writing, mainland China has 21 confirmed cases of H7N9, with 6 deaths and 12 patients with severe symptoms, according to the most recent update from the World Health Organization. Yet lingering doubts about Chinese disclosure at a local level – a natural concern given the SARs cover-up – along with ongoing distrust of China’s official media, provides ample space for conspiracy theories— such as that the virus is a U.S. bio-psychological weapon as one military officer claimed— to take hold.  

However, a new burst of face-mask clad people will not be such an unusual sight this time around, for it has already been a difficult year for health in China. Record levels (at least acknowledged levels) of pollution in January, February and March already garnered much media attention. So widespread was the discussion that face-masks once again became common sights on the streets of some Chinese cities even before fears of H7N9 spread.

At this point, there are no signs that H7N9 has caused a flood of expats and well-off locals out of China along the lines of what occurred during the SARS outbreak, but HR departments in China’s major cities are almost certainly closely monitoring the situation.  Furthermore, even if the H7N9 virus turns out to be less serious than some fear, the ongoing problems with food safety and pollution will probably continue to push some of those who can leave to do so.  

After all, if H7N9 were to reach a tragic death toll of 400,000+ people per year, few who didn’t have to stay in China would do so. Yet the World Bank has reportedly estimated that almost double that amount of people die prematurely each year in China from pollution related illness.

“Brain Drain” afflicts a country when the best and brightest of a country opt to use their talents abroad. China, with its latest flu outbreak but more importantly its appalling environmental situation, may well be on the cusp of coining a new term; perhaps “health drain,” with the negative economic effects that such a phenomenon would entail. 

James Parker has lived in Beijing for eight years and has worked at both foreign and domestic financial institutions. He is also engaged in consulting in the areas of international economics and international political risk, and teaches post-graduate finance courses for various UK Universities. He is currenly a writer for The Diplomat's Pacific Money blog.

There’s a key reason real estate is hot in China--it’s one of the few investment options available to Chinese citizens. The stock market is super volatile, interest rates on savings accounts lag behind inflation, and there are significant overseas investment restrictions. Regarding the latter, citizens are allowed to send $50,000 a year out of China for “current account transactions” such as tourism, but not for “capital account transactions” like most types of investment. There are several investment products allowed, including foreign currency-denominated financial products issued by foreign commercial banks and the gold trade, according to WantChinaTimes, but they are limited. 

However, the Wall Street Journal estimates that from September 2011 to September 2012, $255 billion left China--3% of China’s economic output for that period.   If Chinese want to invest overseas, there are a number of ways to do it. One very popular method is to set up a corporation to channel funds abroad, though corporate income taxes are levied.  There are also a spate of quasi-legal methods, such as using “underground banks” (which are straight-up illegal), and other methods detailed in Quartz including: exchanging gambling chips in Macau; getting foreign currency to pay fake foreign invoices; and buying art and selling it for foreign currency. The WSJ comments that a cottage industry has developed to get money out of the country, including money-transfer agents and private jets, and adds other money-moving methods such as corporate bank transfers that include private money and private funds rolled into export and import transactions. 

There has been an effort on the part of the government to expand investment opportunities.  In 2006, the central government launched the QDII (Qualified Domestic Institutional Investor) program, which allowed citizens to buy securities in overseas market, but via asset managers and funds.  In 2007, the “through-train” program provided an opportunity for citizens to invest in Hong Kong stocks, but was ended in 2010, in favor of the QDII program, according to the State Administration of Foreign Exchange (SAFE), and also over fears that it would hurt the mainland stock markets.  The QDII program was expanded in 2008 to allow investment in U.S. stocks.

On a less encouraging note, a pilot investment program launched last year in Wenzhou and Tianjin that allowed for direct overseas investment lasted just a short time. The pilot program in Wenzhou permitted $200 million of investments, albeit with such restrictions as no investment in property, stocks, or in any countries without diplomatic ties to China. SAFE allowed the program for just 2 weeks, after which it was cancelled, potentially because of inter-agency power conflicts, according to some analysts.

Last April, SAFE commented that it would open more channels for capital outflows and allow for increased overseas investment.

This spring, speculation was rife on the topic of the QDII2 program, which would allow for direct overseas investment, but for now, will likely be limited to allowing investors to participate in the Hong Kong stock market, according to The South China Morning Post. In a January 2013 work report, the People’s Bank of China stated that the QDII2 initiative is a “major goal” for 2013. 

However, the enthusiasm about QDII2 is measured--analysts believe that it would have a limited impact due to the length of time it would take to develop and the fact that the investors the program is trying to attract are most likely already invested in the Hong Kong market, again according to SCMP  Analysts also cited the brief tenure of the “through train” program as a reason for caution.

Capital outflow reforms have thus come in fits and starts, but the overall trend is certainly toward a more open system, which is fitting, considering that capital outflows occur anyway through semi-legal and illegal means.  This area is something to watch as the new leadership becomes more comfortable and more able to effect policy changes, particularly since Xi Jinping has a reputation for pro-market liberalization.  What happens in this arena will significantly impact other areas such as the currency and the balance of international payments.

The Organization of Petroleum Exporting Countries (OPEC) said in a report this week that it now expects China to overtake the U.S. in terms of oil imports next year. The report estimates that China will be importing 6 million barrels a day (bpd) by the end of the year, and that U.S. imports—which declined by 21 percent in 2012—will drop below the 6 million bpd mark in 2014. The report also said that China may have to import as much as 60 percent of its oil needs this year.

This is a dramatic turnaround from 2011 when the U.S. imported 8.7 million bpd compared to just 5.5 million bpd from China, according to the U.S. Energy Information Administration. The EIA also writes that oil made up less than 20 percent of China’s total energy consumption in 2009, with the overwhelming bulk of its energy (70 percent) coming from coal.

As Chinese leaders have long understood, the country’s explosive growth in foreign oil dependency creates stark vulnerabilities. Indeed, many analysts believe that Beijing’s investments in seaports along the greater Indian Ocean are part of a “string of pearls” strategy that could ultimately see the PLA Navy actively patrolling the area in order to ensure the protection of oil tankers transporting supplies to China from the Middle East and parts of Africa.

Furthermore, some believe that China’s interest in laying claim to the entire South China Sea is driven in part by the oil reserves the waters are believed to hold. Indeed, as production from Beijing’s onshore oil fields has peaked the country has expanded its offshore exploration and production, which is currently around 15 percent of its total oil production.

At the same time, with the U.S. quickly becoming energy self-sufficient, and EU energy demand likely to remain stagnant or even decline as a result of greater efficiencies, alternative energy sources, and slow economic growth, China could come to have a dominant presence on the demand side of global oil markets. This is especially true if India’s expected growth rates are not realized.

In this case China’s reliance on foreign oil could be matched by large oil-exporting nations’ dependence on China as a customer. Whereas China will purchase its oil from many different sources some countries may become increasingly unable to lose Beijing as a customer.

Even Russia is becoming increasingly reliant on China as an energy customer. According to a deal signed during Xi Jinping’s recent trip to Russia, a copy of which was obtained by Bloomberg News, Russian oil giant, Rosneft, has agreed to more than double its exports to China in exchange for US$ 2 billion in oil-backed loans. Starting in 2018, Rosneft has agreed to furnish China with at least 37 million metric tons of oil a year (743,000 barrels a day) for the next 25 years.

As a result, China—which was just Russia’s fourth largest oil export market in 2011— will become Russia’s largest oil customer in five years. China already became Russia’s largest trading partner in 2010, and in 2011 bilateral trade reached a record high of US$80 billion.

Russia is the largest energy exporter in the world and its economy remains extremely dependent on these sales. According to a December 2012 report by the European Bank for Reconstruction & Development, oil and natural gas now account for 70 percent of Russia’s exports and over half of its government budget, up from the 1990s when oil and natural gas were less than 50 percent of the country’s exports. Altogether commodities made up as much as 92 percent of Russia’s exports in 2011, according to the EBRD report.

With the shale revolution in North America and greater output in Iraq likely to drive down energy costs in the years and decades ahead, this dependency puts Russia in a precarious position. As Georgy Bovt, a Russian political analyst recently put it, Russia is quickly becoming China’s favorite junior partner.

A good way to directly or inadvertently start a trade war with China would be to take on the economic development goals expressed in the Five-Year Plan. After all, China's leaders see continued economic growth as the key to their survival. 

Conscious that massive investment in heavy industry is unsustainable, Party planners have focused for years on “innovation.”  In the future, they believe, China must change from manufacturing goods for multinational companies to selling products developed by Chinese companies under Chinese brands.  Thus, China's leaders hope to avoid the “middle income trap” and a prolonged recession that could fatally undermine the legitimacy of the Party.

After the first five years of the “indigenous innovation” policy, it has become known in the international business community as a massive scheme for protectionism and technology theft.  Dealing with its impact remains a top priority for American trade negotiators.  But a few Chinese companies have emerged as global brands during this period, establishing a niche in international markets as reliable low-cost alternatives – PC maker Lenovo, the appliance company Haier, and the network equipment manufacturers Huawei and ZTE.

So the way that the U.S. has dealt with Huawei and ZTE, pillars of China’s economic development, over the past year is remarkably ill-advised.  Friday's Wall Street Journal suggests that American regulators are taking a page from China's protectionist playbook – using vague national security concerns, secret hearings, and behind-the-scenes pressure on private companies to exclude Chinese competitors from American markets.  This is hardly consistent with Washington’s efforts to open Chinese markets to American IT equipment – an issue which dominates.

Most recently, U.S. regulators have pushed Japanese and American telecom operators Softbank and Sprint to swear off using Chinese-made equipment as a condition of their proposed merger. The move was driven by concern about Chinese hacking and intellectual property theft.  This follows a move by Congress two weeks ago that added language to a budget resolution strongly discouraging government agencies from buying IT equipment from companies “owned, directed or subsidized by the People's Republic of China.”

As the Journal shows, the decision in the Sprint-Softbank deal was suggested by the national security apparatus, and doesn't appear to have followed any set rules – it differs from the deal worked out by the Federal Communications Commission  in the T-Mobile/Metro PCS deal also under negotiation.  Federal officials have evidently settled on a ban that isn't a ban:

“Because of concerns about violating trade rules, any constraints wouldn't specifically exclude gear from Huawei, which Softbank has used in its home market of Japan, or ZTE, a person familiar with the process said. Nor would they explicitly give the government a veto, this person said. But U.S. officials have made no secret of their distrust of the Chinese companies and are aiming to make sure their equipment doesn't become a core part of U.S. telecom infrastructure, the people said.

"You have to find a way to say, 'Don't buy from the Chinese,' without saying, 'Don't buy from the Chinese,' " said a person who has spoken with Sprint.”

The national security concerns may well be justified. Still, given the available public evidence – the net effect of the Sprint-Softbank vetting procedure is likely to be undermining many of the United States' top priorities with China.  Using non-transparent processes to avoid World Trade Organization rules will only confirm widespread Chinese suspicion that American talk of international norms is a tool to constrain Chinese development.  Huawei is a particularly critical example – as one of the champions of China's current development goals, it is a high priority for China's leaders.  If global rules cannot protect it from backhanded treatment, Beijing is much more likely to give up on global trade agreements and turn to tit-for-tat protectionism.

Government meddling in the procurement decisions of private companies undermines another key goal of our relationship with China: reaching an agreement on the government procurement protocol of the WTO, under which governments that are party to the protocol agree not to discriminate against other members’ companies in sourcing.  China's accession to the Government Procurement Agreement, however, has been held up for more than a decade by legal technicalities regarding the question of State-Owned Enterprises.  China would prefer not to consider them as part of the government, which would allow them to keep “buy Chinese” policies, while the U.S. argues that their role in carrying out public projects makes them part of the government.  If the American government can ban private companies from using Chinese products in infrastructure, that severely blurs this line.

The U.S. should not have to compromise its national security to uphold free trade – but following China's example is not the way to do it.  Rather, it should develop transparent procedures that allow companies like Huawei and ZTE to clear their names – and which can serve as models for procedures American companies could deal with overseas. 

Hundreds of billions of dollars of U.S. trade are at stake with these issues: U.S. companies have struggled for years to overcome protectionist measures loosely justified by national security (a report from the U.S. Trade Representative covers China's restrictions on foreign IT) – in the IT field, Microsoft, Google, and Intel, have all been cast as possible American Trojan horses, while cultural exports like Hollywood movies and Facebook contend with the charges of ideological infiltration – in Chinese eyes, another form of national security.

Huawei and ZTE are national champions, and the Chinese state has frequently proved willing to bend over backwards on their behalf in domestic affairs.  Their access to the U.S. market could be a huge step for China's development goals – which could give Washington substantial leverage to get concessions on free trade or security issues.  But to get those concessions, the U.S. will have to show that it is negotiating in good faith – and to convince China's leaders that its concerns about security are not excuses to exclude China from its market.

Every Wednesday, The Diplomat’s editorial team scours the web to find the best material on all things China. From Beijing’s relations with its neighbors and growing military might, to a rapidly evolving economy and amazing arts and culture, we present a diverse grouping of articles for your reading pleasure.

Here is our top pics for this Wednesday. What did we miss? Want to share an important article with other readers? Please submit your links in the comment box below!

 -The big news this week was the emergence of a new variant of H7N9 bird flu in China. Two individuals have already died from the disease and at least five others have been infected. Currently authorities do not believe the disease is transmitted by humans. In political terms this development immediately conjures up images of the SARS epidemic that took place early on in the Hu-Wen administration.

- Could Sino-Japanese relations be on the mend? The two sides have begun  their first unofficial cultural exchanges since bilateral relations deteriorated after Tokyo announced plans to nationalize the Diaoyu/Senkaku Islands in September of last year. This weekend former Japanese PM Yasuo Fukuda is expected to meet with Chinese President Xi Jinping at a regional security forum.

     - In February Daryl Morini outlined six ways Chinese and Japanese leaders can dial down tensions in the East China Sea.

- Many news organizations are reporting on a recent study that found that 1.2 million Chinese died prematurely in 2010 from outdoor air pollution. This constituted 40 percent of the global total. Public concern over pollution has been growing in China in recent months.

     - There are signs the government has been proactive in addressing the issue. The Climate Institute’s 2013 report on G-20 nations’ green energy policies, which was released in late March, found that China was among the top five countries best positioned to compete in a low-carbon economy. This was partially due to the fact that China boasted over half of worldwide public equity investment in clean energies.

     -For analysis on how China’s new leaders may address environmental issues see Greenpeace China’s Li Shuo & Monica Tan’s recent piece in  China Power.

- Deng Yuwen, deputy editor of the Study Times, a weekly journal published by the Central Party School, told South Korean media this week that he was relieved of his position as deputy editor and suspended from the school after he wrote an op-ed in the Financial Times arguing that China’s relationship with North Korea was “outdated.”

      - For more on China’s North Korea diplomacy, see Joel Wuthnow’s recent piece on how Beijing handled negotiations over the most recent UNSC sanctions against Pyongyang.

-  Beijing and Shanghai outlined new rules aimed at curbing property prices. Beijing’s municipal government said it planned to finish construction  on 70,000 affordable housing units in the city this year. Shanghai’s local government also said that it hopes to complete 10,000 affordable housing units in 2013.

     -Creating affordable urban housing is crucial to Premier Li’s goal of accelerating the pace of urbanization.

- Bonus: Xi Jinping made his first foreign voyage as China’s president last week. Here are some interesting primary documents and official coverage.

     - Transcript: Xi Jinping’s pre-trip interview with BRICS nations media.

     - Transcript: Vladimir Putin and Xi Jinping’s remarks following bilateral talks.

     - Transcript and Video: Xi Jinping’s speech in Tanzania.

- Full Text: Joint Communique Between The Republic of South Africa and the People's Republic of China

- Full Text: Fifth BRICS Summit Declaration and Action Plan

- China’s Foreign Ministry Recap of Xi’s speech to the Parliament of the Republic of Congo.