Archive for February, 2013


* Railway linking China, ASEAN becomes operational

New Orient Express slowly taking shape.

Xinhua: “A railway that links southwest China’s Yunnan Province with the Association of Southeast Asian Nations (ASEAN) countries became operational on Saturday after seven years of construction, local railway authorities said.

The railway between Yuxi and Mengzi is part of the eastern line of the planned Pan-Asia Railway network.

The 141-km railway has a designed maximum speed of 120 km per hour. It passes through 35 tunnels and crosses 61 bridges, which together account for 54.95 percent of the eastern line’s total length.

The eastern line also consists of Kunming-Yuxi Railway, which had been in operation, and the Mengzi-Hekou Railway that is under construction and scheduled to be operational end of next year.

Upon the full completion of the eastern line, it will further open up China’s southwest, improve transportation and boost economic development along the line, experts said.

The Pan-Asia Railway network also consists of central and western lines and is an international railway project that will bring China closer with southeast Asia.”

via Railway linking China, ASEAN becomes operational – Xinhua |

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* I am here to share your pain, PM tells Hyderabad blast victims

Times of India: “Prime Minister Manmohan Singh on Sunday visited the Thursday’s blast sites and hospitals where the injured are being treated to express “solidarity” with the people of the city and appealed for peace and calm.


He lauded the people of the city for refusing to be provoked by the “nefarious” act.

Singh visited the twin blast sites and Omni and Yashoda hospitals where he met some of the injured and their families, assuring them of all help.

“I have come to share the grief of people of Hyderabad. I express condolence for the families of the bereaved and wish speedy recovery for the injured,” Singh said after meeting the blast victims at the hospitals.

He also said the state government has assured all medical help for them.

“The state government has assured all help will be given for treatment,” Singh, who flew in here from Delhi by a special IAF plane, said.

Making an appeal for peace, he said, “I call upon the people to maintain calm in this hour of grief. I am happy that people of Hyderabad have refused to be provoked by this nefarious incident.”

Singh had on Saturday strongly condemned the blasts, saying those responsible for the “dastardly” act would not go unpunished.”

via I am here to share your pain, PM tells Hyderabad blast victims – The Times of India.

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* Will China Ever Be No. 1?

Foreign Policy: “Will China continue to grow three times faster than the United States to become the No. 1 economy in the world in the decade ahead? Does China aspire to be the No. 1 power in Asia and ultimately the world? As it becomes a great power, will China follow the path taken by Japan in becoming an honorary member of the West?

English: Senior Minister Lee Kuan Yew of Singa...

Senior Minister Lee Kuan Yew of Singapore,  (Photo credit: Wikipedia)

Despite current punditry to the contrary, the surest answer to these questions is: No one knows. But statesmen, investors, and citizens in the region and beyond are placing their bets. And U.S. policymakers, as they shape the Obama administration’s pivot to Asia, are making these judgments too. In formulating answers to these questions, if you could consult just one person in the world today, who would it be? Henry Kissinger, the American who has spent by far the most time with China’s leaders since Mao, has an answer: Lee Kuan Yew.

Lee is the founding father of modern Singapore and was its prime minister from 1959 to 1990. He has honed his wisdom over more than a half century on the world stage, serving as advisor to Chinese leaders from Deng Xiaoping to Xi Jinping and American presidents from Richard Nixon to Barack Obama. This gives him a uniquely authoritative perspective on the geopolitics and geoeconomics of East and West.

Lee Kuan Yew’s answers to the questions above are: yes, yes, and no. Yes, China will continue growing several times faster than the United States and other Western competitors for the next decade, and probably for several more. Yes, China’s leaders are serious about becoming the top power in Asia and on the globe. As he says: “Why not? Their reawakened sense of destiny is an overpowering force.” No, China will not simply take its seat within the postwar order created by the United States. Rather, “it is China’s intention to become the greatest power in the world — and to be accepted as China, not as an honorary member of the west,” he said in a 2009 speech.

Western governments repeatedly appeal to China to prove its sense of international responsibility by being a good citizen in the global order set up by Western leaders in the aftermath of World War II. But as Kissinger observes, these appeals are “grating to a country that regards itself as adjusting to membership in an international system designed in its absence on the basis of programs it did not participate in developing.”

via Will China Ever Be No. 1? – By Graham Allison and Robert D. Blackwill | Foreign Policy.

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* China commercializes 3D printing in aviation

ZDNet: “China looks to lower the cost of 3D printing and make large titanium components to build the next-gen fighter jet and self-developed passenger plane.


By using laser additive manufactured titanium parts in its aviation industry, China is looking to become a global leader in commercializing 3D printing technology.

The laser additive manufacturing technology not only lowers the cost of titanium parts to only 5 percent of the original, it also reduces the weight of the components and enhances the strength of complicated parts.

As much as 40 percent of the weight can be reduced if the forged titanium parts on an American F-22 were made using the Chinese 3D printing technology, according to a a report on Chinese Web site, Guancha Zhe.

With funding from the government, especially from the military, the Chinese aviation laser technology team is making headways in making titanium parts for the country’s fifth generation of fighter jets, the J-20 and J-31, by lowering the cost and raising the jets’ thrust-weight ratio.

The Northwestern Polytechnical University of China is also making five meter-long titanium wing beams for the C919 passenger plane, which is scheduled to be put into commercial operation in 2016.

“As the aviation technology develops, the components are also getting lighter, more complicated, and also need to have better mechanical properties,” said Huang Weidong, director of the university’s laboratory, to a local newspaper. “It is very hard to use traditional technologies to make such parts, but 3D printing could just meet such demands.”

via China commercializes 3D printing in aviation | ZDNet.


* China to push compulsory insurance for polluting industries

Reuters: “China will force heavily polluting industries to participate in a compulsory insurance program to ensure they can adequately provide compensation for damage, the government said on Thursday.

Steam billows from a chimney of a heating plant near the World Trade Centre Tower III, a 330-meter-tall (1,083 feet) skyscraper, in central Beijing February 4, 2013. REUTERS/Petar KujundzicPollution has become a core concern for the stability-obsessed ruling Communist Party because of the public anger and protests it generates and because the issue cannot easily be hidden from view.

Companies that must participate in the scheme include mining and smelting industries, lead battery manufacturers, leather goods firms and chemical factories, the Environment Ministry and China Insurance Regulatory Commission said in a joint statement.

Petrochemical companies and firms that make hazardous chemicals and hazardous waste would also be encouraged to participate, it added.

Special environmental protection funds would be allocated to companies taking out the insurance, and they would be given priority for bank lending, the statement said.

Companies which don’t apply for the insurance may face negative environmental impact assessments and credit downgrades, which could hamper their development, it added.

A pilot insurance program currently covered more than 2,000 companies across a dozen provinces and had underwritten some 20 billion yuan ($3.21 billion) in risk, the government departments said.

“Using the tool of insurance … is conducive towards pushing companies to raise their environmental risk management and reduce incidents of polluting accidents,” it added.

The insurance scheme follows a spate of rules aimed at cleaning up the country’s notoriously filthy environment.

via China to push compulsory insurance for polluting industries | Reuters.

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# Seeking your feedback!

Hi Chindia Alert ‘followers’ and other regular readers:

It’s been a year since my first blog and now it’s well over 700 blogs. However, very few people seem to comment.  I do get dozens a day. But WordPress filters 99% of them as Spam messages either machine generated or written solely to attract attention to the commentator’s own website or blog.  I do check these out and sure enough even if the comment is complimentary, it contains no relevant content. Could have been praise for any post in any blog.

What I would appreciate is feedback from you with content!

All the best to you for the Year of the Snake.


* Outsourcers turn to China to plug India’s skills gap

The Times: “India is running out of the skilled engineers needed to man its giant software industry, forcing companies to hire staff overseas, especially from China, one of the industry’s pioneers has warned.

An Indian employee at a call centre provides service support to international customers

Kris Gopalakrishnan, the co-founder and executive chairman of Infosys, said that the outsourcing sector was facing a manpower shortage. India, he said, was not producing enough properly trained engineering graduates to meet expanding global demand for its services.

The country may have a population of more than 1.2 billion people, but the dearth of trained graduates is driving up salaries in its IT industry by 15 per cent a year. That, in turn, is eroding the sub-continent’s global competitiveness and forcing companies such as Infosys, Tata Consulting Services and Wipro to invest in finding foreign workers.

“A lot of the tertiary education in India is done by private colleges and there are significant quality issues there,” Mr Gopalakrishnan said.

India produces about 700,000 engineering graduates every year, but of these only about 25 per cent are sufficiently well trained to be considered for a job in IT, Mr Gopalakrishnan said.

Infosys — whose customers include BP, GlaxoSmithKline and Tesco — was planning to treble its workforce in China from 3,500 to more than 10,000 to help cope with constraints at home, where most of its 155,000 staff work.

“Apart from China, there are not many countries in the world where we can recruit large enough numbers,” Mr Gopalakrishnan added. Infosys, which generated revenues of $7 billion last year, already operates large software development and outsourcing operations in Shanghai, Dalian, Beijing, Hangzhou and Jiaxing. The wages in China are higher than in India but are rising at a more modest pace of about 10 per cent annually.

Infosys has also been expanding its overseas presence in other low-cost countries, such as the Philippines, and has explored opportunities in Egypt.

In expanding fields such as data analytics, there are only about 50,000 engineers in India with the right programming skills. Demand is at least five times that number, according to Heidrick & Struggles, a recruitment company.

India’s software and outsourcing industry employs about three million people directly, an increase of 188,000 from a year ago. It generated $75.8 billion in exports in 2012-13, making it India’s largest single export industry, and is continuing to grow at more than 10 per cent a year even as India’s overall rate of economic growth has nearly halved over the past three years, to just over 5 per cent.

Mr Gopalakrishnan said that as well as hiring overseas, Infosys was trying to improve the quality of education in India by funding teacher training programmes at 350 engineering colleges. The group has also built a private campus in the southern city of Mysore capable of training 14,000 students.

“We will have to continue to invest heavily in education and training,” he said.”

via Outsourcers turn to China to plug India’s skills gap | The Times.

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* 5 Ways China Could Become a Democracy

Most thoughtful and provocative article.  Reads very plausible too. Which of the five outcomes come true?

The Diplomat: “Few have seriously thought about the probability and the various plausible scenarios of a regime transition in China — until now.

Speculating about China’s possible political futures is an intellectual activity that intrigues some and puzzles many.  The conventional wisdom is that the entrenched Chinese Communist Party (CCP), so determined to defend and perpetuate its political monopoly, has the means to survive for an extended period (though not forever).  A minority view, however, holds that the CCP’s days are numbered.  In fact, a transition to democracy in China in the next 10 to 15 years is a high probability event.   What stands behind this optimistic view about China’s democratic future is accumulated international and historical experience in democratic transitions (roughly 80 countries have made the transition from authoritarian rule to varying forms and degrees of democracy in the past 40 years) and decades of social science research that has yielded important insights into the dynamics of democratic transition and authoritarian decay (the two closely linked processes).

To be sure, those believing that China’s one-party regime still has enough resilience to endure decades of rule can point to the CCP’s proven and enormous capacity for repression (the most critical factor in the survival of autocracies), its ability to adapt to socioeconomic changes (although the degree of its adaptability is a subject of scholarly contention), and its track record of delivering economic improvement as a source of legitimacy.

To this list of reasons why the Chinese people should resign themselves to decades of one-party rule will be a set of factors singled out by proponents of the theory of predictable regime change in China.  Among many of the causes of the decline and collapse of authoritarian rule, two stand out.

First, there is the logic of authoritarian decay.  One-party regimes, however sophisticated, suffer from organizational ageing and decay.  Leaders get progressively weaker (in terms of capabilities and ideological commitment); such regimes tend to attract careerists and opportunists who view their role in the regime from the perspective of an investor: they want to maximize their returns from their contribution to the regime’s maintenance and survival.  The result is escalating corruption, deteriorating governance, and growing alienation of the masses.  Empirically, the organizational decay of one-party regime can be measured by the limited longevity of such regimes.  To date, the record longevity of a one-party regime is 74 years (held by the former Communist Party of the Soviet Union).  One-party regimes in Mexico and Taiwan remained in power for 71 and 73 years respectively (although in the case of Taiwan, the accounting is complicated by the Kuomintang’s military defeat on the mainland).   Moreover, all of the three longest-ruling one-party regimes began to experience system-threatening crisis roughly a decade before they exited political power.  If the same historical experience should be repeated in China, where the Communist Party has ruled for 63 years, we may reasonably speculate that the probability of a regime transition is both real and high in the coming 10-15 years, when the CCP will reach the upper-limit of the longevity of one-party regimes.

Second, the effects of socioeconomic change –rising literacy, income, and urbanization rates, along with the improvement of communications technologies — greatly reduce the costs of collective action, de-legitimize autocratic rule, and foster demands for greater democracy.  As a result, authoritarian regimes, which have a relatively easy time ruling poor and agrarian societies, find it increasingly difficult and ultimately impossible to maintain their rule once socioeconomic development reaches a certain level.  Statistical analysis shows that authoritarian regimes become progressively more unstable (and democratic transitions more likely) once income rises above $1,000 (PPP) per capita.  When per capita income goes above $4,000 (PPP), the likelihood of democratic transitions increases more dramatically.  Few authoritarian regimes, unless they rule in oil-producing countries, can survive once per capita income hits more than $6,000 (PPP).  If we apply this observation and take into account the probable effect of inflation (although the above PPP figures were calculated in constant terms), we will find that China is well into this “zone of democratic transition” because its per capita income is around $9,100 (PPP) today, comparable to the income level of South Korea and Taiwan in the mid-1980s on the eve of their democratic transitions.  In another 10-15 years, its per capita income could exceed $15,000 and its urbanization rate will have risen to 60-65 percent.  If the CCP has such a tough time today (in terms of deploying its manpower and financial resources) to maintain its rule, just imagine how impossible the task will become in 10-15 years’ time.”

If this analysis is convincing enough for us to entertain the strong possibility of a democratic transition in China in the coming 10-15 years, the more interesting follow-up question is definitely “how will such a transition happen?”

Again, based on the rich experience of democratic transitions since the 1970s, there are five ways China could become democratic:

“Happy ending” would be the most preferable mode of democratic transition for China. Typically, a peaceful exit from power managed by the ruling elites of the old regime goes through several stages.  It starts with the emergence of a legitimacy crisis, which may be caused by many factors (such as poor economic performance, military defeat, rising popular resistance, unbearable costs of repression, and endemic corruption).  Recognition of such a crisis convinces some leaders of the regime that the days of authoritarian rule are numbered and they should start managing a graceful withdrawal from power.  If such leaders gain political dominance inside the regime, they start a process of liberalization by freeing the media and loosening control over civil society.  Then they negotiate with opposition leaders to set the rules of the post-transition political system.  Most critically, such negotiations center on the protection of the ruling elites of the old regime who have committed human rights abuses and the preservation of the privileges of the state institutions that have supported the old regime (such as the military and the secret police).  Once such negotiations are concluded, elections are held.  In most cases (Taiwan and Spain being the exceptions), parties representing the old regime lose such elections, thus ushering in a new democratic era. At the moment, the transition in Burma is unfolding according to this script.

But for China, the probability of such a happy ending hinges on, among other things, whether the ruling elites start reform before the old regime suffers irreparable loss of legitimacy.  The historical record of peaceful transition from post-totalitarian regimes is abysmal mainly because such regimes resist reform until it is too late.  Successful cases of “happy ending” transitions, such as those in Taiwan, Mexico, and Brazil, took place because the old regime still maintained sufficient political strength and some degree of support from key social groups.  So the sooner the ruling elites start this process, the greater their chances of success.  The paradox, however, is that regimes that are strong enough are unwilling to reform and regimes that are weak cannot reform.  In the Chinese case, the odds of a soft landing are likely to be determined by what China’s new leadership does in the coming five years because the window of opportunity for a political soft landing will not remain open forever.

“Gorby comes to China” is a variation of the “happy ending” scenario with a nasty twist.  In such a scenario, China’s leadership misses the historic opportunity to start the reform now.  But in the coming decade, a convergence of unfavorable economic, social, and political trends (such as falling economic growth due to demographic ageing, environmental decay, crony-capitalism, inequality, corruption and rising social unrest) finally forces the regime to face reality. Hardliners are discredited and replaced by reformers who, like Gorbachev, start a Chinese version of glasnost and perestroika.  But the regime by that time has lost total credibility and political support from key social groups.  Liberalization triggers mass political mobilization and radicalism.  Members of the old regime start to defect – either to the opposition or their safe havens in Southern California or Switzerland.  Amid political chaos, the regime suffers another internal split, similar to that between Boris Yeltsin and Gorbachev, with the rise of a radical democratizer replacing a moderate reformer.  With their enormous popular support, the dominant political opposition, including many defectors from the old regime, refuses to offer concessions to the Communist Party since it is now literally in no position to negotiate.  The party’s rule collapses, either as a result of elections that boot its loyalists out of power or spontaneous seizure of power by the opposition.

Should such a scenario occur in China, it would be the most ironic.  For the last twenty years, the Communist Party has tried everything to avert a Soviet-style collapse.  If the “Gorby  scenario” is the one that brings democracy to China, it means the party has obviously learned the wrong lesson from the Soviet collapse.

“Tiananmen redux” is a third possibility.  Such a scenario can unfold when the party continues to resist reform even amid signs of political radicalization and polarization in society.  The same factors that contribute to the “Gorby scenario” will be at play here, except that the trigger of the collapse is not a belated move toward liberalization by reformers inside the regime, but by an unanticipated mass revolt that mobilizes a wide range of social groups nationwide, as happened during Tiananmen in 1989.  The manifestations of such a political revolution will be identical with those seen in the heady days of the pro-democracy Tiananmen protest and the “Jasmine Revolution” in the Middle East.  In the Chinese case, “Tiananmen redux” produces a different political outcome mainly because the China military refuses to intervene again to save the party (in most cases of crisis-induced transitions since the 1970s, the military abandoned the autocratic rulers at the most critical moment).

“Financial meltdown” – our fourth scenario – can initiate a democratic transition in China in the same way the East Asian financial crisis in 1997-98 led to the collapse of Suharto in Indonesia.   The Chinese bank-based financial system shares many characteristics with the Suharto-era Indonesian banking system: politicization, cronyism, corruption, poor regulation, and weak risk management.   It is a well-known fact today that the Chinese financial system has accumulated huge non-performing loans and may be technically insolvent if these loans are recognized.  In addition, off-balance sheet activities through theshadow-banking system have mushroomed in recent years, adding more risks to financial stability.  As China’s capacity to maintain capital control erodes because of the proliferation of methods to move money in and out of China, the probability of a financial meltdown increases further.  To make matters worse, premature capital account liberalization by China could facilitate capital flight in times of a systemic financial crisis.   Should China’s financial sector suffer a meltdown, the economy would grind to a halt and social unrest could become uncontrollable.  If the security forces fail to restore order and the military refuse to bail out the party, the party could lose power amid chaos.  The probability of a collapse induced by a financial meltdown alone is relatively low.  But even if the party should survive the immediate aftermath of a financial meltdown, the economic toll exacted on China will most likely damage its economic performance to such an extent as to generate knock-on effects that eventually delegitimize the party’s authority.

“Environmental collapse” is our last regime change scenario.  Given the salience of environmental decay in China these days, the probability of a regime change induced by environmental collapse is not trivial.  The feed-back loop linking environmental collapse to regime change is complicated but not impossible to conceive.  Obviously, the economic costs of environmental collapse will be substantial, in terms of healthcare, lost productivity, water shortage, and physical damages.Growth could stall, undermining the CCP’s legitimacy and control. Environmental collapse in China has already started to alienate the urban middle-class from the regime and triggered growing social protest.  Environmental activism can become a political force linking different social groups together in a common cause against a one-party regime seen as insensitive, unresponsive, and incompetent on environmental issues. The severe degradation of the environment in China also means that the probability of a catastrophic environmental disaster – a massive toxic spill, record drought, or extended period of poisonous smog– could trigger a mass protest incident that opens the door for the rapid political mobilization of the opposition.

The take-away from this intellectual exercise should be sobering, both for the CCP and the international community.  To date, few have seriously thought about the probability and the various plausible scenarios of a regime transition in China.  As we go through the likely causes and scenarios of such a transition, it should become blindingly clear that we need to start thinking about both the unthinkable and the inevitable.”

via 5 Ways China Could Become a Democracy.


China Daily Mail

Nexen BuildingSeeing its $3 trillion foreign exchange reserve dropping in value due to falling US dollar exchange rate, China is anxiously looking for opportunities to take over profitable foreign assets. CNOOC’s takeover of Nexen is China’s first success in purchasing substantial foreign assets. Encouraged by the success, China will further intensify its efforts to buy foreign assets.

With such a trend, we can foresee that China will step up building up its navy to protect its trade lifeline and foreign assets.

One thing that should be clear is that CNOOC is a state-owned enterprise belonging to the Chinese government. There will be further reform of economic liberalisation to enable China’s private sector to compete with the state-owned sector, but it does not mean the privatisation of the state-owned sector. The reform aims at introducing competition to make state-owned enterprises more efficient and boosting the development of the private sector.

The state-owned…

View original post 793 more words


* Claims China is world’s No 1 trading economy are nonsense

SCMP: “The high import and export numbers are distorted by domestic firms fiddling taxes and the country’s heavy involvement in processing trade


Mainland imports of goods from the mainland via Hong Kong (left) and foreign value-added content of China’s exports

If you believe the media reports, China passed another milestone last year, overtaking the United States to become the world’s biggest trading economy.

According to data from Beijing’s customs officers, China’s total imports and exports of goods reached US$3.87 trillion in 2012.

In contrast, figures from the US Commerce Department show that America’s international goods trade was worth just US$3.82 trillion.

Hooray! China beats the US by US$50 billion.

Except there’s a problem: the figures are nonsense.

The most obvious way they are wrong is because China’s import and export numbers are heavily distorted by domestic companies fiddling their taxes.

Under mainland regulations, exporters of electronic gadgets and other widgetry can claim a value-added tax rebate worth 17 per cent of the goods’ value.

What’s more, under the Closer Economic Partnership Arrangement, no tariffs are charged on goods imported into the mainland from Hong Kong, provided the importer claims a relatively small component of value was added in the city.

As a result, mainland companies ship huge quantities of goods to Hong Kong, where their value is marked up by around 20 per cent before they are re-imported back into the mainland.

With this dodge, the scammers not only get their tax rebate when they export. By over-invoicing the re-imports, they get to circumvent the mainland’s capital controls and ship money offshore, either to invest in international markets (or Hong Kong’s properties) or to round-trip back into the mainland as foreign direct investment, which qualifies them for yet more tax breaks.

Figures from the Hong Kong government show the city was responsible for re-exporting some US$116 billion worth of stuff from the mainland back to the mainland last year, a 13 per cent increase over the year before (see the first chart).

If we assume the mainland importers claimed that 17 per cent of the value of their purchases was added in Hong Kong, which is in line with the Trade Development Council’s figures, then we can estimate that the value of the mainland’s total goods trade – both exports and imports – last year was exaggerated by some US$212 billion.

As a result, it looks very much as if China still lags some US$160 billion behind the US in terms of its international trade in goods, with just US$3.66 trillion of combined imports and exports in 2012, compared with America’s US$3.82 trillion.

But even those figures are dubious. That’s because much of China’s international commerce consists of processing trade. High-value components from developed economies get imported, bolted together by low-paid workers in China’s factories, and then re-exported to their final markets.

As a result, China’s contribution to the total value of the goods it exports is low by international standards.

Infamously, one 2011 study estimated that China’s share of the value added in a made-in-Shenzhen iPad with a US retail price of US$499 was just US$8.

Overall, according to the trade in value added database compiled by the Organisation for Economic Co-operation and Development, the foreign value-added share of China’s exports amounted to 26 per cent of their face value in 2009. For US exports, the proportion was 11 per cent.

That makes a huge difference to the raw trade numbers. In 2009, the foreign value-added content of China’s exports was worth almost US$400 billion, compared with US$160 billion for US exports (see the second chart).

Adjust the gross trade numbers to allow for this difference, and it soon becomes apparent that China is still a long way from becoming the world’s largest trading economy in any meaningful sense, despite what last week’s headlines may have claimed.”

via Claims China is world’s No 1 trading economy are nonsense | South China Morning Post.


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