Igor Greenwald's  Instablog

If your opponent is of choleric temperament, seek to irritate him.
— Sun Tzu

As if it’s not enough to bicker over democracy, pollution, trade, and finance, the US and China can now add Internet censorship and hacking to the list.

Late Tuesday, Google (Nasdaq: GOOG) revealed that it had been targeted by Chinese online intruders spying on human-rights activists, and said it will stop censoring Chinese search results, even at the risk of getting booted from the country. At least 20 other companies had also been hacked, Google’s top lawyer charged. The next morning, US Secretary of State Hillary Clinton said the allegations raised “serious concerns” and called on China to address them.

Google gets some revenue but very little of its profit from China; its shares drifted less than 2% lower on the news. Those of Baidu.com (Nasdaq: BIDU) soared more than 12% on expectations that China’s homegrown search champion would grow even more dominant should Google leave.

Though little money is at stake, it is a dangerous rift all the same, implying that the political differences between China and the West now loom as major obstacles to business ties. This adds to the ill will created by the summer arrests of four Rio Tinto (NYSE: RTP) employees in China on suspicion of commercial spying. That case is now before Chinese prosecutors, who could take another six weeks to decide whether the imprisoned men, among them an Australian citizen, will stand trial.

Trade remains the biggest irritant of course, even more so now that China has surpassed Germany as the world’s leading exporter. The US trade deficit is growing again alongside a recovering economy, and though the deficit with China shrank last month, it still accounted for more than half the overall shortfall.

China has steadfastly resisted foreign calls to lift its dollar-pegged currency. Instead the Bank of China has just hiked loan reserve requirements on lenders, in a move that will restrain credit and domestic consumption. Chinese stocks and commodities wilted in the surprise move’s aftermath. But the bigger danger in the long run is that China’s cheap currency sparks a trans-Pacific trade war.

Or perhaps a Eurasian one. It’s doubtful that a stronger yuan would do much to bring back American jobs. But the weak Chinese currency is clearly sapping Europe’s fortunes. Former top exporter Germany has just reported a 5% annual GDP drop—its worst year since World War II—and a statistics official said the economy has stagnated for the last three months. Moody’s is forecasting a “slow death” for Greece. The manufacturing recovery in Italy and the UK has lost momentum, and the bitter winter will further chill growth.

David Fuller of Fullermoney argues that emerging markets are destined to continue outperforming as their economies catch up to the rich world’s living standards. And as consumer spending across Asia ramps up, Australian packager Amcor (OTC: AMCRY) should be among the beneficiaries, writes Carla Pasternak. Meanwhile, Irwin Michael and Gordon Pape have spotted value in a Canadian printer of currency as well as one of its stronger commercial landlords. Like Australia, Canada’s a big exporter of commodities. So their economies are tied to growth in India and China, without anything like the same level of risk.

—Igor Greenwald, Editor, MoneyShow.com Global Investing

Disclosure: "no positions"

So much for the notion that debt problems in Dubai and Greece might wreck the global economic recovery. China's factories have since turned up the heat, and it would take a huge momentum shift in the year ahead to run the boom into the ground.

Brazil's revved up like it hasn't been in two years; debt-laden, violence-ridden Mexico has watched stocks round-trip back to their 2007 highs.

The story's no different in India or South Korea: throughout Asia and the Americas the trend is up, as it has been for nine months.

Money may not solve all problems, but it can paper over most of them, for a time. Dubai's monument to chutzpah, the half-mile high Burj Dubai tower, opened as Burj Khalifa, renamed for the neighboring Abu Dhabi sheik who rescued Dubai with a bailout.

They won't be building much of anything in Greece any time soon, but if they did they certainly wouldn't name it for Juergen Stark, Germany's man at the European Central Bank. "Markets are deluding themselves if they think that member states will open their wallets to save Greece," an Italian newspaper quoted Stark as saying. He added that Greece's problems were the result of profligacy, rather than fallout from the financial crisis.

Hours later, European bureaucrats arrived to review the government's plans to slash its budget deficit from 12.7% of GDP to 3% within three years, in the teeth of a renewed credit crunch and economic stall. No one really believes Athenian stables will really smell so sweet by then, if ever. But many also don't believe that Europe will sacrifice Greece if the worst comes to pass.

Wrestling with intractable deficits can damage people’s health, too: Japan's finance minister has quit on health grounds, depriving the untested new government of one of its most experienced hands. His replacement is seen favoring a weaker yen—music to the ears of Japanese exporters.

UK Prime Minister Gordon Brown looks in need of several consecutive vacations, and now some of his own party's grandees are arguing that he deserves an early one. Adding insult to injury, Brown topped GQ's worst-dressed list. Perhaps it's time to try a leopard skin.    

Political change often marks turning points for financial markets, writes Carlton Delfeld in a common-sense list of new year's resolutions for global investors. It can also make a big difference for companies: In a new Global Q&A, fund manager Lisa Myers describes how closer integration between Taiwan and China has made Compal Electronics (Taipei: 2324) an even more promising investment.

Paul Goodwin points out two New York-traded Chinese ADRs, CNinsure (Nasdaq: CISG) and Shanda Games (Nasdaq: GAME), that should continue to benefit from rapid growth in Chinese consumer spending. Meanwhile, Tom Slee warns income investors to beware of credit risk, and recommends the floating-rate securities of Canada's top telecom. These offer a tax-advantaged 3% yield that's likely to rise with interest rates—hardly enough to make anyone rich but probably a better bet than a fixed-rate five-year loan to Uncle Sam, which yields still less. And BCE, which earns $11 billion a year, is on a sounder fiscal footing as a bonus.

--Igor Greenwald, Editor, MoneyShow.com Global Investing

Disclosure: "no positions"

Some of the economic recovery's green shoots are beginning to brown around the edges. Not that tufts of weeds sprouting from a mountain of monetary manure were ever going to look especially pretty.