There is a real – and sad – possibility that U.S.-China relations this year might become tenser.

Tensions have been lurking about for years on a variety of issues, including trade and currency valuation. The Google news this week – announcing that the company wanted an unfiltered search engine in China and sophisticated cyber attacks against Gmail – marks the first cork to pop for 2010.

For the most part, China - including its economy and the nation as a whole – is ascending. Its leaders are using their new economic, political and global clout in many noticeable ways.

There have been reports out of Greater China about whether that country has entered a housing bubble and its growth is sustainable.

As for the United States, the country is trying to leave its Great Recession and find firm financial footing for the new decade. People also are questioning the country’s overall place in this post-Great Recession world. And businesses continue to eye the roaring Chinese market.

On top of all of this, Chinese President Hu Jintao is scheduled to visit the United States this year. President Barack Obama invited him during their meeting in Beijing last year.

That makes the Google-China issue involving cyberattacks, censorship and a true free flow of information one of the best and, likely, most prolific dramas to watch.

Google’s market share is a reported 35 percent with Chinese officials noting there are about 338 million Internet users in the country.

Almost all of the issues that parties in China wanted to keep separate are, in some way, touching.

That includes: politics, commerce, technology, online searches, investments from a U.S. company and the sensitivity of Chinese officials in maintaining stability given how new leaders historically have gained their titles.  

David Drummond, Google’s chief legal officer, laid out his company’s concerns Tuesday, including a sophisticated cyber attack on Gmail users – including activists who are critical of China – and concerns about the limit and censorship of information of Google.cn, which operates in China. 

The Chinese government responded by saying that the Internet is open in China and that international Internet companies in China need to abide by Chinese law, according to articles in the People’s Daily and China Daily.

Chinese Foreign Ministry spokeswoman Jiang Yu explained:

China has tried creating a favorable environment for Internet….China welcomes international Internet companies to conduct business within the country according to law….China’s law prohibits cyber crimes including hacker attacks.

The China Daily printed an article saying that Google essentially was trying to “pressure” the Chinese government.

Whether this remains just a blip or bellwether of a moment remains to be seen. But even if it’s just a blip, it’s big.

Nicholas Kristof, a long-time New York Times writer and well-respected China watcher, weighed in with praise for Google in his recent column. A few days earlier, the Times ran an editorial about China, arguing that leaders there might want to consider how their economic strategy is affecting the globe.

Of course, Chinese leaders have the right to do what they want as they guide their country.

But blowback can take form in many ways. A modern era also means that technology will bring about change.

There’s also the idea of opportunity costs – and this is a real one for Google in China: In order to gain something, you have to give up something.

Given this context, here are some categories that I think are worth watching:

1. KEY WORDS TO WATCH

The fact that the Chinese government is seeking “more information” regarding the Google news means that communication lines are open.

Chinese government officials could have quickly condemned Google’s move. Just what type of middle ground the two sides might broker, if any, is up in the air.

But reporter Joe McDonald of The Associated Press identified some key language from the Chinese media in his report:

The Global Times, published by Peoples Daily and known for a fiercely nationalistic tone, took an unusually conciliatory stance Thursday, warning that Google’s departure would be a ‘lose-lose situation’ for China. ‘Google is taking extreme measures but it is reminding us that we should pay attention to the issue of the free flow of information,’ the newspaper said. It said China’s national influence and competitiveness depend on access to information and added, ‘We have to advance with the times.’

2. FOLLOW THE LAW

In China, what does that mean?

Who should follow the law and the rules? Should all people in China follow all the laws and rules all the time? If you live in China or do business there and you find the law objectionable or a nuisance, is it permissible for you to ignore it?

If you live in a competitive society and victory is the ultimate goal, why should you follow rules?

3. GOOGLE’S MOTIVE

I’ve seen online comments already saying that Google is pulling a publicity stunt, partially to generate more momentum for its search engine in China, which only has about 35 percent market share.

The argument is that Google wants money, that it’s a business. Baidu is the big player in China’s search engine market.

But in the CNBC interview above, Drummond explained that it was not a financial strategic move and that revenues fail to account for a large portion of money for Google.

“This was never really a financial move for us,” Drummond said. “…Our revenues from the China business are truly immaterial.”

4. UNINTENDED CONSEQUENCES

If Google actually shuts down its search engine in China, people living in that country might find other ways to access information from the Mountain View, Calif.-based company.

People living in China – and many other countries – realize that if barriers go up, someone out there is smart enough to go around them – especially in the case of information that floats in the ethers.

5. FOREIGN DIRECT INVESTMENT

Presuming that Western companies have money to invest, especially in the future, would they want to invest in China should the Chinese government actually make or enforce rules which produce an unfriendly business climate?

If the Chinese government and Google maintain their respective positions, what type of message would that send to the various international companies that want to remain in China to do business?

The Times has an article talking about reaction from international businesspeople in China. Many people declined to be identified because they feared action from the Chinese government.

It also discusses whether international companies will revisit their policies of operating in China, given Google’s public stand.

China might have enough capital these days such that foreign investment has dropped as a priority.

But international companies in China do, as Chinese government officials know, employ a large number of Chinese citizens. The companies also spend money.

6. WHAT WAS THE TARGET OF THESE CYBER ATTACKS?

In his CNBC interview, Drummond pointed to evidence that Gmail accounts of activists who are critical of the Chinese government were the targets.

He also said it was much bigger, explaining that it went just beyond Google and extended to other companies.

But in a different CNBC interview, David Garrity, an analyst who covers Google for GVA Research, said the prize was actually substantial source code – and that the attacks amounted to intellectual property theft.

One gaping hole in Garrity’s comments was that he failed to state, or at least allude to, his sources or give evidence. I know stock analysts often talk to people at the companies they cover and present the information as solid fact.

That said, this is what Garrity asserted on CNBC:

What is actually going on here isn’t so much the fact that you have Gmail email accounts that are being broken into. You actually had a fairly substantive series of cyber attacks taking place in mid-December, which actually ended up in a fair amount of core source code from Google being essentially misappropriated from the company. This isn’t a matter of essentially upholding privacy. This is a matter of intellectual property protection. And when you start going after the source code for a software company such as Google, you’re going after what basically are the crown jewels for the company.

I have no idea if what Garrity said is true.

The CNBC journalists who were interviewing him failed to ask for more evidence – because if this is true, it’s raises the severity of this incident to higher levels.

If it is true, I’m sure major business journalists in the United States are racing to their sources to confirm and shed light on the information. That core of smart technology bloggers is probably beating the bushes to get their sources to confirm and expand upon this.

If this is true, why did Google not come out and tell the public?

What Google has told the public is that the Gmail accounts of activists were the “primary” targets and that security fixes have been made.

So, if Garrity is right, then Google needs to return again to address the source code angle because shareholders are probably clamoring to know.

Again, if Garrity is right, I’m sure U.S. government officials have been briefed.

It is a huge charge but it is puzzling.

I’ll wait and see if more developments and evidence surface on this front – especially from national news outlets which probably want to advance this serious allegation.

7. DOES GOOGLE HAVE TO PHYSICALLY BE IN CHINA TO BE IN THAT MARKET?

This is connected to the other question that people are asking: Will Google actually leave China?

Obviously, the answer falls on the co-founders and highest executives.

But the Google executives were the first ones to raise it publicly.

To maintain their credibility – or what credibility you put into the company – they’re in a tight spot. But like I’ve said before, it is possible that they’ve said, “We’ll take that risk.”

If they do want a Greater China presence, there are places outside of mainland China where Google executives can set up operations.

I’m sure executives are reviewing their viewership in China and how that relates to advertising dollars it brings the overall company, among other topics.

Finally, Siva Yam, president of the United States of America-China Chamber of Commerce, was absolutely correct in comments to the AP:

As long as you aren’t involved in politics, the media or pornography, the government will leave you alone.

That is true.

In this case, though, one of the world’s leading companies, Google, actually deals with media and information which can be political.

And the issue about the flow of information, whether it’s free or filtered, in the world is this: It can move in surprising ways.

NOTE: If you didn’t see it, I wrote an analysis about the subject for TechFlash. I also posted a blog entry on Wednesday stressing the importance of warm, long-term U.S.-China relations.

I know both countries have brilliant, visionary and ethical people who really can revolutionize the world in many ways.

But nearly everyone can feel an externality.

This was done in the context of China’s economic trajectory, from moving from a developing status to a more developed one.

Many Western business leaders were treated like superstars in Beijing and Shanghai in ways they never imagined at home.

There were face-giving banquets, motorcades with black sedans, five-star hotels and business cards with big titles.

In television interviews, hosts asked Western business leaders how they became so successful and lobbed easy-to-answer questions. There were speeches packed with many adoring audience members who looked at the leaders as if they literally had invented the Internet.

The word “friendship” must have popped up numerous times in these conversations that used translators.

I’m Chinese American. I’ve always argued for strong, cooperative long-term relations between the United States and China.

I think it’s time that we in the West, if we have not done so already, say to Chinese leaders: It’s time we learn from you.

I’ll let the fine reporting from U.S. journalists – and the Chinese staff members who help them – in China stand regarding all the eye-popping events about Google reconsidering its place in the roaring Chinese market.

I’ve been following the dispatches from The New York Times. You can also find stories on Google.com’s news search.

All I can say is this: China has 5,000 years of history. Strategies of all sorts have been tried over those years.

The Three Kingdoms remains the Chinese classic about power and strategy. I’m still trying to get through the book, which doesn’t always follow a linear plot.

But my wife and I have talked about many of its main points.

After President Obama returned from his China trip late last year, I wrote about Liu Bei, a central character from The Three Kingdoms.

One lesson that I think people should keep in mind when it comes to China and its long history is that multiple possibilities on multiple levels can move simultaneously.

Yes, you might have to reach for some aspirin.

If anything, your mind will be at work. You will remain intellectually agile.

In The Three Kingdoms, keep in mind how Cao Cao, who was powerful, lost his arrows to Liu Bei, who later used them.

When I told my wife of my thoughts, following the Google in China news, she told me of one famous four-character Chinese saying.

It is: Guo he, chai qiao.

The translation: After you cross the river, we tear down the bridge.

The optimist in me wants U.S.-China relations to steadily become warmer.

But I’ve studied international relations. I’ve been a journalist. I was educated in the United States. I’ve traveled to China many times since the 1990s.

So, I know there are times when a full accounting and review of the facts are needed – even if it’s a process you don’t want to do.

Western business leaders in China, I’m sure, have been aware of the limits they face in that country.

The only catch is that they might not have been at liberty to talk openly about them because long-term success and profits from the Chinese market were still floating in their minds.

Let’s see how this unfolds.

UPDATE: Todd Bishop, co-founder of TechFlash, asked me to type up some thoughts about the Google news from China. Have a look and read TechFlash for some solid, insightful technology news about the Seattle area.

Todd and I worked together at the Seattle Post-Intelligencer and covered Chinese President Hu Jintao’s visit to the Seattle area in 2006.

Justin Solondz will serve a three-year jail sentence issued by a Chinese court in Dali, which is located in Yunnan province. Dali police said they found 33 pounds of marijuana in his rented house, Times reporter Dan Levin wrote.

A local prosecutor said that Solondz, an environmental activist in the United States, also had a “drug laboratory” at his house, according to the newspaper article.

After Solondz, who apparently used two aliases in China, finishes his jail sentence, he will be sent to the United States to stand charges for his reported involvement in an “arson rampage” in Washington, Oregon and California.

In Washington, officials believe that Solondz made firebombs that were used in an attack on the UW’s Center for Urban Horticulture. He was accused, in absentia, the Times reported.

In a 2008 article for the Seattle Post-Intelligencer, reporter Paul Shukovsky wrote that his girlfriend at the time, Briana Waters, received a six-year sentence in federal prison for that attack.

Waters, a violin teacher, let Solondz make firebombs in her Olympia, Wash. house, federal prosecutors in Seattle said. A federal jury found her guilty in March 2008.

Federal authorities linked the attacks to some members of the Earth Liberation Front, a group that opposes genetic engineering labs.

The case became complex because federal officials used the word “terrorist” to describe the people involved in the attacks.

Solondz’s mother has said she doesn’t believe her son was involved in arson. The Time also said that his father does not believe that his son is a terrorist.

The Seattle Times coverage of Waters’ sentencing can be found here.

UPDATE: The Associated Press has moved a story, including quotes from a federal prosecutor in Seattle. Also, see the FBI notice regarding Solondz.

In Anyang, a city in China's Henan province, steel furnaces mark the skyline in 2008. Photo credit: Copyright Lu Guang

I’m Chinese American. My grandparents left China’s Guangdong province in the 1910s and 1930s.

These images of pollution in the Middle Kingdom from Chinese photographer Lu Guang nearly made me ill.

Photojournalism, executed well and by those who have studied the art, still matters.

Lu recently won the W. Eugene Smith Grant for Humanistic Photography for his images made over a four-year period.

In Photo District News, reporter Holly Stuart Hughes notes:

Guang says he will use the $30,000 grant to expand his travels in hopes of ‘shocking authorities’ about the effects of industrial pollution.

I’m posting three of his images not to steal his documentary work.

Rather, it’s to convey a side of China that many who have never traveled there – and those who have visited - might not see.

Yes, in many ways, China has improved dramatically and quickly over the recent decades.

But given these photographs, there has been a true cost to economic and industrial modernization.

A man turns his face and covers his nose because of the stench from the Yellow River in 2006. Photo credit: Copyright Lu Guang

On my many trips to China, I’ve seen pollution but nothing to the extent that Lu has documented over the years.

In 1994, I pedaled my mountain bike through Anyang – the same city in the top photograph – during my 1,200-mile solo trek through China.

On some days, I wiped my face and knew I was covered in coal dust. I often thought about what it was doing to my body.

But I was thousands of miles away from a doctor in the United States.

So, I probably did something that people who feel they have to work around coal to earn a living probably do: I tried not to dwell on it.

Besides, at the end of each day’s ride, my primary goal was to find safe lodging, running water and a hot meal.

Once during my trip, I stopped and asked a peasant for directions.

On the ground, coal dust surrounded him. He clutched a long shovel.

Black dust covered him from his hair to his shoes.

I didn’t have the gumption, at that moment, to take out my bulky camera and make a picture.

I also didn’t even tell him something that you might hear, given his standing in life: You know, you might want to go visit a doctor. 

In the end, it doesn’t matter whether you’re a high-government official. Or a taxi driver. Or a university professor. Or a parent. Or a supermarket employee. Or a peasant. Or a construction worker. Or a club-hopping hipster. Or a member of the new middle class.

It really doesn’t matter what country you’re in, either.

These images are arresting.

Children who live in a polluted area of China in 2005. Photo credit: Copyright Lu Guang

My wife spotted them on a Chinese Web site. Then, I walked into the room, stood and instantly recognized the country and problem.

My young son entered the room. We all looked at the images together until my wife and I realized some were graphic in terms of health and the end of life.

We decided it was time for our son to go wash up.

I know it’s easy to fall back on the standards and histories of our own countries when we venture out to places in the world - and eventually pass judgment.

Perhaps with these photographs, it’s best to strip away our status as citizens of one country and just approach as a person.

From there, we can backtrack to piece questions and answers together to come up with some type of logical conclusion to what we’ve seen.

I’ve written about my experience as a Chinese American who has returned to my ancestral homeland.

Even after all these years, I’m still asking questions about the place.

Earlier this week, there was an up, when Hodo Soy Beanery opened its organic tofu shop in Oakland, Calif.

On Thursday, there was a bit of a low when Quong Hop & Co., a South San Francisco tofu company, was ordered to pay $90,000 in fines for failing to keep its plant clean.

The San Mateo County District Attorney’s Office announced the fines that covered the past two years, reporter Sean Maher of the San Mateo County Times wrote.

The company – which says it was one of the first tofu businesses in the United States – essentially did not keep its food area free of pests, according to the article.

It also reportedly maintained poor plumbing and lacked enough areas for employees to wash their hands.

The company has made tofu since 1906 and markets its products under Soy Deli, Soy Fresh and Raquel’s.

Prosecutors said the company’s products have not caused anyone to become sick and state of California health officials determined on Wednesday that the food plant met safety codes.

Maher quoted San Mateo County Deputy District Attorney John Wilson:

These fines are about law violations in the past….Part of the injunction going forward forces the company to comply with basic laws, but goes above and beyond and requires the company to take extra steps to ensure the food will be safe.

Reporters in the San Francisco Bay Area called the company for comment but were unable to reach a representative.

The company said on its Web site that it distributes its products in California, Washington, Oregon, Nevada, Arizona, Alaska, Minnesota, North Dakota, South Dakota, Illinois, Indiana, Wyoming and Montana.

In the past, inspectors in Washington state found that one pack of the company’s tofu was contaminated, according to information posted on the Quong Hop & Co. Web site.

The company conducted tests for Listeria monocytognes, which are found in water and soil. The company said they can enter food products before packaging.

The company reported that they are “bacteria which can cause serious or fatal infection and temporary illness, and in rare instances, miscarriages and still births.”

Some of Quong Hop’s 12- and 30-ounce packages of white tofu showed trace amounts of the bacteria. In 2007, the company issued a recall for these tofu batches.

Sing Hau Lee started the company, which made tofu daily and sold it to Chinese in the San Francisco Bay Area from a grocery store.

The San Francisco Chronicle also reported on the case.

Do you remember that question – which has become a cliche – where a car dealer stands next to you on the lot and asks:

“What would it take for you to drive away in this car today?”

These days, with the recession still dominating discussions, I wouldn’t be surprised if it takes a lot – lower pricing, tax breaks, special discounts, access to a competitive credit rate and cash for your old model.

And with Christmas fast approaching, The New York Times ran an informative piece on the forecast for holiday retail sales since some analysts expect it to be as sobering as last year – meaning as dismal as the late 1960s.

One prognosis from the article: Flat sales.

In a bit of a logical twist, reporter Stephanie Rosenbloom writes:

Retailers are relieved to hear that prediction. Flat sales this holiday season would at least mean that things had stopped getting worse.

In other words, the bottom of a recession can make for a bright day in a strange sort of context.

Rosenbloom quotes analyst James Russo as saying: “It’s reflective of this ‘new normal’ we’re in….Flat is good.” 

She reports that Wal-Mart is offering a special $10 price on various toys. The company would “match any local competitor’s advertised offer on the same toy if the price fell below $10,” she writes.

That makes perfect financial sense, given that the price is not sky high.

A consumer can benefit by taking a price match right there instead of getting back in a car, driving to another store and fighting the crowds only to save a few dollars. 

But will other companies that sell more expensive items - such as computers, electronics, digital cameras – follow suit to boost sales or at least cover costs?

Rosenbloom notes that consumers might look for consumer electronics because of an expectation of “continuing to nest” in their homes, as they wait for better times to come.

I have actually gone to electronic stores that made this price matching offer, knowing a competitor was blocks away.

In a way – and this is hypothetical - will a price match policy really work in stores where you’re talking about hundreds, or possibly thousands, of dollars for the retail cost?

As you recall, during the heady days of real estate in the United States, outbidding another party on a coveted house was the way to success.

Offering to match another bidder’s price for a house was never seen as a deal closing strategy.

When international investors traveled to Asia in recent years to sink money into factories – and those days might be over, if not slowing – business leaders there most likely never offered this pitch: “We’ll give you exactly what our competitor has offered.”

When I traveled in China, one quick lesson that I learned: When I approached three nearly-identical fruit or food stands – say at a tourist site or train station - the sellers almost immediately started talking about lowering the price for what I wanted to buy.

That meant, the seller made a sale but lost a dime off the price.  

As we see, if the price is “A-B,” then the competitor is offering the exact same amount of “A-B.”

I’ve written about how a new American price – meaning significantly lower than before - might emerge given the recession.

It seems that if retailers want to make a sale – even just to cover their fixed costs or avoid losing business - they might have to consider a price of “A-B-C” on the spot.

And before that consumer walks out to buy an electronic item elsewhere.

Of course, consumer behavior differs.

The price might not be a concern for some people. Some people might need the product that moment.

And retailers who lower their price to score a sale that moment might be engaging in an edgy transaction.

As we know, in order for the wheels on the bus to go round and round in the economy, money needs to circulate.

And enough money has to be pulled in through sales to cover retail basics: Employee wages, rent, electricity, advertising and insurance.

If you’re a consumer and have money, there is purchasing power during a recession.

But it’s up to you to decide whether you want to pursue a true, free market strategy of price lowering – and especially when, where and how often.

Price matching, as we know, is better than nothing.

But in a market economy, there is always room for negotiations.

Ideally, once the economy improves and more money flows to people, this discussion will become pointless.

In my analysis, I might have overlooked something important.

If I did, let me know.

The 63-year-old newspaper has been suffering years of advertising and circulation losses, the company said.

But some Nichi Bei Times staff members and Asian American community leaders hope the formation of the nonprofit Nichi Bei Foundation will enable them to receive grants and donations to continue the newspaper.   

If the publication ceases, it would mean the loss of Northern California’s oldest Japanese American newspaper. It reportedly has about 8,000 subscribers.

The newspaper has covered a variety of issues including redress for the internment, immigration, Japantowns and better U.S.-Japan ties.

Its goal was “to be the glue that holds the community together – culturally, historically, socially, emotionally, spiritually and politically,” according to the history section on the newspaper’s Web site.

The decision to end the newspaper ”was not taken lightly,” the board of directors said in a letter to readers.

In addition to the newspaper losing money, the board explained: “We felt the traditional bilingual daily did not serve today’s Japanese American community.”

In an online opinion piece, Kenji G. Taguma, foundation president and the newspaper’s English Edition Editor, put the closure in the context of the recession and mainstream media outlets facing their own advertising losses: 

At this time, when community organizations are being hit hard by funding issues, and mainstream newspapers are cutting down on coverage of communities of color, the community may need us now more than ever.

The newspaper, led by key founder Shichinosuke Asano, launched on May 18, 1946. It followed the legacy of the Nichi Bei Shimbun, which started in 1899.

Kunisaku Mineta, the father of former U.S. Secretary of Transportation Norman Mineta, once served as a reporter for the newspaper and covered San Jose. Norman Mineta, a former San Jose mayor, also delivered the Nichi Bei newspaper, the company said.

In March, the newspaper sponsored a Northern California Tofu Dessert Competition and Festival. It featured five finalists, including one person who made green tea souffle topped creme brule tofu cupcakes.

Declining advertising dollars this year have roiled the U.S. newspaper industry, including ethnic publications. 

In January, San Francisco-based AsianWeek, another newspaper serving the Asian American community, stopped publishing. It maintains a Web site.

Read the San Francisco Chronicle’s coverage of the Nichi Bei Times here.

Reporter Mead Gruver explained that the money, which will consist of 19 grants going to various sites or groups, will support a museum at what was the Heart Mountain Relocation Center in Wyoming and oral history projects involving internees.

In California, Manzanar and Tule Lake internment camps will receive money as will sites in Hawaii, Texas, Utah and Idaho.

Citing national security and military necessity, the U.S. government sent approximately 110,000 Japanese Americans to the camps during World War II. It turned out to be a wholesale denial of civil rights.

Gruver quoted Denver-based Park Service historian Kara Miyagishima as saying:

Especially now, it’s really urgent that we document internees’ experiences – firsthand experiences, what it was like.

I can understand why Miyagishima said that: Many internees are getting older. They are passing away.

Earlier this year, I had the opportunity to interview Fumiko Hayashida, a Seattle resident who is in her 90s and a former internee.

If her name doesn’t ring a bell, her photograph might.

She’s the mother who a Seattle Post-Intelligencer photographer captured in an iconic image in March 1942.

The image is famous worldwide and has been shown at the Smithsonian Institution and published in numerous books.

My story about her can be found here. The look on her face captured what her daughter, who also is pictured, describes as: “She was nobody yet everybody.”

There is, of course, that age-old, hard-nose question of: So what?

Certainly, civil rights have long been a cornerstone of American-style, law-based democracy. Upholding rights, even in times of intense crisis, for innocent people is critical for any open society. 

Hayashida’s outlook also says something about the human spirit: She still considers the United States to be a great nation.

And the fact that the picture of her exists shows that journalists who are willing to cover news at any time – and almost anywhere it occurs - remain relevant.

Yes, technology is changing media in revolutionary ways. News budgets are tight. It’s great that more people are telling stories, shooting photographs and making videos. 

But there is a need - in terms of knowledge and history - for an impartial, trained observer to witness an event no matter the conditions.

To learn more about the internment, visit Densho: The Japanese American Legacy Project. The Seattle-based group is one of the Park Service grant recipients. The group’s blog posting about the grant is here.

The Japanese American National Museum in Los Angeles has information about the internment, as does Seattle filmmaker Frank Abe.

I want to thank Stan Honda of AFP for sending this AP story out on a list serv. I don’t know Stan, but I’m glad he spread the news.

I might have missed it.

Police in Indonesia this week apparently seized gallons of formalin that were used to make tofu in a Cipinang, East Jakarta factory, according to a Jakarta Post article.

The public informed Jakarta police about the use of the ingredient, which the University of Minnesota reports “is used as a fixative to preserve tissue samples in health care laboratories.”

The article neither listed the tofu brand name nor stated whether the product is shipped to other countries. Investigators also did not provide a motive.

A police spokesperson identified as Adj. Sr. Comr. Mahbub told the newspaper:

The factory, which produces a well-known brand of tofu, had been selling a lot of tofu to several markets in Jakarta for a while now.

The factory is located  on Jl Harapan II, Cipinang Melayu Makasar, East Jakarta, the newspaper reported. Police also confiscated production equipment from the factory.

Indonesian officials have outlawed the use of formalin, which typically includes formaldehyde, methanol and water, in food. The article did not say whether prosecutors expect to file charges.

The University of Minnesota notes that:

low to moderate exposure to formaldehyde can irritate the eyes, nose, mouth, throat and skin, and cause headaches. Formaldehyde may be carcinogenic, and toxic or fatal to humans at high concentrations.

The formaldehyde and methanol also make formalin waste toxic.

It appears that the Jakarta Post was one of the few, if not only, media outlets to report the tofu factory raid. Soybean consumption reportedly is high in Indonesia.

Concerns about food quality in the United States have grown in recent years, especially with more items made overseas and then imported.

U.S. soybean farmers probably have Indonesia on their list of buyers and places to visit. If not, they should. Soybean production in Indonesia is dropping, according to a recent Jakarta Post article.

Buried in the story is some noteworthy market intelligence about, well, tofu and tempeh consumption.

Reporter Anissa Febrina writes:

Currently, Indonesia consumes an average of 2.3 million tons of soybeans each year, of which 50 percent is used for tempeh production with another 40 percent used to make tofu.

Febrina notes that tempeh, which is fermented soybean cake, is a “national treat” and the staple is second in popularity to rice. It reportedly dates to at least 1875.

The problem, though, is Indonesia’s soybean crop production dropped to 600,000 tons in 2008, down from about 700,000 tons in 2006. That accounts for a 14 percent decrease.

As a result, the country relies on soybean imports and Febrina writes that the United States, Brazil and Argentina are the world’s top suppliers.

The country buys “about 90 percent of its total 1.2 million tons of imported soybeans from the United States,” according to the article.

The price for imported soybeans also has increased. As of last year, the country has an estimated population of 237 million people.

All of this makes for an interesting sub-story to tofu – that behind the recipes, instructional videos and tasty restaurant dishes is the old fashioned theory of supply and demand.

Many sectors in world trade have taken a hit with the recession. But I wonder whether soybean shipments to Asia are one of them because the food is a staple.

I’m sure U.S. soybean farmers keep a daily eye on the changing market, including weather patterns, water supply, population growth, existing stock and making sure they can meet demand.

Recently, South Korean buyers purchased $5 million worth of U.S.-grown soybeans for that country’s tofu market.

Years ago, I wrote a story on wheat farmers in the Pacific Northwest selling their crop to China.

I visited Eastern Washington, interviewed farmers and witnessed wheat being shipped along the Snake River.

For the first time in 30 years, China had entered the Pacific Northwest wheat market in a significant way.