Tuesday, June 28, 2011

Communisty Party of China's happy birthday: 90 years old (still counting...)

Mao Inc. – China’s Terribly Successful Communist Party Turns 90
By Erich Follath and Wieland Wagner
Der Spiegel, 27/06/2011

Beijing’s communists are among the world’s most successful capitalists, but their economic ascent is often overshadowed by its human rights violations. The Communist Party now faces a crucial test: Can it become more democratic without jeopardizing its hold on power?

China needs heroes, shining role models, ordinary people who can bring positive change to society through their actions. This was true at the time of Confucius, but it has been particularly true since China has had a communist party. And because the Chinese Communist Party channels, organizes and monitors everything, it didn’t take long after its victory in the 1949 revolution to establish a “Foundation for Altruism and Courage” that selects China’s heroes. Its various decisions over the past decades reveal a surprising and even sensational development.

In the 1950s, the government in Beijing celebrated Shi Chuanxiang, a model worker. In the pre-communist era, he had worked hard as a day laborer, was often hungry and was ashamed to be exploited. According to the official version of the story, it was only after the party had come into power that Shi found work that allowed him to be more independent: as someone who literally collected excrement for socialist development, and who even managed to increase per capita transport capacity from 50 to 80 buckets of feces. “To make the world a cleaner place, I happily put up with the stench,” Shi said as he accepted the party’s award, standing next to the president in the Great Hall of the People.

A New Hero for a New Age

Until a few years ago, the phrase “to breathe the spirit of Shi” was still being chanted as a slogan in schools. But now, in 2001, a new spirit is in the air. Today’s official role models show how thoroughly the party has adjusted to conform to a globalized era. Enter Duan Wenyin, 27. He is the man the communist authorities are currently touting as their latest hero of the revolution.

Mr. Duan runs his hand over his impeccably tailored suit. His hair is perfectly gelled. He speaks smoothly and chooses his words carefully. An eloquent, practiced sense of modesty is part of his persona. “No, I don’t want to be a hero,” says Duan, a graduate of an elite university, in the village of Beigou 60 kilometers (38 miles) east of Beijing, “but a patriot.”

Portraits of Marx, Lenin, Mao and Deng Xiaoping hang next to each other at the entrance of the local party headquarters building. Duan looks up at the wall, where a slogan reads: “Li dang wei gong,” or “Commitment of the Party to the Community.”

Following the government’s advice to new university graduates, Duan first spent three years working as a volunteer in the countryside. He turned the village upside-down with his ideas, which included setting up a small library of books on proper family planning, organizing a contest for the most well-kept house and even helping to organize an internal party election for the post of mayor. In doing so, he helped turn Beigou into a model community that now attracts tourists, who bring funds into the local coffers. He can even imagine staying longer, perhaps working as an entrepreneur in the tourist industry or as a local party official.

His pride and joy is having been accepted into the party. “Hundreds in my graduating class applied, but only a few received a response,” says Duan. Acceptance into the party was “extremely helpful” to his subsequent professional development, he says. Now Duan, a young party official, makes himself useful by settling disputes over a new road and compensating the farmers “as fairly as possible” for the land grab, learning about the problems encountered in the local chestnut harvest, issuing reprimands and words of praise, and creating incentives — all with the goal of achieving the “harmonious society” that the party proclaims as its highest objective. Duan, unlike the “heroes” of past decades, isn’t expected to sacrifice himself. He is allowed to show initiative, behave like a capitalist and even get rich. He can even criticize the party leaders in Beijing on purely procedural matters. There is only one thing Duan cannot do: position himself outside the system.

Duan, the model Chinese from a model village with his sights firmly set on a model career, has no intention of doing that. He waves as we say goodbye, satisfied with himself and the world and his party. Perhaps he doesn’t love the party, but he needs it, because although it isn’t capable of achieving everything for him, nothing is possible without it.

Paving the Way for Consumer Communism

This week is a particularly Chinese week. On Monday, Chinese Prime Minister Wen Jiabao, 68, is coming to Berlin with 13 of his cabinet ministers, carrying a questionable “gift” in his luggage: the release of the now-muzzled Ai Weiwei, the most famous artist-dissident in the People’s Republic. And the Chinese Communist Party is celebrating its 90th birthday on Friday, July 1.

The momentous event has already cast its shadows, as the party employs original methods to drum up enthusiasm in advance. For instance, thousands of Beijing residents have been sent classic communist songs on their mobile phones and asked to forward them to others. Those who can prove that they have forwarded the songs to at least 10 people they know are entered into a prize drawing. The party seems to be paving the way for consumer communism.

Television programming has been purged of anything even remotely resembling social criticism, including crime films and family dramas. “Red” programs that publicize the progress of the People’s Republic are now in demand instead. The high point of the Communist Party’s culture festival is an elaborately produced movie called “The Founding of a Party,” which was financed in large part by General Motors. In return for its funding, the American automaker stipulated that the actors would always drive Cadillacs on the set of the melodrama about the hardships of the early days of the revolution.

China’s communists have not been shy. Little is sacred, while almost everything can be bought, even the Great Hall of the People. When the party is not in session in the magnificent building, with its more than 300 rooms and enormous paintings, companies like Ford and Kentucky Fried Chicken can rent space at astronomical prices.

A Dinosaur Which Has Learned to Adapt

The membership of the Chinese Communist Party is almost as large as Germany’s population. Its 78 million members make it the largest political party in the world, and a very successful one at that — a terribly successful party, say many anxious Western observers. Soviet communism ended up in the dustbin of history. The parties in North Korea and Cuba led their people to economic downfall and are considered discredited. Communist parties stood — and continue to stand — for an incurable sclerosis, while their leaders are viewed as dinosaurs. The outcome of the socialist idea has served as ample proof that it cannot work in practice.

In China, this quasi law of nature seems to have been suspended. The dinosaur has learned to evolve, and adaptation instead of agony shapes the picture, as Beijing rushes from one economic success to the next. In the last 30 years, China has increased its gross domestic product by about thirty times and has overtaken Germany and Japan as an economic power, and it will likely leave the United States behind by 2020, becoming the world’s largest economy. No other country has amassed such large foreign currency reserves as the People’s Republic. If it wanted to, Beijing could buy up all the companies listed on Germany’s DAX index with only one-third of its $3 trillion (€2.1 trillion) in reserves.

Politically and militarily, China is becoming increasingly self-confident in its role as the only superpower next to the United States. Beijing intimidates its Pacific neighbors with new land and naval weapons systems, making territorial claims in waters from Japan to Vietnam to the Philippines.

The Biggest Challenge of Our Time

The party has come a long way in the last nine decades. It consisted of all of 57 members when it was founded as an underground organization in Shanghai in 1921. In 1927 its brigades, worn down by a superior adversary and on the run, were on the verge of demise. In 1949, they triumphed on Tiananmen Square in Beijing and united the giant country. Today, as the only force that can take on the United States, the Communist Party is understandably bursting with self-confidence. At 90, and (at least) a little wiser, the party now strives to permanently correct China’s economic course without diverging from the rigid one-party system.

Can this balancing act across all ideological Grand Canyons even work? What are China’s communist functionaries doing right and what signals have they heard — signals that have remained hidden from other nations? How is the world’s largest party faring internally? Is it run by a meritocracy in which the best make it to the top, or are family relations more important? And why can it be so flexible and modern and yet so thin-skinned vis-à-vis its critics, often operating with Stalinist harshness?

A few countries in Asia and Africa have stopped treating Western democracy as the measure of all things, and are instead trying to imitate the “Beijing model” of a capitalist economy combined with authoritarian policies. China is the biggest challenge of our time and raises central issues, such as whether the party can maintain the giant country’s position at the top of the global economy in the long term without opening up politically. Or whether the communists will eventually fail because of the contradictions produced by a rapid rise to power unimpeded by any opposition: the extreme differences between rich and poor, rampant corruption, environmental destruction and brutal clashes with Tibetan, Uighur and Mongolian minorities.

US Secretary of State Hillary Clinton underscored the contradictions in a recent interview with The Atlantic, in which she was highly critical of Beijing. The Chinese system is doomed, she argues, adding that Chinese officialls are “worried, and they are trying to stop history, which is a fool’s errand.”


The United States has the White House, France has the Elysée Palace, Germany has the Federal Chancellery — and the People’s Republic has a secret.

Secretive Leaders

China is ruled from a mysterious location that very few foreigners have seen from within. The country’s leaders operate from a shielded complex behind high, red walls. Some of the buildings date back to feudal times, while gray, utilitarian structures were added following the Communists’ victory and the proclamation of the People’s Republic in 1949. The secluded and well-guarded district in the middle of Beijing is called Zhongnanhai, or “Middle and Southern Sea.” Formerly part of the Forbidden City, Zhongnanhai was a place where emperors, concubines and eunuchs once concocted courtly intrigues.

The Top Nine, or Permanent Committee of the Politburo of the Communist Party, the most powerful group in China, meet in the southern part of this refuge. Their meetings are businesslike and completely off-limits to the public. They are never called upon to smile for news cameras, they only appear in public together on very special occasions, and they rarely appear for more than a few minutes.

They are nine men in dark suits, muted ties so similar that they could have been bought together at a group discount, and obviously dyed hair. No one within the ranks of China’s stiff technocrats is known for his charisma. They even clap in unison at official events. President and Communist Party General Secretary Hu Jintao, 68, has a degree in hydraulic engineering, and all but one of the members of the Permanent Committee are engineers. They have all been professional politicians for several decades, with careers that seem almost as interchangeable as their physical appearance.

For some, their path to the top was facilitated by the fact that they had been born as “princelings” into influential families. But to make it to the very top and hold their ground there, they also had to prove their worth as capable bureaucrats. They learned to forge coalitions within the party and anticipate positions capable of producing consensus. According to leading experts on China, the view of a monolithic Chinese Communist Party widely held in the West is wrong. In fact, they say, the party’s leaders are often sharply at odds over the right approach. But once internal compromises have been reached, all senior leaders usually form a united front in championing these decisions in public.

According to US diplomats whose secret cables from Beijing were published by WikiLeaks, the expanded Politburo, consisting of 24 men and one woman, is characterized by a “consensus system in which members can exercise veto power.” In fact, the cable continues, “true democracy” prevails in the Politburo.

Record Figures for Red China Inc.

It is certainly true that China’s impressive economic figures can outshine everything else. Hardly a day goes by in which Red China Inc. does not report new record figures. And the more helplessly world leaders, from US President Barack Obama to German Chancellor Angela Merkel, struggle to reform their traditional market economies, to free the United States of its debts and to keep Europe liquid, the more enviously the West eyes China’s rapid growth.

At first glance, China’s recipes for success should not be effective: five-year plans, manipulated exchange rates, no private ownership of land. But these factors represent only one side of things in the giant country. The other is an unbridled capitalism that the party manages in a thoroughly non-ideological way that includes investments in the future. For example, Beijing has increased its research and development spending by an average of 21 percent a year since 2000 (as compared with 4 percent a year for the United States). “Socialist market economy with Chinese characteristics” — the term alone underscores the Communist Party’s flexibility. And what exactly the “Chinese characteristics” are remains vague — and expandable as needed.

“Zou Chuqu,” or “swarm out,” is the slogan the party uses to encourage the economy to acquire know-how and buy up companies abroad. The policy represents the best of both worlds, as Chinese business executives go on shopping sprees armed with loans from state banks. And in the giant country itself, the party plays the “barbarians” off against one another. Like a powerful groundskeeper, it assigns foreign companies to local partners, with which they are to modernize China’s industry.

A Party as ‘Omnipresent as God’

In the process, the party never budges a centimeter from its sole claim to political leadership. China, says party leader Hu, is and remains a “democratic dictatorship of the people.” The party’s octopus arms encompass far more than government functions. Through its “organization department,” the Communist Party controls virtually every important position in the country. In the words of a Beijing professor, the party is as “omnipresent as God.” It controls the army, the intelligence service, the press, the courts and the state-owned companies, placing them in a more privileged position as they compete with private enterprise.

A look at license-plate numbers reveals the true hierarchy in a city like Shanghai, where the local party chairman’s plate number is 00001, while the mayor and deputy party chairman has 00002. Other insignias of power are even more telling. All 300 high-ranking party officials have a special telephone called the “red machine,” with which the members of this top echelon can communicate with one another on a secret, secure line.

“If Vladimir Lenin were reincarnated in 21st-century Beijing and managed to avert his eyes from the city’s glittering skyscrapers and conspicuous consumption, he would instantly recognize in the ruling Chinese Communist Party a replica of the system he designed nearly a century ago for the victors of the Bolshevik Revolution,” Australian communism expert Richard McGregor wrote earlier this year in the US journal Foreign Policy.

However, comparisons with the extinct Soviet Union are as unwanted in Beijing as references to the current turmoil in the Arab world. The calls on the Internet for a Chinese ” jasmine revolution” have made the country’s normally self-confident leaders so nervous that they have banned the use of the term on the Internet.

‘Seventy Percent Positive’

Hardly anyone is as familiar with the Communist Party’s sensitivities as Professor Xie Chuntao, who teaches at the Beijing Cadre School. He looks thoughtful as he sips his cappuccino in a café in Xidan, a popular watering hole for the capital’s smart set. He answers “13 Questions for the Party” in his new book. Xie admits that the Communist Party does not have a handle on important social issues.

Nepotism is Xie’s biggest concern. The central bank recently revealed an astonishing number when it claimed that corrupt officials had illegally moved 800 billion yuan (about €85 billion) abroad in the last two decades. Xie also worries about the growing lifestyle differences between rich and poor and between the urban and rural populations, as well as the dramatic aging of society. The privileges enjoyed by the children of senior party officials are also not a taboo subject for Xie. “The cadres I teach want me to address everything openly,” he says. “They are familiar with the problems.”

And the solutions? The shrewd intellectual struggles with the question. “There is no corruption in Singapore,” he says. “That should be our role model.”

Would that include Singapore’s elections, which include opposition parties?

The professor says he can imagine this happening in the long term. In fact, he has already sent his daughter to Singapore to study. And as far as further economic development is concerned, the advice of Western experts is more than welcome. “I try to get the best professors from Harvard and Yale as guest lecturers.”

However, the views of Nobel Peace Prize winner Liu Xiaobo and artist Ai Weiwei are non-negotiable for the cadre educator. “Those who attack the party so directly and want a completely different system are placing themselves outside of society.” According to Xie, the Communist Party must remain responsible for the interpretation of history. And no one should be allowed to challenge the image of the Great Chairman. In his view, Chinese reformer Deng Xiaoping’s assessment of the dictator and revolutionary should remain valid for all time: “Seventy percent positive.”

A Journey into Chinese Communist History

Two excursions to different regions of China are like two journeys through time into the historic heart of Chinese communism.

The first stop is at the Museum of the First National Congress of the Chinese Communist Party in Shanghai, a city of 23 million. The museum is housed in a brick building in a former working-class neighborhood of a city once subjugated by foreign powers. It offers a look back at the 1920s, when Shanghai was the epitome of excess, a paradise for trading companies from the West but a hell for most local residents, a place where life was shaped by child labor, prostitution, gang crime and opium dens.

Mao Zedong, the eldest son of a relatively affluent farming family, a rebel against authority, came to Shanghai in July 1921 to secretly launch the Communist Party, together with 12 others. The main exhibit at the museum, a room filled with “faithful reproductions” of the revolutionaries, suggests that Mao was already their leader at the time. He is the only one standing at the table, a shining light, a Jesus among his disciples. In truth, however, the ambitious delegate from Hunan was more of a tagalong at the beginning, although that would soon change when he retreated to the mountains and, using a combination of his charisma and tangible threats, led the farmers in uprisings.

The Renaissance of the ‘Whore of Asia’

The museum on Xingye Street, which gets very few visitors, feels like a left-over socialist foreign body in the midst of a glittering capitalist world. The relic sits in the midst of the commotion of Xintiandi (“New World”), an exceedingly chic neighborhood today, where bars, boutiques and German beer attract the rich and the beautiful. Once again, anything goes nowadays. The Bar Rouge, not far from the showroom of an Italian racecar maker, is the top attraction on the nearby Bund, Shanghai’s waterfront boulevard. The Shanghai of 2011 is no less than a renaissance of the “Whore of Asia,” as the city used to be known in the 1920s and 1930s. This city is indeed red, but it is the red of a Ferrari.

The second stop is Yan’an, a city of 2 million near the Yellow River, in Shaanxi Province in central China. If the religion of Chinese communism has a Mecca, it is the city’s yellowish Loess Plateau with its mysterious caves, the endpoint of the legendary “Long March” that led Mao’s troops through 10,000 kilometers of the country over 370 days as they fled from the rival Kuomintang, the Chinese Nationalist Party led by Chiang Kai-shek.

Mao survived the ordeal and attained the unlimited leadership of the Communist Party in Yan’an, but this was partly the result of his having had a horse at his disposal and the fact that he even rode in a litter for a time. Mao, who preached equality, never had a problem with the notion that some were more equal than others. Of the 86,000 soldiers who had set out with him and suffered terrible ordeals, often barefoot and without food, less than one in 10 survived.

A Revolutionary Disneyland

Mao set up his headquarters in the Yan’an caves in October 1935 and remained there for the next decade, gathering his strength. He had no objections to funding his movement with the proceeds from opium poppy cultivation, and he was happy to accept the help of the Soviet Union. However, his communist project was always primarily a national and independent project. In fact, Mao oriented himself more heavily toward the Chinese emperors, who had united the realm with dictatorial severity, then toward Marx and Lenin.

Today the Yan’an caves, with their whitewashed walls and colorful strings of lights, resemble a revolutionary Disneyland. In Mao’s former quarters, the guide introduces am eight-year-old schoolgirl wearing a pioneer uniform. She has won a contest and, as a reward, is now permitted to recite a few words she has learned by heart: “The Great Chairman was very sincere and honest. He unified our nation and lives in our hearts forever.”

Battles between the Red Army and the Kuomintang are reenacted outside twice a day. As smoke and the sound of heavy artillery fill the air, Kuomintang leader Chiang Kai-shek’s troops stage a treacherous attack on a wedding party. But Mao’s guerillas carry the day with their cunning and superior fighting spirit in this cowboys and Indians version of the Communist Party’s sage. Nevertheless, the background is dead serious. “Patriotic education is essential to our survival. The future of the party lies in the spirit of Yan’an,” Wang Yimei, the director of the brand-new history museum, says with a steady voice. An enormous statue of Mao stands guard in front of the architecturally impressive circular building. It seems almost defiant, as if the old man were trying to compete with the hypermodern television towers and skyscrapers of modern-day China.

On the evening before the anniversary fireworks, China’s communists agree on a few things. For one, the Communist Party is thrusting aside “setbacks,” such as Mao’s “Great Leap Forward.” The campaign, which forced farmers into communes in the late 1950s and claimed the lives of an estimated 45 million people, has not been seriously scrutinized to this day. The same approach is taken to the witch-hunts of the Cultural Revolution in the late 1960s.

Instead, the party proudly highlights its positive achievements, such as national unity, the liberation of more than 300 million Chinese from poverty and widespread stability in a modernized, autocratic system. It believes that without its firm grip, the country would drift apart and descend into chaos.

The Sharp Contradictions of Modernization

But parts of the Communist Party leadership and the intellectual elite are deeply divided over the most important issues of all: the party’s path into the future, and how it should react to the increasingly sharp contradictions brought about by modernization.

The two most prominent advocates of the different schools of thought are Prime Minister Wen, who is increasingly telling the foreign media that he supports opening up the system. He has even said that, “yearning for democracy is unstoppable, and freedom of speech is indispensable.” On the other side is Wu Bangguo, 69, the chairman of the National People’s Congress, officially the country’s second-in-command. “If we waver, the achievements gained thus far in development will be lost,” says Wu, “and a multiparty system is out of the question for China.”

Wu and the party’s hardliners, such as Zhou Yongkang, the head of the Central Political and Legislative Committee, are now setting the tone. They are responsible for extreme increases in the military budget and spending on national security. The people must fear the government, or the country will fall apart, China expert McGregor has quoted a high-ranking Chinese official as saying. At the same time, it is also clear that the system still places more emphasis on enticement and career opportunities than on naked repression.

The new urban middle class now has a lot to lose: the possibilities of social advancement, and the freedom to shop and go out, seem more appealing to many Chinese than the vague promise of democracy and the separation of powers. As long as the party achieves economic growth hovering around 8 percent, and as long as inflation (currently 5.5 percent) remains reasonably under control, little more than regional pockets of unrest are to be expected in China.

Growing Influence for the Rich

The wealthiest individuals are to play a prominent role in the Communist Party, which is astonishing when one considers that businessmen, the former “class enemies,” were not permitted to join the party until 2002. One in three of China’s 189 dollar billionaires is now a party member, one in eight of the country’s super-rich holds a “significant” political advisor post, 83 are members of the National People’s Congress (a number that is likely to rise), and 38 Chinese “parliamentarians” are wealthier than the wealthiest member of the US Congress. They include delegate Zong Qinghou who, with assets of $12 billion, is the richest man in the People’s Republic of China.

Zong meets with visitors in his native Hangzhou, which, with its idyllic setting on West Lake, is nothing short of a paradise. He is wearing an ordinary blue shirt, basic dark trousers and inexpensive linen shoes. His office is also plainly furnished, with almost nothing but management books from around the world on the shelves.

This much modesty is demonstrative. Zong’s mantra is not to show off with one’s wealth. The 65-year-old multibillionaire, who made the roughly 30,000 employees at his 58 production sites shareholders long ago, tries to set an example with his own work ethic. He works 14-hour days, smoking and drinking tea are his only luxuries, and he spends no more than $20 a day.

Zong started life at the very bottom, the son of poor parents, and had only a middle-school education. He worked on a salt farm as a teenager. Together with two retired teachers and €14,000 in loans, he finally managed to produce milk-based soft drinks.

The business eventually blossomed into Wahahah, which later entered into a joint venture with the Danone Group. When the French accused Zong of undermining the joint venture with parallel products, his employees came to his aid with strikes and protests. In one campaign, which had strong nationalist overtones, the protesters berated the foreigners with their signs until they were so unnerved that they gave up and allowed the Chinese to buy them out.

Does Zong, a member of the Communist Party, see himself as more of a communist or a capitalist?

‘If There Is Anyplace in the World Where Socialism Prevails, It’s Europe’

He smiles. “That’s a very German question,” he says. “I’m a pragmatist.” As such, he says, he fights for the rights of business owners and workers. “If there is anyplace in the world where socialism prevails, it’s Europe,” he says. In Zong’s opinion Europe, with its high taxes and welfare states, is a dead end. “People in your country should work harder,” says the richest man in China, sounding almost sympathetic.

American political scientist David Shambaugh’s recent book about the Chinese Communist Party is subtitled “Atrophy and Adaptation.” The astonishing thing is that the party’s atrophy and adaptation are opposing tendencies, and yet they move forward at the same time. “Some observers predict a collapse of the system in the long term, some predict a prolonged stagnation, and others are convinced that they are seeing signs of a real reform process.” Shambaugh believes that a successful cleansing of the party is the most likely future development.

If that happens, however, the Communist Party will have to move well beyond the current nostalgia for Mao. It is possible that heightened patriotism could be used to develop a new, but hardly controllable ideological cement for society. The country’s leaders seem themselves confronted with entire new problems following the saturation with consumer goods. They will have to provide a population whose age structure is dramatically changing with services that were practically unknown until now: adequate pensions, insurance, healthcare.

Whether they are prepared for this seems very questionable. However, the skeptics, who never thought the Chinese Communist Party was capable of the impossible, have been disabused again and again. The party leaders still manage to pull off every sleight of hand and Mao paradox. The Great Chairman of communism is simply being repurposed, and turned into a role model for globalization, into the Great Board Chairman.

What is the closest comparison to this strange Chinese party, this admirable but despicable institution with its quasi-religious aspirations, partly ossified and partly willing to reform, fluctuating between total repression and the recognition of pluralism?

The Catholic Church, at least to an unofficial envoy of the Chinese Communist Party during a visit to the Vatican in 2008. “We have the propaganda department, and you have the Heralds of the Gospel. We have our organization department, and you have the College of Cardinals.” When the Vatican representative asked the Communist Party envoy what he thought the differences were, he replied: “You were sent by God, but we were sent by the devil.”

Translated from the German by Christopher Sultan

Monday, June 27, 2011

Illusion and dellusions about China - a naive American (NYRBooks)

My Disillusionment: China, 1973
Perry Link
The New York Review of Books, June 25, 2011
Perry Link
The author with with a professor of Chinese at Fudan University, Shanghai, 1973

The first time I tried to go to China was in 1967, the year after I graduated from college. My father was a radical leftist professor who admired Mao Zedong. And that influence, along with the Vietnam War protests—a movement in which I was not only a participant but an activist—led me to look at socialist China with very high hopes.

I was living in Hong Kong and wrote a letter to Beijing. A few months later I received a charming reply on two sheets of paper that looked like they had been labored over for days by a Red Guard with little English and a faulty typewriter. The letter explained that the Chinese people had nothing against me, but that I was from a predatory imperialist country and could not visit the People’s Republic. Before I left Hong Kong I bought four volumes of “The Selected Works of Mao Zedong,” and, rather grandiosely, ripped the covers off of them so that I might carry them safely back to the imperialist US.

In May, 1973, however, I got another chance. A year earlier, in April 1972, the Chinese ping-pong team had visited the US to break a twenty-three year freeze in diplomatic relations, and I had served as an interpreter. I made a good impression on Chinese officials on that US tour, in part because I led four of the six American interpreters in a boycott of the teams’ meeting with President Richard Nixon at the White House. (Nixon had ordered the bombing of Haiphong just the day before; to me, small talk in the Rose Garden just didn’t seem right.)

A year later we US interpreters asked if we could visit China, and the answer was yes. Over a four-week itinerary we visited Guangzhou, Shanghai, Suzhou, Xi’an, Yan’an, Beijing, and Tangshan. The bill for the trip—room, board, airfare, rail, sightseeing, everything—was $550. It was a friendship rate.

But it was during that trip that cracks began to form in my image of the People’s Republic. I carried a small camera and took walks on my own, in search of “real life.” I had learned in graduate school that there were no flies in China after the “Four Pests” campaign of 1958—which in the name of public health was supposed to eradicate mosquitoes, rats, and sparrows as well. When I saw a fly on a white stone table in Suzhou, I photographed it. I thought I had something.

When four of us boarded a crowded bus in Yan’an, the town in central Shaanxi Province that had been the Communists’ base from 1936 to 1948, the driver shouted “waibin!” ( “foreign guests—make room!”). Immediately four seated passengers stood up, offering us their seats. The old man who stood up next to me did not, in my impression, seem to want to. I said, “Please, you sit,” but he said nothing and remained standing. Embarrassed, I remained standing, too, and for the rest of the ride the people on the bus endured the ludicrous spectacle of an empty seat on a crowded bus.

We foreigners always rode “soft sleeper” class on the railroad, while most people were riding “hard seat” class. I asked our guide about it. “Why is there a soft-sleeper class?” I said, my socialist principles in mind. “Who rides in it, besides us?”

“The leaders,” the guide replied.

“Why?” I asked, unaware that this was a stupid question.

“They are busy. They have many burdens. They need soft-sleeper.”

My image of a classless society had suffered a blow, and it suffered a few more before the tour was over. The example that sticks most in my mind happened in Tangshan, about a hundred miles east of Beijing, when we visited its huge coal mine. We descended in an elevator far below the earth’s surface. (This was three years before a magnitude 7.8 earthquake buried countless workers in that same mine.) Riding small railroad cars through a maze of tunnels deep underground, I noticed various signs: “slow!,” “sound horn!,” etc. The signs were in traditional Chinese characters, not simplified ones, and I also couldn’t help noticing that there were no political slogans among them. All the signs were strictly business. This contrasted sharply with the surface of the earth, where slogans and quotations from Chairman Mao, on splendid red-and-white banners, or giant red billboards with gold writing and trim, were everywhere.

After emerging, I asked our guide: “Why are there no quotations from Chairman Mao down there with the miners?”

Her immediate reply: “Oh, it’s too dirty!” She seemed a bit irritated at me for suggesting such an inappropriate location for the Chairman’s thoughts. To me, though, it was a hard fact to swallow: the dirt of the mines was okay for the working class but not for the thoughts of its leader.

The inner insecurity of the guides became apparent to me in something that happened in Shanghai, when I bought a souvenir for my mother. She was born on a farm in Nebraska and was a salt-of-the-earth type. Her name was Beulah, she ate wheat germ, and brown was her favorite color. In a small shop I found hand-brooms I knew she would like. They were crafted of sorghum stalks, light brown with dark flecks. Lovely. And symbols of the dignity of labor—which I knew she also would like. I imagined that she might hang it on a wall in her house, so I bought one.

Afterwards one of our guides, very nervous, accosted me. He seemed torn between handling an emergency and trying to maintain politeness.

“Why did you buy this?!” he asked.

I explained about my mother.

“Let me get you a better one!” He took the broom back to the shop and returned with another—not much better or worse, to my eye, but in his view more nearly perfect. Then, sitting next to me on the mini-bus ride back to the hotel, he began to interrogate me.

“Doesn’t your mother like silk? …China has silk. China has jade carvings, China has cloisonné. Why do you buy a farmer’s broom to represent China to your mother?” I began to realize that the guide saw what I had done as “unfriendly.” My mother and I were looking down on China.

And this started me wondering: did this guide, deep inside, respect China’s working people, the wielders of brooms—and want my mother to have the impression that “China is silk” only because he guessed that she, from a bourgeois society, would respect silk but not brooms? Or was it maybe worse than that? Was he participating in the larger hypocrisy of a society that pretended to value brooms over silk but in reality did not?

From time to time I tried to strike up conversations with ordinary citizens, people with whom meetings had not been arranged. This was not easy. People constantly formed crowds to look at us, but kept their distance and stayed quiet. I have a vivid memory of one man—I would guess he was about thirty—who was part of a crowd but made eye contact with me. When I tried to address him personally—“What’s your name?”, “How are you?”—his lips and eyebrows contorted wildly, from what seemed to me like severe pain, so I stopped.

Children were a bit less inhibited, and plainly curious about us. On any walk of ten minutes or more on a city street we attracted a long train of them, as if we were pied pipers. I was amused to note, one day as we were walking past the gates of the Beijing Zoo, that some children who already held tickets to go see hippos and giraffes chose instead to follow us.

During one meeting with children—this was in Xi’an—a number of them gathered around us and seemed willing to talk. I asked a boy what he wanted to be when he grew up.

“I want to go to the toughest place and serve the people!” He pronounced the words in a sharp, confident, high-pitched voice.

“And you?” I asked another.

“I want to go to the toughest place and serve the people!” A sharp, confident, high-pitched voice—and exactly the same words.

I asked three or four more, of slightly different ages and of both sexes. All the answers were identical. I do not believe our handlers had prepared this scene for us; it had come about in too casual a manner. And I don’t know how much of the conformity resulted from training in how to answer this question and how much may have come just from others seeing that the first boy had produced a good answer and wanting to play things safe by doing the same. In any case, it left me with a deep impression.

In the years since 1973 I have learned much, much more about how wrong I was to take Mao Zedong’s “socialism” at face value. I lived in China for a full year, from 1979-80, studying post-Mao “scar literature” and coming to realize, by talking with Chinese writers and readers, that even the denunciations that could be published in that era showed only the surface of the disastrous cruelties that had befallen China. The honesty and shrewd analysis in the writings of the journalist and dissident Liu Binyan had a tremendous influence on me.

Still, though, I remained somehow reluctant to conclude that the Communist Party of China would flat-out lie. It seems that only personal experience could teach me this lesson. In February 1989 my friend Fang Lizhi and I, and our spouses, were blocked by police on the streets of Beijing as we were headed to attend a large banquet at the invitation of US President George H.W. Bush. The Chinese leaders did not want Fang at the banquet, and ordered police to monitor and channel us through the streets long enough to make sure it did not happen. This experience surprised me, but is not what changed me. What changed me was the report on the incident that appeared a few days later from the official Xinhua News Agency and was broadcast across China. It told, in detail, a fabricated story that departed in major ways from what my own eyes had seen. Agitated, I brought the report to Fang and asked him, “How can they do this?” Fang is a kind man. He did not want to embarrass me for my naivete. He just chuckled.

A version of this essay originally appeared in The Hong Kong Economic Journal.
June 22, 2011 10 a.m.

Saturday, June 25, 2011

Movies on the old and new China - New York Times

People, You Will See This Film. Right Now.
Shiho Fukada
The New York Times, June 24, 2011
A movie theater in Beijing.

BEIJING — This month China’s great masses are being mobilized by their leaders for an unusual purpose. Employees at state-owned companies and at all levels of government are joining students from grade school to universities as they leave their homes, head out into the heat and do their duty: ensure the financial success of the government’s latest propaganda film, “Beginning of the Great Revival.”

The movie, which opened on Wednesday on almost all of the country’s 6,200 screens, is part of a campaign to commemorate the 90th anniversary of the founding of the Chinese Communist Party next Friday. It is also playing in 29 American theaters, including ones in New York and Los Angeles.

The movie, along with its sister film, “The Founding of a Republic,” which was made for the 60th anniversary of the birth of the People’s Republic of China, in 1949, is an attempt to update the state-sponsored propaganda movie to appeal to younger audiences, by adding screen stars, a subplot and modern production methods. The government has stacked the deck, so success is virtually guaranteed. Government offices and schools are buying tickets in bulk and organizing viewing trips in the middle of the workday, and there are officially sanctioned movie review contests, presentations of paintings inspired by the film and group singing of classic Communist songs at cinemas.

The film claims to have a cast of 178 of the most well-known Chinese-language actors, including Chow Yun-fat and Andy Lau. It borrows stylistic cues from popular Korean soap operas and makes Mao Zedong, the Communist Party leader who died in 1976, both a romancer and a revolutionary, playing up the love story between him and his second wife. It cost $12 million to make. By contrast, just over 10 percent of movies made in China last year had a budget of more than $1.5 million.

Newspapers and television are barred from being critical of the movie, and caustic online reviews have been erased by censors. (Unfortunately for the filmmakers and the government, that edict does not cross borders; in a review in The New York Times, Andy Webster said the movie “demonstrates that mainstream Chinese cinema can be as guilty of self-indulgent overstatement as anything out of the West.)

Both “Beginning of the Great Revival” and “The Founding of a Republic” are attempts by the party to wrest the attention of a new generation away from the Internet, where opinions often deviate from the official line, said Paul Clark, a professor of Chinese culture and film at the University of Auckland, in New Zealand, who is a visiting scholar at Peking University.

“Movies have always been the most effective, consistent form of mass-media propaganda in presenting a party-blessed version of history,” Mr. Clark said.

The two-hour movie begins with the 1911 revolution that toppled the Qing dynasty. Historical characters flash across the screen so briefly that their names appear beside them as explanations. Mao is portrayed in soft-focus lighting as a trim, dewy-eyed and idealistic young man prone to slow-motion frolicking with his beloved in the snow.

But politics take precedence. In the movie’s last scene, the theme is spelled out on the screen: “Under the leadership of the Communist Party, China has been on a glorious path of ethnic independence, liberation, national wealth and strength.” The text is superimposed on a Tiananmen Square flooded with computer-generated fans of Communism, waving red flags.

Yu Yi, 21, who was on summer break from the University of Bedfordshire, in England, and had recently joined the Communist Party, said the scenes of student protests brought tears to his eyes.

“It really made me more patriotic,” he said. “It made me glad I joined the Communist Party.”

Internet reviews have been scathing, but the censors have responded quickly and deleted or changed most of the negative responses.

Other Netizens have commented about the absurdity of the authoritarian Communist government lionizing a period of revolutions against authoritarianism (in this case, the oppressive Beiyang government).

And there is resentment among some Chinese that the film is standing in the way of summer blockbusters. Variety reported that the premieres of “Transformers: Dark of the Moon” and “Harry Potter and the Deathly Hallows: Part 2” will be delayed in China.

Before “Revival” earns a certain amount in ticket sales, for example, 800 million yuan (about $124 million), “other imported films will not be shown,” Gao Jun, a Chinese movie distributor, said at a news conference at the end of May, Southern Metropolis, a Chinese newspaper, reported.

Hitting that box office figure will most likely not be difficult, given all the official help. “The Founding of a Republic” earned $65 million at the box office, the fourth-highest-grossing domestic movie of all time.

As of June 19, “Beginning of the Great Revival” has earned $18 million, and with the state buying up so many tickets, it is likely to surpass the revenue for “The Founding of a Republic.”

But whether all those purchased tickets translate into actual viewers is another matter. On the north side of Beijing, tickets were nearly sold out for a recent afternoon showing, but the theater itself was less than half full.

Most of the audience was sent there by a nearby company, which bought the tickets and gave employees half a day off to watch the film.

Chen Gang, a taxi driver waiting outside the movie theater, said he had no plans to watch the movie.

“It’s a political homework assignment,” he said. “It has nothing to do with reality.”

Adam Century and Edward Wong contributed reporting.
A version of this article appeared in print on June 25, 2011, on page C1 of the New York edition with the headline: People, You Will See This Film. Right Now..

Wednesday, June 22, 2011

Don’t overestimate China’s rise - Moon Chung-in

Don’t overestimate China’s rise
Moon Chung-in
Korea Joongang Daily, June 21, 2011

China cannot afford to invest power and resources for external aspirations with such preoccupations at home.

I attended the June 12-13 World Economic Forum on East Asia in Jakarta, Indonesia. China was the central focus of the meeting amid growing antagonism and a joint stand among Southeast Asian nations against China over territorial claims in the South China Sea. China said it wants to settle the dispute through dialogue, but few among Southeast Asian states were reassured.

But is the hard-headed standoff the only approach? In his recent book “On China,” former Secretary of State Henry Kissinger compares the intransigent rivalry between the British and Germans in pre-World War I Europe to the present tension between the United States and China.

In his concluding chapter arguing for a “balance of power” and the use of meaningful diplomacy to work out sticky foreign and economic affairs with China, Kissinger cited the “Crowe Memorandum,” authored by Eyre Crowe, a senior British foreign officer, for presentation to British Foreign Secretary Earl Grey in 1907.

The memorandum suggested that the British Empire take a hard-line approach to the recently unified German state, a policy that would eventually influence the break out of World War I seven and a half years later. “England must expect that Germany will surely seek to diminish the power of any rivals, to enhance her own by extending her dominion, to hinder the cooperation of other states, and ultimately to break up and supplant the British Empire,” Crowe argued. The conciliatory moves from moderate German statesmen, he argued, were gestures to mask ambitions for expansion and advised against any attempt to seek alliance or mutual trust between the two powers.

Kissinger expressed concern that the same power game and choices are laid out between two major protagonists in the Pacific. Hawkish policy makers in Washington are arguing that “China is surely seeking to extend its dominion and ultimately supplant the United States” in calling for actions to suppress China’s increasing global clout. He warns the U.S. against repeating the apparent European fallacy of a century ago as its relations with China cannot be a zero-sum game, and advised the two major powers to instead seek a richer “co-evolving” pattern of alliances.

His argument, based on his ample experience in dealing with China, also makes us rethink our own response to China’s assertiveness. To pose as a formidable challenge to the U.S., China must be equally competent in capabilities, motives and political will. But China today falls short of meeting these qualifications.

In capabilities, China cannot be genuinely regarded as a rich country even if it becomes the world’s largest economy in terms of gross domestic product by 2017, as the IMF predicts. Even as the world’s largest exporter and holder of foreign exchange reserves, the economy supports an enormous population of 1.3 billion people, of which a majority remain poor.

In military power, it is hardly comparable to the United States. The United States has military alliances with more than 60 countries compared with China’s one alliance with Pakistan. China cannot think of mobilizing military power on a global scale.

China should not be seen as a real threat in intentions as well. Its foreign stance is still a “peaceful” rise, as the leadership is primarily engrossed in domestic affairs of improving the wide wealth gap among the income classes and regions, dealing with corruption, and addressing resource and environmental problems. It must maintain peace with the outside world to pursue harmony within. The egocentric and hard-line view remains a muffled voice in governance.

Will we see the Chinese leader pursuing aggressive expansion in the near future? The bureaucratic leaders after Mao Zedong and Deng Xiaoping won’t likely pursue a risky gamble on the global stage. They are too preoccupied with more urgent complexities at home - such as the growing democratic movement, a restive ethnic minority and other social unrest. China cannot afford to invest power and resources for external aspirations with such preoccupations at home.

If the international society overestimates the minority’s view and mounts an excess defensive against China, it may only end up provoking Chinese military aspirations and nationalism.

Inflated defense and debate over China’s rise can only accelerate its presence as an imminent threat. We must learn from the wise wisdom of a veteran diplomat who experienced it all.

*The writer is a professor of political science at Yonsei University.

The Rise of China's Economy - Thomas G. Rawski

By Thomas G. Rawski
Foreign Policy Research Institute, June 2011

Thomas G. Rawski, Professor of Economics and History, joined the University of Pittsburgh's faculty in 1985 after fourteen years at the University of Toronto. His research focuses on the nature and implications of recent developments and long-term changes in the economy of China. He delivered this paper at A History Institute for Teachers, March 19–20, 2011 on “China and India: Ancient Civilizations, Rising Powers, Giant Societies, and Contrasting Models of Development,” held at the University of Pennsylvania. This History Institute was co-sponsored by The Foreign Policy Research Institute’s Wachman Center as well as by three centers at the University of Pennsylvania – Center for East Asian Studies, South Asia Center, and Penn Lauder CIBER (Center for International Business Education and Research). [1]

China’s remarkable economic boom, now in its fourth decade, has spawned numerous discussions of “China’s Rise.” [2] Beijing’s self-congratulatory slogan “China’s peaceful rise” has advanced this theme. From a historical perspective, however, this terminology seems misplaced. Both the Ming (1368-1644) and Qing (1644-1912) empires occupied key positions in Asian trade and diplomacy. Crude figures compiled by Angus Maddison, author of several sweeping studies of global economic history, show China contributing nearly one-third of global output as late as 1820. The great boom of the late twentieth century has enabled China to regain some of the global economic weight and leverage that the Middle Kingdom enjoyed during the Ming and much of the Qing eras.

The industrial revolution pushed European and North American productivity far ahead of China and India, former giants whose combined share of global output plunged from nearly half to under one-tenth between 1820 and 1950. [3] Prior to 1800, Europeans — for example Marco Polo [4] — viewed China as prosperous and well-governed. As China’s relative economic position eroded, opinions shifted. Both Europeans and Chinese came to view China as a backward society whose very foundations—families, beliefs, values—obstructed progress. Hu Shi (1891-1962), a prominent philosopher who served as China’s wartime ambassador to the United States, summarized this perspective in Chabuduo xiansheng (差不多先生), a witty vignette portraying Chinese people as incapable of the precise thinking needed in the modern world. [5]

China’s recent economic boom, along with the success of Hong Kong, Taiwan, and Singapore, demonstrates that Chinese culture is not inimical to economic progress. Indeed, the opposite perspective, which sees Chinese society as unusually capable of producing individuals who can operate effectively in market systems, helps to explain China’s historic prominence as well as its recent economic surge.

Early work by the late G.W. Skinner (1925-2008), a brilliant and innovative Sinological anthropologist, highlights the economic capabilities of ordinary Chinese before and during the heyday of European imperial expansion. Chinese migrants, many of whom “came to Siam almost straight from the farm,” dominated Thailand’s domestic and international commerce. Skinner explains this in terms of cultural contrasts. In the “Thai universe,” shaped by the ecology of “an underpopulated and fertile land where the requirements for subsistence were […] easily obtained. […] thrift as such was of limited value, and work for its own sake simply senseless.” The migrants hailed from a different universe: “the south Chinese peasant lived in a grimly Malthusian setting where thrift and industry were essential for survival.” Ideology reinforced this divergence: Chinese struggled for wealth to preserve family and lineage continuity, while Thai norms frowned on “excessive concern for … material advancement.” Differences in proverbs tell the story: for the Chinese, “Money can do all things,” but for the Thai, “Do not long for more than your own share.” [6]

Recognizing the strength of entrenched Chinese interests, the British forced the Thai monarch to grant them “equal commercial rights as well as additional privileges” in 1855, benefits that soon extended to “all the major trading states of Europe and America.” In 1890, “after thirty-five years of Western free-trading… under privileged conditions,” Chinese merchants still controlled nearly two-thirds of Bangkok’s trade, more than double that engrossed by the British. In Siam, as in China and Japan, the domestic business of European and American firms was invariably managed by “a Chinese merchant of some wealth, Western training, and standing in the Chinese community.” Chinese dominance extended even to the rice trade, “the biggest prize of all in Siam,” where “the pioneering Western mills were abandoned or passed into Chinese hands.” [7]

Chinese economic capabilities originated in Chinese village life. The Ming-Qing era witnessed a rapid expansion of commerce. Rural households attended periodic markets to buy, sell, or barter farm produce, labor services, animals, fodder, handicraft materials and products, household necessities, and loans, sometimes on a daily basis. [8] The reliance of these markets on a complex monetary system that used copper cash for small purchases and silver coin, ingots, and bullion to manage tax payments and wholesale transactions injected the variable exchange rate between copper and silver into the economic lives of all Chinese. Rural markets were highly competitive: poor but energetic individuals could enter the commercial world as middlemen, earning commissions facilitating local transactions.

Written documents occupied an important position in economic life. Arrangements for short- and long-term labor services, for renting, mortgaging or transferring land, for selling, storing, or conveying merchandise, and for marriage, adoption, apprenticeship, and division of family property routinely involved written contracts. The operation of kinship groups, mercantile and native-place associations, crop-watching societies and other private organizations revolved around complex written arrangements. Both men and women (who often brought their own funds into their husbands’ households) participated in village-level economic life. Documents also permeated interactions with the state.

These circumstances placed a premium on literacy and numeracy, even for humble villagers. In late Qing, literacy extended to 30-45 percent of males and 2-10 percent of females—high figures when compared with pre-industrial Europe. [9] Age-heaping, the tendency of illiterates to give their age in round numbers (so that more people identify themselves as being 20 years old than 19 or 21), is prominent in many low-income nations, but notably absent in nineteenth-century China. [10]

While suffering the low incomes, short life expectancy, and high infant mortality that afflict poor people everywhere, Chinese villagers attained disproportionate levels of entrepreneurial capability, organizational skill and commercial sophistication that often enabled them to out-compete natives of other Asian countries and even Europeans, not just in Shanghai and Bangkok, but across wide swathes of Asia. Colonial authorities in Batavia, Manila, and Singapore found the services of Chinese to be “indispensable.” [11] These unusual features did not extend uniformly across China’s landscape, but concentrated in regions with the most extensive development of trade. These included the lower reaches of the Yangzi River, which formed the hub of domestic commerce, as well as the southern coastal provinces of Fujian and Guangdong, the source of large-scale overseas migration. [12]

These regional differences persist. Chinese executives report wide regional variation in manufacturing capability: “Managers at a leading maker of auto parts were only able to produce products that were less ‘quality demanding’ in their inland facilities. … [where] efforts to raise standards encounter broader cultural obstacles.” [13] Even though massive infrastructure growth has reduced economic distances between inland cities and China’s ports, foreign investments cluster along the coast. Speaking in 2008, Commerce Minister Chen Deming emphasized the regional imbalance in commercial expertise, promising to “help set up centers to train business brains in East China for the central region.” [14]

During the nineteenth century, growing pressure by expanding European powers, later joined by the United States and Japan, led to a procession of “unequal treaties” which compelled China to cede territory and authority to avoid open warfare with the militarily superior imperial powers. While the resulting erosion of Chinese sovereignty created a lasting sense of grievance, the economic consequences of the “unequal treaties” were broadly beneficial. The free trade regime imposed under the 1842 Treaty of Nanking lasted nearly a century. Even though free trade imposed costs associated with unrestricted imports of opium, [15] Peter Lindert conjectures that “common folk were among the greatest gainers” from China’s growing exports of labor-intensive commodities—tea and silk in the nineteenth century, cotton textiles in the twentieth. [16] Treaty provisions allowing foreigners to reside, trade, and, after 1895, to operate factories in an expanding roster of open ports accelerated the inflow of new technologies and ideas—among them telegraph, steamships, railways, new-style banks, company law, and advertising—that contributed to long-term economic modernization.

Despite these supportive circumstances, sustained growth was slow to arrive. To be sure, the Taiping Rebellion of 1851–1864 inflicted massive damage, turning some prosperous regions into wastelands. But what of the 40-plus years between the suppression of the Taipings and the Qing collapse of 1911? One might expect that the combination of political stability, open and competitive trade, and a government moderately supportive of reform would have kindled substantial economic advance, especially with the extra momentum that recovery from war often provides. But available materials do not encourage this line of thinking. Nor do we have a clear idea of what structures or forces might have limited economic advance during the final Qing decades. The list of possible constraining factors includes the difficulty of building momentum in a large economy and the state’s tiny fiscal resources—each quite different in Japan, as well as China’s lack of readily accessible coal deposits. [17]

Despite domestic political instability and mounting Japanese incursions, the decades between China’s 1911 revolution and the outbreak of the Sino-Japanese war in 1937 finally delivered a marked economic upswing. Manufacturing grew steeply, albeit from a tiny base, along with components of the urban economy. These gains spilled into the much larger farm sector, as urban factory growth raised the demand for cotton and wheat, expansion of transport networks enlarged markets for rural products, and banks experimented with retail farm lending. Rising wages in textiles and coal mining, occupations that attracted unskilled rural migrants, and in agriculture itself attest to modest but definite increases in agricultural productivity and incomes, changes that affected the majority of China’s vast labor force. [18]

The outbreak of war in 1937, followed by a steeply rising inflationary spiral, imposed a double blow that reversed a quarter-century of economic advance, but not before new institutions had demonstrated their strength by cushioning China’s economy against the worst consequences of the global depression that began in 1929. Although large outflows of silver, the foundation of China’s pre-war currency system, threatened to tip China’s economy into a deflationary downdraft, China’s private bankers, operating without the benefit of official regulation or support, persuaded their fellow citizens to increase their reliance on private banknotes and deposits with the result that the money stock actually increased during the 1930s. This contributed to the surprising resiliency of China’s economy, and limited the depth and duration of the decline in prices, wages, investment, and output, all of which were far smaller than in many other nations. [19]

Following Japan’s surrender and the conclusion of the ensuing civil war, leaders of the newly established People’s Republic of China faced a poisonous cocktail of runaway inflation, budget deficits, and widespread reluctance to hold currency or bank deposits. These difficulties were quickly resolved despite the added complication of China’s October 1950 entry into the Korean War.

Buoyed by this initial success, China’s new leaders redirected their economic efforts toward growth. Their actions reflected the widespread mistrust of private enterprise and international markets common among low-income nations at the time. China’s alliance with the Soviet Union and confrontation with the U.S. strengthened the tilt toward planning, public enterprise, and isolation from global markets. The design of China’s economic plans followed Soviet example (as did India’s): concentrate resources in industries that can ramp up domestic capacity to expand industrial investment. As in the USSR, raising output of “machines to produce machines” became the key goal. This trajectory called for large-scale expansion of steel, electricity, mining, machine-building, and related industries, along with a supportive educational and research infrastructure. Planners viewed higher consumption as a cost—essential (in small quantities) to preserve incentives—rather than a policy objective.

The effort to channel resources toward industrialization posed difficult choices for rural policy. Raising crop purchase prices could increase farm output and incomes, and provide new opportunities for resource transfer, but only if investment in consumer goods and farm equipment sufficed to maintain farmers’ incentives. Alternatively, collectivization might enlarge the available surplus farm products without shifting investment away from priority sectors. Farm policy vacillated between these poles until 1958, when Mao Zedong’s personal intervention shifted policy decisively toward collectivization. Farmland, tools, livestock, and rural labor were hastily absorbed into large “People’s Communes,” amid an intense campaign to raise output of grain and steel. This “Great Leap Forward” shattered administrative routines, wasted vast resources, undermined work incentives, and triggered a man-made famine that cost 30 million lives. To make matters worse, growing friction between Beijing and Moscow prompted the USSR to withdraw its technical support, crippling numerous industrial projects.

Soon after economic planners managed to restore some semblance of normal economic functioning, Mao Zedong intervened again to promote another disruptive political movement, the “Cultural Revolution,” which began in 1966. Economic costs, although far smaller than during the “Great Leap,” were considerable, especially in education, where colleges and schools either shut down or abandoned normal standards for up to ten years.

The death of Mao Zedong in 1976 was widely seen as a turning point for economic policy. People were not satisfied. Despite important economic achievements in growth, industrialization, technology (including nuclear weapons and space exploration), and human development (rising literacy, declining infant mortality, control of infectious diseases), China’s socialist system had fallen short in two key dimensions. The commune system failed to solve China’s food problem: as one local leader put it “hunger suddenly emerged without warning [in 1959] … For the next twenty years, the problem of hunger was part of our lives.” [20] Furthermore, the country lagged far behind the economic achievements of neighbors whom most Chinese viewed as inferior: defeated Japan, colonial Hong Kong, Kuomintang-controlled Taiwan.

In reviewing the astonishing outcome of the reforms begun during the late 1970s, it is essential to recall their modest scope. The initial effort included three components. Impoverished localities began to experiment with household farming. Four new Special Economic Zones in the southern coastal provinces of Guangdong and Fujian exposed a sliver of China's isolated economy to international trade and investment. Government-owned urban firms could now retain a modest share of profits as an incentive to “enliven state assets”; revived markets for industrial inputs and products provided an outlet for retained profits.

The agricultural initiatives met with instant success. Farmers raced to abandon collectives and reinstate household cultivation. Massive (and completely unexpected) increases in agricultural production raised farm incomes and improved the diets, energy and productivity of villagers everywhere. Rising farm output swelled exports and curtailed food imports, eliminating long-standing concerns over the availability of food and foreign exchange supplies. The farm boom disgorged new supplies of industrial materials (grain, cotton, sugar, fruit) and revealed vast surpluses of rural labor. Together with rising rural demand and increased access to urban markets and expertise, these changes fuelled an explosive boom in rural industry.

Results of the trade initiatives also dwarfed expectations. Initial prospects seemed limited because the managers of China’s special zones, unlike their counterparts in Taiwan or the Philippines, lacked international experience. But the opening of trade zones coincided with growing pressure from higher wages and land prices on the cost of labor-intensive exports originating in Taiwan and Hong Kong. These exporters began to shift operations to the mainland, where the new combination of abundant low-cost labor with the knowledge, skills, and experience of Hong Kong and Taiwanese entrepreneurs generated an export boom that soon launched China from self-imposed isolation into the developing world's largest recipient of foreign investment.

Looking back, it now seems evident that the unexpectedly large payoff to modest reforms in agriculture and trade owed much to the legacy of human capital accumulated within China and among overseas Chinese during the decades and centuries prior to 1949. While “agricultural projects in East Africa … suffer from a shortage of well-trained African accountants … [who can manipulate] a simple cost-accounting system,” [21] Chinese villagers quickly mastered the complex record-keeping demands of the commune system. Once reform began, the supply of managers and accountants easily accommodated massive expansion of township and village enterprises, which mushroomed to encompass 18.5 million firms with 92.6 million workers and over $10 billion worth of goods procured for export in 1990. [22]

Urban reform turned out to be far more complex. Vast swathes of Chinese manufacturing were creatures of the plan that lacked any market heritage. Furthermore, urban reform cut to the core of Chinese socialism, which, despite its rural background, had long focused its attention on the development of cities and the welfare of urbanites. Chinese leaders entered the reform process with vague notions of improved economic performance rather than clear objectives. At the same time, entrenched party and bureaucratic interests eliminated any possibility of sweeping reform. This turned the transformation of China's urban, industrial economy into a lengthy process that gave birth to the distinctive features of Chinese gradual reform.

With “big bang” reforms of the sort attempted in Russia and Eastern Europe neither feasible nor, in the view of Chinese leaders, desirable, urban reform evolved as a series of policy experiments and initiatives, decentralized responses, and official reactions. At the outset, Deng Xiaoping and his reform-minded colleagues sought to improve outcomes rather than to pursue a clear vision for China's post-reform economy. Because Chinese planning was relatively decentralized, with provincial and local leaders enjoying greater authority and control than in the Soviet Union, central reform initiatives typically focused on enabling measures that broadened the opportunities and choices available to enterprises and lower-level governments. Instead of eliminating price controls, China gradually raised the share of sales transacted at market prices. Rather than privatize, a growing range of firms began to issue shares. Production planning did not vanish, but its span of control gradually diminished.

This open-ended approach invites decentralized reactions that the center cannot fully anticipate or control. Governments at all levels become participants; sometimes even followers, as well as leaders of reform. Reform unfolds as a process replete with interactions among governments, enterprises, workers, and consumers rather than as a sequence of events in which the state imposes decisions on businesses and individuals.

The heterogeneous nature of China's pre-reform system meant that the effect of Beijing’s reform initiatives was far from uniform. The uneven impact of enabling reforms destabilized outcomes and intensified competition. Competition reduces profits. In socialist China, government agencies and state-owned enterprises, which controlled the bulk of capital assets, suffered mightily. The steep decline in government's share of national product during the 1980s illustrates the importance of unforeseen outcomes. Some enterprises reacted to financial pressures by developing new products, trimming costs, and raising productivity. Others bombarded their official sponsors with claims of “unfair competition” and pleas for financial assistance. Supervisory agencies, short of funds because of the slow growth in their revenues from profits (or taxes on profits), often found it easier to respond with further reform initiatives than with cash.

In this way, Chinese reform created a “virtuous cycle” that enabled myriad small reforms to cumulate into substantial institutional change. Reform expanded competition and created financial pressures that spurred some participants toward innovation, resulting in further intensification of competition. Even when financial pressures resulted in lobbying rather than innovation, the typical response involved further partial reform, which unleashed fresh rounds of competition.

This system produced an odd structure in which the balance between plan and market varied widely for different official agencies, regions, enterprises, and households. Variation allowed participants to weigh their own prospects under each system. As Susan Shirk has shown, the result was a gradual shift of opinion toward preference for market outcomes that culminated in the China’s Communist Party’s 1993 decision to pursue a “socialist market economy with Chinese characteristics.” [23]

Comparison of circumstances in 1993 with the recent past shows that subsequent development has followed the track established by the 1993 decision, under which government was to undertake macroeconomic management, regulation of health, environment etc., and setting strategic priorities for the economy, leaving other decisions to the market. The shift from plan to market continues: the share of industrial output originating in state-owned or collective firms that are subject to strong official controls plunged from 81.7 to 11.0 percent between 1993 and 2008. The move from public to private ownership has accelerated, with the share of domestic private firms and firms with offshore investment in industrial production leaping from 18.5 to 56.4 percent during the same period. [24] Continued movement from isolation toward global involvement is also clear: between 1993 and 2008, annual two-way trade advanced from $195.7 billion to $2.56 trillion, China’s trade ratio (combined exports and imports as a percentage of GDP) rose from 28 to around 60 percent, incoming foreign direct investment jumped from $28 to $92 billion, and China emerged as a substantial source of outbound direct investment, with annual flows rising from $4.4 billion in 1993 to $52.1 billion in 2008. [25]

These important structural changes occurred amid a further acceleration of growth that has pushed the leading edge of urban prosperity into new territory, with affluent households now able to afford luxury housing, private automobiles, international travel, and overseas schooling for their children. Strong momentum has enabled China’s economy to power through sharp setbacks from the international financial crises of 1998 and 2008/09 as well as the 2003 SARS epidemic. [26]

One vital ingredient in China’s long-term reform success came from domestic policies that pushed aside major obstacles to improved economic performance by improving incentives and allowing increased entry, competition, mobility, and price flexibility. Although these reforms remain incomplete—private businesses, for example, still confront formidable legal, administrative, and institutional barriers—they created sufficient momentum to overcome the friction and drag linked to a host of less critical inefficiencies associated with price distortions, imperfect markets, and institutional shortcomings (for example in banking, property rights, and corporate governance)—all of which retarded growth and increased its cost without endangering the ongoing boom.

The combination of Chinese land and labor with the capital and expertise of Taiwan and Hong Kong industrialists provided a particularly important boost to exports and employment during the first decade of reform. China’s coastal regions used the experience and confidence gained from initial cooperation with Overseas Chinese entrepreneurs to attract rising investment flows from multi-national corporations. Foreign investment has powered China’s revival as a great trading nation and contributed to the expansion of Chinese manufacturing capability (for example, in automobiles).

What of the future? China’s economic prospects appear strong. Rapid diffusion of education will further improve its already impressive pool of human resources. Entrepreneurship flourishes despite remaining barriers to the expansion of private business. With public interest in socialist ideology notably absent, China’s political elites understand that continued economic growth is essential to maintaining their own power; their focus on development is therefore intense. Manufacturing, the largest and strongest sector of China’s economy, seems poised for further upgrading, which will benefit from enlarged flows of college graduates, domestic R&D activity, and new ideas from China’s growing portfolio of international investments.

China’s efforts to harvest these promising economic opportunities must confront formidable obstacles. Although international media and NGOs tend to exaggerate the dangers arising from environmental and public health hazards as well as tensions linked to ethnic and economic inequalities, these issues pose major challenges, as do corruption and the intertwined problems of unemployment and (especially rural) education. The biggest dangers, however, lie elsewhere.

On the domestic side, a largely unreformed investment mechanism allows government decisionmakers to channel funds from state-owned banks into state-controlled investment projects. This relic of Soviet-style planning holds back the growth of output, productivity, and (especially) employment, extends a long-standing pattern of grotesque seasonal fluctuations, creates mountains of bad loans that increase the risk of financial instability, and truncates expansion prospects for private businesses (which find themselves crowded out of financial markets).

On the international side, global market access, which has made China the greatest beneficiary of globalization, remains essential to China’s future prospects. The recent economic crisis shows how quickly disruption of overseas export sales can undercut domestic economic activity (best measured at the moment by electricity use) and employment (Chinese economists reckon that the 2008 crisis caused over 40 million layoffs). Imports of energy, materials, equipment, components, and technology are equally essential. Chinese plans to grapple with a wide range of pressing economic issues routinely anticipate unfettered access to world markets for funds, expertise, and ideas as well as commodities.

China’s continuing growth spurt, now in its fourth decade, is a major event in world history that has delivered massive benefits to its citizens, and also to its trade and business partners, including the United States. Chinese economic expansion also creates conflict—in the economic sphere alone, China has become involved in disputes over cross-national shifts in production and employment, corporate takeovers, trade imbalances and protection, environmental hazards, currency valuation, intellectual property, internet censorship, labor standards, subsidies, and many other issues.

Beijing’s intense focus on building a prosperous Chinese future, along with China’s large and growing reliance on global markets to promote its economic objectives, tilts China’s international behavior toward cooperation rather than conflict. Despite the inevitable friction that accompanies the China’s expanding economic, political, military, and technological strength, this orientation, which is evident in Beijing’s approach to issues surrounding trade, environment, property rights, and the Korean peninsula, creates an opportunity for the international community to adjust to China’s expanding power and influence through mutual agreement rather than armed struggle.


[1] The author acknowledges beneficial advice from Lucien Ellington and two anonymous reviewers.
[2] For example, C. Fred Bergsten et al, China's Rise: Challenges and Opportunities (Washington: Peterson Institute, 2008); William W. Keller and Thomas G. Rawski eds., China’s Rise and the Balance of Influence in Asia (Pittsburgh, U. of Pittsburgh Press, 2007).
[3] Angus Maddison, The world economy: a millennial perspective (Paris: OECD, 2001).
[4] The Travels of Marco Polo, available at http://books.google.com/books?id=VovVAAAAMAAJ&printsec=frontcover&dq=travels+of+marco+polo#v=onepage&q=&f=false
[5] For Chinese and English versions, see http://www.readchinese.net/chabuduoxiansheng
[6] G. W. Skinner, Chinese Society in Thailand (Ithaca: Cornell U. Press, 1957), pp. 97, 92, 93. 95.
[7] Ibid. 102, 105.
[8] G. W. Skinner, Marketing and Social Structure in Rural China (Ann Arbor: AAS, 1965).
[9] Evelyn S. Rawski, Education and Popular Literacy in Ch’ing China, (Ann Arbor: U. of Michigan Press, 1979), chap. 1.
[10] Joerg Baten et al, “Evolution of living standards and human capital in China in the 18–20th centuries.” Explorations in Economic History, forthcoming.
[11] Sarasin Viraphol, Tribute and Profit: Sino-Siamese Trade, 1652-1853 (Cambridge: Harvard Council, 1977), p. 170.
[12] For an architectural example, see http://www.nytimes.com/2009/12/04/world/asia/04taishan.html?emc=eta1
[13] Loren Brandt and Thomas G. Rawski eds., China’s Great Economic Transformation (Cambridge: Cambridge U. Press, 2008), p. 625
[14] Gong Zhengzheng, “Central China Urged to Up Ante.” China Daily, 28 April 2008, p. 2.
[15] Carl Trocki warns that “Much of the literature [on opium] is emotional, uninformed, highly prejudiced and intended to persuade rather than to inform” (Opium, Empire and the Global Political Economy (London: Routledge, 1999), p. 177).
[16] “International Economics,” in Thomas G. Rawski et al, Economics and the Historian (Berkeley: U. of California Press, 1996), p. 229.
[17] On coal, see Kenneth Pomeranz, The Great Divergence (Cambridge: Cambridge U. Press, 2000).
[18] Thomas G. Rawski, Economic Growth in Prewar China (Berkeley: U. of California Press, 18), chap. 6.
[19] Ibid, chap. 3.
[20] Shu-min Huang, The Spiral Road (Boulder: Westview Press, 1989), p. 61.
[21] Uma J. Lele, The design of rural development: lessons from Africa (Baltimore: Johns Hopkins U. Press, 1975), pp. 127, 131.
[22] China Statistical Yearbook 1991- abbreviated below as CSY (Beijing: China Statistics Press, 1991), pp. 377, 628; David Zweig, Internationalizing China (Ithaca: Cornell U. Press, 2002), p. 121.
[23] Susan Shirk, The Political Logic of Economic Reform in China (Berkeley: U. of California Press, 1993).
[24] CSY 1994, p. 373; 2009, Table 13.1.
[25] Data from CSY, 1994 and 2009; Penn World Tables; UNCTAD website.
[26] Official data conceal the impact of these reversals on overall output. For example, official reports for the fourth quarter of 2008 show electricity output falling by 12.1 percent compared to year-earlier results, but claim that GDP expanded by 6.8 percent during the same period.

Sunday, June 19, 2011

Ten Reasons Why China is Different - Stephen S. Roach

Ten Reasons Why China is Different
Stephen S. Roach
Commentary, May 5, 2011

NEW HAVEN – The China doubters are back in force. They seem to come in waves – every few years, or so. Yet, year in and year out, China has defied the naysayers and stayed the course, perpetuating the most spectacular development miracle of modern times. That seems likely to continue.
Today’s feverish hand-wringing reflects a confluence of worries – especially concerns about inflation, excess investment, soaring wages, and bad bank loans. Prominent academics warn that China could fall victim to the dreaded “middle-income trap,” which has derailed many a developing nation.
There is a kernel of truth to many of the concerns cited above, especially with respect to the current inflation problem. But they stem largely from misplaced generalizations. Here are ten reasons why it doesn’t pay to diagnose the Chinese economy by drawing inferences from the experiences of others:
Strategy. Since 1953, China has framed its macro objectives in the context of five-year plans, with clearly defined targets and policy initiatives designed to hit those targets. The recently enacted 12th Five-Year Plan could well be a strategic turning point – ushering in a shift from the highly successful producer model of the past 30 years to a flourishing consumer society.
Commitment. Seared by memories of turmoil, reinforced by the Cultural Revolution of the 1960’s and 1970’s, China’s leadership places the highest priority on stability. Such a commitment served China extremely well in avoiding collateral damage from the crisis of 2008-2009. It stands to play an equally important role in driving the fight against inflation, asset bubbles, and deteriorating loan quality.
Wherewithal to deliver. China’s commitment to stability has teeth. More than 30 years of reform have unlocked its economic dynamism. Enterprise and financial-market reforms have been key, and many more reforms are coming. Moreover, China has shown itself to be a good learner from past crises, and shifts course when necessary.
Saving. A domestic saving rate in excess of 50% has served China well. It funded the investment imperatives of economic development and boosted the cushion of foreign-exchange reserves that has shielded China from external shocks. China now stands ready to absorb some of that surplus saving to promote a shift toward internal demand.
Rural-urban migration. Over the past 30 years, the urban share of the Chinese population has risen from 20% to 46%. According to OECD estimates, another 316 million people should move from the countryside to China’s cities over the next 20 years. Such an unprecedented wave of urbanization provides solid support for infrastructure investment and commercial and residential construction activity. Fears of excess investment and “ghost cities” fixate on the supply side, without giving due weight to burgeoning demand.
Low-hanging fruit – Consumption. Private consumption accounts for only about 37% of China’s GDP – the smallest share of any major economy. By focusing on job creation, wage increases, and the social safety net, the 12th Five-Year Plan could spark a major increase in discretionary consumer purchasing power. That could lead to as much as a five-percentage-point increase in China’s consumption share by 2015.
Low-hanging fruit – Services. Services account for just 43% of Chinese GDP – well below global norms. Services are an important piece of China’s pro-consumption strategy – especially large-scale transactions-based industries such as distribution (wholesale and retail), domestic transportation, supply-chain logistics, and hospitality and leisure. Over the next five years, the services share of Chinese GDP could rise above the currently targeted four-percentage-point increase. This is a labor-intensive, resource-efficient, environmentally-friendly growth recipe – precisely what China needs in the next phase of its development.
Foreign direct investment. Modern China has long been a magnet for global multinational corporations seeking both efficiency and a toehold in the world’s most populous market. Such investments provide China with access to modern technologies and management systems – a catalyst to economic development. China’s upcoming pro-consumption rebalancing implies a potential shift in FDI – away from manufacturing toward services – that could propel growth further.
Education. China has taken enormous strides in building human capital. The adult literacy rate is now almost 95%, and secondary school enrollment rates are up to 80%. Shanghai’s 15-year-old students were recently ranked first globally in math and reading as per the standardized PISA metric. Chinese universities now graduate more than 1.5 million engineers and scientists annually. The country is well on its way to a knowledge-based economy.
Innovation. In 2009, about 280,000 domestic patent applications were filed in China, placing it third globally, behind Japan and the United States. China is fourth and rising in terms of international patent applications. At the same time, China is targeting a research-and-development share of GDP of 2.2% by 2015 – double the ratio in 2002. This fits with the 12th Five-Year Plan’s new focus on innovation-based “strategic emerging industries” – energy conservation, new-generation information technology, biotechnology, high-end equipment manufacturing, renewable energy, alternative materials, and autos running on alternative fuels. Currently, these seven industries account for 3% of Chinese GDP; the government is targeting a 15% share by 2020, a significant move up the value chain.
Yale historian Jonathan Spence has long cautioned that the West tends to view China through the same lens as it sees itself. Today’s cottage industry of China doubters is a case in point. Yes, by our standards, China’s imbalances are unstable and unsustainable. Chinese Premier Wen Jiabao has, in fact, gone public with a similar critique.
But that’s why China is so different. It actually takes these concerns seriously. Unlike the West, where the very concept of strategy has become an oxymoron, China has embraced a transitional framework aimed at resolving its sustainability constraints. Moreover, unlike the West, which is trapped in a dysfunctional political quagmire, China has both the commitment and the wherewithal to deliver on that strategy. This is not a time to bet against China.

Stephen S. Roach, a member of the faculty of Yale University, is Non-Executive Chairman of Morgan Stanley Asia and author of The Next Asia (Wiley 2009).

Sunday, June 5, 2011

Advice to Chinese leadership - Tom Friedman (NYT)

Advice for China
The New York Times, Sunday, June 4, 2011

FROM: Ministry of State Security
TO: President Hu Jintao
SUBJECT: The Arab Spring

Dear President Hu: You asked for our assessment of the Arab Spring. Our conclusion is that the revolutions in the Arab world contain some important lessons for the rule of the Chinese Communist Party, because what this contagion reveals is something very new about of how revolutions unfold in the 21st century and something very old about why they explode.

Let’s start with the new. Sometime around the year 2000, the world achieved a very high level of connectivity, virtually flattening the global economic playing field. This web of connectivity was built on the diffusion of personal computers, fiber-optic cable, the Internet and Web servers. What this platform did was to make Boston and Beijing or Detroit and Damascus next-door neighbors. It brought some two billion people into a global conversation.

Well, sir, while we were focused on the U.S. recession, we went from a connected world to a “hyperconnected world.” It has connected Boston, Beijing and now Baotou in inner Mongolia. This deeper penetration of connectivity is built on smarter cellphones, wireless bandwidth and social networks. This new platform for connectivity, being so cheap and mobile, is bringing another two billion people into the conversation from more and more remote areas.

To put it in Middle Eastern terms, sir, this new platform has connected Detroit and Damascus and Dara’a. Where is Dara’a, you ask? Dara’a is the small Syrian border town where the uprising in Syria began and whose residents have been pumping out video, Twitter feeds and Facebook postings of regime atrocities ever since.

The point, sir, is the world is now hyperconnected, and there is no such thing as “local” anymore. Everything now flows instantly from the most remote corners of any country onto this global platform where it gets shared. What the laptop plus the Internet plus the search engine did for Web pages was enable anyone with connectivity to find anything that interests them and what the cellphone plus the Internet plus Facebook are doing is enabling anyone to find anyone who interests them — and then coordinate with them and share grievances and aspirations.

The days when Arab dictators could take over the state-run TV and radio and shut off all information to their people are over. The Syrians can’t shut off their cellphone networks now any more than they can shut off their electricity grids.

Sir, think about this: Syria has banned all foreign networks, like CNN and the BBC, but if you go to YouTube and type in “Dara’a” you will see the most vivid up-to-date video of the Syrian regime’s crackdown — all shot with cellphones or flip-cams by Syrians and then uploaded to YouTube or to newly created Web sites like Sham News Network. Nothing stays hidden anymore.

The second trend we see in the Arab Spring is a manifestation of “Carlson’s Law,” posited by Curtis Carlson, the C.E.O. of SRI International, in Silicon Valley, which states that: “In a world where so many people now have access to education and cheap tools of innovation, innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.” As a result, says Carlson, the sweet spot for innovation today is “moving down,” closer to the people, not up, because all the people together are smarter than anyone alone and all the people now have the tools to invent and collaborate.

The regime of Hosni Mubarak of Egypt was just too dumb and slow to manage the unrest. The Tahrir revolutionaries were smart but chaotic, and without leadership. Therefore, the role of leaders today — of companies and countries — is to inspire, empower, enable and then edit and meld all that innovation coming from the bottom up. But that requires more freedom for the bottom. Do you see what I mean, sir?

But this is not about technology alone. As the Russian historian Leon Aron has noted, the Arab uprisings closely resemble the Russian democratic revolution of 1991 in one key respect: They were both not so much about freedom or food as about “dignity.” They each grew out of a deep desire by people to run their own lives and to be treated as “citizens” — with both obligations and rights that the state cannot just give and take by whim.

If you want to know what brings about revolutions, it is not G.D.P. rising or falling, says Aron, “it is the quest for dignity.” We always exaggerate people’s quest for G.D.P. and undervalue their quest for ideals. “Dignity before bread” was the slogan of the Tunisian revolution. “The spark that lights the fuse is always the quest for dignity,” said Aron. “Today’s technology just makes the fire much more difficult to put out.”

We need to keep that in mind in China, sir. We should be proud of the rising standard of living that we have delivered for our people. Many of them appreciate that. But it is not the only thing in their lives — and at some point it won’t be the most important thing. Do you see what I mean, sir?