Read the manifesto that landed 2010 Nobel Peace Prize winner and Chinese dissident Liu Xiaobo in prison
Foreign Policy, October 8, 2010
In December 2008, 303 Chinese activists, including Nobel Peace Prize winner Liu Xiaobo, issued "Charter 08", a petition calling for greater human rights and democratic freedoms in China. An English translation by the Hong Kong-based NGO Human Rights in China is republished here with permission. The translation was first published in China Rights Forum, the organization's quarterly journal.
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Charter 08
I. Preamble
This year marks 100 years since China’s [first] Constitution, the 60th anniversary of the promulgation of the Universal Declaration of Human Rights, the 30th anniversary of the birth of the Democracy Wall, and the 10th year since the Chinese government signed the International Covenant on Civil and Political Rights. Having experienced a prolonged period of human rights disasters and challenging and tortuous struggles, the awakening Chinese citizens are becoming increasingly aware that freedom, equality, and human rights are universal values shared by all humankind, and that democracy, republicanism, and constitutional government make up the basic institutional framework of modern politics. A “modernization” bereft of these universal values and this basic political framework is a disastrous process that deprives people of their rights, rots away their humanity, and destroys their dignity. Where is China headed in the 21st century? Will it continue with this “modernization” under authoritarian rule, or will it endorse universal values, join the mainstream civilization, and build a democratic form of government? This is an unavoidable decision.
The tremendous historic changes of the mid-19th century exposed the decay of the traditional Chinese autocratic system and set the stage for the greatest transformation China had seen in several thousand years. The Self-Strengthening Movement [1861–1895] sought improvements in China’s technical capability by acquiring manufacturing techniques, scientific knowledge, and military technologies from the West; China’s defeat in the first Sino-Japanese War [1894–1895] once again exposed the obsolescence of its system; the Hundred Days’ Reform [1898] touched upon the area of institutional innovation, but ended in failure due to cruel suppression by the die-hard faction [at the Qing court]. The Xinhai Revolution [1911], on the surface, buried the imperial system that had lasted for more than 2,000 years and established Asia’s first republic. But, because of the particular historical circumstances of internal and external troubles, the republican system of government was short lived, and autocracy made a comeback.
The failure of technical imitation and institutional renewal prompted deep reflection among our countrymen on the root cause of China’s cultural sickness, and the ensuing May Fourth [1919] and New Culture Movements [1915–1921] under the banner of “science and democracy.” But the course of China’s political democratization was forcibly cut short due to frequent civil wars and foreign invasion. The process of a constitutional government began again after China’s victory in the War of Resistance against Japan [1937–1945], but the outcome of the civil war between the Nationalists and the Communists plunged China into the abyss of modern-day totalitarianism. The “New China” established in 1949 is a “people’s republic” in name, but in reality it is a “party domain.” The ruling party monopolizes all the political, economic, and social resources. It has created a string of human rights disasters, such as the Anti-Rightist Campaign, the Great Leap Forward, the Cultural Revolution, June Fourth, and the suppression of unofficial religious activities and the rights defense movement, causing tens of millions of deaths, and exacting a disastrous price from both the people and the country.
The “Reform and Opening Up” of the late 20th century extricated China from the pervasive poverty and absolute totalitarianism of the Mao Zedong era, and substantially increased private wealth and the standard of living of the common people. Individual economic freedom and social privileges were partially restored, a civil society began to grow, and calls for human rights and political freedom among the people increased by the day. Those in power, while implementing economic reforms aimed at marketization and privatization, also began to shift from a position of rejecting human rights to one of gradually recognizing them. In 1997 and 1998, the Chinese government signed two important international human rights treaties.2 In 2004, the National People’s Congress amended the Constitution to add that “[the State] respects and guarantees human rights.” And this year, the government has promised to formulate and implement a “National Human Rights Action Plan.” But so far, this political progress has largely remained on paper: there are laws, but there is no rule of law; there is a constitution, but no constitutional government; this is still the political reality that is obvious to all. The ruling elite continues to insist on its authoritarian grip on power, rejecting political reform. This has caused official corruption, difficulty in establishing rule of law, the absence of of human rights, moral bankruptcy, social polarization, abnormal economic development, destruction of both the natural and cultural environment, no institutionalized protection of citizens’ rights to freedom, property, and the pursuit of happiness, the constant accumulation of all kinds of social conflicts, and the continuous surge of resentment. In particular, the intensification of antagonism between the government and the people, and the dramatic increase in mass incidents, indicate a catastrophic loss of control in the making, suggesting that the backwardness of the current system has reached a point where change must occur.
II. Our Fundamental Concepts
At this historical juncture that will decide the future destiny of China, it is necessary to reflect on the modernization process of the past hundred and some years and reaffirm the following concepts:
Freedom: Freedom is at the core of universal values. The rights of speech, publication, belief, assembly, association, movement, to strike, and to march and demonstrate are all the concrete expressions of freedom. Where freedom does not flourish, there is no modern civilization to speak of.
Human Rights: Human rights are not bestowed by a state; they are inherent rights enjoyed by every person. Guaranteeing human rights is both the most important objective of a government and the foundation of the legitimacy of its public authority; it is also the intrinsic requirement of the policy of “putting people first.” China’s successive political disasters have all been closely related to the disregard for human rights by the ruling establishment. People are the mainstay of a nation; a nation serves its people; government exists for the people.
Equality: The integrity, dignity, and freedom of every individual, regardless of social status, occupation, gender, economic circumstances, ethnicity, skin color, religion, or political belief, are equal. The principles of equality before the law for each and every person and equality in social, economic, cultural, and political rights of all citizens must be implemented.
Republicanism: Republicanism is “joint governing by all, peaceful coexistence,” that is, the separation of powers for checks and balances and the balance of interests; that is, a community comprising many diverse interests, different social groups, and a plurality of cultures and faiths, seeking to peacefully handle public affairs on the basis of equal participation, fair competition, and joint discussion.
Democracy: The most fundamental meaning is that sovereignty resides in the people and the government elected by the people. Democracy has the following basic characteristics:(1) The legitimacy of political power comes from the people; the source of political power is the people. (2) Political control is exercised through choices made by the people. (3) Citizens enjoy the genuine right to vote; officials in key positions at all levels of government must be the product of elections at regular intervals. (4) Respect the decisions of the majority while protecting the basic human rights of the minority. In a word, democracy is the modern public instrument for creating a government “of the people, by the people, and for the people.”
Constitutionalism: Constitutionalism is the principle of guaranteeing basic freedoms and rights of citizens as defined by the constitution through legal provisions and the rule of law, restricting and defining the boundaries of government power and conduct, and providing appropriate institutional capability to carry this out. In China, the era of imperial power is long gone, never to return; in the world at large, the authoritarian system is on the wane; citizens ought to become the true masters of their states. The fundamental way out for China lies only in dispelling the subservient notion of reliance on “enlightened rulers” and “upright officials,” promoting public consciousness of rights as fundamental and participation as a duty, and putting into practice freedom, engaging in democracy, and respecting the law.
III. Our Basic Positions
Thus, in the spirit of responsible and constructive citizens, we put forth the following specific positions regarding various aspects of state administration, citizens’ rights and interests, and social development:
1. Constitutional Amendment: Based on the aforementioned values and concepts, amend the Constitution, deleting clauses in the current Constitution that are not in conformity with the principle that sovereignty resides in the people, so that the Constitution can truly become a document that guarantees human rights and allows for the exercise of public power, and become the enforceable supreme law that no individual, group, or party can violate, establishing the foundation of the legal authority for democratizing China.
2. Separation of Powers and Checks and Balances: Construct a modern government that separates powers and maintains checks and balances among them, that guarantees the separation of legislative, judicial, and executive powers. Establish the principle of statutory administration and responsible government to prevent excessive expansion of executive power; government should be responsible to taxpayers; establish the system of separation of powers and checks and balances between the central and local governments; the central power must be clearly defined and mandated by the Constitution, and
the localities must exercise full autonomy.
3. Legislative Democracy: Legislative bodies at all levels should be created through direct elections; maintain the principle of fairness and justice in making law; and implement legislative democracy.
4. Judicial Independence: The judiciary should transcend partisanship, be free from any interference, exercise judicial independence, and guarantee judicial fairness; it should establish a constitutional court and a system to investigate violations of the Constitution, and uphold the authority of the Constitution. Abolish as soon as possible the Party’s Committees of Political and Legislative Affairs at all levels that seriously endanger the country’s rule of law. Prevent private use of public instruments.
5. Public Use of Public Instruments: Bring the armed forces under state control. Military personnel should render loyalty to the Constitution and to the country. Political party organizations should withdraw from the armed forces; raise the professional standards of the armed forces. All public employees including the police should maintain political neutrality. Abolish discrimination in hiring of public employees based on party affiliation; there should be equality in hiring regardless of party affiliation.
6. Human Rights Guarantees: Guarantee human rights in earnest; protect human dignity. Set up a Commission on Human Rights, responsible to the highest organ of popular will, to prevent government abuse of public authority and violations of human rights, and, especially, to guarantee the personal freedom of citizens. No one shall suffer illegal arrest, detention, subpoena, interrogation, or punishment. Abolish the Reeducation-Through-Labor system.
7. Election of Public Officials: Fully implement the system of democratic elections to realize equal voting rights based on “one person, one vote.” Systematically and gradually implement direct elections of administrative heads at all levels. Regular elections based on free competition and citizen participation in elections for legal public office are inalienable basic human rights.
8. Urban-Rural Equality: Abolish the current urban-rural two-tier household registration system to realize the constitutional right of equality before the law for all citizens and guarantee the citizens’ right to move freely.
9. Freedom of Association: Guarantee citizens’ right to freedom of association. Change the current system of registration upon approval for community groups to a system of record-keeping. Lift the ban on political parties. Regulate party activities according to the Constitution and law; abolish the privilege of one-party monopoly on power; establish the principles of freedom of activities of political parties and fair competition for political parties; normalize and legally regulate party politics.
10. Freedom of Assembly: Freedoms to peacefully assemble, march, demonstrate, and express [opinions] are citizens’ fundamental freedoms stipulated by the Constitution; they should not be subject to illegal interference and unconstitutional restrictions by the ruling party and the government.
11. Freedom of Expression: Realize the freedom of speech, freedom to publish, and academic freedom; guarantee the citizens’ right to know and right to supervise [public institutions]. Enact a “News Law” and a “Publishing Law,” lift the ban on reporting, repeal the “crime of inciting subversion of state power” clause in the current Criminal Law, and put an end to punishing speech as a crime.
12. Freedom of Religion: Guarantee freedom of religion and freedom of belief, and implement separation of religion and state so that activities involving religion and faith are not subjected to government interference. Examine and repeal administrative statutes, administrative rules, and local statutes that restrict or deprive citizens of religious freedom; ban management of religious activities by administrative legislation. Abolish the system that requires that religious groups (and including places of worship) obtain prior approval of their legal status in order to register, and replace it with a system of record-keeping that requires no scrutiny.
13. Civic Education: Abolish political education and political examinations that are heavy on ideology and serve the one-party rule. Popularize civic education based on universal values and civil rights, establish civic consciousness, and advocate civic virtues that serve society.
14. Property Protection: Establish and protect private property rights, and implement a system based on a free and open market economy; guarantee entrepreneurial freedom, and eliminate administrative monopolies; set up a Committee for the Management of State-Owned Property, responsible to the highest organ of popular will; launch reform of property rights in a legal and orderly fashion, and clarify the ownership of property rights and those responsible; launch a new land movement, advance land privatization, and guarantee in earnest the land property rights of citizens, particularly the farmers.
15. Fiscal Reform: Democratize public finances and guarantee taxpayers’ rights. Set up the structure and operational mechanism of a public finance system with clearly defined authority and responsibilities, and establish a rational and effective system of decentralized financial authority among various levels of government; carry out a major reform of the tax system, so as to reduce tax rates, simplify the tax system, and equalize the tax burden. Administrative departments may not increase taxes or create new taxes at will without sanction by society obtained through a public elective process and resolution by organs of popular will. Pass property rights reform to diversify and introduce competition mechanisms into the market; lower the threshold for entry into the financial field and create conditions for the development of privately-owned financial enterprises, and fully energize the financial system.
16. Social Security: Establish a social security system that covers all citizens and provides them with basic security in education, medical care, care for the elderly, and employment.
17. Environmental Protection: Protect the ecological environment, promote sustainable development, and take responsibility for future generations and all humanity; clarify and impose the appropriate responsibilities that state and government officials at all levels must take to this end; promote participation and oversight by civil society groups in environmental protection.
18. Federal Republic: Take part in maintaining regional peace and development with an attitude of equality and fairness, and create an image of a responsible great power. Protect the free systems of Hong Kong and Macau .On the premise of freedom and democracy, seek a reconciliation plan for the mainland and Taiwan through equal negotiations and cooperative interaction. Wisely explore possible paths and institutional blueprints for the common prosperity of all ethnic groups, and establish the Federal Republic of China under the framework of a democractic and constitutional government.
19. Transitional Justice: Restore the reputation of and give state compensation to individuals, as well as their families, who suffered political persecution during past political movements; release all political prisoners and prisoners of conscience; release all people convicted for their beliefs; establish a Commission for Truth Investigation to find the truth of historical events, determine responsibility, and uphold justice; seek social reconciliation on this foundation.
IV. Conclusion
China, as a great nation of the world, one of the five permanent members of the United Nations Security Council, and a member of the Human Rights Council, ought to make its own contribution to peace for humankind and progress in human rights. Regrettably, however, of all the great nations of the world today, China alone still clings to an authoritarian way of life and has, as a result, created an unbroken nchain of human rights disasters and social crises, held back the development of the Chinese people, and hindered the progress of human civilization. This situation must change! We cannot put off political democratization reforms any longer. Therefore, in the civic spirit of daring to take action, we are issuing Charter 08. We hope that all Chinese citizens who share this sense of crisis, responsibility, and mission, whether officials or common people and regardless of social background, will put aside our differences to seek common ground and come to take an active part in this citizens’ movement, to promote the great transformation of Chinese society together, so that we can soon establish a free, democratic, and constitutional nation, fulfilling the aspirations and dreams that our countrymen have been pursuing tirelessly for more than a hundred years.
Friday, October 8, 2010
Big Brother vs CNN: seria patetico, se nao fosse ridiculo...
Todo mundo, ou quase, sabe que o Comitê Nobel atribui o prêmio 2010 da Paz ao ativista chinês pelos direitos humanos e pela democracia Liu Xiaobo.
Na China, ainda falta avisar alguns milhões, talvez algumas centenas de milhões.
Claro, todo mundo conectado de alguma forma com o mundo já sabe, menos os milhões de chineses que não dispõem de meios de informação independentes do governo.
Este, de modo absolutamente patético, está tentando impedir os chineses comuns de tomar conhecimento dessa notícia. Os meios oficiais fazem silêncio absoluto sobre o assunto.
Mas o Big Brother chinês também atua de modo absolutamente ridículo ao tentar impedir o acesso a essa informação objetiva pelos canais independentes, estrangeiros.
A CNN, por exemplo, acaba de ficar mais de 2 minutos fora do ar, por causa disso mesmo.
Entretanto, os burocratas e os censores do Great China Firewall foram particularmente vagarosos, e distraídos, neste caso: eles cortaram o sinal depois que a "âncora" da CNN já tinha começado a dar a notícia, inclusive de que o governo chinês estava bloqueando a infor.... (tela apagada).
Dois minutos depois, ou quase, a CNN retoma, desta vez anunciando a renúncia do Conselheiro de Segurança Nacional do presidente Obama, general Jones. Enfim a vida continua.
Esses censores precisam ser mais eficientes, não podem dormir no ponto, afinal de contas eles são pagos para isso.
Já foram mais eficientes de outras vezes...
No dia 1 de junho, por exemplo, eu estava assistindo a um especial na CNN sobre os 30 anos do início das emissões, a partir de Atlanta, daquela rede que se pretendia mundial e que era chamada depreciativamente de "Chicken Noodles Network".
A CNN fazia então um retrospecto das grandes reportagens de seus 30 anos desde 1980, focando a partir de seus arquivos os eventos mundiais de maior impacto no período: desastre da Space Shuttle, guerra Irã-Iraque, catástrofes, tragédias, de repente, isso mesmo: tela preta, chuvisco, ausência de sinal, por alguns segundos, 20 ou 30, depois retomada: invasão do Kwait pelo exército de Saddam Hussein, primeira guerra do golfo, etc, etc, etc.
Curioso, escrevi para correspondentes no Brasil e em outros países, para saber o que eu (e alguns milhões de residentes na China conectados na CNN) tinha perdido: justamente o que eu tinha deduzido imediatamente: o massacre da praça Tian An-Men, ironicamente chamada de Paz Celestial. Sim, também teve a queda do muro de Berlim, enfim, essas coisas incômodas do ponto de vista do Big Brother.
Se alguém perguntar, digamos o próprio escritório da CNN em Beijing, o governo chinês dirá, com a cara mais hipócrita do mundo, que foi um "problema técnico", alguma dificuldade qualquer com a transmissão do sinal, mas que a interrupção tinha sido prontamente resolvida por seus "técnicos".
Acredito que esses técnicos tenham de aumentar o tempo da decalagem entre o sinal da CNN e sua retransmissão na China, digamos para mais de um minuto, para dar tempo de cortar o sinal antes que a notícia entre nos aparelhos, como ocorreu agora, quando pelo menos ficamos sabendo que um chinês havia ganho o Premio Nobel da Paz, e que esse chinês estava preso, por ser um "dissiden..." (...).
Ou eles estavam dormindo, ou comendo miojo, pois se atrasaram vergonhosamente.
Não se pode ser um Big Brother eficiente dessa maneira; desse modo, alguém vai ter de escrever uma nova versão de "1984", criando a figura de um Big Brother trapalhão, distraído, lento, atrasado, ineficiente...
Enfim, acho tudo isso ridículo, pois só contribui para a causa que o governo do Big Brother quer evitar, mas acredito que a burrice seja própria das ditaduras...
Finalmente, sou contra essa caracterização de Liu Xiaobo como "dissidente".
Dissidente do que? De nada, obviamente.
Quem é dissidente é o governo chinês: da democracia, dos direitos humanos, dos princípios mais elementares da transparência e do livre acesso à informação...
Paulo Roberto de Almeida
(Shanghai, 8 de Outubro de 2010)
PS: A cena patética, ou ridícula, se repete: assim que os "titulares" da notícia foram novamente anunciados na CNN, as 23hs locais, inclusive de que o governo chinês tinha ficado bravo com a atribuição do Prêmio Nobel da Paz a Liu Xiabo, o sinal voltou a ser cortado. Assim será pelos próximos dias, cada vez que a matéria for abordada pela CNN (e pela BBC e outros canais, que vou continuar tentando).
Enfim, recomendo muito café e estimulantes aos rapazes do Great Firewal: eles vão ter de trabalhar muito nos próximos dias, e sobretudo ficar mais atentos, do contrário vão acabar tomando uma "censura" do censor-mor...
Na China, ainda falta avisar alguns milhões, talvez algumas centenas de milhões.
Claro, todo mundo conectado de alguma forma com o mundo já sabe, menos os milhões de chineses que não dispõem de meios de informação independentes do governo.
Este, de modo absolutamente patético, está tentando impedir os chineses comuns de tomar conhecimento dessa notícia. Os meios oficiais fazem silêncio absoluto sobre o assunto.
Mas o Big Brother chinês também atua de modo absolutamente ridículo ao tentar impedir o acesso a essa informação objetiva pelos canais independentes, estrangeiros.
A CNN, por exemplo, acaba de ficar mais de 2 minutos fora do ar, por causa disso mesmo.
Entretanto, os burocratas e os censores do Great China Firewall foram particularmente vagarosos, e distraídos, neste caso: eles cortaram o sinal depois que a "âncora" da CNN já tinha começado a dar a notícia, inclusive de que o governo chinês estava bloqueando a infor.... (tela apagada).
Dois minutos depois, ou quase, a CNN retoma, desta vez anunciando a renúncia do Conselheiro de Segurança Nacional do presidente Obama, general Jones. Enfim a vida continua.
Esses censores precisam ser mais eficientes, não podem dormir no ponto, afinal de contas eles são pagos para isso.
Já foram mais eficientes de outras vezes...
No dia 1 de junho, por exemplo, eu estava assistindo a um especial na CNN sobre os 30 anos do início das emissões, a partir de Atlanta, daquela rede que se pretendia mundial e que era chamada depreciativamente de "Chicken Noodles Network".
A CNN fazia então um retrospecto das grandes reportagens de seus 30 anos desde 1980, focando a partir de seus arquivos os eventos mundiais de maior impacto no período: desastre da Space Shuttle, guerra Irã-Iraque, catástrofes, tragédias, de repente, isso mesmo: tela preta, chuvisco, ausência de sinal, por alguns segundos, 20 ou 30, depois retomada: invasão do Kwait pelo exército de Saddam Hussein, primeira guerra do golfo, etc, etc, etc.
Curioso, escrevi para correspondentes no Brasil e em outros países, para saber o que eu (e alguns milhões de residentes na China conectados na CNN) tinha perdido: justamente o que eu tinha deduzido imediatamente: o massacre da praça Tian An-Men, ironicamente chamada de Paz Celestial. Sim, também teve a queda do muro de Berlim, enfim, essas coisas incômodas do ponto de vista do Big Brother.
Se alguém perguntar, digamos o próprio escritório da CNN em Beijing, o governo chinês dirá, com a cara mais hipócrita do mundo, que foi um "problema técnico", alguma dificuldade qualquer com a transmissão do sinal, mas que a interrupção tinha sido prontamente resolvida por seus "técnicos".
Acredito que esses técnicos tenham de aumentar o tempo da decalagem entre o sinal da CNN e sua retransmissão na China, digamos para mais de um minuto, para dar tempo de cortar o sinal antes que a notícia entre nos aparelhos, como ocorreu agora, quando pelo menos ficamos sabendo que um chinês havia ganho o Premio Nobel da Paz, e que esse chinês estava preso, por ser um "dissiden..." (...).
Ou eles estavam dormindo, ou comendo miojo, pois se atrasaram vergonhosamente.
Não se pode ser um Big Brother eficiente dessa maneira; desse modo, alguém vai ter de escrever uma nova versão de "1984", criando a figura de um Big Brother trapalhão, distraído, lento, atrasado, ineficiente...
Enfim, acho tudo isso ridículo, pois só contribui para a causa que o governo do Big Brother quer evitar, mas acredito que a burrice seja própria das ditaduras...
Finalmente, sou contra essa caracterização de Liu Xiaobo como "dissidente".
Dissidente do que? De nada, obviamente.
Quem é dissidente é o governo chinês: da democracia, dos direitos humanos, dos princípios mais elementares da transparência e do livre acesso à informação...
Paulo Roberto de Almeida
(Shanghai, 8 de Outubro de 2010)
PS: A cena patética, ou ridícula, se repete: assim que os "titulares" da notícia foram novamente anunciados na CNN, as 23hs locais, inclusive de que o governo chinês tinha ficado bravo com a atribuição do Prêmio Nobel da Paz a Liu Xiabo, o sinal voltou a ser cortado. Assim será pelos próximos dias, cada vez que a matéria for abordada pela CNN (e pela BBC e outros canais, que vou continuar tentando).
Enfim, recomendo muito café e estimulantes aos rapazes do Great Firewal: eles vão ter de trabalhar muito nos próximos dias, e sobretudo ficar mais atentos, do contrário vão acabar tomando uma "censura" do censor-mor...
Thursday, October 7, 2010
Rampant fraud and economic success in China
Rampant Fraud Threat to China’s Brisk Ascent
By ANDREW JACOBS
The New York Times, October 6, 2010
BEIJING — No one disputes Zhang Wuben’s talents as a salesman. Through television shows, DVDs and a best-selling book, he convinced millions of people that raw eggplant and immense quantities of mung beans could cure lupus, diabetes, depression and cancer.
For $450, seriously ill patients could buy a 10-minute consultation and a prescription — except Mr. Zhang, one of the most popular practitioners of traditional Chinese medicine, was booked through 2012.
But when the price of mung beans skyrocketed this spring, Chinese journalists began digging deeper. They learned that contrary to his claims, Mr. Zhang, 47, was not from a long line of doctors (his father was a weaver). Nor did he earn a degree from Beijing Medical University (his only formal education, it turned out, was the brief correspondence course he took after losing his job at a textile mill).
The exposure of Mr. Zhang’s faked credentials provoked a fresh round of hand-wringing over what many scholars and Chinese complain are the dishonest practices that permeate society, including students who cheat on college entrance exams, scholars who promote fake or unoriginal research, and dairy companies that sell poisoned milk to infants.
The most recent string of revelations has been bracing. After a plane crash in August killed 42 people in northeast China, officials discovered that 100 pilots who worked for the airline’s parent company had falsified their flying histories. Then there was the padded résumé of Tang Jun, the millionaire former head of Microsoft China and something of a national hero, who falsely claimed to have received a doctorate from the California Institute of Technology.
Few countries are immune to high-profile frauds. Illegal doping in sports and malfeasance on Wall Street are running scandals in the United States. But in China, fakery in one area in particular — education and scientific research — is pervasive enough that many here worry it could make it harder for the country to climb the next rung on the economic ladder.
A Lack of Integrity
China devotes significant resources to building a world-class education system and pioneering research in competitive industries and sciences, and has had notable successes in network computing, clean energy, and military technology. But a lack of integrity among researchers is hindering China’s potential and harming collaboration between Chinese scholars and their international counterparts, scholars in China and abroad say.
“If we don’t change our ways, we will be excluded from the global academic community,” said Zhang Ming, a professor of international relations at Renmin University in Beijing. “We need to focus on seeking truth, not serving the agenda of some bureaucrat or satisfying the desire for personal profit.”
Pressure on scholars by administrators of state-run universities to earn journal citations — a measure of innovation — has produced a deluge of plagiarized or fabricated research. In December, a British journal that specializes in crystal formations announced that it was withdrawing more than 70 papers by Chinese authors whose research was of questionable originality or rigor.
In an editorial published earlier this year, The Lancet, the British medical journal, warned that faked or plagiarized research posed a threat to President Hu Jintao’s vow to make China a “research superpower” by 2020.
“Clearly, China’s government needs to take this episode as a cue to reinvigorate standards for teaching research ethics and for the conduct of the research itself,” the editorial said. Last month a collection of scientific journals published by Zhejiang University in Hangzhou reignited the firestorm by publicizing results from a 20-month experiment with software that detects plagiarism. The software, called CrossCheck, rejected nearly a third of all submissions on suspicion that the content was pirated from previously published research. In some cases, more than 80 percent of a paper’s content was deemed unoriginal.
The journals’ editor, Zhang Yuehong, emphasized that not all the flawed papers originated in China, although she declined to reveal the breakdown of submissions. “Some were from South Korea, India and Iran,” she said.
The journals, which specialize in medicine, physics, engineering and computer science, were the first in China to use the software. For the moment they are the only ones to do so, Ms. Zhang said.
Plagiarism and Fakery
Her findings are not surprising if one considers the results of a recent government study in which a third of the 6,000 scientists at six of the nation’s top institutions admitted they had engaged in plagiarism or the outright fabrication of research data. In another study of 32,000 scientists last summer by the China Association for Science and Technology, more than 55 percent said they knew someone guilty of academic fraud.
Fang Shimin, a muckraking writer who has become a well-known advocate for academic integrity, said the problem started with the state-run university system, where politically appointed bureaucrats have little expertise in the fields they oversee. Because competition for grants, housing perks and career advancement is so intense, officials base their decisions on the number of papers published.
“Even fake papers count because nobody actually reads them,” said Mr. Fang, who is more widely known by his pen name, Fang Zhouzi, and whose Web site, New Threads, has exposed more than 900 instances of fakery, some involving university presidents and nationally lionized researchers.
When plagiarism is exposed, colleagues and school leaders often close ranks around the accused. Mr. Fang said this was partly because preserving relationships trumped protecting the reputation of the institution. But the other reason, he said, is more sobering: Few academics are clean enough to point a finger at others. One result is that plagiarizers often go unpunished, which only encourages more of it, said Zeng Guoping, director of the Institute of Science Technology and Society at Tsinghua University in Beijing, which helped run the survey of 6,000 academics.
He cited the case of Chen Jin, a computer scientist who was once celebrated for having invented a sophisticated microprocessor but who, it turned out, had taken a chip made by Motorola, scratched out its name, and claimed it as his own. After Mr. Chen was showered with government largess and accolades, the exposure in 2006 was an embarrassment for the scientific establishment that backed him.
But even though Mr. Chen lost his university post, he was never prosecuted. “When people see the accused still driving their flashy cars, it sends the wrong message,” Mr. Zeng said.
The problem is not confined to the realm of science. In fact many educators say the culture of cheating takes root in high school, where the competition for slots in the country’s best colleges is unrelenting and high marks on standardized tests are the most important criterion for admission. Ghost-written essays and test questions can be bought. So, too, can a “hired gun” test taker who will assume the student’s identity for the grueling two-day college entrance exam.
Then there are the gadgets — wristwatches and pens embedded with tiny cameras — that transmit signals to collaborators on the outside who then relay back the correct answers. Even if such products are illegal, students spent $150 million last year on Internet essays and high-tech subterfuge, a fivefold increase over 2007, according to a Wuhan University study, which identified 800 Web sites offering such illicit services.
Academic deceit is not limited to high school students. In July, Centenary College, a New Jersey institution with satellite branches in China and Taiwan, shuttered its business schools in Shanghai, Beijing and Taipei after finding rampant cheating among students. Although school administrators declined to discuss the nature of the misconduct, it was serious enough to withhold degrees from each of the programs’ 400 students. Given a chance to receive their M.B.A.’s by taking another exam, all but two declined, school officials said.
Nonchalant Cheating
Ask any Chinese student about academic skullduggery and the response is startlingly nonchalant. Lu, an engineering student who last spring graduated from Tsinghua University, considered a plum of the country’s college system, said it was common for students to swap test answers or plagiarize essays from one another. “Perhaps it’s a cultural difference but there is nothing bad or embarrassing about it,” said Mr. Lu, who started this semester on a master’s degree at Stanford University and asked that his full name not be used for fear his candor might affect his future. “It’s not that students can’t do the work. They just see it as a way of saving time.”
The Chinese government has vowed to address the problem. Editorials in the state-run press frequently condemn plagiarism and last month, Liu Yandong, a powerful Politburo member who oversees Chinese publications, vowed to close some of the 5,000 academic journals whose sole existence, many scholars say, is to provide an outlet for doctoral students and professors eager to inflate their publishing credentials.
Fang Shimin and another crusading journalist, Fang Xuanchang, have heard the vows and threats before. In 2004 and again in 2006, the Ministry of Education announced antifraud campaigns but the two bodies they established to tackle the problem have yet to mete out any punishments.
In recent years, both journalists have taken on Xiao Chuanguo, a urologist who invented a surgical procedure aimed at restoring bladder function in children with spina bifida, a congenital deformation of the spinal column that can lead to incontinence, and when untreated, kidney failure and death.
In a series of investigative articles and blog postings, the two men uncovered discrepancies in Dr. Xiao’s Web site, including claims that he had published 26 articles in English-language journals (they could only find four) and that he had won an achievement award from the American Urological Association (the award was for an essay he wrote).
But even more troubling, they said, were assertions that his surgery had an 85 percent success rate. Of more than 100 patients interviewed, they said none reported having been cured of incontinence, with nearly 40 percent saying their health had worsened after the procedure, which involved rerouting a leg nerve to the bladder. (In early trials, doctors in the United States who have done the surgery have found the results to be far more promising.)
Wherever the truth may have been, Dr. Xiao was incensed. He filed a string of libel suits against Fang Shimin and told anyone who would listen that revenge would be his.
This summer both men were brutally attacked on the street in Beijing — Fang Xuanchang by thugs with an iron bar and Fang Shimin by two men wielding pepper spray and a hammer.
When the police arrested Dr. Xiao on Sept. 21, he quickly confessed to hiring the men to carry out the attack, according to the police report. His reason, he said, was vengeance for the revelations he blames for blocking his appointment to the prestigious Chinese Academy of Sciences.
Despite his confession, Dr. Xiao’s employer, Huazhong University of Science and Technology, appeared unwilling to take any action against him. In the statement they released, administrators said they were shocked by news of his arrest but said they would await the outcome of judicial procedures before severing their ties to him.
Li Bibo and Zhang Jing contributed research.
By ANDREW JACOBS
The New York Times, October 6, 2010
BEIJING — No one disputes Zhang Wuben’s talents as a salesman. Through television shows, DVDs and a best-selling book, he convinced millions of people that raw eggplant and immense quantities of mung beans could cure lupus, diabetes, depression and cancer.
For $450, seriously ill patients could buy a 10-minute consultation and a prescription — except Mr. Zhang, one of the most popular practitioners of traditional Chinese medicine, was booked through 2012.
But when the price of mung beans skyrocketed this spring, Chinese journalists began digging deeper. They learned that contrary to his claims, Mr. Zhang, 47, was not from a long line of doctors (his father was a weaver). Nor did he earn a degree from Beijing Medical University (his only formal education, it turned out, was the brief correspondence course he took after losing his job at a textile mill).
The exposure of Mr. Zhang’s faked credentials provoked a fresh round of hand-wringing over what many scholars and Chinese complain are the dishonest practices that permeate society, including students who cheat on college entrance exams, scholars who promote fake or unoriginal research, and dairy companies that sell poisoned milk to infants.
The most recent string of revelations has been bracing. After a plane crash in August killed 42 people in northeast China, officials discovered that 100 pilots who worked for the airline’s parent company had falsified their flying histories. Then there was the padded résumé of Tang Jun, the millionaire former head of Microsoft China and something of a national hero, who falsely claimed to have received a doctorate from the California Institute of Technology.
Few countries are immune to high-profile frauds. Illegal doping in sports and malfeasance on Wall Street are running scandals in the United States. But in China, fakery in one area in particular — education and scientific research — is pervasive enough that many here worry it could make it harder for the country to climb the next rung on the economic ladder.
A Lack of Integrity
China devotes significant resources to building a world-class education system and pioneering research in competitive industries and sciences, and has had notable successes in network computing, clean energy, and military technology. But a lack of integrity among researchers is hindering China’s potential and harming collaboration between Chinese scholars and their international counterparts, scholars in China and abroad say.
“If we don’t change our ways, we will be excluded from the global academic community,” said Zhang Ming, a professor of international relations at Renmin University in Beijing. “We need to focus on seeking truth, not serving the agenda of some bureaucrat or satisfying the desire for personal profit.”
Pressure on scholars by administrators of state-run universities to earn journal citations — a measure of innovation — has produced a deluge of plagiarized or fabricated research. In December, a British journal that specializes in crystal formations announced that it was withdrawing more than 70 papers by Chinese authors whose research was of questionable originality or rigor.
In an editorial published earlier this year, The Lancet, the British medical journal, warned that faked or plagiarized research posed a threat to President Hu Jintao’s vow to make China a “research superpower” by 2020.
“Clearly, China’s government needs to take this episode as a cue to reinvigorate standards for teaching research ethics and for the conduct of the research itself,” the editorial said. Last month a collection of scientific journals published by Zhejiang University in Hangzhou reignited the firestorm by publicizing results from a 20-month experiment with software that detects plagiarism. The software, called CrossCheck, rejected nearly a third of all submissions on suspicion that the content was pirated from previously published research. In some cases, more than 80 percent of a paper’s content was deemed unoriginal.
The journals’ editor, Zhang Yuehong, emphasized that not all the flawed papers originated in China, although she declined to reveal the breakdown of submissions. “Some were from South Korea, India and Iran,” she said.
The journals, which specialize in medicine, physics, engineering and computer science, were the first in China to use the software. For the moment they are the only ones to do so, Ms. Zhang said.
Plagiarism and Fakery
Her findings are not surprising if one considers the results of a recent government study in which a third of the 6,000 scientists at six of the nation’s top institutions admitted they had engaged in plagiarism or the outright fabrication of research data. In another study of 32,000 scientists last summer by the China Association for Science and Technology, more than 55 percent said they knew someone guilty of academic fraud.
Fang Shimin, a muckraking writer who has become a well-known advocate for academic integrity, said the problem started with the state-run university system, where politically appointed bureaucrats have little expertise in the fields they oversee. Because competition for grants, housing perks and career advancement is so intense, officials base their decisions on the number of papers published.
“Even fake papers count because nobody actually reads them,” said Mr. Fang, who is more widely known by his pen name, Fang Zhouzi, and whose Web site, New Threads, has exposed more than 900 instances of fakery, some involving university presidents and nationally lionized researchers.
When plagiarism is exposed, colleagues and school leaders often close ranks around the accused. Mr. Fang said this was partly because preserving relationships trumped protecting the reputation of the institution. But the other reason, he said, is more sobering: Few academics are clean enough to point a finger at others. One result is that plagiarizers often go unpunished, which only encourages more of it, said Zeng Guoping, director of the Institute of Science Technology and Society at Tsinghua University in Beijing, which helped run the survey of 6,000 academics.
He cited the case of Chen Jin, a computer scientist who was once celebrated for having invented a sophisticated microprocessor but who, it turned out, had taken a chip made by Motorola, scratched out its name, and claimed it as his own. After Mr. Chen was showered with government largess and accolades, the exposure in 2006 was an embarrassment for the scientific establishment that backed him.
But even though Mr. Chen lost his university post, he was never prosecuted. “When people see the accused still driving their flashy cars, it sends the wrong message,” Mr. Zeng said.
The problem is not confined to the realm of science. In fact many educators say the culture of cheating takes root in high school, where the competition for slots in the country’s best colleges is unrelenting and high marks on standardized tests are the most important criterion for admission. Ghost-written essays and test questions can be bought. So, too, can a “hired gun” test taker who will assume the student’s identity for the grueling two-day college entrance exam.
Then there are the gadgets — wristwatches and pens embedded with tiny cameras — that transmit signals to collaborators on the outside who then relay back the correct answers. Even if such products are illegal, students spent $150 million last year on Internet essays and high-tech subterfuge, a fivefold increase over 2007, according to a Wuhan University study, which identified 800 Web sites offering such illicit services.
Academic deceit is not limited to high school students. In July, Centenary College, a New Jersey institution with satellite branches in China and Taiwan, shuttered its business schools in Shanghai, Beijing and Taipei after finding rampant cheating among students. Although school administrators declined to discuss the nature of the misconduct, it was serious enough to withhold degrees from each of the programs’ 400 students. Given a chance to receive their M.B.A.’s by taking another exam, all but two declined, school officials said.
Nonchalant Cheating
Ask any Chinese student about academic skullduggery and the response is startlingly nonchalant. Lu, an engineering student who last spring graduated from Tsinghua University, considered a plum of the country’s college system, said it was common for students to swap test answers or plagiarize essays from one another. “Perhaps it’s a cultural difference but there is nothing bad or embarrassing about it,” said Mr. Lu, who started this semester on a master’s degree at Stanford University and asked that his full name not be used for fear his candor might affect his future. “It’s not that students can’t do the work. They just see it as a way of saving time.”
The Chinese government has vowed to address the problem. Editorials in the state-run press frequently condemn plagiarism and last month, Liu Yandong, a powerful Politburo member who oversees Chinese publications, vowed to close some of the 5,000 academic journals whose sole existence, many scholars say, is to provide an outlet for doctoral students and professors eager to inflate their publishing credentials.
Fang Shimin and another crusading journalist, Fang Xuanchang, have heard the vows and threats before. In 2004 and again in 2006, the Ministry of Education announced antifraud campaigns but the two bodies they established to tackle the problem have yet to mete out any punishments.
In recent years, both journalists have taken on Xiao Chuanguo, a urologist who invented a surgical procedure aimed at restoring bladder function in children with spina bifida, a congenital deformation of the spinal column that can lead to incontinence, and when untreated, kidney failure and death.
In a series of investigative articles and blog postings, the two men uncovered discrepancies in Dr. Xiao’s Web site, including claims that he had published 26 articles in English-language journals (they could only find four) and that he had won an achievement award from the American Urological Association (the award was for an essay he wrote).
But even more troubling, they said, were assertions that his surgery had an 85 percent success rate. Of more than 100 patients interviewed, they said none reported having been cured of incontinence, with nearly 40 percent saying their health had worsened after the procedure, which involved rerouting a leg nerve to the bladder. (In early trials, doctors in the United States who have done the surgery have found the results to be far more promising.)
Wherever the truth may have been, Dr. Xiao was incensed. He filed a string of libel suits against Fang Shimin and told anyone who would listen that revenge would be his.
This summer both men were brutally attacked on the street in Beijing — Fang Xuanchang by thugs with an iron bar and Fang Shimin by two men wielding pepper spray and a hammer.
When the police arrested Dr. Xiao on Sept. 21, he quickly confessed to hiring the men to carry out the attack, according to the police report. His reason, he said, was vengeance for the revelations he blames for blocking his appointment to the prestigious Chinese Academy of Sciences.
Despite his confession, Dr. Xiao’s employer, Huazhong University of Science and Technology, appeared unwilling to take any action against him. In the statement they released, administrators said they were shocked by news of his arrest but said they would await the outcome of judicial procedures before severing their ties to him.
Li Bibo and Zhang Jing contributed research.
Dissidents against Chinese favorite for Nobel peace prize
Unusual Opposition to a Favorite for Nobel
By ANDREW JACOBS and JONATHAN ANSFIELD
The New York Times, October 6, 2010
BEIJING — With just a day until the Nobel Peace Prize is awarded, the usual whirl of speculation over the winner is in full force, with many human rights advocates contending that an imprisoned Chinese dissident, Liu Xiaobo, has emerged as the favorite.
If selected, Mr. Liu, a former literature professor who has spent the last 20 years cycling in and out of Chinese jails for championing democratic reform, would be the first Chinese citizen to win the prize. The prospect has clearly alarmed Beijing, so much so that the Nobel Institute’s director said last week that a senior Chinese official had warned him such a decision would “pull the wrong strings in relations between Norway and China.”
But the idea of selecting Mr. Liu has also stirred objections from a somewhat more surprising contingent: a group of fellow activists.
In recent days, a group of 14 overseas Chinese dissidents, many of them hard-boiled exiles dedicated to overthrowing the Communist Party, have been calling on the Nobel committee to deny the prize to Mr. Liu, whom they say would make an “unsuitable” laureate.
In a letter, the signatories accused Mr. Liu, below, of maligning fellow activists, abandoning persecuted members of the Falun Gong spiritual movement and going soft on China’s leaders.
“His open praise in the last 20 years for the Chinese Communist Party, which has never stopped trampling on human rights, has been extremely misleading and influential,” they wrote.
Among the signers were Zhang Guoting, a writer now living in Denmark who spent 22 years in Chinese prison, Bian Hexiang, who describes himself as a New York-based member of the Central Committee of the Chinese Social Democratic Party, and Lu Decheng, who was jailed for throwing paint-filled eggs at the Mao portrait on Tiananmen Square and now lives in Canada.
The letter and calls from other detractors have infuriated many rights advocates, inside and outside of China, who say the attack distorts Mr. Liu’s record as a longtime proponent of peaceful change.
Supporters, among them Vaclav Havel, the former Czech president and dissident, say that Mr. Liu has been a pragmatic advocate since 1989, when he helped persuade the students occupying Tiananmen Square to leave just as army tanks were preparing to move in.
More recently, Mr. Liu was given an 11-year prison sentence last Christmas for his role in shaping a manifesto, known as Charter ’08, that called for popular elections and an end to the Communist Party’s unchallenged grip on power.
“Liu Xiaobo has always worked to advance the peaceful democratic transformation of Chinese society, and to avoid the violence, rebellion and bloodshed of the past,” said Zhang Zuhua, a former high-ranking official in the Communist Party Youth League and a chief force behind Charter ’08.
Cui Weiping, a social critic and professor at the Beijing Film Academy, called some of Mr. Liu’s more radical opponents “highly irresponsible.”
“Just the fact that he was sentenced to 11 years in prison is enough to answer those who question how critical he is of the government,” said Ms. Cui, one of 10,000 Chinese who signed Charter ’08 before government censors effectively pulled it from the Internet.
Whatever the merits of the anti-Liu Xiaobo camp, their very public sentiments provide a window into the state of the overseas Chinese dissidents, a fractured group beset by squabbling and competing claims of anti-authoritarian righteousness.
Many of its prominent members fled to the United States and Europe after the failed democracy campaign of 1989 and have tried, with limited success, to build a broad-based movement against the Chinese government.
Even if they have differences over strategy, many intellectuals and activists inside China describe Mr. Liu as a dynamic thinker who appealed both to members of the party and many of its die-hard opponents.
Bao Pu, a Chinese book publisher whose father spent seven years in prison for supporting negotiations with protesters as a top associate to the Communist Party chief, Zhao Ziyang, said the lack of unity among dissidents living outside China was dispiriting.
“All exile movements are fractured, but the community has reduced themselves into oblivion,” said Mr. Bao, who lives in Hong Kong. “We have a long way to go.”
Mr. Liu’s critics are unbowed by suggestions that their campaign against him may play into the Chinese government’s efforts to discredit his qualifications as a Nobel laureate.
Yi Xu, a linguistics professor in London who translated the anti-Liu letter into English, said he had no reservations about the effort to deny Mr. Liu the award.
“I don’t believe the Nobel Prize is so important that once we have one, China will be entirely changed,” Mr. Yi said. “Look, the Dalai Lama won and China didn’t change.”
By ANDREW JACOBS and JONATHAN ANSFIELD
The New York Times, October 6, 2010
BEIJING — With just a day until the Nobel Peace Prize is awarded, the usual whirl of speculation over the winner is in full force, with many human rights advocates contending that an imprisoned Chinese dissident, Liu Xiaobo, has emerged as the favorite.
If selected, Mr. Liu, a former literature professor who has spent the last 20 years cycling in and out of Chinese jails for championing democratic reform, would be the first Chinese citizen to win the prize. The prospect has clearly alarmed Beijing, so much so that the Nobel Institute’s director said last week that a senior Chinese official had warned him such a decision would “pull the wrong strings in relations between Norway and China.”
But the idea of selecting Mr. Liu has also stirred objections from a somewhat more surprising contingent: a group of fellow activists.
In recent days, a group of 14 overseas Chinese dissidents, many of them hard-boiled exiles dedicated to overthrowing the Communist Party, have been calling on the Nobel committee to deny the prize to Mr. Liu, whom they say would make an “unsuitable” laureate.
In a letter, the signatories accused Mr. Liu, below, of maligning fellow activists, abandoning persecuted members of the Falun Gong spiritual movement and going soft on China’s leaders.
“His open praise in the last 20 years for the Chinese Communist Party, which has never stopped trampling on human rights, has been extremely misleading and influential,” they wrote.
Among the signers were Zhang Guoting, a writer now living in Denmark who spent 22 years in Chinese prison, Bian Hexiang, who describes himself as a New York-based member of the Central Committee of the Chinese Social Democratic Party, and Lu Decheng, who was jailed for throwing paint-filled eggs at the Mao portrait on Tiananmen Square and now lives in Canada.
The letter and calls from other detractors have infuriated many rights advocates, inside and outside of China, who say the attack distorts Mr. Liu’s record as a longtime proponent of peaceful change.
Supporters, among them Vaclav Havel, the former Czech president and dissident, say that Mr. Liu has been a pragmatic advocate since 1989, when he helped persuade the students occupying Tiananmen Square to leave just as army tanks were preparing to move in.
More recently, Mr. Liu was given an 11-year prison sentence last Christmas for his role in shaping a manifesto, known as Charter ’08, that called for popular elections and an end to the Communist Party’s unchallenged grip on power.
“Liu Xiaobo has always worked to advance the peaceful democratic transformation of Chinese society, and to avoid the violence, rebellion and bloodshed of the past,” said Zhang Zuhua, a former high-ranking official in the Communist Party Youth League and a chief force behind Charter ’08.
Cui Weiping, a social critic and professor at the Beijing Film Academy, called some of Mr. Liu’s more radical opponents “highly irresponsible.”
“Just the fact that he was sentenced to 11 years in prison is enough to answer those who question how critical he is of the government,” said Ms. Cui, one of 10,000 Chinese who signed Charter ’08 before government censors effectively pulled it from the Internet.
Whatever the merits of the anti-Liu Xiaobo camp, their very public sentiments provide a window into the state of the overseas Chinese dissidents, a fractured group beset by squabbling and competing claims of anti-authoritarian righteousness.
Many of its prominent members fled to the United States and Europe after the failed democracy campaign of 1989 and have tried, with limited success, to build a broad-based movement against the Chinese government.
Even if they have differences over strategy, many intellectuals and activists inside China describe Mr. Liu as a dynamic thinker who appealed both to members of the party and many of its die-hard opponents.
Bao Pu, a Chinese book publisher whose father spent seven years in prison for supporting negotiations with protesters as a top associate to the Communist Party chief, Zhao Ziyang, said the lack of unity among dissidents living outside China was dispiriting.
“All exile movements are fractured, but the community has reduced themselves into oblivion,” said Mr. Bao, who lives in Hong Kong. “We have a long way to go.”
Mr. Liu’s critics are unbowed by suggestions that their campaign against him may play into the Chinese government’s efforts to discredit his qualifications as a Nobel laureate.
Yi Xu, a linguistics professor in London who translated the anti-Liu letter into English, said he had no reservations about the effort to deny Mr. Liu the award.
“I don’t believe the Nobel Prize is so important that once we have one, China will be entirely changed,” Mr. Yi said. “Look, the Dalai Lama won and China didn’t change.”
Saturday, October 2, 2010
Innovation in China
China's Innovation Wall
Beijing's Push for Homegrown Technology
Adam Segal
Foreign Affairs, September 28, 2010
In a bid to end its dependence on foreign intellectual property and become a global power in science and technology, China is attempting to foster indigenous innovation. Are the U.S. government and business community right to be worried about threats to free trade and intellectual property rights?
If you want to get to the bottom of indigenous innovation, the Chinese policy so deeply aggravating Western businesses and governments, look at the bottom of your DVD player. Most likely, the machine was made in China. For Beijing’s leaders, that is part of the problem: for every Chinese-made DVD player sold, the Chinese manufacturer must pay a large royalty fee to the European or Japanese companies that patented various components of the unit, such as its optical reader. These foreign firms reap substantial profits, but the Chinese take is extremely small -- and is shrinking further as energy, labor, and commodity prices rise. Policymakers in Beijing, looking to strengthen China’s economy, are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break China’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”
The Chinese phrase for indigenous innovation, zizhu chuangxin, was introduced in a 2006 state-issued report, “Guidelines on National Medium- and Long-Term Program for Science and Technology Development.” The paper contained a curious mix of top-down, state-directed policies alongside bottom-up efforts meant to foster technological innovation. The top-down measures echo China’s old state planning system. They include 20 state-driven megaprojects, including initiatives to develop nanotechnology, biotechnology and new drugs, high-end generic microchips, and aircraft. The bottom-up efforts seem to follow a Silicon Valley model and are centered on university-industry collaboration, small start-ups, and venture capital.
If these guidelines leave the government’s approach to technological innovation somewhat ambiguous, they are clear on ultimate objectives: China will become “an innovative nation in the next 15 years and a world power in science and technology fields by the middle of the twenty-first century.” By 2020, the report states, China should reduce its “degree of dependence on technology from other countries to 30 percent or less” (down from 50 percent today, as measured by the spending on technology imports as a share of the sum of domestic R&D funding plus technology imports). Noting that reliance on other countries--especially the United States and Japan -- is a threat to Chinese national and economic security, the paper calls for China not to purchase any “core technologies in key fields that affect the lifeblood of the national economy and national security,” such as next-generation Internet technologies; high-end, numerically controlled machine tools; and high-resolution earth observation systems.
New Chinese policies prompted by the report have raised the hackles of foreign governments and technology enterprises. In 2009, for example, China’s government, a massive consumer of high-tech products, announced that in order to be a recognized vendor in the government’s procurement catalog, a company would have to demonstrate that its products included indigenous innovation and were free of foreign intellectual property. Yet since R&D is a global, collaborative process, no individual high-tech product is completely independent of technology from outside of China. In April 2010, Beijing ordered those high-tech companies seeking to be listed on its procurement catalog to turn over the encryption codes to their smart cards, Internet routers, and other technology products.
Chinese policymakers are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break Beijing’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”
In addition, China’s failure to protect intellectual property rights (IPR) in the Chinese market -- leading to massive theft and piracy -- is constantly in the background. As Senior Director for Greater China at the U.S. Chamber of Commerce Jeremie Waterman testified before the International Trade Commission in June, a weak legal environment allows Beijing to “intervene in the market for IP [intellectual property] and help its own companies ‘re-innovate’ competing IPR as a substitute to foreign technologies.”
The U.S. government has raised the issue in public. U.S. Treasury Secretary Timothy Geithner, Deputy Secretary of State James Steinberg, and Trade Representative Ron Kirk have openly denounced indigenous innovation and put it on the agenda for discussion at the annual Strategic and Economic Dialogue, the most important meeting between the two countries, and the U.S.-China Joint Commission on Commerce and Trade. U.S. businesses, which typically embrace quiet diplomacy with Beijing, have also publicly voiced their concerns. In a speech in Italy in July, General Electric CEO Jeffrey Immelt said, “I really worry about China. I am not sure that in the end they want any of us to win, or any of us to be successful.” And in a report for the U.S. Chamber of Commerce, business consultant James McGregor wrote that the guidelines are a “blueprint for technology theft on a scale the world has never seen before.”
In the face of this uproar, China has made some concessions. In May, Cao Jianlin, a vice minister at the Ministry of Science and Technology, noted that the 2009 procurement policy was an early draft and that future revisions would address concerns over IPR protection. Beijing has also announced that it intends to join the World Trade Organization’s Agreement on Government Procurement, a treaty that ensures nondiscriminatory access to government purchases for foreign companies, “as soon as possible.”
The problem for the United States is that these concessions are more tactical than real shifts in underlying policy. China’s leadership is broadly committed to the goals of reducing dependence on foreign technology, producing Chinese intellectual property, and creating Chinese technology champions. Even if China reverses certain policies under U.S. pressure, it will remain dedicated to those goals. U.S. policy is likely to become a game of Whac-a-Mole, beating down one Chinese initiative on indigenous innovation only to see another pop up.
That parts of China’s bureaucracy still advocate raising the country’s technological capabilities through trade-friendly policies, such as providing greater transparency and enforcing IPR-protection regulations, provide some glimmer of hope. They have not forgotten that China’s gradual opening to the world economic system brought with it billions of dollars in foreign investment, access to customers and distribution networks worldwide, and technology transfers from the West and Japan. In addition, many Chinese firms are looking to expand abroad, realizing that their global competitiveness will be severely curtailed if the Chinese market is isolated as a result of indigenous innovation initiatives. The challenge for the United States will be to identify and support these kinds of actors as they push against mercantilist policies.
Disputes over indigenous innovation may eventually cast a pall over the broader Sino-U.S. relationship. It is not hard to imagine battles over intellectual property and market share derailing collaborative efforts to address climate change, energy security, or global public health. If both sides fail to develop some common understandings of technology development and trade, the next decade is bound to be one of conflict and competition between them.
ADAM SEGAL is Ira A. Lipman Senior Fellow in Counterterrorism and National Security Studies at the Council on Foreign Relations and the author of the forthcoming book Advantage: How American Innovation Can Overcome the Asian Challenge.
Beijing's Push for Homegrown Technology
Adam Segal
Foreign Affairs, September 28, 2010
In a bid to end its dependence on foreign intellectual property and become a global power in science and technology, China is attempting to foster indigenous innovation. Are the U.S. government and business community right to be worried about threats to free trade and intellectual property rights?
If you want to get to the bottom of indigenous innovation, the Chinese policy so deeply aggravating Western businesses and governments, look at the bottom of your DVD player. Most likely, the machine was made in China. For Beijing’s leaders, that is part of the problem: for every Chinese-made DVD player sold, the Chinese manufacturer must pay a large royalty fee to the European or Japanese companies that patented various components of the unit, such as its optical reader. These foreign firms reap substantial profits, but the Chinese take is extremely small -- and is shrinking further as energy, labor, and commodity prices rise. Policymakers in Beijing, looking to strengthen China’s economy, are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break China’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”
The Chinese phrase for indigenous innovation, zizhu chuangxin, was introduced in a 2006 state-issued report, “Guidelines on National Medium- and Long-Term Program for Science and Technology Development.” The paper contained a curious mix of top-down, state-directed policies alongside bottom-up efforts meant to foster technological innovation. The top-down measures echo China’s old state planning system. They include 20 state-driven megaprojects, including initiatives to develop nanotechnology, biotechnology and new drugs, high-end generic microchips, and aircraft. The bottom-up efforts seem to follow a Silicon Valley model and are centered on university-industry collaboration, small start-ups, and venture capital.
If these guidelines leave the government’s approach to technological innovation somewhat ambiguous, they are clear on ultimate objectives: China will become “an innovative nation in the next 15 years and a world power in science and technology fields by the middle of the twenty-first century.” By 2020, the report states, China should reduce its “degree of dependence on technology from other countries to 30 percent or less” (down from 50 percent today, as measured by the spending on technology imports as a share of the sum of domestic R&D funding plus technology imports). Noting that reliance on other countries--especially the United States and Japan -- is a threat to Chinese national and economic security, the paper calls for China not to purchase any “core technologies in key fields that affect the lifeblood of the national economy and national security,” such as next-generation Internet technologies; high-end, numerically controlled machine tools; and high-resolution earth observation systems.
New Chinese policies prompted by the report have raised the hackles of foreign governments and technology enterprises. In 2009, for example, China’s government, a massive consumer of high-tech products, announced that in order to be a recognized vendor in the government’s procurement catalog, a company would have to demonstrate that its products included indigenous innovation and were free of foreign intellectual property. Yet since R&D is a global, collaborative process, no individual high-tech product is completely independent of technology from outside of China. In April 2010, Beijing ordered those high-tech companies seeking to be listed on its procurement catalog to turn over the encryption codes to their smart cards, Internet routers, and other technology products.
Chinese policymakers are no longer satisfied with the country’s position as the world’s manufacturer. Their solution is to break Beijing’s dependence on foreign technology, moving from a model of “made in China” to one of “innovated in China.”
In addition, China’s failure to protect intellectual property rights (IPR) in the Chinese market -- leading to massive theft and piracy -- is constantly in the background. As Senior Director for Greater China at the U.S. Chamber of Commerce Jeremie Waterman testified before the International Trade Commission in June, a weak legal environment allows Beijing to “intervene in the market for IP [intellectual property] and help its own companies ‘re-innovate’ competing IPR as a substitute to foreign technologies.”
The U.S. government has raised the issue in public. U.S. Treasury Secretary Timothy Geithner, Deputy Secretary of State James Steinberg, and Trade Representative Ron Kirk have openly denounced indigenous innovation and put it on the agenda for discussion at the annual Strategic and Economic Dialogue, the most important meeting between the two countries, and the U.S.-China Joint Commission on Commerce and Trade. U.S. businesses, which typically embrace quiet diplomacy with Beijing, have also publicly voiced their concerns. In a speech in Italy in July, General Electric CEO Jeffrey Immelt said, “I really worry about China. I am not sure that in the end they want any of us to win, or any of us to be successful.” And in a report for the U.S. Chamber of Commerce, business consultant James McGregor wrote that the guidelines are a “blueprint for technology theft on a scale the world has never seen before.”
In the face of this uproar, China has made some concessions. In May, Cao Jianlin, a vice minister at the Ministry of Science and Technology, noted that the 2009 procurement policy was an early draft and that future revisions would address concerns over IPR protection. Beijing has also announced that it intends to join the World Trade Organization’s Agreement on Government Procurement, a treaty that ensures nondiscriminatory access to government purchases for foreign companies, “as soon as possible.”
The problem for the United States is that these concessions are more tactical than real shifts in underlying policy. China’s leadership is broadly committed to the goals of reducing dependence on foreign technology, producing Chinese intellectual property, and creating Chinese technology champions. Even if China reverses certain policies under U.S. pressure, it will remain dedicated to those goals. U.S. policy is likely to become a game of Whac-a-Mole, beating down one Chinese initiative on indigenous innovation only to see another pop up.
That parts of China’s bureaucracy still advocate raising the country’s technological capabilities through trade-friendly policies, such as providing greater transparency and enforcing IPR-protection regulations, provide some glimmer of hope. They have not forgotten that China’s gradual opening to the world economic system brought with it billions of dollars in foreign investment, access to customers and distribution networks worldwide, and technology transfers from the West and Japan. In addition, many Chinese firms are looking to expand abroad, realizing that their global competitiveness will be severely curtailed if the Chinese market is isolated as a result of indigenous innovation initiatives. The challenge for the United States will be to identify and support these kinds of actors as they push against mercantilist policies.
Disputes over indigenous innovation may eventually cast a pall over the broader Sino-U.S. relationship. It is not hard to imagine battles over intellectual property and market share derailing collaborative efforts to address climate change, energy security, or global public health. If both sides fail to develop some common understandings of technology development and trade, the next decade is bound to be one of conflict and competition between them.
ADAM SEGAL is Ira A. Lipman Senior Fellow in Counterterrorism and National Security Studies at the Council on Foreign Relations and the author of the forthcoming book Advantage: How American Innovation Can Overcome the Asian Challenge.
Saturday, September 25, 2010
Dreaming in Chinese - Book
Character Building
By LESLEY DOWNER
The New York Times, Sunday Book Review, September 26, 2010, p. BR16
DREAMING IN CHINESE: Mandarin Lessons in Life, Love, and Language
By Deborah Fallows
Illustrated. 205 pp. Walker & Company. $22
When I used to ask my mother about her family village in China, she always said it was three hours from Canton by bus. A hundred years ago, when my great-grandfather left China for good, that couldn’t have been far, but it was certainly no help in locating it. So I was pleased — though still mystified — to read in Deborah Fallows’s charming and witty little book that in China, “if you ask someone where their hometown is, they’ll say it is seven hours by bus. Or four hours by train. They won’t tell you where it is.”
Fallows spent three years living in China with her husband, the journalist James Fallows. Since she’s a linguist by training, her method of getting under the skin of the country was to immerse herself in its language. In “Dreaming in Chinese,” she uses key phrases and concepts to unlock aspects of the society that interested or surprised her, casting light along the way on many idiosyncrasies of the Chinese view of the world.
Fallows doesn’t arrive with many preconceptions. Instead, she takes the Chinese as they see and present themselves. And she soon discovers that what the Chinese think is important isn’t always what we think is important. One thing they’re interested in is ensuring good luck. This explains why the Beijing Olympics began on Aug. 8, 2008, at 8:08 p.m. Eight, ba, rhymes with fa, “as in fa cai, which means ‘to become wealthy,’ ” making it a very auspicious number. And even though Aug. 8 was well into the rainy season, it didn’t rain.
Auspiciousness also enters into the choosing of names, an art in itself. Most Chinese have three names: surname (there are just 100 common surnames in a population of 1.3 billion people), middle name (to identify your generation and connect you with your cousins) and personal name. Which yields the realization that — in a country where most people are allowed only one child — future generations will have no cousins.
On matters that Westerners make a fuss about, like human rights, Fallows presents the common Chinese viewpoint. At a conference on censorship, technology and commerce, she recalls that “one exasperated Chinese participant finally blurted out that people, the laobaixing, aren’t as preoccupied as Westerners about free speech and an uncensored Internet: what laobaixing really want, he said, is . . . a flush toilet, a refrigerator and a color TV.” For ordinary Chinese, material concerns come first.
Fallows has an endearing affection for these laobaixing, these common folk. Unlike conventional journalists, she’s not very interested in press conferences, in listening to what the politicians say. Little by little, she finds herself becoming more like the laobaixing: learning to deal with the plethora of rules as the Chinese do — by finding ways around them.
“Dreaming in Chinese” is chatty and colloquial, with helpful photographs and drawings, as well as a pronunciation guide. The eager student will learn a fair bit about the history of the language and how its array of characters and tones were systematized, all the while gathering insights into the country’s customs and culture. Rather than draw sweeping conclusions, Fallows sticks to her own experiences and observations, which makes her book all the more valuable. China hands will have many moments of recognition. For others, “Dreaming in Chinese” will be a fascinating introduction to a foreign culture.
Lesley Downer is the author of “On the Narrow Road to the Deep North” and other nonfiction books on Asia. Her most recent book is a novel, “The Courtesan and the Samurai.”
By LESLEY DOWNER
The New York Times, Sunday Book Review, September 26, 2010, p. BR16
DREAMING IN CHINESE: Mandarin Lessons in Life, Love, and Language
By Deborah Fallows
Illustrated. 205 pp. Walker & Company. $22
When I used to ask my mother about her family village in China, she always said it was three hours from Canton by bus. A hundred years ago, when my great-grandfather left China for good, that couldn’t have been far, but it was certainly no help in locating it. So I was pleased — though still mystified — to read in Deborah Fallows’s charming and witty little book that in China, “if you ask someone where their hometown is, they’ll say it is seven hours by bus. Or four hours by train. They won’t tell you where it is.”
Fallows spent three years living in China with her husband, the journalist James Fallows. Since she’s a linguist by training, her method of getting under the skin of the country was to immerse herself in its language. In “Dreaming in Chinese,” she uses key phrases and concepts to unlock aspects of the society that interested or surprised her, casting light along the way on many idiosyncrasies of the Chinese view of the world.
Fallows doesn’t arrive with many preconceptions. Instead, she takes the Chinese as they see and present themselves. And she soon discovers that what the Chinese think is important isn’t always what we think is important. One thing they’re interested in is ensuring good luck. This explains why the Beijing Olympics began on Aug. 8, 2008, at 8:08 p.m. Eight, ba, rhymes with fa, “as in fa cai, which means ‘to become wealthy,’ ” making it a very auspicious number. And even though Aug. 8 was well into the rainy season, it didn’t rain.
Auspiciousness also enters into the choosing of names, an art in itself. Most Chinese have three names: surname (there are just 100 common surnames in a population of 1.3 billion people), middle name (to identify your generation and connect you with your cousins) and personal name. Which yields the realization that — in a country where most people are allowed only one child — future generations will have no cousins.
On matters that Westerners make a fuss about, like human rights, Fallows presents the common Chinese viewpoint. At a conference on censorship, technology and commerce, she recalls that “one exasperated Chinese participant finally blurted out that people, the laobaixing, aren’t as preoccupied as Westerners about free speech and an uncensored Internet: what laobaixing really want, he said, is . . . a flush toilet, a refrigerator and a color TV.” For ordinary Chinese, material concerns come first.
Fallows has an endearing affection for these laobaixing, these common folk. Unlike conventional journalists, she’s not very interested in press conferences, in listening to what the politicians say. Little by little, she finds herself becoming more like the laobaixing: learning to deal with the plethora of rules as the Chinese do — by finding ways around them.
“Dreaming in Chinese” is chatty and colloquial, with helpful photographs and drawings, as well as a pronunciation guide. The eager student will learn a fair bit about the history of the language and how its array of characters and tones were systematized, all the while gathering insights into the country’s customs and culture. Rather than draw sweeping conclusions, Fallows sticks to her own experiences and observations, which makes her book all the more valuable. China hands will have many moments of recognition. For others, “Dreaming in Chinese” will be a fascinating introduction to a foreign culture.
Lesley Downer is the author of “On the Narrow Road to the Deep North” and other nonfiction books on Asia. Her most recent book is a novel, “The Courtesan and the Samurai.”
Thursday, September 23, 2010
Is China making a rare earth power play?
Is China making a rare earth power play?
Blake Hounshell
Foreign Affairs Blog, Thursday, September 23, 2010
At one point in Diamonds Are Forever, the 1971 James Bond thriller, Agent 007 asks the villain, who has covertly amassed a stockpile of valuable gems: "What do you intend to do with those diamonds?"
"An excellent question," the evil criminal mastermind, Ernst Stavro Blofeld, replies with a diabolical grin. "And one which will be hanging on the lips of the world quite soon." Bond gets his answer soon enough: a satellite-rigged laser powerful enough to hold the world hostage.
Hu Jintao is no Blofeld, but if Chinese leaders are trying to provide a readymade plot for the next Bond film, they may have succeeded with today's news that China has quietly begun blocking Japan's supply of rare earth elements, used in everything from Priuses and iPads to wind turbines, oil refineries, and smart bomb
Such a move, which Chinese officials have denied, would represent a sharp, sudden escalation in the ongoing diplomatic dispute between China and Japan over an island chain in the East China Sea. Real or imagined, the threat is credible, and it's been a long time coming.
In 1992, Deng Xiaoping, the late Chinese leader, reportedly declared, "There is oil in the Middle East; there is rare earth in China." His comment spawned a crash program to develop and exploit China's vast reserves of the metals, estimated at 57 percent of the world total. It wasn't easy: Though most of the 17 elements known as rare earth minerals (numbers 57 through 71, as well as a couple others, on the periodic table) are not actually all that rare, they are difficult and costly to extract. Seven years after Deng's remarks, his successor Jiang Zemin ordered the Chinese state to go a step further. "Improve the development and applications of rare earth," he instructed, "and change the resource advantage into economic superiority."
If anything, Deng was too generous to the Middle East, which today pumps less than half the world's oil and still relies heavily on Western expertise. Today, China has become dominant in rare earths in ways the Saudi royal family could only dream, driving others out of the business, and now controls as much as 97 percent of the global market. According to a recent paper by Cindy Hurst, an analyst for the U.S. Army's Foreign Military Studies Office, that figure may even understate China's supremacy: Beijing has also poured untold millions into basic and applied research on rare earth elements, and runs two state laboratories employing hundreds of scientists devoted exclusively to the subject. The world's only two journals dedicated to rare earth metals are in Chinese.
This isn't the first time rare earths have been big news. Last year, Britain's Daily Telegraphreported that Beijing was considering altogether banning its exports of the stuff -- a story that provoked alarm among high-tech manufacturers and Pentagon planners. Any such ban has yet to be imposed, but China has actually been tightening its chokehold over the strategic commodities for several years now, preferring to use the minerals in its own factories in the hopes of moving up the supply value chain. Chinese premier Wen Jiabao hinted at the thinking in a forum Wednesday with American business leaders. "An iPod is sold at $299, and China in the manufacturing link will only get $6 for it," he complained. As of 2008, China was consuming more than half of the rare earth elements it produced, while smugglers also absconded with a significant chunk.
Initiatives are now underway to revitalize the industry outside China -- a business once dominated by the United States. In April, Molycorp Minerals, a U.S. firm based in Colorado, announced a $500 million plan to refurbish Mountain Pass, a California mine that, before closing in 2002 due to low-cost Chinese competition and environmental concerns, had once been the world's leading producer of rare earth metals (ironically, China nearly acquired Mountain Pass in 2005 as part of its failed bid for Unocal, the U.S. energy company that then owned the mine).
South African, Canadian, and Australian companies are all racing to develop their own mines, though as the New York Times' Keith Bradsher notes, these plans are fraught with risk and questionable economic rewards. "One potential threat," Hurst warns, "is that, while China's reduction in export quotas is currently causing prices to go up, if China were to turn that around and bring prices back down, this could potentially put these and other companies out of business even before they become fully operational."
There is also talk of setting up a U.S. stockpile for rare earth elements, as South Korea and Japan have already done, but any such plans for an American "strategic metals reserve" remain embryonic. It may be time to get cracking: According to the latest projections by Dudley Kingsnorth, an industry consultant, China could be consuming nearly its entire annual production of rare earth elements by as early as 2014.
Some rare earth elements matter more than others. Among the most important is dysprosium, a silky, silvery metal used to make hybrid motors, lasers, nuclear reactors, and computer hard drives. Ninety-nine percent of it is produced in China through a laborious, expensive process (appropriately enough, the element's name is derived from a Greek word meaning "difficult to get at"). Mountain Pass doesn't contain significant amounts of dysprosium, which is critical for the so-called permanent magnets used in many critical components of American defense systems, such as precision-guided munitions -- and Chinese officials have warned that their supplies are running low.
All this has many in the U.S. government and the defense industry worried. An April 2010 report by the U.S. General Accountability Office estimated that it will take as many as 15 years before the United States can rebuild its domestic rare earths industry -- assuming a number of legal, technical, and financial hurdles can be overcome. The Pentagon is studying the military's vulnerability, and is expected to come out with its initial findings later this month -- but the GAO has already found "a wide variety of defense systems and components," including the M1 A2 Abrams tank, "that are dependent on rare earth materials for functionality and are provided by lower-tier subcontractors in the supply chain." The Department of Energy is working on its own plan, and the House Armed Services Committee has scheduled a hearing on the issue.
In the meantime, Hu Jintao may not have a space laser pointed at our heads, but if you see him fighting the urge to pet a white cat or curl his pinkie finger to his lips, you'll know why.
Blake Hounshell
Foreign Affairs Blog, Thursday, September 23, 2010
At one point in Diamonds Are Forever, the 1971 James Bond thriller, Agent 007 asks the villain, who has covertly amassed a stockpile of valuable gems: "What do you intend to do with those diamonds?"
"An excellent question," the evil criminal mastermind, Ernst Stavro Blofeld, replies with a diabolical grin. "And one which will be hanging on the lips of the world quite soon." Bond gets his answer soon enough: a satellite-rigged laser powerful enough to hold the world hostage.
Hu Jintao is no Blofeld, but if Chinese leaders are trying to provide a readymade plot for the next Bond film, they may have succeeded with today's news that China has quietly begun blocking Japan's supply of rare earth elements, used in everything from Priuses and iPads to wind turbines, oil refineries, and smart bomb
Such a move, which Chinese officials have denied, would represent a sharp, sudden escalation in the ongoing diplomatic dispute between China and Japan over an island chain in the East China Sea. Real or imagined, the threat is credible, and it's been a long time coming.
In 1992, Deng Xiaoping, the late Chinese leader, reportedly declared, "There is oil in the Middle East; there is rare earth in China." His comment spawned a crash program to develop and exploit China's vast reserves of the metals, estimated at 57 percent of the world total. It wasn't easy: Though most of the 17 elements known as rare earth minerals (numbers 57 through 71, as well as a couple others, on the periodic table) are not actually all that rare, they are difficult and costly to extract. Seven years after Deng's remarks, his successor Jiang Zemin ordered the Chinese state to go a step further. "Improve the development and applications of rare earth," he instructed, "and change the resource advantage into economic superiority."
If anything, Deng was too generous to the Middle East, which today pumps less than half the world's oil and still relies heavily on Western expertise. Today, China has become dominant in rare earths in ways the Saudi royal family could only dream, driving others out of the business, and now controls as much as 97 percent of the global market. According to a recent paper by Cindy Hurst, an analyst for the U.S. Army's Foreign Military Studies Office, that figure may even understate China's supremacy: Beijing has also poured untold millions into basic and applied research on rare earth elements, and runs two state laboratories employing hundreds of scientists devoted exclusively to the subject. The world's only two journals dedicated to rare earth metals are in Chinese.
This isn't the first time rare earths have been big news. Last year, Britain's Daily Telegraphreported that Beijing was considering altogether banning its exports of the stuff -- a story that provoked alarm among high-tech manufacturers and Pentagon planners. Any such ban has yet to be imposed, but China has actually been tightening its chokehold over the strategic commodities for several years now, preferring to use the minerals in its own factories in the hopes of moving up the supply value chain. Chinese premier Wen Jiabao hinted at the thinking in a forum Wednesday with American business leaders. "An iPod is sold at $299, and China in the manufacturing link will only get $6 for it," he complained. As of 2008, China was consuming more than half of the rare earth elements it produced, while smugglers also absconded with a significant chunk.
Initiatives are now underway to revitalize the industry outside China -- a business once dominated by the United States. In April, Molycorp Minerals, a U.S. firm based in Colorado, announced a $500 million plan to refurbish Mountain Pass, a California mine that, before closing in 2002 due to low-cost Chinese competition and environmental concerns, had once been the world's leading producer of rare earth metals (ironically, China nearly acquired Mountain Pass in 2005 as part of its failed bid for Unocal, the U.S. energy company that then owned the mine).
South African, Canadian, and Australian companies are all racing to develop their own mines, though as the New York Times' Keith Bradsher notes, these plans are fraught with risk and questionable economic rewards. "One potential threat," Hurst warns, "is that, while China's reduction in export quotas is currently causing prices to go up, if China were to turn that around and bring prices back down, this could potentially put these and other companies out of business even before they become fully operational."
There is also talk of setting up a U.S. stockpile for rare earth elements, as South Korea and Japan have already done, but any such plans for an American "strategic metals reserve" remain embryonic. It may be time to get cracking: According to the latest projections by Dudley Kingsnorth, an industry consultant, China could be consuming nearly its entire annual production of rare earth elements by as early as 2014.
Some rare earth elements matter more than others. Among the most important is dysprosium, a silky, silvery metal used to make hybrid motors, lasers, nuclear reactors, and computer hard drives. Ninety-nine percent of it is produced in China through a laborious, expensive process (appropriately enough, the element's name is derived from a Greek word meaning "difficult to get at"). Mountain Pass doesn't contain significant amounts of dysprosium, which is critical for the so-called permanent magnets used in many critical components of American defense systems, such as precision-guided munitions -- and Chinese officials have warned that their supplies are running low.
All this has many in the U.S. government and the defense industry worried. An April 2010 report by the U.S. General Accountability Office estimated that it will take as many as 15 years before the United States can rebuild its domestic rare earths industry -- assuming a number of legal, technical, and financial hurdles can be overcome. The Pentagon is studying the military's vulnerability, and is expected to come out with its initial findings later this month -- but the GAO has already found "a wide variety of defense systems and components," including the M1 A2 Abrams tank, "that are dependent on rare earth materials for functionality and are provided by lower-tier subcontractors in the supply chain." The Department of Energy is working on its own plan, and the House Armed Services Committee has scheduled a hearing on the issue.
In the meantime, Hu Jintao may not have a space laser pointed at our heads, but if you see him fighting the urge to pet a white cat or curl his pinkie finger to his lips, you'll know why.
Tuesday, September 14, 2010
Critiquer le pouvoir en Chine (mais de forme "harmonieuse"...)
La Chine lance un site où critiquer le pouvoir est possible
Nouvelobs avec AFP, 13.09.2010
Pékin a mis en ligne un site internet permettant aux Chinois d'exprimer leur opinion sur la marche de leur pays. Des internautes ont aussitôt saisi l'occasion de manifester leur opposition au régime.
Dans un geste d'ouverture inhabituel, le gouvernement chinois vient de lancer un site web offrant à la population la possibilité d'exprimer franchement son opinion sur la marche du pays.
Depuis l'ouverture du site la semaine dernière, des dizaines de milliers de messages ont abordé de façon directe les problèmes de liberté d'expression, de collusion ou de corruption en Chine, même si d'autres messages chantent les louanges du parti communiste au pouvoir.
"Si vous vous préoccupez des conditions de vie de la population, alors soyez solidaires : tuez les responsables corrompus et les tyrans locaux", conseillait par exemple un message adressé au président Hu Jintao.
Liberté inédite...
Le site, baptisé "ligne directe sur Zhongnanhai", le siège du pouvoir au coeur de Pékin, offre une faculté pratiquement jamais accordée à la population chinoise et dépend du Quotidien du peuple, journal officiel du Parti communiste chinois.
La censure très active en Chine interdit généralement aux internautes de déposer des opinions critiquant le gouvernement ou évoquant la question des droits de l'Homme. Mais en l'espèce la règle ne semblait plus s'appliquer pour de nombreux commentaires.
Toutefois, affirmait un internaute dans une contribution en ligne, la censure était toujours en vigueur sur le nouveau site, malgré la fenêtre de libre expression apparemment ouverte.
... et limitée
"Camarade Hu, n'est-il pas intéressant de constater que j'ai laissé tant de messages et que tous ont été harmonisés ? Ne pouvez-vous donc pas nous laisser dire la vérité?", a-t-il écrit à l'adresse du président Hu.
Les cybercitoyens chinois ont pris l'habitude d'utiliser le verbe "harmoniser" dans le sens de "censurer", en référence ironique aux coupes sur l'internet exercées par le pouvoir au nom de "l'harmonie sociale".
Mais c'est la hausse des prix de l'immobilier qui semblait beaucoup préoccuper les Chinois qui étaient nombreux à dénoncer la collusion de responsables locaux corrompus et de promoteurs immobiliers avides.
Nouvelobs avec AFP, 13.09.2010
Pékin a mis en ligne un site internet permettant aux Chinois d'exprimer leur opinion sur la marche de leur pays. Des internautes ont aussitôt saisi l'occasion de manifester leur opposition au régime.
Dans un geste d'ouverture inhabituel, le gouvernement chinois vient de lancer un site web offrant à la population la possibilité d'exprimer franchement son opinion sur la marche du pays.
Depuis l'ouverture du site la semaine dernière, des dizaines de milliers de messages ont abordé de façon directe les problèmes de liberté d'expression, de collusion ou de corruption en Chine, même si d'autres messages chantent les louanges du parti communiste au pouvoir.
"Si vous vous préoccupez des conditions de vie de la population, alors soyez solidaires : tuez les responsables corrompus et les tyrans locaux", conseillait par exemple un message adressé au président Hu Jintao.
Liberté inédite...
Le site, baptisé "ligne directe sur Zhongnanhai", le siège du pouvoir au coeur de Pékin, offre une faculté pratiquement jamais accordée à la population chinoise et dépend du Quotidien du peuple, journal officiel du Parti communiste chinois.
La censure très active en Chine interdit généralement aux internautes de déposer des opinions critiquant le gouvernement ou évoquant la question des droits de l'Homme. Mais en l'espèce la règle ne semblait plus s'appliquer pour de nombreux commentaires.
Toutefois, affirmait un internaute dans une contribution en ligne, la censure était toujours en vigueur sur le nouveau site, malgré la fenêtre de libre expression apparemment ouverte.
... et limitée
"Camarade Hu, n'est-il pas intéressant de constater que j'ai laissé tant de messages et que tous ont été harmonisés ? Ne pouvez-vous donc pas nous laisser dire la vérité?", a-t-il écrit à l'adresse du président Hu.
Les cybercitoyens chinois ont pris l'habitude d'utiliser le verbe "harmoniser" dans le sens de "censurer", en référence ironique aux coupes sur l'internet exercées par le pouvoir au nom de "l'harmonie sociale".
Mais c'est la hausse des prix de l'immobilier qui semblait beaucoup préoccuper les Chinois qui étaient nombreux à dénoncer la collusion de responsables locaux corrompus et de promoteurs immobiliers avides.
Thursday, September 9, 2010
Competitive index ranks China 27th
Competitive index ranks China 27th
By Wang Yanlin
China Daily, September, 10, 2010
CHINA is inching higher on a list of the world's most competitive economies - to 27th place, up from 29th last year.
"China continues to lead the way among large developing economies, improving by two more places this year, and solidifying its place among the top 30," said the Global Competitiveness Report 2010-2011, released yesterday by the World Economic Forum.
Switzerland remained in top spot, followed by Sweden and Singapore.
The United States, the world's biggest economy, fell two places to 4th due to macroeconomic imbalances, a weakening of its public and private institutions, and lingering concerns about its financial markets.
Several Asian economies also performed strongly. Japan moved up to 6th place from last year's 8th, and Hong Kong Special Administrative Region remained as number 11.
China outpaced the three other BRIC economies. Brazil ranked 58th, Russia 63rd and India 51st.
Li Jing, an economist and managing director of JPMorgan, said yesterday in Shanghai that the world's emerging markets, upon which the global economic advance hinges, have diverged from the growth path of developed countries.
"While the United States is now concerned about deflation, China pays close attention to the risk of inflation," Li said. "When the US encourages people to reduce debt and save, China is pushing hard for more consumption. Such sharp differences reflect huge potential of future growth in emerging markets, as well as the challenges that different countries should face."
China's economy eclipsed Japan during the April-June period to become the world's second-largest. But under a tightening policy stance, the country's gross domestic product has moderated to 10.3 percent growth in the second quarter from an 11.9 percent surge in the first three months.
Last year, China overtook Germany to become the world's biggest exporter and then nudged the US aside as it became the world's largest automobile market.
The latest Fortune Global 500, unveiled in July, listed a record 54 Chinese companies with three in the top 10.
Wednesday, September 8, 2010
China-US relations: shifts in global power
Detecting subtle shifts in the balance of power
Daniel Blumenthal - Shadow Government
Foreign Policy, Friday, September 3, 2010
Subtle shifts in the balance of power are difficult to detect yet of foremost importance to peace and stability. And even if detected in a timely fashion, policymakers can be slow to react. But maintaining a balance of power favorable to one's interests is one of a president's key tasks. On that score, our leaders have been negligent for over a decade.
Occasionally, presidents detect shifts in the military balance when it is too late and then compound the problem by responding with questionable policy choices. For example, President Eisenhower's policy of massive retaliation was, in part, a response to what seemed to be a loss of the U.S nuclear monopoly and Soviet conventional supremacy in continental Europe. (Eisenhower also wanted to maintain U.S superiority on the cheap -- by cutting Truman's conventional defense build-up).
A policy of responding with a nuclear attack to Soviet aggression anywhere did not seem very prudent to many at the time, but at least the president took the perceived shift in the balance of power seriously. Some of President Nixon and Carter's questionable arms control ideas were a response to a shift in the strategic balance in favor of the Soviets. Unfortunately, most of the time, policymakers do not react to an adversary's growing capabilities until met with disaster (e.g. Pearl Harbor, the Soviet invasion of Afghanistan, 9/11).
Today the balance of power in Asia is shifting. Since the end of World War II, Washington has kept the peace in Asia through its forward presence of military forces and its uncontested ability to project force into the region. Take an example from just 14 years ago. Realizing how destabilizing were China's missile tests conducted in the waters around Taiwan, President Clinton sent carrier battle groups near the Taiwan Strait. The missile tests stopped, Taiwan held its elections, and conflict was avoided.
Today, any president would think twice about doing the same. Why? China has arguably gained conventional supremacy around its periphery. Without remediation this could become a hard fact. China's growing short-range missile arsenal (maybe up to 1,500) and fleet of modern aircraft could not only be used to destroy much of Taiwan, but could also be used to strike devastating blows against U.S. forces in Japan. Together with its fast-growing submarine fleet, the Chinese missile force will, within the next decade, be able to cause serious harm to U.S. carriers steaming into the region.
Beijing has been focused like a laser beam on how to coerce and intimidate Taiwan while deterring U.S. and Japanese intervention. Washington has not given the same attention to defense. Our shipbuilding program has atrophied, our ability to protect the bases from which our aircraft fly is non-existent, and there is nothing in the current navy or air force programs of record that demonstrate our attentiveness to this problem.
As a country, we have become so accustomed to projecting air and sea power with impunity anywhere in the world that the idea that our aircraft could be shot down or surface ships sunk seems like science fiction. But China has been studying how to undermine the way we do battle for decades, and its efforts are bearing fruit.
A president choosing to respond to a Chinese attack on Taiwan would now face a host of bad options, most of which are dangerously escalatory. If U.S. forces or those of an ally were attacked, Washington could eventually bring its superior power to bear from other theaters of conflict, but it would take time, and, as shown both in the Center for Strategic and Budgetary Assessment's AirSea Battle and in RAND's A Question of Balance, would probably require hitting military targets in China itself. Considering China's growing conventional superiority, a president's response to a devastating blow by the Chinese against U.S., Japanese, and Taiwanese assets may, by necessity, be highly escalatory.
The good news is that it is not too late to restore some stability to the equation. The United States is a far richer and more stable nation than China. With marginal adjustments in how we spend our finite tax-payer dollars, we can restore a favorable conventional balance in the Pacific that would lessen Chinese temptations to use force and provide us with more strategically stable defensive options should Beijing succumb to those temptations. We seek a cooperative relationship with China, which makes it difficult to think about the unthinkable -- a conflict with China. But a conflict with the United States is just about all the PLA thinks about, and for the sake of peace we must take them seriously.
…………………………………………………
Biography
Dan Blumenthal is a current commissioner and former vice chairman of the U.S.-China Economic and Security Review Commission, where he directs efforts to monitor, investigate, and provide recommendations on the national security implications of the economic relationship between the two countries. Previously, he was senior director for China, Taiwan, and Mongolia in the Secretary of Defense's Office of International Security Affairs and practiced law in New York prior to his government service. At AEI, in addition to his work on the national security implications of U.S.-Sino relations, he coordinates the Tocqueville on China project, which examines the underlying civic culture of post-Mao China. Mr. Blumenthal also contributes to AEI's Asian Outlook series and is a research associate with the National Asia Research Program.
……………………………………
Shadow Government is a blog about U.S. foreign policy under the Obama administration, written by experienced policy makers from the loyal opposition and curated by Peter D. Feaver and William Inboden.
So, Shadow Government has three goals: 1) to provide you, our readers, with a respectful and nuanced assessment of the Obama administration's foreign policy; 2) to offer, where we find points or policies to disagree with, what we think is a responsible alternative course of action; and 3) to defend the Obama administration, as fellow foreign-policy professionals, when good decisions they make are misunderstood or unfairly criticized.
We are critical at times, but we always seek to be civil and constructive. We occasionally find fault, but we always do so in good faith. And we do all of this with the goal of elevating the discourse on U.S. foreign policy, as much as one blog can. We hope you find it interesting.
—Peter Feaver & William Inboden
Daniel Blumenthal - Shadow Government
Foreign Policy, Friday, September 3, 2010
Subtle shifts in the balance of power are difficult to detect yet of foremost importance to peace and stability. And even if detected in a timely fashion, policymakers can be slow to react. But maintaining a balance of power favorable to one's interests is one of a president's key tasks. On that score, our leaders have been negligent for over a decade.
Occasionally, presidents detect shifts in the military balance when it is too late and then compound the problem by responding with questionable policy choices. For example, President Eisenhower's policy of massive retaliation was, in part, a response to what seemed to be a loss of the U.S nuclear monopoly and Soviet conventional supremacy in continental Europe. (Eisenhower also wanted to maintain U.S superiority on the cheap -- by cutting Truman's conventional defense build-up).
A policy of responding with a nuclear attack to Soviet aggression anywhere did not seem very prudent to many at the time, but at least the president took the perceived shift in the balance of power seriously. Some of President Nixon and Carter's questionable arms control ideas were a response to a shift in the strategic balance in favor of the Soviets. Unfortunately, most of the time, policymakers do not react to an adversary's growing capabilities until met with disaster (e.g. Pearl Harbor, the Soviet invasion of Afghanistan, 9/11).
Today the balance of power in Asia is shifting. Since the end of World War II, Washington has kept the peace in Asia through its forward presence of military forces and its uncontested ability to project force into the region. Take an example from just 14 years ago. Realizing how destabilizing were China's missile tests conducted in the waters around Taiwan, President Clinton sent carrier battle groups near the Taiwan Strait. The missile tests stopped, Taiwan held its elections, and conflict was avoided.
Today, any president would think twice about doing the same. Why? China has arguably gained conventional supremacy around its periphery. Without remediation this could become a hard fact. China's growing short-range missile arsenal (maybe up to 1,500) and fleet of modern aircraft could not only be used to destroy much of Taiwan, but could also be used to strike devastating blows against U.S. forces in Japan. Together with its fast-growing submarine fleet, the Chinese missile force will, within the next decade, be able to cause serious harm to U.S. carriers steaming into the region.
Beijing has been focused like a laser beam on how to coerce and intimidate Taiwan while deterring U.S. and Japanese intervention. Washington has not given the same attention to defense. Our shipbuilding program has atrophied, our ability to protect the bases from which our aircraft fly is non-existent, and there is nothing in the current navy or air force programs of record that demonstrate our attentiveness to this problem.
As a country, we have become so accustomed to projecting air and sea power with impunity anywhere in the world that the idea that our aircraft could be shot down or surface ships sunk seems like science fiction. But China has been studying how to undermine the way we do battle for decades, and its efforts are bearing fruit.
A president choosing to respond to a Chinese attack on Taiwan would now face a host of bad options, most of which are dangerously escalatory. If U.S. forces or those of an ally were attacked, Washington could eventually bring its superior power to bear from other theaters of conflict, but it would take time, and, as shown both in the Center for Strategic and Budgetary Assessment's AirSea Battle and in RAND's A Question of Balance, would probably require hitting military targets in China itself. Considering China's growing conventional superiority, a president's response to a devastating blow by the Chinese against U.S., Japanese, and Taiwanese assets may, by necessity, be highly escalatory.
The good news is that it is not too late to restore some stability to the equation. The United States is a far richer and more stable nation than China. With marginal adjustments in how we spend our finite tax-payer dollars, we can restore a favorable conventional balance in the Pacific that would lessen Chinese temptations to use force and provide us with more strategically stable defensive options should Beijing succumb to those temptations. We seek a cooperative relationship with China, which makes it difficult to think about the unthinkable -- a conflict with China. But a conflict with the United States is just about all the PLA thinks about, and for the sake of peace we must take them seriously.
…………………………………………………
Biography
Dan Blumenthal is a current commissioner and former vice chairman of the U.S.-China Economic and Security Review Commission, where he directs efforts to monitor, investigate, and provide recommendations on the national security implications of the economic relationship between the two countries. Previously, he was senior director for China, Taiwan, and Mongolia in the Secretary of Defense's Office of International Security Affairs and practiced law in New York prior to his government service. At AEI, in addition to his work on the national security implications of U.S.-Sino relations, he coordinates the Tocqueville on China project, which examines the underlying civic culture of post-Mao China. Mr. Blumenthal also contributes to AEI's Asian Outlook series and is a research associate with the National Asia Research Program.
……………………………………
Shadow Government is a blog about U.S. foreign policy under the Obama administration, written by experienced policy makers from the loyal opposition and curated by Peter D. Feaver and William Inboden.
So, Shadow Government has three goals: 1) to provide you, our readers, with a respectful and nuanced assessment of the Obama administration's foreign policy; 2) to offer, where we find points or policies to disagree with, what we think is a responsible alternative course of action; and 3) to defend the Obama administration, as fellow foreign-policy professionals, when good decisions they make are misunderstood or unfairly criticized.
We are critical at times, but we always seek to be civil and constructive. We occasionally find fault, but we always do so in good faith. And we do all of this with the goal of elevating the discourse on U.S. foreign policy, as much as one blog can. We hope you find it interesting.
—Peter Feaver & William Inboden
Sunday, September 5, 2010
Xinjiang, restive province of China - New York Times
Resentment Simmers in Western Chinese Region
By ANDREW JACOBS
The New York Times, September 4, 2010
URUMQI, China — The five-star hotels are full, bulldozers are making quick work of dreary slums and billboards for “French-style villas” call out to the nouveau riche. In the year since rioting between the Han and Uighur ethnic groups killed nearly 200 people in this city in far western China, life appears to be returning to normal.
“Don’t worry, everything is peaceful now,” said the perky bellhop at a hotel in the city’s predominantly Han Chinese quarter.
But before turning away, he had second thoughts. “You’d better not go to the Uighur part of town at night,” he said.
Beneath the gloss and mercantile buzz of Urumqi, the capital of the Xinjiang region, there is a palpable unease that neither tens of thousands of surveillance cameras nor the patrolling squads of black-shirted police officers can completely assuage.
Since July 2009, when rampaging Uighur mobs set upon Han Chinese with iron bars and bricks — a scene that was reversed for several days when Han vigilantes sought revenge — the Chinese authorities have arrested hundreds and tried to soothe frayed nerves with a $1.5 billion spending package, a change in local leadership and a barrage of uplifting slogans strung across public buses and highway overpasses.
But the feel-good propaganda and revved-up economy have so far done little to repair the mutual distrust. And experts say the government’s “strike hard” campaign, which has led to the secret detention of perceived troublemakers and the execution of at least nine people accused of having a hand in the bloodshed, has worsened tensions.
“I don’t think a single Uighur is convinced that the government is acting in their interests,” said Dru C. Gladney, a professor of Asian studies at Pomona College in California who studies the region. “In fact, the hostile environment is making people feel embattled and resentful.”
Given the heightened surveillance here, it is not always easy to tease out unvarnished sentiments from either the Uighurs, a Turkic-speaking Muslim minority, or the Han, who make up 96 percent of China’s population. But with patience and the promise of anonymity, raw resentments emerge.
Take the Han Chinese owner of a small restaurant who initially described Uighurs as “part of our family” but later allowed that he found the vast majority of them frightening, untrustworthy and “savage.”
The man, who would give only his surname, Zhou, said he stopped riding buses in Urumqi last fall after the city was swept by tales of Uighurs jabbing Han with H.I.V.-infected hypodermic needles. The police initially detained more than a dozen people in the attacks but later dismissed suggestions that the needles were contaminated.
Like the hundreds of thousands of Han who migrate to Xinjiang each year, Mr. Zhou, who left Sichuan Province in 2004, said he was partly inspired by the notion that he was helping to “open up” western China. Although he grew up learning that the Uighurs were Chinese and part of the country’s happy kaleidoscope of 56 ethnicities, he said he quickly discovered otherwise.
“We just don’t have much in common,” he said with a wary glance around him. “And what’s worse is they don’t appreciate what we’ve done for them.”
Much as it did in Tibet, in an effort to pacify another restive ethnic region, the government has spent huge sums of money to try to help Xinjiang’s economy catch up to eastern China, where income and production are on average twice as high. In May, the Communist Party announced the first leg of its “Love the Great Motherland, Build a Beautiful Homeland” initiative, which will include six new airports and 5,000 more miles of rail line linking the far-flung cities in this Alaska-size region of desert and mountains.
Bowing to popular discontent, Beijing also replaced the region’s leader, Wang Lequan, whose 15-year tenure was marked by a hard-line approach that alienated many Uighurs and in the end failed to forestall the riots, prompting street protests by Han residents demanding his resignation.
The Uighurs, who make up just under half of Xinjiang’s 22 million people — down from more than 90 percent in 1949 — harbor their own deeply felt animosities. Beijing is determined to dilute Uighur culture, they say, while Han migrants often end up with the best jobs, especially in government bureaucracies or in the factories of the prosperous “bingtuan,” the largely segregated Han outposts carved out of the desert by the People’s Liberation Army in the 1950s.
While an inability to speak Mandarin shuts some Uighurs out of Han-run companies, many say the larger force behind their economic marginalization is naked discrimination. “It used to be that state-owned enterprises had Han-only hiring policies, but these days they are more subtle,” said Ilham Tohti, a Uighur economist who studies the job market in Xinjiang. “They reject you after you’ve gone in for the interview and they’ve seen your face.”
Although the uneducated and unskilled have been hardest hit by unemployment, even bilingual Uighurs who graduated from Chinese universities say they have a hard time finding good jobs.
The frustration many Uighurs have is compounded by a sense that they are trapped, prevented by bigotry and strict residency rules from moving to more affluent coastal cities, and by tight passport restrictions from leaving China.
The policy, partly shaped by government fears that Uighurs who travel abroad might become radicalized and return as terrorists, cuts them off from overseas jobs, academic opportunities and family reunification. It also frustrates Uighur business owners who seek a bigger slice of China’s trade with its Central Asian neighbors. “How can we compete with the Han if we can’t meet our customers in their own countries?” asked a textile trader in Kashgar, a southern oasis city. “Just because we are Muslims doesn’t mean we’re all interested in becoming terrorists.”
Government concerns about the radicalizing influence of Islam play out through a raft of religious restrictions, including strict limits on the number of Uighurs who can travel to Mecca, Saudi Arabia, for the annual pilgrimage and rules that force students and government workers to eat during the monthlong fast of Ramadan.
Fear also governs secular life. Cellphones and e-mail exchanges are frequently monitored, and even mild criticism of Chinese policies posted online can have dire consequences. In July, four Uighurs — three Web site managers and a journalist — accused of endangering state security were sentenced to long prison terms during closed trials.
A graduate student from the city of Khotan said he did not dare click on Web sites run by Uighur exile groups that can be reached only by evading government Internet restrictions, known as the Great Firewall. “They will find you,” he said of the government. “Sometimes I feel like I’m living in a giant prison.”
Anu Kultalahti, a researcher at Amnesty International in London who interviewed witnesses of last July’s violence, said the fear extended to those now living in Europe and the United States. “It borders on paranoia,” she said. “If you promise them confidentiality, they laugh and say: ‘That’s what you think. The government already knows we’re talking.’ ”
Xiyun Yang contributed research.
By ANDREW JACOBS
The New York Times, September 4, 2010
URUMQI, China — The five-star hotels are full, bulldozers are making quick work of dreary slums and billboards for “French-style villas” call out to the nouveau riche. In the year since rioting between the Han and Uighur ethnic groups killed nearly 200 people in this city in far western China, life appears to be returning to normal.
“Don’t worry, everything is peaceful now,” said the perky bellhop at a hotel in the city’s predominantly Han Chinese quarter.
But before turning away, he had second thoughts. “You’d better not go to the Uighur part of town at night,” he said.
Beneath the gloss and mercantile buzz of Urumqi, the capital of the Xinjiang region, there is a palpable unease that neither tens of thousands of surveillance cameras nor the patrolling squads of black-shirted police officers can completely assuage.
Since July 2009, when rampaging Uighur mobs set upon Han Chinese with iron bars and bricks — a scene that was reversed for several days when Han vigilantes sought revenge — the Chinese authorities have arrested hundreds and tried to soothe frayed nerves with a $1.5 billion spending package, a change in local leadership and a barrage of uplifting slogans strung across public buses and highway overpasses.
But the feel-good propaganda and revved-up economy have so far done little to repair the mutual distrust. And experts say the government’s “strike hard” campaign, which has led to the secret detention of perceived troublemakers and the execution of at least nine people accused of having a hand in the bloodshed, has worsened tensions.
“I don’t think a single Uighur is convinced that the government is acting in their interests,” said Dru C. Gladney, a professor of Asian studies at Pomona College in California who studies the region. “In fact, the hostile environment is making people feel embattled and resentful.”
Given the heightened surveillance here, it is not always easy to tease out unvarnished sentiments from either the Uighurs, a Turkic-speaking Muslim minority, or the Han, who make up 96 percent of China’s population. But with patience and the promise of anonymity, raw resentments emerge.
Take the Han Chinese owner of a small restaurant who initially described Uighurs as “part of our family” but later allowed that he found the vast majority of them frightening, untrustworthy and “savage.”
The man, who would give only his surname, Zhou, said he stopped riding buses in Urumqi last fall after the city was swept by tales of Uighurs jabbing Han with H.I.V.-infected hypodermic needles. The police initially detained more than a dozen people in the attacks but later dismissed suggestions that the needles were contaminated.
Like the hundreds of thousands of Han who migrate to Xinjiang each year, Mr. Zhou, who left Sichuan Province in 2004, said he was partly inspired by the notion that he was helping to “open up” western China. Although he grew up learning that the Uighurs were Chinese and part of the country’s happy kaleidoscope of 56 ethnicities, he said he quickly discovered otherwise.
“We just don’t have much in common,” he said with a wary glance around him. “And what’s worse is they don’t appreciate what we’ve done for them.”
Much as it did in Tibet, in an effort to pacify another restive ethnic region, the government has spent huge sums of money to try to help Xinjiang’s economy catch up to eastern China, where income and production are on average twice as high. In May, the Communist Party announced the first leg of its “Love the Great Motherland, Build a Beautiful Homeland” initiative, which will include six new airports and 5,000 more miles of rail line linking the far-flung cities in this Alaska-size region of desert and mountains.
Bowing to popular discontent, Beijing also replaced the region’s leader, Wang Lequan, whose 15-year tenure was marked by a hard-line approach that alienated many Uighurs and in the end failed to forestall the riots, prompting street protests by Han residents demanding his resignation.
The Uighurs, who make up just under half of Xinjiang’s 22 million people — down from more than 90 percent in 1949 — harbor their own deeply felt animosities. Beijing is determined to dilute Uighur culture, they say, while Han migrants often end up with the best jobs, especially in government bureaucracies or in the factories of the prosperous “bingtuan,” the largely segregated Han outposts carved out of the desert by the People’s Liberation Army in the 1950s.
While an inability to speak Mandarin shuts some Uighurs out of Han-run companies, many say the larger force behind their economic marginalization is naked discrimination. “It used to be that state-owned enterprises had Han-only hiring policies, but these days they are more subtle,” said Ilham Tohti, a Uighur economist who studies the job market in Xinjiang. “They reject you after you’ve gone in for the interview and they’ve seen your face.”
Although the uneducated and unskilled have been hardest hit by unemployment, even bilingual Uighurs who graduated from Chinese universities say they have a hard time finding good jobs.
The frustration many Uighurs have is compounded by a sense that they are trapped, prevented by bigotry and strict residency rules from moving to more affluent coastal cities, and by tight passport restrictions from leaving China.
The policy, partly shaped by government fears that Uighurs who travel abroad might become radicalized and return as terrorists, cuts them off from overseas jobs, academic opportunities and family reunification. It also frustrates Uighur business owners who seek a bigger slice of China’s trade with its Central Asian neighbors. “How can we compete with the Han if we can’t meet our customers in their own countries?” asked a textile trader in Kashgar, a southern oasis city. “Just because we are Muslims doesn’t mean we’re all interested in becoming terrorists.”
Government concerns about the radicalizing influence of Islam play out through a raft of religious restrictions, including strict limits on the number of Uighurs who can travel to Mecca, Saudi Arabia, for the annual pilgrimage and rules that force students and government workers to eat during the monthlong fast of Ramadan.
Fear also governs secular life. Cellphones and e-mail exchanges are frequently monitored, and even mild criticism of Chinese policies posted online can have dire consequences. In July, four Uighurs — three Web site managers and a journalist — accused of endangering state security were sentenced to long prison terms during closed trials.
A graduate student from the city of Khotan said he did not dare click on Web sites run by Uighur exile groups that can be reached only by evading government Internet restrictions, known as the Great Firewall. “They will find you,” he said of the government. “Sometimes I feel like I’m living in a giant prison.”
Anu Kultalahti, a researcher at Amnesty International in London who interviewed witnesses of last July’s violence, said the fear extended to those now living in Europe and the United States. “It borders on paranoia,” she said. “If you promise them confidentiality, they laugh and say: ‘That’s what you think. The government already knows we’re talking.’ ”
Xiyun Yang contributed research.
Saturday, September 4, 2010
Brasil-China: much ado about almost everything
A culpa pode até ser do Estado brasileiro, mas não pelas razões apontadas por esses pretensos especialistas em China.
Contrariamente ao que diz Delfim Neto, vários outros países já reconheceram a China como economia de mercado, mas o ponto não está aí. Quer se reconheça, ou não, a China como economia de mercado, seus produtos continuam e continuarão a ser imbatíveis no plano da competitividade internacional. O não reconhecimento funciona apenas para medidas de defesa comercial, ou seja, disfarçar a própria falta de competitividade colocando barreiras protecionistas discriminatórias contra os produtos chineses, que entram nos países porque simplesmente são mais baratos, não porque um país reconhece ou deixa de reconhecer a China como economia de mercado. De toda forma, se não for agora, será dentro de 3 ou 4 anos, quando a China terminar o período de transição regulado em seu protocolo de acesso e tiver de cumprir todas as regras da OMC, e aí os parceiros só poderão reconhecê-la como economia de mercado. Pode-se até argumentar que até lá ela vai continuar conquistando poições de mercado, o que é seu direito.
Quanto ao câmbio, simplesmente não é verdade que o câmbio está fixo em 7 yuans há cinco anos, não é verdade. Nesse período, o moeda chinesa já passou por duas fases de revalorização, o que implicou um movimento de quase 20%. Correto é dizer que a taxa está estável atualmente em torno de 6,7 yuans por dólar, mas já depois de uma valorização que a trouxe, justamente, de mais de 7 no ano passado (sendo que era mais de oito até 2006).
E não é pela nossa suposta valorização cambial que os produtos brasileiros não são competitivos. Os industriais, exportadores e economistas precisam parar de chorar e pedir desvalorização para passar a atuar nas verdadeiras causas da falta de competitividade do Brasil, começando por uma carga tributária extorsiva.
Por que é que os industriais não lutam contra o governo por causa disso? Só porque querem o dinheiro do BNDES? Querem créditos fiscais e isenções tributárias setoriais? Querem tarifas altas e mais proteção? Poltrões: deveriam atuar nas causas certas, não pedir políticas erradas e distorsivas.
Não é verdade, tampouco, que as empresas chinesas que estão exportando para o Brasil sejam estatais. Apenas algumas o são, e são as que importam, não as que exportam. É verdade que os chineses trabalham com pequenas margens de lucro, ganhando na quantidade, mas isso é um direito deles, e uma estratégia inteligente. É patético ver brasileiros reclamando de uma estratégia comercial legítima.
Os industriais brasileiros precisam parar de reclamar da China e atacar as causas corretas, que estão, sim, no Estado brasileiro, mas não pelas razões apontadas por eles...
Paulo Roberto de Almeida
Para analistas, invasão chinesa é culpa do Estado brasileiro
João Villaverde, de São Paulo
Valor Econômico, 01/09/2010
A competição comercial entre Brasil e China, que envolve importados chineses mais baratos que os equivalentes nacionais, e a conquista de outros mercados pelos chineses, não é culpa da China. O responsável pela sequência de derrotas entre os dois países nas relações mercantis é o Estado brasileiro. Essa é a avaliação de economistas e especialistas em comércio exterior presentes ontem no 7º Fórum de Economia, realizado pela Fundação Getulio Vargas (FGV) em São Paulo.
"Apenas dois países, no mundo inteiro, acreditam que a China é uma economia de mercado. Um acredita com alguma dúvida: a China. O outro, de maneira convicta: o Brasil", afirma Antônio Delfim Netto, ex-ministro da Fazenda, do Planejamento e da Agricultura entre os anos de 1967 a 1985. Para Delfim, a política industrial, cambial e comercial chinesa não está errada. "Eles fazem o que qualquer país que quer crescer faz. O erro está aqui", diz o ex-ministro.
As críticas à estratégia adotada pelo Estado brasileiro, consensuais entre os analistas, estão centradas nas políticas econômica e comercial adotadas. Para eles, é preciso reduzir as taxas de juros brasileiras e permitir maior desvalorização cambial, que serviriam por tornar o crédito às empresas mais barato e ampliaria a remuneração oriunda das exportações. O câmbio chinês é fixo em torno de 7 yuans por dólar há cinco anos, enquanto o dólar oscila próximo ao patamar de R$ 1,70. As taxas de juros chinesas são de 2,47% ao ano, enquanto a Selic está fixada em 10,75% ao ano - hoje, o Banco Central anuncia a nova taxa.
Além disso, dizem os especialistas, o governo é "tímido" em fiscalizar a entrada de mercadorias subfaturadas provenientes da China. Segundo números apresentados por Roberto Giannetti da Fonseca, diretor da Federação das Indústrias do Estado de São Paulo (Fiesp), o saldo entre vendas e compras internacionais de bens manufaturados saiu de superávit de US$ 5,1 bilhões, em 2006, para um déficit projetado de US$ 60 bilhões neste ano.
"Do jeito que está, o déficit da indústria de transformação atingirá US$ 100 bilhões em um ou dois anos. Não só a indústria precisa reverter sua produção para o mercado interno, porque o importado chinês chega mais barato e o câmbio para exportar está ruim, como também estamos perdendo mercado no exterior para os chineses", diz Giannetti da Fonseca.
Para Renato Amorim, ex-secretário-executivo do Conselho Empresarial Brasil-China e atualmente sócio-diretor da Strategus, o governo brasileiro tem olhado para o alvo errado. Amorim, que chegou ontem de viagem à China, avalia que a disputa se dá em terreno onde os chineses "obviamente" têm vantagens. "As empresas chinesas contratam ótimos engenheiros a US$ 400 por mês. Não temos como competir com isso", afirma Amorim, para quem a disputa não se dá entre empresas, mas entre companhias brasileiras e o Estado chinês.
"As empresas chinesas trabalham com margens muito apertadas, uma vez que não remuneram acionistas e não precisam dar lucro. Por quê? Simplesmente porque são estatais", diz Amorim.
O empresário Antônio Maciel Neto, presidente da Suzano, afirmou ao Valor que a desigualdade de condições se dá também na comparação entre custos para investimentos fixos. A planta da Suzano em Mucuri, no sul da Bahia, a maior unidade produtora de celulose da companhia, teve custo total de US$ 2 bilhões. "O mesmo projeto teria custo de capital US$ 70 milhões menor, por ano, se fosse feito na China", diz Maciel.
Para Vera Thorstensen, que acaba de retornar ao Brasil depois de 15 anos na assessoria econômica do governo brasileiro na Organização Mundial do Comércio (OMC), em Genebra, os chineses "não respeitam regra alguma". "Eles não respeitam o artigo 4 do FMI, que veta a manipulação cambial, além de terem pendurados uma série de ações antidumping e pedidos de salvaguardas comerciais", diz ela. Para Giannetti da Fonseca, o Brasil "ainda não sabe usar medidas antidumping ou de salvaguardas".
Contrariamente ao que diz Delfim Neto, vários outros países já reconheceram a China como economia de mercado, mas o ponto não está aí. Quer se reconheça, ou não, a China como economia de mercado, seus produtos continuam e continuarão a ser imbatíveis no plano da competitividade internacional. O não reconhecimento funciona apenas para medidas de defesa comercial, ou seja, disfarçar a própria falta de competitividade colocando barreiras protecionistas discriminatórias contra os produtos chineses, que entram nos países porque simplesmente são mais baratos, não porque um país reconhece ou deixa de reconhecer a China como economia de mercado. De toda forma, se não for agora, será dentro de 3 ou 4 anos, quando a China terminar o período de transição regulado em seu protocolo de acesso e tiver de cumprir todas as regras da OMC, e aí os parceiros só poderão reconhecê-la como economia de mercado. Pode-se até argumentar que até lá ela vai continuar conquistando poições de mercado, o que é seu direito.
Quanto ao câmbio, simplesmente não é verdade que o câmbio está fixo em 7 yuans há cinco anos, não é verdade. Nesse período, o moeda chinesa já passou por duas fases de revalorização, o que implicou um movimento de quase 20%. Correto é dizer que a taxa está estável atualmente em torno de 6,7 yuans por dólar, mas já depois de uma valorização que a trouxe, justamente, de mais de 7 no ano passado (sendo que era mais de oito até 2006).
E não é pela nossa suposta valorização cambial que os produtos brasileiros não são competitivos. Os industriais, exportadores e economistas precisam parar de chorar e pedir desvalorização para passar a atuar nas verdadeiras causas da falta de competitividade do Brasil, começando por uma carga tributária extorsiva.
Por que é que os industriais não lutam contra o governo por causa disso? Só porque querem o dinheiro do BNDES? Querem créditos fiscais e isenções tributárias setoriais? Querem tarifas altas e mais proteção? Poltrões: deveriam atuar nas causas certas, não pedir políticas erradas e distorsivas.
Não é verdade, tampouco, que as empresas chinesas que estão exportando para o Brasil sejam estatais. Apenas algumas o são, e são as que importam, não as que exportam. É verdade que os chineses trabalham com pequenas margens de lucro, ganhando na quantidade, mas isso é um direito deles, e uma estratégia inteligente. É patético ver brasileiros reclamando de uma estratégia comercial legítima.
Os industriais brasileiros precisam parar de reclamar da China e atacar as causas corretas, que estão, sim, no Estado brasileiro, mas não pelas razões apontadas por eles...
Paulo Roberto de Almeida
Para analistas, invasão chinesa é culpa do Estado brasileiro
João Villaverde, de São Paulo
Valor Econômico, 01/09/2010
A competição comercial entre Brasil e China, que envolve importados chineses mais baratos que os equivalentes nacionais, e a conquista de outros mercados pelos chineses, não é culpa da China. O responsável pela sequência de derrotas entre os dois países nas relações mercantis é o Estado brasileiro. Essa é a avaliação de economistas e especialistas em comércio exterior presentes ontem no 7º Fórum de Economia, realizado pela Fundação Getulio Vargas (FGV) em São Paulo.
"Apenas dois países, no mundo inteiro, acreditam que a China é uma economia de mercado. Um acredita com alguma dúvida: a China. O outro, de maneira convicta: o Brasil", afirma Antônio Delfim Netto, ex-ministro da Fazenda, do Planejamento e da Agricultura entre os anos de 1967 a 1985. Para Delfim, a política industrial, cambial e comercial chinesa não está errada. "Eles fazem o que qualquer país que quer crescer faz. O erro está aqui", diz o ex-ministro.
As críticas à estratégia adotada pelo Estado brasileiro, consensuais entre os analistas, estão centradas nas políticas econômica e comercial adotadas. Para eles, é preciso reduzir as taxas de juros brasileiras e permitir maior desvalorização cambial, que serviriam por tornar o crédito às empresas mais barato e ampliaria a remuneração oriunda das exportações. O câmbio chinês é fixo em torno de 7 yuans por dólar há cinco anos, enquanto o dólar oscila próximo ao patamar de R$ 1,70. As taxas de juros chinesas são de 2,47% ao ano, enquanto a Selic está fixada em 10,75% ao ano - hoje, o Banco Central anuncia a nova taxa.
Além disso, dizem os especialistas, o governo é "tímido" em fiscalizar a entrada de mercadorias subfaturadas provenientes da China. Segundo números apresentados por Roberto Giannetti da Fonseca, diretor da Federação das Indústrias do Estado de São Paulo (Fiesp), o saldo entre vendas e compras internacionais de bens manufaturados saiu de superávit de US$ 5,1 bilhões, em 2006, para um déficit projetado de US$ 60 bilhões neste ano.
"Do jeito que está, o déficit da indústria de transformação atingirá US$ 100 bilhões em um ou dois anos. Não só a indústria precisa reverter sua produção para o mercado interno, porque o importado chinês chega mais barato e o câmbio para exportar está ruim, como também estamos perdendo mercado no exterior para os chineses", diz Giannetti da Fonseca.
Para Renato Amorim, ex-secretário-executivo do Conselho Empresarial Brasil-China e atualmente sócio-diretor da Strategus, o governo brasileiro tem olhado para o alvo errado. Amorim, que chegou ontem de viagem à China, avalia que a disputa se dá em terreno onde os chineses "obviamente" têm vantagens. "As empresas chinesas contratam ótimos engenheiros a US$ 400 por mês. Não temos como competir com isso", afirma Amorim, para quem a disputa não se dá entre empresas, mas entre companhias brasileiras e o Estado chinês.
"As empresas chinesas trabalham com margens muito apertadas, uma vez que não remuneram acionistas e não precisam dar lucro. Por quê? Simplesmente porque são estatais", diz Amorim.
O empresário Antônio Maciel Neto, presidente da Suzano, afirmou ao Valor que a desigualdade de condições se dá também na comparação entre custos para investimentos fixos. A planta da Suzano em Mucuri, no sul da Bahia, a maior unidade produtora de celulose da companhia, teve custo total de US$ 2 bilhões. "O mesmo projeto teria custo de capital US$ 70 milhões menor, por ano, se fosse feito na China", diz Maciel.
Para Vera Thorstensen, que acaba de retornar ao Brasil depois de 15 anos na assessoria econômica do governo brasileiro na Organização Mundial do Comércio (OMC), em Genebra, os chineses "não respeitam regra alguma". "Eles não respeitam o artigo 4 do FMI, que veta a manipulação cambial, além de terem pendurados uma série de ações antidumping e pedidos de salvaguardas comerciais", diz ela. Para Giannetti da Fonseca, o Brasil "ainda não sabe usar medidas antidumping ou de salvaguardas".
Yuan versus Dollar: the fight of the century
A self-denominated "currency capitalist", Evaldo Albuquerque, who seems to be a Brazilian, has some interesting things to say about this exchange struggle:
Why the Yuan Could Replace the Dollar By 2015
By Evaldo Albuquerque
THE SOVEREIGN INVESTOR, September 3, 2010
Dear Paulo Roberto,
Do you know anyone who speaks “Esperanto?”
If not, don’t worry. I never heard of the language until my recent trip to Brazil. Over the summer, I spent a couple weeks traveling around South America on a research mission.
While I was traveling, I met with the heads of major companies and important government leaders in Latin America. As a currency guy, I wanted to know how these major players in Latin America feel about the U.S. dollar.
Of all the business leaders I met with, Maria Ramos, head of investor relations at Brazilian oil-giant Petrobras, had the most interesting opinion on the dollar.
Instead of answering right away, Ms. Ramos told me a story about Esperanto. It was designed in the 19th century to serve as a universal second language.
“Trying to come up with an alternative to the dollar today is like trying to impose Esperanto as an international language. It doesn’t work like that,” she said.
“The same way English has evolved naturally to become the international language, the dollar has become the world’s reserve currency. The dollar is the currency everyone has access to!”
Of course she’s right.
At the moment, there is no alternative to replace the dollar as a world reserve currency.
But there is something happening right now that can easily change that.
A couple of weeks ago, McDonald’s became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong. Wal-Mart has already revealed its intention to do the same. In my opinion, it’s one of the greatest developments of our time.
The Only Real Threat to the Dollar's Supremacy
Empires don’t suddenly end. There are always warning signs that can sometimes last for years leading up to an empire’s collapse.
Out-of-control debt levels have historically been a major red flag. This debt can signal an empire’s end.
Look at what happened with the Spanish Empire in the 17th century or the British Empire in the 20th. Excessive debt effectively crumbled both empires. Given its massive deficits, America may soon become another good example.
And there’s a viable threat to the dollar’s supremacy in Asia. It’s the rise of the Asian market and the internationalization of China’s currency, the yuan.
China is Planting the Seeds of a Powerful Reserve Currency
Right now, Chinese leaders are making strides toward effectively capturing the dollar’s place as a reserve currency.
In the past two months, China’s leaders allowed the yuan to trade offshore in Hong Kong. They announced opening their bond market to foreign banks.
The yuan also started trading in the domestic Forex market vs. the Malaysia’s ringgit. Soon the yuan will be trading against other currencies, including the Russian ruble and the Korean won.
Hong Kong's securities regulator also just approved a new fund of yuan-denominated fixed-income products, such as bonds and commercial paper.
Chinese financial officials are also planning to introduce “junk” bonds to provide smaller private companies with new funding channels.
As other companies follow McDonald’s and Wal-Mart’s lead in tapping into China’s bond market, the yuan will play a significant role in global commerce.
Big banks around the globe such as HSBC, BBVA, JPMorgan Chase and Citigroup are all doing road shows in Latin America to encourage the use of the yuan in trade with China.
Do you see the pattern? The development of China’s currency is here to stay.
U.S. Dollar Crisis in the Making
What does that all mean for the U.S. dollar? One word: crisis!
One important reason the U.S. dollar remains the reserve currency is the U.S. bond market. Our bond market is the most-liquid of its kind.
But a well-developed Chinese capital market will provide strong support to the yuan. And the faster this process advances, the faster the dollar will lose status in the international market.
I agree with Ms. Ramos that the U.S. dollar won’t lose its reserve status tomorrow. It may take five years or more.
But China is planting the seeds of a powerful international currency that may become this alternative to the dollar. Without any serious fiscal reform in the U.S., the buck is looking more and more like a disaster waiting to happen.
Personally, I’m not waiting. I have already diversified part of my savings into stronger foreign currencies for my family. You can buy yuan through an exchange-traded fund (NYSE: CYB). Or you can even hold yuan (aka, renminbi) in a WorldCurrency Access Deposit Account at EverBank*. Learn more here.
It’s best to do diversify your currency holdings now while the dollar is still strong to get the most for your money. I’m grabbing all the foreign currency I can at a discount and I urge you to do the same.
Best Regards,
Evaldo Albuquerque
Editor, Exotic FX Alert
Contributor, Currency Capitalist
P.S. I’ll be talking more about the yuan and about exotic currencies at the Offshore Advantage Academy in November. Thought you might be interested in learning more. For event details, click here.
Why the Yuan Could Replace the Dollar By 2015
By Evaldo Albuquerque
THE SOVEREIGN INVESTOR, September 3, 2010
Dear Paulo Roberto,
Do you know anyone who speaks “Esperanto?”
If not, don’t worry. I never heard of the language until my recent trip to Brazil. Over the summer, I spent a couple weeks traveling around South America on a research mission.
While I was traveling, I met with the heads of major companies and important government leaders in Latin America. As a currency guy, I wanted to know how these major players in Latin America feel about the U.S. dollar.
Of all the business leaders I met with, Maria Ramos, head of investor relations at Brazilian oil-giant Petrobras, had the most interesting opinion on the dollar.
Instead of answering right away, Ms. Ramos told me a story about Esperanto. It was designed in the 19th century to serve as a universal second language.
“Trying to come up with an alternative to the dollar today is like trying to impose Esperanto as an international language. It doesn’t work like that,” she said.
“The same way English has evolved naturally to become the international language, the dollar has become the world’s reserve currency. The dollar is the currency everyone has access to!”
Of course she’s right.
At the moment, there is no alternative to replace the dollar as a world reserve currency.
But there is something happening right now that can easily change that.
A couple of weeks ago, McDonald’s became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong. Wal-Mart has already revealed its intention to do the same. In my opinion, it’s one of the greatest developments of our time.
The Only Real Threat to the Dollar's Supremacy
Empires don’t suddenly end. There are always warning signs that can sometimes last for years leading up to an empire’s collapse.
Out-of-control debt levels have historically been a major red flag. This debt can signal an empire’s end.
Look at what happened with the Spanish Empire in the 17th century or the British Empire in the 20th. Excessive debt effectively crumbled both empires. Given its massive deficits, America may soon become another good example.
And there’s a viable threat to the dollar’s supremacy in Asia. It’s the rise of the Asian market and the internationalization of China’s currency, the yuan.
China is Planting the Seeds of a Powerful Reserve Currency
Right now, Chinese leaders are making strides toward effectively capturing the dollar’s place as a reserve currency.
In the past two months, China’s leaders allowed the yuan to trade offshore in Hong Kong. They announced opening their bond market to foreign banks.
The yuan also started trading in the domestic Forex market vs. the Malaysia’s ringgit. Soon the yuan will be trading against other currencies, including the Russian ruble and the Korean won.
Hong Kong's securities regulator also just approved a new fund of yuan-denominated fixed-income products, such as bonds and commercial paper.
Chinese financial officials are also planning to introduce “junk” bonds to provide smaller private companies with new funding channels.
As other companies follow McDonald’s and Wal-Mart’s lead in tapping into China’s bond market, the yuan will play a significant role in global commerce.
Big banks around the globe such as HSBC, BBVA, JPMorgan Chase and Citigroup are all doing road shows in Latin America to encourage the use of the yuan in trade with China.
Do you see the pattern? The development of China’s currency is here to stay.
U.S. Dollar Crisis in the Making
What does that all mean for the U.S. dollar? One word: crisis!
One important reason the U.S. dollar remains the reserve currency is the U.S. bond market. Our bond market is the most-liquid of its kind.
But a well-developed Chinese capital market will provide strong support to the yuan. And the faster this process advances, the faster the dollar will lose status in the international market.
I agree with Ms. Ramos that the U.S. dollar won’t lose its reserve status tomorrow. It may take five years or more.
But China is planting the seeds of a powerful international currency that may become this alternative to the dollar. Without any serious fiscal reform in the U.S., the buck is looking more and more like a disaster waiting to happen.
Personally, I’m not waiting. I have already diversified part of my savings into stronger foreign currencies for my family. You can buy yuan through an exchange-traded fund (NYSE: CYB). Or you can even hold yuan (aka, renminbi) in a WorldCurrency Access Deposit Account at EverBank*. Learn more here.
It’s best to do diversify your currency holdings now while the dollar is still strong to get the most for your money. I’m grabbing all the foreign currency I can at a discount and I urge you to do the same.
Best Regards,
Evaldo Albuquerque
Editor, Exotic FX Alert
Contributor, Currency Capitalist
P.S. I’ll be talking more about the yuan and about exotic currencies at the Offshore Advantage Academy in November. Thought you might be interested in learning more. For event details, click here.
Monday, August 30, 2010
State companies in China: growing powerful
China Fortifies State Businesses to Fuel Growth
By MICHAEL WINES
The New York Times, August 29, 2010
BEIJING — During its decades of rapid growth, China thrived by allowing once-suppressed private entrepreneurs to prosper, often at the expense of the old, inefficient state sector of the economy.
Now, whether in the coal-rich regions of Shanxi Province, the steel mills of the northern industrial heartland, or the airlines flying overhead, it is often China’s state-run companies that are on the march.
As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition.
New data from the World Bank show that the proportion of industrial production by companies controlled by the Chinese state edged up last year, checking a slow but seemingly inevitable eclipse. Moreover, investment by state-controlled companies skyrocketed, driven by hundreds of billions of dollars of government spending and state bank lending to combat the global financial crisis.
They join a string of other signals that are fueling discussion among analysts about whether China, which calls itself socialist but is often thought of in the West as brutally capitalist, is in fact seeking to enhance government control over some parts of the economy.
The distinction may matter more today than it once did. China surpassed Japan to become the world’s second-largest economy this year, and its state-directed development model is enormously appealing to poor countries. Even in the West, many admire China’s ability to build a first-world infrastructure and transform its cities into showpieces.
Once eager to learn from the United States, China’s leaders during the financial crisis have reaffirmed their faith in their own more statist approach to economic management, in which private capitalism plays only a supporting role.
“The socialist system’s advantages,” Prime Minister Wen Jiabao said in a March address, “enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings.”
State vs. Private
The issue of state versus private control is a slippery one in China. After decades of economic reform, many big state-owned companies face real competition and are expected to operate profitably. The biggest private companies often get their financing from state banks, coordinate their investments with the government and seat their chief executives on government advisory panels.
Chinese leaders also no longer publicly emphasize sharp ideological distinctions about ownership. But they never relaxed state control over some sectors considered strategically vital, including finance, defense, energy, telecommunications, railways and ports.
Mr. Wen and President Hu Jintao are also seen as less attuned to the interests of foreign investors and China’s own private sector than the earlier generation of leaders who pioneered economic reforms. They prefer to enhance the clout and economic reach of state-backed companies at the top of the pecking order.
“China’s always had a major industrial policy. But for a space of a few years, it looked like China was turning away from an active and interventionist industrial policy in favor of a more hands-off approach,” Victor Shih, a Northwestern University political scientist, said in a recent telephone interview.
Mr. Shih, among others, now believes that the 1980s reforms that unleashed China’s private sector and the 1990s reforms that dismantled great sections of the state-run sector are being partly undone.
“The problem is that the reforms of the first 20 years, from 1978 to the end of the ’90s, actually did not touch on the power of the government,” said Yao Yang, a Peking University professor who heads the China Center for Economic Research. “So after the other reforms were finished, you actually find the government is expanding, because there is no check and balance on its power.”
Divining Government’s Role
There are no comprehensive statistics to catalog the government’s influence over the economy. So the shift is partly inferred from coarse measures like the share of financing in the economy provided by state banks, which rose sharply during the financial crisis, or the list of the 100 largest publicly listed Chinese companies, all but one of which are majority state owned.
The statistic showing an uptick in the share of industrial production attributable to the state sector is regarded by some analysts as a blip rather than the start of a trend. The World Bank’s senior economist in Beijing, Louis Kuijs, said the state sector’s unusually rapid growth will most likely moderate with the ending of the government’s stimulus spending.
“As the growth process normalizes again, the traditional trend toward a declining SOE share will take over again,” he wrote in an e-mail message, using the shorthand for state-owned enterprise. “I don’t think that the senior leaders had a strategy of reversing this trend.”
But others argue that officials had always intended to create a vibrant state sector that would tower above the private sector in important industries, even as they sold off or shut down money-losing state enterprises that drained capital from the government budget and banking system.
Recent alarm over the expanding role of the state, said Arthur Kroeber of Dragonomics, an economic forecasting firm based in Beijing, is mostly “perception catching up with reality.”
In some ways, the differences in this debate are small. Everyone agrees that China runs a bifurcated economy: at one level, a robust and competitive private sector dominates industries like factory-assembled exports, clothing and food. And at higher levels like finance, communications, transportation, mining and metals — the so-called commanding heights — the central government claims majority ownership and a measure of management control.
Yet the two camps’ view of China’s future are markedly different. Those who see little evidence of an expanding state sector generally believe that China has a decade or more of robust growth awaiting it before its economy matures. Theirs is a Goldilocks view of state intervention — not too much or too little, but just enough to push a developing economy toward prosperity.
The skeptics have a darker view: they believe distortions and waste, in no small part due to government meddling, have resulted in gross misallocation of capital and will end up pushing growth rates down well before 2020. What drives their pessimism, the skeptics say, is that China, like Japan a generation ago, has too much confidence in a top-down economic strategy that defies conventional Western theory.
The skeptics also point to what they say is the growing political and financial influence of China’s state-owned giants — 129 huge conglomerates that answer directly to the central government, and thousands of smaller ones run by the provinces and cities.
While no public breakdown exists, most experts say the vast bulk of the 4 trillion renminbi ($588 billion) stimulus package that China pumped out for new highways, railroads and other big projects went to state-owned companies. Some of the largest companies used the flood of money to strengthen their dominance in their current markets or to enter new ones.
In the last year or so, many of the 129 central government companies have moved forcefully into China’s real-estate industry, with hundreds of billions of dollars in construction projects and land deals. State-owned steel giants have cut deals to buy out more profitable and often more efficient private competitors. A host of government conglomerates have snapped up coal mining companies in Shanxi Province.
“In 2009, there was a huge expansion of the government role in the corporate sector,” Huang Yasheng, a leading analyst of China-style capitalism at the Massachusetts Institute of Technology, said in a telephone interview. “They’re producing yogurt. They’re into real estate. Some of the upstream state-owned enterprises are now expanding downstream, organizing themselves as vertical units. They’re just operating on a much larger scale.”
Local Interests
At the local level, governments set up 8,000 state-owned investment companies in 2009 alone to channel government dollars into business and industrial ventures, Mr. Huang said. One example suffices: a private Chinese automaker, Zhejiang Geely Holding Group, made worldwide headlines in March when it agreed to buy Sweden’s Volvo marque from Ford. Much of the $1.5 billion purchase price came not from Geely’s relatively modest profits, but from local governments in northeast China and the Shanghai area.
Geely reciprocated this month, announcing that it will build its Volvo headquarters and an assembly plant in a Shanghai industrial district.
The reasons for the state’s push for greater involvement in business vary. State control of energy supplies is crucial to China’s growth, and the Shanxi coal takeovers will increase production, guarantee fuel to some state-owned utilities and give Beijing new power to control coal prices. State mining companies also argue that they have a superior safety record to their accident-prone private competitors.
But in other areas the state looks more mercenary.
Take telecommunications. Upon joining the World Trade Organization, China committed itself to opening its communications market to foreign joint ventures for local and international phone service, e-mail, paging and other businesses. But after eight years, no licenses have been granted — largely, the United States says, because capital requirements, regulatory hurdles and other barriers have made such ventures impractical. Today, basic telecommunications in China are booming, and are virtually 100 percent state-controlled.
Take the passenger airline industry. Six years ago, the central government invited private investors to enter the business. By 2006, eight private carriers had sprung up to challenge the three state-controlled majors, Air China, China Southern and China Eastern.
The state airlines immediately began a price war. The state-owned monopoly that provided jet fuel refused to service private carriers on the same generous terms given the big three. China’s only computerized reservation system — currently one-third owned by the three state airlines — refused to book flights for private competitors. And when mismanagement and the 2008 economic crisis drove the three majors into financial straits, the central government bought stock to bail them out: about $1 billion for China Eastern; $430 million for China Southern; $220 million for Air China.
One private passenger carrier that remains is Spring Airlines, a tenacious startup run by a founder so frugal that he shares a 100-square-foot office with his chief executive and takes the subway to business meetings.
That founder, Wang Zhenghua, survived in part by building his own computer reservation system. He canceled a planned interview. But in Chinese news reports, he was caustic about the state subsidies given his competitors. “Now with the injection of 10 billion yuan” for China Eastern and China Southern, “everything is in chaos,” he told Biz Review, a Chinese magazine.
China’s private entrepreneurs have a catchphrase for such maneuvers: “guo jin, min tui,” or “the state advances, the private sector retreats.”
State-owned enterprises in China have taken the best of the economy for themselves, “leaving the private sector drinking the soup while the state enterprises are eating the meat,” Cai Hua, the vice director of a chamber-of-commerce-style organization in Zhejiang Province, said in an interview.
First in Line
Mr. Cai says he believes that China needs government-run industries to compete globally and manage the country’s domestic development. But locally, he said, their advantages — being first in line for financing by state banks, first in line for state bailouts when they get in trouble, first in line for the stimulus gusher — have created a “profound inequality” with private competitors.
Some analysts argue that the state-owned conglomerates, built with state money and favors into global competitors, have now become political power centers in their own right, able to fend off even Beijing’s efforts to rein them in.
Of the 129 major state enterprises, more than half the chairmen and chairwomen and more than one-third of the chief executive officers were appointed by the central organization department of the Communist Party. A score or more serve on the party’s Central Committee, which elects the ruling Politburo. They control not just the lifeblood of China’s economy, but a corporate patronage system that dispenses top-paying executive jobs to relatives of the party’s leading lights.
China’s leaders have sought occasionally in the past year to curb speculative excesses by state-controlled businesses in real estate, lending and other areas. In May the State Council, a top-level policy body sometimes likened to the cabinet in the United States, issued orders to give private companies a better shot at government contracts — for roads and bridges, finance and even military work — that now go almost exclusively to state-owned companies. Virtually the same rules were issued five years ago, to little effect.
Yet it is hard to argue with success, other economists say, and China’s success speaks well of its top-down strategy. Asian powerhouses like South Korea and Japan built their modern economies with strong state help. Many economists agree that shrewd state management can be better than market forces in getting a developing nation on its feet.
Experts on both sides of the debate have but two questions. One is how much longer state control of vast areas of the economy will generate that growth.
The other is whether, should that strategy stop working, China will be able to change it.
Li Bibo contributed research.
By MICHAEL WINES
The New York Times, August 29, 2010
BEIJING — During its decades of rapid growth, China thrived by allowing once-suppressed private entrepreneurs to prosper, often at the expense of the old, inefficient state sector of the economy.
Now, whether in the coal-rich regions of Shanxi Province, the steel mills of the northern industrial heartland, or the airlines flying overhead, it is often China’s state-run companies that are on the march.
As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition.
New data from the World Bank show that the proportion of industrial production by companies controlled by the Chinese state edged up last year, checking a slow but seemingly inevitable eclipse. Moreover, investment by state-controlled companies skyrocketed, driven by hundreds of billions of dollars of government spending and state bank lending to combat the global financial crisis.
They join a string of other signals that are fueling discussion among analysts about whether China, which calls itself socialist but is often thought of in the West as brutally capitalist, is in fact seeking to enhance government control over some parts of the economy.
The distinction may matter more today than it once did. China surpassed Japan to become the world’s second-largest economy this year, and its state-directed development model is enormously appealing to poor countries. Even in the West, many admire China’s ability to build a first-world infrastructure and transform its cities into showpieces.
Once eager to learn from the United States, China’s leaders during the financial crisis have reaffirmed their faith in their own more statist approach to economic management, in which private capitalism plays only a supporting role.
“The socialist system’s advantages,” Prime Minister Wen Jiabao said in a March address, “enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings.”
State vs. Private
The issue of state versus private control is a slippery one in China. After decades of economic reform, many big state-owned companies face real competition and are expected to operate profitably. The biggest private companies often get their financing from state banks, coordinate their investments with the government and seat their chief executives on government advisory panels.
Chinese leaders also no longer publicly emphasize sharp ideological distinctions about ownership. But they never relaxed state control over some sectors considered strategically vital, including finance, defense, energy, telecommunications, railways and ports.
Mr. Wen and President Hu Jintao are also seen as less attuned to the interests of foreign investors and China’s own private sector than the earlier generation of leaders who pioneered economic reforms. They prefer to enhance the clout and economic reach of state-backed companies at the top of the pecking order.
“China’s always had a major industrial policy. But for a space of a few years, it looked like China was turning away from an active and interventionist industrial policy in favor of a more hands-off approach,” Victor Shih, a Northwestern University political scientist, said in a recent telephone interview.
Mr. Shih, among others, now believes that the 1980s reforms that unleashed China’s private sector and the 1990s reforms that dismantled great sections of the state-run sector are being partly undone.
“The problem is that the reforms of the first 20 years, from 1978 to the end of the ’90s, actually did not touch on the power of the government,” said Yao Yang, a Peking University professor who heads the China Center for Economic Research. “So after the other reforms were finished, you actually find the government is expanding, because there is no check and balance on its power.”
Divining Government’s Role
There are no comprehensive statistics to catalog the government’s influence over the economy. So the shift is partly inferred from coarse measures like the share of financing in the economy provided by state banks, which rose sharply during the financial crisis, or the list of the 100 largest publicly listed Chinese companies, all but one of which are majority state owned.
The statistic showing an uptick in the share of industrial production attributable to the state sector is regarded by some analysts as a blip rather than the start of a trend. The World Bank’s senior economist in Beijing, Louis Kuijs, said the state sector’s unusually rapid growth will most likely moderate with the ending of the government’s stimulus spending.
“As the growth process normalizes again, the traditional trend toward a declining SOE share will take over again,” he wrote in an e-mail message, using the shorthand for state-owned enterprise. “I don’t think that the senior leaders had a strategy of reversing this trend.”
But others argue that officials had always intended to create a vibrant state sector that would tower above the private sector in important industries, even as they sold off or shut down money-losing state enterprises that drained capital from the government budget and banking system.
Recent alarm over the expanding role of the state, said Arthur Kroeber of Dragonomics, an economic forecasting firm based in Beijing, is mostly “perception catching up with reality.”
In some ways, the differences in this debate are small. Everyone agrees that China runs a bifurcated economy: at one level, a robust and competitive private sector dominates industries like factory-assembled exports, clothing and food. And at higher levels like finance, communications, transportation, mining and metals — the so-called commanding heights — the central government claims majority ownership and a measure of management control.
Yet the two camps’ view of China’s future are markedly different. Those who see little evidence of an expanding state sector generally believe that China has a decade or more of robust growth awaiting it before its economy matures. Theirs is a Goldilocks view of state intervention — not too much or too little, but just enough to push a developing economy toward prosperity.
The skeptics have a darker view: they believe distortions and waste, in no small part due to government meddling, have resulted in gross misallocation of capital and will end up pushing growth rates down well before 2020. What drives their pessimism, the skeptics say, is that China, like Japan a generation ago, has too much confidence in a top-down economic strategy that defies conventional Western theory.
The skeptics also point to what they say is the growing political and financial influence of China’s state-owned giants — 129 huge conglomerates that answer directly to the central government, and thousands of smaller ones run by the provinces and cities.
While no public breakdown exists, most experts say the vast bulk of the 4 trillion renminbi ($588 billion) stimulus package that China pumped out for new highways, railroads and other big projects went to state-owned companies. Some of the largest companies used the flood of money to strengthen their dominance in their current markets or to enter new ones.
In the last year or so, many of the 129 central government companies have moved forcefully into China’s real-estate industry, with hundreds of billions of dollars in construction projects and land deals. State-owned steel giants have cut deals to buy out more profitable and often more efficient private competitors. A host of government conglomerates have snapped up coal mining companies in Shanxi Province.
“In 2009, there was a huge expansion of the government role in the corporate sector,” Huang Yasheng, a leading analyst of China-style capitalism at the Massachusetts Institute of Technology, said in a telephone interview. “They’re producing yogurt. They’re into real estate. Some of the upstream state-owned enterprises are now expanding downstream, organizing themselves as vertical units. They’re just operating on a much larger scale.”
Local Interests
At the local level, governments set up 8,000 state-owned investment companies in 2009 alone to channel government dollars into business and industrial ventures, Mr. Huang said. One example suffices: a private Chinese automaker, Zhejiang Geely Holding Group, made worldwide headlines in March when it agreed to buy Sweden’s Volvo marque from Ford. Much of the $1.5 billion purchase price came not from Geely’s relatively modest profits, but from local governments in northeast China and the Shanghai area.
Geely reciprocated this month, announcing that it will build its Volvo headquarters and an assembly plant in a Shanghai industrial district.
The reasons for the state’s push for greater involvement in business vary. State control of energy supplies is crucial to China’s growth, and the Shanxi coal takeovers will increase production, guarantee fuel to some state-owned utilities and give Beijing new power to control coal prices. State mining companies also argue that they have a superior safety record to their accident-prone private competitors.
But in other areas the state looks more mercenary.
Take telecommunications. Upon joining the World Trade Organization, China committed itself to opening its communications market to foreign joint ventures for local and international phone service, e-mail, paging and other businesses. But after eight years, no licenses have been granted — largely, the United States says, because capital requirements, regulatory hurdles and other barriers have made such ventures impractical. Today, basic telecommunications in China are booming, and are virtually 100 percent state-controlled.
Take the passenger airline industry. Six years ago, the central government invited private investors to enter the business. By 2006, eight private carriers had sprung up to challenge the three state-controlled majors, Air China, China Southern and China Eastern.
The state airlines immediately began a price war. The state-owned monopoly that provided jet fuel refused to service private carriers on the same generous terms given the big three. China’s only computerized reservation system — currently one-third owned by the three state airlines — refused to book flights for private competitors. And when mismanagement and the 2008 economic crisis drove the three majors into financial straits, the central government bought stock to bail them out: about $1 billion for China Eastern; $430 million for China Southern; $220 million for Air China.
One private passenger carrier that remains is Spring Airlines, a tenacious startup run by a founder so frugal that he shares a 100-square-foot office with his chief executive and takes the subway to business meetings.
That founder, Wang Zhenghua, survived in part by building his own computer reservation system. He canceled a planned interview. But in Chinese news reports, he was caustic about the state subsidies given his competitors. “Now with the injection of 10 billion yuan” for China Eastern and China Southern, “everything is in chaos,” he told Biz Review, a Chinese magazine.
China’s private entrepreneurs have a catchphrase for such maneuvers: “guo jin, min tui,” or “the state advances, the private sector retreats.”
State-owned enterprises in China have taken the best of the economy for themselves, “leaving the private sector drinking the soup while the state enterprises are eating the meat,” Cai Hua, the vice director of a chamber-of-commerce-style organization in Zhejiang Province, said in an interview.
First in Line
Mr. Cai says he believes that China needs government-run industries to compete globally and manage the country’s domestic development. But locally, he said, their advantages — being first in line for financing by state banks, first in line for state bailouts when they get in trouble, first in line for the stimulus gusher — have created a “profound inequality” with private competitors.
Some analysts argue that the state-owned conglomerates, built with state money and favors into global competitors, have now become political power centers in their own right, able to fend off even Beijing’s efforts to rein them in.
Of the 129 major state enterprises, more than half the chairmen and chairwomen and more than one-third of the chief executive officers were appointed by the central organization department of the Communist Party. A score or more serve on the party’s Central Committee, which elects the ruling Politburo. They control not just the lifeblood of China’s economy, but a corporate patronage system that dispenses top-paying executive jobs to relatives of the party’s leading lights.
China’s leaders have sought occasionally in the past year to curb speculative excesses by state-controlled businesses in real estate, lending and other areas. In May the State Council, a top-level policy body sometimes likened to the cabinet in the United States, issued orders to give private companies a better shot at government contracts — for roads and bridges, finance and even military work — that now go almost exclusively to state-owned companies. Virtually the same rules were issued five years ago, to little effect.
Yet it is hard to argue with success, other economists say, and China’s success speaks well of its top-down strategy. Asian powerhouses like South Korea and Japan built their modern economies with strong state help. Many economists agree that shrewd state management can be better than market forces in getting a developing nation on its feet.
Experts on both sides of the debate have but two questions. One is how much longer state control of vast areas of the economy will generate that growth.
The other is whether, should that strategy stop working, China will be able to change it.
Li Bibo contributed research.
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