China Comment

Energy, Environment, and Economy

Post-Olympic Pieces

Here’s a couple of interesting “Olympic-Aftermath” posts from around the internet, and below is some value-added analysis:

* The Olympic Sponsor – Biggest Winners and Biggest Losers
All Roads Lead to China
Discusses how sponsors like Lenovo and GE may have benefitted from their Olympic sponsorship.

*Yeah! I’m a Llama Again
Silk Road International
Great Olympic-review/overview piece with even better links that are worth consideration. (Such as this harsh piece by TimesOnline (Some of its assertions might be treated with a grain of salt though- and it should be noted that the British Times appears to have an almost pathological dislike for China’s regime), and a thoughful piece in the Washington Post.)

* The Great Convergence?
The China Beat
Compares similarities between China and the United States and coverage of the Olympics.

* Making sense of what comes after the Olympics
Michael Pettis at Asia EconoMonitor
Discusses China’s still-weak stock-market, declining growth in expansion of tax revenues, and speculates on near-future performance of the Chinese economy.

*Rio Tinto predicts post-games boom
By Rebecca Bream and Chris Flood; Financial Times
The Financial Times reports how Rio Tinto believes commodity prices will rise again, amid a post-Olympics construction boom as transportation/supply chains are untangled, factories are reopened, and trucks get back onto the streets… This would probably happen starting sometime around mid-September after the Paralympic Games are finished.

Olympic Pollution: Comparisons
chinacomment
If you wanted to compare pollution pre-Olympics, or to compare Beijing’s pollution to Olympics’ pollution in Athens, or Barcelona, this is an excellent resource.

Wireless Data Roaming Wins Gold During Beijing Olympics
MarketWatch
Ever wondered how much information was sent over roaming phones during the Beijing Games? Now you can become enlightened. “[A] surge in wireless data roaming traffic exceeding 40 percent over the same period of days the month before. This increase in roaming traffic resulted in more than 332 GB of data being exchanged between 225 mobile operators in 106 different countries on the Aicent network. This increase in wireless data roaming is the equivalent of the content in books stored on nearly two miles of shelves.”

Conclusion… What Does This Mean?
Links without analysis are only of marginal use, so here’s some value-added content.

* Rio Tinto is probably right to believe demand in China for metals and resources will continue, despite a weak international economy. And if other countries’ demand for resources drops, China has the cash to step in and bargain-shop.

* A weaker international economy will harm China’s export-market, but the PRC appears willing to focus policy on expanding economic growth. Brad Setser of the CFR (Council on Foreign Relations) persuasively argues that China’s exports have not yet been significantly harmed by the global slowdown.

It appears RMB appreciation will slow if the Chinese continue to prop up their exporters. Michael Pettis, who specializes on Chinese Financial Markets and teaches at Beida in Beijing, believes that China might also sustain high inflation in order to support its exporters.

It is surprising that exporters are still maintaining at least a limited amount of strength, considering that the new Labor Law requires employers to pay workers more and treat them better, and considering that new tax provisions do away with some benefits for foreign companies based in China. A fuller examination of China’s economic future and the consequences of its economic policies definitely merits more in-depth future analysis that will certainly take a good deal of time to properly treat.

* And The China Beat reminds us that in many ways, China and the United States have similarities… things that often go unnoticed when the “China Threat Theory” is promulgated, or China’s collectivist culture is over-stressed, or when commentators focus on China’s “communism.”

* And, to close, I welcome your thoughts on where China’s economy is going post-Olympics or if the Olympics really changed anything about China in the long run. (Bonus Article: “Orville Schell discusses the future of Chinese nationalism and Olympic changes. (Written Before the Games)”) Thanks for reading.

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29 August, 2008 Posted by | China Economy, China Future | , , , , , , | 1 Comment

Beijingers Love Their Games? (Guest)

by: Danny J. (Guest Contributor)

In a survey of Chinese natives, 93% believed that ‘the Olympics will help China’s image around the globe’ and 96% said that the games ‘will be successful.’

These numbers, while enlightening on exposing Chinese national thought, don’t hit on one key question: How are Chinese, and Beijingers in particular, satisfied with the preparations for the games and the new security regulations?

This quote seems to sum up at least some Beijingers’ feelings: ‘For years we couldn’t wait for the Olympics to start. Now we can’t wait for them to be over.’ To be fair, many are still excited for the event, they are just a bit tired of all the extra measures.

The quoted person presumably wants the Olympics to be over so everything can be ‘normal’ again, without all the new rules and restrictions imposed on Beijing to clean it up – environmentally, legally, and even in terms of fashion (Shirts and ties for taxi drivers) . (ed: One interesting dramatized story about local discontent with the Olympic games can be found in this “sci-fi” tale from China Digital Times, reposting from the SCI-FI Great Wall blog. The story discusses how poor local Beijingers are pushed aside in the lead-up to the Olympics, all for the sake of honored foreign guests.)

Rules have been drawn up to guard against fashion no-no’s. Here’s the abridged version: ‘white socks worn with black shoes are out, leather skirts are frowned upon, bright nail varnish is a no and woe betide anyone whose colours clash.’ What will actually happen to someone who violates these new guidelines, let alone what these rules will do to that Chinese 农民(nongmin) summertime tradition of rolling up shirts to mid-chest height, is unclear.

Maybe it’s not just the fashion police who are bothering Beijingers. It could be the new Taxi protocol requiring identity checks at random police stops. Or it could be that a good number of clubs ‘have been forced to go dark,’ and the ones that are still open have a mandated 2 a.m. closing time. Then, in a move to clean up pollution, most barbecue or 串儿 restaurants/stalls have been closed.

Checkpoints on the outskirts of the city have helped decrease the number of vegetables in Beijing, and partially due to that and inflation, foodstuff prices have increased by around ’20 percent.’ Compounded together, it’s easy to understand a Beijinger’s frustration.

There is some good news: Water will not be in short supply in Beijing. It has been diverted from Hebei, to ensure that the Olympians get enough water. Hebei, already a bit short of water, might have some problems. On top of sufficient water, rules have been put in place to ensure cabbies ‘go easy on their garlic consumption.’

One more humorous measure involved ‘a series of measures banning cigarettes in schools, railway stations, office buildings and other public places.’ Wen Jiabao ‘has declared that the Olympics will be smoke free.’ 100,000 inspectors are on the lookout to ticket smokers, but the ticket is a mere $1.40, which among the middle classes is unlikely to curb much smoking. To emphasize this, a general reaction to the rare non-smoking sign: “If I point to the no-smoking sign, the passenger will just laugh and keep smoking.”

Chinese may love their Olympic games, but with over 350 million Chinese smokers, 1/3rd of the world’s smoking population, many Chinese also love their cigarettes and their normal lives.

This piece does not necessarily reflect the views of chinacomment. However, it is interesting, so I hope you will find it enjoyable. Once again, I thank Danny very much for his contribution.

(Note: Chinacomment is currently on vacation and without constant access to computer until the beginning of September; however, updates will continue at the pace of 1-3 a week since Chinacomment does have a sizable backlog of relevant material to post.)

12 August, 2008 Posted by | China General, Isn't That Odd? | , , , , , , | Leave a comment

China’s Prison Population

It is well known that the US leads the world in incarceration rates with 751 per 100,000 people in prison; but it is less well known how China’s incarceration rates compare. Interestingly, China, which is often portrayed as a police state, only has 119 prisoners per 100,000 people, according to December 2007 data posted at King’s College London. China ranks 113th on the list. But what does this say about China? Is it a safer place? If so, then why is it a safer place? Are criminals not getting arrested? Or, is all the data not being reported?

IS CHINA A SAFE PLACE?

The data says a lot of things- for example, it tends to punish countries that better report true rates of incarceration (by ranking them higher in the list). Countries that have higher stability and greater rule of law will also tend to have higher incarceration rates. For example, the Democratic Republic of Congo, which lacks order and stability ranks a relatively benign 183rd place with only 57 people incarcerated per 100,000. 

But the number of prisoners in a country doesn’t tell the full story about crime, so I compared data on year 2006 incarceration rates to data on crimes per 100,000. That data is from 1994-1997, so it’s a bit out of date, but it is relatively legitimate, from the UN. 

In China, there were 131 crimes per 100,000 people in 1997. (This was probably massively underreported; but when compared to rates of incarceration- at only 119 per 1,000 people as of 2006, it seems fairly legitimate.)

For comparison with other Asian countries that have Confucian histories; Taiwan had 256 (at 31st place), and South Korea had 97 (at 133rd). And Japan had 63 per 100,000 incarcerated, putting it at 177th place. This indicates China’s 113th place is average when compared to a cultural-group incarceration rate.

Japan, South Korea, and Hong Kong all suffer higher crime rates than the Chinese. In Japan there were 1,507 crimes per 100,000 people in 1997. In S. Korea, there were 3,741 crimes per 100,000 people in 1997.  In Hong Kong, there were 1,070 crimes per 100,000 people in 1997.

Comparing China to other post-Soviet countries such as Cuba, Russia, and even the Soviet Bloc countries; it also ranks quite favorably: Cuba had 531 incarcerated per 100,000 (at 5th place), and Russia had 632 (at 2nd place) [With 1,627 crimes per 100,000 in 1997. (Which I would assume is underreported)], Georgia had 428 (10th place) [With 256 crimes per 100,000 in 1997- almost, but not quite as low as China’s numbers and strikingly strange considering its high amount of people currently incarcerated), Ukraine had 325 (29th place) [With 1,162 crimes per 100,000], and Latvia had 287 (35th place) [With 1,496 crimes per 100,000].

Among other developing countries, Brazil was 54th with 270, and India was in 203rd place with 52 people behind bars per 100,000 citizens [and a 1997 reported crime rate of 179 per 100,000 people].

Interestingly, France was in 140th place with only 91 prisoners per 100,000 citizens, but France was a leading country in the survey of reported crimes committed with over 6,754 crimes per 100,000 people in 1994.

Denmark, Belgium, Germany, New Zealand, Sweden and Moldova (at 32,000+ crimes per 100,000 people in 1997) all suffered numbers in excess of 8,000 reported crimes committed per 100,000 people.

In the US, there were 5,375 crimes per 100,000 people in 1994.

WHY WOULD CHINA BE A SAFER PLACE?

The question then emerges, why would China have less criminals than are present in other societies? Assuming the majority of criminals are arrested, some would argue that Chinese Confucian values encourage people to respect the law.

Others would argue that close Chinese kinship ties ensure that “black sheep” are scolded by their family and kept in line. This belief would segue with social control/ social constraint criminological theory.

Also perhaps the supervision of “block captains” in charge of neighborhoods who function like a support group/neighborhood watch, resolve problems that in other societies would lead to conflict. Japan has a similar system in place, where policemen visit citizens in their district, going door to door and meeting with them several times a year.

ARE CHINESE CRIMINALS GETTING ARRESTED?

A discussion on whether or not criminals are actually getting arrested in China would involve an in-depth report I cannot go into at this time. Anecdotally, China has a high proportion of private security guards; they can be seen everywhere. In major cities like Beijing or Shanghai, the gonganju, the police, and the chengguan can be often seen patrolling.

However, examining the data closer, “bad” data reporting on actual arrests might account for part of the relatively low alleged Chinese prison population.

A reevaluation of China’s prison population rate is necessary since “There are two types of administrative detention: according to Chinese government statistics there were more than 500,000 serving administrative detention in re-education-through-labour camps in 2005, and it is reported (U.S. State Department Human Rights Report 2005) that in 2004 there were 350,000 in a second type of administrative detention, which is for drug offenders and prostitutes. The number of pre-trial detainees is not known but has been estimated at about 100,000” (King’s College Data).

“If this is correct the total prison population in China is about 2,500,000.” As opposed to the official statistic used in evaluation, which was 1,565,771″ (King’s College Data).

“A total prison population of 2,500,000 would raise the prison population rate to 189 per 100,000 of the national population” (King’s College Data).

This would put China’s position in world incarceration rates at 65th place.

This would still imply China is a relatively safe society; having a few less offenders incarcerated than 59th place Mexico.

TYPES OF CRIME AND CONCLUSION

It would be interesting to examine a cross-section report examining how many people are in prison for political crimes, violent crimes, subversive crimes, property crimes, and other crime strata. Before a full declaration can be made on how “safe” China is in regards to other countries, much more work needs to be done.

Nevertheless, it is clear that based on the rate of criminals per 100,000 in the population and possible dubious statistics on crimes committed per 100,000; China is oddly enough one of the safest countries in the world.

For Those of You Who are Tourists for the upcoming Olympic games: The US Government has a 2008 China Crime and Safety Report. (It is not very rigorous, but at least it’s something.)

19 June, 2008 Posted by | China General | , , , , , , , , | Leave a comment

China’s Oil Price Freeze

Considering recent shortages in fuel in some places in China, as reported by today’s WSJ and an article by the Jamestown Foundation, many may wonder why China is leaving its oil prices at the same level since the last raise in November 2007?

What follows is an analysis focusing on bank loans and stability concerns. More work needs to be done looking into the elite political decisions, namely the discussions between ministers in charge of different portfolios since that can also affect these decisions, but that will have to wait for later.

China wants to present a good image to the world while it prepares to host the Olympic games. The Olympics are a coming-out ceremony for them, an opportunity for much 爱国 (aiguo) or love of country/patriotism. Red, the color of China, appears everywhere. Even PEPSI changed its traditional blue to red in the run up to the Olympics. As one Chinese said in the article: “I thought it was a good idea when I saw those promotional cans. They’re supporting Team China.”

So, what stereotypes does China have to promote to present a good image of their country?

1.) China is not backward

Thus they have retranslated many formerly amusing signs that made little sense in English, such as “Deformed Man” signs outside toilets for the handicapped.

2.) China is ruled by law and order and every Chinese loves China.

Thus, they will increase security and recently presented new regulations aimed at discouraging protestors, both from outside and inside the country. Additionally, the recent clampdown on foreigners overstaying and sometimes working on tourist visas is somewhat based on this. China wants to catalogue all the people inside the country. Laxity in law enforcement is dissipating as the government becomes concerned that foreign elements might seek to upset the festivities.

This also explains the move to ban liquids on Beijing subways starting on May 9th, which appears to be based on International Flight legislation banning liquids on airplanes, and the ban on liquids in other major cities’ subways around the world.

Additionally, the ban of reporters from travelling freely in T*b*t is another example of China trying to present a good “face” to the world– if no one is seen protesting, then it doesn’t happen.

And of course China’s press has cracked down against “negative stories”, and the Hong Kong-based South China Morning Post and other media outlets routinely provide evidence of the country’s greater crackdowns on the free speech of the press. (“Free media for Games = media free of bad news, one city says.” South China Morning Post. March 20, 2007.); also see an April 30, 2007 report on: “The Olympics countdown – repression of activists overshadows death penalty and media reforms”

3.) China wants its economy to keep growing.

China has not reevaluated its currency extremely fast in order to control inflation since it fears (since 2007 in fact, when it had only appreciated 5% against the dollar since the July 2005 depegging, compared to the over 20% it has appreciated by April 2008) that exporters will not be able to survive if there is a rapid reevaluation. Chinese exports to the world have risen exponentially since the early 2000s as the multifiber agreement and trade protectionist agreements expired.

If exporters start suffering, then bad loans could accumulate back to levels not seen since 2005/6 when worries about China’s 10-45% nonperforming loans in state banks led some people to predict an imminent banking collapse– that did not happen, however (China claimed state banks NPLs were only 9.5%) . China seems to have cleaned up it banking act (surprisingly quickly), making its banks at least as solvent as those in America and Europe wracked by subprime.

Some argue that China’s state banks’ cleaned up their balance sheets. However, it appears that some exposure might be hidden. According to the 2006 NYT article: “China Construction had turned in the best numbers at that point, reducing its share to 3.92 percent of loan assets late in 2004, down from 17 percent in 2002… But the risk adviser began cautioning that bad loans were being hidden at the bank’s branches, erroneously labeled as good loans, even though company records showed that they were impaired. He told bank officials that in Beijing and Tianjin alone, he had uncovered $750 million in bad loans that had been deemed good.”

According to an article in Britain’s Telegraph from December 2006; “Less understood is that a sharp rise in the yuan could be the last straw for China’s banks, sitting on a network of loss-making factories living off marginal exports. Standard & Poor’s said a 25pc rise in the yuan combined with a 2pc rise in interest rates would slash corporate profits by a third.”

All these reasons may explain why China raised the reserve requirement to 17.5%. China’s leaders don’t want to risk a hit to their economy’s growth and want to insulate themselves from runs on banks that might happen if loans start to go bad.

As one professor said in regards to a 2006 report on China’s banks, quoted in the NYT: “If there is a slowdown, there will be a day of reckoning. It might be in a long, long time or it might be the day after the Olympics.”

BUT WHY WOULD RAISING GAS PRICES HURT THIS?

Considering all the unrest and trouble that China has recently suffered in T*b*t, and with increasingly loud voices calling for accountability in the construction of school buildings, China wants to avoid more unrest.

With inflation at around 8 percent on the year already, and likely to climb higher, increasing prices for gasoline and ending subsidies can send that rocketing even faster. China’s low per person GDP means that non-subsidized gas will negatively effect farmers, and small businesspeople disproportionately. This could cut into entrepreneurialship and send some to protest, like people have already done in India and Malaysia where “the pump price of gasoline rose Thursday by a whopping 41 percent to 87 cents a liter, or $3.30 a gallon.”

The question is, will gas shortages, caused by undersupply (due to price controls) result in more unrest than raising prices. It appears that as far as the Chinese leadership is concerned, they believe it is better to keep prices low, considering all the other hits to the world economy.

Therefore, I predict that if gas prices in China rise before the Olympics, they will rise much less than they have elsewhere in the world. More likely, the prices will be raised after the Olympic ceremonies are complete.

12 June, 2008 Posted by | China Economy, China Energy, China Future | , , , , , , , , , , | Leave a comment

John McCain’s China Policy

If John McCain, the presumptive American Republican Party presidential candidate wins in November 2008, his China policy appears to be one of seeking to maintain positive relations while attempting to convince China to become a responsible stakeholder in international affairs.

McCain’s voting record in the Senate indicates a relatively benign attitude toward China-US relations, but his recent campaign rhetoric indicates he might take a harsher line toward China. Then again, President Bush was harsh on China when he came into office, and that shifted sharply once he came to believe that although it might be popular to malign the country, the US might benefit by cooperating with the Asian state.

The often-quoted Yan Xuetong of “Qinghua University says Chinese-U.S. relations might be more stable under a McCain presidency than with either Democrat.”

I invite you to look below and come to your own conclusions about McCain’s statements on China.

CHINA DEMOCRATIZATION AND HUMAN RIGHTS

In (1999), McCain said that “we need not shrink from a strong advocacy of religious and political freedom [in China].” Shades of this statement were echoed McCain’s his April 2008 comments in regard to Beijing’s response to unrest in T*b*t; “If Chinese policies and practices do not change, I would not attend the opening ceremonies… It does no service to the Chinese government, and certainly no service to the people of China, for the United States and other democracies to pretend that the suppression of rights in China does not concern us. It does, will and must concern us.”

(All three Presidential candidates echoed similar statements regarding attendance of the opening ceremonies.)

McCain went on to urge China to engage in “a genuine dialogue” with T*b*ts spiritual leader. McCain said: “I have listened carefully to the D@l&i L&ma, and am convinced he is a man of peace who reflects the hopes and aspirations of T*b*t*ns.” He went on to say, “I urge the Chinese authorities to ensure peaceful protest is not met with violence, to release monks and others detained for peacefully expressing their views and to allow full outside access to T*b*t.”

DIPLOMACY AND ECONOMICS

He promotes economic engagement with China (1999), and voted for normalized trade relations with China in 2000. He appears to be a “free trade” Republican who believes that lowering barriers will increase democratization, make others wealthy and lead to peace. It appears McCain subscribes to the Thomas Friedman’s “Golden Arches Theory of Conflict Prevention” (Scroll down to see the definition).

However, in recent years, his statements in regards to China have turned more belligerent. In response to unsafe toy scandals in April 2008 McCain said “If I were president of the United States, the next toy that came into this country from China that endangered the lives of our children, it would be the last,”

McCain also implied that “the G-8 should be limited to democracies,” according to a Bloomberg article reposted on The China Post, which implies he would keep China, and Russia out of the world’s major economic decisions. The economic and political wisdom of keeping some of the most powerful economic powers away from the discussion table is a bit murky. Perhaps pressure-tactics might encourage a change in attitude by the countries- but that remains to be seen.

It appears McCain is willing to confront Beijing on issues such as their support for Myanmar (Burma) and China’s continued trade dealings with Sudan. As he said in May 2008, “”I would hope” Americans would sell stocks and other investments tied to Sudan, McCain told reporters… “because I think that government obviously is one that has done virtually nothing to prevent the genocide that is taking place in Darfur.”

His comments are a bit odd, coming as they did soon after China sent over 140 engineers and troops to Sudan, but it is a fact that China’s promotion of Sudan’s “national sovereignty” has resulted in it pushing for watered down UN votes sanctioning Sudan over its treatment of the minorities in the Darfur region.

CHINA AND TAIWAN

“Guarding against Chinese threats to our strategic interests in Asia is a sound rationale for helping reduce the growing threat to Taiwan from a mainland missile attack” (1999).

Considering McCain’s interest in East Asian security, it is likely he will support the continued de facto independence of Taiwan. He would unlikely, however, support de jure independence, seeing as he has previously spoken of a “One China” principle.

CONCLUSION

John McCain appears willing to challenge China on shoddy imports, and human rights. He also appears willing to seek to maintain American military interests in the region and may subscribe to a view that America’s long-term world-competitors are large states rather than small. This would encourage him to expand the size of the professional military, and perhaps purchase a larger amount of F-22s.

If McCain speaks most belligerently about China, it will be in regards to T*b*t, or Taiwan. While he has been noted for his compassion for the Sudanese people, beyond the stock sell-off he has had little to say directly on the subject.

Of course, American forces in East Asia are currently being drawn down as troops are moving gradually from  South Korea to Guam. The drawdown of US troops could ameloriate Chinese fears of American encirclement.

McCain would try to keep the trade levers open between the countries, believing trade would be mutually beneficial. McCain’s past record is of promoting economic policies that satisfy China, and benefit America by creating a more efficient supply-chain. These policies do much toward peacefully co-existing with the Chinese State.

It appears that a McCain presidency, though potentially confrontational in regard to Chinese human rights and shoddy merchandise, would tend to reflect George Bush’s status quo of criticising China, while still increasing trade, and working toward dialogue. That is, if the OLD free trade McCain overcomes the populist G-8 and dialogue-limiting McCain that has appeared in the 2008 election cycle. If the new, more belligerent McCain crafts China policy, then pressure and stresses might develop in the Sino-US international relationship.

* The major source article for this analysis was the CFR’s analysis of Presidential Candidates’ China views.

* John McCain’s major foreign policy article in Foreign Affairs is “An Enduring Peace Built on Freedom.”

12 June, 2008 Posted by | China Future | , , , , , , | 1 Comment