U.S., China can forge a more cooperative relationship
By Yang Jiechi, Published: July 8
Yang Jiechi is a state counselor of the People’s Republic of China.
Universities Face a Rising Barrage of Cyberattacks
Bill Mellon of the University of Wisconsin said the school has seen as many as 100,000 hacking attempts a day from China.
Analysts can track where communications come from — a region, a service provider, sometimes even a user’s specific Internet address. But hackers often route their penetration attempts through multiple computers, even multiple countries, and the targeted organizations rarely go to the effort and expense — often fruitless — of trying to trace the origins. American government officials, security experts and university and corporate officials nonetheless say that China is clearly the leading source of efforts to steal information, but attributing individual attacks to specific people, groups or places is rare.
…Berkeley’s cybersecurity budget, already in the millions of dollars, has doubled since last year, responding to what Larry Conrad, the associate vice chancellor and chief information officer, said were “millions of attempted break-ins every single week.”
Mr. [David J.] Shaw, who arrived at Purdue last year, said, “I’ve had no resistance to any increased investment in security that I’ve advocated so far.” Mr. [Bill] Mellon, at Wisconsin, said his university was spending more than $1 million to upgrade computer security in just one program, which works with infectious diseases.
China’s blackout of U.S. media can no longer be ignored
By Jim Sciutto, Published: July 10
Jim Sciutto was chief of staff at the U.S. Embassy in Beijing from 2011 to 2013. Before that, he was senior foreign correspondent for ABC News. He is on Twitter: @JimSciuttoChina.
From the moment we land in China, Americans must adjust to an aggressively censored version of the Internet, sanitized of the United States’ most iconic brands. Twitter, Facebook and YouTube are blocked. Google is partially blocked and sometimes runs through a ringer of digital interference that makes it painfully slow. The New York Times and Bloomberg News are off-limits, while the home-page Wall Street Journal and other U.S. news sites endure targeted blockages of stories deemed sensitive.
This censorship is not just an inconvenience but also a reminder that many leading U.S. media and technology companies are excluded, or largely excluded, from one of the world’s largest markets and this country’s largest trading partner.
The United States should act forcefully to make this media freedom issue also about trade.
The international community missed an opportunity when China was allowed to enter the World Trade Organization in 2001 while refusing to sign the media portion of the membership agreement.
But China’s Web-site-blocking appears inconsistent with its broader free-trade commitments under WTO and related agreements, including the General Agreement on Trade in Services (GATS) and the General Agreement on Tariffs and Trade (GATT). As the Georgetown Journal of International Affairs has noted, GATT Article III stipulates that countries should apply “no less favorable” treatment to goods or services imported from other member countries. China’s arbitrary blockage of U.S. Web sites would seem to violate this: The New York Times and Bloomberg are blocked while other U.S. and international news sites are not. Similarly, Facebook and Twitter are shut down, while Chinese social media sites, such as http://www.renren.com/”>Renren, are allowed to operate with censoring.
China’s blockages are either punitive or a matter of policy, or both. YouTube has been blocked since 2009 after a video was posted showing Chinese security forces beating Tibetans; Twitter and Facebook since the Chinese government nervously witnessed the role of social media in the Arab Spring; Google since 2010, after the company stopped censoring searches on its own. Bloomberg and the Times were restricted after publishing stories documenting the immense wealth of the relatives of China’s senior leaders.
China’s methods are sometimes more disturbing. American journalists covering sensitive topics have received messages containing threats to their safety. China has delayed or refused visas to many U.S. journalists, feeding suspicions that the approval process has become a form of blackmail. Meanwhile, the United States has granted and continues to grant visas to nearly 700 Chinese journalists to report in the States, most of whom work for Chinese state media.
U.S. officials have repeatedly raised these issues with their Chinese counterparts, so far with few results. The time has come to exact a price for unfair behavior.
First, at this week’s U.S.-China Strategic and Economic Dialogue, Washington has an opportunity to raise this as a violation of China’s trade commitments. Beijing has denied the New York Times and Bloomberg millions of dollars in revenue. Meanwhile, Chinese media — including the state-run China Daily, which is available on street corners across Washington — face no trade barriers in the United States. The effect on U.S. technology companies is even broader. By interfering with Google, for example, the government has helped funnel most of China’s 600 million Internet users to a homegrown search engine, Baidu.
Second, the United States can execute a more reciprocal visa policy. Denying visas to Chinese journalists would undermine the U.S. commitment to a free press. The State Department could, however, make it more difficult for executives of Chinese state media to obtain visas for travel not related to news-gathering.
Finally, the United States should name and shame the government ministries responsible, much as it has done with Chinese cyberattacks. U.S. media outlets have been reluctant to discuss China’s abusive tactics for fear of tempting a more aggressive crackdown. Washington can and should assume the burden.
As many diplomats have concluded, the United States must deal with the China that is, not the China it wants. And today China has no free press or Internet. Yet while American journalists are subject to Chinese laws, they have broken none in reporting the stories cited above. They are simply doing their jobs. Their employers are implicitly being asked to soften their China coverage or pay a price. To their credit, they have refused to be cowed.
A Google executive explained to me once that China is building its own massive intranet rather than open itself to the challenges of a vast and free Internet. Other countries similarly committed to stifling public discussion, including Russia, are following China’s lead.
The health and wealth of leading U.S. media companies in one of the world’s largest markets are a matter of national interest, not simply of China’s “internal affairs.” Americans should ask: Where will our premier media companies be in two, five or 10 years if they are shut out of China? And how will this affect our commitment to the free flow of ideas globally? U.S. core interests are at stake. We have every right to defend them, even in China.
‘Ding Jihao was here’: Chinese tourist, 15, defaces 3,500-year-old Egyptian temple and his family issue national apology
‘National embarrassment’: Ding Jinhao, from Nanjing in east China’s Jiangsu Province, wrote: ‘Ding Jinhao was here’ over hieroglyphics on the wall of an ancient Egyptian temple in Luxor
Short on graves, China turns to sea burials
Fang Xinwu/ColorChinaPhoto/AP – Workers of the Changchun Funeral Home put the ashes of the dead into the sea during a commonweal sea burial in Dalian in northeast China. With prices of graves skyrocketing, the Chinese government is trying to encourage sea burials.
Snack: But the Chinese are using so many chopsticks that they could cause widespread deforestation with their eating habits
China grapples with rash of fake officials
Posted on Monday, July 1, 2013
China’s young adults: Directionless, unhappy, but unlikely to rebel
By Lara Farrar | McClatchy Foreign Staff
SHANGHAI — For two days, Rocky had been playing video games in the tiny apartment he shares with three other men in Shanghai, a city of 23 million. He left only once, to buy food. The games “help me relax,” he said. “It helps me escape. I feel so tired.”
In June, the 32-year-old quit his job as a salesman with a traditional Chinese medicine company. His monthly wage was a meager $400. Rocky has had nearly a dozen jobs since he graduated from college a decade ago. His mother, who lived in a poor village in Shandong, a province a few hours north of Shanghai by train, died in May.
“I feel so guilty. She worked so hard to try to give me everything, and I could never do anything for her,” said Rocky, who requested that only his English name be used because he’s embarrassed by his poverty. “I feel so lost. I am such a loser. There is such a huge gap between my reality and my dreams. I feel so old.”
Rocky is part of a generation in China known as the post-’80s. Born in the 1980s, they’ve seen rapid change as China moved from a Maoist state to a market-oriented economy characterized by rampant consumerism and unprecedented inequality. Because of the country’s one-child policy, many of them are only children. They’re the first generation to grow up with the Internet, and in turn, have had more access to information – and perhaps greater exposure to individual censorship.
They’ve also had more access to higher education, yet their schooling has been in a system infused with an ideological curriculum that the Chinese Communist Party strengthened after the 1989 Tiananmen Square massacre, where pro-democracy demonstrations were crushed. They’re vastly different from their parents.
Chinese society has long been worried about the post-’80s and what will become of them. They’ve been called spoiled, irresponsible, materialistic, lazy and confused. “They are described as China’s lost generation,” said Minna Jia, who researched the age group while obtaining her doctorate at the University of Southern California. “People say this generation only cares about money, about themselves.”
That sentiment was given voice in May, when the People’s Daily, the newspaper that’s considered the mouthpiece of the Chinese Communist Party, published an editorial that had little good to say about the country’s young adults.
“Why has a generation that should be full of vigor and vitality become lethargic,” the newspaper asked. While it acknowledged that young people face overwhelming pressures, such as finding jobs, buying homes and taking care of their parents, it also blamed them for not having direction in their lives.
“They stepped into a highly mobile society but meanwhile suffer spiritual confusion,” the editorial said.
Chinese in their 20s and 30s were outraged. On social media they denounced the editorial – and the government policies that they think have put them in this spot. Their malaise isn’t something they’ve generated themselves, they complained, but the byproduct of the communist party’s social and economic engineering initiatives gone awry.
“We have four elderly people to take care of and one child to raise. Our children have no access to safe milk or fair education. High real estate prices make us homeless,” said one comment on Sina Weibo, the Chinese version of Twitter. “We want to look up into the starry sky, but who has clouded it?”
The high real-estate prices have made it impossible to buy, or even rent, a home. As a result, many 20- and 30-somethings are living together in cramped apartments in big cities. In Beijing, thousands of unemployed college graduates, mostly from the post-’80s generation, live in urban slums known as “ant villages.”
Owning a home is a virtual prerequisite for marriage here, especially for men. Yet skyrocketing prices make it hard to buy apartments in metropolises such as Beijing and Shanghai, so many young people are postponing getting married.
Meanwhile, the surge of educated young people entering the labor market has made competition fierce for jobs and has depressed salaries, which often are barely enough to cover basic necessities.
As only children, the post-’80s generation also must shoulder the burden of caring for aging parents and grandparents, not just their own, but also their spouses’.
Endemic corruption and nepotism have meant that those in their generation whose families have powerful connections and wealth are privy to the best opportunities. The food that the post-’80s eat is unsafe, and the environment they live in is polluted.
“We have no house, no car, no money,” another Internet user said. “No rights of speaking. No chances. We don’t have anything we long for. Therefore, we have become silent and helpless.”
“If I want to buy a house, I can’t eat or drink for 30 years,” wrote Zuoyeben, a popular social critic. “I belong to the post-’80s generation. How is it possible for me not to be dispirited? It’s enough . . . accomplishment that I’m somehow still alive!”
Interviews with 20-somethings confirm their unhappiness.
Xia Tianyi, 25, works at a university in Shanghai. She said most of her friends “admit they have some sort of psychological problems.” She also said that many of them would like to leave China.
“Our childhood was very pure and simple,” Xia said. “When we grow up, the changes that took place happened overnight. Everybody feels so anxious and doesn’t know what to do. We can’t escape an environment where everyone talks about money.”
Wang Wei, 27, who works for a local government in Nantong, a coastal city near Shanghai, had a similar downcast view.
“I don’t think the situation will get better,” she said. At night, she works a shift at a Kentucky Fried Chicken to help make ends meet. She said she couldn’t get a promotion in her government work because “it is very clear that those who get promotions all have family connections. Opportunities are not really fair for capable people.”
“All we can do is accept the way things are,” she said.
Despite the widespread unhappiness, few expect the post-’80s to demand political change.
Zhu Dake, an outspoken cultural critic and professor at Shanghai’s Tongji University, said the Tiananmen crackdown had crushed hopes for democracy, freedom and justice while stricter ideological education and the rapid expansion of free market reforms replaced it with a cynical outlook.
“They lost the pursuit of their beliefs,” Zhu said. “Materialism became the priority, and they came to understand that beliefs are meaningless. The result is that they became the most pragmatic and materially oriented generation because they were left no other choice.”
“They were born in the wrong age,” he said. “They are the sacrifice of history.”
“They very much support the government in many ways,” said Liu Fengshu, the author of the book “Urban Youth in China: Modernity, the Internet and the Self.” “I think people will protest if the situation really goes beyond their tolerance level, but it is very hard now to say how much young people can bear. They are very nationalistic.”
Mandy Zi is an example of much that the disaffected resent. The 27-year-old works for an international company in Shanghai, hopes to buy an apartment with her boyfriend soon and can afford luxury products. Her father was in the military and her mother worked for a state-owned bank. When she was young, she studied abroad.
She acknowledges the dark side of China today, but she remains an optimist.
“Things happen a lot here in China that sometimes exceed our ethical standards, and I think it is just getting more and more outrageous. So many scandals, so much unfairness,” she said. “Still, I think economic growth gives us a lot of opportunities. China is still a place of hope. That is my conclusion.”
The Demanding Off-Hour Escapes of China’s High-Tech Workers
Thousands of young Chinese come to the city of Zhengzhou to work in electronics factories. To escape the monotony of the assembly line, many take up roller skating as a hobby, like at the outdoor roller rink. More Photos »
For Chinese Students Abroad, Personal Freedoms—Not Political—Are What Matter
Unlike their revolutionary predecessors, today’s students leave China in order help themselves, not their country.
There are nearly 200,000 Chinese students studying in the United States . (Paul Sancya/AP)
As Beijing air pollution worsens, some American expats clear out
Business opportunities abound in China, but some U.S. executives working in the capital say the health of their families is more important.
Beijing in May. “I want them to leave before they hate this place,” one American executive said of his family’s decision to leave pollution-choked Beijing. (Mark Ralston, AFP/Getty Images / May 19, 2013)
By Don Lee, Los Angeles Times
June 20, 2013, 6:19 p.m.
BEIJING — After nearly two decades in Beijing, David Wolf knew it was time for a change when his 11-year-old son, Aaron, somberly asked him, “Dad, when you were growing up, did you ever have PE outdoors?”
Wolf had grown up in smog-choked Los Angeles in the 1970s, but even that wasn’t nearly as bad as Beijing today. His son, like many young students in the city, has been kept inside for months, with the luckier children getting the chance to exercise under huge air-filtered domes that their international schools have built.
Later this month, when school lets out, Aaron and his mother will move to Southern California for good, and Wolf begins a new way of doing his consulting work, splitting his time between Beijing and their new home at Channel Islands Harbor.
“I want them to leave before they hate this place,” Wolf, 49, said on a recent morning as he checked Beijing’s air quality on a smartphone app, something that many people here, expats and locals alike, routinely do several times a day.
After a brutal winter, when Beijing and some other cities in northern China logged their worst air pollution readings on record, and a somewhat better but still unacceptably unhealthful spring, some people are starting to escape from Beijing.
Although Beijing officials have said sulfur dioxide counts have dropped in recent years, other major air quality measures and the soupy haze that often blankets the city tell a different story. China’s rapid economic growth and urbanization have brought many more pollution-spewing vehicles to the city, and Beijing also has the misfortune of being surrounded by mountains that trap the soot-filled air from neighboring provinces that churn out huge amounts of steel, cement and other products for the domestic market.
No one knows how many have fled or made concrete plans to leave, but expats who have been in China’s capital a while seem to know at least a person or two who are getting out, and many more who are talking about it.
So far it has been a trickle rather than an exodus. With China’s economy still growing much faster than other major economies — and Beijing in many ways at the center of it all — it isn’t easy for people, especially executives, to walk away from the opportunities here.
Residents of China “know there are issues of food quality, air quality, even water and rice quality. This is a given,” said Simon Wan, the global head of Cornerstone International Group, a major executive search firm based in Shanghai. “They are taking all kinds of protection,” such as wearing surgical masks and buying air filtration equipment.
As for potential new arrivals to China, Wan said, “this is not a deal breaker…. The reality is that in the U.S. and Europe, the job scope and size are not as interesting.”
Still, China’s poor air is becoming an increasing economic concern, with sickness and stay-indoors alerts cutting into productivity and profits. Given a choice, senior managers are asking to work in Shanghai rather than Beijing, in part because of the difference in air quality.
The American Chamber of Commerce’s membership keeps growing in Shanghai while flat-lining in Beijing. Hardship pay for being based in China, a thing of the past, is starting to come back, says Christian Murck, the chamber’s president in Beijing.
Groups like the American and European chambers here have raised public concerns, and with many Chinese citizens increasingly vocal about pollution and health worries, China’s political leaders have pledged to take tougher action. Saying that the country will not sacrifice the environment for short-term economic gains, President Xi Jinping has vowed to punish officials who approve projects that cause serious pollution.
Last week, the State Council, China’s equivalent of a Cabinet, adopted a set of measures to reduce air pollution, including an order that heavy-polluting industries such as steel and petrochemicals release environmental data to the public and gradually comply with international emission limits.
In the run-up to the 2008 Olympics in Beijing, factories around the city were ordered to curtail production, and use of cars, which have been multiplying, was restricted as well. But policies that would make more-lasting reductions in emissions of burning coal and fuel, through new technologies and standards, have been blocked by China’s petrochemical, steel and other heavy industry groups.
“We are not talking about companies that can be easily pushed around,” said Murck, referring to giant state-owned enterprises that dominate the economy and are politically well connected.
Murck, 70, himself is leaving Beijing this summer, returning to New York after 17 years in mainland China. He says it wasn’t because of the pollution, although he recalled one winter day when the fine particulate matter in the air in central Beijing — the so-called PM 2.5 measure — surpassed 700 micrograms per cubic meter, far into the hazardous zone. That same day, he said, the PM 2.5 reading was 19 in New York City.
“I thought to myself, ‘Well, one more reason to go to New York,’” he said.
As recently as late May, Beijing’s air quality measure almost reached 300, according to the American Embassy in Beijing. A reading above 300 is considered hazardous, although the U.S. Centers for Disease Control and Prevention said last year that the average fine particle pollution count at 16 airport smokers’ lounges was 166.6.
(The U.S. Environmental Protection Agency in December set a new national standard for PM 2.5 at 12, down from 15, established in 1997.)
Calvin Tchiang of the Bay Area and his wife, Melody, who was raised in Taiwan and Los Angeles, moved to Beijing several years ago. Fluent in Chinese, the couple seemed to have everything going for their budding careers. Calvin worked for an investment company developing Chinese partners interested in biotech; Melody had a job as a translator.
But life in Beijing began to change about a year ago when they had a baby, Xavier, and the pollution became intolerable. The Tchiangs put three air purifiers in their apartment, one for each room. The machines whirred 24 hours a day. When the PM 2.5 dropped under triple digits, which was rare, they opened the windows and took their baby outside.
When they went out, though, the couple wore similar Darth Vader-like respirators, Calvin in black and Melody in red. Melody found herself checking the PM 2.5 reading several times a day. Whenever it hit 300, she would not go out at all.
“There were instances when I became a recluse,” Melody said.
The Tchiangs returned to the U.S. in April, settling near Cincinnati. Calvin is still with the same firm but doing more investment work that can be undertaken from the U.S. Melody is content for now to be a stay-at-home mom.
They say it hasn’t been easy readjusting culturally. But one thing they don’t worry about is taking their 11-month-old outside.
“I was just out today walking in the park with a few moms,” Melody said on a recent evening. Calvin added, “We appreciate just walking to the local supermarket.”
A Chinese Virtue Is Now the Law
A group of elderly men at a park in Beijing. The Chinese government enacted a law aimed at compelling adult children to visit their aging parents.
By EDWARD WONG
Published: July 2, 2013
BEIJING — They are exemplars from folklore who are familiar to Chinese schoolchildren. There is the Confucian disciple who subsisted on wild grass while traveling with sacks of rice to give to his parents. There is the man who worshiped wooden effigies of his parents.
But Chinese officials apparently think it is not enough these days to count on tales and parental admonitions to teach children the importance of filial piety, arguably the most treasured of traditional virtues in Chinese society.
The government enacted a law on Monday aimed at compelling adult children to visit their aging parents. The law, called “Protection of the Rights and Interests of Elderly People,” has nine clauses that lay out the duties of children and their obligation to tend to the “spiritual needs of the elderly.”
Children should go home “often” to visit their parents, the law said, and occasionally send them greetings. Companies and work units should give employees enough time off so they can make parental visits.
The law was passed in December by the standing committee of the National People’s Congress. It does not stipulate any punishments for people who neglect their parents.
Nevertheless, that officials felt the need to make filial duty a legal matter is a reflection of the monumental changes taking place throughout Chinese society.
Many aging parents in China, as in other industrialized nations, complain these days about not seeing their children enough. And the children say the stresses of daily life, especially in the rapidly expanding cities, prevent them from carving out time for their parents.
“China’s economy is flourishing, and lots of young people have moved away to the cities and away from their aging parents in villages,” Dang Janwu, vice director of the China Research Center on Aging, said in a telephone interview on Tuesday. “This is one of the consequences of China’s urbanization. The social welfare system can answer to material needs of the elders, but when it comes to the spiritual needs, a law like this becomes very necessary.”
Mr. Dang said the law had already been successful in prompting significant discussion of the issue.
Others have been more skeptical. On Monday, Guo Cheng, a novelist, told the 1.3-million followers of his microblog: “Kinship is part of human nature; it is ridiculous to make it into a law. It is like requiring couples who have gotten married to have a harmonious sex life.”
Nevertheless, the issue of abandoned aging parents is a real one across China. In 2011, Xinhua, the state news agency, ran an article that said nearly half of the 185 million people age 60 and older live apart from their children. People residing in a different city from their parents, including legions of migrant workers, usually find time to go home only during the Lunar New Year holiday.
On the same day the new law went into effect, a court in the eastern city of Wuxi ruled that a young couple had to visit the wife’s 77-year-old mother — who had sued her daughter and son-in-law for neglect — at least once every two months to tend to her “spiritual needs,” as well as pay her compensation, Chinese news organizations reported.
“Mental support is an important aspect in the protection of old people’s rights and interests,” said the head of the court, Yuan Ting, according to Xinhua.
The classic text that has been used for six centuries to teach the importance of respecting and pampering one’s parents has been “The 24 Paragons of Filial Piety,” a collection of folk tales written by Guo Jujing. Last August, the Chinese government issued a new version, supposedly updated for modern times, so today’s youth would find it relevant. The new text told children to buy health insurance for their parents and to teach them how to use the Internet.
Guangzhou Daily, an official newspaper, ran an article in October about a 26-year-old man who pushed his disabled mother for 93 days in a wheelchair to a popular tropical tourist destination in Yunnan Province. The article called it “by far the best example of filial piety” in years.
Shi Da and Patrick Zuo contributed research.
China may not overtake America this century after all
Doubts are growing about whether China can pass the US to become the world’s biggest economy this century amid warnings that the country’s 30-year miracle is nearing exhaustion.
China’s catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc. Photo: Getty
By Ambrose Evans-Pritchard
3:21PM BST 08 May 2013
The world’s tallest tower should have been built by now. Officials said last year that the great edifice with 220 floors would be erected in three months flat in China’s inland city of Changsha by March, snatching the crown from Dubai’s Burj Khalifa.
The deadline has come and gone, yet the wasteland sits untouched. It now looks as if the fin d’époque project – using prefab blocs – may never be approved. Even China knows its limits.
Prime minister Li Keqiang has asked the State Council to clamp down on the excesses of the regions. Not before time. A top regulator says local government finances are “out of control”.
Mr Li aims to cut China’s economic growth to a safe speed limit of 7pc next year and rein in rampant investment – still a world record 49pc of GDP – before it traps the country in a boom-bust dynamic of frightening scale.
Vested interests are conspiring to stop him, launching a counter-attack from their power-base in the $6 trillion state industries. Even so, uber-growth is surely over.
China’s catch-up spurt has a few more years to run in the Western hinterlands perhaps, but when the full story comes out we may find that nationwide growth has already fallen below 7pc.
Mr Li complained in a US diplomatic cable released on WikiLeaks that Chinese GDP statistics are “man-made”, confiding to a US diplomat that he tracked electricity use, rail cargo, and bank loans to gauge growth. For a while, analysts use electricity data as a proxy for GDP but the commissars kept a step ahead by ordering power utilities to fiddle the figures.
The National Bureau of Statistics has since revealed that data collected by the regions overstates GDP by 10pc, though they have not acted on the insight. It is well-known why this goes on. The reward system of the Communist hierarchy has been geared to talking up growth, and officials gain kudos by lowering the stated “energy intensity” of their zone.
China’s Development Research Council (DRC) expects growth to drop to 6pc by 2020. It could be much lower. The US Conference Board says it will average 3.7pc from 2019-2025 as the ageing crisis hits. Michael Pettis from Beijing University thinks it is likely to slow to 3pc to 4pc over the next decade, deeming this entirely desirable if it comes from taming the runaway state enterprises.
If so, China’s growth may not be much higher than the new consensus estimate of 3pc for a reborn America, powered by its energy boom and the revival of the chemical, steel, glass, and paper industries.
All those charts showing China’s economy surging past the US by 2030, or 2025, or even 2017, will look very credulous. China may not surpass the US this century.
A Nation Losing Ground
As of last year US GDP was roughly $15.7 trillion, compared to $8 trillion for China on a nominal exchange rate basis, the measure that matters for gauging economic power.
China’s output is 75pc of US levels on a purchasing power parity (PPP) basis but even on this measure the Chinese `sorpasso’ is looking less certain. Clyde Prestowitz, an arch US `declinist’ who has just thrown in the towel, says China may “never” catch the US on any relevant measure. That is a stretch, but not impossible on a forecastable horizon.
“Keep in mind the next time you are in China and find yourself choking on the foul air that the things making the air foul are counted as positives for GDP. If you adjust Chinese GDP for environmental degradation and for over-investment in things that will never be used, it falls in size by 30-50 per cent. Much of this would show up as non-performing loans in most economies but since such loans are never recognised in China, it will show up as slower growth in future years,” he said.
A new view is taking hold in elite circles that the banking crash in 2008 was a nasty shock for the US, but not a crippling blow to America’s creative enterprise. US governing institutions rose to the challenge. It was however a crippling blow to Europe, and a more subtle blow to China in all kinds of ways.
Richard Haass, president of the US Council of Foreign Relations, says the world may already be in the “second decade of another American century” without realising it.
On almost every key measure, including the fertility rate and high science, there is no credible challenger. Core US defence spending is still greater than that of the next 10 countries combined. “The American qualitative military edge will be around for a long, long time,” he said.
Mr Haass says America has managed its dominance in such a way that it has not brought about a containment alliance against it by threatened powers, and that is no small achievement. Like Wagner’s music, US diplomacy is better than it seems.
Yes, the US faces a debt hangover, but so does China after the state banks let rip with private loans keep the boom going through the downturn. Fitch Ratings has just downgraded China’s debt, warning that credit has jumped from 125pc to 200pc of GDP over the last four years, with mounting reliance on shadow banking that lets banks circumvent loan-to-deposit curbs. This is why George Soros has been warning that there could be a “run” on China’s state banking system akin to the Lehman bust.
Total credit has jumped from $9 trillion to $23 trillion in four years, an increase equal to the entire US banking system.
America has moved in the opposite direction. Its banks now have loan-to-deposit ratio of around 0.7, and the biggest safety buffers in three decades. The Congressional Budget Office says US Treasury debt held by the public has jumped from 40pc to 73pc. This is the sort of damage normally seen in wars, but the US has recovered from bigger wars before, and from much higher debt levels. The CBO thinks the budget deficit will fall to 2.4pc by 2015. Growth will then whittle away the debt ratio for a few years.
China’s premier Li is fighting a battle against those in the Politburo who delude themselves that the Lehman crisis validates China’s top down control. He gave his “unwavering report” last year to a joint DRC and World Bank report on the dangers of the “middle income trap”.
Dozens of states in Latin America, Asia, and the Middle East have hit an invisible ceiling over the last fifty years, languishing in the trap with per capita incomes far behind the rare “breakout” stars, Japan, Korea, and Taiwan. The trap is the norm.
The report warned that China’s 30-year miracle is nearing exhaustion. The low-hanging fruit of state-driven industrialisation and reliance on cheap exports has already been picked. Stagnation looms unless Beijing embraces the free market and relaxes its suffocating grip over the economy. “Innovation at the technology frontier is quite different in nature from catching up technologically. It is not something that can be achieved through government planning,” it said.
Even if Mr Li succeeds in pulling off this second economic revolution – and we should salute him for trying – China’s growth rate is going to slow drastically. Demography will see to that.
The work force began to contract in absolute numbers last year, falling by 3.5 million. The International Monetary Fund says it will now go into “precipitous” decline, and much earlier than thought.
If you are wondering why police are still seizing pregnant women in Chinese cities and delivering them to clinics for forced abortions when they cannot pay the fine for breaching the one-child policy, you are not alone.
The IMF says the reserve army of peasants looking for work peaked at around 150m in 2010. The surplus will evaporate soon after 2020, the so-called Lewis Point. A decade later China will face a shortage of almost 140m workers. “This will have far-reaching implications for both China and the rest of the world.”
China’s working age population: Source: IMF
China’s ageing crisis is tracking Japan’s tale with a 20-year delay. China can expect to see the same decline in “marginal productivity” that has afflicted every other facing a rise in the old-age dependency ratio.
The authorities can of course keep the game going if they wish with another burst of credit, but risks are rising and the potency of debt is wearing off. The extra output created by each yuan of lending has halved in four years. Mr Li knows the game is turning dangerous.
A 2010 book by People’s Army Colonel Liu Mingfu – “China Dream: Great Power Thinking and Strategic Posture in the Post-American Era” – is still selling like hot cakes in China. Yet it already has a dated feel, a throwback to peak hubris.
China has everything to play for. With skill and a blast of freedom, it can take its rightful place at the forefront of world affairs. But nothing is foreordained.
World’s carmakers woo Chinese consumers
Chinese Way of Doing Business: In Cash We Trust
Customers looking at BMWs at a dealership in Ordos in north China. Large purchases require vast quantities of 100-renminbi notes.
By DAVID BARBOZA
Published: April 30, 2013
SHANGHAI — Lin Lu remembers the day last December when a Chinese businessman showed up at the car dealership he works for in north China and paid for a new BMW 5 Series Gran Turismo — entirely in cash.
“He drove here with two friends in a beat-up Honda,” Mr. Lin recalled. “One of his friends carried about $60,000 in a big white bag, and the buyer had the rest in a heavy black backpack.”
Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency.
This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.
For all China’s modern trappings — the new superhighways, high-speed rail networks and soaring skyscrapers — analysts say this country still prefers to pay for things the old-fashioned way, with ledgers, bill-counting machines and cold, hard cash.
Many experts say it is not a refusal to enter the 21st century as much as wariness, of the government toward its citizens and vice versa.
Doing business in China takes a lot of cash because Chinese authorities refuse to print any bill larger than the 100-renminbi note. That’s equivalent to $16. Since 1988, the 100-renminbi note, graced by Mao Zedong’s visage, has been the largest note in circulation, even though the economy has grown fiftyfold. (The country’s national icon, Chairman Mao, appears on nearly every note: the 1-, 5-, 10-, 20, 50- and 100- renminbi note.)
Chinese economists and government officials often suggest that printing larger denomination notes might fuel inflation. But there is another reason.
“I’m convinced the government doesn’t want a larger bill because of corruption,” said Nicholas R. Lardy, a leading authority on the Chinese economy at the Peterson Institute for International Economics in Washington, noting that it would help facilitate corrupt payments to officials. “Instead of trunks filled with cash bribes you’d have people using envelopes. And there’d be more cash leaving the country.”
All the buying, bribing and hoarding forces China to print a lot of paper money. China, which a millennium ago was the first government to print paper money, accounts for about 40 percent of all global paper currency output, according to a report published by the China Banknote Printing and Minting Corporation. Adjusting for the size of its economy, China has about five times as much cash in circulation as the United States.
In the United States, the highest denomination printed is $100; in Japan, it is the 10,000-yen note, worth about $100; the 500 is the highest-denomination euro note, worth about $650. No major economy has limited itself to such a low denominated bill as China.
By making the 100-renminbi note the largest bill, the nation’s citizens need more of it to buy a television or Swiss watch, never mind a car, home or a yacht, which China’s state-run media said was bought a few years ago by men bearing two suitcases filled with cash.
Following those paper bills as they course through this booming economy offers a fascinating glimpse into how China’s financial system works, and how parts of the country remain stuck in yesteryear.
“In large parts of China, it still looks like the U.S. in the 1950s: most everything is in cash,” said Jeffrey R. Williams, executive director of the Harvard Center Shanghai and a former bank executive who has worked in China for more than 30 years. “In the U.S., you might have one bill-counting machine at a bank, but here every teller has one.”
Although China’s coastal cities have flourished during the 30 years of economic prosperity, economists say the country’s interior remains poor and disconnected from the more modern aspects of the financial grid. As a result, the poor prefer to do business in cash.
The rich also like to deal in cash, and they typically hide their money in the underground economy to avoid government scrutiny of their wealth. As was the case in other developing economies of Asia, easily traceable credit cards and checks are not commonly used.
“The average Chinese trusts neither the Chinese banks nor the Communist Party,” said Friedrich Schneider, an authority on shadow economies around the world and a professor of economics at the Johannes Kepler University of Linz in Austria. “This is simply a mistrust of government. And so lots of people deal only in cash.”
That lack of trust fosters a cat-and-mouse game between the government and its subjects, analysts say. Executives make secret cash deals to earn outside consulting fees while working at state-run companies. The government responds by trying to penetrate a vast underground economy, where off-the-books transactions are conducted almost entirely in cash, because it is harder for the authorities to trace and tax.
Often, the culprits are the very government officials who are supposed to be upholding the laws.
Take the case of Wen Qiang, the former police chief in the city of Chongqing. He was caught in 2009 with nearly a million dollars in renminbi, carefully wrapped in plastic bags and hidden in a water tank at a relative’s home.
In another case, the brother of China’s former railway minister was caught hiding about $5 million worth of renminbi at his home, some of it stored so poorly that the mildewed bills broke one government bill-counting machine.
To keep a lid on the illegal cash transfers, China restricts cross-border money transfers and places limits on foreign currency exchange.
Understandably, printing all that money is a major endeavor. The China Banknote Printing and Minting Corporation runs 80 production lines with 30,000 workers, six bank note companies, two paper mills, a printmaking company, a plate-making corporation and a firm that produces special anticounterfeiting security lines.
The People’s Bank of China, which oversees the operation, declined to comment on what the government calls the “name cards of the Republic.”
Perhaps those paper bills should come with a warning about storage practices. Last month, a migrant worker in Shanghai discovered that mice had chewed into tiny pieces the $1,200 his wife stored in a closet.
A local bank agreed to exchange the money if the man could reassemble at least three-quarters of a bill.
“But the bills are now in small pieces and it’s almost impossible to fix them,” said Zhao Zhiyong, the 37-year-old worker. “Who could know that the money would be chewed by mice?”
China’s shadow banking boom rings alarm bells
China announces end to controls on bank lending rates
By Kevin Yao and Jason Subler, Published: July 19
BEIJING — China said Friday that it is ending controls on bank lending rates in a move toward creating a market-oriented financial system to support economic growth.
Reform advocates see an overhaul of China’s interest rate policy as one of the most important changes required to keep its growth strong. Banks currently lend mostly to state industry rather than entrepreneurs who create China’s new jobs and wealth. Allowing banks to negotiate their own rates with borrowers could channel more credit to private enterprise.
“This is a significant development for China’s financial sector in the direction of having interest rates determined by market forces rather than government fiat,” Mark Williams of Capital Economics said in a report.
The scrapping of controls on lending rates is the first major economic reform under the government of President Xi Jinping, who took office earlier this year and faces a slowdown in China’s torrid growth. Xi and other leaders have promised an array of changes, but, until Friday, no details had been released.
“This reform is to further develop the basic role of market allocation of resources — an important measure to promote financial support for the development of the real economy,” a central bank statement said. The change takes effect Saturday.
The end of controls could allow banks to charge lower rates to more credit-worthy borrowers, lowering costs for healthy businesses and spurring growth. Until now, the lower limit on lending rates was set at 0.7 times the state-set benchmark interest rate.
Private-sector borrowers also might be able to get more access to credit by paying more. That could help to reduce their reliance on a vast, unregulated underground credit market.
Regulators allowed that market to flourish over the past decade to support entrepreneurs. But they have tightened controls over the past four years since discovering state banks were putting money into such unsupervised lending and taking on unreported risks.
Friday’s move could foreshadow another significant change in the world’s No. 2 economy — raising low rates paid to savers. There was no word on when that might happen.
Beijing has long used its banks to subsidize state industry with low-interest loans. Savers who had few alternative places to put their money were paid low rates on deposits that in recent years failed to keep up with inflation, meaning Chinese families lost money by leaving it in the bank.
Shanghai at night: a Chinese bank topped the world league table for the first time.Photo: Alamy
Witnesses to Tiananmen Square struggle with what to tell their children
Elite in China Molded in Part by Tiananmen
Student protesters faced police officers in Tiananmen Square in April 1989 while grieving for Hu Yaobang, a former Communist Party leader and liberal whose death set off the protests.
By ANDREW JACOBS and CHRIS BUCKLEY
Published: June 3, 2013
BEIJING — For four days, more than 400 of China’s brightest political minds gathered in smoke-clouded halls at a Beijing hotel, vigorously debating the nation’s future.
It was April 1989, and after a decade of economic transformation, China faced a clamor for political liberalization. Days later, protests erupted in Tiananmen Square, and the lives of those at the meeting took radically different turns. Several are now national leaders, including Li Keqiang, China’s prime minister. Others ended up in prison or exile, accused of supporting the demonstrations that shook the Communist Party and ended with soldiers sweeping through the city on June 4, shooting dead hundreds of unarmed protesters and bystanders.
“The atmosphere at the meeting was to let a hundred flowers bloom and a hundred schools of thought contend,” said Chen Yizi, who helped organize the conference. “Afterwards, it was impossible to hold a meeting like that where everyone was willing to debate different points of view.”
This year is the 24th anniversary of the bloodshed, and the first under a party leadership dominated by officials with such intimate and ambivalent ties to the events of 1989. Many top leaders served their political apprenticeship in the 1980s, when the boundaries between the permissible and the forbidden were not as stark and heavily policed as they are now. Their careers and friendships, and sometimes their viewpoints, overlapped with intellectuals, officials and policy advisers who were jailed or dismissed after the June 4 crackdown.
Few expect China’s new leaders, installed in November, to overturn the official verdict that the protests were a counterrevolutionary rebellion that had to be crushed. But the immersion of today’s leaders in the political experimentation of the 1980s raises the question of whether they will be more open to new ideas and discussion than their immediate predecessors in high office.
Chinese leaders openly debate competing approaches to the economy, but their calls for political liberalization have become increasingly rare. For now, at least, any potential embrace of the more freewheeling spirit of the 1980s appears to be hindered by the conformism demanded of those who have ascended in the hierarchy — and their dread of being accused of ideological heresy.
Yet the lessons of June 4 and its repressive aftermath may weigh on the new leaders, especially if they are confronted by another political uprising, said Wu Wei, a former aide to Zhao Ziyang, the reform-minded party leader ousted shortly before the crackdown.
“For those in power now, it’s still a heavy political burden, even if it’s one that they can never openly discuss,” Mr. Wu said. “Now the people who took part in that time are middle-aged or older, and it’s still a knot in their hearts.”
Prime Minister Li, now 57, was one of six current members of the elite 25-member Politburo who attended the meeting, according to Zhong Dajun, an editor for the official Xinhua news agency at the time. Others included Li Yuanchao, the vice president; Wang Qishan, the chief of anti-corruption investigations; and Yu Zhengsheng, who deals with policy toward religious groups, ethnic minorities and nonparty groups.
Many of these future Chinese leaders were among the hundreds of thousands of students who crowded into universities beginning in the late 1970s, eager for knowledge after years of rote-learning Mao Zedong Thought during the Cultural Revolution, when colleges were mostly shut or paralyzed by ideological campaigns. Photographs showed them dressed in the blue or green cotton coats of the Mao era, a reminder of the drab conformity they yearned to escape.
Throughout the Tiananmen upheaval, Xi Jinping, the nation’s current president, was a local official in Fujian Province in China’s southeast, far from the protests in Beijing. But his father, Xi Zhongxun, a veteran Communist turned supporter of economic reform, had been a friend of Hu Yaobang, the Communist Party leader demoted in 1987 for his liberal tendencies and whose death in 1989 sent thousands swarming into Tiananmen Square to voice their grief and demand steps toward democracy.
There are some indications that the elder Mr. Xi obliquely signaled opposition to martial law but stepped into line after June 4, said Warren Sun, a historian at Monash University in Australia.
At the time, China had abandoned the ideological zealotry of Mao’s era and pursued market reforms under Deng Xiaoping that allowed farmers, factories and traders to escape state fetters. The economic changes were accompanied by a ferment of new ideas and calls for political opening and cultural renovation, despite counteroffensives against “spiritual pollution” led by conservatives.
“What we all shared was the belief that China had to reform, and to do so urgently,” said Chen Ziming, a writer. “The only real division among students and scholars was whether to reform the economy first, or take on political reform first, or do both at the same time.”
Many of China’s current leaders started climbing the political ladder in this febrile atmosphere, when it was not unusual for officials to mix with advocates of more radical change, and even to show some sympathy for them. As a student, Li Keqiang socialized with Hu Ping and Wang Juntao, two firebrands who threw themselves into the unbridled student elections of 1980. Friends say Mr. Li sometimes joined in campus salons, where students stayed up late into the night debating electoral politics, Western philosophy and the excesses of authoritarian rule.
Later, friends say, Mr. Li was cajoled by party officials into giving up the chance to study abroad and instead became a cadre in the Communist Youth League.
“At the time, we had a lot of views in common,” said Mr. Wang, who was jailed after June 4 and left for the United States in 1994. “A lot of the issues that came to divide us hadn’t arisen yet.”
Other future leaders came from similar backgrounds. Wang Qishan, the current anticorruption chief, won prominence in the early 1980s as one of the “four reform gentlemen,” young intellectuals who advocated shifting away from a rigidly planned economy. Later that decade, he sat on the editorial committee of Toward the Future, a series of books avidly read by students.
Chen Yizi, the former leader of the government institute that organized the Beijing conference, recalled having long chats with Mr. Wang and one long conversation with Mr. Li in 1988. Referring to China’s recently retired leadership, Mr. Chen said, “This generation should be more enlightened than Hu Jintao, Wen Jiabao and their generation.”
By 1989, divisions were tearing at the Communist leadership. Despite a decade of economic growth, students and intellectuals were dismayed by corruption and the party’s reluctance to emulate the changes sweeping the Soviet bloc. The broader public was also irate about official privilege and price reforms that had unleashed inflation.
Those tensions flared after the death of Hu Yaobang, when the mourning in Tiananmen Square escalated into demands to curtail the power and privilege of the party’s elite through steps to democracy and free speech.
Mr. Zhao and other relatively moderate members of the party hierarchy advocated measured political liberalization and press freedoms to defuse discontent. But hard-liners argued that liberalization was a menace, not a cure. They had the backing of Mr. Deng, who was more enthusiastic about economic reforms than about political compromise.
Wang Juntao, the democracy advocate, recalled meeting Li Keqiang, his former university acquaintance, for a last time in mid-May 1989, when Mr. Li was among a group of officials trying to coax students to end a hunger strike and return to class. “As a student, he used to speak his mind,” Mr. Wang said. “Now some of that pushiness was gone. He’d become an official who deferred to his superiors, but I still think he had a sense of justice.”
By the time the government declared martial law in Beijing on May 20, Mr. Zhao’s authority was broken, and Mr. Deng and party conservatives prepared a harsher response to students clogging Tiananmen Square. Two weeks later, soldiers and tanks plowed toward the square, and China went through a convulsion of purges and imprisonments.
To navigate these reversals, former acquaintances said Mr. Li and other Communist Youth League officials showed a ruthless pragmatism to ward off suspicions of disloyalty, taking steps that included attending meetings at which they denounced the protests as counterrevolutionary. “To survive in the party, you have to become an opportunist,” Mr. Wang said.
Soon after the June 4 crackdown, Xi Jinping’s wife, Peng Liyuan, a singer in a military troupe, was among the performers who entertained troops in Tiananmen Square. Photographs of her performance, published in a People’s Liberation Army magazine in 1989, spread briefly on the Chinese Internet this year before disappearing — a reminder of the sensitivities of that time.
“The party system changes people,” said Mr. Wu, the former official. “Once you go down that path, you learn that to defend yourself, you have to defend the system. But I don’t believe that era left no traces on them.”
Tiananmen anniversary puts Chinese government and activists on hyper-watch
Tiananmen Square Crackdown: Twenty-four years ago, on June 4, 1989, hundreds of Chinese pro-democracy demonstrators were killed when tanks rolled into Tiananmen Square in central Beijing to squash a six-week long, student-led protest.
Eight fascinating facts about Christmas in China
Performers dressed as Santa Claus play traditional Chinese instruments as part of a Christmas celebration in Xian. (China Photos — Getty Images)
Yu Jianrong, a professor famous for his research on China’s politics and the country’s rural areas, analyzed the situation as well, concluding that society was becoming increasingly vicious. He gave two reasons: the unequal distribution of benefits, and the invalidation of rules. He expounded upon the latter: “The invalidation of rules creates more problems [than the unequal distribution of benefits]. To what extent will we backslide if the rules are ineffective? We may regress to the state of the jungle, where violence rules and prevails. Violence is a gene suppressed by the evolution of rules. Thus, if rules fail, the violence gene will reemerge…The transition to viciousness is the most explicit sign that rules are becoming ineffective.”