Developing China’s Interior

Posted on October 31st, by matt_schiavenza in Uncategorized. No Comments

Matthew Yglesias has a good post at Slate putting China’s growth- and current slowdown- into some perspective. Toward the end, he lays out the bullish case for China’s interior:

My bull case for China would be that for all the rapid catch-up growth the PRC has seen there are still enormous region-to-region gaps. That means that even if Shanghai and the Pearl River Delta have run out of room for further catchup, there’s still enormous scope for interior regions to catch up with the prosperous coasts. We know that existence governance institutions were good enough for coastal China to do a lot of catch up so why shouldn’t they be good enough for the interior to catch up with the coasts?

In response, Max Fisher writes that developing China’s interior depends on developing export-oriented industries and/or encouraging domestic consumption. This is basically correct, and it’s worth explaining why in more detail:

For one thing, it’s unrealistic to expect China’s interior to ever approach the prosperity level of the coast. After all, Kansas and Arkansas have always been poorer than New York, and will likely always be. The inherent economic advantages to being on a coastline aren’t going to go away. The more realistic goal, then, is whether inland development can occur quickly enough to offset the slowdown affecting China’s coastal region. I believe it can, for the following reasons.

First, the infrastructure in China’s inland regions- think Sichuan, Guizhou, and Yunnan- remains in dire need of upgrades. Rural parts of these provinces lack access to decent roads, for one, and there are severe deficiencies in  electricity and plumbing. China may have built a handful of sleek airports in recent years, but a quick visit to the countryside reveals just how much work needs to be done. Beijing can continue investing enormous sums into fixed assets without experiencing the kind of diminishing returns evident in developed economies, something that will keep GDP figures high.

Second, China’s economy is so fragmented that its inland regions are best seen as part of other regional economic networks. The southwestern provinces may face logistical challenges in terms of trans-Pacific shipping, but they are better positioned for trade relationships with countries like Myanmar, Thailand, and Vietnam. Xinjiang has the advantage of being next to the energy-rich Central Asian republics, while parts of northern China are best suited for trade with Russia. Obviously, this won’t amount to more than a small fraction of China’s trade to Europe and North America, but it does represent a viable export strategy for these regions.

Third, reform of China’s antiquated hukou laws would spur urbanization in the inland provinces, as rural Chinese from Sichuan and Hubei will migrate to cities like Chengdu, Chongqing, and Wuhan. China is often thought to have a large number of “mega cities” but given the size of the rural population, the number and size of these cities should be much higher. And they will be, as I believe that hukou reform will happen sometime during the Xi/Li years.

Eventually, China’s economy will reach a point where political corruption becomes too big of a problem to ignore. But that point, I believe, is not imminent simply due to the enormous potential of inland development.

 

 

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China News Roundup

Posted on October 31st, by matt_schiavenza in Uncategorized. No Comments

First, a brief update from New York City in the aftermath of Hurricane Sandy. Much of the flooding, infrastructure damage, and electrical blackouts avoided my part of uptown Manhattan, and as a result we’ve emerged relatively unscathed. Thank you to friends and family who wrote expressing their concern- I appreciate it!

Here’s a roundup of some of the more interesting China stories of the past week or two:

  • Evan Osnos of The New Yorker on what the likely fallout of the Wen Jiabao story will be. Evan’s takeaway? The fact that the story isn’t surprising doesn’t mean it isn’t newsworthy.
  • On the subject of Wen, the Useless Tree writes that the Chinese Prime Minister has failed the Confucius test.
  • NPR’s Louisa Lim profiles ex-government official Bao Tong, a former secretary to Zhao Zhiyang and a leading critic of the Communist Party’s grip on power. Bao says that “there’s no ideology, there’s no socialism, there’s no communism. All that’s left is power.” Sounds about right to me. In June, Ian Johnson wrote a similar profile of Bao in the New York Review of Books. Both are worth reading in full.
  • John Garnaut compiles the A to Z of Chinese politics for the Sydney Morning Herald. This is an excellent, succinct primer of what the key issues are in advance of the 18th Party Congress.
  • A Chinese student at Hampshire College writes about how living in the United States has turned him into a Chinese nationalist. This goes both ways, for sure- I remember angrily defending American politics- even George W. Bush!- to critical Chinese friends in the aftermath of the 2004 election. It’s remarkable how living abroad can intensify feelings of national identity, even though most people travel to, at least ostensibly, gain a different perspective.

Grandpa Wen Jiabao Does Very, Very Well

Posted on October 30th, by matt_schiavenza in Uncategorized. 1 Comment

The New York Timesrevelation that the family of Chinese Premier Wen Jiabao controls assets worth as much as $2.7 billion does not, at first glance, seem to be that big of a story. After all, earlier this summer Bloomberg reported that Vice President Xi Jinping- soon to be anointed as China’s next head of state-  was also fabulously wealthy, and people in both China and abroad reacted with a collective shrug. Just about any political figure in China with a national reputation has cashed in handsomely, something that everyone in the country knows.

What has been interesting, however, was Wen’s reaction. According to this LA Times report, the Prime Minister’s family has retained legal representation and has begun to refute the story, and the Times‘ site has been blocked in China for the first time in several years. This reaction has contrasted with the usual Chinese approach, which is to release a terse statement accusing the foreign media of interference or, better yet,  of hurting the feelings of the Chinese people. What makes this case any different?

First, Wen Jiabao isn’t just an ordinary Chinese politician. While President Hu Jintao has the charisma of a garden gnome, Wen is one of the few Chinese leaders who generates genuine public affection. Following the Sichuan earthquake in 2008, Wen rushed to the scene and, referring to himself famously as Grandpa Wen, exhorted the area’s children to persevere. Even my most cynical Chinese friends, whose regard the Communist Party resembled mine toward stinky tofu, were moved by the Prime Minister’s grace. The foreign media has always appreciated Wen’s candor in describing China’s economy as “imbalanced” as well as stressing the need for political reform. And Wen’s past association with the reformist Prime Minister Zhao Ziyang, the only one of China’s top leaders to oppose the Tiananmen Square crackdown, further cements his image as a relative liberal in China’s political scene.

Wen isn’t a soulless technocrat like Hu Jintao. He isn’t the privileged son of a Party legend, like Xi Jinping. He isn’t an ambitious, attention-seeking mandarin like Bo Xilai. His public persona conveys dignity, modesty, urbanity, and grace- all qualities the Chinese once associated with the beloved Zhou Enlai. Being just another greedy functionary in the increasingly lucrative Chinese kleptocracy doesn’t mesh with Wen’s carefully constructed image.

In Wen’s defense, his family members were more responsible for the asset grab than he was, as the Times‘ article so skillfully lays out. But the story serves as yet another example of how easily politicians enrich themselves in China, and how divisions between the “public” and “private” sector are largely meaningless. Wen Jiabao’s legacy may be that, for all of his supposed intentions, he was unable to change this basic calculus.…

Book Review- Behind the Red Door: Sex in China

Posted on October 29th, by matt_schiavenza in Uncategorized. 2 comments

Sex is everywhere in China. Every city of a certain size is teeming with “adult product” shops selling sex toys and condoms, while every third barbershop, massage parlor, and karaoke hall operates as a front for prostitution. At bars throughout the country, nubile young women serve beer dressed in skimpy mini-skirts, while nightclubs feature go-go dancers gyrating wildly to pulsating, suggestive pop music. Wealthy men in China’s cities keep young women- known as er nai- as mistresses, providing them with an apartment and an allowance in exchange for sex and companionship. Male guests at hotels are offered prostitutes in semi-discreet telephone calls, and business deals often include sexual services as part of a sales pitch.

Sex is also nowhere in China. Students learn little about relationships, intimacy, and contraception in school, as the Communist Party believes that these subjects distract students from their studies. All healthy men and women are expected to marry, and remaining  single past one’s late twenties typically results in intense family pressure to find a match. Gays and lesbians are not exempt from this expectation, and have often resorted to sham marriages in order to present a respectable face to their families. Chinese men retain a traditional desire to marry a virgin, and as a result Chinese women will go to great lengths to restore their hymens in order to erase their sexual histories. Open, frank public discussions about sex, once non-existent, remain taboo for much of the population.

These contradictions are unsurprising in a country like China, where life behind closed doors differs so greatly from external appearances.  To be fair, China is hardly the only country where official attitudes about sex lag behind those of the general public. The United States, for instance, touts its “Puritan ethic” while producing the lion’s share of the world’s smut, filth, and garbage entertainment. Interestingly, however, Chinese attitudes toward sex do not resemble an arc bending toward more tolerance and liberalism but rather have fluctuated wildly throughout the country’s  history. As Richard Burger tells us in his fine new book Behind the Red Door: Sex in China, attitudes toward homosexuality in ancient China were so tolerant that the concept of sexual orientation didn’t even exist; a man was expected to have male as well as female lovers over the course of his lifetime. In fact, Burger argues convincingly, homophobia only emerged in China with the arrival of Western Christian missionaries in the 16th century. While Europe was suffering through the Middle Ages, China enjoyed a golden age of culture and society, producing erotic art and literature that is read and admired today. Burger, who authors the popular China blog The Peking Duck*, weaves through this history nimbly, livening up his historical survey with bright, lively prose.

As the twentieth century dawned, Shanghai had such a reputation for licentiousness that it earned the nickname “The Whore of the Orient”, while concubinage remained a common practice in both rural and urban parts of the country. Yet by 1950, when Chairman Mao Zedong and the Communists consolidated control over the entire country, the Chinese government banned prostitution, closed bars and opium dens, and vowed to eliminate vestiges of China’s tawdry past. During the Cultural Revolution, men and women were discouraged from pursuing romantic relationships and regarded love as a bourgeois conceit; in photographs from this era, it can be difficult distinguishing between the sexes due to the uniformity in clothing and hairstyle. By the time Deng Xiaoping assumed power in 1978 and launched market-driven reforms, the Chinese population had as little regard for sexuality than any population in the modern world.

That, as any visit to the country instantly makes clear, has changed. Modern China is a defiantly sexual place- perhaps not on par with Brazil or France, but certainly more than your run-of-the-mill Communist state. Young Chinese people increasingly express their sexuality, have relationships with whomever they want, and find information about sex at the click of a button. Will this progress be erased by a reactionary regime eager to preserve traditional Confucian values? Perhaps. China’s young, however, are increasingly exposed to a global popular culture in which sex is entwined with freedom, individuality, and choice. Burger’s book contains many examples of heartache and tragedy, but ends on a hopeful note. In the United States, after all, only thirty-five years separated the Stonewall riots from Queer Eye for the Straight Guy. We’re used to changes happening in China at warp speed, but Sex in China gives reason to believe that the remarkable advances may only just be the beginning.

 *Disclosure: Richard is a friend.…

Does the Educational Background of China’s Leaders Matter?

Posted on October 24th, by matt_schiavenza in Uncategorized. No Comments

One of the most curious facts about China’s current leadership is is comprised almost entirely by engineers. This thought-provoking Facebook post by Kaiser Kuo reminds us that the academic disciplines of the nine members of the Standing Committee of the Politburo are: hydraulic engineering, electron tube engineering, geological engineering, electrical engineering, electrical engineering, chemical engineering, geophysical engineering, chemical engineering, and law.

By contrast, here is the distribution of the seven men Reuters reports will comprise China’s next Standing Committee: chemical engineering, law, history, math, teaching, economics, and economics. As a caveat, Kaiser notes that Zhang Dejiang’s economic degree came from a university in North Korea, so he probably isn’t going to be quoting Milton Friedman anytime soon. But this change seems significant. Will it have any effect on policy?

Deng Xiaoping’s accession to power in 1978 transformed China’s government from being primarily ideological to being primarily technocratic, and engineering seemed to be an appropriate background for dealing with China’s immense developmental challenges.  Much of the work of the Chinese government was simply building the country up from its destitute, agricultural base. With China now the world’s second-largest economy, though, a government run by social scientists may be better equipped to manage the country’s increasingly complex relationship with the outside world. An engineer may know how to build a railroad, but can he also manage a central bank? Perhaps yielding to economists and lawyers is the change China needs.

However, while the changing academic backgrounds of China’s incoming leaders presents an intriguing story line, there’s less there than meets the eye. China’s top political leaders are all “career politicians” rather than actual working professionals, and reaching the pinnacle of the Communist Party requires years in the trenches. President Hu Jintao, for instance, made his reputation as a no-nonsense Party chief in Tibet in the late 1980s and other leaders similarly got their start in minor outposts far from the center of power. The idea that an ordinary citizen can vault to high political office in a short period of time is totally alien to China, as I discovered when Chinese friends found the idea of a “Governor Schwarzenegger” totally incredulous.* Not having popular elections frees the Communist Party from worrying about disruptive upstart figures of the sort that routinely win elections in places like  The Philippines, Haiti, or Argentina.

*To be fair, so did a lot of other people.

As a result I’m skeptical that China’s new leaderswill govern any differently simply because of their social science backgrounds. Political constraints within the government prevent any one leader from exercising too much influence, and what one chose to study as a young man tends to matter very little in later life. When George W. Bush was running for president in 2000 for instance, much was made of the fact that he attended business school rather than law school and would thus govern in the style of the “first MBA president”. When all was said and done, Bush’s graduate school experience turned out to be one of the least meaningful aspects of his presidency.  The same, I suspect, will be true of Xi Jinping and his Standing Committee colleagues.…

Romney’s China Position

Posted on October 23rd, by matt_schiavenza in Uncategorized. No Comments

Princeton Professor Aaron Friedberg, one of Mitt Romney’s principal advisers on China, has an op-ed claiming that President Obama’s China policy is a massive failure. Basically, his arguments are that a) Obama’s strategic pivot to Asia is seen as aggressive by China, but b) China still thinks the US is in decline and weak, because c) the US cannot compel China to do its bidding in North Korea and Iran, and d) China seems to insist, oddly enough, on having its own relationships with other countries. President Romney, on the other hand, will rectify these problems by balancing the budget and reducing the US national debt. He also will compel China to behave more in line with US interests. How? Friedberg doesn’t say, but I’m sure we’ll find out once Romney wins the election, since that seems to be how he reacts whenever asked for specifics.

About the only concrete policy proposal we’ve heard from Governor Romney himself is to label China a currency manipulator on his first day of office. In theory, this will open up the possibility that the US will penalize China for its malfeasance. In practice, this will accomplish nothing except to annoy China and elicit an outraged communique warning Washington not to meddle in Chinese affairs. The renminbi will continue to rise against the dollar, albeit slowly. China will continue to finance US debt. American consumers will continue to buy cheap Chinese exports. As Kurt Vonnegut might say, so it goes.

For all intents and purposes, US policy toward China will scarcely change no matter who wins the election. Friedberg no doubt knows this, but as Romney’s “China guy” he still has to pretend otherwise. In general, though, his op-ed refuses to consider that China might have different strategic interests to the US, or that an American presidential administration has the tools to change these interests even if he wanted to. This is a dangerous viewpoint in general, and one that is unfortunately prevalent in US politics.…

The China Questions I’d Ask at the Debate

Posted on October 23rd, by matt_schiavenza in Uncategorized. No Comments

President Obama and Mitt Romney will debate for the third and final time tonight, focusing exclusively on foreign policy. As usual, I expect most of the questions to be about the broader Middle East, particularly Libya, Syria, and Iran. China is too important not to be mentioned, but I suspect that most of the questions will revolve around Mitt Romney’s silly assertion that he will label China a currency manipulator on his first day in office. I hope I’m proven wrong.

If I were to moderate this debate- and time were of no essence- these would be the questions I would ask about China:

  • Governor Romney, you have said that you will label China a currency manipulator on your first day in office. What do you expect this move will accomplish? Aren’t you afraid of economic retaliation from China?
  • China is widely expected to surpass the United States as the world’s largest economy some time in the next fifteen years. Would it be acceptable for China to become the world’s pre-eminent military power? If not, then why?
  • Some have argued that China’s continued stockpiling of US debt is a reflection of our economy’s underlying strength, not weakness. What would your response to this assertion be?
  • Would you be willing to cut or reduce military ties with Taiwan in exchange for Beijing’s diplomatic cooperation on North Korea?
  • President Obama, Secretary of State Clinton played down China’s human rights abuses during her first visit to the country in 2009. Has this approach been successful?
  • Should Japan be permitted to revise its constitution to re-instate offensive military capability in light of China’s rise?
  • Since Richard Nixon first went to China in 1972, successive American presidents have maintained a policy of engagement with the country. However, China remains an authoritarian state with a dismal human rights record. Is it time to re-think this strategy?

Some of these questions are more suitable for graduate school blue book exams than a presidential debate, sure. But it’d be nice to hear what the two major candidates for president think on the more abstract, long-term issues facing the Sino-American relationship. Instead, we’ll get the usual triviality. Oh well- at least it’s better than the lack of public political discourse in China itself.…

Two China Economy Links

Posted on October 17th, by matt_schiavenza in Uncategorized. No Comments

The New York Times has a good piece discussing how difficult it will be to loosen the grip of state-owned enterprises in China’s economy. Meanwhile, over at the Wall Street Journal‘s China Real Time Report, Bob Davis cites an unexpected argument for China’s continued growth. Both pieces are worth reading and have more to do with each other than they seem to at first glance.

The standard bearish position on China’s economy is this:  as China’s capital stock grows and returns to investment diminish, inefficiencies and corruption in the country’s “state capitalist” system will threaten to tear the economy apart at its seams. In order to ensure a smooth transition to a low-growth model, China has to institute significant economic reforms, such as encouraging the growth of the private sector and domestic consumption. Unfortunately, these reforms are unlikely because of the way incentives are arranged in the Communist Party government. Therefore, China is “trapped”.

The WSJ piece points out why this day of reckoning may be a ways off. In the poorer, inland provinces, China’s capital stock is so minimal that the economy is still mired in an earlier stage of development, so there remains significant room for growth using the old state-capitalist investment model. The still-tremendous returns to investment, therefore, are likely to continue to mask inefficiencies for the foreseeable future.  For all the talk of how China over-invests in infrastructure, any visit to rural Yunnan or Sichuan reveals just how much more work there is to be done.

China’s economy is often compared to the United States, but a better analogy might be the European Union. Provinces like Guangdong, Zhejiang, and Jiangsu are akin to France, Germany, and Britain*, but provinces like Guizhou and Gansu are more like Romania and Bulgaria. China is less a “single market” than a collection of fragmented region in which local political leaders play a major role. The gap between, say, France and Bulgaria is far wider than the gap between New York and Mississippi. But the gap between Guangdong and Yunnan is much wider than either. Overall, that fact is less a case for optimism than a belief that China’s problems won’t reach critical mass for a long time.

* Just to be clear, I don’t mean Guangdong, Zhejiang, and Jiangsu are as wealthy or developed as France, Germany, and Britain but rather that they represent an analogous role within the wider Chinese economy.

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Tough on China

Posted on October 17th, by matt_schiavenza in Uncategorized. No Comments

One of the most memorable moments of the 2nd presidential debate was when President Obama scolded Mitt Romney for his business dealings with China. “You’re the last person who’ll get tough on China,” Obama zinged. As an unabashed Obama supporter, the line thrilled me- I was delighted that finally, the president was lashing out at Romney and forcing the Republican to play defense. But, sadly, the small voice in my head that cares about policy recoiled. For all of Mitt Romney’s sins, outsourcing jobs to China ranks pretty close to the bottom of the list. The transfer of manufacturing jobs from the United States to China, blamed so often for our economic decline, has actually been a net positive for both countries.

The unemployment crisis in the United States has many causes. There’s financial under-regulation for starters, but also a badly skewed tax code, absurdly lenient mortgage lending, and, more esoterically, the persistent lack of middle-class wage growth that has led so many Americans to make risky financial bets. In a perfect world, both presidential candidates would campaign exclusively on fixing these problems and restoring the American economy. But elections are won on politics, not policy, and a byproduct of that reality is cheap demagoguery on China.

Politics go both ways, of course. In China, the Communist Party attributes American complaints about currency manipulation as an unvarnished desire to hurt the country’s feelings. China’s leadership knows better, of course, but understands that maintaining a sense of national victimization is essential to keeping its grip on power. American politicians find it useful to remind struggling voters that there are factories full of Chinese workers doing their old jobs for a small fraction of the pay. And, whether or not half these factories are now located in Vietnam or the Philippines or Mexico or wherever, pointing a finger at China resonates far more deeply since China is seen as the United States’ primary rival on the international stage.…

What Norodom Says About China

Posted on October 17th, by matt_schiavenza in Uncategorized. No Comments

The New York Timesobituary of Norodom Sihanouk, the former Cambodian king who died yesterday at the age of 89, is fascinating and well worth a read. During his reign, Norodom cultivated a close relationship with China, the country in which he spent much of his time in exile. China, alas, factored into the most controversial part of Sihanouk’s life:

Convinced that the United States had been behind the overthrow, King Sihanouk allied himself with the Khmer Rouge at the urging of his Chinese patrons, giving the Cambodian Communists his prestige and enormous popularity. Their victory in 1975 brought the ruthless Pol Pot to power, with King Sihanouk serving, for the first year, as the figurehead president until he was placed under house arrest and fell into a deep depression. Over the next four years, the Khmer Rouge regime led to the death of 1.7 million people and nearly destroyed the country.

Criticized throughout his life for these dramatic shifts in allegiances, King Sihanouk said he followed only one course in politics: “the defense of the independence, the territorial integrity and the dignity of my country and my people.”

In fact, he skillfully manipulated the great powers, usually with the support of China, to ensure his survival as well as his country’s independence.

(Emphasis added).  In recognition of this very close relationship, China noted Sihanouk’s death with effusive press coverage and a telegram of condolence from President Hu Jintao. The two countries continue to have a close economic and diplomatic relationship today, with Cambodia refusing to cooperate over territorial issues in the South China Sea at an ASEAN summit meeting in July in apparent deference to China. In return, China has pledged $500 million in soft loans to the impoverished Southeast Asian country.

I don’t think anyone can blame the Chinese alone for the Khmer Rouge, the radical Communist movement whose reign of terror almost completely destroyed the country. The secret U.S. bombing of Cambodia during the Vietnam War also had a fair amount to do with it, as well as forces within the country itself. Nor is there anything untoward about the present relationship between China and Cambodia. Yet the recent history between the two countries is a wonderful example of how China’s vaunted “non-interference” policy is nothing more than convenient fiction. Like all other powerful states, Beijing seeks influence along its periphery and meddles in the domestic affairs of other countries. China may be indifferent to the political composition of its allies and trading partners, but it certainly pays attention to what policies these countries pursue.

The obituary of Sihanouk says less about the man himself than about the fact that, as leader of Cambodia, he was largely at the mercy of powerful outside forces. Such is life in small, strategically important countries.…