January 31, 2006
Spare time with Chinese characteristics

Today's China trivia question: if you reach your 5 year plan targets early, what do you do with the rest of the time?

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[boomerang] Posted by Simon at 10:20
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China, Google, evil and hysteria

I was going to add my $0.02 on the Google.cn hysteria, which is much ado about nothing. But John C. Dvorak pretty much summed up my thoughts already:

So Google goes into China to do business and goes along with the Chinese program of censorship already accepted by Yahoo!, MSN, and others. If a company wants to do business in China, such acceptance is part of the ground rules. An outcry immediately ensues. Apparently Google should tell China to stuff it and stay out, or stay in but refuse to censor anything.

This is one of the funniest debates I've ever seen, and I can only blame Google for the controversy. It's the supposed company motto, "Do no evil," that is the crux of the problem...the company has this motto as an albatross around its neck. Any false move or normal Silicon Valley business practice will be highlighted and the "Do no evil" motto will be thrown in the face of the executives...Indeed, the comment does make it sound as if Google is somehow better than everyone else because of this supposed policy. Holier than thou. It's annoying. So the China thing comes along and boom, the evil hits the fan.

Now what can Google do about this? First of all, I don't think this really affects anything except the company principals, who have to live with never-ending ragging and finger-pointing and the "hypocrite!" moniker. Perhaps some professional damage control will help. The company is clueless about that, and that, too, could be perceived as evil.

Or perhaps they can do what I suspect they'll do. Go into China promising to abide by government censorship and let the Chinese themselves figure out how to bypass the mechanism. Chinese computer users are not idiots.

Problem solved.

The crux of this "debate" is simple: do you see the world in terms of black and white, or in shades of gray? It is better that Chinese internet users have another search engine to use, especially one that allows creative users to access information they might not otherwise find. If those ranting about Google's actions would think about the viewpoint of Chinese internet users for a minute, they may realise that Google might be helping to undo the "evil" of Chinese internet censorship.

Usually it's better to work to change systems from within, evil or not.

Other reading

Catching up on my reading, I note Will is praising Google in China and Danwei hails Google's small stand against Chinese censorship. FH points out how Google in China differs to Yahoo and MSN in some important ways. Shanghaiist also springs to Google's defence, and has a handy list of links to other posts on the topic. Anyone noticing how most of the China based blogs are backing Google? Joel sees the gaps in China's firewall and asks a great question.

On the other hand, Asiapundit is taking Google to task, but not for the obvious reasons. Check out the sample of search results. Billdue also notes how little money is at stake for Google in China.

Brad DeLong notes Google's filter only works if you can spell.

Updated 2/1

Also check out Matthew Stinson's extensive critique of Google's critics.

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[boomerang] Posted by Simon at 10:15
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Linklets 31st January (Updated)

Updated

Simon here (I was going to complain about being at work on a holiday, but after seeing this, it doesn't seem important), with a few pieces that have recently caught my eye:

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[boomerang] Posted by Gordon at 00:51
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» The Asianist links with: Why Read?




January 27, 2006
Dog gone it

To all of my readers, Kung Hei Fat Choi and have a very happy, prosperous and successful Year of the Dog. Posting is likely to be patchy until Tuesday.

In the interim, you can visit to 2006 Bloggies and vote. In a first, the Best Asian blog category, where yours truly is up against Tokyo Times, India Uncut, Tokyo Girl and Noodlepie, has no sign of any Singaporean blogs. While some categories carry prizes, the prestige alone is deemed enough for Asian blogs. It's not too late for some generous benefactor to bestow a massive cash prize for the winner...

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[boomerang] Posted by Simon at 16:17
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Book review: Billions: Selling to the New Chinese Consumer

Billions: Selling to the New Chinese Consumer by Tom Doctoroff

The rapid growth of Chinese trade has seen an equally rapid growth in "how to" books by various China experts and insiders. The pitch is simple: author spends years slogging in difficult Chinese business conditions, learns valuable lessons, distills them in 250 easy to read pages, sprinkled with anecdotes and unlocks the keys to the (Middle) kingdom. It's an alluring prospect and a modern one: an offering of a short-cut to avoid the difficulties of hard work and experience.

Tom Doctoroff is a marketing man, running JWT in China for years. It is not spoiling the book for me to give you the two keys to successful marketing for foreign mutlinationals in China: be Proctor & Gamble and/or hire JWT. But despite the not-so-subtle extolling of his own agency's virtures, the book has strong merit.

Before we get to that, a quick instruction guide to reading this book. Do not read the introduction by Sir Martin Sorrell, unless you are looking to fill your quota of China cliches. Unless you're in marketing, skip Part 2. But the rest is worth reading. Sprinkled with photos from ad campaigns, Doctoroff lays out his rules for success in selling to the two key Chinese markets: the 100 million urban rich (or middle class) and rising mass market (the 300 - 400 million urban poor). Despite a predilection for lists and bullet points, Doctoroff has a keen insight into the Chinese mindset and culture. And that's the true value in this book.

It should not be read by marketing people - I'm not in the field but the book seems to only skim the surface of marketing in China (which may be the point; why else hire an expensive JWT marketing consultant?). But it should be read by anyone from the West trying to understand what makes the Chinese tick. A slightly annoying habit of dropping in political barbs along the way can be excused for the incredibly consise summary from pages 16 to 28 of Chinese history and culture. Doctoroff clearly has not just spent years living in China, but learning and absorbing China as well. In fact the first 100 pages are the strongest of the book and would form a solid base for a longer and deeper analysis of Chinese history, culture and people and how it applies today.

Buy this book and read it for its insights. You might pick up a few tips on selling in China, but more importantly you'll likely be far more enlightened as to how the Chinese think and work. Such an understanding is crucial in dealing with a newly assertive China, reclaiming its (in its own eyes) rightful place as a world power. If marketing doesn't work out for Tom Doctoroff, he could offer his services to his country as a cultural go-between, bringing much needed understanding in Washington and Beijing of the respective mindsets and cultures. I even know a good agency to handle his marketing.

It is my policy to note books that are sent to me gratis for review. This book was sent by JWT to me for review. I've sent it on to another blogger who may have further insights.

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[boomerang] Posted by Simon at 11:34
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Fear not the red dragon

The armed forces of the United States and Taiwan can breathe a sigh of relief, for the People's Liberation Army has been defeated thanks to a lack of yellow sticky notes. The SCMP reports:

In rare criticism, the People's Liberation Army Daily has criticised the armed forces taking part in a major live-fire exercise for their lack of efficiency and failure to master the skills needed to wage information warfare. The criticism followed poor results from the recent Hanhai Storm exercises on the Kerqin grassland in Tongliao city , Inner Mongolia , according to the paper.

Three divisions, comprising about 50,000 troops, from the Shenyang military region took part in the four-stage exercises, in which the troops representing the PLA were defeated by the enemy Blue Army - believed to have simulated US battle techniques.

In the first stage, the Red Army was ordered to repel the attacking Blue Army. Despite its firepower being strengthened by the availability of six hi-tech aircraft, the Red Army troops were defeated because the army commander forgot to call in air support. The other three stages revealed the PLA officers were slow to respond and did not have a firm grasp of the advanced technologies needed to stage information warfare.

Antony Wong, president of the International Military Association in Macau, thought the exercises simulated a "ground battle" on the Korean Peninsula, with the Blue Army representing the US.

I know about the fog of war and all that, but forgetting to call in air support? Meanwhile, China's top military brass have something far bigger to worry about...they're getting audited:
The People's Liberation Army will audit the finances of more than 4,000 senior officers - including at least 100 generals - over the next five years, as part of its efforts to curb the misappropriation of funds and corruption...The audits were "aimed at improving the military's preparedness, strengthening senior officers' administrative abilities according to law, and [maximising] the military budget", Xinhua said.
Perhaps if the PLA unleashed its auditors on the battlefield, they may have a more effective military.

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[boomerang] Posted by Simon at 08:40
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Linklets 27th January

In absence of Simon's Daily Linklets as well as my own lack of time to contribute anything lately, I've decided to throw a few links of my own to some of the posts I've been reading around the Asian blogosphere.

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[boomerang] Posted by Gordon at 05:08
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January 26, 2006
Great Leap Forward in China's economy

China yesterday announced a record 9.9% rise in newspaper cliches to describe its economic growth, including "growth spurt", "gallops", "soaring" and my attempt. Confusion abounds as no-one seems sure if China is now the fourth and fifth biggest economy in the world (it seems journalists have trouble comparing numbers). Even the mighty New York Times can't make up its mind (below the jump).

A mighty achievement, as China reclaims its status as an important part of the world. A time for swelling national pride as the Middle Kingdom assumes its rightful mantle. But one thought: it took the complete dismantling of Mao's Great Leap Forward and other economic disasters for this to happen. Basically this moment has been delayed by more than 50 years thanks to the Chairman. On top of the 70 million people he killed, he managed to retard China's growth and kept the nation impoverished. Here's hoping he's spinning in his mausoleum.

NYTChinaeconomy.gif



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[boomerang] Posted by Simon at 15:22
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China's AIDS population

The Chinese government has released its count of HIV/AIDS cases and as was expected it was significantly lower than previously thought.

The new survey, conducted with the World Health Organization and Unaids, lowered the country's estimated number of HIV and AIDS cases to 650,000 from the official 840,000 figure released in 2003. Many experts and AIDS activists have long believed that China had at least 1.5 million cases, possibly far more.

At a news conference, Chinese and international health officials endorsed the new findings but also warned that China still has a serious AIDS problem that could rapidly worsen if testing, education and treatment programs are not expanded.
That's the good news. But...
...the survey found that while the overall number of cases is less than previously believed, the rate of infection is rising, with 70,000 new cases in 2005. Drug users and prostitutes transmitted the virus in most of these cases, but the report also found that the disease is now spreading from such high-risk groups into the general population, raising the risk of a broader level of infections.

...Since late 2003, China has mounted an aggressive nationwide campaign against AIDS and introduced pilot programs that provide condoms, methadone and even anti-retroviral drugs for free.

The joint effort between China, the World Health Organization and Unaids in drafting the study reflected the improved openness of Chinese health officials on the issue. But that collaboration also underscored the fact that the outside world would probably be skeptical of any study conducted solely by the Chinese government.
The government is starting to confront and deal with the problem, and this new found "openness" in the survey is a promising development. Let's hope it continues, and not just on AIDS.

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[boomerang] Posted by Simon at 08:55
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The 411 on China's Coal Mines

The excellent Christian Science Monitor has a compelling article today on China's ghastly mine disasters. While the disasters are terrible, the author, Kathleen McLaughlin, makes a number of good observations to keep the tragedies in context:

Many of the accidents could have been prevented with basic safety procedures. Chinese media are rife with examples of stingy bosses shutting off gas alarms and failing to fix rail cars that toss sparks into combustible air.

So why did US mining deaths garner so much attention while China's deadly mines continue on? Heavy domestic media coverage of Chinese coal-mining disasters, which began in the past five years, may not be helping, Munro speculates.

"If you publicize a problem but do nothing about it, what you produce is compassion fatigue. You get a lot of reports about these disasters, but nothing ever changes," says Munro. "Just publicity by itself is not nearly enough."

Coal-mine safety wasn't always so lopsided on the global scale. The US has had a low fatality record in recent decades, but it recorded an average of more than 2,000 coal-mine deaths annually from 1900-45, and the number of fatalities never dropped below 1,000 in a year until 1946.

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[boomerang] Posted by HK Dave at 07:24
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January 25, 2006
CEO Killed the Radio Star

The CEO in this case being Hong Kong Chief Executive Sir Donald Tsang, and the Radio Stars being RTHK, the only public broadcaster in Hong Kong. RTHK, thought up as a local equivalent to the BBC during the colonial era, broadcasts some of the territory's most popular programmes. But Sir Donald doesn't want it airing Top 10 music shows - he wants it to be a mouthpiece for government policies, as this Standard article mentions.

Now the BBC in Britain has certainly demonstrated, perhaps to its detriment, its willingness to expose scandals and issues in its own government, despite being publicly owned. RTHK has not done that, but does air local news in a fairly objective manner. It seems clear that having a lively, free press, and a broadcaster with editorial independence, is important in Britain and Hong Kong. Although Hong Kong is not a democracy, the liberty afforded to its people is what makes it the vibrant place it is today. Given RTHK's prominence in public broadcasting in the city, it would be embarrassing, not to mention unwatchable, for the government to turn them into an unholy aural combination of CCTV and C-SPAN.

But that's what the government seems bent on doing by appointing a 7-person 'independent' panel. It reminds me of my youth, playing around with short-wave radio, and tuning into English North Korean broadcasts - with a beautiful female voice speaking about American imperialists and running dogs. I exagerrate, of course - it will never come to that in Hong Kong, I should think - but is this not the wrong direction for media censorship in Hong Kong?

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[boomerang] Posted by HK Dave at 10:50
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January 24, 2006
RMB Morality

There is a fascinating article today in Xinhua, with the irresistable title, "Rich Guy Seeks Girl, Must Be Virgin" (not your father's Xinhua!). It talks about how a newly-minted, and newly-divorced RMB billionaire in China was looking for a new wife. Speaking to a friend, he came upon a solution: place an ad, to the effect of wanting a charming, hot virgin. His lawyer received 600 applications, shortlisted 100, then got 20 for his client friend to interview. One was successfully selected. Oh, and the lawyer took one of the rejects for himself. The lawyer now does a roaring business in matchmaking billionaires with virgins.

What was particularly interesting about this story though, is the aside Xinhua's editorial board deemed necessary to fit into the final stages of the story. Allow me to quote:

For centuries, Chinese practiced arranged marriages complete with dowries, leaving little place for Western-style notions of romance.

Only recently has the idea of living together unmarried gained limited social acceptance in China.

In a breathtakingly short period of time, though, sexual and romantic opportunity has sprung up everywhere in a society that still thinks of itself as conservative in such matters.

Prostitutes work openly in almost every hotel in China. The Internet has made possible everything from online dating to nude Web cam dancing, sprouting a vocabulary all its own, like MBA, or married but available. Unsurprisingly, divorce rates in cities like Shanghai are skyrocketing.

Aside from the surprisingly candid acknowledgement of the prevalence of prostitution in China, it made me wonder - what was the motive of putting this last bit into the story? I can only conclude that the message to girls is: save your virginity - you might be able to use it to land a tycoon. And guys, oh boy, but money sure can buy you love.

Is money the final bastion of public morality?

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[boomerang] Posted by HK Dave at 11:10
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January 23, 2006
Modern Chinese Marxism

Time's at a premium at the moment, which is a shame because the revival of Marxism story continues apace, reports Pravda SCMP:

While Marxism is in decline throughout the world, China has taken the lead in the development of the communist ideology, according to a mainland theorist. Cheng Enfu , executive president of the Chinese Academy of Social Sciences' new Academy of Marxism, said Communist Party leaders had never been so keen to push Marxism forward...

Professor Cheng insisted that Marxist theory could still be applied to the problems China was facing in a market-oriented environment, adding that Japanese Marxist economists had been playing a crucial role in Tokyo's policymaking...

Professor Cheng said Beijing aimed to modernise Marxism by building a theoretical system with Chinese characteristics and style, adding that this would contribute to advance and modernise the ideology worldwide. He said China provided a favourable environment for further development and modernisation of Marxism. "Firstly, we have provided the world a new economic theory - what is now called the `socialist market economy'," Professor Cheng said. "Secondly, China has set a precedent by becoming the first to successfully build a socialist market economic system. And finally, we have advanced the Marxist theory of economics in many areas."

China's current economic system bears more than a passing resembelence to that beast known as capitalism...that's what everyone took "socialist market economy" to mean. I know the CCP has been trying to fill an ideological void since it essentially abandoned communism, but Marxism? I imagine Karl wouldn't be too impressed.

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[boomerang] Posted by Simon at 08:08
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January 22, 2006
Social stability in China

It's going to be a patchy week for posting, but to keep you going the Jamestown Foundation China Brief this week focuses on social stability in China:

1. The Dynamics of China's Social Crisis.

2. Social movements in urban China.

3. Unrest in China's countryside.

I've not had time to read the articles in depth, so let me know your thoughts.

And in case I don't get a chance, Kung Hei Fat Choi!

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[boomerang] Posted by Simon at 16:34
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January 20, 2006
Singapore Buys Thailand

Price Tag: US$1.77 billion. By far the largest deal in Thai history.

Ho Ching, the formidable wife of Singapore's Prime Minister, is apparently set to announce the purchase Monday of a controlling interest in Shin Corp, the company built up and effectively created by Thai Prime Minister Thaksin Shinawatra. Billionaire Thaksin had been accused of conflict of interest as being Thailand's richest man (or one of) and also running the country.

So up steps Ho Ching. Much more important than her being the wife of Singapore PM Lee Hsien Loong is her being the helmswoman of Temasek Holding, the holding company of Singapore Inc., which has about US$80 billion of assets under management - at least. The sheer scale of the transaction has driven up the Baht against the US dollar. It also gives Singapore control of Thailand's largest mobile operator, not to mention all of its satellite networks and an airline.

Before World War I, the countries of Europe were united by the bloodlines of their monarchs. It seems in 21st century Asia, they are united by the private equity funds of their de facto national flagship holding companies.

Breathtaking stuff. But who can argue with economic interdependence being the best way forward for ASEAN? It particularly crucial for Singapore, which must define for itself the hinterland in which it will be the paramount provider of capital and services, and indeed, its identity for the 21st century (especially in the face of the China opportunity/threat). This audacious deal surely highlights Singapore's intentions to be a major regional economic power. Let's see if Singapore's people can also step up to the role with regional entrepreneurial horizons - and whether its other neighbors, like Malaysia and Indonesia, can ever become comfortable with Singapore.

To me, the big winner is Thailand - well past the '97 crisis, secure in its China relationship to the north, with ever-growing links with Singapore and other regional neighbors, and one of the most open, cosmopolitan economies in Southeast Asia. Malaysia may be miffed and feel short-circuited, though, to be sure - let's hope Thaksin does more and not less, to assuage his own Muslims and those across the border.

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[boomerang] Posted by HK Dave at 15:57
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Burning down the country

China's has half the firehouses it needs, according to international standards. Which makes one wonder how the whole place hasn't burnt down already...or that perhaps everywhere else in the world is over-serviced (or burdened?) by excess firehouses.

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[boomerang] Posted by Simon at 13:50
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Raise the Red Marx

Yesterday I mentioned the curious rise of Marxism within the Chinese central bank. It seems this is just one small part of a broader push to revive Marxism within China...which seem incredibly strange given no-one outside North Korean believe Marxist economics works, and that outside of universities no-one believes in Marxist philosophy. The unlinkable SCMP reports:

After more than two decades of capitalist market reforms, Communist Party leaders have pledged "unlimited" funds for reviving Marxism on the mainland. Sources say the programme will also involve turning the country into the global centre for studying the ideology.

Economic reforms have seen the mainland grow richer by abandoning Karl Marx's economic ideas, but President and party general secretary Hu Jintao told a Politburo meeting in November that Marxism was still applicable to the mainland. Leaders are also keen to fill the ideological void that has emerged in a more prosperous China, and the Communist Party believes the answer lies in the ideology that gave birth to it...Beijing will summon 3,000 top Marxist theorists and academics from across the country to the capital to compile 100 to 150 Marxism textbooks, with each work requiring contributions from at least 20 to 30 scholars. Between 100 million and 200 million yuan has been earmarked for the programme, with more than 1 million yuan to be allocated to funding the compilation of each textbook. The project would also see a massive investment of human and financial resources go towards building more research institutes, training more theorists and producing more academic papers, the sources said.

Li Changchun , a member of the Politburo Standing Committee and the party's chief official in charge of ideology, told a meeting of propaganda officials and theorists on Monday that the leadership saw the project as instrumental to solving various issues facing the country and had given it "unlimited" support...All university students are required to attend Marxism classes. Secondary school graduates are also required to sit a national examination on Marxism before university enrolment.

And I thought China's space program was a waste of money.

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[boomerang] Posted by Simon at 08:37
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January 19, 2006
Chinese Soft Power

A fascinating article in the Herald Tribune about China's efforts with its 'Confucius Institutes' (like the Alliance Francaise or Goethe Institutes for France and Germany) that promote Chinese language instruction in America, Europe and Asia. It discusses the growing importance of learning Chinese in Thailand, a country that forbade formal teaching of the language just two decades ago. The growing bilateral ties between China and Thailand, a nation with many ethnic Chinese, is the backdrop by which language instruction is examined as a projection of Chinese 'soft power' in the latter country. I will quote the article:

Beijing recently established the Confucius Institute, modelled on the British Council and German Goethe Institute, as a nonprofit outfit with the stated mission of "promoting Chinese language and culture and supporting local Chinese teaching." Eleven of the centers have been established in the United States, Europe and Asia. China's national office for teaching Chinese as a foreign language, which runs the Confucius Institutes, will provide textbooks for schools in Southeast Asia with the catchy title "Happy Chinese."

All of this is a sign of expanding Chinese soft power. But what are the implications of the spread of Chinese language and culture? It's a more important question in a region like Southeast Asia where as many as half the people living in urban areas like Bangkok are of Chinese descent. Many of the young students who attend Jiang's class in the Chiang Mai school have Chinese roots - their fathers and grandfathers came from China. Learning Chinese has deeper implications than the earlier fad in the 1980s of learning Japanese. For one thing, it's hard to become a Japanese citizen...

There's certainly a reason in business circles to learn Chinese; Thailand has already signed a bilateral free-trade agreement with China and is negotiating one with the United States. Over a million Japanese visited Thailand last year, but this year a million Chinese tourists are expected to visit Thailand, according to the Ministry of Tourism.

The article ends, half-jokingly, by saying there is a practical reason why ethnic Chinese Thais might want to learn Mandarin - the growing gender imbalance in China, due to that country's preference for boys while subject to a one-child policy.

Thailand has been the first of the ASEAN states to have done an about-face with regard to its Chinese population - with the previously ethnic Chinese going from being suspicious harborers of dual nationalisms (and previously, Maoist sympathies) to ambassadors and prized links between themselves and the growing regional hegemon. Clearly the fact that race relations in Thailand have been far better than in other ASEAN (particularly Muslim) countries has been a factor.

But to what extent will this trend be replicated, eventually, in other parts of Southeast Asia? And to what extent will the identities of ethnic Chinese in these countries blur as China's presence in Southeast Asia becomes daily more tangible, and it becomes economically more advantageous to identify oneself as one of the 'Happy Chinese' as opposed to Thai or Malaysian?

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[boomerang] Posted by HK Dave at 16:17
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Book review: Due Preparations for the Plague

Due Preparations for the Plague by Janette Turner Hospital

According to the author bio, Janette Turner Hospital is an author and academic who teaches English literature. You can tell. This book is crammed full of literary tricks, allusions, allegory, symbolism and whatever else English professors get off on. But she makes it work, and work well. The story itself revolves around the consequences of a hijacking and the discovery of the truth behind it. The plot turns aren't particularly difficult to spot, but that's largely beside the point. At times the voice jumps from a narrator to one of the characters, but throughout the erudition and writing remain eloquent without being grandiose. The plot merely serves as a vehicle for some great writing, and the book isn't any less for it. It's not perfect, and there are parts that slip and feel forced. But they are minor compared to the effect of the whole.

In a world awash with crap books, this is one that makes you go hmmmm. It won't take you long but you'll enjoy it, recognise it is far above most of the humdrum that passes for writing these days. It grapples with themes of alienation, identity, connectedness, consequences and the difference between the search for truth and knowledge. You get literature in the form of a thriller. That's value for money.

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[boomerang] Posted by Simon at 14:35
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Karl on the yuan

A great cliche for China watchers is how rapidly the Communist nation is becoming a market economy. Another is how China's vast foreign exchange reserves mean America's economic policy is being wagged by China, especially the People's Bank of China. So these frontiers of finance in a new fangled Chinese market economy are cutting each capitalists, right? Well, perhaps...from the SCMP:

The People's Bank of China has launched an anti-corruption drive in which it will draw on Marxist theory and methods to investigate its branch managers. Central bank governor Zhou Xiaochuan and its chief disciplinary officer, Wang Hongzhang, aimed to make Communist Party members and managers at the bank more honest and better able to fight corruption, the central bank's website said yesterday.

The drive would "employ a Marxist stance, perspective and methods to investigate and analyse problems", it said. "The collective decisions of the bank's leadership will be examined." It did not mention any specific incidents.
I can't find the part of Das Kapital that refers to managing US$800 billion in reserves, but I feel safer in the knowledge that Karl will be helping clear the cobwebs of corruption from the People's Bank. And it clears up why Kim Jong Il was traipsing around China last week.

Solidarity, Comrade Hemlock, in your struggle against ex-SCMP reporter Tinnie Chow and the CBC.

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[boomerang] Posted by Simon at 13:14
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January 18, 2006
Take A Deep Breath

I just got back from Beijing. Wonderful city, a bit nippy, but a pleasant place to get lost by Hou Hai Lake or even in Hai Dian. Food was excellent! Much higher quality than when I was a liexuesheng at Shi Fan Da Xue.

I did, however, note with concern the fact that my flight to Beijing had to be diverted to Taiyuan in Shansi province because of 'fog'. The visibility at the airport was apparently limited to 100 metres. It was not much improved when I landed three hours later.

So it was with some interest that I saw the latest pollution readings for cities in China by the China Environment Monitoring Center via TMC.net. The trouble with all such readings, though, is the basis for its measurements (because the whole world has totally different measures from one another). Basically, though, China has a scale from I to V, with I being an excellent, or 'G' rating, and V being terrible, or an 'XXX' rating. Beijing was rated III.

So I had a look at Shenzhen and Shanghai - they both had I, for excellent.

Hmmm....doesn't sound right to me! If Shenzhen and Shanghai are excellent...better start planting more trees!

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[boomerang] Posted by HK Dave at 18:20
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Shiny happy Hong Kongers

Festive happy Hong Kongers baffle FCC members.

Film at 11.

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[boomerang] Posted by Simon at 15:41
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The history of Chinese fakes (Updated)

Henry Ford said history is bunk, but far better is when fake history is debunked. The Economist, amongst others, hails an alleged 1763 map as a replica of an 1418 Chinese map of the world, proclaiming China beat Columbus to it, perhaps. The hedging in the headline isn't as noticeable in the article proper.

So using the power of the blogosphere, you click over to academic historian Jonathan Dresner's exposition of the problems with the map. That leads you to historian Geoff Wade (from NUS) rebuttal of the Economist article. Finally you click over to Hemlock (as you do daily) and find another piece ripping apart the validity of the map (reproduced below the jump).

Amazing what you can learn.

Update (18/1)

An astute observation by Peter Gordon in The Standard:

If Zheng He really did visit the Americas, it was a historical dead-end. This is, of course, the really interesting question: exactly why did China turn its back on its explorations, leaving the field to the Europeans? The net result was a long, slow decline in China's relative position in the world from which it is only now recovering.

It may still be, however, that some bright spark in China might see the map as a justification for demanding tribute from the United States, that it send large sums of money each year to build up central government coffers.

Except that America is already doing that.

Heh.


Hemlock on the map:

The antiquary in me is intrigued. If an 18th Century Chinese map of the world really is – at its creator claimed – a copy of one from 1418, it would add serious weight to the theory that Admiral Zheng He/Cheng Ho’s fleet visited America before Columbus, and went round the rest of the world too.

Which is more probable?
1. The eunuch not only sailed to India, the Middle East and East Africa in 1421-23, which no-one doubts, but circumnavigated the globe via the Cape of Good Hope and Cape Horn a century before Magellan and also dropped in on Europe, Australia and Antarctica.
2. The mapmaker was lying – he had copied a more recent, Western-influenced work.

The first theory has gained popularity thanks to the book 1421 – The Year China Discovered the World by Gavin Menzies, whose beliefs rest on the spacemen-built-the-pyramids sort of evidence much loved by fans of pseudoscience. Menzies has been debunked as junk history. Other supposed evidence of Chinese exploration, like reports of Chinese DNA among Maoris or peanuts and tomato seeds in ancient imperial tombs, has never come to anything.

Viewing the chart, the words that come to my mind are‘17th Century’ and ‘gwailo’. Whoever put together the original outline knew the world was round and could place geographical features more or less correctly in terms of longitude and latitude and therefore in scale. The Jesuits introduced serious mappaemundi to China from 1600 and had their work criticized and even banned for showing the middle kingdom as anything other than a vast area surrounded by small and adoring tributary barbarian states. Up to that time (and later), all known Chinese world maps were wildly inaccurate. Portugal was described in one as a place south of Java that traded in small children as food. Another divided the distant world into lands of small men, large men, etc.

In the West, the great voyages of discovery from the late 15th century onward ignited interest in “capturing the world as a single ordered image.” But Zheng He's earlier--and in some ways much more impressive--sea voyages had no such effect in China; in fact, they were a source of embarrassment. And whereas the possession and display of a world map or globe from the Renaissance onward in Europe signified that the owner was “a knowledgeable and worldwise citizen,” it meant no such thing in imperial China. Thus, until forced to reconsider their craft by new political and cultural priorities, Chinese mapmakers generally made the choice to depict the world not so much in terms of how it “actually” was, but rather in terms of how they wanted it to be.
Richard J. Smith , Rice University


While even The Economist is taking this “fresh and dramatic evidence” seriously, China’s historical officialdom is bemused. Beijing appreciates Cheng Ho’s ability to stir feelings of national pride, and they especially like the idea of him zipping through the Spratly and Paracel Islands, thus providing incontrovertible historical evidence that the South China Sea is an integral part of the motherland. Claiming America would be pushing it.



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[boomerang] Posted by Simon at 11:34
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January 17, 2006
Linklets 17th January

And for something completely different:

Amazing Russian acrobatic feats.

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[boomerang] Posted by Simon at 11:55
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Civil servants are different

David Webb has letter of the week in SCMP today, commenting on the fanciful theory that Hong Kong will outlaw "expat" packages:

I refer to the article "Race law to put tough curbs on expat deals" (January 11).
If Deputy Secretary for Home Affairs Stephen Fisher is serious about denying permanent residency to anyone getting what he calls "expat packages" or "overseas terms", then would he please tell us how many civil servants of his grade or above receive housing, rental allowances, overseas education for their children, air-conditioning allowances and other perks from their employer?

What utter hypocrisy.

The form of remuneration should have no bearing on a person's eligibility for permanent residency. Employers should be allowed to remunerate employees in whatever form they choose to recruit and retain talent, whether from Hong Kong or overseas, permanent resident or not. The total cost of compensation reflects the free-market value of an employee to an employer. How it is structured, in cash or benefits, is usually driven by other considerations.

The government should instead remove its fiscal incentive to structure packages. Employees should be taxed on the full value of all benefits received, including housing. Currently, housing or rent is only deemed to be worth 10 per cent of the value of the other income from the employer.

Civil servants in aggregate are probably the greatest beneficiaries of this. If housing were taxed at its rateable value, broadly equivalent to market rent, then the government could afford substantial cuts to the percentage rate of salaries tax without reducing inland revenue. Tax employees on what they are paid, not how they are paid.

You can hear the choking on Albert Road from here.

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[boomerang] Posted by Simon at 11:15
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January 16, 2006
Teaching Koreans

An op-ed in the Korean Times by Mike Weisbart, titled Three Cheers for Hong Kong Justice:

Everyone is probably happy to see the Korean farmers return from Hong Kong. But there are some good reasons Koreans ought to enjoy seeing that city’s system come down hard on the three Korean farmers who must return in March to face trial.

They’re happy now because the homecoming means Korea’s international embarrassment won’t be extended indefinitely, and they can stop feeling so hypocritical. Can you imagine the uproar if some foreigners came here and protested violently, disrupting lives and businesses, injuring hard working, everyday Korean policemen, only to be given a get-out-of-jail-free card just because their home government begged? If the shoe was on the other foot, Koreans would be screaming bloody murder.

Sending the men back to Hong Kong for trial will be a boon for Korea’s justice system and, by extension, a boon for the people. Call it the demonstration effect.

If you didn’t follow the news, 1000 Korean farmers converged with other protestors last December to protest the WTO talks in Hong Kong. When the meetings started, the Koreans were uncharacteristically well behaved and everyone praised them for their restraint. On the last day or so, however, things got ugly and there were arrests.

Koreans howled and the government sent a delegation to negotiate. Most of the protestors were let go, except for a hard-core group of 11. For them, Korea dispatched more officials and even enlisted the support of popular actors, as if the Chinese would be swayed by the threat of having the Korean Wave shut off. At the end of last week, charges were dropped against all, but the above-mentioned three and everyone was allowed to return home.

We shouldn’t criticize the Korean government too much. It was caught between an inflamed public demanding the rescue of its fellow citizens being ill treated in a foreign land, on one side, and the understanding that it would be outraged if the situation was reversed and Hong Kong was interfering in Korean jurisdiction, on the other.

It’s just too bad it can’t step out of itself and praise Hong Kong for dealing with the matter properly because that city’s justice system is exactly the model Korea should want to emulate, where the rule of law is respected and the courts and police are given their due.

There, the police made arrests and conducted an investigation. They talked to witnesses, reviewed photos and video footage, and determined there was enough evidence for prosecutors to lay charges. In Korea, the prosecutors would have done the investigation and decided whether to indict or not. If they opted for indictment, the judge would agree with the prosecution as a matter of course (if statistics are to be believed, that happens in 99 percent of cases) and, in the end, the ``accused’’ would have been advised by council to plead guilty and beg for mercy.

It was interesting watching the Koreans avail themselves of the justice system there, knowing full well that the same rights are not extended to the accused here at home. In Hong Kong, they were allowed a lawyer, and given the latitude to mount a real defense in which their defender could cast doubt on the evidence brought by the prosecutors, all done under an assumption of innocence that forces the prosecutors to carry the burden of proof. Because of that burden, the trial was fair.

In this case, the judge ruled the prosecution didn’t had insufficient evidence and let the men go. This isn’t an example of Hong Kong punishing Koreans for political purposes, as alleged by the Korean defense attorney, who comported himself with all the grace of a child whose candy was taken away. It was a matter of due process.

And what did the police say? ``We have done our best to present evidence in a way that is most fair to the defendants.’’ And then this: ``You have to present the case in a fair manner, in accordance with the rule of law. Evidence must satisfy the standard set by the legal system.’’

When was the last time such words were uttered at the end of a dispute of any kind in Korea? Here, the losing side would vow to fight on, as did the ringleader of the Korean farmers on the way back to Seoul: ``The clash was caused by police,’’ he said. ``We are furious that Hong Kong authorities did not drop all charges. The fact that 11 were released without any charges shows that the police are pursuing this on a political basis, rather than on the evidence.’’

No, the system worked the way it is supposed to work and Koreans should look to it and hope the same becomes reality here. They should hope for a separation of power between judges and prosecutors and, yes, they should hope for the police to take a more responsible position in the system.

The president’s laudable judicial reform agenda is off the rails and it would be like hoping against hope to look forward to it getting back on track again during his term. All we can do now is hope someone notices what really happened in Hong Kong and push the next guy into affecting some change here at home.

Also read ESWN's translation of an account by a Taiwanese WTO protesters 48 hours in detention.

On a completely unrelated note, archaeologists have uncovered a coin collector's tomb. Who knew such a useless hobby had such a long history?

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[boomerang] Posted by Simon at 10:55
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January 14, 2006
China's education reforms

The SCMP often comes in for serious stick, the latest deserved example being the controversy over Peter Kovolsky, an anti-smoking campaigner who's interview was spiked due to pettiness. In a paper that often struggles for content (just try it's City section on any random day for an example) it seems bewildering. But to the SCMP's credit, they do have some good journalists filing good stories. Unfortunately again due to misguided policies, the SCMP hides its online articles and lets these stories miss a wider exposure, much to both their journalists' and own detriment.

Today's example is Josie Liu's story, headlined Equality finally gets a chance with revision of education standards. It's reproduced below the jump. China's "free" public schools are often anything but, with some of the elite ones in Beijing effectively turning themselves into high fee private schools. The abolition of the farmers' tax will, perversely, mean poor rural schools will lose their primary source of income. China's leadership continually frets about the widening gap between the rural poor and the urban rich, and the inequality of opportunities and education are a major structural barrier to closing that gap (so is the billions in unpaid wages to over a hundred million rural labourers working in cities, but that's for another time). Amazingly, especially for an allegedly socialist country, schools until now have not been funded by the central government. But reforms are underway and so long as they are properly funded, they will go much further in improving the lives of tens of millions than a bunch of pampered Korean farmers marching down Causeway Bay.

It through such steps that China's future remain optimstic and hopeful.

Beijing newspaper editor Zhang Xiujiang is not happy with his son's Grade Five English teacher. He says she is a bad teacher and those who are good have found jobs in "good" schools far from his home that charge tens of thousands of yuan a year. "There is huge disparity between public schools, even within one city," he said. "It's not fair."

Proposed revisions seek to reduce disparities in education standards between schools and regions. The State Council approved draft revisions last week, almost 10 months after 740 National People's Congress representatives filed the initiative at the last NPC session. The changes will be put to the NPC Standing Committee next month for review and final approval. If passed, China will have its first revised compulsory education law in 20 years.

A version released for feedback had more than 90 items covering issues from the way schools are run to management of teaching staff and legal responsibilities. In contrast, existing legislation has only 18 items in total. It came into effect 20 years ago, to guarantee basic education for every school-age child. By 2004, 94 per cent of populated areas met compulsory education standards, but the law has not kept up with problems that have emerged over the past two decades.

One of the biggest problems was the one-time drive to corporatise education, turning part of the public school system into a money-making machine.

In several instances, elite public secondary schools are allowed to operate like private schools, charging higher fees and adopting their own selection criteria. There are more than 40 such schools in Beijing alone, and pupils have to take many extra classes to acquire the skills needed to qualify for a place. Parents also have to "donate" thousands of yuan in admission fees.

Chu Zhaohui , from the China National Institute for Educational Research, said that in such cases, the few had access to the assets of the many. "Good public schools are funded by the government and the high-quality resource should belong to all taxpayers, but actually they are enjoyed by a small number of rich people," Dr Chu said. "It has been proved that compulsory education cannot continue this way, with the public paying for it. It doesn't work."

The draft revision bans public schools from being run along private lines and contains a consensus on the government's key role in providing free basic education. It says local governments should be prohibited from setting up so-called key schools in the compulsory system.

The government should not only provide sufficient funding for compulsory education but also strike a regional balance in the allocation of resources.

To narrow the chasm between rural underdeveloped regions and the country's east, the draft proposes that central finances pay for textbooks and upgrades to rural schools. Rural governments have had less money to spend on education because of reductions in the fees they can collect. The situation could worsen this year with the scrapping of the agriculture tax, a major source of income for local administrations over the past five decades.

Finances were so badly strapped in some Shaanxi village schools this winter that students turned purple because the school did not have money for fuel.

Peking University law professor Zhan Zhongle said it was widely agreed Beijing should shoulder more of the burden of funding rural education. Yang Dongping , director of the 21st Century Education Development Research Academy, said a State Council meeting last month had fostered hopes of allocating more money for needy rural schools. The council decided that by next year 15 billion yuan in annual fees would be waived for all rural students and Beijing would inject an extra 120 billion yuan into rural education over the next five years, the China Business News said.

Minister of Finance Jin Renqing , said in a speech last month that in the next five years, the central government will shoulder up to 80 per cent of the money needed for fee waivers and school budget improvements in the west and central regions.



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[boomerang] Posted by Simon at 17:29
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January 13, 2006
KJI is in da 'hood

A bewildered community of Americans getting ready to adopt Chinese kids are unceremoniously kicked out of Guangzhou's White Swan Hotel for "an important meeting", namely the arrival (by train, most probably) of North Korea's Kim Jong Il. From an anonymous source, today KJI is in Shenzhen. The cover story they are using is a visit to some high tech factories, but that doesn't wash. Have you ever seen North Korea and high tech in the same sentence (this one excluded)? No, the Kimster is doing what everyone does in Shenzhen: he's stocking up on fake DVDs, perhaps a spot of golf (fake clubs included), some shopping for the concubines (Chloe fake handbags, Channel fake sunnies) and a "rest stop" at a karaoke bar.

Hong Kong kicks out 11 South Koreans yet we're so close to welcoming one North Korea. Does it make you wonder that KJI, fearful of flying, has journeyed so far south? And that he's so close to his alleged Macanese bankers but isn't visiting....

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[boomerang] Posted by Simon at 13:02
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When 20% Growth is a Correction

An article today about the state of China's property market that I found more worrying than breathtaking. The National Development and Reform Commission has said that it expected property sales in China to only increase 20%, and that the market had been in a correction since mid-2005. Allow me a quote:

It expects the growth in property investments in China to slow to 16 percent this year, compared with a projected growth of 21 percent in 2005 and an actual growth of 28 percent in 2004.

The value of property investments in China was 1.316 trillion yuan (US$163.11 billion) in 2004, and was forecast at 1.592 trillion yuan in 2005, it said.

The agency attributed the slowdown to the government's macroeconomic controls and an overinvestment in the property sector in recent years.

It expected this 'correction' to cause non-performing loans to rise, liquidity pressure, and for weaker property players to be weeded out.

Yet 20% is very respectable almost anywhere else in the world. What's going to happen to China when it faces a real correction?

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[boomerang] Posted by HK Dave at 12:37
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Why HK needs new politicians

Donald Tsang boldly leaps into the unknown and celebrates his moving into Government House by telling civil servants they can work the same number hours in a 5 day week instead of 5 and a half days. Everyone's up in arms. The grandees in Exco and Legco are annoyed because they didn't get the chance to add whatever ridiculous arguements they have for or against the proposal. So instead they parade it through the press:

James Tien, chairman of the pro-business Liberal Party, said the plan will create unnecessary pressure on the small-and-medium sized enterprises that account for about 90 percent of business firms in Hong Kong.

"This will raise expectations of staff at private firms. And if some companies choose not to follow the government's system, they will easily be branded `unscrupulous employers'," he said.

Tien called for the government to rethink the system as he believed it could drive more workers to spend weekend holidays in the mainland and thus hurt the retail and catering industry.

The horror, the horror. It is actually a skill to think up such inanities.

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[boomerang] Posted by Simon at 09:39
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January 12, 2006
Linklets 12th January

The astute will have noticed the daily linklets have been on hiatus for the past few weeks. Chances are the linklets are not likely to be daily, at least for the foreseeable future. Thus a name change to just linklets. There's an ever-increasing and incrediblely diverse amount of China and East Asia blogging going on and it is outstripping my ability to keep up. I will continue to link to noteworthy posts as and when I can; I also encourage you to click the blogs on the sidebar and read them yourself. They are the cream of the crop.

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[boomerang] Posted by Simon at 15:31
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Deflating

The SCMP reports:

Economic growth is likely to slow to between 8.5 and 9 per cent on the mainland this year, with deflation emerging as a risk in the second half, the state planning agency said yesterday. "The growth rate will decrease, led by easing investment and exports," the National Development and Reform Commission said in a report published in the official China Securities Journal.
9% growth is a nice problem to have. The true problem is what has driven this growth - exports and fixed asset investment. Consumption has not kept pace and private savings are rising as money is set aside to cover the growing costs of education and health and to supplement a non-existant social security structure, especially for retirees as life expectancy rapidly grows.

The biggest problem is deflation. Too much investment has created too much capacity and already the hissing sounds can be heard, for example in Shanghai's property market. China's financial system is still awash with bad debts, creaky banks with poor controls and policies as often driven by cronyism and politics as by finance. China's pegging of the yuan means effectively it has outsourced its monetary policy to the Fed, ECB, BoJ and other central banks. The government is trying to prop up consumption but is taking in more than it can spend. So when prices start to fall, what is the most likely way out?

Export deflation.

If you own a factory, once it starts running you need to sell whatever it produces. You want to make a profit, but the money you spent building the factory is a sunk cost. Even if you can't make that money back, you'll keep on producing goods if you can sell them for more than it costs to make each individual unit (the marignal cost of production, in econo-speak). It doesn't cost much to make stuff in China. As a factory owner, you don't care if you're not making a net profit - if you can keep making a small amount on each piece produced, you will. Other countries will complain you are dumping goods at below cost, but it depends what you deem the cost of production.

It's a unique kind of deflationary problem, combining some elements of the deflations of Japan in the past 15 years, the Great Depression and others. But it is deflation with Chinese characteristics, especially as China is still not a fully functioning capitalist economy.

The good news? This could keep economists busy for years.

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Free Koreans

11 of the 14 WTO protesters were released yesterday as the charges were dropped due to insufficient evidence. Doug Crets takes a look at the background of the 3 Koreans still facing charges. In short, one is the vice president of the Korean Confederation of Trade Unions - he is not a farmer. Another belongs to the Korean Peasant's League, although he only began farming in 2003 and spends at least some of his time working as a video and film producer. The last is a cucumber farmer, KPL member and has a heart problem. In short, all are professional protesters - they are free on bail, due in court again March 1 and are going back to South Korea tomorrow. See ya.

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[boomerang] Posted by Simon at 11:05
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China: Africa's New Colonizer?

An article in the Times of London provocatively covers Foreign Minister Li Zhaoxing's visit to Africa to tie up various natural resource contracts, including a US$2.3 bn MOU with Nigeria to get access to one of its oilfields. To quote the article:

China now obtains about 28 per cent of its oil imports from Africa — mainly Angola, Sudan and Congo. Chinese companies have snapped up offshore blocks in Angola, built pipelines in Sudan and have begun prospecting in Mali, Mauritania, Niger and Chad.

Chinese interests are not limited to energy. One of the biggest Chinese mining operations on the continent is the Chambishi copper mine in Zambia. In South Africa, China-controlled ASA Metals Ltd said last week that it wanted to triple output of ferrochrome — an alloy used in stainless steel to deter corrosion — by 2008. And Chinese investors are seeking nickel deposits in such fragile nations as Burundi.

Chinese-funded enterprises in Africa increased by 77 in 2004 to 715. The new companies invested $135 million with plans for investment of $432 million, a Chinese official said.

Trade has soared. Two-way trade leapt 39 per cent in the first ten months of last year to £18 billion. Exports totalled $15.25 billion while imports reached $16.92 billion. Between 2002 and 2003, trade soared by 50 per cent to $18.5billion — the fastest growth China has seen with any region.

The numbers are impressive, but what really makes the article controversial is the final paragraphs:
Some African businessmen complain that China is flooding the continent with cheap goods and putting domestic manufacturers out of business.

To counter such criticisms, China ensures that its investments are accompanied by medical and other humanitarian aid, scholarships and generous construction projects. Chinese scholars bristle at suggestions that Beijing is mining the continent for resources needed to fuel the Chinese manufacturing machine.

He Wenping, of the Chinese Academy of Social Sciences, said: “Western media says China is carrying out a ‘new colonialism’ in Africa. That is a deliberate distortion of mutually beneficial China-Africa co-operation. China has built large-scale industries and supplied badly needed skills and funds to African countries.”

I have to say that while some of the regimes that China cozies up to, like Burma, North Korea or Zimbabwe are very unsavory, what they are up to in Africa is generally no different from most Western powers. In general, Africa is hardly offering up compelling alternatives to Chinese goods, and this even with the high tariff barriers many of the African states maintain. Seems like alarmist journalism to me from the Times. What do you think?

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[boomerang] Posted by HK Dave at 11:05
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January 11, 2006
Chinese Engine Greased by Burmese Oil

The bad guys of Southeast Asia, SLORC of Myanmar, the little North Korea in the making on the diametrically opposite side of China, have found themselves a champion. Their regime will quite likely be strongly coddled by a China that is taking an ever deeper interest in it for one major reason - oil. A revelation today that China is the world's second largest consumer of oil in the world after the United States was paired by a lower-key, but potentially as important announcement - that Myanmar (Burma) was declining co-operation with India on an India-Bangladesh-Myanmar gas pipeline and will be working just with China instead.

It has been some time since both Burma and India were both British colonies, but ties of history and of geographic proximity had kept the two countries on speaking terms. However, the greater political similarities between China and Burma (and between China and most of the countries on its western flank) mean that the latter, and other oil-rich states, will be falling increasingly into China's orbit. China offers not only ready cash, but also the prospect of being a counterweight against Indian, and ultimately also American influence.

It seems that most people have focused on Taiwan as the greatest potential flashpoint with the United States. But what is India's concern today may become America's concern tomorrow from a geopolitical standpoint.

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[boomerang] Posted by HK Dave at 11:23
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Dissecting the Chinese miracle

From Peter Zeihan and the good folks at StratFor, by :

The "Chinese miracle" has been a leading economic story for several years now. The headlines are familiar: "China's GDP Growth Fastest in Asia." "China Overtakes United Kingdom as Fourth-Largest Economy." "China Becomes World's Second-Largest Energy Consumer." "China Revises GDP Growth Rates Upward -- Again." Everywhere, one can find news articles about China, rising like a phoenix from the economic debris of its Maoist system to change and challenge the world in every way imaginable.

But just like the phoenix, the idea of an inevitable Chinese juggernaut is a myth.

Continues below the jump.

Moreover, Western markets have been at least subconsciously aware of this for a decade. More than half of the $1.1 trillion in foreign direct investment that has flowed into China since 1995 has not been foreign at all, but money recirculated through tax havens by various local businessmen and governing officials looking to avoid taxation. Of the remainder, Western investment into China has remained startlingly constant at about $7 billion annually. Only Asian investors whose systems are often plagued (like Japan's) by similar problems of profitability or (like Indonesia's) outright collapse have been increasing their exposure in China.

Once the numbers are broken down, it's clear that the reality of China does not live up to the hype. While it is true that growth rates have been extremely strong, growth does not necessarily equal health. China's core problem, the inability to allocate capital efficiently, is embedded in its development model. The goals of that model -- rapid urbanization, mass employment and maximization of capital flow -- have been met, but to the detriment of profitability and return on capital. In time, China is likely to find itself undone not only by its failures, but also by its successes.

The Chinese Model

Until very recently, China's economic system operated in this way:

State-owned banks held a monopoly on deposits in the country, allowing them to take advantage of Asians' legendary savings rate and thus ensuring a massive pool of capital. The state banks then lent to state-owned enterprises (SOEs). This served two purposes. First, it kept the money in the family and assisted Beijing in maintaining control of the broader economic and political system. Second, because loans were disbursed frequently and at subsidized rates -- and banks did not insist upon strict repayment -- the state was able to guarantee ongoing employment to the Chinese masses.

This last point was -- and remains -- of critical importance to the Chinese Politburo: they know what can happen when the proletariat rises in anger. That is, after all, how they became the Politburo in the first place.

The cost of keeping the money circulating in this way, of course, is that China's state firms are now so indebted as to make their balance sheets a joke, and the banks are swimming in bad debts -- independent estimates peg the amount at around 35-50 percent of the country's GDP. Yet so long as the economic system remains closed, the process can be kept up ad infinitum: After all, what does it matter if the banks are broke if they are state-backed and shielded from competition and enjoy exclusive access to all of the country's depositors?

This system, initiated under Deng Xiaoping in 1979, served China well for years. It yielded unrestricted growth and rapid urbanization, and helped China emerge as a major economic power. And so long as China kept its financial system under wraps, it would remain invulnerable.

But the dawning problem is that China is not in its own little world: It is now a World Trade Organization member, and nearly half of its GDP is locked up in international trade. Its WTO commitments dictate that by December, Beijing must allow any interested foreign companies to compete in the Chinese banking market without restriction. But without some fairly severe adjustments, this shift would swiftly suck the capital out of the Chinese banking system. After all, if you are a Chinese depositor, who would you put your money with -- a foreign bank offering 2 percent interest and a passbook that means something, or a local state bank that can (probably) be counted on to give your money back (without interest)?

The Chinese are well aware of their problems, and perhaps their greatest asset at this point is that -- unlike the Soviets before them -- they are hiding neither the nature nor the size of the problem. Chinese state media have been reporting on the bad loan issue for the better part of two years, and state officials regularly consult each other as well as academics and businesspeople on what precisely they should do to avert a catastrophe.

The result has been a series of stopgap measures to buy time. Among these, the most far-reaching initiative has been a partial reform of the financial sector. The government has founded a series of asset-management companies to take over the bad loans from the state banks, thus scrubbing them free of most of the nonperforming loans. The scrubbed banks are then opened up so that interested foreign investors can purchase shares.

So far as it goes, this is a win-win scenario: Foreign banks get access to assets in-country before the December jump-in date, and the state banks avoid meltdown. In addition, a measure of foreign management expertise is injected into the system that hopefully will teach the state banks how to lend appropriately and -- if all goes well -- lead to the formation of a healthy financial sector. At the same time, the deep-pocketed foreign companies come away with a vested interest in keeping their new partners -- and by extension, the Chinese government -- fully afloat.

The only downside is that central government, through its asset-management firms, assumes responsibility for financially supporting all of China's loss-making state-owned enterprises.

But this rather ingenious banking shell game addresses only the immediate problem of a looming financial catastrophe. Left completely untouched is the existence of a few hundred billion dollars in dud loans -- linked to tens of thousands of dud firms for which the central government is now directly responsible.

Which still leaves for China the unsettled question: "Now what do we do?"

Two Opposing "Solutions"

As can be expected from a country that just underwent a leadership change, there are two competing solutions.

The first solution belongs to the generation of leadership personified by Deng Xiaoping and Jiang Zemin, and could be summed up as a philosophy of "Grow faster and it will all work out." It could be said that during Jiang's presidency, while the leadership certainly perceived China's debt problem, they -- like their counterparts in Japan -- felt that attacking the problem at its source -- the banking system -- would lead to an economic collapse (not to mention infuriate political supporters who benefited greatly from the system of cheap credit).

Jiang's recommendation was that everyone should build everything imaginable in hopes that the resulting massive growth and development would help catapult China to "developed country" status -- or, at the very least, raise overall wealth levels sufficiently that the population would not turn rebellious. In the minds of Jiang and his generation of leaders, the belief was that only rapid economic growth -- defined as that in excess of 8 percent annually -- could contain growing unemployment and urbanization pressures and thus hold social instability at bay.

The second solution comes from the current generation of leadership, represented by President Hu Jintao. This solution calls for rationalizing both development goals and credit allocation. The leadership wants to eliminate the "growth for its own sake" philosophy, consolidate inefficient producers and upgrade everything with a liberal dose of technology. Key to this strategy is a centrally planned effort to focus economic development on the inland areas that need it most -- and this entails tighter control over credit. Hu wants loans to go only to enterprises that will use money efficiently or to projects that serve specific national development goals -- narrowing the rich-poor, urban-rural and coastal-interior gaps in particular.

There are massive drawbacks to either solution.

Regional and local governors enthusiastically seized upon Jiang's program to massively expand their own personal fiefdoms. And as corporate empires of these local leaders grew, so too did Chinese demand for every conceivable industrial commodity. One result was the massive increases in commodity prices of 2003 and 2004, but the results for the Chinese economy were negligible. China consumes 12 percent of global energy, 25 percent of aluminum, 28 percent of steel and 42 percent of cement -- but is responsible for only 4.3 percent of total global economic output. Ultimately, while "solution" espoused by Jiang's generation did forestall a civil breakdown, it also saddled China with thousands of new non-competitive projects, even more bad debt, and a culture of corruption so deep that cases of applied capital punishment for graft and embezzlement have soared into the thousands.

Yet the potential drawbacks of the solution offered by Hu's generation are even worse. In attempting to consolidate, modernize and rationalize Jiang's legacy, Hu's government is butting heads with nearly all of the country's local and regional leaderships. These people did quite well for themselves under Jiang and are not letting go of their wealth easily. Such resistance has forced the Hu government to reform by a thousand pinpricks, needling specific local leaders on specific projects while using control of the asset management firms as a financial hammer. After all, since the central government relieved the state banks of their bad loan burden, it now has the perfect tool to strip power from those local leaders who prove less-than-enthusiastic about the changes in government policy.

Or at least that is how it is supposed to work. Local government officials have become so entrenched in their economic and political fiefdoms that they are, at best, simply ignoring the central government or, at worst, actively impeding central government edicts.

Hu's team is indeed making progress, but with the problem mammoth and the resistance both entrenched and stubborn, they can move only so fast for fear of risking a broader collapse or rebellion. And this does not take into consideration Beijing's efforts to strengthen the Chinese interior -- where the poorest Chinese actually live. Complicating matters even more, Hu's strategy relies upon the central government's ability to wring money out of the wealthy coastal regions to pay for the reconstruction of the interior.

That has made the coastal leaders even more disgruntled. However, they have come upon a fresh source of funding, replacing the traditional sources of capital that now are drying up as a result of the personnel changes in Beijing: the underground lending system, which was spurred by the official government monopoly over banks in years past. The central government now estimates that the underground banking sector is worth 800 billion yuan, or some 28 percent of the value of all loans granted in country.

Dealing with Failure -- And Success

The question in our mind is which strategy will fail -- or even succeed -- first. If Jiang's system prevails, then growth will continue, along with the attendant rise in commodity prices -- but at the cost of growing income disparity and environmental degradation. The likely outcome of such "success" would be a broad rebellion by the country's interior regions as money becomes increasingly concentrated in the coastal regions long favored by Jiang. And that is assuming the financial system does not collapse first under its own weight.

Local rebellions in China's rural regions have already become common, but two of are particular note.

In March, the villagers of Huaxi in the Zhejiang region protested against a local official who had used his connections to build a chemical plant on the outskirts of town. When rumors of police brutality surfaced, some 20,000 villagers quite literally seized control of the town from 3,000 security personnel. Before all was said and done, the villagers invited regional press agencies in to chronicle events in the town that had told the Politburo to go to hell, and started burning police property and parading riot control equipment before anyone who would watch. They actually sold tickets to their rebellion. Huaxi marked the first time local officials actually lost control of a town.

Then, in December, protests erupted against a local official in Shanwei, who had similarly lined his pockets with the money that was supposed to have been made available to farmers displaced by his expanding wind-power farm. The local governor figured that since he was investing not just in an energy-generating project in energy-starved China, but a green energy project, that he would have carte blanche to run events as he saw fit. He was right. When the protests turned violent, government forces opened fire -- the first authorized use of force by government troops against protesters since the Tiananmen Square incident in 1989.

Such events are, in part, evidence of a degree of success for the strategy espoused by Jiang's generation. The grow-grow-grow policy results in massive demand for labor by tens of thousands of economically questionable -- and typically state-owned -- corporations. This, in turn, draws workers from the rural regions to the rapidly expanding urban centers by the tens of millions. The dominant sense among those who are left behind -- or those who find their urban experiences less-than-savory -- is that they have been exploited. This is particularly true in places like Shanwei, on the outskirts of urban regions, when urban governors begin confiscating agricultural land for their pet projects.

But for all the complications created by Jiang's solution to China's economic challenges, it is Hu's counter-solution that could truly shatter the system. In addition to dealing with all the corrupt flotsam and high-priced jetsam of Jiang's policies, Hu must rip down what Jiang set out to accomplish: thousands of fresh enterprises that are unencumbered by profit concerns. A steady culling of China's non-competitive industry is perhaps a good idea from the central government's point of view -- and essential for the transformation of the Chinese economy into one that would actually be viable in the long term -- but not if you happen to be one of the local officials who personally benefited from Jiang's policies.

The approach of Hu's generation is nothing less than an attempt to recast the country in a mold that is loosely based on Western economics and finance. Even in the best-case scenario, the central government not only needs to put thousands of mewling firms to the sword and deal with the massive unemployment that will result, it also needs to eliminate the businessmen and governing officials who did well under the previous system (which did not even begin to loosen its grip until 2003). And the only way Beijing can pay for its efforts to develop the interior is to tax the coast dry at the same time it is being gutted politically and economically.

The challenge is to keep this undeclared war at a tolerable level, even while ratcheting up pressure on the coastal lords in terms of both taxation and rationalization. But just as Jiang's "solution" faces the doomsday possibility of a long rural march to rebellion, Hu's strategy well might trigger a coastal revolution. As the central government gradually increases its pressure on the assets and power of China's coastal lords, there is a danger that those in the coastal regions will do what anyone would in such a situation: reach out for whatever allies -- economic and political -- might become available. And if China's history is any guide, they will not stop reaching simply because they reach the ocean.

The last time China's coastal provinces rebelled, they achieved de facto independence -- by helping foreign powers secure spheres of influence -- during the Boxer Rebellion. This resulted, among things, in a near-total breakdown of central authority.



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Law and disorder

A compare and contrast exercise.

The Standard reports Differing wage scales will be legal:

Paying foreign workers more than local employees for essentially the same job will not be a crime under Hong Kong's proposed race discrimination laws, an official said Tuesday.
Meanwhile the unlinkable SCMP screams Race law to put tough curbs on expat deals:
Hong Kong companies will have to justify their offers of generous "expat packages" to foreign employees under an anti-racism bill now in an "advanced stage of drafting". They will have to prove the recruit has expertise not readily available in Hong Kong, and permanent residents will not be able to receive such special terms...

Mr Fisher also said the bill would make harassment and racial vilification an offence, but would not necessarily cover racist "name-calling" unless it was done in the context of the "protected areas" of employment, education, provision of goods and services, public bodies, barristers and clubs.

Same facts, very different angles. Hong Kong's proposed racial discrimination laws are close to useless. Racist abuse is dependant on where it happens, not what is said. The law will not cover mainland Chinese, which in itself is disciminatory. Furthermore it won't do anything to change the other institutional racial barriers. For example, domestic helpers can never qualify for permanent residency, while others here on employment visas can qualify after 7 years. Many here look at domestic helpers (mostly Filipinas, Indonesians, Thais and Sri Lankans) as serfs or even sub-human. If you're going to outlaw racial discrimination, either do it properly or don't do it at all.

While on Hong Kong law, our favourite rabble of 14 protesters are due in Kwun Tong magistracy today. A litany of minor Korean politicians, Hong Kong trade unionists and other odd-balls continue their efforts to subvert the rule of law by staging hunger strikes and threatening travel boycotts. Thankfully the government's attitude remains the right one - these protesters will be tried by a court of law, not a court of media and public opinion. There has not been one legitimate arguement for dropping the charges. These protesters are getting a first hand lesson in what rule of law really means. Getting others to rant and rave on your behalf doesn't get you off, sunshine. The NYT is calling the situation diplomatically sticky. Somehow I don't see relations between South Koera, Hong Kong and China being affected by this.

Economic world beater Hong Kong has only 10% of its population paying income tax while more than half its population live in government housing. As one of the 10% paying tax, it's good to know my tax dollars will be going to putting these people in jail if they are found guilty. It should prevent some of the dollars being wasted on empty exhibition halls (AsiaWorld Expo at the airport), West Kowloon, Kai Tak, Tamar...

By the way, who is paying defendant lawyer and democrat Martin Lee's fees? Protesting ain't cheap.

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[boomerang] Posted by Simon at 08:59
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January 10, 2006
Zheng He Redux

We have all heard, ad nauseam, about how Zheng He (Cheng Ho) the Muslim Chinese eunuch admiral made a number of naval visits to Southeast Asia and various countries in the Indian Ocean. The blinkered view of these visits as entirely peaceful and altruistic have then been generalized and interpreted that Chinese foreign policy has always been entirely peaceful to its neighbors.

Fear not, though, I am not descending into one of my rants on the subject. An Indian defense analyst has written about a new gambit by China in Sino-Indian relations. India is keen to improve its relations with its Central Asian neighbors to the north and west (starting of course with Pakistan). China has certainly stolen a march on India in negotiating gas pipeline deals with Central Asian countries and Iran to keep itself well supplied with oil. In return for sharing the benefits of power projection in Central Asia, China apparently wants India to share power with it in the Indian Ocean.

A brief note, but an interesting perspective from outside our area...

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[boomerang] Posted by HK Dave at 16:21
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Salaam Al-Alaikum, Bob

The People's Daily Online had a rather amusing editorial about America's top leadership convening a conference to push the teaching of 'critically-needed' languages at the primary and secondary schools. They are: "Arabic, Chinese, Hindi, Farsi, Russian and Urdu."

Preparing kids early for anti-terrorism operations! The primary justifications for the focus on langugage instruction, according to the People's Daily is military and intelligence (hence the editorial's title, "Foreign Languages, Security and Anti-Terrorism"), although it grudgingly admitted that cultural affinity and friendship might play a role.

Nevertheless, despite the implicitly cynical tone of the piece, it remained very polite and respectful of President Bush (as Xinhua journalists are trained to be!) until the last paragraph, which suddenly erupts into becoming a violent turn of the knife:

However, Bush may have neglected two facts noticed by all: one is that most of the 9/11 terrorists and London bombers once studied and lived in the West for many years, which seemed didn't help to change their view on America and other western countries; the other is, anti-America sentiment, rather than language barrier, is more caused by preferential policies and double standards the United States has been pushing in the Arabic world.

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Mao was a bigger prick than I thought

From a review of The Cold War: A New History by John Lewis Gaddis, in the Economist (sub req'd):

The reader learns, for example, how close the Americans came to winning the Korean war and creating a united, pro-western Korea. At one point Stalin seemed resigned to the defeat of North Korea. Mr Gaddis quotes him as “wearily” remarking: “So what. Let it be. Let the Americans be our neighbours.” The pro-western tide was turned only when Mao persuaded his own advisers that China must intervene, and sent 300,000 troops to support Kim Il Sung. Mao's baleful influence reappears in 1956. Khrushchev apparently agonised over whether to put down the Hungarian rebellion of that year, and his final decision to send in the troops was made partly “under pressure from Mao Zedong”.

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Cry, freedom

There's been much bally-hoo over Microsoft's closing of Michael Anti's popular blog on MSN spaces in China. It's a nice combination - the evil of China's firewall and Microsoft's rolling over at the first instance. That said, as a corporate decision it isn't so hard to understand. Microsoft is a company, not a public service. The same is true of Yahoo. Bear that in mind and the whole dispute isn't about free speech but what companies operating in oppressive regimes need to operate. It is not a black and white question - oil companies operate in questionable regimes all the time as well. The moral questions posed are for each company to face and answer. But place yourself in the shoes of the Microsoft flunky who received the request to shut down Anti's site. What would you do?

Let me set some homework. What's the difference between the Anti incident and the rolling over by Hong Kong ISP's in handing over the identities of 22 alleged file sharers? One ISP intends to fight the demand, but three of them have meekly rolled over. It will be an interesting test of Hong Kong's Privacy of Data Ordinance, not to mention a host of other legal issues. It seems Hong Kong is leading the world in the prosecution of file sharers. How do we get the 14 WTO protesters onto a file-sharing program?

While we like to think the internet is free and liberal, it is not. Companies and governments are involved. The internet hasn't changed the rules - we are learning it is subject to the same rules as the real world. That's a shock for some.

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January 09, 2006
Hell is Korean protesters (Updated Jan 10th)

On Saturday I wondered past the Star Ferry at TST. A crowd had gathered around a tent, boldly declaring "We might have broken the law but we're Korean farmers so you should let us off". The impoverished farmers were snugly ensconced in their tent, with protective plastic sheeting, mobile phones, card games, heaters, jackets, sleeping bags and more. The local trade unionists helping out these "hunger strikers" had a collection box although it wasn't clear just how much it would take to make them all go away. Don't they need a licence to camp out on government property? A massive protest of 200 (although the organisers claiming it was 150,000) demanding the government and police retrospectively change the law and allow the 14 suspects to go home. The unlinkable SCMP reports another 1,000 Korean farmers are threatening to return to Hong Kong to demand their release. It makes one wonder who looks after their farrms while they do all this protesting, and how can allegedly impoverished farmers afford all this travel?

A small introduction. Hong Kong's law is based on the English system of common law. Commonly people that are arrested are offered bail, where they pay a surety while the case is being prepared to ensure they don't skip the country. The law is applied by courts without influence, fear or favour (at least, in theory). Once arrested the police present a court with the cicumstances and evidence to date, the court decides if there is a case to answer and if so may or may not offer bail until the full trial, scheduled at some later date. That's the system.

Letting these 14 suspects leave Hong Kong would virtually ensure they were never prosecuted. Their chances of returning to Hong Kong are about as remote as my chances of winning the Chinese New Year Mark 6 jackpot. Intimidation and protest may work elsewhere, but welcome to the rule of law. If you don't like it, don't come and protest here. We'd all be better off.

Other reading

ESWN on local press reaction and the dilemma facing HK authorities.
FH isn't impressed by Elizabeth Tang's hunger strike plans.

Update Jan 10th

I noticed 23 people signed a petition asking Hong Kong's government to subvert the rule of law. The government dismissed the request out of hand, noting that it didn't come from the State Council in Beijnig so it didn't count.

Hemlock:

To take his mind off it, Odell asks me a simple but profound question. “Koreans… What the fuck?” I give him the country’s history in a nutshell. First, it was repeatedly invaded by the Japanese, then it was repeatedly invaded by the Mongols, then it was repeatedly invaded by the Chinese, then it was repeatedly invaded by the Manchus, then it got one big, maybe-they’ll-get-the-message-this-time invasion from the Japanese again, and in 1950 it invaded itself. This experience, I explain, has made these people the proud and noble mouth-frothing xenophobes we all know and love today, threatening to send hordes of vicious peasant warriors to Hong Kong if our Government does not honour their birthright as sons of the Hermit Kingdom, namely immunity from laws against assaulting policewomen with bamboo poles. Odell thinks about it. “Maybe it’s the other way around,” he suggests. “Maybe they kept on getting invaded because they’re assholes.”

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January 06, 2006
Somalia tops Hong Kong

Hong Kong is declared again the world's freest economy by the Heritgae Foundation, a group that clearly has never been here. Jake van der Kamp says it best:

Coming right down to it, Somalia is the world's freest economy

According to the Hong Kong Census and Statistics Bureau, the government consumed 9.9 per cent of GDP in 2004, down from the 10.53 per cent reported in the 2005 Index. As a result, Hong Kong's government intervention score is 0.5 point better this year. In the April 2004-March 2005 fiscal year, according to the Economic and Trade Office, Hong Kong received 1.7 per cent of its total revenues from state-owned enterprises and government ownership of property.

And there you have it from the Bible. The Heritage Foundation of the United States is the accepted authority in these matters and it has once again rated Hong Kong as the freest economy in the world with a ranking of 1.28, our best score ever. I am not about to say that Heritage Foundation has it all wrong. Hong Kong deservedly rates well up this index. But by employing a standard cookie-cutter template for its ratings, the foundation has missed a few critical things and they particularly show up in the paragraph I quoted.

Let us deal with a technical one first. Yes, it is true that our government consumed only 9.9 per cent of gross domestic product in 2004, but only if by consumed we mean only what our GDP accounts define as government consumption expenditure. If we include capital expenditure, our government consumed 13.7 per cent of GDP. Oh well, consumed or consumption, it is all just a trivial matter of definition, you know.

And then we get the bit about how our government received only 1.7 per cent of its total revenues from state-owned enterprises and government ownership of property. I now ask you to bear in mind that half of Hong Kong's housing stock is public housing. Bear in mind also the investments and activities of such government entities as Chek Lap Kok airport, Kowloon-Canton Railway Corp, MTR Corp, Cyberport, Science Park, the industrial estates and the list goes on. You probably have the impression from the Heritage Foundation's phrasing that all of these together have a weighting of only 1.7 per cent in our government's budget.

It is possibly true if you do it the foundation's way, which is to say that you include only the money they may remit to government every year after paying all their expenses. This also assumes that they choose to remit it to government rather than keep it in their own accounts. But let us say these are really all government operations and that we should treat their expenditures as government expenditure. It is my guess in this case that you could take the 1.7 per cent in their contribution and at least move the decimal position one digit to the right when assessing how much our government spends.

Look at it another way. The United States builds very little public housing and the money to help the needy cover their housing costs comes out of its direct budgets. This all counts against the US in the score the foundation gives it on government intervention. We in Hong Kong, however, hide it by massive public housing subsidies through a government corporation funded from land grants and land sales. The foundation excludes this from its government intervention score. Would we still rate the world's No1 if it were included? That fact is that we have our advantage largely because all land in Hong Kong is on leasehold, a system of land tenure that the US scorns as an invasion of property rights. The US has gone the freehold route. Our way allows us to hide big slices of government revenue and expenditure. Most other countries cannot do it.

One other country that can do it, however, is Singapore, which has 85 per cent of its population in public housing. And yes, you guessed it, the foundation's choice for the world's No2 is Singapore, the economy that has come closer than all others in the world to achieving communism in the classic Marxist sense.

I shall give you my choice for the world's No1. It is Somalia, which has no government at all and where a very free village-based economy is emerging. It is doing so with no foreign aid, for which Somalia may be grateful. Going by a benchmark measure that staging a one-hour African gun battle costs about US$100,000, and taking into account that Somalia no longer has any foreign money to divert to this pastime, it is also a more peaceful country than it might otherwise be. But Somalia certainly does not fit the foundation's cookie-cutter approach to rating economic freedom and it was not even included in the index.

We have our rating, largely thanks to the approach the foundation has taken, which, whether deliberately or not, happens to emphasise foreign trade and foreign investment over domestic economic considerations. We fit that cookie cutter perfectly.

And this suggests one last question for the foundation. How much of your funding, sirs, comes from Hong Kong donors?

A city largely run by oligarchs doesn't meet most defintions of economic "freedom".

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January 05, 2006
Daily linklets 5th January

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January 04, 2006
Three harmonies, China and the WTO

China Brief time again from the Jamestown Foundation. Two highlights:

1. Willy Lam looks at Hu Jintao's theory of the three harmonies:

Hu and Wen understand that a regime cannot last if it depends solely on the ruthless efficacy of its control mechanisms, which in China’s case include the PLA, PAP, the secret police and the regular police. Yet the risk-averse Hu is loathe to arouse false expectations among the nation’s intelligentsia by going all out in his emulation of Hu Yaobang’s “Theory of the Three Tolerances.” Plans mooted earlier this year by his aides, such as allowing a dozen-odd of the less controversial Tiananmen Square-related exiled dissidents to return to China, have been abandoned. It will not be surprising, then, that perhaps for the rest of the decade, Chinese society will only exude a kind of artificial, party-sanctioned harmony that endures at the pleasure of New Strongman Hu.

2. WTO talks move in China's direction, according to William Hawkins:

Beijing thus finds the current world system well suited to its needs. It has easy access to affluent foreign markets like the United States, with minimal formal commitments to reciprocate. It runs a trade surplus and holds very large hard-currency reserves. Beijing prefers to make bilateral deals in Central Asia, Africa and Latin America, rather than be ensnared in multilateral “global” agreements. There is nothing in the Doha Round that it needs, and it has been successful in fending off any initiatives that would weaken its own development program.

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[boomerang] Posted by Simon at 09:56
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Guest post: Hong Kong in 2006

John Louis Swanie of What Comes to Pass on the year ahead for the Big Lychee:

I know I sound like an old man who is just itching to dash out a letter to the Times signed "yours faithfully, Thomas Martin, 52 Highbottom Greens, Ponceneyton" but I'm genuinely tired of "two thousand and X". Why can't we just call them "Twenty-Oh X"? It fits with convention and makes the year sound less like a battery-powered cheese grater.

It occurred to me, whilst I was mouthing the words to every year of the coming decade (I'm left wondering exactly how I pass my degree modules when I spend time on such pursuits), that '06' when said in the 'archaic' pattern of our forefathers sounds a like the cantonese for "so tasty"; "Ho Sik!"

Is this some good omen for future profit? Will this annus delicere herald a bright new beginning for Hong Kong?

In the typically infuriating manner of almost every other pundit my answer is, "yes and no".

From a financial perspective, I expect Hong Kong to grow. It may be farcical to attribute a lack of political autonomy to economic growth as the pro-Beijing camp have for so many years, but the bottom line is that we can expect 'business as usual' in the coming year. Sir Donald may not have any particularly ripe gifts for the cartels for the coming year (at least not ones of the same caliber as his predecessor) but the status quo isn't going to be shaking anytime soon.

We've finally gotten past the years of Hong Kong writing itself off after the fallout of the '97 crash and then limping through the gloom of the Tung-SARS sucker-punch. The only thing which can and historically has, held Hong Kong back is itself - the territory has never suffered the full force of currency speculation and the artificially inflated property market is its own doing.

A leader directly after 1997 had the opportunity of either bolstering or shelving property speculation as a means to make money but he instead decided to hide under the carpet, so we are left with a rather ill-fitting financial waistcoat - stretched by the portly excesses of the pre-97 years but just about wearable. This will not change in the coming year and I expect to see property prices rise at a healthy rate.

Perhaps 2006 will be the year that the Cyberport really starts bringing in that new generation of high-tech investment we've been promi-Pffft-HAHAHAHAHAH! My apologies, it's almost impossible to resist poking fun at one of the more entertaining White Elephants in our midst. It does however act as a serviceable segue into the other important 'public-works' matter: Disneyland.

I expect Hong Kong Disneyland to plod along at the pace it has set out for itself. Fueled almost entirely by vacationing mainlanders, the Hong Kong Disneyland will do little to help Hong Kong's pre-existing tourism industry in the year to come. We will know this to be true once the Tourism Board haul Jackie Chan out in front of some cameras to waste a few billion HKD on another grand advertising scheme featuring our _one remaining_ sail-powered junk and the same arial footage of the Po Lin Buddha that every person in every country around the world (including, Hong Kong) has seen eighteen times before.

From a political point of view, I predict the most boring year imaginable. Anson Chan, who has been loitering in the democratic wings of Hong Kong politics, will go from innocuous to irrelevant. Sir Donald will begin channeling vintage-Sir David Wilson and do absolutely nothing on the suffrage front - we'll not hear of a political reform agenda until he's sure he's out the door and that won't be for a few years yet.

No one will address the massive, glaring constitutional hole in the Hong Kong judiciary's continued application of _post 1997_ UK House of Lords decisions such as _White v White_ and we will happily float along with the ghostly hands of the Lords of Appeal in Ordinary on our judges' shoulders.

So a good year for Hong Kong? It depends on where you stand. We'll have our annual march, rabidly support football teams with whom we have no ethnic or legal ties during the World Cup and then shut up and make money. Nothing that happens in Hong Kong will affect our political status, change will come when China has finished putting out its many domestic fires or if it fails to deal with them outright.

Ultimately though, I'll be a happy Hong Kong resident if I can find the new address of the Tai Cheung bakery.

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January 03, 2006
Book review: Cloud Atlas

Cloud Atlas by David Mitchell

I have a rule when reading books - if I'm not enjoying it after the first 100 pages, I put it down. It drives Mrs M crazy - she's a read it to the bitter end kind of gal - but if the first 100 pages aren't good, there's unlikely to be a good 400 pages to follow. And for the rare time that is the case, it's a risk I'm prepared to run.

What's this got to do with Cloud Atlas? It is one of those books that flirts with disaster, wearing its artifice on its sleeve. It is a series of six novellas, the first telling the sea voyage of a young American notary in the 19th Century, jumping to the letters of an early 20th Century musician, followed by a political/murder mystery, the delightfully titled "Ghastly Ordeal" of a minor English book publisher, jumps to the near future and then further future before working its way back in reverse order. Sound confusing? Each of the novellas are stories in their own right but with occassional links to stories forward and back. The book takes some time to get into, although it is easy to read and never impenetrable. At the start it feels slight but the pace quickens and the inventiveness kicks in...safely before page 100. There are some literary wonders to behold - the switching of voice and style six times mostly works, but this book is not one to read now and again over several months. While you can pick up the threads of stories as you return to them, it is a book best taken in quickly.

While watching this tight-rope balancing act, the author uses that oh-so-post-modern irony to reflect on the artifice involved, and does so several times. Its the stage wink in written form, a hint from the author that he knows he's showing off. In lesser hands it would come across as trite and contrived, but Mitchell has created a collection where the sum is greater than the parts. It's a book that covers grand themes so often told: alienation, the search for truth, a questioning of our reality and existence, our ability to impact events even as a small cog in a big wheel, to name a few.

There are very few forms of entertainment today that truly satisfy in any medium. There's plenty of content, but not much that you finish and sit there and think that it was worth the time and money involved. Cloud Atlas is worth both the time and money. It's one of those books that you anticipate with glee, enjoy as you read it, and close with a satisfied smile but with a tinge of disappointment - because such good reads are hard to find.

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Daily linklets 3rd January

The welcome 2006 edition...

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Control freaks

China's major problem is it is ruled by control freaks. The relentless need to remain in control will inevitably be the source of the CCP's fall, because human affairs are ultimately not even controllable by Communists.

There are several telling examples. Firstly today's (still unlinkable) SCMP reports on the government's back to the future attempt to close the rural/urban income gap, and finds the biggest problem is land reform:

The government is planning to bridge the widening income gap between urban and rural areas by introducing a raft of initiatives to invest more in the countryside over the next five years. Absent from the plans, however, were any moves to adjust land policies, though land disputes were seen as the main source of discontent behind the series of violent clashes in rural areas during the past year.

A new movement, entitled the "new socialist countryside", will be the focus of rural development during the 11th Five-Year Programme. A similar slogan, "building socialist rural areas", appeared in the 1950s, but was later dismissed as part of propaganda about building a utopian society. The latest campaign draws comparisons between the situation on the mainland and South Korea's experiences 30 years ago...

According to state media, Beijing's vision of a "new socialist countryside" consists of five components: production growth, affluence, rural civilisation, a clean environment and democracy in the management of local affairs. The vision may look like a holistic approach, but scholars are worried that it may turn into another white-elephant construction spree.

Likely problems include the usual: corruption, political point-scoring for provincial officials by wasting funds on "showcase" villages, increased financial strain on villages as local governments tax to spend. And the program largely misses the point - money alone isn't the solution to rural poverty. Proper land reform, well-deliniated land rights, open and honest courts that will defend the poor from developer and government land grabs and cops that don't shoot those defending their patches of earth are all vital. But the control freaks demand progress, and progress can only come with control. The true beauty of the capitalist market system is it works with a minimum of control, not a maximum of it.

Another example is China's banking sector. With many banks of various sizes swamped with bad debt, China is experimenting with taking in foreign capital in the sector. But now the dam wall of control has been slightly breached, you can expect a flood to soon follow. China is delicately trying to leverage foreign money and experience to resolve its financial system problems (bad debts, poor management and poor controls) but without giving up control. But foreigners are not going to give over huge sums of money, time and expertise without getting some say over what happens to it all. China's government will be expected to cede control in return for these things.

This leads to an interesting consideration - China's currency policy. If you view that policy through the prism of control, then China's reluctance to make changes to either the level of the yuan or to its capital account (allowing the free flow of capital into and out of China) makes sense, even though it defies economic wisdom. This is the dimension that is often missing from economic commentary on China's economic policies. Economics is better considered as "political economy", especially when dealing with a government such as China's where the control premium is so large it often outweighs economic logic. And this concept extends past the world of economics - much of China's actions can only be considered through an understanding of the relentless need for the CCP to retain control at all costs.

The CCP's problem is the reforms of the past 25 years have unleashed growth and social changes that are beyond even the best abilities of government's to control. China's government relies on brute force and technology to control the internet, only to find SMS and mobile phones outstripping their control. Information is difficult to control; economies are difficult to control; people are difficult to control. The best systems allow these forces to flow of their own accord, sometimes stepping in when they fail or lead to adverse results but otherwise leaving things to find their own equilibrium. Imposing solutions doesn't work because (and this may be a shock to many) some people do not know better than others.

Equilibriums are a balance of dynamic forces, sometimes assisted by catalysts. They are not brought about by control freaks wishing it is so.

Related reading

Mark Thoma links to an IHT article on rural China's ticking time bomb.

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[boomerang] Posted by Simon at 10:18
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Top referrers and stats for December

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[boomerang] Posted by Simon at 09:50
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