Greetings all, I, HK Dave am back as guest blogger after a long hiatus. One doesn't quite forget how to do an entry, so I thought I'd start with something nice and easy.

So I selected this sad story of a China university graduate who couldn't find a job, so he went into the online florist business. But because business was slow, he linked to several porn sites and got 2.4 million hits (come now you bloggers out there must have some sympathy for the chap). However, he was caught, fined 10,000 RMB which he might have been able to afford, but also a whopping 10 years in jail, which can't be good for anyone.

It seems this situation calls for a Chinese ballad-spinner, a 21st century Chinese Bruce Springsteen, to write songs about how "the downtrodden in The River", like:

I got a job sellin' flowers, with my online company
But lately there ain't been much work, on account o' the economy
etc...

Ideas anyone?

If you give someone a second chance, you really hope that they've learnt from the mistakes that got them into trouble the first time around. That's especially the case when you're trying to move your economy onto a more financially sound footing, and even more especially once you've poured in hundreds of billions of dollars to bail out your banks. But it appears old habits die hard in China's major banks:

China's Big Four banks are still lending indiscriminately to state-owned firms instead of pricing their loans according to the commercial risks they are taking, a new International Monetary Fund working paper says...

Podpiera concludes that reform at the state-owned commercial banks (SCBs) still has a long way to go. Banks have been allowed since October 2004 to charge as much as they like on loans. But official data shows that in the fourth quarter last year virtually no corporate client of the SCBs paid more than 1.3 times the central bank's benchmark rate. Nor does the profitability of state- owned enterprises make a difference to bank lending, which Podpiera finds is driven mainly by the availability of savings deposits to lend out. Indeed, he says SCBs lend less in China's more profitable provinces, where other financial institutions have gained market share...

Although the banks have lent heavily to sectors that are suffering over-investment, such as steel, cement and construction, Podpiera notes that only 2 percent of loans made since 2000 have turned sour compared with perhaps 45 percent of pre-2000 loans. A slower pace of lending compared with the 1991-1995 credit boom might explain part of the difference, but Podpiera wonders whether banks are assessing their loan books rigorously enough.

"There is a striking difference between the reported credit quality of old and new loans, suggesting either a dramatic improvement of the underlying credit quality since 2000 or measurement problems," he says. To make the banks more market- minded, Podpiera says the authorities must avoid interfering in lending decisions for policy reasons.

It would be a major test for supervisors to ensure that all banks meet new capital adequacy requirements by the 2007 deadline. At the end of 2004, banks accounting for only 48 percent of commercial bank assets were in compliance with the rules, and there was a shortfall in provisions for loan losses of 960 billion yuan, Podpiera says.

Move over Hill St Blues. A couple of reports demonstrating how Shenzhen's Public Security Bureau deal with immigration issues promptly and efficiently. These are posted on the Shenzhen PSB website and both involve the Lowu station.

1. The first story is about a 30 year old from Mali (Doucoure Abdoulaye). The PSB report says he came to the Lowu police station on 9 February to deal with his visa, which had expired. He came to counter 205 - Comrade Huang Fengzhu. When Huang input the man's name into the computer system he was found to be an AIDS patient. Huang immediately reported to Comrade Ding Minghua who, upon understanding the situation, told Huang not to act as though anything was out of the ordinary. With a calm demeanour, Huang dealt with the issue. This shows, according to the report, that the police can deal with a foreigner with an infectious disease in a calm and brave manner [as though the officer involved could have caught AIDS in this situation]. They still deported the guy, though the report doesn't say to where (I presume Hong Kong). Along with his name, age, and country of origin, they also felt the need to tell us his skin colour.

2. The second story is about a 76-year-old disabled American (Sommer Herman Benjamin), who visited the Shenzhen police station for help (15 February, again the Lowu station). The man was wheelchair bound, and the report says he seemed to be suffering from mild dementia. He told police he had been cheated by both a Chinese English language centre for which worked and which had not paid him and his intended Chinese fiancee who he had come to marry. As a result did not have enough money. The police told him that in this case he had to leave China before his visa expired. They gave him the contact details of the American embassy and explained that they could offer him water, food and enough money to contact the American embassy. He left Shenzhen the next day for Qingdao. The report has been published to indicate how well they dealt with an issue involving a foreigner (i.e., he left the city and thus didn't cause them any more problems).

Will the Lowu station soon become a tourist attraction in its own right?

David Webb details the full background and the lack of government action over the massive invasion of privacy when data about people who had complained about the police was posted on the net. Even if you've been following the case in the HK papers, you need to read the whole thing. Hong Kong's government keeps pushing its high-tech credentials but the lack of reaction is stunning. When the top management of the MTR KCR feud Donald Tsang drops everything to sort it out, but when 20,000 people's data is plastered on the net, there's nothing. It would be amazing if it weren't so predictable. One can imagine that if the leak had been of top civil service pay and benefits, the reaction would have been very different.

Update (3/29)

Naturally now the contractor at the heart of the scandal is pinning the blame back on the IPCC.

The Economist has a survey of China in its latest edition. The first article in the series looks at the challenges China faces at home before the 2008 Olympics and beyond. The rest of the survey requires subscription. Once I've read through it I'll post more thoughts and comments.

Update

At the half-way point, the survey has basically rehashed much of what you've lready seen at this blog and others over the past year or so. The conclusion seems to be that to solve the rural/urban divide serious rural land reform needs to happen, primarily involving given peseants tradable land rights. Sounds right to me.

According to the SCMP, the three protectionist American senators visiting China have undergone a miraculous conversion and now see the light:

The two US senators behind proposed legislation to impose punitive tariffs on Chinese products have shifted from seeing "China as a threat" to a potential "close ally" after meeting top mainland leaders yesterday.
New York Democrat Charles Schumer and South Carolina Republican Lindsey Graham said they had achieved significant understanding through their "amazing three days" in Beijing.

"It's been an eye-opener in many ways. And it's an amazing country with a depth of history that is just profound with an amazing present and vast potential for the future," Senator Schumer said.

"The vice-premier was a lot of fun. She's really direct. She would do well in an American forum. I like her a lot," Senator Graham said..."Is China a threat? [It] could be. Is China a friend? Yes. Is China a close ally? [It] could be. That's what's changed for me about this trip," he said.

When asked about the bill they have proposed that would impose a 27.5 per cent tariff on US imports of Chinese products, the senators said the jury was still out.

...in strikingly moral tones, they [the senators] pledged Washington's resolve to pressure China to liberalize not only its yuan regime but also its political culture, using trade as a wedge for an almost evangelical campaign for US values...

"In my country, we're very arrogant, and I admit to it," he [Sen. Lindsey Graham] said. "You have to understand that Americans have for 200 years fought and died not just for our freedom, but for other people's freedoms."...But when the time came for questions, the reaction from students and faculty revealed how the American campaign for a free-floating yuan has backfired in some quarters. Many in China resent the specter of the world's lone superpower seemingly attempting to dictate how Beijing manages its economy and the values that should govern Chinese society.

The bill has gained momentum as China's trade surplus with the United States has grown, swelling to US$200 billion (HK$1.56 trillion) last year. But many economists assert that even a significant revaluation would do little to alter the trade balance, noting that many of the goods China exports, such as clothing and furniture, have not been made in large quantities in the United States for years.

"This is just complete posturing," said Pietra Rivoli, a trade expert at Georgetown University. "This is the classic thing with trade: you make outlandish demands that are impossible for either side to satisfy, and then you get points for standing up."

But the reception the senators are receiving attests to the gravity of the issue for China's leaders, who are cognizant of the angry mood in Washington. The senators dined Wednesday with People's Bank of China governor Zhou Xiaochuan. They met Thursday with Vice Premier Wu Yi...

"I've learned that you've got 700 million people who need employment, that the interior of your country is not developed," Graham told the students. "I've learned in coming here that for you to change your system very quickly would be very hard for your country. I understand that better now."

The family planning policy has helped China prevent 400 million births in the past three decades, Zhang Weiqing, minister in charge of the National Population and Family Planning Commission, said Tuesday.

The policy is being made irrelevant while still extacting too high a cost. In that regard, it's not unique in China.

Hong Kong's Secretary for Constiutional Affairs, Stephen Lam, has warned the sky is falling in for the Big Lychee? The successful, vibrant way of lifeand high living standards enjoyed by Hong Kongers is under threat....by universal suffrage:

Lam said it is vital for Hong Kong to focus on development as a capitalist society while gradually moving ahead with its ultimate aim of universal suffrage as stated in the Basic Law...the government raised concerns that the current low-tax system with a narrow tax base would not be able to cope with growing public aspirations for more welfare spending...

"There are also views that in other economies with full democracy, governments provide a relatively high level of welfare protection, but at the same time they are also capitalist societies," the paper said.

What's the big deal if the majority of the population decide they prefer to expand government spending and increased welfare over current arrangements? Plenty of European countries have welfare states while maintaining high standards of living. There will be other political parties standing for the status quo, and in a true democracy people will decide which they prefer. The many living in their 500 square feet dog boxes may decide a bit of welfare is just the thing. But that may mean Hong Kong changes from being the low tax, big business and cartel friendly bureaucracy it is today. And that's the real problem with moving from a benevolent dictatorship of the elite to universal suffrage - the elite loses out.

• According to a poll conducted by the Global Times two in three Chinese like Americans, while one in five dislikes them? Is that like saying three out of four people make up 75% of the population?
• Speaking of polls, 38% of South Koreans see China as the biggest security threat. Personally, I'd be more worried about Kim Jong-il.
• China says it is America's Scapegoat.
• Hong Kong fights for air.
• The Three Gorges Dam: A catastrophe waiting to happen?
• Where's the love? India's supreme court rules abstinence as grounds for divorce while the Shanghaiist reports that 90 couples end their nuptuals everyday in Shanghai.
• China pulls the mask on internet gamers while Li Feng teaches youngsters to help others.
• Is Bangalore the site of the next Silicon Valley?
• South Korea exempts national baseball players from mandatory military service.
• Get ready for the 2008 Olympics in Beijing and be prepared to suffer through the fifty-two episodes of Five Friendlies Fun.

The Game: Penetrating the Secret Society of Pickup Artists by Neil Strauss

It seems that in modern publishing the best thing to do is to explain the book's premise in a sub-title, because otherwise us humble readers won't bother picking the book up. So with an appropriately catchy premise, Neil Strauss's book is sub-titled with the hint of the holy grail for men: how to become an instant Casanova and lure any woman one wants. With such a hook it's pretty hard to stuff the book itself up, although Strauss tries. The plot is simple: it's a step-by-step recounting of Strauss's introduction and delving into this world of PUAs (pick up artists). He meets the obligatory mad-cap set of characters and becomes our tour-guide through this sub-culture of misogynists and misfits. There are some interesting detours, including his interview with Britney Spears (he's a rock critic by day), an interlude with Courtney Love and Project Hollywood, where a group of PUAs find that underneath it all they're just a bunch of backstabbing bastards. It's effectively a group biography of some emotionally stunted, low self-esteem men who can only gain validation in life from their conquests of women. It also doesn't speak highly of the kind of women these guys are picking up. Strauss is bowled over by Lisa, a band member of Courtney Love's who manages to demonstrate there are women that are intelligent, emotionally mature and capable of avoiding all this bullshit. It's almost comical at the end of the book where Strauss finds his lines have already been run on many of the women hanging out on Sunset, his favourite pick up location. But there's always the inevitable Hollywood ending, the self-realisation and the fitting finale (with the movie not far off).

The book is fascinating in the same way as watching a mouse running on an exercise wheel is - it seems entertaining while you wonder if the mouse realises there's far more to life than spinning on the spot. I'd recommend it, although don't be expected to be blown away by the writing. The plot's the thing in this case and Strauss manages to tell it straight. It's a tour of a world you'd think you'd be jealous of, until you visit it.

As for the magic formula? Quite simple, really: have a personality, have some self-confidence and have something to say. Alternatively you can pay US$2,000 and find out from these misanthropes the "secret", or read this book and realise there isn't a secret after all.

In Germany they first came for the Communists, and I didn't speak up because I wasn't a Communist.

Then they came for the Jews,
and I didn't speak up because I wasn't a Jew.

Then they came for the trade unionists,
and I didn't speak up because I wasn't a trade unionist.

Then they came for the Catholics,
and I didn't speak up because I was a Protestant.

Then they came for me —
and by that time no one was left to speak up.

Martin Niemoller

From a friend, the movie poster of Hong Kong's latest drama...

Backstab Mountain

Brought to you by the KCRC.

It's time to send Marxist economist Liu Guoguang a copy of Hayek's Road to Serfdom, according to the SCMP:

Market-oriented reforms must not override state planning because it is a remedy for market failures, including the widening wealth gap, a leading mainland economist said.

The latest shot from Liu Guoguang , an adviser to the Chinese Academy of Social Sciences, shows that intense debate over the direction and thrust of the mainland's economic reforms is continuing. Mr Liu's comments, carried in the China Youth Daily yesterday under the headline "Socialist market economy also needs planning", came after Premier Wen Jiabao pledged to push ahead with reforms earlier this month at the National People's Congress' annual conference.

Mr Liu said pro-reform economists had "blind faith in the market". "An erroneous perception is widely spreading at the moment, and that is to use the word `planning' in a totally derogatory sense," he said in the newspaper's review of China's past 50 years of economic development. "Excessive marketisation which excludes the use of planning is abnormal and wrong."

Mr Liu said his emphasis on the role of planning did not advocate returning to a planned economy. Rather, "effective government regulation and intervention is necessary to correct market defects".

He listed five issues which the market alone was unable to address: the overall balancing of demand and supply, economic restructuring, fair competition, environmental protection and social equity. "The market, which is conducive to the promotion of efficiency and development, cannot realise real social equity and will inevitably result in polarity between the rich and poor," he said.

"The government should take some measures to prevent those problems from worsening. It is more necessary for the government to play a complementary role to remedy market defects."

At his post-NPC press conference, Mr Wen vowed to press ahead with reforms despite "difficulties as we move ahead" and warned that "a retreat offered no way out". Many analysts believe Mr Wen's strong support for reforms may help turn the tide and help the pro-reform camp to prevail over conservatives arguing that reforms have gone too far.

Most worryingly, there's plenty of people that will agree with Mr Liu, and not just in China.

Seeing we're on things planning, Jake van der Kamp notes that Hong Kong's been paying consultants for several years to come up with a master plan, but they've not been able to finish the task. Full article below the jump, but here's the money graph:

These big visions never work. Events always overtake them and, if we shackle ourselves to them, we only make ourselves less responsive to events. Just imagine what a Vision 2006 would have been 30 years ago. It would have forecast a much poorer but more populous Hong Kong surviving on a garment industry with the industrial emergence of China ignored. Long-term studies do not look forward. They just take the present and project it forward and we wind up spending public money on the wrong things for a few years until we recognise reality and give up.

Planners' vision for the future no clearer after five years of babble - Jake van der Kamp

Among my few scholastic achievements include learning to speak Consultababble. I learned it when I was a cub reporter in Vancouver many years ago and assigned to cover the municipal council of the district of North Vancouver.

The big story in this municipal council at the time was the decision to formulate a master plan for the entire district. There was to be no more haphazard planning of development. All would be decided years in advance.

I was as keen as mustard. North Vancouver was leading the way in sound urban planning and I would be there to make sure it got full play in the Vancouver Sun.

I believe I actually managed to plough my way through about three series of the resulting consultants' reports, two more than anyone on the council read and then, fortunately, the whole thing petered out. Net result: I learned to speak Consultababble while North Vancouver paid a big consultants' bill, was told more studies were needed, and went back to haphazard planning, the best sort.

Thus, you will understand that I am not entirely surprised to see Hong Kong's own big vision for the future, Strategy 2030, seemingly adrift and moving nowhere five years after being trumpeted as the answer to where we will be in 30 years' time.

The table shows you where we should have been. This outline schedule, adopted in February 2001, called for all three stages of the study to be completed in 20 months. That means that the final public consultation on Formulation of Development Strategies and Response Plans should have been completed in February 2002.

Hello, fellows, knock, knock, where are we? Do we have that master plan yet?

At least I can say for North Vancouver that it recognised things were going nowhere and let the idea drop. But, as I understand it, we are still formally committed to Strategy 2030 and no one has yet recognised what a charade it has become.

The babbling stream of Consultababble has slowed to a trickle, however. Click the tab marked "What's New" on the official website and three entries come up.

In May 2004, there was a press release on Hong Kong residents' experience of and aspirations for taking up residence in China. In December 2004, there was another press release on Hong Kong people working and living in the Pearl River Delta and then 10 months ago we had a working paper on additional cross-boundary links to the eastern part of Guangdong.

Long-sighted vision, indeed, vision across the border and nowhere short of it. Was this not meant to be a study on what we would be on this side of the border in 2030?

But, then again, what are we to do with the visions of our past chief executive, Tung Chee-hwa?

He told his planners he wanted not only a major Chinese city but the most cosmopolitan one in Asia with a status comparable to New York and London.

From what I can see, they complied by forecasting population growth well above what we have actually had and, if this had any effect, it was to commit us to far more infrastructure spending than we will need for years to come.

Fortunately, we have taken a somewhat wiser course with the Commission on Strategic Development, which is also supposed to think grand thoughts about the future for us. We have appointed all the great and good of Hong Kong to it and they will talk up a storm until they get tired of it, which should not take very long.

These big visions never work. Events always overtake them and, if we shackle ourselves to them, we only make ourselves less responsive to events. Just imagine what a Vision 2006 would have been 30 years ago. It would have forecast a much poorer but more populous Hong Kong surviving on a garment industry with the industrial emergence of China ignored.

Long-term studies do not look forward. They just take the present and project it forward and we wind up spending public money on the wrong things for a few years until we recognise reality and give up.

I think it is about time that we recognise reality with Strategy 2030 too, but, if our planners will not, let us hear from them where we stand and what we are doing.

One of the very best things about movies is the safety they offer - you know that at the end of 2 hours the whole thing will be over and you can return to reality. Even as the stories suck you in, you allow yourself to go on the journey because it is conducted from a comfortable middle-distance away from the events themselves.

Sometimes, however, reality gives you a movie-like scenario that's all too real. The Friday shooting of 2 Hong Kong cops by another seemingly corrupt one would (and likely will) make a great movie one day, but for now it is simply a tragedy. Despite appearances to the contrary, this city's seedy underbelly still thrives and survives.

• China pulls the plug on talk show king.
• Have you seen China's invisible city?
• Wen Jiabao redefines Freedom of Speech.
• ESWN tells the Tale of Taishi Village.
• Something old, something new, something nude.
• What does it take to get a moment of peace?
• EU gives China the boot.
• Ancient Chinese skiers?
• China Driving Exam
• The art of East Asian communitive grunts.
• Hong Kong: Welcome to smog central.

The People's Daily asks an interesting question and replies with a load of blather: are human rights higher than sovereignty? The not-so-subtle introduction says:

As the United Nations is reforming its Human Rights Commission into Human Rights Council, the United States has published 2005 Country Reports on Human Rights Practices accusing countries like China, DPRK and Myanmar of having poor records and claiming human rights are higher than sovereignty. Experts say the essence of such a claim is a pretext for interfering in other country's domestic affairs.

That human rights are higher than sovereignty is an excuse.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just Powers from the consent of the governed, -- That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Just back from a quick visit to Singapore, the land where all the politicians are bankrupt, albeit all in different senses of the word. Had a fascinating conversation with an American who prided himself on being far superior to his insular stay-at-home fellow citizens because he lived in Singapore. With remarkable rapidity things slid when the subject of Iraq (inevitably) came up - apparently George W. is a war criminal, the US should have invaded India, Pakistan and Israel instead, AIPAC is an overly powerful cabal in cohoots with the usual corporate titans running "real" policy and Israel is the cause of the world's troubles. It was such an inane display of ignorance I had to laugh and leave. I didn't tell him I was Jewish.

For some weekend reading, there's two good pieces in the latest China Brief from the Jamestown Foundation:

1. Willy Lam looks at Beijing's all out assault on Chen Shui-Bian.

2. Martin Andrew discusses China's doctrine of "active defense".

With that I'm off to pull the levers of world power for the weekend.

Say's Law in action, or the study of incentives....The Standard reproduces a WaPo report on changing status of baby girls in China from pariahs to sought-after commodity for gangs to kidnap and provide for adoption by Westerners. And while on things economic, William Pesek discusses how a yuan revaluation can lift Asia out of poverty, although the potential to destabilise China and cause economic chaos remains large, the yuan has recently weakened even in its limited float and the Chinese trade surplus shrank last month (although one month's numbers don't make a trend). It's not clear that the yuan is over-valued, protectionist frothing American senators notwithstanding.

There are many problems with paying lip service to democracy. The just completed NPC session in Beijing is basically a set-piece gab-fest with little real news, as several journalist attendees can attest. But even dictatorships need to at least pretend they have due process and are listening to the "people's" representatitves.

Then there's the monetary cost as well. Hong Kong is going to spend a staggering HK$100 million on the 2006/7 elections. That's despite the result of the election for the Chief Executive position already know (Donald Tsang is the only serious candidate). How can it cost so much for something so meaningless? I know that's a stupid question when governments are involved, but it's both easier and cheaper to just declare the fiat accompli. If shams are so costly then let's top pretending.

Tien resigns amid feud screams The Standard. An excited Hong Kong is beside itself now that James Tien, leader of the Liberal Party (the world's only business political party) has stood aside. Imagine the disappointment when it becomes clear that it's his brother Michael quitting as head of the crack-prone (no, not the drug) KCRC. It must be a slow news day.

Thanks to Gordon's help, the Forum area has been de-spammed and is now ready for relaunching. The readers and commenters on this site (i.e. you) are a smart bunch, but you didn't need me to tell you that.

The forums will be completely free and open. There will be no censorship or moderation except to keep things within legal limits, although I retain the right to exclude those who push too far. I hope and trust that everyone can maintain a civil tone. Now go and get chatting!

Update March 13th

Due to a combination of a spam attack and a system crash, the forum has been re-installed. It's a fresh slate....just waiting for you to start a topic!

It's fair to say that the Chinese, in general, like a bet. And the Beijing leadership are no exception. Much to the consternation of various people who matter, the latest five-year plan omits Hong Kong's self-declared status as a tourist and logistics centre:

China's surprise omission of Hong Kong's self-proclaimed status as a tourist and logistics center in its Eleventh Five-Year Plan has alarmed SAR Chinese People's Political Conference delegates as well as local National People's Congress deputies...Hong Kong's role as mentioned in the plan is to maintain its status as an international financial center as well as a commercial and shipping hub. The plan has shifted to Macau where the mainland will help develop tourism and diversify its economy.

To paraphrase a certain Scottish explorer, it's democracy Jim, but not as we know it. As part of a massive re-organisation of officials, the central leadership is introducing new measures:

China is planning a massive reshuffle of local politicians, linking promotions to how well they adhere to the central leadership's efforts to address social imbalances, an official newspaper said. The moves may affect more than 100,000 officials in township, county, city and provincial posts ahead of a party congress next year that is likely to seal changes in the country's ruling circle under President Hu Jintao.

"The criteria for promotion will not [be based only on gross domestic product] growth and other political achievements, it will also [be based on] the level of popular satisfaction with their administration," the People's Daily, the Communist Party's mouthpiece, said Wednesday, citing comments by the party's organization chief, He Guoqiang. It said the decisions about promotions and demotions be made based on the "scientific outlook on development" - the party's catchphrase for balanced economic and social growth that places fresh emphasis on social equality, especially for poor farmers.

Another piece from the StratFor crowd on China's rural problems and how the central leadership is trying to leverage these problems to their advantage:

Chinese President Hu Jintao and Premier Wen Jiabao have been touting the "New Socialist Countryside" initiative. The initiative is being painted as a priority for reducing China's widening rural/urban gap in the near term, and for creating a more sustainable and robust economic future in the long term. The problems of rural economic reform, the social gap and rural unrest rank high on the agenda of China's central leadership and in the current session of the National People's Congress (NPC). Potential solutions to these problems form the heart of China's 11th five-year economic plan (2006-2010).

Over the past quarter century, China has made remarkable economic progress. By all accounts, its cities are booming: The bicycle-clogged alleys of the past are now traffic-clogged avenues, and construction cranes rise within cities as part of a seemingly endless rejuvenation and modernization campaign. Statistically speaking, China has never been stronger; gross domestic product (GDP) has risen from $200 billion in 1978 to $2.7 trillion in 2005. Foreign trade last year reached $1.4 trillion, with a trade surplus of nearly $102 billion. Exports accounted for 18 percent of the 9.9 percent GDP growth China reports for 2005. In the same year, the country utilized some $60.3 billion in foreign direct investment and sent $6.92 billion overseas in non-financial-sector investments. Foreign currency reserves at the end of 2005 registered $818.9 billion, rivaling Japan's.

But the growth has been anything but even. Urban growth continues to outpace rural growth, despite income increases across the board. In 2005, per capita disposable income reached $1,310 in urban areas, compared to just $405 in rural net income. Income disparity in 1984 was about a 2 to 1 ratio; now it is 3 to 1. Overall, the poorest 10 percent of China's citizens hold only 1 percent of the nation's wealth, and the wealthiest 10 percent claim 50 percent of the money. Even in urban areas, there are massive disparities: The poorest 20 percent of urban-dwellers control just 2.75 percent of private income; the top 20 percent control 60 percent of the total.

The gaps manifest in other ways as well. China's registered urban unemployment stands at 4.2 percent, but rural unemployment -- which isn't measured officially -- is anecdotally much higher, and even Beijing admits that some 200 million rural workers have migrated to cities recently in search of employment. That represents a substantial portion of the total rural population, which numbers 800 million to 900 million. In the cities, these migrants are treated as second-class citizens at best. In the countryside, they fare little better: Measures of education and health care are substantially lower. Moreover, there has been little legal recourse for farmers, who technically don't even own the land they work, when local officials confiscate the land for new industrial and housing projects.

The central government is well aware of these problems and, perhaps ironically, began issuing public cautions about social and economic tensions years before the international business community bothered to notice. Unrestrained economic growth no longer is viewed as a viable or sustainable option, and Beijing has begun to reassert more centralized control over economic development, with a particular emphasis on reducing the rural-urban gap.

But in seeking to address this problem, Beijing has exposed a deeper issue: endemic corruption and self-interest at the local and provincial levels of government. It is where economic disparity and government corruption intersect that social clashes occur most often.

Geography of Corruption

More than 25 years after its launch by Deng Xiaoping, China's economic reform and opening program has reached a critical juncture. Economic reforms have outpaced social and political reforms, and historical strains between the coast and inland regions, between urban and rural, and between the educated and less-educated are threatening the fabric of social stability and the central government's ability to rule. It is easy to see the frayed edges: Local protests turn violent where urban development projects eat away at the rural land. As the social instability moves closer to the coastal cities, there is a risk that China's competitiveness as an investment destination will be harmed, thereby triggering a spiral of economic and social degradation. Social instability also lays bare the growing rift between the central government and the local and regional leaders.

From a historical perspective, China's apparently stunning economic success stems from the pursuit and implementation of the quintessential Asian economic plan, which can be summed up as "growth for the sake of growth." Japan, South Korea, most of the Southeast Asian "tigers" and China all facilitated their economic "miracles" by focusing on the flow-through of capital, without regard for profits. As long as money was flowing in, there could be jobs. As long as there were jobs, there was a stabilizing social force. There was also an overall rise in personal wealth, though rarely was it evenly spread.

The coastal provinces and cities became the focal points for international investments in manufacturing, as investors exploited preferential government policies and cheap labor. The rural areas -- traditionally the backbone of China's economy -- and the petroleum and heavy industry of the northeast (which had been core to early Communist Chinese economics) faded in relevance. Though Beijing occasionally promoted more inland development and investment opportunities, geography and a lack of infrastructure made these unappealing to investors. The concentration of wealth in the coastal regions was a source of minor social tensions, but restrictions on internal migration kept a buffer between rural and urban populations, and social frictions remained comparatively low. These restrictions, however, have been only selectively enforced as of late, and many are being lifted.

The booming coastal economies created clear opportunities for corruption. As provincial and local Party cadre and political leaders became the gatekeepers for foreign investments, they also became mini-emperors of their own economic fiefdoms. Collusion and nepotism -- always a part of Chinese political society -- became even more entrenched as the money flowed in. With the central government fixated on growth, the best-performing local leaders were rewarded. The more foreign capital they were able to attract, the greater their personal influence and takings. These officials were not measured on efficiency or profitability, but on total flow-through of capital, rates of growth, employment and social stability.

This partly explains why attempts by the previous government to address the unequal development in China failed. Each time former President Jiang Zemin or former Premier Zhu Rongji tried to adjust policies and financial flows to the interior, there were strong objections from the wealthier coastal provinces. When they launched anti-corruption campaigns, the graft their investigators uncovered was deep and wide, and in some cases even threatened to reach up to the top echelons of power -- at times implicating Jiang himself. This only further entrenched the problem and removed incentives for Jiang and Zhu to act; after all, both were part of the so-called Shanghai clique and derived their political support from the coastal regions.

Under these two leaders, the government was much more successful in reducing the independence of the military, as neither Jiang nor Zhu had significant ties into the institution. But because the economic and political elite in the coastal regions were the source of the central leadership's power, they were able to repel reforms sought by the central government.

This all changed with the coming of Hu and Wen, both of whom are from rural areas. Wen, a perennial political survivor known for his ability to connect with the "common man," has been practically deified among rural-dwellers on account of his 10-year-old coat. That the premier still wears the same coat after 10 years is a clear sign (according to ample coverage by the news media and blog sites) of his care for the people, rather than for himself.

Herein lies the secret of Hu and Wen's strategy to regain control over the local and regional governments and Party officials. Whereas Jiang and Zhu tried using anti-corruption campaigns -- only to end up implicating themselves and their core supporters -- Hu and Wen are moving to harness the power of China's rural masses. Depending on which Chinese official you believe, this is a mass of humanity numbering from 700 million to 950 million people. Even at the low end of the estimates, however, rural-dwellers make up more than half of China's population -- and greatly outnumber the 300 million middle- and upper-class Chinese living mainly in Beijing and the coastal cities.

Harnessing the Masses

Chinese leaders have a long history of using the masses as weapons when challenges to central authority arise -- from the attempts to harness the Boxers at the turn of the 20th century to Mao's communist revolution to the Cultural Revolution. In each case, the process was chaotic and the outcomes were uncertain. Though Mao eventually succeeded in rallying the rural populace to effect his communist revolution, it simply served as a starting point for a new Chinese system. The use of the Boxers led to the dissolution of the Chinese dynastic system, and the Cultural Revolution wiped out whatever economic gains had been made, leaving China to start nearly from scratch once again.

What Hu and Wen intend to do is rally the masses to pressure local leaders into returning authority to the center. From this, centralized economic direction will, they hope, lead to more equalized development without significantly undermining the country's growth (though a slight slowing will be expected). Ultimately, the causes of social discontent would be mitigated and social frictions reduced as money is shifted to the interior.

This is a rather risky proposal, but China's core leadership sees this as the least distasteful among a poor selection of options. The initiative is being presented not as a disruptive social revolution, but as the duty of those who got rich first to assist those who trail them. The initial details of the official plan include greater spending in rural areas on infrastructure, education, healthcare and agriculture, with funding coming primarily from the urban centers. The plan already is meeting with mixed reactions from China's regional leaders -- and while the NPC is expected to approve the plan, that doesn't mean that they like it.

However, as the government's core leadership has pointed out ad nauseum over the past year, the Chinese economy is in a fragile state, and the rural/urban inequalities threaten to undo everything China has built up since the economic opening and reform program began. Unless the central government regains complete control over economic strategy and tactics, there is a fear that China ultimately would fracture into competing regions, largely independent of any central authority -- a sort of economic warlordism reminiscent of the final days of previous Chinese dynasties.

Beijing's choice, then, is between taking no action against local governments, out of fears of triggering massive capital flight or inadvertently crippling investment and export activity, or rallying the rural masses -- which would be another avenue toward recentralizing control.

Thus, the central government has made a point of publicizing ever-more-dire statistics concerning rural and urban unrest. The Ministry of Public Security reported 87,000 cases of public disturbances in 2005, up from 74,000 in 2004 and 58,000 in 2003. (The numbers are high, but the definition of "disturbance" remains ambiguous.) The ministry has also warned of an imminent "period of pronounced contradictions within the people" in which "unpredictable factors affecting social stability will increase." Meanwhile, Wen has repeated that the cause of many protests is the confiscation of rural land for development and industrial projects -- projects that often are linked to corrupt local officials or are local initiatives that don't match the central priorities.

The message to the local leaders, of course, is that China's masses are on the move. In discussing the rural/urban gap, Chen Xiwen -- deputy director of the Office of the Central Financial Work Leading Group -- noted recently (and somewhat ominously) that 200 million farmers have left the countryside; Chen warned that "to increase the living standard of these farmers, China should spare no efforts to build the new socialist countryside." In essence, Beijing is threatening the local leaders with the spectre of a rural rising. The class struggle is on, and the farmers far outnumber the city-dwellers. The implicit message is that, for the safety of the city, the farmers must be funded and rural areas built up.

At the same time, Beijing is looking at a wholesale change in the local leadership, beginning with the Party secretaries and chiefs of China's 2,861 counties. New regulations -- not altogether welcomed by the existing Party cadre -- will require new county-level Party secretaries and chiefs to be around 45 years old and possess at least a bachelor's degree. These individuals would be less likely to have already built up their personal economic connections, and be more beholden to the central government for legitimacy and support. Beijing is also increasing supervision and admonition of Party and government officials.

But to make these changes last, Beijing needs to give the lower cadre some incentive to follow the central government's demands -- even if it means a reduction in local investments or a rise in local unemployment. Beijing must ensure that local officials are more closely tied to the central leadership in Beijing than to foreign investors and shareholders in Japan or the United States. For this, Beijing needs to make it utterly clear what risks the local government leaders face. Threats of prosecution and even the token executions of some officials have not worked, but the potential for more and larger social uprisings might.

This means Beijing needs to allow, if not subtly encourage, more localized demonstrations.

And that apparently is where Hu and Wen intend to go. The central government's response to stories of rural unrest has remained rather low-key thus far. In reference to the Dongzhou protests in December 2005, where at least three were killed when local security forces opened fire on the crowd, officials on the sidelines of the NPC session recently made it a point to say the officers in question are under detention and did not follow orders. In other uprisings, there even have been suggestions of sympathy from the center. In the cost-benefit analysis, Beijing apparently has determined that the risks of allowing the current trend of growing regionalized power to continue outweigh the risks of trying to manipulate popular sentiment against local officials.

This, perhaps more than anything, underscores the severity of the economic and governing problems facing China's central leadership.

The strategy of unleashing the rural masses, allowing and even subtly encouraging protests could quickly get out of hand. However, given the wide array of localized concerns, there is a natural disunity that could be expected to constrain protesters -- keeping demonstrations locally significant but nationally isolated. So long as protesters don't join across provinces and regions, so long as no interest is able to link the disparate demonstrations, the central leadership will retain some leeway to implement its policies.

But as history bears witness, any attempt to harness protests and mass movements is a very risky strategy indeed.

I've been spending a lot of time trying to gather my thoughts in order to compose a series of entires reflecting on the 15 months I spent living in various parts of China and just when I thought it impossible to find something positive to say about Chinese law, I discovered a newfound, yet bittersweet sense of appreciation:

POLICE in northeast China have detained a 32-year-old man suspected of sexually assaulting and killing more than 20 children. Gong Runbo is believed to have lured the children to his apartment in Jiamusi city in Heilongjiang province where he carried out the killings and often left the bodies to decompose, reports said.

He was only stopped on February 28, when a boy escaped and managed to alert the police, according to the report in the Beijing News. Officers sent to search Gong's apartment came across a gruesome scene of rotting bodies and scattered bones, it said. Four of the corpses were still in a somewhat intact state and showed signs of having been sexually abused before their deaths, according to the paper. Forensic evidence led police to conclude that perhaps more than 20 children had been killed in the apartment, it said.

The maximum punishment for murder in China is the death penalty.

Of course, I can also appreciate the fact that this sick imbecile will not spend the next 27 years appealing his sentence from Death Row and nor will his execution be delayed in order to ensure that it is carried out in a humane manner - a consideration his victims were not so fortunate to receive.

Jonathan Dresner has done a typically great job of pulling together the 3rd Asian history blog carnival. Plenty of interesting links and reading.

While on things history, Sun Shuyun in today's SCMP looks at the realities of China's founding myth in an excellent piece of historical analysis:

Every nation has its founding myth. For communist China, it is the Long March - a story on a par with Moses leading the Israelites' exodus out of Egypt. I was raised on it...

...The myth can be stated succinctly. The fledgling Communist Party and its three Red Armies were driven out of their bases in southern China in the early 1930s by Chiang Kai-shek's Nationalist government. Pursued and harried by their enemies, they crossed high mountains, turbulent rivers and impassable grassland, with Mao Zedong steering the course from victory to victory.

After two years and 16,000km of endurance, courage and hope against impossible odds, the Red Armies reached northwestern China. Only a fifth of the original 200,000 soldiers remained, worn out and battered, but defiant. A decade later, they fought back, defeated Chiang, and launched Mao's New China.

How does China's founding myth stand up to reality? In 2004, 70 years after it began, I set out to retrace the Long March. Of the 40,000 survivors, perhaps 500 are still alive; I tracked down and interviewed 40 - ordinary people like Huang Zhiji, who was a boy when he joined the Red Army. He had no choice: they had arrested his father and would not release him until Huang agreed. He thought of deserting, but stayed for fear of being shot. Many did run away.

Six weeks into the March, Mao's First Army was reduced from 86,000 to 30,000 troops. The loss is still blamed on the Xiang River Battle, the first big engagement of the march. But, at most, 15,000 died in battle; the rest vanished. Another battle, at the Dadu River, is the core of the Long March legend: 22 brave men supposedly overpowered a regiment of Nationalist troops guarding the chains of the Luding Bridge, and opened the way for the marchers. Mao told Edgar Snow, author of Red Star Over China, that crossing the Dadu was the single most important incident during the Long March.

But documents that I have seen indicate that the general who commanded the division that crossed the Dadu River first told party historians a very different story. "This affair was not as complicated as people made it out to be later," he said. "When you investigate historical facts, you should respect the truth. How you present it is a different matter."

So, there was only a skirmish over the Dadu River. The local warlord, who hated Chiang, let Mao pass. As a reward, he was later made a minister in the communist government.

The marchers did not know where they would end up. When they converged in north China in October 1936, it was hailed as the end of the march. But the "promised land" could barely support its own population, let alone the Red Armies. Barely a month later, the party decided the Long March was to continue. But the communists were saved when Chiang was kidnapped by the general he had ordered to wipe them out. As part of the price for his release, Chiang recognised the communists as legitimate: the march was over. But not, however, for the 21,000 men and women of the Western Legion. They belonged to the Fourth Army, headed by Zhang Guotao, Mao's arch-rival. Their mission was to get help from Russia. But Mao kept sending them contradictory orders, so they could neither fight nor retreat. They were trapped in barren land, and the overwhelming forces of Muslim warlords wiped them out. Only 400 reached the border. It was the Red Army's biggest defeat, yet it is missing from official history.

So, what motivated the marchers? I asked a top general what he knew of communism at the time. "I had no idea, then and now," he replied. "I doubt that even Mao knew what it was." Perhaps no one knew how much suffering would lie ahead, and how great the difference would be between the dream and the reality.

Some interesting factoids in today's SCMP about China's civil service:

The China Youth Daily yesterday quoted a survey as saying that just more than two-thirds of mainlanders believed Beijing should cut the number of civil servants and streamline the bureaucracy.

It quoted an economist as saying China had 39 civil servants for every US$1 million of gross domestic product, compared with 2.31 civil servants per US$1 million of GDP in the US.

Ren Yuling , a CPPCC delegate and an adviser to the State Council, told official media yesterday that the budget for running the government was 87 times bigger in 2003 than in 1978. In 2003, administrative expenses accounted for 19.03 per cent of total national expenditure, compared with Japan's 2.38 per cent and 9.9 per cent in the United States.

While we all thought the attendees at the NPC sat and listened to Premier Wen's Government Work Report passively, at least one delegate wasn't impressed. The SCMP reports:

A Hong Kong deputy to the National People's Congress has criticised the concept of building a "new socialist countryside" - as outlined in Premier Wen Jiabao's Government Work Report - as "unscientific".
"It is merely a political slogan and it forces experts from academic and planning sessions to support it," Victor Sit Fung-shuen said. "That's why I don't want to stay and listen after I have read all the reports. I am dissatisfied."...

Professor Sit also found fault with the policy of spending 50 per cent of China's gross domestic product on infrastructure, calling it an "act of inefficient economic investment". He said: "Only local officials get the benefits because they assign the projects to their relatives or friends and let local banks pay when the loans become bad debts." State-owned banks' bad debts came from the blind pursuit of building infrastructure, he said.

The push for sciences to prove their relevence to the real world continues apace. Books such as Freakonomics and The Undercover Economist both demonstrate how economic tools can be applied to the real world. Now I've stumbled across a paper by Richard Harter in something called the Science Creative Quarterly, titled a Game Theoretic Approach to the Toilet Seat Problem. Print this and leave on the bathroom door.

It's easy to deride the current NPC and CPPCC sessions going on in Beijing as a token going through the motions exercise, or in the words of Shakespeare, "It is a tale told by an idiot, full of sound and fury, signifying nothing." That doesn't stop the newspapers devoting pages and pages to coverage of the non-event. Indeed some would argue the large volume of hot air being expended has parallels with blogging. So what better than to bring together a useless parliament with the web's pre-eminent form of communication:

Tang Weihong, who is in charge of the website, blog.people.com. cn, which hosts the deputies' blog sites, said all NPC deputies and members of the National Committee of the CPPCC, China's top political advisory body, are free to open blog sites with the website...So far, eight NPC deputies and CPPCC National Committee members have opened blogs on the website, administered by the People's Daily...

To ensure blog sites serve as a platform for individuals to express personal views freely, lawmakers have urged a better legal environment for the management of blog sites to prevent vituperations in the virtual world from extending to people's daily life and to protect citizens' privacy.

Many China watchers are united in the hope that this great country will one day turn democratic. However as recent experience has shown, becoming a democracy does not necessarily mean becoming a peaceful, loving, caring and liberal place (Hamas, anyone?). David D. Hale has released a report observing that a democratic China could well be a greater threat to the rest of Asia. There is an excellent summary of the report in the CSM by Arthur Bright, with additional links to mainstream media reporting on this. David Hale himself discusses the report in an article in The Australian, comparing China's recent rise with Germany in 1914.

Without paying A$20 to read the report itself, the implications certain ring true. A democratic China is not necessarily a more compliant, gentler or less assertive one. In fact the penchant for nationalism the current leadership shows the deep undercurrent of nationalism that exists within what passes for a polity in China. It's not hard to imagine nationalist forces (small n) jumping into a democratic mess - what else could unite such a diverse country? And with a democratic mandate there would be room to push the envelope even further, especially if there's votes in it (please see Chen, Taiwan).

Sometimes it pays to be careful what you wish for.

Have you got a blog and you've posted something pertaining to Asian history? Then my friend Jonathan Dresner wants to hear from you.

And early polling shows folders are outnumbering scrunchers. What's wrong with you people - do you fold paper before you throw it in the bin? The world would be a much better place if everyone scrunched.

It's China Brief time and the standout article this time is Yitzhak Shichor's look at the revolution in China's higher education. Read the whole thing, but here's a taste:

Compared to other countries, China's higher educational system has one major disadvantage and two major advantages. Its main disadvantage reflects the time-honored legacy of conformity, discouraging innovation and lack of academic freedom. As much as Beijing would invest in higher education, if it does not manage to overcome these obstacles and provide a climate for fearless academic and scientific discussion, this revolution will be short-lived. At the same time, China has two formidable advantages: one is its huge population and the other is its mobilization capacity that is not bound by democratic values. Given that the ratio of talented people in the Chinese society is about the same as in other countries (and some would say it is higher), the Chinese government can feed its higher education system with millions of talented and even exceptional students for years to come.

There are two types of people in the world: those who divide people into two types and those that don't. One fundamental difference comes down to whether you scrunch or fold toilet paper. In a most interesting piece of research, I have discovered that this trait is not necessarily inherited. Middle daughter PB is most adamant she is a folding kind of girl, despite coming from a long line of scrunchers. And she's 3.

While not scientific, I wonder what the percentages are of folders vs. scrunchers. Please vote so we can resolve this age old issue.

I'm no fan of the Epoch Times or the Falun Gong. But it does some curious that the International Federation of Journalists* has managed to scoop Hong Kong's English language papers on a break-in at the Times's Hong Kong offices:

Yesterday, the Hong Kong office of the English-language newspaper, The Epoch Times, was broken into by four unidentified men, who smashed a glass door at the entrance of the building and wreaked havoc in the offices, including entering the computer room in the print shop and wrecking office machines and computers.

* _{I've no idea how reputable the IFJ is, so strong caution is advised.}

Thanks to the top referrers for January:

Bloggies 2006
Rockson
Hemlock
Mr Brown
Ambient Irony
Fumier
ESWN
The Peking Duck

Thank you to everyone else who also linked and visited.

As usual, some site statistics for February:

* 26,061 unique visitors made 56,643 unique visits, reading a total of 146,021 pages,and drawing 13.76 GB of bandwidth.
* This equals 2,023 visitors per day reading 5,215 pages each day. In other words each visitor reads 2.57 pages on average. Each visitor returned on average 2.2 times during the month.
* 308 subscribe to this site's feed via Bloglines and 364 via Feedburner.
* 59.6% of you use IE, 22% Firefox, 3.2% Safari, 3.2% Mozilla, 1.5% Opera and 2% Netscape to browse this site. 82% of you use Windows, 5.5% Mac, 1.3% Linux.
* 15.4% of visits were via search engines, of which Google was 62.5% and Yahoo 20% (and something called Tiscali was 10%). The top search phrases included "Nancy Kissel", "Simon World" (is the URL that hard to remember?), and bizarrely "Klara Smetanova", along with "Chinese New Year wishes" (Kung Hei Fat Choi).
* The most visited individual page was "Tiananmen Square - June 4th, 1989", which was my piece last year commemerating that event and which seems to have made the front page of Google's image search under that topic. Don't underestimate the power of Google.

Peter Gordon rants why a GST will bring doom and gloom to Hong Kong. Having lived in Australia when that country went through the introduction of a GST, these points are nothing new. Yet ask an Aussie now and you'll generally hear that the GST is one of the least bad taxes. Sure the form filling is painful for businesses (the tax office effectively outsources collection to busniess) but the lucky country has seen steady economic growth, record number of tourists and the sky didn't fall in. I've yet to see a Sydney beggar with a sign, "On the street thanks to GST". But maybe there's another reason. The (sub req'd) SMH reports that Australia's tax men and women are having a hard time of it:

THE Australian Taxation Office has no way of knowing if it's penetrating the underground economy because it will not estimate the extent of the problem, says the Auditor-General. However, tax officials are flushing out cash operators where they can find them, including the "dancing sector of the adult industry".

The Australian National Audit Office has revealed in its cash economy report that tax investigators contacted more than 50 pole dancing clubs "with a sample receiving unannounced visits". The Tax Office says Australia is home to about 2000 dancers at any one time.

Sure it's only about 3 weeks old, but I heartily recommend the 88s look at the (un)-reliability of Chinese statistics and follow the comments for further debate. Then recall this is the world's sixth biggest economy and most populous nation. Finally ask yourself what's more dangerous - flying a plane blind or with deliberate misinformation?

As I've discussed previously, the problem comes about because those who compile the statistical data are also measured by the results. The natural incentive is to report flattering numbers to help your career and prospects, irrespective of the truth. The simple and obvious solution is to have an independent statistics agency which collects, compiles and disseminates the data. But there's plenty of vested interests to keeping the status quo. It's a classic clash of specific vested interests overriding the broader public interest. That assumes that governments work for the public interest...

On a related theme, a pessimistic look at the durability of China's economic boom and the dark side of China's rise (via MR). And Mark Thoma notes there is a historical precedent for a Western nation maintaining a long term trade imbalance with China.

With all the fuss over Taiwan's defunct National (Non)-Reunification Council, Fumier spots a massive shift in China's position on Taiwan's status.

On a completely unrelated note, a look at the state of HK street food. There's not one mention of H5N1.

Josephine Ma in the SCMP looks at the downside of the new socialist countryside fairy tale, by taking at a look the new model villages being built.

It is an unusual combination: piles of dry wood and maize leaves stacked behind rows of two-storey villas in a clean concrete compound, surrounded by muddy traditional villages. New Liangzhui village and the lookalike Xujia village 2km away look like any other luxury Beijing property development - except for the stockpiled fuel that betrays the residents' dilemma.

As the campaign to build a "new socialist countryside" - a main theme of this year's National People's Congress and the Work Report of Premier Wen Jiabao - sweeps the country, New Liangzhui, the 2002 brainchild of property tycoon Liang Xisen, is widely hailed by the media as a sample of what a modern village could be. It could be likened to a 21st-century version of Dazhai village, the model village that symbolised modernisation and wealth for farmers in the "new socialist countryside" campaign of the 1950s. But this time it owes its existence to capitalism rather than communism.

Mr Liang, who developed Beijing's exclusive Rose Garden estate, spent 42 million yuan converting his home village in the poorest part of Shandong into his vision of a modern village. When the project was completed in 2002, each family was allocated a 280 square metre villa, while younger villagers were given smaller flats in four-storey buildings. In return, villagers handed their farmland to Mr Liang to build a 23-hectare beef feedlot and abattoir. Most of Liangzhui's 400 villagers are hired by the beef operation, earning a stable monthly salary of 600 yuan. They were also given shares in the farm and are eligible for bonuses.

Nevertheless, life in the model village is not as carefree as it appears. Although almost every family has an electric stove, many still burn firewood and maize leaves for cooking, to minimise electricity bills. Li Yulan said although her two children were each allotted a flat and she received a villa, meeting the bills was difficult.

The problem is even more acute in Xujia village, a second attempt by Mr Liang to covert a traditional village into rows of villas, completed late last year. Sitting outside her new villa, 48-year-old Zhang Delan kills time stripping the cotton she harvested last year. "This is the last time we will do such work as we have no land anymore. This is last year's harvest," she said. Xujia villagers also handed over their farmland, with Mr Liang telling the media he planned to introduce mechanised farming, run by a co-operative. "I think they will give us a job, otherwise what can we do? We have no land anymore," Ms Zhang said.

Mr Liang, a farmer with just one year's schooling who became a billionaire after buying out the bankrupt Rose Garden project, has said he plans to convert 109 villages in the town of Huangjia along the same lines. To provide jobs for the landless farmers, he planned to expand his beef business and set up more factories. But Xujia villagers have doubts: the beef business and the modernisation of Liangzhui village cost Mr Liang 400 million yuan, although they can barely hide their pride when they show off the new homes.

Taizhang village lies just next to Xujia, its winding mud paths lined with brick houses. Mr Liang originally chose Taizhang for his second experiment, but the plan soured over a trivial argument with villagers about the thickness of the wall enclosing the village. Taizhang villager Zhang Jun , 60, said he would not mind moving to a villa, although he was also content with his two-storey farmhouse. He used to work in Tianjin , a three-hour drive away, as a migrant worker and managed to save 400,000 yuan to build a house of his own. Mr Zhang said all young villagers were now working in cities and life was better since the agricultural tax was scrapped last year.

Chen Xiwen, a top rural policymaker with the central government, recently said the latest campaign to build a new socialist countryside was not about demolishing old villages, but more concerned with setting aside public funding for infrastructure, education and healthcare services. "I saw in some places they built tall buildings of 10 or 20 storeys and it is so inconvenient for farmers to carry sickles and pickaxes with them into the lifts," Mr Chen said. But despite repeated warnings, local governments had scrambled to spruce up villages and select model villages as "new socialist" showcases, analysts said.

Without billionaire backers, other villages have to foot the bill through public finances or by raising funds from farmers.