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China’s military spending spree

5 Mar

In terms of Western decline and Eastern rise it is not just the economies that are moving apart. On the day when an old hero of the 1982 Falklands War, Major-General Julian Thompson, warned just how vulnerable Britain’s South Atlantic territories are to foreign conquest because of military cuts, it was announced that Chinese annual military spending had reached $100 billion for the first time.

While the UK and its Western allies, including the United States, are planning and executing further savings on defence budgets, China and many other Asian nations are actively rearming with the latest hardware. Although an arms race has yet to begin, India and Japan are concerned at the rate of increase in China’s military spending – up 11.2% this year alone. This does not include any off-balance-sheet spending too, which is believed to add as much as 50% more than the official figure.

Rapidly expanding

China obviously rejects any notion that this extra resource allocation is anything to be feared. The Beijing government’s declaration of China’s peaceful rise is still the national mantra, and there is no acknowledgement that massive more arms spending could be seen to contradict this strategic objective. “China is committed to peaceful development and follows a national defence policy that is defensive in nature. China’s military will not in the least pose a threat to other countries” a National People’s Congress spokesman said.

Despite the smooth words, the budget increase is causing concern amongst China’s 12 Asia-Pacific neighbours – particularly when it becomes apparent that by 2015 Beijing’s military spending will have surpassed their combined defence allocation. The source of this unease is China’s increasing assertiveness over long-standing territorial claims.

The South China Sea is the likeliest flash point, given that China’s demand for full sovereignty are being resisted by half a dozen nations. Japan and India both have disputes with China too, with India having fought a 1962 war over the contested areas. Indeed, India’s Prime Minister has been quoted as saying that his country “must prepare to counter China’s territorial ambitions”.

China also has economic interests to think of. The deployment of Chinese armed police to the Mekong river area in South East Asia last year was partly to protect their investments in the region, as well as expressing their local muscle. The development of a blue water navy – as evidenced by its new aircraft carrier development – is also designed to ensure China can further protect its international interests, especially around trade.

The truth however is that no one really knows how and why China is enhancing its military capabilities. The opaqueness of the Government means that its actual and potential rivals often have to guess at what they are doing.

Luckily for America, it still has some breathing space when it comes to military superiority given that its defence spending is still five times that of the Middle Kingdom. China recognises that this means there is a significant imbalance between the two, and as such is looking obliquely at the situation to nullify the US lead more quickly than if it went into standard competition with the world’s superpower. An article written in the Harvard Asia Pacific Review sums it up so:

“Despite America’s overwhelming military superiority, China aims to exploit vulnerabilities in key US capabilities using counter-space, counter-carrier, counter-air, and information warfare to prevent the United States from dominating a military confrontation or achieving quick and easy victory.”

The US has made Asia the centre of its foreign policy for the coming century. As such, it is highly likely that it will take into keen consideration China’s rising military capabilities to stay ahead of the race. The difficulty though will be in the understanding China’s plans. So long as it keeps the world guessing at where this extra spending is going and for what reason, Beijing will be well placed to ensure that its aims and objectives are easier to achieve without resorting to actual force.

50 Cent Parties

18 Feb

If there is one thing sure to make the blood boil it is the readers’ comments below online news articles. How many times have you read a story in the Economist, or New York Times, or the Guardian, and silently raged against the trolls and misanthropes that dollop their  unwelcome thoughts on the page?

If you are in China, then hope is at hand. There is a phenomenon on the loose, open to any journalist or editor with deep pockets and shallow concerns. It is called the 50 Cent Party, and it has taken the Chinese media by storm.

Wǔ máo dǎng  (五毛党) – as the 50CP is known here - is the term for freelance internet commentators in China that post pro-Government and pro-Communist Party comments. The 50 cent part of their name comes from them being paid to make these comments every time they manage to advance the official state line or indeed just steer a thread away from disruptive topics.

As some of these partiers can earn hundreds of yuan a month – a nice top-up to standard wages in China – it is probable that the activists are motivated by a mix of nationalist and financial fever.

The Government doesn’t take them lightly: there is even an official exam that they take to become a registered partier. Indeed, they appear to have an important role in Government policy, as this leaked propaganda directive to 50 cent partiers shows. Their objective was stated as:

In order to circumscribe the influence of Taiwanese democracy, in order to progress further in the work of guiding public opinion, and in accordance with the requirements established by higher authorities to “be strategic, be skilled,” we hope that internet commentators conscientiously study the mindset of netizens, grasp international developments, and better perform the work of being an internet commentator. For this purpose, this notice is promulgated as set forth below:

(1) To the extent possible make America the target of criticism. Play down the existence of Taiwan.
(2) Do not directly confront [the idea of] democracy; rather, frame the argument in terms of “what kind of system can truly implement democracy.”
(3) To the extent possible, choose various examples in Western countries of violence and unreasonable circumstances to explain how democracy is not well-suited to capitalism.
(4) Use America’s and other countries’ interference in international affairs to explain how Western democracy is actually an invasion of other countries and [how the West] is forcibly pushing [on other countries] Western values.
(5) Use the bloody and tear-stained history of a [once] weak people [i.e., China] to stir up pro-Party and patriotic emotions.
(6) Increase the exposure that positive developments inside China receive; further accommodate the work of maintaining [social] stability

Western commentators that sigh upon reading this will be refreshed to know the depth of ill feeling against these activists. For many Chinese they represent the continued efforts of the Government to interfere in their social media lives, as my Chinese friends can all too well attest.

Yet the campaign is not all that different from some of the political techniques utilised outside China. The 2008 campaign of US Presidential hopeful John McCain attracted criticism when it emerged that volunteers were being offered prizes in exchange for seeding comments and messages supplied to them. The rewards on offer – books signed by McCain, a ride with the candidate on his campaign bus – tap into the mix of profit and politics that are the probable motivations for China’s 50 cent-ers.

Despite this, it is clear that China is in a different league – with an estimated 300,000 volunteers involved. With the internet increasing in popularity across the developing day by day, spurred on by the massive increase in access that smart phones and cheap laptops bring, it cannot be long until other authoritarian regimes start employing the same tactics – Iran may already be doing so. Not all Chinese exports are benign.

Hong Kong blogger Oiwan Lam, who has written widely on the subject, explains all in this video:

A call to Britain: get real and move to the Pacific

16 Feb

The momentous events of last December have permanently changed the UK’s relationship with Europe. To the average Europhile, this is something to be lamented and mourned, the moment Britain became a so-called pygmy on the world stage.

To others, David Cameron’s stand will have benefits far greater than appeasing his own Eurosceptic MPs. It will allow the UK to open its eyes to the rest of the world, and the enormous trading opportunities there.

Here is a question. If you had a business, would you rather sell to the penny-pinching customer with the uncertain future, or the flash kids with money to burn?

Britain finds itself in such a quandary right now. We have been members of the European project for nearly forty years, and our economy has merged with the Continent’s to such extent that our largest trading partners are across the Channel.

The issue though is that the European economy is crumbling. The rest of the world is leaving Europe far behind, a situation that is highly likely to worsen given the EU’s inability to sort out its financial problems.

The EU’s economic growth in 2010 was 1.8%. In contrast, the developing countries of East Asia – excluding Japan – are expected to have grown by a huge 8.2% in 2011, according to the World Bank. India’s growth has slowed, but to a respectable 7%, well above France’s forecasted 1.6% for last year.

By focusing mainly on Europe, the UK’s economy is ignoring the far bigger picture.

When will Britain see the Asian lights? (Photo from here)

The Asia Pacific (APAC) region in particular represents an enormous opportunity for anyone that is willing to work there. This is not new: a nineteenth century British trade delegation to China once mused that if the Chinese added one inch to their shirt-sleeves, ‘the textile mills of Lancashire would be busy for the next 100 years’.

China is an economic sensation. It has quadrupled in size over the last few decades to be the world’s second largest economy, and is projected by many to overtake the US into number one spot sometime over the next ten years. There are untold opportunities for British trade with the country, especially given Beijing’s current push to develop its internal markets: the country is expected to import over $8 trillion worth of goods in the next 5 years alone.

Yet APAC is far more than just China. Indonesia, the Philippines, and Thailand are just some of the countries that are developing fast and ripe to do business with.

The UK needs to start taking APAC far more seriously. There is huge admiration for the UK in Asia. Union Jacks adorn the latest fashions; British music and films are everywhere; English is the lingua franca for many. But we are just not capitalising on it: trade with APAC remains far smaller than with Europe or North America.

Where are the small Manchester companies roaming the Jakarta trade shows? Where are the Birmingham businesspeople looking for deals in Taiwan? Why don’t we see Shoreditch software entrepreneurs selling in Malaysia?

The British pavilion at the recent Shanghai expo is a telling reflection in the UK’s commercial relationship with Asia. A mesmerizing cube composed of 60,000 perspex rods, it was widely praised as the main architectural marvel of the six-month event. But there was nothing in it: a triumph of style over substance.

To be fair to David Cameron, he understands the need for more global trade. He has proudly pointed out that since his high-profile visits, British UK’s bilateral trade with India is up by 20% in the last year and exports to China are up 40%. In addition, embassies and high commissions are being made to provide more commercial support to UK enterprises.

Yet it is not enough. The US is taking an active lead in Asia, as it understand that the 21st century will belong to Asia. President Obama has recently announced that America will be signing up to the Trans-Pacific Partnership (TPP), a group of liberal-minded countries in the region which has the potential to be the world’s largest trade block.

(Although this grouping does not include China, this is not necessarily a bad thing: it does, after all, cement liberal trade as the dominant economic model for most of the region.)

One possible way for the UK to tap into the APAC growth story outside of China is by following the US lead and joining the TPP. The organisation’s agreement makes provision for its expansion to include any state that meets its liberal economic criteria, which the UK plainly does.

With the TPP having core British allies within its actual or provisional members – the US, Australia, New Zealand, Singapore and Brunei – and strong relations with others – like Malaysia and Japan – there is no obvious impediment to the UK joining, no Charles de Gaulle waiting to block our accession.

The only real barriers are the legal limits imposed by the EU, and our emotional ties to our nearest neighbours. The Europhile fear of Britain being blockaded by Europe if we looked elsewhere for trade has no foundation given the amount they export to us.

It will take great political courage to move Britain into the unknown and realign itself to be more world-focused. The Prime Minister though should remember that many companies have successfully reinvented themselves to take advantage of exciting and prosperous new markets. Nintendo – one of the world’s largest video game companies – used to make playing cards. Nokia, the Finnish mobile phone maker, started life as a paper manufacturer. It can be done.

The UK should move further onto the world stage. But the country needs room to manoeuvre, to focus its interests on the parts of the world that are growing, and not stagnating.

The only way we can do that is if we take the plunge and realise that Europe is the past, and Asia the future.

Why Alex Salmond could never be Chinese

12 Jan

Chinese readers of this week’s proposed referendum on Scottish secession are highly mystified by the whole issue. Here, they muse, is one of the world’s most powerful nations allowing itself to be torn apart by a small group of nationalists, and for no obvious benefit. Why, as one Hong Konger put it, would Scotland want to become even smaller?

Independence movements though are not unknown in China. Tibet and Xinjiang are both autonomous regions struggling with ethnic unrest that causes a great deal of damage to the country’s international reputation: Free Tibet t-shirt slogans are hardly conducive to friendly thoughts of the Middle Kingdom. The nation’s image in the eyes of the Western media sometimes seems forever entwined with the Dalai Lama.

Yet despite the headlines, breaking away from China is unthinkable to the vast majority of the population.  Protecting the country’s integrity cannot and will not be compromised.

There are several reasons for this. Of these, security of the people and the economy, and the concept of a single, united people, are the most important.


Security is critical to the Chinese Communist Party, which came to power partly to fill the vacuum left by decades of brutal warlord rule in a divided, post-Imperial country. Much like the Soviets did with Eastern Europe, China has created a buffer zone between the outside world and its central and eastern heartlands, a modern version of the Great Wall. It has learnt to its cost the damage that foreign incursions can make – the 1860 destruction of the Emperor’s Summer Palace being but one example – and has no intention of allowing Xinjiang and Tibet to gain independence, let alone Manchuria or Inner Mongolia.

Linked to security is the performance of the economy. Again like Russia, China recognizes the huge resource potential of its outer lying provinces. Development of these resources is central to the economic rise of the nation as a whole, which in turn is strongly linked to maintaining public order, and in allowing the country to grow in peace.

This physical and economic security is intimately linked to social harmony. Although China has had millennia of internal conflict, the fact is that it has (intermittently) lasted as one country.  This enduring integrity rests on the deeply held belief in a strong, indivisible people and culture, namely the Han, who make up 92% of the population.

What is noticeable to an outsider in China is the sheer variation of faces and features that are seen on the street: skins of every hue, eye shapes from thin to round, noses of different dimensions. Yet if you ask a local about this diversity, she will look at you blankly: “But we are all the same, we are all Han”.

The American political scientist Rupert Emerson wrote that a nation is the “… largest community that, when the chips are down, effectively commands men’s loyalty, overriding the claims both of the lesser communities within it and those that cut across it or potentially enfold it within a still greater society….” The attachment to the idea of being Han is a good example of this in action.

It is also why China has been so successful in expanding over the millennia: once Han colonists settled a region, they were expected to continue to show allegiance to the mother country. In turn their neighbours became Han too, absorbed into the general Han mass. Their previous independence is now revealed by their name and their dialects, but emotionally these distinctions are often subservient to their overall inclusion in the greater Han.

The Chinese have therefore recognized that territorial integrity goes hand in hand with the physical, economic and social wellbeing of the population as a whole. This is an important lesson for observers of the Scotland-England rift to understand. Because although the situation in China is rather different to that in the UK – there are no armed Scottish insurrection movements for a start, nor monks self-immolating (not yet at least) – there are still similarities. After all, maximising wealth, safety and happiness for as many people in the country as possible is hardly unique to Asia.

China house prices continue to slide

10 Jan

Analysts of China’s economic health will be reading the latest news on the country’s house prices with interest. A new report issued this weekend by the Beijing-based Renmin University of China predicts that the nation’s high housing prices will meet a downward inflection point in the third quarter of the year, but the sector is not expected to suffer a “hard landing”.

The report noted that more Chinese cities saw lower price growth for commercial homes during the first six months of the year amid strict measures aimed at tightening the property market and lowering housing prices.

“Some cities experienced a downward trend in property prices in the January-June period, though without a significant drop,” the report said.


Empty Chinese flats: crashing down soon?

In May, month-on-month price growth for new commercial homes was reported in 50 out of 70 major cities, according to the latest statistics from the National Bureau of Statistics (NBS). That compared to 56 cities reporting month-on-month growth in April.

New home prices declined from a month earlier in nine cities and stood unchanged in 11, while 27 cities posted smaller monthly price gains, the NBS said.

China has introduced a series of measures to curb rising property prices, including restricting residents in 35 major cities from buying second homes, requiring higher down payments and charging property taxes in Chongqing and Shanghai. Policies have also raised developers’ borrowing costs.

The country’s property market now has an oversupply of homes, according to Wang Jinbin, a leading economist at Renmin University of China.

“The total stock of commercial homes in the first three months among the 136 listed property companies will perhaps require two years or even more to digest,” he said, citing statistics in the report.

In Beijing, for instance, the total stock of commercial homes stood at 101,912 available properties as of June 7, local official housing figures showed.

And for many home developers, fund shortages are becoming more of an issue, Wang added.

Some analysts and organizations are also starting to forecast declines in home prices, with a growing expectation that the government will not relax its policy stance before the end of the year.

According to a report by the National Institute of Property Finance and Beijing Beta Consulting Center, China’s first-tier cities will probably see a 30-percent fall in property prices. Second-tier cities could see drops of 10 to 20 percent.

“An obvious price drop in the property market is expected to appear in the second quarter of next year when a large amount of government-subsidized houses will pour onto the market,” said Li Chang’an, a public policy professor at the Beijing-based University of International Business and Economics.

According to the government’s plan, construction of 10 million government-subsidized homes will start before the end of October.

Meanwhile, demand for homes will remain high because the country will see accelerated urbanization during the next 15 years, the report said.

“In addition to the current strict measures to cool down the property market, the government should also strive to increase the incomes of local residents, which is the best way to bring down the current rather high ratio of housing price to income,” Wang Jinbin said.

The greatest migration on Earth

9 Jan

This week has seen the start of the world’s largest seasonal migration. Each year tens of millions of Chinese, mainly migrant workers and college students, get on the road for Spring Festival – or Chinese New Year, as it is known in the West.

With an estimated 3.16 billion rail passenger trips expected over the 40 days bracketing Spring Festival (equivalent to everyone in the country travelling twice), the event will place a strain on the nation’s transport infrastructure that would cripple most other countries. But, like with other large-scale projects, China manages – albeit with quite a few problems along the way.

A good day for coffee sellers

The main issue of Chunyun - the Mandarin for ‘Spring Festival travel season’ –  is that China’s railways have a daily capacity of less than 4 million passengers. The vast majority of Chinese cannot afford to fly, and most do not have cars, so the rail network carries the bulk of the migration.

With such asymmetry between supply and demand, the Government has adopted various measures to alleviate the problem. Putting on many temporary trains (train numbers starting with letter L), extending the working hours of ticket booths and opening up more booths have all been brought in.

The trial has also begun of a ‘real-name train ticket policy’ to ease the situation. A common complaint about Chunyun has been on the massive price hikes that have been levelled on desperate travellers, on transport, food, and accommodation – sometimes many multiples of the normal price. Ticket touts have seen the railways as an annual bonanza, and the Government has brought in rules to ensure that tickets are only available with an ID card.

Yet this has done nothing to reduce the core problem of congestion. The train ticket website has buckled with a billion hits per day, and special hotlines are always engaged. Not surprisingly, tempers at the ticket booths often flair, and many more police are on duty to handle the passengers.

The press have been divided on the Government’s handling of Chunyun so far this year. The China Daily has focused on Beijing’s efforts this year to make the event smoother than before, with photos of train stewardesses practicing their smiles and articles on how hard it is to be a ticket seller. Beijing Railway Station, for example, was “not as crowded” as expected.

The Global Times – normally a staunch Government supporter – has not been so lenient. The paper pours its ire on the new real-name registration system, which has hit migrant workers hardest, asking “How did the policy go wrong?” The answer is that “the people who created it spend all day sitting in comfortable offices. They have no concept of what it’s like to labor all day at a construction site without having the time or resources to surf the Internet.”

Yet despite the torrent of problems, the fact is that millions of people will succeed in travelling home for Spring Festival.

China, in its push to modernize, is quick to copy best practice from around the world. In Chunyun, there may be lessons for other nations on how to move huge swathes of the country around, quickly and relatively safely. India, with a staggering 36,000 killed on the railways of Mumbai alone over the last decade (equivalent to 10 a day) is an obvious candidate, but how many Western nations could do anything approaching this? Britain’s rail managers could do worse than spend a few days in China this spring.

Burma’s thaw continues: Britain’s Hague makes a visit

5 Jan

British Foreign Secretary William Hague touched down in Burma’s capital Naypyidaw today to become the highest-ranking British politician to visit the country in more than half a century.

The Foreign Secretary has brought with him a pledge to boost aid to the beleaguered country in response to what Britain sees as political progress over the past year. Trade deals however are not thought to be on the agenda.

Mr Hague’s trip is the latest in a series of attempts to re-align Britain’s foreign policy towards more traditional allies and partners, many from within the Commonwealth or in Asia. High profile visits to China, India and Australia have boosted both trade and diplomatic ties.

British Foreign Secretary Hague holds talks with Burmese Foreign Minister Wunna Maung Lwin in Naypyidaw (Reuters)

The visit by the Foreign Secretary follows closely behind that of Hillary Clinton, the US Secretary of State, who travelled to Burma last month in an historic visit that signaled an unprecedented attempt by the Burmese Government to reach out to the West. For decades Burma has been one of China’s staunchest allies, but like several other South East Asian nations, it is attempting to diversify away from total reliance on Beijing for international support.

Analysts believe this move towards the West may be a reaction to increased belligerence by China. Recent months have seen Beijing increasingly assertive regarding its claim to the South China Sea and its resources, including rich fishing grounds and medium sized oil and gas deposits. Reports of Premier Hu Jintao ordering the Chinese Navy to prepare for warfare, and moves to protect China’s commercial interests in neighbouring countries with armed Chinese police, have both heightened regional fears about Beijing’s true intentions.

Though the two-day visit signals a shift in relations, Britain won’t promise any immediate change in European Union sanctions on arms sales, asset freezes and travel bans — or change a policy that discourages UK businesses from trade with Burma.  

Britain recently pledged £185 million (US $289 million) over three years to fund health and education projects — becoming Burma’s largest bilateral aid donor — but the UK channels funds only through non-governmental groups.

Mr Hague will lay out a series of demands for Burmese leadership to meet before it considers offering funds direct to the government, or before the EU can lift any sanctions.

“We hope to see the release of all remaining political prisoners, free and fair by-elections, humanitarian access to people in conflict areas and credible steps towards national reconciliation,” Hague said.

With Burma lying at a key crossroads between India and China, and South East Asia, the country is fertile ground for commercial opportunities. Assuming that the democratic process in the country continues as planned, the Foreign Secretary’s visit should only be good news for further British trade with Asia.


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