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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.

2011: the year Asia really took off

31 Dec

2011 has been a pivotal year in the history of the world. The Arab Spring – which has changed the Middle East completely – has used traditional and new social media channels to inspire revolution. The importance of social media extends to the other global movement of the past year, the Occupy protests North America and Europe. Indeed, Eric Hobsbawn, the marxist historian, has equated 2011 to 1848, or the year of revolutions that set Europe on fire.

Asia has perhaps been a bit quieter in comparison. But the changes here have been just as important – and probably more so. For this was the year that the continent, in particular Asia-Pacific, has started to really take off. The flow of power and wealth that has been flowing from West to East since the financial world collapsed 5 years ago is now being entrenched, aided by the EU’s woes, America’s political deadlock, and the continued economic development of the Asian nations.

It is certain that we are one or two years away – at most – from the tipping point, when the fulcrum of the world moves from the Atlantic to the Pacific.

The Pacific century is about to begin.

Here are some of the more important events from Asia this year:

China flexes its might

China’s relations with its South East Asian neighbours have slightly deteriorated this year. Despite new initiatives to bolster Beijing’s influence, such as the deployment of Chinese police to the Mekong river, the region’s governments are seeking to

The neighbours are worried

broaden their relations with other countries, especially the US. The visit to Burma by Hilary Clinton and Vietnam’s welcome of a US aircraft carrier are just two such initiatives.

Chinese sabre rattling – such as Hu Jintao telling his navy to prepare for warfare, and intransigence over China’s claim to the South China Sea – has been a main source of these new tensions, but there are others too. Huge numbers of Chinese immigrants to Laos have led to concerns there, and South Korea and Japan have had clashes with their giant neighbour thanks to wayward fishing vessels.

China’s ‘peaceful rise’ might still be the official mantra, but it is looking less and less convincing to her fellow Asians – let alone the US.

US nails its colours to the Pacific mast

Washington has taken advantage of this regional anxiety by seeking to restrict China’s room for strategic manoeuvre in Asia-Pacific. It has done this with a mixture of bilateral and regional deals.

President Obama: more at home in the Pacific

The US free trade agreement with Seoul and its sale of fighter aircraft to Tokyo are two examples of America bolstering its influence with specific nations.

Washington is also looking to cement its position as the regional leader by joining the Trans-Pacific Partnership, and using that as a vehicle for APAC domination. If the TPP – which China is excluded from because of the liberal economic rules that dictate who can and can’t be a member – becomes the main APAC trading block then the US will have succeeded in maintaining its hegemony in the Pacific region.

All of which is looked upon with alarm by China, as numerous articles in its official newspapers bear witness. The chances of Beijing accepting America’s dominance are close to zero, so 2011 is only going to be the beginning.

The march of the Yuan to world currency status

China’s recent currency deal with Japan is a small but important step to making the Yuan a global reserve currency alongside the US dollar, the Euro (for now), and the Yen and Sterling. The deal – which allows Chinese and Japanese trading companies switch between yuan and yen without converting to dollars first – is not though just about regional trade.  China seeks a bigger role for its currency in global markets, and wants power in international forums that is commensurate with its economic might. The sooner its currency is fully convertible and its economy is open to global investment, the sooner this will happen.

Japan’s disaster

March 11 saw a huge earthquake and tsunami hit Japan, leaving at least 16,000 dead and causing $235 billion of damage – the world’s most expensive natural disaster. This came on top of two decades of economic stagnation which has led to Japan being overtaken by China as the planet’s second largest economy.

Prime Minister Noda

The net effect of the tsunami has been to shake Japan into realising its precariousness. For too long the country has been mired in deflationary decay and with a highly unhealthy political system that has seen 7 prime ministers since 2006.

The incumbant leader, Prime Minister Noda, seems to have recognised this and is looking for solutions. Reaching out to the Trans-Pacific Partnership earlier this year was a watershed in Japanese relations with its neighbours, and she has been busy making bilateral currency deals with China and South Korea.

Given the short-term nature of his position, it is hopeful that Noda can continue his apparent mission to further integrate Japan with the world economy well into next year.

India paralysed ahead of its 2012 elections

The world’s largest democracy has some way to go to catch up with its Asian rival China, as can be seen here. But it is not helping itself by sacrificing its economic development on the altar of party politics ahead of next year’s elections.

Not to India's liking - until 2012 anyway

The ruling Congress Party has been attempting to reassert its leadership and kick-start investment in the deteriorating economy, but has been blocked in several initiatives by opposition from other parties keen to position themselves ahead of 2012. The Government’s decision to halt foreign investment in the country’s huge retail sector is the main victim of this politicking, and has damaged India’s reputation as a place to invest.

The rupee’s 13% slide in 2011 – Asia’s worst performing currency – is a reflection on a lack of investment confidence.

If India is to start competing seriously with China then it needs to get its politics inline with what is best for its economy.

North Korea’s succession plans

The death of Kim Jong-il has been a major source of world anxiety. There has been widespread alarm at the youth of the apparent successor, Kim Jong-un, and the instability that his inexperience could bring.

Given the strong messages coming from Pyongyang over the last few weeks it seems likely that the young pretender is increasing his grip on the country. The worry therefore is less about a power vacuum, but perhaps too much power and with a need to use it.

As with all these events, time will tell. 2012 is going to be an interesting year indeed.

Why is southern China protesting?

22 Dec

Thousands of people have protested in southern China against plans to build a new coal-fired power plant, following disagreements over pollution fears from an existing plant. Protesters say two students died in the unrest in the town of Haimen in Guangdong province, although police deny this.

Guangdong has seen some high profile protests recently

This protest comes in the aftermath of another demonstration in the village of Wukan, also in Guangdong province. This is an anti-corruption movememnt that culminated last week in a local uprising, following the death in police custody of one of the protest leaders.

Residents in several villages near Wukan alleged that village officials had confiscated their farm land and sold it to for development to Country Garden, one of China’s largest developers. They alleged that the local communist party had pocketed RMB1 billion ($156m) from the sale, whilst the villagers had been left destitute.

When appeals to the authorities came to nothing, hundreds of people started a sit-in protest on 21 September.

The following days saw a brutal police crackdown on the protest.

Video footage shot by villagers in Wukan showed people of all ages being chased and beaten with truncheons by riot police. One Wukan villager described the police and other security staff as “like mad dogs, beating everyone they saw”.

The Financial Times reported that two children, aged nine and 13, were “badly injured”, and that one may have died. Villagers said elderly and children protesting peacefully were harassed and assaulted by “hired thugs”, provoking an angry reaction from villagers. The attacks on civilians by 400 police officers were described by the Financial Times as “indiscriminate”.

In a change of tactics, the authorities withdrew the police, perhaps at the insistence of the politically ambitious leader of the province, Wang Yang, who is tipped for a national political role in the future. This had the effect of diminishing the protests.

On December 9, one of the village leaders, Xue Jinbo, was arrested without a warrant. He later died in police custody, his body apparently covered in wounds.

Villagers were incensed, and promptly stormed the local police station, expelling both the police and local communist party officials.

A force of 1,000 police was quickly dispatched to surround the village, but the stand-off continued.

Eventually, on 21 December, villagers and officials came to an agreement. This included releasing other detainees, and handing over the corpse of Xue Jinbo to his family. Although officials are still claiming Mr Xue died of a heart attack (despite being caked in blood and with two broken thumbs), an independent autopsy has also been proposed.

Xue Jinbo's portrait is a rallying call to villagers

The China Daily reports that by Zhu Mingguo, deputy Party chief of Guangdong, promised that “We’ll undergo a thorough investigation of the dispute and do our utmost to protect the villagers’ rights,” he said at a work meeting in which some 400 local officials and villagers participated on Tuesday in Lufeng county, which governs Wukan village.

 Beijing is fully aware of the rising anger in the countryside. Rural tension is nothing new in the history of China, and numerous revolts have started there – not least the beginning of the Chinese Communist Party. Yet the issues of today are new.

First there is the huge gulf in wealth between city and countryside. Half the population lives in rural areas, but their (2010) annual average per capita disposable income of 5,900 yuan ($898) is less than a third of the average per capita disposable income of urban residents, which stands at 19,100 yuan ($2,900).

Second, welfare outside of the cities is a real problem. Until last month, the poverty threshold was set at around $0.50  a day and only captured 2.8% of the rural population; and it was only this group that was allowed to access most Government poverty-easing money. November though saw the Government raise the poverty line to $1 a day, which although lower than the World Bank limit of $1.25, still brings in a further 100 million people into poor group. Beijing is, in addition, adding $27 billion in poverty relief funds.

It is not only welfare which is missing. Access to services and the proceeds of the country’s increasing wealth are hard to find. As late as 2009 three of China’s poorest provinces – Tibet, Yunnan and Sichuan – were identified by China’s banking regulator as having more than 50 unbanked counties. This meant that they lacked even basic access to financial services.

Finally, the remoteness of many rural communities – and the provinces they sit in – means that Beijing has less of a grip on them. Corruption, although relatively bad in urban areas, is often endemic in the countryside. Land theft, police abuse, and illegal deals by local Government can all make life decidedly uncomfortable for local residents.

With over 90,000 mass demonstrations a year (characterised by more than 25 people attending) across China, according to the

Rural vs city wealth disparity is increasing

Chinese Government, there is plenty of internal strife. But many of the high-profile cases seem to come from Guangdong province.

What makes this part of China so vociferous in its demonstrations?

It may be that because it is next to Hong Kong protests here get more coverage than for example in Heibei or Shanxi.

On the same note, because Guangdong is next to the former colony – which is renowned in China as being a bastion of freedom and the rule of law – people living nearby may be more aware of their rights, and of the wrongs that are being committed.

Whatever foreign observers may say about China, one thing almost certain is that the leadership of the country have the best interests of the nation at heart. The President, Hu Jintao, is fondly known as Grandpa Hu for the caring manner he shows – he was for example quick to the scene of the major train crash in Wenzhou this summer.

The Government will also be acutely aware of how small demonstrations can quickly spread. Any large-scale protest would have to be put down hard, which would hardly go down well with the rest of the country – or China’s neighbours. And despite stringent controls on social media being brought in to reduce knowledge of the Wukan revolt – some Sina Weibo microbloggers told the BBC that internet searches related to Wukan and the area were blocked after the December uprising started, and villagers’ microblogs were deleted – it is highly likely that dissent could be cut off completely.

The recent rural welfare expansion is likely to be one of many measures coming over the next few years to ease the divide between city and countryside. But if these reforms are not carried out, for whatever reason, then expect Guangdong and many other provinces to loudly speak their mind.


Lies and democracy

20 Dec

The China Daily today published an American writer’s list of the ‘US’ twelve biggest lies of 2012′. “I live in Washington where lying is an art form,” David J. Rothkopf wrote for Foreign Policy.

(Readers of the CD should reflect on the fact that, unlike their hawkish cousin Global Times, they very rarely criticise the US directly, but instead report critical assertions about America written by their own people. A subtle difference.)

Newt: Cold War hero

Some of the political lies of recent times are completely ludicrous, like Newt Gingrich ending the Cold War.

These ‘mis-speaking’ statements, as Hilary Clinton may have put it, are part and parcel of running a Government. Agendas need to have supporting struts, and when no actual ones are found then politicians the world over are happy to do a little invention. This applies to democracies and authoritarians alike.

Yet when American, British and European leaders don’t tell the truth they undermine a fundamental pillar of democracy: namely that our political masters should be upstanding members of the community in whom we can place our trust. If truth becomes expendable then they defile their office, and scorn the voters that put them there. There are of course times when leaders need to be careful what they say for reasons of national security – which we all understand – but when a policy has to be continually defended by mendacity then surely it is time to revisit whether the policy is the right one in the first place?

Despite the Arab Spring, democracy is not in a good place at the moment. Two democratically elected  European leaders have been usurped in favour of technocrats, and the US political system is paralysed by more bitterness and in-fighting than at any time since the Civil War.

With China and other countries showing off the economic advantages of authoritarian rule, it is time for Western democracy to stand up and be counted. A long list of lies is not going to help matters.

Here are the twelve, with CD commentary:

1. “The war in Iraq is finally over after nine years.” Rothkopf notes the US has been militarily engaged in Iraq since the early 1990 and this will likely be just the end of another installment in the long running series of US warmongering policies in the region.

2. “America’s mission in Iraq was a success.” He expresses astonishment at such a claim while Iraq is divided, undemocratic, corrupt, and the US invasion has cost USD1 trillion, thousands of US lives, hundreds of thousands of Iraqi lives, and its national reputation. US war in Iraq bears greater semblance to a full-scale “fiasco”, he says.

3. “We are winning in Afghanistan.” Rothkopf describes this one as a hot from the oven “howler” by the US Secretary of Defense Leon Panetta. Washington has strengthened the region’s extremists and the threat of instability in nuclear Pakistan is now actually higher than it was when US went in, he says.

4. Tie: “Pakistan is America’s ally” and “Afghanistan is America’s partner.” Neither Pakistan nor Afghanistan can by any “credible definition” be called a US ally. This is attested to by the animosity of Islamabad towards Washington and Kabul’s belittling of the US on the world stage, Rothkopf says.

5. “America is unthreatened by China’s growth.” A “prayer” by US Secretary of State Hillary Clinton, Rothkopf says. “It should be true. But it’s not,” he adds.

6. Tie: “Republicans are the problem” and “Democrats are the problem.” Rothkopf dubs this one as “the great lie of American politics.” He says the problem with US politics is not the parties, but the money. “The system is so resolutely corrupt that recent scandals have only resulted in more money flowing into the system and past reforms being undone,” he notes.

7. “Cutting the taxes of millionaires helps create US jobs.” There is not even one single solitary shred of evidence to support this “idiotic” suggestion, Rothkopf notes. [Personally I am not sure about this - there does seem to be some argument that lower taxes increases investment which creates jobs, but it is all a question of degrees I suppose.]

8. “This next summit of European leaders will be decisive …” Rothkopf says despite the fact that this claim has been made every few weeks for the past months, the “supposedly sophisticated financial markets” of the United States continue to fall for it.

9. “The Obama administration is committed to serious financial services reform.” The US financial system is still plagued by all the threats that instigated the 2008 recession. “Not an inch of progress,” Rothkopf says.

10. “Only nine percent of Americans approve of Congress.” “This can’t possibly be true. There can’t possibly be that many,” Rothkopf says in a stinging sarcastic tone.

11. “The operation in Libya will be over in a matter of days or weeks.” Rothkopf says the operation was wrong to begin with, “and then wrong and then wrong again for months.”

12. “I love Israel.”  Even though everyone in US politics makes such an assertion, nobody really means it, Rothkopf notes. What the politicians really mean, however, is that “I want American Jews to think I love Israel enough to vote for me and give me money,” he says



For those of you that looked at the source material, you will notice that there are actually 14 lies that Rothkopf lists. So the question is, did the CD alter the story – so in effect lie – or did they just make a mistake?

Out of interest, the lies that the CD missed were:

  1. “The US might default on its debt”. This would obviously have a huge impact on China, which is the biggest single holder of US debt.
  2. “We believe diplomatic pressure may stop Iran’s nuclear program”. Again, a touchy subject for China given its support for Tehran.

It seems we can never be sure of the truth.


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