It's not just but what can be done?

We all feel so very small sometimes I think. Even here in America.

We’ve seen all these movies about darkly determined futures in which everything is controlled, about future fascist governments that control the population through technology and labor. The US went crazy over The Hunger Games. I don’t think we all necessarily see this as far off, as a warning or prediction. Some of us have fallen for conspiracies, that control is much more far-reaching and complete than we are led to believe. Some of us have fallen for theory. And some of us recognize that in some ways, for some peoples, governments and societies have become more concerned about their own preservation rather than the will or happiness of their own people.

Ilham Tohti, a Beijing-based Uighur scholar, was recently found guilty of separatism in Urumqi, the capital of the western Chinese province Xinjiang. Tohti advocated in his scholarly writings cultural sensitivity and equal treatment for Uighurs, but did not advocate succession from Beijing.

As described by the New York Times, when he was dragged from the courtroom after being sentence, he screamed “It’s not just! It’s not just!”

I was describing this scene to my friends and they seemed unperturbed. He’s a Uighur! It’s Xinjiang! What can you do? These are people who lived in China near the border for years and saw up close how minorities in China are treated. Not just foreigners feel like this – I believe a majority of people in China and in every country feel powerless, have no idea what can be done. We brush these things off because Xinjiang is far away. We brush these things off because we have our own lives and our own struggles and what action can we take that would make any difference?

I think the first thing we have to do is shed our indifference. We all can’t fly to Hong Kong to support the pro-democracy protests there, but we can follow the developments in the news. We can think critically about what is happening in Hong Kong. We can attempt to understand the history of that place and the desires of those peoples. 

I don’t do enough. I don’t support my community enough. I don’t support other people struggling enough. I don’t attempt to express my frustrations. I don’t spend enough time thinking about what can be done. But paying attention may be a first step to doing more. It’s sometimes about being well-informed to be sympathetic then to be ready when it comes time to be active here in our community. Even if there is not a lot I can do about the Uighurs in Xinjiang, I cannot convince myself to be indifferent.

Mid-Autumn Festival

It started with champagne. Adam and I chopped vegetables, cut meat, with glasses of champagne next to our cutting boards: asparagus, mushrooms, spring onions, chicken, and quail eggs. Greg stood behind us at the stove, a wok cooking “Cola Chicken,” some recipe he had brought back from China. Luke started the fire in the pit outside.

I didn’t even get drunk that night but the moon was so beautiful, what little we saw of it, above the building next door, through the leaves of the tree. 

And it was so orange and round, so close, it seemed like we could just walk up to it. Climb a ladder onto the roof to get closer.

Chang’e found herself floating up to the moon, leaving her husband Houyi behind.

Greg told us the story of the moon goddess who found herself immortal but lonely on the moon with just a jade rabbit for company. Though he lives in Beijing now, Greg and I had gone to high school together. Birmingham, Portland, Beijing. The moon was round, the eighth full moon of the Chinese calendar and we were celebrating Mid-Autumn Festival.

Lee and her boyfriend were there, too: another friend from high school and her boyfriend, a man who had grown up in Birmingham with us but whom I had never known. 

Bench by bench we sat around the fire, orange silhouetted against we only knew was around us: plants and spiders and crickets and racoons watching us, ready to invade after we retired to the house. Greg and Ryan. Misti and Allison. I kissed Adam. Daniella and Ryan came out. Luke and Alisa helped make dinner. They had all just arrived back from a camping trip, just in time for the festival. Daniella’s friends from Vancouver were visiting.

Chang’e and her jade rabbit.

Adam’s roommates groaned when I told them I had bought moon cakes. I’m not sure anyone really loved the moons cakes. Except maybe me. Like a Fig Newton filled with lotus paste or red bean paste or date paste, they’re solid and sweet, brick-like. I don’t even mind the egg yolk baked into the middle.

And they look so perfect in their red packages, not sealed because they last forever, the tops of each cake decorated with the art nouveau impressions of Chinese characters and design.

I bought a string of paper lanterns set on a line of Christmas lights for six dollars at the Japanese market going out of business.

Greg had suggested we celebrate Mid-Autumn Festival. Adam and his roommates remembered celebrating in China. The rest of us were experiencing it for the first time, here in Portland, by a string of cheap lights and a fire with moon cakes and the Chinese barbeque Adam was busy seasoning. It was Sunday and there was plenty of wine.

China and Ferguson

America’s gaze is focused inward, away from our borders, our coastal cities, toward our heartland. And the world’s attention has followed with us.

Obama said, “As Americans, we've got to use this moment to seek out our shared humanity that's been laid bare by this moment."

What happened to Michael Brown is not only tragic – the brutality of his death a profound violation of humanity – but also revealing of the darkly systemic racism that still exists in this country.

The entire country is talking about the situation in Ferguson. The world is looking at America, critical of the violence and continued history of suppression we are creating for ourselves.

China, expected to be critical of the situation, was largely silent, picking up some news from American outlets, until a critical editorial was posted on Xinhua. 

Austin Ramzy writes for the New York Times:

“While Chinese state news outlets can be highly critical of problems in American society and its government’s actions abroad, they can be slow to comment on events in the United States that may provoke discussion of similar phenomena in China, such as violent crackdowns last spring on protests against a planned chemical plant in the southern city of Maoming.”

This year we saw acts of terror, death, in Shanghai and Kunming and Urumqi. Tensions between the majority Han Chinese and China’s minorities, a suppression of minority culture and rights, military action against minorities have resulted in extremist responses. But I am not sure that a national dialogue has been generated about this problem in the same way that America was forced to talk about our prejudices and violence over the past several decades. The killing of Michael Brown and the media coverage and the statements made by the public exemplify the continued racism that exists in this country. America still has so far to go; black Americans still face so much racism and irrational fear and stereotyping and suppression. And though there may be many deniers of this racism, though there may be many people who justify these actions which should be labeled racist, America will talk about this. America will look inward and through shock and anger and outrage we will argue and enlighten and come together.

In China, the government cares about equality only as complete social integration. Cultural difference is tolerated so long as it does not constitute a separateness. And though many Chinese talk about oppression and inequality and human rights, these discussions are not wrapped into the national fabric as they must be here in America. Can events like this shape the Chinese consciousness like they do in America if the dialogue is not open in the same way? I fear that the conversation concerning minority tensions is so limited in China that what is seen publicaly are the extreme acts of terrorism but not the simple resistance of minorities to dominance and dispersal.

It should be noted that the Chinese commentary in Xinhua stressed that the real issue here is that the U.S. hypocritically chastises the human rights abuses of other countries while having so many problems at home. And the Chinese government is right. It is hypocritical. We need to do so much more for our own people who face systemic and overt racism here in America. But the difference may be the protections we have enshrined in our government for minorities, the actions we are working to integrate legally, and the conversation the people of our nation have in the media, in offices, at home, with friends about these issues.

Cuba is not Vietnam is not China

She said when her boat arrived in Cuba from Massachusetts, the boat owner asked her to pull out a bar of soap. She had been instructed to bring as many cheap bars of soap as she could. The owner of the boat shaved a sliver of soap from the bar and gave it to a woman who returned with a week’s worth of produce, fresh fruits and vegetables.

Some friends recently described their experiences traveling in Cuba. They both were appalled by the poverty in which Cubans live. They seemed to feel great sympathy and pity for what they describe as the abject poverty Cubans live in.

And I said, if everyone is so poor, why wouldn’t you just give all the soap away to everyone.

Certainly I understand the idea that you might need to protect yourself as a tourist, that it’s not always a good idea to draw attention to yourself, to flaunt your wealth. It makes sense to remain inconspicuous when traveling in any country. But if the people of Cuba are living in the crippling poverty as described to me that night, how could one not want to give up something as simple as soap if one finds him or herself in that position?

Last week I listened to a series of stories about Cuba on NPR. One woman described the residents in Mariel longing for the end of the U.S. embargo, believing that with its end will come a period of opening and great prosperity in Cuba. I agree. I think the embargo is antiquated and it is time to normalize relations with the country. I, too, believe that lifting the embargo could do a lot for the Cuban economy, but I cannot believe that the situation in Cuba will change drastically just because the U.S. will open itself up to trade with the nation.

One of my friends that night said that once the embargo stops he sees factories opening in Cuba and extolled what benefits that could bring the economy. “I mean can you even imagine what a Nike factory opening in Cuba could mean for these people that only make twenty dollars a month?” He pointed out the economic lift that had occurred in China and Vietnam because of the U.S. factories that had opened in those countries.

China is not Vietnam. While the U.S. and China have very large populations and the largest economies in the world. In terms of GDP, Vietnam ranks only as the 55th largest economy in the world according to the U.N., directly under Ukraine, New Zealand, and Romania. Cuba, with its economy “on the brink of collapse” according to my friends, ranks only a little below this as the 65th largest economy. And let’s point out one very telling fact: Vietnam has a population close to 90 million people whereas Cuba only has a population just over 11 million.

With a population including over 1.3 billion people, China has an extremely large workforce and domestic market. But it is obviously not just population and the factory work sent from the U.S. to China that has buoyed the Chinese economy. Let’s remember that Japan held the title of second largest economy for decades. Japan’s current population is 126 million, much less than half that of China’s, and relatively only a little larger than that of Vietnam. (And to put it in perspective, let me also mention that the U. S. population is currently coming in around 318 million.

So what then makes a successful economy, like those of China, Japan, the U.S. and Europe? Innovation. We understand it when we think about the U.S. and Europe and Japan, but it is time we understand that the Chinese economy is not just propped up on manufacturing.

I’ve heard it before: China has dozens of large metropolises you have never heard of. Americans know Beijing and Shanghai and Hong Kong, but what about Guangzhou and Nanjing and Shenzhen and Chongqing. My boyfriend lived two years in Kunming, a city in Yunnan province I had never heard of, with a metropolitan population quite a bit larger than that of Portland’s. The real estate market is huge in China and people are making money.

I like to say China has dozens of huge companies you have never heard of. Xiaomi, Tencent, Weibo, Feiyue: these are only a few of the companies that America has even the faintest inkling of but are huge in China. Sure, Nike sells shoes in China, but China has Feiyue, which now hipsters in Brooklyn buy for six times the price they would pay in Shanghai. Apple has a relatively small presence in the Chinese smartphone market, and this fall, Xiaomi, one of the other major players there, hopes to offer a phone to the American market.

A Nike factory in Cuba isn’t going to change the Cuban economy. With manufacturing wages may be lifted, people in general may come to have more disposable income or more stable jobs, but it will not automatically produce the prosperity we experience in America or China or Europe or Canada. Sure, the embargo must be lifted, but the Cuban government and the Cuban people must also search for a way to push internal economic security, to push for and encourage local innovation and entrepreneurship. Imported jobs manufacturing foreign developed commodities will not grow an economy.

It may be idealistic to say the Cuban people should hope for something more than just to see the end of the embargo because I don’t have a solution. If we are truly concerned about the conditions in any country, we must definitely see that American manufacturing cannot import prosperity. The Cuban government and people must find a way to nurture innovation and put in place an economy that invests and develops internally.

Chinese games

China is playing the world, particularly the United States and Russia. Old players from the Cold War, China is finally ascendant, quickly rising above the stagnant economies and gummed ideologies of the US and Russia. But it’s not the game with Russia that Americans need to worry about – we need to keep our eye on our own relations with China.

China’s recent gas deal with Russia basically takes advantage of Russia’s limited economy and fast growing desperation. The New York Times reported, “The chief executive of Gazprom, Alexey Miller, said the contract called for Russia to supply 38 billion cubic meters of gas annually over 30 years, making the price about $350 per thousand cubic meters. In 2013, the average price of Gazprom’s gas in Europe was about $380 per thousand cubic meters.” Though Putin wanted a price closer to what European nations pay, with the Russian economy close to recession he seemed desperate to move forward with the agreement. The Russian economy is propped up mostly by exports of natural resources, particularly gas, which explains why the Russians reached for Crimea but also why world leaders did not become more aggressive about the annexation – it does not do much to broaden Russian exports and strengthen their economy.

China, on the other hand, will in the short term increase its governmental spending to create pipelines and other infrastructure to accommodate the gas supply from Russia. This will inject money into the Chinese economy, creating jobs. The Chinese get a great deal on the resources it must import and will continue to rely on their expanding economy to pay for these resources as that economy continues to grow and diversify past an agricultural and manufacturing base.

When it comes to America, the US continues to embarrass itself, further weakening its stance in opposition to China. Attorney General Eric Holder’s indictment of 5 hackers working for the Chinese military out of Shanghai was a bold move. Aggressive, the US should make the world aware that the Chinese can play dirty, that they steal industry secrets, and that cyberattacks strike closer to home, affecting the nation more than the average American understands currently.

That said, the US government cannot hypocritically being doing the same thing of which it is accusing another country. In a piece concerning American surveillance of foreign companies and negotiations, the New York Times notes that American “officials say, while the N.S.A. cannot spy on Airbus and give the results to Boeing, it is free to spy on European or Asian trade negotiators and use the results to help American trade officials — and, by extension, the American industries and workers they are trying to bolster.” China knows the US is doing the same thing it is, and the US is trying to defend its actions while denouncing China.

This hypocritical stance by the United States wounds its world standing. What other nations will aid in the indictment of China and the resolution of this government led corporate espionage when the world knows the US takes advantage of these very same weaknesses? This week Republican lawmakers and pundits called Obama's foreign policy address at West Point weak. But it is not the caution that Obama advocates that makes US foreign policy weak - it is our continued hypocrisy. We must learn to lead by example and not just by indictment.

The strong words of Chang Wanquan

China is not letting up on its big talk on sovereignty. This week U. S. Defense Secretary Chuck Hagel met with his Chinese counterpart Defense Minister Chang Wanquan. Wanquan did not have nice things to say about the Japanese, particularly Japanese Prime Minister Shinzo Abe. Nor did Chang have anything particularly nice to say about the Philippines. He did say, ““We will not compromise, nor concede, nor trade on territory and sovereignty.”

A year ago the Chinese announced its “air defense identification zone” which extended to the Senkaku (Diaoyu) Islands and which China says provides it authorization to demand identification from and permission to upon any unidentified aircraft near the islands. Yet China has yet to enforce this air identification zone. And though it has made claims to the Senkakus in the East China Sea and other islands in the South China Sea which are currently held by the Philippines, China has yet to make any attempt to forcibly take the islands from either Japan or the Philippines.

However, it should be noted that this vocal stance is forging or strengthening alliances between other Asian nations. The Philippines recently took China’s territorial challenge in the South China Sea to the U.N. Permanent Court of Arbitration (which China subsequently declared did not have authority to hear the case), prompting Japan to applaud the move by the Philippines. And slowly, slowly, slowly relations between Japan and Korea may be softening. Maybe.

China’s main ally, Russia, has either become an international laughing stock or, due to its actions in Crimea, has become again the world’s greatest threat to international stability. Alarums have been raised. The world is not amused. And while I do not think the world has entered a new Cold War era, I do believe Russia has set itself in a bad position against the rest of the international community. China needs to dump Russia and move on.

In her recent trip to China, First Lady Michelle Obama was received cordially. Her political messages to China indulged. China knows it must work to some extent with Japan and the Philippines and Korea and the U.S. and the E.U. It must work with these other nations politcally to maintain its economic transcendence. But it order to become a greater political influence, it must be able to maintain an image of strength; in order to keep other nations from taking advantage of its weak borders, China sets itself to these little tiffs with strong nations, flexes its military muscle, and defense minister must frown down at defense secretary.

Forgiving Japan, Forging Alliances with China and Korea

This coming week, President Park of South Korea and President Abe of Japan will meet for the first time since both took office over a year ago.

At this point, Asian nations need to forgive Japan just a little. The world no longer punishes Germany for the crimes against humanity committed by Nazi’s. The current generation living and working in Germany, governing Germany, were not even born during the Nazi regime. They had no influence; they cannot be held responsible.

This is also the case with modern Japanese citizens. South Korea and China can no longer call out Japan as a nation, demanding to hold it responsible for the despicable actions committed by a generation that has largely passed away. An apology was provided decades ago. Modern Japan looks nothing like it did ninety years ago. Contemporary citizens should not be held responsible for the crimes of their forebearers, and they need to be able to move on.

So Korea has to be able to forgive. And on the flip side, Japan has to accept its history. But goading from Korea only encourages greater Japanese nationalism.

Japan, China, and Korea must begin trusting each other and relying on each other economically. Right now, all three countries turn to the West, but as some of the world’s largest economies, they must work out better economic and political relations with each other to maximize economic development. Particularly Japan.

Japan maintains a technological sophistication that unfortunately faces stiff competition in the West. China is swiftly becoming the world’s largest economy, has a large population with a growing disposable income, and a thumb on many of the world’s resources. Japan (and Korea) need to pair up with Chinese industry and work on opening the Chinese market to Japanese innovation. Forgiveness and respect: these East Asian countries should expect this from one another.

East Asian cooperation could produce a flourishing elsewhere in the world, as China and Japan work toward developing and creating lasting economic partnerships in Africa. Stronger political and economic alliances would create a less tense East Asian, and the United States could pivot its attention elsewhere, perhaps inward, and the U.S. economy would be forced to drastically change and adapt. Furthermore, East Asian economic integration and alliances could hasten the deterioration in the relationship between China and Russia and perhaps greatly alter the political situation in China itself as its becomes increasingly economically stable.

china on ukraine

The Kansas City Star quotes Chinese Foreign Ministry spokesperson Qin Gang as having said:

“I want to point out that we are aware of the historical facts and realistic complexity of the Ukrainian issue. There are reasons for why the situation in Ukraine is what it is today.”

Qin Gang spoke truthfully when he stated that the situation in Ukraine is historically and politically complex. The writer for the star points out that while China aspires to be an influential player in world politics, the country has been largely neutral in regards to the situation in Ukraine. Though true, can we really blame China of remaining unresponsive to the situation in Ukraine? The United States has been criticised for its lack of action in Syria. And though the U.S. has tried to facilitate political discussion, they have not become militarily involved in either Ukraine or Syria.

The complexity of the situation stretches in many different directions. While the U.S. and Europe support the transitional government in Kiev and the ouster of Yanukovich, and denounce the Russian coup in Crimea, Europe has substantial and troubling ties to Russia which may complicate any sort of forceful action Europe could take against Russia. Europe and Russia are reliant on one another: Europe relies on Russia for its natural gas and natural gas therefore has become Russia’s largest export, propping up the rest of its weak economy. Furthermore, Russia imports heavily from Germany and other western European nations, and European sanctions could jeopardize the income generated by its exports to Russia, which could be particularly damaging during this time of tender recovery within the E.U.

China, as another export driven economy, could also be greatly affected should it choose to cross Russia politically, let alone commit to economic sanctions. China also holds a tenuous alliance, or at least some sort of detente, with Russia - they support each other politically as both seem to fear international intervention, influence, and pressure. The Chinese and Russian governments exert enormous power over their populations and the political systems in those countries. Both countries often defend established governments and the sovereignty of other governments in the face of public protest and international intervention.

But with Ukraine, Russia has directly violated the sovereignty of a foreign nation, despite Crimea’s history as Russian. If China cares so strongly about foreign powers involving themselves in the affairs of other nations, China must break with Russia on this issue. If China does want to be politically influential, and not merely economically influential, it should at this point at least condemn Russia’s actions. Economically it makes more sense to defend its politics of sovereignty and simultaneously appease the Western nations which contribute more to the growth and strength of the Chinese economy. In Mao's Three-World theory, China remained non-aligned with neither the Western capitalist countries nor Communist U.S.S.R.  At this time, China should remain unaligned, forge its own path politically and economically, and take its place as an influential world power.

cool down to ramp up in china

“Already the world’s biggest exporter, China may overtake the United States to be the world’s largest importer this year, HSBC Bank has predicted.”

China is changing. Quickly.

The Chinese economy may have slowed in the past year, or over the past several years, but China is still doing well. Though economies worldwide slowed during the recession, the Chinese slowdown was not nearly as bad as expected nor was it crippling. Exports to America and Europe slumped, but anemic consumption in the western world did not take a huge chunk out of Chinese growth. As the New York Times reported last month, “China said… that its economy grew 7.7 percent last year after adjusting for inflation, while the United States is expected to announce on Jan. 30 that its economy grew about 2 percent last year.” 7% reflects a healthy, expanding economy. 2% indicates struggle, contraction, and the United States is lucky to see a growth rate even that high.

Part of this continued energy stems from increased internal consumption. For some time the Chinese government has sought to develop a greater consumer economy in the country. The Chinese economy may not yet be a consumer driven economy like the United States, and the transformation may develop in fits and starts as other developments in China do, but all signs indicate that this is the general trend for China.

The growth of consumption and the middle class in China has resulted from several factors: the expansion of manufacturing and unstoppable demand from Western countries for Chinese exports during the previous decades, migration to urban centers throughout China, increased wages, and greater access to education. Now, despite a slump in exports, spending increased over 13% this past year and urban workers have 7% more disposable income.

At the same time, China luckily saw a small increase in demand for exports from Western nations this year, and the country’s trade surplus increased. This year China is seeing the best of both worlds, contributing to its robust growth rate. But increased consumerism could rapidly change the Chinese economy. As its middle class grows and demands higher wages, more manufacturing and exports will move to other countries, as they already have: to Vietnam, Laos, Myanmar, and the Philippines. China may sooner rather later be looking at some of the same labor and trade imbalances that trouble the U.S. economy.

perspectives on china

Party of the Century: How China is Reorganizing the Future
Eric X. Li

super interesting perspective about what the economic reforms put in place by the most recent plenum mean for chinese government, corruption, and political agency.

chinese aggression as diplomatic leverage

china’s territorial claims in the past year or so to several islands in the east china sea can be viewed as claims to east asian influence. china may be partially driven by the small amount of resources that lay under the east china sea, but its claims over the islands stem from a desire to exert influence in east and be viewed as a national and global power.

in recent years china’s claims to island chains such as the senkaku (diaoyu in china) have been called aggressive. japan currently administers the senkaku islands, and with the u.s. have been in control of the islands for over a century. the chinese discovered the centuries before and used them as navigational markers in sailing to the ryukyu kingdom. china has recently claimed sovereignty over the ryukyu islands. historically the ryukyuan kingdom gave tribute to both japanese and chinese empires, though quit paying tribute to the chinese empire in the 19th century. contemporarily, the people of the ryukyu islands speak a dialect of japanese and the islands have been administered by two japanese prefectures for over a century.

china has “claimed” these islands by sending patrols out into the east china sea and extending an air defense identification zone into the sea. chinese diplomats have spoken out about the threat of japan. but it not has not taken further action, action that could be described as aggressive. these policies have garnered international attention to china’s history, sovereignty, and relations with its neighbors in east asia, and its policies demands fine and subtle diplomacy from other asian nations, particularly japan and korea. china is demanding attention. and maintaining this aggressive facade may even produce some leverage diplomatically, encouraging countries to make more concessions in reaction to such aggression.

japan, under prime minister shinzo abe, has started to tap its own nationalism and plans have been announced to change its national defense force into a more active army. this change may be beneficial not for just balancing the military power dynamics in east asia, but may also allow japan to contribute more to international peacekeeping efforts (and other foreign conflicts unfortunately.) given japan’s history with china, china’s uneasiness over a military buildup in japan seems understandable, however, china must understand the uneasiness with which its asian neighbors and the world looks on its large standing army. furthermore, chinese aggression and imperialism extends back centuries toward japan and other asian neighbors. contemporary chinese and japanese governments are not those that existed a century ago. japan’s military shift seems only natural - other than china’s recently “aggressive” stance, japan’s proximity to north korea and its involvement in international diplomacy, finance, and conflict legitimize its need for a strong military.

as the u.s. professes to shifting its focus to the pacific, and the world’s third largest economy takes to building a larger, outward looking army, china understands its must further build the image of itself as an international power. it must continue to strengthen itself economically. it must build diplomatic relations and situations with other countries that will not be taken advantage of. if china maintains uneasy relations with its neighbors, if it remains slightly “aggressive,” other countries will have to act gingerly, to allow china more room to maneuver. china’s behavior is a long strategy set to provide it more room for favorable negotiation.

movements of the yuan

the chinese yuan strengthened to a twenty year high against the dollar this past week.  at the end of the 27th, the yuan was trading at 6.0686 to the dollar.  the historic high signifies a buoyant chinese economy, but on the flip side, this present success can only mean that american exports in china could become more competitive even as the chinese economy opens up to foreign exports.  apple begins selling its iphone through china mobile in january.

unfortunately, a lot of the money being created in china comes from a shadow banking system that the chinese central bank has been slowly trying to quell this year.  banks in china "typically scramble for short-term cash to meet month-, quarter- and year-end regulatory requirements. Demand for cash is also high among Chinese companies seeking to meet year-end payments, too." individuals with political or business connections have been able to borrow money from state controlled banks which receive loans from the central bank at very loan interest rates.  these individuals then provide loans to the wider chinese economy at extremely high interest rates.  several problems develop from a system like this.  first, wealth becomes concentrated abnormally in the hands of just a few shadow bankers while state run and private banks do not make the returns they could if they had loaned the money directly.  second, artificially inflated interest rates from shadow banking make it harder for individuals and business to repay loans, and the inflated repayment means that less money is being directly injected into the economy.  third, the high interest rate loans are less likely to be repaid and are thus across the board more risky.  subsequently the state controlled banks are less likely to be able to re-pay the central bank, producing fears of a wider financial instability.

the chinese government has attempted to rein in this risky lending, but has been mostly unsuccessful as of yet. writers for the new york times note that, “the central bank allowed rates late last week and early this week to soar to unsustainable levels. Instead of regularly scheduled open-market operations, the bank tried unconventional methods of guiding money markets.” However, the central bank was forced to quickly inject fresh money into the banking sector as interest rates soared.

this seems like the creaks and groans of a giant, growing economic system.  more growing pains for a young economy.  the central bank wants to move the financial system away from the artificial risk created by the shadow banking system.  the question now will be whether banks will be able to clean their balance sheets of the toxic loans before a financial meltdown not orchestrated by the central government occurs.  if the central government does more to investigate and imprison politicians and businessmen directly involved in graft (as it has been recently doing,) the banks might correct their lending practices directly.  this correction would still produce some short term jolts as less money could potentially be made, but more long term stability.  

chinese bluffs

china may be aggressively asserting itself on the international political stage, but there’s no reason to believe a global take over by china is militarily or politically imminent.  in this article from the telegraph, writer james delingpole entertains assertions that china is about to call an end to the game and the world as we know it is about to change.

in terms of economic change in china, dalingpole quotes economist michael snyder who notes that economic governors in china have discussed limiting the country’s foreign currency investments, particularly the american dollar.  snyder quotes a chinese official as saying, “The monetary authority will ‘basically’ end normal intervention in the currency market and broaden the yuan’s daily trading range.”  though such a move would be detrimental to american investment, particularly in the short run, but the move is a sound financial decision that i think any economist would offer as advice to china.  america and western europe’s currently shaky markets do make investment in their monies particularly attractive.  in the long run, if china does shake its peg of the yuan to the dollar and its trading range is broadened, the effects could be good for american exports in the future.  american economists have been trying to convince china to make a similar move for decades.

delingpole also quotes a scholar who believes a military strike against the west is inevitable and will probably occur soon.  china has definitely ramped up its aggressive stance in the past few months, but its behavior should not be compared to pre-war japan.  china has claimed sovereignty over certain islands in the sea of china and recently claimed an extended air space, but it has committed to aggressive actions beyond this posturing.  “Ego would also play a large part in the decision for a pre-emptive attack.  China wants to be recognised as the most powerful country on the planet.  Successfully driving the United States from the western Pacific would put that beyond doubt.”  with the second largest economy on the planet, china is already an economic powerhouse and may soon be the most economically powerful country in the world before too much longer.  even with the largest standing army on the planet, china does not have the naval, air, or technological prowess that other countries have.  the limitations of its military are widely known.  though it may be attempting to assert itself now militarily or territorially, as it grows economically, and grows economically secure, it will more and more be able to secure what external resources it requires economically.

these military threats are indicative of economic growing pains.  these should be seen as bluffs.  these should be seen as actions to secure power, intimidate.  but i cannot see any evidence that china would follow through on its threats and that it would especially make a strike against more powerful western nations.

changes in china

china looks like the united states one hundred years ago. and china looks like the united states three decades ago. and china and the united states mirror each other now. the asian country has seen different changes and trends, both economic and social, compressed together in a way that echoes the development of the united states economy but varies radically.

 

the chinese government made two important announcements recently: the government will ease restrictions on the national one-child policy and will abolish labor re-education camps.

 

the one-child per family policy has always been contentious internationally. passed in the 70s, the law reflects a consciousness by the government of a problem that has beleaguered chinese governments for centuries. in europe and north america, where population rates hover around zero or lower, many see the policy as unfair, a violation of human rights. reporting on the change in the law points out the shift may be more than an apologia on human rights. a labor shortage haunts china.

 

damien ma and william adams have written about the labor shortage in china for foreign affairs:

 

“By early 2010, job postings began to outnumber jobseekers for the first time since the start of China’s resource-intensive economic boom at the beginning of the twenty-first century, a period we call the Panda Boom (after that cuddly creature’s voracious habit of eating 10–15 percent of its body weight in bamboo each day).”

 

since the industrial revolution in the united states and western europe, the economies in these countries have seen a similar shift. as once workers pressed for jobs in factories and the population (particularly in america) changed from an agrarian civilization to an urban workforce, the labor pool grew immensely and unemployment grew. however, post-world war ii prosperity, with the export of american products and culture, changed the labor market in america, shifting production overseas as it followed cheaper labor.

 

china currently finds itself in a similar position. even before the global recession, china couldn’t meet the entire global demand for cheap labor even with its massive populations. factories in india, malaysia, indonesia, thailand, cambodia, and bangladesh provided more, and often cheaper, labor for factories producing merchandise for north america and europe. and ma and adams note that in China “Occupational safety, collective bargaining rights, and other costly labor protections were vastly less important, and summarily ignored,” but this was a problem both countries have faced in their history. 

 

chinese growth and prosperity during the last few decades has created a bubbling middle class with extra income to spend and a desire for something more for themselves and the next generation. even during the recession, ma and adams note that chinese wages grew faster than gdp. the writers also point out that, “From 2000 to 2010, the number of young people enrolling in higher education programs rather than entering the workforce after high school tripled, growing from 2.2 million to 6.6 million.” this greater population of educated citizens points to a larger affluence but also indicates a growing population that will look for work outside low-paying factory work, adding to china’s labor shortage.

 

as china comes into its own as a middle class country, the united states struggles to maintain its economic status quo. china has enacted seemingly extreme measures to control its population and provide prosperity, measures that seem unreasonable from the comfort of our middle class stability. we should not forget the negligence, violence, and instability of our own past when attempting to understand the quick and momentous transformation currently taking place in china.