One World Insight Blog | Douglas "Las" Wengell

“Our Time has Come,” say the Chinese

What makes China so exciting is not so much its epic infrastructure in tangible projects (opposed to financial vaporware), its gigantean size or meteoric rise, but its singular attitude about the future, an attitude quintessentially at the heart of America’s DNA. There’s a confidence and patriotism, a manic energy, a cautious optimism, a sense that, after a “century of humiliation,” as is said here, China’s time has come.

 

Consider that eighty-six percent of the Chinese who believe their country is headed in the right direction, compared with 37 percent of Americans. The majority of the Chinese also believe that it will produce the next Google, while only a third of Americans believe the next big thing will happen on its soil. The reality may be different --  but you can’t deny the loss of American serotonin and testosterone.

 

Such yankee cowboy bravado is at the core of a nation’s vitality and at the heart of America’s economic engine. When anything is possible, the horizon is far and wide, and opportunities great, things happen. It’s intoxicating and self-fulfilling. How many American’s have been inspired by the hope that if you play by the rules and work really hard, anything can happen?

 

Across the political spectrum, Joe and Jane know that rules of the game are stacked against them. The rules have change.

Authoritarian vs. Democratic Capitalism – Say what?

The most striking thing about China to me, at a macro level, is how affective the central government has been in maintaining its power and embracing capitalism. Unlike in the West, the government is in fact highly competent.

The prevailing belief about democracy is that it’s inevitable. Autocracy would eventual give way to power-to-the-people, if only the guard’s grip on power waned. Russia was our Cold War enemy. And the line sold to American’s proved true. Russia imploded.  But China is different from Russia. It’s economy is capitalistic. It’s politics in the hands of the smartest people Beijing can recruit.

From building massive infrastructure projects ahead of schedule, to reconfiguring the nearby park overnight, I am awed at China’s ability to execute, knowing that it’s based on the very top-down approach vilified in the West.

America: Harder to Climb and Further to Fall

The future is catching up with the present. The American psyche is – or was – obsessed with consumption paid for by debt – in other words, live today at the cost of tomorrow.  It’s a me household and a me budget deficit. Production, savings and innovation are deferred for a nether future. We’ll pay for it after the party. Except what happens then and who takes the hit?

 

With a sordid history emblazed upon the memory of the older Chinese, the nation feels they can only move up. America has already achieved so much. It’s gotten rich and drunk with self-importance. It’s harder to climb and further to fall.

Ayn Rand’s Shanghai on the Hill

Howard Roark, the protagonist in Ayn Rand’s Fountainhead, is a budding young architect. His challenge is to embrace bold, ambitious, future-oriented design from the self-generated well of creativity and ignore convention. This formed the basis of Rand’s libertarianism and influenced a generation of leader’s like Alan Greenspan, who put his faith not in central planning the marketplace. OK, at least he admitted before Congress that his worldview was not entirely correct.

The shimmering architecture of Shanghai got me thinking about Ayn Rand and Alan Greenspan. These buildings are not some Disneyland, or Las Vegas theme park. They are the psychic fabric of Shanghai, in perception and ethos, as well as the requisite urban infrastructure.  They are Shanghai. Here’s a city with attitude, like Beijing and Hong Kong. How unlike modern American urban architecture which, with some notable exception, has all but abandoned innovation for utility, banality over buttresses, functionality over form, mediocrity over majesty. Erase for a moment everything you know about the world and compare Shanghai architecture to America’s aging infrastructure, or JFK airport to Beijing International, and ask yourself who is aspiring and who is asphyxiating.

There’s bravado behind tarring down the old and creating something new. You’ll love Shanghai or hate it. But it’s something. It’s progress. It fosters innovation and creates new companies and new jobs. I laugh to myself when I think how long the new World Trade Center design took, or how the reconstruction of the San Francisco Bay Bridge is going on a decade. That just wouldn’t happen here.

America won World War II and has dominated the second part of the twentieth century. Good for us. But that was then and this is now. The world is changing; India and China are hungry and Americans overweight. “Only the paranoid survive,” said the founder of Intel. So if America is a company, what’s our new creation, our new product, our new skyline, our new marketing campaign, our employee training program, our new buildings, bridges, roads, trains and planes, our 2020?

If you don’t know where you are going, the saying goes, any road will take you there.

The Future of the Internet is in Mandarin

At least Eric Schmidt of Google thinks says so.

Half of all internet uses in the world use languages that have scripts other than Latin based. And so the tide turns to the emerging world. The regulatory body that governs domains said it would declare an end to the exclusive use of Latin characters.

Characters in Mandarin, Arabic, Korean and Japanese will be made available.

India verses China

These two countries account for one-third of humanity. Both of their economies are on fire. Both have a rising middle class. Both are witnessing massive foreign investment, as Western firms look outside of their home countries for profits (something Coke and tobacco companies have been doing for decades.) Millions of Indians and Chinese have been lifted out of poverty.

It’s amazing that a decade ago they were placed in the same sentence. China is racing ahead of India economical and militarily. “China is a brutal place to live if you are on the bottom rung but there is an exit,” said a man in Beijing. Not so in India. India has 10 million manufacturing jobs compared with 150 million in China. India has a sophisticated service sector, but that’s only useful if you are an educated, English speaking, urban Indian. What jobs are there for Indians?

The Chinese government has delivered on basic services and provisions—social mobility, jobs, education and health care. This is what you care about from the bottom rung. India’s chaotic democracy is chaotic and deadlocked, whereas China’s top down, autocracy works at lightning speed, which explains why China’s infrastructure is decades ahead of China and why India is painfully behind in its preparation for the 2010 Asian Games in New Delhi.

Per capita income is double in China, and its life expectancy is lower. Indians are twice as likely to lose a child before the age five. Ninety-three percent literacy in China, compared to sixty percent of Indians who can read (worse for women).

The U.S. is standing behind India and its messy democracy. It hopes it will balance China’s rise.

In the short-term, China is in the lead. Its autocratic system works well at this point in its economic development, when things need to get done. But it faces massive pressure from its people, to keep the machine going, to hold it all together. What if things fall apart, what about China’s long term prospects, can it be both prosperous and free? India’s people may be stifled materially right now, but they are not intellectually sheltered like the Chinese. There is a robust free press in India and deep bridges to the outside world and the support of Washington.  Media after all acts as a watchdog; there are no checks and balances on Beijing. One wrong step and there could be one hundred million peasants on Tiananmen Square.

“China, Inc.”

China is booming. You have to behold to believe. The economy has been on a tare for thirty years. Construction is everywhere, 24/7.

You can feel the hum.

A new KFC opens every other day, a new power plant every week. It holds the largest foreign reserves in the world ($1 trillion dollars) and is the number one destination for foreign investment. Yet it joined the World Trade Organization only in the late 1990s.
By 2013, its economy will be 1/3 of world output. By this century, its economy will pass the US. At least that’s what some are saying. When you look around it’s hard to deny that this could very well happen.

One thing is clear. China’s ascendance is lifting the world, and that’s never happened before. And with it, political aspirations and global influence…
http://www.nytimes.com/2009/08/24/business/global/24global.html?emc=eta1

China’s Adam Smith, Dèng Xiǎopíng

“Poverty is not socialism: to get rich is glorious,” said Deng Xiaping, the leader behind China’s lurch toward a more decentralized market economy. “Socialist market economy with Chinese characteristics,” is the saying but the Chinese business people I talk to laugh and just call it Chinese capitalism.

 

He was the architect of a socialist-capitalist system and unlike Mao, he embraced modernity and copied what he thought was working in the West. 

He made it ok for the Chinese to look outward, to join the world. Under Mao, life was hard and often tragic. Ever since the doors openned, the Chinese have bolted forward and not looked back.

As the Chinese celebrate National Day, I think Xiaoping is seen as the hero.

China Superpower Conundrum

On one hand, China identifies itself as a poor, emerging nation. This line of thinking implies special assistance. On the other, China wants to be a self-sufficient global citizen and leader.

 

The Chinese have been along on a free ride so far. We have been the bad guy. America does the  heavy lifting in foreign policy and make the tough decisions—and protects shipping lanes.  China keep its currency undervalued and benefits from emerging market status. Eventually China needs to become a responsible, engaged stakeholder in the international system and help solve international problems.

The conundrum is historically China has been an insular nation. “We build walls to keep people out, not invade foreign lands,” was how a businessman put it to me on an overnight train.

 

But the only way China will become a leader is if it takes the lead economically. And that will require innovation. And that require an informed, creative, question-asking citizenry. Qian Xuesen, the man who is credited with developing China’s atomic bomb, nearing death, was reported to have told China’s prime minister that what China most needed was innovation. “We’re not producing any creative people. We are making only technicians.”

 

The government wants advanced education without encouraging people to think.

 

In today’s globalize world, can you become a great power if you don’t allow your people to think? The Party wants to create a modern society. But it doesn’t want to allow too strong a civil society of churches, unions, associations, and other social organization needed to build a modern nation. It does not want citizens using the Internet to access sensitive information, but it needs technology to become the modern country it wants to be. The government needs to promote knowledge in order to compete, but knowledge is dangerous. It needs empowered people in order to become strong, but it can’t let the people be too empowered.

Mandarin becoming the new French and German

A telling sign of American education is the instruction of foreign language. The world is fast becoming global and, while English will continue to be the dominant language into the twenty-first century, the precipitous rise of China has not much impacted pedagogy.   The big three foreign languages – Spanish, German and French – remain the primary options on the curriculum menu – provided they can be offered at all. Mandarin is on offer at a mere 4 percent of future-oriented American schools.

We would be wise to do away with German and French altogether and begin a massive campaign to teach our young Mandarin – giving them and America the advantage it will reap well into the future. Yet it’s the Chinese taking the initiative.

Excerpts from a New York Times piece, January 21, 2010, written by Sam Dillon.

Foreign Languages Fade in Class — Except Chinese

WASHINGTON — Thousands of public schools stopped teaching foreign languages in the last decade, according to a government-financed survey — dismal news for a nation that needs more linguists to conduct its global business and diplomacy.

But another contrary trend has educators and policy makers abuzz: a rush by schools in all parts of America to offer instruction in Chinese.

Some schools are paying for Chinese classes on their own, but hundreds are getting some help. The Chinese government is sending teachers from China to schools all over the world — and paying part of their salaries.

No one keeps an exact count, but rough calculations based on the government’s survey suggest that perhaps 1,600 American public and private schools are teaching Chinese, up from 300 or so a decade ago. And the numbers are growing exponentially.

Among America’s approximately 27,500 middle and high schools offering at least one foreign language, the proportion offering Chinese rose to 4 percent, from 1 percent, from 1997 to 2008.

“It’s really changing the language education landscape of this country,” said Nancy C. Rhodes, a director at the center and co-author of the survey.

“We’ve all been surprised that in such a short time Chinese would grow to surpass A.P. German,” Mr. Packer said.

A decade ago, most of the schools with Chinese programs were on the East and West Coasts. But in recent years, many schools have started Chinese programs in heartland states, including Ohio and Illinois in the Midwest, Texas and Georgia in the South, and Colorado and Utah in the Rocky Mountain West.

America has had the study of a foreign language grow before, only to see the bubble burst. Many schools began teaching Japanese in the 1980s, after Japan emerged as an economic rival. But thousands have dropped the language, the survey found.

Japanese is not the only language that has declined. Thousands of schools that offered French, German or Russian have stopped teaching those languages, too, the survey found.

Experts said several factors were fueling the surge in Chinese. Parents, students and educators recognize China’s emergence as an important country and believe that fluency in its language can open opportunities.

“Chinese is really taking root,” she said. Starting this fall, Jackson High will begin phasing out its German program, she said.

The Emergence of the “Beijing Consensus”

From the formation of the United States, Americans have always been paranoid about falling behind. The rise of Japan in the 1980s was the last example. Now it’s China.

As recently as 2008, when China was still an emerging economy eager to put its best foot forward for Western consumers, it lifted censorship, at least temporarily, on several Web sites before the Beijing Olympics. At the same time, it responded to pleas from U.S. and European politicians to cooperate on several other fronts. When China was seeking to join the World Trade Organization a decade ago, it accepted compromises to U.S. and European demands. With China’s rising clout, the West has less leverage over Beijing. At climate talks in Copenhagen, however, China blocked a comprehensive deal and refused to go beyond its earlier promises. Western diplomats complain about the way Beijing is dragging its feet on sanctions on Iran’s nuclear program and is propping up unsavory regimes across the world in its hunt for the natural resources to power its growth.

These days, China is no longer emerging. It has emerged — sooner and more assertively than had been expected before the wrenching global financial crisis, which badly damaged all the established industrial powers, from the United States to Europe and Japan. Its currency, the renminbi, is frozen at an undervalued level, and Internet controls are stricter than ever — even as Google threatens to leave.

The severe recession has fast-forwarded history, catapulting an unprepared world into a period of uneasy cohabitation between the United States, the No. 1 economy, and its likely successor.

“China is the West’s greatest hope and greatest fear.”  “No one was quite ready for how fast China has emerged.” “Everyone is trying to understand what sort of China they will be dealing with.” Politicians, pundits and academics.

For the first time, economists are pointing to Chinese spending — not the U.S. consumer — as the key to a global recovery. China’s GDP could overtake that of the United States within a decade; a PriceWaterhouseCoopers report predicts by 2020; and Goldman Sachs predicts by 2027; others are speculating about when the renminbi might begin to challenge the dollar as the world’s reserve currency.

Meanwhile, as developing countries look for a recipe for faster growth and greater stability than that offered by the now-tattered “Washington Consensus” of open markets, floating currencies and free elections, there is talk about a “Beijing Consensus.”

When the United States was snapping at the heels of the British empire, the global ruler of the early 20th century, the situation caused plenty of heat, even though both countries spoke the same language, shared similar values and were liberal democracies. China, in contrast, is a Confucian- Communist-capitalist hybrid under the umbrella of a one-party state that has so far resisted giving greater political freedom to a growing middle class.

What is the Beijing consensus? Some see it as a form of economic management with greater government involvement that is on the rise across the world. Others interpret it to mean more strictly controlled capital markets, which have made a re-appearance even in previously open countries like Brazil. Policy makers in Malaysia and Dubai focus on replicating China’s special economic zones, which afford generous terms to foreign investors in manageable geographic areas. Some suggest that China’s lack of democracy is an advantage in making unpopular but necessary changes. “It is more challenging for democratic systems because ever day they come under public pressure and every short period they have to go back to the polls,” said Victor Chu, chairman of First Eastern Investment Group in Hong Kong, the largest direct investment firm in China. “China is lucky to have the ability to make long-term strategic decisions and then execute them clinically.”

Some say Chinese officials are using their country’s $2.4 trillion in foreign currency reserves as a bargaining chip, knowing that any hint of reducing those reserves would rattle currency markets. “As China is emerging on the global stage with unprecedented power and influence, it is not proving to be the global partner the United States and E.U. seek,” said Professor David Shambaugh of George Washington.

The world will be asking more and more of China. So far, it appears to be getting less and less in return.

Market Access to China Treacherous - Multinationals Including

McDonald’s plans to double its presence in the world’s fastest-developing economy over the next few years. For those who know how ubiquitous it already is, it’s a huge increase. McDonald’s has about 1,100 outlets and it opened its first outlet in Shenzhen in only 1990. It expects informal eating out to grow by 10% a year, because of China’s growing middle class. China accounts for about 23% of McDonald’s revenue from the Asia-Pacific, Middle East and Africa regions. More uncoupling of American multinations and the S&P 500 from America, or any nation.

Starbucks recently announced similar plans. Same for Boeing, Intel, GM and the list goes on. If you want to know where the action will be in the coming years, multinationals are not counting on the West.  

China is the biggest recipient of foreign direct investment in the world: 450 of the Fortune 500 companies have a business presences there, and many of those reeling at home are doing brisk business in China. G.M. is hurting everywhere but for China.

Despite WTO agreements, Beijing is not making it easy for the largest, most powerful Western corporations, no less medium-sized American firms or non-Chinese entrepreneurs, citing national security concerns, which it defines broadly. “As a socialist country, China must put its own interests first when opening up and keep a firm hold on the right to lead core industries,” said a minister. Beijing is instating a formal review process, similar to the Committee on Foreign Investment in the United States. But a similar panel in China would be part of a government that has much greater direct influence on businesses than in the US.

Meanwhile, China’s new Nasdaq-style ChiNext board, which aims to boost start-ups and small and medium-sized companies, is a huge step forward for the formation of its capital markets.If you want in, you must play by Beijing’s rules. Except for maybe Google, most are willing to comply despite domestic repression. Don’t expect Walmart to let on to its American customers.  

 

Asia Power Unifying: Rail link from China to Singapore

In the planning stages is a rail network that will connect China, into Vietnam, through Cambodia, into Thailand, down Malaysia and to the southern tip of mainland south-east Asia, Singapore and its huge port. Much development is required. The French built Vietnam’s rail line a century ago and anyone who has traveled on it knows that it is cumbersome and slow. Cambodia’s rail network collapsed over decades of war and neglect. (Phnom Penh, the capital, lacks a train station.)

 

It’s completion will be a major boon for Asian commerce and supply chain manufacturing efficiencies. It would also be a pleasure as a traveler…

Labor Shortage in Vietnam and China - Who will make Western stuff?

Those folks in Vietnam and China who make our stuff – they are demanding more pay, a sign of rising prosperity and a global manufacturing food chain in the works. According to Vietnam’s Department of Labor, joblessness remains high but business still cannot attract enough workers. It recommended salary increases and “better welfare mechanisms,” a code for phrase for job benefits taken for granted in the West. Workers are realizing that they are better off going it alone, selling on the street, whatever, than being an underpaid nothing on an assembly line.

The same is true for China, but with much higher stakes. In Guangzhou, just a year after laying off millions of factory workers, unskilled factory workers in China’s industrial heartland are being offered signing bonuses. Factory wages have risen as much as 20 percent. Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Along with an appreciating Yuan (inevitable but for when), such increases will drive up the prices American consumers pay for all sorts of Chinese-made goods, which is just about everything you’ll find in Walmart.

But rising wages could lead to greater inflation in China. In the past, inflation has sown social unrest as the cost of living becomes more expensive. This makes Beijing nervous. The Obama administration has been pushing China to let the renminbi rise against the dollar, which would erode some of China’s advantage in exporting. (Rising wages in China have the same effect — plus they give Chinese families more spending power to grow internally and buy more American made goods.) It’s a complicated dance. Bubbles and asymmetries aside, economics ultimately settles on equilibriums. Labor shortages and its affect on wages is just another illustration.

The immediate cause of the shortage is that millions of migrant workers who traveled home are not returning to the east coast. Government projects like rail and highway construction have absorbed millions of workers, particularly after Beijing allocated nearly $600 billion to economic stimulus spending in 2009 and 2010. Consumer spending is also rising; auto sales more than doubled last month from a year before, and this has created jobs in retailing, restaurants, hotels and other inland businesses.

Temp agencies in Guangzhou have raised their rate for factory workers in early 2010 to US$1.17 an hour, from 95 cents an hour, just to put things in perspective. (The rate was 80 cents an hour two years ago, before the global crisis depressed wages.). But many factories already pay above minimum wage. They are wary because it is not certain they can pass the increased costs on to cash-strapped importers in the United States and Europe.

Two powerful trends are also working to reduce the supply of young labor headed to the “Walmart factories”. For one, the central government has rapidly expanded postsecondary education. (Universities enrolled 6.4 million new students in 2009, compared to 5.7 million in 2007 and just 2.2 million in 2000.) At the same time, China’s birth rate has been sliding steadily ever since the introduction of the “one child” policy in 1977. Personnel managers are even abandoning the unwritten tradition of not hiring those over 35 — imagine that policy in the West! – despite concerns about whether they can keep up with the grueling rapid pace of assembly line work.

China is rising on the economic ladder, and this is a good thing, provided the planet can take the hit of more humans becoming conspicuous consumers. Maybe one day China will outsource to Africa.

But some things don’t change. Quoted in a Chinese paper said one young man: “I expect my wages to rise a lot now. For sure, I want to buy a car. Car first, then maybe marriage later.”

Dragon China Herds Vietnam and Asia

As in China, so in Vietnam. Autocratic censorship is at odds with the Washington Consensus of free markets, transparent government and human rights.

Reports from Google and McAfee suggest that Hanoi is following China’s lead in trying to quash online dissent. Targets: bloggers and websites opposes to the central government. Vietnam is keen to learn what China is doing to suppress dissent, and there is a close link between the public security ministries in both countries (even though Vietnam fears China and relations are not so good).

The Web exploded in Vietnam, until the government realized how effective a tool it is in fermenting dissent. As in China, ISPs are required to block access to social-networking sites such as Facebook, although I didn’t always find that the case. Vietnam can’t help but notice that China’s autocratic, human right thwarted, free market approach is working. Who would have thought that while the Americans won both the cold war and SE Asia in terms of the opening up of markets, the political dimension remains uncertain.

The Americans are backing India and Thailand and Japan and Korea in opposition to China, North Korea, Pakistan, and Vietnam. The history books are still being written. Democratic capitalism may seem inevitable, but it’s far less certain than Westerns care to admit.

China’s Neighbors Falling into Beijing’s Orbit

I wonder what China’s neighbors think about its boundless growth –  the implication of being tethered into Beijing’s widening orbit. The answer: uneasy.

Firms in Thailand, Vietnam, Indonesia, even India, are having a tough time competing with China (never mind bygone Western manufacturers).  From conversations with business men in Hong Kong and Thai businessmen heading back to Bangkok, everyone, including the Americans, share a frustration with the undervalued renminbi because it makes Chinese goods cheaper to the Walmart’s of the world and hurts domestic exports.

As I write, the airport screen is reporting that Vietnam is devaluing its currency by 5 percent, to compete with China. Hanoi’s travel budget just increased.

The Chinese military is seeking to project naval power well beyond the Chinese coast, from the oil ports of the Middle East to the shipping lanes of the Pacific, where the United States Navy has long reigned as the dominant force, military officials and analysts say.

New Delhi firms are filing unfair-trade complaints with the Association of Southeast Asian Nations, similar to NAFTA, and we’re talking mighty, fast-developing India.

The Asia Tigers are becoming the Asian Tiger. America is less of a concern so long as it keeps buying, goes the rational, but “their manufacturing is toast,” said a Beijing business man,  with an hint of spite. 

It’s taking a lot in order to grow itself into a first world society.  It’s frustrating legions of businesses outside its borders. When will it step up responsibility commensurate with its prosperity? When will it help patrol shipping lanes, or offer financial assistance to its neighbors, and be a global arbiter that befits a superpower?

How will China, a historically insular and to-itself civilization, act in the region, and on the global stage? China’s neighbor’s are not the only uneasy observers.

Last fall, during a speech in Washington, Lee Kuan Yew, the former Singaporean leader, reflected widespread anxieties when he noted China’s naval rise and urged the United States to maintain its regional presence. “U.S. core interest requires that it remains the superior power on the Pacific,” he said. “To give up this position would diminish America’s role throughout the world.”

India vs China – and Getting Big Things Done

India and China are comparable in their economic model and development but not so in the political sphere. Beijing is autocratic, New Delhi a large and messy democracy.

Both are rapidly developing the big things required of a first world nation – infrastructure, rules and laws governing commerce. In this regard, at this stage of development, top down China is winning against bottom up India. 

“I just feel disgusted and ashamed that we are incapable of doing even small things.” So said one voice among many in India who are frustrated by Delhi’s inability to roll-out infrastructure projects, which routinely get bogged down in massive bureaucracy. In October 2010, India is hosting the Commonwealth Games in the hope of demonstrating the country’s emergence as an economic powerhouse, much as Beijing used the Olympics as a coming-out party for China. At a spiraling cost of $2B, officials admit that it will be down to the wire to finish in time. Whether it was taxi drivers in Delhi or residents I spoke with, there’s a frustration that “the world’s largest” democracy can’t get anything done.

China, with its sprawling networks of new highways, airports and high-speed rail connections, makes for a daunting comparison. India has weaker government finances and  unruly democratic government that lacks China’s authoritarian discipline, for worse at the moment. Clearing land for roads or power plants in China is no problem, as the verdict comes from atop; not so in India, where land rights are contentious. India’s government relies on private sector companies whereas China’s infrastructure build-out is aided by government-backed companies.

“It is more challenging for democratic systems because every day they come under public pressure and every short period they have to go back to the polls,” said Victor Chu, chairman of First Eastern Investment Group in Hong Kong, the largest direct investment firm in China. “China is lucky to have the ability to make long-term strategic decisions and then execute them clinically.”

How bad is India’s roads, so key to its future? By one account, 70,000 km of India highways “aren’t worth driving on” (and this according to a top politician), and 40 percent of fruits and vegetables rot before reaching market because of delays from poor roads and rail lines.

Despite India’s robust Bombay Stock Exchange –  in which infrastructure companies have raised $6B+ in capital since the beginning of 2008 – things move at the speed of a cow.

China’s Voracious Appetite for Natural Resources at Odds with West

America views Southwest Asia as a security threat. China sees it as an opportunity.  While America is stuck in an Afghanistan quagmire, China is cutting deals with Afghans to aid its economy. In this case, for copper. China’s $3.4 billion bid is the largest foreign investment in Afghanistan and, to be fair, the largest anyone would offer. But that’s hardly the whole story.

You might be surprised to learn that after the blood and treasure America has spent on Iraq, China is investing more in extracting Iraqi oil than American companies. It has reached long term agreements with US-nemesis Iran to buy natural gas. It is the dominant investor in Pakistan, where a Chinese-built port in Gwadar, on the Gulf of Oman, is expected to carry Middle Eastern oil and gas over the western Himalayas into China. And China is cutting deals with despots in Sudan.

In effect, American troops and tax dollars have helped make Afghanistan safe for Chinese investment. (Of course, had an American firm won the bid, the world would have accused war cynical war critics that we waged war to seize the country’s fast mineral assets.)

China views its splurges as national security: to control long-term access to natural resources to keep its industrial empire going and keep its people looking forward.

If China wants to be a global player, it will need to bare responsibility by supporting global stability, not riding on the heels of America’s largess.

Memories of aTibetan Plateau

The recent earthquake in the Western region of China, Qinghai Province, between Xining and Lhasa, in the Tibetan Plateau, is heart breaking. At least 1,700, mostly poor and rural Tibetan’s are dead.

 

One of my most memorable experiences was taking the train from Beijing to Lhasa. The final part of the journey passed through the barren landscape of the Plateau, between Golmud and Lhasa, not far from the quake epicenter. As I have noted, it’s a deprived region economically, made of more Tibetans than Han Chinese. Beijing has responded with more immediacy than the devastating 2008 Sichuan quake – but the CCP is still not going to let the Dali Llama visit.

Green Tech – Who Will Lead?

The “Great Game” of the 21st century will be energy and clean, fresh water. Beijing’s goal is to quadruple the economy but increase energy use by two-fold. To get even close will require innovation and technology. Who will lead? In China, green initiatives, innovation and investment comes from the top down, with little to no private or foreign investment. The firms behind green energy are state-owned energy enterprises. Beijing sees this correctly: as a national security issue. Their gains are impressive:

Wind Energy – China is #3. Manufactures include Sinovel Wind and Goldwind Science and Technology. Massive wind farms are going up in the remote West.

Solar – China is now the leading solar and solar water heater producer.  In  2001, China produced just 5 megawatts of solar cells; last year it produced 1,800 megawatts, a 300 time increase). Suntech are largest producer. It plans to build the world’s largest solar power plant in Inner Mongolia – deal between FirstSolar USA and Beijing. It will be the size of Manhattan and power 3 million homes!

And then there are simple sounding examples that Washington can’t seem to muster. For example, in 2008, China added a small tariff on grocery plastic bags and witnessed a 66 percent reduction. In 2005, it implemented an air conditioner temperature policy that thatr had similar affects.

There are downsides to this approach. Domestic part manufactures are known to knock off Western technology. There is huge overcapacity. Many environmental, health and safety standards and laws are not implemented or enforced. Business and individuals inevitably try to game the rules.

But still.

Thomas Freedman just opined on this subject, again:

"Being in China right now I am more convinced than ever that when historians look back at the end of the first decade of the 21st century, they will say that the most important thing to happen was not the Great Recession, but China’s Green Leap Forward. The Beijing leadership clearly understands that the E.T. — Energy Technology — revolution is both a necessity and an opportunity, and they do not intend to miss it."

China’s Metoric Potential and Pitfalls

During my China travels, discussions and reading I jotted down a list of challenges facing this great nation. It's rise is impressive; the next century perilous; don't underestimate their ability. As a fellow alum said to me in Shanghai: “The West should be more patient. It took America a long time to do the right thing.”

·        Corruption (China ranks 79 in the Transparency International Corruption Perceptions Index)

·        Growing (and aging) population, jobs, threat to unrest

·        Income disparity threatens civil unrest. In just 20 years, China has gone from having virtually no income gap to having one of the world's biggest. According to U.N. statistics, the poorest 20 percent of China's 1.3 billion citizens account for only 4.7 percent of total income, while the richest 20 percent account for more than half. It was cited as China's most serious social problem in a survey conducted by the Central Party School last year.

·        Environmental degradation (clean air, food, water) threatens economy which in turns threatens social stability

·        Government corruption (it’s believed that 20 percent of capital goes to pay off officials.

·        Capital investment. Foreign direct investment is problematic and cumbersome. Doing business in China, even for the big Western firms, is difficult.

·        Urban vs. rural. In urban China, it is the pursuit of happiness and prosperity; in the rural areas, it is still the pursuit of survival in the midst of a lack of clean water, a failing healthcare system, and disappearing economic opportunities

·        Brides. China’s one child policy has had unintended consequences. By 2020, it’s believed China will be short 30 million brides!

·        Brain power. Lack of innovation, creativity, critical thinking among citizens

·        Asset bubbles. Near term. As much as a third of the extra bank lending in China appears to have gone into real estate and stock market speculation. China is not immune to the downsides of a market economy.

The Rise of the Rest

America has always assumed that the world would come to our banks, speak our language and list on our stock exchanges. Our threshold for understanding other cultures is low. We’re too often convinced we are “number one” George W. Bush’s conceit was its poster child, and cost us more in “brand equity” than we care to admit.

 

The old world was capital and labor. Today’s competitive advantage – and our biggest strength –  is realizing new ideas.  One economist is calling the twenty-first century the third industrial revolution. The first was the shift of labor from farms to factories; the second was the transition from manufacturing to services; the next is the emergence of a flat world, where national boundaries fall, brands go global and workers compete irrespective of geography.

 

We can no longer coast on the vapors of post-war 1950s hegemony. While we were partying, or trying to get rich the easy way, the world changed. Globalization is here.

China Becomes Biggest Exporter, Auto Market and Steel Maker

More milestones. Plus China will likely surpass Japan as the second largest economy shortly. It certainly corroborates everything I discovered during my visit.

"Art Mirrors Life in China: Life and Death, Love and Hate, Sex and Violence"

The Chinese are reticent and reserved. The advent guard art districts of Beijing and Shanghai are populated by Chinese intellectuals and artists, and the Propaganda Department doesn’t much care what they paint. So it’s turned out to be an illuminating window into the Chinese soul. More in Shanghai.

Youthful artists push boundaries more than you’d think Maybe because they can’t elsewhere. This is an artist in Xi’an being interviewed by a western journalist: “There is nothing anymore in China that defines orthodoxy, in morality or anything else, so people just do what they want. Because life here in China is brutal. So art is just a mirror of life. Life and death, love and hate, sex and violence. People in other countries don’t have the pressure to survive that Chinese people have.”

2000 Years of Autocratic Government – is Revolution Possible?

It's a pedantic but curious question I ask myself: How is it that with two thousand years of history, countless revolutions brought about by the people, a tradition of art and civility and scholarship, “Enlightenment” reforms such as due process and government checks and balances were never adopted? How is it that this all powerful, autocratic, top-down system has stayed the same for so long? 

It’s not like the West was always that way. It had its share of autocrats, kings and feudal land owners. But then came revolution, first in France, then Britain and America. An entirely new future was envisioned. This could have happened in China long before it did in Europe. But it didn’t happen. All during my trip I have been posing this question, why?

1. Legalism. China is held together by force. It’s a land of different languages and dialects, different customs, different artistic styles, sharing only. common heritage. The very set up of China necessitates a strong top. Much more like Roman than “united” states.
2. Conformity. From the first emperor, Qin, to Mao and the Cultural Revolution, in the tradition of Confucianism, there is little tolerance for challenges to authority. Intellectuals and artists have not had an easy time here. The smartest were cooped to work in service of the state.
3. Tradition. China looks back to its “glorious” past. So why change?
4. Everything is the government. Emperors destroyed the wealthy and merchant classes that was the force behind limiting monarchs in Europe. The government was the church, and the legal system, and the educational system. There has never been a credible challenger, except the people and foreign powers, precisely the two elements Beijing most fears.

Traveler: Communicating in China 软卧，上下铺

This is a big challenge, more anything else. Taxi drivers can’t read your map because it’s in English. You can’t speak the word either. This is true asking directions.

 

The used itouch I picked up on ebay has proved surprisingly helpful. There are Mandarin apps with canned phrases. You can show the display or it will speak the phrase in Mandarin.

 

Think ahead for the day and e-mail yourself the Mandarin you need, using an online translator. For example, I words “ soft sleeper, upper bunk” are now in my itouch, ready to show a ticket agent:

 

软卧，上下铺

 

No matter how prepared you are, invariably communication is lost in translation. When all else fails: Smile, bow and be thankful!

America and China – A Relationship of Opposites

It is believed that when President Nixon first came to China, he saw an opportunity not a threat. Today might be different. China is our banker. China is our supplier. We are busy fighting wars on the other side of the world and our economic reform lectures aren’t getting the attention they once did. Our hand is weak, our options dwindling, our objectives not clear. We look weak in the eyes of Beijing. Obama’s visit was style over substance. Obama let the Chinese stage manage his visit.

Thomas Friedman hits home when he describes the China-America co-dependent relationship:

 “At its core, the China-America growth engine worked like this: We in America built more and more stores, to sell more and more stuff, made in more and more Chinese factories, powered by more and more coal, and all those sales produced more dollars, which China used to buy more and more U.S. Treasury Bills, which allowed the Federal Reserve to extend more and more easy credit to more and more banks, consumers, and businesses so that more and more Americans could purchase more and more homes, and all those sales drove home prices higher and higher, which made more and more Americans feel like they had more and more money to buy more and more stuff made in more and more Chinese factories powered by more and more coal, which earned China more and more dollars to buy more and more T-bills to be recirculated back to America to create more and more credit so more and more people could build more and more stores and buy more and more homes . . .”

Washington's Chinese Challenge

The challenge: To peacefully accommodate China’s legitimate rise, to deter it from aggression and global disruption. America’s worst fear would be a double-edge Cold War: the military we countered with the rise of the Soviet Union, and the economic fear of Japan (before it imploded). We need to sustain our economic and technological superiority because that is the cause of our power. And we need a public relations campaign; according to polls, the Chinese have an unfavorable opinion of Americans as selfish, greedy, lazy, and dishonest.

But with the American economy in the slumps, and stymied by two wars, and China plowing forward, and natural resources war-like concerns for both, the relationship is likely to become more tense, not less. 

The Dragon's Swagger

China Modern Art – 698 Beijing & Moganshan Shanghai

The Chinese soul is contending with radical development and change, rising alienation, hope and fear, repressed feelings, sexual and creative energy. Moganshan is an old factory neighborhood full of galleries and studios, similar to 798 in Beijing.

 urban capitalism, isolation, illusions of Mao's future

  

dejection, desperation, exhaustion

sexual repressions, oppressed emotions, fermenting desire if not expressed might destroy the Chinese soul but Beijing will do anything to repress the will of the people

Mao's Cultural Revolution all but destroyed religion and Christianity. In its wake is a deep emptiness, perhaps why Chinese culture can feel so cold.

 

Madison Avenue has arrived in China and with it an ambivalence as it rejects its past and embraces a Western capitalistic future

Who are we, as the new Chinese? Can the old become part of the new?  The emotional toll of a "century of humiliation" at the hands of the "Ocean People"

chinasmack.com – a Window into Chinese Opinion

A Berkeley undergrad turned me on to a website that provides English translations from (uncensored) chat rooms. Very amusing. The Chinese would never be this blunt to a foreigner. Not these comments about the “Made in China” ad campaign and the Hollywood movie 2012, which many Chinese are viewing as racist.

http://www.chinasmack.com/stories/made-in-china-ad-campaign-chinese-reactions/
http://www.chinasmack.com/stories/2012-movie-insults-china-chinese-netizen-reactions/
http://www.chinasmack.com/stories/avatar-movie-chinese-reactions-long-lines-shanghai/