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.

An American Generation Deferred

There was a time, not long ago, when Americans were confident that the next generation would be wealthier, more skilled, better able, prettier, in a better position, happier than the prior one. That’s no longer true by almost every measure. My generation – Gen X – and those after will be the first in American history to witness a declining quality of living as measured by income, wealth and global competitiveness. And this before our engineers-turned-financial wizards single-handedly orchestrated the Great Recession and before Baby Boomers, who road the wing of postwar prosperity, begin their epic retirement, since they can’t afford to.

 

When I look at my life and those aspiring Americans around me – peers, friends, associates, fancy MBAs, interns, fellow travelers – there is a pattern suggesting a new reality. Few have worked at one job longer than a few years. Few have the time or resources to dig into other non-work aspects of their life – family, hobbies, travel. A huge number are freelancers of one sort or another, stitching together full-time work and taking it as it comes. Savings and retirement are worthy – but who can afford it? Legions of educated women have delayed family, whether because of a missing man or out of necessity (and what if things don’t work out?)  Many friends don’t think twice about receiving financial help from their family and more college graduates move home after graduation.

 

The future is too uncertain. It’s a generation deferred.

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.

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.

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.

Quadrennial Defense Review: U.S. Defense Challenges

The Quadrennial Defense Review was recently released to Congress, and it details the challenges America faces in the twenty-first “One World” century. Among them: asymmetrical warfare with non-state actors using non-conventional, disruptive, radioactive, bioactive, improvised weapons; “cyber” warfare; nuclear non-state actors; climate change and wars fought over natural resources.

 Hear a fascinating World Affairs lecture by Kathleen Hicks, Deputy Under Secretary of Defense for Strategy, Plans & Forces, about its highlights:

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Watch live streaming video from worldaffairs2010 at livestream.com

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.

Top-down Capitalism, Singapore Style

The Switzerland of Southeast Asia, Singapore is an economic miracle. Considering the depressed environment in the West, its 2010 growth forecast is an impressive 8 percent, and its trade-dominated economy grew 32 percent in the first quarter on a adjusted annual basis.

Out of a tiny island at the southernmost tip of the Malay Peninsula, it gained independence from Britain in 1963 and, in one short generation, transformed itself into a legendarily efficient place where per capital income for its 3.7 million or so inhabitants exceed that of many European countries, the education and health systems rival the West, its largely corruption free, 90% of households own their own homes, taxes are relatively low – and sidewalks are famously clean and free of homelessness.

At what cost is this prosperity and security? Many argue that it is a socially engineered, nose-to-the grindstone, workaholic rat race, where the self-perpetuating ruling party enforces draconian laws, squashes free press, and offers dubious financial transparency. (It’s joked that the central government micromanages the details of life down to how flight attendants dress on the state owned company, Singapore Airlines.)

Lee Kuan Yew, the “minister mentor,” is up there with Fidel Castro and Nelson Mandela in terms of dominance, influence and history shaping a nation. He masterminded the “Singapore Model,” converting a country one-eight the size of Delaware, with no natural resources and mix of ethnicities, into Singapore, Incorporated.  He attracted foreign direct investment by building communication and transportation infrastructure – planned from the top down – made English the official language, recruited brilliant government officials with salaries equal to those in the private sector, and cracked down on corruption without mercy. The model – a unique mix of free enterprise and tightly controlled personal liberties – inspired China, Russia, and Vietnam.

“To lead a society,” Yew says in Darwinian terms, “one must understand human nature. I have always thought that humanity was animal-like. The Confucian theory was man could be improved, but I’m not sure he can be. He can be trained, he can be disciplined.” Yew’s criticism of America is that when too much freedom is given, it’s taken for granted. The rights of individuals to do “their thing” is at the expense of an orderly society, not exactly what Adam Smith and Anne Rand had in mind when they posited that the pursuit of individual wealth is, ultimately, a service to society. Singaporeans are proud of their safe, clean nation-state. They ask: What good are freedoms if you’re afraid to go out at night?

Singaporeans are always striving, and at some level, fear falling behind the hungry, foreign born immigrants who make up 25 percent of the population. So competitive is Singapore cultural tradition that by age ten kids are tracked according to “normal,” “special,” and “express,” in terms of their potential to contribute to society. Those at the top make the most money, lucky for them. It’s like the whole society s striving to get into Harvard, from birth to death. The struggle to stay ahead never ends.

Such a highly controlled society breads conformity and a “creativity crisis,” the challenge faced by autocratic governments like China and Vietnam. Imitation is not innovation. Singapore is now chasing after biotech as China is green energy. Whether they can produce the creative leadership required to succeed in the global marketplace is yet to be seen. Singapore, unlike China, is prepared to lure the most talented global citizens to its small island, in the same way Microsoft imports software engineers.

In some ways, it’s just another example of One World in which the nation-state continues to loss its grip to the innovation-driven global corporation that hires not nationals but the most talented global citizens. Passports matter, but less so.

The War over Fresh Water

The natural world knows no boundaries. Twenty-first century wars will be fought over natural resources. One example I encountered was the Mekong River, flowing through Laos, Thailand, Cambodia and Vietnam – and how China’s dams upstream are having an adverse effect to everyone else. Another example is the feud over water between India and Pakistan (who have gone to war three times since 1947), which threatens to derail peace between historically distrustful neighbors.

The two countries have harmoniously shared the waters of the Indus River for decades. But now, the Pakistanis complain that India, like China, is hogging water upstream, which is hurting Pakistani farmers downstream. The latest dispute revolves around India’s plans to build a huge hydroelectric power project on the Kishenganga River, a tributary of the Indus. Islamist groups in Pakistan are watching. “If our government doesn’t act to resolve this issue then the people will take it in to their own hands. If water doesn’t flow in to these rivers, then blood will.” What more can one say?

It’s likely to get worse before it gets better, which could just as well be a refrain for so much of our shrinking world. Pakistan’s water availability has fallen 70 percent since the 1950s. The disputed dam is in Indian-occupied Kashmire, so the issue is not just environmental its political and ideological. Capture Kashmir back, and retake our water. We may be human. We may live on the same planet. But ethnic divisions are ancient, and they may be the root of our undoing.

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.

America’s Economic Engine

I ponder the trajectory of emerging markets. The challenges are daunting. It’s a tough and uncertain road. What it is about America’s recipe that is the envy of the world?

 

· Innovation feeders in science and technology; best universities in the world

· risk capital = starting new companies.

· Meritocracy and diversity means anyone can become boss

· Religious zeal for competition and free markets, or mostly free

· Unparallel ability to turn academic theory into practical invention

· Higher education attracts global talent magnet

· Extraordinary dynamism and resilience to get back up and try again

· Regional, bottom up solutions

America’s debilitating do-nothing political process

From two heavy weights –  Fareed Zakaria and Michael Porter –  apropos to what I am seeing, hearing and reading.

“The American political system has lost the ability for large-scale compromise, and it has lost the ability to accept some pain now for much gain later on…. It has developed a highly dysfunctional politics. An antiquated and overly rigid political system to begin with has been captured by money, special interests, a sensationist media, and ideological attack groups. The results is ceaseless, virulent debate about trivia-politics as theater- and very little substance, compromise, and action. A can-do country is now saddled with a do-nothing political process, designed for partisan battle rather than problem solving.” Fareed Zakaria

 

“America's political system, especially as it has evolved in recent times, almost guarantees an absence of strategic thinking at the federal level. Government leaders react to current events piecemeal, rather than developing a strategy that unfolds over years. Congress and the Executive Branch are organized around discrete policy areas, not around the overall goal of improving competitiveness. Neither candidate has put forward anything close to a strategy; rather, each has presented a set of disconnected policy proposals with political appeal. Both parties contribute to the problem by approaching the economy with long-held ideologies and policy positions, many of which no longer fit with today's reality.” -- Michael Porter.

“My fellow Americans: We are not who we think we are.”

So said Thomas Freedom in Hot, Flat and Crowded.

 “Our political system seems incapable of producing long-range answers to big problems or big opportunities. We have been consuming too much, saving too little, studying too laxly, and investing not nearly enough. And our political institutions are also the institutions we have to overcome.”

 I met a retired French business guy in Shanghai who was putting a thirty year endnote on his East Asia travels from the 1960s. He describes how, on his return to France, he and his spouse were greeted by their town’s mayor and encouraged to have children, buy a house and join the community. His employer was equally committed. I have heard other variations of this story from plenty of American baby boomers, too.

 

This is not to say that this is the way we should live. But it’s a nice option for those not skilled in “Brand Me” self-promotion and life-long skill development. It’s that in our rush to be free of 1950s conformity, in our quest to realize our potential, to put individualism ahead of all else, the world has changed. It’s time we look up and outward.

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.

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

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/

Censorship: China’s Bind and Google's Possible Departure

The Communist Party monitors and controls the content of all mass media. China ranks near the  bottom of world rankings of freedom of the press. There is supposedly a  “Propaganda Department,” responsible for media, textbooks, books, movies, and shaping public opinion as Beijing requires. Chief editors are appointed by the government.

China operates the most sophisticated system of Internet filtering in the world—ISPs, instant messaging, client software, backbone routers and servers, search engine results, banned keywords, URL blocking. 15% are about sex, the rest politics.

Its breathtakingly impressive, Orwellian in scope, and at times terrifying to comprehend.

The Googles of China: www.sohu.com and www.sina.com

Google is apparently fed up, too.
http://www.nytimes.com/2010/01/13/world/asia/13beijing.html?hp

Today Thailand Deports Vietnam War Era Hmong Refugees

As  I write tribal and ethnic conflict lives on –  not far from the highland river crossing. Thailand is deporting to Laos 4,000 ethnic Hmong asylum-seekers who are at risk from persecution by the government. They were soldiers or family members of soldiers -- the "forgotten allies" -- who decades ago fought in a secret army set up by the United States to combat the communist insurgents who eventually took over the country in 1975.

Secretary of State Clinton and her peers are speaking out, to no avail. Thailand and Laos, however small, are sovereign, after all.

Lowly Miramar (Burma)

I meet travelers who have ventured into Burma, now xx. Run by dictators, sanctioned by Washington, oppression and poverty rampant, its infrastructure is rubble. However  I hear the people are a delight, desperate for tourist income and contact with the outside world.

“It’s at least twenty years behind,” said one traveler who was there. It’s not easy for Americans to get in – but it can be done. One look at its Embassy in Bangkok and you have an idea of where it stands in global standing.

China’s Rising: A Precarious Future

AS India, during my China travels, discussions and reading I jotted down a list of challenges facing this great nation. But as a fellow alum said to me in Shanghai: “The West should be more patient around human rights and similar issues. 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 flows. 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. 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.

American Club, Hong Kong. Bridge between East and West

Today I met with a business executive who manages the Pacific-Asia region for a publicly traded US company. We’re sitting at a table high above Hong Kong, talking about China then and now, as I watch the boats cross the harbor and lookout toward the north horizon, mainland China, the place I have been trying to understand for two months.  

 

Hong Kong has lost considerable power in the global economic calamity. Like Singapore, so much of its business is tied to finance and banking. Ironically, it’s the mainland Chinese and their new money that is keeping the economy in the black. Small apartments across the harbor go for millions of US dollars.

 

The British handover ten years ago is slowly leading to assimilation. Hong Kongers are beginning to first identify themselves as Chinese, before they say they are from Hong Kong. Beijing’s perspective is long. It and its people are patient. “Human rights, judicial, law, transparency – it will come in time.” The Chinese are proud of their country. Their government isn’t perfect but it has changed people’s lives for the better. The future looks more bright than anyone can remember.

 

Hong Kong has its advantages. Its UK-based legal and business system make it an obvious base to launch into the mainland. Hong Kong is the bridge between China and the world.

 

At the end of our lunch, I head to the Hong Kong airport, where my entry into China first began. I land in Bangkok tonight, where’s I’ll chill out in the mountains near Burma during the holiday, and write and reflect on the last four months, before heading into Indochina and Vietnam.

Executive opinions from Shanghai

I depart for Guangzhou later today, overnight train to Guangzhou. Last night I met with four American MBA educated Chinese, working at a media multinational, big pharm a French “HomeDepot,” and an ex-Goldman private equity firm devoted to the emerging China market.

There observations where instructive. They too believe China is on a path of evolution not revolution. It’s complex system, with many forces pulling in different directions. Business wants stability as much as the government. But Beijing is nervous. The stability is tenuous. There is intense social unrest just beneath the surface (Tibet, Xinchiang, Taiwan) and the grip is tighter than they can remember. (They and other educated Chinese I met were a bit embarrassed by Beijing’s National Day lockdown.)

Just ten years ago, taking a foreign company job in Shanghai or Beijing was the only game in town. Today more and more young people are interested in positions back in their province or town. It’s a reflection of how far wealth and opportunity has spread from the city center. Working for the government is a big deal. Every year millions of young Chinese take the entrance exam. I’m stunned to hear that half of the educated Chinese abroad are looking to repatriate, but it conforms what EJ said about Beijing recruitment.

The new wealth are those under fifty, mostly entrepreneurs in real estate. Conspicuous consumption and selfish individualism is on the rise.  “China is growing too rapidly,” they agree. Expectations are becoming distorted. Untethered from Confucianist ethics and we’re-in-it-together Mao, young people are beginning to flounder in the isolation of individualism, just as they do in the West. I am realizing that the speed of the change is leaving psychological and spiritual confusion. “Anything and everything is possible here.” As in, anything. My Chinese friends chuckle with a tinge of unease.

Propaganda posters in the basement of an old apartment building

Discovered this most fascinating small museum run by an old man, in a non-descript basement, in an old apartment building, in Shanghai. Some how this seems appropriate.

The posters are between 1949 and 1976, and illustrate how inward looking and closed China was during most the twenty century. The fervor of the Cold War, the defensive position against Western imperialist, the marketing campaigns behind Mao’s Great Leap Forward and the Cultural Revolution.

Mandarin translations along the photo where I could.

 

Obama’s Visit as Reported by Chinese Press

Revealing perspective as reported by Beijing-censored Chinese media:

“Obama's limited results in part reflect the profound shift in Sino-U.S. relations and global politics, with China's rapid rise and America's weakened position, especially in the wake of the financial crisis.”

"It used to be the U.S. could go around and say 'Do this and do that' because they had so much leverage," said Dali Yang, director of the Center for East Asian Studies at the University of Chicago. "Today, the U.S. can't do that."

“In China, Obama's hosts show no signs of budging”

“President Obama is leaving China without any definable concessions on things such as support for tougher sanctions on Iran or currency exchange rates.”

“When it came to China, President Obama's famous powers of persuasion failed to persuade.”

“it was difficult to find anybody in Beijing who would express any real enthusiasm for Obama's visit. Even at a shop selling Obama souvenirs, the reaction was ho-hum. ‘Obama coming here doesn't have anything to do with us. He's the president of the United States. We're Chinese,’ said Yang Xiuying, a clerk at a Beijing crafts store selling dolls of Obama dressed as Superman.”