Hermit: Google is a Political Scam

Disclaimer: the following is not exactly what the article behind the link underneath is saying. It constitutes Hermit’s personal opinion, rather than Xinhua‘s.
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Hermit the Taoist Dragonfly: Google is an Agent of Cultural Imperialism

Hello Children,

Google is a scam. It wasn’t invented by two PhD students – those students were just dummies chosen and used by the CIA, to gather all the global information.

As the American government is fearing the coming of the Great China, they plot in every way to destroy us. That’s why they leerily invented Google. Google never intended to do business in China. How do we know? Because they are too arrogant to be business people. They were always less cooperative than foreign business people normally are, and this year, without any evidence, they claimed to have suffered a hacking attack from the Chinese government, and later, they released an ultimatum, rudely and in a threatening way (蛮横姿态威胁) demanding that China should allow them to provide their search results without censorship of their own do away with the legal administration, otherwise they would withdraw from the Chinese web searching market. It was the worst threat since the Opium Wars. We have narrowly survived this evil plot, thanks to the vigilance of our leadership.

All of a sudden, after four years in the Chinese market, Google no longer respects the normal ways of doing business (在商言商的普世之道)!

I mean, it works with every international company, except Google. So our experience can tell us that Google is no company. It’s an imperialist agent. Besides, history tells us that no company can afford to withdraw from China!

Besides, there are reports saying that U.S. secretary of state Hilary Clinton invited Google CEOs and other web-savvy bigwigs for a small dinner on January 7! They discussed how tools like Twitter and Google and Youtube could support American intervention in other countries, and encourage popular movements there.

Sorry, children, but we simply can’t afford to allow such dangerous media in China. After all, you people are far too gullible. You have eaten all our lies and manipulations without contradiction for decades – so how could we trust that you won’t eat their^*) lies and manipulations just as easily? It will take decades before we can trust you a bit more, and only if you observe the eight honors very carefully. For starters, simply buy this silly explanation from me. Anyway, we will develop and improve internet administration in accordance with your real needs.

Down with cultural imperialism! Yell after me three times.

Now that’s what I call good kids. See you next time, and stay patriotic. Got to tweet fly now.

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^*) “their” includes all foreign cultural imperialists and their lackeys here at home

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Related
Tremendous Improvements, January 22, 2010
Natural disasters and Cola Disasters, China Daily, May 30, 2008

About Mobilizing Movies

A stupid movie begets stupid reviews – even before it arrives at the cinemas. Take Aimee Barnes‘ reaction, for example, on Red Dawn 2010:

[..] in an age of globalization and unparalleled interdependency, can we even afford to use the word “enemy” when referring to nations?

Or can we afford not to?

Korean People's Army Concert Troupe performs at China Grand Theater, November 2009

That depends, obviously. So long as you aren’t viewed or treated as an enemy by another nation, there is definitely no need to refer to another nation as an enemy. Besides, there are many shades we can use when painting friends, enemies, or something in between (strategic partners, strategic competitors, etc).

The term “enemy” should be used very housewifely. But it isn’t uncalled for in every situation.

Red Dawn 2010 is just another nationalist cum movie. It’s private enterprise (Hollywood). No national propaganda department has overseen its production. And the American president will probably either refuse to watch it, or he will watch it as a home video and deny that he ever watched it. The only food for thought should be that it will probably sell. That’s why private enterprise cares to make the movie.

But then, it might sell here in Germany, too, and in my case, it isn’t because I’m dreaming of opportunities to kill Chinese intruders. It’s because of my cineastic backlog. When I was a teenager, I’d have loved to watch Red Dawn 1984. Unfortunately, the neighborhood cinema which had scheduled the movie cancelled it in the end, after some do-gooders had threatened an arson attack.

Maybe I should watch this year’s second instalment, to make up for my past gap in education.

Meantime, let’s enjoy Naked Dawn.

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Related
Good Ganbu’s Friday Nights, November 29, 2009

CCP choices: Inflation bad, Contraction worse?

China could use its foreign currency reserves to recapitalizes its banks – if need be -, believes Victor Shih (史宗瀚), assistant professor of political science at Northwestern University. The amounts the banks were ordered to lend to keep the economy going during the global financial crisis may contain a high share of non-performing loans – not least those to local government investment companies which, Shi is quoted as saying, had a generally poor financial status even before the surge in infrastructure projects which constituted the first Chinese stimulus package. And if they weren’t ordered to lend, let’s say that commerical banks’ credit ceilings were to be abolished late in 2008.

Shih estimates that local governments have accumulated debts of 11.4 trillion yuan RMB by the end of 2009, or roughly a third of China’s GDP of the same year, and would need 12.7 trillion more by the end of this year.  25 per cent of the latter would turn bad, the Wall Street Journal (China Real Time) quotes Shih.

If that turned out to be the case, the banks would need to recapitalize, says Shih – and China’s foreign exchange reserve could offer the means, probably by having the banks issue new shares overseas, then have China Investment Corp. – the country’s sovereign wealth fund – buy the shares using dollars.

According to a Voice of Germany (Deutsche Welle) report, the credit ceilings were indeed lifted. And two-thirds of the stimulus package (total: 26 trillion, according to the Welle) weren’t paid for by the central government (as JR believed in 2008), but by the local governments. The Welle quotes Victor Shih as saying that the country’s leadership neglected the debt issue for political reasons. Shih told foreign journalist in Beijing that as of November 2008, some 8,000 local investment companies took loans of at least 11 trillion – seven times the total revenues of local governments. The central government was facing a choice between quickly issuing restrictions on the flow of money, or let bad loans and inflation spread. “China’s leadership may prefer to let inflation rise, and to continue to make the banks lend money. They may not even wish to allow a healthy contraction, before determining the next generation of party leaders.” (即便是健康地收缩贷款发放，在下届决定下一代中国领导人的党代会召开之前，他们也不会愿意。)

While the foreign exchange reserves could be useful in rebalancing the financial system, Beijing would prefer to use them as checks and balances in its relations with Washington. Some Chinese economists suggested to increase the property tax rate to curb local loans, but provincial governments would hardly support that. “They are themselves players in the real estate game. [...] Even if you say, we will cancel  your debts [我们还掉你的欠债 - my reading of 掉 (diao) is to cancel - JR], they won’t like that, because this is related to the question of how to make money besides that amount, and the real estate market is still developing. Besides cancelling [see previous disclaimer - JR], you will need to pay us another big amount of money. Otherwise, we won’t act in accordance with what you say.”

According to the Wall Street Journal report, Shih, apparently also during the talk to journalists in Beijing (which was on Wednesday), pointed out that he didn’t say there would be a financial crisis. “I’m saying it’s going to be a costly process to restructure and recapitalize the banks.”

Related
At the Crossroads: China’s Development, February 20, 2009
Guangdong: Credit Constriction, October 2008

Motherland, no Abstract Thing

Recent Chinese history has shown that only socialism can save China, and only socialism with Chinese characteristics can develop China. In socialist China, patriotism and socialism are naturally unified. Comrade Deng Xiaoping once said:

“There are people who say that not loving socialism doesn’t amount to not loving the motherland. How could the motherland an abstract thing? If they don’t love the New Socialist China under the leadership of the Communist Party, what do they love?”

Therefore, in contemporary China, under the leadership of the Communist Party, we must vigorously promote patriotism and unswervingly continue the road of socialism with Chinese characteristics, to fight for and to achieve the great revival of the Chinese nation.

近代以来的中国历史已经证明，只有社会主义才能救中国，只有中国特色社会主义才能发展中国。在社会主义中国，爱国主义与社会主义在本质上是统一的。邓小平同志曾经说过，

“有人说不爱社会主义不等于不爱国。难道祖国是抽象的吗？不爱共产党领导的社会主义新中国，爱什么呢？”

因此，在当代中国，大力弘扬爱国主义，就是要在中国共产党的领导下，坚定不移地走中国特色社会主义道路，为实现中华民族的伟大复兴而努力奋斗。

Wu Jun (吴俊), apparently a Xinhua / People’s Daily journalist, in February this year.

Don’t Hide, Don’t Challenge (yet)

After its rise, China “shouldn’t need to to hide its capacities (仍然需要韬光养晦) or to stay within a so-called framework, or fruitlessly hover between the two concepts” any more when handling contradictions with big Western powers, or in the construction of an international system, writes Liang Jiaqi (梁嘉芪), apparently an editor with Singapore’s Morning Post. Following America’s arms sales to Taiwan and Barack Obama‘s meeting with the Dalai Lama, China’s policies towards the U.S. had hardened, and at the same time, and as China had taken a high counter-profile at the Copenhagen Climate Summit, its currency’s exchange rate, the execution of Akmal Shaikh, etc.. This had lead to accusations of arrogance against China, and on the other hand, among the Chinese public, it had also been argued that China should still keep hiding its capacities.

But Western accusations stemmed from Western countries’ unbalanced state of mind (不平衡心态), argues Liang, due to slow growth there, to America’s debt-riddenness, to China’s rapid development, and its maintaining a moderate economic growth speed even during the financial crisis. Many people [the author apparently refers to Westerners] felt that America had to kowtow to China (美国也不得不向中国叩头了), that China no longer had to tolerate other peoples’ fault-findings, and that it was going to change the world according to its own interests and needs.

That America depended on China could be true, writes Liang, but China only saw one side of the issue. The mistake had been to excessively raise people’s expectations that China could stifle America’s arrogance. Although China had an important global position and the ability to help solving problems, power wasn’t the only factor in deciding a country’s role on the global stage. Before the system dominated by America or Europe would really change, before they would decline as military and technological centers, or before they would lose their monopoly on the discourse, would take much longer. The international system wasn’t only based on power, but also on values and historic perspectives of the big countries, and shaped by affinities to American hegemony. It wouldn’t serve China’s interests, nor its image, to stay away from all globally needed problem-solving.

Liang points out that China still depends more on America than vice versa (“only 7% of American debts are held by China”), and then comes back his Taiwan example. “The Taiwan Relations Act is not in China’s interest. But is it the right time now to force America to abandon this law which interferes with China’s internal affairs? Would Chinese military and commercial sanctions against the arms sales to Taiwan make America give in? This needed to be pragmatically (实事求是的) considered before going on the counter-attack.”

For the time being, Liang would recommend longer phases of severed military cooperation, and party and state chairman Hu Jintao‘s visit to the U.S. could also be temporarily cancelled.

Generally, the world’s second-largest economy couldn’t hide its capacities, but should be undogmatic, dealing with the situations as they were, writes Liang. The international situation, including China’s relations and disputes with neighboring countries, was too complicated for the formula made by Deng Xiaoping decades ago.

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Related
Hermit: India is an Unharmonious Serf, June 25, 2009

Cracks on Li Peng’s Memorial

It is one of the “man-must-rule-over-nature” sites: the Three-Gorges Dam (三峡大坝) on the Yangzi River in Hubei Province. It was a controversial project ever since it was revived after Mao Zedong‘s death, in the 1980s and 1990s, but reportedly also one of then prime minister Li Peng‘s (李鹏) favorite projects. No wonder – Li’s alma mater is the Moscow Power Engineering Institute, and the Stalinists liked gigantic construction.

Once more, the monumental hydropower project is now causing headaches (if it ever ceased to, that is). Southern Metropolis Daily reports that the reservoir’s falling water level is causing geological problems, i. e. heightened risks of landslides. It is currently at 160 meters, and planned to drop to 145 meters in the dam’s third year of reservoir testing. The reservoir slopes may need repairs, with no end in sight. Cracks next to a flyover and a school are emerging, and there have reportedly been several landslides and palpable earthquakes. Areas with a high likelihood and at risk of earthquakes overlap each other in the area anyway. The state will have to invest tens of billions of Yuan RMB into geological disaster management (地质灾害治理) shortly, according to the article. The area in question is Fengjie County (奉节县), in the northeast of Chongqing municipality.

Local news reports described earthquakes as a consequence of impounding as “normal”, but Southern Metropolis Daily quotes residents who feel uneasy nonetheless, and who would like to relocate. Given that the area is prone both to earthquakes and landslides anyway, the situation is “complicated”, writes the paper.

China’s rubberstamp parliament, the National People’s Congress, approved of the Three-Gorges project with an unusually small margin of two-thirds [update: in 1992] - a small margin by NPC standards, that is. Several senior officials who reportedly shared the concerns of the delegates who voted against the Dam or abstained.

The Wenchuan Earthquake in 2008 has probably added to public sensitivity. Early in 2009, there was a debate as to which degree the Zipingpu Reservoir, some 5.5 kilometers from the epicenter, had caused or aggravated the disaster.

The Three-Gorges Dam’s side-effects are therefore a fairly sensitive issue – and a number of comments next to the Southern Metropolis article currently express their respect and gratitude for the paper’s report.

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Related
Too many Lies, March 7, 2010
Wenchuan Earthquake and Zipingpu Reservoir, February 5, 2009
LiuHan Hope Elementary School students’ Survival a Miracle? – May 19, 2008

No Growth at the Consumers’ Expense

Currency manipulation is many U.S. Congress members’ favorite term when explaining – and criticizing – China’s still huge trade surplus. In the long run, the U.S.-Chinese trade pattern isn’t sustainable. But an appreciation of the Yuan is no universal remedy. An undervalued currency is only one factor out of many in international trade.

France and Germany have the same currency. All the same, French finance minister Christine Lagarde urged Germany on Monday to boost domestic demand and said Germany’s large trade surplus was endangering the competitiveness of other euro zone economies. Germany’s reactions basically sound like an unofficial Chinese reply to American complaints: “Maybe you simply aren’t competitive?”

Günter Oettinger, until recently a regional prime minister in Germany and now the European Commission’s energy commissioner, doesn’t appear to have fully arrived in Brussels yet – mentally, that is. He still sounds like a German prime minister: Europe needed more reforms, of the kind Germany had implemented during the past decade or so, he is quoted as saying.

He certainly isn’t completely wrong. German companies don’t only compete with European companies, but with America and Japan, too, as Oettinger points out. So do other EU member states, and wage restraint can be one choice to become more competitive on global markets – for a while.

But then, wage restraint is also one of the tools which helped building both China’s and Germany’s trade surpluses. And by keeping wages low, you restrain consumption, too. Adjusting to a competitive environment by choking wages doesn’t solve the problem of lacking domestic demand. The race in terms of “who does best in squeezing the workforce” leads downwards, if everyone joins this kind of “competition”.

It might be time to remember that innovation, and the ways companies organize their production processes, are competitive tools, too.

Keeping wages down is a win-lose design at best. And in the long run, it’s lose-lose.

Creative Destruction or Development?

Thomas L. Friedman listened to Tung Chee-hwa (董建華), Hong Kong’s first chief-executive under Chinese sovereignty. Ralph Gomory on the other hand doesn’t want us to listen to Thomas Friedman. That said, all that Tung said (not too long ago, apparently) was that

“China was asleep during the Industrial Revolution. She was just waking during the Information Technology Revolution. She intends to participate fully in the Green Revolution.”

Anyway, Friedman wants innovation for America – “president Obama should seize this moment before the midterms — possibly his last window to put together a majority in the Senate, including some Republicans, for a price on carbon — and put in place a real U.S. engine for clean energy innovation and energy security”.

Friedman’s view is based on some scientific evidence. America is at a strategic inflection point, he writes. Andy S. Grove, a leading IBM manager, describes a strategic inflection point as

“a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end”.

And before you could say something like “gee, that man must be paranoid”, Andy Grove himself confirms that he is. Always been. That’s why Friedman likes reading Grove after all.

But since then, when Friedman supported his president in 2003, the times have changed. For one, the Iraq war was wrong, or not exactly as right as it first looked. Besides, maybe the French weren’t really that stupid back in 2003. The French prime minister was out drumming up business for French companies in the world’s biggest emerging computer society in India while Friedman and GW Bush were taking care of Saddam’s weapons of mass destruction.

But let’s get back to the strategic inflection point.

To succeed at a strategic inflection point, a company (or a country’s industries, as generalized by Friedman) must not only absorb new technologies, or develop them according to emerging or hidden trends in demand, writes Grove.

To put it more fundamentally scientific (as I understand it), America’s strategic choice between catching Osama and contributing to the wave of green technology is about a choice between surviving and growing in a great time of creative destruction, or getting destroyed in the process – economically, not militarily.

Friedman advocates a – by now seemingly established – pattern of international division of labor:

In the process, China is going to make clean power technologies cheaper for itself and everyone else. But even Chinese experts will tell you that it will all happen faster and more effectively if China and America work together — with the U.S. specializing in energy research and innovation, at which China is still weak, as well as in venture investing and servicing of new clean technologies, and with China specializing in mass production.

This could be a nice prelude for a more perfect Doha Round.

There is probably noone who would question the benefits of being a big player in new technologies – green technologies for example. But Ralph Gomory, himself a scientist, took issue with Friedman’s ideas. America can’t avoid the fate of losing productive capacity by trading designs, ideas, and R&D [...]  for the items we need. Gomory argues that while R&D is crucial for manufacturing, it’s share in an economy is clearly less than ten per cent. There is no way to balance the value of manufactured goods with R&D alone. Gomory writes that

[w]e need successful industries and we need to innovate within them to keep them thriving. However, when your trading partner is thinking about GDP rather than profit, and has adopted mercantilist tactics, subsidizing industries, and mispricing its currency, while loaning you the money to buy the underpriced goods, this may simply not be possible.

Nor is there a need to rely on generating nothing but designs, ideas, and R&D anyway. “Cheap labor” as a location factor doesn’t explain why Japan and Germany as high-wage countries are successful in the automotive industry, and it doesn’t explain why semi-conductors as a model of a high investment, low-labor content industry, are mainly made in Asia.

No need to say that JR finds Gomory’s argument more convincing. What only adds to the charme, Gomory offers surprisingly simple numerical evidence for his side of the debate. When you have good designs at hand, you better take them and build something useful and valuable yourself, rather than put it at your competitors’ disposal.

Besides, every country has its share of tinkerers, engineers, farmers, and unskilled workers. There is little space for that argument in economics – but if a trade-surplus country like China or Germany wants to do its share in rebalancing global trade disparities, not-so-bright citizens must find opportunities to earn money, too.

And then, maybe evening school will help a routined machine operator to become an engineer in the process. This would make sense both economically, and in terms of civil society. Long-term unemployed people on the other hand tend to lose interest in further education.

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Related
National Export Initiative,  White House, March 11, 2010
No Global Governance, January 1, 2010
Obituary: Paul Samuelson, December 14, 2009