Seasonal Considerations: Safeguarding “4.9″

The National Development and Reform Commission (国家发展和改革委员会)  recently decided to increase gasoline and diesel sales prices by 350 Yuan. The new prices took effect at midnight local time (16:00 hours Greenwich Mean Time on Saturday), according to China News Net / chinanews.com (via Enorth, Tianjin). The increase is in line with market expectations, but smaller than the gains in crude costs, reports Reuters:

The government will raise the retail ceiling for gasoline and diesel by 350 yuan ($53) a metric tonne, and jet fuel prices by 340 yuan per tonne. China last raised fuel prices by about [310 yuan per ton for gasoline and by 300 yuan per ton for diesel - JR] percent on Dec 22.

“Experiences in recent years have told us that by suppressing prices it would discourage refiners to produce or import and lead to shortages and queuing at petrol stations,” NDRC said.

The agency said the price move has been delayed and that the increases fell short of the rises in global crude prices to which Chinese fuel prices have been linked since Jan 2009, due to rising inflation concerns.

Letting the prices rise is based on the commission’s intention to let market forces, i. e. supply and demand, determine the allocation of resources, writes China News Net. Oil consumption had continuously and rapidly risen along with China’s steadily rapid development of recent years (近年来，随着我国经济平稳较快发展，石油消费持续快速增长), the author of the China News Net article quotes a comrade in charge at the Development and Reform Commission. The unnamed comrade explains:

Let’s take the automotive industry as an example. In 2010, the number of cars sold in our country exceeded 18 million, an increase of 32 per cent¹⁾. When we calculate the quantity of fuel consumed per car as 1.5 tons, this spells an increase of 27 million tons in demand for refined oil [i. e. gasoline or diesel fuel, basically - JR], and therefore a demand for about 45 million tons of crude oil. Domestic crude oil production within China has continuously been at 190 to 200 million tons, and every added ton in demand had to be imported. In 2010, China imported 239 million tons of crude oil, an increase of 17 per cent. Dependence on foreign oil therefore increased by three percentage points, to more than 55 per cent. This has made China the second-largest importer and consumer of oil, and the security background to those oil supplies can’t be viewed optimistically. Besides, the excessively rising oil consumption exceeds what our country’s economy, resources, and environment can bear. Therefore, price adjustments need to be the levers to take a guiding role in containing excessively rising oil comsumption and to encourage save resources.

Secondly, the commission official points out, the current situation made China too dependent on price developments on the international oil market. Adjusting the prices now would therefore help to protect market supply, avoiding negative shortage effects on production and import dynamics, the phenomenon of queues at gasoline stations, and social operational costs²⁾ (社会运行成本). However, to keep the impact of the price adjustments small, the state had also increased regulation of refined oil prices. The adjustment had come with some delay to the actual market trends, taking the spring festival season into account, even as international prices had kept rising after the most recent adjustment on December 22 last year.

The problems the adjustment constituted for disadvantaged groups was also taken into account, according to the official. Grain farmers and companies whose production was for the common good would be subsidized, as had been the case in the past. Fishery, forestry, urban public transport, rural passenger traffic would be subsidized, and temporarily, there would be subsidies for cab drivers, too. “Unreasonable” price increases in fares and transport fees would be monitored and prevented. The general development of prices, resulting from industrial dependence on fuel, would also be kept stable. National refineries were expected to strictly implement the national pricing policies, and authorities on all levels would intensify price supervision.

Farming today: too subsidized to be concerned?

Delaying the price adjustments until after the spring festival season surely was considerate. But given that administrative price controls notwithstanding, the hike in gasoline prices will drive inflation further, the move can also be explained with the government’s desire to keep inflation low during January. Stock markets had been nervous about the January inflation numbers, and there are strong indications that January inflation would have exceeded five per cent anyway, hadn’t the National Bureau of Statistics based its computations on adjusted weightings in the basket of goods.

China’s government reportedly established an inflation target of four per cent for 2011. Alistair Thornton, an analyst at IHS Global Insight, suggested in December that the four-percent target reflected the realisation that inflationary pressures weren’t going to recede as long as excess liquidity remained.

Somehow, the Chinese authorities will be successful – even if only on paper.
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Note

¹⁾ According to statistics cited by Southern Metropolis Daily on May 1 last year, the number of car ownerships in China had reached 76,190,000  in 2009. Production and sales that year exceeded 13.6 million. The production and sales of passenger cars also exceeded ten million for the first time in 2009, making China the world’s biggest country in terms of car production and consumption.

²⁾ If I’m getting these definitions right, China usually refers to costs of education, public security etc. as social operational costs. The usual international term should then be public operational costs.

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Related

The Emperor’s new Thermometer, February 16, 2011

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Internet Freedom, in Other Words

A Message from behind the Great Maikefeng Wall

This question to Ma Zhaoxu (马朝旭), China’s foreign ministry spokesman, apparently came from a foreign correspondent on Thursday, during the ministry’s regular press conference:

Question: U.S. secretary of state Hilary Clinton said in a speech on internet freedom on February 15 that the Chinese internet is developing rapidly, that it had become a source of development for China, and that many Chinese people are using the internet. Restrictions by some countries on free access to information would hinder long-term development of these countries. There are differences between the U.S. and China on this issue. America would like to discuss with China in frank ways. How does China respond to this?

Ma: As everyone knows, China’s internet develops rapidly, and the number of netizens increases rapidly, having exceeded the number of 400 million. The Chinese government encourages and supports the development of the internet, protects the citizens’ right to free speech in accordance with the law, including freedom of speech on the internet. At the same time, China manages the internet in accordance with the law, which is in correspondence with international practise. We are ready to strengthen communication and exchanges about internet-related issues with any country, to promote the healthy development of the internet, but we are opposed to any country using internet freedom issues as an excuse to interfere with China’s internal affairs.

Official China’s response to Clinton’s speech this time was noticeably calmer than less than a year ago, when Google China no longer respected the normal ways of doing business (不再“遵守”在商言商的普世之道) – Xinhua, March 19, 2010). When Google ceased playing along with the CCP’s rules, Xinhua accused the company of a premeditated plan to use the internet as a tool for cultural and value-based dissemination (价值观渗透的工具), and to establish American “thought hegemony” and “cultural hegemony” (“思想霸权”, “文化霸权”) in China.

Compared with Google’s decisions last year, American advocacy of speech, so long as it isn’t directly business-related, amounts to routine for Beijing.

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Related
Ma Zhaoxu’s press conference in English, MFA, Febr 18, 2011
“Security Concerns” against LSE debate, German Society Committee, Febr 17, 2011
Clinton’s speech in full, Dept of State, Febr 15, 2011
Twitter can’t save you, NY Times, February 4, 2011
Why Wikileaks can’t work, December 1, 2010

Spring is Back

Something's different today.

The year’s most beautiful season is on its way. Once in a while, there’s still some snowfall, and it still freezes at nighttime, almost regularly. But the sunlight is gaining power again, and the first blossoms should appear within weeks, if not within days now. It’s easy to sense that the winter is leaving, and that spring is coming.

Days are full of work, but I realize how the sun rises a bit earlier by the day now. I’m aware of it every morning. I never minded the cold, but really missed the daylight, during the past few months.

Inflation: The Emperor’s new Thermometer

News too good to be true – that’s the reaction of several analysts quoted by the Wall Street Journal (WSJ) on Tuesday.

China’s consumer price index rose 4.9 per cent in January from a year earlier, according to China’s National Bureau of Statistics (NBS), wrote the WSJ.

… at a time of politically-sensitive food price gains, it was unlikely that a reformulated CPI basket would produce a higher inflation figure,

the WSJ quotes Alistair Thornton, of IHS Global Insight.

The new inflation number is the first after the NBS adjusted the weighting in the basket of goods it uses to calculate consumer prices, explains the WSJ. That’s one reason why the January numbers had been awaited somewhat eagerly.

Johnny Erling, German daily Die Welt correspondent in China, goes into some detail:

Food prices in particular are to blame for the high inflation rate. They rose by 10.3 per cent in January – vegetables by 14.4 per cent, grain by 15.1 per cent, eggs by 20.2 per cent, and fruits by 34.8 per cent. Manufacturers’ prices rose by 6.6 per cent. The National Bureau of Statistics itself triggered doubts – on its website, the authority concedes that its January figures had been calculated on a new basis. Composition had been weighed differently, too. Housing-weighting had been increased by 4.2 per cent more, but food prices by 2.2 per cent less. Bloggers write that Beijing “fought inflation in a Chinese way. The state has tinkered itself a new thermometer”.

"To the People, Food is Heaven" (民以食为天, archive)

Three weeks ahead of the National People’s Congress convening in Beijing, the 4.9 per cent index is sufficiently convenient for China’s planners, believes Erling. Inflation would be a topic, but without discussion as heated as if it had been 5. something.

Also, the stock markets had been within an ace of signalling a thumbs-down, which didn’t happen after the National Bureau of Statistics had published an index less than five per cent.

Not only bloggers seem to doubt the NBS’ – or the central government’s – scientific accuracy in calculating inflation. Early in December last year, Chinese economists gathered at Beijing’s Sun Yat-sen University and reportedly found that underlying inflation was far higher than the official numbers. Much of their discussions, according to Guangzhou Daily, focused on excess liquidity (流动性过剩) and on hot money (热钱) on overseas and domestic markets – an issue which features prominently in Alistair Thornton’s assessments, too. Asked by The Diplomat‘s Jason Miks what he made of two of China’s macro-economic targets for 2011 – 4 per cent inflation and 8 per cent GDP -, Thornton replied that

An inflation target of 4 percent reflects the realisation that inflationary pressures aren’t going to recede as long as excess liquidity remains. Given they don’t want to jeopardize the broader economy, a relatively high bank lending target has been set, and inflation is just one of the inevitable side-products. There’s no point trying to pretend that inflation is going to remain at the abnormally low levels China has seen through the past 30 years.

Besides, an emphasis of China’s future growth model had to be on job creation, added Thornton.

China’s purchasing managers’ index (PMI) had decreased in June last year, from 53.9 per cent in May of the same year, to 52.1 per cent. Xinhua newsagency  found that encouraging. But in November 2010, the index was at 55.2 per cent, from 54.7 per cent in October, being the highest figure since April of that year.

A PMI of less than 50 would tell that the economy is contracting, Xinhua explained on June 3 last year. Anything more than 50 amounted to an expanding economy.

A summary by the Hongkong and Shanghai Banking Corporation (HSBC) of February 1 sees China’s domestic market as a key driver of expansion. In January rose sharply, too, notes the summary,

with panellists attributing growth to higher output requirements.

But apparently, output didn’t rise quickly enough to meet demand. Besides, high prices in procurement spelled high prices at sales, too.

Nothing serious, one might think. But in the light of stark differences in individual Chinese incomes, Beijing needs to take inflation very seriously.

Income inequality China was nearing the red line of what society can tolerate (接近社会所能忍受的 “红线”), chinanews.com wrote on October 4 last year, and it had become a big obstacle to development.

To “social stability”, too. Some of what the central government could do for people with small incomes – subsidizing housing, for example -, is being done,  and duly celebrated by its propaganda units. But distorting market prices isn’t necessarily the ideal or most sustainable approach. A tax reform with genuine teeth would be a better way to re-distribute incomes. Particular interests are in the way of that. Convincing approaches to control property prices (and therefore housing costs) were also discussed last year, but weren’t adopted, quite probably because they would have hurt the incomes of city governments, the state (especially local administrative levels) as the owner of land sold [*)] for property development.

But while the absence of inequality would lead to an absence of individual – growth-enhancing economic efforts, too high a degree of inequality doesn’t only destabilize society.

[E]xtreme income inequality was a precipitating factor behind the financial crisis,

argues Justin Fox, in a post on a Harvard Business Review blog. A documentary named The Flaw

certainly left an impression on [Martin] Sorrell [a CEO who watched the decoumentary]. “Wealthy people invest in financial assets; they create asset bubbles,” he said this morning. When wealth is distributed more equally, he went on, you get more sustainable growth.

If that is true for America, it’s about as true for China, where bubbles have been building for years. A few well-chosen punches against excess liquidity could prove much more efficient in fighting rising prices, than subsidizing some food or some flats. Besides, taxes would be much more macro-economic.

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Edited/updated
*) “Sold” isn’t the preferred nomenclature in this context. It should, of course, have been “transferred for money”, as the land is state property and can’t officially be sold — JR, March 16.

Related
Income Distribution: SASAC not Available, March 13, 2010
“When Reforms reach your own Connections…”, October 5, 2009

-

Sincere Thanks: You name the Problem, the CCP solves it

Thanks to the family elder

Beijing Daily (BJRB, 北京日报), via Enorth (Tianjin), February 15, 2011:

Yesterday at 16.30, disabled Li Nan (李楠) hurried home and didn’t even take her coat off, and the first thing she did was to browse the internet. She had heard that chief state councillor Wen Jiabao had already issued instructions, after she had written a letter to him.

She told journalists that she had written the letter gradually, which took three months. “I felt confident as I wrote the letter, given chief councillor Wen’s good personality”. She had written the letter after a suggestion she had made during a forum had been implemented speedily.

Li had been very touched by Wen Jiabao‘s (温家宝) personality, and had therefore, free of stagefright, spoken her genuine thoughts and recommendations. Wen had been just as nice as he always came across on television, like a family elder, and all her nervousness had left her, BJRB quotes Li.

Li Nan graduated from Beijing Youth Political College, stayed on to teach after graduation, and served there as a local cadre, and then as Communist Youth League group secretary. In a car accident on January 17, 2003, her spinal cord was irreversibly injured. She received 2,000 Yuan RMB monthly as a subsidy for coping with her condition. She therefore had to depend on her parents’ pensions. Her suggestion to Wen [at the forum] was that articles such as disposable diapers should be included into the catalog of medical articles for patients who had suffered work-related accidents, or a directory of auxiliary accessories.

Wen gave a short reply to her suggestion during the forum. On March 5, 2010, he stated at the National People’s Congress that each of the 1.3 million [disabled] people affected by work accidents should be included into  the work injury insurance’s scope.

The article describes how Beijing human resources and social insurance offices had started implementing the instructions by June 1. *) By September 2010, the regulations had been implemented.

“That suggestions made by an ordinary disabled person would be implemented so quickly really impressed me, and I felt that I should write to the chief state councillor”, Nan said.

Writing the letter took three months. The drafts contained up to 4,000 characters, but in the end, were reduced to 2,000. “There were too many things I wanted to tell the chief state councillor”, Li said. [...] “Besides wanting to tell him that, in Beijing, his instructions had already been implemented, I wanted to relate my health situation, my feelings, and my work in the field of people with disabilities this year.” She then deleted her remarks about her own spiritual development as a handicapped person again, and added other practical problems faced by handicapped people, given that the chief state councillor is so  busy with his work. But once she had finished the letter in December, she found another problem. How to get the letter conveyed to the chief state councillor?

During a  reception by a China Disabled Persons’ Federation leader on January 20, Li gave him her letter, and with the federation leader’s help, it was conveyed to the chief state councillor.

Once again, writes BJRB, Wen Jiabao approved of her suggestions, which was a great encouragement to Li’s work. Also, the paper quotes Li, grassroot organizations had by now been widely established to help channelling the needs of persons with disabilities.

“Our requests are taken seriously by more and more departments, which inspires and warms us”, said Li Nan. “I want to express my sincere gratitude to the party, the government, and the people!”

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Note
*) I can’t tell if these implementations mean to refer to all work-related incidents in China, but the article seems to suggest that, as for Beijing, both the Human Resource office and the more general social insurance office are mentioned.

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Related
Reality you can believe in, January 22, 2011
This Propaganda is weak Tea, Zhongnanhai Blog, January 3, 2011

Press Review: Huanqiu apparently relaxes Egypt Commenting

People’s Daily online (人民网) had an article on Saturday which explored the paths Egypt might take after president Mubarak’s departure. After pointing out that the military had vowed to respect all existing international treaties, Li Xiao (李潇), a People’s Daily correspondent in Cairo,  describes the military leaders’ and the opposition groups’ current situation. The military leaders’^*) fourth communiqué, he writes, had stated that the existing cabinet would temporarily continue to govern. It wasn’t yet possible to assess if the public would find the communiqué acceptable. The military leaders were in discussions and explorations concerning the transitional period. Li touches on several possibilities, such as presidential elections within sixty days (as the current constitution would require after a president’s resignation), a transitional period longer than sixty days, or a new constitution, which would define a president’s powers, the maximum number of terms in office, etc. Concerning the possibility of a new constitution, Li quotes an American University researcher (阿里·侯赛因) that there was a variety of different demands from different opposition groups.

Opinions among the Muslim Brotherhood, concerning the transitional period, weren’t all identical either, writes Li. While some gave the army credit for a neutral position during the demonstrations, and advocated dialog with the military, there were also younger brotherhood members who were expecting a broader base and membership of a government of unity during the transitional period.

Former International Atomic Energy Agency director general Mohamed El Baradei is quoted as saying that during the difficult transitional period, the military should share power with the people (军队应与人民共享权力).

Enorth (Tianjin) kept most of  its articles on the situation in Egypt shorter, and seems to depend on Xinhua newsagency reports mostly, and on china.com.cn (中国网) occasionally.  Enorth did, however, carry a longer Xinhua article on Saturday, dealing with the development on crude oil prices after Mubarak’s resignation. While Egypt was no major oil-producing country, there had been concerns about control of the Suez Canal. Mubarak’s resignation had led to falling oil prices, as tensions were now expected to ease. The New York stock market had started somewhat lower on Friday, but quickly began to rise after the news of Mubarak’s resignation had been out. European stock markets had also been generally rising after Mubarak’s resignation. However, market analysts and brokers remained cautious about Egypt’s situation and expected market performances, writes Xinhua, quoting from two opinions.

"On the first day after Mubarak, Egyptians spontaneously cleaned up Liberation Square"

That said, forum exchanges seem to remain a sensitive issue. A forum where a photographer named Adi was quoted as saying that there was hope in Egypt, and where spontaneous activities to clean up Liberation Square after the demonstrations were apparently described too, was apparently rejected or “blocked by administrator” (可能被管理员屏蔽或删除！) later.

"Possibly blocked"

Meantime, the English-language Global Times (affiliated with China Daily) reports that

The world countries agree that the fall of Mubarak’s regime will usher in a new era in the Middle East in general, while expressing concerns over the future of the country and the Middle East.

Huanqiu Shibao‘s main headline is that Egypt’s current cabinet will remain in office, pending elections. And different from recent days, there are readers’ comments again, even if only fifteen, more than twenty-four hours after publication. And interestingly, not everything is harmonized:

In the end, they didn’t open fire (终于没开枪),

says one comment, and another, more skeptical comment suggests:

Let’s wait until they hand the power to the people – let’s talk again then (先还政于民再说吧).

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Note
^*) Referred to as Egypt’s Highest or Supreme Military Commission (埃及最高军事委员会) in the articfle.

Related
“The Greatest Democracy for Humankind…”, February 3, 2011
On the Events in Egypt, Adam Cathcart, February 11, 2011

Democracy or Meritocracy?

Both these nouns are fairly broad concepts, and frequently vague, too. Just try to apply either of these tags on any country.

Singapore claims to be a meritocracy. China, where you best be a princeling, or close to one to be considered a decisionmaker, claims to be one, too. Its officials actually claim it to be both a meritocracy, and democratic.

Then take Egypt. Until a month ago, Hosni Mubarak was Egypt’s president. OK – nobody I  know personally called Egypt a “democratic country”. But only in more recent weeks, he has been addressed here as a “dictator”. Or, as David Hugendick wrote in Germany’s weekly Die Zeit on Thursday:

Now, as Egypt revolts, the world is crying out aloud: Mubarak is a dictator. After all, language is constantly changing.  But one could ask, why only now?

It’s not that the terms would be wrong. What is vexing is the pace and volume the Western public is disposing of its decades-old indifference. [...] What was very recently a government is now a regime, as if nothing else had ever been said.

Meritocracy. President Mubarak, in his last televised speech in office, emphasized his merits – how he fought for Egypt as a military pilot, lived for Egypt, faced death, and “exhausted his life”.  How he rejoiced when the Sinai returned to Egypt. How he never reeled under foreign pressures or dictated orders.

Meritocracy. It is argued for in this commenting thread on the Peking Duck. It was the topic of a debate held by Intelligence Asia in Hong Kong, on Tuesday, too. Zhongnanhai gives an account of its course, adds links, and some thoughts. That plus a return to the question as to how – if at all – “different culture” should be a point in an argument about democracy.

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(Remotely) related:
Cairo protesters speak (a bit of) Chinese, February 10, 2011

The Egyptian Revolution, seen from Commencement Bay

If you are looking for stories and links this morning, try Adam Cathcart‘s post On the Events in Egypt first. There’s a good collection of links, including one to a French source (which seems to be sort of becoming for a story like this one, of course), it contains some observations about Chinese coverage on the topic, without drawing conclusions which would appear to be somewhat far-fetched, and all this is tied together by a Tacoma sunrise, near the waters called Commencement Bay.

Al Ahram, "the 25 January Revolution", Special Issue

And to read some coverage and opinion from the new land of hope and glory itself, you might try Al-Ahram, which was, over the past decades, usually referred to as semi-official in our press reviews. You might start with Hani Shukrallah‘s to-do list, which may, of course, only be one list out of many.