Archive for July, 2013

Sunday, July 7, 2013

Reforming China’s Financial System: who will bear the Costs?

Warning: JR is trying to explain the economy to himself. His word pool and previous knowledge about this topic are shaky, and the following may or may not make sense – you’ll have only have yourselves to blame if you base your homework (or investment decisions) on this post.

This is not the first time that a “financial crisis” is predicted for China, and certainly not so in Western media, which seem to have become aware of problems in China’s financial system by 2011. It doesn’t seem unlikely that the times of export-led growth in China are coming to an end – a new policy needs to be found, and it will need to be more specific than these.

The third wave of the global financial crisis is likely to occur in the emerging markets, and it is in its preliminary (or brewing) stage in China, Hong Kong’s Beijing-leaning Wen Wei Po (文匯報) quoted Guan Qingyou (管清友), assistant dean of the Minsheng Securities Research Institute, on June 21. However, it hadn’t started yet, Guan added, and there were two reasons for that. America’s Federal Reserve Bank hadn’t sufficient reason yet to exit its quantative easing policy, and the Bank of Japan, Japan’s central bank, was firm in its radical easing policies.

But that was no reason to lean back, Wen Wei Po continues to quote Guan Qingyou. The longer the brewing stage of the crisis lasted, the more fiercely it would become once it broke out. For the time being, there were three firewalls, Guan suggested: China’s current account suprlus with a corresponding amount of foreign-exchange reserves, a capital account that hadn’t yet been completely liberalized, and short-term capital flight would therefore be limited, and thirdly, China’s financial system was relatively stable – this third aspect had allowed China to escape the Asian financial crisis (of 1997) rather unharmed. Despite these reassuring short-term “firewalls”, an aging population, growing financial risks and excess production capacity stemming from overinvestment as well as high housing/property prices were burdens that made it difficult for China to prosper.

It would therefore be possible to avoid an acute currency crisis, Wen Wei Po quotes Guan Qingyou.

On July 2, China News Service quoted excerpts from Hong Kong’s Ming Pao‘s (明報) July 2 edition. Here, too, the Federal Reserve got a mention: there was no fixed end to the third round of quantative easing, and it would continue until the US economy’s recovery was really steady. This positive change would occur later this year, the Federal Reserve is quoted as predicting – “we hope that the Fed is right”, China News Service quotes Ming Pao.

The Fed’s “quantative easing” was at times cussed in the Chinese media (I can’t tell if that was also true for Hong Kong media) during the first years of the financial crisis, for destabilizing the global economy (and, presumably, for devaluing both the dollar and the U.S. bonds China holds  as America’s creditor). But few Chinese observers appear to be waiting for an end to quantative easing too impatiently.
Ming Pao, according to China News Service, uses some stronger language than Wen Wei Po in describing the need for Chinese financial market reforms: just as the economy was slowing down in China, and while the global markets weren’t stable, the Chinese central bank was trying to defuse the bomb in China’s financial system:

To meet their needs for working capital, mainland private enterprises are often seriously dependent on short-term funding. And if Chinese everywhere scramble for working capital, the whole Asian supply chain may become affected. This is bad news for the close regional ties between exporting and processing enterprises in mainland China. If the tightening period drags on, this will also negatively affect northeast Asian countries depending on Chinese growth.

内地的私营企业为满足营运资金的需求,往往 严重依赖短期资金。因此,若中国供货商到处争夺营运资金,整条亚洲供应链都可能会受到干扰。对于与内地出 口加工企业关系密切的地区出口商来说,这是个坏消息。若内地的紧缩周期拖长,对于那些俨如中国经济增长寒暑表的东北亚国家来说,将会不利。

The more resolute China’s [financial?] reform plans, the more painful the labor pain will be. The decision makers will try to increase the efficiency of capital use within the financial system. There is no “painless” way of dealing with the problem of debt dependence.


Access to loans had long been a problem for smaller and medium-sized enterprises (SMEs). Occasionally even the press seemed to confront the central bank with the issue. A Zhejiang Satellite TV reporter asked People’s Bank of China (PBoC)  governor Zhou Xiaochuan in March 2011 how, under a tightening policy, harm for the SMEs can be avoided, given that banks could easily raise interest rates, and the SMEs had absolutely no bargaining power. Zhou’s answer amounted to a speech, rather than to an answer, and the only “practical advice” it contained basically amounted to a one-liner: We also encourage small companies to choose from the market.

The central bank hasn’t earned itself better grades very recently either, at least not by the Economist‘s standards: stirred by one trillion yuan added to the commercial banks’ loanbooks during the first ten days of June, the PBoC concluded that some banks were expecting a fresh government stimulus to revive a slowing economy and had “positioned themselves in advance”. But rather than going into another illicit lending orgy, the commercial banks had – arguably – only recognized existing loans in deference to the regulator’s instructions.

The message the BBC‘s Laurence Knight reads into the PBoC’s decisions is that the newly-ensconced government of President Xi Jinping is deadly serious about “rebalancing” China’s economy. (Knight’s story also contains a history of China’s recent “cheap-money era”, i. e. the stimulus package, and how small borrowers have been marginalised from the mainstream financial system.

But if the Xi leadership is indeed deadly serious about addressing the reform of the financial system, the question remains who will need to bear the pain Ming Pao (as quoted by China News Service) predicted on July 2. Michael Pettis, finance professor at Peking University’s Guanghua School of Management, can think of one sector which must not take the burden:

You can only resolve a bad debt problem by assigning the cost to some sector of the economy. In the past it was the household sector that implicitly paid to clean up the debt, but if we expect rapid growth in household consumption to lead the economy going forward, and this is what rebalancing means in the Chinese context, we cannot also expect the household sector to clean up the bad debt in the same way it has done so over the past decade.

But if growth led by domestic demand – instead of export-led growth – is indeed the goal, neither Guan Qingyou’s comments as quoted by Wen Wei Po nor Ming Pao’s article as quoted by China News Service seem to hint at such a solution.  And when it comes to China’s colonial possessions, investment appears to remain the only answer, to economic and political problems alike. But then, excess production capacity may hardly be the main issue there, in the short run.

Saturday, July 6, 2013

“China is Alright”: a Summer Camp for Overseas Chinese students from Laos

China Radio International‘s Mandarin service renders a newslet by China News Service (中国新闻社), China’s second-largest state-owned newsagency after Xinhua, on the field of public diplomacy.

Original title: Ethnic Chinese Laotians go to Yunnan to experience Chinese culture

CRI Online news: according to China News Service, the “2013 China is alright – the perfect Yunnan summer camp” has started in Kunming, with fourty campers and group leaders from Chinese schools in Laos. It is scheduled to go on for ten days. Apart from developing [an awareness or knowledge of, apparently] Yunnan ethnic culture, knowledge of China, and exchange, the overseas Chinese students will also experience Yunnan province’s local conditions and customs.


With Chinese-Laotian cooperation growing closer and the surging “Chinese language fever” in Laos, more and more ethnic Chinese and Laotians want to understand the Chinese way of life and traditional culture. Luo Bailan, a teacher and group leader with the camp, says that the Chinese schools in Laos are continuously adjusting their educational methods, to allow the students to learn by experience.


Chinese Language and Culture Education Foundation of China deputy secretary general Li Xianguo says that “China is alright” is an important part of the foundation’s “Young Ethnic Chinese Chinese Culture Heritage Project”.


Chinese fever, Kunming

Chinese fever – click pictdure for China News Service coverage

The State Council Information Office (SCIO) is more elaborate, adding that most of the students haven’t been to Yunnan before. Even though it has been rainy for days, and temperatures in the spring city [i. e. Kunming] are a bit low, this hasn’t affected the campers’ high spirits in the least. They are reading the course schedules of the camp reader, excitedly discuss the coming lessons and the tourist attractions. A student tells the SCIO reporter that he is most interested in poetry recital and calligraphy, and in touring the Stone Forest, the birthplace of Ashima:

“We also want to experience the culture of national minorities in the Yunnan Nationalities Village I don’t know a lot about national minorities and hope to experience a lot of interesting things”, Lin Yingcai says in fluent Chinese.


Many Laotians and Burmese and Cambodians and North Koreans see China as a promised land, Joshua Kurlantzick wrote in his 2007 book Charm Offensive (p. 137). And America, he warned, had earned itself a bad image in the past, and was still doing so:

For decades, the United States still did not grant Laos normal trading relations, though Laos’s human rights record was no worse than the record of China, with whom America traded vigorously. American sanctions on Laos infuriated Lao officials, who didn’t understand why such a big country like the United Stateswould punish a minnow – especially since during the Vietnam War, America had dropped more bombs on Laos than it dropped on Germany and Japan together during World War II, leaving Laos riddled with unexploded ordnance.

(Kurlantzick, p. 59)

Jiang Zemin visited Laos in November 2000, reportedly the first visit by a Chinese head of state. In November 2006, Jiang’s successor Hu Jintao followed up, and moved China Radio International (CRI) one step ahead of the BBC and the VoA, by pushing a button for a rebroadcasting FM station – the inauguration ceremony was reportedly broadcast live, as the rebroadcaster’s first program ever:

So, Vientiane listeners, for the first time, clearly and vividly heard the the warm voice of state chairman Hu Jintao, a visitor from a friendly neighbor.



A CRI official said that the friendly relations between China and Laos created good conditions for CRI’s operations in Laos. According to the official, the Laotian government’s approval of CRI’s Vientiane frequency was one of only few. Before, the BBC and the VoA had applied for frequencies to the Laotian government, but had received no approval.




Branding China, May 18, 2008
Meeting the Volunteers, CRI, Nov 21, 2006


Friday, July 5, 2013

The China-Related Blogosphere: a Deserted Playground

It resembles an experience in a summer camp: you wake up at night and everyone seems to be asleep, just as you feel in the mood for a deck of cards.

I have read a number of posts during the past five years of blogging which said that the English-language Chinese blogosphere was dead. Those who have written this in the past may not write it anymore, because they don’t blog anymore – not about China, anyway. This would seem to suggest that the sphere is now dead and that therefore, there’s nobody who can say so now. The dead can’t know that they are dead.

Can you blog about China without being there? Proably - but it will become a different kind of blogging.

Can you blog about China without being there? Proably – but it will have to be a different kind of blogging.

EastSouthWestNorth, the arch bridge blog from Hong Kong, isn’t dead – there are still updates about Chinese sources at its top. But the last entry was in December last year, about Nobel Prize for Literature laureate Mo Yan.

The China Beat came to an end in July last year, and I didn’t even notice. Chinageeks most recent post dates back to February this year.

MyLaowai, once a great blog that pioneered a rather irreverent perspective on China, is only a shadow of its own past. Few posts, fewer comments, and the ones that do appear there keep me from commenting – it’s not my kind of company.

Generally, those who keep posting usually get rather few comments – that even seems to be true for Beijing Cream, kind of a tabloid for big and small news from China. King Tubby, a man with a blog of his own, but not that much about China, revived the idea – or illusion – of an existing sphere in December last year, but it wouldn’t last. (Some of the comments his posts caught may or may not be an indication why it wouldn’t.)

I realized how calm the sphere has become when I looked at the list of bloggers I interviewed and that I wanted to interview in this BoZhu series. Most who I asked had agreed to an interview and saw it through, nobody flatly declined, and in a few cases, it didn’t come to pass.

I don’t think the sphere is dead. But it is hibernating. It will come back to life once in a while, when something “big” happens in China, but it will never be as lively as it was around 2008. One blogger, Foarp, suggested that the sphere lost much of its activity between 2006 and 2008, when China began to comprehensively block the foreign blogs.

And then, there’s Twitter. To quite an extent, it seems to have replaced blogging – when it comes to the sphere, anyway. It is microblogging where the division between the sphere and its topic – China – becomes most apparent.

It wouldn’t need to be so, C. A. Yeung suggested in an interview in 2011. The difference between the two groups of bloggers could be bridged.

I’d happily participate in bridging the gap if this was still a sphere of blogs in the first place. But nothing on Twitter or Sina Weibo seems to last, most of it looks both chaotic and boring, and I doubt that I’ll ever become a microblogger in this life. Next life, something still hipper (and still more boring) will have replaced the microblogs.But I’m wondering: are there still active English-language Chinese blogs?

If so, please drop me a link. My kind of blogging doesn’t depend on “company”, but once in a while, it would be refreshing to read different perspectives, and to have discussions there.

Thursday, July 4, 2013

Huanqiu Shibao on Xinjiang: the “Five Not-Afraids”

The following editorial was published by Huanqiu Shibao, on Tuesday morning local Beijing time. It is a reaction to recent coverage on reported violence in Xinjiang which was said to have killed 35 people in June.

My translation of the editorial may contain errors. For example, the regular Chinese word for “terrorist” would be 恐怖分子 (terrorist element) or 恐怖主义者 (terrorist), but in this editorial, it’s 暴恐分子 which seems to read more like sudden-fear element. I translated the term as “terrorist” anyway.

Main Link: Using the five “Not Afraids” to knock the Terrorist Element’s Aggression out (用五个“不怕”打掉暴恐分子嚣张)

Editorial: Using the five “Not Afraids” to knock the Terrorist Element’s Aggression out

The arrogant aggression of the Xinjiang terrorist elements was fought down right away, but will it raise its head again in the future?  This doesn’t depend so much on the terrorist elements, but more so on our attitude.


Why could the terrorist elements be arrogant? Because they believe that the society that surrounds them “fears” the trouble they create. They are only a few people, but believe that today’s society is frail, and that they only need to “put lifes at danger” to impose imbearable shocks on society. Therefore, when society looks at their faces, they [the “elements”] think of themselves as something “very new”.


Now, we have to tell them by practical action that society in Xinjiang and in all of China is not afraid of them at all. We can obtain anything we strive for in terms of stability in Xinjiang, not to mention our nation-wide political design. If the terrorist elements dare to defy the law, we will resolutely eliminate them. Xinjiang and China will continue to advance.


The first meaning of “not being afraid” is that we care about real stability in Xinjiang, but we do not care about the image of Xinjiang being “very stable”. The violent forces of terrorism in Xinjiang have not been eradicated, and every once in a while, they may jump forward and create an incident and chime in with foreign anti-China forces. This is an obvious reality. We accept this phenomenon in Xinjiang, and we won’t put make-up on this [phenomenon].


But while many countries and areas worldwide are plagued by terrorism, Xinjiang is different from them. The terrorists’ capabilities there are small. They hardly have access to military weaponry or powerful explosives. Their main tools to commit their crimes are hacking knives. They can’t shake the foundations of Xinjiang’s stability, the overall situation is under control, the normal economic development is real, and the chances for committing crimes successfully generally remain very small. This reality and phenomenon in Xinjiang is “normal” by global standards. Such things happen in a modern and prosperous society.

然 而世界有很多遭恐怖主义困扰的国家和地区,但新疆与它们不一样。新疆暴恐分子的本事并不大,他们几乎得不到制式武器和威力强大的爆炸物,他们的主要作案工 具就是砍刀。他们动摇不了新疆社会稳定的根基,新疆大局可控、经济发展如常进行都是真实的,暴恐分子的作案得逞总体上仍是极低概率事件。新疆的这一现实和 形象在现代世界是“达标的”,它是偶尔出现暴恐事件的现代繁荣社会。

The second meaning of “not being afraid” is that officials in Xinjiang don’t need to be afraid of assuming responsibility. Cadres and police people all over Xinjiang have made great efforts and the policies applied in Xinjiang have been formulated under participation of the national level. As terrorist forces move fast and are contagious, terrorists incidents that happen in whichever place aren’t the sole responsibility of local officials, cadres and police, and Chinese society won’t complain about them. We understand their difficulties.


The third meaning of “not being afraid” that while everyone will fear individual misfortune, nobody fears that terrorist elements can bring about political threats. They are just a group of criminals, and won’t find [………..] Once they come up with a crime, a powerful nation will easily deal with them in accordance with the law.


The fourth meaning of “not being afraid” is that a resolute struggle against the Xinjiang terrorist elements will not lead to controversy or divisions within Chinese society.   Even if some people disagree about the administration of Xinjiang, there are no doubts that the terrorists must be dealt with toughly. The more resolutely terrorism is fought, the more united Chinese society will be.


The fifth meaning of “not being afraid” is that Western fault-seeking of our fight against terrorism should be like water running off a duck’s back. We will not, for the sake of “good reviews” from the West, be soft-hearted in dealing with terrorist elements. China has become ever firmer and will soberly achieve in this field, too.


As we are clear about these five “not afraids”, and act clearly, the Xinjiang terrorists will lose all the capital they need to threaten society. They will become more desperate, they will learn that they are extremely lonely, that they are criminals who will get very little echo, that they can’t influence Xinjiang’s and China’s politics, and they will have to ruminate about their own insignificance.


We believe that military and police presence will be needed on the streets of Xinjiang for a long time. This isn’t going to damage Xinjiang’s image. It will only maintain the pressure on the terrorist elements, and strengthen the sense of security among all nationalities.


The terrorist elements want to achieve their own “super-influence” in an exceptional atmosphere, but seeking truth in the facts will get embedded in every detail in Xinjiang, and the true nature of the terrorist elements will be unmasked. They count for nothing against twenty-three million Xinjiang nationality people and the 1.3 billion people of the entire country. How can they be arrogant? They are losing every spiritual sanctuary.


Monday, July 1, 2013

Journalism under Attack

Glenn Greenwald talking to the Socialism Conference in Chicago on June 29.

Transcript there.

From the introduction (not part of Greenwald’s talk):

There are people in our society who have remained consistent under Democrats and Republicans, who put principle over partisanship, who have committed to being the same people that they are, whether a Democrat is in office, or a Republican is in office.

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