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thepeel
Joined: 08 Aug 2004
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 Posted: Thu Apr 12, 2007 9:03 am Post subject: Have China Scholars All Been Bought? |
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Academics who study China, which includes the author, habitually please the Chinese Communist Party, sometimes consciously, and often unconsciously. Our incentives are to conform, and we do so in numerous ways: through the research questions we ask or don�t ask, through the facts we report or ignore, through our use of language, and through what and how we teach.
Foreign academics must cooperate with academics in China to collect data and co-author research. Surveys are conducted in a manner that is acceptable to the Party, and their content is limited to politically acceptable questions. For academics in China, such choices come naturally. The Western side plays along.
What happens when we don�t play along is all too obvious. We can�t attract Chinese collaborators. When we poke around in China to do research we run into trouble. Li Shaomin, associate professor in the marketing department of City University in Hong Kong and a U.S. citizen, spent five months in a Chinese jail on charges of �endangering state security.� In his own words, his crimes were his critical views of China�s political system, his visits to Taiwan, his use of Taiwanese funds to conduct research on politically sensitive issues, and his collecting research data in China. City University offered no support, and once he was released he went to teach at Old Dominion University in Virginia. One may wonder what five months in the hands of Chinese secret police does to one�s psyche, and what means the Party used to silence Mr. Li. To academics in Hong Kong, the signal was not lost.
Our self-censorship takes many forms. We ask Western instead of China-relevant questions. We try to explain the profitability of state-owned enterprises (SOEs) by basic economic factors, when it may make more sense to explain it by the quality of enterprise management (hand-picked by the Party�s �Organization Department�), or by the political constraints an enterprise faces, or by the political and bureaucratic channels through which an enterprise interacts with its owners, employees, suppliers and buyers. But how to collect systematic information about the influence of the Party on the operation of a state-owned or state-controlled enterprise, when these are typically matters that nobody in the enterprise will speak about?
We talk about economic institutions and their development over time as if they were institutions in the West. �Price administration� regulations, central and local, abound, giving officials far-reaching powers to interfere in the price-setting process. Yet we accept official statistics that show 90% of all prices, by trading value, to be market-determined. We do not question the meaning of the Chinese word shichang, translated as �market,� but presume it to be the same as in the West.
Similarly, we take at face value China�s Company Law, which makes no mention of the Party, even though the Party is likely to still call the shots in the companies organized under the Company Law. Only if one digs deeper will one find unambiguous evidence: The Shaanxi Provincial Party Committee and the Shaanxi government in a joint circular of 2006 explicitly require the Party cell in state-owned enterprises (including �companies�) to participate in all major enterprise decisions; the circular also requests that in all provincial state-owned enterprises the chairman of the board of directors and the Party secretary, in principle, are one and the same person. At the national level, the leadership of the 50 largest central state-owned enterprises�enterprises that invest around the world�is directly appointed by the Politburo. Economists do not ask what it means if the Party center increasingly runs enterprises in the U.S. and Europe.
Are we na�ve? Or are we justified in ignoring the central bank governor�s second�or rather, first�life as Party secretary? Are we subconsciously shutting out something that we do not comprehend, or something we do not want to see because it doesn�t fit into our neat, Western economic concepts?
Article after article pores over the potential economic reasons for the increase in income inequality in China. We ignore the fact that of the 3,220 Chinese citizens with a personal wealth of 100 million yuan ($13 million) or more, 2, 932 are children of high-level cadres. Of the key positions in the five industrial sectors�finance, foreign trade, land development, large-scale engineering and securities�85% to 90% are held by children of high-level cadres.
A general dearth of economic information shapes our research. Statistics on specific current issues are collected by the National Bureau of Statistics on special request of the Party Central Committee and the State Council. None of this information is likely to be available to the public. The quality of the statistics that are published comes with a large question mark. Outside the realm of official statistics, government departments at all levels collect and control internal information. What is published tends to be propaganda�pieces of information released with an ulterior objective in mind. One solution for China economists then is to resign themselves to conducting sterilized surveys and to building abstract models on the basis of convenient assumptions�of perfect competition, profit maximization given a production technology, household utility maximization with respect to consumption and subject to financial constraints, etc. How much this can tell us about China is unclear.
We speak of the Chinese �government� without further qualification when more than 95% of the �leadership cadres� are Party members, key decisions are reached by leadership cadres in their function as members of Party work committees, the staff of the government Personnel Ministry is virtually identical to the staff of the Party Organization Department, the staff of the Supervision Ministry is virtually identical to the staff of the Party Disciplinary Commission, and the staff of the PRC Central Military Commission is usually 100% identical to the staff of the Chinese Communist Party�s Central Military Commission. Does China�s government actually govern China, or is it merely an organ that implements Party decisions? By using the word �government,� is it correct to grant the Chinese �government� this association with other, in particular Western, governments, or would it not be more accurate to call it the �government with Chinese characteristics� or the �mafia�s front man�? Who questions the legitimacy of the Party leadership to rule China, and to rule it the way it does?
The Party�s�or, the mafia�s�terminology pervades our writing and teaching. We do not ask if the Chinese Communist Party is communist, the People�s Congresses are congresses of the people, the People�s Liberation Army is liberating or suppressing the people, or if the judges are not all appointed by the Party and answer to the Party. We say �Tiananmen incident,� in conformance with Party terminology, but called it �Tiananmen massacre� right after the 1989 Tiananmen massacre, when �incident� would have made us look too submissive to the Party.
What is not normal is accepted as normal for China. Hackers were collecting the incoming emails of a faculty member of the University of Hong Kong from the university�s server until they were found out in June 2005, when they accidentally deleted emails. The hackers came from three mainland Internet provider addresses, and all three IP addresses are state telecommunications firms. Within China, the staff of the foreign students� dormitories includes public security officials who keep tabs on foreign students and compile each student�s file. In a Shanghai institution of tertiary education, typing �Jiang Zemin� into a search engine from a computer located on campus, three times in a row, leads to the automatic shutdown of access to that search engine for the whole campus. The Party is rumored to employ tens of thousands of Internet �police.� Phone calls are listened to, if not systematically recorded. Emails are filtered and sometimes not delivered. Who will not learn to instinctively avoid what the Party does not want them to think or do?
Party propaganda has found its way deeply into our thinking. The importance of �social stability� and nowadays a �harmonious society� are accepted unconditionally as important for China. But is a country with more than 200 incidents of social unrest every day really socially stable, and its society harmonious? Or does �socially stable� mean no more than acceptance of the rule of the mafia?
�Local government bad, central government good� is another propaganda truism that is accepted unquestioningly in the foreign research community, informing and shaping research questions. Yet, viewing the Party as a mafia, there is no room for such niceties, and reporting outside academia indeed suggests that the center hides a rather hideous second face, and inevitably does so for a purpose.
We see the �ends��successful reform�and don�t question the �means.� The Party�s growth mantra is faithfully accepted as the overarching objective for the country and the one measure of successful reform. Nobody lingers on the political mechanisms through which growth is achieved. The mafia runs China rather efficiently, so why worry about how it is done, and what the �side effects� are? We obviously know of the labor camps into which people disappear without judiciary review, of torture inflicted by the personnel of state �security� organs, and of the treatment of Falun Gong, but choose to move on with our sterilized research and teaching. We ignore that China�s political system is responsible for 30 million dead from starvation in the Great Leap Forward, and 750,000 to 1.5 million murders during the Cultural Revolution. What can make Western academics stop and think twice about who they have bedded down with?
If academics don�t, who will? The World Bank and other international organizations won�t because they profit from dealing with China. Their banking relationship depends on amicable cooperation with the Party, and a de facto requirement of their research collaboration is that the final report and the public statements are acceptable to Party censors. The research departments of Western investment banks won�t because the banks� other arms likely depend on business with China.
The size of China�s economy will exceed that of the U.S., in purchasing power terms, by 2008 or 2009. China is a country with which Western economies are increasingly intertwined: A quarter of Chinese industry is foreign-owned and we depend on Chinese industry for cheap consumer goods. Ultimately, our pensions, invested in multinationals that increasingly produce in China, depend on the continued economic rise of China. But does the West understand that country and its rulers? At what point, and through what channels, will the Party leadership with its different views of human rights and the citizens� rights affect our choices of political organization and political freedoms in the West (as it has affected academic research and teaching)? And to what extent are China researchers guilty of putting their own rice bowl before honest thinking and teaching? |
http://www.feer.com/articles1/2007/0704/free/p036.html
I think that this article touches a very big question. How much of the China-obsession in finance, business and economics is a bubble resting on a bed of misinformation/misunderstanding? My own personal position is that China has far, far more problems in the short, medium and long-term than many people want to believe but that the 'market' is irrationally trusting the CCP's official statistics/ideas as an accurate representation of what is happening in the nation.
Any nation that has 600,000,000 people on less than 2$/day is exceedingly vunerable to any inflationary pressure.. Even the smallest changes could lead the left behind to erupt. And pegged currencies have a very bad history (with exceptions such as Hong Kong and Singapore which have pegged and 'managed' currencies respectively). I think the China boosters are being very naive. But that is just my opinion. |
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stevemcgarrett
Joined: 24 Mar 2006
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| Posted: Thu Apr 12, 2007 9:11 pm Post subject: |
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BJWD:
Great thread topic, especially for someone like me who's intensely interested in China.
This article raises a legitimate concern and addresses it from a perspective that is rare.
I'll have more to say later but for now suffice it to say that Western media has not kept pace with the changes in China over the past two decades nor with the demographic landscape of this huge and unwieldy nation. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Apr 13, 2007 1:07 am Post subject: Re: Have China Scholars All Been Bought? |
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| BJWD wrote: |
| And pegged currencies have a very bad history (with exceptions such as Hong Kong and Singapore which have pegged and 'managed' currencies respectively). I think the China boosters are being very naive. But that is just my opinion. |
But China's currency hasn't exactly been pegged for almost two years now. Although, I agree the China boosters aren't taking full stock of economic history, particularly the Japanese and Korean experiences of the past few decades.
I was emailed this article by a friend stateside. The parts you bolded were also those that caught my eye.
In America, we consider the current collusion of business interests and our representatives via lobbying to be disturbing. What about the China? I mean, for god's sake, these aren't government officials on the take, these are government officials establishing their own personal corporate dynasties.
BJWD, I know you have commented on the Chinese market before. I wanted to reply a few months ago, but my post ran so long that I lost it (you know, the Dave's double login). All the major accounting firms have basically said that the jig in China is up. Essentially, there are over 700 billion dollars worth of non-performing loans (NPLs) on the books. Who knows how many NPLs there are off the books. Even worse, there are a great many more enterprises which are posting negligible returns, which these accounting firms cited as a larger problem. This started in May '06, and continued through that summer. I had hoped the Asian market crash from February was a correction, but it looks as if development continues unhindered. I believe a lot of people who don't know better are having a romance with a Chinese economy of which they are generally ignorant.
In Beijing, you can see a lot of office buildings that have been built around the 2nd Ring that are simply empty. They have been that way for awhile. This is purely anecdotal, but taken together with everything that A) the major accounting firms have told us, B) the massive and under-reported incidents of unrest in the countryside, C) the gross nepotism (tai duo guanxi-zhuyi?), it contradicts the idea that China will be able to post 7-8% growth, much less growth at half that rate, for the next decade.
Naive is a nice word for China-boosters. I would call them ignorant. [/quote] |
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thepeel
Joined: 08 Aug 2004
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| Posted: Fri Apr 13, 2007 1:27 am Post subject: |
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| In Beijing, you can see a lot of office buildings that have been built around the 2nd Ring that are simply empty. They have been that way for awhile. This is purely anecdotal, but taken together with everything that A) the major accounting firms have told us, B) the massive and under-reported incidents of unrest in the countryside, C) the gross nepotism (tai duo guanxi-zhuyi?), it contradicts the idea that China will be able to post 7-8% growth, much less growth at half that rate, for the next decade. |
This is a huge topic. HUGE. Dave's just can't do it justice.
But, about the buildings, yes. The market expects upward currency revaluations and is investing in real estate as a way to park money until then. Much of this money is "round-tripping" due to preferential tax policies given to foreign money. So, bank manager "a" jacks 10mill from a bank, uses the Triads to get it to HK, at which point he buys a few condo buildings in Vancouver (which is interesting too.. The two largest industries in Van, weed and construction, are both dirty money). Money now clean, he invests it in property in China as a "foreign investor" getting less taxes and waits for the currency to appreciate.
You have the Eastern part of China growing at about 18% annually and the interior growing at about 1.5% annually with little in the way of productivity gains. This FAST growing inequality is just one of the massive problems brewing there. Corruption is another. Environmental degradation occurs on a scale that would drive limo-environmentalists in the West to suicide.
Many individual Chinese borrow from the Triads or other quasi criminal syndicates and NOT banks and are in debt to their ears and the state is involved in a defrauding of her own citizens to an unmeasurable degree. The estimate is 87-95 billion USD/year is lost in bank fraud. By fraud, I mean loans that are never intended to be paid back.
India is an even bigger joke. They can't even get airports, roads or functioning EPZ's built.
We might want to hold off on the "Asian Century" nonsense for a few hundred more years. |
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thepeel
Joined: 08 Aug 2004
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| Posted: Fri Apr 13, 2007 1:37 am Post subject: |
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Another point,
The mag that ran this article, the FEER, is the best mainstream source of balanced info on China around IMO. I actually can't get it in Singapore any longer as the government here has banned it. It is illegal to bring it into the city-state. I'll subscribe to it once I leave the Lion City. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Apr 13, 2007 1:40 am Post subject: |
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| BJWD wrote: |
Many individual Chinese borrow from the Triads or other quasi criminal syndicates and NOT banks and are in debt to their ears and the state is involved in a defrauding of her own citizens to an unmeasurable degree. The estimate is 87-95 billion USD/year is lost in bank fraud. By fraud, I mean loans that are never intended to be paid back. |
This to me seems the most damning, and calls into question those record growth rates in the East.
Its bad loans, and bad lending, that has sparked most of the major financial crisises following the Cold War. This includes the '97 Asian crisis, and also includes the Mexican crisis that happened soon after.
For anyone who would defend the idea that China's growth rate will continue as high as it has, or even safely taper off, I would ask: what is so fundamentally different today about China than all those failed economies of the late 90s? |
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thepeel
Joined: 08 Aug 2004
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| Posted: Fri Apr 13, 2007 1:51 am Post subject: |
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| It will be an interesting ride. I don't know if I trust the CCP to successfully manage all looming problems. |
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thepeel
Joined: 08 Aug 2004
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| Posted: Sat Apr 14, 2007 8:31 am Post subject: |
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Kuros, your comments reminded me of something I read many months back for school. Tonight, while rummaging around my bookshelves, I found it.
Here is Ruchir Sharma, a MD at Morgan Stanley, on China.
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Everyone seems to be convinced that a new superpower is on the verge of overtaking the US. History, of course, never plays out in purely linear fashion. We've seen this before. In the 1990s it was the small economies of East Asia, the "Asian Tigers", which were the wave of the future. recall that in the 1950s, based on linear projections, Burma and the Philippines were supposed to become the most developed countries of the region. And in the early 1980s the CIA was projecting that the Soviet economy was nearly as large as that of the US.
Linear projections are not the entire story; they do not encompass the quality of growth or social benefits. it takes a lot more than uninterrupted growth rates to match or even surpass the United States. We don't focus on the very real challenges China faces in making it to the next level of development. I wonder how, in five years time, we are going to evaluate some of these overblown expectations about China.
It is popular to underestimate how well the US economy is doing, and to be worried about the Chinese juggernaut. China is still very dependent on exports to the US to sustain its economic growth. Domestic demand in China is flat. For along time to come, China is going to need a healthy, strong and prosperous US to ensure its own prosperity and development. |
From the Sept/Oct The National Interest. (I typed it so any mistakes are my own). |
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