Archive for the 'China' Category

China Hearts Africa: Beijing Does Deals, Not Gifts

Published on 7/12/2010 in Africa and China . Closed Tags: .

Thanks to Paul Kedrosky for this gem:

Good piece in Time (sic.) on China’s expanding love affair with Africa:

The ambition, speed and scale of Chinese involvement in Africa is extraordinary. According to Chris Alden, author of China in Africa, two-way trade stood at $10 billion in 2000. By 2006, it was $55 billion, and in 2009 it hit $90 billion, making China Africa’s single largest trading partner, supplanting the U.S., which did $86 billion in trade with Africa in 2009.

… Beijing doesn’t do gifts; it does deals. In Congo, China’s infrastructure-for-mines deal irked the International Monetary Fund (IMF). The Fund argued that Congo’s guarantee to China that it would recoup at least $3 billion in minerals was an IOU on Congo’s national assets and therefore a new debt. That fell afoul of debt-write-off conditions, which require that the debtor take on no new loans. “If the Congolese take the Chinese deal,” said a Western official familiar with the negotiations in mid-2009, “they will not get any more [Western] support.” A standoff ensued. An earlier deal, in 2007 with Angola, also outraged the IMF. It had been negotiating a new loan with Angola for years, with carefully calibrated conditions to block corruption and alleviate poverty. By paying Luanda $5 billion in return for oil concessions and infrastructure contracts, China effectively made the IMF redundant. [Emphasis mine]

State oppression, as carried out through the operations of China’s local goons

Published on 7/10/2010 in China and Foreign Policy . Closed

How did Xinhua get a county police chief to talk?  

(…) On this occasion, it was deeply satisfying to give the goons the slip as we left for the drive back to Suzhou, by luring them into a blind alley.

It is of course less fun if you have to live under them. It has long been clear that the local security apparatus sees a big part of its job to be preventing people from taking their legitimate grievances to higher organs of the state. The techniques of spying, snitching and low-level oppression, reminiscent of the Stasi, have rarely been spelt out so clearly as by a county police chief in Inner Mongolia, interviewed approvingly by Xinhua and translated here by the very good China Digital Times.

British crime no longer pays

Published on 7/9/2010 in China . Closed

Very interesting. An excerpt from Banyan’s notebook:

(…) Asking criminals why burglary across Britain has fallen by three-fifths since 1995, he finds that Chinese televisions, DVD players and the like have got so cheap they’re not worth the bother of nicking. The “China price”: keeping Britain safe.

China: where do you get the English teachers?

Published on 6/2/2010 in China and Education . Closed

The English teacher shortage is obviously acute, but only an indicator of the general education gap. Ezra Klein summarizes in WaPo:

(…) The reason for this is that there’s no one to teach English to a nation of 1.3 billion. The people who are proficient in both Chinese and English have better job opportunities than public school teacher. So you’ve got a lot of English classes, but fairly few English teachers, and so not much in the way of English proficiency. Maybe computer software will eventually make up the gap, but settling on a program and rolling it out across the country is a major project.

I spent some time tonight with some ex-pats who run a small company trying to spread Western educational techniques. Their argument was that the quality of China’s schools was, even more so than in the United States, dependent on the quality of China’s teachers. Competing in the new Chinese economy doesn’t mean learning about as much as the average person in your town, as it does in much of America. Instead, it means learning way more than the previous few generations, as the 20th Century saw a razing of China’s human capital.

In practice, that means learning up to the educational level of your teachers, as your parents and neighbors won’t be able to compensate for their failings the way they can in America. But how many good teachers are there? For that matter, how many good teachers can there be in a country where there’s enormous demand paying Western-influenced prices for the most skilled and educated workers?

This is the big difficulty as China tries to transition from an economy based mainly on cheap labor to one powered by innovation and knowledge industries. The country has enough humans to do it. What they need is the human capital. But it’s hard to go from having few workers ready to participate in the global economy to having a lot of workers ready to lead it. The hope is that the foreign firms will provide a kind of secondary schooling for China’s workforce, giving employees skills and perspectives that will allow them to strike out on their own. But the foreign firms are still mainly using China for cheap, low-skill labor, and that translates into a much slower form of economic advancement. China’s offering a lot of incentives for foreign investors who want more than that, but they don’t have the natural advantages in that area that they had when it came to offering a massive labor force.

China’s Internet obsession

Published on 3/11/2010 in China . Closed Tags: .

People in the country’s 60 largest cities spend 70 percent of their leisure time online. Seismic changes in the consumer market are likely as a result.

There is a very interesting McKinsey & Co. article out this week. The penetration and growth rate of the Chinese internet is stunning. China is a bigger deal for Google than I realized.

Just how big (or small) a market would Google leave behind were it to pull out of China today? In January, China Internet Network Information Center, the country’s official domain registry and research organization, reported that by the end of 2009, the number of Internet users in China had touched 384 million, more than the entire population of the United States. That’s an increase of around 50 percent over 2008. Moreover, 233 million Chinese—twice as many as in the previous year—accessed the Net on handheld devices, partly because China’s cellular providers started offering 3G services widely last year.
The Chinese are obsessed with the Internet. People in the 60 largest cities in China spend around 70 percent of their leisure time on the Internet, according to a survey we conducted in 2009. In smaller towns, the corresponding number is 50 percent. The PC is fast replacing the TV set as an entertainment hub, and emotions run high over who gets to log on and for how long. In a small city in northwest China, for instance, a man told one of us that domestic squabbles over using the PC got so out of hand that his wife and he discussed spending, for them, a large sum of money to buy another machine—or filing for divorce. They eventually bought a second PC and saved their marriage.
People in China use the Internet more for entertainment—playing online games, messaging, downloading music and movies, and shopping—than for work. The Chinese place great stock in the opinions of online product reviewers. One in five consumers between the ages of 18 and 44 won’t purchase a product or service without first researching it on the Internet. They shop online at auction Web sites such as Taobao, paying for products and services with prepaid Taobao cards that the post offices sell for a small commission. The volume of e-commerce in China more than doubled last year.
Unsurprisingly, both Chinese and foreign consumer-facing companies are pouring money into Internet marketing. Online advertising has been growing at between 20 and 30 percent a year—twice the print media’s growth rate—and the market was around $3 billion (20 billion renminbi) in size last year.

Please continue reading…

Deborah Brautigam on Sino-African Development Partnerships

Published on 2/28/2010 in Africa , China and Economics . Closed Tags: , .

If you have been wondering about China’s expanding role in Africa, read this:

In Africa’s Eastern Promise, a recent article in Foreign Affairs, Deborah Brautigam writes of the two-part development strategy that China pursues with a select number of partner countries in Africa. The strategy consists of loans backed by natural resources and special economic zones—ideas that come directly from China’s development experience at home.

China Eximbank issues market-rate loans that finance infrastructure projects such as roads, railways, hydropower, schools, water systems, and hospitals in Africa. Borrowers repay the loans with natural resources—oil in countries like Angola, Nigeria, and the Republic of the Congo, cocoa beans in Ghana, and copper in the Democratic Republic of the Congo. More often than not, Chinese firms receive the infrastructure contracts, but the agreements typically contain provisions that specify a competitive bid process and a degree of subcontracting to local firms.

China also partnered with Nigeria, Mauritius, Zambia, Ethiopia, and Egypt to build special economic zones (SEZs) oriented toward the type of light-manufacturing that drove Chinese growth in the recent past. In most cases, the Chinese agencies with experience building China’s own SEZs advise the development of the new zones in Africa. The zones will allow African “countries to improve poor infrastructure, inadequate services, and weak institutions by focusing efforts on a limited geographical area.” With the new zones, China appears have learned some lessons from its past development failures in Africa:

“For decades, Chinese teams in Africa constructed agricultural projects or built factories only to turn them over to inexperienced and sometimes uninterested host governments. Once the Chinese left, the benefits of the projects declined, prompting the host governments to ask the Chinese to return. Now, Chinese companies are taking responsibility for both designing and building the zones and then managing them as businesses.”

Though the prospect of China partnering with authoritarian regimes in Africa may seem disconcerting at first, Brautigam calls on Westerners to be open-minded about China’s initiatives in Africa. Indeed, rich Western countries might do well to follow China’s lead. Where traditional aid programs have failed, forging partnerships with African leaders and establishing special zones could be a more effective way for the West to promote development and respect for human rights.

Brautigam’s latest book, The Dragon’s Gift: The Real Story of China in Africa, treats the development relationship between China and Africa in greater detail.

[From Deborah Brautigam on Sino-African Development Partnerships]

Emerging market bonds: bull or bubble?

Published on 2/7/2010 in China and Economics . Closed Tags: , , .

Buttonwood at The Economist November 28, 2009:

(…) Matt King, a strategist at Citigroup, cites IMF figures showing that the debt-to-GDP ratio of the leading 20 developed nations is already twice that of the top 20 emerging markets. By 2014 it will be three times as high.

Every bubble needs a plausible narrative, whether it is the transformative power of the internet or the growth potential of emerging markets. It usually needs easy money as well—and near-zero short-term interest rates in America, Europe and Japan fit the bill, as they encourage investors to search for yield. Bubbles also normally need a trigger event to give them impetus. In this case the credit crunch gave investors cause to doubt the growth prospects of rich-world markets and to favour developing countries.

The bullish argument for emerging-market bonds is based not just on the state of government finances but on the outlook for foreign-exchange markets. The American government may talk about the desirability of a strong dollar but it seems to have no intention of doing anything about it. Governments in Japan and the euro zone are hardly applauding the resulting strength of the euro and yen. By contrast, argues Mr King, some emerging countries may find their currencies appreciating, no matter what policy they follow.

(…) Buying emerging-market debt is not quite as straightforward as buying equities. The countries to which investors may most desire exposure (China and India, for example) are underweighted in emerging-market-bond indices relative to the likes of Venezuela and Lebanon. There is also the question of whether to buy debt denominated in local currencies, which is less liquid but carries a higher yield. Regardless of the country’s chequered financial history, Brazil’s local-currency debt, yielding 11.8%, must look awfully tempting to income-seeking investors at the moment.

Please continue reading…

Google is playing hardball with China

Published on 1/27/2010 in China . Closed

This is from the Google Blog 13 Jan 2010. It is, of course, a negotiation — one where Google threatens to pull out (unless China gives what they want — the public has no information on the position of either side).

Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident–albeit a significant one–was something quite different.

First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.

Third, as part of this investigation but independent of the attack on Google, we have discovered that the accounts of dozens of U.S.-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties. These accounts have not been accessed through any security breach at Google, but most likely via phishing scams or malware placed on the users’ computers.

We have already used information gained from this attack to make infrastructure and architectural improvements that enhance security for Google and for our users. In terms of individual users, we would advise people to deploy reputable anti-virus and anti-spyware programs on their computers, to install patches for their operating systems and to update their web browsers. Always be cautious when clicking on links appearing in instant messages and emails, or when asked to share personal information like passwords online. You can read more here about our cyber-security recommendations. People wanting to learn more about these kinds of attacks can read this Report to Congress (PDF) by the U.S.-China Economic and Security Review Commission (see p. 163-), as well as a related analysis (PDF) prepared for the Commission, Nart Villeneuve’s blog and this presentation on the GhostNet spying incident.

We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech. In the last two decades, China’s economic reform programs and its citizens’ entrepreneurial flair have lifted hundreds of millions of Chinese people out of poverty. Indeed, this great nation is at the heart of much economic progress and development in the world today.

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.

Update: Added a link to another referenced report in paragraph 5.

Posted by David Drummond, SVP, Corporate Development and Chief Legal Officer

[From A new approach to China]

China’s Commitment is Significant

Published on 12/10/2009 in China and Energy Policy . Closed

Rarely is there any “good news” regarding progress to zero or low carbon economies. In fact the gloomiest outlook is often focused upon the projected GHG burden of China and India. That may still turn out to be true, but there are some indications that China is in fact doing something different — by implementing policies and incentives that would be totally impossible in the developed democracies. China “fell off the wagon” in 2004-2005 and may well do so again as the Chinese provinces are fighting the central government policies. And the data we gave on energy intensity is dependent on Chinese government statistics.

For reference I will excerpt my 29 September comments on China’s on-again, off-again energy intensity policies – from Dispelling China’s Environmental Myths:

There is some unreported good news regarding China’s energy policy. First, the jump in energy intensity in 2002-2004 was related to the abandonment by Bejing of their intensity improvement goals, including a dismantling of the bureaucracy that had been available to advise industry on technology to improve intensity. That policy was reversed in 2005, and now China seems to be back on track to improve intensity while growing rapidly at the same time. That is atypical of developing economies.

For an informed discussion, I highly recommend the Stanford Center for Social Innovation podcast interview with Mark Levine: “Dispelling China’s Environmental Myths“. Dr. Levine is group leader of the China Energy Group at Lawrence Berkeley National Laboratory (LBNL)

Two days ago William Chandler published Memo to Copenhagen: Commentary is Misinformed—China’s Commitment is Significant. Dr. Chandler goes into more detail on the results achieved by Chinese central government policy. I think this confirms Mark Levine’s main conclusions. Here’s an excerpt on the policy switches and the resulting energy intensity changes:

China once before did achieve a high rate of energy (and carbon) intensity reduction over a long period of time. In the 1980s and 1990s, post-Mao China was exceptionally wasteful in energy use, as were all centrally planned economies. Reform, restructuring, energy shortages, and exceptionally strong regulation enabled China to make rapid reductions in energy and, therefore, carbon intensity.

But China’s economy has not performed well over the last decade in reducing energy and carbon intensity. Intensity turned sharply upward in 2001 and got worse each year through 2006.2 Energy and emissions increased much faster than the economy between the years 2000 – 2005. Technically speaking, the energy and carbon GDP elasticity was well above unity.

Changes in Chinese Energy Intensity

Full size PDF of Figure 2…

Only a draconian effort to reduce energy intensity by 20 percent by 2010 reversed that trend. The Chinese central government imposed a five-year policy to reduce year 2010 energy intensity by 20 percent relative to 2005. The policy is decided by the central government, but is implemented by provincial and city governments, who see it as a drag on GDP growth and a weight around the neck of local development plans. That policy is set to expire next year.

(…)

Moreover, many of the provinces are unlikely to meet their current targets, and can be expected to oppose their continuation and strengthening (see Figure 3). The current energy intensity policy (which the author of this paper has supported) can legitimately be described as severe, even draconian. The policy imposes hundreds of detailed industrial efficiency standards to a degree unparalleled in any other country in the world. The policy has forced closure of tens of thousands of factories, power plants, and production lines that failed to meet the standards. It is unimaginable that such a policy could ever be enacted in the United States, much less be continued for another decade. It’s a non-trivial error to call it a “reference case,” as the IEA has done.

William Chandler is a fellow at the Carnegie Endowment for International Peace.

Charter Cities: North vs. South Korea

Published on 10/26/2009 in China and Economics . Closed Tags: .

Paul Romer on the impact of the institutional differences which have been tested for half a century on the Korean peninsula. NOKO is an excellent refutation of the argument that culture dominates rules “it won’t work to reform their government because their culture is so different”.

(…) There are many statistical measures of the large difference in the quality of life between the North and the South. One gripping visual indication comes from a satellite picture of the Korean peninsula at night. Compared to its neighbors, North Korea (outlined for clarity) seems like a black hole. South Korea, which looked like the North within living memory, is now a sea of lights.

Until the end of World War II, the North and South shared a common set of formal and informal rules, first as an independent nation, then under occupation by the Japanese. When the allies disarmed the occupying Japanese forces, Russia set up one system of government above the 38th parallel. The U.S. set up a different one below this arbitrary line on a map.

(…)

In today’s world, charter cities offer the best strategy—perhaps the only feasible strategy—for giving people the option to move to a place with a new system of government. Charter cities can also give the leaders of founding nations the chance to set up new systems of government that can, in the best case, do what better government did for South Korea, unleash the potential of the people who use its rules to connect with each other.

I’m wondering if a charter city on the Chinese border might offer a way forward for the North Korean peasants – if NOKO did not gun them down when attempting to cross over. As it stands China tolerates NOKO criminality in nukes and drugs because they fear a collapse which would lead to millions of starving immigrants.

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