Archive | March, 2013

China voice ‘strong dissatisfaction’ with new US IT restrictions

30 Mar

Chinese authorities are unhappy with recently passed US laws on ‘cyber espionage’ which have resulted in the restriction of imports (into the US) of Chinese IT products. In a recent state media broadcast Chinese officials have stated their ‘resolute opposition’ to the new changes. These comments are the latest in a series of events that have led to an ever-increasing friction between the two nations, following accusations by the US that China was supporting a number of hackings on US companies.

China’s IT exports to the US are worth almost $130 billion (as of May 2012) and with these new cyber laws limiting these exports, it’s easy to see why China are less than happy with the situation. The main issue is that Chinese authorities feel they are being unfairly punished and that the hacking claims are simply a case of false accusations. A member of the ministry of commerce highlighted the significance of the new laws by arguing that they will have a large detrimental impact on trade between the two nations, well as damaging their trust. Chinese officials have since urged the US to reconsider the restrictions. One thing is certain, if these laws are to be implemented, it will not be without consequences.

Source: http://in.reuters.com/article/2013/03/30/china-us-trade-idINDEE92T01320130330

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Video

Migrants Dilemma

29 Mar

http://www.bbc.co.uk/news/world-asia-china-21963430

A very modern Catch 22 as migrant workers expand towns and High-rises they are forced out of the homes they live in. This video also highlights how there is discrimination of migrant workers and how they are financially marginalised by society through low pay.

China and its forced American friendship

19 Mar

The relationship between China and America has become more and more strained over the last few years due to a spectrum of issues. The economic depression saw American economists suggesting a return to protectionist policies and stopping outsourcing to China. At the same time China is trying to secure its regional power by increasing its military might. This has aggrovated their neighbours as they see China becoming an imperial power trying to assert control through force. A third point of conflict between America and China is Chinas desperate need for more energy.

 

At the moment there is a discussion in America about the countries future economic relation with China. Obama’s first treasury secretary, Timothy Geithner, damned the way china manipulated its currency. By not only having a very large trade surplus with America, china had then used American dollars to invest in American businesses without letting the Chinese currency float freely on the market. As a reaction to this some economists, such as the economic Nobel Prize winner Paul Krugman, suggest increasing tariffs on Chinese goods. A return to protectionism would not be popular and the results would not be pleasant in the slightest.

 

However it must be taken into account that a lot of America’s spending recently has been on the Chinese credit card. This creates a confused and complicated picture. China needs America to purchase the goods it exports and America needs China to continue funding its public spending. This creates a very tense and necessary friendship. Two of the world’s biggest traders on the global stage need each other out of economic necessity but don’t really want each other. It could be suggested that there may in the near future, a race between America and China to find other economic partners to rely on so they are not as interdependent as they are now.

 

Another flash point between the two nations is the South pacific and more specifically the South China Sea. As America refocuses it’s foreign policy towards the South Pacific and its variety of allies, such as Japan and Australia, China is building its naval fleet in order to become a regional power. It is obvious these two foreign policies are not designed to work together. America must appear strong to its allies, not only to maintain its image as the only global superpower but for its own battered ego after the experience of Afghanistan and Iraq. China on the other hand is forced by the public to secure the disputed island chains referred to as the Spratlys and the Parcels, amongst other names. Vietnam, the Philippines, Maylaysia and Brunei all lay claims to these islands as well. This sets up a face-off between the American allies and China’s increasingly powerful navy.

 

It must be taken into account the role of the two Koreas in this regional dispute. Despite neither laying claim to the islands both Koreas have influence in the region. If there was a conflict over the islands China would have to face the prospect of an American army on its doorstep with only North Korea as a buffer zone. All this suggests that there is a taut scene in the South China Sea and neither America nor China have the decisive edge to strike first, thus they must reign in their allies so they are not drawn into a conflict.

 

An additional subject of disagreement between America and China is the energy problem. China needs a constant and large source of energy from abroad; at least 60% of its oil comes from the Middle East. China recognises that it is in a vulnerable position because its use of energy is currently inefficient. This is proven by around 750,000 deaths a year due to pollution in China.

 

Currently the US Navy is based around the straights of Taiwan and other strategic locations could sever the important fuel flowing into China. This has caused the Chinese to buy up oil fields abroad rather than just import the oil, in order to take physical control of their energy and establish fuel security. However if oil prices are to drop rapidly at any point this may be a severe blow to the Chinese. There is also the problem that Chinese oil companies are seen to be doing business with ‘bad’ countries, those where American sanctions prevent other nations from working there. The future of China’s energy security is something not taken lightly by the communist leadership and if America does prepare itself it may find the Chinese outplaying them at a game they began.

 

In conclusion, in can be seen that America and China are friends of necessity. Until one achieves the upper hand or the other falters then there shall be an equilibrium not seen since after the Berlin wall fell.

 

 

 

Sources

 

http://www.bbc.co.uk/news/world-asia-pacific-13748349

 

http://www.economist.com/node/14678579

 

McGregor, Richard. “750,000 a year killed by Chinese pollution.” Financial Times 2 (2007).

 

Shirk, Susan , China: Fragile Superpower (Oxford, Oxford University Press, 2008)

 

Hutton, Will, The Writing on the Wall: China and the West in the 21st Century (London, Brown Little, 2006)

 

Yahuda, Michael, The International Politics of the Asia-Pacific (Oxon, RoutledgeCurzon, 2009)

Could the knife and fork replace chopsticks?

19 Mar

A Chinese tradition that has been in existence for 4000 years could be under threat. The Chairman of Jilin Forestry Industry Group has suggested that the production of chopsticks is unsustainable, as it is no longer possible to continue chopping down 20 million trees a year to produce around 80 billion pairs of chopsticks a year. He stated that “we must change our consumption habits and encourage people to carry their own tableware”, he even mentioned an idea that metal knives and forks should be available in restaurants. This could prove a difficult part of the Chinese culture to change seeing as many people are opposed to the idea, however it could become necessary in order to help sustain the environment.

Sources:
http://www.telegraph.co.uk/news/worldnews/asia/china/9926599/Chinese-must-swap-chopsticks-for-knife-and-fork.html

The New Era in Beijing

18 Mar

As the China People’s Congress approves the new cabinet and Xi Jinping is sworn in as president, 14th March, a new transition has been completed in Chinese politics.

Xi Jinping is known as a political and economic reformer and has recently talked about a ‘renaissance’ in China’s future. However in his speech which closed the annual National People’s Congress, Xi Jinping stressed a nationalist tone which reinforces the view he will pursue an assertive foreign policy, stating that the military should improve its ability to “win battles and… protect national sovereignty and security”. Though reform did look to appear on the horizon as both Xi JInping and Li Keqiang talked of the corruption within the party and Li Kenqiang promised to reform the central government, citing the growing inequality gap and “extravagance” in government spending.

The Chinese media also focused on reform in the new era, the China Daily citied economic slowdown, corruption, healthcare and pollution as all issues in need of tackling through reform. Wen Wei Po also gave the territorial disputes as a new challenge to be faced by the leadership as well as increased US presence in the Asia-Pacific region, however Li Keqiang, when talking of Chinese-US relations, stated that “common interests far outweigh our differences”.

Economic growth was also a key topic as Li Keqiang said that the government was unlikely to reach its economic growth target of 7.5% for the year, while central government funds increases by only 1.6% over January and February. However this unlikely to affect  reform as spending on social programs will only increase.

Greater democratic reform may also be part of China’s future, Xi Jinping in his speech stated “I will accept supervision and monitoring from the people”, which seemed to suggest more democratic tendencies maybe part of China’s political reform as public support for democracy grows within China. The Hong Kong Economic Journal also states that “the political structure of a one-party monopoly of power is no longer able to meet the diverse demands of society. The later the Xi-Li system embarks on political reform, the greater the pressure it will encounter”. Despite this, the Apple Daily warned that unless Xi Jinping was prepared to separate the Communist Part of China from the government then political reform looked unlikely, though Xi Jinping has urged for more competitive election for China’s elite by having more candidates than available seats. However small this may be, it could be the start of a new era for political reform in China.

The new leadershp:

Xi Jinping: President of the People’s Republic of China (also General Secretary of the Communist Party of China, Chairman of the Part Central Military Commission Chairman of the State, Central Military Commission)

Wang Yi: Foreign Minister of the People’s Republic of China

Lou Jiwei: Finance Minister of the People’s Republic of China

Zhou Xiaochouan: Central Bank Chief

Li Keqiang: Premier of the People’s Republic of China

Sources:

 http://www.bbc.co.uk/news/world-asia-china-21797185

http://www.bbc.co.uk/news/world-asia-china-21819494

http://www.bbc.co.uk/news/world-asia-china-21812057

http://uk.reuters.com/article/2012/11/06/us-china-congress-idUSBRE8A50J420121106

http://www.cbsnews.com/8301-202_162-57574750/chinas-new-leader-rejects-hedonism-and-extravagance/

China’s economy

14 Mar

Since the reforms beginning in the late 1970’s, China’s opening up of its market to foreign investors has been a source of economic change and international praise. In 2012, China’s gross domestic product made up 12% of the Worlds GDP, and the country was responsible for 6% of all world outputs. However, following the financial crisis of 2007-2008, which saw a global downturn in the levels of economic growth, the Chinese economy has suffered. However, despite the global downturn in economic productivity, the Chinese economy continued to grow at unprecedented rates; In 2010 the target GDP growth was 10.3% and in 2011 it was 9.2%. However in 2012 the predicted and targeted GDP growth for the country fell to 7.5%, and in the second quarter, although higher than the target, the Chinese economy had a growth of only 7.6% (the lowest in 8 years). Economist Nouriel Roubini argued that this slow down in economic growth, although still significantly higher than that of the America and Great Britain, will have serious effects on the Chinese economy. “China needs to maintain at least a 9 percent growth rate just to handle its growing labor force and move farmers to the urban sector. China may be in for a hard landing,” Roubini writes.

Michael Schuman, writing for TIME magazine has argued that the problems China is facing can be seen in a number of ways across the country “Wind farms have been erected but not connected to the electricity grid. Hundreds of solar cell makers will likely go under. Shopping malls get built where no one shops”. Schuman argues that, in order for China not to fall into an economic recession that would not only challenge the country but will have adverse effects throughout the world economy, newly appointed president Xi Jinping, will have to introduce economic reforms that are as fundamentally important as those undertaken by Deng Xiaoping in the 1970’s. According to Schuman the ‘state-led, investment-driven growth model is running on empty’, and the economy instead needs to become more market-driven and better balanced, with an effective rule of law established. Schuman creates a list of reforms, he argues are needed to be pushed through by Mr Xi, in order to prevent an economic crisis occurring within the World’s (present) fastest growing economy:

  • Scale back on State Enterprises
  • Encourage the country’s consumers
  • Develop a real financial sector
  • Strengthen the rule of law

Whether you agree with Schuman’s suggested reforms or not, depends upon your view of the relationship between the state, the market and the economy. What is important here is that work must be done by the Chinese Government, led by XI Jingping, in order to pre-empt and reduce any severe economic downturns within the country’s economy, to ensure the continued growth to support not just China’s domestic market, but also the worlds.

Sources:

China targets 7.5% GDP growth- http://www.china.org.cn/business/2013-03/05/content_28130136.htm

China’s economic growth slows to 7.6% – http://www.guardian.co.uk/business/2012/jul/13/china-economic-growth-slows-gdp

Can China’s New Leader Prevent an Economic Crisis? – http://business.time.com/2012/11/07/can-chinas-new-leader-prevent-an-economic-crisis/

Google threatens to withdraw its service from mainland China

13 Mar

In 2010, search engine Google threatened to close its service in China, after having accused the Chinese authorities of hacking its email system and customer accounts. They have also said that they are no longer willing to censor search results on google.cn, after the government refused to relax their laws on censorship.

Google’s chief legal officer stated “we have decided we are no longer willing to continue censoring our results on google.cn”, which they realize could lead to the end of its business in China, and seeing as the country has the largest number of internet users worldwide, this could mean a massive loss for Google, however this does not seem to be an influence in their decision. A professor at the University of Hong Kong expressed her opinion that the move “certainly sets an example in terms of a company trying to do what’s best for the user”.

However, unsurprisingly this decision has provoked anger within China, who has expressed its fury over Google’s attempts to make the Chinese government change their rules on censorship. One internet specialist pointed out “any company entering China should abide by Chinese laws. Google operates under its own laws”. When Google began providing its Chinese service in 2006 they were aware that they would have to censor search results, therefore China is claiming that the company has broken a “written promise”.

http://www.telegraph.co.uk/technology/google/7500917/China-angry-as-Google-stops-censoring-search-results.html
http://www.euronews.com/2010/03/23/china-angry-at-google-withdrawal/
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/7490223/Google-in-China-were-closing-tomorrow.html
http://www.guardian.co.uk/technology/2010/jan/12/google-china-ends-censorship

Image

qianhai1.jpg

12 Mar

Manhattan of the Pearl River Delta

China’s most recent development comes in the form of another “special Zone” , the “Qianhai experimental zone” will be China’s experimental move towards a more international yuan as well as more open financial sector with the introduction of Hong Kong’s international financial products. The zone is still in its conceptual stages having only recently been approved by the National Development and Reform Commission. At the heart of the development is the cross border Yuan lending from Hong Kong Banks with the sole purpose of investment into Qianhai infrastructure. The Hong Kong Banks have permission to loan up to 2 billion in Yuan a small amount to start with but with the scope for expansion. The cross border lending in Yuan is a move in line with China’s ambition to create an internationalized currency to compete with the dollar. The loans will have to be approved by the PBOC and abide by a number of other rules applied to the special zone. The loan rates will be determined between the lender and borrower, a move away from the state managed interest rate system currently in place. Hong Kong Banks are eager to put their surplus liquidity to use. As well as the loans Hong Kong firms will develop schools and hospitals as part of the agreement to invest in Qinghai’s infrastructure. China has offered a 15% corporation tax rate to entice development into the region. The hope is for developers and regional governing powers to be autonomous and “bold” in their approach to the development President Xi hopes to replicate the successes of the former SEZs to develop new models of growth for China.

The development has come under some criticism however, the scale of the development is relatively small and its effectiveness has come under question. There is also no established anti-corruption body to address the possible problems Hong Kong faced before the ICAC was established. Another point of criticism is whether this is a somewhat reckless plan in light of the recent housing bubble. With some property in Qianhai exceeding prices of places such as Manhattan and Paris, in a largely uninhabited under developed city is this speculation premature? The opportunity it would appear is ripe with eager Hong Kong firms to extend their financial expertise to the mainland and benefit from the first mover advantage. Some of the success of the development however may rest in the hands of the already successful Shenzhen officials. The question is whether they will willingly put themselves at risks considering they are already in a very comfortable position.

China is developing its economy in a distinctively unique way. It has the economic resources to embark on such “experiments”. The experimental formula that china has adopted with success has the advantage of drawing upon world history .China has some key issues to resolve that may stunt the development of such experiments mainly corruption. If it hopes to continue its international growth this is a key area for correction.

http://www.scmp.com/news/china/article/1173636/can-real-reform-take-root-qianhai

http://www.telegraph.co.uk/finance/personalfinance/expat-money/9437968/Chinese-city-of-Qianhai-could-be-the-next-Hong-Kong.html
http://www.telegraph.co.uk/finance/personalfinance/expat-money/9437968/Chinese-city-of-Qianhai-could-be-the-next-Hong-Kong.html
http://www.scmp.com/business/banking-finance/article/1158490/hong-kong-bankers-say-reforms-will-help-establish-qianhai
http://www.reuters.com/article/2013/01/28/china-loans-qianhai-idUSL4N0AX1AC20130128

China’s trains

12 Mar

China’s leadership is about to change and so like any new leader there has to be a shakeup in order for them to show how they are in some way different. The changes that are about to come with Xi Jinping’s term in office include a decentralisation of some of the country’s infrastructure in order to focus on the bigger economic disputes that include squabbling with both Japan and Vietnam about territory disagreements.

The railway reorganisation was needed after a high speed crash in Wenzhou, a city found in Eastern China, which not only killed 40 people but highlighted flaws in the management of the railways. The railways will now be managed by Ministry of Transportation administratively and commercially by a new company, thus simplifying the set up.

In total the railways are worth a great deal to the Chinese economy, with annual spending on the railways, with total spending for 2013 expected to be in excess of 630million Yuan, which is an increase from the 610billion Yuan predicted in September last year.

Expansion of the railways is also a continuous thing as new projects that have been predicted to take place with investment up and confidence gradually being restored after the fatal crash and the removal of railway minister Mr Liu Zhijun after he was accused of corruption.

Before any project is scheduled to take place a cost benefit analysis has to take place. World Bank evidence suggests that not all the benefits are properly recorded as the flow of people, which creates a wider market place, is not well measured. The predicted flows from the new Beijing to Guangzhou line expect the 3million that currently travel the more convoluted route to rise to 28million. The line is also the world’s longest high speed rail route.

 

References

 

http://www.bloomberg.com/news/2013-03-10/china-restructures-energy-regulation-in-government-overhaul.html

http://uk.reuters.com/article/2012/11/27/uk-china-economy-rail-idUKBRE8AQ03S20121127

http://www.worldbank.org/en/news/press-release/2013/01/21/evaluation-of-high-speed-rail-program-should-consider-wider-economic-benefits

http://www.railjournal.com/index.php/high-speed/chinas-high-speed-programme-back-on-track.html

China’s Response to the Global Financial Crisis

12 Mar

America’s subprime financial crisis and the resultant dramatic global downturn after the Lehman Brothers fiasco hit the Chinese economy staggeringly. Following the sudden free-fall of the global economy, growth of the Chinese economy fell to 6.8% in the fourth quarter of 2008, down from 13% in 2007. Parallel to this was the imminent threat of deflation, contrary to the usual inflationary pressure that had pestered previous Chinese economies.

 Clearly, the four main channels whereby the global financial crisis impacted the Chinese economy was:

 –          Direct losses in American capital market

–          Changes in cross – border capital flows

–          Reduction in growth of exports

–          Safety of foreign exchange reserves.

  Now, the Chinese government were forced into a prompt reaction to this sudden plummet. In November 2008, a 4 trillion yuan stimulus package was introduced. Acting in tandem, the central bank, the People’s Bank of China (PBOC) cut interest rates deeply, and the growth rate of credit and of broad money shot up. It seems that the economy started bottoming out as early as in the first quarter of 2009, owing to the stimulus package and the extremely accommodating monetary policy.

 Focusing predominantly on this Stimulus Package which equated to 16% of the Chinese GDP, you can see the explicit spending breakdown here – Infrastructure: 45%, Post Earthquake Reconstruction: 25%, Rural Infrastructure: 9%, Ecology: 9%, Housing for Low Income Population: 7%, Technological innovation and Economic Re-structuring: 4% and Medical Services, Culture and Education: 1%.

 You can see clearly how the majority of this package was spent on infrastructure such as railways and highways with 1800 billion yuan spent on ‘expenditures in transportation network and construction. One would assume this was a deliberate ploy by the Beijing Government in order to get the ‘country running again’. Highways, railways are essential for transport in China exacerbated by its huge size. This can be seen currently by the money being poured in to the building of the Bullet Train Network. Furthermore, vast amounts of money was spent on the construction of highways et al because they provide jobs. Take the Bullet Train Network again – up to 10, 000 workers are employed on just one particular line of this rail network highlighting how the construction of these transport links can provide jobs which provide workers with capital which can then be spent in the local community. Therefore more money is pouring into the local economy as people are spending their earned money in the community eliciting economic growth etc.

 Table 3. Breakdown of the 4 Trillion Yuan Stimulus Package

(billion yuan)

 

Construction of houses for low-income urban households

280

Increased spending on rural infrastructure and boosting rural incomes

370

Expenditures in transportation network construction 1800
Increased investment in medical services, culture and education

40

Increased spending on ecological protection

350

Technical innovation and economic restructuring

160

Sichuan post-earthquake reconstruction 1000
Total 4000

 Source: NDRC.

 

 The Economist, ‘The World in 2009’ China’s Stimulus Package, November 12th 2008. http://www.economist.com/blogs/theworldin2009/2008/11/chinas_stimulus_package

 

Yu Yongding, TWN Global Economy Series, The Impact of the Global Financial Crisis on the Chinese Economy and China’s Policy Responses, 2010.