This is not what you call good P.R.:
The fate of four signed basketballs given by NBA great Shaquille O'Neal to Sichuan earthquake survivors sparked an Internet storm in China this week.
The 15-times All Star doled out the balls to four children on Tuesday when he was visiting a school in Mianyang, the city worst affected by the earthquake which killed more than 80,000 people last year.
The boys were devastated when the balls were subsequently confiscated by school staff and China's increasingly assertive Internet community rallied to their cause.[...]
O'Neal, who is hugely popular in basketball-mad China, later dispatched replacement balls to the students.
"I never thought it would be like this. I can imagine how disappointed the boys must be," O'Neal told the paper.
If these officials had ever played Shaq Fu on SNES they would know what happens when you get between Shaq and his charity work.
Yeah, "electro-convulsive therapy" doesn't quite sit well with me, either:
China's ministry of health has banned the use of electric shock treatment to cure internet addiction. [...]
An earlier report by the Information Times claimed patients received electroconvulsive therapy if they broke any of the centre's rules, which included eating chocolate, locking the bathroom door, taking pills before a meal and sitting on Yang's chair without permission. It said parents had to sign a contract acknowledging their child would be given ECT before admission.
Seems like this Yang fellow was on something of a power trip (no pun intended). Does this make for two cases in which Beijing's intervention was a good thing?
I suppose not abusing one's patients is a step forward, of sorts.
Turkish President Recep Tayyip Erdogan seems pretty quick to throw the g-word at China, considering his own country's historical sensitivities:
"The incidents in China are, simply put, a genocide. There's no point in interpreting this otherwise," Erdogan said.
It's not exactly that simple. There's a case to be made that China's suppression of the Uighurs combined with it's efforts to build the Han population in Xinjiang constitute genocide under the 1948 convention, which includes "Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part" as part of the definition. But this is a pretty broad interpretation, especially considering that the local Han population has been suffering attacks as well.
It's also surprising to see a Turkish president so willing to use the word genocide this freely. Turkey has charged quite a few people over the years -- including the country's most famous author -- with insulting Turkishness for saying similar things about the massacre of Armenians after World War I or the killing of Kurds in more recent years. Erdogan himself has attacked proposals that Turkey apologize for historical wrongdoings.
Is this really a conversation he wants to start?
TIM SLOAN/AFP/Getty Images
A Beijing train went into "Explosion Mode" on Sunday as a piece of scrap metal touched the electrically-charged third rail, setting off "two explosions in the tunnel":
Just about every last soul on the train started -- in essence -- crapping out, totally unable to believe that this kind of trauma was happening. The train had just managed to approach Fuxingmen when a third explosion was reported. At this point, people just got out of the train the moment the doors opened and got the hell out of the station. Smoke was pretty much everywhere.
The state news media didn't report the story, but it's probably safe to assume Chinese riders, like their counterparts in the United States, might be avoiding front cars for a while.
China's reserve currency proposal might be getting the big financial headlines today, but for millions of online games, the People's Republic's crackdown on imaginary gold is a much bigger story.
If you were a level-three dwarf but had insufficient magic points to defeat that nine-headed dragon, what would you do? Many online multiplayer gamers would probably whip out their credit card, buy a few hundred gold pieces for $5 and pump themselves full of magic before venturing into the dragon's lair. Until now.
The practice of intentionally earning and hoarding game currency -- with the ultimate aim of selling it to others for real money -- was declared illegal this week in China, where as much as 80 percent of the world's so-called "gold farming" takes place. The gold farming craze has spawned "an enormous Chinese workforce earning 30 cents an hour playing MMOs and harvesting treasure to supply the major retailers."
In all, InformationWeek reports, nearly $150 million in virtual currency was traded last year. Worldwide, the industry rakes in some $1 billion a year from players eager to make their mark on their favorite fantasy universe online.
Buying gold from the farms might come off as cheating when compared to the honest players who earn gold through their own hard work. But to look at it another way -- isn't this all about entrepreneurial spirit?
If there were still any doubts about capitalism's arrival in China, this puts it to rest. Wealthy mainlanders are increasingly taking to the grassy fields as polo becomes yet another mode of expression:
The founder of the Nine Dragons Hill Polo Club, today's host in fact, is Steve Wyatt. He says in China polo is becoming the perfect way to show you have made it.
"It is hats, beautiful dresses, finest champagne, whisky and people looking at the best cars," he explains.
Is China learning to trot before it can walk?
Shanghaiist has a very interesting roundup of Web message board reactions to Iran's election from China, a country that knows a thing or two about the government stifling dissent. Many of those commenting faulted the government not for cracking down on the protests, but for bothering to hold sham elections at all, and allowing the protests to get out of hand:
"The Iranian presidential election evolved after decades but now is triggering so many protests and riots; I am not sure how the liberal wings of the party would think? Use the army. Whoever fights against the government should be killed. There are so many people in Iran so killing several hundreds of thousands is not a big deal. What does the army do? Foolish (Iranian government)."
Barack Obama's caution also doesn't seem to have convinced Chinese netizens that the U.S. isn't behind all of this:
"America is always opposed to the other countries' democracy because American politics is a fake democracy; it is really the 'presidential dictatorship.' However, America asks other countries to be 'fake democracies' -- killing the real democracy!"
"When Bush was elected as the American president, he cheated too. But Al Gore was rational and admitted that he lost because of national stabilization. Mousavi has America as his biggest backer but not many Iranian supporters. He should admitted that he lost."
It's a very small sample size and I'm sure not universally representative of Chinese opinions, but telling nonetheless.
(Hat tip: Josh Kucera)
In October, Huang Guangyu was the second-richest man in China, having built a fortune through his appliance company Gome. But in November, "The Price Butcher," as Guangyu was known, suddenly disappeared, with hushed reports that he was 'in trouble.' Now, not only is Guangyu being held by Chinese authorities in an undisclosed location on charges of bribery and stock manipulation, but Der Spiegel reveals that his disappearance is part of a larger anti-corruption effort undertaken by the Communist Party:
The deep fall of corporate CEO Huang, the son of a farmer and a self-made man who worked his way up from being a minor radio merchant to the powerful head of a company with about 1,350 retail stores, is increasingly claiming political casualties.
At the beginning of the year, the vice minister for public safety and senior criminal prosecutor for economic crimes, Zheng Shaodong, was arrested, as was his deputy Xiang Huaizhu. According to reports in the Chinese media, the two top officials allegedly took bribes from Huang.
In April, two high-ranking Communist Party officials from Guangdong, China's important exporting province which borders Hong Kong, were arrested on corruption charges[...]
President and Communist Party Chairman Hu Jintao apparently wants to use the affair to clean up the party ahead of October's celebrations to mark the 60th anniversary of the founding of the People's Republic. The affair is also an opportunity to fundamentally restructure the world's manufacturing powerhouse in response to the global economic crisis.
Whether the anti-corruption efforts last long enough to be more than a gesture at the next anniversary remains to be seen. But such is the fear among wealthy Chinese of becoming targets that Forbes's list of richest Chinese is "colloquially known in China as 'pig slaughter lists.'" Talk about a mixed blessing.
Nelson Ching-Pool/Getty Images
Coming from China's state news agency, this prediction of social turmoil seems significant. Translation by China Digital Times:
Without question, we’ve already entered a period of highly concentrated mass incidents. Furthermore, 2009 may also be the year that Chinese society will face many contradictions and conflicts in a way that will test the governance at every level of Party government.
At the moment, the most sensitive problem is that of working to stop the financial tsunami’s metamorphosis from economic pressure to a social crisis. The focus has been on maintaining economic growth, guaranteeing employment, protecting the people’s livelihood and maintaining stability....
The common characteristics of current mass incidents can be summarized as follows: social contradictions have already formed certain foundations of society and the masses, creating a powder keg ready to explode at the first hint of a flame. Conflicts escalate extremely rapidly; confrontation is intense; the destruction to society is sizable; appropriate management is difficult. At the same time, behind the seemingly random “sparks,” there is always a pile of “tinder.” This causes small incidents to escalate quickly, evolving into a large-scale, intense conflict. This shows that in a period of constant change in greater social interest and personal interests, a social crisis can be instigated by a contagion of dissatisfaction among the people. Even a street brawl could turn into an irrational mass venting that engulfs the whole city.
The Chinese government made waves again yesterday as it released its controversal new Internet censorship program known as "Green Dam -- Youth Escort."
The move has privacy activists fuming over China's declaration that all new computers must be equipped with the software. But although the Ministry of Industry and Information Technology claims Green Dam is capable of blocking inappropriate content with "95 per cent accuracy in 0.2 seconds," initial consumer reports say the program has been less than effective:
I have to come to this Web site and curse. After we installed the software, many normal Web sites are banned. ... For example, when [Network News] reports that there is a campaign against pornographic Web sites, the software bans the story because the term "pornographic Web sites" was used. Don't tell me how great the software technology is, because this is a piece of junk."
How much flesh color does it take to make something 'pornography'? I went on the Internet to check out some animal photos. A lovely little naked pig was sent onto the black list. Pitiful little pig! I was curious, so I looked up some photos of naked African women. Oh, they were not censored!"
Complaints over filter accuracy aside, it's still unclear whether the program actually works as advertised. In tests conducted by the South China Morning Post and the European Commmission's KDNet, Green Dam required intensive micro-management and failed to block explicit material on any consistent basis.
Cheating on the gaokao, China's national college entrance exam, has been a perpetual nuisance for test officials for years. A combination of parental pressure, rampant ambition and the highly competitive nature of the exam have contributed to rising dishonesty among millions of test-takers:
The penalties [for cheating] are severe: a student convicted of peeking at a neighbor's paper is never allowed to take the gaokao again, and his name is entered in a public database for prospective employers' perusal.
Still, every year some students come up with innovative efforts to beat the system — 3,000 were caught last year alone. Before this year's gaokao, police raids in the industrial city of Shenyang turned up "cheating shoes" outfitted with radio transmitters."
Chinese educators are beginning to wisen up, however. Ahead of next week's administration of the 2009 gaokao, video cameras are being installed in as many as 60,000 exam rooms.
Chinese authorities have burned (in a single industrial furnace) over 860 pounds of smuggled drugs after a three-year effort to track and arrest more than 16,000 suspected dealers. But that's not all. A government spokesperson said drug enforcement agents only destroyed "about half" of the stockpile that was created as a result of the 2006-2008 operation.
Yesterday marks the 170th anniversary of China's Humen Opium Destruction, in which another government official had 1,000 tons of foreign drugs burned. Today's event was held in honor of the original.
James Fallows of The Atlantic was in Beijing today, observing the 20th anniversary of the Tiananmen Square confrontation between human rights protesters and the Chinese government. Security was airtight, but that doesn't mean reporters were completely incapacitated:
As reported yesterday, CNN is still blacked out whenever words like "In China today...." or "Twenty years ago in Bei...." come across the airwaves. Whereas BBC TV is airing uncensored footage of tanks in the square twenty years ago and repeatedly using the phrase "Tiananmen massacre." And just as I type, the admirable Quentin Somerville of the BBC is talking, live from Beijing, about the "ruthlessness at the heart of the Communist government." (And just this second, in a Borges-worthy moment, Somerville said that international coverage was being blacked out across China -- so I got to see him saying that I was not able to see him. Still, the general point is true.)"
Yesterday, David Rothkopf described his own experience as an observer of June 4, 1989.
The trial of American journalists Euna Lee and Laura Ling, who worked for Al Gore's Current TV, started today in North Korea.
The two were arrested in March along the North Korea-China border, apparently reporting on the refugee situation. Pyongyang has charged them with "hostile acts" and espionage. If convicted, they face five to ten years in one of the country's feared labor camps.
North Korea gains some leverage over the U.S. and its allies by holding the women. In the past weeks, the country has stoked tensions by engaging in some serious saber-rattling, testing a series of missiles and a nuclear bomb; it's provoked South Korea to begin fortifying the militarized border and moving warships into better strategic positions.
I'm more and more concerned by the situation, in which Lee and Ling are pawns in a reckless, needless game of military embrinkmanship. The easy answer here is, of course, that North Korea should simply stop testing missiles and join in six-party talks.
But since that situation is unlikely, it's China that needs to step up here. They have the best relationship with Pyongyang, much at stake, and the best opportunity to assuage the tensions.
Posted this one during the Olympics last year but am re-posting in honor of tomorrow's anniversary:
Freedom House's Ellen Bork along with the Weekly Standard's design director Philip Chalk and Tiananmen survivor Tian Jian have created this map for Beijing tourists interested in visiting the sites of the June 4, 1989 massacre of the Tiananmen Square protestors. Each number shows the place where where one of the 176 victims were killed or the hospitals to which their bodies were taken.
Paul Kedrosky quips:
I am increasingly convinced that there is a factory in China that does nothing other than come up with beguiling statistics about factories in China. There are just too damn many such statistics to be explained any other way.
Potential Twitter version: Bushies, asleep at switch, drunk on oil, missed boat."
Meanwhile, guess who's taken up the emerald green mantle?
It might be startling to realize that China is far outpacing the U.S. on green-energy investment."
He is picking up on a recent report by the Washington-based think tank, Center for American Progress: "We Must Seize the Energy Opportunity or Slip Further Behind."
Osnos is, I think, one of the finest correspondents writing from China today. But here I beg to differ. Or at least urge a bit of a reframing.
But let's put this in perspective: First, as a general point, China has had ambitious green goals for several years, especially on energy efficiency, but implementation still lags behind reality. Before we cheer, or worry, too much about Beijing's presumed green-technology progress, let's see what actually gets built. Large earmarks for infrastructure, green or otherwise, are particularly susceptible to local corruption. (The shiniest government office buildings in Lanzhou, capital of Gansu province, were built out of something called the"poverty reduction fund.") Alas, lately we've seen a relaxing of green construction standards in China for the sake of putting economic stimulus money to work quickly. In sum: Setting budgets and targets is easy; follow-through is harder.
Second, on the particular matter of green-energy investment, pretty please stop putting so much faith in the framing of the Center for American Progress. I like CAP. They do good work. But they also have a long-standing habit of beating up on U.S. policy by pointing out that even China is doing more. I'm not against beating up on the U.S., or against giving kudos to China when due. But I am wary of how this formula can lead to exaggerated estimations of what China is in fact doing. (A few years back, CAP put out similar statements when Beijing announced lofty, and as yet unmet, energy efficiency targets.)
Lastly, and most importantly, I think that highlighting the competition angle could ultimately be counter-productive, as fun as it is to envision a U.S. vs China jolly green smackdown. Stressing a rivalry could ultimately lead -- not necessarily in Osnos’s hands, but in looser, more politically-minded interpretations -- to the impression that the race for green energy is somehow a zero-sum game. That any progress made by China (again, let’s be careful to avoid exaggeration here) is somehow threatening to the U.S. Like if the Soviets got to the moon first; oh no. It’s us or them; only one racer breaks the ribbon; get off our green lunar pathway!
Some might argue that Americans do best when their competitive instincts are aroused. But I tend to agree with Charles McElwee, an environmental lawyer in Shanghai whom Osnos cites and whose insights I've long found valuable: Fanning the flames of us-vrs-them-ism -- in the context of global issue that isn't so much a race to win as to survive -- could backfire. It could undercut political support on Capitol Hill for cooperative efforts, technology sharing, and perhaps even climate-treaty negotiations.
For too long, on climate matters, the U.S. and China have been stuck in a dusty stalemate, with both sides refusing to budge first -- especially with regards to seriously considering carbon caps -- while they eye each other as threats, and competitors. Somehow this Gunsmoke scenario needs to end.
Photo by Feng Li/Getty Images
Here's what the action star said at a forum whose attendees included Wen Jiabao:
"I'm not sure if it is good to have freedom or not," he said. "I'm really confused now. If you are too free, you are like the way Hong Kong is now. It's very chaotic. Taiwan is also chaotic."
He added: "I'm gradually beginning to feel that we Chinese need to be controlled. If we are not being controlled, we'll just do what we want."
Via Evgeny, I see that the comments have provoked an angry online backlash in Taiwan and Hong Kong as well as the blogosphere on the mainland. There are calls for a boycott of the "racist" Chan's films.
At Post Global, John Pomfret sees a class dynamic at play:
Chan is just saying what a lot of other rich Chinese feel. In the 20 years since Tiananmen, Chinese society has changed enormously. One of the most astounding ways has been in the return of a class society and in the disdain with which China's rich view China's poor. When Chan was saying Chinese need to be "controlled," to be sure, he was speaking about the poor. He didn't have to say it, But that's what the audience at Boao heard and that's why they cheered him on. Anyone who has conversations of depth with members of China's elite has heard this argument before.
Granted I don't know much about the context, but it seems to me like it's at least possible that Chan is being sarcastic. The comments were in response to a question about censorship. Chan's new film Shinjuku was recently banned in mainland China because of violence. It seems strange to me that Chan would so vociferously praise a set of policies that resulted in him losing quite a bit of revenue. Whatever his class prejudices or political beliefs, I'm sure that Chan believes that poor Chinese should at least be free to spend their hard-earned yuan on his products. He should also know better than to insult his many fans in Taiwan and Hong Kong.
Chan's not in a position to criticize a decision by the Chinese government, but the over-the-top comments seem like they could be a subtle dig at the Chinese authorities for being so uptight about his movie. Then again, I could be giving the guy too much credit.
Victor Fraile/Getty Images
Amid all the hype about China becoming the world's new superpower, it's easy to lose sight of the fact that people have been expecting this moment for a long time. A really, really long time.
Here's a passage from Barbara Tuchman's excellent biography of Joseph "Vinegar Joe" Stilwell, the U.S. general who tried in vain to prop up Chiang Kai-Shek and the nationalists:
America at this time [the early 1900s], newly directed toward Asia by the recent acqiusition of Hawaii and the Philippines, was dazzled by the vision of the opportunities for her enterprise and outlets for her commerce in the Far East. China seemed the area of America's future and took on vast importance. John Hay was credited with having said that whoever understands China holds the key to the world's politics for the next five centuries. "Our future history," declared President Theodore Roosevelt in 1905, "will be more determined by our position on the Pacific facing China than by our position on the Atlantic facing Europe."
Last month China recorded its largest-ever surge in bank loans, the government reported over the weekend.
While the rest of the world begs for lines of credit and U.S. policymakers struggle to unclog the financial system, Beijing has announced that it will need to "strictly control lending," especially to certain areas of the economy such as "high-polluting, high-energy consuming industries and...those with overcapacity."
Part of the Chinese government's concern is that money from their stimulus package, announced last November, is getting stuffed into various industries that may eventually produce a spate of overly risky loans. They also worry about the onset of inflation in 2010, if too much money gets dumped into the economy now. Remember the good old days (as far back as summer 2008) when Beijing's biggest economic worries were high inflation and over-heating? Well, even if we don't, the Chinese certainly do. And they plan to avoid revisiting them.
In a related announcement on Saturday, Chinese Prime Minister Wen Jiabao explained that the Chinese economy was performing better than expected, building on recent positive projections from a variety of analysts, including some at the World Bank. A day earlier, U.S. President Barack Obama gave a press conference at which he expressed "glimmers of hope" for the American economy, but comparatively, the evidence for his prognosis seemed much more meager.
And it's safe to say that the Chinese noticed that fact as well. In fact, while reading this China Daily (one of China's state-run newspapers) report, it's hard not to detect a sense of schadenfreude coming out of Beijing when it compares Chinese prospects:
'Despite the year-on-year slowdown, the Chinese economy has posted a strong recovery on a quarterly basis, making us more upbeat about the country's economic prospects,' said Frank Gong, senior economist, JP Morgan, who predicted China's quarter-on-quarter GDP growth has rebounded to about 5 percent in the first quarter from only 1.5 percent three months earlier."
to American prospects:
US President Barack Obama said last Friday that the US economy was beginning to show 'glimmers of hope,' as mortgage interest rates declined to historic lows, while refinancing has shown significant pick-up. But some analysts said the largest economy in the world and also China's major trade partner is far from bottoming out, given the severe stress of financial malaise and job losses."
One hopes that China will use this growth potential not just to expand its regional influence and national interests, but also to continue to take positive steps in global cooperation. After all, they certainly still have great interest in the health of the American economy.
Photo: Frederic J. Brown/Getty Images
Speaking with the New York Times, a top Chinese economist explained why China is cutting its holdings of U.S. bonds by quoting John Maynard Keynes: “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.”
With that reasoning in mind, China sold U.S. Treasuries and other foreign bonds in the first two months of the year; it returned to buying them in March. Around two-thirds of China’s foreign reserves are held in dollars.
That bulk holding has complicated relations between the two economic super-powers during the Great Recession. Chinese Premier Wen Jiabao and the central bank governors have expressed concern about the U.S. economic situation and their exposure to it -- though the resumption of purchases in March suggests they may believe the outlook is better.
Still, numerous economists and policy experts have suggested careful, controlled, slow draw-down would be a good thing for both countries.
The New York Times reports that China is facing a gender imbalance of 32 million among under-20s, because Chinese women often abort female fetuses due to the country's strict one-child policy.
The researchers, who analyzed data from a 2005 census, said the disparity was widest among children ages 1 to 4, a sign that the greatest imbalances among the adult population lie ahead. They also found more distortion in provinces that allow rural couples a second child if the first is a girl, or in cases of hardship.
Those couples were determined to ensure they had at least one son, the researchers noted. Among children born second, there were 143 boys for 100 girls, the data showed.
Passport reader John Duffell sends in the above newspaper supplement from Malawi. He writes:
I'm an American who's been living in southern Malawi for nearly a year and a half. Yesterday morning, during a trip to town, I picked up a copy of Malawi's "Daily Times" newspaper to find a 12-page advertisement celebrating "50 years of democratic reform in Tibet" It's mostly about how grateful the people of Tibet are that China has reclaimed what's rightfully hers, and given them freedom at long last. [...] The ad spread looks remarkably like editorial content, and I've since learned that it was paid for by the Chinese Embassy in Malawi.
There's more info on Duffell's blog including a bizarre conversation with the newspaper's editor.
It's not news that China is waging a public relations campaign along with its economic expansion in Africa, but it's a bit hard to understand why Malawians would care that much about Tibet, or why China would care that much what they think.
Have any other readers in Africa seen anything similar?
Photo: John Duffell/Flickr
Today, the U.S. Bureau of Labor Statistics released a frankly horrific set of numbers. The unemployment rate hit 8.5%, the highest in more than 25 years; 663,000 workers lost their jobs in March alone; 25 million are underemployed; and over the course of the recession, the U.S. has bled more than 5 million jobs.
Certainly, the U.S. has fewer social safeguards against the disruptions of unemployment than many other high-income economies, meaning fewer protections against lay-offs and less-generous unemployment benefits. (FP looked at the best places to lose your job last month.) This generally means more volatility in the unemployment rate.
But is the U.S. really doing worse than, say, France and the United Kingdom, countries with historically high unemployment?
The short answer is yes; the U.S. recession has gone on for longer and is deeper than in Europe, and therefore has sapped three times as many jobs. The unemployment rate in the U.S. is higher than in the U.K., and close to France's. (The U.K. and French numbers above are estimates.) And the job-losses are accelerating faster in the U.S. than in other countries.
Here's hoping for it to bottom-out soon.
Beijing monitors China's Internet users; Chinese Internet users monitor Beijing. Or at least hackers based in Taiwan recently tapped into a top State Council official's computer to snatch drafts of Premier Wen Jiabao's government work report and other documents.
According to the South China Morning Post:
"The documents included comments from Politburo members who wanted to change this or that in the government report. These are regarded as top state secrets, even more sensitive than the government report itself," one source said. "Mr Wen was said to be furious when told about the case."
This happened in March, prior to Wen delivering the equivalent of China's State of the Union address at the annual meeting of the National People’s Congress in Beijing.
No secrets were revealed as to the source of the mysterious and unchanging GDP predictions, but according to SCMP, speculation based on the report did leak out and jigger global stock markets.
LIU JIN/AFP/Getty Images
A hearing of the U.S. Senate Committee on Foreign Relations yesterday on the financial crisis gave some interesting insight into what -- and how much -- policymakers are thinking about China these days.
While the three witnesses (Martin Wolf, George Soros, and Lawrence Lindsey) all spoke about the IMF's role in the current crisis (for more on that, check out our debate here and here on The Argument), none could help themselves from pointing out that the current economic situation is a clear turning point for the world's balance of power.
Here are a few exerpts:
The ability of the west in general and the U.S. in particular to influence the course of events will also be damaged. The collapse of the western financial system, while China's apparently flourishes, marks a humiliating end to the "unipolar moment". As western policymakers struggle, their credibility lies broken."
- Martin Wolf
"When history is written, it will be recorded that - in contrast to the Great Depression - protectionism first manifested itself in finance rather than trade... If the multilateral system falls apart, every country will pursue its interests unilaterally. Then China will be much better situated than we are. While we are, regrettably, still lagging behind the curve in dealing with the crisis, China is ahead of the curve."
- George Soros
"...a second set of policy mistakes that led to this current crisis were decidedly non-American in origin. During the 1990s, many of the world's newly developing countries, most notably China, managed their currencies in a way designed to increase exports and build foreign exchange reserves... China purchased hundreds of billions of dollars of U.S. Treasury and Agency securities, driving down our interest rates and facilitating the development of the housing bubble. The world saw the perverse economic result of Chinese workers and peasants being underpaid by their own government in order to finance the building of McMansions in America."
- Lawrence Lindsey
With as much China talk as there is in Washington these days, it begs the question: is the U.S. having a case of China-envy? Or has China replacing the U.S. role in the world economy?
This strikes me as a significant moment, but let's hang on a second before we lose our heads.
In it, Zhou asks, "What kind of international reserve currency do we need to secure global financial stability and facilitate world economic growth, which was one of the purposes for establishing the IMF?"
Theoretically, an international reserve currency should first be anchored to a stable benchmark and issued according to a clear set of rules, therefore to ensure orderly supply; second, its supply should be flexible enough to allow timely adjustment according to the changing demand; third, such adjustments should be disconnected from economic conditions and sovereign interests of any single country. The acceptance of credit-based national currencies as major international reserve currencies, as is the case in the current system, is a rare special case in history. The crisis called again for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability.
Though Zhou does not say so explicitly, the clear implication is that the dollar isn't doing these things. Interestingly, he cites John Maynard Keynes:
But, he admits, "The re-establishment of a new and widely accepted reserve currency with a stable valuation benchmark may take a long time." As the WSJ explains:
Back to the 1940s, Keynes had already proposed to introduce an international currency unit named "Bancor", based on the value of 30 representative commodities. Unfortunately, the proposal was not accepted. The collapse of the Bretton Woods system, which was based on the White approach, indicates that the Keynesian approach may be more farsighted.
[T]he technical and political hurdles to implementing China's recommendation are enormous, so even if backed by other nations, the proposal is unlikely to change the dollar's role in the short term. ... The central banker's proposal reflects both China's desire to hold its $1.95 trillion in reserves in something other than U.S. dollars and the fact that Beijing has few alternatives. With more U.S. dollars continuing to pour into China from trade and investment, Beijing has no realistic option other than storing them in U.S. debt.
Looks like you can hang on to those greenbacks for a little while longer.
It seems counterintuitive to say the least. The Dalai Lama, spiritual leader in exile of Tibet, was denied a visa on Friday to attend a peace conference in Johannesburg, South Africa at the invitation of fellow Nobel Prize-honorees Nelson Mandela, Archbishop Desmond Tutu, and F.W. de Klerk.
"Of all the nations on Earth that should empathise with [Tibetans'] plight, South Africa should" wrote The Times of South Africa. "We echo the accusation by Archbishop emeritus Desmond Tutu, that barring the Dalai Lama is a 'total betrayal of our struggle history.'"
So what gives? A bit of real politik -- learned from France's mistakes with China late last year: Nicolas Sarkozy held a highly publicized meeting with the Dalai Lama only to have Beijing cancel its planned joint EU summit and skip France on its Premier Wen Jiabao's European tour. "I looked at a map of Europe on the plane. My trip goes around France," The Economist quoted Wen saying.
South Africa, the rationale might go, can't really afford a chill in relations. The country accounts for one fifth of China's trade with Africa; and South Africa depends increasingly on China for financing. So Archbishop Tutu had it quite right: "We are shamelessly succumbing to Chinese pressure. I feel deeply distressed and ashamed."
In the lead-up to the World Cup in South Africa in 2010, the country was also looking to head off what it saw as a public relations disaster in the making. Spokesman for the South Africa president told reporters, "at this time the whole world will be focused on the country as hosts of the 2010 World Cup. We want the focus to remain on South Africa... A visit now by the Dalai Lama would move the focus from South Africa onto issues in Tibet."
But if avoiding the headlines was the goal, that strategy has backfired. The conference organizers have promised to pull out of the meeting and the press is eating it up and spitting the South African government out. So much for damage control.
KAZUHIRO NOGI/AFP/Getty Images
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