The Rise of the Dragon

The Chinese government is old.  I am not talking about their ideologies only, they are literally old in age.

First I need to digress.  People love to say that China has over 5,ooo years of history compared to only a couple hundred years for the US.  But remember that China as we know it and their current form of communist government has only been in power for a little over 50 years.  On top of that I would argue that their “real” current form of government/economic system has only been around since 1976, so 30+ years.

Back to old China:  A lot of China is not old.  To this part of China capitalist communism is all they have known.  The emphasis being on “capitalist.”  A certain part of this group really has the Chinese government scared, their own kids.  Young aristocratic Chinese are wealthy, educated (often times in the West) and are more inclined to democracy than their parents would like.

Now before I state my case (trust me, I have one) I need to digress a little more.

A big problem with Chinese capitalist communism (those words together sound strange) is that it only works when the economy is good, like throughout the past three decades.  What happens to capitalist communism when the economy struggles?  No one knows because it hasn’t happened before.  However, we know from historical experience that the more people have, the more they want, and the Chinese people have more in the ways of affluence and freedoms than they have ever had.  (Well at least in the past 70 years or more.)  People will surrender freedom (i.e democratic choice) for security.  Security they currently feel that they have, but could lose in the event of an economic collapse.  (Or even prolonged down-turn.)

So now to tie the title of this post in with everything I have written so far.

China is gorging the economy with whatever it takes as far as financial stimulus because they know what they have to lose.  My argument is that they literally have “power over their country” to lose.  Political unrest is at astronomical highs in China right now.  What will happen when unemployment jumps, wages drop and government benefits decrease?  Those same people who were willing to surrender their freedoms for the “better life” the communist government was giving them will want change, and they will get it.

I am not trying to prophesy what is or will happen to the government in China, only saying what I think could happen.  I guess we will have to wait and see.

Thomas Friedman is a really smart guy.  Or at least he has the guts to say what a lot of other smart people are thinking but don’t dare publish with heir name on it.  Ever since I read “The World is Flat” I have always been incredibly impressed and fascinated with his opinions and insights on the world.

On Christmas day I was reading on www.nytimes.com and was sure to check out his latest post, “Time to Reboot America.”  Great post.  I think that it rings incredibly true with a lot of what I have seen in my limited life experiences.  The premise of the article is that the US is falling behind.  Or no, the US HAS fallen far behind the world in certain areas, mainly infrastructure and educational investment.

I am always amazed when I am in Asia that although much of it is clearly third world, certain things like subways, trains, bridges and roads are far nicer than anything I have ever seen in the states 10X over.

Read the entire article HERE at www.nytimes.com

This piece of news is very sad and it brought back a strong memory.

I lived in Taiwan two years after the terrible September 21 Earthquake of 1999.  I lived in Nantou, a larger city located only miles away from the epicenter of the monstrous quake.  I remember people re-telling their experiences and grief caused by the traumatic experience.  A lot of people were effected, but one story theme that I heard multiple times left an extra deep impression.  In the Nantou suburb of Puli City, where the epicenter was located, a lot of buildings, including a school collapsed.  What makes the news especially sad is that many of them should not have fallen.  During the post earthquake damamge inspection it was found that the builder filled cement pillars that were supposed to be filled with cement and re-bar, with empty paint cans and buckets.  He did this to save a little money on cement, and besides, who would ever know?  How would they know?  Unfortunately the only way for this evil building practice to come to light was for the building to collapse in an earthquake.  People died because of the greed of one man, or one company.  This man was punished and an embarrassed Taiwanese government spent a fortune testing and inspecting thousands of suspect buildings.

Then in 2008 it happened again.  Only this time across the strait in China, and this time over 90,000 people died.  Granted not all because of faulty building practices, but no one doubts that this was a culprit in many cases.  Yesterday the Chinese government admitted that indeed faulty business practices were used in the Sichuan province where the earthquake hit.  The Chinese government rarely ever admits guilt.  There was a lot of pressure domestically this time around.  Mainly thousands of grieving parents.

An article I just read yesterday on www.nytimes.com said, “The Ministry of Education report is a rare government admission of substandard school construction. The issue has been a delicate one since the earthquake, which killed 88,000 people, many of them children crushed in shoddily built schools.”

An estimated 14,000 schools were damaged in the earthquake in the Sichuan province and unofficial reports estimate that as many as 10,000 students died from the earthquake.  In Yunnan province (South of Sichuan) government officials estimated that approximately 20% of grade schools are structurally unsound.  (Remember that Chinese statistics are notoriously high or low depending on whether or not they make China look good or bad.)

Every time something like this happens people ask me what I think of the Chinese government.  So here is my answer again:  China has a lot of room for improvement.  They need to try harder in a lot of areas (but so do all countries) and should not be let-off-the hook in cases like this.  However, they should also not be thrown under the bus.

Read the www.nytimes.com article here

I think that this is a great word to describe China and Taiwan’s recent relationship development. “frenemies”

According to Forbes.com the two countries have “become more closely aligned economically, huddling together to ward off the chill of global recession.”  Really it makes a lot of sense. The two countries are neighbors, they are both filled with Chinese speaking Chinese people and are incredibly tied when it comes to their economies, yet they put up a “front” of condescending hate and resentment.  Propaganda can do a lot of harm.

The  highlights of recent talks between the Taiwanese government and the mainland Chinese Beijing government are as follows:

1. China said it would expand loans to Taiwanese companies operating on the mainland
2. Open its doors wider to Taiwanese financial services firms
3. Buy more liquid crystal displays from Taiwan

The changes are part of a 10-point proposal that will serve as the blueprint for a formal memorandum of understanding between the two governments that is expected to be inked early next year.  I personally think that is is extremely important for both sides economically, and politically.

This new found cooperation has it’s root in Taiwan’s presidential decision in the past election of Ma Ying-jeou.  I can’t imagine Chen Shui-bian buddying-up with China.  He was too busy inciting frustration from Beijing’s government as well as just about every other government  on the planet.  Oh, that and embezzling money in the way of Sogo gift certificates.

Source: Forbes.com

I have read a bit about a new phenomenon currently taking place in Chinese cities.  Migrant workers don’t want to go home. There are millions and millions of migrant workers living in the coastal cities and more economically successful parts of China. They all moved to these areas to make more money and take a part in China;s economic boom.  They all wanted a piece of capitalism.  They all wanted a better life.  In the past migrant workers would move to where the work was.  This had them moving sometimes seasonally to survive.  But now, there is a new group of Chinese migrant workers.  They are young.  They are addicted to text messaging, the Internet, MP3 players, social networking websites, hanging out with their friends, KTV’s, bars, dance clubs, their boyfriend/girlfriend etc…  To put it plainly, they have a social life.  So unlike in the past, when the work left so did the people, this new wave of migrant workers still have their social life, something that they don’t want to leave.  The problem is that their jobs are leaving, the government is asking them to move back home, or move to where the other jobs are and they are asking the government to create new jobs right where they are.  This group is getting restless.  The last thing China wants or needs right now is tens of millions of migrant workers clamoring for reform.

I had to smirk reading through this article.  Maybe I should not admit that, but I did, and I am smirking right now.  It shouldn’t be considered “funny” that US citizens lost tens of billions of dollars of their hard earned money during the latest stock market bomb.  Nor is it funny that citizens and countries of the world also lost tens and even hundreds of billions of dollars along with us.  I just read an article about China’s decision not to invest money from their sovereign wealth fund in US banks.  Some of the wording made me smile.

The article began with The chairman of China’s sovereign wealth fund saying, “China had no plans for further investments in Western financial institutions, nor did it have any plans to “save” the world through economic policies.”

I sure was hoping for China to save the World.

The chairman added, “Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have.”

I have to say that I don’t disagree with him on that one. Although, if I had a trillion dollars, what’s a few billion dollars here and there?

An issue that I did find interesting was the idea that China sees itself as a small fish in the worldwide economic pond.   “China can only save herself because the scale of China is still rather small,” Chairman Liu had to say when asked about how China could potentially affect the worldwide economic situation.

I find that a lot of the people I talk with who have a casual interest in China business and culture have the belief that the Chinese economic machine is some all-powerful monster that could destroy the US economy and maybe even the entire world on a whim.  My response is two fold: 1) Why would China want to destroy the US economy?  That makes no sense on any level. 2) China’s economy is booming, similar to how ours boomed 120 years ago.  I am not saying that they are 120 years behind  the US, but that they do have a ways to go.  I’m rooting for them!

Read the entire NYT article here

China Premier Wen Jia Bao spoke at the 43-nation Asia-Europe Meeting summit in an attempt to ease the fears of the world concerning the latest China product issue, with melamine still at the center.

Wen wanted the world to know the crisis involving tainted dairy products will spur the introduction of China’s first major food safety law and will ensure food exports meet international standards.

Wow, the FIRST food safety law.  Unfortunately I don’t know if the world is ready to believe China just yet.  The world wants to believe, I want to believe, but until they prove that they have made the necessary changes that they promise they are working on, I am not going to bet the farm.

What I will bet on is that the government WILL try to make the necessary changes.  They are too ashamed of the problems they have and they have the power to make broad sweeping changes better than most any other organization in the world.

I wish I could say this is the last post concerning fertilizer ingredients in baby food, but I have my doubts.  To repeat my opinion one more time, I think that China is learning and will change.  I am a big fan of the reforms I see the government carrying out, and I think all the issues that they are having and will continue to have are unfortunate.  But that can not be an excuse if China is to garner the international communities respect.

Read the source article here at CNN.com

China’s economy has held a high standard of double digit growth for years, until now.  With the rest of the worlds economies struggling China’s economy was sure to slow too, right?  The answer is yes, but the rate of the deceleration has come faster than most expected.

It makes sense I guess.  If you are often considered “the worlds factory,” and the world is tight in the wallet, who is going to buy the stuff that you produce?  But before we go any further, I must add that although China’s economy is slowing, it certainly has not stopped.

Forbes.com’s Paul Maidment put it this way in an article on the decelerating Chinese economy. (Click here to read the whole article) “The consensus forecast among analysts had been for 9.7% GDP growth. China’s growth rate has now slowed for five quarters in a row.”  9.7%, that is really good, for most every other economy on the face of the planet, just not China.

Weak exports are a main issue, but another villain is actually the Olympics.  Factory furloughs for the Olympics held back a lot of factories that are now struggling to get back on their feet as the world economy slows.

It will be interesting to see how the communist government handles this situation.  As the general populations prosperity has risen they have been generous in looking the other way to some of the governments “controls” and restriction of freedoms.  But unrest is also growing right along with bank accounts.  My feeling is that people will be a little less forgiving when money isn’t so good.  We will see.

In other related news one of the main toy suppliers for Mattel, Hasbro and Disney has filed for bankrupcy.

“My missile is bigger than your missile!”

I saw an article over the weekend that intrigued me. It involved China, missiles, Taiwan, more missiles, the USA and attack helicopters equipped with guess what, missiles. Not in that particular order perhaps, but close enough.

According to the article the U.S. plans to sell the Taiwan nearly $6.5 billion in weaponry. This purchase will include: Patriot III anti-missile missiles, Apache attack helicopters, Harpoon missiles and Javelin anti-tank missiles.

As you may already know, this type of action does not make China very happy. And now for my own personal commentary: First, the article mentions that China has threatened retaliation if Taiwan makes any move towards independence. My question is, how can purchasing 6.5 billion dollars worth of weapons not be considered divisive enough to constitute a “move” towards independence? Sounds like politicking to me. Second, the article also includes the following statement:

“Andrew Yang, a military analyst with the Chinese Council of Advanced Policy Studies, said the sale, which the U.S. Congress must approve, was largely symbolic, because China has more than 1,000 missiles pointed at the island, and Taiwan’s defensive capabilities remain limited.”

I would argue that “Taiwan’s defensive capabilities…” actually are not that limited considering the United States has historically vowed to step-in if fighting ever does break-out. And if the USA is going to step in anyway, why buy missiles and helicopters now? I bet they would be on the way “free of charge” if needed anyway. According to Mr. Yang, if the US did not step-in, whatever small amount of “war toys” Taiwan has saved up wouldn’t matter anyway.

The issues between China and Taiwan are very real and very important, but they are also very hard to understand. The history is deep and the feelings are strong. The good news is that it is not in Taiwan or China’s interest to go to war. In fact to do so would be devastating for both countries and their economies. Let us all hope for everyone’s sake that we all can learn to get along.

Source: washingtonpost.com: Taiwanese Leader Hails Weapons Deal With U.S.

I have to admit that before this year I had no idea that there was a minimum age for Olympic gymnastics.  I always thought that female Olympic gymnasts looked young, but I also thought that male Olympic gymnasts looked like freakishly “buff” comic book characters.

After the Olympics the news of under-age gymnasts slowly faded away, but I was surprised to hear that not only is the IOC’s investigation of the 2008 Olympic gymnasts still ongoing, but it now includes Chinese gymnasts from the 2000 Sydney Olympics.

This year my favorite comment from any sportscaster concerning the Olympics also concerned some mini-female gymnasts.  In response to the IOC stating that they could not perform background checks on all of the tens of thousands of Olympic athletes, a commentator made the remark that at least they could afford to put forth the effort to perform back ground checks on the “ones who looked like they were 8 years old.”

I have my own opinions, but I have decided to keep them to myself until after the IOC investigation is complete.

Andre Gueisbuhler, secretary general of the International Gymnastics Federation, told The Associated Press on Wednesday that, “we did not have another choice,” he said. “If we want to remain credible, then we have to look into things.”

Here are a few links concerning the issue.  Read them and feel free to share your thoughts on the matter with the rest of us.  The first is recent, the second and third are from August.

AP article found at SI.com: FIG investigating members of China’s 2000 Olympic team, too

Huffington Post Article: Scandal of the Ages: Documents Reveal Underage Chinese Gymnast

NBC Olympic Website Article: Paperwork shows Chinese gymnasts are not underage