The Contradiction between Capitalism and Communism

uniqlo-scandal

Any casual Chinese observer will tell you that the traditional ideological divide set out by Karl Marx in the 1800s between two forms of social and economic organisation called capitalism and communism is not a problem for those who dream up the official party line in the People’s Republic of China.

The simple answer to the seeming contradiction of a communist country pursuing capitalist policies was put forward early on in the revolution – China has a communist system with ‘Chinese characteristics’. This short qualification has allowed leaders from Deng Xiao Ping onwards to liberalise the economy to enrich the country, mobilise the massive workforce, unleash the entrepreneurial spirit of the people, open the markets, allow private ownership and set up a stock market.

The results have been widely acclaimed as ‘miraculous’. Commentators have marvelled how in 20 years China went from an introverted, basket case economy to one of the world leader’s in terms of GDP, foreign exchange reserves and the other indicators of financial might. China is challenging the USA, Japan and Europe for economic supremacy. The Chinese authorities limited the damage of the 2008 financial crash and have avoided austerity and crippling debt re-payment. Despite the slowdown in demand for Chinese consumer goods, China is doing very well economically.

Nobody cares if this is real communism. The popular belief is that hard work, private ownership and starting up your own business is the way to achieve a workers’ paradise. It is not sharing, communes, state ownership that is going to lead to universal prosperity.

The only problem is that the freedoms necessary for a successful economy are challenging the hegemony of the Chinese Communist Party. While the ideological contradictions bother no one, the restrictions on people’s freedoms do. Artists want full freedom of expression. Artists, writers and musicians are pushing the boundaries of what is and what is not acceptable according to the party. They struggle with censorship, house arrest and state pressure.

It is here that we see the real contradiction between communism and capitalism. Is it market forces in charge of the economy or is it an elite and unelected group of leaders?

A good example of this friction was recently exposed in the incident of the Uniqlo viral video of a couple having sex in a changing booth. (See http://www.theguardian.com/world/2015/jul/16/uniqlo-sex-video-film-shot-in-beijing-store-goes-viral-and-angers-government) Marketing is leveraging the massive power of the internet to increase sales. TV ads, radio, billboards, expos etc. are still relevant but less cost effective (and perhaps less far-reaching) than using SEO, viral marketing and marketing psychology. We all know sex sells. We also know that ‘no publicity is bad publicity’.

Chinese authorities arrested 5 people over the Japanese clothes store sex scandal. “The vulgar video had spread like a virus online and clashed with socialist core values,” Xu Feng, a director at the Cyberspace Administration of China said.

The government has a clear moral code they are upholding. They want to control public mores, and to limit the effectiveness of advertising to use sex. Since it is a Japanese company involved in this particular clash of values, the government has nationalist feeling on its side; although, many Chinese have bought commemorative t-shirts of the infamous incident.

How long before the majority of Chinese citizens evolve their morality to tolerate modernity – homosexuality, transgender people, pornography, obscenity, political satire, cynicism? The West has shown that these things seem to attend laissez-faire politics and neo-liberal politics. Will they decriminalise cannabis? Will they let artists say what they want? Will they let manufacturers produce whatever will sell? Will they allow mass media to feed the masses with messages to promote extreme consumerism? Will they allow their food system to be hijacked by multi-national supermarkets that will increase the levels of sugar and salt in food items to unhealthy levels?

The answer might be yes. The Chinese government has shown they care very little for protecting the environment if it means denting the bottom line. Why not sacrifice other traditional values at the altar of modern capitalism?

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Culinary Wars

Japanese home-cooked food

Japanese home-cooked food

The Chinese have always rightly prided themselves on their cuisine, or to be more precise the cuisine from their region or province. They can point to the fact that every major city in the world has a Chinese food restaurant as evidence that the world agrees with the Chinese – Chinese food is delicious. However, over the last few years a relatively new player has arrived on the scene that is threatening to over-take Chinese as the world’s favourite cuisine and that is Japanese food.

In the 1990s a few Japanese restaurants started appearing in European cities. After years of beginning considered ‘odd’ food, the food buying public suddenly started to regard raw fish with not disgust but with relish.

Of course foreign food restaurants are very much connected to immigration. In the UK two big ethnic groupings are the Indians and the Chinese, and so they traditionally tended to dominate much of the budget to mid-level restaurant trade. Also kebab shops run by Middle Eastern people should be mentioned in the same category.

This pattern can be seen reflected over much of the world. Immigration helps to disseminate culture. The Irish due to potato famines and poor economic prospects have left Ireland’s shores in large numbers. Hence the number of Irish bars around the world. Britain had the last pre-World War Empire that spread their culture and that resulted in a spread of the English language, English pubs and other English cultural exports.

The world has changed because of globalisation. This is a new force to spread consumer items and habits independent of immigration. The Japanese, who apart from a brief spell of immigration to Brazil prior to World War II, have never settled in numbers aboard. Instead globalisation and the consumerist obsession with the new and ‘trendy’ have propelled Japanese cuisine on to the world scene. Foods such as sushi, sashimi, udon and grilled meat have become popular. Chain restaurants such as ‘Yo! Sushi’ has educated the food buying public about Japanese food. Moreover, people like to try something new – why not sushi rather than yet another Indian takeaway or Chinese egg fried rice?

Another telling trend is found in luxury hotels around the world in places like Silom in Bangkok, London, Paris, Rome and New Delhi the 5 star hotels have Japanese restaurants rather than Chinese restaurants to accompany restaurants with local food and perhaps Mediterranean food or French / Italian food. The rich obviously think it is more glamorous or sophisticated to eat Japanese rather than the ‘old hat’ Chinese food.

The Japanese shouldn’t however feel too special. Globalisation will no doubt foist on the world public new eating trends and the next big thing could be Mongolian BBQ or Australian bush tucker. These things are ephemeral.

Another thing to consider is that the Chinese have so much more to give to the world economy now than it did in the 1980s. The economic miracle in the People’s Republic of China has led to a legion of highly qualified managers, engineers, scientists etc. who travel the world bringing with them their skills and their cultural mind-set.

Personally, I find the Chinese food outside of China poor. The Indian food outside of India is adulterated with large lumps of meat and tomato soup. The sashimi outside of Japan is not fresh enough and lacks the theatre of the master chef patiently carving up the fish. Globalisation only gives us a copy; and not an exact copy, but rather a market-appropriate product.

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Travel on Chinese Trains

boys drew us while we slept on the floor ofr a Chinese train station

These boys drew us while we slept on the floor of a Chinese train station

I did a big tour of China in the summer of 1997. I started off in Hunan Province and went north to Beijing and then Xi’an. We carried on up to Inner Mongolia and then did the long haul west to Golmud in Qinghai Province. From there we caught the bus to Lhasa. I then said goodbye to my travel companion and caught a bus from the Tibetan capital to Chengdu. I then resumed my train travels to first Kungming and then the long stretch back to Hunan.

It was an epic circular journey that took just over a month. We spent nearly a third of our time on slow Chinese trains in fourth class. It was hard going and full of events. At one point my friend and I helped to save someone’s life. You can read about it here – http://goo.gl/b9Gng4. It was quite a surreal experience.

Trains are the most important means of transport in China still. They cover a vast area with a huge network. They are cheap and there are plenty of them to deal with the huge population. Since 1997 China has seen its economy flourish thanks partly to a mobile work force able to use the train system.

I am reliably informed that now in many train stations in the People’s Republic of China those seeking to buy train tickets are made to queue. Before there was a rush for the ticket counters. It was considered par for the course for people to push in from the side. My friend used to shoulder others out the way while I shouted out our travel needs in my poor Mandarin and strained to understand the replies.

We only ever managed to get fourth class tickets. Sleepers were too expensive and very hard to come by without connections or guanxi. In Kunming I tried to use a travel agent who did no better than I would have done wading into the crowds and fighting for a ticket.

Getting a ticket was only the first obstacle. Passengers were then hemmed into a holding pen. When the doors opened everyone ran for the train. It was bedlam. Before people could alight the crowds were forcing their way on to the train hoping to get a seat. It was a frequent sight to see people climbing in through the windows.

Sometimes we got seats. Other times we made it no farther than the section between carriages, nose to nose with a packed crowd of Chinese. Everyone accepted the situation and tried not to get worked up. Over time people usually find a bit of floor to sit on, or even a seat.

You could smoke on Chinese trains. The Chinese love smoking and I wonder if the authorities impose a smoking ban on trains whether anyone will pay any attention, similar to trains in Thailand where the guards turn a blind eye to those smoking between carriages.

The Chinese don’t usually read on trains. They chat and consume food and drink continuously. Perhaps they play with their smart phones for hours now. On sleepers they all awoke at the same time and queued up for the toilets with a little flannel and a toothbrush. After they hung up their wet flannels and helped themselves to the free hot water at the end of the carriage for pot noodles. After breakfast they continually put stuff in their mouths – cigarettes, pumpkin seeds, food bought from the platform and lots of green tea.

The Chinese I encountered on trains in China were right to come prepared as the journey times were very long; most of the time I did overnight journeys. My longest was 2 nights to get from Kunming to Yueyang.

I believe Chinese trains have speeded up slightly. This means trips are still long, uncomfortable and over-crowded, but over slightly quicker. There are some high speed trains now in China but they only serve a small fraction of the train network and are probably too expensive for the average citizen.

China has a long way to go to provide a train system like Japan where train travel is fast, orderly, comfortable and relatively affordable.

Now that the Chinese economy is showing signs of slowing down it would be sensible to upgrade trains in China not just to the big commercial centres of Beijing and Shanghai but all over China. Such big infrastructure projects bring jobs and stimulate the economy.

The only exception is the Lhasa train. This is bringing cultural genocide to Tibet. Sometimes remoteness is the only way to safe guard a culture.

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Catching the Chinese Tourist Buck

chinese tourist scalds thai flight attendant

Chinese citizens were not allowed to travel to foreign countries until recently. With their growing amount of disposable income they are able to visit countries they previously could only dream about. Tourism makes up 9% of the global GDP. In 2012 the Chinese overtook Americans as the number one tourist spenders in the world. In 2012 they spent $102 billion (http://www.theguardian.com/theobserver/2013/dec/22/chinese-tourism-changing-the-world). That is a lot of money and countries around the world are keen to get some of this cash.

The British are looking to simplify the visa process for Chinese tourists. The Thai government is always altering their visa regulations in favour of Chinese tourists. Other countries are no doubt employing similar tactics.

Yet Chinese tourism is not without its problems. In December 2014 a flight between Nanjing and Bangkok was forced to turn around after Chinese passengers threw hot water and noodles over a cabin attendant. The incident was picked up by an outraged Thai state media that wrote ‘They behaved like barbarians’. This is ironic as traditionally, those not from the Middle Kingdom, were labelled as ‘barbarians’. The news story highlights the growing number of stereotypes that have attached themselves to Chinese tourists. The rest of the world is just starting to encounter the Chinese outside of a Chinese restaurant milieu and are branding Chinese as rude, loud, impolite and mono-lingual. They are some of the least liked tourists even though they spend money.

As with other Far East Asian countries, the Chinese tend to go on package tours. These tours herd people around Buddhist temples and street markets. Typically Chinese are looking for a good deal. Thailand is an ideal destination because it is only a short airplane journey away. Moreover, there are lots of Thais with Chinese ethnicity in Thailand. There is no shortage of Chinese restaurants, Buddhist temples and fake watches on sale. As well as Bangkok, Tawaen Beach near Pattaya is the main spot for Chinese tourism in Thailand.

One useful comparison can be to look at how Japanese tourism has developed. They too move in packs and conform to stereotypes. Yet, with each new generation leaving its shores behaviour changes. More can speak some English; more travel independently; more start following backpacker trails. There is a growing number of Japanese now to be spotted at Haad Rin’s Full Moon Party and the Bantai parties in Koh Phangan. This will surely happen to the Chinese. They will throw off their group behaviours and participate in a greater diversity of tourist activities. In short individualism will eventually rear its head. The Chinese tourist buck will then be harder to attract with phony attractions and visa lures.

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Chinese Authorities Ban Wordplay

The edicts of the Chinese communist party can be a strange mix of the frightening and the absurd. Despite the window dressing of democracy and lip service given to the 55 ethnic minorities of China, the ‘party’ makes the rules, changes the rules and enforces the rules. The latest rule change is that Chinese media and other sources are not allowed to make puns or indulge in the venerable tradition of wordplay using popular idioms.

For thousands of years Chinese people have been playing with their language. Thanks to a large amount of homophones it is possible to take common phrases and idioms and substitute characters with homophones to make a pun. This is an integral part of Chinese rhetoric and poetry. It shows wit and can be used to make a joke, sell a product or make a political point. The puns stick in the mind and soon go viral in the Zeitgeist.

It is no doubt this last use of wordplay that the authorities object to. The potential for making memorable slogans using a clever wordplay worries the party. In a bid to fend off any threat to their authority and their tight grip on the minds of the people the party has banned wordplay. This takes censorship to another level and risks making the totalitarian regime look plain ridiculous.

It is hard to listen and read every utterance both private and public. It is hard to read every news article, forum post and blog post. Indeed it is impossible. But it is another stick to keep public comment under control; another excuse to stop political dissent. One is immediately reminded of the Nazis burning books and the Soviets declaring certain art ‘unsuitable’.

Language is a rich resource of expression and communication. Literalism is the death of the creative element of language use. If the limits of the world are the limits of language as Wittgenstein claims then the world for the Chinese will be drastically shrunk by this new law. At the same time the law smacks of desperation.

A related topic is the curtain of censorship that the Chinese authorities have attempted to bridle the internet. Certain words and phrases are banned, and sites that are flagged are blocked by internet providers. One way around this obstacle for those wanting to declare their opinions has been to use wordplay and substitute characters. The richness of Mandarin allows people plenty of room to avoid censorship.

While the party knows the value of propaganda it doesn’t realise that history teaches us that draconian measures of self-preservation only serve to speed up the inevitable fall from power.

The example of wordplay below using the ‘zhou’ in the place name Whenzhou and replacing it with a homophone that means porridge. Thus, the sign sounds like ‘people from Zhenzhou’ but actually says ‘warm porridge people’.

warm porridge people

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China and Tourism

China has over 2,000 years of continuous history. Along with India it has the oldest surviving civilization and history in the world. And along with India, China is the cultural heavyweight of Asia. For this reason alone, China will always be a place that appeals to a certain type of tourist.

Moreover, the country is blessed with places of special significance and beauty such as the Forbidden City, The Great Wall and Lhasa. These places vie for status as belonging to the modern wonders of the world.

For many, the transition of China from being a rural and insular economy to being a modern, hi-tech state with a vast pool of young and talented people makes for an exciting destination. There are the bars, restaurants and nightclubs in Beijing, Shanghai and Hong Kong to discover. The countryside is also becoming more accessible thanks to a vastly improved public transport system which now includes high speed railway links.

China has economically exploded since the 1990s. At the same time foreign visitor numbers have shot up. The dual money system of foreign exchange credits has been dropped. More hotels now accept foreign guests. The central authorities have lost some of their suspicion and paranoia of foreign ideas and people. As a consequence, fewer places are off bounds. Even Tibet has largely been opened up. This is all good news for tourism in China.

The other side of the coin is that the Chinese economic miracle has created a large middle and upper middle class with plenty of spare cash. These intelligent young people now look outside of China’s borders for their recreation, fashion and to inform their world view. China now has millions of young Western-influenced professionals who want to see Europe, America, Canada and other parts of Asia.

As yet Chinese tourism abroad is still in its infancy. I say this because most Chinese still travel in tour groups. They are as yet still lacking in the confidence to travel independently. This is something of an ‘Asian’ trait, as the Japanese and the Koreans also tend to travel in groups, use package tours and interpreters. Those hotels that have staff that can speak Chinese and that have connections with Chinese tour operators do a very brisk trade.

Thailand is a good example of a popular Asian destination for Chinese tourists. As yet most Chinese visitors only make it to the main tourist areas of Phuket and Bangkok. However, with the level of demand it is only a matter of time before other tourist areas come on to the radar for Chinese such as Koh Samui and Koh Phangan. Already Santhiya on Koh Phangan does a brisk trade with Korean guests. It is an ideal resort with its own beach, large pool, spa services, gym and glamorous restaurant.

It is only a matter of marketing back in China combined with media stories and word of mouth recommendations and many new Thai, Cambodian, Malaysian and Indonesian destinations will be welcoming Chinese visitors.

Also the level of English will improve among the Chinese middle class as well as confidence to use it. They will be less worried about eating Chinese food and having Chinese speaking tour guides. These people will look to rent a holiday villa in Thailand and elsewhere as they represent better value for families and groups of friends.

As Europe and America continues to suffer from the consequences of the financial meltdown of 2008, it is to other emerging economies that countries that rely heavily on tourism for income will have to turn. Moreover, rising prices in Thailand combined with high flight prices are keeping many tourists away. South East Asia is not such an exotic destination anymore. For those Europeans who do have the money, it is probably less well trodden locales that entice.

It is the Chinese and the Russians who are filling in the holes left by a receding European market as far as tourism goes. These nations are used to getting value for money and so the future looks bright for those tourist destinations that can offer this. There is always a tendency in the tourism business to charge as much as the market will bear until a location becomes as expensive as Paris or Rome. This is a huge mistake since Paris and Rome will always have a massive appeal to tourists.

Resources

Koh Phangan Reviews: www.kohphanganhotelreviews.com
Sunrise Villa in Koh Phangan: www.sunrisevilla.info

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Shanghai Mansion

We have mentioned elsewhere in this site the strong cultural connections between Thailand and China. It should not come as a surprise that Chinatown in Bangkok has one of the best Chinese themed hotels in the world. It is called Shanghai Mansion.

The hotel re-creates the feeling of Shanghai in the 1930s. The city at the time was the hub of commerce and culture for the South Pacific region. Many immigrants had fled from Russia in the 1920s to Shanghai. The architecture and design of Shanghai in the 1930s reflected both Chinese and Western sensibilities, as is apparent in the art deco pieces of the time made there.

Shanghai Mansion recreates the style and ease of this period. It has plenty of authentic furniture pieces, a strong color motif of Chinese red and art deco flourishes. There are two room choices – Chinese and contemporary. The Chinese rooms feature four-poster beds, dark wood and paper lanterns. The ground floor features an indoor water garden, a restaurant and bar featuring regular jazz performances. As you can imagine they serve some great Chinese food in the restaurant.

The hotel has been mentioned in countless travel publications and in 2010 won the Sunday Times Travel Award. Shanghai Mansion doesn’t have a swimming pool or spa and an indoor shopping mall, but it does provide a boutique holiday experience. Rooms start at just $80.

The hotel is in a busy area of Chinatown in Bangkok. It is near plenty of shopping, eating and drinking options as well as Hualamphong Train Station and the adjacent metro line.

To read more check out http://www.bangkokboutiquehotel.info/shanghaimansionbangkok.html

Other articles looking at the relationship between Thailand and China:
Chinese Temples in Thailand
Chinese Culture in Thailand

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Chinese Temples in Thailand

Chinese temple in Koh Phangan

Chinese temple in Koh Phangan

Thailand has the largest community of ethnic Chinese people in the world. For over 400 years the Chinese have moved to Thailand. King Rama VI (1910 – 1925) decided to fully integrate the large Chinese community into his Kingdom by making all those who wished to stay to adopt Thai surnames. King Rama VI was from the present Chakri dynasty that itself has Chinese ancestry.

There are plenty of examples of Chinese culture in Thailand. There are China towns in cities and towns; you can see Chinese characters on shop signs; and many of the dishes served to foreigners in Thailand. Another more obvious example of Chinese culture is the prevalence of Chinese Temples.

Chinese temple in Koh Samui

Chinese temple in Koh Samui

They are noticeably different to Thai wats in many respects. For a start iconography and the form of Buddhism worshipped is different. The aesthetic of Thai and Chinese temples are very different. From an architectural point of view Thai wats depend on their high, steep roofs often cleverly overlapping. Gold leaf is used to create the awe in the statutes and building flourishes of ornamentation. The interiors use high ceilings and windows to create large spaces and light.

A Chinese temple has a roof with gentle slopes. The impression in a Chinese temple is created by a rich embroidery of dragons, lions, Buddhas and other images found wound around pillars, over arches and in standing statues. A wider palette of colors is used. Inside a Chinese temple it feels darker and more enclosed. A different but still appropriate way to reinforce faith.

Thai wat in Bantai, Koh Phangan

Thai wat in Bantai, Koh Phangan

You can find big Chinese temples in Bangkok and Changmai, indeed all over mainland Thailand. More surprising are Chinese temples in small isolated communities such as Koh Samui and Koh Phangan used to until the second half of the Twentieth Century. The Chinese temple in Koh Samui is located in the main town of Nathon. It is an imposing building and well worth a visit.

The Chinese temple in Koh Phangan is near the popular beach resort areas of Mae Haad, Haad Yao and Chaloklum. Although there is an old tradition of Hainan fishermen visiting the southern islands there was no major Chinese temple in Koh Phangan until a woman had a dream while visiting Koh Phangan. In her dream she was told to build a temple in Koh Phangan. It might be considered a divinely sanctioned temple.

To find out more about Haad Yao in Koh Phangan visit: www.haadyao.info

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Liuzhou

GreenChineseolives
Liuzhou City in the People’s Republic of China is in north central Guangxi Province. It has a population of 3.7 million and covers an area of 18,700 square kilometers. The city is on the banks of the Liu River. It is the second biggest city in Guangxi Province.

Among the main industries of the city are LiuGong, a construction machinery company and SAIC-GM-Wuling Automobile, a Joint Venture whose partners include General Motors and Wuling Motors.

Liuzhou as well as being a hub for industry and wealth creation is also a popular tourist destination thanks to its mountains, caves and karst scenery. Just north of the city is Sanjiang. It is an area of pretty villages where the ethnic Dong minority live.

There is a famous saying in China:

“Born in Suzhou, live in Hangzhou, eat in Guangzhou, die in Liuzhou”
(sheng zài su zhou, zhù zài háng zhou, chi zài guang zhou, si zài liu zhou).

The reference to Liuzhou is because the city was traditionally famous for its coffins made of fir wood, camphor and sandalwood.

There is a lot more to Liuzhou. The experience of living in the city, especially for a foreigner is one that is hard to imagine. In 1997 I met Ken. We were both new to China at the time. While I opted to move out of the Middle Kingdom he chose to stay.  He has made an impressive record of his experiences living in Liuzhou. It is well worth reading both http://www.liuzhou.co.uk and the blog http://liuzhou.co.uk/wordpress/ to find out more about this fascinating part of China. The blog is particularly amusing. It covers such stories as the man who had his shoes stolen while in hospital and Chinese olives. It is a fascinating insight into a city undergoing the transformations caused by the so-called Chinese economic miracle: a culture firmly planted in tradition and yet trying to embrace modernity, only with Chinese characteristics. In short these websites are compulsive reading for those wanting to know about life behind the iron rice bowl.

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The Population Conundrum

It is China’s one child policy that is perhaps the mostly widely known of the communist party’s many political directives. It is a policy that produces an extreme reaction among foreign observers. There are libertarians and pro-lifers who view the population control strategy with moral abhorrence. Some environmentalists laud the idea as the only practical way to curb the danger of rampant population growth that would lead to massive environmental degradation and resource loss. These things are already a problem in China, thanks mainly to its aggressive economic expansionism, but would be worse without any control on the numbers of new children born.

There is a further political grievance with this policy – it is only applied selectively: Han Chinese in Tibet and other so called ‘autonomous regions’ are given license to have as many children as they want. This is leading to what the 14th Dalai Lamai has called ‘cultural genocide’ where local populations are becoming the minority in their own land.

What the mandarins of the Chinese communist party did not envision was the long term social consequences of the one child policy. It is a radical policy and it is beginning to have alarming consequences.

Population imbalance

The first is selective progeny. As with India and other Asian countries having a son is traditionally viewed as paramount to a family’s success. A first son must take over the family business. A first son must place offerings at the shrine of his ancestors. A first son carries forward a name and a cultural and genetic inheritance in a way that a daughter is perceived not to.

What this means is that women have been having multiple abortions until they conceive a boy. Today there are 119 boys for every 100 girls in China (http://www.scientificamerican.com/article.cfm?id=there-are-more-boys-than-girls).  This is an imbalance that is going to get worse.

In terms of society it means that parents save more money than ever. They need to give their son every advantage possible such as college education and a car to attract a female partner. The bargaining position of parents with a daughter has never been stronger. They can demand large sums for their daughter’s hand. Independent Chinese women are now not shunned, but courted. It is empowering in some ways. In others, it is just a reminder of how traditional attitudes prevail – women are inferior and parents will do anything to get a grandchild. Communism was meant to free humanity of superstition and gender prejudice. The experiment, if it was ever really applied, has failed. Human nature with all its warts has prevailed.

For the economy it means a reduction of consumer growth. The Chinese have become ‘savers’ not ‘spenders’ – a grandchild is more important than a new car. Naturally, lack of rampant growth in consumer demand at home has to be made up for by looking for markets abroad. This is fine as long as the world economy is not ailing as it is now. Already we are seeing huge stock piles of raw resources piling up in China. Its massive manufacturing sector has created more supply than there is demand.

Ageing society

The other alarming social impact of the one child policy is a rapidly ageing society. China now has the fastest ageing population in the world. A widespread improvement in living standards accompanied by better medical facilities has increased life expectancy in China to levels approaching the developed world.

At present there are 6 workers to support 1 pensioner. The one child policy means that in 20 years time this ratio will drop to 2 workers to every pensioner (http://www.bbc.co.uk/news/world-asia-china-19647867). That is a swift and paradigm changing scenario that will impact Chinese economics, politics and society. The Chinese economic miracle has been largely driven by a young workforce ready to travel great distances and work for small remuneration. In 20 years time such a workforce will not exist. Employees will have the upper hand and will be able to demand higher wages. This will corrode any competitive advantage China had in the world market place. India and Indonesia with an abundance of young and poor citizens will be well placed to become the ‘New China’.

The Chinese Communist Party has a major re-shuffle every 10 years. Now in 2012 it is about to have another. This is one of the most pressing problems to solve for the new technocrats at the helm. Luckily, the party ditched any real pretense to ideological integrity many years ago and so nearly all options are on the table. What they cannot afford to do is to aggravate the citizenry too much. If anything too calamitous happened to China even the brainwashed army might turn on its master. That is the ‘mandate from heaven’ factor.

At present the Chinese government has avoided excessive taxation and set up only a bare bones welfare state; very much following an example long set by the USA. The idea is that the state should not burden business with excessive red tape or tax demands. The lessons of capitalism have been studied just as Western technology was studied and then copied. In countries like Thailand it is simply not possible for the government to collect large tax revenues and institute a major welfare state undertaking. In contrast the Chinese communist party has the political might and the logistical resources to collect more tax if it chose to create better facilities for pensioners.

It is going against the grain of current economic thinking but higher taxes might be inevitable in China in the next 20 years. As for solving the problem of halting a society moving further into old age there are a number of suggestions on the table. We know these because Japan has been wrestling with the problem for the last 30 years.

Mass immigration

The Japanese pay lip service to this idea but covertly reject it as the Chinese will do. Both countries are obsessed with racial identity and cannot brook the notion of their population becoming watered down by ‘foreigners’ or ‘outsiders’. Itinerant foreign workers that are regulated and made to leave are expedient but mass immigration policies are political suicide for the Chinese and Japanese polity. So much so that the Japanese are now even suggesting they can build millions of robots to look after the old rather than have millions of foreigners come in as carers.

Encourage population growth

This is what the Japanese government is doing. They are giving lots of money out for those who have children. China already has 1.3 billion people; despite the one child policy China’s population is still a runaway train. To go back to the old ways of big families with lots of children is suicide for everyone in the country.

Japan doesn’t see this. They see it as a viable solution. Really it is just pushing the problem back a few generations: when the new baby boomers grow old the problem will be worse than before. Nobody seriously imagines China will follow this path.

Technological fix and outsourcing

The new economic ethos is to think beyond borders. Just because it is a problem in your country doesn’t mean it has to be regarded as a purely domestic problem. Just as the great potato famine of 1740 drove the Irish out of their homes so a lack of good facilities for old people will drive a lot of rich Chinese out of China. They will go to the Philippines, they will take long term villa rentals in Thong Nai Pan and other holiday destinations, they will move to Europe, and they will move to North America. Anywhere that is cheap and / or has good medical facilities. In effect, the Chinese will start to outsource their ageing population problem.

Chinese government policy has been heavily influenced by technocratic thinking over the last 20 years. They may well try some type of Japanese style crusade to bring in a technological fix to the problem. For a start shrinking numbers in the factories can be compensated for by robots. It is a front-ended investment but the RMB is strong and the country has massive reserves of cash.

The level of technology needed to solve the many problems of an ageing society in China has not been reached. Will the Chinese leadership preserve with reverse engineering or will it invest in Japanese technology? This would be a moot point if it were not for the fact that a technological fix is clearly not enough. The number of old people in the equation makes a technological solution unrealistic.

Do nothing

This is the real Asian solution. To please the masses the politicians claim to be tackling the problem –whether it is a democracy or an oligarchy. Really the political actions are cosmetic. They can see no solution. Better to leave the problem for the next generation of leaders.

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China and Carbon

The cost of a carbon based economy

China opens a new coal burning power plant every week. It has overtaken the USA as the single largest emitter of the green house carbon dioxide. William Chandler of the Energy Transition Research Institute has gone on record saying:

“The most important thing in the world for meeting carbon goals is what China does in its overall energy policy in the next 10 years.”

Just prior to the failed 2009 Climate Change Summit China promised to decrease its carbon emissions to at least 40% of 2005 levels, and at the same time switching 15% of energy generation to non-fossil fuels within the next 20 years.

Experts point out that China is behind schedule in this endeavor. Part of the problem at the 2009 Copenhagen summit was that China refused to have independent monitoring of its energy policy.

However, a new development has left America looking like the bad guys and China like the newly reformed eco-kid on the block. Authorities are going to roll out a pilot carbon emissions trading scheme by 2013 in Beijing, Shanghai, Tianjin, Chongqing, Shenzhen, Hubei and Guangdong.  These 7 cities represent a combined population of 250 million people.

The pilot scheme if successful will lead to a nationwide carbon trading scheme by 2015. The scheme will be based on the already existing European model. Recently Quebec in Canada, New Zealand, South Korea, Australia and California have all passed legislation to start carbon trading.

It is an audacious move that will see a wider Asia-Pacific carbon trading area that will be worth billions of dollars. The lure of such a big market will force the ever recalcitrant American central government to begin carbon trading. When the world’s number one and number two biggest carbon emitters start to properly count carbon emissions and trade in the right to pollute we will have a much better framework for dealing with the ever more pressing problem of global warming.

Despite the inherent deficiencies of a Chinese economy that is heavily carbon based that is also quickly consuming the world’s natural resources it is one that can be manipulated from the totalitarian strength of its government. The question will be how open and transparent will China’s carbon trading scheme be? Will companies be apt to fiddle the figures to reduce the extra costs of buying carbon quotas from other companies? The money involved in buying carbon will be huge and where huge money is corruption soon follows.

Another point to make is that the issue of moving to alternative sources of energy is connected to carbon emissions. It takes a large input of electricity to extract silicon from silica. This silicon is needed to make photovoltaic panels. China is the leading manufacturer of photovoltaic panels and the energy needed to makes these panels comes mostly from burning coal.

Despite life being based on carbon, it is tempting to see carbon as the enemy. In our efforts to fight global warming we are using more carbon to make solar panels, wind turbines etc. It can only be hoped that making a carbon based economy unattractive through policing and trading emission quotas has the desired effect. This hoped outcome is not an economy based on financial services. We have already seen the disaster in America and Europe that such a vision can produce. Of course we should not blame China in isolation -they are after all performing the role of being the factory for the world’s consumer goods.

Further reading

www.eco-business.com
More about carbon
Cost of solar panels

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Chinese Reverse Engineering

It is no accident that China is stealing a march on the rest of the world in many manufacturing sectors. It is not just enough to have a cheap and plentiful supply of factory workers. Nor is it enough to have a currency that isn’t floated. There is a history that explains China’s growing world dominance in producing TVs, radios, engineering tools, home ware, factory machines, office supplies, electrical equipment and so on. A big part of this history is to do with reverse engineering.

The story goes back to the Sino-Soviet Alliance that started shortly after the end of World War Two. Stalin and Mao were initially on good relations and Russia was prepared to be China’s only friend in the world. During this time the Red Army relied on military equipment from Russia. In many sectors Russian technology was used to secure China as a viable state and continuing ally against the capitalist West.

By 1958 it became clear to the leaders of China that the Sino-Soviet Alliance was destined to soon fall apart. It was then that the leaders made the important decision to make every effort to ‘stand alone’. This meant copying Russian machine guns, rockets, fighter jets etc.

By the time the inevitable split between Russia and China occurred in 1960 Chinese engineers were already busy pursuing a policy of reverse engineering or guochanhua. Virtually from scratch engineers figured out methods for taking soviet technology apart and replicating it.

It was a long process, no doubt partly because the Cultural Revolution had destroyed the intelligentsia of the country. Historians studying military parade footage and other sources estimate that the Chinese army did not reach the 1960s levels of soviet military hardware until 1984. This capability included jet fighters and warships.

Now that Chinese engineers and scientists understood reverse engineering Deng Xiao Ping issued directives to import foreign goods to China such as machinery, electronics and other hi-tech products with the aim of copying them.

The rest really is history. In a very short time TVs, washing machines, tape recorders etc. were being made entirely in China without any foreign imports. Chinese factories helped by authorities that turned a blind eye to copyright issues and that actively promoted overseas trade soon started to take a huge market share in several areas of consumer products.

By the early 1990s China could make everything itself bar integrated circuits and engines for passenger carrying aircraft. Computers, helicopters, cars, solar panels, large generators were all well within China’s manufacturing capability.

The gap now between the West and China in terms of technology is very small. In certain fields they lag slightly behind, but in others they are leading the way. China is now the world leader in new engineering patents.

It is perhaps possible in the future that Chinese companies will innovate important new technologies that emerging economies like Indonesia will effectively ‘steal’ through reverse engineering. No doubt they will hypocritically complain about this and initiate legal proceedings.

For the time being the real challenge for the Chinese manufacturing economy that is progressing at a blistering pace thanks to guochanhua is to secure enough natural resources to keep going, and also to keep wages low and costs down.

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