31 Oct 2008

Keywords: rural reform, human right, anti-corruption, food safety, Tibet, environment, nuclear, U.S.-China relationship, Japan-China relationship, oil

POLITICS AND SOCIETY

Rural Reform at the 3^rd Plenary Section of 17^th Central Committee of CCP

China wants to improve its rural economy. Details of the reform contents and procedures were released 3 days after the section. Zheng Ming suggests that there have been lots of disagreements within the party, which constrained structural reform from emerging. (Zheng Ming, Oct: p.8-9) Western media like the New York Times and the Los Angles Times share this view. (NYT, 10 Oct; LAT, 15 Oct) [1]

Major points are as follow:

1) Enhancing land rights transfer, farmland merging and relieving rural population? The reform allows farmers to “lease their contracted farmland or transfer their land use right” to boost the scale of operation for farm production and provide funds for them to start new businesses. Markets for the lease of contracted farmland and transfer of farmland use rights shall be set up and improved to allow farmers to sub-contract, lease, exchange and swap their land use rights, or joined share-holding entities with their farmland. (Xinhua , 19 Oct)[2]

2) Managing Illegal land uses by local authorities. The text did not say whether farmers must first obtain permission from their villages, but said such transactions of land-use rights must be voluntary and that farmers must receive adequate payment for their land. The purpose of the land use also may not be changed in the process, the document said. Such restrictions appear to address concerns regarding illegal land seizures to build factories, shopping malls and other projects that have caused angers and protests around the country, especially among farmers. (WSP, 19 Oct) [3]

3) Providing Social Security for the Rural. Recently, the government decided to initiate a micro-insurance scheme. The group-based micro-insurance products are tailored for low-income people, as they require a relatively lower annual premium compared with insurance products designed for their urban counterparts. SOEs are going to coordinate the provision of these products. (Xinhua , 11 Oct) [4]

Detail examinations and comments also see, China Newsweek, vol. vol.392, pp.21-37, Caijing. Vol. 222, pp.100-116; Oriental Outlook, vo.257, p.7. Some scholars claim that the change is more of a symbolic nature. (Southern Metropolis Weekly, 27 Oct) [5]

Implications:

Centralization of Rural LandàExtensive Farming becomes possible
Relive of Rural Population à Challenge to Rural-Urban Segregation
Process of CentralizationàRural Conflicts might be intensified

Index of National Responsibility: China at the Top and U.S. at the Bottom!

The Chinese Academy of Science (CAS) issued the worldwide “Report of National Health,” which claims that, according to its ranking of “Index of National Responsibility” (NRI), among 45 sample countries worldwide, China, rated 0.74, scores No.1, while the U.S., rated 0.32, scores No.1 counting backwards. The NRI includes disarmament, poverty elimination, development assistance, resource saving, and environmental protection etc. Where, the first five countries of NRI are China, Mexico, Brazil, Thailand and Philippines. The last five are UK, Italy, Israel, Singapore and U.S.[6] Interestingly, although state-run media has published related reports on national health, it has not produced any report in English on the national responsibility ranking whereas it has become a very hot topic on blogs and forums.

1.3 Social Incidents in Guangdong, Zhejiang, Jiangxi, Jiangsu and HelongJiang

1.31 Human Rights in China said that more than 500 police and paramilitary police clashed with hundreds of village protesters in rural Sanjiang Town in Guangdong province’s Xinhui District. Protestors and civilians taking photos on the scene have been beaten and detained. The protest followed a typhoon, which collapsed the local dam, damaging farmland, fishponds and farm property. Villagers blamed government officials for illegally selling and removing trees around the dam, which may have caused it to collapse. (HRIC) [7]

1.32 Residents of Taizhou, Zhejiang plagued by pollution are mobilizing against a proposed chemical plant that they say could harm their health, with some urging marches against the plan, which they say puts growth before the environment. The plant proposed would make paraxylene, a petrochemical also known as PX, which could make polyester. Last year, protests against a PX plant planned at Xiamen, had led to its being shelved. (IHT, 13 Oct)[8]

1.33 Eight forestry security guards have been detained for their role in recent riots in Jiangxi, Xinhua reported. Police also denied reports of deaths in the riot, which broke out just before midnight on 23^rd Oct in a dispute over land-use rents paid by a privately owned forestry company in Jiangxi Province. Twelve villagers were injured, three of them seriously, after about 150 residents of Shuanghong Village, Daduan Town in Tonggu County, confronted around 30 company security guards, said police. The villagers attacked the offices of the Luhai Wood Industry Company Ltd., destroying or taking away computers, air-conditioners and desks. (Xhinua, 27 Oct)[9]

1.34 A teenager was beaten to death by 6 police officers in HelongJiang. The case received lots of public attention and sympathy. But the attitude changed to be in favour of the police after some media and Internet reports suggested that the victim was indeed the son of a tycoon and connected to the governments. The change of public attitude seems to reinforce the belief that “Police officials are bad, entrepreneurs are even worse, officials are the worst” People are not very keen in identifying the truth, instead they are interested in, and easily manipulated by rumours that coincided with their beliefs. (Southern Weekly, 30 Oct). [10]

1.4 Political Struggles, Anticorruption Efforts and Accountability Tests

1.41 Premier Wen’s Hard Time (See 3.4)

1.42 The trial and the fallen of Four Senior Officials

1) Former Beijing vice mayor, Liu Zhihua (劉志華), who in charge of overseeing Olympic construction projects was on trial for corruption. His offenses include taking bribes, living an opulent lifestyle, and engaging in promiscuous activities. He received a suspended death sentence for two years. (NYT, 20 Oct) [11】

2) Party Secretary of the Ministry of Cultural Affairs, and former mayor of Shenzhen, Yu You Jun (于幼軍) was sacked. He was undergone corruption and misconduct investigations and was dismissed from the Central Committee of CCP. (The Trend, Oct, pp.8-9)

3) Zhu Zhigang (朱志剛), former vice finance minister and director of the budget work committee of the Standing Committee of NPC was removed from his post due to charges of relatives to buy property at discounted price. (ST, 28 Oct) [12]

4) Wang Song You (黄松有), deputy chief judge of the Supreme Court was sacked and his NPCSC representative status was also relieved . He is connected to local corruption investigation in Guangdon, and becomes the highest-ranking judiciary official facing charges. (SW, 28 Oct)[13]

1.43 Central Investigation of Local Incompetence and Deceit

A total of 22 officials are being investigated and one has been arrested, accused of covering up a mine explosion that killed more than 30 miners in Hebei province on July 14, a senior official said on Tuesday. The blast in the unlicensed Lijiawa mine in Yuxian county was set off by explosives illegally stored down the shaft. Relatives of the dead were kept quiet with payments and threats.

Besides, a reporter’s blog, which caught the attention of Premier Wen Jiabao last month, helped uncover the truth about a burst mine dam in Loufan County, Shanxi. At the time, local authorities said only 11 people had died, and the accident was described as a natural disaster. Then, two reporters from Oriental Outlook published an article stating that the death toll was at least 41, and not 11. An investigation team sent from the centre confirmed the report and the case is under further investigation. (CD, 9 Oct) [14]

1.5 Food Safety Crisis Continues

Despite Premier Wen Jiabao, speaking at a 43-nation Asia-Europe Meeting summit, said the milk scandal will spur the introduction of China’s first major food safety law and China’s food exports will meet international standards, food safety crisis continues. (AP, 27 Oct) [15]

The problem emerged over the weekend when Hong Kong authorities said eggs from Hanwei Corp. were tainted with melamine. Officials and China’s state-controlled press reported on Wednesday that eggs from other suppliers in Wunan had found to be contaminated with melamine, which can give food the appearance of higher protein levels. Against this backdrop, some supermarkets in Beijing, Shanghai and other cities announced they were recalling various brands of eggs, although others appeared unsure what to do with the central government yet to give directives. (AFP, 30 Oct)

Even pro-Chinese media like Wen Wei Po condemned the practice of Hanwei Corp, which deliberately kept secret the melamine contamination in the eggs exported to Hong Kong and Japan. Th comment suggest that it is ironic that Mr Han Wei, the Chairman, reiterated his concerns about the food safety issue in CPPCC proposals at least ten times. He is a very powerful entrepreneur, being elected as national CPPCC representative for 3 successive terms. (Chinese Media Report)[16]

1.6 Guns Crimes and More

China may be freer from gun crime than many nations, and overall crime is on a continuous down trend. Yet, reports about gun crimes turn up frequently in the tightly controlled state-run media. The splashy gunfights, murders, gun-factory raids and smuggling busts that get reported contrast with China’s zero-tolerance stance on guns, and point to changes in criminals’ behavior. But the trend is about more than crime. Bored with golfing, some affluent businessmen slip into the countryside for hunts. In July, a Shanghai man drew a prison sentence of 12 years, and his wife 11 years, for possessing three guns and 600,000 bullets, plus peddling weapons on the Internet. Chinese authorities dealt with 4,666 gun cases last year. (WSJ, 14 Oct)[17]

1.7 For the Tibetans

Authorities in the Chinese province of Sichuan plan to spend 5 billion Yuan to settle 470,000 Tibetan herders in permanent houses, state media said, as part of efforts to promote the development of ethnic Tibetan areas. Over the next four years, the Sichuan government will build brick houses and villages including primary schools, clinics and offices for the Tibetan nomads. (Xiuhua, 11 Oct)[18] At the same time, eight Buddhist monks convicted of bombing a government building in Tibet during March have been sentenced to prison, two of them for life. (AP, 14 Oct)[19]

1.8 Environmental Issues in Beijing, Shanghai, Hubei, on Coal, and at Home

1.81 Beijing has announced a series of post-Olympics car restrictions that will take effect next month and hopefully sustain the hard-won smooth traffic and good air quality during the Games. Under the new traffic restrictions, 30 percent of government vehicles will be sealed off as of October 1. The remaining 70 percent of government vehicles, as well as all corporate and private cars, will take turns off the roads one out of the five weekdays as of October 11. Cars whose number plates end with 1 or 6 will be taken off roads on Monday, while those ending with 2 or 7 will be banned on Tuesday, 3 or 8 on Wednesday, 4 or 9 on Thursday and 5 or 0 on Friday. The ban does not apply on weekends. (CD, 28 Sept) [20]The Shanghai municipal government follows this measure lately. (Reuter, 15 Oct)[21]

1.82 More than 1,300 farmers in a remote county in Hubei Province have been diagnosed with skin ailments due to pollution from smelting plants. The government in Jianli County has promised to tear down all plants that smelt the highly profitable alloy vanadium. The smelting plants discharged waste containing toxic cadmium and arsenic into waterways, which led to the pollution of both water and farms. The contaminated water also spread to several villages and polluted tens of thousands of hectares of fields. (Shanghai Daily)[22]

1.83 China’s dependency on coal as its major energy source is creating hidden environmental and other costs worth more than 7% of GDP. A report entitled: “The True Cost of Coal,” jointly commissioned by Greenpeace, the Energy Foundation and WWF, said taking into account the real expense was vital to the nation’s future energy security. The unaccounted costs equate to an estimated 1.7 trillion yuan ($249 billion), and would be even higher if impacts of climate change were included. (GreenPeace)[23]

1.84 China is already home to 16 of the planet’s 20 most heavily polluted cities — a noxious consequence of its double-digit economic growth. Now researchers have worse news for the nation’s beleaguered lower classes: The air inside their homes is up to 10 times worse than the prevailing gloom outside. Currently, 7 out of 10 homes still burn coal and wood for heat, and half of Chinese men smoke — a toxic combination of indoor pollution that raises dire questions about the fate of this industrial giant’s long-term public health. (LAT, 13 Oct) [24]

1.9 Slapping a Historian, Killing a Professor and Murdering a Migrant

1.91 Annoyed by Yan Chong Nian (阎崇年) ‘s favourable attitude towards several aggressive C’hing Emperors, a student suddenly decided to give Yan a lesson on the meaning of force. A columnist of Southern Metropolitan Daily suggested that it was a violent expression against dominant discourse. Thanks to the media and popular sentiment towards knowledge, a number of scholars have become celebrities. But their views are so overwhelming that no scrutiny can be deliberated and no alternative will be treasured. It was a fight on discourse, said the writer.[25] But it should also be noted that the teenager interpreted his action as a reflection of his patriotism.

1.92 A law professor of Chinese University of Political Science and Law, was killed by a year four student. The offender thinks that an affair is going on between the professor and his girlfriend. [26]

19.3 A migrant worker, Cao Da He, who was traveling back to Guangzhou, was gradually trussed to death on train because of his abnormal behaviour. Nearly no one, including his companies, had dared to complain and offer helps. Only one passenger found the treatment absurd and consistently protests. Finally, he cut off the bundle but found out that it was too late. He revealed the incident in Tinya Forum and has drawn immediate and enormous attention in the web. Many of the netizens compare it to the Sun Chin Kang Incident. (SW, 27 Oct)[27]

1.10 Olympic Freedoms for Foreign Press will continue

China eases the restrictions on foreign journalists enacted for the Olympics would become permanent. Premier Wen Jiabao signed the decree, which took immediate effect, said Foreign Ministry spokesman Liu Jianchao at a late-night news conference on the date when the original practice is due. Under the new regulations, which had been anticipated by journalists, foreign reporters would not be required to get government permission to travel within the country or to interview Chinese citizens. (AP, 17 Oct) [28] Foreign medai and NGOs urge the government to extend the rule to include domestic media and to cover Tibet. (AFA, 17 Oct) [29]

1.11 Death of renowned Chinese Director Xie Jin

1.12 Reforming the Education System

FOREIGN AFFAIRS

2.1 US Weapons Sale to Taiwan and China’s Response

An announcement that the United States will sell more than $6 billion advanced weapons to Taiwan elicited strong reactions from leaders in China, with officials in Beijing issuing denunciations and warnings that the weapons deal could worsen relations. (IHT, Oct 2008) [30]Lately, China has cancelled a series of military and diplomatic contacts with the United States in response to the plan. (AP, 7 Oct 2008)

2.2 A calculated backing of a close ally in hard time: in words & with actions?

President Asif Ali Zardari of Pakistan has visited China. The high-profile visits signified a close and reliable ally for each other. The relationship between the countries is unlike the relationship between Pakistan and the US, which has been rocky and often complicated, and based on short-term needs and expediency, said New York Times. Pakistan, facing economic difficulties, was looking to China for foreign aid (around $500min) and closer economic cooperation, including assistance to Pakistan’s civilian nuclear program to overcome an acute energy shortage. (NYT, 12 Oct 2008)[31] But Chinese state media did not mention any agreement on those issues. Only a deal to supply and launch a communication satellite for Pakistan and agreemts to to co-operate on mineral extraction, agriculture and broadcasting were released.(FT,16 Oct 2008)[32]

2.3 Dalai Lama said he has given up talks with China on Tibetean issues

“I have been sincerely pursuing the middle way approach in dealing with China for a long time now but there hasn’t been any positive response from the Chinese side,” “As far as I’m concerned I have given up,” said Dalai Lama. He will let the Tibetan parliament, which is said to be truly reflecting the wishes of the people to decide the future course of actions. [33] Lately, it is reported that Dalai Lama’s envoy is meeting Chinese officials in Beijing— the first time since the Olympics. (CD, 30 Oct)[34] And the British government is dared to step into the trouble water in favour of China. Its Foreign Secretary ends British recognition of Tibet’s special status after 100 years of practice on 30 Oct 2008.

2.4 Russia Swaps Oil For Chinese Cash

During difficult times, emerging markets is helping each other out: China and Russia signed a deal to build an oil pipeline between the two countries on Tuesday, amid speculation that China would grant a loan of around $25 billion to Russian oil companies as part of a renegotiated supply deal. Further, Wen Jiabao made a deal with Vladimir Putin to build an extension of the East Siberian-Pacific Ocean pipeline to China. A further step would be to secure a long-term supply deal, making it cheaper and easier for China to get Russian oil. (Forbes, 28 Oct) [35]

2.5 Exporting Toxic Product that Kills

Thai riot police officers used a cheap Chinese tear gas, which contained an explosive powerful enough to rip craters in the ground, to disperse crowds of antigovernment protesters lately. (NYT, 14 Oct) [36]

2.6 Sino-Japanese Relationship Should Move Forward

China and Japan pledged to continue their recently warming ties, with Japanese Prime Minister Taro Aso proposed setting up a hot line with Chinese leaders. Aso even unexpectedly apologized for Japanese wartime crimes. (AP, 27 Oct) [37]

POLITICAL ECONOMY

3.1 Sources of Energy Related Environmental Problems: Operation not Technology

A detailed analysis of power plants in China by MIT researchers debunks the widespread notion that outmoded energy technology and the utter absence of government regulation are blame for that country’s notorious air-pollution problems. The real issue, the study found, involves complicated interactions between new market forces, new commercial pressures and new types of governmental regulation.

China’s power sector has been expanding at a rate roughly equivalent to 3-4 new coal-fired, 500-megawatt plants coming on line every week. Based on detailed research across 14 Chinese provinces, it found that most of the new plants have been built to very high technical standards, using some of the most modern technologies available. The problem has to do with the way that energy infrastructure is being operated (day to day field operations) and the types of coals (low quality to minimize costs) being burned.[38]

3.2 Chinese Nuclear Power Takeoff

Nuclear power development in China’s vast inland region is ready for takeoff now after a technology base has been confirmed. On September, China officially adopted AP1000 nuclear power technology — a standard for plants designed by U.S.-based Westinghouse — as the basis for inland nuclear projects, rejecting a French company’s design. The decision was seen as a key step toward faster development of the nation’s nuclear power industry. (Caijing, 17 Oct) [39]

Recently, the poor eastern Anhui province is hoping to win central government approval to build a 4 gigawatt (GW) nuclear plant and a company has been set up to push the project forward. The new joint-venture aims to supply the southern part of Anhui but also send electricity on to the country’s financial hub, Shanghai, and the power-thirsty Yangtze River Delta. (Reuter, 13 Oct)[40]

3.3 Legal and Economic Implications of the Tainted Milk Crisis

3.31 Restrained Civil Law Actions

Lawyers advising the families of children sickened in China’s tainted milk scandal said Tuesday they are facing growing official pressure to withdraw from the cases.

A loose grouping of more than 100 lawyers across China have been offering free legal advice to the families of children who became ill after drinking milk laced with the industrial chemical melamine. (AP, 8 Oct) [41]The authorities were worried that it would trigger off a series of damages lawsuits.

3.32 Structural Problems of the Milk Industry

1) Gross sale values of some prominent members of the industry had expanded at a rate of 200% -1000% annually during 2001-06. They relied on scattered diary farmers and collective terminals without any intention to build and monitor their own farms. The rapid expansions brought a lot of inexperienced and un-regulative participants to enter the industry. Demands for milks overrode any concerns of regulation.

2) The collaboration between the big corp. and state apparatuses destroyed competitions in the industry. The capacity of the big corp became un-regulative by officials and unchallenged by other participants of the industry.

3) The power structure among dairy farmers, collection terminals, small competitors, and big dairy corporations has gradually slanted the latter in the past 8 years. Lowering the prices becomes the utmost concern of the big corp. Admixture had become an agreed practices. Even a new profession, 调奶师, who know what chemicals to be added to pass QC, has emerged. (SW, 9 Oct)[42]

3.33 China’s Products’ Image!

The Chinese government banned the sale and use of one brand of an herbal medicine after three people injected with it died and three others fell seriously ill, revealing a new product safety issue even as the government is grappling with the scandal over tainted milk. (NYT, 9 Oct 2008) [43] China on Tuesday declined to release updated figures revealing how many children have been affected by the tainted milk scandal, as it attempted to boost confidence in its food safety standards. (AFP, 7 Oct 2008) [44]

Meanwhile, China’s reputation has been so damaged by this scandal that the Burma junta is warning citizens against products from China! (WSP, 7 Oct 2008, p. A14)[45]

3.4 The Chinese Economy

Shuttered factories and laid-off workers tell how the world credit crisis may end the Chinese export miracle and pose the greatest threat to economic reforms since they began in 1979. CCTV, for example, recently broadcast a report prepared for the cabinet saying that 67,000 companies have gone bankrupt in the first half of the year and 20million workers have lost their jobs. Electronic productions of fridges, air-conditioners, and ovens have dropped from 14% to 7% as compared to last year. Out of 6000 shoe factories in PRD, 2331 have gone bankrupted. Further, Rio Tinto Chief Executive said the Chinese economy is “pausing for breath” amid global turmoil, which will mean softer demand for Rio’s minerals. (Forbes, 15 Oct)[46] Domestically, the real estate prices haves fallen by 40% and stock markets have dropped by 60%.

Indeed, GDP rose 9 percent in the 3^rd quarter from a year earlier, which was 2.3 percentage points lower than that in the same period last year. [47] Inflation cooled to 4.6 percent in September, the slowest pace since June 2007, on easing commodity prices. [48] Second, the central bank had cut interest rates for the third time this year to provide liquidity to the market. Third, The Chinese government relaxed the restrictions for private investors on owning second properties, a reduction of property taxes and an extension on mortgages for individuals. (Property Wire, 15 Oct) Fourth, the circulation of M2 in China was lower than the expectation, only up by 15.7% as compared to last year. Given that the circulation of M2 is positively linked to level of domestic capital flow and consumption. The journal expects a slow down of domestic economy. (HKEJ, 15 Oct)

Nonetheless, China’s Trade Surplus records a new high of $29.3 Billion and its currency reserves rise to $1.9 Trillion. The fact that Chinese buyers must put down a minimum deposit of 20-30 % to get a mortgage provides banks with a large buffer as prices fall. Loans to property developers are riskier and banks’ profits will be hurt as developers go bust. But according to Wang Tao, an economist at UBS, these loans account for only 7 percent of total bank lending. Further, the country’s system is funded through deposits rather than capital markets. Chinese banks’ loans amount to only 65 percent of their deposits, compared with far higher ratios in EU and US. (The Economist) [49]

Whether domestic consumption could replace export-driven growth is at the heart of debate. A report from CLSA, suggests that Chinese economy has long been driven by huge domestic consumptions. (Perhaps true, before entering WTO) But there are two factors that limit the effects of this old wisdom. First, Chinese saving rate, around 16% of disposable income is rational. They are saving for education, retirement and healthy care in which the state is far from being able to allocate. As last year’s private consumption had account for 30% of GDP, the room for growth is limited. Second, although the Chinese economy has started to encourage consumption via easy mortgage, and use of credit card, etc. But given the problems in real estate, securities market, and manufacturing sector, it is doubtful whether the attempts would lead to multiplier effect of money circulation or instead, becoming the latest victim of excess consumption.

3.5 China’s Roles in the Financial Crisis

BBC suggests China should be part of the solution to the global financial crisis. [50] Premier Wen claims maintaining a stable Chinese economic growth. China can’t save the world from a financial meltdown, but it’s strong economic growth, even in a time of crisis, can help to alleviate the trouble for the rest of the world, commented Economic Times. They are expecting China’s involvement in coming ASEM on24 Oct. [51]

Further, there has been report that the Chinese government would buy $200b US Treasury bond to provide necessary liquidity for the US. Second, the IMF has urged for the appreciation of Yuan again recently, saying that it will help the China and world economies. But Chinese official claims that the first one is a rumour, and the second one would be monitored cautiously. Zheng Ming suggests that the first proposal was initiated by Wen, which were severely attacked in the Politburo and Central Comittee. (ZM, Oct, pp.6-7) Indeed, many of Wen’s more liberal comments on universal values, democracy, human rights and scientific practices during his foreign visits or interviews have not been reported in the mainland official media. [52]

A column from Financial Times suggests that the rich nations have yet to face up properly to the implications. They can imagine sharing power, but they assume the bargain will be struck on their terms: that the emerging nations will be absorbed – at a pace, mind you, of the west’s choosing – into familiar international forums and institutions. But the geopolitical order may gradually shift to in favour of the emerging market when they learnt a lesson from the current crisis. [53] Indeed, there are reports suggest that Wen is having a hard time in internal power struggles. (The Open, Oct, pp.10-12; The Trend, Oct, pp.6-7)

3.6 Handling Manufacturing Bankruptcy

Shutdown of a Hong Kong listed company’s mainland factories has triggered off the worry that a chain of reaction might happen, said Ming Pao. The company was the producers of a number of the world largest toy brands. (OEM) Factory workers have marched to the local county government and the authority has decided to deliver CNY$24 million to the workers. (MP, 17 Oct 2008) Last week, two listed retail chain in Hong Kong also filed bankruptcy protections.