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Niall Ferguson Displays His Dickishness on U.S.-China Relations

A nice bit of reporting by David Brooks in the New York Times.  Brooks attended one of those intelligentsia meetings (this one was the Aspen Ideas Festival — I wonder if Tom Friedman was there?) where China policy was discussed.

Luckily for the reality-based community, Jim Fallows was there providing counterpoint to Niall Ferguson, who was apparently representing the batshit neocon community.

Now, I haven’t liked Ferguson for some time now, notably because of his neo-imperialistic ideas post 9/11 and the run-up to the Iraq war. Even so, I’ve always respected the man’s intellectual chops. Sad to say, he comes off as a major douche according to Brooks’s reportage.

The agent provocateur was Niall Ferguson of Harvard. China and the U.S., he argued, used to have a symbiotic relationship and formed a tightly integrated unit that he calls Chimerica.

I think I’ve already written about Ferguson’s use of this ridiculously trite term “Chimerica”. For some reason, that term annoys me to no end, most likely because the term itself has absolutely no scholarly value, and I do not find it particularly descriptive. I assume that Ferguson’s use of “Chimerica” is a sad attempt to gain even more popular fame by coining a term (”The World is Flat” anyone?).

The frictions are building [between China and the U.S.] and will lead to divorce, conflict and potential catastrophe. China, Ferguson argued, is now decoupling from the United States. Chinese business leaders assume that American consumers will never again go on a spending binge. The Chinese are developing an economy that relies more on internal consumption.

The two major schools of thought on US China relations these days are divided by the inevitability of conflict. I tend to agree with those who see conflict as entirely avoidable, while others such as Ferguson look forward to another bipolar, Cold War-ish future. I believe Ferguson’s views, as are those of many other folks who grew up and received their professional training during the Cold War, are simply out of date and inapplicable to present situations, insofar as they assume that China will operate in the same manner as the old Soviet Union. Ferguson and his ilk would never, of course, admit that they are using a Cold War framework, but I think it’s pretty clear.

Chinese officials are also aware that the U.S. will never get its fiscal house in order. There may be theoretical plans to reduce the federal deficit and the national debt, but there is no politically practical way to get there. Depreciation is inevitable and the Chinese are working to end the dollar’s role as the world’s reserve currency.

As usual, China’s moves in this area, which are entirely reasonable from a realist point of view, become sinister and scary when described by the American neocon and/or the American exceptionalist crowds. Just because the US dollar has been the world’s reserve currency for so many years, this does not mean that God has so ordained this situation and that it can’t be changed in the future as the global economy matures.

Chinese nationalism is also on the rise. The Internet has made young Chinese more nationalistic. The Chinese are acquiring resources all around the world and with them, willy-nilly, an overseas empire that threatens U.S. interests. The Chinese are building their Navy, a historic precursor to expanded ambitions and global conflict.

I think Ferguson assumes a bit too much here. I know a fair amount about China, and at least can say that I have grown up here along with the Internet (I arrived here in 1998). That being said however, I would not profess to know with any certainty that the Internet has been the cause of an increased level in nationalist sentiment.

I think it’s accurate to say that blogs and BBSs reflect a lot of nationalistic opinions, many of which are certainly negative from my point of view. One might even argue that these opinions have become more frequent in the past two years, perhaps beginning with the run-up to the Olympics last year. However, I don’t see the causal link between the Internet and nationalistic views. Perhaps Ferguson is a China BBS troll or something, and is up on the local scene, but I tend to doubt it.

I’m going to call bullshit on this one and assume that Ferguson is incorrectly assuming that an increased incidence of nationalist opinion posted on the Internet somehow suggests causation. It’s just a medium for expression, not a mind control device. Would Ferguson argue that newspapers and pamphlets caused the American Revolution as opposed to being a major means of facilitating revolutionary ideas?

Think of China, Ferguson concluded, as Kaiser Wilhelm’s Germany in the years before World War I: a growing, aggressive, nationalistic power whose ambitions will tear through pre-existing commercial ties and historic friendships.

Once again, Ferguson is looking backwards (okay, he is an historian) in an attempt to find a match between present-day China and a modern, strangely enough European, historical analog that can help us to predict China’s behavior in the near term. It just so happens that his example is a country that was responsible in a number of ways for launching everyone into a global war (I would have expected him to use pre-World War II Japan, particularly with respect to natural resources/energy policy).

I suppose Ferguson has a detailed argument as to why pre-World War I Germany is a good fit, and I’d really like to hear the evidence because I tend to believe the assumptions underpinning the alleged similarities are bullshit. Then again, going up against Ferguson with respect to modern European history is probably a losing battle.

James Fallows of The Atlantic has lived in China for the past three years. He agreed with parts of Ferguson’s take on the economic fundamentals, but seemed to regard Ferguson’s analysis of the Chinese psychology as airy-fairy academic theorizing. At one point, while Fallows was defending Chinese intentions, Ferguson shot back: “You’ve been in China too long.” Fallows responded that there must be a happy medium between being in China too long and being in China too little.

Enter Ferguson the dick, and not a smart one either. Challenging Fallows’s opinion on the intentions of the Chinese by questioning his objectivity as a Beijing resident is a low blow, and certainly not something one would expect from an academic type. I do like Fallows’s response, though.

If one were to use the logic implicit in Ferguson’s statement, my two years in Washington DC during the Bush administration would have made me much more sympathetic to the US government than I was when I arrived there in 2004 from Beijing. The reality of course is that two years in DC during the Bush era drove me to the point where I was actively in support of impeachment. Perhaps I needed another year to rid myself of all that residual Chinesey sentiment.

Some of the officials interviewed by Fallows believe the U.S. is following unsustainable fiscal policies that will lead to decline, but they view this with frustration, not joy. Fallows doesn’t know what the future will hold, but he believes that Chinese officials still see the dollar as their least risky investment. Domestically, China will not turn democratic, but individual liberties will expand. He agreed that China and the U.S. will dominate the 21st century, but he painted the picture of a more benign cooperation.

Here’s the main issue. Ferguson is a neocon, an idealist, a supporter of Western/American exceptionalism — however you want to describe this point of view these days. I used to be much more of an idealist than I am today (although my views came from the left, not the right, politically). After two years of grad school and, more importantly, seeing how idealism could lead to some really bad shit when put into practice (thanks to the Bush administration), I drifted a bit towards the realist camp.

Perhaps Ferguson cannot recognize China’s profoundly realist worldviews for what they are because he personally left realism behind several years ago. Without acknowledging the possibility that we do not live in a zero sum game world and that China’s realist outlook could actually lead it to adopt cooperative, or at least benign, international policies, I guess it’s not surprising that Ferguson sees an inevitable struggle within “Chimerica.”

More important though, and his specific views notwithstanding, there is no excuse for being a dick. Despite his solid rhetorical comeback, Jim Fallows is no doubt too much of a gentleman to call Ferguson out directly on this behavior. I have been in arguments before in the past about U.S.-China relations where my “loyalty” has been called into question. In addition to “loyalty” to a specific country being entirely irrelevant to any policy argument, bringing the issue up is a sign of rhetorical weakness. To summarize: hyper-nationalists are assholes.

For all my American readers out there who aren’t dicks, happy July 4!

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China Mobile to revamp mobile newsletter services

China Mobile is in the process of revamping its mobile newsletter services to stem declining service subscriptions and to boost revenues from that part of its business.

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Lenovo’s revenues and shares in emerging markets up in Q2

China’s largest PC manufacturer, Lenovo Group Ltd., witnessed increasing revenues and shares in emerging markets in the second quarter of this year.

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China Telecom, China Mobile race to launch application stores in July

China’s two leading mobile phone operators, China Telecom and China Mobile, are racing to launch online application stores by the end of July.

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China’s electronic information industry revenue down 2.09 pct year-on-year in first five months of 2009

Revenues of China’s electronic information industry declined by 2.09 percent year-on-year in the first five months of 2009.

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NetEase still awaiting WoW approval, game user numbers could erode - analyst

The user base of online game World of Warcraft (WoW) could dwindle, spelling bad news for NetEase, the new operator of the game in China.

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FIE Listings in China: Don’t Hold Your Breath

China may allow foreign firms with investments inside the country to list domestically, as part of efforts to boost trader confidence during the global downturn, according to an official.

“We will continue to actively work with relevant authorities to study and complete the policy of allowing foreign-invested companies to list in the country,” Vice Commerce Minister Chen Jian told reporters.

“We will guide high-quality foreign-invested companies to carry out domestic listings at appropriate times,” he said.

The remarks came as figures showed foreign direct investment in China had fallen for an eighth straight month in June as overseas companies grow more cautious due to the crisis.

In other words, we are still studying the issue and will get back to you at some point in the future. Note the AFP headline, “China May Allow Foreign Firms to List.” OK, it’s a straightforward news piece, but I think some perspective on this issue (i.e. likelihood that anything new is actually going on here) would have been helpful.

I can’t remember with any specificity, but I dimly recall when the law was changed to allow for FIE listings. I believe it was several years ago (before 1994?).

In China, one must never mistake a change in the law with a change in political will to implement/enforce that law.

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Win in China: Driving Entrepreurialism in China.

Win in China

Whether it is the entrepreneurs of Wenzhou who have developed the informal lending circles, those returning from Silicon Valley, your local delivery man who represents 6 delivery companies or the freshly minted grads who are receiving government aid, China breadth of entrepreneurial ventures is wide.

Some of China’s biggest celebrities (Jack Ma) are in fact entrepreneurs, so big in fact that they warranted their own reality  TV compeition (CCTV’s Win In China) and their own documentary Win In China.

Recently released, the documentary is an interesting behind the scenes look on the show, and the wider entrepreneur phenomenon, to capture the fascination behind entrepreneurs by looking through its judges (Jack Ma) as they have attained a hero status in China…. and what some will take to make it there.  The core competition is structured my like that of Trump’s Apprentice in so far as contestants are tested on their ability to work in teams, think on their feet, and succeed at a task, however, unlike Trumps version where it is a pool of elite MBAs, this show runs the gamete of single mothers/ grandmothers, successful manufacturer, recent MBA, returning Chinese, and so on. Additionally, the show adds a final 1-on-1  self criticism/ debate that becomes the climax of each show, a segment that leads into the final judging by Jack Ma and his team to decide the fate of one member over the other.

On a wider level, what I find interesting about this show is not so much the competition, or who won (the good guy won), but the range of character that was displayed by the contestants, and the flexibility that the game offered contestants as they proceeded. You had some members who were really trying hard to proceed with a moral compas in hand.  Their goal was to develop a product/ service that was truly the best, without cutting corners.  While others clearly were happy to trade their moral compass, and push the lines of sexual harrasement, to gain the edge.

Equally interesting, perhaps more so, was the fact that when one member (The Wolf) was called out for repeatedly working outside the confines of the rules, he trumped with “I was not educated in school.  I had to work doubly hard for my success”..and received a standing ovation. A very interesting insight.

As I mentioned, in the end the “good” guy won the battle that was Win In China, but the update from the producer showed that in reality that had little bearing on who the war:

The winner of the competition, Song Wenming, started his business; it is going slower than he expected. The second place winner - Zhou Yu – “The Wolf” - has rapidly expanded his plants and is growing his business quickly

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Auto Purchase Tax and China’s Policy Priorities

This is a very complicated policy area. Vehicle tax policy impacts the overall economy, the important auto industry, air quality and pollution, and of course applicable revenue usage by parts of the government.

Looking at things like emissions standards, incentives given to the auto industry, trade issues in this sector, and infrastructure/transportation initiatives helps to understand the relative importance of the industry to the government, both in terms of economic power as well as political influence.

See how many policy areas, explicit and implicit, you can spot in this Caijing article about the purchase tax:

For several months after China halved the car purchase tax rate January 20, vehicle sales soared. Sales Dealers sold 4.96 million units during the first five months of 2009, up 14 percent year-on-year, raising the possibility that annual sales could surpass 10 million.

But the good times passed quickly. The trend reversed course in June; passenger car sales fell 16 percent in the first week of that month alone.

The car industry is considered an important growth engine for China’s gross domestic product. So when the government last year implemented a series of policies aimed at stimulating the economy, measures to boost the auto industry were rolled out first, and the purchase tax rate was ordered cut in half for cars whose engines don’t exceed 1.6 liters.

The cut pointed to China’s heavy tax rate for new cars. Indeed, taxes now account for 30 percent of a vehicle price – even after the recent revocations of six types of road maintenance taxes. Components include a 17 percent value-added tax, sales taxes ranging from 3 to 20 percent, and a 10 percent purchase tax.

The purchase tax, formerly called a “vehicle purchase surcharge,” took effect May 1, 1985, on order from the Ministry of Transportation and after being approved by China’s cabinet, the State Council. It applied to all vehicles in China.

The Ministry of Transportation collected 18 billion to 20 billion yuan a year in purchase surcharge a year before 2001 and distributed the funds among the nation’s provinces in line with needs of different regions.

In theory, fees should be used for road construction and maintenance, but a certain percentage was used to pay ministry employees. The fee was called a purchase tax after January 1, 2001, and collected by tax authorities, yielding 25.5 billion yuan in revenues that year.

The government soon realized that the purchase tax greatly limited car sales. But it brought in so much money that the Ministry of Finance considered it hard to replace with any other method for financing road construction. Therefore, the purchase tax has continued to this day.

Industry insiders say once the latest purchase tax rate discount is lifted, car sales may fall quickly.

Dong Yang, deputy director of the China Car Industry Association, said the association has suggested an extension of the reduction. But officials overseeing the car industry at the National Development and Reform Commission said the tax cut will not be extended, although collection standards may be amended.

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Online Games: Weekly Update


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Breaking: DeNA, Japanese Leading Mobile Social Networks Buying Chinese Tianxia

In this post our editor published a month ago, we were asking DeNA: What does an advanced Japanese mobile commerce and entertainment provider do in China? Despite Wang Yong, CEO of DeNA China was telling us:

We (DeNA) will not be able to copy our success. We are here to meet friends and share insights. This market is very different so we need new ideas for China.

Today, we obviously have the answer: DeNA, the biggest mobile social network in Japan and currently has 632 employees with a market cap of USD1.5 billion, has entered a tentative (not final) agreement to take a majority stake in WapTX, the owner company of the leading mobile SNS Tianxia (天下网) in China.

Tianxia, the leading Chinese mobile SNS is reported over 30million registered users and 1million active users daily. DeNA has around 14.2 million users in Japan and 18 billion page views per month. It sounds like a win-win deal. Also note that Tianxia was invested by Infinity Venture which is from Japan, this deal is not that surprising, I guess.

Another giant from Japan Mixi has its office set up for quite a while, but its Chinese version still keeps very low key. Mixi is facing a very tough market in China, Social Networking. But for DeNA, the story might be different since the Chinese mobile market just reborn because of 3G and Japan has very advanced mobile industry and loads of experience in running a mobile service.

Welcome, DeNA! We are looking forwards to some fresh ideas from Japan mobile web.



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Special Report: A Closer Look at Virtual Currency Regulations


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Racial Preferences in China: Not Just an American Issue

Lots of online chatter this week regarding the plight of a Chongqing student:

In the latest development of a case that has received quite a bit of attention over the past week, the admissions office of Peking University announced yesterday that it would not accept the application of He Chuanyang to study at the university’s Guanghua School of Management.

He had the highest score on the college entrance exam, the gaokao, in Chongqing this year. However, along with thirty other Chongqing students, He was found to have faked his ethnic minority status, which awards 20 bonus points on the gaokao. [Danwei]

If you’re into U.S. politics or constitutional law, you might find this story interesting, seeing as how it is being discussed contemporaneously with the ruling by the U.S. Supreme Court in Ricci v. DeStefano. Ricci involved the promotion process used by the city of New Haven, Connecticut and to the extent racial details of applicants could be used — I am oversimplifying, the facts of the case were a bit complicated.

China’s racial preferences arguably have little to do with past discrimination (as compared to the situation in the U.S.) and were put into place to promote the government’s image as an egalitarian institution. Also unlike the U.S., the system here is not controversial and will probably not be subject to any legal challenges in the near term.

This is somewhat surprising if there really are a lot of kids out there who are faking their ethnic status to get a leg up on university admissions. The system is so incredibly competitive here, given the numbers involved, that one would expect some discouraged kids to launch legal challenges. They would lose the cases, but that never stopped a disgruntled parent before.

Something to look forward to, perhaps. If you’re into contentious litigation, that is.

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Chenhao: Big Money Mirrors a Big Problem

Over the past few weeks, speculation has been mounting that China is planning to issue a new RMB 500 bank note in November . Reports suggest that the new note, which would be far and away the largest face-value bank note in circulation on the mainland…

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LDK: Q2 Shipments Up, Revs Down QoQ

Jiangxi-based multicrystalline wafer maker LDK Solar (NYSE:LDK) said July 2 that it expects second quarter shipments to come in between 220MW and 230MW, above previously issued guidance of 200MW to 220MW, while revenues are expected to be $215 million to $225 million. In the first quarter of 2009,…

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China Journal Wrap: Global Resource Push, H1N1 Measures

China continues on its global prowl for natural resources: China National Petroleum Corp. may bid on some Argentine assets of Spanish oil company Repsol YPF and is looking at other deals in South America.

While much of the rest of the world has adopted a relatively blasé attitude towards the H1N1 flu virus, China is still actively taking preventative measures such as enforcing quarantines and school closures.

Wind, sun and sand: A look at some of the green energy initiatives taking place in China’s desert regions, plus a story of one man’s redemption from his environmental wrongs.

Authorities in southern China are investigating reports that local officials in Guizhou province took babies from families who violated family planning laws and handed them over to orphanages for overseas adoption. (Reports in Chinese here and here).

Police said that the deadly bus blaze that killed 27 and injured dozens more in Chengdu last month was a deliberate act of suicide. The suspected arsonist, a 62-year-old unemployed man who died in the fire, reportedly set the fire after carrying a bucket of gasoline on board.

Celebrating the Fourth of July with “Made in China:” The folks behind New York’s annual fireworks extravaganza seek out the latest in pyrotechnic technology from deep in the heart of China.

–Sky Canaves

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China Telecom Kicks Off 3G Handset Tender

China Telecom’s (NYSE:CHA, 728.HK) 3G brand e-Surfing opened a 3.6 million-handset tender on July 3, qq.com reports. The report said 70 handset manufacturers - including ZTE (000063.SZ, 763.HK), LG Electronics (066570.SEO), Samsung Electronics (5930.SEO), Nokia…

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China Teleco Giants Sign Ericsson Contracts

Ericsson (Nasdaq:ERIC) announced that it has won contracts to provide fixed broadband to China’s three telecom operators, China Mobile (NYSE:CHL, 941.HK), China Telecom (NYSE:CHA, 728.HK) and China Unicom (NYSE:CHU, 762.HK, 600050.SH). The initial contract will provide fiber-to-the-home…

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Yingli to Supply Dunhuang Modules

Vertically integrated photovoltaic (PV) products manufacturer Yingli Green Energy (NYSE:YGE) has been selected by State Development and Investment Corp. (SDIC) subsidiary SDIC Huajing Power Holding (601886.SH), to supply PV modules for a 10MW on-grid solar plant to be located in Dunhuang,…

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Source: The9 Pres Stays On, 20-F Delayed

The9 (Nasdaq:NCTY) President Xiaowei Chen has renewed her contract with the company for another two years, reports National Business Daily quoting an unnamed source close to Chen. A related company chief confirmed that Chen will renew her contract but would not comment on the duration. Chen dispelled…

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