Where Google Doth Trod

Published March 14, 2010 Changing Media , Economics , Foreign Affairs , Social Behavior Leave a Comment
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What are the chances of a China like me and a Google like you ending up together? You mean not good like one out of a thousand? So you’re tellin’ me there’s a chance…

This is just one of many situations where my post would be enhanced by linking to a Youtube clip of Dumb and Dumber — but alas my fellow China-based readers remain in the dark, and therein lies Google’s dilemma.

Actually, it’s not just a dilemma for Google — it’s the whole point. There are many passionate observes, such as Jeff Jarvis, who argue that Google’s decision to withdraw from China is long overdue. But perhaps because, not despite, of the risks presented by a most powerful foe, Google should not withdraw from China, arguably the world’s single most important battleground for the future of information access and knowledge sharing.

Google’s heart is entirely in the right place, and for that we should litter refrigerators in Googleplex with shinny, sticky neon stars. There is no question that sending a big ‘FUCK YOU’ to the CCP on this one feels so right. I abhor censorship in almost all forms, particularly when imposed by a self-serving minority.

The restrictions on information sharing in China represent a direct challenge to Google’s existence. And for that reason Google should stay, which means following CCP rules.

The first – and less important – benefit to staying is financial. Google is projected to earn about US$600 million in revenue from the China market in 2010, according to Imran Khan, an analyst at JPMorgan Chase. China is already home to more than 360 million netizens, and is adding more than five million new users each month. Google has gradually managed to capture somewhere between 30% and 40% of the search engine market in China, which is not trivial. However, all of the major internet players are just barely scratching the surface of the long-term internet market potential in the world’s most populous country. These are potential profits that could go to promoting one of the greatest causes in modern human history — or, without Google, that money would go directly to Baidu, Yahoo!, and/or other less scrupulous or less progressive organizations.

The second – and more important – benefit is that all of us in China are better off with a castrated Google than no Google at all. Every marginal increase in connectivity provided by diverse and competing search engines is good for China’s internet users. Is that not Google’s mission? Is the goal not to create more access to diverse information?

To further this point, I just performed a search for my own insignificant blog on google.cn and Baidu. Not surprisingly, the Baidu search provided no substantial results, while the google.cn search generated easy access to my opinions. In the long run, Google’s existence in China fosters more discussions about important social and humanitarian challenges in China. Google’s existence allows people in China to build more creative lines of solidarity with more diverse ranges of people around the world. Google should be proud of that, especially now as enemies test its mettle.

The always-thoughtful James Fallows disagrees, writing:

In terms of information flow into China, this decision probably makes no real difference at all. Why? Anybody inside China who really wants to get to Google.com — or BBC or whatever site may be blocked for the moment — can still do so easily, by using a proxy server or buying (for under $1 per week) a VPN service. Details here. For the vast majority of Chinese users, it’s not worth going to that cost or bother, since so much material is still available in Chinese from authorized sites.”

It is exactly because “for the vast majority of Chinese users, it’s not worth going to that cost or bother” that it makes a difference. Although the type of sensitive information in question represents a minute fraction of the total information commonly available, it happens to be an important fraction. I’m not as worried about the person who “really wants to get to Google.com” as I am about the people who will never know what a VPN is or why you need one. I am worried about the people who will assume that the extra, inaccessible information is superfluous to their everyday lives.

Another criticism seems to be, “Won’t staying bring Google down to the same level as all of those other less scrupulous organizations?” Well, after threatening to leave and then balking it will certainly seem that way. And maybe Google has now gone past the point of no return, though I would certainly forgive them for staying. Because what would leaving accomplish? James Fallows writes of the potential symbolic value of Google’s departure:

And if a major U.S. company — indeed, Google has been ranked the #1 brand in the world — has concluded that, in effect, it must break diplomatic relations with China because its policies are too repressive and intrusive to make peace with, that is a significant judgment.”

Significant? Yes. It would be headline news. But I want to hear how Google’s judgment will improve the behavior of the CCP or the living and working conditions for people in China. I like the idea but I just can’t see how it will play out. I wish I could.

If Google decides to stay, it certainly must protect its global brand by communicating to internet users and investors around the world that they are playing by China’s shitty rules and proud of it. And they need to communicate to users that their system is under constant assault by a powerful foe, and unfortunately they cannot guarantee information security. That is the unfortunately reality. And they would need to communicate that they are doing everything possible to positively influence the system from the outside and from within. As long as Google is seen as a reluctant participant in China’s sinister information game, they will be cast as a profit-seeking organization chasing RMB at all moral costs. Google needs to wipe off the guilty look because at the end of the day people in China are better off with more information access and diversity than with less.

Or Google could always change its mission statement accordingly: “To organize the world’s information and make it universally accessible and useful, except when doing that gets really, really hard.”

Now i’ve gone too far — truthfully, I will respect Google either way. But I hate to see our best soldiers shrink from the front lines in fear of loosing themselves in the battle. CEO Eric Schmidt says Google isn’t leaving, only refusing to play by the rules. But the game will go on without them and it will be a whole lot less fun for the rest of us.

The world is dark where saints doth trod.

What’s happening to China’s trade surplus?

Published January 11, 2010 China Hating , Economics , Foreign Affairs Leave a Comment
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With media focusing primarily on China surpassing Germany as the world’s largest exporter, the real news in recent trade data is China’s soaring appetite for imports, which saw 59% growth in 2009. Expanding consumer demand and government-driven investment programs have revitalized international commodity markets and given some credence to the idea that China could drive the world out the global recession in 2010.

And here is where it gets interesting. China’s trade surplus last year plummeted 34% to US$196 billion, less than 9% of the country’s total trade value of US$2.2 trillion. In addition, Merrill Lynch predicts that the trade surplus will fall another 19% in 2010, to US$160 billion, on surging domestic demand and a 16% rise in imports.

Wait – I’m confused. Does this mean that the undervalued Yuan is suddenly a good thing? And will US politicians still complain about China’s currency practices if China runs an account deficit in 2011?

Let he who is without debt cast the first stone…

GM Criticized for Success in China

Published January 5, 2010 China Hating , Economics , Foreign Affairs 1 Comment
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I could not have scripted more appropriate news than this as a follow-up to my last post on senseless protectionism. GM announced Monday that its sales in China surged 67% in 2009, as revenues in the US continue to decline. Based on the graph pictured right, and the fact that only 35 out of every 1,000 Chinese people own vehicles, it seems probable that China will surpass the US as the company’s largest market within a few years. Not to mention, GM apparently has a fair share of the mianbaoche (bread-loaf-shaped van) market, which I can assure you is substantial. By all accounts this should be good news for the ailing Detroit giant and its principle investor — US taxpayers. Apparently not everyone agrees…

Because the U.S. government invested $50 billion to rescue GM from bankruptcy last year, the company has had to deal with complaints that its focus is too international, and that it should try to grow the size of its U.S. business and factories.”

That’s rich. Not only do people want GM to survive, they want it to survive by selling cars only to the people who are paying to keep the company out of bankruptcy. Why doesn’t the US government just buy every taxpayer a Chevy Volt? At least Rebecca Lindland, an analyst with IHS Global Insight, was there to add some sense to the conversation:

Regardless of where they make the money or make the vehicles, the profits come back to the U.S.”

Krugman: Why doesn’t China just be uncompetitive?

Published January 2, 2010 China Hating , Economics , Foreign Affairs 9 Comments
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Paul Krugman knows he should be concerned about China’s growing competitiveness — but he throws his Nobel credibility behind a number of worn-out political arguments frequently regurgitated by China-bashing masses, without contributing much clarity or insight. On New Years Eve, in a piece titled Chinese New Year, Krugman begins with a tired prediction: “…2010 will be the year of China. And not in a good way.” He writes that the biggest problems with China are related to climate change, but that he would rather focus on currency policy.

Two paragraphs wasted and we are still waiting for an argument. He has however assured the reader that China is responsible for the woes of the world, that there are plenty of reasons he could knock-out-of-the-park one by one, but today he is going to focus on one of the most pathetically over-flogged topics in modern economic history: China’s currency policies. The broken record continues:

Here’s how it works: Unlike the dollar, the euro or the yen, whose values fluctuate freely, China’s currency is pegged by official policy at about 6.8 yuan to the dollar. At this exchange rate, Chinese manufacturing has a large cost advantage over its rivals, leading to huge trade surpluses…This policy is good for China’s export-oriented state-industrial complex, not so good for Chinese consumers. But what about the rest of us?”

To start with, there is no official policy that pegs the currency at 6.8 yuan to the dollar as there was no policy in 2005 that pegged the currency at 8.28 yuan to the dollar. However, China’s central bank has and continues to make strategic FOREX purchases to control and stabilize the value of the country’s currency. Recognizing that an excessively undervalued currency creates domestic and global economic instability, manifest in inflation and asset bubbles, Chinese banks have gradually relaxed currency controls, up until the World Financial Crisis, and permitted a steady, 18% valuation of the yuan between 2005 and 2009 (see graph). That is a remarkably aggressive transition in a relatively short period of time.

If Krugman is right in that a stable, unchanging currency peg “is good for China’s export-oriented” economy, then an 18% appreciation of the yuan should negatively impact China’s exporting industries and perforce its economy, right? China’s economic activity (GDP) grew by 11% in 2006, 12% in 2007, and 9% in 2008, as China’s exports nearly doubled in the same period. The decision to raise the currency’s value seems to have been a pretty good one for China’s economy. Why? Because China’s economy is not nearly as export-dependent as Krugman believes. Which brings us to the most poorly researched and most politically loaded-line of Krugman’s argument:

My back-of-the-envelope calculations suggest that for the next couple of years Chinese mercantilism may end up reducing U.S. employment by around 1.4 million jobs.”

This is the danger of back-of-the-envelope calculations. Krugman should have taken a second napkin to figure out how sales of the iPhone would be impacted if the product’s price rose by 50% because Apple could no longer assemble the device in China. Then he should have pulled out a third napkin to determine how many well-paying US-based creative service jobs would be lost in such a transition. Then he should have worked out on the glove-box how much more money US taxpayers would have to pump in to GM, whose largest growing market is China. But GM is not even the tip of the iceberg, as protectionism could severely damage other major US employers like Coca-Cola and Intel who are doing very well in the world’s largest-growing market. But he doesn’t — and that’s why we can’t take this argument seriously. Krugman finishes with a note of self-pity and senseless confrontation:

The bottom line is that Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation. So I’d urge China’s government to reconsider its stubbornness. Otherwise, the very mild protectionism it’s currently complaining about will be the start of something much bigger.”

The US has to stop thinking of itself as a victim in this trade relationship. China didn’t tell the US to accumulate record federal deficits while spending US$1 trillion per year to fight two wars in the Middle East. China didn’t tell the US to spend billions of taxpayer dollars sustaining failing corporations. China didn’t tell the US to cut funding for poorly performing schools. China really doesn’t want to keep buying US debt — but now they have to if there is anything to this whole “credit crisis.” So who is the victim here?

The bottom line is that excessive consumerism, failing education systems, irresponsible banking practices, and senseless federal spending — particularly on military expenditures — in the US are growing problems. So I’d urge Krugman to reconsider his holier-than-thou schpeel. Otherwise, the not-so-mild endemic plaguing US competitiveness will be the start of something much bigger.

How do I know China wrecked the Copenhagen deal?

Published December 24, 2009 China Hating 2 Comments
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Reports that China single-handedly torpedoed Copenhagen have caused great distress among those who believe that the conference’s failures spell doom for our planet. Mark Lynas of the Guardian, who witnessed the train-wreck first-hand, provides this insightful and engaging account of conference events. He concludes the article with a passionate indictment of China’s role in the international community:

Copenhagen was much worse than just another bad deal, because it illustrated a profound shift in global geopolitics. This is fast becoming China’s century, yet its leadership has displayed that multilateral environmental governance is not only not a priority, but is viewed as a hindrance to the new superpower’s freedom of action. I left Copenhagen more despondent than I have felt in a long time. After all the hope and all the hype, the mobilisation of thousands, a wave of optimism crashed against the rock of global power politics, fell back, and drained away.”

I have a hard time casting China as the villain in this pathetic tragedy. In fact, it’s a good thing that China doesn’t have a decent full-time PR firm, less they would put cracks in the West’s moral haughtiness like an ice shelf in Greenland. But China doesn’t really care all that much, especially when they can control the conversation at home.

Here’s the thing: not all countries are made equal. Although China and Russia’s tiny friend Nauru are both generally classified as “countries” in the English language, we should not deduce that they have the same responsibilities and that – in a just world – they would be permitted to produce the same carbon emissions. Why? Because the entity known as “China” represents about 100,000 times more people than the entity known as “Nauru.”

To flip this on its head, we would never agree to permit Nauru the same carbon emissions as, say, the United States. That’s absurd! But, for some reason many believe that China, which represents about 1/5th of world’s population, should not be allowed to emit more carbon than the United States, which represents less than 1/20th of the world’s population. If only there was a way to figure out carbon emissions as a function of a country’s population…

Based on this data from the International Energy Agency, I present my top 20 carbon culprits (of 1990 to 2006):

China is nowhere to be found – they rank 96th with carbon emissions of 4.6 metric tons per capita, on par with the global average. However, Russia’s friends in Nauru are really killing our environment! Though not nearly as much as the United States, the world’s wealthiest country.

The irony is that China is nearly leading the world in green investments as a percentage of GDP. In other words, they are working harder than anyone else to create the solutions to a problem that they didn’t cause – and the West is still bitching.

China wrecked the Copenhagen deal because they arn’t suckers. If I were in Wen Jiabao’s shoes – which I’m glad I’m not – I would have done the exact same thing. Actually, I would have upped the stakes with something like this:

I’ll tell you what. We promise to keep our per capita carbon emissions permanently below 75% of the United States’ per capita emissions. The ball is in your court – put up or shut up.”

Zhongguo Gexin – Chinese Innovation

Published December 19, 2009 Uncategorized Leave a Comment

It was the week before Christmas, and all through Shanghai,
The scent of my baking could be smelled far and nigh’…

The move to Shanghai is over, but even as we are approaching Christmas, Walker is still making overnight trips to Wuxi. At my house, Christmas has always been celebrated with a huge brunch, and so I have spent the last week in the kitchen, preparing one make-ahead dish each day.

Yesterday, it was crab mini-quiches, and the recipe I was using called for mayonnaise. I had bought a small jar of Kewpie mayo, a very common and inexpensive Chinese brand.

…The veggies were prepped by the stove top with care,
In hopes that the mayo soon would be there.
The quiche crusts were nestled all snug in their tin,
While my dreams of mini-quiches were dumped in the bin.
Walker in Wuxi and I with quiches to make,
Had just settled in for a long winter’s bake…

But this Christmas tale is about to come to a pause. I have tiny hands, but with the aid of a kitchen towel, I can usually avoid calling in reinforcements. I struggled for fifteen minutes, using every trick I could conjure up to try to work the stubborn top off of the jar, but it hadn’t budged a bit.

I had to admit defeat. I ran downstairs to see Shu Shu. He runs a store down stairs in my three story building. We live on the top floor, he and his wife live on the second, and they run a little shop selling drinks and cigarettes on the first. He was busy preparing their dinner, but was more than happy to help me with China’s most annoying jar of mayonnaise.

Even with his big hands, he was unable to make any progress. And just when I thought I was going to have to give up on my quiches for the night and get a new jar of mayonnaise in the morning, Shu Shu did something ingenious.

Opening the Mayonnaise Jar, Shu Shu Style.

He went to the door with the jar of mayonaise, put the metal top inside thedoor jamb, on the hinge side, between the jamb and the door itself. He pulled the door shut as hard as he could with his left hand, and with his right, twisted the glass jar.

Pop. The jar was open.

Now, mayonaise! Now, mustard! Now, paprika, start mixin’!
On peppers! On shallots! Those quiches I’m fixin’!

It’s such a small thing, but I’ve never seen anyone do that. So next time you come upon a difficult jar and you have a silly attachment to the skin on the inside of your palms, try Shu Shu’s trick! Chinese Innovation, what Walker and I usually make fun of relentlessly, is alive and well at Shu Shu’s house!

… Shu Shu exclaimed as he walked off in the night,
May all jars be opened, even ones that are on really tight!

Roll On CRH

Published December 12, 2009 Economics Leave a Comment
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I never expected to receive a full refund. After missing my 4:58pm train from Wuxi to Shanghai, I casually meandered to the station’s ticket office around 6pm to buy a new ticket and hopefully get home before midnight. After waiting in line for no more than three minutes, a polite and professional, middle-aged women looked carefully at my tian piao (unused ticket), skillfully examined the schedule, and quickly responded, “I’m sorry, your ticket class is not available for the next train. However, we do have a second class ticket available — would that work?”

“Absolutely,” I replied. I usually take second class anyway. “How much is the change fee?”

“We will refund the fare difference.” She passed a second-class ticket, leaving at 6:18pm, along with 8RMB. What service! Not only did they place me without penalty on the next available train, but they paid me back for having to accept a downgrade.

“You better hurry,” she said. “You might miss the train.”

For all of the archaic, bureaucratic systems in China plaguing industries from banking to telecommunications, the heavily-nationalized rail network seems to really be designed with the consumer in mind. At a distance of 120km, Wuxi and Shanghai are only a bit farther apart than Philadelphia and New York City (150km). A one-way, second-class ticket on a China High-speed Rail (CRH) train between Wuxi and Shanghai costs RMB39 (US$5.50). Not only are the cars clean and well kept, but the passage takes less than an hour as the train exceeds speeds of 200 kilometers per hour. Compare this to Amtrak’s Acela Express, the fastest running passenger train in the United States, which operates regularly between Philadelphia and New York City. A one-way ticket costs between US$45 and US$87, depending on when its booked, and the passage takes about an hour and a half.

Not only is China home to the fastest train in the world, which runs south from Wuhan at top speeds exceeding 380 kilometers per hour, but the country has committed to laying 13,000km of high-speed rail by 2012.  I have every reason to believe that China’s rail network will soon compete directly with the country’s airline industry — in speed, convenience, and price. Lets not forget, this is a country wtih a per capita income that is one-eighth of that in the US.

I am probably comparing apples to oranges. With 1.4 billion people, China needs reliable public transportation like a train needs tracks — its a developmental imperative. (Just imagine if they all had two cars!) But, for such projects, the US has a decisive resource advantage with one notable hindrance: strong rule of law that prohibits powerful people from tearing through thousands of miles of private property.

Regardless, China’s success in developing a world-leading rail system — that is remarkably consumer-focused — while managing extreme population distress is beyond impressive. In this case, I’ll take the product Made in China.

China’s Hopenburnin’

Published November 10, 2009 China Hating , Economics , Foreign Affairs Leave a Comment
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In anticipation of the Copenhagen (Hopenhagen) Climate Change Conference on December 7th, advocates of mandatory carbon targets are again flogging China, given the country’s position as the world’s leading carbon emitter. There are those who dismiss China’s green efforts to-date and those who demand more action. Perhaps the most disconcerting argument i’ve encountered on the matter comes from Steve Forbes of Forbes Magazine:

Last year, China surpassed the U.S. in carbon dioxide production, even though China’s economy is less than one-third the size of ours. By 2020, China’s emissions will be twice ours… Our CO2 emissions increased only 1.3% from 2006 to 2007–proof that we are already more efficiently pursuing economic growth. Even if the U.S. drastically cut back on its CO2 output, its impact on global temperatures would be barely noticeable. It could be three-tenths of a degree Fahrenheit at best.”

If i’m reading this right, Forbes is arguing that high existing economic activity perforce justifies high continued carbon emissions. In other words, those who have managed to get out there early and accumulate wealth, largely by burning carbon, should be allowed to continue to burn the most carbon. What if, for example, the UK had three times more economic activity than the US — would they then be permitted three times the quantity of carbon warrants? Any equitable and democratic assignment of obligation regarding the costs of carbon must first consider per capita emissions. See how long it takes you to find China on this list.

At the same time, it should be comforting to know that the government responsible for the world’s largest population is arguably making the most concerted efforts to develop the most efficient technologies to reduce their economy’s dependence on heavy-carbon productivity. Consider this from The Climate Group:

China ranked second for the absolute Dollar amount invested in renewable energy in 2007 with approximately US$12 billion, trailing the leader Germany which invested US$14 billion. The nominal sizes of the Chinese and German economies were almost equal at US$3.3 trillion in 2007, meaning that China trails leader Germany only slightly in renewable energy investment as a percentage of GDP.”

The energy-intensive economic growth model acutely seen in China and throughout the Asia Pacific region has brought more people out of poverty than any other system in human history. Evidence suggests that global warming is a very real and nasty problem — but as far as I can tell it is not nearly as dangerous as the non-linear pains of poverty and destitution. Despite the doomsday rhetoric surrounding global warming, or perhaps because of it, we should at least take Jim Manzi’s lead and simply consider the costs and benefits of carbon taxes that could accompany binding carbon targets.

There is hopenburnin’.

The Default China Explanation

Published September 24, 2009 Economics Leave a Comment
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This strident excerpt from The Default Power, an essay by Josef Jesse published last month by the Council on Foreign Relations, casually dismisses modern China as “a place where the rest of the world essentially rents workers and workspace at deflated prices.”

If, as the article suggests, China’s “miraculous growth is foreign made,” how could the country withstand a 26% decline in exports and a similar drop in inbound foreign investment to achieve 7% economic growth in the first half of 2009? And who is so pessimistic to believe “that China’s economy will [only] grow by 6 percent in 2009?” The article is right that the U.S. is renting from China – capital, not labor, to keep its banks from defaulting.

I would not question the historical resilience of the United States. But I hope that making a case for buying American doesn’t require belittling the recent success of developing countries by regurgitating outdated myths and misinformation about export-dependence. Our political science students deserve better.

Playing Chicken with the Chinese Government

Published September 18, 2009 Economics , Foreign Affairs Leave a Comment
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For American expats living in Beijing, there will obviously be large ramifications from Obama’s tire tariff that will be put in to effect this month. For one, many cab drivers will love questioning us about what we personally think about the tariffs, and whether or not we agree with our President. For its part, the Chinese government’s reaction has been to appeal to the WTO, and to announce that they will enact their own retaliatory tariffs on American car parts and chicken.

But I imagine that Chinese cab driver are chatty no matter who they pick up, and I can just imagine the conversation about this new set of tariffs that might take place between two Chinese locals. After the initial bashing of protectionist trade policy and maybe some unprintable comments about our President’s race, I imagine that the biggest complaint will be that the new tariff against American chicken will severely curtail their access to higher quality American chicken feet.

Because the Chinese don’t differentiate between white and dark chicken meat and don’t prefer white meat, they haven’t started feeding their chickens hormones to increase the size of the chicken breasts – at least, not as part of company policies. By comparison, we love our boneless skinless chicken breasts, and therefore produce enormously fat, force-fed birds whose legs have become more muscled in an attempt to support their unnaturally engorged bodies.

According to Tyson, selling chicken feet in the Chinese market is more than twenty seven times more profitable than selling them at home. A chicken foot can only fetch 2 cents in the U.S., but in China, where it is considered part delicacy, part tasty pre-packaged snack, the American chicken production companies can ear up to 55 cents. According to Beijing-based China Meat Association, the country’s per capita urban meat consumption increased by 87% from 17 kg in 1979 to 31.8 kg in 2007. Not to mention, as wealth reaches more and more Chinese, they will begin to shy away from buying meat in traditional wet markets and towards packaged meats in grocery stores.

So this tariff is clearly a huge loss for the American chicken industry. But it will also mean less chewy goodness for Chinese citizens with joint problems who believe that the extra minerals and gelatin in chicken feet will alleviate their arthritis and minor joint aches alike. They’ll just have to make due with the chicken with smaller breasts and smaller legs if the Chinese government goes through with its plan.

But don’t worry. In my office, we have enough pre-packaged, spicy chicken feet to build a very creepy fort or to sustain ourselves in the case we get locked in our office for the next month due to military parade practices.

While we wait for the paramilitary to let us out of the diplomatic compound,  I can only hope that the American and Chinese governments will stop engaging in protectionist one-up-manship, and that cab drivers can go back to lecturing about harmonious societies and cursing Beijing traffic under their breath.

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