Economics, Politics, Culture and CHINA

From: http://time-blog.com/china_blog/2007/09/us_congress_and_china_brace_yo.html

While I agree that the knee-jerk reaction concerning dangerous Chinese goods by US politicians is mostly to appease their voting constituents (we are heading into an election year after all), I must give a warning to Chinese nationalists who claim that China does not need the US more than the US needs China. Similarly we Americans cannot simply pat ourselves on the back for being good consumer watchdogs and calling out China on its faulty products.

I once thought that with its massive population, determination and glorious history that China could survive fine on its own without the US. From the other side, the US would simply have to forgo the comfortable middle-class lifestyle made more affordable by cheap imports from China if it were to try and block out Chinese goods. The US would never do this so China was safe from US pressure. WRONG

China's economic rise has been based loosely on the East Asian export-oriented development model. What does this mean? It means that China's economy grows by producing goods for export. While the US is not China's largest market - that would be the EU - the US is the second largest and a very major consumer. Yes, Chinese goods are making inroads in Russia, Southeast Asia and Africa but these markets are tiny in comparison to the US. China's factories that keep the population employed and content with their rising standard of living are mostly for export. If the US were to suddenly stop buying Chinese products (although such an extreme trade war is completely impossible) China's economy would suffer greatly. Chinese workers would be thrown out of work and social stability would be severely threatened.

For the US, no red-blooded American is about to give up their standard of living in order to make a point with China. While there will be calls for a boycott of Chinese goods I highly doubt these would become widespread. Moreover, where would such a boycott end? Many components are made in China. Even though my Dell laptop is assembled in the US many of the parts (usually the low value-added ones, I might add) are made in China. Should I stop buying Dell to make a point?

Foreign multinationals in China DO hold some of the blame for the rise in faulty products shipped to the US and elsewhere. This works on two levels - lax oversight of suppliers and subsuppliers due to willful negligence or simple cost cutting AND the eternal pressure to drive costs lower and lower in order for the US market to be satisfied and keep profits high. Chinese suppliers for foreign MNCs do not have much incentive to maintain quality standards so long as the price is low. Their brand names are not at risk. While the MNCs could threaten to switch suppliers the end result will be the same because the cost-pressure on the supplier will not end.

Unless China is willing to experience extreme economic hardship OR the US is willing to forgo affordable consumer goods, China and the US will continue to need each other. Let's accept this fact and solve the problems we have - and there are many - without resorting to name calling or threats from BOTH sides.

Many people criticize China for its policies - one child only, devalued currency, government monopolies, procurement policies that bar foreigners, etc. The truth of the problem actually goes deeper than whatever is written on the policy documents. Simply put, it's the institution!

 As an institutionalist scholar this makes me happy because it means the situation I study fits most neatly with my preferred theoretical approach to research. It also means that I can safely step around culturalist arguments. Today in fact I mentioned why I avoid culturalist arguments during an interview. To summarize, cultural arguments for why a certain country does things a certain way do not work because they invariably boil down to circular logic. Chinese companies behave the way they do because they are Chinese. Silicon Valley companies act the way they do because they are American, etc. None of this actually helps because there is no predictive power in the explanation. Moreoever it doesn't help because the theories are not generalizable. They cannot help understand what goes on in other situations.

 Institutional arguments on the other hand are able to be utilized in countries or situations where the combination of governance structures and industries are roughly approximate. These arguments also help explain why the wholesale adoption of policies from one country will NEVER work in another. Economists fear other countries trying to copy the developmental state models of Korea and Japan because of the risk of incredible waste and inefficient use of resources. Their fears are most definately grounded in reality. A country that attempts to adopt Shingikai and an all powerful state ministry (like MITI in 1950s, 60s and 70s Japan) will most likely fail spectacularly. Why?

Because it requires more than the policies to make the system work. Any set of policies require a very specific institutional setting in order to function properly. One must consider the policy making procedures (in Japan it is the technocrats in the bureaucracy that drafted policy and sent it to be rubber stamped by the legislature). One must consider the implimentation process (who is responsible, to whom and what are the incentives or sanctions to industry and bureaucrats to make sure they follow the central directives).

China has in many ways tried to adopt policies wholesale from Japan, Taiwan, Silicon Valley and Korea. China sees Japanese and Korean national champions and tries to build them from its SOEs (and to a lesser degree from privatized SOEs or the uber successful private firms that arose in the 1980s). China sees Taiwan set up industrial parks and high tech zones and sets up its own. China sees government procurement in Silicon Valley and tries to follow suit. The problem is that all of these great policies are grafted on top of China's existing political, economic and social institutions. Silicon Valley innovates because firms trust each other enough to cooperate. China's institutions make cooperation too risky because the rewards for cheating are too great and the potential risks too small. Taiwan makes high tech parks work because they are centered around ITRI which acquires and develops technology with the exclusive intent of diffusing it to industry. China does not have an ITRI. Nor does it have an effective technology transfer mechanism. Japan and Korea built national champions because they followed government directives and were sanctioned or cut off if they failed to perform. In China the national champions are so well connected to state elites that they cannot be cut off. To do so would upset too many vested interests. The result - sanctions without teeth which means national champions have no incentives to innovate because they do not need to fear the state or even the market (which the state protects for them or in times of trouble suppliments with hefty grants and loans).

China must build entirely new institutional structures if its policies are to work as they are intended. This would put reforms in conflict with deeply entrenched public and private interests. Hence I do not see this happening any time soon.

 (Please note, this blog entry is a gross oversimplification. See the book, coming 2009 for more information)

In one of my favorite films - 1776, an exasperated John Hancock screams at the representative from New York after his 7th or 8th (courteous) abstention from a vote, "What the hell goes on in New York!" The reply, "Have you ever been present at a meeting of the New York Legislature, they all talk very fast and very loud and no one listens to anyone else so nothing ever gets done."

 Now in China, the meetings of the national legislature (the National People's Congress) are a far cry from the anarchy of the New York legislature described above. In truth there is probably not a more civil and obedient legislature on earth. As everything is decided before the Congress even sits, the meetings are a rather uninteresting series of speeches followed by nearly unanimous ratification. Interestingly, often the closest thing to opposition comes in the form of abstentions (courteous ones of course).

Why do I bring this up in the context of my blog? Well the fact is, I was inspired recently by a paper I am helping proof read for publication. It argues that whatever the policies and regulations on paper may be the fact on the ground is that implicit laws or unspoken rules exibit far more influence in China than those that are officially decreed by the government.

 This begs the question then, "What the hell goes on in China?" Well, in truth, my research shows, no one - not the government, business people, academics or foreigners, really knows for sure. Everyone has a partial piece of the pie. The government at the national level has increasingly well written laws defining its science and technology sector (among everything else a government legislates). Business people have the policies and incentives they choose to follow or seek (that is when they even know about them). Academics understand that much more is at work than meets the eye. Nonetheless, collectively they may have the answer but since no one talks to anyone else, no one really knows what is going on.

For the government side, here is a slice of what I feel goes on in China - which partially accounts for why policy seems much less effective than the Communist Party and government would lead one to believe:

The government at all levels from the national policy makers to district or even industrial park managers legislate and pontificate but really have no grasp of what is really needed to make a high technology industry function. China, in its attempt to develop rule of law, has indeed made many laws, regulations and policies defining high-tech industries. They are to be efficiency minded, not too focussed on exports but encouraged to do so nonetheless, they are to tolerate failure, take risks and assume all their own costs. Moreover they are encouraged to focus on key sectors which the government will support with (increasingly) generous grants. Unfortunately this doesn't mean a thing on the ground. In many ways laws, regulations and policies and China still act like the slogans of the Cultural Revolution. Just as in the old days, it seems that if you shout the slogan loud enough and say it enough times, it will become true. Underlying structures, institutions and culture do not matter. If you shout it, it will become reality. Hence (as has become apparent in some of my interviews) policies regarding risk, failure and seeking long-term innovation are only slogans in practice. The institutions and practices needed for implimentation are ignored. Thus although officials can pat themselves on the back for a job well done after having a policy written and repeated long enough, nothing has changed. The industry remains risk averse, short-sighted and largely neglected - especially in terms of making technology transfer a realty (both from foreign companies to the local economy and from research institutes to industry).

As for business folks and academics, that is a story for another night. Sorry about the delays, life was quite hectic (those who understand my visa situation will understand) back in Guiyang. But now in Beijing I have found a coffee shop on Renmin University campus with excellent vegetable sandwiches, reasonably priced (for China) coffee and WIRELESS INTERNET. As Droopy Dog would say, "I'm so happy, hooray."

The Rise of China's Consumer Culture

 Historically and culturally, the Chinese are known as avid savers. The belief in providing for the next generation and always saving for the future by delaying instant gratification remains strong. The Chinese continue to save a significant portion of their income. This remains very important because of the traditional Chinese view that a man is not a man, nor can he truly start a family unless he owns property. Of course it is impossible for a fresh college graduate to buy a house in cash. Even loans, while increasingly popular, remain underutilized. The preference remains for parents to begin saving up for their child to purchase a house from the moment the child is born. Since university education remains comparatively cheap (ridiculously cheap by American standards) these savings are not for college - they are for the house. With rapidly rising housing prices however, it will become increasingly difficult for those in the developed areas to afford a home, with or without their parents savings. Perhaps Chinese urbanites will be forced to adopt a system similar to that in Japan with mortgages that last for generations. (Shudder)

China does, nonetheless have an increasingly materialistic and consumer-oriented society. For the up and coming middle and upper class, there are luxury items in hot demand. Among them - cars (so much for the "Bicycle Kingdom"), foreign travel, and fully western-style homes. That means air conditioning, flat screen HDTVs, surround sound in the home, Nokia cell phones, bilingual (although most are bilingual in name only) or international school for their kids,  and lots of western food or (for the Cantonese) the priciest exotica on the planet (bear paw in ginseng sauce anyone?). In general for the middle class, brand consciousness is very important. This is bad news for Chinese manufacturers. Chinese brands are generally not well respected. Given the prevelance of OEM companies, this is not terribly surprising. However, since Chinese consumers who are willing to pay brand name prices do not opt for Chinese brands it hurts efforts to move industry out of MNCs' shadows. One aspiring Chinese consumer electronics brand lamented that it cannot compete with OEMs on price but nor can it compete for the market share of established foriegn players. Being in the middle is tough.

 Foreign brands are in vogue in China with Rolex, BMW, and Versace (the real ones, not like you buy in the Silk Market in Beijing) in hot demand. Dealerships spring up everywhere, even in humble little Guiyang (yes we have outlets for all of these. The rich people's mall GuoMao offers prices so high I can't imagine that many folks ever actually buy anything there. Still, even having such outlets makes the city look more developed and in China, even the Potemkin Village Effect has merit - at least when national leaders come a-callin').

At lower income levels consumerism is also alive and well although it tends to rely on lower priced Chinese brands, knock-offs, and OEM surplus. Cell Phones and Xiaolingtongs are now so cheap that even farmers and migrant workers can afford the lowest end ones. Cutthroat price competition makes wireless telephony (even if it only works within a single urban area like the Xiaolingtong or province like most cell phones unless you pay for the daily roaming charges) affordable to the masses. The result has been a breathtaking boom in mobile services, packages, manufacturing and support industries. Amazingly, despite its size the profit margins are so low that even those who argue that volume can compensate for low unit profit (such as we find for value added service providers not affiliated with the main state-owned telco operators) find the market to be a dead end. 

China will increaslingly consume what it produces but until wages rise significantly there will remain two very different markets - foreign elite goods and cheap Chinese products. Unfortunately for Chinese brands, they find themselves squeezed in the middle. 

I promised aword or two about the currency exchange rate issue about two weeks ago. Now I will make good on that promise. However, since these issues often become confused I will begin with a language lesson. The Chinese currency is officially known as the Renminbi (人民币) which means "People's money" in Mandarin. Whenever you see the acrony RMB, it is referring to this particular name for the currency. The character Bi (币) means money and is used in China to refer to the Hong Kong and Taiwanese currencies (港币 and 台币 respectively). You will also likely encounter the word Yuan (元). This is a catch all term that means money. It is the same Chinese character used for Won in Korea and Yen in Japan. You may also hear the Chinese taking about Kuai (块). Kuai is a counter used for money - effectively like referring to dollars and cents. For the purposes of this blog I will try to refer to RMB to prevent confusion.

Throughout the first 15 years of Chinese experiment with market reform the RMB was kept at a very high peg to the dollar - about 3 RMB for 1 USD. This overvalued exchange rate hurt China's push toward export-oriented development. In 1994, the Chinese central government revalued the RMB and established a currency peg at about 8 RMB to the dollar. This value held steady under the summer of 2005. By this point the phenomenal success of China's export push was beginning to generate trade friction with its undervalued currency (like the Yen in the 1980s) held partly to blame. In response to pressure to to try and cool an increasingly overheated economy the central government agreed to a tiny increase in the band through which the RMB would be allowed to float. As expected the RMB rose against the dollar as it has continuously done since that time. Granted the float has not been very significant. Even after almost 2 years the exchange rate has only moved to about 7.5 RMB to the US Dollar.

This is not nearly enough to please foreign manufacturing and trading interested, particularly those in the United States who blame the continuing decline of US manufacturing on the unfair competition from China's undervalued currency. Calls for an immediate shock therapy to raise the value by 30-40% have been voiced in the US Congress. Given China's long-standing gradualist approach to reform such a shock-therapy approach is - to this observer - a remote possibility at best. It would require a major threat of a trade war or a sudden onset of uncontrolled inflation to trigger such a policy shift. Although arguably a more realistic exchange rate or a freely convertable Chinese RMB would be good for the overall health of China's economy and its relations with trading partners such a revaluation is politically untenable in China. Yes, a more scientific or economically rational exchange rate could reduce inflationary pressure, encourage domestic consumption, cool the red hot influx of FDI and cut the mammoth trade surplus China runs with the West. Yes, it would help increase the self sufficiency of China's economy by making it grow based on consumer demand rather than producing (assembling, processing, etc) for export. It would encourage broader economic health and more sensable investment but as I said, "not going to happen."

 Given the advantages, why would China not simply reap the benefits of a one-off shock that fixed the complaints of trading partners and injected a good strong medicine into China's economic engine? To most China watchers, the answer is simple - such a currency devaluation would devastate many local economies. Much of the trade surplus run by China is based on light industrial consumer goods made by hundreds of thousands of small factories in Guangdong, Fujian, Zhejiang and elsewhere along the eastern coast. These enterprises compete solely on price and competition is incredibly fierce. This has driven profits down to 1-4% of revenues in many industries. Such profits as remain are made by simple volume of sales - usually as exports. A rise in the value of the RMB would cut back on exports and dry up the last vestiges of profits. Thousands of small enterprises - upon which the economic miracle in the coastal provinces is based - would be driven into bankruptcy. I have heard even the tiny revaluations thus far have already hit manufacturers in Zhejiang particularly hard. A massive revaluation would devastate these industries. Unemployment in towns dominated by a single light-industrial export-oriented industry (of which there are hundreds if not thousands) would skyrocket. This would naturally lead to social instability - anathema to local and national government officials alike. Hence, the risks of a shock are too great. better to let the value creep up and allow the most inneficient of these small factories to close but enable to local economies to adapt.

Also, it is important to note that China remains deeply embedded in the investment and growth at all costs paradigm. Attracting foreign investment remains a key career goal of many local government officials. Large FDI figures help ensure promotion. Large export statistics make the local economy appear internationally competitive - also good for bureaucratic advancement. A major currency value shift would completely undermine these systems. Government officials operating in the current paradigm have no incentive to change what has worked well at raising millions out of poverty since 1978.

Finally, the great question remains, revaluation, then what? In areas whose economy would be hit the hardest by a rapid currency float, what would be the recourse? These areas have economic and political institutions built around their export-oriented paradigm. Other than the old planned economy, these areas do not know anything else. To what would they turn if their large and relatively unskilled workforces suddenly found themselves out of work. There is no work readjustment or retraining program on the scale needed to deal with such an eventuality. The social consequences would be severe and not just locally. These export towns also attract millions of migrant workers. Leaving the countryside to seek work in these industries relieves pressure on rural societies. Loss of this pressure valve could make an already bad and increasingly volitile situation in the hinterlands even worse.

If the US wants to see action on China's currency it needs to provide both the stick (we will throw up tariffs if you don't revalue) and show that there are alternatives to the current paradigm. Just saying that China's economy competes unfairly (true as it may be) will not turn many heads in China. 

Langston Hughes once asked, "What happens to a dream deferred?" I think in some ways he could be talking about China or at least about the lives of migrant workers. This is not going to be a tirade about the evils of China's oppressive manufacturing industry. Nor is this going to be a tirade blaming evil multinational corporations for the manner in which they choose to outsource, rather it is a simple analysis of how I view the lives of the migrant class in China.

 Anyone who spends any time in China has the opportunity to see how the other half lives. Naturally if you only stay in 5-star hotels and get shuttled from meeting to meeting in a car with tinted windows and a driver maybe you can avoid the sight of the lower classes but in general their presence is inescapable. They are the garbage pickers, the construction workers, the factory line workers, the beggars, the day laborers and the crowds playing cards under overhangs on rainy afternoons. The economy in China is built on their labors. This fact is celebrated in the Shenzhen Museum with the words (or something close to): "The economic success of Shenzhen was built on their nimble fingers." The garbage pickers ensure that nothing is wasted. Plastic, carboard, glass, styrofoam, and even paper is meticulously sorted one can at a time by metal claw wielding migrants. Their treasures are then taken to collection points around the city to be weighed and purchased before being sent off for recycling.

 The construction workers live in squatter camps behind the walls of the construction site. As elsewhere in Asia, they often move into their buildings as they go up. Using manual labor and few skills they build the landmarks that China's leaders proudly display on their websites and in the literature handed to foreign businessmen. No thanks is given. Often they are denied pay due to the lack of institutional protections. More and more, however, the masses of construction workers are realizing that they have a collective voice. Their protests are gaining strength, despite the continuing tight connections between developers and local Party and bureaucratic don, and their voices are being heard.

 On the factory lines making the electronics, the garments, the low end consumer goods that foreign markets consume with a ravenous appetite the migrants labor day in and day out. These, often female, workers work in 10-12 hour shifts doing the same small repetitive tasks time and time again. During a visit to a lighting factory in Guzhen we asked the manager if the workers changed positions on the line to prevent repetitive motion injuries. His reply? Of course they do, every two years we move them to a new post. Two years? I can't imagine what it would be like to do the same tiny task 5000 times per day, 315 days per year. These workers live in crowded dormatories restricted by the hours of their shifts and the curfews set by their bosses.

But what does this have to do with a dream deferred? Everything. Every migrant goes to the cities with the hope of saving money. Garbage pickers may only make enough money to survive and thus remain at the bottom rung of society (although those that deal in used and unwanted appliances who buy them from their owners and then sell them to second hand shops actually make a relatively decent living by Chinese working class standards). Construction and factory line workers have most of their expenses paid for by their employers. Food, housing - the two major drains on anyone's income - are covered. This means that their meager salary can be saved and sent home to support their family or saved up to purchase a home, open a business or get married. These workers are deferring their dreams knowing that they may have a shot at a better life once they get through the tough times.

I do not defend exploitation of workers. I think that construction and factory workers should always be paid on time and given a fair shake. I think they - as the one's doing the labor - should receive a larger cut of the profits earned by their workmanship. Nonetheless, such is the nature of international commerce and production. The lowest value-added activities (ie assembly) will be the least well paid. Those at the high end will continue to gather the fruits of their (and others) labor. Such is the way it must be. Every country must pass through this stage. My research suggests that China is trying to move out of this low-value added trap. Perhaps with the right reforms and enough time even the migrants will see that they needn't defer their dreams quite as long. But then again, my research also suggests that there is much resistance to changing the system. Perhaps China will remain at this lower rung - enriched by scale but not by quality or innovation. So at the macro level, it may be that without the right reforms China itself must defer its dream of becoming a world power. 

Dear Comrades, 

Thanks to a certain professor and colleague I have a ready made post for this rainy Monday morning in Guiyang. This professor asked for my comments on internet usage in China so here you are, a few thoughts with the caveat that the Internet per se is not my research focus. Nonetheless I have had some opportunities through the media here and first-hand experience to comment on just what the Internet is doing in China. He we go...

In China, the main Internet use demographic is, as one would expect, people under the age of 30. 20-somethings make up the bulk (about 90%) of the online community in China. Younger people clamor for the opportunity to use the internet but unless they have access in their homes Intenet Bars (the most common method for getting online) are supposed to deny entry to anyone under the age of 18 - especially during the school year. Internet users use the Internet mainly as a source of entertainment. The most popular activities are instant messaging (through the all powerful and onmipresent QQ Chat Client - www.tencent.com), and online gaming. Online gaming has become so widespread that it is considered by some to be a national addiction. Much like in Korea, young people who are disconnected or left behind in the real world find release in online gaming and fantasy. The problem has grown such that in 2005 (I believe it was), the Chinese government began opening clinics to treat Internet addiction.
 

The Chinese are extremely avid bloggers. Most frequent users have a blog of some sort. Despite the widespread nature of blogs, most remain apolitical. Such blogs as do venture into politically sensative territory are often shut down by the government censors. In 2007, to help keep online dissent in check the government has taken a two-pronged approach. First, many foreign blog services (Blogger, Xanga, Blogspot) were blocked by the infamous Great Firewall of China. Second, local governments in some major cities began requiring that bloggers using Chinese blog services use their real names when registering an account.

The Great Firewall itself is a technological wonder employing highly sophisticated technologies to block access to undesirable sites. In general any site talking about Taiwanese independence, Tibetan separatism, the Falun-gong movement or any other topic considered taboo will be blocked. Sites dedicated to these causes are permanently blocked. A search engine may turn up hits for these only to find that the search engine crashes or the links fail to load. BBC and Wikipedia are also usually blocked. Although for the moment wikipedia is getting through. The Great Firewall also employs thousands as internet monitors that study usage and block unfavorable sites.

There are many ways to get around the Firewall for those who choose to do so. There are some websites that act as proxy servers so simply accessing the site grants access to sites blocked by the firewall. There are also ways to create remote servers outside of China and allow the user to get around the wall. The methods employed are always one-step ahead of the censors but not for long. Any one service that works for a time will likely fail if given enough time for the government censors to figure out how to block it.

Although Google and Yahoo both have a presence in China thanks to their willingness to cooperate with government censors, their market share remains small. The main search engines/home pages are Baidu.com, sohu.com, qq.com (which uses the soso.com search engine), and sougou.com. If one uses Internet Explorer (which is almost everyone) then tying to access the actual google.com (as opposed to the officially sanctioned google.cn) will be automatically rerouted to google.cn.

The main Chinese value-added online service provide is Tencent Technologies. They run the chat client QQ as well as online gaming, shopping, mobile IM services, blog hosting, search engines, news, etc. Tencent is very powerful and very proud of the success it has had in China's value-added services department. Nonetheless like google and yahoo the majority of its services are free. Its revenues come mostly from heavy embedded online advertising.

Chinese will soon become the most widely used language on the Internet as China is set to surpass the United States as the country with the largest number of Netizens. That being said, although I strongly encourage everyone to study Chinese there is no need to rush off and take a Berlitz class. Chinese-language media will continue to be specific to Chinese users and the language of significance on the Internet will of course remain English. Also, it may be cultural but I think Chinese web designers have some things to learn. Chinese websites, even the major ones are incredibly text heavy and cumbersome affairs - at least in my opinion. I tend to like spartan web sites and China's home pages are most frequently not open and airy (see www.qq.com).  That all being said, the Internet continues to have a vast market and even more growth potential in China. If you can find a way to make it pay, cash in on the value added services market. If you can find a way to get through try and broadcast some ideas since you will have a vast audience. If nothing else, just check out the Chinese Internet sometimes - afterall a nation of bloggers is bound to have some great stories of economics, politics, culture and of course, juicy, whiny, angstry blog poetry! The world may well be flat afterall.

For the time being China has allowed time.com to slip through the 天下第一关 (the first pass under heaven: the easternmost gate in the Great Wall). As a result I was able to indulge a guilty pleasure and read through the most recent posts in their China Blog. One of the articles that caught my attention was a 3 pager concerning China's urban 20-somethings.

Any foreigner who has spent time in China becomes intimately familiar with this group. This is obvious because the types of places that foreigners frequent - bars, expensive restaurants, high-end hotels, Starbucks, etc - are the most likely to attract this segment of Chinese society. To generalize they are the protected and economically successful products of Deng Xiaoping's experiment in socialism with Chinese characteristics. China's young middle class tends to be entrepreneurial, multilingual (to a point), well traveled and well educated. They are also highly nationalistic while at the same time deeply enamored with all things foreign. As such you would never see them in a Qipao but could catch them on any given day in Armani. This group is deeply and completely materialistic. In many ways it seems that the "he who dies with the most toys wins" ethos has found a home in modern China. Hence the craze for stock market and real-estate riches, the drive for automobile ownership and the ever increasing demand for highend consumer goods.

This group also tends to buck the common conceptions about economic growth and prosperity leading to calls for political reform. This occured in other countries and regions like Korea and Taiwan. However China has one crucial difference - size. Korea and Taiwan enjoyed growth with an amazing degree of equity. Farmers, workers and white-collar urbanites all improved together. Thus when the calls for political change came the people could speak more or less with one voice. In China this simply isn't the case. China's economic miracle remains highly regional with large East Coast cities - the Beijings, Shanghais and Shenzhens - leading the way. The urban middle class treasures its wealth and privilege. They enjoy their ability to live in a relatively stable society with seemingly endless opportunities to get richer. This class also disdains quite openly the migrant workers on whom their fortunes are built and even moreso the dirty peasants looming 800 million strong just over their shoulders.

China has long drawn distinctions between urban and rural. Although considered the noblest of people under Confucian thought and honored as the leaders of the revolution under Mao, the peasantry in practice have been and are disdained by urbanites. One of the worst slanders among the middle class is to call someone a "peasant." When asked about the peasantry, upwardly mobile urbanites will respond that they are dirty, uneducated, backward and quite simply stupid. The urban middle class fears that the masses would swamp their lifestyle if given the chance. So, there is no call for an political reform that could give them such a chance.

So what about democracy? In a representative western-style democracy with simply majoritarian politics the masses of rural poor would easily overwhelm the urban vote. The result, urbanites fear, would be a redistrubtive state that drains the wealth and glamor of the cities to support the countryside. Such an eventuality would spell the end of the party for the urban elite. The Communist Party has realized its need to keep the urbanites happy and even to co-opt them by granting Party membership to the bourgeoisie. The rural masses continue to be left out of China's boom by the hukou policy which makes even migrants unable to integrate into urban society. The party continues for the urban elites, to hell with the countryside.

I do not see this situation changing in the near future. The Communist Party now shares a common interest in the status-quo with the most productive and economically viable segments of society. So long as the middle class can enjoy its party, the system will not change. It will take great instability spilling over from the countryside or a profound failing by the Communist Party before the urban middle class would seek a change. I am not holding my breath.

Dear Comrades,

 I have decided to follow in the footsteps of my favorite webcomic (www.megatokyo.com in case you are interested) and try to make this a regularly updated blog. Hence the goal will be to update about every other day or three times per week. This seems like a doable number and it will mean that I will at least be somewhat likely to have something to talk about. But then again those who know me are well aware that I talk my head off so finding something to say usually isn't a problem.

Anyway, I flew back into Guiyang this morning. Actually it was one of the more pleasant flights I've had in China. Even the landing went smoothly. This is actually saying a lot because those who fly domestic in China know that pilots tend to dump the plane onto the runway. That or they manage to get one side of the plan down but not the other. This leads to an overcorrection and a back and forth bouncing that (hopefully) only feels like each bounce is higher than the last.

 Got into town in a taxi. Much to my consternation the local taxi drivers have decided to jack up the price on a standard airport trip. Although I didn't get a straight answer from the driver (and I ended up sharing the cab anyway so the price was the standard 50 RMB) but it should be somewhere around 60 or 70 now. This is to be expected. With the rise in consumer prices this year it is only natural that drivers will try to increase their income by placing a surcharge on a captive market like the run from the airport to town. Of course if I wasn't lazy or rushed I could always just take the airport bus. But what's the fun in that?

Actually prices in China have gone up significantly this year. This is partly the result of inflationary pressures and partly the result of a big oops on the part of Chinese farmers. By typical economic logic last year's glut of pork led to a price depression. Farmers therefore opted out of raising pigs this year. But such porkers as were raised then were hit by a nasty virus (Blue Ear I think it is called). Result: normal demand for pork, which has been rising with the increased affluence of China, but a smaller supply. Naturally this drives up the price. Since pork is the main meat for the Chinese, a rise in pork will put pressure on everything else and so we have seen a healthy rise in prices. In the past if I was asked to pay 7 RMB for 400 grams of pork I would have told off the vendor and walked to someone not looking to rip off a laowai. Now it actually seems this is the price. Much to my dismay.

That brings the other bit of economic news to the fore. China has been incrementally allowing the RMB to rise over the course of the last year. But that will have to wait for another day... 

Dear Comrades, 

After the blocking of my last blog and spending entirely too much time reading message boards for the China Blog at time.com, I realized it was time to get back to work. Not on my research of course, that can always wait, but back to work on blogging in China. It is my hope that all of you dear comrades will find this blog insightful, useful and perhaps even humorous.

As for the rules: comments are fine, flames are fine, cursing is fine, etc. I don't see a need for censorship because nothing can be as bad as the ranting garbage I read in youtube or online newsgroups.

Please feel free to make disparaging comments although lay off my spelling (Marcus, I am talking to you journalism-boy). It is much more fun to get on my case about factual inconsistancies, illogical statements or simply things I just got plain wrong. Of these types of errors, there should be more than enough.

Therefore, it is with great pleasure that I introduce my (belated) China Blog. If I am lucky this one won't be shut down. If I am really lucky people will read it. If I hit a home-run then I will start a national outcry like the ChinaBounder hoax last summer.

Facebook has served a useful purpose in the last few months but now it is time for vanity to reign so let all be released in the public domain! Cheers and remember, Jesus loves you!

Old Enter: Try not to hate Da Shan

I remember some old Comedy Central video my little brother and I rented. At the beginning it had some previews for a show called "Viva Variety" - one of which included a sketch about an anti-prejudice program called "Try Not to Hate the Turks." I am now inspired to try and amend my personal bias against the Chinese-speaking foreign media sensation in China known as Da Shan (Mark Rowswell).

He is famous throughout China for his ability to speak Mandarin perfectly - with a touch of a Beijing accent (hence the r's when he speaks). As I like to joke: "He has perfect tones, CHINESE people don't have perfect tones!" He also wears a beatific smile characteristic of foreigners featured on Chinese TV. He does some acting but mostly now hosts English competitions, Chinese-language programs for foreigners on CCTV 9 (http://english.cctv.com) and does lots of advertising for various language-learning tools.

Like most foreigners (dare I say all) in China, I immediately developed a deep-seated dislike for the man when I first came here. Most of it was pure jealousy. When asked why all foreigners in China hate Da Shan I would always reply. "We are jealous because his Chinese is better than ours." As one working off and on in China's English teaching industry I also abhore the little electronic dictionaries that he (and others) advertise because they form the ultimate crutch for students.

Thinking about my own work in Chinese now, I have greater respect for the man. I am currently translating the interviews I conducted on my last visit to Beijing. This is great for my Chinese but bad for my ego.I also realized that I put WAY too much faith in my Chinese abilities. I did not ask for a translation on many occassions when I should have. This has meant that now when I need to do more than just get the gist (ie the details are REALLY crucial), I am stuck with unclear recordings of words I don't know and have a hard time looking up. Fortunately, I am able to figure out most of it and I am feeling better about my Chinese - that and my vocabulary of business and IT terms is growing nicely.

Once all is said and done I will be really able to speak Chinese - imagine that.

So as for hating Da Shan, I can now say that I respect the man. He has made amazing accomplishments in the Chinese language. Maybe I will one day be like him.

This is an example of what I am doing here...(This actually dates from the end of February but who really cares?)

I had my first research interview...man my head hurts. I have run my translator at full speed but nothing had prepared me for today. At least I was cheered by the thought that two years hence I will be able to understand every word of interviews like that and be actually able to make smart comments rather than stare inanely back at my question sheet looking for one that hasn't yet (I think) been addressed. Unfortunately, I could tell my subject realized there were some communication failures since sometimes he would begin his answer with, "As I already said" (D'OH!!)

Now I have to translate the whole interview...man that is going to hurt...

Nonetheless I can say that at least here in Guizhou there seems to be some semblance of entrepreneurial spirt going on. Although there is definately some infighting and wasting of resources among different branches of the government and different programs (which has led to some problems where certain projects get infrastructure investment but no development, etc - details to be published circa 2009). My subject also went into some detail about the imperitive need in China for more innovation in research. In his own words: "Without innovation, China's enterprises have no future." That cheered me up.

As for a bit of investment advice, I would say that for foreigners looking to put money into China, the western provinces would be a good bet. Although this region has a LONG way to go, the government emphasis and the desire of the people to stop being the forgotten cousins of rich easterners bodes well for future development.

If you want to sink money into precision instruments and machine control, look to the enterprise park south of Guiyang - although for at least the next decade the products here will only be competitive in China.

If you want to invest in the aerospace industry, this area has always been a good bet.

Fortunately for entrepreneurs out here, the distance and difficulty in transport has ironically made it easier to develop a truly innovative business. Unlike on the coasts where access to world markets means any tin-pot MBA can start a factory cranking out OEM products for someone else, businessmen here have to really bring something to the table - like a new idea (imagine that). Higher transport costs are also likely (in my opinion) to force enterprises here to increase the value added on-sight and the amount of self-owned IPR. This will enable them to keep a high profit margin in the face of higher costs.

Man, I love this place!

 In the spirit of Animaniacs (which I miss terribly)...assume calm TV announcer voice

And now it's time for another good idea/bad idea

Good Idea: Learning Chinese
Bad Idea: Learning Chinese in Shenzhen (begins squawking in Cantonese)

Good Idea: Eating dried fruit every day for a month
Bad Idea: Eating a month's worth of dried fruit in a day (clutches stomach)

Good Idea: Investing in Chinese enterprises
Bad Idea: Investing in China's stock market

Good Idea: Reading the International Herald Tribune front to back
Bad Idea: Reading the International Herald Tribune front to back online

Good Idea: Sending SMS on your cell phone
Bad Idea: Sending SMS on your cell phone while crossing the street

Good Idea: Drinking Nescafe to save money
Bad Idea: Drinking Nescafe

Good Idea: Going to Hong Kong for the day
Bad Idea: Trying to get back into China the same day

Good Idea: Staying in a hotel-cum-bar to save money
Bad Idea: Staying in a hotel-cum-brothel to save money (that would be this one)

Good Idea: Savoring the tropical weather in Shenzhen
Bad Idea: Savoring the tropical weather in Shenzhen in a business suit

Good Idea: Eating in local restaurants
Bad Idea: Eating in local restaurants as a lone foreigner

Good Idea: Recording research interviews
Bad Idea: Recording research interviews in .wav format

Good Idea: Doing your own research interviews
Bad Idea: Doing your own research interviews with someone who doesn't speak English or Mandarin

Good Idea: Using taxis to get around Shenzhen
Bad Idea: Using taxis to get to around Hong Kong (the meter rings like a slot machine)

Good Idea: Keep the air conditioner on low to save energy
Bad Idea: Turning the air conditioner off to save energy (and no, opening the window doesn't help. In the late afternoon the breeze feels like the air jets used in a blast furnace)

Good Idea: Speaking Chinese in China
Bad Idea: Speaking Chinese with anyone you don't know in China...

I hope these brought a smile...