Giant on the move
By Nicholas Consonery
The opinions expressed are his own.
When the global economy broke down in 2008, China was the savior. At that time Beijing rolled out a massive stimulus that was one of the biggest—per size of the economy—that the world has ever seen. The resulting benefits bolstered China’s economic strength at a time when the rest of the global economy was staggering under the weight of failing banks and surging public debt.
But the success of Beijing’s stimulus has masked underlying weaknesses in the country’s growth model. And the market is now waking up to the realization that global economic growth might remain suppressed for years to come.
In this environment, investors should be aware that the Chinese economy won’t be able to serve as the beacon of global growth indefinitely. Exports and investment overshadow household consumption. Public pressure is growing on the government to make growth more sustainable. The yawn between rich and poor is widening. And the Chinese leadership struggles to negotiate such difficulties with a homogeneous 1.3 billion person population dispersed throughout a country that is in different stages of development at the same time.
Reigning over this conundrum is the Chinese Communist Party—the 80-million member strong political apparatus in the unenviable position of being responsible for ironing out the country’s massive economic imbalances.
Walking past Apple's sleek shop along London's Regent Street on Sunday, my wife asked me what I wanted for Father's Day.
"An iPad?" I ventured, half-jokingly.
"Are you sure you want one? Don't you care how they're made?" came her disapproving reply.
By Zhou Xin
As the world watches how Beijing’s $585 billion stimulus package can create opportunities for investors, they might be overlooking another mini-stimulus that is coming in a matter of weeks: the lavish celebration the government will be staging to mark the 60th anniversary of the founding of the People’s Republic of China on Oct. 1.
On top of what is expected to be a huge military parade through central Beijing, massive firework displays are expected to light up the capital and other big cities around the country.
This is almost certainly not what Chinese policy makers had in mind when they started encouraging exporters to explore the domestic market to help make up for a drop in Western demand: sex toy makers opening flagship stores in Beijing.
The next time anyone questions the reliability of Chinese statistics, they should first spare a thought for the sensitive, earnest souls who gather the data. The National Bureau of Statistics asked its employees to craft poems to celebrate the 60th anniversary of the People’s Republic of China.
Like Chinese growth surging beyond economists’ forecasts, their literary talents are sure to leave critics gasping for breath.
China has long said that its biggest contribution to a world racked by financial turmoil would be to ensure that its own economy grows strongly, implying that a rising Chinese tide will lift all boats. The latest data show that Beijing has delivered on one part of the bargain; its economy, the toast of the world over the past five years, is once again ahead, far ahead, of the pack.
Many investors and companies are confident that the second part of the bargain will follow – that China’s recovery will be just the cure for markets still woozy from the financial battering. Such faith is not yet justified.
Thirty years ago today, China invaded its one-time Communist ally Vietnam to “teach it a lesson”, to the delight of Beijing’s newfound friend, Uncle Sam, which was still smarting from having lost its own Vietnam War.
The attack came on the heels of Washington switching diplomatic recognition from Taipei to Beijing and a closed-door meeting between China’s paramount leader Deng Xiaoping and U.S. President Jimmy Carter in Washington.
Three decades on, it remains unclear just how much Deng told Carter about the incursion and whether Washington offered any assistance such as satellite imagery of Vietnamese troops and military bases.
Until the Chinese Foreign Ministry and the U.S. State Department declassify minutes of the meeting, the world will not know for sure whether the United States offered to back China in the event the Soviet Union rushed to Vietnam’s rescue.
Now the great wheel of history has turned again, and 30 years on, the United States is seeking China’s help in applying pressure on another Communist neighbour, North Korea.
China’s foray into Vietnam was brief yet in some ways disastrous. Its troops suffered terribly against the battle-hardened Vietnamese who were fighting on their home soil.
But there is no arguing that the invasion was a watershed event that smoothed the way for China to mend fences with the West. American investors, tourists and students flocked to China. Western and Japanese aid and loans flowed in, while trade and investment mushroomed, helping to transform the world’s most populous nation from an economic backwater into an export powerhouse and the world’s third-biggest economy.
In an apparent quid pro quo, China abandoned its longstanding policy of “liberating” Taiwan and offered “peaceful reunification” in an overture to the self-ruled island it has claimed as its own since their split in 1949 amid civil war.
Also in 1979, Deng invited Tibet’s exiled spiritual leader, the Dalai Lama, to visit, prompting the latter to renounce advocacy of Tibetan independence, beseech CIA-armed and -trained Tibetan guerrillas to end their struggle and send his older brother to China on fact-finding trips.
The United States softened its criticism of human rights abuse in China, including the imprisonment of dissident Wei Jingsheng for challenging Deng at the height of the Democracy Wall movement.
American Sinologist David Shambaugh described as a “marriage of convenience” the teaming up of the United States and China to curb Soviet expansionism.
On a lighter note, American culture invaded China. Many Chinese traded their Mao suits for jeans or business suits and dined at McDonald’s and KFC outlets. Hollywood movies and rock ‘n’ roll — once considered decadent by China’s ideologues — swept many Chinese off their feet.
The honeymoon abruptly ended on June 4, 1989, when Chinese troops crushed student-led demonstrations for democracy centred on Beijing’s Tiananmen Square. China slipped into diplomatic isolation in the face of U.S. sanctions.
China broke out of isolation and forced the United States to deal with it after menacing Taiwan with war games in the run-up to the island’s first direct presidential elections in 1996. Bilateral relations see-sawed in the ensuing years, hitting low points when NATO bombed the Chinese Embassy in Belgrade and a U.S. spy plane collided with a Chinese jet fighter over Chinese airspace.
Fast forward to February 2009. When U.S. Secretary of State Hillary Clinton visits on Friday, she will be dealing with a richer, more confident and assertive China. Again, but now in peacetime, it will be a China that needs the United States as much as the United States needs China.
The United States needs China to help rein in a nuclear North Korea and help nurse the global economy back to health. But China’s abrupt slowdown in growth and exports shows that it remains yoked to U.S. fortunes.
Photo Credit: A Vietnamese border guard stands next to a border marker between China’s Guangxi and Vietnam’s Lang Son provinces on Jan. 13, 2009. REUTERS/Kham
Karaoke is much maligned in most of the West and much loved in most of China.
After years in Beijing, I’ve become perhaps too fond of all-night singing sessions in the city’s karaoke palaces, where you can rent a room for two or 20 friends to croon along to tens of thousands of Chinese numbers and an eclectic English selection that ranges from old hymns to Amy Winehouse.
For as long as I’ve lived here, singing on a Saturday night meant reserving a room, arriving on time (more than 10 minutes late and you lose your room) and then waiting around for at least half an hour for the previous group to tear themselves away from the mics and for the cleaners to do a quick mop-up.
The ideas came pouring in, with variations centered on the rising might of China’s economic powerhouse, fresh from memories of Beijing’s triumphant hosting of the Olympic Games and following years of double-digit economic growth that have made China the world’s third-largest economy after the United States and Japan.