China’s military rise

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AT A meeting of South-East Asian nations in 2010, China’s foreign minister Yang Jiechi, facing a barrage of complaints about his country’s behaviour in the region, blurted out the sort of thing polite leaders usually prefer to leave unsaid. “China is a big country,” he pointed out, “and other countries are small countries and that is just a fact.” Indeed it is, and China is big not merely in terms of territory and population, but also military might. Its Communist Party is presiding over the world’s largest military build-up. And that is just a fact, too—one which the rest of the world is having to come to terms with.

That China is rapidly modernising its armed forces is not in doubt, though there is disagreement about what the true spending figure is. China’s defence budget has almost certainly experienced double digit growth for two decades. According to SIPRI, a research institute, annual defence spending rose from over $30 billion in 2000 to almost $120 billion in 2010. SIPRI usually adds about 50% to the official figure that China gives for its defence spending, because even basic military items such as research and development are kept off budget. Including those items would imply total military spending in 2012, based on the latest announcement from Beijing, will be around $160 billion. America still spends four-and-a-half times as much on defence, but on present trends China’s defence spending could overtake America’s after 2035 (see chart).

All that money is changing what the People’s Liberation Army (PLA) can do. Twenty years ago, China’s military might lay primarily in the enormous numbers of people under arms; their main task was to fight an enemy face-to-face or occupy territory. The PLA is still the largest army in the world, with an active force of 2.3m. But China’s real military strength increasingly lies elsewhere. The Pentagon’s planners think China is intent on acquiring what is called in the jargon A2/AD, or “anti-access/area denial” capabilities. The idea is to use pinpoint ground attack and anti-ship missiles, a growing fleet of modern submarines and cyber and anti-satellite weapons to destroy or disable another nation’s military assets from afar.

In the western Pacific, that would mean targeting or putting in jeopardy America’s aircraft-carrier groups and its air-force bases in Okinawa, South Korea and even Guam. The aim would be to render American power projection in Asia riskier and more costly, so that America’s allies would no longer be able to rely on it to deter aggression or to combat subtler forms of coercion. It would also enable China to carry out its repeated threat to take over Taiwan if the island were ever to declare formal independence.

China’s military build-up is ringing alarm bells in Asia and has already caused a pivot in America’s defence policy. The new “strategic guidance” issued in January by Barack Obama and his defence secretary, Leon Panetta, confirmed what everyone in Washington already knew: that a switch in priorities towards Asia was overdue and under way. The document says that “While the US military will continue to contribute to security globally, we will of necessity rebalance towards the Asia-Pacific region.” America is planning roughly $500 billion of cuts in planned defence spending over the next ten years. But, says the document, “to credibly deter potential adversaries and to prevent them from achieving their objectives, the United States must maintain its ability to project power in areas in which our access and freedom to operate are challenged.”

It is pretty obvious what that means. Distracted by campaigns in Iraq and Afghanistan, America has neglected the most economically dynamic region of the world. In particular, it has responded inadequately to China’s growing military power and political assertiveness. According to senior American diplomats, China has the ambition—and increasingly the power—to become a regional hegemon; it is engaged in a determined effort to lock America out of a region that has been declared a vital security interest by every administration since Teddy Roosevelt’s; and it is pulling countries in South-East Asia into its orbit of influence “by default”. America has to respond. As an early sign of that response, Mr Obama announced in November 2011 that 2,500 US Marines would soon be stationed in Australia. Talks about an increased American military presence in the Philippines began in February this year.

The uncertainty principle

China worries the rest of the world not only because of the scale of its military build-up, but also because of the lack of information about how it might use its new forces and even who is really in charge of them. The American strategic-guidance document spells out the concern. “The growth of China’s military power”, it says, “must be accompanied by greater clarity of its strategic intentions in order to avoid causing friction in the region.”

Officially, China is committed to what it called, in the words of an old slogan, a “peaceful rise”. Its foreign-policy experts stress their commitment to a rules-based multipolar world. They shake their heads in disbelief at suggestions that China sees itself as a “near peer” military competitor with America.

In the South and East China Seas, though, things look different. In the past 18 months, there have been clashes between Chinese vessels and ships from Japan, Vietnam, South Korea and the Philippines over territorial rights in the resource-rich waters. A pugnacious editorial in the state-run Global Times last October gave warning: “If these countries don’t want to change their ways with China, they will need to prepare for the sounds of cannons. We need to be ready for that, as it may be the only way for the disputes in the sea to be resolved.” This was not a government pronouncement, but it seems the censors permit plenty of press freedom when it comes to blowing off nationalistic steam.

Smooth-talking foreign-ministry officials may cringe with embarrassment at Global Times—China’s equivalent of Fox News—but its views are not so far removed from the gung-ho leadership of the rapidly expanding navy. Moreover, in a statement of doctrine published in 2005, the PLA’s Science of Military Strategy did not mince its words. Although “active defence is the essential feature of China’s military strategy,” it said, if “an enemy offends our national interests it means that the enemy has already fired the first shot,” in which case the PLA’s mission is “to do all we can to dominate the enemy by striking first”.

Making things more alarming is a lack of transparency over who really controls the guns and ships. China is unique among great powers in that the PLA is not formally part of the state. It is responsible to the Communist Party, and is run by the party’s Central Military Commission, not the ministry of defence. Although party and government are obviously very close in China, the party is even more opaque, which complicates outsiders’ understanding of where the PLA’s loyalties and priorities lie. A better military-to-military relationship between America and China would cast some light into this dark corner. But the PLA often suspends “mil-mil” relations as a “punishment” whenever tension rises with America over Taiwan. The PLA is also paranoid about what America might gain if the relationship between the two countries’ armed forces went deeper.

The upshot of these various uncertainties is that even if outsiders believe that China’s intentions are largely benign—and it is clear that some of them do not—they can hardly make plans based on that assumption alone. As the influential American think-tank, the Centre for Strategic and Budgetary Assessments (CSBA) points out, the intentions of an authoritarian regime can change very quickly. The nature and size of the capabilities that China has built up also count.

History boys

The build-up has gone in fits and starts. It began in the early 1950s when the Soviet Union was China’s most important ally and arms supplier, but abruptly ceased when Mao Zedong launched his decade-long Cultural Revolution in the mid-1960s. The two countries came close to war over their disputed border and China carried out its first nuclear test. The second phase of modernisation began in the 1980s, under Deng Xiaoping. Deng was seeking to reform the whole country and the army was no exception. But he told the PLA that his priority was the economy; the generals must be patient and live within a budget of less than 1.5% of GDP.

A third phase began in the early 1990s. Shaken by the destructive impact of the West’s high-tech weaponry on the Iraqi army, the PLA realised that its huge ground forces were militarily obsolete. PLA scholars at the Academy of Military Science in Beijing began learning all they could from American think-tanks about the so-called “revolution in military affairs” (RMA), a change in strategy and weaponry made possible by exponentially greater computer-processing power. In a meeting with The Economist at the Academy, General Chen Zhou, the main author of the four most recent defence white papers, said: “We studied RMA exhaustively. Our great hero was Andy Marshall in the Pentagon [the powerful head of the Office of Net Assessment who was known as the Pentagon’s futurist-in-chief]. We translated every word he wrote.”

China’s soldiers come in from the cold

In 1993 the general-secretary of the Communist Party, Jiang Zemin, put RMA at the heart of China’s military strategy. Now, the PLA had to turn itself into a force capable of winning what the strategy called “local wars under high-tech conditions”. Campaigns would be short, decisive and limited in geographic scope and political goals. The big investments would henceforth go to the air force, the navy and the Second Artillery Force, which operates China’s nuclear and conventionally armed missiles.

Further shifts came in 2002 and 2004. High-tech weapons on their own were not enough; what mattered was the ability to knit everything together on the battlefield through what the Chinese called “informatisation” and what is known in the West as “unified C4ISR”. (The four Cs are command, control, communications, and computers; ISR stands for intelligence, surveillance and reconnaissance; the Pentagon loves its abbreviations).

Just another corner of the network

General Chen describes the period up to 2010 as “laying the foundations of modernised forces”. The next decade should see the roll-out of what is called mechanisation (the deployment of advanced military platforms) and informatisation (bringing them together as a network). The two processes should be completed in terms of equipment, integration and training by 2020. But General Chen reckons China will not achieve full informatisation until well after that. “A major difficulty”, he says, “is that we are still only partially mechanised. We do not always know how to make our investments when technology is both overlapping and leapfrogging.” Whereas the West was able to accomplish its military transformation by taking the two processes in sequence, China is trying to do both together. Still, that has not slowed down big investments which are designed to defeat even technologically advanced foes by making “the best use of our strong points to attack the enemy’s weak points”. In 2010 the CSBA identified the essential military components that China, on current trends, will be able to deploy within ten years. Among them: satellites and reconnaissance drones; thousands of surface-to-surface and anti-ship missiles; more than 60 stealthy conventional submarines and at least six nuclear attack submarines; stealthy manned and unmanned combat aircraft; and space and cyber warfare capabilities. In addition, the navy has to decide whether to make the (extremely expensive) transition to a force dominated by aircraft-carriers, like America. Aircraft-carriers would be an unmistakable declaration of an ambition eventually to project power far from home. Deploying them would also match the expected actions of Japan and India in the near future. China may well have three small carriers within five to ten years, though military analysts think it would take much longer for the Chinese to learn how to use them well.

A new gunboat diplomacy

This promises to be a formidable array of assets. They are, for the most part, “asymmetric”, that is, designed not to match American military power in the western Pacific directly but rather to exploit its vulnerabilities. So, how might they be used?

Taiwan is the main spur for China’s military modernisation. In 1996 America reacted to Chinese ballistic-missile tests carried out near Taiwanese ports by sending two aircraft-carrier groups into the Taiwan Strait. Since 2002 China’s strategy has been largely built around the possibility of a cross-Strait armed conflict in which China’s forces would not only have to overcome opposition from Taiwan but also to deter, delay or defeat an American attempt to intervene. According to recent reports by CSBA and RAND, another American think-tank, China is well on its way to having the means, by 2020, to deter American aircraft-carriers and aircraft from operating within what is known as the “first island chain”—a perimeter running from the Aleutians in the north to Taiwan, the Philippines and Borneo (see map).

In 2005 China passed the Taiwan Anti-Secession Law, which commits it to a military response should Taiwan ever declare independence or even if the government in Beijing thinks all possibility of peaceful unification has been lost. Jia Xiudong of the China Institute of International Studies (the foreign ministry’s main think-tank) says: “The first priority is Taiwan. The mainland is patient, but independence is not the future for Taiwan. China’s military forces should be ready to repel any force of intervention. The US likes to maintain what it calls ‘strategic ambiguity’ over what it would do in the event of a conflict arising from secession. We don’t have any ambiguity. We will use whatever means we have to prevent it happening.”

If Taiwan policy has been the immediate focus of China’s military planning, the sheer breadth of capabilities the country is acquiring gives it other options—and temptations. In 2004 Hu Jintao, China’s president, said the PLA should be able to undertake “new historic missions”. Some of these involve UN peacekeeping. In recent years China has been the biggest contributor of peacekeeping troops among the permanent five members of the Security Council. But the responsibility for most of these new missions has fallen on the navy. In addition to its primary job of denying China’s enemies access to sea lanes, it is increasingly being asked to project power in the neighbourhood and farther afield.

The navy appears to see itself as the guardian of China’s ever-expanding economic interests. These range from supporting the country’s sovereignty claims (for example, its insistence on seeing most of the South China Sea as an exclusive economic zone) to protecting the huge weight of Chinese shipping, preserving the country’s access to energy and raw materials supplies, and safeguarding the soaring numbers of Chinese citizens who work abroad (about 5m today, but expected to rise to 100m by 2020). The navy’s growing fleet of powerful destroyers, stealthy frigates and guided-missile-carrying catamarans enables it to carry out extended “green water” operations (ie, regional, not just coastal tasks). It is also developing longer-range “blue water” capabilities. In early 2009 the navy began anti-piracy patrols off the Gulf of Aden with three ships. Last year, one of those vessels was sent to the Mediterranean to assist in evacuating 35,000 Chinese workers from Libya—an impressive logistical exercise carried out with the Chinese air force.

Just practising

Power grows out of the barrel of a gun

It is hardly surprising that China’s neighbours and the West in general should worry about these developments. The range of forces marshalled against Taiwan plus China’s “A2/AD” potential to push the forces of other countries over the horizon have already eroded the confidence of America’s Asian allies that the guarantor of their security will always be there for them. Mr Obama’s rebalancing towards Asia may go some way towards easing those doubts. America’s allies are also going to have to do more for themselves, including developing their own A2/AD capabilities. But the longer-term trends in defence spending are in China’s favour. China can focus entirely on Asia, whereas America will continue to have global responsibilities. Asian concerns about the dragon will not disappear.

That said, the threat from China should not be exaggerated. There are three limiting factors. First, unlike the former Soviet Union, China has a vital national interest in the stability of the global economic system. Its military leaders constantly stress that the development of what is still only a middle-income country with a lot of very poor people takes precedence over military ambition. The increase in military spending reflects the growth of the economy, rather than an expanding share of national income. For many years China has spent the same proportion of GDP on defence (a bit over 2%, whereas America spends about 4.7%). The real test of China’s willingness to keep military spending constant will come when China’s headlong economic growth starts to slow further. But on past form, China’s leaders will continue to worry more about internal threats to their control than external ones. Last year spending on internal security outstripped military spending for the first time. With a rapidly ageing population, it is also a good bet that meeting the demand for better health care will become a higher priority than maintaining military spending. Like all the other great powers, China faces a choice of guns or walking sticks.

Second, as some pragmatic American policymakers concede, it is not a matter for surprise or shock that a country of China’s importance and history should have a sense of its place in the world and want armed forces which reflect that. Indeed, the West is occasionally contradictory about Chinese power, both fretting about it and asking China to accept greater responsibility for global order. As General Yao Yunzhu of the Academy of Military Science says: “We are criticised if we do more and criticised if we do less. The West should decide what it wants. The international military order is US-led—NATO and Asian bilateral alliances—there is nothing like the WTO for China to get into.”

Third, the PLA may not be quite as formidable as it seems on paper. China’s military technology has suffered from the Western arms embargo imposed after the Tiananmen Square protests of 1989. It struggles to produce high-performance jet engines, for example. Western defence firms believe that is why they are often on the receiving end of cyber-attacks that appear to come from China. China’s defence industry may be improving but it remains scattered, inefficient and over-dependent on high-tech imports from Russia, which is happy to sell the same stuff to China’s local rivals, India and Vietnam. The PLA also has little recent combat experience. The last time it fought a real enemy was in the war against Vietnam in 1979, when it got a bloody nose. In contrast, a decade of conflict has honed American forces to a new pitch of professionalism. There must be some doubt that the PLA could put into practice the complex joint operations it is being increasingly called upon to perform.

General Yao says the gap between American and Chinese forces is “at least 30, maybe 50, years”. “China”, she says, “has no need to be a military peer of the US. But perhaps by the time we do become a peer competitor the leadership of both countries will have the wisdom to deal with the problem.” The global security of the next few decades will depend on her hope being realised.

Correction: The following definitions have been changed in the main table of this article: “Main battle tanks” to “Modern main battle tanks”; “Armoured infantry vehicles” to “Armoured infantry fighting vehicles”; “Intercontinental ballistic missiles” to “Intercontinental ballistic missile launchers”; “Transport helicopters” to “Heavy/medium transport helicopters”; “Transport aircraft”  to “Heavy/medium transport aircraft”; “Tanker and multi-role aircraft” to “Tanker aircraft”. Additionally, the data are from 2011 not 2010 as originally reported. These changes were made on 6th April 2012.

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‘Occupy’ protest, inside a revolution

Occupy! Scenes from Occupied Movement

Books review by Andrew Ross guardian.co.uk,

Occupy Wall Street demonstrators stage a march dressed as corporate zombies. Photograph: EMMANUEL DUNAND/AFP/Getty Images

Occupy Wall Street is wintering. That’s not to say its seasoned recruits are taking time off, though there surely are equivalents of the “summer soldier and sunshine patriot” that Tom Paine invoked in his address to the Valley Forge winter encampment of the revolutionary Continental Army 236 years ago. But it’s been business as usual at 60 Wall Street, in the cavernous atrium of the Deutsche Bank building, where OWS working groups have been meeting continuously since the early weeks of the occupation. In those well-attended huddles, all sorts of plans are being made for re-occupations in the months to come – an American Spring to rival the Arab one – and the air is thick with proposals for ever bolder actions.

1. Occupy!: Scenes from Occupied America
2. by Astra Taylor, Keith Gessen et al

Still, it’s not a bad time to take stock of the early months of the movement. The publication of two books is an occasion either to reminisce about, or catch up with the momentous events that originated in Lower Manhattan just one week after the 10th anniversary of 9/11. The respective publishers, Verso and OR Books, are natural allies of the movement, and are to be saluted for delivering the first two book-length treatments – there will be many others in the year ahead.

Both volumes are documentaries of the heady life of the encampment at Zuccotti Park, though each book has a distinct flavour, and they deploy quite different methods of reporting. Occupy! Scenes From Occupied America reads like a series of diary entries – on-the-ground vignettes, testimonials of events, and snap analysis of where it might all be heading. Included are fragments of speeches by visiting luminaries – Angela Davis, Slavoj Žižek, Rebecca Solnit, Judith Butler – but the bulk of the entries are from writers with close ties to New York City’s left-wing media organs: n+1, New Inquiry, Triple Canopy and Dissent. By contrast, Occupying Wall Street: The Inside Story of an Action that Changed America by Writers for the 99% (OR Books, £10) takes the form of a more orthodox narrative, quarried out of interviews from a field ethnography of Zuccotti Park undertaken by many hands and then polished by a team of writers.

Most of the contributors to these books are movement participants – not armchair analysts or journos on a short deadline – so the pages of each volume ring with authenticity.

On the face of it, any book about Occupy might have been superfluous. After all, the movement has been so meticulously documented by its own participants through a variety of media–official websites, blogs, tweets, livestreaming and other social media channels, in addition to alternative radio and TV, and a steady flow of pamphlets, gazettes, journals and other print outlets. Never has a protest movement documented and broadcast its doings in real time with such utter transparency and to such a far-flung audience. In some respects, the sheer volume of self-generated media has even pre-empted the need for conventional media coverage. Forging an alternative society – and many occupiers saw Zuccotti Park as a prefiguration, if not a microcosm, of such a society – requires the creation of your own autonomous institutions.

Despite this spate of agit-prop, reflection and analysis, the conventional book formats stand up quite well, and, on certain topics, are indispensable. Occupy! abounds with insights on how the occupiers have dealt with internal challenges to their experiment in direct democracy. A general assembly in full flow is a galvanic prospect; “more than one speaker,” it is noted, publicly “expressed love for the general assembly”.

But the GA’s horizontal culture is also an open invitation to assassins of this kind of joy. Complaints about the neglect of race and gender are the most common, righteous cause of disturbance, and when the outcome reinforces the GA’s reliance on the “progressive stack” – whereby speakers of (white, male-identified) privilege are encouraged to “step back” – the interference has an alchemy that is breathtaking.

Manissa Maharawal describes how she and other members of South Asians for Justice stood up to block the GA consensus on the Declaration of the Occupation of Wall Street: she “felt like something important had just happened, that we had just pushed the movement a little bit closer to the movement I would like to see”.

GAs also attract their share of people “damaged by capitalism” and further frazzled by brutal policing and the roughneck life of 24/7 activism. Their fractious behaviour is at odds with the smoother, educated norms of civic speech, and they often violate the rules of GA process.

As the Zuccotti Park occupation wore on, the increasing presence of the homeless – the most vulnerable of the 99% – became the acid test of whether OWS was up to the task of heralding a new kind of society based on mutual aid. In the calendar entries of Occupy! this theme comes more and more to the fore. Indeed, Christopher Herring and Zoltán Glück’s long meditation, “The Homeless Question” is worth the price of admission alone. Noting that some occupations – in Atlanta, Philadelphia and Oakland – had been more forthright in feeding and servicing the homeless, they faultlessly argue that the burgeoning unhoused population “should not be seen as a liability for the movement” (a not uncommon perception around OWS) “but a reminder of why the protest exists”.

Occupying Wall Street offers a detailed rendering of how daily life was organised in the Zuccotti Park encampment. The challenge of accommodating the homeless is also part of its record of how quite different populations came to co-exist in the half-acre space. Most absorbing is the book’s account of the social geography of the park, conspicuously visible in the divide between its east end, where ideological open-endedness prevailed, and the west side, or self-styled “ghetto”, where the more radical groupings set up shop, along with the drum circle. As one of the westenders, a member of Class War Camp, put it, “This side of the camp isn’t for reform. This side’s for revolution, you know?” Unlike the east side “liberal college kids”, he added, “we have nothing to lose. We don’t want to fix the system, we want to fucking burn it to the ground.”

Writers for the 99% (the book’s collective of writers) do not shy away from pointing out that the less educated, poorer and more precarious sleepers in the “ghetto” were not only underserviced by OWS’s support systems, but also lacked ready access to the resources offered by sympathetic residents of Lower Manhattan.

Such observations highlight just how difficult it is to expunge the toxic residue of race and class that poisons our existing society. For those who want Occupy to be a living, breathing alternative, every act of fellow-feeling is an opportunity to set a better norm. As many occupiers say, “the process is the product”.

• Andrew Ross’s Nice Work If You Can Get It is published by NYUP.

Yuan or not to Yuan? Yuan way to new monetary order

A ‘grown-up’ yuan means a more stable world economy

WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

CHINESE New Year has come and will soon go. The eurozone debt crisis is well past two years. Yet uncertainty persists. The World Bank‘s January 2012 Global Economic Prospects reports:

“World economy has entered a very difficult phase characterised by significant downside risks and fragility and as a result, forecasts have been significantly downgraded. However, even achieving these much weaker outturns is very uncertain Overall, global economic conditions are fragile.”

This week’s IMF World Economic Outlook says more of the same: “The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere.” China, India, South Africa and Brazil have entered a slowing phase.

No country and no region can escape the consequences of a serious downturn. Nevertheless, growth in the East Asia and Pacific region (excluding Japan) is expected to slowdown to about 7.8% in 2012 (8.4% in 2011) and stabilise in 2013.

This reflects continuing strong domestic demand (evident in third quarter or 3Q 2011 GDP) while exports will slow to about 2% due to Europe heading towards recession and sluggish rich “Organisation For Economic Coercion And Direction (OECD)” demand.

The middle-income nations are, I think, in a good position to weather the global slowdown, with significant space available for fiscal relaxation, adequate room for interest rate easing, ample high reserves and rather strong underpinning for domestic demand to rise.

I see the modest easing in China’s growth being counterbalanced by a pick-up in GDP gains in 2013 over the rest of the region. Outside China, growth has slackened sharply to 4.8% in 2011 (6.9% in 2010), but is expected to strengthen in 2012, reaching 5.8% in 2013.

China

GDP growth in China, which accounts for 80% of the region, had eased to about 9.1% in 2011 (10.4% in 2010) and is expected to slacken further to a still robust 8.2%-8.4% in 2012.

The World Bank projections point to growth moderating at 8.3% in 2013, in line with its longer-term potential GDP. Expansion is expected to emanate from domestic demand, with private spending and fixed capital outlays contributing most of the growth in 2012.

For China, the health of the global economy and high-income Europe in particular, represents the key risk at this time. Domestic risks include property overheating, local government indebtedness, and bloating bank balance sheets.

The 4Q 2011 growth of 8.9% annoy investors who are looking for indications either weak enough to justify further policy easing or strong enough to allay fears of a hard landing. Bear in mind the forecast growth for 2012 will be the weakest in a decade, and may cool further as exports slump.

The Chinese economy is buffeted by two very different forces: (i) slow global growth will hurt Chinese exports (especially to its largest trading partner, European Union) which rose by 7% in December, and exporters foresee more trouble ahead; however, (ii) analysts point to strong retail sales (up 18% in December) reflecting rising wages and domestic spending which represented about 52% of GDP in the first quarter, higher than in 2009-11.

China is counting on its massive effort to build low-income “social housing” to provide enough demand to keep the real-estate market from collapsing.

It is unclear whether China can accelerate this program to build 36 million subsidised housing by 2015enough to house all of Germany’s households. But financial markets are anticipating worse news ahead. After all, the Shanghai Composite Index fell 21% in 2011. As the adage goes, stock analysts did forecast 10 of the past 3 recessions!

The yuan

Appreciation of the yuan (renmimbiRMB) against the US dollar in 2012 is expected to slow to about 3%, from +4.7% in 2011. The yuan closed at 6.3190 at end 2011, up about 8% compared with June 10 (when China effectively ended its 2-year long peg to the US dollar and has gained 30% since mid-2005 when it was last revalued.

The slowdown reflects growing demand for the US dollar amid uncertainty, lower growth, diminishing trade surplus, and growing US military presence in Asia, according to China’s Centre for Forecasting Science (of the Chinese Academy of Sciences) which reports directly to the State Council, China’s Cabinet.

Much of it will be in the latter year as China is likely to keep the yuan relatively stable in the first half to allow time to assess the impact of goings-on in the euro-zone. Dollars are pumped in via state banks, providing markets with a clear signal it will not allow the yuan to depreciate, while not in a hurry to let it appreciate either. The yuan has since moved sideways.

Off-shore yuan

To make the yuan a true reserve currency, China begun to liberalise currency controls and encourage an offshore yuan market in Hong Kong, creating an outlet for moving the currency across borders. However, foreign investors in China have been slow in using the yuan.

In practice, it is still difficult to buy & sell yuan because of paperwork & bureaucracy. It is still easier to settle in US dollar as it is the universal practice. Its convenience outweighs the potential costs of any unfavourable move in the US dollar-yuan rate. Nonetheless, China is encouraging more businesses to use the yuan and more US banks to step-up their yuan-settlement business.

This market will grow as China diligently moves to internationalise its currency. Encouraged by the authorities, a vibrant offshore yuan market has blossomed in Hong Kong. Beijing still controls the currency and how the yuan bought in Hong Kong can be brought back to China.

Yuan deposits in Hong Kong rose more than 4 times to 622.2b yuan (nearly US$100bil) at end September 2011 from a year earlier according to the Hong Kong Monetary Authority, and now account for 10.4% of bank deposits.

Growth in offshore yuan stalled in late 2011 as China slowed its currency appreciation against the dollar. Given Beijing’s gradualist approach to reform, the market will soon revive.

An audience poll at the recent 2012 Asian Financial Forum in London indicated 63% believes full yuan convertibility is more than 5-years away.

The very fact that London wants to be a yuan-trading centre now says a lot. Only 10% of China’s international trade is settled in yuan, rising to 15% in 2012. It’s still a small market in the global context.

The yuan is used for just 0.29% of all global payments in November 2011 according to financial messaging network Swift. By comparison, the euro’s share is about 40%.

Dim-sum bonds

A booming business in dim-sum bonds (offshore yuan denominated bonds) followed, with companies including Caterpillar and McDonalds issuing such bonds. In September 2011, a spurt of capital flight towards “safe haven” assets in the US tied to the worsening debt crisis in Europe caused currencies of emerging nations to depreciate against the US dollar.

In East Asia, modest declines were recorded compared with South Africa (the rand fell 22%) and Brazil (the real dropped 18%). Only the Indonesia rupiah (down 5.8%) and the Malaysia ringgit (fell 5.4%) come under some pressure.

This event slowed the appreciation of the yuan and with it, trading in dim-sum bonds eased as investors were no longer in a hurry to invest. Over the medium-term, most analysts expect this yuan market to grow in the face of its massive US$3.18 trillion in reserves, as China moves to build its international status.

When dim-sum bonds started to hit the market in 2010, investors were enthusiastic, bidding up prices and driving down yields. But in the second half of 2011, the average price of investment grade dim-sum bonds fell 3.3%, amid a broad flight towards quality spooked by euro-zone turmoil and Chinese accounting scandals.

Bankers hope new entrants (private banks, commercial banks, mutual funds & life insurers) will give the market more stability this year. They would add depth & breath to the market, which tripled to 185b yuan (US$30bil) in dim-sum bonds issued in 2011. Expectations are for such bond issuance to reach 240 billion yuan this year, as new issuers (including more foreign companies) join early adopters such as government entities & state run banks.

This offshore bond market has developed well over the past year. Investor diversification in both types & geographics is still evolving, which is key to the healthy growth of the market. Equally important, investors look to the continuing appreciation of the yuan.

In addition, its average yield has risen to 3.8% (from 2.35% since mid 2011) and most now trade at higher yields than comparable US dollar bonds.

This rise in yields reflects expectation for (i) slower yuan appreciation; (ii) increase in supply; and (iii) investors desire for a higher liquidity premium during market downturns. Overall, the dim-sum market is turning into a buyer’s market.

Bilateral arrangements

China is forging ahead in laying the groundwork to internationalise the yuan via bilateral arrangements with foreign companies, nations & financial centers, particularly Hong Kong (mainly because it can fully control the terms of the market). More mainland-based financial institutions will be able to issue yuan denominated bonds in Hong Kong.

This is part of a broader effort, first started in July 2009 when it encouraged enterprises in Shanghai & Guangzhou province to use the yuan when settling trade with Hong Kong, Macau and some foreign companies (see my column “China: RMB Flexibility Not Enough” of July 3, 2010).

The post-X’mas direct yuan-yen trade deal forms part of a wide-ranging currency arrangement between China & Japan to give the use of the yuan a big boost. After all, China is Japan’s largest trading partner with 26.5 trillion yen in 2-way transactions last year. Encouraging direct settlement in bypassing the US dollar would reduce currency risks and trading costs. Also, Japan will buy up to US$10bil in yuan bonds for its reserves even though it represents no more than 1% of Japan’s US$1.3 trillion reserves. And, it is now easier for companies to convert Chinese and Japanese funds directly into each other without an intermediate conversion to US dollar. About 60% of China-Japan trade is settled in US dollar, a well-established practice.

The package allows Japan backed institutions to sell yuan bonds in the mainland (instead of Hong Kong) helping to open China’s capital market.

In recent weeks, China has taken new steps to promote the use of yuan overseas, including allowing foreign firms to invest yuan accumulated overseas in mainland China; widening the People’s Bank of China (its central bank) network of currency swaps with other central banks to enable their banks to supply yuan to their customers, including with Thailand, South Korea and New Zealand totalling 1.2 trillion yuan.

It already has completed arrangements with the big Asean counterparts. Berry Eichengreen (University of California at Berkeley) observed: “Japan appears to be acknowledging implicitly that there will be a single dominant Asian currency in the future and it won’t be the yen.”

But Harvard’s Jeffrey Frankel is more down to earth: “This hastens a multicurrency world, but this is just one of 100 steps along the way.”

China still has a way to go in: (i) getting the yuan fully convertible (ii) reducing exchange rate interventions (iii) liberalising interest rates, and (iv) reforming the banking system. In all, so the yuan can really trade freely.

What to do?

The China-Japan deal points the way, nudging the yuan towards the inevitable becoming a reserve currency alongside now discredited US dollar and the euro. This is to be welcomed by all.

China must realise a fully internationalised yuan should be free to float (and to appreciate) part of its overall reform. Over the longer term, though, avoiding huge imbalances is good for everyone, not least China. While it is understandable for its Prime Minister to label China today as “unstable, unbalanced, uncoordinated and ultimately unsustainable,” opportunities to take advantage of new openings don’t come often.

Alexander Gerschenkron, my professor at Harvard (in my view, the best economic historian of his time) points to economies like China as having “advantages in backwardness,” including China’s ability to weather shocks: high reserves, robust fiscal situation and comfortable external position.

Shakespeare’s Hamlet sums it up best: “If it be not now, yet it will come – the readiness is all.” A grown-up yuan is good for China’s welfare.

It also means a more stable world economy which benefits the United States. For China, there will never be enough cushion. Politicians need to seize the moment and act boldly.

● Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my

To Yuan or not to Yuan, that is the question  

The government of Zimbabwe is considering using China’s Yuan as their national currency.

China has reportedly been offered mining rights by Mugabe, despite protests [EPA]

Bulawayo, Zimbabwe - From downtown shops that stock cheap clothing and shoes that fall apart after one wear, to mining concessions in platinum, gold and diamonds – the Chinese finger is now in virtually every Zimbabwean pie.

From city sidewalks to low-income suburbs, the Chinese have become part of the local population, and if some senior government bureaucrats have their way, the country could soon find itself adopting the Chinese Yuan as its official currency.

For some influential monetary policy czars, the massive assailing of the Zimbabwean economy by the Chinese now only requires the Yuan to strengthen these economic reconstruction efforts.

Invited by President Robert Mugabe as part of his infamous 2004 “Look East” policy to help drive the economy and employment creation, after relations with former traditional investment partners the European Union and United States soured, China has been able to create its own little sphere of influence and establish an ubiquitous presence in Zimbabwe.

Zimbabwe looks to China for economic revival

This is despite being unpopular with Zimbabwe’s industrial and commercial players – and general members of the public who accuse the Chinese of poor labour practices and shoddy goods and services.

Late in 2011, Reserve Bank governor Gideon Gono, seen by many as a close ally of Mugabe, announced he was in favour of having the Chinese Yuan as the country’s official currency. After the Zimbabwean dollar was suspended in 2008, the country has been using a multi-currency regime, which includes the use of the US dollar, the South African rand and the Botswana pula.

According to Gono, the Chinese Yuan would be introduced alongside the Zimbabwean dollar. Mugabe’s political supporters have been calling for currency reforms to bring back the Zimbabwean dollar.

“With the continuous firming of the Chinese Yuan, the US dollar is fast ceasing to be the world’s reserve currency and the eurozone debt crisis has made things even worse,” Gono told state media in November.

“As a country, we still have the opportunity to avoid being caught napping, by adopting the Chinese Yuan as part of consolidating the country’s ‘Look East’ policy.

“It’s only recently when we had the startling revelations, with Angola offering to bail out her former colonial master Portugal from her debt crisis. This can also happen with Zimbabwe if we choose the right path,” Gono added.

He continued: “If we continue with our ‘Look East’ policy, it will not be long [until] we will also be volunteering to bail out Britain from her debt crisis, and I will not wait for my creator’s day before this happens. There is no doubt that the Yuan, with its ascendancy, will be the 21st century’s world reserve currency.”

‘Handing over’ the country?

Officials from Mugabe’s Zimbabwe African National Union – Patriotic Front see huge potential in using the Yuan, citing the growth of the Chinese economy under BRICS, which brings together emerging global economic powerhouses Brazil, India, China and South Africa.

But not everyone is as upbeat about such prospects.

There are concerns that this could mean “handing over” the country to the Chinese, who already have been offered huge mining rights by Mugabe – despite protests from his coalition government partners. The country’s finance minister, Tendai Biti, has said that Mugabe was forfeiting state resources to China, whom critics are calling “Africa’s new coloniser”.

Economist Eric Bloch said “it is not practical” for Zimbabwe to adopt the Chinese Yuan.

“Zimbabwe won’t have any interaction with international markets, as the US dollar remains the standard currency in international trade,” Bloch explained.

With China increasingly being touted to overtake the US as the world’s largest economy, the temptation to embrace all things Chinese has proven too much to resist for poor economies across the globe, contends Tafara Zivanayi, an economics lecturer at the University of Zimbabwe.

“There has been false hope given to Chinese economic growth, with many African countries imagining they can transfer this growth to their own economies,” Zivanayi said.

“Such decisions (to adopt a foreign currency) as usually based on international trade indices and monetary policies of the country where the currency is domiciled. Even if there have been projections that the Chinese economy will surpass the US economy, this won’t happen overnight,” Zivanayi said.

“There are still concerns about Chinese penetration of international, especially low income, markets and creating wealth for itself and not host countries,” Zivanayi said.

Even traders who have long ridiculed cheap Chinese products and have no grasp of international trade intricacies find themselves offering opinions about the prospects of adopting the Chinese Yuan.

“As long as things have worked fine for us using the American dollar, why change that formula?” asked Thabani Moyo, a commuter omnibus driver. His colleagues, who are struggling to handle giving change in the basket of currencies they receive, nodded in agreement.

Gono and other opponents of US currency cited this lack of change in coins as a reason why Zimbabwe needed to adopt a single currency or revert to its own, previously useless, dollar.

However, during the presentation of the national budget for the 2012 fiscal year, Biti told parliament that Zimbabwe would continue using US currency until the economy stabilised.

Not everyone supports the introduction of the Chinese Yuan. “We want real money, not zhing-zhong,” taxi driver Jourbet Buthelezi said, referring to the pejorative term Zimbabweans use for sub-standard Chinese goods.

A version of this article was first published on Inter Press Service.

Source: IPS

Here is the Dragon, the best to come?

The Dragon is here and the best is yet to come

BRICKS AND MORTAR By TEH LIP KIM

COME midnight tomorrow, as we usher in the Year of the Dragon, most of us will not help but stop to wonder what the next 12 “moons” of the lunar calendar have in store for us.

The Dragon the fifth and incidentally the only mythical animal of the 12 animal signs in the Chinese zodiac is a symbol of power and good fortune.

Those born under this sign are considered to be dynamic, flamboyant, colourful and vibrant. People born under the sign of the Dragon include historical figures Joan of Arc and Martin Luther King Jr, author Pearl S. Buck and artiste John Lennon.

This year is the year of the Water Dragon and astrologers believe will be a year of many opportunities for growth and expansion.

But astrology aside, what exactly can we expect in the year ahead for the property sector? If one is to listen to the rumblings on the ground, it sounds like it’s a mixed bag up ahead.

Built quality: A worker inspects a dragon lantern decoration made from recycled materials and energy-saving LED lights at a temple in Jenjarom, Selangor. The Chinese year of the Dragon ushers mixed feelings about the property sector but with the right design concept like this environment-conscious dragon lantern, homebuyers will still make that commitment. -AFP

For many in the business from those who are building and selling or just analysing its investment climate there still is room for growth in the Malaysian property market, at least in the next few years.

Initiatives by the government, such as the proposed high-speed rail link from Kuala Lumpur to Johor Baru and the MRT project, are expected to give the property sector a boost.

Areas that currently are not nearly as easily accessible will soon be easily reached by rail or MRT, and this will certainly be a boost for the value of property in these areas.

Take a look at the route for the first phase of the MRT between Sungai Buluh and Kajang and you will see that major residential centres will soon be linked by rail to popular commercial and entertainment centres.

Of course the finer details such as where all the stations will eventually be located are still being worked out.

On the other hand, some players in the property market are painting a rather gloomier picture, citing conditions in Europe and the United States as reasons for caution. The European debt crisis does not seem any closer to resolution and, some analysts fear, export driven economies such as China, Brazil and Malaysia, are not likely to come off the turmoil unscathed.

Across the Atlantic, the US economy is, as some economists there put it, “still messed-up”. In Japan, hit by the mega earthquake and tsunami of 2011, the economy is still experiencing long-term problems that are considered even worse than that in the United States.

Back home, some players in the property market are expecting a more moderate growth in 2012. In some areas, there may even be a price correction, going by what these people are saying.

According to them, commercial properties as well as high-end residential units are likely to be most susceptible to a market downturn. These are the first to be hit when confidence in the market ebbs.

Nevertheless, there is a bright spot of sorts in the midst of this gloomy outlook. A bubble is unlikely in the Malaysian property market.

So what do we think? Do we see a boom or bust, or something in between? Predicting what will come is a game of chance. Who really knows what the future holds for us anyway?

On the other hand, we can always analyse our own experience in the preceding 12 months to find hope in the corresponding period ahead.

As we have seen, Malaysian property prices are still among the lowest in the Southeast Asian region. As I wrote in this column sometime last year, Kuala Lumpur is only the sixth most expensive city in this region to invest in property, behind Singapore, Phnom Penh, Bangkok, Jakarta and Manila.

That means there still is room for upward price movement. Of course other factors will come into play. As most property investors will tell you, location is a prime consideration.

Areas that are well served by public transportation facilities will certainly be preferred over those that are not and, logically, will command higher demand and thus fetch higher prices.

Entry price is, of course, another factor. Take a look around you and you will see that many new launches, even in the Klang Valley, have remained unsold. These mostly luxury homes have unfortunately been priced way above most investors’ affordability.

At RM3mil to RM4mil a unit, even for landed property, landing a buyer is a tall order.

Of course this does not mean that million-ringgit homes are no longer in demand. Our experience shows that anything priced between RM1mil and RM1.75mil, and in the right location can still find buyers.

At that price, such properties still meet the needs of those who purchase with the intention to occupy as well as those who hope to see their property appreciate in value. At the same time, the repayment amount is still within the means of a fair number of Malaysians, especially those in their 30s or 40s and who are already fairly established in their careers.

For instance if a couple were to purchase a home at RM1.75mil, they are likely to be able to get a loan of up to 80% of the cost of the property or about RM1.4mil.

At an interest rate of 4.35% (BLR-2.25%) for a repayment period of 20 years, their monthly repayment amounts to RM8,744 a sum that a fair number of working couples can afford.

The right designs and concepts also add to the value of such properties. Many property purchasers today do not have the time and some not even the inclination to fuss over how to spruce up an apartment before moving in.

To meet their needs, developers also provide many fixtures and appliances so one can move in with just clothes and perhaps a new bed.

Overall, I think there still is room for growth in the Malaysian property sector. There will certainly be many more new launches whatever the doomsayers say. At the right price, in the right location and with the right design concept, homebuyers will still make that commitment.

Our economy is expected to grow about 5% or more and unemployment is at a low 3%. The outlook remains positive, as reflected in the stock market.

So if you are still looking to invest in property, the Year of the Dragon may be as good as any year to make that commitment. Remember, it is supposed to be a year when there will be many opportunities for growth and expansion.

Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Send by email to md@sdb.com.my

World Bank warning of another global recession; Mier: Worse to come!

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(Shanghai Daily)

THE World Bank is warning developing countries to prepare for the “real” risk that an escalation in the eurozone debt crisis could tip the world into a slump on a par with the global downturn in 2008/09.

In a report sharply cutting its world economic growth expectations, the World Bank said Europe was probably already in recession. If the debt crisis deepened, global economic forecasts would be significantly lower.

“The sovereign debt crisis in the eurozone appears to be contained,” Justin Lin, chief economist for the World Bank, said in Beijing yesterday. “However, the risk of a global freezing-up of the markets as well as a global crisis similar to what happened in September 2008 is real.”

The World Bank predicted world economic growth of 2.5 percent in 2012 and 3.1 percent in 2013, well below the 3.6 percent growth for each year projected in June.

“We think it is now important to think through not only slower growth but sharp deteriorations, as a prudent measure,” said Hans Timmer, the bank’s director of development prospects.

The report said if the eurozone debt crisis escalates, global growth would be about 4 percentage points lower. It forecast that high-income economies would expand just 1.4 percent in 2012 as the eurozone shrinks 0.3 percent, sharp revisions from growth forecasts last June of 2.7 percent and 1.8 percent respectively.

It cut its forecast for growth in developing economies to 5.4 percent for 2012 from its previous forecast of 6.2 percent.

It saw a slight pick up in growth in developing economies in 2013 to 6 percent. But the report said threats to growth were rising.

It cited failure so far to resolve high debts and deficits in Japan and the United States and slow growth in other high-income countries.

On top of that, political tensions in the Middle East and North Africa could disrupt oil supplies and add another blow to global prospects.

China’s growth – forecast in the report at 8.4 percent – could help bolster imports and gives it “big fiscal space” to respond to changing conditions, Lin said.

But the World Bank report added: “No country and no region will escape the consequences of a serious downturn.”

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Mier: Worse to come

By LEONG HUNG YEE  hungyee@thestar.com.my

Eurozone crisis, slower China growth likely to hurt economy

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) expects gross domestic product (GDP) for 2011 to be 4.9% but to decelerate to 3.7% in 2012.

MIER executive director Dr Za-kariah Abdul Rashid said this year would not be as bad as 2008 or 2009 but might not be as good as 2011, pulled down by the eurozone crisis as well as slower growth in China’s economy.

He said if the eurozone crisis turned worse, the country’s economy might be affected and the GDP could reach the 2008/2009 level.

“There’s some avenue if the Government wants to spur the economy by spending on development. It will depend on the private sector whether our economy turns out to be strong this year,” Zakariah said at a briefing to present Malaysia’s economic outlook.

Zakariah: ‘The private sector has done a lot for the economy.’

“However, the private sector has done a lot for the economy. We can’t expect much more from the private sector.”

He said MIER had previously forecast 2011 GDP growth to be 4.6% but revised it upwards after looking at the latest numbers and the crisis in the eurozone.

“Growth in the last quarter of 2011 is expected to be much lower on account of external developments. The latest monthly economic indicators are already suggesting that,” MIER said in a report.

It added that economic growth would likely get “bumpier” in the months ahead.

Meanwhile, Zakariah said that there was “room for 25 to 50 basis-point downward revision” in the overnight policy rate (OPR). However, he said the revision would depend on the situation and had to be done vigilantly.

Based on MIER’s Business Conditions Index (BCI), the business sentiment had worsened from the second quarter of last year. The BCI fell to 96.6 in the fourth quarter of 2011, the first time it had dipped below the 100 threshold since the fourth quarter of 2010.

“It usually shows a contraction mode when the index sinks below 100. The BCI had been dropping since the second quarter of 2011,” Zakariah said.

Sales, local and foreign orders, as well as capacity utilisation were significantly lower in the fourth quarter of 2011, with companies expecting to scale back production over the next three months as inventory builds up.

Concurrently, consumer sentiment also fell to a two-year low of 106.3 on the Consumer Sentiments Index as household incomes lost momentum, and finances and job became a growing concern.

Zakariah said the index pointed out that consumers were also holding on to purchasing big tickets items as spending plans took a backseat.

Separately, Zakariah said it would be better for the Government to call for general elections early as uncertainty over the nation’s political future would hurt the economy.

He said private investors were currently holding back investments on concerns that government policies could change due to the political climate here.

“If you ask me as an economist, I would rather see the problem solved once and for all. The earlier they settle the political matters, the better, we can focus on the economy.

“Right now everything is still hanging. People are postponing because of the elections. So if they settle it once and for all and immediately, it would be better,” Zakariah said.

China to Become the World’s Largest Importer by 2014

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Helen H. Wang, Contributor Author, consultant and expert on China’s middle class

We have heard a lot about China becoming the world’s largest this and that. In 2009, when the world was in recession, China leapfrogged the U.S. to become the world’s largest auto market. In 2010, China overtook Germany as the world’s largest exporter. This year, China is likely to surpass Japan to become the world’s largest luxury goods market.

So, it shouldn’t be a surprise when The Economist predicts that China will become the world’s largest importer by 2014. Yet, many skeptics still doubt China’s potential to be a stronghold of the world economy.

Last month, I was on BBC World News to discuss the eurozone debt crisis and whether Chinese consumers can make a difference in the world economy.  My discussion partner Johathon Holslag from the Brussels Institute of Contemporary China Studies argued that Chinese consumption is still far below its production, and people should not be over optimistic about China rescuing the world economy. See the discussion video below:

Yes, official statistics show that consumption is only 34 percent of China’s GDP (compared to 70 percent in the U.S.). While the West’s economy is imbalanced with over-spending, the Chinese economy is imbalanced with under-consumption. However, this dynamic is changing. When I travel in China, I can clearly see the consumption boom in China’s large and small cities. Retail has been growing like a wildfire in recent years.

While it is not China’s role to save the world economy, it is in China’s best interest to balance its own economy toward domestic consumption. In so doing, China serves as a counter-balance of over-spending Western economies.  China may not want to bail out Italy or Greece, but China can provide opportunities for these troubled economies to get their own house in order.

As matter of fact, China has already helped. The Chinese middle class is creating enormous opportunities for Western companies selling into China. Europe’s exports to China have been growing steadily. Many Western brands are doing extremely well in China.

For example, Chinese consumers prefer to pay a premium price for furniture that is made in Italy. The UK-listed retailer Burberry has opened 60 stores in China and plans to have 100 stores in the near future. Western automakers, from Volkswagen to Bentley to General Motors, are enjoying huge success in China.

In the coming years, China’s economy may slow down a little, but will still grow at least at 7 or 8 percent. There are plenty of opportunities for Western companies to take advantage of China’s growing middle class. For companies that want to export to China, here are a few useful tips:

• Check out your local Chamber of Commerce or Export Assistance Center and familiarize yourselves with legal and regulatory issues in China. These facilities also have a lot of resources and services that can help you develop China market entry strategies and find the right business partners.
• Consider rebranding or repositioning your products in China. Remember, what works in your native country may not work in China. You really need to learn about Chinese culture, understand Chinese consumers, and adapt your products and services to the China market.
• For smaller brands, e-commerce is a great way to break into the China market without significant upfront cost. China’s ecommerce has been growing at 60 percent each year in recent years. More than 100 million Chinese shopped online last year. And China’s Internet users are expected to reach 750 million in 2015.

According to Credit Suisse, China will become the largest consumer market in the world by 2020. In the past, all the predictions about China have proved to be on the conservative side. With all its problems and potential crises, China somehow has managed to astonish the world again and again.

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Enter the Dragon Year 2012, with hope, fear, or both?

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 China moves to centre stage

THE STRAIT TIMES by IVAN KRASTEV

The most striking contrast when comparing today’s American world with a possible Chinese world of tomorrow is how their people experience the world beyond their borders.

FOR a European these days, thinking about the future is disturbing. America is militarily overstretched, politically polarised, and financially indebted. The European Union seems on the brink of collapse, and many non-Europeans view the old continent as a retired power that can still impress the world with its good manners, but not with nerve or ambition.

Global opinion surveys over the last three years consistently indicate that many are turning their backs on the West and – with hope, fear, or both – see China as moving to centre stage. As the old joke goes, optimists are learning to speak Chinese; pessimists are learning to use a Kalashnikov.

While a small army of experts argues that China’s rise to power should not be assumed, and that its economic, political, and demographic foundations are fragile, the conventional wisdom is that China’s power is growing. Many wonder what a global Pax Sinica might look like: How would China’s global influence manifest itself? How would Chinese hegemony differ from the American variety?

Generally, questions of ideology, economics, history, and military power dominate today’s China debate.

But, when comparing today’s American world with a possible Chinese world of tomorrow, the most striking contrast consists in how Americans and Chinese experience the world beyond their borders.

America is a nation of immigrants, but it is also a nation of people who never emigrate.

Notably, Americans living outside the United States are not called emigrants, but ‘expats.’ America gave the world the notion of the melting pot – an alchemical cooking device wherein diverse ethnic and religious groups voluntarily mix together, producing a new, American identity. And while critics may argue that the melting pot is a national myth, it has tenaciously informed the America’s collective imagination.

Since the first Europeans settled there in the 17th century, people from around the world have been drawn to the American dream of a better future; America’s allure is partly its ability to transform others into Americans. As one Russian, now an Oxford University don, put it, ‘You can become an American, but you can never become an Englishman.’

It is, therefore, not surprising that America’s global agenda is transformative; it is a rule-maker.

The Chinese, on the other hand, have not tried to change the world, but rather to adjust to it. China’s relationships with other countries are channelled through its diaspora, and the Chinese perceive the world via their experience as immigrants.

Today, more Chinese live outside China than French people live in France, and these overseas Chinese account for the largest number of investors in China. In fact, only 20 years ago, Chinese living abroad produced approximately as much wealth as China’s entire internal population. First the Chinese diaspora succeeded, then China itself.

Chinatowns – often insular communities located in large cities around the world – are the Chinese diaspora’s core. As the political scientist Lucien Pye once observed, ‘the Chinese see such an absolute difference between themselves and others that they unconsciously find it natural to refer to those in whose homeland they are living as ‘foreigners.’

While the American melting pot transforms others, Chinatowns teach their inhabitants to adjust – to profit from their hosts’ rules and business while remaining separate.

While Americans carry their flag high, Chinese work hard to be invisible. Chinese communities worldwide have managed to become influential in their new homelands without being threatening; to be closed and non-transparent without provoking anger; to be a bridge to China without appearing to be a fifth column.

As China is about adaptation, not transformation, it is unlikely to change the world dramatically should it ever assume the global driver’s seat. But this does not mean that China won’t exploit that world for its own purposes.

America, at least in theory, prefers that other countries share its values and act like Americans. China can only fear a world where everybody acts like the Chinese. So, in a future dominated by China, the Chinese will not set the rules; rather, they will seek to extract the greatest possible benefit from the rules that already exist.

Ivan Krastev is Chairman of the Center for Liberal Strategies in Sofia and a Permanent Fellow of the Institute for Human Sciences, Vienna.

Think global or you lose out! Malaysians consumed too much with local affairs!

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ONE MAN’S MEAT By PHILIP GOLINGAI

They (Malaysian businessmen) don’t think global. They don’t want to even think Asean. For them, they are in a comfort zone and it is enough to do business in Malaysia.

NINE years ago, Datuk Ilyas Mohamed’s businessmen friends laughed when he asked them to invest in Indonesia.

“Malaysian economy was at its best until 10 years ago. We were at the peak. After that, it started to go down,” recalled the Cartrade Group executive chairman.

And Ilyas decided to enter the Indonesian market. His first deal was to buy Mandala Airlines.

The deal, however, fell through when a Singaporean company outbid his group. It put more money on the table.

But the setback did not discourage him.

“I am very fortunate as I have a business partner there, who is one of the richest men in Indonesia,” noted the 50-something businessman.

His silent partner is a low profile multi-billionaire (we’re not talking about rupiahs but in US dollars).

“He is by name my partner. But he is not interested in my business as it is too small for him. Half of Jakarta belongs to him,” Ilyas related.

(Who? Google: Artha Graha Group.)

Now, 20% of Ilyas’ business is in Malaysia and the rest overseas, mostly in Indonesia; coal mining in Kalimantan and property development in Surabaya and Jakarta.

And his friends, who laughed at him as they thought he would be conned in Indonesia, are now following his footsteps.

“Indonesia is THE market. They have 245 million people. Can you go wrong in a market with 245 million people? And the Indonesian Govern­ment welcomes Malaysian companies,” he explained.

“There are a lot of opportunities in Indonesia. They are not even developing. They are just about to develop. If you go in now it is the best time. You can’t piggy back when they are (already) up there.”

Ilyas, however, cautioned:

“Of course, the important thing is to find the right partner. Many people go there and find the wrong partner, they get conned and then they say Indonesians are ‘penipu’ (conmen).”

The Malaysian market is small as the country’s population is 28 million.

“You can do small business (in Malaysia). But if you want to think big, you have to go out (of Malaysia),” the businessman said.

How big is Indonesia?

“Out of the 245 million Indone­sians, about 10% are super rich and that’s the total population of Malaysia,” Ilyas said.

How rich is “rich”?

“Oh, they are very, very rich,” he said and gave a figure (in ringgit) which I thought was unbelievable.

The thing with Malaysians, according to Ilyas, was we think small.

“They don’t think global. If not global then think Asean.

“But, they don’t want to even think Asean,” he said.

“For them, they are in a comfort zone. Sudahlah (it is enough) to do business in Malaysia.”

Most Malaysian businessmen (and we are not talking about the bosses of CIMB etc) do not want to venture.

For example, Ilyas said, “Sri Lanka is a good market now. Their trade minister, chief justice and banker (with a bank equivalent to Maybank) came down to talk to our businessmen. But they were not interested.”

It is the opposite for Singapore entrepreneurs. With their rock solid Singapore dollar, they are rushing into Sri Lanka.

“They know that their local base is small and they have to do business outside of Singapore,” he said.

The Philippines’ economy is also booming.

“Over the past 30 years, Filipinos are fed up with politics. And they work and work, building the economy themselves. And if we are not careful, we might be sending maids to the Philippines soon,” Ilyas said.

It is politics as usual in Malaysia.

“Instead of coming up with ideas on how to create business opportunities, our politicians come up with all sort of (political) issues,” Ilyas contended.

“They are creating issues for cheap publicity. For example, you can take 10 Chinese, 10 Indians and 10 Malays and sit them down together and there will be no racial issue among them.

“But it is the politicians and not the rakyat that come up with all sort of racial issues.”

“How to be a global player when you are thinking of politics 24 hours a day?”

Ilyas flies in and out of Indonesia spending about 15 to 16 days a month in that country.

So I asked: “Why don’t you relax and do business in Malaysia?”

His eyes gleamed. “Of course as a businessman, you are an opportunist. When you see so much of opportunities (in Indonesia) you just can’t resist.”

Ilyas assures that the Indonesian market is not as hostile as its fans during an Indonesia vs Malaysia football match.

Consumed with local affairs

One Man’s Meat By PHILIP GOLINGAI

The Philippines looms as the next big Asean entity and Indonesia is the place to ‘park’ one’s money, but we would rather not know that the barbarians are at the gate.

THE barbarians are at the gate and yet Malaysians are more fixated with whether a mentri besar was caught for khalwat with a girl from Pasir Panjang.

Not true, says the MB. But tongues still wag.

Perhaps we should be more concerned with the fact that the Philippines will be the next big thing in Asean.

I remember reading a report saying that if we are not careful, in two decades or so we will be sending maids to Manila.

The thing about us is we are more consumed with domestic affairs than foreign happenings.

Yes, from my Twitter timeline, Malaysians are also interested in the fact that former president Gloria Macapagal Arroyo was arrested on charges of fraud and Muammar Gaddafi’s son Saif al-Islam was captured.

But we are more intrigued with when Parliament will be dissolved, and whether Parti Kita president Datuk Zaid Ibrahim will contest in Petaling Jaya Utara or Petaling Jaya Selatan.

I, too, am guilty of paying too much attention to local politics and not enough to global issues.

Yes, I’m aware of the eurozone debt crisis. But don’t ask me to get into specifics.

However, I’ve become a specialist on Kedah Gerakan Youth chief Tan Keng Liang’s challenge to DAP publicity secretary Tony Pua: he will consume a mug of Kedai Rakyat 1Malaysia’s (KR1M) Chocolate Malt if the Petaling Jaya Utara MP donates RM1,000 to charity.

The challenge came after Pua claimed that KR1M’s 1Malaysia Growing Up Milk contained eight times the permitted amount of Vitamin A and was missing essential nutrients such as Omega 3, Vitamin B1, Vitamin D, Vitamin C and folic acid.

There was so much excitement in TwitterJaya (the moniker of the Malaysian twittersphere) over the issue, with some twitterers milking the issue with clever tweets such as “Pray for @TanKengLiang because he is going to drink 1Malaysia Choco Milk”.

Another big issue on TwitterJaya has spawned the mother of all puns and has also something to do with milk.

So syiok I was to absorb these comments like SpongeBob SquarePants, until I read a tweet by @Art_Harun (the lawyer) on Wednesday.

He tweeted in Malay: Malaysian politics – last month it was about molesting breast, this month it is about cows. When will we discuss the maximum impact of the eurozone on our economy?

Ouch. Time to come out from under my coconut shell.

So I decided to find out what the barbarians (Malaysia’s foreign rivals) were up to.

On Friday, I met a 20-something think-tank director at Coffee Bean in Bangsar Village to pick his brain.

The cerebral hotshot, who wants to keep a low profile at the moment, listed three challenges that Malaysia faces.

“Population wise, we are too small. We have a population of 28 million. Compare that with Indonesia’s 245 million, Thailand’s 66 million and the Philippines’ 103 million,” said the animated man, still wearing his maroon Friday prayer shirt.

“In terms of economies of scale, our enterprises will not grow so big because our market is small. We don’t have any option but to invest outside.”

Malaysian enterprises, he said, should think Asean to survive and grow.

“We should be on the forefront of ‘big’ Asean,” he explained.

He noted that Malaysian companies such as CIMB and Khazanah were investing in vibrant Indonesia, the country to “park” one’s money.

And through Twitter, he understands how important Indonesia is to the United States by reading the tweets of the American ambassador to Jakarta.

“Food security,” he said. “Many Malaysians do not realise that Malaysia imports almost everything – rice, fish and even chilli.

“Imagine chilli! I did not know that we imported chilli until I attended a briefing by Pemandu (Performance Management and Delivery Unit).

“We are also overly dependent on foreign workers. Free movement of people is important in a globalised world.

“But certain industries, such as palm oil and construction, should train Malaysians to work in these sectors.

“Suddenly they are finding it difficult to recruit Indonesian workers as that country’s economy is booming. Indonesians would rather work in Malaysian-owned palm oil plantations in their own country than in Malaysia.”

Note to myself: download the Economist iPad edition that has, as its cover story, “The magic of diasporas: Immigrant networks are a rare bright spark in the world economy”.

In the meantime, I wonder what will happen to Tan should he drink the 1Malaysia Chocolate Malt.

Is China still a developing nation?

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Global Trends By MARTIN KHOR

Last week, US President Barack Obama said China has ‘grown up’ and must take on the responsibilities of a developed country. But is China already grown up – or is it still a developing country?

 China’s fight to retain its developing country status is of interest to other developing countries, for they will be next if China loses that fight

IS CHINA still a developing country, or has it joined the ranks of the advanced developed countries? This has become a topical question, especially after US Presi-dent Barack Obama reportedly told Chinese President Hu Jintao last week that China had to act more responsibly now that it has “grown up”.

This interesting conversation took place at the Asia-Pacific Economic Cooperation (Apec) Summit in Hawaii. And when Obama met Chinese premier Wen Jiabao at the East Asia Summit hosted by Asean in Bali last week, he must have said something similar, in between chiding him for not allowing the Chinese currency to shoot up.

By telling China that it has become a grown-up, Obama meant that China should now be treated just like the US or Europe in terms of international obligations – like taking on binding commitments to reduce greenhouse house gas emissions, cutting its tariffs to near zero and giving up its subsidies under the World Trade Organisation, giving aid to poor countries and letting its currency float.

This is what the US has been pressurising China to do in the recent negotiations in climate change, in the WTO’s Doha talks, at various meetings of the United Nations and at the Apec summit.

In fact, most of the important multilateral negotiations are stalled because the US (with Europe and Japan standing behind it) insists that China gives up its developing country status and takes on the obligations of a developed country.

It is not only China, of course. They also want India and Brazil to do likewise. And often also mentioned are South Africa and the wealthier or bigger Asean countries.

The main focus, however, is China. There has been growing respect for – or, rather, fear of – China, that it is growing so fast and has become so big and powerful it might swallow up the Western world in a decade or two.

So, the question is pertinent. Is China a developed country?

The answer depends on what criteria are used. In absolute terms, China is indeed a big economy. Its GNP is second only to that of the United States. It has become the biggest emitter of greenhouse gases, having overtaken the United States.

But this is mainly because China is a big country in terms of population. With 1.3 billion people, it is the world’s most populous country.

However, despite the mighty image it has been given by the world media, China looks like a very ordinary developing country once we look at per capita indicators.

Whether one is a developed or developing country is defined by the UN and by the IMF and World Bank, and the most important criterion is income per capita.

By that yardstick, China is very much a developing country.

The International Monetary Fund, in its latest World Economic Outlook, classifies China as a developing country, with a per capita Gross Domes­­-tic Product last year of US$4,382 (RM13,852), ranked a lowly 91 of 184 countries in the world.

Six African countries (Equatorial Guinea, Gabon, Botswana, Mauritius, South Africa, Namibia) had GDP per capita levels higher than China.

China’s GDP per capita was less than a tenth that of the United States, which had US$46,860 (RM148,129). Luxembourg had the highest ranking, US$108,952 (RM344,408). Ma­­laysia was No. 65 at US$8,423 (RM26,626) and Singapore No. 15 at US$43,117 (RM136,297).

Economists also use the measure of GNP per capita “in gross purchasing power” (GPP). This is to take into account the different costs of living in different countries. People living in countries with a lower cost of living could enjoy a higher li- ving standard than their country’s GNP implies.

Last year, in GDP (at GPP) per capita terms, China was lower still at No. 95 with US$7,544 (RM23,847), just below Ecuador and just above Albania, El Salvador and Guyana.

By contrast, Malaysia was at No. 58 with GPP per capita of US$14,744 (RM46,607) while Singapore was No. 3 with US$56,694 (RM179,295).

The UN Development Programme has a human development index (HDI) that measures quality of life in terms of income, schooling, life expectancy and so on.

The Human Development Report 2011 shows China at No. 101 of 187 countries with a HDI of 0.687 and in a category of “medium human development”.

What about climate change? China, again mainly because of its huge population, is the top greenhouse gas emitting country, with a total of 7,232 megatonnes of CO2 equivalent in 2005. The US is second with 6,914 Mtonnes. India was fifth with 1,859 Mtonnes.

But in per capita terms, China’s emissions level was 5.5 CO2-equivalent per person, ranked 84 in the world. By contrast, the US’ per capita emission was 23.4 CO2 equivalent, Australia’s 27.3, Russia’s 13.7, Ger­many’s 11.9, Japan’s 10.5, Singa­pore’s 11.4, Malaysia’s 9.2, South Africa’s 9.0, Brazil’s 5.4, Indonesia’s 2.7, India’s 1.7 and Rwanda’s 0.4.

Thus, as No. 91 country in the world in GDP per capita, No. 101 in human development index and No. 84 in per capita emissions, China is looking like, and is, a middle-level or even lower-middle level developing country, with not only all the developed countries ahead of it, but also many developing countries, too.

China also shares the same characteristics of many developing countries. More than 700 million of its 1.3 billion people live in the rural areas, and in 2008 there was a large imbalance, with the urban disposable household income 3.3 times bigger on average than in rural areas.

According to China’s own standard, 43 million Chinese are low-income (below US$160 (RM506) a year). By the higher UN standard, 150 million people are poor, living on less than US$1 (RM3.16) a day.

Each year, 12 million people are newly added to the job market, outnumbering the population of Greece, and it is quite a task to find them jobs.

This does not deny the fact that there are high points in China’s development: its big GNP in absolute terms, its high rate of economic growth, the foreign reserves of above US$3 trillion (RM9.5 trillion).

But the fact remains that while China has become a big economic power in absolute terms, it is still a middle-level developing country, with the socio-economic problems that most developing countries have.

And if China is pressurised to take on the duties of a developed country and to forgo its status and benefits of a developing country, then many other developing countries that are ahead of China (at least in per capita terms) may soon be also asked to do the same.

Thus China’s fight to retain its developing country status is of interest to other developing countries, for they will be next if China loses that fight.

New thinking on human rights & cooperation

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New thinking on human rights

REFLECTING ON THE LAW By SHAD SALEEM FARUQI

Compliance with human rights by a country must be examined both as to domestic conduct as well as international conduct, and theory must always be read in the light of practice.

HUMAN RIGHTS DAY is approaching and many organisations worldwide are putting forth their views on this noble, transcendental quest.

A few weeks ago, the Fourth Bei­­­-jing Forum on Human Rights enunciated a bold Third World perspective.

Last week, a Malaysian NGO co-sponsored The People’s Charter to Create a Nonviolent World.

Scholars at the Beijing Forum pointed out that human rights were not born in the crucible of any particular culture or civilisation.

All cultures, religions and regions have a concept of the sacredness of human life and of some common aspirations and needs.

There is universal acceptance that humans are entitled by birth to certain inalienable rights.

These rights do not depend on the charity or generosity of the state but are inherent in the human condition.

In the human rights discourse around the world, there are many commonalities, shared beliefs, core ideas and basic elements. These must be highlighted and honoured.

However, though the idea of human rights is universal, the substantive content of human rights may vary from society to society and from time to time.

As we move from the core of the doctrine to the fringes, cultural, religious, economic, political and historical differences become relevant.

Priorities begin to vary. Value pluralism manifests itself. Context begins to determine the content.

The ideal equality of nations and people requires that these diversities and differences be recognised and allowed to find expression.

The richness of the human rights discourse has manifested itself in the analysis of human rights into many conflicting or overlapping categories.

Among them are:

• > The first generation civil and political liberties. These are referred to as the “negative liberties” which thrive best if there is non-intervention by the state.
• > The second generation socio-economic rights or the “positive liberties” which require vigorous, affirmative action by the state to create the socio-economic conditions in which civil and political liberties may flower.
• > The third generation development rights.
• > Individual rights versus collective and communitarian rights.

There is universal agreement that the eradication of absolute poverty is necessary for the realisation of human dignity.

However, there is no universal agreement on the path to the goal of social amelioration.

To most Western observers, electoral democracy is the surest catalyst for the evolution of a regime of human rights.

Along with political democracy is the instrumentality of a free market economy.

Others feel political democracy and a free market economy do not always result in economic democracy and socio-economic justice. Various models of “social democracy” and “welfare state” are put forward as alternatives.

There are differences of opinion about whether the government alone should be responsible for supplying the welfare net or whether the family and the community must play a role to help their kith and kin.

Traditions and religion can be harnessed to involve the community in kinship welfare.

It is also agreed that without enforcement, human rights have no practical value. Rights without remedies are like lights that do not shine and fires that do not glow.

Traditional reliance on judicial remedies is inadequate because of the weaknesses of the judicial method and the unbearable expense for the development of Western style judicial institutions, hierarchies and methods.

Attention must therefore turn to development of remedies that are informal, inexpensive and expeditious.

There are many threats to human rights.

Among them are poverty and lack of human rights education. Along with state institutions, there are many private, religious and social centres of power that violate human rights.

Multi-national corporations often act like a state within a state.

The pervasiveness of Western global dominance in the economic, political, cultural, communication and educational fields is not always acknowledged.

Rating institutions like Moody’s exercise vast extra-territorial influence over a government’s economic policies.

Global institutions like the World Bank, the Security Council, the International Monetary Fund and the International Criminal Court consistently act to preserve the unfair advantages for the West.

Some aspects of globalisation, notably the patents regime and the selective way in which the war against terrorism is being waged, are deeply destructive of the rights of the peoples of Asia and Africa.

Realisation is growing that human rights are an evolutionary process.

New claims, demands and expectations are emerging.

The human rights theory must remain abreast of the felt necessities of the times.

We must be cognisant of the problems from environmental degradation, pollution of the rivers, de-forestration of traditional lands for “development” and the inequitable way in which the benefits and burdens of development are shared.

The problems of an ageing population and the right to privacy in an age of electronics call for attention.

In evaluating human rights, we must realise that human rights are not a destination but a continuing journey.

Nations must be judged by their direction and by their progress.

Theory must always be read in the light of practice.

Compliance with human rights by a country must be examined both as to domestic conduct as well as international conduct.

The Third World must not shy away from articulating its own concept or concepts of human rights.

The institutions, methods and procedures for the realisation of human rights in Asia, Africa and Latin America must reflect the priorities, peculiarities and existing resources of each country.

Third World countries must seek to banish the idea that human rights are incompatible with Eastern traditions.

They must articulate their problems, challenges and accomplishments. They must combat distortions and lies.

They must, if need be, reciprocate the “ranking exercises” of some Western nations that selectively evaluate the human rights record of Third World nations.

Throwing stones is a game two can play.

The significant link and occasional conflict between human rights and human dignity must be studied.

Human rights must go hand in hand with duties to the family, to the community, state and all humanity.

Shad Saleem Faruqi is Emeritus Professor of Law at UiTM and Visiting Professor at USM

New thinking on human rights cooperation

By Wang Qinghong, China.org.cn, March 16, 2011

Western mainstream media and think tanks applauded the Chinese government’s determination and efficiency in evacuating its citizens from Libya when civil strife recently broke out. This can be interpreted as an indirect and unintentional recognition of Chinese government’s achievement in protecting the human rights of Chinese people by the West. This is significant, not only because it shows what kind of new efforts China has made for its people, but also because it triggers an inquiry into what kind of new thinking the West and China can adopt in their human rights dialogue.

Obviously, the first point for the West and China in their discussion of human rights should be both sides recognizing each other’s progress rather than pointing out each other’s problems. But if they only focus on each other’s flaws, they then risk neglecting the successes and goodwill efforts of each other in protecting and improving human rights, which will hinder the buildup of mutual trust and cooperation. However, if both sides broaden their vision regarding each other’s human rights achievements, they can deepen mutual understanding of relevant issues and find common ground for bilateral cooperation.

As for recognition, the West should pay more attention to the human rights implications of China’s cancellation of the death penalty for 13 crimes and the regulation of “Demolition with Administrative Coercion” earlier this year. Correspondently, more China should offer more recognition of President Obama’s recent efforts in improving American human rights in the areas of health care and education. This could substantially balance the negative atmosphere of human rights dialogues and eventually lead to more positive and constructive cooperation.

Secondly, both sides must not only eliminate Cold War mentalities, impatient and arrogant attitudes, biased and oversimplified judgments, and radical rhetoric, but also re-identify shared values and different preferences in the realm of human rights. To this end, they should understand each other’s concepts of human rights within historical and cultural context, and should communicate with each other patiently and respectively.

The two international human rights treaties and other human rights agreements of the United Nations could serve as a good starting point for renewed dialogue. However, all human rights values and principles are built upon and evolve with the social, political, and economic development of societies. They have to be in turn codified as laws in accordance with cultural and historical specificities. For example, Western liberal traditions emphasize the equality and integrity of the rights of the individual, while Chinese Confucian traditions prioritize social stability and justice. Accordingly, although the notorious shooting incident by a political extremist in Arizona earlier this year was unanimously condemned by the American public, it is still difficult and extremely controversial to change the individual’s right to possess firearms in the United States, which is protected by the Second Amendment to the US Constitution. On the contrary, it has been debated in recent years in China whether policemen should be equipped with guns routinely, due to the conflict between protecting the safety of individual policemen and the potential danger to public security. The strict gun control regulation in China reflects Chinese traditions of prioritizing collective human rights over individual human rights.

Thirdly, both sides should not only strengthen the dialogue about the connotations of human rights but also enhance cooperation and innovation in social management that aims to improve the real status of human rights.

Western societies mainly pursue protecting and enlarging human rights through checks and balances as well as by laws, while Chinese traditions emphasize enhancing social harmony and prosperity through promoting social fairness, responsibility, morality, and education.

Both sides can learn from each other if they maintain an open mind. In a recent speech, Chinese President Hu Jintao called for safeguarding the rights and interests of Chinese people and for improving their livelihood through strengthening China’s social management mechanisms. And Premier Wen Jiabao’s regular chats with the public via the Internet, which resembles US town hall meetings, shows the determination of Chinese leaders to improve human rights through social and political innovations and their ability to learn from Western experiences in social management.

Perhaps President Obama and American politicians could study the Chinese government’s recent regulations in controlling real estate prices and inflation, increasing social welfare, and narrowing various socioeconomic gaps and could be inspired to enact reforms for financial, social security, and Medicare in the United States.

In addition, both sides should also upgrade previous exchanges and cooperation in governance and self-governance to a more detailed and pragmatic level. Both American and Chinese people deeply understand that their human rights have to be protected and improved through law and order and that a Cultural Revolution style “great democracy” will only jeopardize human rights and bring anarchy and chaos.

Furthermore, China and the United States should expand the range of participants in the human rights dialogue by promoting people-to-people exchanges and by following a new perspective of building up a “community of common interests” initiated by Chinese and American leaders and senior strategists. Although individuals have their own views on human rights that might contrast from what government officials, distinguished scholars, media, think tanks, and nongovernmental organizations have advocated, the more people-to-people exchanges, the deeper human rights communication at the grassroots level.

People-to-people exchanges could enhance the perspective of a “community of common interests” that could in turn strengthen the foundation for human rights cooperation. The international disaster relief for China’s Wenchuan earthquake in 2008, the Chinese government’s humanitarian withdrawal from Libya of more than 21,000 citizens from 12 countries, and the Chinese rescue efforts for the victims of the recent earthquakes in New Zealand and Japan have shown the strength and potential in protecting and improving human rights under the perspective of a “community of common interests.”

The author is an Adjunct Fellow of the Pacific Forum of the Center for Strategic and International Studies (CSIS).

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.