Showing posts with label speeches. Show all posts
Showing posts with label speeches. Show all posts

Monday, April 18, 2022

Pushing China's head under water won't make America great again

The future of our young generations is at stake. This is a presentation before the Chinese American Association at Rossmoor (CAAR) on April 11, 2022. Introduction begins around the 2 minute mark.

Saturday, July 9, 2016

Chinese American Career Development in Silicon Valley

Below is the text of my speech given on July 9, 2016 at a career development conference sponsored by Chinese American Semiconductor Professionals Association held in Santa Clara.

Good afternoon everybody. I stopped going to work on a regular basis since 2008  (my ex-colleagues might even say it was earlier than 2008) and I got off the board of a large cap, NYSE listed public company in 2014. Other than writing occasional op-ed pieces for online Asia Times, I am enjoying my retirement.

We live in America, a society where old soldiers are quickly forgotten. So this is an unexpected surprise and pleasure to be invited to speak before you today.

Fortunately for me, we Chinese respect our elders and presume that they have grown wiser from the accumulation of life experiences and thus they are not to be quickly put into the dumpster. Also fortunate for me, I know Simon Ma and he invited me. So, thank you Simon.

I have lived in Silicon Valley practically before there was a Silicon Valley, since 1971, and I am delighted today to share with you some of my lessons learned.

 My talk today is roughly divided in four parts. First as brief as possible I need talk a little about my career to put what I have to say in proper context.

I certainly am not about suggest that what I have to say is the only path to enlightenment but I hope you could better understand my remarks in light of the life I’ve had.

Next, taking advantage of the vantage point of a senior citizen, I am going to tell you some stories of some of the Chinese America pioneers that broke the glass ceiling and pave the way for succeeding generations such as you folks in the audience to succeed.

I am honored and pleased to say that these individuals are contemporaries and friends of mine.

Of course, there is a price to be paid for success, whatever that might mean to each one of you individually. Since the theme of this conference is how to succeed, I can presume that you are all interested what that means.

So I plan to summarize for you what I think are the essential characteristics for success in your professional career.

Lastly, if you don’t already know and feel it already, America is not a level playing field for us Chinese. To have a successful career and not just a so-so career, you need to be sensitive and aware of how the field is tilted against you.

 As I have been writing my autobiography for my grandchildren, I reflect that I have been lucky and enjoyed the best of two worlds.

First, I finished 6th grade in China and thus has a solid foundation in Chinese, which I was able to maintain by avidly reading 三国演 (Romance of Three Kingdoms) and later on when I was in college, an endless supply of武侠小 (martial arts novels).

Second, I was fortunate to get a scholarship and attend MIT and got a quality education.

Third, I met May Jen who became my wife without her love and support, I wouldn’t have a story to tell today.

I won’t bore you with the details of my life or professional career, but just to let you know that I started in a major American company, a predecessor of today’s Honeywell.

I was considered a rising star. The company did not have an organized education assistance program in those days but the corporate vice president in charge of R&D took me out to lunch one day and offered me leave with pay so that I can complete my doctorate degree while keeping my position at the company.

My Chinese language background, my technical background and my consulting experience enable me to jump off the normal career path to become an advisor to Corporate America on doing Chinese in China.

Thus I had the privilege of a front row seat as I witnessed the rise of China.

My China experience directly led to an invitation to serve of on the board of the world’s largest integrated resort/casino company in the world.

Throughout my working career I developed the knack to write clearly and succinctly. In putonghua, we would call it 针见 style.

In my retirement, I use my skill to become a regular contributor to online Asia Times where I strive to present a point of view representing Chinese in America and not the general mainstream public.

As I said at the beginning of my talk, this—hopefully you would consider it as brief—self-introduction is to give context to the rest of my presentation.

 When my family arrived as refugees from China in 1949, ethnic Chinese residing in America make up around one tenth of one percent of this country’s population.

By the time my wife and I immigrated to Silicon Valley from New Jersey, the Chinese population in America has just about tripled, but still a relatively insignificant number.

There was no such place known as Silicon Valley, just fruit orchards in Santa Clara. To buy Chinese groceries and have a dim sum lunch, we would need to drive into Chinatown in San Francisco.

Today we are around 4 million around the country. I can get groceries at Ranch 99 and dim sum lunch in downtown Mountain View, both about 1.5 miles away from home.

 Another way of looking at the Chinese American influence in Silicon Valley is to trace the formation of professional Chinese American organizations here.

The San Francisco chapter of the Chinese Institute of Engineers has been around for almost 100 years. My friend, the late Lester Lee, was a member, but I was not too familiar with this organization and their activities until today.

AAMA was established in 1980 by a bunch of technical types that gathered in the cafeteria of Lester Lee’s then company. The feeling that Asian Americans in the valley needed a mutual support network was the motivation to start AAMA.

I joined around 1983 and chaired a series of annual conferences on cross border strategic alliances starting in 1990 and became the chairman of the organization around 1996.

AAMA started out as Asian American Manufacturers’ Association. Somewhere along the way, the name was switched to Asian American Multi-technology Association because we don’t manufacture anything anymore but there was value in keeping the AAMA brand.

Ten years after AAMA, Monte Jade Science and Technology Association was established.  It was the idea of Zhuang Yi-der who was then head of Taiwan’s Science Division based in Silicon Valley. To this day, Monte Jade has the support of the Science Division.

The formation was a reflection of increasing presence of high tech companies from Taiwan in Silicon Valley and increasing presence of ex-pats here from Taiwan.  At the beginning and for a long time, the lingua franca at the dinner meetings was Putonghua. At AAMA meetings English was always the spoken language.

Shortly after Monte Jade, Chinese American Semiconductor Professional Association was established. Again this was a reflection of the dominating presence of Chinese engineers in the semiconductor industry both here in Silicon Valley and in Taiwan.

In fact some years later, Professor Annalee Saxenian of Berkley who studied the impact of immigrants on Silicon Valley made the observation that in Silicon Valley, IC stood for Indians and Chinese. Without these two groups of immigrants, the valley would implode.

Ten years after formation of Monte Jade came the formation of Hua Yuan Science and Technology Association. This time the founders came from PRC and they immediately became visible by hosting delegations from China to Silicon Valley. )

The most famous deal still talked about was struck between Jack Ma of Alibaba and Jerry Yang of Yahoo at a golf outing sponsored by HYSTA. At the time, Yahoo was the big brother and Alibaba the young upstart.

Last year I spoke at the first annual conference of The Society of Chinese Physician Entrepreneurs. The founder of SCAPE is a practicing physician affiliated with Stanford and the organization was founded in 2014.

I mentioned SCAPE just as the latest organization to be established in Silicon Valley that I am aware of and is an indicator of how much we Chinese like forming affiliations and associations, sort of professional .

 Now I would like to tell you about some of the Chinese American pioneers that broke through the glass ceiling in Silicon Valley.

The earliest was David S. Lee (李信麟). In the late 60’s he started a printer company called Diablo Systems that was acquired by Xerox. As soon as his company was acquired, Xerox replaced him with a white guy because who have ever heard of a Chinese knowing how to manage.

So David left and started another printer company called Qume Systems. This was before ink jet or laser printers and David invented a daisy wheel printer.

Qume was acquired by ITT Corporation and this time, David was asked to stay and run the computer peripherals division. When IBM rolled out the PC, ITT asked David to lead the effort to compete with IBM.

To gain a competitive advantage, David took the PC designed by ITT to Taiwan and asked Acer and Mitac to make the PC as OEM supplier. That’s how those companies got into the PC business, and David came to be known as the father of Taiwan’s PC industry.

Since then David has gone on to start and run other companies, served on the board of many companies and on advisory boards of venture capital companies.

He also took time to serve as chairman of CIE, AAMA and Monte Jade. Very early on, after his reputation as a business leader was firmly established, he recognized the importance of being part of the American political process.

He along with Lester Lee and Stanley Wang, founder of Pantronix--one of your gold sponsors, would fund raise for political candidates. They would actively encourage and support Asian candidates regardless of party affiliation. Many others in Silicon Valley have since followed their example.

Because of his prominence and activism, he was appointed to serve on the board of regent of the UC university system for 12 years and he served on many presidential panels and commissions, appointed by both Republican and Democratic presidents.

After his PhD from MIT, David K. Lam landed in H-P in Silicon Valley. One day he noticed that all of the sudden, a white guy that used to report to him was made the manager over him.

David Lam resigned and started Lam Research in 1980 and he became the first Chinese American to take his company public in 1984. Those of you in CASPA would know that Lam Research is one of the major semiconductor manufacturing equipment companies in the world.

Similar to David Lee, this David has gone on to start other ventures, advise still more others and sit on board of some.

He also has sat in presidential and state level commissions. In the early 90’s, his leadership established AAMA as the preeminent Asian American professional organization in Silicon Valley.

One of his smartest moves, David convinced Pauline Lo Alker to assume the leadership of AAMA after him, which she did for the next four years from 1991-94.

Pauline was charismatic and a high-energy person. You would find it hard to say no to her. She got people energized and engaged in AAMA and she began an active mentoring program for the young professionals. Under her leadership, AAMA became known as the meeting place for valuable networking and relationship building.

Pauline began her career facing two handicaps. She was Asian and female. Even though she was trained in computer programming, her first job was as a typist in the computer department of GE.

Once given the opportunity to show her ability, she moved up quickly and landed a job in Silicon Valley. From technical positions she moved into sales and marketing and became the vice president for a workstation company called Convergent Technologies, a rising hot company in its days.

She then started a workstation company called Counterpoint, which was acquired by Acer, the Taiwan PC company. By the time she was leading AAMA, venture investors had recruited her to turn around the fortunes of Network Peripherals. She did that and took the company public.

At various times, Pauline has received national recognition as one of the most influential woman executive and role model for aspiring women in the high tech industry.

The above three individuals achieve their success as hugely capable entrepreneurs. Because of their accomplishments, Asian Americans are no longer perceived as just good engineers.

Because of their prominent success stories, the venture capitalists on Sand Hill Road no longer ignore Asians with business plans. These firms even began to hire partners with Asian faces.

I cannot begin to tell you how different Silicon Valley was before and after these pioneers made their mark. I honestly believe their record pave the way for all the others to follow.

John Chen was different. More than a decade younger, he was not an entrepreneur per se. Instead he showed that he knows how to manage and run companies and can turn sick companies into healthy ones.

When he was asked to take over Sybase in 1997, he already had a proven track record in senior management positions. Sybase was literally on a financial death spiral when he took over.

He changed the company business focus, returned the company to profitability and sold the company to SAP for almost $6 billion thirteen years later. He is now trying to do the same with Blackberry.

John sits on two major corporate boards, Disney and Wells Fargo as well a bunch of high tech start-ups and as trustee of a number of national NGOs.

He also led the fund raising drive to build the library in honor of Chancellor Tien Chang-lin at UC Berkeley.

Bob Lee basically climbed the corporate ladder within one company becoming the Executive Vice President of Pacific Bell. He retired after a 26-year career with the telecom company.

In his day, if you go by size of the company, he was the highest ranking corporate executive of Chinese ancestry in the San Francisco Bay Area.

He was chairman of the board of Blue Shield of California, served on the board of numerous smaller companies and non-profit groups. In particular he was active on the board of Asian Pacific Fund and Youth Tennis.

Both Bob and John Chen had served as past chairman of The Committee of 100, a national organization of prominent Chinese Americans.

Like Bob, Albert Yu is also a lifer who spent virtually his entire career in one company. In this case it was Intel.

The difference is that during his stint there, Intel grew from virtually a start-up to the leading semiconductor company in the word.

Albert led Intel’s effort in microprocessor development, the dominance of Intel’s microprocessor in the PC industry was the reason for Intel’s success. He clearly played a major role in Intel's rise.

After 30 years, Albert retired from Intel as their senior vice president. He wrote two books on management Intel style along with many technical papers.

After retirement, he continued to advise companies and sat on the boards of some of the companies in the valley.

His passion was mentoring Asian Americans. He organized mentoring sessions inside Intel and after his retirement he was active participant of mentoring programs organized by Monte Jade and others.

I save Ken Fong for last on this list because he started a company in biotech when electronics and semiconductors dominated the valley.

Secondly, like John Chen, Ken is not retired but actively working. He sold his company to Becton Dickinson for undisclosed hundreds of millions and he has been busy investing and coaching young biotech startups, both here in the US and in China.

Ken has been very generous with his wealth--not only writing checks for charitable causes, but he actively supports Asian American candidates running for political office.

Because of Ken being politically active, he was appointed to the board of trustees of the California State Universities. He was the second Chinese American to serve in this capacity. The first was Stanley Wang of Pantronics.

Ken and I are part of a team organizing a public forum co-sponsored by the Commonwealth Club where we present topics and speakers different from the usual American mainstream.

The topics involve sensitive areas on US China relations that we believe important for the American public to know more about. We have invited speakers from China and U.K. in this endeavor and Ken has generously underwritten the expenses in bringing the speakers over.

I have selected for discussion today the glass ceiling breakers that I knew personally and are friends of mine. I don’t claim this list to be all inclusive. I am sure there are others worthy of mention.

My point is that by breaking the glass ceiling, they made it easier for the many that have followed their footsteps.

 It should be obvious from the success stories I just told you that there is no single route to getting there. What they do have in common, however, is that they all gave back to their community in one way or the other.

Now, I would like to share with you what I think are essential attributes necessary to succeed. If you think about it, these are really quite self evident, so I am going to go over them quickly and we can always discuss any of them in depth during the panel discussion.

But first, what do we mean by success? It’s not the same for everybody. Some want to be famous. Others want to be rich or powerful or both. Still others want to be comfortable in his/her own skin.

Each of you has to decide for yourself.

Know yourself. What I mean is that each one of you needs to take a realistic look at yourself and have the ability to objectively identify your strengths and your weaknesses.

Know others to me means that you have solid interpersonal skills, you know how to establish rapport and empathy with others. You also know how to size up others and decide if their skills complement yours.

Both attributes are, in my view, important if you decide to start a new venture and need to build a team. You can’t find a team with complementary skills if you don’t know what skills you have and don’t know how to identify needed skills in others.

In America, everyone is selling him or herself all the time. You are constantly being evaluated on who you say you are. If you choose to be humble typical of a reticent Chinese; that might be OK in China but here you are putting yourself on discount.

Of course, you will need excellent presentation skills, verbally and also in writing.

Whether you are joining a young startup or a giant corporation, you need to know how to be a team player. Sometimes you are a member of the team and other times you might be leading the team. Either way, you need to help the team move together. This means no back stabbing, no forming factions, no acts of a lone ranger.

I might add that one of the best places to practice team building is to volunteer, such as one of these sponsoring organizations. Why? Because when everybody is a volunteer, there is no command structure, as you would have in a company. To get anything done and move together as a team, you have to have good persuasive skills.

To be a good leader, you must be willing to lead the charge up the hill and not sit in the back and order everybody else to face the enemy fire.

A good leader also knows how to be decisive and know when a decision has to be made and move on. Sometimes the timing is such that you are required to make decisions sooner than you’d like, but you have to have the will and confidence to make the tough calls.

One attribute that will help you being a decisive leader is the ability to think of contingencies. In other words, for every critical decision, you will have thought of alternative scenarios and what-ifs. In this way, if you make a wrong call, you will be in a position to know how to rectify the situation.

Last but not least, I believe it’s important to give back for several reasons. For one, you will feel better about yourself and that will show when you interact with others. For another, others have helped you on your climb to the top and you have a moral obligation to do the same.

 This is my last slide and I have two thoughts to leave with you.

Contrary to common wisdom, America is not a level playing field. Yes, America is the land of opportunity for anyone willing to work hard, but it does not mean that you will be treated the same way as the person next to you.

If you are Asian, if you don’t speak accent free English and if you not the assertive type, you can expect to put out 110% or even 120% of effort in order to get the same recognition and respect as the white person.

This is just the way it is. If you should be fortunate and work in a place where your race, accent and manner is not held against you, so much the better, but at least you should be prepared and ready to accept the bias as an added challenge.

Silicon Valley is more likely to be equitable than elsewhere in the United States. If you ever relocate to other parts of the country, you should be prepared to over come hidden and unconscious bias.

An even more insidious form of racial bias that you must be aware of is the U.S federal government considers each and every one of you a potential spy for China just and only because you are Chinese.

I am part of the task force in the Committee of 100 that goes around the country giving half-day workshops on how to avoid being a victim of racial profiling. We don’t have time to go into this today.

For the purpose of today’s discussion, let me simply give you some practical advice.

If you work in high tech or in government labs or even in academia, you should assume that someone is reading your email and listening in on your telephone conversation, and I don’t mean hackers from PRC. The initials I am thinking of are FBI, CIA or NSA or ATF or DEA.

I just heard on the public radio that since 9-11, we now have over 40 government agencies that are running undercover investigations. Not all of them are concentrating on Chinese espionage—thank goodness--but a sobering thought nonetheless.

You don’t want do anything that can be misinterpreted as something unsavory.

Just keep in mind that our law enforcement agencies are quick to jump to conclusion and in cases where national security is involved, you are presumed guilty and it’s up to you to prove that you are innocent.

If the FBI breaks down your door and want to question you, just remember that you have the right to remain silent and to legal counsel. Don’t make the naïve mistake of thinking that if you cooperate, you can extricate yourself and convince them that they have made a mistake.

When they come to see you, they are already convinced that you are guilty of something. Your agreeing to talk to them will simply give them additional opportunity to find flaws in what you said and accuse you of perjury and other charges. The only protection for you is for you to have your lawyer with you.

With that cheerful note, I am finished with my presentation and look forward to a vigorous panel discussion.

Wednesday, October 1, 2008

What America Needs to Know about China

Below is text of address delivered at Pitzer College

Thank you for coming to hear what I have to say about China and about the U.S. China bilateral relations. As a business consultant, I have been going to China regularly for the last 30 years, essentially from the beginning of China’s economic reform. My first personal visit to China actually took place in 1974, during the height of the Great Cultural Revolution. I certainly have enjoyed a ringside seat watching China’s amazing transition and transformation during this period.

In my early trips into China, I would be interviewed by the CIA and the FBI upon my return. They would want to know whom I saw, what we talked about and so on. I was happy to tell them all I knew because from the start, I thought I had a mission, which was to explain China to Americans and America to the Chinese. I felt that I was in the position to act as a bridge between the two countries that meant the most to me.

Thirty years later, some things have not changed much. In particular, there remains a lot about China that America does not understand and I continue to feel that the role of a cultural intermediary is as relevant as ever. So it is today that I am here to describe and explain some things about China that America needs to know and understand--such understanding being crucial to the development of a healthy bilateral relationship. As the two arguably most powerful nations and economies in the world, a strong positive bilateral relationship is important not only to the peoples of the two countries but to a peaceful world.

I might also add that given the recent financial turmoil on Wall Street and the increasing importance of China, holding close to $1 trillion or our treasury notes and government debt, it becomes increasing relevant that we develop a measure of respect for someone that is likely to end up owning a bit of America in exchange for bailing us of out of our financial excesses.

My talk today is not about western media distortion of China or the biases of western politicians. If it is, I would be on the podium for hours. What I hope to do is to take you outside of your customary American frame of reference. I would like to present some data and thoughts that would automatically counter many of the preconceptions of China that you have grown up with. To paraphrase Secretary Paulson from his Foreign Affairs article about China, I want to help you see the country as it actually is, not as many Americans imagine it to be. If I can persuade you to rethink about China, I would feel that I have accomplished something worthwhile today.

Olympics Aftermath
Let’s start with the Olympics. By most accounts, the Beijing Olympics was an overwhelming success. Certainly, the people of China, and for that matter most of the overseas ethnic Chinese, are rightfully proud of the number of gold and medals the Chinese athletes won. But frankly, that was not the most significant achievement in my mind. Considering that Australia won 42 medals with a population of 21 million, that’s two medals for every million population. To attain parity on a per capita basis, the U.S. would have to win more than five times their actual tally. For China, they would have to sweep every event and then supplement with plenty of knock-offs to meet that standard. On the other hand, if one were to measure achievement against the level of economic development, Ethiopia, Jamaica and Georgia would come in first, second and third.

There are many ways to slice and dice the Olympic outcome, but more important in my mind, is that billions of people in the world have tuned in and caught a glimpse of today’s China for possibly their first time without the filter of the western media or political leaders or the bias of some religious cult. I thought NBC did a good job of introducing some of China’s culture to their viewing audience, particularly short vignettes such as Shaolin martial arts by Mary Carillo and hand pulled noodles by Martin Yan. I was also impressed with GE and their commercials specially done just for the Olympics—sort of like commercials geared just for the Super Bowls--using authentic Chinese backdrops and storylines to make their point.

Despite all the anti Olympic torch rallies and sentiments advocating another Olympic boycott, some even go so far as to call this the “genocide Olympics,” a record number of 100 heads of state representing 80 different countries attended the opening ceremony. They did not witness any slaughter of innocents but did see that the Chinese could really put on a show and raised the bar that likely will stand for many future Olympics. I am glad that Mr. Steven Spielberg was not involved so as not to confuse the minds of the viewers as to who contributed what. The visitors left after seeing a virtually flawless execution of a 16-day event. The 10,000 athletes from around world went home with, I am sure, memories to last a life time.

The 30,000 some journalists found different perspectives and events to write about and most, by and large, will further understanding between the East and West. The worst example of going out of his way to look for dirt under the carpet, that I happened to have read, was a near hysteric blog on ESPN accusing Beijing of a cover-up because a building under construction was draped by a beautifully decorated plastic sheet to hide the construction in progress underneath. Why an attempt to present a more pleasant public appearance became an excuse to blacken China is something I do not understand.

The Chinese Spy that Never Was
How many of you read Physics Today regularly? In the September issue, there is an article written by the former Secretary of Air Force talking about the period in the late ‘80s and early ‘90s when Chinese scientists were attending scientific conferences in the U.S. As the testimony at the Cox Committee hearing later revealed, the American authorities regarded these attendances as intelligence gathering on the part of the Chinese. Actually, just opposite was going on, the visitors, according to Thomas Reed, the author, was trying to find ways to let America know what China was doing in nuclear weapon development.

These visitors found Danny Stillman, a nuclear weapon scientist at Los Alamos who was charged with gathering intelligence on China’s weapon development—a polite way of saying that he was a spy. Stillman was eager to meet and talk to the Chinese visitors, who in turn invited Stillman to visit China. Through a series of visits over months to various secret facilities including the nuclear testing grounds, Stillman came away thoroughly impressed with what China had done. He put all his trip reports together into a cohesive tome and sought permission to publish his book. The U.S. government said no.

Stillman’s timing was bad. The Congressional Committee headed by then Representative Christopher Cox had just concluded that America was running wild with Chinese spies, that every Chinese company was a front to steal secrets from America. And then Dr. Wen Ho Lee was identified as the one who leaked W-88 multi-head missile technology to China. It would have contradicted all that anti-China rhetoric if Stillman’s book were to come out saying that China detonated their first atomic bomb in 1964 and in a mere 32 months their first H-bomb and launched their first unmanned satellite in 1970. The unacceptable conclusion would have been that China has independently developed their first class nuclear weaponry all along--all of it having taken place well before Nixon went to China in 1972 and before exchanges were taking place between the two countries. Stillman’s book had to be suppressed as it would have taken the hot air out of the hysterical China bashing balloon floating around Washington from 1998 to 2000.

Why, you might ask, did the Chinese want to expose their nuclear secrets to the U.S.? I think the answer is very simple. How can you have a nuclear deterrence if the other side doesn’t know that you have the capability to deter? China has consistently declined to join the arms race to see who can pile up the larger heap of ever more sophisticated arms. But once in a while, I think, China feels that Washington and Pentagon need to be updated and be informed that China has a credible 2nd strike capability to retaliate and enter that data into their calculations when they plot the course to world domination. Of course, this leads to the question of whether the DoD’s current expanding defense budget makes any sense, which we can discuss in the Q&A if you wish.

America’s Racism
Personally I am acutely aware of the historic racial bias of the American authorities towards the ethnic Chinese in America as exemplified by the Congressional hearings and by the case of Wen Ho Lee, where after 9 months of solitary confinement, all the charges against him were dropped except for one, and that was for not following lab procedure and downloading files from office computer to home computer. Just think, nine months of solitary confinement for downloading computer files against procedure. The special agent of the FBI involved in this case had to admit in court that he lied. The presiding judge apologized to Dr. Lee on behalf of the government for their misconduct. It had to be one of the more embarrassing chapters of American justice.

Lest you think the Wen Ho Lee case was an isolated aberration, it is not. I live in Silicon Valley and there are frequent cases of miscarriage of justice and official intimidation. Recently, there was a Bill Chen originally from China who was appointed sales manager to sell vibration tables to China. The government accused him of selling the tables to a missile building facility when his sales report indicated that they went to a locomotive factory. Originally his employer supported his defense but then the government quietly informed the company that if they plan to sell any more tables to the American Air Force, they better withdraw their support. The company had to fire him. He was in limbo for some time before the government dropped all charges. The last public statement he made to the local press last year was that his career was ruined and he was taking his family back to China.

Just earlier this year, there was a case involving another PhD whose expertise was in agriculture remote sensing, involving the use of satellite data to predict crop harvest, and had been in this country for 20 years. He came to the U.S. from China to study for his PhD. Most recently he worked for a contract research organization analyzing publicly available satellite data to quantify global climate changes for NASA at its facility in Mountain View. His work had no connection to national security. He even got clearance for his ID badge to enter NASA at will. Then the FBI came to interview him, followed by a lie detector test and then two more interviews, at the end of which he was escorted off the premises and fired. He never could figure out why the FBI came to see him and on what grounds he was dismissed. The only explanation I could offer him was that the special-agent-in-charge of Silicon Valley had told BBC in a public interview that the valley was crawling with spies from China and that every working Chinese was a potential security risk.

There are, of course, costs associated with the national practice of racial profiling. Let me ask you, which universities and colleges do you think, have sent the most number of graduates on to obtain a doctorate degree in America? If you guess UC Berkeley, you would be close but incorrect. According to National Science Foundation’s latest compilation, in 2006, the latest year of the survey, the two schools that contributed the most number of Bachelor degree holders that went on to earn a doctorate degree in the United States (in science or engineering) was Tsinghua and Beijing University. This is the first time in history where two Chinese institutions of higher learning out supplied the American universities. Berkeley was third. Over the period of 1999 to 2006, over 26 thousand doctorates earned their undergraduate degrees from China. For 2006, the latest year reported, for every 6 that got their undergraduate training from the U.S., one more came from China. So the question to ponder is this: Given the racist attitudes that prevail, how many of these PhD’s would remain in the U.S. after getting their degree, and of those that remain how many would risk their careers by working in a national laboratory?

Shipping Jobs Overseas
This bias against ethnic Chinese in this country has been around since the 19th century. This prejudice is tied to how we feel about China which is why I personally want to do what I can to counter the China bashing rhetoric by our political leaders. The first one I would like to tackle is the question of so-called “shipping jobs overseas.” According to the National Association of Manufacturers, manufacturing from the U.S. contributes 22% of the total global output with a workforce of about 14 million, by far the leader of the world. China, the rising manufacturing power that we love to demonize, contributes just 8% and with a workforce as large as 100 million if the migrant workers in rural industries are included--22% with 14 million versus 8% with 100 million, that is roughly 20 fold difference in productivity. It should immediately become obvious that there is no way that the American worker would be willing to take a humongous pay cut to do the low paying jobs being done in China. The Chinese might wish to move up the value chain and take over the American job but their productivity (and capability) has a long way to go. The next time you hear about shipping jobs overseas, you should challenge the speaker not to sprout nonsense.

China’s emergence in becoming the global factory really began in earnest when China entered WTO (World Trade Organization) in 2001. In order to conform to the stipulations of membership, China had to stop subsidizing inefficient, state-owned enterprises and let some of them go belly up. They knew that the price to be paid was to put around 30 million of their workers out on the streets. Led by Premier Zhu Rongji, China accepted the pain because they saw the long term benefits of competing in the global market. China made the right choice and hopefully America will also have the courage to make the hard decisions necessary to overcome their current economic dilemma. Blaming China is not going to cut it.

China, the Polluter
Now, China’s rapid economic development does come at a price and the most serious would be the environmental cost. In recent weeks, lambasting China for runaway pollution damage has become a fashionable diatribe for the politicians. They seem offended that China is soon going to overtake us as the biggest polluter in the world. Our political leaders say: “How dare the Chinese insist that we take the lead in pollution abatement before they, India and the rest of developing countries take corrective measures?”

I used to think well, the politicians have a point there. But then a July 31, 2008 press release from the The Climate Group caught my attention. The lead paragraph of this press release said. “China is already the world’s leading renewable energy producer and is over taking more developed economies in the exploiting valuable economic opportunities, creating green collar jobs and leading development of critical low carbon technologies.” The report goes on to say that China has the advantage of low cost, a clear policy framework, a dynamic and entrepreneurial business environment and plenty of abatement opportunities. I must admit until I read the report, I didn't know that China is already a leader in the Green revolution. That China is already a world leader in the manufacture of solar panels and wind turbines. That China is introducing fuel efficiency standards for cars which are 40% higher than those in the U.S. Forty percent! While Washington continues to talk about going green, China has been doing something about it. I have no expertise on China’s effort to go green and I was really surprised by the strong definitive statements from this non-profit organization, organized in 2004 in multiple countries to promote a green and clean earth. However, in recent separate visits to Beijing, my friends and I can testify to seeing blue skies, so there must be something to this report.

Human Rights & Democracy
Now let’s talk about human rights and democracy. First, I find it ironic that the country who perpetrated Abu Ghraib, Guantanamo and the fine art of waterboarding should be the leading critic of others facing their own set of human rights challenges. I believe that at the very least, the very visible and prompt manner that authorities came to the rescue of the unfortunate victims of the giant earthquake in Sichuan showed to the world that the Chinese government is not a callous body but cares as much about its people as any responsible government.

There are at least 56 ethnic groups living in peaceful co-existence inside China. Official policies go out of their way to favor the 55 ethnic minorities such as no single child restrictions and a Chinese version of affirmative action that makes it easier for minorities to get a higher education. During my travels inside China, I have met folks that are half Han and half another minority. Invariably when they fill out their residence registration (hukou), they claim to be the minority and not a Han majority in order to take advantage of the more favorable conditions. I cannot recall ever talking to a Chinese citizen that disparages another because of the other person’s ethnicity. Conversely, every minority person will openly admit that they belong to Bai, or Miao, or Korean, or Hui, or Mongolian, or Tibetan, or whatever minority in the course of normal conversation. They can be proud of who they are and do not feel that they need to hide their ethnic identity.

We do blanch at how quickly China carried out the executions of the condemned. It’s sort of “one strike and you’re out.” But it is not our place to condone or condemn China’s administration of justice. They have a huge population to deal with and how to maintain order and stability in such a society is beyond our American experience and expertise. Human rights abuses abound in China, such as children in sweat shops, slave labor camps, tainted blood transfusions, toxic baby formulas and so on. These are appalling situations, but it’s important to bear in mind that the Chinese government is combating the problems and not condoning them—no more than the U.S. government condoning many of the human right abuses in this country.

The city of Shenzhen bordering Hong Kong, which a quarter of a century ago was nothing more than rice paddies and fishing boats, has been the greatest experiment since China launched its reform. Up to now, the reform is most visible economically, but they have just announced that the mayor will be the first of China’s major cities to be elected and not appointed. This is a major step for China.

Chinese officials have been talking about democracy even back in Mao days but always within a single political party and not in a pluralistic framework. We Americans have trouble understanding the seeming contradiction of a democracy functioning within a single party rule. We are befuddled, I think, partly because we are accustomed to associating exercise of democracy with serious fundraising and that money is what makes democracy go around.

But there is something to be said about the Chinese system of governing. Leaders are judged and promoted based on the merits of their past performance. They are tested every step along the way. They rise to the top, not dependent on their lineage and on their cronies and public persona. In their selection process, the candidate who knows how to stay low key and keep a low profile (di diao in Chinese) is more likely to be promoted over the handsome, flamboyant and dynamic orator. These promotions came not because of unilateral decisions of a strong man but through consensus, compromise and horse trading between various factions.

China’s Foreign Policy
China’s foreign policy is also diametrically different from the U.S. China has insisted on non-interference of the internal affairs and non-infringement of the sovereignty of another country and to work within the confines of the United Nations. They have contributed troops and police in 13 of 17 on-going UN Peacekeeping operations. Since 1990, China has contributed 9000 peacekeepers in 22 UN operations, more than the combined total of the other four permanent members of the Security Council. As of the end of 2007, China has exercised its veto power on the Security Council a total of 6 times since they joined that body. During that same period, USSR/Russia cast 123 vetoes, the U.S. 80 times, UK 32 and France 18.

I would like to describe just one example of China’s foreign policy based on the exercise of soft power and on the principle of mutual benefit. About a year ago, China signed a deal with Congo to work on infrastructure projects in accordance with the Congo government’s priorities, which were water, electricity, education, health and transportation. The total cost will exceed $9 billion, far more than Congo’s annual budget of $1.3 billion. To pay for the infrastructure investment, China formed a JV with Congo to extract copper, nickel and cobalt, a $3 billion investment. Presumably, the Congo side will pay for their share of the investment with their share of the extracted minerals. Other parts of the deal include technology transfer and training of Congolese staff, work on social welfare and environment and subcontracting certain work to local Congolese companies.

The deal is neither colonial exploitation nor charity to a destitute developing nation. China is not telling the Congo government how to run their country and make no judgment on whether the government is to their liking. Instead, they just structured a win-win arrangement that will make a difference in Congo quickly. The World Bank considers Congo one of the worst countries to conduct business. So the success of this cooperation is not assured. Hopefully the Congolese people will soon see and reap the benefits of this outcome.

The West likes to hold China responsible for Darfur. The premise seems to be that China is doing business with the Sudan government and Sudan government is using the revenue to commit genocide in Darfur. But China is not the only country doing a lot of business in Sudan. India, Japan and Russia are also major players. Furthermore, many years before China was involved in Sudan, the U.S. was there. The CIA backed the other faction and when that faction did not win control of the government, conflict resulted which gradually moved to the Darfur region. Needless to say, conflict takes two opposing parties, in this case the Sudanese government and the rebel faction. Since we Americans are backing the rebels, the government must be the bad guys. Just ask Mia Farrow.

At least last year, China was able persuade the Sudan government to allow a 20,000 strong UN-AU peace-keeping force into the Darfur region, and China took the lead in contributing peace keepers to the force. Unfortunately the force has not been effective, in part because other UN member and African nations have been slow to contribute their share of personnel. Everybody bears some responsibility for the tragedy that is Darfur, it is too easy just to fault China.

I would like to make a brief comment about Taiwan and Tibet so that we can move on to the Q&A, which is my favorite part of the program.

Taiwan & China
Taiwan has been economically integrated with the mainland for well over a decade. Taiwan is either the largest or second largest source of foreign direct investment in China. Entrepreneurs from Taiwan have made millions, and at least one billionaire, from China. Today, over one million Taiwanese live and work in China. Taiwan’s productizing expertise and understanding of the world market coupled with China’s manufacturing prowess has been a powerful amalgamation of complementary strengths. Taiwan’s early factories in China served as the foundation of China’s manufacturing strength. In turn, the components and sub-assemblies shipped from Taiwan across the straits for final assembly every year has earned Taiwan a trade surplus that has always exceeded the total trade deficit incurred with the rest of the world. The common culture, language and ethnicity across the straits have made the synergy a natural outcome.

Unfortunately for Taiwan, the last eight year under President Chen Shui-bian has been an absolute disaster. He did not care about how to manage Taiwan’s comparative advantages. He was much too busy figuring out ways to line his and his family’s pockets. He and his immediate family are currently under investigation for various money laundering schemes, hidden Swiss accounts and bogus accounts in Singapore, the U.S. and who knows where. Having stepped down, Chen lost his presidential immunity and the investigators are hot after many leads. The Taiwan stock market seems unable to get out of the free fall as nervous investors wonder how many of the listed companies are waiting to be implicated by the radiating circle of wrongdoing. It didn’t help that the incoming president Ma Ying-jeou campaigned on the promise of a quick turn-around in Taiwan’s economy. The voters took him literally and expected miracles in his first 100 days in office, and he has not delivered. It is fair to assume that he did not anticipate a financial scandal as he stepped into office.

Tibet & China
The Dalai Lama is an excellent proselytizer for Lamaism, a form of Buddhism--based on animism--indigenous to Tibet. In the case of His Holiness, admirers in the West seem willing to overlook the principles of separation of church and state. No doubt he is the religious leader of a majority (but not all) of the Tibetans. As a secular leader, he represents perhaps the 5% of the population that formerly belonged to the privileged ruling class. In his days, the other 95% were serfs and had no rights whatsoever. Today, China has invested heavily in the infrastructure and offered every Tibetan the opportunity to an education and the freedom to make a decent living by the dint of his/her own efforts. When Dalai Lama ruled Tibet, the average life expectancy was not even 36 years of age, now it’s 67; still less than China’s national average but far better than what it was. Today, Dalai Lama cannot legitimately champion the human rights of the Tibetan masses that had no rights when he was the titular ruler. I am planning to visit Tibet next year. Perhaps I will have more to say about this matter then.

At the beginning of my talk, I proposed raising a perspective about China different from the mainstream to stimulate your interest. I hope I have been provocative enough for this audience. I don’t know why it is that China is the favorite punching bag in the West--sometimes, I refer China as the go to piñata—but I believe this attitude is in for some adjustment. Let me quickly raise some other issues without elaboration to round out our topic.

• China has just put three astronauts in space along with a space walk and has plans to go to the moon. Heretofore, the U.S. has specifically excluded China from the space consortium membership that included Russia. Now NASA has been quietly meeting with China’s space officials about cooperation and leverage from technology that China has developed that NASA does not own. If we weren’t so darn sure that the Chinese needs to steal everything from us, we might have come to this realization sooner.
• China has steadfastly been buying U.S. treasury bills and agency notes and now owns close to $1 trillion of American debt. They have been buying even as Japan has been decreasing their holding for the very practical reason that the dollar is worth less and less. If you ask, the Treasury Department officials will privately admit to you that without China’s financial support, our economy would be in worse shape than it is.
• The Bush Administration made a hash of the relationship with North Korea. Without China’s assistance and leadership, the situation would be even more unstable than it is now.
• China built their Great Wall to keep foreigners out. They do not have the mentality or a history of conquering and occupying other countries. If that is the U.S. goal, China is unlikely to stand in the way. There is no need to regard China as an adversary so long we do not insist on their seeing everything our way.
• Just as China is rapidly becoming one of the most popular tourist destinations, China is also fast becoming the largest source of international tourists. Europeans will tell you that tourists from China are bigger spenders than Americans or Japanese. Until recently, we did not welcome tourists from China. This situation is changing to the potential benefit of our local economy.
• Just as China has become America’s largest source of foreign graduate students, China is also becoming a popular destination for foreign student. According to the most recent tally, China is the 6th most popular destination of the world for students going abroad. I hope some of you will take advantage study abroad opportunities to go to China and see for yourself. With more exchange of people will come improved mutual understanding and more acceptance of the other and different points of view and way of life. I believe this is important to the prospects of attaining world peace.

Now, I want to thank you for your attention and I welcome the opportunity to extend our discussion in any manner you, the audience would like. Please do allow me one small commercial. Much of what I presented today has been elaborated under various entries in my blog. I invite you to visit and to share with others. I have also posted today’s speech on my blog if you wish to refer to anything I've said. Thank you.

Tuesday, April 8, 2008

China's Economy is not a Zero-Sum

Invited speaker
Barbara & Richard M. Rosenberg Institute for East Asian Studies
Suffolk University, Boston, April 8, 2008

Ladies and Gentlemen,

It is a great honor to be an invited speaker at this inaugural conference of the Rosenberg Institute of East Asian Studies. I would like to add my personal congratulations to Barbara and Richard Rosenberg for their wisdom and leadership. Recent events strongly suggest that Americans and for that matter the people in the West do not understand East Asia and China. Yet students today better get to know about the cultures and peoples of East Asia, because such knowledge or lack of it will impact their careers. I applaud the Rosenberg’s attempt to rectify this deficiency by establishing this Institute.

I picked as the title for my talk, “China’s Economy is not a Zero Sum,” for a very specific reason. I am keenly aware of America’s rather dismal understanding of China and I hope that today I will have the opportunity to clear up some of the false premises about China, either through my prepared remarks or in the Q&A that follows. For the sake of clarity and continuity, I am eschewing the usual PowerPoint presentation, although the organizers have very kindly provided each of you with a set of hand-outs that back-up the factual part of my talk. The hand-outs are in the order of my talk.

My talk will touch on three inter-related issues. Namely, a description of today’s China economy, how China got to this point and what China is not and in doing so, take the opportunity to debunk some of the notions that are flat out wrong about China. As we enter into the heated presidential campaign, China appears to be once again the piñata of choice, a convenient scapegoat for everything wrong in this world. I hope today to neutralize some of the ill wind or at least point out how silly some of the rhetoric about China can get.

It is important that I make a disclaimer at this point of my talk. Although I am an employee of Deloitte and proud to be part of that global firm and rely on the research material and resources from the firm, my remarks today are strictly my own and does not represent in any way the views of my employer.

By any measure, China’s economic growth over the last three decades has been nothing short of miraculous. Nothing of this scale and growth rate of economic expansion has happened in humankind’s recorded history of 5000 some years. China’s annual GDP is now around $3 trillion, having overtaken Germany (or will overtake Germany soon, the uncertainty is due in part to fluctuating exchange rates) to become the third largest in the world. In 2000, China was the 6th largest (just ahead of California) and ten years earlier in 1990, China was 19th just one place ahead of Taiwan, but with a population 50 times larger, and back in 1980 when China had just barely began its economic reform, China was in 30th place with an economy smaller than even Nigeria, Argentina and Iran. Since 1978, China’s economy has been doubling every seven years.

Since China joined WTO in December 2001, its exports have grown five fold in five years. By 2006, China overtook the U.S. as the second largest exporter of goods and is expected to surpass Germany sometime this year. In the early ‘90s, China’s foreign currency reserve was an anemic $20 billion or so. Today, China’s reserve has exceeded $1.5 trillion, an increase of 75 fold in roughly 15 years.

During this period, the lives of the Chinese people have significantly improved. Over 400 million have been lifted out of poverty. China now has more than 140 metropolitan areas with populations over 1 million. The portion of the population now living in urban areas is approaching 50% from around 20% when reform began in 1978. Just about every household, including those in the rural area now owns a TV set. There are over 500 million mobile phones in use, 220 million Internet users, 190 million PC owners.

Already China has more mobile phone and Internet users than the U.S. and closing fast in PC ownership. And these numbers are constantly changing because new wealth is constantly being created. China is the fastest growing market for Bentleys that sell for $3-400,000 each. China is overtaking the U.S. as the source of greatest number of tourists traveling abroad; China sent 35 million abroad in 2006. Furthermore, as Europeans in the hospitality business will tell you, the average spending per Chinese tourist is 2-3 times higher than the American tourist.

How did this come about? Ironically, while the rate of change in China seemed so breath taking, the fiscal policy behind it was cautious with emphasis on gradual, trial and error approach. The policy makers in Beijing took to heart Deng Xiaoping’s advice to carefully grope for the stones while crossing the river. After Deng returned to power in 1978, there have been three premiers that implemented policies of economic reform.

Under Zhao Ziyang, the first premier after Deng’s return, the communes were disbanded giving farmers the chance to determine their destiny by working harder and smarter. Some of the farmers turned to higher value added crops and were soon shipping tulips to Holland, Shiitake mushrooms to Japan and garlic to Gilroy California. Others turn to cottage industries and started collectively owned enterprises. These township and village enterprises were the first non-state owned sector to make a significant economic contribution. Economic experiments were carefully monitored by a dual track system. In other words, a local price in local currency the RMB and a higher price in foreign exchange certificates that that visiting tourists get when they convert their hard currency—not a system pleasing to visiting foreigners.

Zhu Rongji took over as the economic czar, though not formally as premier, shortly after the Tiananmen incident, the memory of which, by the way, has become indelible in the minds of the West, but virtually forgotten in China. He tamed the run away inflation when he first seized control of the national economy—he introduced the economic concept of hong guan tiao kong (宏观调控) (macroeconomic control) to the Chinese population for the first time. Following Deng Xiaoping’s edict that to get rich is glorious, he proceeded to open China wide to foreign direct investments. 1993 was the first year when registered FDI exceeded $30 billion for the year. It has been increasing steadily and leveling off recently at around $60 to $70 billion of new foreign investments every year. No other country other than the U.S. has attracted as much foreign investments.

By the time Zhu retired in 2003, China had entered the WTO and rapidly became the factory of the world. By the time Zhu’s successor Wen Jiaobao took over, a new set of challenges were awaiting. Huge gaps now exist between the wealthy and the poor, the urban and the rural, the coastal region and the interior. Theses gaps are sources of social tension. Ironically, universities have greatly increased their capacity and are now generating many more college graduates than ever. This too adds pressure to growing the economy and creating jobs to meet the expectations of the new graduates. And, I have to tell you that China is struggling to deal with all these challenges and will be doing so in years ahead.

The current premier Wen has a challenging balancing act. On the one hand he has to keep the economy growing to create jobs. On the other he is concerned with inflation. The economic figures for the first two months of this year show ominous signs of inflation as if to reinforce his worry. He has to deal with a strengthening RMB, which has appreciated about 16% since it was taken off the peg to the dollar in July 2005. As a consequence, multinational companies are beginning to look elsewhere to put in their next plant. He also has to worry about the $1.5 trillion of reserves he is holding in dollars that are eroding in value by the day. He is facing rising labor cost, rising energy cost, the need to bring environmental degradation under control and exert tighter enforcement of labor laws. He has just begun his second term of office and he has a tough job ahead of him.

So what did China do to be so successful so far? I would say three main factors.

First, ever since Deng Xiaoping returned to power, China has been stable and had an orderly transition of leadership. Increasingly the leaders are highly educated, all college graduates and some with advanced degrees. The Jiang/Zhu generation was all engineers. In the current generation, a few economists and lawyers have been allowed into the inner circle. More importantly, every leader has been tested and proven that they are capable each step along the way as they rose in rank. Sons and daughters of senior leaders sometimes do enjoy the inside track but only the capable ones end up in key positions while less capable or motivated are assigned to cream puff positions.

Secondly, since Deng, China has taken down the bamboo curtain of Mao days and opened the country to outside ideas. In the early 1980s, China invited Robert McNamara, then president of the World Bank into China. Beijing wanted not just World Bank financing but the rules and conditions that go with the financing. Beijing wanted the World Bank guidance as a framework to establish their own rules of governance for banking and financial institutions, a matter where they had no experience from their past as a planned economy to draw from. This is not your typical third world response where they just want the money but not the discipline and constraints. No wonder then that to this day, the World Bank considers China to be their most successful client. And, as a historical note of interest, the leader representing China in the working group with the World Bank was Zhu Rongji.

Another example of China’s openness is their entry into the WTO. There was a lot of resistance inside China to the idea of entering WTO. Many state-owned enterprises feared open competition in the global market and wanted to protect their domestic piece of the pie. Indeed in the transition, many inefficient factories were closed and more than 30 million jobs were lost. But Premier Zhu recognized that despite near term pain, in the long run, China needs to compete at the international level and forced the country into this multilateral agreement over the objections of many. He was right, of course. Sadly, the need to compete in the global market is a principle some of our political leaders seem to have forgotten.

Third important factor, I feel, is China’s willingness to invest in infrastructure--heavily so. From the first World Bank financing, China has placed high priority to infrastructure investments even when they did not have the funds from internally generated sources to do so. Consequently, China now has a highway network that rival the U.S. Interstate system. There was just one bridge across the mighty Yangtze River when my wife and I visited China in 1974. There are now so many that nobody bothers to keep track. I believe the most recent is around 18 miles long near the mouth of the river connecting Suzhou in the south to Nantong in the north. China has constructed at least two bridges that I know of over 20 miles long, over open water. The port handling facilities, airports, the train system (including the only one in the world to operate above 4000 meters in altitude), the power plants and grid, the telecommunications networks and Internet broadband are all constantly increasing in capacity and improving to keep up with demand. The Beijing government has been running deficits to keep their infrastructure in pace with their economic development and by and large they have been successful.

In summary, many developing countries are now looking at China as a model for development. What they see is a stable government that allows the leadership to concentrate their attention on economic development including prioritizing infrastructure projects and moving away from a planned economy to one where the market is the driver.

Of course, phenomenal as China’s economic growth has been, it has not been without some serious costs. In growing the economy, China unfortunately hewed to the traditional western model, which was pollute now and worried about it later. Anyone that have visited China over a period of years can see that this approach has devastated the quality of air around most cities and severely constrained the availability of already tight supply of clean water. More recently, one can spot occasional improvement in air quality—a friend of mine just returned from Beijing where she saw 5 continuous days of blue sky and she has changed her mind and decided to take her son to the Olympics--but China has a long ways to go. In pollution control and environment remediation, the West has a lot to offer and China represents a market of huge potential.

China is also in the process of rebuilding its tattered social safety net—a system that broke down in the transition from a planned economy to a free market. Their need to restore and improve their health care system is another very large market for outside technology and services. Their need to construct a sturdy national retirement pension plan represents opportunities for financial and macroeconomic experts from everywhere.

All in all, China economic development has been a win for its Asian neighbors that trade with China, for Latin America and Africa where most of China’s foreign investments have been going, and for the West that buys from China, because up to now, the prices have been stable and low and thus help keep us, the American consumer, in a style we are accustomed, all at a reasonable price. Not only China’s economy has not been a zero sum but has been an all around win.

Some critics of China accused China of predatory trade practices and frequently link China to the mercantilist policies of Japan. I see two entirely different models of external trade. The U.S. has been blaming China for its booming trade deficit. Let me break this down for you. In 1997, 27% of our trade deficit is from China while another 43% is from the rest of East Asia, (mainly from Japan, Korea, Taiwan and Singapore). That means a total of 70% of America’s trade deficit came from East Asia. In 2006, ten years later, China accounts for 28% while East Asia adds another 17% to our trade deficit for a total of 45%. The reason is that much of the manufacturing that used to be done in other countries has now been shifted to China.

In percentage terms, our trade deficit with East Asia including China has actually shrunk. Some members of Congress has blamed China’s pegged exchange rate as the cause of “manipulated trade.” Since China’s RMB was taken off the peg, it has appreciated by about 16% but our trade deficit has continued to rise. In absolute terms, our government has not been able to manage our trade and fiscal policies. Our policy makers’ inability to balance our trade should not be blamed on China.

To reinforce this point, nearly 60% of China’s exports come from foreign invested enterprises (FIE), about half from wholly foreign owned factories. On the high end of the export products, anywhere from 85 to 90% of the goods are made for foreign invested enterprises. Let me just cite just one example. China is a major exporter of boom boxes. In 2006, 34% of the exports came from FIEs but accounted for 73% of the total value of this export category. If you do the math, FIE made boom boxes came out 5 times higher in average value than the domestically made ones.

In other words, everybody is benefiting from China’s open economy, not just China.

The U.S. is an important market for China but our perceived leverage may be overblown. In 2007, 21% of China exports were sent to North America including Canada. Europe took 23.5% while Asia is the destination for 46.6% of China’s export.

Another misleading statement frequently bandied about is the lack of consumer spending in China. One recently published book by a veteran Western journalist even goes so far as to say that China has a policy to suppress consumerism. Maybe not comparable to the American consumer but these views fly in the face of the density of TVs, mobile phones and PCs that I mentioned earlier. It is also not consistent with the maker of Bentleys and others who regard China as the fastest growing market for their high profile brands of luxury products.

China’s annual retail sales is already over $1.2 trillion and growing at almost twice as fast the GDP, which as I said is doubling every 7 years. Wal-Mart clearly sees China as its most important market of the future. They have just over 100 stores in China, having added 23 in just last year. The per store sales in 2006 was half of their experience in the U.S. Their public statements indicate that they see an as yet largely untapped potential ahead for China.

According to recent poll of American companies already operating in China, 68% of them are planning to increase their resource commitment in China over the next 12 months, while 30% plans to hold steady and only 2% are pulling back. When asked of their 5-year business outlook in China, 55% are optimistic, 38% are somewhat optimistic and nobody is pessimistic.

While China is one of America’s major trading partner, a major holder of our national debt, and a partner in anti terrorism, for reasons hard to understand, U.S. policy makers insist on seeing China as an adversary. This hostility has a deleterious effect on every Chinese American living in the U.S. The FBI special agent has publicly declared that every ethnic Chinese working in Silicon Valley is a potential spy for China. The federal government nearly succeeded in railroading Dr. Wen Ho Lee to a sentence of life imprisonment on a trump up charge. Recently, an engineer in Southern California was sentenced to 24 years after being convicted of trying to send publicly available, non-classified information to China. The sentencing judge even said that the sentence was intended to warn others of the consequences of spying for China—the judge even used a classic Chinese strategy of killing the chicken to frighten the monkey.

The rhetoric can get down right hysterical sometimes. Let me say for the record that China detonated its first atomic bomb and launched the first guided missile in 1964, detonated the first hydrogen bomb in 1967 and launched the first unmanned satellite in 1970. All of this before Nixon met Mao in 1972 and bilateral relations were normalized in 1979. During that pre-normalization era, there couldn’t be much exchange between China and the U.S. and hard to make a case of blaming China’s achievements on stolen secrets from the U.S.

The Pentagon is proposing a military budget of $515 billion for the coming fiscal year, not including the extraordinary expenditures for Afghanistan and Iraq. The budget will include development of advanced fighter, advanced aircraft carrier, advanced destroyer and advanced submarine. The DOD is not pretending that this is for combat against the global terrorists. The largest one year expenditure request since WWII is for the prospects of meeting a future unnamed adversary. Want to guess who is the unnamed adversary? In the interest of brevity, I will simply make the observation that China’s military budget well under one fifth of the U.S. budget rests on a strategy of maintaining a credible retaliatory threat, a second strike capability against any other global power but otherwise concentrate on domestic economic priorities.

I am a member of the Committee of 100, a national organization of Chinese Americans. At their conference I attended last November in Beijing, China’s Vice Foreign Minister, Zhang Yesui was one of the invited speakers. He said, “We should observe the purposes of principles of the UN Charters and the universally recognized norms governing international relations to promote democracy, harmony, cooperation and win-win progress in international relations.” He goes on the say, “China cannot develop itself in isolation from the world, and the world cannot sustain prosperity and stability without China. China’s active participation and constructive role in the international affairs has boosted its own growth and promoted world’s peace and prosperity.

Indeed China’s foreign policy has been to work within the confines of the United Nations. They have contributed troops and police in 13 of 17 on going UN Peacekeeping operations. Since 1990, China has contributed 9000 peacekeepers in 22 UN operations, more than the combined total of the other four permanent members of the Security Council. As of the end of 2007, China has exercised its veto power on the Security Council a total of 6 times since they joined that body. During that same period, USSR/Russia cast 123 vetoes, the U.S. 80 times, UK 32 and France 18.

Permit me to just mention one example of China’s foreign policy to this audience. In September 2007, China signed a deal with Congo to work on infrastructure projects in accordance with the Congo government’s priorities, which were water, electricity, education, health and transportation. The total cost will exceed $9 billion, far more than Congo’s annual budget of $1.3 billion. To pay for the infrastructure investment, China formed a JV with Congo to extract copper, nickel and cobalt, a $3 billion investment. Other parts of the deal include technology transfer and training of Congolese staff, work on social welfare and environment and subcontracting certain work to local Congolese companies. The deal is neither colonial exploitation nor charity to a destitute developing nation. China is not telling the Congo government how to run their country and make no judgment on whether the government is to their liking. Instead, they just structured a win-win arrangement that will make a difference in Congo quickly. Hopefully the Congolese government is up to the task and its people will see and reap the benefits of this kind of venture.

We can talk about Tibet, Sudan and Darfur and human rights and whatever else in the Q&A if there is an interest. I would like to conclude my presentation by mentioning a historical character that happens to be from state of Massachusetts. How many of you have heard of Anson Burlingame? He was a Congressman from Massachusetts who was appointed ambassador to China by Abraham Lincoln in 1861. He spent about 6 years in China. As he was ready to come home, he was asked by the Chinese imperial Manchu court to serve as the envoy to negotiate with the West while representing China. To my knowledge he is the only person in history who had the privilege of holding successive flip-flop diplomatic posts for two nations. (You can visit my blog, for more about Burlingame.)

My fervent wish is that with the inauguration of the Rosenberg Institute of East Asia Studies in Suffolk University we will see in the future more ambassadors that can bridge the two countries and two cultures and replace the ill will that stems from ignorance with good will that comes from an informed public between the peoples of America and Asia. Thank you for your attention.