Showing posts sorted by relevance for query burlingame. Sort by date Show all posts
Showing posts sorted by relevance for query burlingame. Sort by date Show all posts

Wednesday, November 21, 2018

Life of Anson Burlingame, a Celebration


On Friday, November 16, 2018, a ceremony to honor the memory of Anson Burlingame was held at the library of the city of Burlingame, the Bay Area city named after him. This is a project my friend David Chai and I have been working on for many years. It’s most gratifying to see this come to being. His contribution to the US China relations has been unique in the history of modern civilization.

One local coverage is https://www.burlingamevoice.com/

A national coverage in the Chinese language is http://video.sinovision.net/?id=47573

A Silicon Valley coverage on Dingding TV is https://youtu.be/lMZPwpC4azk

A full set of photos taken by the Burlingame city photographer can be seen at https://drive.google.com/open?id=1HxJD37SnslIcDG_BVt4nyVWWozwxqBo5

As reported in online Asia Times
http://www.asiatimes.com/tribute-to-anson-burlingame-ambassador-to-and-from-china/

Archive of relevant research material are kept at
https://www.burlingame.cmain.org/ 


Part of the standing room only audience
Co-instigators David Chai and George Koo with sculptor Limin Zhou (center)

Mayor Michael Brownrigg









Text Box:
On March 23, 2022, the City of Burlingame celebrated Anson Burlingame and the Principles of Eternal Justice. https://www.smdailyjournal.com/news/local/homage-to-burlingame-s-namesake/article_7d547914-ab2a-11ec-bd49-1b26effe9370.html?utm_medium=social&utm_source=email&utm_campaign=user-share

Monday, January 21, 2008

America needs more Anson Burlingames

Anson Burlingame has a unique place in history. First he was an envoy from the U.S. to China. Then he became an envoy for China to America.

Periodic tension between Washington and Beijing suggests that we need more leaders like Anson Burlingame. He was a politician and Congressman from Massachusetts, whom President Abraham Lincoln appointed as his envoy to China in 1861. Burlingame was an excellent orator with a strong sense of right from wrong which showed in his highly visible anti-slavery stance.

Upon his arrival in China, he undertook side trips to various cities to get a better understanding of the country and although not a trained diplomat, he quickly became a leader of the diplomatic community in Beijing. He was outspoken in defense of the sovereignty of China and criticized foreign interference in China’s internal affairs. He became a trusted advisor to the Manchu imperial court and was befriended by Prince Kung, the power behind the throne.

He was interested in helping China modernize. To that end, he introduced an American geologist and also mining technology to help China develop her coal deposits. He was also in regular contact with another American then living in China, Frederick Townsend Ward. A soldier of fortune, Ward organized troops from Shanghai to fight the Tai Ping rebels. Ward’s battlefield successes led to his eventual appointment as a Chinese general by the imperial court. It was likely that Burlingame played an intermediary role. (click here)

When Burlingame was ready to return to the U.S., Prince Kung asked him to accept the appointment as High Minister Plenipotentiary and Envoy Extraordinary representing the imperial court, in other words, to become an ambassador on behalf of China. He accepted and led a delegation from China to Washington D.C. where the historic Burlingame Treaty was signed on July 28, 1868. The gist of the treaty was to commit the U.S. to noninterference of China’s affairs and accord China the same peer stature and obligations as the western powers.

Burlingame then led the Chinese delegation to Europe where he was warmly received. He began treaty negotiations with Britain, France, Prussia, Sweden, Norway, Denmark and Russia. Tragically, he contracted pneumonia in St. Petersburg and died on February 23, 1870, after being ill for four days. He was not yet 50. Apparently, none of his other negotiations culminated in formal treaties except the one with the U.S. Ever since then, China has received a more even-handed and sometimes sympathetic treatment from the U.S. than from other western powers. Undoubtedly, this is a legacy of Burlingame’s unique role in history.

From knowing nothing about China to becoming a diplomat working on behalf China may seem remarkable, but China has this effect on many Americans that spend time in the country. While living in China, they come to appreciate Chinese culture, values and the daily lives of the people. Some come to love their experience and memories in China.

Henry Kissinger as Nixon’s secret envoy to China took a number of clandestine trips to Beijing to pave the way for Nixon’s historic meeting with Mao. In between meetings with Mao and Zhou Enlai, he was said to have spent many solitary hours visiting the Forbidden City, the former imperial palace. Since then, he has been a moderating influence on the U.S. side of the bilateral relations.

George H. Bush served as the minister in charge of the liaison office in Beijing before the normalization of diplomatic relations. After becoming President, his administration was marked by a lack of confrontation with Beijing.

Leonard Woodcock, appointed by Jimmy Carter, became the first ambassador to Beijing where mutual diplomatic recognition and normalization took place in January 1979. Subsequently, even in failing health, Woodcock was a vigorous advocate of China joining the WTO. Despite being the former leader of United Auto Workers, his position on China has been far more enlightened than his colleagues in organized labor.

As a matter of fact, virtually all of the ambassadors to China since Woodcock have become reasoned voices in favor of positive engagements and collaboration with China. There may be two possible exceptions. Winston Lord, who left Beijing just before the Tiananmen disturbance, saw that his vision to be the pivotal influence in turning China into a western style democracy was not to be. Now his acerbic comments about China seem to reflect his disenchantment.

James Lilley, Lord’s successor in Beijing, has also been less than empathetic with Beijing. In his case, his outlook may have been hardened by prior years of service in the CIA and a stint as Washington’s representative in Taiwan before rotating to Beijing. Probably, it did not help matters that he was the sitting ambassador having to deal with the fallout of the Tiananmen incident.

(While Donald Rumsfeld was still Secretary of Defense, Lilley spoke at a Pacific Council event in San Francisco. He overheard my conversation with a fellow attendee and was outraged when I described the neoconservatives in the Bush Administration as a bunch of “neoconpoops.” He was certainly clear where he stood on the Middle East conflict.)

Even a brief visit to China can open eyes if not the mind. Senator Chuck Schumer comes to mind. He had been a leading proponent of levying a 27.5% duty on goods made in China to penalize China for alleged currency manipulation. After a quick visit to Beijing, he actually toned down his rhetoric for a while, although the China effect wore off and he has rejoined the demonizing China camp.

Today, China can engage the world on her own and no longer needs a Burlingame to exercise diplomacy on their behalf. However, hostility rooted in ignorance and not understanding China still persists in Washington. In the interest of the public good, we should offer an annual “Burlingame” prize to the person who has contributed the most to promote mutual understanding between America and China.

Wednesday, April 20, 2011

Is Gary Locke America’s Answer to China’s Anson Burlingame?

Assuming that he is an unworthy target for obstructionist politics and is confirmed by the Senate, Gary Locke will be first American of Chinese ancestry to serve as ambassador to China.

Over 140 years ago, Anson Burlingame became the first American to be appointed by the Qing imperial court to serve as ambassador from China to Washington.

There are some interesting mirror image parallels in these two historical appointments and some important differences.

Burlingame was first appointed Ambassador to China by Abraham Lincoln. After six years in that capacity, Prince Gong, the regent behind the throne approached Burlingame and asked if he would accept the appointment as China’s ambassador to the West and help China renegotiate the many unequal treaties signed with the western powers.

Burlingame known for his integrity and highest sense of right and wrong immediately submitted his resignation to Washington and accepted the appointment to represent China. He was credited with the Burlingame Treaty of 1868 between China and the U.S. which recognized the sovereign rights of China.

In 1870, Burlingame died of pneumonia in St. Petersburg while negotiating with the Russian Czar on behalf of China. Less than a decade after his death, the U.S. began to renege on the terms of his treaty but that’s another story.

Locke did not come from China, his father and grandfather did. Locke was born and raised in America. His qualifications to be ambassador come from his past service as governor of Washington and as Secretary of Commerce.

Washington was one of the most active states in building trade relations with China, long before China emerged as a world economic power and predating Locke’s terms as governor. As governor, he was certainly engaged in those initiatives and can rightly claim a leadership role.

Then as Secretary of Commerce, Locke has been one of Obama’s key players in the bilateral relations with China. He can certainly claim ample experience with and knowledge of China

However as the next ambassador, Locke will face some challenges that might be uniquely his because of his being an ethnic Chinese.

In some circumstances, a foreign country does not always welcome a native born who have immigrated to America to return as the ambassador from America. Sometimes such appointments are regarded as a put-down—the psychology of “aren’t we important enough for Washington to send a real American envoy?”

Locke is unlikely to encounter such a form of reverse snobbery because of the strength of his credentials and stature. Instead the Chinese officials might expect more from him because of his presumed cultural affinity than a “real” American.

Even for a Mandarin speaking Jon Huntsman, the Chinese officials would never think of him as one of them but looking at Locke, they might, even if his Mandarin is not as fluent as Huntsman, his predecessor.

The Chinese officials may presume Locke to possess certain cultural empathy and can pick up the nuances and innuendoes that a white person cannot and they would expect Locke to be more sympathetic to the Chinese points of view.

Such a presumption would put Locke in a delicate position since his duties and obligations are to represent America’s interest, not necessarily that of China. Inevitably he will be call on to occasionally deliver hard-nosed messages from Washington, whereupon he would have to exercise his diplomatic skills to moderate America’s traditionally imperious approach.

Locke also risks being challenged by select members of Congress and other Americans on occasions when they are having xenophobic fits and demanding to know, “Whose side are you on?”—a question that would never be asked if Locke were white.

On top of all this, Locke is also becoming America’s envoy to Beijing in a new era when the basis of bilateral relations is shifting from big brother/little brother to one of equals between peers.

While America may not willingly relinquish its position as the senior partner, the reality suggests that the next envoy will have to. As holder of over a trillion dollars in American IOU’s, China expects to be treated with the respect of someone the US is beholden to.

The US China bilateral relation has arguably become the most important in the world. As ambassador, Locke’s priority will be to enhance closer cooperation despite the expected bumps on the road when the two sides cannot agree. Obama faces plenty of challenges for the remainder of his term of office and he does not need China to be among them.

Even though no other American ambassador to China had become a turned-around envoy from China since Burlingame, nearly all, since George H. Bush was appointed by Nixon, have returned from their posting to share their understanding of China with the American public and reject simplistic lambasting frequently indulged by Congress.

Many became proponents and supporters of less confrontational and closer bilateral relations. Whether Locke’s term is two years or more, we can expect him to join the ranks of positive emissaries when he returns from China.

A version of this post appeared in New America Media and subsequently picked up by China-US Focus.

Friday, April 17, 2015

Book Review: Fateful Ties by Gordon H. Chang


This book is a comprehensive review and valiant attempt to explain the unusual love-hate relationship between China and the United States. Given the funny season that is about to descend on us, as candidates race for the U.S. presidency, this book could not come at a better time. Readers will find the book an antidote to the inevitable anti-China polemic venom to come from candidates looking for slightest edge.

Written by a Stanford history professor—no, not the other Gordon Chang that runs around cackling that the sky is falling in China—this is the scholarly one that writes with elegance and eloquence about the ups and downs of a relationship between the most powerful nation and the most populous one.

The author points out that China’s relationship began with America even before there was an America. All the tea dumped in the Boston Harbor came from China—the Brits have not yet smuggled the tea saplings to India—and it was the desire to buy tea direct from China and save on the taxes being imposed by the British crown that led to the American Revolution. (My “aha” moment: All of a sudden I realized where the expression came from, “I wouldn’t do such and such for all the tea in China.”)

The author goes on to suggest that visions of trading for the wealth that was China led Jefferson to the Louisiana Purchase and sending Lewis and Clark west to find the passage to China, as Columbus attempted centuries before.

Such notable historical characters as Anson Burlingame, John and Alice Dewey, Pearl Buck and Henry Luce furthered America’s fascination with China. Burlingame went to China as the American ambassador and came back as the envoy from China. The Deweys went to Japan for a vacation, decided to visit China on a whim and stayed for two years. Buck and Luce wrote and published bountifully about China.

These people spent a significant part of their lives in China and were all enthralled by the Chinese people and culture. They became positive influences in America’s perception of China. On the other hand, xenophobes such as Denis Kearney that spewed racist hatred across the American society had never been to China and know nothing about China. Sounds familiar in today’s context?

China suffered from the ravages of the Opium War and the unequal treaties imposed on the country by the western imperialists. Burlingame attempted to help China rectify the injustices. The Treaty of 1868 named after him entered between China and the U.S. actually paved the way for the first batch of Chinese boys to be educated in New England.

While the U.S. participated in the quelling of the Boxer Rebellion, it was the only western power to return most of the indemnity fund back to China in the form of scholarships for advance studies in America. Studying in the United States became the gold standard for every aspiring student in China and continues to this day.

The writings of many others such as John Dewey and Pearl Buck created a level of understanding about China that formed the foundation of popular American sympathy and support for China and sentiment against Japan during the eve of World War II.

This book is a pleasure to read for entertainment and for those wishing to become better informed individuals. It should be required reading for all current and aspiring politicians. Given all the loose talk about the impending conflict between a rising power and reigning power, it is crucial that our leaders understand China and get the relationship right.



Sunday, April 27, 2014

Book Review: Fortunate Sons

“Fortunate Sons” told the story of the first group of 120 young boys to be sponsored by the Manchu government in Beijing and entered the U.S. for a western education. The first cohort rode on the newly completed transcontinental railroad from San Francisco to Hartford Connecticut in 1872. These boys grew into adulthood in America and played important roles the early bilateral relations between China and the U.S.

Sending boys to America for a western education was Yung Wing’s idea. He had undergone just such an experience, becoming the first Chinese to graduate from Yale in 1854.

When he went back to China, he eventually met and became a trusted assistant to Zeng Guofan, the most powerful official at the imperial court. Zeng felt the sting of Western imperial powers and the unequal treaties imposed on China. He asked Yung for his ideas on modernizing China, Yung proposed sending boys to the U.S. for further education.

By the time Yung accompanied the first of three batches of 40 boys to America in 1872, Zeng had died and succeeded by Li Hongzhang, who became Yung’s chief patron in court. Li shared Zeng’s desire to modernize China.

With the help of Yung’s friendship and connection with the Christian missionaries, the boys were dispersed to families in Connecticut to attend schools preparatory to entering leading universities in America.

By and large these boys, at ages of 12 and 13, adapted to American life and quickly became fluent in English. Some even excelled in baseball and all worked diligently to get to the top of their class. Anti racist bias had not yet found their way to the eastern parts of the U.S. Their female classmates found the Chinese boys exotic and more attractive than their more ordinary white classmates.

The first group of students graduated from high school in 1876 and they were accepted into such elite schools as Yale, MIT and other Ivy schools. The race riot that rampaged through Chinatown of San Francisco incited by Dennis Kearney was a year away in the future.

By 1881, Li Hongzhang came under severe political pressure at the imperial court and was forced to abort the mission to educate the boys sent to the U.S. Only two had completed their college education and received their degrees. Over 60 of them were sprinkled in various colleges; Yale had the most with 22, MIT with 8, Columbia with 3 and Harvard 1.

The last contingent was to return to China in September 1881. Before boarding ship in San Francisco, the now young men challenged the local team to a baseball game. The local team couldn’t hit against the lefthander on the Chinese team and lost.

Some of these men found positions in the government. Others built some of the first railroads in China. Others found schools and universities. Among the more notable were Tong Shaoyi and Liang Dunyan.

Tong was one time the right hand man under Yuan Shikai before becoming disillusioned by Yuan’s greed for power. He led a delegation to Lhasa and successfully negotiated a treaty with the Brits that gave possession of Tibet back to China.

Liang was the southpaw pitcher who became Minister of Foreign Affairs. He convinced America to use some of the indemnity funds to send Chinese students to America. He started Tsinghua prep school to prepare the student before sending them overseas.

The book was as much devoted to the life of Yung as the boys he brought to America. By accident, he became the hero of his Yale freshmen class by scoring the equivalent of the winning touchdown in the traditional annual scrum between the freshmen and sophomore class.

Yung met or intersected with the lives of many historical figures. Besides Zeng and Li, Yung met some of the leaders of the Taiping Rebellion and flirted with the idea of joining them. In the U.S. he met Mark Twain and shook the hands of President Ulysses Grant.

Yung was to cross the Pacific numerous times in the service of the Chinese government. On March 2, 1875, he married Mary Kellogg. By then he was in his early 40”s, well past the age when Chinese men married for the first time.

The book did not record whether Yung met Anson Burlingame during his stay in China. There was no question that he and his charges benefitted from the Burlingame Treaty of 1868 which respected the sovereignty of China and stipulated that citizens of each was to protected by the other.

By the time, the last of Chinese mission returned to China, it was just one year before the Exclusion Act of 1882. It was an America radically different from the one Yung first entered.

In September 1898, the famous 100 days of reform came to an end, and Kang Youwei and Liang Qichao, the lead proponents of reform had the escape beheading by sneaking out of China. They did so with Yung Wing’s help.


Yung himself was not so fortunate. His US citizenship was revoked for no justifiable reason and he had sneaked back into the U.S. He died penniless and alone in a San Francisco flophouse on May 29, 1912 less than one year after China became a republic.

Wednesday, November 17, 2021

Webinars on US China relations

Part 1 - Early U.S. China Ties; One shining moment: Burlingame Treaty of 1868, given on Novembere 3, 2021 Part 2 - How did our China relations turn so sour? The future of our young generations are at stake, given on November 10, 2021 The above 2 part webinars were 7th and 8th in a 9 part series organized and sponsored by Coalition Peace Initiative. https://www.coalitionpeaceinitiative.org/replay-files-for-webinar-series/ Presented at the Schiller Institute Conference. The Survival of Our World Depends on U.S. and China Getting Along.

Tuesday, November 30, 1993

MFN Means Trade, Not Human Rights

By George Koo and David Lam

President Clinton showed great statesmanship in pushing NAFTA through Congress. In meeting President Jiang Zemin of China at the recent APEC, the President showed wisdom in opting for dialog over confrontation. However, we believe that the most favored nation (MFN) status is not an effective carrot to exchange for a human rights concession from China. MFN is a trade issue and should remain so.

China has come a long way since the normalization of relations with the U.S. in 1979. It is now the world's top producer of coal, cement, grain, cotton, meat, and fish; third after Japan and the U.S. in steel and paper; fourth in power generation after the U.S., Japan, and Russia; fifth in crude oil output after the U.S., Saudi Arabia, Russia, and Iran. After adjusting for the real purchasing power, China's economy is now regarded as the third largest in the world by the International Monetary Fund, after only the U.S. and Japan. In 1992, China became Japan's second largest trading partner. Much of Japan's new investment has been diverted from North America to China. Just on the eve of APEC, German Chancellor, Helmut Kohl, led a high level delegation to Beijing to sign 17 contracts worth close to $3 billion, including 6 airbuses, a subway system in Guangzhou, and contracts covering power, steel, auto production, and machinery. Obviously, these two major world economies--Japan and Germany-- recognize the market in China and the value of the trade relations with China.

American companies, such as Campbell Soup, Coca Cola, Hewlett-Packard, IBM, McDonald's, Motorola, Proctor & Gamble, 3M, and Xerox, have also been important participants in China's economic boom---an economy that grew at a phenomenal annual rate of close to 10% for the last 15 years. Many smaller and lesser known U.S. companies are also there. American business needs China's market to grow, and China's economy needs American products and technology to continue to develop. Time and again, Chinese officials and entrepreneurs alike have privately expressed their preference for working with Americans. However, as long as the U.S. insists on subjecting China's MFN status to a yearly review and the vagaries of the political slings and arrows that go with the process, it will be difficult for American interests to make long term plans in China and for China to regard the U.S. as a dependable partner.

The purpose of MFN is to promote bilateral trade. Increase in bilateral trade means more jobs for both trading partners. MFN is not a dole, not a form of foreign aid, and not a subsidy, and the United States has MFN status with over 100 nations. In the case of China, because of the unfortunate Tiananmen incident in June 1989, the U.S. has elected to use a free trade promotion tool as a political weapon. Use of this weapon is not only inappropriate and ineffective in influencing China but also damaging to American economic interest.

History shows that individual freedom and improvement in human rights come with economic improvement and not by decree. Recent examples are Taiwan and South Korea where "free economy has led to free men," to quote Dr. Milton Friedman, Nobel Laureate economist. On the other hand, the veneer of democracy, in the absence of economic development, can lead to chaos and cause human misery. One need only look at Russia.

Chinese managers, as they listen to Western joint venture partners' ideas of managing an enterprise, are constantly exposed to Western concepts of egalitarianism; and Chinese entrepreneurs who think about business opportunities are inevitably developing independent thinking and questioning outdated methods. This doesn't mean, however, that the Chinese will necessarily embrace the American model of democracy and human rights.

No country's human rights conditions are without blemish. Even the U.S. has its Rodney King and Waco disasters, not to mention the ever pervasive threat of random violence. China and other Asian countries do not subscribe to the concept that only the U.S. knows how to implement policies relating to human rights. Developing nations like China must find their own way of dealing with human rights as their economy develops and an influential middle class emerges.

The use of MFN as a weapon detracts and undercuts U.S. trade negotiations with China. There are plenty of trade-related issues that the Clinton Administration needs to focus on, such as protection of intellectual property, market access, non-tariff barriers, investment guarantees, repatriation of profits, etc. These are properly within the confines of a most favored nation agreement, and their progress will help American business succeed in China. But if MFN has already been bartered for human rights concessions, U.S. influence would be diminished on critical trade-related issues that remain to be resolved.

Chancellor Kohl's recent trip to Beijing helped secure an order for six airbuses. That corresponds to a direct job loss for the six 747-400's that Boeing will not get to build for China. According to Boeing, that is nearly $1 billion in sales which would create or sustain 10,000 jobs for one year, of which 87% is resident in the U.S. President Clinton has articulated the need to stimulate export to revive the nation's post-cold-war economy and reduce unemployment. To that end, we need to treat MFN, a trade issue, as a trade issue.

# # #

------------------------------------
George Koo is Managing Director of International Strategic Alliances, Mountain View, California, a company established to assist American companies form cross-border alliances. He is also a member of the Executive Committee of Asian American Manufacturers Association and is the chairman of its annual conference.

David Lam is president and CEO of Expert Edge, Corp. of Palo Alto, California, a software developer. He also serves as a director of the Asian American Manufacturers Association and co-chair of Silicon Valley Global Trading Center. He recently spoke at the BRIE Technology Summit in Burlingame, California.

Saturday, March 1, 2014

Gary Locke's China Legacy is for all Americans

There were strong murmurs of dissatisfaction within the Chinese American community over Gary Locke's performance as ambassador to China. Their disappointment seemed similar to Beijing's official criticism upon his departure--namely too much harping on human rights according to official party line from Washington and not enough effort on being a friend of China.

Expecting Locke to be more empathetic to China's position was unfortunately based on the wrong assumption. He was appointed by the U.S. to represent the official position of the Obama Administration. That was his mandate which he carried out as best as he could. It's certainly debatable whether he is even qualified to represent Chinese Americans point of view steeped in Chinese culture and history. As an American born Chinese, he did not have the necessary background and exposure to Chinese values and he probably did not have the personal inclination to become a bridge to both sides.

Even so, he played a vital albeit unwitting role in the Wang Lijun affair which led to the downfall of Bo Xilai. The drama is not yet over but we may yet find out that in ensuring the safe delivery of Wang to the central authorities, Locke thwarted an attempt to overthrow the current regime and be replaced by a rogue and corrupt cabal. When (and if) all the sordid details of the attempted coup are ever revealed, Beijing may yet acknowledge the positive contribution by Locke and the U.S. government.

As I had anticipated in my blog, written when he was first nominated, Locke's task as the ambassador was more challenging than just any plain old white guy because of expectations associated with his ethnicity that he cannot fulfill. Sadly for him, based on the official lambasting farewell sendoff that he received, he may not even be welcome in the future as a "friend of China." Unlike his predecessor ambassadors, he may have difficulty developing a lucrative advisory practice based on his rolodex built during his Beijing stay.

Ironically, there was even some speculation in Washington circles that Locke could never be counted as a member of the U.S. establishment because there were always some doubt as to "which side he is on." (It happened to the late Matt Fong during his Senate confirmation hearings when he was asked hypothetically as to which side of the Pacific his loyalty lay.)

This won't be a problem for Max Baucus. He is white with many years of service in Congress. Few can claim his kind of inner circle credentials. He will be able to talk to any members of Congress and perhaps alter some deeply ingrained China bashing attitude. He should find receptive listeners in Secretary of State Kerry and President Obama, both former colleagues in the Senate. He has the real potential to construct and strengthen the communications link between Beijing and Washington. 

Chinese Americans should take pride in Gary Locke becoming the first Chinese American governor of a state and first cabinet secretary. He made history by being the ambassador to China, though not quite on par with Anson Burlingame becoming the ambassador from China. Instead, Locke is a role model for all Americans, not just Chinese Americans.

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, www.georgekoo.com 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.