Book Review: The Chinese Dream by Helen H. Wang

For three decades, since China began its reform in 1978, its economy amazed the world by growing in double digits, doubling roughly every seven years. When it first doubled, most pundits pooh-poohed the growth as coming from a small base. When the economy doubled again, some say it couldn’t possibly go on. Then it doubled and some predicted a pending collapse. Despite the dire forecasts, it doubled yet again.

Finally, China’s economy stopped growing in double digits, but it was not because of any of the reasons given by the western pundits and economists. The economy slowed to below 10%/year because of the global slowdown triggered by the bubble created by America’s Wall Street in 2008.

The credit default obligations and repackaged subprime mortgages brought the American economy to a virtual ruin while the European and Japanese economies actually contracted. China managed to grow at “only” around 8% per annum, which means doubling every ten years instead of seven.

Suddenly, the world’s equity markets began to take notice of China’s economy, by now the second largest, second only the U.S. Today when China’s manufacturing indices decline slightly, all the stock markets take a tumble. Conversely when China’s indices changed positively, all the world’s equity markets brightened.

Despite the obvious linkage of China’s economy to the well being of the global economy, there remain naysayers that maintain their skepticism and believe that so long as China does not become a democracy, its economy cannot defy gravity indefinitely. It would be terribly tactless, of course, to point out that so-called democracies were the first to tumble during the crisis triggered by the collapse of Lehman Brothers.

Many mainstream economists now share the widespread belief that not enough of China’s economy is coming from consumption, that China needs to rebalance economic priorities away from too much dependence on fixed assets investments such as infrastructure building and to spend more and save less.

On the other hand, retail sales in China’s cities have been increasing at a rate nearly double that of GDP. We see young urban professionals living the life of conspicuous consumption; travelling overseas and sweeping the luxury goods clean off the shelves of high-end, name brand shops.

How can we reconcile the seeming contradiction of China’s need to have more of its GDP coming from consumption and the obvious over the top consumption behavior of certain socio-economic groups? One explanation comes from “The Chinese Dream” written by Helen Wang.

This book is an intensive study of China burgeoning middle class and how it came to be. The bulk of the book is devoted to personal interviews in China, from migrant workers to entrepreneurs, from laid off workers to those that got the jump start by taking over parts of state owned companies in the process of being privatized. By way of examples, the author illustrated that China’s private sector “is really neither private nor public” but a peculiar blend of capitalism with Chinese characteristics.

It’s not possible to explain the complexity of today’s China in any single book, but by her wide-ranging interviews and personal stories along with careful research and extensive footnotes, Ms. Wang has made an important contribution to understanding the attitudes and mindsets of upward and mobile young Chinese.

By understanding this social and trend setting group of largely urban professionals, it is possible to project China’s consumer behavior into the future. Just as China has become an integral part of the global economy, the Chinese customer will become an increasingly important buyer for all kinds of goods and services.

Whether you are interested in understanding today’s China as part of business planning exercise or for personal enlightenment, this book would be an excellent primer and starting point. 

China’s Minister of Defense Visits the U.S. to Build Common Ground but Japan Stands in the Way

This commentary was first posted on New America Media.

How will Japan’s recent policy shift to offensive weaponry affect the U.S.-China ongoing dialogue between their respective defense chiefs?

General Chang Wanquan’s visit to the US this week as minister of defense is the latest of a continuing series of exchanges between China and the U.S, aimed at building trust between the military of both countries. Both sides agree that sharing information and discussing issues of common interests will enhance understanding and cooperation.

Whether meeting on common grounds will lead to recognition and mutual respect for the differences still outstanding between the two counties remains unanswered. Moreover, aside from existing differences that have bedeviled the bilateral relations, a new development has come to the fore: Japan’s pronounced shift to militarism.

The newly elected Abe government, elected on a platform of nationalism, is threatening to revise Japan’s constitution and disavow the peace covenants that were inserted to remind the people of Japan of the atrocities committed by their military--hideous acts of inhumanity that repelled the people in Asia. At the end of WWII, Japan was to never again mount offensive military capabilities but limit to pacifist self-defense forces.

The Abe government picked August 6, the anniversary of the atomic bombing of Hiroshima, to launch a new super destroyer, named “Izumo,” big enough to launch helicopters and, with a bit of modification, fighter planes. The deck was festooned with the war flag of the old imperial army and the helicopters were emblazoned with the number 731.

Much of the symbolism associated with this launch went over the heads of the American public but certainly had the desired affect by arousing the anger of the people in China.

Japan’s official position has always been to point to Hiroshima as a reminder to the Japanese people that they were victims of WWII and American aggression, contrary to the idea that Japan was the aggressor.

Unit 731 was the secret research station located in the outskirts of Harbin where live human beings were subject to injections of toxins such as bubonic plague and anthrax and then cut open while alive to monitor progress of the ravages of the diseases—all without administration of anesthesia. Use of anesthesia, the reasoning went, may distort the test results of the trial weapons of germ warfare.

The victims of these biological experiments were not just Chinese civilians but included American POWs captured from the Bataan death march in Philippines. In the waning days of the War, most of the biological testing camp was destroyed.

General Shiro Ishii, the commandant of Unit 731, secretly negotiated with the American occupation force to turn over the research data in exchange for escaping from prosecution for himself and his research team. The Americans accepted Ishii’s terms and thus the activities of Unit 731 were never exposed to the limelight of a military tribunal and prosecution.

Thanks to Ishii and America complicity, members of his research team died of natural causes and never felt the sting of having to explain their heinous activity and the disgrace of public condemnation; some even walked tall in their post-war careers as respected members of society.

The bombing of Hiroshima and Nagasaki that ended the war was just a bit too soon for Ishii. He was experimenting with the use of high altitude balloons to drop germ-laden bombs on the west coast of the U.S. Had he succeeded, America would surely not be so ready to forget Japan’s role in the war.

President Obama likes to tell despots that they are standing on the wrong side of history. In siding with Japan on any disputes Japan has with China, the U.S. is clearly on the wrong side and perhaps the blind side of history.

Hard to know if General Chang would have the opportunity to discuss with the Secretary Hagel of the significantly different attitude about Japan between China and the U.S. America has been quick to forgive Japan but China could not because Japan has yet to own up to their role in the war and make a heart felt apology and amends.

China and the U.S. were wartime allies when Japan was the mortal enemy. Japan should not now become an obstacle to China and the U.S. becoming partners to world peace.

First Chinese American Leaders

Thanks to historian and veteran China hand, Scott D. Seligman, we now know something of Chinese American leaders that lived in America as early as the middle of 19th century and the turn of the 19th to the 20th century.

The first notable leader who fought for the civil rights of Chinese in America was Wong Chin Foo. Wong came to the U.S. in 1867 at the age of 20 under the sponsorship of a well meaning American missionary who thought that after being properly educated, Wong would return to China to preach to the vast masses waiting to be converted.

Wong lasted one year at the university at Lewisburg, Pa, predecessor to today's Bucknell University. He didn't finish his studies but went back to China to marry and sired a son. He came back to the U.S. in 1873 alone leaving his family behind and became a U.S. citizen in 1874. For the next quarter of a century he lived in the U.S. and he was to exercise his rights of American citizenship to the max.

In a role reversal, he self appointed himself as China's first missionary to America to extoll values in Buddhism and Confucianism and to counter anti-Chinese prejudices and racial bias at every opportunity. He wrote and spoke tirelessly and was credited with the first to coin the term, Chinese American. He challenged anti-Chinese demagogue, Denis Kearney, to a public debate and he was judged the winner when they finally did meet in a public confrontation.

He said on behalf of the Chinese living in America, "As residents of the United States, we claim a common manhood with all other nationalities, and believe we should have that manhood recognized according to the principles of common humanity and American freedom." Not bad for someone whose English was a second language without the advantage of proper schooling.

The next set of Chinese American leaders as told by Seligman was a group of four that organized a fundraiser for the benefit of victims of pogrom in Kishinev, then a part of Russian empire. The benefit was a play held in the Chinese Theater in Chinatown in May of 1903. There were three performances in order to satisfy the demand. New York Times reported that this must be the first event of this kind ever in the world.

The leaders, all ethnic Chinese, were Joseph Singleton, Guy Maine, Dek Foon and Jue Chue. All four were prominent in the Chinese community, spoke fluent English and well known to the New York society at large. Two of them saw the advantage of adopting Anglicized names and three had Caucasian wives. They were pillars of society and saw their future staked to the American soil.

They have been battling against the Chinese Exclusion Acts and the bias against the Chinese ability to immigrate the America. They have been reaching out to the American society at large and in holding the fundraiser, they were aligning with the Jewish community and indirectly protesting the injustices being suffered by the Chinese in America.

These stories go to show that contrary to the image of docile, well behaved Chinese in America, we always had activists willing to challenge injustices and intolerable status quo.  These individuals deserved to be honored and remembered.
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I had known Scott as a highly regarded China business consultant, the July 2013 issue of Chinese American Forum reintroduced him to me as a historian wherein he wrote about Chinese fundraiser for the Jews of Kishinev.

The U.S. Senate Hog Wild over the Chinese Bid for Smithfield Pork

When Shuanghui, China’s largest pork producer, made an offer to buy Smithfield, it should have been a straightforward business transaction. Smithfield is America’s largest pork producer.  By acquiring Smithfield, Shuanghui would be positioned to fill China’s rising demand for more pork.

Chinese living in America have been long familiar with the premium priced Smithfield country ham; the cured meat reminds them of the taste of “Jinhua” ham famous throughout China. Through Shuanghui’s distribution channels, America stands to export a lot of pork to the most dynamic growing market in the world—not incidentally, exporting is an activity encouraged by President Obama for job creation.

What should have been a simple win-win deal is becoming a lot more complicated thanks to Congressional review. As presented at the hearing, the humble bacon has suddenly risen to become an ominous threat capable of imperiling the security of the United States.

According to the testimony of one alleged expert on China, Usha Haley, pork is a strategically important industry for China. Therefore even if heretofore pork consumption is declining in the US, suddenly because the Chinese desires American pork, the US should think hard about denying them access.

Then Daniel Slane, a member of the U.S.-China Economic and Security Review Commission, artfully blackened the Chinese tycoon behind Shuanghui by labeling Mr. Wan Long a high-ranking member of the Chinese Communist Party at the beck and call of the Beijing government. The day after Mr. Slane’s testimony before the Senate Agriculture Committee, the Wall Street Journal ran a profile on Mr. Wan that supported none of his allegations.

While the per capita American consumption of beef is around 7 times that of per capital Chinese consumption, China’s per capita consumption of pork is roughly 20% higher than in the US. Since China’s population is more than four times greater, the claim that China consumes a lot of pork is not in question. As China’s middle class continues to swell, demand for their favorite meat will only increase.

Hogs in China are raised mostly in small family-owned farms and could never match the productivity of factory farms in the US. Thus demand will continue to exceed domestic supply. That the Chinese hog farmers won’t be swamped by the import of American pork is only because some Chinese consumers prefer the more robust flavor of “free range” pork than the more consistent but blander tasting meat from the US.

There isn’t any question that Smithfield represents the standard that Shuanghui aspires to attain. Without a significant economic comparative advantage, there wouldn’t be any reason for Shuanghui to tender for the American company.

Part of the motivation for acquiring Smithfield would be to learn from the Americans in raising healthier hogs and producing more consistent quality of meats. Even if the Chinese improve their productivity using American technology, why should the US object to having more pork to go around? It’s not as if pork has suddenly become a material for the weapons of mass destruction.

In fact, such a development would be a good thing for the world as a whole. Americans may eat more than that’s good for them, but the rest of the world wouldn’t mind having a bit of meat once in a while. In a world of burgeoning population facing perpetual hunger, for the august members of the US Senate to look at this deal as a zero sum game—where Chinese dietary gain is somehow equated to America’s loss--reflects small minds of petty consequences.

But leave it to the politicians to make a pig of themselves and raise the threat of national security at every imagined shadow even when cast by a dangling ham. “Shuanghui” could be loosely translated from Chinese as “both win.” If Senator Debbie Stabenow and her committee have their way, it seems only a “both party lose” outcome can satisfy their proclivity for xenophobic paranoia.

A version appeared in New America Media and China-US Focus.

China enters first bilateral swap agreement with G7 countries (UK)

I have not been tracking swap agreements as closely as I once did. But China has just entered such an agreement with UK for up to 200 billion RMB over a three year period. This is the first with one of the G7 countries and could be considered as part of China's movement toward having a convertible renminbi. A fuller explanation can be found in the Wall Street Journal.

There is more to Snowden than the media reports

Asia Times has given the public the first truly extensive and thoughtful analysis of Snowden, the latest NSA whistle blower that captured worldwide attention. Most of us, including me, probably has not heard of previous whistle blowers on the NSA. Author Peter Lee of Asia Times gives you a fascinating look of what happened to previous whistle blowers, Binney, Wiebe and Drake, and how their experiences may have shaped the course of action taken by Snowden.

It's no small irony that this great democracy of the United States encourages the idea, in principle, of whistle blowers to keep abusive government practices in check, but in reality woe unto those that believe in the protection of the American Constitution when they decide to take on the government.

Anyone wishing to understand the degree of dysfunction that afflict the government of United States needs to read the article on the three wise men of NSA.

Just the quote from Snowden is worth the visit, "Being called a traitor by Dick Cheney is the highest honor you can give an American."

Could North Korea Become the Breakthrough in the US-China Relations?

This entry is an revision of the previous blog entry to reflect that the summit between Obama and Xi had taken place and was first posted on China-US Focus.

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The informal summit between the leaders of China and the US concluded pretty much according to most expectations, namely no breakthroughs or unpleasant surprises.

According to some reports, Presidents Barack Obama and Xi Jinping did agree to work together on keeping North Korea in check and the Korean peninsula nuclear free. 

Indeed there have been some recent developments to suggest that North Korea is apparently yielding to China’s pressure to behave. The North Koreans have approached the South Korean government to renew a dialogue that has gone on for years, more off than on.

Of course historically nothing about North Korea has been predictable or dependable. The Pyongyang government has always been able to exploit the difference in the policies regarding North Korea between Beijing and Washington, a difference that gives Pyongyang room to alternatingly test the patience of the two powers.

Despite or because of vocal protests from the US, North Korea has apparently gone ahead with an underground nuclear detonation—“apparently” because no one seems to know for sure.

Despite consternation from Japan and South Korea along with pressure from the US, North Korea has test-fired ballistic missiles in the direction of neighboring South Korea and Japan. Some supposed intercontinental range missile turned out much shorter range than expected and some were outright duds.

Each time after the government has misbehaved on the international stage, it would offer to begin the six party talks, provided of course the US will agree to preconditions that the North Koreans know the US will not accept.

The only recourse Washington seems to have is to lean on Beijing to get the North Korea to behave, since the regime is completely dependent on the food and energy aid from China, without which the regime would certainly collapse.

But China is equally frustrated, if not more so, by the North Koreans. Each time Beijing sends a special envoy to Pyongyang to ask the government not to build a bomb or not to fire a missile, the Pyongyang would assure the envoy and then goes ahead and reneges a few days after the envoy leaves. Sometime, the misbehavior takes place a couple of days ahead of the arrival of the visiting delegation just to rub it in.

Most recently, after the most recent missile test and after finally releasing Chinese fishermen held by the North Koreans—as this has happened more than once—Pyongyang promptly sent their highest ranking military official to Beijing to again express proper contrition and again promise to participate in the much desired six party talks.

North Korea’s seemingly erratic behavior has been deliberate and carefully calibrated. It continues to push and test the boundary of what China will tolerate, because Pyongyang knows that China will not allow the regime to totally implode.

China has two major reasons not wanting to see the Pyongyang regime collapse. First it would have to deal with a massive refugee problem as Koreans flee north into China. Second, presumably the Seoul government will take over and unify the entire peninsula. This would mean potential American military presence all the way to the border of China.

Up to now, Washington has been badgering Beijing to fix the problem and make Pyongyang behave but has offered nothing that would help Beijing get out of the conundrum.

But there is something the US can offer to China that would help China exert pressure on North Korea more effectively. Namely, the US can promise to immediately withdraw all its troops from the Korean peninsula when and if the Pyongyang government collapses and the South Korea government were to unify the peninsula.

It would take a lot more mutual trust in the bilateral relations than currently exists between China and the US before Beijing would accept the promise of American withdrawal as realistic. However once confidence has been established, the Pyongyang government would find much less room to be the bad actor. It would either have to behave or face extinction.

Obama could point out to Xi that since China normalized its relations with South Korea (to the consternation of the North) in 1992, South Korea has become an important economic partner of China and the bilateral relations have been cordial without one-sided demands like those from the North.

If the Korean peninsula were to unify under Seoul, China would have a friendly neighbor and enjoy a stable relationship. With peace and stability being the common goal of China and the US, there would be no further reason for an American military presence.

In order to convince Xi and his Zhongnanhai colleagues that Obama is sincere, he would have to take steps to build trust. The most prominent step would be to change his pivot to Asia, which China regards as military containment, into a platform for joint high sea patrols and exercises with the PLA Navy.

When realized, there are two important benefits for Obama in addition to reining in North Korea. First, with sequestration, Obama is facing a shrinking defense budget. He still has a war budget on al Qaeda that needs to be fed. He does not have the funds to deploy troops in the Pacific where the US faces no threat.

More importantly, Obama should be thinking about his legacy to history. By brokering a lasting peace with China and become partners in developing a stable Asia Pacific, Obama would be remembered for altering the disastrous warpath toward self destruction embarked by the previous Bush administration and putting America back on a path to prosperity.