Friday, November 16, 2012

Xi Jinping's first press conference as leader of China

Immediately after being elected general secretary of China Communist Party's Central Committee, Xi Jinping spoke at a brief press conference. Video record of his entire address including bilingual English translation can be seen here.

Xi made virtually no reference to foreign policy in his speech. Only his concluding paragraph touched near the subject: Just as China needs to learn more about the world, so does the world need to learn more about China. I hope that you [referring to the media] will continue your efforts to deepen mutual understanding between China and the world. 

There was no mention of external threats and adversaries and reference of global instability. Instead, Xi made it very clear where the priority and responsibilities lie and best summarized by his remarks in the body of his speech:

Our people have an ardent love for life. They wish to have better education, more stable jobs, more income, greater social security, better medical and health care, improved housing conditions, and a better environment.
They want their children to have sound growth, have good jobs and lead a more enjoyable life. To meet their desire for a happy life is our mission. It is only hard work that creates all happiness in the world.

Let the world, especially the U.S., take note. Xi is not rolling up his sleeves to duke it out with the West. He is going to have his hands full on China's many domestic issues. Not least, he said,

Under the new conditions, our Party faces many severe challenges, and there are also many pressing problems within the Party that need to be resolved, particularly corruption, being divorced from the people, going through formalities and bureaucratism caused by some Party officials.

Wednesday, November 14, 2012

Obama should take a new approach to China

While there are numerous difficult hurdles facing Obamas next administration, China does not have to be one. All it takes is a fundamental change in its approach regarding China and the bilateral relationship.

The first step to resetting the bilateral relationship is to recognize the campaign rhetoric on China for what it was: nonsense. Both candidates felt obliged to savage China for our ills but the voters saw through the political ruse and did not pay any attention.

Whos the currency manipulator? We are. No one can be expected to keep up with our printing presses run by the Fed. Even so, the renminbi has appreciated by about 32%, since it was taken off the peg to the dollar.

Lets also not talk about outsourcing jobs as if companies are committing grand larceny. Private enterprises make rational decisions. They send the work to China or elsewhere because it makes economic sense. When it ceases to make sense, the work comes back as some have.

Adding an import duty on goods invariably backfire as has been the case with the much talked about 30% duty on auto tires made in China. A few hundred jobs may have been preserved but all American consumers ended up paying significantly more for their tires and most of the tires were still foreign made, just not from China.

Raising tariffs also prompts retaliation. In a tit-for-tat, China raised tariffs on American chicken which may have cost as many jobs on Tysons assembly line as the gains at the Goodyear plant. Time and again, nobody wins in trade wars.

China has an apparent huge trade surplus with the US and we hold that against China as well. But why should we object to being able to buy our iPad and stuffed animals at a much lower price than if made in the US?

Furthermore, as many economists have pointed out the trade surplus is not exactly what we say it is. For example, the added value of China labor in an iPad is about 2% of the total cost. Many of the components and assemblies are made in Japan, Korea and Taiwan and even some in the US but China gets all the credit for the import value.

Its not as if enjoying a trade surplus when doing business with the US is some extraordinary aberration. The US has a trade deficit with 98 countries because this is the way our American economy works.

One of the first principles of the Chinese classic, Sun Zis Art of War, is to know your counterparts, be they friend or foe, before engagement. Perhaps its time that we take a look at how China regards this bilateral relationship to gain the more solid understanding of what actions to take.

The Chinese public continued to be fascinated by the presidential election. Apparent exercise of democracy in action made the people in China wishful that some would rub off in China.

The financial tsunami of 2008 and aftermath had shaken the Chinese confidence in Americas ability to manage its finances and has cause them to diversify their hard currency holdings and to make the renminbi more accepted as an international currency. The trauma however has not changed Chinas regard of the US as a vital economic partner.

It simply is not in Chinas national interest to consider the US a hostile competitor. China has its own laundry list of internal challenges and do not need the distraction of external confrontations.

For more than a decade the leaders of Beijing have been talking about the urgency of combating graft. Endemic corruption saps the economy and more importantly erodes the legitimacy of those in power. While success in overcoming corruption is problematic, it will be the foremost preoccupation of the incoming leaders.

Secondly, even though the US has a serious unemployment problem; it pales by orders of magnitude to the one Beijing has to face. Just finding jobs for the approximate 8 million college graduates every year is beyond American comprehension.

Although Obamas pivot to Asia defused accusations during the campaign for being soft on China, he needs to review the consequences of this policy.

Occupying foreign lands may have been a western tradition, but it is not for China. In early 15th century, the Chinese had the worlds mightiest navy and could have colonized the many places Admiral Zheng He and his sailors visited, but they did not.

It is not in the Chinese DNA to compete with the US for world hegemony. However, if Chinas sovereignty is being tested by US activity in Asia, China will not quietly stand by. Rather than enhancing stability, the American increase military presence has encouraged Japan, Philippines and Vietnam to be more energetic in contesting the islands off Chinas coast.

In response, China raised the stakes by establishing the Sansha City on one of the Paracel Islands in the middle of South China Seas. The city will own an enlarged runway, a desalination plant and other related infrastructure for future tourism. The city along with a military garrison will administer over 200 islets and sand bars along with two million square km of water.

Sansha, in midst of South China Seas, enjoys significant logistical advantage over the nearest US marines in Australia. Such asymmetrical arrangement is the only basis that China would counter unfriendly acts from America--in other words, relatively modest investment by China that would offset considerably more investment by the US.

China has no appetite to match US military might on a dollar for dollar basis.

Its time the US reexamine the concept of strategic ambiguity in dealing with China. It simply has not worked. Sometimes friendly, sometimes hostile, sometimes cajoling and sometimes imposing has merely led to a permanently rocky relationship. Both the US and China can better deploy their energy on other issues than managing the ups and downs of the bilateral relationship.

With the incoming new generation of leaders, Obama should try a new approach: be transparent. Lay all the cards on the table and agree on those issues the two countries can work together and put others on holdan approach Deng Xiaoping would applaud.

The US cant really afford to allocate money it doesnt have to build up a military presence that would only increase tension in Asia. With China, cooperation trumps confrontation.

An edit version has been posted on China-US Focus.

Jack Perkowski is well known investor in China. Read his careful debunking of Obama's complaint about China's alleged unfair subsidy of its auto industry.

Tuesday, November 13, 2012

About Peng Liyuan, wife of Xi Jinping

If Peng Liyuan, the next first lady of China, is a representative of what the new leadership is like, there is hope for China. South China Morning Post provided a lengthy profile on her with two interesting video clips.

The first clip of nearly 12 minutes long was produced (with English subtitles) to raise awareness of young children with HIV in China. She starred as the visiting dignitary (ambassador for children with AIDs) to a remote Anhui village with many orphans, shunned by society because they are HIV carriers and in many cases became orphans because their parents died of AIDs. This video was produced in 2006. In this documentary, Ms. Peng held the children, played with them, taught them songs and generally showed what a loving mother can be like to kids that have not experienced much joy in their young lives.

The second clip show she singing in a national day celebration and was filmed in 2011.

The videos showed a warm and selfless human being and that bodes well for China.

Friday, November 9, 2012

What's Next for America?

The US presidential election is finally over. Now comes the hard part: having to deal with reality.

Over six billion dollars had been spent by the two political parties during the long arduous campaign. Almost none of it were used to explain how each candidate propose to solve the really, really hard challenges confronting the next administration.

Both Romney and Obama seemed to lack the confidence that American voters can stomach bad news or be told the harsh reality. Instead each tried to outdo the other in bombastic platitudes, grandiose promises and deceptive innuendos. 

Now the American public will hold their collective breath (and nose) to see if Obama and the Congress can hammer out a solution that will keep the economy from going over the fiscal cliff. The campaign gave no hint on how that will be done.

The candidates always conclude their speeches with "God bless America." Whether God will or not, it seems to me, will depend on attributes heretofore rarely sighted in Washington: statesmanship and bipartisanship.