Friday, January 1, 2010

China on a Roll

China’s been in the news lately, very little of it benign or promising.

One story of note has to do with illegal logging in Russia’s far east that is being organized by Chinese and fueled by Chinese demand for hardwoods. Century old Oaks and Ashes are being felled to produce flooring and furniture mostly for western markets.

The Chinese, not surprisingly, are good at capitalism and generally don’t call on many scruples in their dealings in the commercial world. They aren’t the world’s only buyers that encourage illegal loggers and hardly the only crooked capitalists vying for filthy lucre, but the same economic philosophy, based on the mania for short term gain, that has driven Western capitalists to produce in Communist China, has given China free reign to exploit its advantage in any way it can.

Enforcement of environmental rules is bad enough in America but the one party state and its fostering of corruption makes its environmental record far worse. Since no demonstrating or protesting or any sort of challenge to the state is allowed, individuals seeking redress for tainted food, as in the melamine scandal, or answers as to why so many schools crumbled in the Sichuan earthquake, are targeted and harassed as enemies of the state.

However, as long as Western consumers get their hardwood products cheaply then there are no complaints from capitalist democracies. If Chinese industry gains a cost advantage by absence of environmental rules then it’s the problem of the Chinese people who suffer from the pollution, not Mall-Wart’s customers. Of course, it isn’t only their problem: environmental degradation anywhere affects everyone, but in the mind of the capitalist; out of sight, out of mind… and, if you can save money by trashing the environment, then you do it until you get caught and then use your high-powered lawyers to try to avoid responsibility.

A second event is the recent prison sentence of 11 years to a prominent dissident for advocating freedom of expression, human rights and democracy. Trade and capitalism automatically brings an open society and democracy, or so we’ve been endlessly told. Obviously, demonstrably there’s no inherent connection between the two.

While China still likes to characterize its system as socialism, it’s really much more akin to fascism or state socialism. It’s economy is designed to benefit its rulers and upper classes. This is perfectly illustrated by the great gulf between the urban and rural in society.

In China you only have citizen rights where you are registered. If you move across a boundary line, even if it’s just a kilometer, you cannot send your kids to school or receive any benefits of citizenship unless you are willing and able to pay a substantial bribe. Even back in the mid-nineties it cost $3000 to purchase citizenship in Kunming where I lived. I thought back then that the registration system was an anachronism, a throwback to the time when Chinese weren’t allowed to leave their home districts without official permission. I’m almost shocked that it’s still around, or would be if I had any faith in the country’s leadership. It’s a convenient way to exploit the peasantry for the benefit of the better classes, so they are clinging to it.

In the Chinese countryside there are near desperate conditions for hundreds of millions of people. There are few jobs and the land cannot support the number of people who live there. (China, with 22% of the world’s people has only 7% of its arable land.) The only option for many is to leave their families behind and seek work in the cities, mostly the booming cities of the East Coast. As a result, there are an estimated 150 million migrant laborers in China. When they do find work they may also find themselves mercilessly exploited. Construction workers, for example, often do not get paid until the project is finished. No Chinese workers have rights, but the migrants are especially looked down upon.

Last year there were a reported 80,000 ‘mass incidents’ - what we would call demonstrations or protests – in the Chinese countryside, some which turned violent. All demonstrating is harshly repressed but rural people know they are getting the shaft and have reached the boiling point. They pay heavy taxes and suffer corrupt officialdom. Until recently they had to pay school fees that were prohibitive for many. Now, with more than $2 trillion dollars of foreign currency in the bank, the country’s rulers are just starting to consider the needs of the rural poor.

Recent events in Thailand provide a possible indicator of what democracy would mean for China. Taksin Shinawatra, Thailand’s richest person and former prime minister, was elected on a populist platform. His government was the first ever to give a damn about the poor. He provided, for example, nearly free health care for everybody and allocated money to the village level for civic improvement. He was hounded out of office by the Bangkok elite but he’d win an election today in a snap because developing countries have disproportionate numbers of subsistence farmers and lower classes in general.

By virtue of having 800 million rural poor, China is still a developing country in spite of its emerging power. In a democracy their numbers would easily counterbalance the country’s 500 million urbanites.

India has largely neglected its poor in spite of being a democracy, but recently a more populist government established a program which guarantees subsistence farmers 100 days of work a year. I’m sure it makes a world of difference for those people to have steady incomes; and unsurprisingly, they are sure to have a strong loyalty to that party for a long time, even if it means supporting a leader who is fundamentally corrupt. And Thailand’s Taksin is a case in point: just before he sold his $2 billion telecommunications company he had the Thai legislature exempt the sale from taxes. Being the richest person in the country was not enough.

It’s hard to say definitively what a Chinese democracy would look like but it’s certain the peasantry would have substantial power and at least some of the money going to fantastically expensive projects like the Olympics and high-speed rail would be redirected to the countryside. Eighty thousand demonstrations in a country that doesn’t allow demonstrating is an indicator of extreme distress and anger. It’s axiomatic that the longer you wait to provide relief from the pressure the greater the explosion when it happens.

Chinese leaders have said that democracy won’t come to China for 100 years. At least among urbanites they have done their job well by creating a compliant population. One man recently quoted on BBC said if the government didn’t want him to know something then he didn’t care to hear about it. They know their news is censored but think the power of the state is more important than their personal freedom.

Nationalism in China is pervasive, but it won’t be able to compete with hardship or exploitation when conditions get bad enough. Time will tell.

China provides a large amount of development money to Cambodia in the form of grants and soft loans and is financing many infrastructure projects so when China pressured Cambodia to return 20 Uighur asylum seekers it almost had to comply. They came to Cambodia because it’s one of the few countries in the area that is signatory to an international treaty on refugees. They are sure to be mistreated in China.

Before the UN had sufficient time to process their refugee claims and just two days before an official Chinese visit in which a large amount of development money was pledged they were sent back. Widespread objections by international NGO’s and Western governments had no effect on the Cambodian government when balanced against a billion dollars of development money. China is not the only large country that likes to throw its diplomatic weight around but as a one party state where just a few people hold almost all the power there are no checks on that power. For sure, the country is going to be increasingly hard to handle as illustrated by the below example.

The cropper of these four news events is China’s trashing of the Copenhagen summit and its humiliation of Obama in the process. While Obama sat with world leaders trying to hammer out an agreement, inadequate and voluntary though it was, China absolutely refused to even allow the mention of any numbers that had to do with targets for CO2 reductions or a minimum temperature rise.

Chinese premier Wen Jinbow did not even deign to attend the meetings, instead sending a second tier official who had to check with his superiors on every minor question while Obama, Brown, Merkel and many other world leaders were left to cool their heels in frustration. China succeeded in having the blame for the failure of the climate talks placed on the West while it deflected any sort of restrictions on its own growth, which is largely based on coal: the country opens a new coal-fired power plant every week. It is also investing heavily in renewables but still expects to increase its CO2 emissions by 60% by 2020.

China’s new power was a gift from the West and will come back to haunt the capitalists and their democratic countries. While it’s true that, as a friend who has spent a long time in China pointed out to me in response to a previous post, the country was always destined to be a great power because of its culture and the energy and determination of its people, the wholesale transfer of industry from the West has tremendously accelerated the process.

There are quite a few developing countries that are also democracies where Western industries could’ve transferred their production but that might have meant slightly less profit and maybe more hassle dealing with authorities and workers. There’s nothing like a repressive authoritarian government to keep workers in line.

With two trillion dollars of foreign assets in the bank, about 75% in dollar assets, the US in particular and the West in general have precious little leverage with China. For America especially, it’s kowtow time to the Middle Kingdom.

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