Ich Bin Ein Beijinger

A Surreal Summit

The highlight of this evening was, without doutbt, drinks on the 35th floor of the  Nikko Hotel in Dalian. A small group of us sat and listened to sci-fi author and blogger-provacateur Cory Doctorow address hot Saville Row bespoke designer Ozwald Boateng on the finer points of Linux while swilling a Chinese alcohol-free beer. Cory had pulled his sticker-covered IBM tablet Thinkpad out of a fuzzy orange Muppet-monster case and showed an Ubuntu distribution--he explained how the South African creator of that particular distribution basically made the thing user-friendly and easy to install--while Ozwald critiqued its overall aesthetic. Then Cory went on at length about the political peculiarities of early open source trailblazers like John Stallman, who evidently was an unreconstructed Marxist and something of an idiot savant.

Meanwhile I queried a very well-spoken Dutch conflict management diplomat named Jaime (H.R.H. Prince de Bourbon Parme), who happens to be a scion of both the Duth and Spanish royal families, on the best way for the U.S. to extricate itself from the Iraqi quagmire. He's been in Kosovo and elsewhere in the Balkans, in Northern Afghanistan brokering deals with warlords, and in all sorts of other hot conflict zones. But he's clearly never seen anything so intractable as Iraq. He and I are of the same mind: A staged withdrawal, ownership of the mess the U.S. has made, and abject apology to our allies--"who are very much like us, and who probably have some good reason to object when they object." 

Earlier, on the way up to the bar, I had a good and very serious chat with Cory about Singapore, China, the spectre of social unrest that haunts and scares people in neo-authoritarian technocracies like these two states, China's constant appeals to historical exemptionism, and whether--and if so, for how long--we should buy into those appeals.

It's a pity that this sort of shit only happens at gatherings like these: far too rare, and far too short.

Is Obama your man for '08?

Any China-based American citizens who are willing to get behind Illinois Senator Barack Obama's presidential bid should email me (kaiser.kuo at gmail.com) to learn more about what a Beijing-based group is doing to raise money and help form the campaign's China policy. We've got a good solid core of smart people, including some names I'm sure many of you are quite familiar with. We're planning a major fundraising event in early June, so anyone looking to picth in is welcome.

I liked New Mexico governor Bill Richardson myself, personally, but he's been so sidelined by the media that I don't rate his chances high. He could, though, end up as Secretary of State--something I wouldn't object to. Dodd, Edwards, and Biden don't really do it for me. While I greatly admire Ms. Clinton, I think she's just too polarizing. If Gore jumps in now, my current support for Obama might, I confess, have to undergo a rethink.

I'm at once encouraged and worried about the Republican race: encouraged, because if they field Giuliani I can live with him as president, but worried, because he'd have a damned good chance of beating whoever the Dems field.

Happy to hear anyone's input. I'll listen to any intelligent argument in favor of the other candidates at this point, or to any information anyone has that might give me a better sense of Senator Obama's position on China-related issues.

Chas W. Freeman, Jr., with an optimist's view of China 2025

Veteran diplomat Chas W. Freeman, Jr. first came to my attention last year when I heard a KQED broadcast of a talk on China to a foreign policy group in San Francisco. He was talking about China's oil policies, which he judged relatively enlightened, and about Saudi Arabia's plans to build a jointly-controled strategic oil reserve in China--first and last I've heard of that. I believe it was him, and not the other speaker--whose name, which was not as colorful and therefore not as memorable, now eludes me--who made a very clever crack at the Bush administration, contrasting China's resource-driven "value-free diplomacy" with Bush's "diplomacy-free foreign policy" in the Middle East.

Freeman, who speaks fluent Mandarin, was the official U.S.-side interpreter back when Richard Nixon visited China 35 years ago. He has served as ambassador to Saudi Arabia, co-chairs the U.S. China Policy Foundation, and is now president of the Middle East Policy Council. He spoke on March 27 at the inauguration of the D.C.-based think-tank the CNA Corporation's new China Studies Center; his speech is here (h/t to China Digital Times for the link). He starts off by offering a little historical perspective--the historical reasons for American misperceptions about China, and some correctives. Some excerpts that resonated with me:

To deal effectively with China, Americans need to understand it in terms of its own complexities and authentic aspirations. This is unlikely to be achieved by officials engaged in writing narrowly focused and highly tendentious reports mandated by Congress to justify the single-issue agendas of our military-industrial complex or, for that matter, our humanitarian-industrial complex. Nor can it be accomplished by analysts stir-frying intelligence to suit the political appetites of those they work for. Government-friendly but politically independent study centers like the one we are inaugurating tonight have a vitally important role to play in keeping our country from developing the world’s first genuinely autistic national security establishment, if only in relation to China.

Predictions about China based on a priori reasoning, ideologically induced delusions, hearsay, conjecture, or mirror-imaging have been frequent and numerous. They have racked up a remarkable record of unreliability. To cite a few relevant examples: contrary to repeated forecasts, the many imperfections of China's legal system have neither prevented it from developing a vigorous market economy nor inhibited foreign investment — of which China continues to attract more than any other country, including our own. China's failure to democratize and its continuing censorship of its media, including the Internet, have not stifled its economic progress or capacity to innovate, which are increasingly impressive. China's perverse practices with respect to human rights have not cost China's Communist Party or its government their legitimacy. On the contrary, polling data suggests that Chinese have a very much higher regard for their political leaders and government than Americans currently do for ours.

Toward the end of his talk, this self-described optimist on China's future does a bit of crystal ball gazing, and though he recognizes that there are plenty of "darker scenarios," paints a picture of China circa 2025 that looks like this:

• The Chinese yuan may have long since joined the dollar and euro as one of the principal currencies in world trade and reserves and helped to bring into being a new and more flexible global financial system in a world more secure in its prosperity;
• Those here tonight who are into wealth management and still alive may be as heavily invested in the Hong Kong and Shanghai stock exchanges as in New York or London and private Chinese investment may play a significant, sometimes dominant, role in global markets, including our own;
• Thanks to continued economic growth and the appreciation of its currency, China may have the largest economy on the planet while we continue, by a considerable margin, to have its most formidable military;
• the nature of Taiwan's relationship to the rest of China may have been peacefully resolved, taking with it the only conceivable casus belli between the United States and China;
• China may have evolved a system in which rule by law, if not perhaps the rule of law, has brought about a high level of domestic predictability and tranquility;
• the habits of consultation, based on mutual respect, and the policy transparency that characterize democracy at its best may have become integral to Chinese politics, even as the Chinese Communist Party, whether by that or another more accurately descriptive name, continues in power;
• China and the United States may both be in the process of establishing a sustainable presence on Earth's moon;
• contributions to the advancement of science and technology by Chinese may once again be at least proportional to China's share of the world's population;
• China may have begun, with us, to lead the way: not in the destruction of the global environment but in its rehabilitation;
• the mounting attractiveness of China's political and economic success may have challenged us to rediscover and reassert the values and practices that for long made others see America as the last, best hope of humankind; and
• China may have joined a united Europe, India, Japan, Brazil, Russia, the United States, and other major powers in a concert of nations that can actually accomplish some of what President Roosevelt hoped the United Nations could do — bringing about a harmonious and largely peaceful world order, increasingly free of both want and fear, and respectful of individual and collective rights as well as of the cultural diversity of humankind.

Too rosy? Cynical as I can be, nothing here strikes me as preposterous. 2025 is 18 years out still, and when I look back 18 years--funny what year that lands you at--only a complete nutcase would have foreseen the China I live in today.

Greenpeace and the Midi Music Festival - Good news and bad

First the good news: The Midi Music Festival is going Green. and Peaceful. Beijing's marvelous annual band blowout, which takes place from May 1 to 4 this year in Haidian Park, will be working closely with the global environmental organization to promote green consciousness.

Sze Pang Cheung (a.k.a. Kontau, on the left), who has headed up communications in China for Greenpeace for the last four years or so, and Fish Yu, outreach campaigner, came by the Ogilvy office today to give me the low-down on what's happening with Midi. They'll have a booth at the festival, and will debut an environmental doc called "The Planet," shot by big-name European filmmakers and featuring interviews with some serious environmental heavyweights. They've also listed 10 or so main stage bands and half the bands on the secondary stage to do short environmental spots that will be shown during breakdown/setup between bands. And they're bringing Dave Stewart, formerly of the Eurythmics, out to Beijing for the festival. He'll be busting out some old Eurythmics hits, I'm told.

I gotta say, these Greenpeace guys not only dress the part, but they practice what they preach: When the tea lady came into the meeting room with paper cups, Fish quickly asked her to bring ceramic ones--which you see before them above--instead. Respect. They're very cool guys who are obviously committed to their cause, and I'm hoping to help them out however I can. Some years back I spoke with Greenpeace's international director Gerd Leipold here in Beijing, and he impressed me, frankly, with his embrace of globalization, his pragmatism, and his PR savvy. He comes from the PR world, actually, if I recall. (Correction: I recall incorrectly, as Kontau tells me). Same is true of Kontau: He really has his head around marketing.

Okay, so now the bad news: My damned band won't be playing at Midi this year. Not on either stage. For the first time in years. It's our own fault, too, because 1) we didn't sign up because a certain Yunnanese bandmate of mine couldn't tell us by the deadline whether he was coming back from Kunming in time for Midi, and 2) because a certain high-ranking Midi School official (hint: he has the same name as my wife) told me when I called him today to see whether I could wheedle Chunqiu's way onto the roster, if only on the secondary stage, that he thinks we ought to lose our singer because his voice lacks that leather-lunged liliang that Metal singers are supposed to have. Fuckity-fuck fuck fuck. Dave Stewart's looking for some Chinese musicians to help him out on stage; maybe I'll put my hand up to play bass for him. Admittedly, I was no big fan of the Eurythmics, though I do love Annie Lennox's voice, and songs like "Who's That Girl" and "Here Comes the Rain Again" had lovely melodies despite the New Wave synth I so loathe.

Fixing Chinese Journalism - the "Authority of the Community"

David Bandurski, project researcher at the China Media Project at the University of Hong Kong's Journalism and Media Studies Centre, posted translated excerpts from this fascinating editorial by Oriental Morning Post deputy editor Chen Jibing (陈季冰), which appeared in the China Youth Daily on 27 March. The upshot: Chen's diagnosis for the ethical ailments which plague the Chinese media isn't governmental regulation and oversight, but rather civil society--stronger non-governmental associations capable of setting their own ethical guidelines.

The most basic reason why we cannot establish effective "norms" in many sectors is that we lack the necessary social "communities". Academic freedom needs to be supported by an "academic community", and journalistic norms need to be supported by a "media community". Of course, these sorts of communities are different from the government in that they are not backed up by legal force (the power to restrain under the law). Nevertheless, anyone who challenges the authority of the community will automatically lose their credentials as a community member, and owing to the internal operation of mutual acknowledgement and censure within the community, the community works as a strong binding force.

Chen goes on to cite as an example European football associations, which he says work their ethical suasion even without legal teeth.

What I'm arguing is that journalistic norms are the precondition for freedom of speech, and the creation and protection of journalistic norms relies upon the emergence of a "media community".

Some boiler-plate caveats follow: this is the China Youth Daily, after all.

I don't mean that we should give the work of propaganda offices entirely over to a news media association. And I'm not saying the government should not control [the media] from here on out. What I'm saying is that because the functions and resources of the government and industry communities are different, they should have different spheres of management. In light of China's national realities, propaganda authorities should be responsible for questions of guidance in the ideological realm of media.

Despite this, there's meat in the message, and I'm sure everyone agrees that it's a nice idea: peer censure, and not government regulation, is the basis of a responsible media in those geographies where one can be said to exist. But let's be realistic here. Civil society in China is embryonic, feeble, and exists in China at the pleasure of Beijing. It's allowed to develop when it serves the interests of the state. Chen argues that those interests are indeed aligned:

Media professional associations should be charged with ordering market competition, professional principles for journalists and other questions belonging to the "social" sphere. Once this pattern of assuming respective roles and working together emerges, "freedom" and "regulation" will complement one another.

But I wonder whether a public sphere professional media association in China could be expected to circumscribe its activities to "ordering market competition" and urging "professional principles for journalists." How long would it be suffered to live? Any better suggestions?

Pete Townshend at SXSW

Absolutely nothing to do with China--oh wait, something the Who's Pete Townshend said about rock and politics did resonate with me and my thinking about the Chinese rock scene--but I took good notes as this massively iconic figure presented the keynote to the SXSW Conference and Music Festival, and thought I'd share some of what he said.

The Who has iong ranked among my favorite bands, and as much as I love Roger Daltrey's voice, loved the late Keith Moon's drumming, and adored the more recently late John Entwhistle's bass lines, it was Townshend who of course was always the sould of the band. For me, they're the band that produced for me ranks as the most perfect album (Who's Next, though Quadrophenia is up there among my all-time loves too) and best rock song ("Won't Get Fooled Again") to date.

So naturally I was thrilled to hear Townshend speak. He was lucid, as expected, and funny, at time way out there in space, especially when talking about his new project, which will formally launch with a webcast news conference on April 25. That project, which he calls "The Method," was based on the rather abstract concept originally behind Who's Next: that seminal album was originally written as another rock opera in the vein of Tommy called Lifehouse, but the concept-album idea was scrapped. (See the Wikipedia article on Who's Next for the whole story.)

"The Method," which will be Web-based, will supposedly allow subscribers to sit for a musical "portrait," based on inputs (physical? verbal? it's not enitrely clearr) supplied by the subscriber. The result is a unique piece of music corresponding to the subscriber. Townshend says he came up with the idea back during the creation of Lifehouse but "in 1971 there were no computers powerful enough to do what I wanted." He was told, "Nice idea--but you should get treatment. That came later. [audience laughs]."

In his own words, as nearly as I was able to transcribe:

You come to the Website and we give you a piece of music. You own a third of the copyright. This music is elaborated; we bring it all together, and play it in a big event. We gather and share our music together. My idea is that it might sound terrible, like a plane going by, or the gentle undulations of the sea.

On the Punk Rock revolution, he had this to say:

Punk triggered something. It vented something that was there, that needed to be vented. There was nothing wrong with the Electric Light Orchestra. There was nothing wrong with Ian Anderson's [sic] Yes. I was shopping the other day and heard some music, and said, "What an interesting blend of folk and classical--and it was fucking Yes."

Oh, and this is what made me think of Beijing rock, where a political/dissident patina gets painted onto so much music as a marketing ploy, or out of juvenile, misguided iconoclasm:

I didn't know what politics was when I was a kid. If we're going to make [rock music] political, let's make it fucking political.

Hallelujah, brother Pete. I have no objection per se to politics in rock music: I just want rock musicians to acknowledge that most political issues we confront just aren't that simple. For me, 99.99% of the time, reducing any issue to rhyming verses and a repeating chorus is just bullshit sloganeering that doesn't contribute to intelligent discussion. If I had a choice between allowing the ideas of rock musicans or, say, college professors to influence my political thinking, the choice for me wouldn't be a tough one.

Chalmers Johnson interviewed on Znet

Following on the Fareed Zakaria Newsweek post, here's more sensible talk about China (thanks to China Digital Times for this). Chalmers Johnson, formerly chair of the Center for Chinese Studies at U.C. Berkeley spoke to Amy Goodman from Znet about his new book, Nemesis: The Last Days of the American Republic, last in a trilogy of works critical of American foreign policy. His comments on China are a nice riposte to some of that alarmism now so prevalent in the Beltway; I'm not ready, yet, to dismiss as alarmist his own dire prognoses about America's fate. Not ready to buy them entirely, either, but I'll read the book.

I was at Cal in the mid-80s but never took a class from Chalmers Johnson, to my great regret. I was busy stuffing my head with Soviet studies courses--all of which became more or less irrelevant in August of '91.

On the subject of Beltway attitudes toward China, I wrote a piece for the Red Herring some time back about Chinese networking equipment vendor Huawei, and interviewed James Mulvenon, a former Rand Corporation analyst now at another D.C. defense think-tank. Mind you, this guy was described to me by one well-known Beijing-based telecoms consultant as "the closest thing to a Cold Warrior in the China telecoms scene." He had a great quote on Washington attitudes toward China generally:

I live in Washington, and there's a certain percentage of people here who see the Chinese as some faceless guy stroking a white Persian cat on his lap in a floating volcano island headquarters."

Money quote!

Fareed Zakaria: The Sky Isn't Falling in China

Newsweek editor Fareed Zakaria, always someone I enjoy reading, has a thoughtful and thought-provoking op-ed on China in the March 12 issue, inspired by the so-called "Black Tuesday" stock plummet, examining why China continues to confuse many Western observers and defy expectations. He offers a succinct and, to my mind, correct assessment of that:

When a market has gone up 150 percent since 2006, as Shanghai's had, one doesn't need to search for grand explanations to recognize that it's bound to retreat at some point. More important, there is little linking the Shanghai stock market with the overall Chinese economy. It simply doesn't play the role that the stock market does in the United States or Britain. Most Chinese companies raise money through banks, not equities. Indeed, for the past 10 years, Chinese stocks have gone down while the economy has boomed. And yet the day after the market fell, we saw yet again all the same warnings about the hollowness of the Chinese system, the perils it faces and the imminent possibilities of its collapse.

But the good part is what follows--how China doesn't fit into Western (mainly American) models of how countries grow, prosper, and hang together as a polity. Worth a read. He concludes:

Is it so difficult to understand why the Chinese people might be satisfied with their current situation? Over the past century the country has gone through chaotic turmoil almost every decade—the collapse of the monarchy, warring states, the Japanese invasion, civil war, the communist takeover, the Great Leap Forward, the Cultural Revolution. But in the past 30 years, China has enjoyed stability, as well as the fastest growth rate of any country ever. Some 350 million people have been lifted out of extreme poverty. The country has a new, sparkling image across the world. If you were Chinese, you might take some pride in that too.

   

"China's Black Tuesday": A Roundup

I've avoided making any comment on this, but now that a quorum of sensible voices have emerged to help undo some of the collective panty-bunching that's happened this week, I thought I'd point out some of the people who've made sense. First up, Dan Harris of China Law Blog:

...stock markets rise and fall and business moves forward. Life goes on. My firm got two new China clients yesterday. One, an already good sized manufacturer who is expanding its China operations to beter serve its countless high end American manufacturing clients who are also expanding in China, and the other, an Internet company wanting to set up a China WFOE [wholly foreign-owned enterprise]. If anything, a better day than normal. China's stock market never came up with either client. I was not going to say a thing about it here on the blog, but changed my mind only after receiving a couple of e-mails expressing surprise at my silence.

I know major stock market shifts can affect an economy as a whole, but I do not see that sort of impact in China. Not now. Not yet. And I am not going to call it before I see evidence of it.

He also quotes another cooler-head, Andrew Hupert of Diligence China, who counsels "Don't just do something, stand there!"

I personally think we're already seeing funds take advantage of a huge buy opportunity on the Nasdaq- and other non-China-listed Chinese company stocks that, for whatever strange reason, reacted so strongly to the drop on the Shanghai and Shenzhen boards. Shit, the fundamentals are all still unchanged.

An investor had this to say to Forbes:

"Bottom line is that stocks are cheaper today than they were yesterday, so I am more optimistic now than I was a couple of days ago," says value investor John Buckingham, editor of the top-performing Prudent Speculator newsletter.

"Yes, China was down 9% [Monday] night, but that market had gained 13% in the previous six trading sessions and more than 150% since mid-2005," notes Buckingham, who adds that he now has 99 stocks on his "buy" list--up from 69 on Monday morning.

Deutsche Bank's Jun Ma weighed in with a thoughtful analysis on the triggers for the drop. (Thanks to Bill for sending this along):

Yesterday's 9% drop in Shanghai A share index-the largest single-day decline in ten years--and a 3% fall in the H share index were partially explained by the following speculations among market participants:

1) Feb CPI inflation is likely to be as high as 3% yoy and the PBOC is likely to raise rates in response to the Feb CPI figure;

2) The govt will form a special task force within CSRC to investigate into illegal securities operations;

3) The govt may adopt further measures to crackdown on illegal fund flows (bank lending and foreign funds) to the stock markets;

4) A capital gains tax is likely to be levied on stock transactions soon;

5) CSRC chairman Shang Fuling may not be in his position much longer;

6) PBOC governor Zhou Xiaochuan encouraged discussion of "whether there is a bubble in the A share market";

7) The govt may delay the implementation of management incentive schemes (eg stock options) at listcos;

8) Insurance companies were told to reduce their exposure to A share market;

9) Mutual funds selling; redemptions from retail investors; experts warning on A share market risk on CCTV yesterday, etc.

Our views

*     Strong CPI inflation in Feb/Mar, a near-term rate hike, and new govt efforts to crackdown on illegal fund flows to A share market are very consistent with our expectations (see our strategy report on Jan 11 and a few recent notes on inflation and rate hikes).  These concerns-which are most important triggers for yesterday's correction--will not go away within days and will most likely be confirmed by govt actions in the coming 1-2 months. This implies that risks to the A share market will remain biased to the downside at least in the very near term.

*     The establishment of the CSRC special task force is a fact; it was reported by official press yesterday. It reinforces our expectation that new measures are likely be taken against illegal fund flows into the A share market.

*     Points 4-8 listed above are too speculative and we are not in the position to comment on these. They are less important anyway.

*     The fundamental reason for an A share market correction is its stretched valuation (trading at 26x 07 earnings vs 17x for MSCI China yesterday), and above points are just specific catalysts.

*     We view another 15-20% correction of the A share index as needed and healthy, which should then justify renewed interest from many investors in A shares.  Based on historical correlation, H share volatility is about half of that of the A share index (ie. if the A share index is down 20%, chances are the H share index will be off 5%).  A 10% correction in the H share index from here will create attractive entry points for many HK listed China names, in our view.

*     As we stated before, during major China market corrections stocks in the property, financial, and metal sectors tend to be more vulnerable; while F&B, utilities, expressways, exporters, and industrials tend to be more defensive.

*     We do not see any significant impact of this market correction on China's real economy. We remain bullish on the fundamentals of the economy and on the medium-term outlook (10 month basis) of the China equity markets (both A share and H shares) despite the on-going short term correction.

*     Given that almost all the catalysts for the A share market correction are domestic in nature, we do not think they should have a significant spill-over effect on markets in other countries. If it occurs, we consider it an over-reaction.

Dammit, missed the Chunjie Wanhui (again)

Joel Martinsen, one of my favorite commentators on the Chinese cultural scene, has a great post over at Danwei on the evidently disastrous CCTV Gala this year. I was blessedly spared watching it this year, though in plenty of years past I've been in sneer-and-groan sessions. That's just not any fun for me, but that's the stage that China's going through now. Allegations of plagiarism, flubbed lines, and political ineptitude aside--all that's detailed by Joel in his post--the whole "Whither Chunwan" question must be utterly confounding for CCTV programming directors. It's a relic of a simpler, pre-snarky age in China, and certainly ain't compelling content for younger urbanites. But they can't make the thing inaccessible to the vast majority of viewers out there, who still look forward, even to the costumed minority dance numbers, and who are genuinely entertained. Chunwan's really become something of a marker of the great cultural divide in China. I do pity the folks who have to put the thing together every year.