Friday, October 16, 2009

Not the first to forget history; let's remember 

True, much of Mao's brutality has already emerged over the years, but this biography supplies substantial new information and presents it all in a stylish way that will put it on bedside tables around the world. No wonder the Chinese government has banned not only this book but issues of magazines with reviews of it, for Mao emerges from these pages as another Hitler or Stalin.

In that regard, I have reservations about the book's judgments, for my own sense is that Mao, however monstrous, also brought useful changes to China. And at times the authors seem so eager to destroy him that I wonder if they exclude exculpatory evidence.

...Perhaps the best comparison is with Qinshihuang, the first Qin emperor, who 2,200 years ago unified China, built much of the Great Wall, standardized weights and measures and created a common currency and legal system - but burned books and buried scholars alive. The Qin emperor was as savage and at times as insane as Mao - but his success in integrating and strengthening China laid the groundwork for the next dynasty, the Han, one of the golden eras of Chinese civilization. In the same way, I think, Mao's ruthlessness was a catastrophe at the time, brilliantly captured in this extraordinary book - and yet there's more to the story...

Out of the tens of millions of alleged "counterrevolutionaries" and dissidents who spent long periods of their lives in Mao's system of prison-factories and corrective labor gulags, it's estimated that 20 million died during their "re-education" into collectivism, obedience and communal selflessness.

Additionally, the human cost of Mao's ill-planned and ill-named Great Leap Forward of 1959-1961 might well have reached 40 million deaths from starvation, the result of the largest and most deadly famine in world history.

In 1968, Wei Jingsheng, 18, a Red Guard member, provided a firsthand account of how the Great Leap Forward had driven parents mad with hunger:

"Before my eyes, among the weeds, rose up one of the scenes I had been told about, one of the banquets at which families had swapped children in order to eat them. I could see the worried faces of the families as they chewed the flesh of other people's children."

What's so unusual about Emperor Shih Huang of the Chin Dynasty? He had buried alive 460 scholars only, but we have buried alive 46,000 scholars. In the course of our repression of counter-revolutionary elements, haven't we put to death a number of the counter-revolutionary scholars? I had an argument with the democratic personages. They say we are behaving worse than Emperor Shih Huang of the Chin Dynasty. That's definitely not correct. We are 100 times ahead of Emperor Shih of the Chin Dynasty in repression of counter-revolutionary scholars.
When 900 million are left out of 2.9 billion, several five-year plans can be developed for the total elimination of capitalism and for permanent peace. It is not a bad thing.

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Wednesday, September 30, 2009

Don't rain on my parade 

Just got home and am ready to sleep, but as I checked through email I ran across a story in the Wall Street Journal's Political Diary (subscription req.) about China's promise to seed clouds to minimize precipitation tomorrow, which is the day they will celebrate 60 years since the Communists took over the country.

Preparations there are massive and were increasing as we went along the last week. Banners are everywhere. So too was an increasing security presence. I'm fine with cops on streets, and I expect them to have guns. Semi-automatic machine guns, on the other hand, I could live without. On the journey back from Tianjin we were stopped twice, the second time with a request for all passports. I think that, because we were flying out soon, it was not a problem for us, but I did wonder about our transportation and host. They seemed surprised but adapted quickly. A machine gun will do that to you.

But the point of this was clear: They'd just as soon not have people coming in to Beijing that might cause any problem for the parades. The flight we came back on today had many Chinese on it, and none were holding a flag.

I should be back to normal posting tomorrow. Thanks for stopping by and being patient while both Janet and I are attending to our work and families.


Tuesday, September 22, 2009

Best sentence I read while heading to the plane 

Liberals make fun of conservatives' patriotism, but in fact liberals' preferred economic policies are more dangerously nationalistic, and full of contradictions.
Ben Casnocha. On my way to a conference in China where I am speaking on the third wave of globalization, the one China embraces. I like Casnocha's description of economic nationalism, which I'm sure walks in the neighborhood of Jonah Goldberg's liberal fascism, but is probably less value-laden. Goldberg himself closed his blog for the book using the term "state capitalism", which indicates convergence with my preferred "corporatism".

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Monday, April 20, 2009

The copper medal 

When I posted last week about the lack of Chinese enthusiasm for U.S. Treasuries, I thought it might indicate poor performance of the Chinese export sector. But perhaps they're doing fine with exports and buying something else. What could it be? An alum sends me a note that it could be metal:
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.

"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years."

"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.

The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).

While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.

John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."

Those alarmed by the suggestion of a new world currency should relax. This Chinese behavior simply reflects a preference long held in Asia for metals other than gold. After the US and Europe moved towards gold monometallism in the 1870s, only China and India remained on a silver standard -- the loss of demand for silver moved its price to gold from around 16-to-1 (the legal standard) to near 30:1.

There is in fact nothing sacrosanct about the current fiat dollar standard even in the Constitution. A switch to a gold standard, a bimetallic standard or any other metallic standard -- which in essence makes the dollar's value a promise of government -- has been part of the U.S. history since the Coinage Act of 1792.

As for the Chinese, their behavior was well-described as being diversification. Loose money, if it leads to inflation (eventually), is often hedged by holding industrial metals.

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Monday, April 13, 2009

China purchases of our debt dropping 

I'm intrigued by this item from the NYT today:
Reversing its role as the world�s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released during the weekend by China�s central bank.

China�s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year. ...

Chinese reserves fell a record $32.6 billion in January and $1.4 billion more in February before rising $41.7 billion in March, according to figures released by the People�s Bank over the weekend. A resumption of growth in China�s reserves in March suggests, however, that confidence in that country may be reviving, and capital flight could be slowing.
If you asked me what caused that, I would put it to differences in trade. Remember that a trade surplus with Country X means Country X will buy your assets (I suppose they could hold your cash, but that earns zero interest -- less, in real terms if there's inflation.) A massive slowdown of the U.S. economy in the first quarter would show up in trade volumes between the two countries, and the Chinese report they exported 17.5% less to the U.S. in January year-over-year, and the U.S. Census has reported a similarly steep drop for February. Brad Setser wraps all of this together.
China�s trade surplus was larger in the first quarter of 2009 than in the first quarter of 2008 ($62 billion v $41 billion). [This largely due to lower cost of imported oil and energy, he notes. --kb] The global shock has gotten rid of many of the world�s macroeconomic imbalances. American households are saving more and importing less, so the US deficit is down. The oil exporters are no longer running a surplus. Even Japan�s surplus has come down, as demand for Japan�s exports has fallen more rapidly than Japan�s commodity import bill. China�s surplus though has continued to rise.
He thinks China went into recession in Q4 2008. If so -- and I just don't know enough about China to judge that -- the Chinese would be pleased by the US stimulus package providing a locomotive to their economy, which will keep their demand for US Treasuries up. I expect it's got nothing to do with Chinese reluctance to purchase our bonds, just that they had less dollar reserves to invest.

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Thursday, March 05, 2009

China's stimulus 

During our conference last week one speaker mentioned that China is using consumption vouchers to create stimulus. Chinese citizens save a lot, so handing them vouchers that cannot be saved and that have an expiration date was seen to help local merchants. Some vouchers go towards domestic vacations. One of my colleagues passed along that in Taiwan, where the vouchers are also being used, one county has used a lottery to induce more consumption; a four-year-old has won the use of a private island for the summer.

Counties elsewhere in Taiwan have offered cars, houses and other prizes to encourage locals to spend consumer vouchers worth T$3,600 ($103) that the government gave to every citizen in January to encourage spending to help boost the sagging economy.

Penghu, which comprises 64 islands, is known for its beautiful beaches and water sports.

One place is giving discounts for using the Taiwanese discount dollars. I haven't figured out why you'd get a discount. Maybe because they're out of towners. Details of the Taiwanese program are here.

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