Category Archives: China

Effects of Corruption in Asian States

The power of the state to influence operations and success of businesses is accepted in virtually all policy circles, though traditionally this focus centers on regulatory and tax regimes. Less obvious is the hidden intersection of governance and markets which distorts and subverts both. In Asia, the rapid evolution of markets in many countries over the last century has made government interactions with those markets more uncertain: the lack of durable institutions and legal traditions in the area has created a series of more ad hoc relationships. Corruption and rent-seeking behaviors by bureaucrats is somewhat inevitable in this climate.

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Principles are expensive

Alone with his wife and children, Chen Guangcheng periodically switched on a cell phone Thursday to tell friends and foreign media he felt scared and wanted to go abroad, and that he had not seen U.S. officials in over a day.He even called in to a congressional hearing in Washington, telling lawmakers he wanted to meet with U.S. Secretary of State Hillary Rodham Clinton, who is in Beijing this week. “I hope I can get more help from her,” Chen said.Chens high-profile effort to keep his case in the public eye increased pressure on Washington and embarrassed Beijing as it hosted Clinton and other U.S. officials for annual talks on global political and economic hotspots.

via U.S. seeks solutions in China activists case – CBS News.

If Chen’s story is even partially accurate, the narrative of the US human rights regime should make this an open and shut case. Unfortunately, realpolitik makes this a lot more complicated.

Obviously State cannot be especially eager about the prospects of granting asylum or even a meeting to Chen, especially during the middle of a high-profile visit from Secretary Clinton.

The most likely outcome is either a convenient concession by Chen, or a backchannel-directed pressure by the US to allow Chen some modicum of freedom. In either case, the public stalling does us no favors.

Modeling might be real: Taiwan and the Falkland Islands

A few weeks ago I was in class and Dr. Sterken asked me a question I don’t remember, which I had no answer for because I hadn’t been following the discussion at all. Obviously, I’m a great student. I had a pretty good reason, though: I was extremely distracted by this paper.

I may be overselling it some, but this is arguably the coolest academic/policy publication I’ve read. That includes a paper on cereal pricing, and I love cereal.

To make a long story short, Goldstein argues that China visualizes the Falkland Islands conflict between Argentina and Britain as a proxy for the tensions involving itself, Taiwan, and the United States. Going further, the paper provides rather substantial evidence that China actively models a great deal of its military planning regarding Taiwan on Argentinean action in 1982. This is not entirely unexpected, given the relationships between the relevant states and how China thinks of itself in the context of global power projection.

Why am I so enthralled by this? That’s a good question. Continue reading

All eyes on Europe

“China has no appetite or ability to buy up Europe or control Europe as some European commentators have said,” wrote Feng Zhongping, director of the Institute of European Studies at the China Institute of Contemporary International Relations. “China has from the beginning strongly supported the EU and the euro, in clear contrast to the talking down of Europe in the international community,” Feng wrote in the piece, carried in the papers overseas edition. China has promised not to link helping Europe in the debt crisis with issues such as the EU recognizing China as a market economy or the EUs arms embargo on China, Feng added. “This is the best example of Chinas proactive stance on the EU,” he wrote. Any Chinese economic assistance to resolve the debt problem, whether via the International Monetary Fund or the EUs own systems, would be a purely economic decision, Feng said.

via China paper says country does not want to buy up Europe | Reuters.


China increasingly has to worry about flagging demand in critical export markets like the United States and the Eurozone, especially as their fiscal expansion has mostly expired. The latter problem is currently working itself out via the PRC encouraging banks to rollover the debts of local or provincial governments, which should at least reduce the size of the domestic contraction. The former, however, is more troubling.

Interconnectivity has been the driving force of Chinese growth for much of the last two decades, and it has paid off handsomely for them. Now, that return is much less certain. Consumer credit in the US has been surprisingly easy to divest, and Americans have remained reluctant to make the plunge again in uncertain times. European consumer spending is also trending downward, placing the Chinese in an awkward position in terms of sourcing future growth. Developing markets are, well, not quite developed enough to prove reliable customers for Chinese goods, and China’s two main trading blocs are proving unreliable.

So while Feng indicates China has no “appetite” for European domination, the “ability” question might be more relevant. Put simply, China can borrow again to finance European solvency, thereby (hopefully) stimulating demand for Chinese goods, or they can take an immediate hit in terms of reduced domestic growth – a particularly frightening prospect for the CCP, which fears widespread social upheaval if unemployment rises too much. The former strategy just kicks the can down the road, however, as current rollovers are demonstrating: at some point, that debt will come due, and who knows what fiscal condition China will be in then?

The choice between alarming demographic pressures now or aggressive bond vigilantes later is not a facile one. The most likely outcome is that the PRC decides the risks of financial market failure are globally dispersed, while social failure is far more concentrated. Moral hazard, indeed.

Whither China, Redux

Ambrose Evans-Pritchard has a great post about the recent sluggishness in Chinese consumption. Imports from certain countries are down, internal freight is declining, with property values and energy usage also slipping.



There is a widespread misunderstanding that China’s households can easily come to the rescue by cranking up spending because they have the world’s highest savings rate, and consumption is just 36pc of GDP.

Prof Michael Pettis from Beijing University puts that one to rest. The Chinese do not have a much higher personal savings rate than other East Asians. The reason why consumption is so low is that wages are low, the worker share of GDP is low, and the whole economy is massively deformed and tilted towards excess investment.

This is deeply structural. It cannot be changed with a flick of the fingers, and contains the seeds of its own destruction.

China is a marvellous country. I wish them the best. But they have not found the secret formula for perpetual uber-growth.

No such formula exists.

via China’s very mysterious data – Telegraph Blogs.


There’s been a lot of talk in the last year or two about the potential for a slowdown in the Chinese real estate sector, and implications for the broader economy. Part of the problem, as Evans-Pritchard points out, is that the data that China releases regarding internal events is often spotty or contradictory. Given that constraint, and the fact that the end result of an investment glut might be worse than a “normal” contraction, how confident do you feel that an expansionary fiscal policy in 2008-2009 resolved intrinsic risks?


The problem with a “too small” stimulus is that you get an initial economic boost, but when the stimulus expires the economy slumps back down, as indeed happened in mid 2011.  Ideally a stimulus employs some idle labor, stops it from depreciating, and tides those workers over until they can look for other jobs in fundamentally better economic conditions.  Those last few words are important.  If conditions are not improving soon, the ability of the stimulus to “buy time” for those workers isn’t worth much.  The workers get laid off from the government projects and their reemployment prospects are no better than to begin with.  We end up having spent a lot of money to postpone our adjustment problems, rather than achieving takeoff.

via The size of fiscal stimulus vs. the length of fiscal stimulus — Marginal Revolution.


While China is obviously not the US, especially in terms of political constraints or moderately-liquid assets needed to attempt additional stimulus as a response, the answer to the question should probably be “not very.”