Why Should I Care about the Power Transition in Beijing?

The 18th CCP Congress is going on right now in Beijing, I was lucky enough to be invited to BBC TV and BBC radio to comment on this once-in-a-decade power transition. Before that, I was asking many ordinary people around me about what this moment means to them. Some cannot care less, as they feel they have zero influence on the outcome. Some are watching it as a “Gong Dou Drama/宫斗剧” (Fights-in-the-Palace Drama) and found pleasure in all the conspiracy theories and the tabloids about power elites’ in-fights . Some are busy interpreting and deciphering the formulaic and predictable official announcements, and looking for so-called signals of future policy directions. Some are making their wish-lists of what reform they hope to see under the new leadership. I happen to think that it is futile to try to peek into this black-box of CCP meeting, but it is an interesting moment that triggered a lot of important public discussions about what China did right and what it did wrong in the past decade.

Jin Ge & Martin Jacques on BBC World News discussing the 18th CCP congress

In BBC TV’s program, I had a mini debate with Martin Jacques, author of When China Rules the World, who was known for championing the so-called “China Model”. Our debate was so short that I left out some key points, so allow me to make up here. Right before this Party Congress, Mr. Jacques wrote an article saying that the Chinese leaders are more legitimate than the US president coming out of an election. Well, the Chinese government certainly did not show much confidence in its own legitimacy, otherwise we should not having so much problem accessing the real Internet, buying kitchen knives, or letting our pigeons fly.

Jacques argues that unity is the core value of Chinese civilization. I find it offending that he feels comfortable to assume the huge population in China composed of diverse communities share one value. And he certainly ignored the fact that the value systems in China changed many times throughout the history.

But is unity currently a sufficient source of legitimacy for the Chinese government? What about the high percentage of rich Chinese trying to emigrate out of China? What about the peasants who are protesting against some local governments’ forceful land grab? What about the middle class who held protests against environmentally dangerous industrial projects run by state owned enterprises? It seems people care not only about whether the government holds the nation together with strong hands, but also about whether they can feel safe and free under the government.

Mr. Jacques likes to emphasize China’s economic growth in the past 3 decades as a proof of the superiority of the “China model”. But even President Hu in his speech on Nov.8th acknowledged that China’s current economic growth is “unbalanced, uncoordinated and unsustainable”. Also what about the fact that China is still a poor country in terms of income per capita? What about all the costs of nominal GDP growth, from environmental crisis to corruption to unjust wealth distribution?

I am not saying that all that growth is illusionary, but we cannot forget that it was the shift away from authoritarianism that initiated the economic growth thirty years ago. Mr. Jacques suggested that the lack of democracy contributed to the efficiency of China’s economy. Following that logic the centralized economy under Chairman Mao should have been the most efficient. Even today, the local governments and state owned enterprises are mis-allocating resources to the extent that wasteful and low-quality infrastructure projects are becoming a liability rather than an asset, real estate bubbles in places like Erdos and Wenzhou are busting, and so-called innovative projects heavily sponsored by tax payer’s money, such as solar or cloud computing, turned out to be technological disasters and hotbeds for corruption.

Mr. Jacques’ view has won him popularity among the power elites in China. But even the leaders of CCP have stated many times that “reform” is urgently needed to make the people more satisfied, evidently they are aware that economic growth and nationalism no longer can bring them the desired “stability”. Meanwhile, the increasing exposure to the outside world has changed the Chinese public’s expectation of their government fundamentally, although few of them are calling for a whole-sale adoption of western-style democracy, many are calling for more openness and transparency of the government and more rule of law. If China manages to overcome the current challenges, which is certainly my hope, it will not be the victory of the “China Model” that Mr. Jacques extolled, rather it will be a result of the Chinese public’s success in “reforming” the government.

 

 

People’s Daily’s IPO Farce: Washing People’s Brain with People’s Money

The website of People’s Daily, the mouthpiece of the CCP, is now a listed company in the Shanghai Stock Exchange. The company raised 1.4 billion yuan (US$222.2 million) in its IPO, nearly three times the amount it hoped for. On the first day of its trading, its stock price surged 76%. Before People’s Daily’s IPO, some pro-democracy activists said that no citizen would buy the stock of a propaganda machine whose profit comes solely from government subsidy. But they couldn’t be more wrong.

Hu Xijin (胡锡进), the Chief Editor of Global Times and a shareholder of People’s Daily, proclaimed victoriously, “The strong performance of People’s Daily on the stock market clearly showed that the majority of Chinese people support our political system. People have voted with their own money.” Meanwhile, pro-democracy blogger Wu Yue San Ke (五岳散客) sadly reflected: “In our society most people are still willing to exchange democracy for monetary gains.”

I do find the retail investors’ enthusiasm over People’s Daily unnerving, only because it confirms my pessimistic view that many people are not against a repressive system as long as they have a chance to join the repressor side. But from an investor’s perspective, People’s Daily’s success is no surprise. The single most important lesson Chinese investors learned in the past several years is that you have to “Follow the Government”. People are buying People’s Daily only because they believe the government will not let it fail even if it means showering taxpayer money on it.

A Webpage of People.com.cn

Here are some facts about the website of People’s Daily that have been discovered by netizens so far:

  • It has certain monopolistic advantages in the heavily controlled news industry. For example, a Chinese journalist can only be acknowledged as a “professional journalist” after they received a “journalist license” from the government. Any journalistic investigation might be considered illegal if the journalist does not have the “journalist license”. None of the other Internet news portal has any journalist licenses, while People’s Daily has more than 120 ones.
  • The other Internet news portals, from Sina, Sohu to Tencent, are required to buy and publish news from People’s Daily. How many companies have such power over their competitors?
  • The biggest clients of People’s Daily are all government institutions who are not price sensitive at all.
  • It can generate profit even without income. For example, the People’s Search Engine, which is set up to compete with Google, has not been monetized at all, but already has more than 30 million yuan profit magically showing up in its book.
  • It plans to spend part of the money it raised on office equipment, namely iPhones and iPads, at the price of 10000 yuan each, several times the market price.

The successful IPO of the website of People’s Daily is a testament to the success of state capitalism in China. The bureaucrats working for People’s Daily must be celebrating: Who said the Internet or the market will undermine state authority? Now we have more money to buy luxury goods such as iPhones and LV or to fly first class to the US for business tour. And if we have some money left, we can spend it on educating people that democratic values are just Western imperialist ideology.

Related article: Red Pad, a Pad Tailor-Made for Government Officials

 

 

Niall Ferguson Warned about “Shrill Nationalism” in the Documentary “China: Triumph and Turmoil”

In the documentary China: Triumph and Turmoil, just aired in UK on Channel 4, Niall Ferguson stated that the Internet and China’s integration into global economy didn’t really spread democratic values in China, instead, they facilitated a growing “unofficial nationalism”, particularly among young Chinese.

Ferguson says, “It is one of our comforting and enduring myths that as China becomes more modern and sophisticated, more like us, it will come to adopt our values. I’m not sure it’s going to be like that. [Chinese students during the Lhasa riots in 2008] were very hostile to the criticism of the Chinese government. The key insight for me is that rather than pro-democracy feelings increasing as China grows economically, it is a radical, shrill nationalism that is emerging. There is an enthusiastic embrace of the economic benefits of the market but resentment of Western cultural hegemony. The attitude is: if we make it economically, we don’t have to kowtow to you culturally.”

There is plenty of China-phobia in the West right now and Ferguson’s discussion played right into it. In another interview, he even talked about the troubling parallel between today’s China and Germany before WWI, on the ground that both had “rapid economic growth, self-confidence and increasingly a rather shrill nationalism”.

I have been studying nationalism in China for years, and like Ferguson, I found the nationalist sentiment among young people very unnerving. But Ferguson certainly exaggerated the power and social influence of radical nationalists in China, maybe just to make his documentary more sensational.

Yes it is true that there are some young people who are forming online communities that circulate xenophobic discourses, some even organized hacker attacks, but there are also many Chinese NGOs and individuals who are using the Internet to initiate cross-cultural dialogues.

It is also true that the government is relying on nationalism as a main source of legitimacy, but some top leaders are aware of the danger that radical nationalism could destabilize Chinese society and ruin China’s relationship with the International community. That is why one of the most influential nationalist website, Utopia/乌有之乡, was shut down recently for its speeches that defend the Culture Revolution and criticize the government for being too soft in China’s disputes with Asian neighbors over resources in South China Sea.

Also, the power elites are too invested in the current system of state capitalism, which is dependent on the global market, that it will not risk a show-down with the West. Many of our leaders, including the recently indicted Bo Xilai, have been storing their wealth in the US, and their family members are already US citizens. Are there such things in Germany a hundred years ago?

Many of the nationalist young Chinese, despite their resistance to so called Western values, fully embraced individualism and consumerism. I interviewed some leaders in the nationalist community, and I noticed that they are very fond of iPhones and LV bags, and they are even hoping to use the money they made from publishing nationalistic books to emigrate to the West.

However, nationalism has indeed become the main obstacle for domestic reform. It has worked well as a justification for the current status quo and local injustice. For example, nationalism has been used to justify internet censorship on the ground of national sovereignty in the cyberspace; and it was used to defuse media exposure of social problems, with investigative journalists being labeled “traitors” and “guides of Western imperialists”.

Overall, I believe Chinese nationalism is a bigger threat to the democratization of China than to global stability. Few nationalists in China are actually shouting “let’s conquer the world”, but many are telling the repressed in China that “you don’t need those Western values such as democracy, freedom of speech, equality or human rights.

 

Chinese Netizen’s “Occupy Obama Movement” on Google Plus

Last night I heard from friends on Sina Weibo that Google Plus was unblocked and there is a Chinese carnival on Barack Obama’s G+ page, where we can do our favorite online activities such as 抢沙发 (”occupying sofa”-being the first in the comment roll ), and刷屏 (”swiping screen”-creating a sea of comments that flood the whole page). I immediately went to my G+ account, which I haven’t used since I opened it last year, and added Obama to my circle of “family”. Wow, under the first post I saw on Obama’s page dated Feb.24, 90% of the 500 comments are in Chinese, and a significant amount of the rest are in Chinglish. I have not seen a virtual party so wild since the April of 2010 when we climbed over the Great Firewall to follow the twitter of Aoi Sola (Japanese AV star).

BBC actually reported on this phenomenon already, but its misinterpretation of the Chinese comments has itself become a source of amusement for Chinese netizens. The BBC article says, “they talked about occupying the furniture and bringing snacks and soft drinks.” Obviously the reporters had no idea what “occupying sofa” means in Chinese Internet Language, which is the frontier of linguistic innovation. The folks at China Internet Watch tried to help out and explained:“occupying sofa” is a common behavior often in online forums trying to be the first to leave a comment or reply. Imagine many friends visit you at your house, the first ones arrived can take the sofa (which is more comfortable), those who are a bit late have to take the chairs, and the ones come last have only the floor to sit on”.

But most of my friends found the misunderstanding so funny that they excitedly gathered more people to occupy the Obama page and say more nonsense to further confuse the poor translators of Western media.

Anyway I feel that some of the Chinese comments are so good that they deserve good English translation. Here are some of my favorite comments:

-Good afternoon Mr. President, I just come here to chill.

-Don’t fight with me, this is the last available space! Advertisers interested in renting this space please contact me.

-How to tell if a girl is a virgin by looking at her thigh…

-The one above me is a very very bad person.

-People behind me, keep your line straight!

-For Sale, Canon 60D+17-55mm f2.8 Lense…

-Tour group from Huadong University blowing by.

-This is such a historical moment! Have you guys had dinner?

-Mr. President, I’d like to order some food. The people behind me will pay.

Continue reading

Observation of Public Discussion over Syria Crisis in China

Just two weeks after China and Russia vetoed the UN resolution condemning the bloody crackdown on protesters in Syria, China’s Ministry of Foreign Affair is now saying on its website that China supports the Arab League’s plan for ending the violence in Syria. Many netizens are saying that we are witnessing the same drama that happened during the Libya revolution, at that time China started with backing Qaddafi but quickly reversed the course when the opposition gained momentum. But it seems to me that Mr.Xi’s visit to the US played an important role in this change of position, and our next president Mr. Xi’s approach to foreign affairs seems to be more pragmatic than ideological. 

Replay of the Libya drama?
When the Libya revolution just broke out, the official media in China, from CCTV to Global Times, underplayed the libya people’s discontent, praised Qaddafi’s achievement in building a prosperous Libya, and condemned western interference. The grassroot nationalists cheered the government’s courage to stand up for “Libya” and against Western imperialists. But later when Qaddafi’s demise seemed inevitable, Chinese government mended relationship with the opposition, and official media started to praise libya people’s courage. The grassroot nationalists was caught by surprise, they found themselves in a difficult dilemma between criticizing the government for the inconsistency and acknowledging their own misunderstanding of the people of Libya. This time these nationalists anticipated the ambiguity of the government’s position, and many of them talked about protecting China’s economic interest in Syria, which basically means being ready to work with the opposition if they win.
“General Zhang’s Curse” 
Zhang Zhaozhong, a general from People’s Liberation Army and one of CCTV’s favorite commentators, said at the beginning of the Libya revolution that Qaddafi was an old friend of China, and the “people’s army” of Libya would not be defeated by Western imperialists. General Zhang also called North Korea’s dictator Kim Jong-il “an old friend of China” in another interview. So after the death of Qaddafi and Kim Jong-il, pro-democracy netizens invented the sarcastic phrase “General Zhang’s curse”, which means that if someone is praised by General Zhang, his life will be in severe danger. General Zhang appeared on TV again one week ago and voiced his support for the al-Assad government: “The well trained people’s army of Syria will not be defeated by Western imperialists”. So many netizens are joking “Assad, watch out! General Zhang said good things about you!”
CCTV vs Microblog
On Feb 18, Lao Rong (老榕), one of the most famous bloggers in China, posted on Sina Weibo that in Syria about 20,000 people were going to the street in big snow to join a memorial for the protesters who were slaughtered during the bloody crackdown by the Assad regime. CCTV also reported the same event, but its correspondent in Syria told the audience that only 200 people joined the memorial. Some people commented on Lao Rong’s post and accused him of spreading rumor. But soon there were so much video footage of the event on the Internet that CCTV’s version was easily discredited.
Western Media Correspondents in the Middle East are CIA agents?
I just read an outrageous post on Sina Weibo by a well-known nationalist named “lazy 1980″, which says that Marie Colvin, the American journalist who was just killed in Syria, is definitely a CIA agent.

China’s Political Model is Superior?

The New York Times published an article by Eric Li, on Feb.16 when our “next president” Xi Jinping was visiting the US, that argues China’s political model is superior to that of the US. Eric Li sums up the difference between the two systems, “whereas America sees democratic government as an end in itself, China sees its current form of government, or any political system for that matter, merely as a means to achieving larger national ends”.

What is the “national ends”? Eric Li used the crackdown of Tian-an-men Square in 1989 as an example and explained that the stability resulted from the crackdown “ushered in a generation of growth and prosperity that propelled China’s economy to its position as the second largest in the world”.

So economic development is the “end”, and human lives are “means”? And this is the China Model? Then why don’t we go back to the era of Chairman Mao during which millions of people are starved or tortured to death only to fulfill Mao’s personal ideal of what China should be? What about the fact that the income per capita of China ranks at 93rd in the world and the well documented problem of “rich state poor people”?

Eric Li is a venture capitalist. Many capitalists love China because in state capitalism, as long as they form an alliance with the ruling elites, their pursuit of money would not be hindered by things like labor rights, environment regulation or public accountability.

But it is possible that Eric Li is writing from his heart and truly shares a belief with the Chinese nationalists that I’ve been researching: The rise of China is the ultimate end, and people are just “means”.

Latest Statistics on China Real Estate

By Jin Ge

Looking at the January sales reports by major real estate developers, I cannot help thinking that the bursting of China’s real estate bubble is happening sooner than I thought. Most of the developers saw their sales number dropped more than 50% compared to January 2011, with the sales of industry giants Jindi Group(金地) and Longfor Group (龙湖) decreased 75.8% and 72.3% respectively.

Reports from the Ministry of Finance show that real estate continues to be the main source of income for the government. In 2012 Property related tax accounts for 10% of the total tax income of the central government, and 30% of that of local governments. The government also pocketed RMB 3.15 trillion from all the land sales in China; the total sales of property market in 2012 is RMB 5.9 trillion.

Based on the above data, it is safe to say that in China’s model of state capitalism, the government is the biggest real estate capitalist. That is why many people believe the government will come to the rescue again if the property bubble shows signs of bursting.

But I’ve argued that there are now more political cost than ever for the government to keep relying on real estate, and the bubble has grown to such a degree that it might be too big to save even for the almighty government. In the past several years, parabolic rise happened to not only the price of property but also the amount of new construction projects. At the end of January 2012, all the unsold new apartments in four first-tier cities of China, Beijing, Shanghai, Shenzhen, and Guozhou, amounts to 30 million square meters, a 42% increase year on year. Who are going to buy these apartments?

What’s next for state capitalism? Still more investment than consumption.

The Economist just hosted a timely debate on state capitalism. I notice that even those who believe state capitalism is a legitimate alternative of liberal capitalism mostly agree that countries of state capitalism tend to have worse problems of cronyism and injustice. The Chinese government has been relying on economic growth to sustain its legitimacy after the Mao era, but now many people are starting to ask why their living standard does not seem to rise with our miraculous GDP numbers. So I believe the government will have to invest more in social programs that help to manufacture public consent. But the innate mechanism of state capitalism determines that these social programs will still end up boosting government-run investment rather than domestic consumption.

China’s Ministry of Finance has just released some data of 2011. In 2011, the total tax income of the Chinese government reached a new record of RMB 10.37 trillion, that’s RMB 9000 tax burden on every Chinese citizen; meanwhile, the average income of Chinese people in 2011 is only RMB 24000 (around USD 4,000).

People on the Bund

The government spent most of its money on fixed asset investment rather than social welfare. This is what has been driving the GDP miracle of Chinese economy. A lot of these fixed asset projects became a way that public money is privatized.  The corruption cases happened in the construction of high-speed railway are prime examples. The wife of the former head of the Ministry of Railway became a billionaire simply by supplying all the toilets for all the bullet trains.  No wonder some people say that, in state capitalism, public property is just the private property of power-holders.

It’s hard to imagine that the ruling elites are willing to give back the power and wealth concentrated in their hands, but they do have to protect its legitimacy and appease public discontent. One example of what they plan to do next is the ambitious Welfare Housing Project. The central government announced that from 2011 to 2015  it will build a total of 36 million welfare apartment for low income families. Continue reading

Protests against Bear Farms IPO and Western Imperialist Conspiracy

Bile Extracted from Live Bears

Gui Zhentang Pharmaceutical Company (归真堂), a company that specializes in bear farming and extracting bile from live bears, is applying for IPO on the Shenzhen Stock Exchange. The news was met with outrage all over social media in China. This company announced shocking plans to expand the number of bears they are torturing from 400 to 1200 with new capital raised through the IPO. So tens of thousands of netizens are petitioning the China Securities Regulatory Commission to disqualify this company from being listed on the stock market. But the Association of Traditional Chinese Medicine just published a statement on 2/7 saying that western imperialist interest groups are stirring up these protests against bear farms in order to undermine the traditional Chinese medicine industry and enhance the dominance of western medicine companies.

Bear bile is considered a precious ingredient in traditional Chinese medicine. Despite the fact that there are already synthetic alternatives that prove to have the same medical effects as bear bile, companies like Gui Zhentang still kept moon bears (an endangered species in cages, cut a hole in their stomach and stick a tube into their gall bladder to drain bile from them everyday. NGOs like Animal Asia and End Bear Farm have detailed documentation of such cruel practices on their websites. Continue reading

RedPad, a Pad Tailor-Made for Chinese Officials

 

RedPad, technology innovation from state capitalism

Can innovative entrepreneurship prosper in state capitalism? A Beijing company called Red Technology (红派科技) said “Yes” and announced its new product that aims to rival the influential iPad: the RedPad, a pad tailor-made for the Chinese government officials. The innovation of this RedPad does not lie in its hardware or software, it looks no different from other pads and runs on the Android system. What makes it stand out, according to Red Technology, is that it offers a unique information service that helps government officials to read the minds of top leaders of the central government and stay informed about public discussions online, also, it guarantees complete online privacy of its users. 


The RedPad sells at 9999 RMB each, twice as much as the price of iPad in China, though it offers a wholesale discounted price of 7100RMB to government institutions. Why would Red Technology think officials will pay such a hefty price for a copycat product? I think we should not under-estimate Red Technology’s ingenuity, at least, it has the profound insight that Chinese government officials live in a completely different world from common people, so of course the Internet means something completely different to them than to common people. The RedPad’s selling points indeed meet the specific demands of officials: to know what their superiors are thinking, and to control what their inferiors know and say about them. And high price is not an issue for people who are spending other people’s money. In RedPad, we see the kind of innovation that truly matters in China: Creative Ass-kissing, and the perfection of an established business model of state capitalism: privatization of public money.  Continue reading