All posts by LLD - 193. page

This is an article from the 21st Century Business Herald on October 29, 2008. It reflects part of the Chinese scholars’ thinking on how to deal with the current international financial crisis. The full translation follows. [1]
China should establish its strategic goals based on its international political goals

The subprime lending crisis has become the largest economic crisis since the Great Depression of the 1930s that spread through all of the capitalist countries. Because the center of this crisis is the US and Europe, which control the world’s economic and politic hegemony, China is in a relatively good situation. Although the crisis is having a certain impact on our export-oriented economy, at the same time this is a rare opportunity that China won’t encounter in a hundred years. If China fully takes advantage of this opportunity, it may significantly improve its position in the international economic and political system. Thus taking a certain degree of pressure and paying a small price is worth it.

We need to bear in mind that the economic goal of an isolated country is just absolute growth alone. But in the international system, as the result of interest distribution, a country not only needs to pursue the absolute growth rate; it also needs to pursue a relative growth rate, because the latter decides the country’s position in the interest distribution pattern; it decides what role a country plays regarding cheap labor; or a country can obtain a reasonable share of international trade and economic growth. During development, a big country in the process of growth should be good at seizing the opportunities created by instability and disaster. In the face of turmoil, all countries will be affected, but only during instability can the country with the ability to sustain the risk show its superiority. A big power is not worried about itself being impacted. During global economic decline, it does not even worry if the nation’s economic absolute scale declines, as long as its decline is less than its competitors. Then its relative position in the structure of the world is in fact rising. In the future’s recovery it would obtain much more profits than previously. If it can obtain more profits in the future, then the impact it suffers today is rather an investment.

In the face of the subprime lending crisis, whether we deal with it, or take advantage of it, first we need to be clear on China’s goals. When facing any major incident, our effort should be directed to a series of goals, from the lowest to the highest goals. On this basis we can know clearly what choices we have. During this crisis, China’s goals are listed below from low to high in sequence:

Reduce and eliminate the losses from the subprime lending crisis, weaken the subprime lending crisis’ impact on China’s economy and society, and ensure that China’s economy will continue growing at a certain rate. This is the lowest goal that China must achieve.

Use the crisis to weaken the competitors’ opportunities, etc., establish and consolidate the dominant position of the country and the nation’s capital on the domestic market. This is the necessary precondition for a great power to rise in the outside world. It can also place us in an initiative situation, whether attacking or defending.

Improve to the greatest extent China’s right of discourse in the world economic system, including consolidating, and enhancing our economic impact on neighboring countries/regions and other major countries/territories, and improving as much as possible China’s influence in the whole international economic system.

Regarding making efforts surrounding the first level goals, from enhancing the export incentives, to stimulating the domestic market, we have seen it (the effort), now and what is needed is to put measures in a timely manner to implement them.

On the second level, the first thing we need to do is to use the opportunity of the subprime lending crisis impacting the headquarters of the foreign-funded enterprises, and selectively buy back the foreign enterprises with a fair option. It not only will weaken the impact of the foreign-funded enterprises on domestic bank credit, suppliers business accounts receivables, and employment, but it will also help to break the foreign investment’s monopoly, help to build and consolidate the dominant position of the country’s and the nation’s capital on the domestic market, to reduce the pressure on the country’s foreign exchange reserves’ continued high growth, and at the same time to develop investment channels consistent with the national public interest, for large quantities of domestic surplus capital. Of course, we need to be selective when we acquire domestic foreign-funded enterprises. With other things being equal, priority should be given to buying back those foreign enterprises in the domestic market. The foreign enterprises with overseas markets are the second priority; high-tech and strategic enterprises are the first priority; low-skill, everyday consumer goods enterprises are the second priority. If we cannot grasp the sales channels of the acquired business, the acquisition is no more than a pile of waste metal. It is much easier to grasp the domestic sales channels than the overseas sales channels. The acquisition of high-tech and strategic foreign-funded enterprises can help us to obtain at least some technology that we do not have, and to enhance control over the strategic business. The low skill, everyday consumer goods enterprises have a low entry barrier. Thus they may not offer the technology that we need.

On the third level, we can use the right conditions as an exchange in which we use the right format and scale to participate in the western financial crisis. This will also help to maintain China’s external demand from shrinking dramatically. The exchange condition should be across political and economic lines, etc. of which, in the economy, the possible choices include asking the other side to ensure market entry and the right of China’s goods, services and investments (thus opening a path for the growth of China’s investments); reduce or stop any interference to the trade relationship between China and the third country, thus improving China’s right of discourse in the international economy system; or taking China’s suggestions during multilateral trade and financial negotiations, and so on.

Any crisis can mean the reshuffling of the existing economic and political structure, meaning that all emerging great powers have obtained more rising opportunities. After the Opium War, China’s weakness and turmoil created an unprecedented opportunity for Japan to rise. The First World War allowed the United States to leap from a European economic colony not long ago to become a European creditor. The Great Depression in 1930s allowed the Soviet Union to quickly rise from a nation of poverty and underdevelopment, with the majority of the population illiterate. The Second World War destroyed the ruling status of the British Commonwealth and the French empire. The United States and the Soviet Union quickly replaced them. In view of this, as long as the leadership is strong, the goal is clear and appropriate, and the action is timely and strong, it is entirely possible for China to make full use of this opportunity to leap forward and upgrade its position in the international political and economic system.

Endnote:
[1] 21st Century Business Herald, October 29, 2008
http://www.nanfangdaily.com.cn/spqy/200810290106.asp

Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin met on October 28 in Moscow, Russia, for the thirteenth annual meeting between the premiers of the two countries. During the meeting, Wen and Putin exchanged their views on major issues regarding the pragmatic cooperation between the two countries. On the same day, the Xinhua News Agency published the background material on its website (Xinhuanet) about the system of the two premiers having regular meetings annually. Below is a translation to the background material. [1]

In April of 1996, Yeltsin, the Russian president at the time, visited China. He and Jiang Zemin, who was then the chairman of China, came to an agreement that there should be periodic meetings between China and Russia. They both agreed that it was very important that different branches of the two countries could communicate frequently in various ways and it was especially important for the leaders of the two countries to get in touch regularly. From December 26 to 28 of the same year, Li Peng, the premier of China at the time, went to Russia for a working visit. During the visit, the two sides agreed to a new system of having annual meetings between the two Premiers. Since the establishment of this system, the premiers from the two countries have met once every year.

There are three major regular meeting branches under this system: the meeting between premiers, the meeting for humanitarian affairs cooperation, and the meeting for energy negotiation among representatives. In all the foreign cooperation systems, this one [the meeting between the premiers] has the highest level, the most complete framework, and the widest area of discussion. The establishment of this system has pushed forward the good neighborliness and mutual beneficial cooperation, and has driven a healthy development of the strategic partnership of Russia and China. The major successes resulting from these meetings in recent years are as follows:

9/8/2001: Chinese Premier Zhu Rongji and Russian Premier Kasiyanov met in St. Petersburg for the Sixth Regular Meeting and signed a joint communiqué.

8/22/2002: Chinese Premier Zhu Rongji and Russian Premier Kasiyanov met in Shanghai for the Seventh Regular Meeting. The two parties thoroughly exchanged opinions on issues such as enhancing cooperation between the two nations, anti-terrorism, and easing tensions in hot spot regions.

9/24/2003: Chinese Premier Wen Jiabao and Russian Premier Kasiyanov met in Beijing for the Eighth Regular Meeting. The two parties both agreed that at the same time of making breakthroughs in the development of bilateral economic and trade relations, the two countries should extend humanitarian cooperation.

9/24/2004: Chinese Premier Wen Jiabao and Russian Premier Fradkov met in Moscow for the Ninth Regular Meeting. In a friendly and collaborative atmosphere, the two parties summarized the cooperative achievements between the two countries, worked over ways for solving existing problems, and determined the priorities of future works.

11/3/2005: Chinese Premier Wen Jiabao and Russian Premier Fradkov met in Beijing for the Tenth Regular Meeting. The two sides signed eight agreements in the fields of economics, education, health, banking, etc., and issued the “Joint Communiqué of the Tenth Regular Meeting Between Chinese and Russian Premiers.”

11/9/2006: Chinese Premier Wen Jiabao and Russian Premier Fradkov met in Beijing for the Eleventh Regular Meeting and both attended the closing ceremony of China’s “Year of Russia.” The two sides signed 17 agreements in the fields of energy cooperation, financial insurance cooperation, news exchange, etc.

11/6/2007: Premier Wen Jiabao and Russian Premier Zubkov met in Moscow for the Twelfth Regular Meeting. They signed a joint communiqué, and together attended the signing ceremony for signing the agreements on the cooperation between the two countries in the fields of trade, energy, technology, banking, border trade, etc.

Endnotes:
[1] Xinhuanet, October 28th, 2008
http://news.xinhuanet.com/world/2008-10/28/content_10267944.htm

The following is the translation of a series of interviews Radio Free Asia (RFA) conducted on the general election of village heads in China. [1]
BEIJING — On November 4, 2008, the U. S. elected an African-American, Barack Obama, as the next President of the United State of America. Yet, in China, some of the websites were still discussing the issues related to the election of village heads, and the people sighed over the struggling village elections in China.

Guang Ming Daily, an official Chinese News website published an article Xu Xun-Lei titled, "The U.S. Presidential Election Versus the Election of Village heads in China." The author disclosed that in recent years, there have been a lot of issues with the election of village heads in China, including bribery, the Village Committee and the Village Party Branch of the Chinese Communist Party (CCP) fighting for interests and power, and the lack of the judiciary playing its role that has caused corruption among village officials. The author quoted some of well-known experts within the Party, "Despite of existing issues, the direct election of the villages needs to be extended to the township level. In recent years, there are many people requesting that the general election of officials [be expanded] from the village to the township level, but the Central Government and many local government officials have opposed such requests." The author believes that this has been an obvious obstacle for moving one-step, or even half-a-step towards democracy. The general election of village heads in China was piloted in the mid-1990s [but] until now, it is still very hard to move forward. Cheng Xiao-Nong, the Editor-in-Chief of "Contemporary China Studies," a magazine in the U.S., has been working for the Chinese Reformation Committee. He is very familiar with the problems of Chinese farmers. He expressed that, in fact, the general election of village heads in China is deviated; it cannot be regarded, in a sense, as a genuine form of democratic election.

The CCP has used some clever ways to maintain its power; as a result, the Village Committee Organization Laws have been short-changed. In the end, they have gradually become the CCP’s former local appointed organizations who appoint officials for the villages; then, a fake voting system is used to pass the nomination. First, competition is not allowed; second, all candidates must be approved by the CCP beforehand. Therefore, the general election of village heads is much less meaningful; it has returned into the CCP’s local organization for appointing the village officials.

Mr. Cheng believes that the reason for the general elections of village officials running into difficulties is that the CCP does not want to give up its power in a "One-Party-Totalitarian System."

"The earlier elections of the villagers, generally, were relatively clean and normal. To the CCP, on the one hand, it was desirable to have the villagers’ general election form; however, it cannot allow the officials who are elected to be out of the control of the CCP. Therefore, along the way, the basic direction of the local governments has been to reinforce the leadership of the CCP, and there has been a gradual manipulation of the elections mainly through intervention from local CCP organizations.

Li Hong Kuan, the past Editor-in-Chief of a U.S.-based online magazine, "Big Reference," regards the general elections in Chinese villages as not comparable to general elections in democratic countries.

"They are incomparable because they are from systems of a different nature. In the United State, at the general elections, the Executive Head of a government is elected, but not the village heads. Frankly, in a village, the Village Secretary of the CCP, picks a running dog, or a gopher as the Village Head to carry out the CCP’s Central Birth Policy. It was like in World War II, the Japanese selecting a Committee Head to govern the villages by the same token. The Head of the Committee had no authority; the main power was in the hands of the Japanese. The real power over the land and the allocation of benefits belongs to the Village Branch Secretary of the CCP."

According to "the Village Committee Organization Law," the Village Heads are directly elected by the villagers expressed Cheng Xiao-Nong. Any organizations or individuals cannot appoint or replace [the village head]; however, local organizations of the CCP often intervene in the elections in the villages. In some areas, it happens all the time that the local governments appoint or replace the village heads. Cheng believes that the root of the culprit is "the One-Party-Totalitarian System," of the CCP that has caused difficulties for the general elections in the villages.

Endnote:
[1] Radio Free Asia, November 6, 2008,
http://www.rfa.org/mandarin/yataibaodao/xuanju-11062008110216.html