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On Foreign Corporations

China’s State Media Comments on World Fortune 500 Companies: Avoid Taxes, Pinch Pennies, and Abuse China’s Natural Resources

[Note: Below is a commentary from China’s state media on the world’s Fortune 500 corporations that are doing business in China. The article was initially published in Beijing Times after an investigative report on the "2005 Ranking of the World Fortune 500 Companies with Investments in China" organized by Southern Weekend was released on December 6, 2005, and posted on Xinhuanet on December 7, 2005. The article, titled "World Fortune 500 Companies Avoid Taxes in China; Some are Penny-Pinching and Abuse China’s Natural Resources," is translated below.]

"Among World Fortune 500 companies, which ones are the best investors in China? What kind of impacts do their investment activities make on China? The "2005 Ranking of the World Fortune 500 Companies with Investments in China" published by Southern Weekend on December 6 answered these questions. However, this list also revealed some of the dark secrets of these international corporations’ operations in China: Some corporations are extremely stingy, avoid taxes in China, and abuse China’s resources."

The List Focuses on the Corporations’ Responsibilities and Contributions; the World Fortune 500 Companies’ Scores Are Consistently Low

"According to Southern Weekend‘s evaluation criteria, Samsung won first place as the best investor on the list with a score of 70.409 points, followed by General Motors (57,206 points) and Philips Electronics (53.783 points.) Nearly 400 corporations participated in the evaluation. Because many corporations had a very low score, Southern Weekend decided to publicize only the top 70 best investors in China. The 70th on the list was Astra Zeneca, a U.K. pharmaceutical company, scoring 13.783 points.

"In terms of the evaluation criteria, Mr. Cao Xing, a chief supervisor at Southern Weekend, explained that there were five categories of evaluation criteria, including the amount of investment in China, the business operations in China, the social responsibilities, the local contributions, and the brand image in China. The amount of investment in China constitutes 20 percent of the score; the business operations, 25 percent; the social responsibilities, 20 percent; the local contributions, 25 percent; and the brand image in China, 10 percent. ‘This ranking emphasizes responsibility, development, and harmony with the environment,’ Cao explained.

"In addition, Southern Weekend also published four related rankings. Samsung in China won first place for its best business operations in China. Nissan Investment Company, Ltd., in China is ranked first as the best employer. General Motors in China is ranked first for its local contribution. And Proctor & Gamble in China wins first place for its best public image in China.{mospagebreak}

"To emphasize the objectivity and fairness, Cao said this evaluation project does not accept any corporation’s sponsorship or advertisement. ‘We have an allocated budget for this project,’ said Cao. The data used for the evaluation came from the Chinese government and public sources. For example, they looked at the top 500 corporations published by the Chinese government every year, the public information of all the corporations with stocks, etc. In addition, Southern Weekend conducted an investigation of these companies. They also verified all the data used for the evaluation."

Decoding the List

1. Most corporations are not good taxpayers in China

"One surprising data is that the majority of the world’s fortune 500 companies score low on paying taxes [in China]. The result has once again proven the common knowledge that not all international corporations are model taxpayers.

"Samsung, which ranked top on the list, scores 1.203 points on paying taxes, and General Motors has a full score of 10 points. Of the top 70 international corporations on the list, only 21 of them score above one point while the rest score lower than one point.

"Even though international corporations score extremely low on paying taxes in China, some people question whether some companies are given too high a score in this category. Some reporters say that some international corporations are very good at taking advantage of China’s tax policies to get tax returns, to get tax exemptions, to avoid taxes, and to use some regions’ favorable tax policies to reduce taxes."

2. No Corporation Stands Out for Charity Donations

"Besides taxes, international corporations in China are not generous in giving charity donations. Many corporations are penny-pinching. Samsung in China scores 0.877 point in charitable giving. IBM ranks number one in charitable giving with a score of 4.653 points. Twenty-seven corporations score zero."

3. Exploiting Workers

"Some international corporations in China are shameful in using the labor resources. Mr. Xi Guoming, chairman of International Corporation Research Center at Nankai University, said that larger international corporations in China are better in that they pay their employees better than domestic companies. They also provide medical insurance, employee training, and educational reimbursements, and so on. Some smaller international companies are not good to their human resources. In some regions in southern China, the average salary was about 500 yuan (US$63) [per month] during the late 1980s. According to research in the past few years, the average salary in these regions remains the same. This means that employees did not obtain benefits proportionate to the value they have created. The benefits went to the international corporations."{mospagebreak}

4. Leave Environment Problems to the Chinese Government

"This list also indirectly exposes the truth about another problem: The demand in China has created the acceleration of consumption of the world’s energy resources. Actually, the large quantity of energy and resources consumed by international corporations are calculated as China’s consumption. In addition, when these corporations use China’s resources, they fail to pay the costs.

"At the press release, Mr. Xi Guoming pointed out directly, ‘It’s undeniable that some foreign corporations are abusing China’s resources.’ For example, China transferred land or rented out land to international corporations at a very low price, causing an imbalanced price for using the land, which is unfavorable to the use of China’s resource.

"Xi said that foreign corporations intentionally move their factories with pollutant products or pollutant manufacturing environments to China. On the other hand, some local Chinese governments neglect the environmental protection regulations when inviting foreign investments. Hence, some corporations … moved the pollution problem to China and the Chinese government."

Translated  by CHINASCOPE from  http://news.xinhuanet.com/fortune/2005-12/07/content_3886247.htm

China’s State Media Identifies "Anti-China" Scholars

[Note: The article below, titled "Who is Viciously Attacking China?" was original published in Global People (the magazine under Chinese Communist Party media People’s Daily group). The article was reposted on Xinhuanet on December 18, 2006. The article identified seven Western scholars from the United States, Japan, and Russia as "vicious attackers (against China)."]

"For several years, absurd theories like ‘China Threat,’ ‘China Collapse,’ ‘China Split,’ and ‘Yellow Peril’ have continually attacked China from the West. These arguments and rhetoric are not worth refuting, since they have never been real and will not become reality in the future. However, they have harmed China’s international image and have disrupted China’s efforts at development and engaging the world, and for this reason they should be taken seriously by Chinese people.

"So who are the people planning and disseminating these irresponsible opinions? How have they maligned China, and what is their goal in doing so? For the answer, you must look to ‘China’s vicious attackers.’ Only by gaining a deep understanding of their words can you truly uncover the means and motives of those attacking China, and by doing so lay bare their sinister machinations. Therefore, Global People has selected several ‘attackers’ from the United States, Japan, and Russia:{mospagebreak}

"Bill Gertz, The Washington Times: For 20 years he has been spinning the ‘China Military Threat Theory.’ Bogus news stories like ‘Chinese submarine tracks American carrier’ and ‘China paid millions to steal B-2 bomber stealth technology’ were entirely his creation. Most galling, this forger has won the support of the Pentagon and some members of Congress.

"Larry Wortzel, former assistant army attache at the U.S. Embassy in China [1988-1990]: This is a man who detests China to his very bones. He worked within the military intelligence system monitoring China for 25 years. In his eyes, China’s planes and guided missiles come from Chinese exchange students and computers, and pose a ‘serious threat’ to the United States. In the first half of this year, the U.S. State Department’s purchase of Lenovo computers was scuttled by him at the last minute.

"Michael Pillsbury, Pentagon consultant: His greatest trait is that when he is in China, he speaks of ‘friendship,’ but when he returns to the United States, he talks of ‘threat.’ He claims to have ‘a good deal of understanding of Sunzi’s The Art of War,’ but the strange thing is that he ‘discovered’ from The Art of War a ‘threat’ coming from China. He was the main author of the Pentagon’s 2005 Report on the Military Power of the P.R.C. that trumpeted the ‘China threat.’

"Gordon G. Chang, Chinese-American opportunist: ‘China’s economy is in decline and has begun to collapse; the time will be prior to the 2008 Beijing Olympic games and not after….’ His ‘China collapse theory’ is so much sensationalism. Though he is ‘besieged’ at every turn because of the utter nonsense that issues from his mouth, his wacky theories still find purchase across the globe.

"Shintaro Ishihara, Governor of Tokyo: Chief among the anti-Chinese in Japan, he started on the anti-China road 40 years ago. By cursing China to ‘split apart’ and calling for a re-invasion of China, he has become a classic representative of vicious attacks on China. Worth being aware of is that his anti-China ideas run deep in the fringes of Japanese culture and have extremely negative effects.

"Mineo Nakajima, ‘anti-China hero’ of Japanese academia: The earliest person in Japan to put forth the ‘China collapse theory,’ and an advocate of the ‘China split theory,’ he goes traveling every month for exchanges with anti-Chinese elements in other countries and to spread his anti-China fallacies. However, nothing that he has predicted has come to pass, so he had no recourse but to return to the ‘China threat theory.’

"Evgeniy Nazdratenko, Russian official: He is one of the leading modern drum-beaters for the ‘Yellow-Peril Theory.’ ‘China has plans to expand its population across the Russian border,’ ‘Russia will inevitably fall to become a raw-material tribute-state for China’— during his tenure as governor of Russia’s Maritime Region, he not only made noise about this sort of twisted theory but also instituted discriminatory policies toward Chinese people and gave orders to expel tens of thousands."

Translated by CHINASCOPE from http://news.xinhuanet.com/world/2006-12/18/content_5501723.htm

Reclaiming Chinese Culture

If it’s true you can learn a lot about someone from who are his enemies (even if imagined), then so too, it would seem, can one learn a lot about a nation-state. Or Party-state, as in the case of mainland China, which has been ruled by an unelected Communist Party (the CCP) since 1949.

One needs look no further than the bizarre (un)diplomatic efforts of Chinese officialdom over the past couple of weeks for confirmation. For around the world, embassy officials and consuls of the Chinese state have been putting the Chinese people’s hard-earned tax dollars to work trying, oddly enough, to bring down a cultural show. And a Chinese cultural show, at that—New Tang Dynasty (NTD) Television’s Chinese New Year Spectacular.

What would prompt such abnormalities, then, as crank calls to the show’s hotlines trying to crash the phone system, threatening letters to show sponsors, and even attempts to pressure venues into canceling the event? Granted, communist rulers sometimes find enemies in strange places—witness the notorious campaign to once "eradicate sparrows," or the branding of the Mary Kay cosmetic company as an "evil economic cult."

But isn’t NTD’s show itself Chinese culture—a shared, collective good? Isn’t this something for everyone, especially officials, to be proud of? What could be threatening to a powerful regime about petite ladies prancing about doing innocuous things like a fan dance?

The answer, I would suggest, cuts to the heart of a fascinating set of issues, not the least of which is who is "China," who gets to be "Chinese," and whether it’s possible for a Chinese cultural space to exist that is not managed and orchestrated by Beijing’s rulers.

Since the ascendancy of the Communist Party in China, "culture"—defined locally as performing arts, shared stories, traditions, etc.—was seen as means par excellence of disseminating ideology among the less (and sometimes more) literate. Performing troupes would thus bring the message of the Party to the masses through various theatrical shows. Values such as "struggle" and the demonizing of new social pariahs such as "landlords" were standard fare.

Traditional culture, meanwhile, became the unlikely fodder for these tellings; traditional stories and themes were refashioned in barbarous, if unlikely, ways. This gave way to all-out hostility toward and assault on China’s traditional past by the Marxist rulers during the Cultural Revolution (1966-76), which was more akin to cultural insanity: Imagine Red Guard troops taking baseball bats to Buddha statues.

With the death of Mao in 1976 things normalized, but only slightly, perhaps. While artists were no longer jailed or beaten publicly, the arts, or Chinese culture proper, remained quite firmly in the Party’s hands. New contortions of the past have marked this (the "post-Mao") era, with most instantiations being contrived, if not for purposes of ideology, at least to cater to the imaginations of tourists from afar (something like Confucius meets Colonel Sanders).{mospagebreak}

In each case, the Communist Party has wed itself to Chinese culture, and claimed it for its own—and as its sole, self-proclaimed, proprietor, felt a sense of entitlement, if not possessiveness.

With the arrival of NTD’s first Chinese New Year production in 2003, the Party-state’s monopoly on culture was faced with—in its own words—a "crisis." The people now had an alternative, as it were. How so?

First, the formation of NTD as a media entity marked, judging by scholarship on Chinese media, one of the first Chinese-language media ventures truly independent of China’s Communist Party. Confirmation of this is found quickly in the stunning extent of efforts by Chinese authorities to thwart the station. Many of its New Year performers, like the station’s founders, could be called Chinese communism’s discontents—people who have seen and gone through a lot. Several I have interviewed were abused something horrible for being artists (and thus "bourgeoisie") under communist rule. They strike me as an uncompromising, determined bunch. Whereas indicators are that many Chinese media outlets have been bought off or bought out (call it the CCTVization of the world), these folks are dogged.

Secondly, the NTD New Year’s show is very much Chinese. Positively so. And that makes it fundamentally different from the Party’s brand of communist culture. (As to the latter, one almost has to see for oneself the uniformed Chinese PLA soldiers dancing ballet to believe it.) The latter is the brainchild of a German figure, Marx, that came by way of the then-Soviet Union.

By contrast, the NTD show envisions itself as a return to, and draws inspiration from, China’s golden age—the Tang Dynasty (617-907). The Tang was a time of tremendous cultural diversity, tolerance, and religious devotion; note the contrast to China’s contemporary autocratic state. The show seeks to, like NTD itself, empower its viewers insofar as it reaches back to a shared past—unmediated by Party or state—for common values, ideals, and inspiration.

(And given that it was NTD that broke the SARS story—fully three weeks before China’s state media admitted to a top-down cover up—you might call NTD "the people’s station." It was, unlike Beijing, more concerned with the Chinese people’s welfare than the Party’s image.)

The show amounts to nothing less than a refashioning—or recovery—of Chinese self, I dare say. It suggests, tacitly, that there are other interpretations and visions of Chinese culture available, and that venturing in such directions need not be feared. It’s part of a process of becoming.{mospagebreak}

When we hear communist officials thus denounce the show as being "anti-China" (which is often), it is the highest form of flattery, it would seem. For in that ironic accusation is confirmation that NTD has ruptured a five-decade-long conflation of Party with China, of Communist Culture with Chinese Culture, and with being patriotic with loving the Party. One is tempted to say that these are two visions of Chineseness—one meant to control, one to empower.

Nobody can say for sure how all of this will play out, but for the historically minded it is a fascinating, hopeful moment. Until all is said and done, I’ll be enjoying the show.

Matthew Kutolowski is a Ph.D. student studying Chinese religion and culture in the department of East Asian Languages and Cultures at Columbia University.

China’s Top 10 College Scandals of 2006

1. Shanghai Jiaotong University

In February 2003, Chen Jin, a testing engineer at Motorola, hired another person to remove the original logo on the MOTO-Freescale 56,800 chip that he purchased in the United States and to replace it with his own logo. This way, he appeared to have "developed" the so-called China Chip No.1. Because of his "outstanding research," he was offered the titles of professor, advisor of doctoral degree students, and president of the Microelectronics Institute. Thanks to "China Chip No.1," Chen Jin applied for dozens of heavyweight research projects and received grants totaling 1.1 billion yuan (US$140 million) for his "research." In January 2006, his plagiarism was exposed, shocking the whole country.

2. Beijing University

Shing-Tung Yau is a renowned professor of mathematics at Harvard University. In July 2006, in an interview with reporters, he claimed "most of the talent that Beijing University allegedly imported from abroad is bogus." According to a New York Times article published on October 17, 2006, "For the last year Dr. Yau has carried on a campaign against Beijing University, accusing it of committing fraud by padding its faculty with big names from overseas and paying them lucrative salaries for a few months of work."[1] Many other media outlets picked up this report.[2]

A survey in Science magazine showed that the number of such part-time professors in China had grown from 6 to 89 over the last six years, while the number of full-time professors had risen from 66 to 101. The arrangement allows Chinese universities to piggyback on the glory of work these people do in their other jobs. Dr. Yau pointed out that it also drains resources that should go to young researchers.

The authorities at Beijing University subsequently accused Dr. Yau of distorting the facts. At once, Dr. Yau, Beijing University authorities, many scholars, and China’s Ministry of Education all began hotly debating this issue. According to the online comments, most people agree with Dr. Yau’s allegations.

3. Nanjing Normal University

On September 27, 2006, university authorities "forced" 10 female students majoring in choreography at its College of Music to come to a party to dance with the high-level leaders who were visiting the school. The notorious scandal is that China’s education system is ultimately joining the tide of degeneration. They had to happily accommodate the desires of these corrupt officials.{mospagebreak}

4. Sichuan University

In 2006, a number of bogus academic research results at Sichuan University were exposed. In January, before Professor Qiu’s fake research was exposed, the bogus research of another scholar, an academician of Chinese Academy of Sciences, was revealed, as was that of the university’s vice secretary of the Party. The Ministry of Education promised that the authorities of Sichuan University would investigate the incidents and disclose their findings to the Chinese people. As of today, no such information has been published.

5. Shanghai Normal University

In June 2006, the theses of 12 undergraduate students majoring in Oil Painting were rejected. The root cause: University President Xu Mangyao had a major academic disagreement with Liu Dahong, the thesis adviser for the 12 students. Sadly, all of the 12 theses became the sacrificial objects of the academic conflict.

6. Beijing University of Foreign Languages

On April 18, 2006, the college authorities accused Wei Yin (nickname), a Ph.D. candidate in 2002, of harassing, humiliating, and cursing her dissertation adviser using mini ads and e-mails. Because she also allegedly harassed another two faculty members, she was expelled from the school based on "sufficient evidence." After she failed in her appeal to the college, Wei Yin presented her case to the Education Committee of Beijing. The committee rescinded the decision for expulsion that the Beijing University of Foreign Languages authorities made. The media reported that nobody knows whether it was Wei Yin or the authorities at her college who misbehaved. In another scandal at Beijing Jiaotong University, exposed in 2005, a female graduate student allegedly used her body to get the admissions exam professor to let her see the graduate admission exam.

7. Huazhong University of Science and Technology

In June 2006, Professor Xiao Chuanguo of the college formally filed a lawsuit at Wuhan City Intermediate Court against Fang Zhouzhi, a scholar "renowned" for being against fake science, often called the "anti-fake science knight." Professor Xiao complained that he was not promoted to be an academician of Chinese Academy of Sciences because Fang slandered him in an anti-fake science article that he published on the Internet. This was unprecedented news in Chinese academic circles as it forced a judge, who knows nothing about science or medicine, to make a judgment on an academic issue.{mospagebreak}

8. Lanzhou University

As a key college in greater northwestern China highly supported by the Ministry of Education, Lanzhou University has a lot of privileges regarding various aspects of state policies. In October 2006, however, a major scandal involving commercial bribery was exposed. Two high-ranking officials from the university—the president and the Party secretary—exploited their power in regard to a residential project and a new hospital building project to amass as much as 15.93 million yuan (US$2.0 million) in bribes.

9. Tianjin University

In November 2006, Shan Ping, the former president of the university, lost his title as representative to the 10th National People’s Congress. The reason was that Hong Jianmin, the vice president in charge of the university’s finances, abused the school treasury by borrowing money to trade in stocks. He lost 37.5 million yuan (US$4.7 million) of the school’s money, breaking the Chinese college record for the largest amount of college money to be diverted to the stock market.

10. People’s University of China

While extravagant construction in China’s colleges is no longer news, this latest incident demonstrates how today’s colleges in China are meticulously looking after their campuses instead of the fundamentals of college education. In August 2006, People’s University of China reportedly spent several million yuan to install two luxurious "tourist elevators" in a three-story cafeteria building. The "tourist elevators" outside the wall of the three-story building are to "demonstrate the scale of internationalization."[3]

Translated by CHINASCOPE from CReaders.net February 9, 2007.

Footnotes:
[1] http://www.nytimes.com/2006/10/17/science/
17yau.html?pagewanted=3&ei=5088&en=d9355e80aff72279&ex=1318737600&partner=rssnyt&emc=rss
[2] http://www.danwei.org/scholarship_and_education/peking_universitys_fake_sea_tu.php
http://news.xinhuanet.com/english/2005-08/17/content_3367440.htm
[3] http://news.creaders.net/breaking/newsViewer.php?id=70716

Authorities Find Scapegoat to Blame For the Death of a Sixteen-Year-Old

On January 16, 2007, following the news of the death of 16-year-old former hotel waitress Yang Daili, more than 10,000 angry civilians flocked to the Lai Shi De Hotel in Zhuyang Town, Dazhu County, Dazhou City, Sichuan Province, to call for the arrest of the three suspects who are high-ranking Party officials in Sichuan.

Civilians Protest the Death of 16-Year-Old

By afternoon, as the situation grew beyond control, local authorities dispatched large contingents of policemen to suppress the angry civilians. According to witnesses, besides being beaten up and threatened by the policemen, numerous civilians were also arrested, including local students and children. An infuriated resident then set a fire in the hotel, which lasted for the next five hours.

An agitated worker at the Lai Shi De Hotel revealed: "It is a known fact that Yang Daili was gang-raped by the three officials who visited the hotel on December 29. We have witnesses and material evidence to prove this. That is why we are so angry. To make matters worse, the local authorities have done all they can to cover up the incident and destroy all the evidence. Many websites and forums where we have posted related news have started censoring our voices.

"Moreover, I’ve heard that Yang’s family has also come under surveillance by the authorities. I wonder how things will turn out."

According to a worker at the Zhuyang Town Police Station who wishes to remain anonymous, "More than 10,000 civilians have come to protest over the past two days. Many police officers have already been beaten up.

"After the incident, Party officials from the provincial Public Security Bureau, the Provincial Party Council, and the Municipal Party Council all met together. I heard that the central government has also caught wind of this. So far, they have settled it by arresting the bartender of the hotel, Liu Zhikun."

The anonymous worker also revealed that the hotel is run by Xu Feng, son of the chief of the local West District police station.

Yang Wanted to Quit Her Job

Yang Daili, 16, was from Luojia Village, Dazhu Town, Sichuan Province. After graduating from middle school, she decided to start working, and on December 1 she formally began her employment at the Lai Shi De as a waitress. Yang’s father, Yang Wanguo, revealed: "On December 20, she told her mother that she was not going to work at the hotel anymore after collecting this month’s salary. She said that there were a lot of unusual management practices going on in the hotel and that there were a lot of drug addicts."{mospagebreak}

On December 29, three high-ranking Party officials in Sichuan Province came to Lai Shi De. They spotted Yang Daili immediately, named her as their waitress, and wanted to take her out. The next day, Ms. Yang was found lying in one of the hotel rooms. A worker at the Lai Shi De found that she had been drugged, a tooth was missing, her tongue was cut, and a nipple had been sliced.

Local Authorities Cloud Her Autopsy Results

Yang Wanguo continued, "The hospital gave me a report saying that she had died before arriving at the hospital. Even though the Public Security Bureau sent someone to perform the autopsy the same day afternoon, I have yet to receive a report. I checked her body in the hospital and saw no signs of injury except for some blood in her mouth. Later, in the autopsy, they said that they found some marks on her neck and back, as well as some blood in her genital area. The county government told me out of nowhere that my daughter had been raped before she died.

"The next day, however, I sensed something had changed. Initially they told me that there were four needle holes on her arms, but when the Provincial Judicial performed a second autopsy the next day, they told me that the four needle holes were fake. And as of today, I haven’t seen any report on her being raped. They’ve got us all confused."

"Liu Is Not The Culprit"

A local state-run media proclaimed the next day that the "collective mass event" had been basically settled and that "the hotel bartender, Liu Zhikun, the prime suspect in this rape-and-murder incident, had been arrested."

However, Ms. Yang’s family feels that Liu could not be behind the murder. A source pointed out: "They simply refused to do anything for 10 days after the girl’s death. Only after the civilians got all worked up and set a fire in the hotel did they finally, and very suddenly, arrest a suspect. Weren’t there three officials who raped the girl? What has it got to do with the bartender?"

Moreover, another anonymous source said: "An emergency meeting was held at 4:00 a.m. on January 18. It was the bartender who found the girl, so they decided that he was the best scapegoat. Every civilian knows that it is definitely not the bartender. The guilty ones are the three officials."

Indeed, the Internet community is far from satisfied with the result. An anonymous post was found on the Net: "I’ve heard that there are people in the county Party council involved, and there are quite a number of people in the provincial government backing it up."

Hundreds of other angry posts have emerged: "The officials all ganged up with each other," "Chinese law is no longer the law of the people, it is the law of the government," "Corruption! Even when they commit a crime, they can make use of all their power to cover themselves up," "To think that the Provincial Party Secretary Wang Wei proclaimed that Yang Daili’s death is just ‘the size of a butthole!’" "What kind of world is this! The powerless civilians are worthless in the eyes of those officials!"

Can Sun is a correspondent for Chinascope.

Colors in Chinese Culture

For several thousand years during China’s history, other than in the pre-Qin and Qin dynasties, the Chinese people have used brilliant colors. Today, red is a very popular color in modern China. But the ancient people before the Ming Dynasty did not pay special attention to the color red, contrary to modern people’s assumptions.

Yan Se means color in today’s Chinese; however, in ancient China, the word Yan Se had a meaning that was not completely the same as it is today. It actually meant "facial color." In the book Shuo Wen Jie Zi (Explaining Characters and Expressions), Yan means the area between one’s eyebrows, and Se means qi (or energy). In the commentaries added by the noted scholar Duan Yu Cai, it says: "All the shame, regret, joy, and worries are called Yan Se (facial color)" because "one’s heart reaches qi and qi will reach the eyebrows." So it is obvious that initially Yan Se referred to one’s facial color. Only in the Tang Dynasty did Yan Se start to carry the meaning of all colors.

About 5,000 years B.C., during the time of Huang Di (The Yellow Emperor), people worshiped a single color. After Huang Di and through the Shang, Tang, Zhou, and Qin dynasties, the emperors selected colors as symbols based on the theory of the five elements. The order of five elements is water, fire, wood, metal, and earth. These correspond with the colors black, red, greenish blue, white, and yellow, respectively. Ancient Chinese people believed that the five elements were the source of everything in nature. As the source of everything comes from these five elements, the colors come from the five elements as well. Based on the understanding that "colors come naturally while black and white are the first," people gradually established the relationship between the colors and the principle of the five elements, which guided the natural movement of heaven and the heavenly Dao.

In the traditional Chinese system, five colors—black, red, greenish blue, white, and yellow—are regarded as standard colors.

The color black was regarded as the color of heaven in the Yi Jing (Book of Changes). The saying "heaven and earth of mysterious black" was rooted in the ancient belief that the northern sky shows a mysterious black color for a long time. They thought that the North Star is where the Tian Di (heavenly emperor) is. Therefore, black was regarded as the king of all colors in ancient China. It is also the single color that was worshiped the longest in ancient China. In the Taiji diagram of ancient China, black and white are used to represent the unity of Yin and Yang.

According to ancient Chinese concepts of color, white represents multiple things. In the theory of five elements, white corresponds to gold, which shows that the ancient Chinese people felt that the color white symbolized brightness. They classified it as a standard color, representing the nature of purity, brightness, and fullness.{mospagebreak}

The color red symbolizes good fortune and joy to the Chinese people.

Yellow is the color of the center, symbolizing the color of the earth. In China, there is a saying, "Yellow generates Yin and Yang," regarding yellow as the center of all colors.

Greenish blue symbolizes the spring, when everything is brimming over with vigor and vitality.

During the pre-Qin period, the symbolic colors of ancient China started to show a tendency toward diversification. In order to support the Zhou Dynasty’s ceremonial observances, Confucius defined the colors of yellow, greenish blue, white, red, and black as the standard and superior colors. He related the five colors to benevolence, virtue, and kindness and incorporated them into formal ceremonies. During the Zhou Dynasty, the color red was worshipped. Lao Zi, on the other hand, said that "five colors make people blind," so black became the symbol of the Dao.

During that period of time, the symbolism of various colors was widely incorporated into the naming of seasons and directions. Each season was given a color and a direction. Spring was represented by greenish-blue sun, its main guardian god was a green-blue dragon, and its direction was east. Summer was represented by reddish brightness, guarded by a red sparrow, and its direction was south. Autumn was represented by white, guarded by a white tiger, and its direction was west. Winter was represented by black, guarded by a black tortoise, and its direction was north. The color yellow was the symbolic color of the five legendary emperors of ancient China. In China, yellow had a special symbolic meaning and was the center of the five colors, symbolizing the color of earth.

Since the Qin Dynasty, color gradually assumed a decorative function, and the colors of ancient China also started their rich and colorful development. After the Han Dynasty, yellow became the special symbolic color of the royal court because of its brilliance, and its shade was close to a golden color. Ordinary people were not allowed to wear yellow clothes. Throughout all the dynasties, clothing for officials of different ranks were also of different colors. Usually, people regarded the five secondary colors as the inferior five colors. During the Han Dynasty, bright purple was often regarded as an extremely precious and rare color. In the Tang Dynasty, the color purple was used in the clothing of officials ranking above "fifth class." Purple borders were considered elegant.

Colors were also widely used in city planning, murals, and paintings. For example, after the Ming Dynasty, only those who were related to the emperor could live in houses with red walls and yellow roof tiles. Ordinary people’s houses could be made only of blue bricks with blue roof tiles.

In Chinese folk traditions, the culture around color is even richer. Yellow is the color for emperors—royal palaces, royal altars, and royal temples often use it. Yellow also represents being free from worldly cares; therefore, it is also a color respected in Buddhism. Monks’ garments are yellow and temples are also yellow. Red is one of the colors beloved by the Chinese people. During the celebration of the New Year, holidays, and gatherings, the color red is a must. Purple is the color of a propitious omen and solemnity. White is the color of mourning. Ancient Chinese people wore white clothes and hats only when they mourned for the dead. That tradition is still practiced to this day.

The Huge Trade Surplus And China’s Economy

Looking back at China’s economy in 2006, the most remarkable phenomenon was the gigantic trade surplus of US$177.5 billion. The total foreign trade in 2006 amounted to US$1.76 trillion, representing an increase of US$338.78 billion, or 23.8 percent over the level in 2005.

From January to November 2006, China’s total imports and exports reached US$1.69 trillion. The exports of US$875.4 billion represent a 27.5 percent growth over the first 11 months of 2005; the imports of US$718.52 billion represent a 20.6 percent increase over the same period of the previous year. The 11-month trade surplus was US$156.52 billion.

Year 2006 was significant not only for strong trade growth but also for the trade surplus that grew ever larger almost every month. Monthly trade in October and November reached a record high of US$23.83 billion and US$22.92 billion, respectively. The monthly trade surplus from January to December was, in billions: US$9.49, $2.453, $11.19, $10.457, $13.004, $14.5, $14.61, $18.8, $15.3, $23.83, $22.92, and $21.0, respectively, totaling almost US$180 billion.

The 2006 number was almost double that of 2005’s US$101.0 billion. For previous years, the surplus was US$50 billion in 2004, US$30 billion in 2003, and US$22.5 billion in 2001. What caused the huge growth in the trade surplus over the past two years?

China Has Exported 70 Percent of Its Economic Growth

The US$1.76 trillion trade volume in 2006 was approximately 65 percent of China’s GDP. This ratio is not only an indicator of China’s dependence on foreign trade but also evidence that China’s products flow to foreign countries. Yu Yongding, a famous scholar, once described it: "Trade surplus means a misplaced resource allocation."

The ratio of trade surplus to GDP is an important figure. China’s trade surplus constituted 2.5 percent of the GDP in 2004, 4.5 percent in 2005, and more than 7.0 percent in 2006. If China’s economy grew by 10.5 percent in 2006, then about 8.0 percent of the growth would have gone to foreign countries. Only 2.5 percent of the high growth benefited the Chinese people.

People may say that 7.0 percent of the net exports from the GDP are from Chinese people’s savings accounts, and that it is equivalent to the Chinese people lending US$180 billion to foreigners. It is questionable, however, whether these loans will ever be paid back.{mospagebreak}

China, a developing country that should have used its valuable resources to improve its people’s living standards, has instead been exporting a huge volume of resources. This is indeed the most critical problem in China’s growth mode. Of course, China is also accepting foreign investment. If we assume 2006’s direct foreign investment is US$50 billion, this amount could partially offset the resource drainage from the trade surplus.

The media has reported that, in November 2006, Japan’s trade surplus surged 54 percent, but the total amount was merely US$7.96 billion. After 59 months of continuous growth, Korea’s trade surplus in November 2006 was only US$2.86 billion. The total trade surplus of Japan and Korea in November was less than half that of China, while their combined GDP was more than double that of China. The Chinese economy’s dependence on foreign countries is second to none. If China’s growth is mainly for selling goods in exchange for foreign currency, what is the real benefit to the Chinese people?

Is China’s Economic Development on a Balanced Path?

The huge trade surplus and the 65 percent trade-to-GDP ratio are indications that China’s economic growth is out of balance. Using human body structure as an analogy, some people have strong muscles on their upper body, while others have very strong legs. China’s economy is like a severely disfigured strong man with a big head and puny legs, with one arm very strong and the other skinny. Overall, China’s economy has the following phenomena: Taxes are heavy, income is light; exports are heavy, imports are light; investments are heavy, and spending is light. Consequently, we have the following observation: Monopoly is heavy, competition is light; exports are heavy, domestic consumption is light; upstream sectors are heavy, and downstream sectors are light.

The abnormal development is caused by the unbalanced capital distribution. In other words, the resource distribution among different sectors is severely out of proportion. Some sectors absorb too much nutrition and become very strong. Other sectors are very weak due to long-term shortage of (blood) supply and malnutrition. For instance, Suzhou is famous for its attraction of capital, but in such a high investment area, the personal savings rate is very low. This means that despite large foreign investments, the local people don’t have much money; most of the products sold there are very cheap.{mospagebreak}

Some scholars, however, even praise the high ratio of trade to GDP. For example, Mr. Lin Yifu believes that China’s foreign trade has not exceeded that of Japan and Korea in their peak years. Mr. Wang Jian believes that China’s future trade will be even stronger as developed countries continue transferring manufacturing to China. Mr. Wang Jian even believes that by 2030 China’s foreign currency reserve will be as high as US$10 trillion. But I honestly believe that if China follows this growth pattern, China’s economy will most likely have collapsed long before then. This is because many parts of China’s development are irrational.

Re-examining China’s Mercantilist Development Model

I have been calling China’s current development model a traditional mercantilist model. This model, to make it sound better, is to be frugal. To put it undiplomatically, it is to achieve the country’s growth or, more specifically, that of a handful of people, at the expense of the majority of the Chinese people’s income. This development model includes searching for job opportunities globally, exporting domestic products, and accumulating foreign currency reserve.

Two conditions are necessary for this model to be successful. One is low wages, or cheap labor; the other is a large enough overseas market. The first condition has been achieved. China has a huge labor resource and a legal system that guarantees a ready supply of cheap labor (that is, migrant workers from rural areas, nonexistence of workers’ right to strike or bargain with management, a nonfunctional trade union). Especially in China, the tradition of low wages was already established during the old planned economy. Therefore, after decades of reform, the general level of wages remains very low.

This type of low-income economy not only results in cheap products; it also contributes to a lack of domestic consumption. Economies of this kind share a common goal: to actively develop an international market and sell products to foreign countries. As a result, these countries normally have a high trade surplus and a growing foreign currency reserve, while the bank savings rate tends to be very high.

However, these countries also share another attribute: People’s living standard is kept at a low level because their spending power is low. In these countries, businesses can accumulate huge wealth while governments normally possess powerful financial resources. However, from the perspective of development, this model of a strong government, strong business, and weak labor is different from models that focus on human capital.

In general, there is a limit to China’s mercantilist model, which cannot continue on the same path forever. Its capacity is primarily measured by how people feel satisfied with this mode of growth. If the majority of the people can’t improve their living standard over a long period of time, then they will question the legitimacy of economic reform.{mospagebreak}

Economists, including Mr. Wang Tongsan, have also found that this problem represents unhealthy symptoms in China’s economy. The cycle starts with certain industrial sectors that have an overcapacity while the domestic market demand is relatively weak. Because of this, manufacturers are forced to develop an export market. This causes increased exports and a foreign currency overstock. To balance the foreign currency reserve, the finacial authorities must increase the money supply, which in turn helps accelerated investment. Because of the unbalanced domestic income distribution, investment and consumption disparity occurs. The economy, due to the lack of a strong domestic demand, is led by strong investments and exports. Under such a circumstance, a generous money supply causes implicit inflation pressure. Although in the short run it has not caused the consumer price index to climb, it has obviously led to an increase in the price of capital. This situation provides some upstream industries with the incentive to make irrational investments for short-term profit, making the future overcapacity problem even worse.

Facing such abnormal development and unbalanced cycles of economy, people have given various kinds of policy suggestions, such as changing the interest rate, having a uniform tax for foreign and domestic companies, and placing constraints on land use. In my opinion, the most fundamental problem is still low wages for labor, which leads to low spending and large resources to export at a cheap price. The biggest factor causing low wages for labor is the lack of labor rights. Therefore, economic measures alone are not enough to solve the problem; we need political reform to facilitate a resolution.

Figure 1. Percentage Investment in GDP in China, Japan and Korea in their Perspective High Growth Time
20070304_F1.png

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Figure 2. Investment-to-GDP Ratio for Businesses, Households and Government between 1992 and 2005
20070304_F2.png
Source: International Monetary Foundation Project Paper "What’s Driving Investment in China," December 12, 2006. Website: www.dajun.com.cnimf.htm.

Disproportion in Income Distribution, Saving, and Investment

Different development strategies and policies usually generate different economic structures. The condition of the current Chinese economy, marked by high investment, high saving, and low spending, has never occurred even in other developing countries.{mospagebreak}

Figure 1 displays the investment pattern in China, Japan, and Korea over the course of high economic growth. Japan’s high-growth period was between 1962 and 1976, with its investment-to-GDP ratio being between 30 percent and 35 percent for most of those years and 37 percent as the highest. Korea’s high-growth period was from 1984 to 1998, with the same ratio rising from 30 percent to 39 percent, and then dropping to below 30 percent. In China between 1990 and 2006, the ratio started at 25 percent and increased to as high as 48 percent. Both Japan and Korea experienced about 14 years of high investment before the figure dropped down. China’s high investment period has lasted 15 years, and we have seen no sign of it slowing down. To make heavy investments, one needs to have lots of cash. Let us see who is investing in China and who has the money. Figure 2 clearly shows who the real investors are. The top, thicker curve is businesses’ investment; the bottom two dashed lines represent household and government investment. It is clear from Figure 2 that investments from businesses are consistently between 28 percent and 35 percent, while both household and government investment run about 5.0 percent of GDP.

Song Guoqing, a Chinese professor, once mentioned that, over the past eight years, China has been implementing policies to stimulate spending. However, during the same eight years, the share of personal spending of GDP has declined by 8 percent, and that trend continues. Let’s look at the following table to see the changes between household savings and business savings. In 1996, household savings amounted to 20 percent of GDP, but in 2005, the ratio dropped to 16 percent; at the same time, the ratio of business savings to GDP increased from 13 percent to 20 percent over the same period.

Table 1. Change of Percentage Saving in GDP from 1996 to 2005

  1996 2000 2004 2005
Family 20 15 16 16
Business 13 15 19 20
Government 5 6 6 6
Source: Beijing Dajun Economic Observation and Research Center Data Bank

From Table 1, it is clear that over the past decade, the percentage of GDP of the government’s fiscal revenue and of state-owned businesses has steadily risen, while the percentage of personal income has continuously declined. At present, household savings make up 33 percent of total savings, while business savings are 49 percent and government savings are 16 percent. These changes are the reason why domestic spending remains weak. On the one hand, people have little money to spend; on the other hand, the government and businesses have plenty of money to spend and invest.{mospagebreak}

Since the fiscal reform started in 1994, the steady fiscal revenue decline of more than 10 years has turned around. Year after year, revenue has risen. The government’s tax revenue has grown considerably. This to a large extent has deterred personal spending and forced more products to be exported. The cheap exports have not only affected people’s living standards and wasted valuable domestic resources but also have fueled global risk factors, such as the U.S. dollar devaluation. If the U.S. dollar keeps going down, China’s foreign currency devaluation will continue. The hard-earned foreign currency reserve will be at a higher risk.

Let us make another international comparison. Table 2 shows several countries’ saving structure as part of their GDP. Among those, the saving rate in the United States is only 14.3 percent; Korea has the second highest saving rate at 31 percent; China’s saving rate in 2006 was likely to reach 50 percent of GDP. This high saving rate can only cause high investment and high trade surplus. This is why China had a huge trade surplus in 2006.

Who Designed This Model?

From the above analysis, we can see that, due to income distribution disparity, China’s household savings ratio is declining, and the share of disposable income in GDP is rapidly declining. From 1978, when China began the reform and open door policy, until today, private citizens’ income has undergone an "n" shaped change (went up and down). Is this change normal or abnormal? There are many different viewpoints.

I have to point out the following serious situation: That capital income is greater than labor income is the root cause of all economic problems in China. This type of income distribution structure is never seen in Western developed countries.

Table 2. Percentage of Saving in GDP of Several Countries

   China  U.S.  France Japan  Korea  Mexico  India
 Total Percentage of Saving  41.7  14.3  20.7  25.5  31 20.8  28.3
 Household  16  4.8  10.8  8.2  4.5  8  22
 Business  20  10.3  9.5  19.4  14.8  10.6  4.8
 government  5.7  -0.9  0.3  -2.2  10.7  2.2  1.5
Note: Chinese data is for 2005, Mexico is for 2001, India is for 2004, and all others are for 2002. Data source: Beijing Dajun Economic Observation and Research Center Data Bank

Zhong Dajun is the director of Dajun Economic Observation and Research Center in Beijing.

Translated by SCHINASCOPE from http://www.dajun.com.cn/shunc.htm

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