Chinese Box

Interesting sort-of fact of the day

Follow-up from my recent comment on the alcohol market.

I was at dinner with a consultant yesterday, who said that if you look at government expenditure in the yearbook, far and away the largest category is "other."

Why alcohol companies love China

One small village government recently published its full budget:

in the publicized government spending, we found 65% of the expenses are used on accommodating and entertaining (the superior officials) and they are costly, each table in each meal costs more than 400 yuan.

I recently published an opinionish piece on the importance of the government in alcohol marketing.

A friend runs afoul of the Chinese authorities

Earlier this month thirteen different metropolitan newspapers and their subsidiaries published a joint editorial on China's Hukou (social registration) system. A policy which was put in place in the 1950s to slow down the process of urbanization in China, which very basically raises the costs of social services for those who leave their official place of residence, and sets major boundaries for those wanting to change their place of residence. The system is on its way out, with numerous party leaders speaking, including Wen Jiabao, speaking out against it, but cities who reform unilaterally often face large pressures on their infrastructure, which isn't suffered by nearby cities.

The editorial was spearheaded by a few editors at the Economic Observer website, who thought this issue wasn't controversial, so they doubted that there would be any trouble caused, but thought it could still raise the profile of media participation in policy making. Of course it didn't turn out like that, all the participating media outlets were punished, but one of the two main writers, a man by the name of Zhang Hong, who is also a major contributor to our paper, took the brunt of the blame. He is now out of a job, it remains to be seen how things will go for him in the future.

Below is Zhang Hong's more detailed description, and you can find more about it on the Wall Street Journal's China blog, which has been covering it rather well.

I Am a Moderate Adviser

By Zhang Hong

After the 13 newspapers jointly published the editorial “Request for Representatives at the Two Meetings to Hasten Reform of the Household Registration System,” major repercussions ensued, and there were a great many conjectures about the back story behind the appearance of this editorial. As a party involved, I think it is necessary to discuss the context of this event through the appropriate media that is able to report on it. Some have commented that this event should go down in media history, so I want to write an explanation.

The original plan for the joint editorial was hatched last year when the Economic Observer joined the Guardian newspaper in a joint editorial on climate change that was published by 56 media outlets. At the time I was responsible for communicating with the Guardian, discussing and translating the joint editorial, and developed a fairly deep understanding of the entire process. Afterward the idea sprung up of whether we could publish a similar type of editorial domestically.

The suggestion to use the household registration issue as a focal point came from another colleague. In choosing this as the topic, it’s important to understand that hukou reform has already seen breakthroughs on many fronts, many cities are speeding it up, and Premier Wen Jiabao and high level central government officials have stated their position on this item of reform on many public occasions. We believed that publishing an editorial on this topic would be in line with the direction of Chinese government reforms and with the broad public interest, and that the risks were not too great. Some foreign news agencies have said that the order for this may have come down from high levels of government, but in fact it was not at all like that. This was the product of a few editors working behind closed doors, but the stir it created went beyond our initial expectations.

Moreover, we decided to use the two meetings [of the National People’s Congress and the Chinese People's Political Consultative Conference currently taking place in Beijing] as the timeframe for publication in order to express the media’s wish to participate in China’s overall reform. To put it bluntly, I’ve lived for 36 years, but never known which representatives were chosen by me, who are able to seek justice on my behalf. I think many people might also have similar views. As part of the media, we hope that the voices of the masses can make themselves heard among the representatives who “represent public opinion.” This is a moderate stance, but it is the type of thing that before was rarely expressed directly in the media.

The entire household registration reform plan had four steps, with the joint editorial as the focus.

The first step: On Jan. 26, the Economic Observer Online posted a survey on household registration reform, with a call for submissions and a special topic page, and at the same time we invited two other Web sites to participate. The first paragraph of the joint editorial, “China has endured the bitterness of its household registration system for so long! We hold that individuals are born free, born possessing the right to move freely!” first appeared as part of the online call for people to participate in our survey. Our online survey was well-received, with more than 3,500 people participating, which was quite unusual for a Web site on the scale of the Economic Observer Online.

The second step: On Feb. 22 we promoted a special section in the newspaper titled “Angry Hukou.” This special section mainly featured the difficulties people face due to the current household residence system and experts were invited to participate in the discussion. This special section already created some impact.

The third step was the climax: Putting out the joint editorial on March 1, in time for the two meetings. Our work on inviting other media to participate with us was somewhat affected by the Lunar New Year. Originally we expected that more than 20 media organizations might participate, but the actual number of participants was somewhat smaller than expected. The first draft of this editorial was written by a colleague, and I received a draft for revision on Feb. 7. I made drastic changes and the final version that appeared in the paper was largely the same as this draft. On Feb 9., after I sent the revised version to my colleague, he suggested some revisions in accordance with provisions of the [Chinese] constitution, and we made some further slight changes in wording based on feedback from other media organizations. I understand the article was quite stimulating, but it’s the style that I have always embraced- commentary should be incisive. Since we had decided to publish the joint editorial on March 1, after the papers were printed, the major Web sites only posted the joint editorial on the morning of March 1, and the Economic Observer Online also promoted the editorial as the top story that day. The editorial went out, and that’s how we set the prairie on fire.

The fourth step was the conclusion. According to our plan, we would write at least two articles following the publication of the joint editorial. One was our own news story about the joint editorial, and the other was an explanation of the whole drafting process behind the editorial. I myself wrote another commentary in the afternoon entitled “Media is Not Only a Witness: Why We Released the Joint Editorial,” which we posted online. At the same time, we also published another article, “The 13-media Joint Editorial on Household Registration Reform Inspires Heated Discussion”. However, the planned article about the editorial drafting process wasn’t run due to some problems, which is the sole regret in our entire plan.

After the joint editorial was published, the reactions to it went far beyond what we initially anticipated, so to speak. We expected it would get some response, but we didn’t think it would be so great. It actually echoes an old Chinese saying, “In a world without heroes, ordinary people can make a name for themselves.” I don’t dare to take credit for the work of others, but at the same time I am not willing to put the blame on someone else, so I removed all the names of both media and individuals who participated in the editorial, leaving only the name of myself who has nothing to lose. As a matter of fact, every reader understands that the reason why this joint editorial has attracted such widespread attention is not because the media is so powerful, but because it shows the fervent anxiety of the people’s expectations!

After this incident, I was punished accordingly; other colleagues and media partners also felt repercussions. I feel a sense of guilt whenever I think about it. This can’t be blamed on the newspapers, because they are confronted by forces that cannot be resisted, and when we act we must always consider that there are many others whose livelihoods must be protected. Here I would like to thank the folks who have worked hard together with me.

My father’s generation endured so much hardship because of the household registration system, many of my friends and even the next generation still suffers greatly because of this system—struggling endlessly with nowhere to turn with their complaints. I’m not an expert, I do not propose a complete plan for reform, but I have a firm conviction that legislation that disregards the dignity and freedom of the people will ultimately land on the rubbish heap of history. I hope that this system will ultimately be abolished. When the time comes I believe that many people will burst into tears from happiness and run around spreading the news. As a media person, I can only do my utmost to fulfill my duties and obligations, and each of us should also assume our respective duties and obligations.

I am a moderate adviser, who has inadvertently stirred up a great controversy, and the development of circumstances has gone beyond my expectations. In the end I hope everyone will remember this. I am now an independent commentator. I just hope that these words may allow everyone to have a full understanding of this event. Thank you for your feedback, whether supportive or critical.

Whoa (or my reaction to the news Google may be leaving China)

Though I doubt this news will still be breaking by the time anyone gets around to reading my blog, as of the moment google's decision to stop censoring its chinese search results is breaking news, and so all I can do is vaguely surmise how its going to play out over the next few weeks, months (years?). 

The basic gist of the story is that there is considerable circumstantial evidence that the Chinese government was supporting hackers aiming to break into private gmail accounts, as well as the servers of a number of silicon valley companies. This, in the context of ever tightening censorship since the end of the olympics and especially since the failure of the green dam initiative & the twitter led troubles in Iran, led google to announce that it would no longer be censoring its search results (youtube and blogspot were the only google services that were outright blocked, but a number of google's cloud computing services were acting spotty, and pretty much any major external web 2.0 service is blocked). Free access to information is of course illegal in China. The company claims that it is willing to speak with the government about a solution, but also said they were open to leaving China, and the Chinese government hasn't been known for being reasonable.

Though the general experience in China has always been "if there's money to be made a compromise can be found," there are a number of reasons not to be particularly enthusiastic here:

1. Though Google said it had gone to the US authorities with its information, it does not sound as if they have enough evidence to put together a arbitration case. Meaning that officially this is being done on moral grounds, and thus they are not giving the Chinese much room to maneuver. (For the record, I assume whatever happened on the Chinese side involved government departments with little oversight, and any outside investigation would involve claims of "interfering in internal affairs")

2. If their Chinese business puts the rest of their business at risk then it probably needs to be shut down. China accounts for fairly little of their revenues, and they can't risk being seen as less secure than competitors in larger markets. Particularly with their cloud computing services where they are trying to encourage businesses to put all their information on google services.

3. The Chinese government is open about preferring home grown technology to foreign technology, so I assume they could give a flying fuck about whether google is in their country, particularly as its in an industry that communists don't consider particularly important (knowledge).

The real losers here are all people using the internet in China, which is rapidly becoming devoid of usable products. Particularly people who care about the world outside China. The government's information policy is designed to make China a single sphere of discourse, where outside discussions mean relatively little, even if they are technically audible. While that might be good for maintaining consent its fairly bad for helping people come to decisions about the best course of action in a global environment (I mean that rather broadly).

The other loser is China's public imagine, which has descended to near all time lows since it hit its highest point during the Olympics. The country has just killed a British citizen, is looking to put an Australian citizen in jail for a long time, and is now has an Internet policy that is inviting comparison with the government of Iran. If Google up and leaves its going to definitely cause a hit to FDI whether anything official happens or not. Though of course China has looked plenty bad in the past, and business kept flowing.

Hell of a time for someone who has just recently suggested selling your Baidu stocks.

The European Chamber says everything I want to hear

I was at the big release of the European Chamber's 2009 "Position Paper," a 500-page document talking about all the things Europe really hopes China will do over the next year. An event that to my surprise had pretty much every major journalist I could think of there.

 Though I plan on delving into the 500 page document over the next few days (half of it is just a translation of the other half), what really was the most important aspect of the meeting for me was the constant regurgitation of the word "transparency." They took the very correct position, that the Chinese government can do pretty much whatever it wants, as long as its open about it, and discusses it with the business community first. I.e. Green Dam Mandate - they didn't announce it early enough to work out all the bugs. Or the Rio Tinto case - no one has any clue what information is protected by national security laws, so no one knows if they are breaking any laws.

Joerg Wuttke, the president of the chamber, made the simple statement that "corruption is a cancer in any economy," but it can only be fought bey transparency.

There was some other rather fun stuff relating to protectionism in the greentech sector. Particularly the highly publicized wind turbine case. I've noted previously that government intervention in this sector is already an issue, and the chamber implied that having a bunch of people jumping for handouts is seriously distorting the market (the term they used was that the market was "price driven," which is why the State Council said it would cut down on overcapacity soon.

Last thing on the someone saying something I wanted to hear list. Is that Wuttke argued that "SOEs (state-owned enterprises) are the big winners of the financial crisis." Which is what I've been saying all along.

Rio Tinto and the saddest thing about Chinese image management

From Crikey:

Whatever the facts surrounding Hu’s role in negotiating iron ore contracts, Rio Tinto is a company renowned for playing hard-ball in its commercial operations around the world. The mining behemoth is no model of business propriety.

... And in a practice that may have a bearing on the Hu case, Freeport, “working hand in hand with Indonesian military intelligence officers”, established a covert program to spy on its environmental critics by intercepting their e-mails. Company lawyers had advised that intercepting other people’s emails was not illegal “outside the United States”.

As I mentioned in my previous post on the subject, I do believe Rio probably did something wrong, though whether it knew it was doing something wrong that's another question entirely. The Crikey article makes a really convincing case that Rio has a history of doing things that are immoral, illegal or just plain nasty, and so probably did know they were doing something wrong.

That said, China will get absolutely no sympathy because their handling of the situation made them look about as guilty as can be.

Thanks Danwei for the reference.

The Internet Censorship Laffer curve

I'm a strong believer that one of the dumbest censorship decisions that China has ever made involved making pornography illegal, because, to quote Scott Adams:

Dilbert: " I'm inventing a new technology to prevent kids from seeing smut on the Internet"

Dogbert:"So, you're pitting your intelligence against the collective sex drive of all the teenagers who own computers?"

Dilbert: "What is your point?"

Dogbert: "Did you know that if you put a little hat on a snowball it can last a long time in hell?"

As one might see by my last post, things have been somewhat overwhelming on the internet censorship front over the past month or so, and so yesterday, fed up, I decided to investigate how much a VPN cost. VPNs are similar to proxies in that they give you access to a external internet access point in order to maintain anonymity, security and avoid website blockers of the type set up in most offices (and china), but they generally run much faster than proxies, and I had mistakenly believed they always cost money.

Well it seems after a short google search that there are a good number of free VPN services out there, all quite a bit faster than proxies (though I would assume the pay services are even faster). It took me about 15 minutes to set up, and my internet experience just went up 100%. I'm thinking of doing things I wouldn't have otherwise even thought of (like using Tumblr, which has been blocked forever). 

The internet being what it is, there now seems to be a censorship laffer curve its easy to keep people away from things that they are only mildly curious in because of a block, but if you seriously hamper people's use of the internet, you will encourage even more people to access sites that they would not previously think to access.

I'm 99% sure they just blocked typepad

Can't access any typepad related blogs (the typepad dashboard has been running suspiciously slow as well). This is really really really annoying.

Thoughts on Xinjiang

I mostly want to recommend the Economist's quite good coverage of the riots (here and here). I think what's most interesting is the distinction made between the independence movement in Tibet, and the Xinjiang riots, which the magazine argues were basically race riots, accentuated by the fact that information isn't freely exchanged in China, so nasty rumors have the tendency to quickly take on aspects of fact.

I really think that the best thing that China could ever do for itself is liberalize its media. Which of course isn't going to happen anytime soon, though for a while I was optimistic. Over the past 2 years or so you could see almost daily improvements in China's media environment, not only with the internet (my girlfriend get rid of her proxy server because she thought she didn't need it anymore), but increasingly high level leaders have been doing quite good PR, as seen by the openness to foreign journalists during this whole debacle. 

That though has been turning around. My girlfriend has now reinstalled her proxy server after facebook and an increasing number of blog and news sites started being blocked, and whatever we say about the frontline coverage of the riots propaganda officials are still REALLY bad at understanding  how to communicate (my friend who works for a government agency says that creating good PR will never get you noticed or promoted, but creating bad PR will almost certainly get you fired).

Two step forward and one step back, or one step forward and two steps back, I'm not really sure, but censorship slows down the efficiency of the country, it causes instability, and just ingrains anti-government attitudes (I think they called more attention to the tiananmen square anniversary by blocking hotmail than a few petitions being sent around the web possibly could). So I do think liberalization is desperately needed.

My guess is though that they would need some sort of reform of their law system first (which is a hole of non-transparent activities), and that's not going to happen any time soon.

Censored: China dominates the textile markets

One of the things that I definitely could not print in my recent article on China-Africa trade is the dominance of Chinese textiles, and how no one ever in the world can compete with them (my censor told me I had the "wrong theory"). The particular points I discovered:

Mauritius' lost 25,000 textile industry jobs, when they opened the markets to Chinese textiles in 2005.

But Mauritius is getting huge investments in its textile manufacturers from Chinese companies, because the country has tariff free access to the US textile markets and large portions of Africa. (Mauritius is a tax haven, and is used as a portal for trade between Africa and Asia by many Chinese and Indian companies, it also has strong trading ties with Europe, where it sends 95% of its sugar, which is the country's main export)

South Africa has a ridiculous 40% tariff on Chinese textiles, and STILL isn't holding market share (though they are losing it to other people besides the Chinese), its generally assumed that their textile market will collapse if they sign a free trade agreement with China, though the economy would more than make up the difference in other manufacturing industries. According to one economist it would increase the overall value of South Africa’s manufacturing sector by USD 1.42 billion, due to improvements to the chemical, plastics and rubber industries among others.

China has very consciously cornered the market in textiles, which is what a country is supposed to do in a globalized society - pick a particular market which it has a comparative advantage in and specialize, trading for things other countries have a comparative advantage in. This annoys protectionists who bitch about lost low-wage jobs and set high tariffs, but China should be taking the high road here, not telling me I have the "wrong theory."