Meeting the New Year

The Project for a Post-American Century meets an international system with Chinese characteristics.

There’s something in this Evan Osnos article in The New Yorker for nearly everyone:

[Trump] announced his intention to withdraw the U.S. from the Paris Agreement on climate change and from UNESCO, and he abandoned United Nations talks on migration. He has said that he might renege on the Iran nuclear deal, a free-trade agreement with South Korea, and NAFTA. His proposal for the 2018 budget would cut foreign assistance by forty-two per cent, or $11.5 billion, and it reduces American funding for development projects, such as those financed by the World Bank.

China’s approach is more ambitious. In recent years, it has taken steps to accrue national power on a scale that no country has attempted since the Cold War, by increasing its investments in the types of assets that established American authority in the previous century: foreign aid, overseas security, foreign influence, and the most advanced new technologies, such as artificial intelligence. It has become one of the leading contributors to the U.N.’s budget and to its peacekeeping force, and it has joined talks to address global problems such as terrorism, piracy, and nuclear proliferation.

Some of China’s growing sway is unseen by the public. In October [2017], the World Trade Organization convened ministers from nearly forty countries in Marrakech, Morocco, for the kind of routine diplomatic session that updates rules on trade in agriculture and seafood. The Trump Administration, which has been critical of the W.T.O., sent an official who delivered a speech and departed early. “For two days of meetings, there were no Americans,” a former U.S. official told me. “And the Chinese were going into every session and chortling about how they were now guarantors of the trading system.”

For Chinese leaders, Yan [Xuetong, dean of Tsinghua University’s Institute of Modern International Relations] said, “Trump is the biggest strategic opportunity.” I asked Yan how long he thought the opportunity would last. “As long as Trump stays in power,” he replied.

The Trump clan appears to “directly influence final decisions” on business and diplomacy in a way that “has rarely been seen in the political history of the United States,” the analyst [from the Pangoal Institution, a Beijing think tank] wrote. He summed it up using an obscure phrase from feudal China: jiatianxia—“to treat the state as your possession.”

For years, China’s startups lagged behind those in Silicon Valley. But there is more parity now. Of the forty-one private companies worldwide that reached “unicorn” status in 2017—meaning they had valuations of a billion dollars or more—fifteen are Chinese and seventeen are American.

There’s also an extended bit about a startup that combines AI and facial recognition. The company works very closely with police. For example, in one demo it displays jaywalkers’ names and official ID on a display screen at the intersection. “As a demonstration, using the company’s employee database, a video screen displayed a live feed of a busy intersection nearby. ‘In real time, it captures all the attributes of the cars and pedestrians,’ [the company’s VP of marketing] said. On an adjoining screen, a Pac-Man-like trail indicated a young man’s movements around the city, based only on his face.”

Happy New Year!

More Stages of the Globalisation Process

Who knew Hungary has an entire shopping centre devoted to Chinese-owned businesses? Der Standard reports on the “Asia Centre” in the 16th district of Budapest, home to a community that has made Hungary the biggest entrepot for Chinese goods in central Europe. Last year, $4bn of Chinese exports entered Hungary, of which two-thirds was re-exported. The centre is 90 per cent utilised and is going to expand. Not entirely surprisingly, its owners are the Austrian construction group Strabag and the Austrian mutual banks’ investment arm, Raiffeisen Investment AG.

Apparently, there may be as many as 60,000 Chinese in Hungary, the flourishing legacy of a botched late-communist trade agreement. In order to keep up appearances after the two sides failed to agree anything substantive, they ended visa requirements between China and Hungary. This came into its own a year later, when large numbers of people quit China after the Tiananmen Square massacre and arrived in a Hungary that was about to be the first mover in the wave of revolutions. Originally, their businesses shot out of the ground around the eastern railway station’s freight yards. Later, the Austrian investors built the new centre.

It’s striking that they will be very well placed if this railway project comes to fruition.

On the other hand, there’s a fist. Jörg Haider’s election posters this time around carried photos of two “violent Chechens”, whose access to social services was then cut off. They haven’t been accused of an offence, and neither does the Klagenfurt police know of any case involving a Chechen.

Gazprom, Iran and EU Energy

Well just in case the Iranian situation wasn’t difficult enough in and of itself (or here), there are always some around who will seek to take short-term benefit from the temporary embarassment of others. So this week, as June delivery oil prices spiked up around the 74 dollar a barrel mark, it became just a little bit clearer who might be doing what.
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All Gas Or Just Hot Air?

This is a kind of bits-and-bobs post without a lot of coherence, as I am trying to make sense of something which is hard to make sense of, so anyone with more specialist knowledge, please chip-in.

Now I think what we have here is a highly complex situation, and if individual actors behave strangely in a complex situation, this should not in fact surprise us. The big picture scenario is the economic take-off of what are going to be two enormous energy consumers – India and China – and a growing per-capita consumption of energy in the rest of the OECD towards the previous US ‘highs’. This has lead to a large and significant increase in oil prices, and the rest of what is happening can be seen as the scrum which has assembled in the wake.

Now what else do we know?
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Battle Of The Standards

An intereresting piece in the FT today about 3g standards and China. Basically there are three competing technologies: the European-backed WCDMA and US-supported CDMA-2000 standards, and the Chinese TD-SCDMA technology. There is a wikipedia entry on TD-SCDMA. Basically the Chinese system doesn’t imply the payment of license and patent fees (what a surprise) and it offers an asymmetrical data rate, i.e. it offers different speeds for downlink and uplink. The interesting isssue is, I suppose, after all the talk about China soon being the number one market in this, and the number one market in that, to ask the question just how much “upstream standards clout” will all this scale advantage eventually imply. Normally, third world economies would be expected to conform to first world standards eventually, but will the Chinese case be different?

Airbus May Build Factory In China

This is news. Bloomberg covers the story. China apparently may need 1,790 planes new planes by 2023 Airbus estimate, and it makes sense to, well, make them in China.

Toulouse-based Airbus, which is trailing Boeing in new orders this year, may win an order for as many as 150 planes valued at $9 billion, said people familiar with the negotiations yesterday. Chinese Premier Wen Jiabao may announce at least part of the order today at a Paris press conference with his French counterpart Dominique de Villepin, said the people, who declined to be named.

The European planemaker said yesterday after Wen’s visit that it might open a factory in China for assembling A320 planes. Air China and the country’s six airline groups may need 1,790 planes valued at $230 billion by 2023, Airbus estimates. Boeing on Nov. 20 won an order from China for 70 planes worth $4 billion.

Airbus spokeswoman Barbara Kracht declined to comment yesterday on the Chinese order. Ren Houxiang, director of the Civil Aviation Administration of China in Beijing, declined to comment Dec. 2 on the likelihood of China signing an order with Airbus. Repeated calls to the Chinese embassy yesterday weren’t answered.

More from Reuters here.

Getting Old Before Getting Rich

This is definitely about to become the new ‘meme’ about China. Actually it is reasonably valid. China’s ‘demographic shocks’ which come principally from the great famine produced at the time of the cultural revolution, and then from the subsequent one-child policy, are undoubtedly going to have significant consequences. Today UK Tory front bench spokesman on Trade and Industry David Willetts has a piece on the topic in the FT (subscription only unfortunately):

One reason for China’s stellar growth is that it is at a demographic sweet-spot. The massive reduction in infant mortality achieved by China’s barefoot doctors in the 1960s and 1970s is now yielding a surge of young workers – an extra 10m working-age adults per year. China’s challenge now is just to absorb them into the labour force. Add to that the massive population flow from the countryside and you can see why wages are low and growth is so fast. There are few pensioners and there are not many children either. The rabbit is indeed in the middle of the python.

If you are frustrated by your inability to read more, and are willing to hack it through a more academic paper on the same theme, then can I recommend “Demographic Dividend and prospects for economic development in China” by Wang Feng, of the University of California Irvine and Andrew Mason, of the University of Hawaii. The paper was presented at the recent (August 2005) UN experts meeting on ageing.

Update: New Economist has a fuller version of the Willets piece online.

China: Eating our Lunch or Taking us to Dinner?

That’s the dilemna posed by the latest paper from Laurence Kotlikoff Hans Fehr and Sabine Jokisch: Will China Eat Our Lunch or Take Us to Dinner. Simulating the transition paths of economies in the U.S., EU, Japan, and China the paper develops a dynamic, life-cycle, general equilibrium model to study their interdependent demographic, fiscal, growth and current account evolution.

Having taken a close look at the respective population dynamics they point out that as a consequence of relatively high fertility and net immigration rates, the U.S. population is projected to increase from 275 million in 2000 to 442 million in 2100. In Europe – as we all already know – population may well fall over the next century from 375 to 340 million, while in Japan, the population falls from 126 million to 85 million. However the projections show the Chinese population decreasing by even more – from 1.3 billion to 1.2 billion. Although China is in fact aging rapidly, its saving behavior, growth rate, and fiscal policies are currently very different from those of developed countries. Kotlikoff et al find that if successive cohorts of Chinese continue to save like the current cohorts, if the Chinese government can restrain growth in expenditures, and if Chinese technology and education levels ultimately catch up with those of the West and Japan, the developed world’s long run future looks much brighter. China eventually becomes the world’s saver and, thereby, the developed world’s savoir with respect to its long-run supply of capital and long-run general equilibrium prospects.

In a recent article on declining yield differentials William Pesek (Hat Tip Brad Setser) asks “What’s China got to do with all this?”. Perhaps the paper by Kotlikoff et al offers him part of the answer. (I have more on this paper here).

Troubled Waters And No Bridge

Global Voices has a story (Hat Tip Financial Times and Simon World) about how China dissident Shi Tao has more than a little cause to be angry with Yahoo. Reporters Sans Frontiers, on analysing the text of the verdict in Shi Tao’s case (he was sentenced to 10 years in April for “divulging state secrets abroad”) , found that details supplied by Yahoo Holdings (Hong King) Ltd helped identify and convict him.

As Global Voices indicates Yahoo “provided the Chinese investigating organs with detailed information that apparently enabled them to link Shi’s personal e-mail account (on the Chinese Yahoo! service at and the specific message containing information treated as a “state secret” to the IP address of his computer”.

Now this raises a number of interesting issues.
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A Certain Irony

In a post back in May about the bloody repression in Uzbekistan I noted that Crooked Timber’s John Quiggin was suggesting that US troops should be withdrawn immediately (I didn’t agree if you read the post). Well he seems to have got his way, and the reasoning behind the Uzbekistan parliament decision is of course interesting. The parliament has backed a government order which gives the United States six months to vacate the Karshi-Khanabad airbase. The suggestion is that this order is not entirely unconnected with the U.S. decision to join international demands for an independent investigation into May’s bloody crackdown.

While I’m up posting on Uzbekistan,
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