Tag Archives: Economics

Surveillance, Stability, and How Everything is Terrible

UPDATE: It’s a burden being right all the time. According to this official government release (via the New York Times), the purpose of the cameras being added in Beijing has nothing to do with safety:

“The goal, the [Beijing government] Web site ((Seriously, New York Times? You’re too cool for AP Style?)) stated, is to “directly and effectively monitor” the content of performances on behalf of various government agencies.”

***

Amidst the kerfuffle about another Global Times piece from the Beijing Metro section, you’d think more people would be watching their pages from day to day. But since they aren’t, it falls to me to share this really depressing news with you:

The culture industry is the latest to fall under the authorities’ watchful eyes, quite literally, with the debut of yet another surveillance project Wednesday.

The capital is planning to inject 5.57 million yuan ($847,754) to establish a massive remote surveillance system covering all the capital’s entertainment venues, according to the Municipal Bureau of Culture Wednesday.

The bureau is seeking bids this month for a system combining audio and video monitoring and emergency services coordination.

When complete, the bureau will be able to use the system to “directly and effectively monitor” all performances in cinemas, theaters, music clubs and even arcades, store and manage all video materials and share the information they obtain with other government departments as needed, according to the bidding document.

Apparently, the authorities have finally figured out that people are committing thoughtcrime in private and are taking the first steps towards putting a stop to it, which is to put cameras and microphones anywhere people might congregate (that doesn’t already have cameras and microphones).

Actually, no one will clarify the purpose of this surveillance, but I imagine that when the government gets its PR game together, this will be presented as a safety measure. How that would work, I don’t know ((What I mean by “I don’t know” is “It wouldn’t.”)), but that’s not the point. Regardless of what the stated or even intended purpose of this system is, putting surveillance systems inside cultural centers is creepy. And it gets even creepier:

This project is the third surveillance plan announced recently by the city. On Tuesday, State authorities proposed a nationwide database to gather information on the assets, income and families of all individuals in order to curb corruption. And last week, the Municipal Science and Technology Commission announced that China Mobile’s Beijing branch plans to track cell-phone users’ positions to study transportation patterns and in turn combat traffic jams.

So, when you’re in public, cameras and phones track your precise location. When you’re at a bar, nightclub, movie theater, or concert, cameras are watching you. Not a problem, if you trust your privacy, safety, and freedoms to China Mobile and the stability-maintenance arm of the PSB. However, I think many people — myself included — don’t trust them.

But is this really a big deal?

“I think mass surveillance helps deter anti-social behaviors,” Tian Yangang, a Beijing lawyer told the Global Times, adding that one need not worry too much about privacy in a public place like a theater.

Does surveillance help deter anti-social behaviors? Because there are plenty of cameras around Beijing, but people still spit, curse, and push people out of the way when getting on to buses and subways. It probably does deter actual crime, but how often are serious crimes committed in movie theaters or at concerts? Often enough to warrant legally-mandated, government-monitored video and audio 24-hour surveillance?

A theater is not a public place, it is a privately-owned establishment. And I for one have no doubt whatsoever that this initiative is about rooting out and putting a stop to bands, artists, and filmmakers who get away with politically edgy material by performing it in private clubs.

Now, add that development to the recent GFW upgrade that has blocked several VPN services (I know for a fact Freedur and Witopia have been targeted, albeit without total success) and Gmail ((I’m not sure what exactly they’ve done to Gmail. It works sometime, but it’s so slow and unreliable as to make it essentially unusable most of the time.)), the recent beatings and detentions of numerous foreign reporters, the recent declaration that China will under no circumstances do anything that might challenge the Party’s death-grip on power, etc.

I asked way back in December if things were getting worse. It seems pretty clear they are. And for those of you this-is-what-Chinese-people-want advocates, here’s some food for thought. This story was originally reported by the VOA, but its statistics come from a poll conducted by China.com.cn, which is a Chinese government-owned portal):

In a China.com.cn poll of 1,350 netizens, only 6% reported they were “happy”. Only 36% felt their lives had improved over the last five years. Additionally, according to a Gallup poll conducted from 2005-2009, China ranked 125th out of 155 countries in terms of whose people said they were the happiest (Denmark was the happiest country, apparently, with 82% of its people reporting happiness).

But the first is an unscientific poll, to be sure, and the second one was probably conducted by wily foreigners bent on using their science to promote anti-China forces! Well, here are some hard numbers for you:

Even though China has a large GDP, this is simply due to the fact that it has a large population. On a per-capita basis, the country ranks 99th out of 183 nations. It is no surprise, therefore, that wages are low.

But salaries in China aren’t just low, they are abnormally low. Typically, a country’s minimum annual wage is 58% of its per capita GDP; in China it is 25% of per capita GDP, good enough for 158th place out of the aforementioned 183 nations.

The gap between the GDP and minimum wage rankings – 99 versus 158 – is perhaps the most telling statistic. For the majority of countries, there is a close correlation between the two rankings; the disparity in China’s case points to grossly inequitable income distribution.

This is borne out by the Gini coefficient numbers, a widely accepted measure of economic disparity. China’s coefficient is 0.47 on a range of 0 (perfectly equal) to 1.0 (perfectly inequal), putting it 83rd out of 134 countries measured.
According to Gini, China’s level of income inequality is higher than in almost every industrialized country in the world.

Past studies have blamed the income disparity on the rural-urban divide, the development divide between coastal and interior regions, and even foreign purchases of Chinese products. These factors may be responsible to some degree, but so too is the government.

[…]

Recent studies have shown that:

• Wages of civil servants are abnormally high. The average salary of a civil servant in China is six times the minimum wage, compared to a global average of two times.

• Management level salaries in state-owned enterprises (SOEs) are abnormally high. The average SOE manager in China makes 98 times the minimum wage, compared with a global average of five times.

• Within the state sector itself, wage disparity is abnormally high. An SOE banker on average earns 3,000% more than his counterpart at a construction company, compared with a global average disparity of 70%.
The pressure is compounded by costs of necessary items being abnormally high relative to wages.

• The UN recommends that it should be possible for an average worker to purchase a home with three to six years of annual income. In Beijing, it is estimated that the average worker would have to toil for 74 years just to buy a place in a suburban multi-story condo block, unfinished, unfurnished and without any amenities.

• The cost of electricity is a good index of the basic utility costs for urban residents. The average cost of 1,000 kilowatt-hours as a proportion of the average monthly wage in the US, South Korea and Japan is 2.67%, 3.19% and 8.19% respectively. In China, by comparison, it is 30.68%.

• The US Department of Agriculture estimates that the average Chinese family spends 28% of its total monthly income on food. While this compares favorably with other developing countries, the number is far higher than America’s 6.1%. Food prices remain the key driver of inflation in China, rising 10.3% year-on-year in January as the newly revised consumer price index rose 4.9%. The figure is well above the traditional central government target of 3%, and even above its revised target of 4% for 2011. This makes wage growth an even more pressing social issue.

So yeah. What was that about how stability makes everyone rich and happy?

Advertisements

Rich State, Poor People

‘Guo jin min tui,’ or ‘the state advances, the private sector retreats’ has now become a catch-phrase among China watchers. It refers to the rising dominance of China’s state-owned sector at the expense of the vibrant private enterprises. Debates surrounding this phenomenon have been focused on the economics side. For example, in a New York Times report back in August, Michael Wines observes:

Those who see little evidence of an expanding state sector generally believe that China has a decade or more of robust growth awaiting it before its economy matures. Theirs is a Goldilocks view of state intervention — not too much or too little, but just enough to push a developing economy toward prosperity.

The skeptics have a darker view: they believe distortions and waste, in no small part due to government meddling, have resulted in gross misallocation of capital and will end up pushing growth rates down well before 2020. What drives their pessimism, the skeptics say, is that China, like Japan a generation ago, has too much confidence in a top-down economic strategy that defies conventional Western theory.

In a recent piece, Mo Zhixu, a prominent Chinese blogger, approaches the debate from a political point of view. ‘Guo jin min tui’ is not really an economic phenomenon per se, but an expression of political will to maintain the authoritarian structure. He claims that since the economic reform, key industries have remained in firm government controls. This includes strategic sectors such as defense, electricity, petrochemicals, telecoms and transportation. There is also no fundamental change in the financial sector, the crucial sector for resource allocation. This is also true in social sectors including education and culture.

Because maintenance of the authoritarian regime is the primary objective, efficiencies and marketization are not really top priorities of the regime. As Mo observes:

The so-called ‘small government, big market’ is just an elusive goal created by academics, and has never been a policy option for the government. State planning proved to be a failure during the first 30 years [of the PRC]. Without marketization, it was a dead end for the Chinese government. However, to introduce marketization, the Chinese government has to abandon its control over the economy. More seriously, following a ‘small government, big market’ policy entails transforming the authoritarian structure, in which politics dominates over the society, into a constitutional structure, in which politics is accountable and subordinated to the society. This is what Deng Xiaoping and Chen Yun cannot accept. As their ‘two focal points’ illustrated, introducing marketization and constraining it to specified areas are the gist of reform.

Yang Jisheng’s book, Political Struggles in the Reform Era, once quoted a saying by Chen Yun to Zhao Ziyang: ‘CCP’s political authority is underpinned by its economic authority.’ According to my understanding, political authority is not only manifested in central-local relationships, but also in the relationship between the administration and society as a whole. In order to maintain absolute social control in this authoritarian structure, the government not only needs to resist political reforms and supervisions, but also needs to control economic and social resources. But the challenge lies in the inefficiencies, wastes and corruptions in the governmental structure and state-owned enterprises (SOE). The private sector, given its higher efficiency, will soon overtake the state sector. And inefficiencies, wastes and corruptions will soon kill the state sector.

Therefore, to protect the authoritarian structure, the government needs to use its power to interfere in the market at a time when marketization proceeds. To compensate for the deficiencies of the state sector and to maintain the leading role of the state-owned economy requires executive control and monopolization. Hence, the marketization process is twisted. To achieve the same [authoritarian] objective, the dual tools of inflation and low interest rates are also employed. They have the effect of transferring economic resources from the private to the state sector. We therefore observe the phenomenon that the growth in monetary supply is faster than GDP growth for over three decades, and executive control in the financial sector has never been loosened.

This observation highlights the political dimension of China’s state intervention in the economy. If maintaining the authoritarian system is what it is all about, the regime will achieve it at the expense of inefficiencies, wastes and corruptions. Economists’ concerns about the disadvantages of state intervention then miss the point: what they are arguing about are just the symptoms, rather than the root cause of the problem. Putting economics at the service of politics is the real issue, and in the words of Mo Zhixu, it is ‘an open conspiracy with a political intention which is all too clear.’

“The Sound of Rising Prices”

It may not be as well-produced as the Chinese song about rising housing prices ((For more on how crazily expensive houses are, see this Danwei post.)), but rising inflation has finally inspired its own song.

The song is a parody of an already well-known tune called “The Sound of Applause” (掌声响起来, listen here). The parody version is called 涨声响起来, roughly translated as “The Sound of Rising Prices.” Here’s one of many videos that’s been made already:
http://www.tudou.com/v/kRdTpCGNBok/v.swf
(direct link to Tudou)

Here are the lyrics used in the video (note: the following translations are especially artless as I am exhausted and over-caffeinated, but you get the idea):

Standing at the counter of the supermarket,
Seeing how all the [prices] are rising,
I only feel like sighing,
There is nothing inexpensive,
So many prices have been changed,
Now regular people can’t afford to buy vegetables.

Thinking back on Chinese cabbage when I was young,
When 20 cents bought a big bagful,
I can’t keep from crying,
So many big buildings being constructed,
So many new cars being sold,
But I still have to tighten my belt.

As the sound of rising prices rises,
I feel more and more helpless,
My wages aren’t rising as fast as the prices,
As the sound of rising prices rises,
I begin to understand,
From now on I may have to eat [only] pickles ((咸菜 could be translated variously as pickles, salted veggies, salty food, etc. I’ve mixed and matched here for variety’s sake, but the point the songs are all making is that 咸菜 is relatively cheap.)).

Living in these times,
Are we lucky or is it tragic?
I feel even more like sighing.
There’s no such thing as “good quality goods at fair prices,”
Food, clothing, shelter, and transportation [costs] have all gone up,
I suffer each and every day,
Waking and hurrying to work,
Busy making money and paying off [housing] loans,
My happy carefree life is long gone,
So many second-generation rich kids are buying nice cars,
So many second-generation poor selling things off of blankets on the street,
The gap between rich and poor is getting worse.

As the sound of rising prices rises,
I feel more and more helpless,
Everyone will be eating salted turnips,
As the sound of rising prices rises,
I begin to understand,
We’d be better off and happier as beggars.

[Cue dramatic key change and female vocal harmony]

As the sound of rising prices rises,
I feel more and more helpless,
Everyone will be eating salted turnips,
As the sound of rising prices rises,
I begin to understand,
We’d be better off and happier as beggars!

However, netizens are so enthused about this song that there are already a bunch of versions (all share the same melody and, generally, the same rhyming sounds). Here’s are the lyrics as written in the image posted above, which we found being passed around on RenRen:

Standing at the supermarket counter,
Seeing [the price] of everything rise,
I feel unlimited helplessness in my heart,
So few inexpensive options,
So many prices have changed,
Common people can’t afford to buy vegetables!

As the sound of rising prices rises,
I feel more and more helpless,
Prices are rising faster than salaries,
As the sound of rising prices rises,
I begin to understand,
There’s no industry that isn’t tainted by corruption.

And here’s still another version of the lyrics we found here:

While eating bread and pickled veggies,
I heard the sound of prices rising,
And I suddenly feel like sighing,
Every day it’s radishes and cabbage,
Looking forward to when housing prices drop,
Waiting for my wife to “say bye-bye,”
The floor covered in instant noodle packaging
Is a record of my helplessness,
And I can’t keep from shedding a tear.
I was once confident and bold,
I was once strong and patient,
But in the end I was defeated by rising prices.

As the sound of rising prices rises,
My tears flow till they’re an ocean,
Some people laugh and some people are full of sorrow,
As the sound of rising prices rises,
My tears flow till they’re an ocean,
I finally understand the great importance of money

There are actually a lot more versions of this song, but we’ll leave it at that as they tend to be fairly similar. The phrase “the sound of rising prices” has even become so widespread that it’s referenced in news broadcasts, such as this story about the rise of “group purchasing” websites:

http://www.tudou.com/v/Tc4J880Vijo/v.swf

The Chinese government, of course, is busy throwing an absolute fit about Liu Xiaobo’s Nobel Peace Prize, and doing everything it can to appear as petulant and immature as a three-year old.

I think, though, that if the government is really concerned about things that “subvert state power,” they should lay off Liu and address the rising discontent with housing and commodity prices and the atrocious gap between rich and poor, which is manifesting itself in all kinds of ugly ways.

The incident I’ve linked to there, in which a police officer crashes his car into an old woman and then gets out to beat her, shouting “What I’ve got is money, so I’m gonna beat you today!” is just one of a number of recent rich-people-play-with-the-lives-of-the-poor stories that has incited outrage and violence.

Personally, I see this as the biggest challenge to state security that China currently faces. Unfortunately, it’s a tough one to blame on the West, so it looks like for now China’s government will be content to shriek their Liu Xiaobo conspiracy theories in increasingly-shrill editorial pieces that no one reads (except, of course, when they’re looking for a laugh).

Of course, why should the government care if “Kart-like” Westerners laugh at their ridiculous propaganda? They should, however, be concerned with the tone of public opinion in China, especially on the internet, where a recent Global Times op-ed noted (without a hint of irony):

[There is] a [sic] extreme lack of tolerance for dissident public opinion on the Internet where there is almost no room for opinions that favor the government.

Note that here, by “dissident,” they mean people who support the government. Yeah. That’s how bad it’s gotten.

Good luck, Zhongnanhai. Your preposterous “Confucius Prize” stunt might succeed in distracting people from the Nobel Peace Prize award ceremony (at least for as long as it takes to laugh, snort derisively, and change the channel), but I’m not sure it’s going to distract Chinese people from the fact that despite China’s powerhouse economy, living here seems to be getting harder and harder.

Will Xenophobia and Cynicism Obstruct Chinese Philanthropy?

Bill Gates and Warren Buffet have arrived in Beijing to meet with some of China’s richest tycoons and discuss philanthropy. Gates and Buffet have been visiting the world’s richest people to sell the idea of “The Giving Pledge”—a commitment to donate a large majority of one’s wealth, either during their lives or upon their death, to charity.

Bill Gates and Warren Buffet

Since beginning this campaign, they have convinced over 40 U.S. billionaires, including Michael Bloomberg, Larry Ellison, George Lucas and David Rockerfeller, to pledge giving at least half of their fortune to charity. While Gates and Buffet have been very clear that the objective of the meeting with the Chinese is not to ask for contributions, but instead to share their experience, xenophobia and cynicism seem to be a major obstacle to establishing a Chinese rival to western philanthropy.

According to CNN, China boasted 477,000 millionaires (in U.S. dollars) at the end of 2009, a 31-percent increase from the previous year and trailing only the United States, Japan and Germany, according to a report jointly released last June by consulting firm Capgemini and investment bank Merrill Lynch.

CNN also reported that wealthy Chinese seem unwilling to open their purse strings for charitable causes, however. In 2009, a government-sponsored honor roll listed 121 Chinese philanthropists who donated a combined $277 million, less than half of what a single family — American financier Stanley Druckenmiller and his wife — gave away in the same year in the United States.

So what is it that is keeping the Chinese from opening up their wallets and giving? Recently, Economic 30 Minutes has released a three-part series on Chinese philanthropy. The first part examines the reactions of some who were invited to the meeting. Below are reactions to the invite, as well as some insightful comments by Zhang Xin, CEO of Soho China.

Translation

Chen Guangbiao

Chen Guangbiao, Chairman for Jiangsu Huangpu Recycling Resources: I hope to learn from their experiences. [Hopefully, they] can enlighten more Chinese entrepreneurs on philanthropy. I gladly accept their invitation.

Wahaha Group Co., Ltd. Chairman, Zong Qinghou, respectfully declined the invitation, saying, “As I’ve recently been invited to attend a Forbes CEO meeting, the timing is inconvenient. I hope no one misunderstands. I’m not afraid of being pressured into making a contribution. It’s just that I don’t have the time [to attend].”

Fuyao Glass Group Chairman, Cao Dewang, said, “There’s still sometime before the event. I’ve yet to decide on whether or not I’ll attend.”

Soho China CEO, Zhang Xin, said, “This is an opportunity to advance my own experience by studying from foreign philanthropists. I will certainly attend.”

Zhang Xin: Recently there have been a number of official groups which have come and discussed with us philanthropic opportunities and channels which exist. I feel that these channels are not very affective. Realistically, philanthropy isn’t about just donating money. It’s about donating your experience, your compassion and your spirit. It’s about identifying those within society who need to be identified [and helped]; this is the quintessence of philanthropy.

Zhang Xin, CEO Soho China

Zhang Xin: [One of the largest problems is that] there is really no system. Today, we come across this opportunity, so we donate. Tomorrow, we come across another opportunity, so we donate [directly to that cause]. Sometimes we donate to orphanages, sometimes we donate money for surgeries to repair hare lips in pediatric cases. After some time of donating, and realizing that net contributions were starting to increase, we had to begin doing some serious research to consider how to go about continuing our philanthropic causes. [Since the start] we’ve really just been crossing this river stone by stone. [We’ve had to consider], do we simply just write a check to a charity that’s already established, or do we try and do something on our own.

Analysis

Clearly, there are a number of Chinese who are genuinely concerned and actively involved in philanthropy. Of notable mention, Chen Guangbiao, worth an estimated US$440 million, has pledged his entire fortune to charity upon his death. Chen commented, “I don’t want to become a slave to my wealth. Every dollar I made was with the help of others — so I want to give it back to society and make my life more meaningful and valuable.”

But why isn’t this charitable line of thinking more prevalent in China? If China is home to the second largest group of billionaires, why aren’t more Chinese stepping up to challenge charitable groups such as the Gates foundation and others?

The answer likely lies in China’s xenophobia and cynicism to giving to charity, both foreign and domestic.

What will China's wealthy do with their money?

In regards to how the banquet has been portrayed by many invitees as well as the media, many are referring to the Gates-Buffet event as the “Hongmen Banquet”, a reference to an episode in Chinese history where guests were lured to a fancy dinner which turned out only to be a ploy to murder the attendees. The idea propagated here by the media is that Gates and Buffet are trapping China’s rich, and will pressure them into making large donations.

Another red flag for many would-be philanthropists is the skepticism that money donated would even reach the cause. Jet Li said in a recent interview that, “The main reason [why Chinese are skeptical about donating is] because there is an inherent mistrust in giving your money to any third party to pass it on. They’re convinced that for every 100 that they give, the end party won’t receive anything near that 100.”

Such an example can be found in reports that have been filed on how Sichuan earthquake relief funds have been seized and misappropriated by corrupt officials. Such acts not only hurt those who would be directly benefiting from such donations, but also further cynicism amongst the rich and discourage them from donating.

Zhang Xin and others have commented that transparency amongst domestic charities is an issue. According to Wang Zhenyao, director of the Center for Philanthropy Research at Beijing Normal University, “The environment is not ready in China for rich people to donate large sums of their fortune, where the progress is mainly led by the government and driven by the public…. Chinese rich people cast doubt on the transparency of charity operations. For example, very few of the country’s growing number of charity organizations and foundations offer feedback to the donors or publish the money flow.”

If transparency and a lack of systems is the leading excuse for China’s rich to keep their wallets closed, then the Gates-Buffet banquet should prove to be an excellent opportunity for potential donors to learn about what charitable causes and opportunities exist, channels they can use for making charitable contributions, as well as systems which can be used to established independent charities in China and develop trust amongst the public.

But it seems many wealthy Chinese are more willing to take a chance giving to domestic charities, as a recent pledge head by Chen Guangbiao suggests. While only a small number of the Gates-Buffet invitees accepted the invitation to attend the dinner, Chen had persuaded more than 100 entrepreneurs to donate all of their personal wealth to charity ahead of the Gates-Buffet dinner.

Is China willing to learn from western philanthropists?

Does such a pledge suggest that Chinese pride is also an obstacle to giving—that the Chinese do not want to admit that their charities and donation systems are underdeveloped compared to that of the West’s? Such sentiment seems to be evident, “We don’t need foreigners coming here to tell us how to be charitable,” sniffed one anonymous Chinese philanthropist.

Regardless of the reasons why more wealthy Chinese aren’t giving, they would do a tremendous amount of good in living up to their long-standing virtues of modesty and humility and learning from others with substantial philanthropy experience, regardless of race and nationality. After all, it was the Chinese who coined the term, “One World One Dream”. Perhaps its time that they start putting their money where their mouth is.

“How to Solve Labor Shortages”

The following is a translation of selections from this blog post by Wan Xiaodao. These suggestions may not be particularly feasible economically speaking, but they’re worth reading because they speak to the dissatisfaction that exists in the rural labor community.

Translation

Under the influence of the financial crisis that swept the globe last year, there were labor shortages; nowadays as the economy warms back up, labor shortages have reappeared. According to reports, in the Chang Triangle, the Pearl Triangle, and even in Wuhan, after the holiday there has been a dearth of laborer recruitment. This problem directly affects the development of our economy, and seeing as businessmen and scholars only know how to drink tea and chase girls, don’t know how to investigate [things] among the people and thus can’t resolve this problem, this worker [i.e., I] will undertake the difficult job of showing everyone how to get on the right track.

Resolving the problem begins with these five things:

  1. Raise the salaries of rural laborers. Business is about making money, for both bosses and laborers. Many workers in factories make less in a year than they would if they were farming, so of course they don’t come. Some people will say that rural workers’ salaries are quite high and that even college students can’t compete […] the “high salaries” of workers come from their blood and sweat working long hours and extra shifts.

    At many factories in the South, the salaries are just the local area’s minimum wage, several hundred RMB a month, just enough to live on. Their real net income comes from overtime. The “eight hours of work a day” system is just a piece of paper, they work from eight in the morning ’till five at night and then add more shifts […] until two in the morning or even all night long. The bosses only care about making money, and see the workers as machines, not people […] Aside from rural laborers, only prisoners understand this kind of life.

    If you want to resolve the issue, raise worker salaries […] and guarantee at least 3000 RMB/month. I think if you do that, rural laborers will volunteer to become your “machines”. If raising salaries causes losses, think about how to use new technology to lower net costs of your product, don’t always go taking it out of workers’ salaries. If you can’t cut costs and raising salaries will cause losses, then just shut down the enterprise for good.

  2. Reasonably safeguard the rights and interests of workers. […] I have said before, many government departments weren’t created for us workers, they were created to give rich people a back door. I have spoken with many laborers’ rights defenders, and they’ve said many bosses are actually local representatives, or on this or that [government or Party] committee, etc.

    I have heard from brothers in Shanghai that those with a Shanghai hukou are treated differently from other workers for doing the same jobs, and are guaranteed 600 RMB/month more than the non-local workers [… Also,] in the South, some factories only hire women, with the reasoning that women are easier to manage. I ran into this problem a few years ago in Shenzhen. You should know, among young laborers there are some men who don’t make money; why do they keep working? They have come to the factory to find girlfriends.

  3. Humanize business, show some warmth to the families of laborers.One hundred percent of businesses will say this point is clear and logical, but I think eighty percent don’t do it. Those bosses think of themselves as the workers’ savior, as though they were benevolently giving to charity by paying their workers’ salaries. They are wrong. We laborers (especially the new generation) think this way: we’re helping you make money and not asking you to be grateful; at the very least, you must pay me for however much I work. Without us to help you, you would be reduced to a poor wretch, too.

    [I remember at one job making shoes we had a boss who held our salaries over spring festival because] there was a chance we wouldn’t come back after the holiday, and said that when we got back from Spring Festival there would be a 200 RMB subsidy. We didn’t want that, we just wanted the money we were owed. I had never before seen a boss who refused to pay wages before Spring Festival. [A few days before the holiday], several hundred of us “surrounded him, and wouldn’t let his car leave the factory. The boss gave everyone a bag of candy, which we threw on the ground until the whole entrance was covered in candy. We were very angry. It was already the 27th [of the lunar month], the new year was very soon. This kept up straight until night, when the boss finally gave us our wages.

    […] If you give laborers a sense of belonging in their business, they will naturally love it like they love their homes. But up until now I haven’t found any businesses capable of this.

  4. Deepen reforms of the hukou residence registration system, let rural laborers urbanize. For this, we must rely on our great Party. If you let rural people become city people, the labor force in the city increases greatly, and the problem of not finding workers would be easily solved. In industrial parks build laborer areas, the houses need not be too good but they must be strong and the prices can’t be too high, no higher than 10,000 RMB […] Haha, it seems I’ve let my imagination run wild. Of course, if things were this way, it would lead to many problems, rural people would vie to be the first to get to the city, and what would we do with no one left to farm the earth?
  5. Shift factories towards the interior. If there’s no way to urbanize rural laborers, then move factories towards the interior. If you put the factories on workers doorsteps, you don’t have to worry you won’t have enough. This would alleviate the pressure of Spring Festival travel, and promote the development of the economy in the interior [as opposed to just along the coast…] actually, many businesses have shifted towards the interior, but the situation is nothing to be optimistic about. Because the internal regions are so poor the local governments look at these enterprises like a hungry dog looks at a piece of fatty meat. The town I’m in is like this, [they] have already driven off several enterprises.

[This story has been republished on Forbes’s website!]

Film Review: Win in China

The following is a review of the documentary Win in China, directed by Ole Schell. In the interest of full disclosure, you should know I’m reviewing a media screener copy of the film on DVD, which I received free of charge.

There were a lot of reasons why, going into it, I expected to hate Win in China. For one, I have little interest in economics, and less interest in hearing for the millionth time how much China’s economy has changed in the past thirty years. I also hate reality TV shows, and almost everything on Chinese television generally, so it wasn’t looking good. Given that there was also a rather pretentious subtitle (“the story of China’s entrepreneurial revolution”), I decided to watch it and grade tests concurrently.

Win in China isn’t “the story of China’s entrepreneurial revolution,” but it is a story, and that’s why it works. It follows the story of the TV show “Win in China”, a Trump-esque business reality show that pitted entrepreneurs against each other for a huge cash prize (the biggest in any reality show, the film says). The story of the show — not just the story that unfolded on the air but the story of the show’s inception as well — is broken into thematic chapters and interspersed with more general summaries of the relevant history.

The picture it provides of the Chinese “economic miracle” is necessarily shallow — the film is only sixty minutes long — but it’s hard to fault the filmmakers for only covering the simple stuff. This is, after all, a film that’s meant to be watchable for people of all ages and backgrounds, and the filmmakers have to take John Q. Public’s knowledge of Chinese history (i.e., none at all) into account. Furthermore, getting deeper into the details of Chinese economic policy is, frankly, pretty boring if you’re not an economist (or perhaps even if you are; I wouldn’t know).

So the filmmakers wisely focus their efforts on the show. It isn’t, as I initially feared, just an English translation. The filmmakers have gotten their hands on a lot of behind-the-scenes stuff, and the parts of the show they do choose are compelling enough, as they generally follow the exploits of one contestant who exemplifies fairly well the anything-to-get-ahead ethics-be-damned style of business that seems so prevalent in China. But the filmmakers — and the show’s judges — realize that things are more complex than that. In the final showdown, the viewing audience votes for the evil guy, but the expert judges (who are themselves super-successful Chinese businessmen) cast their votes for the slightly softer Song, who wins.

The subtitle I took as pretentious is actually pretty fair, especially if you change “the” to “a”. The film isn’t extremely deep or entirely comprehensive, and it shouldn’t be. It would be a disaster if it was. It definitely is “a story of China’s entrepreneurial revolution,” and a rather compelling one at that. It was enough to tear me away from my test grading pretty quickly, and it’s worth watching for anyone interested in the Chinese economy but unfamiliar with the TV show “Win in China”. In fact, given that I found it interesting, it might even be worth watching for those who aren’t interested in the Chinese economy.

Win in China is available on DVD via the film’s official website.

The Economist: Chinese Economic Model Dead

Please welcome our newest contributor, Michele!

From the Economist‘s May 2nd blog post: “Do recent events and the extraordinary growth of China prove quasi-capitalism with lots of government manipulation work [better than the laissez-faire American system]?”  Given the political bent of this magazine, it is no surprise that the blog writer answers with a resounding “No.”   Looking closer at the post, however, the Economist’s logic proves to be inconsistent:

China has and continues to experience lots of growth, but that did not occur in a vacuum. It came largely as a result of [1] demand from American consumers and [2] the government’s manipulation of the currency, which has ensured Chinese products remain attractive to Western consumers.

 

  1.  China may have relied on US consumption, but didn’t the US also depend on low prices as a result of Chinese goods? Americans have been able to consume so much recently not because real wages have risen (they have actually decreased), but because Chinese factories have been producing low-priced goods for the last twenty years. Wal-mart, who is responsible for10% of the US trade deficit with China, probably would not exist and a host of other companies like Nike and Adidas could not remain competitive without China.  China’s growth may not have occurred in a vacuum, but in the 21st Century, no country’s does. 
  2. If the Chinese had to manipulate their currency to keep exports competitive, that means that without government intervention the country could not have developed so quickly. This shows that a relaxed, hands-off government could not have guaranteed China’s continuous growth.  That runs contrary to the point the author is trying to make.     

 

The post goes on to say:

[3]The only source of sustainable growth is technology, and so far China has been importing much of their technology from the West. Unless that changes, at a certain point Chinese growth rates will look more like Western rates. It remains to be seen if the Chinese market, as it currently operates, can provide the incentives and support for useful innovation. </blockquote>

  •  What is the author defining as sustainable growth?  This year most developed economies, especially ones heavily dependent on technology exports like Japan, Taiwan and Korea are expected to shrink, while the Chinese economy will continue grow (albeit at a slower rate than in 2008).  China might not have a Microsoft, but there are signs that it has been making great strides in improving on or developing already existing technology.  A Chinese firm began producing the first all battery-powered automobile last year in Shenzhen.  Another company has been manufacturing environmentally-friendly, low cost air conditioning units for over a decade.  The number of patents issued, a somewhat reliable indicator of the level of technological innovation, has been growing by a rate of around 20% annually for the past several years. 

The overall argument of this post is that the Chinese model is ineffective, while the American laissez-faire model is superior.  But looking at recent events, it is obvious which one has failed miserably.  The American people have already rejected wholesale the laissez-faire model and it appears that the country is now moving toward a watered-down form of European socialism.  Even before the election of Obama, the Bush administration abandoned laissez-faire economics overnight when Bear Stearns collapsed.  The Chinese government, on the other hand, does not appear to be changing its economic model in the slightest to combat the recession.  They have stepped up government intervention and are planning on expanding government-funded social services.   

The question that the Economist should be asking is not, “is China’s model better than America’s?”  The question should be, “Is China’s current model good for China?”  So what do you think?  Will the current model be able to sustain long-term growth?  What recommendations or concerns do you have for the future course of the Chinese economy?