Results for “china”
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China Bible fact of the day

The parent company of the two largest Bible publishers in the United States has warned the Trump administration that proposed tariffs on China would amount to a “Bible tax.”

Trump’s proposed tariffs on $300 billion in Chinese-made products would affect books and other printed materials, according to Bloomberg. That includes Bibles, which are overwhelmingly printed in China because of the specialized technology and skills they require to produce…

More than half of the 100 million Bibles printed every year have been printed in China since the 1980s, he said. Of those, 20 million are sold or given away in the United States.

That’s because of the specialized printing requirements for a complex book such as the Bible, which requires thin paper that cannot be fed into standard printing equipment, leather covers, stitched binding, color pages and special inserts such as maps.

Here is the full Washington Post story.

Why China is not close to democratizing

That is the topic of my latest Bloomberg column, here is one excerpt:

It’s also worth thinking through exactly what changes Chinese democracy is supposed to bring. China’s urbanization has been so rapid — it has had more urban than rural residents for less than a decade — that a national election might well reflect the preferences of rural voters, which after all most Chinese were until very recently. If you belong to the Chinese upper class or even middle class along the eastern coast, you may end up asking yourself the following question: Who is more likely to protect my basic economic interests, the current Chinese Communist Party, or a democratic representative of Chinese rural interests? China is also growing rich during a time of extreme economic inequality, which may make many Chinese elites think twice about democratization.

Compare China’s situation to that of Taiwan, which is much smaller, does not have a comparable preponderance of rural population, and started becoming democratic in an era when inequality was not so extreme. There was enough of a sense of a common Taiwanese national interest for democracy to be trusted, and furthermore Taiwan has always been keen to distinguish itself from a non-democratic mainland.

What about social issues? One recent study has shown that Communist Party members are more likely to have progressive views on issues of gender equality, political pluralism and openness to international exchange than do the Chinese public at large. Again, if you are an elite among the Chinese citizenry, it is not a sure thing that you will do better with democracy than under the Communist Party.

There are many other points at the link.

No sweet spot for Singapore in US-China tensions

That is the title of the new and remarkable Bilahari Kausikan Op-Ed in The Straits Times.  I will serve up some bits, and please note this is now the world we live in:

Evoking the Long March [by Xi] is intended to prepare the Chinese people for a prolonged struggle with the US. It was, in effect, a tacit admission of the CCP’s mistakes with the consequent need for a retreat, while holding out the promise of ultimate victory…

The Chinese have long memories. Despite our constant denials, they still consider Singapore a “Chinese country” and may feel entitled to our support and will not quickly forget if we are regarded as insufficiently helpful in their time of need.

Some in the Trump administration also seem inclined to view the issue in racial terms. As the only ethnic Chinese-origin majority sovereign state outside greater China, we may be subject to special scrutiny.

What Singaporeans need to understand better is that, under present circumstances, there may be no sweet spot we can occupy that will keep both the Chinese and the Americans simultaneously happy. There is no silver bullet, and it is a fool’s errand to look for one.

Neither can we just lie low and hope for the best. You may not look for trouble but trouble may come looking for you. And trouble is all the more likely to seek you out if either side thinks you are, or can be, intimidated.

We must have the courage to pursue our own national interests. Sometimes our national interests may lead us to tilt one way, sometimes the other. But it must always be our national interest that guides us and nothing else.

Both the Chinese and Americans may not be too happy with us for pursuing our own interests. But Singapore does not exist to give joy to American or Chinese hearts. So long as neither side is so unhappy that it dismisses us as unredeemable, we can live with their unhappiness and manage it…

Our more complex domestic politics is a complication. I see still faint but distinct signs that some section of our population – how large, I do not know – either for transactional economic reasons, or unthinking ethnic sympathies, or sheer chauvinism, is beginning to look at the current US-China tensions through a racial lens.

As US-China competition heats up, this tendency may be accentuated. This is the greatest danger to Singapore in this new phase of US-China competition. It is still at a nascent stage and must be checked, if necessary by the prophylactic exercise of the coercive powers that are the legitimate monopoly of the state, before external and internal forces act and react with each other in a vicious spiral downwards.

If we hold together, we can manage the external complications. If we do not, and the social compact which is the foundation on which modern Singapore was built is strained or broken, these internal stresses may make the external complications unmanageable.

Since this period of US-China tensions will be prolonged, this is not a challenge that lends itself to definitive solutions. Managing it requires continual vigilance and periodic decisive action. It is our own Long March.

Do read the whole thing, as I said above this is now the world we live in.

The real losers from the U.S.-China trade war

The countries caught in the middle, as I argue in my latest Bloomberg column.  Excerpt:

n this setting, many Pakistani businesspeople work with both China and the U.S. Now President Donald Trump is essentially telling them to choose sides. Will they do business with Huawei or not? Will they work to open up the Chinese economy or not? And so on.

If you’re Pakistan, on the actual matters under consideration, you will side with China. Pakistan is not going to ban Huawei or push China to open its markets to major U.S. tech companies. China will get its way on those issues, and win some very public victories in the Pakistani public arena. Pakistani leaders and businesspeople who sided with the U.S., or expressed strong American loyalties, will feel burned. Their side just lost a very big debate, centered on a conflict that did Pakistan no good in the first place and was at least in the proximate sense started by Trump.

In other words, the U.S. is making it harder for many foreigners to be on its side, even partially. Over time, it is limiting its own soft power in the countries caught between America and China — and soft power is the one area in which America still has (or is it, already, had?) a big advantage over China.

There is much more at the link, including coverage of Singapore and South Korea.

China fact of the day

We find that party members on average hold substantially more modern and progressive views than the public on issues such as gender equality, political pluralism, and openness to international exchange.

That is from Chengyuan Ji and Junyan Jiang, via the excellent Kevin Lewis.  Of course this may partly explain why China’s rising middle class is not so outright enthusiastic for democratization.

Who loses most from the U.S.-China trade war?

You are hearing claims, hints, implications, or outright statements that the full burden of the trade war is falling on American consumers.  (Maybe some of the commentators are too wrapped up in the “Trump’s action have no merits whatsoever” game?)  I strongly believe that is wrong, as outlined in my latest Bloomberg column.  Here is one bit:

…there are well-done studies showing that the recent tariffs have translated into higher prices for U.S. consumers. I am not contesting that research. The question is whether those studies give sufficient weight to all relevant variables for the longer run.

To see why the full picture is more complicated, let’s say the U.S. slaps tariffs on the industrial inputs (whether materials or labor) it is buying from China. It is easy to see the immediate chain of higher costs for the U.S. businesses translating into higher prices for U.S. consumers, and that is what the afore-mentioned studies are picking up. But keep in mind China won’t be supplying those inputs forever, especially if the tariffs remain. Within a few years, a country such as Vietnam will provide the same products, perhaps at cheaper prices, because Vietnam has lower wages. So the costs to U.S. consumers are temporary, but the lost business in China will be permanent. Furthermore, the medium-term adjustment will have the effect of making China’s main competitors better exporters.

And:

China has an industrial policy whose goal is to be competitive in these [branded goods] and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.

Most generally:

In my numerous visits to China, I’ve found that the Chinese think of themselves as much more vulnerable than Americans to a trade war. I think they are basically correct, mostly because China is a much poorer country with more fragile political institutions.

I should note that I am not trying to defend Trump in this column, rather we need to get the economics right if we are to understand what is going on and why America can exert any pressure at all.  On Twitter, Christopher Balding is one who is getting these matters right.

Returning to the bigger picture, to the extent you wish to criticize Trump’s policies, focus on what China may do as a result of its vulnerability, not America’s supposed lack of bargaining power in the struggle.

Why a U.S.-China trade deal won’t change much

That is the topic of my latest Bloomberg column, here are some bits:

The trade talks are chaotic because a trade deal would be chaotic. By which I mean, it would be difficult to interpret and enforce, not unlike the present situation…

The basic problem is easy enough to state, though it is all but impossible to solve. Many of the U.S. objections to Chinese trade practices, regardless of their merits, are fundamental objections to how the Chinese economy is organized. They are more than mere complaints about easily monitored variables such as tariff rates.

…If a trade agreement is concluded, then, it is likely to have two parts: the parts that are easy to enforce, and the parts that aren’t. To the extent that the U.S. insists on greater Chinese compliance on the easier parts, a self-interested China will respond by shifting more trade onto the difficult-to-enforce parts of the agreement.

The tug of war will never cease. Trump will continue to tweet and move markets. The Chinese will continue to organize their economy to maximize state control. And maybe, over time, we will all recognize the broader truth: In a highly legalistic world, vague and hard-to define-strategies offer a competitive advantage.

Here is a new Reuters piece on how China already had started walking back many of its earlier commitments.

What is China’s Belt and Road?

Another form of domestic politics?  Here is Andrew Batson on his blog:

The Belt and Road is really the expansion of a specific part of China’s domestic political economy to the rest of the world. That is the nexus between state-owned contractors and state-owned banks, which formed in the domestic infrastructure building spree construction that began after the 2008 global financial crisis (and has not yet ended).

Local governments discovered they could borrow basically without limit to fund infrastructure projects, and despite many predictions of doom, those debts have not yet collapsed. The lesson China has learned is that debt is free and that Western criticisms of excessive infrastructure investment are nonsense, so there is never any downside to borrowing to build more infrastructure. China’s infrastructure-building complex, facing diminishing returns domestically, is now applying that lesson to the whole world.

In Belt and Road projects, foreign countries simply take the place of Chinese local governments in this model (those who detect a neo-imperial vibe around the Belt and Road are, in this sense, onto something). Even the players are the same. In the 1990s, China Development Bank helped invent the local-government financing vehicle structure that underpinned the massive domestic infrastructure. Now, China Development Bank is one of the biggest lenders for overseas construction projects.

Those who defend the Belt and Road against the charge of debt-trap diplomacy are technically correct. But those same defenders also tend to portray the lack of competitive tenders and over-reliance on Chinese construction companies in Belt and Road projects as “problems” that detract from the initiative’s promise. They miss the central role of the SOE infrastructure-complex interest group in driving the Belt and Road. Structures that funnel projects funded by state banks to Chinese SOEs aren’t “problems” from China’s perspective–they are the whole point.

The fact that this model was dubbed the “Belt and Road Initiative” and turned into a national grand strategy by Xi Jinping effectively gave the SOE infrastructure complex carte blanche to pursue whatever projects they can get away with. These projects were no longer just money-makers for SOEs, but became a way to advance China’s national grand strategy–thereby immunizing them from criticism and scrutiny.

And Andrew is always worth reading on music and jazz.

China fact of the day

China’s major commercial banks have a funding issue outside Beijing’s control: They’re running low on the U.S. dollars they need for activities both at home and abroad.

The combined dollar liabilities at the big four commercial banks exceeded their dollar assets at the end of 2018, their annual results show—a sharp reversal from just a few years ago. Back in 2013, the four together had around $125 billion more dollar assets than liabilities, but now they owe more dollars to creditors and customers than are owed to them.

Bank of China BACHY -0.66% is by far the greatest contributor to the shift. Once the holder of more net assets in dollars than any other Chinese lender, it ended 2018 owing about $70 billion more in dollar liabilities than it booked in dollar assets. The other three lenders actually finished the year with more dollar assets than liabilities, though Industrial & Commercial Bank of China IDCBY -0.33% had a deficit at the end of 2017.

In its annual report, Bank of China says that its asset-liability imbalance is more than addressed by dollar funding that doesn’t sit on its balance sheet. Instruments like currency swaps and forwards are accounted for elsewhere.

But such off-balance-sheet lending can be flighty. As the Bank for International Settlements notes, the vast majority of currency derivatives mature in under one year, meaning they are up for constant renewal and could evaporate during times of pressure.

Here is the full WSJ piece, via Christopher Balding.

Will China capture the main benefits from Belt and Road?

Maybe not, that is the topic of my latest Bloomberg column.  Here is one excerpt:

I was struck by a recent deal between China and Montenegro that gave China the right to access land in Montenegro as collateral, in case Montenegro does not repay certain loans. This has upset people in Montenegro, and it makes China seem like an imperialist country with territorial designs. But there’s also a more benign interpretation: China is demanding land as collateral because it knows Montenegro is not creditworthy. The loan sent Montenegro’s ratio of debt to gross domestic product to almost 80 percent, from 63 percent in 2012.

To put that in context, let’s say you heard of a loan shark who threatened to break the fingers of borrowers who did not repay. You would sooner infer that was a risky, so-so investment rather than a sure winner.

In essence, China is playing the role of loan shark, and that is not obviously the way to get ahead in today’s world. If China did claim some land in Montenegro as recompense for a bad loan, it might find holding the asset to be more trouble than it’s worth, much as Amazon decided to depart from a deal with New York because of hostility in parts of the city and state governments. If China tried to sell the land, a potential new buyer could never be sure of having enforceable title to the property.

Another problem with Belt and Road, at least from a Chinese point of view, is that China is dealing with many countries that are much smaller in terms of their GDP. There’s a tendency for small countries to renege on deals in hopes that big creditors won’t bother to make an example of them. You might think that smaller countries are easier for China to push around, and there is some truth to that. At the same time, both China and the small countries know that the small countries are not entirely masters of their fates, and so punishment strategies can be counterproductive or occasion more resentment than it is worth. Has the U.S. found it so easy to induce Honduras and Guatemala to stem the flow of migrants toward the border?

And this:

China has proven remarkably poor at supplementing Belt and Road with soft power persuasive techniques using diplomatic and cultural influence. This is no accident, nor does it reflect some kind of stubborn unwillingness of the Chinese to learn to wield soft power tools. Rather, the problem is structural. Since the Chinese government does not derive legitimacy through normal democratic channels, much of its diplomacy and foreign policy have to be channeled to please domestic audiences, whether the citizens or coalitions within the Communist Party. The necessary internal presentation shapes incentives for Chinese foreign policy, and that in turn alienate the other countries China is dealing with.

There is much more at the link.

New results on the China shock, furthermore the China shock is largely over

Using Census micro data we find that the impact of Chinese import competition on US manufacturing had a striking regional variation. In high-human capital areas (for example, much of the West Coast or New England) most manufacturing job losses came from establishments industry switching to services. The establishment remained open but changed to research, design, management or wholesale. In the low human-capital areas (for example, much of the South and mid-West) manufacturing job-losses came from plant closure without much offsetting gain in service employment. Offshoring appears to drive these manufacturing job losses – the Chinese trade impact arose primarily in large importing firms that were simultaneously expanding service sector employment. Hence, our data suggest Chinese trade redistributed jobs from manufacturing in lower income areas to services in higher income areas. Finally, the impact of Chinese imports appear to have disappeared after 2007 – we find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015.

That is from a new paper by Nicholas Bloom, Kyle Handley, André Kurmann, and Philip Luck.  Via Bryan Caplan.

China fact of the day

It is undeniable that China since the late 1950s has deployed hard and soft power in its determination to exert influence over Africa.  In the Mao era this translated into enormous aid budgets.  By 1975, China was throwing ‘more than’ — in Zhou Enlai’s revealingly hazy formulation — 5 per cent of its national budget into foreign aid; in fact, two years earlier it had reached 6.92 per cent.  Compare this proportion with the 0.7 percent of national income that the much wealthier UK annually reserves for international aid..It thus seems certain that Mao-era china spent a greater proportion of income on foreign aid — including in Africa — than did either the US (around 1.5 per cent of the federal budget in 1977) or the USSR (0.9 per cent of GNP in 1976).

That is from Julia Lovell, Maoism: A Global History, so far my favorite book of the year.  One implication of course is that One Belt, One Road isn’t as new as you might think, and that contemporary China has more in common with the Mao era — and I’m not just referring to the censorship element — than many people realize.

China non-fact of the day

China’s economy is about 12 per cent smaller than official figures indicate, and its real growth has been overstated by about 2 percentage points annually in recent years, according to research. The findings in the paper published on Thursday by the Brookings Institution, a Washington think-tank, reinforced longstanding scepticism about Chinese official statistics.  They also add to concerns that China’s slowdown is more severe than the government has acknowledged. Even based on official data, China’s economy grew at its slowest pace since 1990 last year at 6.6 per cent.

That is from Gabriel Wildau of the FT — adjust your debt to gdp ratios accordingly.

The political culture that is China

News from the Middle Kingdom seems to be coming out systematically worse than what you might have been expecting, at least these days.  Here is an update on censorship and content control:

The platform has been designed with a built-in “Xi Study Points” system (学习积分系统) that allows users to accumulate points on the basis of habitual use of the platform, from reading and viewing of content to the posting of comments and other forms of engagement. It has been widely promoted by local governments and ministries and departments across China, and there have also been reports that some work units have ordered employees to attain specified point levels, with disciplinary measures to be imposed for those who fail to comply…

The app defines several periods of activity as “lively intervals,” or huoyue shiduan (活跃时段), during which users engaging with the platform can earn double points — 0.2 for each article or video, 2 points for a full 30 minutes of use, and so on. The intervals are Monday through Friday from 8:30 PM to 10 PM, and on Saturdays and Sundays from 9:30 AM to 10:30 AM, and 3:30 PM to 4:30 PM. The system, then, incentivises Party members, once home from the office and done with family dinner, to spend golden hours of otherwise discretionary personal time engaging with “Xi Jinping Thought.”

Interesting and frightening throughout, via Comrade Balding.