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Foreign Campuses in China: What are the tradeoffs?

Foreign Campuses in China: What are the tradeoffs?

As China’s prominence in the world grows, increasing numbers of international students are considering a first degree in China as a realistic option. Study abroad programs and joint degrees through Western universities are already very common. Doing a full Master’s degree in China has also been an increasingly normal phenomenon for international China scholars for many years, an idea made popular by the now-famous Hopkins Nanjing program. However, there has recently been an increase in the number of international students who are considering opting out of doing their main undergraduate study in their home country, but rather completing the full program in China, through renowned, international universities- and supply is beginning to follow demand.

 

 

There are still only a handful of Western universities who offer a full undergraduate degree at their own, independent campus in China. But, as the profitability of this possibility becomes apparent, new universities are jumping on the bandwagon each year. American universities currently have the largest number of such campuses, with UK and Australian universities making up the majority of the remainder.

 

 The Chinese response to these programs has been mixed. The government has been slow to approve the opening of schools with apparently some hesitation about how it will affect China’s own top tier schools. However, local response seems to be quite positive. The newest school highlighted in this article, NYU Shanghai, was offered the rent-free use of a 15-story building in a central location in the city to encourage its growth (in addition to the Shanghai government footing two thirds of the tuition bill for all Chinese students in the program). The large number of Chinese to international students in many of these programs also indicates the level of domestic interest in this new type of educational endeavor.

 

 These programs claim to integrate Western and Eastern teaching styles into a unique learning environment. NYU Shanghai evaluates prospective Chinese students through a weekend-long process where professors can assess students’ global outlook and creativity, instead of just their gaokao score. Xi’an Jiaotong Liverpool University includes encouraging students to question teachers as one of their stated priorities. Its main mission as a university is creating students who will have “a happy life and a successful career”.

 

 However, there have been issues with foreign universities dealing with the Chinese university system and government in the past, and some of these problems are still evident in foreign campuses. Nottingham Ningbo, a Sino-British joint university, states that its available courses are decided based on “expertise available at Nottingham UK and the needs of China”. Some joint ventures in the past have met with complaints from foreign professors about censorship and plagiarism as well as educational rigor. Yale University ended its partnership with Peking University after a few years of a joint program because participation was too low. International language students complained that they could not successfully continue in Chinese language classes at Yale after returning from Peking University, even with the huge additional benefit of being immersed in the country for a semester, because the language classes in PKU were not sufficiently up to par with those at Yale. In a joint Master’s degree program myself, I was told by my foreign school’s administrators to expect to spend about three times as much time studying next year at the foreign university compared to this year at Peking University- China’s best university- due to the disparity in academic rigor. With these issues in mind, it remains to be seen if foreign universities will be capable of maintaining their high teaching standards on their Chinese campuses.

 

 The current quality of these programs is difficult to assess as many have only had a few years of graduating classes so far (or are even newer), and are not considered on most ranking charts as they are branches of a main university. The universities claim that teaching staff is held to the same high standards as the staff at the home campuses. As these are quite prestigious universities, however, it seems unlikely that the best professors would choose to research and teach at a lesser-known campus with fewer resources or opportunities. Additionally, as the percentage of non-native speaking students in the classroom will be much higher, and this may lower the overall level of academic caliber. Yet for students interested in an international experience, and particularly to improve their knowledge of China and their Mandarin, the Chinese campuses may more than compensate for some lack of educational rigor. Additionally, ultimately all students will have the same prestigious school name on their diploma, and often for a significantly cheaper cost.

 

 Below we outline the structure, advantages, and disadvantages of three internationally-renowned universities who now have full bachelor’s degree-granting campuses in China- New York University, University of Nottingham, and Liverpool University. At all three, classes are taught in English, and students receive a degree from both the Chinese and foreign university. Another up and coming project is Duke’s campus in Kunshan, scheduled to open next year. If these programs prove successful, increasing numbers of top international universities are likely to look toward China as a future investment.

 

New York University Shanghai

 

 

New York University has a degree-granting campus in Shanghai, which is now coming to the end of its first year of operation with 294 students who will graduate in 2017. It currently offers undergraduates a choice of seven broad majors covering humanities and sciences. NYU Shanghai is the first American university to receive independent registration status from China's Ministry of Education.

 

The NYU New York campus is consistently rated a top-50 school in the world. NYU also has a very successful campus in Abu Dhabi.

 

Admission:

In this first cohort of students, 51% were from the PRC and 49% from abroad (with 100 out of 145 of those from the US).

 

The admission rate of NYU New York is normally about 30-35% of applicants. Its campus in Abu Dhabi is one of the most competitive in the world, admitting fewer than 5% of applicants (making it more competitive than Harvard or Yale). For its first year, NYU Shanghai received about 6,000 applications (split approximately evenly between Chinese and foreign students), making its admission rate about 20%.

 

NYU Shanghai has a fairly unique admissions process in an attempt to combine Chinese and Western university admission processes. All students must submit their high school transcript, the NYU common application, a teacher evaluation, and essay. American students submit an SAT or ACT score while Chinese nationals submit their gaokao score. Chinese students are not required to take an English language proficiency test, but instead must attend a Candidates Weekend where they are evaluated through various exercises and discussions on their English, critical thinking skills, global outlook, and general fit for the program. International students must participate in an interview for admission.

 

 

NYU Shanghai

NYU New York

Chinese student tuition

16,000

45,000 plus small fee*

Non-Chinese student tuition

45,000

45,000

Living expenses (non-Chinese)

11,600/year

25,000/year

Undergraduate students

295 (first year)

19,401

 

 

 

 

 

 

 

 

 

Tuition:

Non-Chinese students pay the same tuition at the Shanghai campus as the New York campus. However, Chinese students pay considerably less at 100,000 RMB/year (about $16,000 USD). This is reportedly because the Shanghai government covers the remaining 2/3 of the tuition costs for Chinese students. This is in comparison to NYU New York where all students, domestic, in-state, and international pay the same tuition rate. On the other hand, the Chinese tuition is still considerably higher than that at the partnered East China Normal University, which is about 5,000 RMB ($800 USD) per year for undergraduates.

 

Educational experience:

All classes at NYU Shanghai are taught in English, with the opportunity for students to take Chinese classes (international students) and English classes (Chinese students). One obvious difference is the huge disparity in size of the campuses as the Shanghai campus has a few hundred students while New York has nearly 20,000. The New York campus therefore has many more opportunities and choices of subjects to study, but the Shanghai campus may allow for a more personal experience.

 

The living arrangements for NYU Shanghai are quite unique in that Chinese and international students live together, which is generally not allowed in Chinese universities. This can provide significantly more interaction between students and could be invaluable to international students in their immersion into Chinese language and culture. Currently, students are living on the campus of East China Normal University, with which NYU Shanghai has a partnership, until the expected completion of the Pudong campus in summer 2014.

 

University of Nottingham Ningbo China.

 

 

The University of Nottingham opened a degree-granting campus in Ningbo, China in 2006. In addition to this and its UK campus, it has a third campus in Malaysia.  The UK’s top employers in a survey from this year ranked its UK campus the most targeted university.

 

Nottingham Ningbo has an undergraduate student body of nearly 5,000 students with international students making up about 500 of the undergraduate population.  

 

Admissions: 

All students are considered for admissions based on their home country qualifications by GPA equivalents. All international students also submit a recommendation letter and personal statement. Chinese students are assessed on their gaokao exam. Students must have a First Division score to be eligible to study and a minimum score of 115 for English to enroll for a degree program, though most domestic Chinese students are expected to take the preliminary prep year.

 

 

Nottingham Ningbo

Nottingham UK

Chinese student tuition

12,800

25,200

Non-Chinese student tuition

12,800

15,100 (British/EU students)

Annual room cost-International

1,750

8400

Annual room cost- Chinese

330

8400

Undergraduate students

4,962

21,093

Undergraduate majors

31

350+

 

 

 

 

 

 

 

 

 

 

 

 

Tuition/Costs:

One advantage for international students in this program is that they pay the same tuition price as domestic students. However, their housing is significantly more expensive. This is the opposite of the UK campus where all students would have the same housing options, but non-EU students pay significantly higher tuition.

 

 Educational experience:

Nottingham Ningbo has chosen to offer either a three of four-year program for its Undergraduate degree in China, with the extra first year being offered for those who need to improve their English. This is a positive requirement for international students in China, whose in-class experience is likely to be improved by this required extra year of English training for domestic Chinese students.

 

The Ningbo campus has quite a large undergraduate body, which allows for a significant number of choices of majors. However, of the nearly 5,000 undergraduate students, fewer than 600 are international students. Additionally, Chinese and international students are required to live separately. Therefore, non-Chinese students maybe feel somewhat isolated and less well-integrated into the campus.

 

Xi’an Jiantong Liverpool University.

 

 

XJTLU was founded in 2006 in Suzhou, making it the world’s first Sino-British university. It now offers an undergraduate program with about 7,000 students and 26 options of majors. Liverpool is ranked as a top 40 British university, and Xi’an Jiaotong as a top 10 Chinese university.

 

 Admissions:

XJTLU admissions for international students is unique in that there is no test required but rather students’ high school grades make up the majority of the decision, with letters of recommendation and a basic application also submitted. Foreign students who are not from native-English speaking countries must also take a standard English language test (TOEFL or IELTS). All Mainland Chinese students are evaluated on their gaokao scores, with First Tier as a requirement, but Cantonese students also must take a XJTLU aptitude test.

 

 

XJLU

Liverpool UK

Tuition (non-Chinese)

13,100

15,000 (EU students)

Tuition (Chinese students)

10,500-13,100

22,000

Housing (non-Chinese)

4,000

10,000

Housing (Chinese)

350

10,000

Undergraduates

7,000

17,500

Majors offered

26

230

 

 

 

 

 

 

 

 

 

 

 

 

Tuition/Costs:

Chinese and international students’ tuition is roughly the same, but with some cheaper options for Chinese students depending on major choice. Housing for foreigners in this program is vastly more expensive than Chinese students as international students may only stay in university apartments while Chinese students are in dorms.

 

Educational experience:

Non-native English speakers at XJTLU are generally expected to take one to two years of preparatory English classes before beginning content classes. The program boasts an 80% foreign nationality of its professors. However, of over 7,000 undergraduate students, only about 100 are international students and they are housed separately. While this small percentage of foreigners may improve their language skills, it is difficult to imagine that this creates any real feeling of a British university.

 

Pragmatism rules when the Bears are...

Pragmatism rules when the Bears are out!

It remains to be seen if 2014 really will be the year in which the Chinese authorities grapple with the country`s freewheeling financial system. The government`s current policy of kicking the can down the road means ever-larger piles of credit, slowing growth and the rising risk of financial crisis.


Some market participants thought the potential default at the end of January of a CNY 3 billion product sold by China Credit Trust would be the epiphany, in which investors learned the painful lesson of the risks involved in blindly ploughing funds into the shadow banking system. There were those who thought the collapse of a major institution might trigger a systemic reaction, forcing the government to take drastic action.

 

 


It turned out to be neither. The trust company, the bank which marketed the product, the local government and investors reached agreement where the principal and at least some of the product`s final-year interest payments were paid out. Moral hazard continues to rule the financial system.


This isn`t the first bullet the authorities have dodged. The actors in China`s financial system – the local government officials, regulators, issuers and lenders – are complicit in avoiding failure, even as lending has boomed. Chinese bank assets have more than doubled since the end of 2009 to CNY148 trillion (US$24.3 trillion), nearly three times last year's GDP. By comparison, U.S. commercial bank assets are just over $14 trillion, even though its economy is more than a third larger than China`s.


Bears see a crisis approaching.
For the growing number of China bears, the dramatic expansion of the financial system, coupled with its suspiciously low failure rate, is prime evidence of a brewing financial crisis. Government advisors acknowledge that the longer debt is allowed to grow, the greater the risk of a crisis and the greater that crisis could be.

 

 


For a central bank staring down the barrels of a financial crisis, however, the People`s Bank of China doesn`t sound overly concerned. Large chunks of its latest monetary policy report are devoted to explaining the rise of shadow banking, including the kinds of activities pursued by China Trust, and warn of more market volatility to come. Market participants will "need to tolerate reasonable money rate volatility," the PBOC said in the report released last weekend.


The pressure to make profits in the face of regulatory curbs on traditional lending has pushed overstretched banks to borrow short and lend long, making them more sensitive to changes in liquidity availability, the PBOC explained. Meanwhile, the growth of bank assets and "off-balance sheet innovations" are eating up increasing amounts of liquidity, and this explains periodic bouts of tight liquidity despite expanding M2. "The more active the financing activity, the more banking system liquidity is digested, leading to rising liquidity demand," the report said.


Money market rates were driven to record levels last June after the PBOC moved suddenly to cut off the flow of liquidity into the interbank system. Officials said that the goal was to force deleveraging, but the central bank`s sudden, poorly-communicated move sent panic through the system and forced the authorities to back off and make direct liquidity injections. The PBOC may have lost that battle, but the war is ongoing.


Rates Rising.
Market rates have risen, increasing financing costs and opening up fissures in the interbank market which are expected to lead to more and more investment products getting in trouble. The seven-day repo rate – which is a candidate for a market benchmark rate under the government`s financial reform plans – averaged 3.78% during the first half of last year and 4.38% in the second half. The 10-year Ministry of Finance yield has also risen sharply, reflecting a shift into riskier paper amid tighter liquidity conditions.

 

’Moral hazard continues to rule the financial system.‘
Despite its anodyne wording, the PBOC report does indicate once again that the authorities are aware that a badly mismatched system stands an ever-greater risk of getting into trouble. Market participants are braced for a fresh wave of regulatory curbs, particularly in the wake of a State Council notice at the end of last year suggesting that management of the policing of the shadow banking system has now been elevated to the executive body.


The PBOC itself provided few clues about its plans, saying only that it will step up monitoring of financial system risk and "explore market mechanisms to solve local government debt problems.” That will help tackle the existing stock of debt, but doesn`t explain how Beijing is going to deal with the dramatic rise in Chinese financing while delivering the growth needed to create jobs and maintain social stability.


The Communist Party is pledged to a sweeping economic and financial system overhaul, but the PBOC report suggests that it sees little change for now. "The Chinese economy's reliance on debt and investment, the high investment model and the overconcentration of resources in real estate and other sectors mean it is easy for debt levels to increase,” it said, before drawing the underwhelming conclusion that: "The massive local financing-construction model has strengthened in recent years, increasing the potential for risks to the economy's performance."

 

 


Despite signs of a credit splurge in January, market participants are already betting on whether the PBOC will actually ease policy in the first quarter to offset signs of sharp disinflation and slowing economic growth. That doesn`t bode well for attempts to grapple with the risks posed by shadow banking.


Pragmatism Rules
China avoided potential calamity by effectively bailing out China Credit Trust. Supporters of the government`s refusal to allow for defaults would call this approach pragmatic, that the known unknowns of failure warrants caution. Besides, in allowing Lehman to fail, the U.S. Treasury arguably worsened the global financial crisis, they argue.


But not everyone agrees with this approach. In China default has its supporters. A source familiar with discussions at the level of the State Council said he had been hoping that a China Credit Trust default would teach the market a "profound lesson."


But he is in the center, and provincial governments tend to have greater influence because they`re closer to the action. "Local governments don't want their financing costs to get too high because of a default and they're worried about accounting to the central government," he said. China has been kicking cans and dodging bullets for years, to the extent that its banking system is nearly the size of the U.S. and Japan`s combined ($30.68 trillion). The government has made the right noises about cleaning up the financial system, but the China Credit Trust agreement suggests that it is not yet ready for action.

 

Pictorial: Bound Feet Women of China...

Pictorial: Bound Feet Women of China.

A Living History: Bound Feet Women in China

By Jo Farrel,

 

A selection of images from this long-term project documenting some of the last remaining women in China with bound feet. A tradition that started during the Song Dynasty, foot binding was banned in 1911 but carried on through 1939 when women had the bandages forcibly removed. Although considered just for the elite, the majority of women in this documentation were farm workers from peasant families living in rural areas. Once unbound the feet are disfigured for life with toes broken beneath the souls of the feet.

 

A New Great Game.

A New Great Game.

Pakistan’s Prime Minister Nawaz Sharif praised Xi Jinping Thursday at the 2014 Boao forum for his “visionary concept” of the New Silk Road, revitalizing discussion on the topic. In a session titled ‘Reviving the Silk Road – A dialogue with Asian Leaders’ he stated that the increased trade and economic relations will bring prosperity to the region.

 

In the modern world, it’s access to markets and communications links that define the development of a country. China, realizing the importance of infrastructure, combined with its need for growth, embarked on an epic building boom in the early 21st century. The importance of having comprehensive road, rail, mass transit and port networks cannot be underestimated. The utilization of such has allowed the Chinese economy to prosper and grow.

 

 

Looking at the next stage of its development trajectory, it has identified Central Asia as playing a key role in its development along the New Silk Road: it was no coincidence one of President Xi Jinping’s first trips abroad was to the region, securing energy deals and pledges of increased security and economic cooperation. China is already the largest trading partner of four out of the five former Soviet Republics (the exception being Uzbekistan), and a main source of foreign investment. Trade between the region and China stands at around USD 46 billion and is set to expand.

 

The Silk Road Economic belt, as described by President Xi, will aim to provide much needed and integrated infrastructure along new road and rail links that are currently under construction. These arteries will carry fiber optic cables and pipelines across the region creating new towns, manufacturing hubs and transportation crossroads. The development of these sectors will help Central Asian countries move away from their dependence on trade in natural resources to more balanced economies based on trade, manufacturing and services.

 

 

This past September, President Xi Jinping embarked on a 10-day tour of Central Asia, leading to a list of agreements signed which will at least double Chinese investment in the region. Existing Chinese investments in Turkmenistan, Kazakhstan and Uzbekistan are estimated at about US$30 billion, while the value of the new contracts will contribute an additional US$51 billion in Chinese investment.

 

Regarding its investment in Central Asia, China has 3 stated aims:

 

Provide a dependable and stable energy supply route, diversifying its energy sources.

Create a means for cost effective transportation of goods and services to Central Asia and finally Europe.

The development of Kashgar in Xinjiang into the transport, services and financial center of Central Asia

 

Other domestic advantages for China would include further securing an export market in this region and preserving stability between its western neighbors.

 

Central Asian Energy resources

 

Central to these plans is a shift in focus from China`s eastern coastal regions to the underdeveloped west and in particular the Xinjiang region where Beijing hopes increased economic development and prosperity will help mollify the grievances of the native Uyghur population.

 

 

Current major Silk Road Economic belt projects under way or under discussions are:

 

The Baku-Tbilisi-Kars (BTK) railway, due for completion this year. The project is designed to facilitate shipping of cargo between Asia and Europe, and will connect the railway networks of Central Asia, the Caucasus and China with those of Azerbaijan and Europe. The BTK railway will have an international impact, expected to transport 1.5 million passengers and 3 million tons of freight per year.

 

Galkynysh Gas field in Turkmenistan. Work has started on the world’s  second largest gas field that will more than double the country’s gas exports to China via the world’s longest pipeline. Due to come online in 2016 with development by CNPC Chuanqing Drilling Engineering Company.

 

Iran-China Natural gas pipeline, via Afghanistan, Tajikistan and Kyrgyzstan, allowing the latter two to reduce their reliance upon Uzbekistan.

 

China National Petroleum Corp (CNPC) paid $5 billion for a share of Kazakhstan’s Kashagan oil field project in September, giving it an approximately 8% stake in the project.

 

This New Silk Road will take careful planning and Realpolitik on Beijing’s part as well as favorable support from its Central Asian neighbors. It has yet to been seen if the economic incentives offered will reinforce political integration amongst historically competitive and volatile nations that feel little allegiance to one another. Security in these nations will play a key as well a China’s desire to preserve stability and security in XinJiang: Uzbekistan’s upcoming elections might provide a clue as to the feasibility of these grand plans and ISAF’s withdrawal from Afghanistan will have the China strategists increasing their efforts to engage with the country. Meanwhile China’s continuing development of the Maritime Silk Road, increasing security for China’s shipping lanes through the Indian Ocean and South China Sea, places it in an increasingly dominant position throughout South Asia, meeting the needs of its population.

 

China`s Investments in Overseas ports

 

Sino-Venezuelan Ties: Strong Despite...

Sino-Venezuelan Ties: Strong Despite Unrest.

"The future of resource cooperation between the two countries is rather optimistic."

 

This statement by Wu Baiyi, a Latin American economic specialist at the Chinese Academy of Social Sciences, is carefully positive about the future of Sino-Venezuelan relations. Based on recent investments and Beijing’s lack of comment on political unrest in Caracas, it seems safe to assume that the relationship is stable and moving forward. Yet, some analysts warn that Beijing may be moving too quickly in a region with an unclear future.

 

 

 In the past several years, Chinese-Venezuelan relations have improved and expanded dramatically as Hugo Chavez and Hu Jintao formed a close working relationship. Following the death of Chavez and the leadership change in Beijing, the two countries appeared to remain close with Venezuelan President Nicolas Maduro visiting Xi Jinping this past fall, followed by a series of deals and investments. The relationship is vital to both sides, with Venezuela relying on China as one of its biggest export markets and Beijing requiring the ties for a stable flow of oil imports. As Beijing avoids interference in what it deems the internal affairs of foreign nations, it is unlikely to let political unrest affect such a significant relationship.

 

China is now Venezuela’s second largest trade partner and Venezuela is China’s biggest investment destination in Latin America. In recent years, there have been several multi-billion-dollar agreements on investments in oil, energy, construction and high-tech industries between the two nations. Additionally, China has provided more than $36 billion in loans to Venezuela since 2008. The vast majority of trade and loans between the two is a result of Venezuela’s massive oil industry. Venezuela is the world’s largest holder of oil reserves, with which it repays most of its debt to China (to the tune of 600,000 barrels per day). As the largest net importer of oil in the world, China requires a highly reliable source. For Venezuela, China provides a refreshingly apolitical export market as a counterbalance to the United States, with which it has not had friendly relations for years.

 

Since coming into power, Nicolas Maduro has made efforts to continue this mutually beneficial relationship. In fact, his ties with China began before even becoming president. During his six years as the Minister of Foreign Affairs under Chávez, Maduro visited China six times. In September, several months after his election, he arrived in Beijing to meet with Xi Jinping and sign several major investment deals (the largest with Sinopec which agreed to a $14 billion dollar development of Venezuela’s Junin oil field). Beijing too has highlighted the importance of Latin America in the foreign affairs of the current president. Xi Jinping’s second foreign trip as President of the People’s Republic was to Latin America, a region with which China’s trade has risen from practically nothing a decade ago to over $250 billion.

 

 

Beginning in February of this year, there have been violent protests in Venezuela’s capital, Caracus, against the government of President Maduro. Allegations against him include human rights abuses, a chronic shortage of basic necessities, high levels of violence (with Caracus listed as one of the most dangerous cities in the world), and poor economic practices leading to severe inflation.

 

 

Unlike most prominent nations and institutions around the globe, Beijing has remained largely neutral on the topic. State run media issued a statement saying, “Venezuela’s government and people have the ability to handle internal affairs, protect national stability and promote social development.” This is consistent with Beijing’s policy of avoiding interference in other nations’ domestic concerns and generally not allowing this to affect their trade relations. Derisively dubbed “dictator diplomacy” by Western nations, this policy has allowed Beijing to maintain ties with “pariah states” and keep politics out of economic policy.

 

 

There have been several major investments made by Chinese companies in the last few months since Maduro’s election. These include the $14 billion investment of the Junin 10 block in the Orinoco Oil Belt mentioned earlier, which was in addition to an earlier $14 billion investment in nearby Junin 1 block. This is predicted to bring in an estimated 1 million barrels of crude oil in the coming two years. Another project includes the investment of $5 billion into a joint development fund between Venezuela and the China Development Bank. The Export-Import bank of China is also making a sizeable investment of $390 million into a new port being developed by Venezuela’s state petrochemicals company Pequiven. Another major Chinese bank, China’s Citic Group, has made moves to fund gold-mining projects in Venezuela’s large Las Crinstinas deposits. Between these and other smaller projects, China’s state-affiliated companies have significant investments in the now-tumultuous Latin American country.

 

 

While Beijing’s continued close relationship with Caracus has been beneficial thus far, Chinese leaders must certainly have a watchful eye on the Venezuelan economy and the deteriorating  political situation. With a looming currency crisis, stagnating production at the main government-run petroleum company (PDVSA), immense inflation and mounting corruption problems, Venezuela could be a sinking ship in which China has invested too heavily. Politics aside, China’s choice to move forward in Venezuela may be a risky gamble, but the lure of the largest oil resources in the world seems likely to maintain an increasingly mutually-dependent relationship into the coming years.

 

Surviving dinner with a China Hand...

Surviving  dinner with a China Hand.

China Hands can be awful bores at the best of times, the China Brain team included. Here’s a quick guide for those of you who come across one at a dinner party, or more likely, propping up the bar of an unwholesome establishment, desperately hoping to engage someone in a deep, philosophical conversation.

 

 

First things first – the basics: Be aware, of course, that if a China Hand is found outside of their comfort zone – for some that is the 6th Ring road of Beijing, for others just China in general - they will undoubtedly be feeling nervous and uncomfortable that they can’t hold court on the Middle Kingdom. If the conversation is ranging from, for instance, the upcoming London mayoral and US elections, to the continuing downfall of Tiger Woods, or even to what baby stroller to purchase for a new arrival, the China Hand will be pretending to listen. He or she may even utter the odd word, but rest assured, the Hand is simply waiting.

 

What is the Hand waiting for you may ask? They are waiting to hear the key words that will allow them to demonstrate their cavernous knowledge of what is of course the most important country in the world at the most important moment (since the last most important moment) in its very, very long history. These words are too numerous to list in full here but obvious examples are of course ‘China’, ‘Beijing’, ‘Communist’ (be careful when discussing Ken Livingstone), and somewhat mysteriously to those not in the know, ‘Hu’, ‘Wen’ and ‘Xi’. By simply avoiding the key words, you may stave off any China Hand’s attempts to wade into the conversation for a little while.

 

Basic deflection will only last so long. At some point, the China Hand may catch you unaware or the conversation may naturally move towards the most populous country in the world, which as you may be aware is soon going to be the biggest economy in the world. The very fact that China is so very important now means that the China Hand’s ability to link China to almost anything is assured.

 

For instance: You: ‘Who do you think will win the London mayoral election?’ China Hand ‘Well I’m not too sure, seeing as I actually live in Beijing, but whoever does win it will be making a beeline straight for the Chinese over there as the City wants to become the global centre for trading the Renminbi”. Or, You: “What do you make of Tiger’s shambolic behavior in the US Masters?” China Hand : “Well I’m not that into golf, but I did hear that in China, they were mystified by his fall from grace, because your success over there is kind of measured by the number of mistresses you have”.

 

At this point, it’s highly likely that you cannot avoid asking the China Hand a bit more about what he or she does in China and this is the point where you have a key decision to make.

 

Option A is you pretend (or not as the case may be) that you know little or nothing about China and are therefore ready to be ‘(re)educated’ by the great sage before you. This is the path of least resistance and will probably lead to around 20 minutes of listening to the China Hand about what life is ‘really like’ in China, no doubt helping you to understand that the Chinese are not going to take over the world quite yet and that yes, the pollution really is as bad as they say. But why would you want to be anywhere else right now as it’s currently the most important place in the world, the opportunities are endless and no, Mandarin really isn’t quite as hard as everyone says it is, blah blah blah.

 

Option A is safe and easy, but let’s be honest, why not spice things up a little? Here again, you have two options, as you can be sure that whatever you do say, the China Hand will disagree with you. Your first option is to say that you think that China’s rise has been overplayed and it’s all going to come crashing down pretty soon. As economic growth slows and social instability rises, the Party will no longer be able to keep control of all the different emotions and desires that exist within a very tightly controlled society. If you throw in the names Gordon Chang and Minxin Pei (or better yet, Pei Minxin as he would be known in China), that will undoubtedly impress. A China Hand would rarely completely agree with their particularly doom laden predictions, which incidentally have been wheeled out again recently after the rumours of a new schism at the heart of the Communist Party. That is unless of course you’re actually having dinner with Mr. Chang or Mr. Pei.

 

Option B is to say that we all might as well just give up now because China is going to take over the world soon anyway. It’s buying up our companies on the cheap, it’s grabbing whole swathes of Africa, its military is expanding at an alarming rate, alongside it’s confidence in diplomatic circles. You could even throw in the fact that it’s going to smash all records of gold medal hauls at the London Olympics with its platoon of 9 year old gymnasts.  This will probably force the China Hand into a slight corner, where he will feel duty bound to point out some of the frailties that still exist within China: continued growth is by no means guaranteed, the US still holds the dominant position by a very long way in terms of military power, innovation and entrepreneurship, and they promised not to do that thing with the 9 year olds again so don’t worry too much.

 

Your final option is what we call the social hand grenade. You turn to the China Hand and tell him or her in no uncertain terms, that you find Brazil a far more interesting, exciting, enticing topic of conversation. The China Hand will look stunned, shocked and perhaps a little bit hurt -- before responding with, “Did you know who Brazil’s largest trading partner is these days?”

 

China’s Economic Transition: Embracing...

China’s Economic Transition: Embracing the Market Allocation of Resources.

At an impasse

 

China’s economic challenge at the moment is probably the greatest it has faced since Deng Xiaoping embraced market reform in the early 1980s. Thirty years on, “Socialism with Chinese Characteristics” has passed through several stages before arriving at its current plateau in the 2010s. Without a major evolution in the national growth model, the pressures facing the Chinese economy could destabilize the achievements of the past decades.

Until now, China relied upon low-value exports and major investments to grow its economy. This model has resulted in diminishing returns in recent years. Low wages, the key ingredient to its global competitiveness in low-cost manufacturing, are no longer part of the economic equation (on average, wages rose 12% in 2012). Countries like Bangladesh and Cambodia, with rock-bottom pay and a rapidly expanding industrial base, will continue to reap the benefit of this increase as foreign companies shift production from China to maximize profits.

This trend exacerbates the problem of China’s already-excessive industrial capacity. Private companies and state-owned enterprises (SOEs) have long had easy access to credit from China’s state-owned banks. China’s population is notoriously thrifty, a characteristic that has stymied the kind of domestic consumption growth the nation sorely needs. Instead, the banks have played the essential distributive role in the economy, using the population’s saving accounts to provide cheap credit to Chinese companies, in particular the SOEs, who have been under little pressure to use this capital effectively.

 

Financial reform in the works

 

            Fortunately, the news from the Third Party Plenum in mid-November was mostly positive. Plenums in China happen on an annual basis as part of the five-year Party Congress, and the third one is often policy-focused – indeed, the market-based economic shift initiated in 1978 was similarly announced at a Third Party Plenum.

            Contemporary China may indeed be at a decision point that is in some ways as important as the one 35 years ago. Good, then, that the result of November’s plenum was a strong affirmation of market-led development. The single most talked-about sentence in the summit’s main document is that the market should play a “decisive function in resource allocation,” a deliberate rhetorical upgrade from the status quo, which declared that the market had a “basic” role in directing resources. From The Economist to Avery Goldstein, a professor at the Center for the Study of Contemporary China at the University of Pennsylvania, those whose job it is to read the semantic tea-leaves in Chinese government communiqués insist that this is a significant symbol of policy evolution. Pieter Bottelier, a professor of China Studies at Johns Hopkins, even characterized the plan as “the most ambitious reform [...] I’ve ever seen.”

            Aside from finance, other aspects of the reform include the dismantling of the labour-camp penal system, the end of the one-child policy, reform of the hukou system that defines the population’s right to live in the city, and the establishment of an elite council to execute these reforms.  

            Such a dramatic announcement of reform required Xi to amass significant political capital. To that extent, at least in the short term, “political reform” is off the table. On the contrary, Xi has increased surveillance and repression–the surveillance apparatus now costs nearly as much as the entire military budget ($111 billion USD versus $114 billion). But, notes Goldstein, further market reform may lead to political opening down the road – just not right away.

            That may be for the best. It would no doubt be practically impossible for Xi to unleash economic reform on this scale while simultaneously throwing the hegemony of the Party into jeopardy. As for the SOEs, the administration is almost certainly attempting to address the problems created by cheap credit and its economic effects (excess industrial capacity and a bloated real-estate market) by insisting on the market distribution of resources. Here Xi is admirably taking on state-owned companies that are controlled by family members of the highest-ranking government officials. With the publishing of the post-plenum document, he seems to be announcing his dominance over this gilded class to both China and the world.

 

Charting the way forward

 

Replacing China’s investment-powered growth engine with a vibrant domestic consumer market will require a cultural change if Chinese people are to part with their wages, of which they currently save about one-third. In contrast, profligate Americans manage to save only between two and three percent of their annual income.

 

 

Various government policies, including  its anti-corruption measures, which has reduced conspicuous consumption among China’s 60 million party members, and the spread of automobile limits to more cities, a measure intended to reduce China’s choking urban pollution, will also continue to exert downward pressure in various sectors.

These issues demand a strident government response. For one thing, China’s deposit savings rates, usually between three and four percent, are much higher than in most developing East Asian countries. Lowering this would encourage Chinese people to leave less money sitting in the bank. Continued de-incentivizing of real estate investment is a must: property prices have increased nearly 10% year-over-year. Thankfully, the administration’s plethora of mechanisms designed to cool the housing market, seem to be taking effect, as November 2013 showed a slowdown in property inflation compared to the rest of the year.

 

The hackneyed adage about “crisis” and “opportunity” being the same character in Chinese, a mainstay in Western motivational speeches, has an undeniable relevance at this historical juncture. China seems more confident and powerful than ever, while the world’s financial markets fret about grave structural problems and images of smog-choked cities shock the rest of the world. The concerns won’t cease until China sees itself past the current challenge into an economy that is driven chiefly by consumers rather than cheap government credit and ever-increasing industrial output. In this process, there is the potential to forge a nation that is more sustainable economically, socially, and environmentally. To fail to capitalize on this opportunity would be grave for an administration that has set out its stall to achieve a historical transformation.

 

China`s changing ambitions in Africa...

China`s changing ambitions in Africa.

Whilst Africa as a continent continues to grow at a modest pace, 6.6% GDP growth in 2012 (4.8% and 5.3% are forecast for 2013/14), the fact remains that this growth is not high enough to alleviate poverty and move countries up the Human Development Index (HDI). Growth alone has proved to have little impact on poverty reduction. Whilst resource rich African countries continue to benefit from relatively high commodity prices, this represents a short-term positive. It`s infrastructure, power production and intra-African trade (via locally manufactured goods) that will push countries up the HDI on a durable and sustainable growth path and this is where China could prove to be the making of the continent.

 

 

 

Whilst China-African relations have been shaped in the past by China securing the supply of resources and financing the infrastructure to obtain them, the future will be a far more expansive relationship, involving both the state sectors and private entrepreneurs selling to Africa’s consumers, and not just outsourcing production there. To facilitate this, China currently deploys some 150 commercial attaches throughout the continent..

 

Africa represents about half of the 25 fastest growing economies of the world, meaning rapidly accelerating consumption of made in China products: everything from low cost textiles to up-stream advanced technologies are suitable for African markets and the rapidly growing middle classes. Private investment is simultaneously taking advantage of the wage cost differential and adding value to products on African soil, if not carrying out the full manufacturing process there. On a recent visit to Ethiopia, the landscape I encountered transported me back to Guangdong with its neat lines of machining factories.

 

   

 

Surprisingly China currently lies in 6th place behind the UK, India, USA, UAE and France in terms of greenfield investment, however the ambition is there to increase this dramatically. Chinese FDI is currently re-focusing on the manufacturing and infrastructure sectors, and current Chinese governmental subsidies are now aimed at developing industrial parks, to both enhance manufacturing capacity as well as facilitate technology and skill transfer. In return African Nations will increasingly be expected to support China`s policies in international forums. China increased its share of total African exports from 3.2% in 2000 to 13% in 2011, whilst investment has gone from US$100 million to more than US$12 billion in the same period.

 

Potential stumbling blocks that must be addressed now by the new Government are: environmental concerns, worker safety, compliance with local labor law and corporate social responsibility. Currently Chinese businesses on the continent often rely on imported Chinese labor, offer limited job training or opportunities for Africans to rise beyond unskilled work and continue to have image problems among the local populace.  China is not unaware of such issues and is actively addressing its image problem in Africa with vigorous soft power initiatives: 5,000 fully paid scholarships to Chinese Universities, technical training for over 30,000 Africans, the launch of the very slick CCTV Africa as well as numerous local grants for infrastructure projects. China is fast addressing its image in order to reverse hostility towards deeper economic engagement.

 

China, not only has the supply chain in place, the FDI, the political will, but also a multitude of both smaller and state run companies well placed to provide the skills, technology and materials needed to realize Africa’s structural transformation: the reallocation of economic resources from activities with low productivity – such as small farming and informal trading – to more productive ones – such as manufacturing, will ultimately define the rate of development of the African Continent as China’s demand for African raw materials  grows at a slower pace each year.

 

 

 

 

Human development in Africa

Very high and high human development

Algeria, Libyan Arab Jamahiriya, Seychelles, Tunisia.

 

Medium human development

Botswana, Cape Verde, Egypt, Equatorial Guinea, Gabon,

Ghana, Morocco, Namibia, South Africa, Swaziland.

 

Low human development

Angola, Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoros, Congo, Congo, Demireps. Côte d’Ivoire, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Nigeria, Rwanda, São Tomé and Príncipe,

Senegal, Sierra Leone, Sudan, Tanzania, Togo, Uganda, Zambia, Zimbabwe.

Source UNDP 2013

Books: China`s Urban Billion, the Bigges...

Books: China`s Urban Billion, the Biggest Migration in Human History.

By Tom Miller for China Brain.

 

The journey from farm to city is the story of China’s transformation from a poor and backward country to a global economic superpower. By 2030, when China’s urban population is projected to swell to 1 billion, its cities will be home to one in every eight people on earth. How China’s urban billion live will shape the future of the world.


 

Nowhere is China’s urban miracle more obvious than in Chongqing, the largest city on the upper reaches of the Yangtze River. Once a rusting laggard, marooned far from the dynamic cities of the eastern seaboard, this rough-and-ready river port is undergoing a spectacular transformation. Over the past decade, hundreds of towering apartment blocks have sprouted from the city’s deep red soil, and new bridges have soared across its muddy riverbanks. The skyline, a thicket of skyscrapers, already resembles Hong Kong’s. Yet the construction frenzy shows no sign of slowing: entering Chongqing is like walking into a giant building site. On the city’s northern outskirts, bulldozers flatten wooded hills and lush ravines to satisfy property developers’ insatiable appetite for land. Near the airport, teams of construction workers lay track on a new monorail, which will eventually run to nine lines. And at the heart of the old city, wreckers armed with pickaxes hack at a tangle of grimy slums.


 

Chongqing municipality is often wrongly called the world’s largest city. It is actually a mostly rural city-province a little larger than Scotland, with a resident population of 28 million. Around one-quarter of these people live in the city proper, which is rapidly expanding to accommodate an enormous influx of new urban residents. By 2020, planners expect the city’s population to top 12 million. A model of central Chongqing at the municipal planning centre shows a sea of skyscrapers and smart residential compounds dappled by green, verdant spaces. Accompanying captions confidently proclaim that six big cities, 25 smaller cities and 495 towns will surround the core megacity, “just as many stars encircling the moon”. In the local government’s cosmic view of their city’s development, “A new Chongqing is galloping to the world.”


 

Amid all this spectacular development, it is easy to miss the poverty on the ground. Urbanization has brought enormous wealth to the city, but the millions of rural migrants who work on building sites, serve in restaurants, and rub flesh in massage parlours remain poor. Many new arrivals from the rural counties that surround the metropolis struggle to scratch out a living. Not far from the city centre, scrawny men flog pirated porn DVDs from pavements sticky with cooking slop, rows of women sweat at sewing machines in dank basements, and crowds of unemployed migrants gather at an outdoor labour market. On the mossy stone steps that lead down to the Yangtze River, shirtless old men toil under stout bamboo poles laden with heavy, wicker panniers, their muscular calves bulging like tennis balls. Chongqing’s famous army of “stick men” are just as much a part of the modern city as rich businessmen sipping cocktails in glitzy bars.


 

Chongqing’s leaders want many more rural people to migrate to the city and other towns within the municipality. They believe that faster urbanization will unlock economic growth and boost rural incomes. Their ambitious goal is to double the municipality’s urban population from 10 million in 2010 to 20 million by 2020. This kind of direct promotion of urbanization is new: for the past 50 years or more, China deliberately held back the pace of migration, partly for fear that cities would not be able to cope with a vast influx of migrants. Chongqing’s plan jibes with a shift in national policy: China’s 12th Five Year Plan, which runs from 2011-15, explicitly calls for more urbanization and supports the emergence of giant megacities. Li Keqiang, the incoming premier, has consistently expressed his support for speedier urbanization nationwide. But policy makers are playing a high-risk game: forced urbanization could dramatically improve millions of lives—or vastly swell the ranks of the urban poor.


 

Even without explicit central-government support, China is already urbanizing faster than expected. In 2011, the country passed a development milestone: for the first time, more than half its citizens lived in towns or cities. The number of people in urban areas jumped to 691 million, taking China’s urbanization ratio past 51%. In the development stakes, that puts China many decades behind rich economies like the United Kingdom and the United States, which became predominantly urban countries in 1851 and 1920 respectively. But China’s urbanization process is occurring at a mind-boggling rate. In 1980, fewer than 200 million people lived in towns and cities. Over the next 30 years, China’s cities expanded by nearly 500 million—the equivalent of adding the combined populations of the US, the UK, France and Italy.


 

The primary driving force behind urbanization is economic. Migrant workers earn far more than those who stay on the farm. And the productivity gains from the twin processes of urbanization and industrialization are vital for the national economy: moving hundreds of millions of people out of economically insignificant jobs on the land, and into factories and onto building sites in the city, produces enormous economic growth. Mass migration to the cities makes sense both for individual farmers and for the country as a whole. For this reason, nothing is likely to halt the huge migration from farm to city—bar economic collapse, political turmoil, or some other cataclysmic event. Historical experience, economic logic and government policy all point to the same conclusion: by 2030, 1 billion Chinese will live in cities.


 

This leaves two central questions. What kind of lives will China’s urban billion lead? And what will China’s cities be like?


 

China’s urbanization numbers are very impressive, but they hide an unpalatable truth: a large chunk of Chinese urbanization is bogus. At least 230 million people in Chinese cities do not live genuinely urban lives, because migrant workers from the countryside are not entitled to urban social security and face institutionalized discrimination in the cities. China’s household registration—or hukou—system legally ties migrant workers to their rural home, preventing them from putting down proper roots in the city. Rural migrants in the city lead segregated lives, hidden away in worker dormitories or slum villages. As temporary residents with few legal rights, most migrants remain trapped in low-income jobs, save as much as they can, and buy few goods or services. For this reason, China has failed to reap many of the economic benefits from its huge surge in migration.


 

The rapid modernization of urban China over the past couple of decades is astonishing, but social stratification is worsening. Without hukou reform, China’s cities will soon be home to several hundred million second-class citizens. Even the lucky residents who enjoy full urban rights must put up with clogged roads, polluted skies, and cityscapes of unremitting ugliness. China is trying hard to make its cities more liveable, but the sheer speed and scale of the urbanization process mean this will be extremely tough to achieve. The problem is made worse by urban planners’ impoverished view of modernity, which often requires obliterating the past to make way for the new. China’s cities will continue to shock and awe—but they will struggle to inspire hearts and minds.


 

城市化


 

For 30 years, China has pursued an exploitative model of urbanization that allowed it to industrialize on the cheap. But that model has run its course. As China’s cities grow, their biggest challenge is to find a healthier path to urban development. This book aims to show why this must happen and to explain how it can be achieved. First, it describes the process by which hundreds of millions of people will move off the land and into the city. And second, it suggests how China can begin to create liveable cities that fully capture the economic benefits of urbanization.


 

China’s internal migration bears comparison with the great migration from Europe to the US a century ago. Every year, millions of farmers leave the drudgery of the fields for the bright lights of the cities. Most migrants arrive in the city empty handed, live in squalid conditions, and do the dirty work that no one else wants to do. In return, they are denied health care, schooling for their children, and basic social security. As more migrant families begin to settle in cities permanently, equitable access to affordable housing and social welfare is becoming a pressing issue.Integrating hundreds of millions of rural migrants into urban society is one of the greatest challenges, both economic and social, that China faces over the next two decades.


 

A crucial step will be reforming the household registration system. Because migrant workers do not have local residence permits, they are treated like illegal immigrants in their own country. Pressure to reform the dispiriting hukou system has been growing since the late 1990s, but the central government has failed to make any fundamental changes. New plans to extend an alternative system of local residence permits to migrant workers in cities across China are encouraging. But city governments will struggle financially to provide migrant workers with more urban benefits. If China is serious about delinking social security entitlements from citizens’ hukou status, the central government will have to bear much more of the financial strain.

 

 

Tom`s book: China`s Urban Billion, is available from Amazon

 


----------------------------

 

Tom Miller is Senior Asia Analyst at Beijing-based research firm Gavekal Dragonomics and a former China correspondent for the South China Morning Post. Tom has spoken at Chatham House in London, the Friends of Europe think-tank in Brussels, and the World Bank in Beijing. He has written op-eds for the Financial Times and appeared in the Wall Street Journal, New York Times, Economist​, Guardian, Reuters, BBC and CNN, among others. He has lived in China for 13 years.
 

China’s image crisis

China’s image crisis

Sandwiched between articles on the smog in Beijing and the political machinations of the Chinese government, a BBC article a few weeks ago featured Chinese painting, calling it “one of the world’s oldest continuous artistic traditions – and so innovative that it was centuries ahead of the European art movement”.It neatly exemplifies the main thrust of this article – China currently has something of a media-led image crisis outside its borders that threatens its ascendancy in the world order. Who can be sure of what China stands for when the CCP is quite so opaque?

So how do people all over the world view China? Perceptions appear to be almost as diverse as the country itself but key themes of surging economic growth, the prevalence of ‘Made-in-China’ products,  and rapid urbanization on an unprecedented scale all make a strong showing. According to a recent poll, 23 out of 39 nations believe China either has or will soon supplant the US as the world’s next big superpower. Whilst close neighbours view China negatively (just one in twenty Japanese think of the Chinese in a positive light), what makes 79% of El Salvadorians choose the US over China? After all, the US had a tendency to favour dictators in Latin America while China has a booming economic relationship with the region. The Chinese, for their part, think this is quite unfair – the majority, in a survey by the Pew Research Centre, felt their country deserved more respect globally than it gets now.

 

The cultural and linguistic gulf between the West and China is undeniable, but is underscored by the Chinese immigrant story in the West, that still taints perceptions. As with other immigrant groups, first generation Chinese made their niche in classic immigrant sector jobs characterised by manual labour, often catering to the needs of the local communities where they settled in businesses such as restaurants and laundries.This led to historical stereotypes associating the Chinese with laundries and restaurants.

 

In recent years this has changed as university towns are inundated with an influx of wealthy Chinese students who represent a wholly different category of educated, ambitious Chinese expats. Chinese business people are welcomed globally as the carriers of much needed investment and Chinese tourists are even spoken to in their native tongue in the most fashionable shopping districts such as 5th Avenue in New York and Knightsbridge in London .

 

The Western media’s portrayal of China, also contributes significantly to China’s global image crisis. International politics is obviously a major factor in the media’s decisions, but so is the Chinese government’s press censorship policies –in a vicious cycle, the censorship tends to antagonise the press further, causing more ‘bad press’. But as China’s grip on the world economy tightens, Western media may choose to impose self-censorship to protect their business interests in the country: the recent New York Times article on Bloomberg editors halting publication of an article that questioned the uncomfortable relationship between the Chinese leadership and business being one such example.

 

The most obvious vehicle of Beijing’s soft power efforts has been the Confucius Institutes – there are ten in France, nine in Germany and seventeen in the UK alone. But even this soft power is soft power, Chinese style. The Chinese government’s heavy-handed dealings with its neighbours – such as the recent unilateral extension of air-defence identification zone over the disputed East China Sea islands – belies the promise of panda diplomacy. No amount of Mandarin lessons will decrease the anxiety nations around the globe feel upon seeing China’s border disputes with almost all its neighbours. The obvious question they ask is, ‘If that’s what the next superpower does to its neighbours, what happens if we ever land in their bad books?’

 

Nevertheless, there are many nations where China is making steady inroads in gaining prominence – for them Chinese business is key to survival and China is a ‘partner’. Asian countries, such as Pakistan and Malaysia, and African nations, such as Senegal and Kenya, lead the pack when it comes to pro-Chinese views. For 4 of the 5 former Soviet Republics, China is their largest trading partner.  In some regions it is a case of strategic alliance – Pakistan, for example, receives military support from China, which shares its antipathy towards rival India. In other nations, it is the business angle that triumphs –China is Ghana and Kenya’s second largest trading partner, Nigeria’s fourth, and Senegal’s fifth. This scenario is similar to Latin America as well. (China Brain has covered China’s trade relationship with Latin America in detail, particularly Brazil and Mexico.)

 

The Chinese government’s approach in Africa has been an intelligent one: “Soft power, Hard cash”, along with the launch of CCTV Africa and its numerous partnerships with African media bodies.Its positive coverage of African affairs, focusing on the self-reliance of Africans in developing Africa, also sets itself apart from the Western media’s mostly doom-and-gloom coverage of the continent. This has helped it gain significant popularity as an alternative source of credible news in the region. The charm offensive is also helped by heavy investment in building infrastructure, which are very visible sources of cooperation between the nations and plays a role in garnering much needed  public support.

  

To understand to what degree this approach has been successful one should look at some of the voices coming out of Africa that quite worryingly question the very basis of liberal democracy in favour of China-style state capitalism: ‘Why wait for lacklustre democracy tomorrow if you can get a job or a new roof over your head today?’

 

Some of the criticisms levelled against China – lack of freedom of expression, workers safety, etc. – certainly also merit some serious internal reflection. The way forward for China therefore lies in a combination of rethinking its media policies, along with strengthening its soft power initiatives. Defining a brand, that fits with the country, of who it is now and who it hopes to become in the future, can be the first step in this process. The country contains so much young talent and ability that is simply under represented to the world. In doing so it can draw significantly on its glorious history of arts and culture to establish ‘Brand China’, but it also needs to promote the intellectual and commercial innovations from a fresh emerging China, least its image remain in a quandary.


 

Brazil-China trade relations: end of...

Brazil-China trade relations: end of the honeymoon?

China’s phenomenal economic growth has made it the second largest economy in the world in a relatively short time. In the process, its impact on Brazil has been significant. The two countries have long been allies; China recognised Brazil as a ‘strategic partner’ in 1993, the first country in the Latin American region to be accorded this status. The commodity related interdependency between the two countries is so high that it has even lent itself to the official name for a classification of ship type – Brazil developed massive ships called “Chinamax” to ply mineral ore from Brazil to Chinese ports. Over time “Chinamax” has become the standard name for ‘very large ore carriers’. In this article, China Brain explores how the relationship between the two countries is evolving and why tension has been rising in recent years.

 

Bilateral trade

The rhetoric from the two nations is still overwhelmingly positive. As the Brazilian foreign minister put it in 2004, “We are talking about the relationship between the largest developing country in the Western hemisphere and the largest developing country in the Eastern hemisphere”. Brazilian exports to China rose massively from $1.1bn to over $21bn in the first decade of the twenty first century. At present China is Brazil’s largest trading partner, although, crucially, Brazil is not even among China’s top ten trading partners. In the following sections we explore the nature of this asymmetry and what it means for the countries involved.

 

 

 

Primarization of the Brazilian market

 90% of Brazilian exports to China are primary products such as iron ore and soybeans that satisfy the Middle Kingdom’s need to build its new skyscrapers and feed its giant population. Brazilian commodity businesses have long been riding high off the back of China’s growth. Contrast this to Chinese imports into Brazil – in 2009, only 1.6% of total Chinese imports were primary goods. The majority were relatively low cost consumer appliances, which have put price pressure on local manufacturers. Many Brazilians now see Chinese companies as direct competitors and a threat to their own employment. The combination of these two forces is threatening to move Brazil further down the technology ladder and regress into a less industrialised market.

 A possible explanation for this ‘primarization’ is that as a resource-abundant country, Brazil’s comparative advantage over China is only in primary goods. But studies indicate this is not always the case. Machado and Ferraz (2006) identified 58 products that Brazil was not exporting to China despite having a comparative advantage in their production. In these cases it was the Chinese government’s import substitution-protectionist policies that were barriers because China imposes escalating tariffs on processed products.

 Unfortunately, any attempt to even the playing field between the two countries is fraught with danger. In 2010, when Argentina tried to restrict import on Chinese manufactured products, China retaliated by stopping soybean oil imports from Argentina. Trade relations did not normalise till Argentina ultimately relented six months later. Brazil cannot afford to make the same mistakes. If China closed its doors to Brazilian goods, however temporarily, the impact on Brazils’ economy would be disastrous.

 

Battling in third markets

 

Brazil and China are not only competing in their respective domestic markets; they are competitors in other nations too. Here the battle is fierce, and highly tilted in favour of China. Between 2003 and 2010, Brazil’s share of the US market fell by 0.15 points while China’s rose by 6.54 points. In Argentina, China has already displaced Brazil as the chief supplier of home appliances. This is why both Brazilian manufacturers and government officials have begun to voice their concerns, leading to China developing a serious ‘image problem’ in the Latin American business sector.

 

China can counter this image problem if it intelligently disseminates information on how its inelastic domestic demand for commodities has boosted prices globally. So when Brazil now sells commodities in third markets, they can piggyback on the global price hike led by rising demand in China. Studies show that if China’s impact on the global market prices on commodities was removed, Brazil would have lost between $9bn and $14bn in income since 2007. This is a significant figure in Brazil’s $2.5tn economy.

 

Direct investment evolves

 

Initially, China’s relationship with Brazil was one based on the import of Brazilian produced products. Prior to 2009, Chinese FDI in Brazil was nominal. But from 2009 to 2010, it rose sharply by $310m, making the current stock value of Chinese firms in Brazil $20bn. This may actually represent the lower end of the scale of the true value because a lot of the funds are transferred through off shore accounts in tax havens and the real value of Chinese FDI is notoriously difficult to estimate.

 

The main areas of Chinese investment into Brazil have been natural resources like mining, oil, gas, etc. Coupled with investment into Brazilian agribusiness, like Chinese state group BBCA sinking $320m to build a maize processing factory in Brazil, it shows a continuation of Chinese export strategy into FDI strategy. Rather than buying commodities from Brazilian producers, Chinese businesses are now buying Brazilian mines and companies so they can serve their own needs more directly.

 Chinese investment into the Brazilian manufacturing sector is also rising. Chinese automotive company, Chery Automobile Co, plans to build a factory for engines and gearboxes in Brazil. Technology company, Huawei, has already set up business in Brazil, relying on more than 90% Brazilian employees to run the company to good effect. In the beginning of 2011, Huawei’s local revenue reached $1bn, proving the future for Chinese technology companies in the Brazilian market is promising. Financial acquisitions are also increasing, albeit slowly – only last month, China Construction Bank Co. signed a deal to take control of a small Brazilian bank called Banco Industrial e Comercial.

 Brazilian FDI into China, on the other hand, has remained steady for the past decade at $500m, i.e. only 0.04% of the total stock of FDI into China. This comparatively lower FDI is explained by the difficulties foreign firms face when navigating the unfamiliar rules and nuances of the Chinese market.

 Unfortunately, the Chinese government still limits which sectors foreign firms can invest in. Sectors they consider strategic, such as energy and advanced communication technology, are strictly off limits. Firms working in other industries however have been lured in by the inexorable expansion of the Chinese market. One such example is Brazil’s sole business jet aircraft manufacturing firm, Embraer, which operates in China from the Harbin region. The firm projects that within the next two decades, Chinese airlines will require over 1000 new jet aircrafts (which is 15% of global delivery of jets). Embraer does plan to tap into this market. But despite the phenomenal projected growth in China, Embraer’s biggest FDI to date has been in the United States so progress in China has been limited.

 

Future

 Brazil and China’s trade relationship, even in its present form, is beneficial for both parties but inherently lop sided. Brazil’s narrow specialisation on commodities, plus its over-dependence on the Chinese market, may turn out to be dangerous. After decades of unbridled double-digit growth, the Chinese market is beginning to slow down – some analysts put this year’s projected growth at 7.5%. Not only will this lower the demand for Brazilian commodities in China, it will also have a negative impact on the price of commodities in the global market. Brazil will then have to deal with significant fallout from its over-dependence on China.

 Brazil can avoid this catastrophe by diversifying its exports and producing higher technology products, as well as commodities at different stages of processing. Though reports suggest Brazil has been making tentative efforts to diversify, their ultimate success will also depend considerably on the flexibility (or not) of the Chinese government in opening up more sectors for direct investment.

 

Pictorial: Chinese Catholics 天主...

Pictorial: Chinese Catholics 天主教

Literally the “Religion of the Lord of Heaven” there are estimated to be some 12 million practicing Catholics currently in China.  Of which some 5 million belong to the official Catholic Patriotic Association, having some 70 Bishops in around 6,000 churches nationwide.

There are many villages throughout China where Catholicism has been deeply rooted, some since the first Missionaries during the Yuan Dynasty, their practices being strongly identified with the Jesuits. Patricia Calvo ventured to one such village near Xiàn in Shaanxi.

All Images © Patricia Calvo 2013

 

Pictorial: Chongqing

Pictorial: Chongqing

When Jiang Jieshi, otherwise known as Chiang Kai-Shek  set up Chongqing as the capital for his Republic of China, he could not have envisioned the journey that the city would take. 

 

 

Achieving the status of a municipality in 1997 as part of the Chinese government’s attempt to speed up economic development in the central and western regions, Chongqing is now one of China’s five ‘National Central Cities’, along with Shanghai, Tianjin, Beijing and Guangzhou. The municipality has a population of 32.8 million although it is actually estimated that the number of actual urban residents stands at about six or seven million.

 

 

By all accounts, this economic initiative has been a success. Chongqing plays a central role in the the military, iron and steel industries, with heavy industry accounting for 71.5% of Chonqing’s gross industrial output. It is one of the countries three largest aluminium producers, and is home to Asia’s largest aluminium plant, South West Aluminium. Within these heavy industries, transport equipment takes the lion’s share at 29.3% of gross industrial output. Chongqing is the third largest centre for motor vehicle production, and the country’s largest producer of motorcycles. Car and motorbike manufacturers in Chongqing include Changan Automotive Corp, Lifan Hongda Enterprise and the Ford Motor Company.

 

 

The consumer market in Chongqing is also booming, as disposable income increases along with the industry. Total retail sales increased by 18.7% in 2011, standing at RMB 348.8 billion.Logistics has  developed to keep up with ever increasing demand. The imposing and controversial Three Gorges Dam has the potential to provide up to 22,500 MW of electricity. It also increases the shipping capability of the Yangtze river, making shipping from Chongqing to Shanghai quicker, cheaper and safer. Work has also begun on the Shanghai-Wuhan-Chengdu High-Speed Railway, which will connect Chongqing to a 2,078km east-west high-speed railway line.

 

 

Chongqing is also leaning towards the electronics and information industries. Foxconn have a manufacturing base there, as do Hewlett-Packard Co. Several new development zones such as the Chongqing New North Zone will hopefully provide an industry hub. Indeed, the Chongqing local government hopes that high technology manufacturing will eventually account for a quarter of all its exports. 

 

 

So, Chongqing sees a bright future ahead. It aims to become a major oil hub, processing crude oil from Burma, the Middle East and Africa and transporting it across China. At the same time, the city also promotes green industries: large companies such as Suntech are already important operators, and the city authorities are actively encouraging more green start-ups.Naturally, there are caveats. The last decade in Chongqing’s history has also been marked by corruption scandals, environmental problems and social inequality. However, Chongqing hopes to move past this and become a model of urban development for the rest of China to follow.

 

 

All Photographs © Patricia Calvo

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