Kevin Rudd on The Rise of China

Kevin Rudd

The previous Australian prime minister Kevin Rudd recently gave a speech on his view of China and it’s interactions with the world which I found fascinating. Rudd is an expert on China and has an open minded approach I found refreshing.

Rudd’s main argument is that China is a powerful country in many ways and should be treated as such. He thinks the CCP is inward focused and doesn’t deserve much of the vitriol that is directed to it. Rudd does point out many of their flaws but attempts to keep them in perspective – something most everyone fails to do.

It’s a fascinating speech delivered by a very well spoken and intelligent person and well worth your time.

PodCast Link

The People’s Republic of Amnesia: Tiananmen Revisited

A gulf exists between the average Chinese and average non Chinese view of the 1989 Protests in China. It seems obvious to us outside China that a great tragedy took place and then was intentionally covered up in order to protect CCP dominance. Many people in China though buy the CCP version that nothing happened and if anything happened it was unavoidable (or a CIA plot). In The People’s Republic of Amnesia: Tiananmen Revisited the author Louisa Lim has done a great service to everyone by forgoing the talking points and finding facts. The result is an even handed view which shows that terrible crimes were committed by people on both sides of the situation – but perhaps only one side is continuing to commit them now.

The story which emerges from Lim’s investigation has two themes. First is that the events which took place in 1989 were more tragic in every way than people have heard before. Thousands died in Beijing including police, members of the military, and many thousands of protestors. Less reported is the many who died in protests across China. One horrifying situation from Chengdu is highlighted where there was brutality unlike anyone has heard before. Protestors were killing police when they could and police were catching and murdering any protestors they found. It seemed like it shoud be a story of Japan in the 1935, not China in 1989.

The second theme is that the CCP is willing to do most anything in order to hide from this situation. Not only has the official history been white washed but anyone who speaks out has been forced into silence. In an ideal world books like this would be the first step towards healing and taking steps towards ensuring similar tragedies don’t happen but that is not happening. The greatest tragedy is not that this blood bath took place but that the CCP is so actively trying to hide the truth.

Avoiding the Fall: China’s Economic Restructuring

Avoiding The Fall reads like the story of the Emperor’s New Clothes. China’s economy has had thirty years of lightning fast growth and looks like it has room for another thirty years,  but the author, economist Michael Pettis, is shouting that China’s economy isn’t healthy at all. His approach is well reasoned and approachable for non experts such as myself which makes his opinion incredibly alluring, but this is also it’s greatest downfall. Pettis writes throughout the story with an air of certainty – his argument isn’t wrong and no one can possibly argue against it – and so ignores counter points and alternative arguments as fundamentally off base. His well crafted web of facts and arguments could be fragile but he doesn’t seem overly concerned about it. This isn’t an argument against his book per se, but it does make he hesitant to believe it.

The book’s argument is simple: China has a raft of policies depressing its consumption rate and elevating the investment rate; this has caused poor investments to an extent which is no longer manageable; therefore the Chinese economy will be forced into a correction most likely highlighted by an extended period of stagnant growth.

China’s growth is investment driven rather than consumption driven. The facts are striking. The household consumption rate is a way to measure local expenditure in an economy relative to investment and government spending. Values typically are high: As a percentage of GDP the US is 68.0%, the Germany is 55.9%, Japan is 61.1%, India is 60.4%, etc. In China it is 34.1% of GDP, an unheard of value in large economies. Through a raft of policies the government is forcing them to saving their money in banks at an artificially high rate. The gross national savings rate is relatively low throughout the world, the US is at 17%, Germany is 26%, Japan is 22%, India is 30%. China is again the opposite at  51%. The banks are spending this money on investments, and have been doing so for the last thirty years, however not all investments are worth the cost. Three decades of fast growth has built a huge reservoir of debt that can no longer be paid down or rolled over. When the debt becomes unmanageable something has to change.

A China which can no longer rely on ever greater investment as the primary engine of growth will look very different. Alternative growth strategies are primarily consumption based, which is fine, but the transition has proven difficult for other countries in this situation. Brazil and Japan were both described as economic miracles with expectations sky high, but in each case they sputtered out. Brazil in the 1970’s and Japan in the 1990’s showed that when investments stopped performing and debt levels got beyond control the result was a crash in investment and a slow adjustment of consumption to make up for it. This led to ten plus years of flat growth which neither country has truly recovered from.

This transition is unavoidable according to Pettis, but in the conclusion he attempts to show alternative paths forward which can ease the adjustment. In great detail he describes six methods China is using or considering using, however in the final analysis Pettis shows that all of them are either impractical, unlikely to have enough of an effect, or lack the political or social will to be implemented. Pettis ironically has quite an optimistic tone about the whole thing, but I suspect this could be due to his living and working in China and needing to keep the CCP happy.

Avoiding The Fall is one of the most interesting books I’ve ready about current events in China and while only time will tell if he is right, Pettis has certainly laid out a convincing argument that screams to be paid attention to.

Debating China: The U.S.-China Relationship in Ten Conversations

After reading Debating China: The US-China Relationship in Ten Conversations I can honestly say I haven’t been as excited to discuss a book on China as I am now. The book is in the form of a series of debates between American and Chinese thought leaders on a wide range of issues important to both sides. Edited by Nina Hachigian it includes many names I’ve heard before such as Susan Shirk and Elizabeth Economy and prestigious Chinese names such as Wang Jisi and Wang Shuo. Each of the debates has a topic introduced via a set of questions addressed to both sides and is in the form of a set of four letters between the participants. While the authors are very complimentary of each other they don’t hold back in their arguments and the conversations can get quite pointed.

“The Media” with Susan Shirk and Wang Shuo. One of the most interesting debates was between the famous Chinese author, director, and actor Wang Shuo and prominant Chinese policy commentator Susan shirk on the importance of media new and old in modern China, with an understandably heavy focus on the CCP censorship. Wang points out that because censorship is so much more effective on mainstream journalism, social media in China has gained a much more influential role than in the west. Wang is very positive in the current power of social media pointing out that while it is heavily censored it still a main avenue Chinese people use to discuss prominent and contentious topics. While in the west we usually regard professional journalists as a key check on the power of the government in China it is social media which has taken on that role, when a story gets enough social coverage often the central government feels forced to respond in the same way a story covered by professional media in the west would be. This debate was a very interesting back and forth affair with many interesting aspects I hadn’t considered, this one debate by itself makes the book worth the cost!

“Military Developments” Christophyer  P. Twomey and Xu Hui. The majority of debates in this book are very courteous full, flowery compliments and ready accession of points, but I wanted straight arguments and sharp differences of opinion! This debate on military developments in China deliveres. Twomey and Xu are sharply at odds over their interpretations of the past actions of both the US and China, with each countries national views on display. Xu repeatedly accuses the US of attempting to smother China while and fearing China’s power, Twoney fired back that China was reckless and often aggressive while the US is interested in a peaceful world with both powers. In the end I felt like Xu’s argument felt like it was just intended to cover China’s actions rather than explain them logically. It feels like a dangerous game to shout that China is only reacting to America’s aggressive reconnaissance flights when explaining why a Chinese fighter jet accidentally rammed the plane while buzzing it. He repeatedly pointed ways to rationalize China’s aggressive actions but never addressed Twoney’s main point that as China has grown stronger it has shown a more and more aggressive disposition.

“Taiwan and Tibet” Jia Qingguo and Alan D. Romberg. My favorite debate of the book was with regard to the most contentious issue between China and the US – the status of Taiwan. I was very interested to hear why the CCP has consistently made Taiwan it’s most important goal, as someone on the outside looking forth it has always seems strange. Jia makes several arguments why, first that the CCP wants to “unify” China and that since Taiwan was part of China is should be part of China going forward. He promotes the “China has been a unified country for 2000 years” nonsense that’s so common and points out that the US has been preventing China from invading Taiwan since the 50s. Jia’s second argument for retaking Taiwan is “national dignity and respect” which I take as a coded way of saying “because we want it”. The third and probably strongest argument is the Chinese fear of being encircled. They feel that having a country like Taiwan so close to China would be a strategic weight around their shoulders. This is basically the same reason China props up North Korea, preventing a US ally from being directly on their border. The problems with this strategy are apparent in the long term however and China needs to find a better solution.