Today Political Scientists talk about the concept of “government legitimacy”. Defining legitimacy is actually quite difficult, but some of the ideas we tend to associate with it include benevolence, competence and popular support.

In fact, the 20th Century American political sociologist Seymour Martin Lipset offers by far the most compelling definition of legitimacy:

A government is legitimate if and only if it is generally believed that the government performs at least as well or better than that all conceivable alternatives. Performance here means proven increases in the public good, especially economic growth.  

Notice that the principles of both competence and consent are integral to this definition.

Lipset also describes this notion of legitimacy as the key source of a government’s stability. As a result, the key to a government’s persistence is either the want of a better alternative, or its ability to generate “performance legitimacy”.

Today Lipset’s theory of legitimacy is not just widely admired, it has achieved essentially axiomatic status.

How does democracy relate to Lipset legitimacy? If it is generally believed that voter choice guarantees optimal policy, then democracy achieves a sort of automatic “democratic legitimacy”. However, generally political scientists, including Lipset, do not believe this to be the case. Instead, the persistence of democracy is still believed to revolve around its ability to generate performance legitimacy.

Until very recently, political scientists generally believed that Western Democracy was economically outperforming all other models of government, demonstrating superior performance legitimacy. If this was ever proven widely incorrect, the decline of Western democracy follows axiomatically. For example: Robert Kagan, foreign-policy analyst at the Carnegie Endowment for International Peace, has said: “We lived under the illusion that economic success required political liberalisation. All the [democratic] optimism of the 1990s rested on this assumption. Now it appears that the causality is less certain… The old struggle, the one that long predated the Cold War, has returned.”

Readers will probably ask themselves “Is democracy really on such shaky grounds? Is ‘performance legitimacy’ really the only factor? Surely there must be more to it, what about morality?” This is where political science and liberal politics diverge; Lipset’s theory does not make moral assumptions and is very focused on economic growth. Even Francis Fukuyama’s rather populist essay “The End Of History” revolved around the economic out performance of democracy, if you reverse that assumption you reverse the argument. Fukuyama did speculate that mankind’s evolution toward democracy on material grounds has accompanied his evolution toward democracy on philosophical grounds. In other words, democracy is the endpoint of mankind’s search for material progress just as it is the endpoint of mankind’s search for justice and virtue. There is something intuitively appealing about this argument, were democracy not to be the ideal system on material grounds, perhaps we would also find it not to be the ideal system on philosophical grounds.

Now that we have equipped ourselves with the concept of legitimacy, we can analyze the Chinese model of government. In fact the Chinese government essentially targets Lipset legitimacy directly. Instead of democracy, China employs policy experts, today generally scientists and engineers, who optimize policy in order to maximize Lipsettian goals such as economic growth. Although realized increases in living standards are the most important factor in Lipset legitimacy, radical unfamiliar policy changes can jeopardize public confidence in government. In order to maintain Lipset legitimacy, Chinese officials are not allowed to circumvent public support by relying on terror, which is egregious “despotic power”, such as that employed by Joseph Stalin. So Chinese officials must maintain public confidence, they must convince the people that they are delivering and will continue to deliver, that the government is working effectively in the people’s interest. For example: Officials are not allowed to suspend the need for broad public support in the hope that they will regain it at a later date when the wisdom of their radical new policy initiative manifests in greater social utility. One of the ways to overcome this limitation is to experiment with radical policy in a limited geographical area, avoiding endangering broad support, but giving officials a chance to publicly demonstrate the advantages of the policy, allowing them to subsequently extend it without protest.

Improving living standards are the results the Chinese people are looking for, the results by which they primarily judge the legitimacy of their government. Chinese technocrats translate this into a basket of numerical indices which include, for example, a growth index, a green index, a poverty index (further reading: Glasshouse Forum, China Model). The goal of policy makers then becomes the optimization of this basket. Behind the calculation and optimization of policy are vast numbers of academics, economists and statisticians. Chinese technocrats regularly experiment with new policy ideas at the provincial level, and if successful introduce them nationwide. Massive localised infrastructure investments have leveraged the type of economy of scale economics which Paul Krugman won a Nobel Prize describing. Whereas governments in most advanced democracies spend less than eight percent of government revenue on capital investment, this figure is close to fifty percent in China. The creation and incredible expansion of a highly competitive science and engineering focused educational system has also greatly contributed to the economic revolution. Many senior Chinese officials, including President Hu Jintao, have engineering degrees and industry backgrounds. In principle, opinion polls can be used to estimate the utility functions of the populace, allowing scientists to construct the best basket of statistics. Policy making looses all ideological colour, it becomes a purely pragmatic scientific process, a vast economic optimization problem driven by statistics and experimentation.

In summary, at the heart of Chinese Government we have a committee of expert scientists / engineers / economists running policy designed to maximize performance legitimacy constrained by the necessity of maintaining popular support. In the last thirty years these experts have delivered an average annualized GDP growth rate of over 10%, even the Japanese post war economic miracle only managed 8½%. It is an unparalleled achievement, and just as Lipset predicts, Chinese government is consequently hugely popular with the Chinese masses and politically stable.

Further Reading: http://www.theoligarch.com/scientific_development_concept_china_political_philosphy.htm

The similarity of these 3 events is that they are natural disasters with many deaths and many more left homeless. However, for those who lost their home in such a large scale natural disasters, which government do you think do more and care more for their citizens in need? The so-called “autocratic” regime in Beijing, China or the so-called “democratic” and “human right” governments in USA and Australia?

The scale of damage to property and the human cost in the 3 natural disasters:

- Australia: Black Saturday (Bush fire) in Victoria 2009:

The fires killed 173 people, injured 414 with 7,562 people displaced. The list of damage to property are as follows:

· 450,000 ha (1,100,000 acres) burnt

· Over 3,500 structures destroyed, including 2,029+ houses, 59 commercial properties (shops, pubs, service stations, golf clubs, etc), 12 community buildings (including 2 police stations, 3 schools, 3 churches, 1 fire station), 399 machinery sheds, 729 other farm buildings, 363 hay sheds, 19 dairies, 26 woolsheds.

To learn more: Wikipedia.

- USA: Hurricane Katrina in New Orleans 2005

The flood killed 1,464 people, and an approximately 200,000 people were evacuated from the Gulf Coast Region to Texas, Florida, Georgia and Washington, D.C. Of the more than 400,000 residents who lived in New Orleans prior to Katrina, approximately 350,000 lived in areas that were damaged by the storm.

Again, please click on Wikipedia, and Amnesty International to learn more.

- China: Sichuan earthquake in 2008:

Approximately 15 million people lived in the quake affected area. More than 90,000 people in total were dead or missing in the earthquake and 374,176 injured. The quake left at least 5 million people without housing. The area affected by earthquakes exceeding liedu VI totals 440,442 km2, occupying an oval 936 km long and 596 km wide, spanning three provinces and one autonomous region.

Again, to learn more, click on Wikipedia.

Which governments do you think do more and care more for their citizens in need?

- Australia government

Out of the above three named natural disasters, Australia suffered the least in term of the scale and human cost of the disaster. Besides damages to a total of 3,500 structures including 2,029 + houses, the basic infrastructure such as road and other transport system were fully in tact. However, at the first anniversary of the disaster, let’s examine the governments performance during and after the disaster:

The disaster begin on 7 Feb 2009, the then Prime Minister ‘Rudd activates disaster plan’ (Brisbane Time, 9 Feb 2009) and announced a “$10 million in federal and Victorian government funds to help victims and emergency workers.”

Two days later, Mr Rudd told Parliament: “Hear this from the Government and the Parliament of the nation. Together we will rebuild each of these communities — brick by brick, school by school, community hall by community hall.” (Brisbane Time, 11 Feb 2009 – ‘We’ll rebuild: Rudd’)

However, he then begin to play politics with the well being of the disaster victims by “linking government relief for Victoria’s bushfire victims to its $42 billion economic stimulus package,” (Canberra Times, 11 Feb 2009 – ‘Opposition blasts bushfire, stimulus ‘link’‘)

Our media begin to compare Australia handling of the Victoria’s Bushfires with the American during the Hurricane Katrina in 2005. This is how the contributing editor of the Age, Russell Skelton wrote: “Where the Bush administration dithered for 48 hours after hurricane Katrina, leaving the flooded city of New Orleans without help, in Victoria, government and non-government agencies such as the Red Cross were on the ground from first light. Within days a reconstruction authority was set up along with a royal commission.” (The Age, 31 March 2009 – Out of the fire)

As usual in this country, the words of the politicians always sound louder than action. The actual outcome to the victims of the fires was: ‘Australia, Survivors of Victorian bushfires receive minimal compensation’ (wsws.org, 28 April 2009). One should note that: “More than 2020 homes were destroyed in the “Black Saturday” fires; 700 or just under a third of these had no insurance. Nevertheless, Victorian fire survivors have only received token government support. Small farmers unable to prove that over 51 percent of their income is derived from their properties will receive nothing from the official public bushfire appeal fund.”

Despite the fact that: “Victorian Labor Premier John Brumby has granted a one-off $50,000 grant for owner-occupiers whose homes were destroyed and the possibility of an additional $40,000 for some victims, subject to government approval” The arrangement was : “according to the premier, $35,000 of this amount can be used for building expenses and the remaining $15,000 for restoration of home contents. Those with homes partially destroyed by the fires and those who were renting will receive $15,000. The state government is charging survivors who have been forced into temporary accommodation a “maintenance” fee of up to $100 per week “.

The reality was: “These paltry grants will not even cover the cost of repairs, let alone fully replace homes and contents. They amount to a fraction of the cost of a home in the fire affected areas.” (Full report by wsws.org)

14 months on, our Reconstruction Authority which was set up within days of the bush fire seems to have done a “great” job? Frankly speaking, as someone who read dozen of Australian Newspapers every day, I have no idea what our “Reconstruction Authority” done so far for the bushfire victims? This was how the Herald Sun reported on the 4 April 2010 (without mentioning the Reconstruction Authority) – ‘Slow and steady but no promise of winning race’. The reality on the ground after one year are:

“HUNDREDS of people in the worst-affected zones are committing to rebuild after Black Saturday,” “But progress is patchy in some areas, and statistics reinforce that it will be many years before the destruction is close to being repaired.”

“Just under 300 rebuilding permits have been issued for houses, sheds and commercial properties in Marysville and the surrounding triangle,” “Locals believe as few as 50 houses are actually being rebuilt in Marysville while many permits are probably for sheds.”

“In the Kinglake Ranges, taking in Kinglake, Pheasant Creek and Toolangi, 361 building permits have been sought. There were 505 properties destroyed there on February 7.” and again: “There were 117 permits sought for Flowerdale and its sister hamlet, Hazeldene, compared with the 225 properties destroyed.”

The progress for reconstruction has been very slow, part of the reason mentioned by Herald Sun report was: “with the rebuilding process arduous for many – particularly those who lost family or can’t decide whether to face the risk of any disaster.”

However, I believe that among those 700 who were not insured, there must be people who do not have the financial ability to rebuilt but not mentioned by the media. The major reason for the “slow in progress” is actually due to bureaucratic red tape. I read a report about this aspect of the delay in building approval few months back, but unable to find back the link. However, one of the NSW’s local council has this statement in their website under the title: Rebuilding after a bush fire pointing out that: “When bushfire events do occur, Council’s ability to help in terms of the approval process is limited because State planning and building laws continue to apply as they would in normal circumstances, and Council is not at liberty to alter or ignore them.”

15 months on, a Royal Commission of Inquiry set up more than a year ago to investigate into the Victoria’s Bush Fire has the following finding:

“The tragically high death toll was caused by grossly inadequate emergency services, lack of fire warnings and the absence of any centralised evacuation plan.” The individual homeowners were left to decide by themselves whether they should “stay or go”. (WSWS, 28 May 2009 – ‘Australian bushfire royal commission: Survivors expose “stay or go” policy’)

The enquiry also find that: “None of those in command showed any real leadership” (News Limited, 28 May 2010 – ‘Black Saturday – Leaders faltered as Victoria burned’). The situation were:

“VICTORIA’S police minister and the state’s three most senior police officers were all absent from the emergency nerve centre when most of the deaths occurred on Black Saturday” (Herald Sun, 7 May 2010).

“The uncoordinated and chaotic division of responsibilities and functions of senior police and emergency services leadership points to the negligence of the state government of Premier John Brumby. It made no serious attempt to establish clear lines of command and communication inside the IECC prior to the devastating fires.” (WSWS, 17 May 2010 – ‘Australia: Government culpability in 2009 Victorian bushfires’)

As for the Federal Government, beside making some grand statements and posting for photo opportunities with the media at the beginning of the Bushfires and on its anniversary seems to disappear from the radar screen throughout the very slow rebuilding process. At the anniversary this year, the state government of Victoria was left alone to defend the delays in rebuilding including the rebuilding of schools in the bushfire-hit towns of Marysville and Strathewen (Herald Sun, 7 Feb 2010 – ‘Brumby defends bushfire rebuilding delays’)

- US government

Comparing to the Bush administration, Australian media did has the right to feel good about ourselves.

President Bush has been warned on the eve of Hurricane Katrina that New Orleans’ flood defences could be overcome” and “the risk to evacuees in the Superdome. However, “Mr Bush does not ask any questions as the situation is outlined to him.” (BBC, 2 March 2006 – ‘Video shows Bush Katrina warning’) That is, no action being taken by the President to do anything to the anticipated disaster.

During the disaster, a well research website in the US with links to its sources showing photos of the President enjoying himself – “playing Guitar While New Orleans Drowned”.

The research also show that: “Vice President Dick Cheney continued to enjoy his vacation in Jackson Hole, Wyoming during the whole debacle,” while “Secretary of State Condoleezza Rice bought $3000 worth of shoes at the exclusive NYC boutique Ferragamo.”

“Speaker of the House Dennis Hastert called for the bulldozing of New Orleans, saying that it didn’t make sense to spend the money to rebuild the city; he also initially refused to call a special session of Congress to appropriate emergency relief funds for the Gulf Coast, saying that FEMA was handling the situation perfectly well. Hastert capitulated to pressure from House Minority Leader Nancy Pelosi to allow the vote, then tried to take credit for the funding.”

At the 4th anniversary of the disaster last year, reality on the ground of New Orleans indicated that, not much being done by the US government to rebuilt the flood affected areas. Amnesty International released a report with title: ‘The Facts: The Right to Return—Rebuilding the Gulf through the Framework of International Human Right.’ indicated that:

“Despite the passage of almost four years, thousands of those internally displaced as a result of Hurricane Katrina who want to return to New Orleans are unable to do so.”

“More than 14,000 families living in metropolitan New Orleans are still receiving Disaster Housing Assistance Program (DHAP) vouchers which help them pay rent. These vouchers come with an expiration date, which was recently changed from March 2009 to September 2009. Only approximately 7,500 of these families may be eligible for Housing Choice vouchers, which gives them access to Section 8 housing. Once the DHAP vouchers expire, the remaining families face potential homelessness. The U.S. Department of Housing and Urban Development (HUD) acknowledges that at least 4,000 of those who do not qualify for Section 8 housing will have difficulty finding affordable housing.”

The report further explained the situation: “After Katrina, the federal government placed tens of thousands of families in trailers which were meant to provide temporary shelter. Today, there are approximately 3,400 families still living in trailers in Louisiana and Mississippi, 760 of which are in New Orleans. After being told that they would be evicted if they did not vacate their trailers by May 30, 2009, the trailer residents will now be given the option to purchase their trailers for $5 or less. Many of the FEMA trailers contain levels of formaldehyde, a carcinogenic toxin, which are 75 times the recommended maximum for U.S. workers. The federal government has indicated that trailers with elevated levels of formaldehyde will not be available for purchase. As a result, only 1,160 of the trailers currently being used qualify for purchase by these IDPs. HUD has not yet provided a clear indication of how it will supply the remaining trailers.”

Here is the full Amnesty International Report in 2009

The mainstream cooperate media in US were basically silence on the problem in New Orleans. This is how AlterNet, an independent website reported the situation on 10 September 2009: ‘How Corporate Media Are Washing Away Katrina From America’s Mind’.

This year, on the March 2010, a blogger by the name of Douglas Brown has this personal account of what he watched first hand in New Orleans: “This week, I drove to New Orleans as part of a Mission Trip to help rebuild homes that were destroyed by Hurricane Katrina in 2005. After five years, there are still literally thousands of people who are still homeless or living in trailers that FEMA provided in 2005. Most of these people are people who have little or no income, have lost family, often the main income earner, are elderly, widowed or disabled. There is no funding that these people can get to rebuild. They have nowhere to go, and in the richest nation in the world, the shame we saw when the poor were left behind when Katrina hit is still here, albeit not on National TV, since it is not a current story anymore.”

For your info, a US federal judge has ruled in November 2009 that the Army Corps of Engineers’ failure to properly maintain a navigation channel led to massive flooding in Hurricane Katrina in 2005. (Brisbane Time, 20 Nov 2010 – ‘Corps’ negligence caused Katrina flooding’).

- China Government

Sharp Contrary to the performance of the Australia and US’s governments during a major natural disaster, Chinese leadership responded to the 2008 earthquake in a professional manner characterise by its high efficiency and comprehensiveness:

The military formed the key elements in the rescue process and its response to the earthquake was rapid with “the first Chinese military rescue team reportedly headed for the disaster area within 14 minutes after the strong earthquake began” (Hoover Institute Research: China Leadership Monitor – 2008 No 25 – ‘The Chinese Military’s Earthquake Response Leadership Team’).

The research also find that within days, “China’s armed forces dispatched more than 100,000 soldiers and armed police to help with rescue operations in earthquake-hit areas, dividing their units into three geographical rescue zones.”

“Military transport aircraft and helicopters had made 1,069 flights during the first week of operations, supplemented by 92 military trains and about 110,000 military vehicles, cranes, rubber boats, portable communication devices, and power generators. The military units had pulled 21,566 people both dead and alive from the debris, treated 34,051 injured people and transferred 205,370 people to safety”.

“115 medical teams were sent to the disaster zone, and quilts, food, medicine, and tents weighing 780,000 tons were distributed. The armed forces also airdropped 307 tons of relief supplies and repaired 557 kilometers of damaged roads.”

There are 9 working groups involved in the rescue mission: “Emergency Management and Relief Provision Group, Masses’ Livelihood Group, Seismic Monitoring Group, Sanitation and Epidemic Prevention Group, Propaganda Group, Production Restoration Group, Safeguarding Infrastructure and Post-Disaster Reconstruction Group, Water Resources Group, and the Public Order Group.”

The Time (14 May 2008 – ‘China Races to Save Quake Victims’) also has this account of the military involvement in the rescue mission: “On the streets of Dujiangyan the rescue troops are ubiquitous. Military vehicles are lined up, and People’s Armed Police and People’s Liberation Army soldiers, kitted out in crisp, matching green camouflage, are battling rain and rubble as they try to reach trapped survivors and control emotional crowds.”

The response from the top leadership in Beijing were also sweep and decisive. This is how Wikipedia described the rescue effort: “President Hu Jintao announced that the disaster response would be rapid. Just 90 minutes after the earthquake, Premier Wen Jiabao, who has an academic background in geomechanics, flew to the earthquake area to oversee the rescue work. Soon afterward, China’s Health Ministry said that it had sent ten emergency medical teams to Wenchuan County in southwest China’s Sichuan Province. On the same day, China’s Chengdu Military Area Command dispatched 50,000 troops and armed police to help with disaster relief work in Wenchuan County.”

Not long after the quake, the Chinese government begin to announce an eight-year reconstruction plan, which targets 2008-2010 for immediate recovery and 2011-2015 for long-term economic reconstruction. (International labour Organisation, 12 Oct 2009)

Within 16 months of the massive earthquake, Premier Wen Jiabao already re-visited the quake zone 8 times (This is the report of his 8th visit by the Hong Kong’s media, Ifeng news, 27 Sept 2009 in Chinese language).

A year later, China government released a report in regards to the progress of the rebuilding effort covering a wide range of issues and statistics including the reconstruction of schools, hospitals and residential building; the variety of assistance given to the farmer who lost their land, people who lost their home, old people who lost their children, children who lost their parents and people who became handicap; and the issue with employment, etc. (Detail in Ifeng News in Chinese language, 7 May 2009).

The Time’s journalist, Austin Ramzy has a personal account of the quake zone after 6 months as follows (The Time, 19 January 2010) :

“I went back to Sichuan six months after the catastrophe and was amazed at the speed of physical and economic recovery. In Dujiangyan, the largest city in the quake zone, the rubble and tent cities had disappeared. The jumble of debris was replaced by piles of new bricks, lumber and other construction materials. There was a building boom across the region, and dozens of temporary villages were erected to house the 5 million people who were rendered homeless by the quake. The prefab housing was made out of blue aluminum siding lined with Styrofoam insulation. It had concrete floors and was arranged in neat rows in flat spots at the bases of the mountains. Conditions weren’t luxurious, but the camps were clean and the housing dry and fairly warm.”

“I found no evidence of homelessness, though there were reports of people in the mountains who refused to spend their rebuilding funds and chose to remain in tents.”

“In 2008 the government said it would spend $176 billion on reconstruction by 2011. (The total recovery cost is estimated at $250 billion.) As of last June it had already spent more than $50 billion. Some of the expenses have been shouldered by other parts of China. Twenty provinces have set aside 1% of fiscal revenues for two years to help rebuild Sichuan.”

In fact, the kind of care the Chinese government extended to its citizens in needs has gone beyond financial aids and the reconstruction of buildings and infrastructures, their care for the people has extended to areas such as: “paid for group weddings and plan to hold a matchmaking fair.” (The Guardian, 11 May 2009 – A year on from the Chinese earthquake, love flourishes amid ruins of Sichuan)

In fact, the center of the quake begin from a village where the Tibetan’s live, and what the Australian media did not tell us is how China assist their minority to rebuilt their live. I will have a special article on this issue at an appropriate time with title: “Minority Policy—China Vs. Australia”.

Purpose of this article

The purpose of writing this article is to use actual examples of how the three governments (US, Australia and China) handled a major natural disaster to demonstrate one fundamental truth: That is, the world has yet to find a perfect political system. All form of government has its strength and weaknesses. For the sake of humanity, countries should learn from each other successful experience to improve on oneself.

Unfortunately, in Australia, despite the fact that we have daily news about China, our media not only failed to tell the Australian public the massive human right achievement China made to the more than 5 million people who lost their home in the 2008 Earthquake, some in our media industry systematically running smear campaign with invented stories to demonise China. For those who are interested to find out how? Click on this story: How the Australia Press Council protected media that violated it own written principles?

Conclusion: Democracy Needs Reform

Theoretically, democracy is supposed to bring about caring leaderships with the assumption of “from the people, by the people and for the people”. In practices, this may not be the case as the above 3 examples already demonstrated. Why?

Have we become complacent and obsessed with Winston Churchill assessment of democracy in 1947: “Democracy is the worst form of government except all those other forms that have been tried from time to time.”

Is there any room for improvement? For examples, I believe it is fair for one to ask the following questions:

1) Has our current form of democratic process produce leaders with the right attitude, mindset and ability to care for the people in needs?

2) If not, what should we do to overcome those system deficiency?

3) Will it be a good idea to introduce the element of socialist philosophy into our democratic process? How?

4) Should we regards the inability of a government to care for their citizens in need a human right issue?

The 2009 International Monetary Fund (IMF) report rank China 98 (USD3,678) out of 180 countries based on its per capital GDP, Australia rank 11 (USD45,587) and USA 9 (USD46,381). However, why China out perform the two much richer countries in term of caring for their citizens in need?

If democracy is define as government ‘listening and caring for their citizens in need’, I believe, China has no doubt achieve such goal.

I will continue to write a series of articles using the heading ‘Democracy Needs Reform’ before moving into the area of analysing the solutions. Unfortunately, I was banned by the Australian Media as an accredited Journalist from enjoying my membership due to my political view, so I reckon, most Australians would have to be happy with the Age contributing editor assessment that: “Australia is better than USA.”

However, my up coming article, ‘Democracy Needs Reform—Australia Voters Facing a Basket of Rotten Apples’ may provide some insight into why both Australia and US’s governments failed to care for their people in needs during the Bush Fires in Victoria and Hurricane Katrina in New Orleans.

To read with hyperlink, please visit: http://www.outcastjournalist.com/index_democracy_need_reform_australia_china_n_usa_a_tale_of_3_natural_disaster.htm

Written on 2 Aug 2010 by www.outcastjournalist.com

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Democracy needs reform—The cruelty of poll driven politics (28 June 2010)

http://www.outcastjournalist.com/index_democracy_need_reform_the_cruelty_of_poll_driven_politics.htm

This post was submitted by Chua Wei Ling.

It looks like 2010 will be the worst diplomatic relations between China and the US since 1989. It started with the censorship issue with google, then trying to isolate China from Iran’s with its nuclear program, the issue with the sinking of the Cheonan resulted in war games between South Korea and US in the Yellow sea. Perhaps these issues will come and pass, but there are more distressing issues in Southeast Asia.

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/22/AR2010072206037.html

http://news.yahoo.com/s/afp/20100718/wl_asia_afp/cambodiausmilitary

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/29/AR2010072906416.html

According to this articles, there are several things happened between US and several countries in Southeast Asia. US has resumed relations with the Kopassus, Indonesia’s special forces, which had past history of atrocities and assassinations. Relations with Malaysia has improved despite Anwar Ibrahim being put on trial for sodomy. Laos (an ally of China) dispatched dispatched its highest delegation to the US since 1975. The Obama administration has ended Bush administration policy towards Myanmar by trying to reach out to that nation. US is reengaging military relations with Cambodia.

http://news.yahoo.com/s/afp/20100725/wl_asia_afp/chinausmilitary

Recently, Hillary Clinton came into Vietnam as a symbolic gesture to commemorate the 15th anniversary of relations between Vietnam and the US. Furthermore, she also went to the ASEAN meeting and said, “The United States has a national interest in freedom of navigation, open access to Asia’s maritime commons, and respect for international law in the South China Sea.” She also wanted to make land disputes in the Spratly Island as a discussion against China. The last time when the US was this engaged in Southeast China was during the Vietnam War.

So does Obama want to contain China? It is anybody’s guess, but it seems that US already have discussions of how to counterbalance China’s influence over Southeast Asia even before Obama was elected as president.

http://csis.org/files/media/csis/pubs/081208_mitchell_usandseasia-web.pdf

This post was submitted by pug_ster.

Android came out about 2 years ago and steadily rose up from being the niche smartphone to the ‘alternative’ smartphone. Mobile manufacturers like Motorola, HTC, Samsung, and LG clearly are in the game while other companies like Dell, Lenovo, and Acer will have smartphones down the pipeline.

But what does Android and China have do with this? After all, google (which developed Andriod) and China were at odds with the censorship issue earlier this year. Despite this, China has been embracing the Android market with open arms. They are creating Android services with their own email app stores, search engines and maps from google.

It all sounds nice, but how can an average Chinese afford can’t afford a phone from Motorola and Nokia and would rather buy a nice looking Shanzai phone for about $60? Cheaper chipsets. Recently lesser known companies like Mediatek, Rokchip, and telechips are coming out with cheaper solutions for the Chinese market. While ipads are sold at a premium of $500+ each, Chinese companies like Eken are selling them beginning at the $100 range. Next year we will probably see Android phones come out based on the cheaper SOC’s (system on chip) that will push the phones coming down starting at the $100 range. So Apple has alot to worry about from Android.

http://www.salon.com/technology/android/index.html?story=/tech/htww/2010/07/19/android_in_china

This post was submitted by pug_ster.

China (2010)

It is hard at this point to be sure of who will benefit the most from it economically. There are concerns in Taiwan that there will be a net loss of jobs as a result of the agreement. Whilst Taiwan will be able to ship goods to China with fewer trade barriers, this does not mean that increased trade will employ more Taiwanese than lose their jobs due to an increase in Chinese imports. After all, some Taiwanese bosses may just pocket increased profit, though others will see increased demand and need to employ more workers. It will be easier to consider the impact of the agreement after it has been in place for a year or two.

But now that the ECFA has been agreed upon, where do Sino-Taiwanese relations go from here? The Wall Street Journal has a suggestion.

Leaders from both sides have wagered their personal legacies on the outcome of the trade talks. For Taiwan President Ma Ying-jeou, whose approval ratings have slumped over the past several months, it is a chance to integrate Taiwan more deeply into the regional economy and accelerate the island’s lackluster growth. For Chinese President Hu Jintao, the pact could be a stepping stone for political dialogue, and even a peace accord, with Taiwan before he retires in 2012.

China clearly will want to launch into political discussions at the first opportunity. Ma Ying-jeou is less worried about his legacy and is more concerned about getting re-elected in 2012. But Hu Jintao wants to be remembered for doing something that none of his predecessors could – firmly putting Taiwan on the path of unifying with China, even if this will require further agreements to take place. A “peace agreement” is possible before 2012, even if it is currently not likely.

There is a question as to whether such a new agreement would be suitable. The Chinese Civil War was between the CCP and KMT, not China and Taiwan. The skirmishes between China and Taiwan after 1950 were not a formal declaration of war. If the respective political parties wanted to, they could formally sign a peace agreement between themselves and leave their respective countries out of it. Of course China wants the agreement to include China and Taiwan in some way as a means of making Taiwanese unification more likely.

However, even if a “peace agreement” between China and Taiwan would be suitable, Ma will be reluctant to force one through before the 2012 presidential election, unless it’s clear it would be very popular. Even if Taiwanese would clearly welcome it, most would want a referendum on it – especially as Ma previously promised not to sign political agreements with China before 2012.

But there is one very important question that needs to be considered. After the ECFA, what are China and Taiwan going to do next? As hard as it was to get the ECFA agreed, it was relatively easy compared to the sorts of political agreements that will need to be considered to resolve once and for all Taiwan’s status in a way that is acceptable to both China and Taiwan. Even a “peace agreement” would be highly controversial due to how it referred to Taiwan, but even that would not do much to resolve the China-Taiwan divide. Coming up with ways to bring China and Taiwan together politically and legally, as Beijing wants, would be a horribly complex and divisive process even if it took place over decades. Most Taiwanese do not want unification, and as older Taiwanese who were born in China die off there will be even less support for it. Many Taiwanese will still vote KMT, but as an alternative to other political parties like the DPP, TSU and PFP. They will not do so out of a desire to see unification. China also cannot rely on the KMT staying in power definitely, short of the current ruling party sabotaging the electoral system and ending democracy in Taiwan. The DPP will at some point form a government, which would put the breaks on unification (assuming the process had already started), if not necessarily political rapproachment.

On top of all of that there will be further demands from Taiwan for China to give it more international space, with greater meaningful representation in international bodies, dropping its opposition to Taiwan signing free trade agreements with other countries, agreeing to other economic changes such as fifth freedom rights, etc. Beijing may be reluctant to do this for fear that this will make Taiwan more economically and diplomatically independent and then have no reason to want to unify with China. However, Taiwan will say that economic and other matters cannot rest with the ECFA, especially if political agreements are pushed by China.

Hu should be glad that he is retiring in 2012 – all these headaches will have to be dealt with by his successor.

The first article is from the China Daily while the other is from an Atlantic Council forum. The China Daily article feels there are ‘three gnawing issues’, as they put it. The Indian side looks at it historically, politically and diplomatically. They are both short so I’ll include them in their entirety.

This year marks the 60th anniversary of the establishment of diplomatic ties between India and China. Amid a series of exchanges of high-level congratulations and visits, news from the economic front is also exciting: The first two months of the year saw a 55 percent increase in bilateral trade as compared to 2009. All this seems to show that the relationship between the world’s two most populous countries is faring well and will grow even stronger.

Behind this promising picture, however, a few gnawing issues are still standing in the way between the two titans. If not handled properly, the road ahead for them would not be as smooth as expected.

First, China and India share about 2,000 kilometers of border, and the boundary has never been formally delineated. The famous poet Robert Frost said in a well-known poem that “Good fences make good neighbors.” Many confrontations between countries have been ignited by disputes in their border area. The two sides should quicken their steps on demarcation consultations that began in the 1980s.

Second, as China gains an increasing sphere of influence in the world arena, many Indians, including high-ranking officials, see China as a potential rival or even a threat to India. This may partly explain why India has yet to recognize China’s market economy status, while over 60 countries have granted such status to China. Such anti-China sentiments will not help cultivate a friendly atmosphere for bilateral ties to grow, but rather sow the seeds of distrust between the two countries.

Third, India has always harbored a grudge over China’s all-weather friendship with Pakistan. The China-Pakistan relationship is based on mutual trust and mutual support in nation building and international cooperation. To maintain a peaceful external environment, China also wants to build closer ties with India. If China could become a mutual friend to the two Asian rivals, it will contribute more to regional peace and stability. This will eventually serve India’s interests as well.

To address these issues, the Indian side needs to show real sincerity in forging a more friendly relationship with China. An “Asia century” will remain only a dream until the two Asian giants can treat each other with mutual trust and respect.

India-China Relations: Current Issues and Emerging Trends

January 25, 2010

Event Summary:

The Atlantic Council recently hosted Mr. Mohan Guruswamy, South Asia Center Nonresident Senior Fellow and Chairman of New Delhi’s Centre for Policy Alternatives. In his talk, he addressed the deep-seated rivalry between two Asian powerhouses, India and China, and the factors contributing to the exacerbation of the issue. He also discussed the future of the India-China relationship – where it is headed and what it could possibly bring on both regional and international scales.

Mr. Guruswamy first explored the India-China relationship through a historical lens, pointing out that the relations between these two neighbors have always been tenuous, riddled with contentious border issues and territorial claims, and made even more muddled by the lack of a clear historical record demarcating the borders. He indicated that the burgeoning border disputes, partly a result of the British Raj’s lack of setting clear borders, were exacerbated by China’s occupation of Lassa in 1962 and then by India’s retaliatory occupation of the Tawang region. Attempts to resolve these border issues – from China’s package deal offer in 1986 to their revised proposal in 1988 – have proved unsuccessful, and now neither country is willing to further negotiate on their dispute.

In today’s political context, Guruswamy observed, these two neighbors still show an unrelenting rivalry. China’s fears regarding India, such as their belief that India is a part of the US’ plan to encircle their country (a claim which China feels is “evidenced” by the US-India Civilian Nuclear Agreement) encourages China’s desire to “trip” India before the military asymmetry will begin to close. Further adding to the preexisting distrust between the two countries is India’s economic growth, specifically as China’s GDP growth rate is expected to decline in the recent future while India’s is supposed to steadily increase. Other political factors that continue to deepen the India – China divide is the issue of Tibet.  Ever since India granted political asylum to the Dalai Lama, China has accused India of being pro Tibet (despite India’s acknowledgement of Tibet as a Chinese territory). There is also what Guruswamy calls ‘the coming crisis of the Dalai Lamas’, where two Dalai Lamas will rise (one from Dharamsala and one from Tibet) to succeed upon the passing of the current Dalai Lama which will further create tension regarding this issue. The political stability of other key regional countries – such as Afghanistan, Pakistan and Myanmar – all have the potential to impact India-China relations as well.

Indian interests in respect to China in the long-run include the following key concepts: avoiding an arms race with China, avoiding entanglement in the US-China rivalry, and avoiding being kept in check by China. India’s aim for the future, Guruswamy asserted, is to “walk softly but carry a big enough stick to keep the dragon at bay”.

The question and answer session following the discussion addressed several topics, most importantly, India’s developing relationship with key strategic countries Russia, the US and China. In respect to recent Indo-Chinese cooperation (specifically at the Copenhagen Conference on Climate Change), Guruswamy noted that while they were rivals, they were not enemies, and that “they knew how to work together with common interests in mind”. To reassert his point, Guruswamy exemplified their burgeoning trade relationship, and the potential for the two countries to work together on a number of key security issues, such as terrorism and drug trafficking.

More on Mohan Guruswamy:

Guruswamy heads the Center for Policy Alternatives in New Delhi, an independent think tank that focuses on critical policy issues and whose studies are disseminated to India’s political, administrative and media leaders.  Prior to working at CPAS, Mr. Guruswamy was Advisor to the Finance Minister with the rank of Secretary to the Government of India.

His diverse career path also includes teaching, senior management and journalism.  He is a frequent television commentator on matters of current interest and writes a widely read and disseminated column. Guruswamy has authored several books on policy issues, the latest being The Looming Crisis in India’s Agriculture; India China Relations: The Border Issue and Beyond; and Chasing the Dragon: Will India Catch-Up with China?.

Let’s examine both viewpoints. The China Daily article’s points are:

1. Border issues
2. Geopolitical threat
3. China/Pakistan relationship

The Indian article stresses:

1. Border issues
2. China’s fears of encirclement
3. India’s increasing economic growth
4. Tibet issues
5. Political stability of Afghanistan, Pakistan & Myanmar
6. Potential arms race
7. Indian neutrality vis a vis the China/USA relationship
8. China putting limits on Indian growth

Do you feel this covers all the issues facing the two growing world powers? Do you agree or disagree with the list of issues? Can you add others? What do you feel is the best approach for the two countries to take in the coming years to settle the issues fairly and equitably? Is this a win/lose  or win/win game between the two?

The Expo has finally come to China. A largely forgotten event in most parts of the world, it has been rejuvenated, on a scale in which no other country could even dream of. A record number of 192 countries and 50 organizations have registered, the highest in the Expo’s history. Most people hadn’t even heard of the expo before it came to China. The verdict is clear – The Expo needed China as much as China needed the Expo.

The Indian Pavilion is a massive stupa (pronounced stuup, with an slightly elongated u), resembling specifically the Sanchi Stupa built during the Maurya Dynasty (322-185 BC) by King Ashoka (pronounced  Ashok).

In what is one of the greatest examples the diversity and plurality of Indian history and culture, the dome is shaped like the Taj Mahal Mausoleum (which, commissioned by the Mughal Emperor Shah Jahan and completed in 1653, is one of the seven wonders of the world) and the inspiration of its design comes from the Sanchi Stupa (which was completed in the third century BCE and is a UNESCO World Heritage Site).

And what better model than ancient India, where the Indus Valley Civilization (3300–1300 BCE), whose cities, most notably – Harappa and Mohen-jo-daro, reached a level of urban planning and technological sophistication which was unparalleled during the time. As a matter of fact, the sheer brilliance and superiority of those prehistoric cities would put Mumbai to shame, whose streets flood every couple of years due to heavy rains and poor town planning coupled with inefficient drainage systems, not to mention 55% of the city’s population living in slums! (In the words of India’s Environment and Forests Minister, Jairam Ramesh, if there is a Noble Prize for filth, India will win it!)

According to the official website:

Where’s India’s other achievement?

While all this should certainly be applauded, what is surprising is that a presentation of the other aspect that India is known for around the word – its IT prowess – is nowhere to be seen. A combination of culture, environment friendly urban planning and India’s IT and software industry prowess would have been a great and unique combination. Not to mention the fact that this is one of the few advantages which India has over China.

Strengthening  Sino – Indian Relations

The India pavilion has become one of the most popular spots at the expo with an average of 25,000 visitors every day.

The huge line of visitors queued up to get inside the Indian pavilion as seen above speaks for itself.

Many countries are increasingly realizing that Soft Power can be a very effective tool for increasing their influence, especially countries with rich histories and cultures like India and China. They have a lot to export in that direction; and can use Soft Power very effectively to project an image. Pavan Varma, the head of the Indian Council on Cultural Relations, has argued that “Culturally, India is a superpower.”

This year is the 60th anniversary of the establishment of diplomatic relations between two countries. In China, interest in Indian culture and History is on the rise. The Indian President, Pratibha Patil, on a recent visit to China, unveiled the first Indian Style Buddhist Temple in Luoyang in Henan province after a gap of 1900 years, when two Indian monks Kashyapamatanga and Dharmaratna helped establish the first Buddhist shrine. This temple was at the same site as the White Horse Temple, built in 68 AD, the first Buddhist Temple in China,  and is  part of an India-China Cultural cooperation initiative. She also unveiled a statue of poet and Nobel Laurate Rabindranath Tagore in the heart of old-town Shanghai, which the poet visited in the 1920s and left a strong influence on a whole generation of Chinese intellectuals and writers.

This post was submitted by Maitreya Bhakal.

Here is one perspective to look at it. Only a few of the points here were made by me, but a lot of information I got from elsewhere and people who study this topic. I will try my best to put what I know so far understandable and straight to the point.

If we were to strip down all the activities and devices we use for our modern lifestyles down to their basic components, one can see that there aren’t as many original inventions as most people assume. Patent numbers and journal publications are just one aspect of technology. Though they are important, it’s mostly working on an accumulation of works of the past, making little improvements along the way. Most scholars of this field, define modern technology as the substituting the usage of human muscle and animals for power and how far is the reach and accessibility of technology to the general population. If we took those definitions into account, then the reality is that the modern lifestyle was more recent, only happening in the 20th century. In China’s case, one can argued that modernization happened in the last few decades. The foundations were laid for centuries along with many discoveries, but only a few members of society benefited throughout most of world history.

With that in mind, looking at the basic components, one can say that China before adopting the modern lifestyles, had all of the original inventions in their lives, except for one item; the harnessing of electricity. That was the only physical thing left. Some original inventions did originate from China, some came from other places of course, but many people believe that a lot of it was created independently of other civilizations. However, what made the develop world was the accumulation of all these original inventions and using it with the knowledge of the natural world together to make something remarkable. Knowledge of the natural world was what China needed more of, they had some ideas but it didn’t go as far as other parts of the world. There are many reasons why but that’s kind of the missing secret ingredient you can say.

One thing I need to mention is that many articles and books tend to say China outpaced the world in the arts and sciences. The reality is that throughout China’s “verified” recorded existence, it was a contemporary (equal) to whoever was the most powerful civilization at the time. That’s how Ancient China is viewed as if we were to look at it from the global framework of world history. Some of the technology was quite efficient, or advanced one can argue, and some of it was not quite as sophisticated. The level of disparity was the same throughout the world. Life for the average person on Earth was very hard and cruel throughout most of history.

In many ways, there wasn’t a whole lot of difference between China and the West until the last 150 years. A lot of people like to use China vs. West comparison because that was the most recent and profound. South Asia and the Muslim world (which included a lot of people who were not Muslim or Arab as well) was much closer than China in having some version of an Industrial Revolution. The Arabs had the first “de facto” scientific revolution. The renaissance and enlightement were important eras but it took a while for Europe to actual global dominance. By the time that happened, many people in the great powers had the benefit of having all those experiences of the past and knowledge gather from people all over the globe, while contributing with their own creativity.

One side note to think about. A lot of the maps we see of colonization involved shades of red, blue and other colors to note the dominion. In reality, they should have look more like a bunch of dots and only the coasts would be colored as actual rule was very hard to establish and most power was still in the Natives.

A lot of people often assume that China fell behind or stagnated regarding technology. From what we know, it appears that what really happened was China was moving along the same pace. Progress in subsequently, and people just kept doing the same things as they were. This pace was similar to just about everywhere on the globe. If we reflect here a bit, the last two centuries were the real anomaly of technological development. There wasn’t a lot to choose from regarding Chinese and conventional medicine before the mid 1800s. A lot of the engines that help power a lot of machines for everything else took off in the late 19th to early 20th century. Even in the infamous Opium wars, the notion of winning due to superior technology was less than half the story. There was a lot of collaboration, a lot of manpower on the British side included many native Chinese and other Asians. The Chinese also use firearms as well. The battles themselves were kind of skirmish-like and many seem to have been won mainly through logistical problems. A lot of things were going on at that time. Four decades later when groups in China fought against the French, the same exact weaponry was use with the French slightly updated, and the Chinese manage to hold them at bay in several points. Though eventually defeated.

Ancient China had many unique attributes but what makes it stand out even more than the others are the geographic location, a distinct language and organization of its society that wasn’t common in other places. It’s mainly due to those distinguish markers is what makes China stand out even more and has people thinking the Chinese of the past came up with a lot of ideas on their own. The historical records do show if they got anything from other places outside China’s realm, notably the Indian subcontinent, Persia, Portugal and even the nomadic tribes of the steepes. They might not be as impartial, precise or detailed as our current documents, but that’s how the past was like everywhere. This is what makes investigating history exciting in a sense.

Another thing to think about is we need to put aside generalizations if people want more clarity. Any generalizations made by Chinese people themselves or others. The whole Chinese superiority is quite infamous but we do need to look at it from another perspective. First, it doesn’t take a lot or any reason(s) to believe yourself as better than others. Unless one travels a lot, has many interactions with outsiders or can read, most people were basically living in their “own worlds”. For the average person in China and those in power or could read, the attitude of superiority wasn’t any more or less than what other powerful empires or complex societies had. Although I also think that the arrogant attitude was a factor in preventing progress in China, they also had a lot of other issues which were more significant than that.

Everyone probably has heard about Zheng He’s story, but in my opinion, there were other opportunities present after that. For example, if the Jesuits had sent more people to reach the general population instead of intellectuals serving the court, it might have inspire more Chinese to venture out on their own. Or something more controversial, the Taiping rebels might presented the fastest route towards modernization during the turbulent times. As they inspired a lot of women to their cause, if we look back, a lot of social movements succeeded in part of freeing up this gender to pursue many activities. No doubt, women warriors would have pushed their communities. However, that is all just speculation of what ifs.

It’s kind of hard to really say what China was like in the past. Civilization, Empire, sub-continent…we would have to use definitions on that scale to describe China, but it doesn’t seem complete. It does seem that many people use the the Tianxia (under heaven) idea and applied it to their environment. Kind of the Ancient Greeks and their known world. Except that the Greeks and others in the area saw themselves as one part out of many and the Chinese saw everyone else as related somehow. Other than the written script, everything else seem pretty different among the Chinese. Overtime did other items like architecture, currency, clothing, etc. did they share some similarities, but overall there’s quite a lot of variety.

Reflecting on the past, in many ways it is quite impressive to see how China didn’t fully collapse. This is also what makes a lot of people think that the methods the Chinese of the past used seem fundamentally sufficient. If we were to look at Chinese history from a global perspective, it seems that either China could have taken the opportunities spread from the late Ming dynasty to early Qing to have gradual change. Or this; Since daily life was saturated under the same system of authority, it would have require a social movement, similar to those in the 1930s that led to World War 2, to really shake China. As history shows, it was the latter that happen. If change is gradual, it’s called development, if change happen in a very short frame of time, its a revolution.

It kind of makes sense in my mind why it took so long for China to change considering what happened in the past and choices many people made or not take. That’s reality.

If my mini-essay doesn’t make sense in any way, please let know. I do want to clear up any misunderstandings or questions people might have. I admit I could be off from my assessment. There’s no citations as I gather information from many different books, journals and small conversations with people, as well as what I’ve experienced in the science arena. I actually shortened a lot of what I wrote. This is only 1/4 of what I had. There were a lot more examples, details and other perspectives to think about, but I believe this should be a decent outline.

http://www.nytimes.com/2010/06/09/business/global/09labor.html?ref=world

The Recent suicides at Foxconn seems to be a watershed moment for Chinese workers who are fed up with the long hours, low pay and crappy cafeteria food. Recent strikes at this company, Honda and KFC recently announced substantial pay raises raises alarm bells for the companies and questions if they can still can produce goods affordability in China. China has already facing a of shortage workers in Guangdong/Shenzhen areas as well while the Chinese government is willing to stand aside and allow these strikes to happen.

While many Western Businesses are afraid this this is just the beginning, I believe that this is no longer business as usual where some Western Company where they can just build a factory in China Workers will come. The Chinese government is already making it harder for business to produce low end, high carbon goods.

While it might sound bad about the ability for China to continue to be the “factory of the world.” I don’t believe it is. The workers mostly strike in places where it is to the East of China where labor intensive industries are starting to get discouraged. China is constantly encouraging Western Companies to set up shop in central or Western China while enticing Western and Chinese Companies to produce value added goods or services. I believe the landscape will be good in China for the next few years the when Chinese government encourages development of the 2nd the 3rd tier cities and can still be the “factory of the world.”

This post was submitted by pug_ster.

Apple was elated that iPads sold briskly. Then they fretted when they sold out. Apple continues to experience supply shortages, just like with the iPhone release. Where have all the iPads gone? It turns out the iPads are not just made in Chinese factories, but even their distribution is re-routed by networks of Chinese people.

A CBN Weekly (第一财经周刊) feature examines the intricate gray market for iPads, and the role of overseas Chinese in this informal logistics chain.

By Xie Leining and Lei Jingshu

“The iPad is here.” Ads from Apple are proclaiming in the United States. But they are false.

On April 21 reckoned by local time, the Apple Store in the busy Northpark Shopping Center here in Dallas has not sold a single iPad for a week. The same at a store five miles north of here. Go further some ten miles and it is still the same.

In each of these stores, a dozen display iPads are put on the big tables near the entrance. Then after you’ve experienced the smooth operation of the 9.7″ touch screen and the rich content, including music and videos from iTunes, book readers, AppStore, email and social web functions, and office software, and you’ve satisfied yourself and ready to pay up, the store associate will tell you they are out of stock. And they don’t know when more will arrive.

On the same day, Bill Jordan picked up his pre-ordered iPad from a Colorado Apple Store. Just as he walked out and put the iPad into his shopping bag, two robbers appeared behind him and grabbed the bag from him. Though the 59-year-old fought them, his bag was still taken from him and he got his finger injured. The local police found the surveillance video and the Apple Store are cooperating with police, saying they record the serial number on every iPad sold.

Either these were two technology-loving robbers, or the iPad is a really hot item. More and more we are led to believe the latter is true.

Mose is a professional scalper. He buys products from regular retail channels, then sells them to designated hoarders. His most recent target is the iPad. Lots of iPads. Just two days ago, he went to two stores and swept four iPads. The second day he went to four stores but only got two. And, the Apple Store refused the use of cash and gift cards. If a customer’s credit card information showed he had already purchased two or more iPads, then the store would not sell him another one no matter what. You could go to Best Buy to circumvent Apple’s control and sweep one or two per store per day. But most of them have already been swept up. If you go to Apple’s store online, the earliest you can get them is ten days later.

So at this time the news at every store is, there will be no stock this weekend.

Where have all the iPads gone?

Beside asking Apple’s supplier, you could also go to a place like “MITBBS” to find your answer. This is one of the largest and most popular overseas Chinese forums in the United States, with 20 thousand people regularly logged on. “Fleamarket” is one of the several hundred forum boards. The main topic of discussion is how to use various tactics to obtain electronic products from the retail distribution channel. It works like this. There are two job titles, “Superdoctors” and “Nurses.” A Superdoctor is the equivalent of a redistribution point or somebody with access to professional distribution channels. Behind them are usually import/export companies. A Nurse, on the other hand, is somebody like Mose, who is responsible for sweeping retail and online stores for products to sell to Superdoctors. According to an experienced Nurse named Galvin, a “Healthcare Team” headed by about ten Superdoctors and their Nurses managed to hoard more than 30,000 iPads within three weeks of iPad’s release.

We begin on April 16. This was the second Friday after the iPad’s release in the US. At 12:26 Eastern time, reknowned Superdoctor RL posted a buy bid on the “fleamarket” board of MITBBS for eleven 16G iPads, at $620 each, postage paid.

At this time, the buy price for the 16G Wi-Fi version of the iPad had already gone up by $100 from a week before. A “retired” Superdoctor named Yang tells us that the gray market price of the iPad remained stable in the first week. Experienced Superdoctors and Nurses had already hoarded what they believed was a sufficient quantity as early as March 12, when Apple began taking pre-orders. Apple Stores and Best Buy had stock and the sales staff had not begun to police the quantity limit on iPad purchases. Even though demand in large US cities exceeded expectation, they had hoarded enough iPads for delivery. So in the first week, Nurses bought iPads from stores for $540, saved them up, and flipped them to the Superdoctors for a $5 spread.

So, when RL posted a bid for $620 on April 16, it meant a $120 profit for any Nurse living in a tax-free state such as Oregon or Delaware. Even to Nurses facing a 8.25% or 9% sales tax, profitting $70 or $80 from flipping an iPad was a swell trade. It may have exceeded the per-unit profit made by the Superdoctors.

This trade had little risk, so long as they strictly executed their agreed protocol: Superdoctors paid Nurses via PayPal while providing shipping information. Then UPS or FedEx picked up the packages from the Nurses’ homes.

On April 21, the market prices for the 16G/32G/64G iPads had stabilized on the “fleamarket” board at $620/$720/$820. Suppliers filled several pages worth of information. The place was like a busy bazaar. Some uninvolved people temporarily took up the Nurse trade and put their one or two iPads up for sale; some were used. A user named “fairprice” jokingly began selling call options for the following Monday. His post was shut for not being in compliance with exchange rules.

A Nurse called “Igamble” posted a photo titled “stashing corner” to show the quantity of his iPads. Soon he was cornered by several big Superdoctors. They shoved him around ten thousand dollars in exchange for his entire stash. “Nurses set their sights too low. We’re not meant to make big money,” he lamented. He figured the price of the 64G iPad would eventually rise to $900. Because there were true visionaries on the board: in 2009, speculators drove the price of an $8 toy called the Zhu Zhu Pet to $45.

But reality would soon show that the iPad was not to be another Zhu Zhu Pet. The price of the $499-MSRP 16G iPad reached a market peak at $620. After the weekend, Nurses and Superdoctors would be taking shipment of their iPad pre-orders placed ten days ago on Apple’s online store. Some Apple Stores were also getting new stock on April 20. Though not enough to sate the demand of all passing shoppers, it was sufficient to fill pre-orders. Of course, many of these pre-orders were made by professional Nurses. The most informed Superdoctors began limiting buy prices to $575/$675/$750 and putting up minimum quantity requirements.

These hoarded iPads would then take a trip across the seas, going to markets where Apple had not officially released iPads. China is one of them.

Chinese users got to know Apple products later than other markets. But since China has a prosperous gray market, they have found numerous ways to get them. By using a foreign credit card or iTunes points, they even got access to iTunes or AppStore. According to Apple’s official estimate, before Apple and China Unicom released the iPhone last year, there were already millions of people in China using this handset.

The Mong Kok district in Hong Kong is one of Asia’s largest redistribution points for gray market electronics. On April 20, iPads were the hot item, and every electronics stall had iPads on display. At Sin Tat Plaza, the price tag for 16G iPad was between HK$5000 to HK$5180 (about $644 to $667). This was a drop of HK$300 to HK$400 from a week before. As smugglers continue to carry their luggage into the mainland, the price may drop further still. Compared to Beijing, Shanghai, or Guangzhou, Hong Kong remains the best place to shop for gray market goods.

On the evening of April 21, at the Pacific Computer City in Shanghai’s Xujiahui district, Tang Yong was ready to sell a 32G iPad for 5800 Yuan ($853). A 16G iPad sold for 4800 Yuan ($706). The iPads coming into these markets arrive from the US in Hong Kong, make their way into Shenzhen via the Luohu Customs point, then flow into other cities. Since the customs clearing fee and the risk of being caught are low at Luohu, this is the frequently used entry-point for gray market electronics into China.

Tang Yong makes about 100 Yuan from this 32G iPad. The 5800 Yuan sale price includes mark-ups for using the special purchasing channel, sales tax, cost of shipping, and customs clearing fees. Compared with his initial sales on April 10, his profit had already dropped by 100 Yuan per iPad from increasing competition.

Tang Yong also has a store on TaoBao (China’s eBay equivalent). Like many who flocked to ply the iPad trade on TaoBao, he made sure to write “Professional Overseas Orders” on his ads. In truth, these professional orders are filled by big and small Superdoctors on MITBBS.

He is an avid Apple fan. His cellphone, notebook, are all from that company known for its closed-loop control. Several years ago he became Apple’s authorized reseller in China. He also sells iPhones and MacBooks at his store. But many Apple resellers are also selling gray market iPads behind the counter, because “everybody is.”

On January 17, he waited all night for the iPad announcement. Just like he predicted, this little LED-backlit touch-screen wonder attracted the attention of many Apple customers who had bought from his store. Every day somebody called to ask about iPad’s release in China. Customers were already impatient by February. In the month afterwards, Tang Yong took paid orders from more than 30 customers. They all wanted the iPad.

In the months since iPad’s announcement, TaoBao filled 70 pages worth of merchants taking orders. Initially, few products made it here. At a Zhongguancun brick-and-mortar store, a 16G iPad sold for 7000 Yuan ($1029) at one point. But a week later, as more supply arrived, the price quickly slid. Now, no matter on TaoBao or on MacHome, an Apple user forum, a 16G iPad has a stable price between 4500 Yuan and 4800 Yuan.

There is another subtle point. Every distribution terminal like Tang Yong operates in a black box. When they import from Superdoctors, they get different prices and don’t know what others paid. They differ depending on the import quantity, reputation, and relationship with the Superdoctors. Tang Yong relies on his market experience and his own judgement to decide the price of import. In half a month, he personally sold about 20 iPads.

“The future price is hard to say,” said Tang Yong. According to upstream sources, Apple may implement strict purchasing limits beginning May. It looks like Apple is bent on satisfying US demand first, and preventing the outflow of supplies from the US. It is pushing back the iPad release date for other countries beyond May.

Before China Unicom’s iPhone entered the Chinese market, gray market iPhones had already taken half the market. The same story may play out with the iPad. At least Apple is quickening its pace by announcing the opening of 25 additional Apple Stores in China within two years. Unofficial sources also say that official iPads will be sold in China after May, in step with other markets.

Apple needs to hurry now.

(Tang Yong’s name has been changed)
Contact: liyang@1cbn.com

May 27, 2010 – Opinion: the Foxconn Incident is a Reflection of the Growing Pains Associated with China’s Traditional Mode of Development

The recent spate of suicides at Foxconn in China has brought unprecedented attention to this major international manufacturing subcontractor of electronics equipments.  While the causes of these suicides are inevitably complex,  the incidents are a general reflection of the stress the traditional mode of development has wrought on China’s society and provide a warning that change must be brought about soon.

Foxconn employs some 80,000 in Mainland China.  In 2008, it exported products worth some U.S. $ 55.6 billion, representing about 3.9% of all exports from China.  Foxconn has ranked among the top 200 exporters in Mainland China for each of the last seven years.

Offering low cost, high quality electronics assembly manufacturing services, Foxconn has attracted clients from Nokia to Apple, who has come to rely on Foxconn to supply many of their most important products. Leveraging low-coast, reliable labor, Foxconn imports crucial components from abroad and assemble these components into products for export.  Foxconn’s operation represent in miniature the development model of Mainland China for the last several decades.

As “the factory of the world,” China has become a major export platform used by most multinational corporations. Labor added export such as those from Foxconn represent some 50% of all China’s export. While such exports have enabled China to become a major economy, it has also produced contentious trade surplus while placing China at the lowest rung in the global trade value chain.

Consider the experience of global best-seller iPad. Foxconn is the biggest supplier of the iPad. According to global market supply intelligence research iSuppli, the average cost of assembly in China of each iPad is about U.S. $11.2.  Given that the lowest priced version of the iPad cost U.S. $499, one can see that the assembly cost  is minuscule when compared to the overall value of iPad. For comparison, the component cost of each  iPad is estimated to be U.S. $219.35, still less than 1/2 of the total value Apple extracts from the end customer. The most costly component in the iPad is iPad’s much-raved 9.7 inch touch screen, supplied by Korean manufacturer LG, costing Apple some U.S. $95 per screen.

From the iPad example, one can see multinational branded companies such as Apple reaps by far the biggest share of the profit. Manufacturers of innovative products such as LG also reap a decent amount of profit. The profit made by operations in China, by comparison, is minuscule. To add insult to injury, in providing such low-cost services, China has to sustain the indignation of taking the blame for its trade surplus. Because of the thin profit margins inherent in Chinese operations, the only way for these operations to make a decent profit is through cost control. Under such circumstances, it is not surprising that employees feel stress, high demands are placed on laborers, and pay and benefits are reduced to the lowest amount possible.

Subcontracting, export-led economy can increase industrial activities but not create new brands or new technology; it can increase GDP and trade surplus but not generate wealth; it can create jobs but not generate substantive increases in incomes and standards of lives for the working people.  The present model of economic development has brought on resource deficiency and trade frictions. The recent global financial crisis has also has shown that this model of development is unstable, and make us too dependent on foreign markets.

The rash of suicides represent only the tip of ice berg in terms of the ravages the current mode of development has brought onto the Chinese society. It is time for change – fast. Last year, China overtook Germany as the largest exporting economy.  This year, China is set to overtake Japan as the second largest economy. But if Germany has Mercedes-Benz, BMW, and Japan has Toyota, Sony, what does China have? Where are the world-class brands and companies?

When China first reformed and opened up, China’s economy was still in a very backward state.  It made sense then to focus on economic growth as a top priority. But while growth did make China strong in many ways, it has also caused China to build a huge trade surplus as well as gigantic foreign reserve.

Internally, while the single minded leap toward economic development has pulled many out of poverty, it has also created traumatic stress and shock throughout society. Today’s pace of change is not sustainable. There is a fundamental disconnect between people’s ever growing expectation of increasing material wealth and what can be sustainably provided by our economy.

Today, China’s economic growth is still based on a “demand-driven model” and not an “innovation-driven model.” Our economy consumes a lot of resources, but creates little in terms of technological innovation. Our growth may be a strength of our economy, but it has given the laborers little.  Between 1993-2007, the share of earnings by laborers as a percentage of GDP dropped from 49.49% to 39.74%.  That drop was worse between 2000-2008, when earnings dropped 11.7% as a percentage of GDP.

In order to improve the situation, we need to change the model of economic development. And the key change to pursue is to increase our own ability to innovate. Our ability to improve the mixture of our industrial production depends on our ability to innovate. Our abilities to improve the way we industrialize, to develop technological and scientific know-how, and to grow emerging industries depend on our ability to innovate. Our abilities to build defensible brands and to become more competitive in the global marketplace also depend on our ability to innovate.

This is not to say change will be easy.  But it is only through such changes that we as a society can climb out of the predicament  that the Foxconn incidents symbolize. As Commentator Li of Shen Zhen News Broadcast has observed, “we hope Foxconn will take appropriate measures to rectify immediate dangers facing its employees, take this opportunity to transform its work environment, improvement management, and raise the bar of development for everyone going forward.”

We should emphasize that embarking on this new model of development going forward depends on growing our ability to innovate – including the ability to develop indigenous technological innovations. A key ingredient to doing that is to strengthen the creation, protection and enforcement of intellectual property. The central government has set 2020 as the date China becomes an innovation-based economy. There is not a lot of time left, but much to accomplish.

China clearly didn’t pick the role up although there are still commentators who say China should do this or that if it is to be a responsible stakeholder.

Furthermore, China doesn’t seem to like the descriptor of stakeholder either. It’s such a neutral term, one doesn’t know what it means anyway.

Instead, China should strive to be a world leader. Like it or not, or exercise it or not, China’s influences on the global economy, energy, environment and security are growing.

China needs to sit at the top table setting rules and enforcing them accordingly for the sake of global prosperity and security. The annual US-China Strategic and Economic Dialogue is a good start.

China can’t claim to be a poor or third-world country for inaction anymore. Many in the world are looking to China for leadership.

This post was submitted by Legalist.

War can easily happen, by accident or design. South Koreans are nervous. Americans are nervous. Japanese are nervous. And others are nervous, too. Everyone is looking to China to bring the North Koreans to their sense.

China has many reasons to be hesitant. The American-South Korean military alliance is as much against China as against North Korea. Then, if North Korea collapses under pressure, refugees will flood northeast China. Finally, American troops would come to Chinese border.

If China doesn’t get involved, the tension between the North and South will escalate. Willing or not, China must get involved.

But in order to win domestic support, China must clearly articulate its policies opposing any military conflicts between its neighbors, any third country using force against its neighbors, any foreign military bases stationing in the territories of its neighbors and any military alliances in its neighborhood without being included as a member.

I think only when such clear policies are in place, would the Chinese domestic oppinion support a more involvement or cooperative policy on the Korean peninsula and elsewhere.

This post was submitted by Legalist.

China Daily
May 25, 2010

XI’AN/WASHINGTON — Zhai Taishan, the father of a Chinese doctoral degree student in New Jersey accused by US police of attempted arson and making threats, flew from Xi’an, Shaanxi province, to Beijing on Monday night, seeking help from the Ministry of Foreign Affairs.

“I will never believe that my son is a terrorist,” Zhai said.

His son, Zhai Tiantian, studied at the Stevens Institute of Technology in Hoboken, New Jersey, before he was arrested by police on April 16. Police allege he tried to set fire to a campus building after threatening to get revenge on a professor who gave him a low mark.

The indictment statement said the incident was treated as a “terrorist threat.”
Zhai Tiantian, 27, however, denied that he had any plans to commit arson.

The Stevens Institute canceled Zhai Tiantian’s student visa the day he was arrested and the next day the US Immigration and Naturalization Services ordered his arrest. The following day the immigration authorities issued a deportation order for Zhai Tianian.

“Zhai’s behavior over a period of months and involving numerous individuals, was deemed to represent a threat to the well being of others. The suspension has nothing to do with conflict or difference of opinion with academic faculty, as some reports have stated erroneously,” university spokespeople said in a statement to China Daily.

“On April 15, Zhai (Tiantian) was arrested after threatening to burn to the ground a University building. Police determined that the threat was credible and took appropriate action,” said the spokespeople.

They added that the school suspended Zhai Tiantian after a thorough investigation but would not go into detail, saying that “disciplinary actions are confidential and Stevens cannot comment on specific violations”.

Zhai Tiantian is being held in the Hudson County jail in New York state.
He was born in Xi’an and went to study in the US in 2003.

Zhai Tiantian’s mother, Wang Xiaojun, said she received a phone call at her home in Xi’an from one of her son’s schoolmates early on May 10, who told her that her son was in jail.

“My friend was a bit brash in his quarrel with the professor, but he told me that he absolutely did not say anything about setting fire to the school,” said a classmate surnamed Wang.

According to Wang, Zhai Tiantian is a top student who maintains good relations with his fellow students, adding she does not understand how he could be considered a terrorist.

Zhai Taishan said he and Wang could not believe the news after receiving the phone call from the US and we so incredulous that they tried to contact friends in the US to confirm it.

“We felt so disappointed when we got confirmation from a story in the US China Press (a Chinese newspaper published in the US),” Zhai Taishan told China Daily on Monday.

The US China Press reported on May 20 that Zhai Tiantian said something about getting revenge to his professor and the professor later called the campus police. They arrested Zhai Tiantian and turned him over to the New Jersey police. Zhai is reportedly unable to raise the $20,000 bail.

Hai Ming, Zhai Tiantian’s lawyer, told the US China Press that America is a nation with freedom of speech and that people cannot be convicted on the basis of what they think or say.

The case is being mishandled, Hai said.

Zhai Tiantian has two lawyers, a government-appointed one for the criminal charge and Hai to handle the immigration case. The outcome of the criminal case will ultimately determine whether Zhai Tiantian will be sent back to China. If convicted, he might not be allowed to stay in the US.

The lawyer said that before the dispute, Zhai Tiantian expressed dissatisfaction with the institute in a television interview in which he said he wanted to sue the school for racial discrimination.

“This may be the real reason why the school is dealing with him this way,” Hai alleged.

Luo Gang, the overseas Chinese affairs consul with the Chinese Consulate-General in New York, said he has handled similar cases in which Chinese students had verbal clashes with others.

“Chinese and American cultures are different, so what the Chinese regard as acceptable remarks may be deemed by Americans as threats. This is an unfortunate incident,” Luo said.

“The case is in the judicial phase and we can only hope the lawyers will be able to help him,” added Luo.

Zhang Xingfan, vice-president of the Shaanxi Chamber of Commerce in the US, made a phone call to Zhai Taishan on Sunday after learning the news, saying he would be happy to provide assistance to the family.

“We were shocked by the news and will pay attention to the progress of the case. As fellow Shaanxi people, we will offer any possible help to the student,” Zhang said.

This post was submitted by Bill.