Submitted By: Peter Wu

I came across this article in the New York Times. Please click here (China Defends Oil Trade With Africa).

To briefly summarize, China was criticized by Western aid groups for exploiting oil resources in Africa while not doing enough to help the countries like Sudan with issues of civil war atrocities in Darfur.

China countered the criticism by stating last year’s crude oil export statistics out of Africa. China took 8.7%, while Europe took 36% and the United States took 33%. China also stated that the buying and selling of oil is conducted in reasonable market prices.

Reading this article quickly reminded me of Dr. Morris’s lecture last quarter when he showed us an article (also from New York Times I believe) of China getting a step ahead tying the Guanxi (relationships) with African countries.

Is China really exploiting Africa?

Is the West (with 69% total imports from Africa according to the stat figure above) worried that one day China will take away their share of oil resources from Africa? Should the West try to improve their diplomatic relationships with African countries before China becomes Africa’s best friend, and if so, what might it do in this regard?

What are your thoughts?

You may enjoy this You Tube video a colleague sent me with the following message:

Chris:  In four minutes this video captures some of the vision of the future I have been spouting off about since my first trip to China ten years ago. I can remember standing on a bridge in Guangzhou during that trip at rush hour and seeing more people pass by me in fifteen minutes than pass by me all day on a sidewalk in [City X].   I knew the numbers were against us.

I agree with him and the overall theme that this video seeks to convey.  And seeing some of the points made in this video first hand is one of the reasons we have put this course and trip together for you.  Perhaps more than ever, success in the future will go to those individuals, businesses and countries who best deal with and adapt to this shifting world.   Straight up:  in the future each of us will need to run even faster ….

I am back in SLO.  China was great, but sleeping in my own bed is even better.  What a trip!  I am exhausted! 

In a few weeks, after I lock down some addtional details, I will report to you what we have planned for the trip.  I think you will be pleased.

For now, I will take break from making a post for a day or two or three and catch up on other work on my desk.  But I did read each of your comments while I was away and have responded to a number of them.  Scroll down below and see my notes and responses to some of your questions.  I hope you are having a great break!

Submitted By: Peter Thelen

Early this winter, a scientific expedition on the Yangtze River ended with the discovery that China’s ancient White Dolphin is essentially extinct. Here is a Humane Society story and a CBS News story regarding the unfortunate discovery. The White Dolphin, or baiji, is the first marine mammal species in 50 years to be called extinct. More importantly for China, however, is that this recent discovery can be directly linked to the increased industrial activity in the country. Though baiji were living in a polluted river and were often killed by local fisheries, a main reason for their extinction was the constantly increasing ship traffic in the area. Baiji were effectively blind and used sonar to find their food, but increased ship noise has made this nearly impossible.

Now, another endangered species, the Finless Porpoise, faces the same fate in the Yangtze River. Is this an issue China should be concerned about? There have been earlier posts about China’s environmental problems and how it may be “unfair” to impose strict environmental standards on a country that is in the height of its own industrial revolution. But this is not emission or toxin levels at issue here; this is the fate of entire species. Though the significance of the loss of a species is a point of contention, it is reasonable to assume that if China does not establish a more rigorous system to keep the environmental impact of its industry in check, the local ecosystems will begin to change drastically. Now, I would never call myself an environmentalist, but I am a Californian and something about this issue does not sit right with me.

Here are some questions to think about that I have pondered myself:

Protecting an endangered species is not easy, but is it excusable for China to throw up its arms in futility because of its extremely rapid growth?

Can we expect China to be concerned with endangered species when it has other, more pressing issues such as providing clean drinking water and improving air quality levels?

Many people in the U.S. understand the issue of protecting endangered species and why it is important to humans. Is the issue of protecting endangered species important to the average Chinese person? Should it be?

Submitted By: Andrew Gardner

While studying financial derivatives for the upcoming finance final, I remembered an article that I read a few weeks ago in the Wall Street Journal. The article, “China Tries Long-Term Response to Stock Volatility” by James Arredy, briefly discusses the boom and bust cycles of the Chinese Stock market and suggests strategies that could be used to level the highs and lows. One of the suggestions given is the implementation of a financial futures market. As we have learned in class, a futures market gives investors the right to both buy and sell stocks. This allows investors to bet against the movement of the market, decreasing the overall volatility of stock prices.

Although China recently finished constructing the brand new China Financial Futures Exchange, the country bans the trading of all financial derivatives (sounds pretty hypocritical to me, why would you build something designed to promote something illegal?). This mandate has been in affect since 1995 when a scandal in the government-bonds-future market led to the loss of over $10 billion in minutes. With losses this substantial, China has been hesitant to reconsider a financial futures market. This has changed recently with the dramatic drop in Chinese stock prices.

China has already responded to the request for a futures market by offering limited trading of “financial futures and options related to securities, interest rates, foreign-exchange rates, as well as index-related products.” According to the Wall Street Journal article “China Widens Futures Rules’ Scope,” the rules are still strict as each firm must obtain a government issued license.

While still a small step, the recent change in policy appears to be the first movement toward widely traded index-fund futures that could help stabilize the Chinese stock market.

I make this post from the airport in Shanghai.  I have been moving at light speed from firm to firm and from city to city.  All is coming along very nicely, and even better than I had hoped. 

I think if you come into this trip and part of the world with an open mind, throw out preconceived notions and biases,  and let yourself go, we have put together a business trip, course and experience for you that will allow you to return to the US a different and better person. 

More information and details to follow early spring quarter, after I return and work on finalizing the details.  Gotta run.  They just called for boarding.  Cheers!   - Professor Carr

Submitted By:  Jared Samarin

This morning’s New York Times was headlined by a topic that I believe to be a core necessity for the growth of market based economies, private property rights. The “China Moving to Approve Law That Protects Private Property“ article outlines in very brief terms the concept for a new policy that would allow for an increase to the rights of entrepreneurs and the middle class. The bill passed the annual parliament session on Friday March 16th and marks an historic change for both the Chinese government and the Chinese people. Legal protection of private property is a right often taken for granted in many parts of the world, but in China this as fresh and welcome as springtime sun.

The new policy addresses many of the concerns of past party leadership and leading scholars who have pointed out repeatedly that current economic policies have led to rampant corruption, a widening of the gap between elite and poor, and has severely taxed the environment. The hope is that this policy can induce better stewardship and create more entrepreneurial opportunities. A very important stipulation of the bill is that “The property of the state, the collective, the individual and other obligees is protected by law, and no units or individuals may infringe upon it”.  With little ambiguity this stipulates that the Chinese people, including the rural poor will finally have a legal right to what is “theirs”. This does not include real property however land is still the property of the state. This will protect the user of said properties though during the 70 years of lease that they have with the government. This landmark ruling should finally curb the illegal expropriation that has taken place for some time and the wrongful booting of people off of their land.

Traditional Socialist economies would never think of such policy, mainly because it takes from the collective and gives to an individual. Many leftist academics have bawked at the legislation that was originally introduced in 2002 and it has gone through a record eight reads at the National People’s Congress. The policy has endured many arrows but the time was finally right for some sort of ruling that protected the rights of the growing middle class, and in time hopefully the disenfranchised rural Chinese may finally be allowed to climb the ladder with such legislation. With that said I pose two major questions:

1.  Will this new policy fulfill its intended purpose by expanding the middle class and filling in the gap economic gap?

2.  Does this policy wholly abandon the ideals of Socialism as Leftist scholars are arguing, or has China already abandoned these ideals by becoming more market driven and welcoming foreign investment?

Submitted By: Lee Smith

Found on the China Daily website, the two articles that I present here (”No Room for Laxity When It Comes To Food Safety”) and here (”Safe For All Should Be The Recipe”),  are spreading wide controversy over China’s food safety issues. While reading them, there were some pretty interesting issues that were brought to my attention. Honestly, I cannot say that I am surprised by China’s issues with their food safety regulations and management. In both articles, the writers focus on China’s current problems with food safety and how they plan to deal with these issues in the future.

The major issues that have been brought forth are: contamination of food by unregulated pesticides, poor packaging and preservation, and finally infestation by parasites. One example of these issues includes a case of parasite-infested snails that sickened 87 people in a Hong Kong restaurant. Another example was industrial dye used on leather, floor polish & household chemicals was found to have been feed to hens and ducks to make their egg yolks red in color.

You might be asking why this issue is happening in an age of technology and science? According to the Chinese government, outdated production methods and laws, followed by the primitive mobility of transportation are primarily to blame. In addition to these setbacks, China currently has ten (10) different agencies regulating its food system each designated to specific areas of concentration. Overlap in these regulatory agencies often leads to grower, transporter and consumer needs not being met when problems do arise.

Fortunately China is taking action. According to China Daily many food safety authorities are beginning to enforce China’s food safety regulations and new round of food safety laws will be coming out this May of 2007.

One article makes reference to international companies being too lenient on Chinese food safety standards. This same article also mentions multinational companies such as KFC, Nestle, Kraft, Heinz and Haagen–Dazs have come under fire with China’s food safety guidelines with accusations of creating double standards for the quality of food they are producing. For example, KFC is being accused of reusing frying oil for up to 10 days and also adding a carcinogenic called magnesium trisilicate to prolong the oils’ life. (Note: this many not be a bad thing, it is just how the article presents it.)

Questions

As our food has to travel farther to get to our dinner table, how do countries as large as China and the US maintain safety?

In the end who is responsible for managing our food safety? In China it is the government, is the same true in the US?

What does the future hold for China’s food supply?

Professor Carr addendum:  Good post.  Critically important topic to both agriculture and business.  Click on this excellent China Law blog post and its discussion thread (”Don’t Drink the Water, Don’t Breathe the Air, Don’t Eat the Food, and Don’t Wear the Shoes“) that relates to Lee’s post.  Think of the business opportunities, across a variety of industries, that need to and will develop to help solve and clean up these food safety issues in China!!!

Submitted By: Patrick McGuire

Here’s a quick tip for those who are a little concerned about carrying large amounts of cash to China. If you’re a Bank of America customer, you can use China Construction Bank ATMs without any fees. It’s pretty convenient; it really saves you the trouble of carrying a lot of money and they’ll dispense the local currency (saving you currency exchange fees). I haven’t tried it in China, naturally, but I’ve used Barclays Bank ATMs in England a few times and it was just as easy as taking money out in California (except you can’t check your balance). From my experience, the exchange rate seems to be about as good as you’ll find, but it’s been a couple of years. For those who aren’t B  ofA customers, you might check with your local bank to see if they also have an arrangement with a Chinese bank. For those from China or who have been to China, how prevalent are CCB ATMs? I know they’re one of the biggest banks in China, but are they easy to find?

Professor Carr Addendum:  Good post, Patrick!   China Construction Banks are everywhere.  But I would be surprised that there would be no fees for using BofA  ATM cards.  EVERY Chinese bank charges “roaming” fees when you use your ATM card outside the city in which you have an account with the same bank! So if I lived in Beijing and use my China Merchant Bank card at a Chinese Merchant Bank ATM in Guangzhou, I will be charged a fee of 0.5% for deposits and withdrawals. It’s minimal if you take out a few hundred, but if you take out 10,000 RMB (roughly $1,200 US) and the fee is 50 RMB, well, that’s enough for a good foot massage!!  If Chinese banks charge their own customers just because they move across city lines, guess how much they would charge foreign cards!?  So you may want to consider the following …. verify with B of A first.  My experience with students in China is that they charge about $5 US per withdrawal. Citibank and HSBC have ATM machines at major airports and are fairly easy to use WITHOUT fees for their customers.

Oh, and two other important notes … you can only take/bring $5,000 (US) CASH into China with you.  There is NO WAY any of you should be taking anywhere near that much money with you into China!!  (See my FAQ questions on this point in your handout re: how much $$ to bring and how much most students spent in China on last year’s trip!!).   The only way you would want to bring anything remotely close to that amount is if you are staying in China or Asia to travel for some time at the end of our MBA trip. 

Also, we will fly into Guangzhou and the hotel we will stay at is very nice — I think you will be pleased.  You will all be able to exchange money there at the hotel the very first day we arrive.   The rate in the hotel is about the same as what you would get in/at a bank so do like me and exchange at the hotel!!  Don’t obsess over locating a rate that is, e.g., 7.9 to 1 versus 7.8447 to 1 — as splitting hairs like that on a trip like this is just too much work and it’s too damn hot in China to be walking all over a town trying to save a US dollar or two!!

Several weekends ago I finished a good book that recently came out by James Mann called The China Fantasy: How Our Leaders Explain Away Chinese Repression.

I very much enjoyed this book. Roughly 144 pages (hardcover version) and a pretty quick read. It has made me rethink some of my own views and biases toward China, both for and against.   I recommend you consider reading it for your Spring quarter book review. I have also previously blogged on this book and a related topic (Rule of Law or Rule by Law?). The chapter where he applies his theory to the upcoming Beijing summer Olympics and how China may present itself to the world is particularly good and insightful — it provides a unique lens that can’t help but impact how I will view, see and interpret the upcoming inevitable Chinese (and Western) advertising and marketing of the Olympics, Beijing, and China.

Below are two book reviews that might help you decide whether to buy the book and read it:

From The New York Times:

In The China Fantasy, bestselling author James Mann examines the evolution of American policy toward China and asks, Does it make sense? What are our ideas and hidden assumptions about China? In this vigorous look at China’s political evolution and its future, Mann explores two scenarios popular among the policy elite. The ‘Soothing Scenario’ contends that the successful spread of capitalism will gradually bring about a development of democratic institutions, free elections, independent judiciary, and a progressive human rights policy. In the ‘Upheaval Scenario’, the contradictions in Chinese society between rich and poor, between cities and the countryside, and between the openness of the economy and the unyielding Leninist system will eventually lead to a revolution, chaos, or collapse.

Against this backdrop, Mann poses a ‘third scenario’ and asks, What will happen if Chinese capitalism continues to evolve and expand but the government fails to liberalize? What then and why should this third scenario matter to Americans? Mann explores this alternate possibility and—in this must-read book for anyone interested in international politics—offers a startling vision of our future with China that will have a profound impact for decades to come.

From The Washington Post’s BookWorld
Reviewed by Margaret MacMillan (University of Toronto History Professor)

James Mann is a distinguished journalist and historian who covered China for the Los Angeles Times; his 1999 book, About Face, was a first-rate account of the troubled path of U.S.-Chinese relations after President Richard M. Nixon’s decision to open contacts with the communist government, and his 2004 bestseller, Rise of the Vulcans, explored President Bush’s war cabinet. In The China Fantasy, he now adds polemicist to his resume.

As this angry, lively little book makes clear, Mann has had enough! His main target is all those American policymakers — aided and abetted by big business, the media and Beltway think tanks — who have sold a bill of goods to the American people. Since Nixon first made his historic trip to Beijing in 1972, Mann charges, American elites have dispensed soothing and dangerously misleading nostrums to the public. Yes, China under the control of the Communist Party is somewhat authoritarian — even, if you want to be rude, a totalitarian state. But that state of affairs, Americans are reassured, can’t last forever. At some point, perhaps quite soon, China’s dramatic economic development will inevitably lead to democracy as its growing middle class demands more rights and freedoms. Meanwhile, and confusingly, comes a set of warnings that China is more fragile than it seems and that if we don’t all handle it with kid gloves, it could collapse into chaos and civil war, as it has done so often before.

Consequently, Mann argues, foreign critics of China’s human rights abuses are told not to be so outspoken. After all, there is no point in hurting Chinese feelings or making the Chinese authorities dig in their heels. Mann is particularly scathing about what he describes as the “Lexicon of Dismissal.” Criticism of China is dismissed as “bashing,” “provocative” or “anti-China” (a favorite of the Chinese themselves), and any such censure always runs the risk of turning China into an enemy.

In his anger over this muzzling trend, Mann comes close to seeing a conspiracy by well-meaning but self-serving American elites — with, of course, the happy acquiescence of the Chinese communists — to keep the United States investing in and trading with China.

The China Fantasy raises an awkward and important question: What if there is a third alternative between the rise of democracy and the collapse of China’s political order? What if that alternative is the survival of the one-party state, with all its apparatus of control and repression? In an era when capitalists can join the party built by Mao, the Chinese communists have already shown how adept they are at changing their spots. What would it mean for the United States — and, indeed, the world — if 20 or 30 years from now a much richer and more powerful China proved to be every bit as authoritarian a state as it is today? What if that China were one in which the middle classes decided, much as they did in Hitler’s Germany, to opt for stability and prosperity over democracy?

Mann thinks that scenario highly likely, even if he does not share the alarmist view now taking root in some Washington circles that China is going to challenge the United States militarily. His concern is both that an undemocratic China is bad for the Chinese themselves and that it will be bad for the world, giving comfort and even support to other unsavory regimes as it already does to that of Robert Mugabe in Zimbabwe. What seems to outrage him most, though, is that the American people are going to go on being deceived.

Like all good polemics, this one raises more questions than it answers. Can the Chinese Communist Party, which now numbers some 70 million people, really be as monolithic or as cunning as he suggests? Is the American establishment really of one mind on China? Is there no possibility of the Chinese middle classes, or at least part of them, joining forces with the country’s long-suffering peasants to push for greater democracy? We will have to wait and see, but, in the meantime, Mann has done a fine job of making sure that we won’t do so complacently.

See also this China Law Blog post (click here) on the this book. And, see also this very recent and relevant Wall Street Journal article to Mann’s book, where two prominent economists debate the following question that has less than a clear cut answer: Is Democracy the Best Setting for Strong Economic Growth?