Wednesday, May 28, 2008
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Monday, May 19, 2008
Since May 12, the catastrophic Wenchuan earthquake in China’s Sichuan province has gripped the world’s attention. As political scientists who study China, this monumental tragedy hits us close to home. Some of us have lived and worked in communities devastated by this disaster. Friends and colleagues have offered firsthand accounts of loved ones left dead, trapped, injured or homeless, many of them children attending school at the time of the quake.
In the weeks to come, there will be much discussion of how prepared China was for such a calamity, the effectiveness of Beijing’s response, and whether China’s leaders manipulated media coverage to underscore their ability to govern. As analysts of Chinese politics, we will be obliged to examine these aspects of the earthquake’s aftermath.
Now is not the time for such criticism or debate, however.
As thousands remain buried in rubble across northern Sichuan and survivors struggle desperately to come to terms with their overwhelming losses, we must remain focused on doing whatever possible to assist those who endured this tragedy.
We thus write to express our deep sympathy for those who have perished in Sichuan and the surrounding regions. We salute the heroism of those who have worked bravely to rescue victims trapped by debris and alleviate the suffering of the living. Such acts transcend politics and are beyond our collective professional expertise. They humble us as manifestations of the utmost humanity, and should be celebrated as such.
In this light we request you donate to the China Relief Fund established by the American Red Cross (www.redcross.org) or any other legitimate charity now sending relief to the region. We thank you for your support.
William Hurst (University of Texas at Austin)
Andrew Mertha (Washington University in St. Louis)
Allen Carlson (Cornell University)
Victor Shih (Northwestern University)
Does the American Red Cross have a special donation account for the earthquake? Hong Kong Red Cross has one and its online donation is very easy and convenient. They provide proofs for tax purposes too, although I'm not sure if that works for people outside Hong Kong. China Red Cross is an option for online donation too, although they seem to have some problems with credit card donations.
Wednesday, May 14, 2008
Amid the tragedy in Sichuan, some politics is emerging. I have no doubt that Premier Wen really wanted to go to Sichuan to direct front-line rescue effort. In the mean time, who is running the State Council bureaucracy in Beijing? Hu follower Vice Premier Li Keqiang. Everyone gets what they want. Wen gets to save the victims. Li gets to play Premier. Hu gets to showcase his loyal follower. If Li does a decent job, his popularity will shoot up, and perhaps even put him back in the running for the top job. Where is Xi Jinping in all of this? I think he had better put himself in the limelight somehow. This is a major disaster, and the people will give major credit to those playing an apparent part in the rescue effort.
2008年05月15日 01:20:23 来源：新华网
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Inflation equals monetary tightening equals asset deflation
Victor Shih | May 14, 2008
The rumors were correct. April inflation came in at 8.5%, showing no sign of slowing from the 8% range first reached in February. This will not allow the People's Bank of China (PBOC) to relax monetary policies. In fact, we can expect further increases in reserve requirements and quite possibly an interest rate increase before the end of the first half. As soon as the inflation rate was announced, the PBOC announced a 50 bp increase in reserve requirement, bumping it to 16.5%. This means unfavorable conditions will continue for both the equity and real estate markets. The continuation of monetary tightening may create a world of trouble for real estate investors in particular.
First, let's look at the inflation. Most of it still comes from food inflation, which grew by 22.1% YoY. The problem continues to be that once pork prices shot into the stratosphere, other food categories became very vulnerable to even small shocks because substitution puts high pressure on the prices of all foods. The latest fire to watch for is of course grain prices, which grew 7.4% YoY. The increase in grain prices is likely under-counted because of administrative control over grain prices. Non-food inflation remains relatively low at 1.8%. In fact, official figures show a decline in clothing prices in April. I am totally unconvinced of the official figures in this regard, however. A significant part of wage in many work places in China is food provided by the company cafeteria. As the prices of all food categories increase, the in-kind nominal wage of workers is increasing. Even if cash wage does not increase (big if), companies may soon find it necessary to increase product prices to reflect increasing wage costs. Of course, rising energy prices do not help (7% YoY even with price control).
The bottom line is that the food inflation will soon leak into non-food inflation in the official figures, which will sustain inflation momentum into the second half. I don't have a fancy model to predict the precise level, but this game of adjusting annual inflation estimate upward slightly every month because of the "surprising" inflation of that month is getting tiresome. I think major banks, the IMF, and the World Bank should just admit that annual inflation in China will be above 5% and will likely be closer to 7-8%.
Since late last years when inflation emerged as a problem, top policy makers have engaged in a latent debate on whether monetary tightening was a cure of inflation. Premier Wen Jiabao and a group of technocrats who fought the mid 90s war against inflation initially carried the day in the November (2007) Politburo meeting, which announced that inflation was threat number one for the regime. Soon after, we saw a series of increases in reserve requirements, an interest rate increase, and --perhaps most important-- credit ceiling on bank lending and a 30% down payment requirement for second mortgages. We know, however, that there is an opposing voice at the top of the regime. Princeling officials (princelings are children of high officials) with heavy ties to the real estate sector likely form the backbone of the opposing voice. The opposition has formulated an argument stating that inflation is caused by the "structural" problem of an artificially low RMB, which led to the monetary problem. At the March National People's Congress meeting, the opposition came out in the open to criticize continual monetary tightening. Li Yining, a Hayekian economist with ties with the real estate sector, articulated this argument in public. Nonetheless, as my book Factions and Finance in China shows, monetary conservatives--the central technocrats-- gained the upper hand whenever inflation rates were high.
To be sure, 8% is far from the record inflation in the past 30 years (around 30% was the record), but we certainly have not seen quarterly inflation at 8% since the mid-90s. The sustained inflation pressure will give Premier Wen the political leverage with which to continue tight monetary policy. His newly appointed helper, Vice Premier Wang Qishan, is a veteran inflation fighter first promoted by former economic czar Premier Zhu Rongji. At a recent speech given in Shanghai, he made it very clear that he will make fighting inflation a top priority and that fixed asset investment needed to be brought down to "a reasonable level." As long as inflation rates remain at a high level, I do not expect the technocrats to relax their grip on money supply.
The increasingly tight monetary policy coincided with a major correction of the Chinese stock market. I am no expert on this matter, and I leave to Michael Pettis to comment further on whether monetary tightening will continue to exert downward pressure on stock prices. It seems a reasonable conclusion, especially given that price controls are imposing heavy costs on oil, food, and even retail businesses. After the down payment requirement was imposed late last year, the real estate market in China experienced an instant cooling down. By February, month-on-month increases of average housing prices were basically flat in most of China's major cities. The March figures were literally 0s in many of China's major cities and negative in a few cases.
Shenzhen Today, China Tomorrow
We now get to the bottomline--real estate prices will likely get hit substantially in this environment, causing a major decrease in household equity, a substantial rise in non-performing loans, and sluggish real estate market in the medium term. Although official figures from March show declines in only a handful of markets, I would argue that official figures compiled by the National Development and Reform Commission (NDRC) are not reliable and that we will soon see widespread declines in many major markets. On the reliability issue, we focus on Shenzhen, the first major market to show a sizable decline. The NDRC reported a month-on-month decline of 4.9% for new housing in Shenzhen in March. Soon afterward, the housing authorities in Shenzhen reported a 16.53% monthly decrease for new residential housing in Shenzhen. THE NDRC UNDER-REPORTED THE DECLINE OF SHENZHEN HOUSING PRICES BY THREE FOLD! Of course, even the official figure from Shenzhen under-reports the true magnitude of the problem. The press is filled with stories of last-minute discounts, free renovation, free cars, which sum up to a 20+% price fall in Shenzhen residential real estate. Things are about to get worse in Shenzhen because 1 million sq mtr of new residential came on the market in the first quarter, adding to the 5 million sq mtr in stock left over from 2007. April figures from the Shenzhen housing authorities show a decline of ANOTHER 12% for new residential housing, bring prices back to the level exactly one year ago. In the absence of systematic data, the press is reporting stories of highly leveraged investors beginning to resort to the desperate tactic of borrowing from "underground banks" at 5% a month to make payments. Of course, this is unsustainable unless a miraculous recovery of housing prices occur, and inflation makes this more and more remote for 2008.
Will this disastrous pattern be repeated elsewhere in China? The answer is yes with a high probability. The official figures show impressive run-ups of real estate prices in both east coast markets like Beijing, Hangzhou, Ningbo, and Haikou and inland markets like Nanning, Xi'an, Lanzhou, and Urumqi in 2007. These spectacular increases have no doubt attracted leveraged speculators as well as enthusiastic local officials who approved swathes of new projects last year, which will be completed this year. Unfortunately, the housing authorities elsewhere are not nearly as enlightened as those of Shenzhen, so we have no local figures with which to compare with the suspicious NDRC figures. If substantial declines occur in other markets, we will see widespread defaults among both individual investors and developers going into the fourth quarter of this year. At the end of 2007, loans outstanding to developers and buyers combined 4.8 trillion RMB (700 billion USD at current exchange rate). Even 10% of those loans getting into trouble would generate half a trillion RMB of non-performing loans. Although this would not cause a financial panic, it certainly would cause investors to take a much closer look at Chinese banks. Furthermore, expensive write-offs from the CIC may once again be necessary. Finally, this decline of real estate prices, unlike previous such events, will be the first one experienced by a large number of Chinese households. This lesson will (hopefully) instill caution among Chinese real estate investors.
Tuesday, May 13, 2008
[Xinhua domestic reports that the emergency PBSC meeting of evening 12 May decided to "set up a quake and disaster relief work headquarters with Comrade Wen Jiabao as the head and Comrades Li Keqiang and Hui Liangyu as the deputy heads to take full charge of the current quake and disaster relief work."]
As expected, some kind of PSC level leading group has been set up, led by Wen himself, but also including Li Keqiang, Hui Liangyu (he is the VP normally in charge of disaster relief, but obviously, it's a bit over his head). I think it probably also includes Ma Kai, Meng Jianzhu, and most likely Minister of Finance Xie Xuren.
Sadly, the death toll looks like it is going to be quite horrendous. Tens of thousands of people are still trapped under rubble, and we still have little idea of what happened in Wenchuan itself. The affected areas will need food and medical shipments from the rest of China for months to come. This will not help inflation.
More ominously, anger is spreading, as seen in the excellent WSJ article: "At least nine schools fell across the quake zone, trapping thousands of children in gruesome scenes that were repeated time and again. There was rising anger at authorities over the loss of so many young people, expressed both on the ground and on the Internet."
Wall Street Journal
China Earthquake Exposes
A Widening Wealth Gap
By LORETTA CHAO and JASON LEOW in Pengzhou, China, JAMES T. AREDDY in Shanghai and GORDON FAIRCLOUGH in Shifang, China
May 14, 2008
With the death toll from China's earthquake mounting, the disaster is throwing a harsh spotlight on the widening gap between the nation's rich and poor.
As soldiers and paramilitary police rush to dig victims out from collapsed schools, homes and hospitals, it is clear that the quake inflicted its greatest destruction on rural areas. These include small but fast-growing towns that have mushroomed from the farm fields in recent years as part of China's rapid urbanization.
China Photos/Getty Images
Soldiers of the People's Liberation Army block entry to the site of a collapsed primary school, where hundreds of students are trapped.
Such areas have far less stringent building-safety practices than China's relatively wealthy big cities, construction experts say. As a result, some citizens were more vulnerable than others when disaster struck. Rescue and relief workers struggled Tuesday to reach victims in remote areas most damaged by the magnitude-7.9 quake in the southwestern province of Sichuan. Deaths in Sichuan alone had exceeded 12,000 as of Tuesday evening, with more than 26,000 injured and at least 9,400 buried in debris, the state-run Xinhua news agency said, quoting a senior provincial official.
On the outskirts of the small city of Shifang, east of the epicenter, Fang Haiying, a 40-year-old rice farmer, said more than 10 members of her village remained buried in rubble of their houses. She and her extended family were wearing surgical masks to protect themselves from a chemical leak at a damaged ammonia plant a few kilometers away. "We've been waiting but no one from the government has come. We have nothing to eat," she said.
Nearly every house in Yinhua village on Shifang's western edge was destroyed. Boulders loosed by Monday's quake, some as big as vans, littered the main road in the area, along with the vehicles they knocked over or crushed.
Survivors of the chaos walked down the narrow mountain roads to Yinhua in search of transportation out of the quake-stricken area. Two 15-year-old boys said they had walked three hours from their village in the mountains to get to Yinhua. The pair, Chen Shi and Zheng Jia, said their middle school, like so many others, had collapsed within seconds. About 100 of their schoolmates died, they said.
Tens of thousands are still missing as the rescue effort continues in China following the country's worst earthquake in three decades. Officials warn that more aftershocks and mudslides could add to the toll. Video courtesy of Reuters.
Roughly 90 kilometers away, the disparity of damage was striking. The glitzy new office towers and hotels of Chengdu, Sichuan's bustling capital of nearly 10 million people, were still standing and largely intact. The city suffered relatively little in Monday's quake, despite its proximity to the epicenter.
Natural disasters often wreak their worst havoc on the disadvantaged, people who tend to live in subpar housing. This was the case with Hurricane Katrina in the U.S.
Now, the issue is especially thorny for China's government: President Hu Jintao and Premier Wen Jiabao have based much of the public legitimacy of their administration on trying to address a widening wealth gap resulting from decades of capitalist reforms. Part of their overall plan, for example, has called for improving rural health care and education.
China's booming economy has lifted the financial fortunes of most of its citizens, but some have gained far more than others. Economists say the country, still nominally socialist, is now among the most unequal major economies in the world. Much of this imbalance is seen in the contrast between residents of the big, wealthy cities, and those of small, poorer towns and rural areas.
A mother mourned as Chinese soldiers carried the body of her child, killed when his school collapsed in Dujiangyan.
Incomes in rural areas, for example, averaged 4,140 yuan per person last year, or about $590 at current exchange rates. That represents an increase of 91% from a decade earlier, not adjusted for inflation. Urban disposable incomes, by comparison, rose by 150% during the same period, to an average of 13,786 yuan last year.
Mr. Wen, who flew to the disaster zone within hours of the quake, spent Tuesday touring affected areas and reassuring the public that Beijing would help those most affected. "We will try our best to send milk powder to parents and ensure that children do not go hungry," Mr. Wen told victims after learning of shortages of food, drinking water and tents, the Xinhua agency reported.
On the Ground
On the ground, authorities scrambled to rescue survivors. China's defense ministry said that as of Tuesday afternoon, nearly 20,000 soldiers and paramilitary police had arrived in quake-hit areas, with an additional 30,000 en route in planes, trains and trucks, or on foot. Repeated aftershocks complicated efforts and prompted thousands to seek refuge outside in makeshift tents scattered across the region.
[See an Interactive Graphic]2
See details on the earthquake's impact nationwide, and see how the aftershocks took place.
The epicenter of the quake, Wenchuan County, has remained largely cut off from help. Because of bad weather, officials scrapped plans to fly relief supplies in by helicopter, then canceled a second plan to send in rescuers by parachute. Finally, about 1,300 military doctors and soldiers reached Wenchuan by foot -- nearly 24 hours after the quake struck.
China's building code has long required that new structures be able to withstand earthquakes, according to Huang Shimin, an earthquake engineering expert at the China Academy of Building Research in Beijing. But standards from region to region remain inconsistent. Throughout Sichuan, the specification is grade 7 on scale of up to ten. The same level applies in Shanghai. But in Beijing, the standard requirement is a grade of 8 -- reflecting the capital's close proximity to the epicenter of a 1976 earthquake that killed at least 240,000.
"Based on China's codes for earthquake-resistance in building designs, if there is no problem in specific design and construction, China's capability to resist the earthquake should be strong," said Mr. Huang. "But there are many uncertain issues related to the earthquake, so it's still a complicated issue."
Architects said the quake's discrimination could be partly attributable to the variation of tremors from one area to the next. But they also cited widespread differences in construction materials and technical skills between wealthy Chengdu and the poorer towns around it, as well as often patchy enforcement of building codes.
"There are a lot of holes," said a Shanghai-based architect who often works in Sichuan province.
[Map of plates]
Adding to the pressure is that thousands of little-known cities are literally sprouting up from pastureland in China. China's urbanization push is bringing up to 15 million people into cities annually. All of them need shelter, often as cheaply and quickly as possible.
The trend has helped make the world's most populous country the world's largest construction zone. China built about 1.80 billion square meters, or more than 19 billion square feet, of property in 2006. At the time, another 4.10 billion square meters was also under construction, according to government statistics.
Such rapid urbanization is transforming Sichuan, one of China's biggest provinces with a population of about 82 million -- roughly equal to that of Germany. The mountainous province ranked fifth out of China's provinces for the amount of floor space it laid down in 2006, almost twice as much property as completed in Beijing.
In hastily built towns around Pengzhou, about 60 kilometers southeast of the epicenter area, local people acknowledged the construction of their now- destroyed homes was shoddy, with little consideration given to safety. The government's oversight of building regulations has tended to be scant.
Liao Xiaoling said her brother in law was thrown from an upstairs window and her 86-year-old father crushed under a wall when the brick structure that was both their home and business toppled. "Our home is gone," she said.
Besides its collapsed schools, two hospitals also suffered damage in Sichuan. Some experts say public funds often accumulate more slowly than new residents in fast-developing areas, and are often diverted to other uses, such as building lavish local government offices.
Government officials warned against drawing the conclusion that particular kinds of buildings were more vulnerable than others. Li Bingren, the spokesman at China's Ministry of Construction, said buildings in the disaster area were built to code, but the quake and its aftershocks were "stronger and higher than the designed resistance level." Schools, he said, tend to have larger rooms and be bigger than ordinary buildings, exacerbating the toll when they fail.
In Beichuan County, about 160 kilometers from the epicenter, nearly 1,000 paramilitary police were searching frantically Tuesday for survivors in a school that collapsed, burying at least 1,000 students and teachers. The Beichuan Middle School's main building, formerly seven stories tall, had been reduced to a pile of rubble about two meters high, the official Xinhua news agency said. One teenage victim was pulled out with no legs, Xinhua said. Authorities have estimated the death toll could reach more than 3,000.
At least nine schools fell across the quake zone, trapping thousands of children in gruesome scenes that were repeated time and again. There was rising anger at authorities over the loss of so many young people, expressed both on the ground and on the Internet.
At the People's Hospital in Pengzhou, nurses estimated they had treated at least a thousand injured people. A lack of electricity prompted hospital officials to evacuate patients outside into blue tents in the hospital's parking lot and backyard.
'It's All Gone'
The hospital was starting to run out of water Tuesday afternoon. Many patients were frantic because they had been separated from their families and were unable to reach them because of downed phone networks. Some were told to go home, but said they had no homes to return to.
Zhou Yan, a 26-year-old farmer, was in a tent recovering from a head injury she sustained after bricks from the second floor of her home fell on her. Doctors said she was free to go but there was no way for her to get home. "I have no home to go back to. It's all gone," she said.
Ms. Zhou's husband is a migrant worker who makes furniture in Shenyang. He managed to get in touch with her, but no buses were available for him to take home. She said she believes the parents of her niece, who was staying with her when the quake hit, are dead.
Ms. Zhou said her house, built over 10 years ago, was brick, which is common in this area. The couple never thought to build it to withstand earthquakes, especially of this magnitude. She estimated it will cost at least 100,000 yuan to rebuild it, money she said will be "impossible" to save. "There's just no way. I don't know what to do next, or who to ask."
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Monday, May 12, 2008
Tragically, the earthquake in Sichuan now has an official death toll of 7651 people, and many more are expected. Like previous disasters, the central government is making this the top priority, and Premier Wen himself has been dispatched to Sichuan. He is accompanied by Ma Kai, the secretary general of the State Council and former head of the NDRC, and Meng Jianzhu, the Minister of Public Security! Clearly, public order is a major concern. Also, the princelings wanted one of their own representative in Sichuan as well in case Wen decides to fire someone on the spot.
The problem is that bridge collapse has prevented rescuers from going to the epicenter of Wenchuan County, and snow is preventing army helicopters from flying there. The rescue headquarters now is in Dujiangyan, but that is as far as rescuers can go. Our thoughts are with the victims in Sichuan.
2008年05月12日 23:05:54 来源：新华网
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Wednesday, May 07, 2008
The article referenced below in SCMP can be found here:
Foreigners pose risk to stability, says academic
South China Morning Post, 8 May 2008
Shi Jingtao in Beijing
A leading Communist Party-sponsored publication has sounded an alarm
about the rise of foreign interest groups on the mainland, saying they
pose severe threats to economic security and social stability.
In a strongly worded article published by Xinhua's weekly news magazine,
Outlook, foreign businesses and investment groups came under attack for
their alleged heavy intervention in the mainland's policymaking process
and negative influence on the country's development.
The article by Jiang Yong, director of the Centre for Economic Security
Studies at the China Institute of Contemporary International Relations,
raised grave accusations about the role of foreign businesses in China
in the past three decades - claims rarely seen in official publications.
But mainland analysts criticised the article - which echoed the recent
nationalist sentiment on the mainland after a spate of protests in Tibet
and around the world - for failing to present a full picture of China's
economic and social problems.
Professor Jiang said: "Due to the lack of effective restrictions and
countermeasures, all sorts of overseas interest groups have become ever
more deeply involved in the country's major affairs through various
channels, with complicated implications."
He lashed out at a large number of foreign interest groups, saying their
intense lobbying - or even bribery - of government officials, their
relatives, think-tanks, business leaders and the mainland press had
eroded China's economic sovereignty.
He was critical of overseas listings of the mainland's leading
enterprises, including many state monopolies such as PetroChina, Sinopec
and China Unicom, which had led to a loss of public resources, seepage
of profits overseas and, in some cases, a loss of local control.
His long list of foreign businesses' "bad behaviour" in China also
included their denial of mainland workers' rights to set up labour
unions, rampant tax evasion and their growing involvement in other
He also accused mainland officials, government-backed experts and the
media of helping foreigners at the expense of social and public
interests. "Under the protection of local government departments, some
multinational companies have long ignored the lawful rights of Chinese
labourers ... which resulted in the soaring number of mass incidents
among their workers," he said.
In another rare, daring move for a mainland academic, he singled out the
children and relatives of top-level officials who had become lobbyists
for foreign business interests.
Professor Jiang published a similar article two years ago in the same
magazine, lambasting "special interest groups" inside and outside the
Liu Junning , a political analyst based in Beijing, said the Outlook
article missed the real culprit of the economic and social woes that
Professor Jiang listed.
"It is a fact that foreign interest groups have a presence in China. But
they should not be blamed first and foremost for the problems in the
country," Professor Liu said.
He said conflicting interests within the ruling party and the mainland's
political system allowed the rise of powerful domestic interest groups
in the first place, and created the problems. "It is not fair to say
that foreigners have made the water here murky, because it was dirty