China is now by far the United States’ largest creditor. Its treasury portfolio recently surpassed that of Japan’s, and it has long held more agency (Fannie Mae, Freddie Mac) bonds than any other country. Never before has a nation as poor as China provided so much financing to a country as rich as the United States. In this Center for Geoeconomic Studies Working Paper, Brad W. Setser and Arpana Pandey estimate the true scale of China’s U.S. portfolio and examine how the pace of growth and composition of China’s portfolio have evolved over time.
Link to the full article (pdf) (26 pages): China’s $1.5 Trillion Bet: Understanding China’s External Portfolio
Friday, June 12, 2009
How Beijing kept its grip on power
By Minxin Pei, FT.
It is hard to miss the self-congratulatory mood in Beijing’s corridors of power these days. The Chinese Communist party was practically written off after its army crushed the pro-democracy movement in Tiananmen Square on June 4 1989. At home, it faced a shocked and resentful population. Internationally, it was isolated. The fall of communism in the former Soviet bloc further demoralised its members. A sense of impending doom permeated Beijing.
Twenty years later, things could hardly be more different. China is riding high as a new economic and geopolitical giant. The party’s rule has never felt more secure.
Chinese leaders appear to believe that they have discovered the magic formula for political survival: a one-party regime that embraces capitalism and globalisation. Abroad, the party’s success raises fears that it has established a viable new model for autocratic rule.
As the world commemorates the 20th anniversary of the Tiananmen tragedy, it is time to reflect on how the party has held on to power against seemingly impossible odds and whether the strategy it has pursued since Tiananmen will continue to sustain its political monopoly.
Clearly, the most important explanation for the party’s apparent resilience is its ability to deliver consistently high growth. However, largely through trial and error, the party has also developed a complementary and quite sophisticated political strategy to strengthen its power base.
A lesson taken from the Tiananmen debacle by the party’s leaders is that elite unity is critical to its survival. The political necessity of launching China’s economic reforms in the late 1970s required the party to form a grand alliance of liberals, technocrats and conservatives. But the liberals and the conservatives constantly clashed during the 1980s, over both the speed and direction of reform.
Disunity at the top sent out mixed signals to Chinese society and, during Tiananmen, paralysed the decision-making process. After Tiananmen, the party purged liberals from its top echelon and formed a technocratic/conservative coalition that has unleashed capitalism but suppressed democracy.
An additional lesson learnt from the party’s near-death experience in Tiananmen was that it must co-opt social elites to expand its base. The pro-democracy movement was led and organised by China’s intelligentsia and college students. The most effective strategy for preventing another Tiananmen, the party apparently reasoned, was to win over elite elements from Chinese society, thus depriving potential opposition of leadership and organisational capacity.
So in the post-Tiananmen era, the party courted the intelligentsia, professionals and entrepreneurs, showering them with perks and political status. The strategy has been so successful that today’s party consists mostly of well-educated bureaucrats, professionals and intellectuals.
Of course, when it comes to those daring to challenge its rule, the party is ruthless. But even in applying its repressive instruments it has learnt how to use them more efficiently. It targets a relatively small group of dissidents but no longer interferes with ordinary people’s private lives. In today’s China, open dissent is stifled but personal freedom flourishes.
On the surface, the collapse of the Soviet Union reduced China’s strategic value to the west. But after overcoming its initial shock, the party adroitly exploited the situation by using the turmoil in the former Soviet bloc to instil in the Chinese public the fear that any political change would bring national calamity. Rising Chinese nationalism, stoked by official propaganda, allowed the party to burnish its image as the defender of China’s national honour.
The wave of globalisation that followed the cold war offered another golden opportunity. Capitalising on the lure of the Chinese market, the party befriended the western business community. In turn, western businessmen found a natural partner in the Chinese Communist party, its name notwithstanding.
With any self-respecting multinational rushing into the Middle Kingdom, those who refused to recognise the new reality risked being outcompeted. In China, they also found undreamt-of freedom in doing business: no demanding labour unions or strict environmental standards. Wittingly or otherwise, western business has become the most powerful advocate for engagement with China. Its endorsement, along with the pragmatic policy pursued by western governments, has lent a legitimising gloss to the party’s rule.
Ironically, this political strategy has worked so well that the party is now paying a price for its success. With the technocratic/conservative alliance at the top and the coalition of bureaucrats, professionals, intelligentsia and private businessmen in the middle, the party has evolved into a self-serving elite. Conspicuously, it has no base among the masses.
There is already a backlash against the party’s post-Tiananmen pro-elite policies, which have resulted in inadequate social services, rising inequality and growing tensions between the state and society. Externally, the alliance with western business is also fraying, as China’s bureaucratic capitalism – anchored by state-owned monopolies and mercantilist trade policies – begins to alienate the party’s (genuinely) capitalist friends.
So when the Chinese Communist party toasts its post-Tiananmen success, it should be under no illusion that the good times are here to stay.
Source: How Beijing kept its grip on power
It is hard to miss the self-congratulatory mood in Beijing’s corridors of power these days. The Chinese Communist party was practically written off after its army crushed the pro-democracy movement in Tiananmen Square on June 4 1989. At home, it faced a shocked and resentful population. Internationally, it was isolated. The fall of communism in the former Soviet bloc further demoralised its members. A sense of impending doom permeated Beijing.
Twenty years later, things could hardly be more different. China is riding high as a new economic and geopolitical giant. The party’s rule has never felt more secure.
Chinese leaders appear to believe that they have discovered the magic formula for political survival: a one-party regime that embraces capitalism and globalisation. Abroad, the party’s success raises fears that it has established a viable new model for autocratic rule.
As the world commemorates the 20th anniversary of the Tiananmen tragedy, it is time to reflect on how the party has held on to power against seemingly impossible odds and whether the strategy it has pursued since Tiananmen will continue to sustain its political monopoly.
Clearly, the most important explanation for the party’s apparent resilience is its ability to deliver consistently high growth. However, largely through trial and error, the party has also developed a complementary and quite sophisticated political strategy to strengthen its power base.
A lesson taken from the Tiananmen debacle by the party’s leaders is that elite unity is critical to its survival. The political necessity of launching China’s economic reforms in the late 1970s required the party to form a grand alliance of liberals, technocrats and conservatives. But the liberals and the conservatives constantly clashed during the 1980s, over both the speed and direction of reform.
Disunity at the top sent out mixed signals to Chinese society and, during Tiananmen, paralysed the decision-making process. After Tiananmen, the party purged liberals from its top echelon and formed a technocratic/conservative coalition that has unleashed capitalism but suppressed democracy.
An additional lesson learnt from the party’s near-death experience in Tiananmen was that it must co-opt social elites to expand its base. The pro-democracy movement was led and organised by China’s intelligentsia and college students. The most effective strategy for preventing another Tiananmen, the party apparently reasoned, was to win over elite elements from Chinese society, thus depriving potential opposition of leadership and organisational capacity.
So in the post-Tiananmen era, the party courted the intelligentsia, professionals and entrepreneurs, showering them with perks and political status. The strategy has been so successful that today’s party consists mostly of well-educated bureaucrats, professionals and intellectuals.
Of course, when it comes to those daring to challenge its rule, the party is ruthless. But even in applying its repressive instruments it has learnt how to use them more efficiently. It targets a relatively small group of dissidents but no longer interferes with ordinary people’s private lives. In today’s China, open dissent is stifled but personal freedom flourishes.
On the surface, the collapse of the Soviet Union reduced China’s strategic value to the west. But after overcoming its initial shock, the party adroitly exploited the situation by using the turmoil in the former Soviet bloc to instil in the Chinese public the fear that any political change would bring national calamity. Rising Chinese nationalism, stoked by official propaganda, allowed the party to burnish its image as the defender of China’s national honour.
The wave of globalisation that followed the cold war offered another golden opportunity. Capitalising on the lure of the Chinese market, the party befriended the western business community. In turn, western businessmen found a natural partner in the Chinese Communist party, its name notwithstanding.
With any self-respecting multinational rushing into the Middle Kingdom, those who refused to recognise the new reality risked being outcompeted. In China, they also found undreamt-of freedom in doing business: no demanding labour unions or strict environmental standards. Wittingly or otherwise, western business has become the most powerful advocate for engagement with China. Its endorsement, along with the pragmatic policy pursued by western governments, has lent a legitimising gloss to the party’s rule.
Ironically, this political strategy has worked so well that the party is now paying a price for its success. With the technocratic/conservative alliance at the top and the coalition of bureaucrats, professionals, intelligentsia and private businessmen in the middle, the party has evolved into a self-serving elite. Conspicuously, it has no base among the masses.
There is already a backlash against the party’s post-Tiananmen pro-elite policies, which have resulted in inadequate social services, rising inequality and growing tensions between the state and society. Externally, the alliance with western business is also fraying, as China’s bureaucratic capitalism – anchored by state-owned monopolies and mercantilist trade policies – begins to alienate the party’s (genuinely) capitalist friends.
So when the Chinese Communist party toasts its post-Tiananmen success, it should be under no illusion that the good times are here to stay.
Source: How Beijing kept its grip on power
Wednesday, June 10, 2009
Country Brief: Cambodia
Here is the brief analysis of Cambodia. Enjoy.
Cambodian Genocide (1975-1979)
1.7 million people lost their lives within 4 years. That is 21% of the country's population
Group responsible for mass murders: Khmer Rouge regime headed by Pol Pot
Pol Pot has been in power until 1997, died a year later in 1998. (not charged for genocide!)
30 years later (February 2009):
“Now, five leaders of the Khmer Rouge will face charges in a tribunal backed by the United Nations. The first, Kaing Guek Eav — known better by his nom de guerre, Duch — ran the Tuol Sleng prison camp in Phnom Penh, where out of 17,000 Cambodians who were imprisoned, fewer than 20 survived. Pol Pot's second-in-command, Nuon Chea, will also face charges, as well as the Khmer Rouge's former foreign minister and head of state. “ Time
Form of Government: Authoritarian (based on what I've read), however some say Cambodia has constitutional monarchy
Prime Minister (has executive power): Hun Sen (in power since 1998)
Ruling Party – Cambodian People's Party (since 1970's)
Per Capita Income (Average Annual Income) - $590
Government controls mass media (radio,tv)
freedom of speech is limited. People may end up in jail or be killed for expressing their opinions about the government.
Possible revenues from oil: ~ $1.7 billion per year.
The UN Development Programme’s resident representative Douglas Gardner said that at least 700 million barrels of crude oil are also estimated to lie off the country’s coast.
Population - ~ 14 million
80% of the population lives in rural villages
Life expectancy: 59 for males, 62 for females.
One Third of the population lives under $1 dollar a day.
preventable diseases such as typhoid, malnutrition, malaria, dengue kills 1 in 7 children before the age of five.
Literacy rate: 74% (s one in four Cambodians cannot read )
Shocking Facts:
- 16% of the population has toilets. The Rest 12 million does not.
- gov't offcials steal between $300 million to $500 million a year (where state annual budget is ~ $1 billion)
half of the budget comes from foreign donors.
Teacher's salary: ~ $40 a month. (student pay teachers on daily basis, before entering the class. You need answers for the final exams, don't worry in Cambodia teachers will sell you the answers.
Sources
Brinkley, J (2009).Cambodia's Curse. Foreign Affairs. 88, 111-122.
Joel Brinkley, former Foreign Affairs Correspondent for the New York Times, is Professor of JOurnalism at Standford University.
http://news.bbc.co.uk/1/hi/business/6929407.stm
http://www.livemint.com/2007/02/23180933/Cambodia-likely-to-see-oil-rev.html
http://www.time.com/time/world/article/0,8599,1879785,00.html
http://www.yale.edu/cgp/
China Press Freedom
Recent unrest in Tibet has once again raised questions about media freedom in China. The gulf between Western perceptions of this developing superpower and China's desire to control the message now seems bigger than ever.
101 East - China Press Freedom - Pt 1
101 East - China Press Freedom - Pt 2
Source: AlJazeeraEnglish
101 East - China Press Freedom - Pt 1
101 East - China Press Freedom - Pt 2
Source: AlJazeeraEnglish
Monday, June 8, 2009
Woodrow Wilson's Heir
By Robert Kagan, The Washington Post
President Obama likes to see himself as a pragmatist, but in foreign policy he is proving to be a supreme idealist of the Woodrow Wilson variety.
Like Wilson's, Obama's foreign policy increasingly seems to rest on the assumption that nations will act on the basis of what they perceive to be the goodwill, good intentions or moral purity of other nations, in particular the United States. If other nations have refused to cooperate with us, it is because they perceive the United States as aggressive or evil. Obama's job is to change that perception. From the outreach to Iran and to Muslims, to the call for eliminating all nuclear weapons, to the desire for a "reset" in relations with Russia, the central point of Obama's diplomacy is that America is, suddenly, different. It has changed. It is better. It is time, therefore, for other nations to cooperate.
But how has America changed? Obama's policies toward Iran, the Middle East, Russia, North Korea, China, Latin America, Afghanistan and even Iraq have at most shifted only at the margins -- as many in those countries repeatedly complain. So what, for instance, is the source of the "new beginning" in U.S.-Muslim relations that Obama called for in Cairo?
The answer, it seems, is Obama himself. In the speech, The Post reports, "Obama made his own biography the starting point for a new U.S. relationship with Islam." Or as the New York Times put it, while "the president offered few details on how to solve problems around the globe," his basic argument "boiled down to this: Barack Hussein Obama was standing on the podium in this Muslim capital as the American president."
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Critics complain that Obama's speeches are too self-referential. If so, this is not a mark of vanity. It is a strategy. Obama believes that his story is a powerful foreign policy tool, that drawing attention to what makes him different, not only from George W. Bush but from all past American presidents, will persuade the world to take a fresh look at America and its policies and make new diplomatic settlements possible.
In Cairo, he emphasized his Muslim heritage to show Muslims around the world that he empathizes with them as no previous American president possibly could. His apologies for America's past behavior also highlight his uniqueness. He is not the first president to apologize. Wilson apologized to the peoples of the Western Hemisphere for the interventionist policies of his Republican predecessors (only to outdo them with his own interventions). Bill Clinton apologized to Africans for America's history of slavery. But Clinton accepted responsibility for America's sins as if they were his own.
Obama, on the other hand, does distance himself from America's past sins. His response to Daniel Ortega's long recitation of U.S. misdeeds in Latin America was to point out that he personally had nothing to do with them -- "I was three months old." When he admits American sins in relations with Iran, he wants Iran's revolutionary leaders to distinguish between America, which they hate, and America's new president, whom they can like and with whom they can do business.
Can this work even without fundamental change in the conduct and parameters of U.S. foreign policy? Obama obviously hopes so. Take the Israeli-Palestinian issue. Obama calls for a freeze on settlements, but the question for many Arabs and Palestinians is what he will do to force Israel to comply with his demands. Will he cut off aid? The answer is almost certainly no. But Obama must believe that the expression of his good intentions is enough.
Or take Obama's declared desire to eliminate all nuclear weapons. Of course he admits that he cannot make this happen. But he believes that by agreeing with American critics that the present American-dominated order is unjust, he can buy the international goodwill necessary to end Iran's and North Korea's nuclear weapons programs.
Finally, Guantanamo. Who knows when Obama will be able to close it, what he will be able to put in its place or whether, ultimately, he will be able to strike a fundamentally different balance between American security and the legal rights of detainees than was struck by Bush or by previous presidents in times of perceived national security threats? It probably won't be all that different. But Obama hopes that by displaying earnestness to change American practices, he can build an image of greater moral authority and that this in turn will produce diplomatic results that have hitherto eluded us.
It is conceivable that this theory may prove correct. Certainly, it will soon be tested. But let us not call it realism. The last president who sincerely pursued this approach was Woodrow Wilson. He, too, believed that the display of evident goodwill and desire for peace, uncorrupted by the base motives of national interest or ambition, gave him the special moral authority to sway other nations. And Wilson was as beloved around the globe as Obama is today, possibly more beloved, at least for a moment. Millions took to the streets in the great cities of Europe when he crossed the Atlantic in 1918. His gifts to persuade, however, proved ephemeral, and the results of his efforts were, from his own perspective, an utter failure. Not only the nations of Europe but his own United States proved more self-interested and less amenable to moral appeals. We will see whether Barack Obama, the most Wilsonian president in a century, fares better.
Source: Woodrow Wilson's Heir
President Obama likes to see himself as a pragmatist, but in foreign policy he is proving to be a supreme idealist of the Woodrow Wilson variety.
Like Wilson's, Obama's foreign policy increasingly seems to rest on the assumption that nations will act on the basis of what they perceive to be the goodwill, good intentions or moral purity of other nations, in particular the United States. If other nations have refused to cooperate with us, it is because they perceive the United States as aggressive or evil. Obama's job is to change that perception. From the outreach to Iran and to Muslims, to the call for eliminating all nuclear weapons, to the desire for a "reset" in relations with Russia, the central point of Obama's diplomacy is that America is, suddenly, different. It has changed. It is better. It is time, therefore, for other nations to cooperate.
But how has America changed? Obama's policies toward Iran, the Middle East, Russia, North Korea, China, Latin America, Afghanistan and even Iraq have at most shifted only at the margins -- as many in those countries repeatedly complain. So what, for instance, is the source of the "new beginning" in U.S.-Muslim relations that Obama called for in Cairo?
The answer, it seems, is Obama himself. In the speech, The Post reports, "Obama made his own biography the starting point for a new U.S. relationship with Islam." Or as the New York Times put it, while "the president offered few details on how to solve problems around the globe," his basic argument "boiled down to this: Barack Hussein Obama was standing on the podium in this Muslim capital as the American president."
ad_icon
Critics complain that Obama's speeches are too self-referential. If so, this is not a mark of vanity. It is a strategy. Obama believes that his story is a powerful foreign policy tool, that drawing attention to what makes him different, not only from George W. Bush but from all past American presidents, will persuade the world to take a fresh look at America and its policies and make new diplomatic settlements possible.
In Cairo, he emphasized his Muslim heritage to show Muslims around the world that he empathizes with them as no previous American president possibly could. His apologies for America's past behavior also highlight his uniqueness. He is not the first president to apologize. Wilson apologized to the peoples of the Western Hemisphere for the interventionist policies of his Republican predecessors (only to outdo them with his own interventions). Bill Clinton apologized to Africans for America's history of slavery. But Clinton accepted responsibility for America's sins as if they were his own.
Obama, on the other hand, does distance himself from America's past sins. His response to Daniel Ortega's long recitation of U.S. misdeeds in Latin America was to point out that he personally had nothing to do with them -- "I was three months old." When he admits American sins in relations with Iran, he wants Iran's revolutionary leaders to distinguish between America, which they hate, and America's new president, whom they can like and with whom they can do business.
Can this work even without fundamental change in the conduct and parameters of U.S. foreign policy? Obama obviously hopes so. Take the Israeli-Palestinian issue. Obama calls for a freeze on settlements, but the question for many Arabs and Palestinians is what he will do to force Israel to comply with his demands. Will he cut off aid? The answer is almost certainly no. But Obama must believe that the expression of his good intentions is enough.
Or take Obama's declared desire to eliminate all nuclear weapons. Of course he admits that he cannot make this happen. But he believes that by agreeing with American critics that the present American-dominated order is unjust, he can buy the international goodwill necessary to end Iran's and North Korea's nuclear weapons programs.
Finally, Guantanamo. Who knows when Obama will be able to close it, what he will be able to put in its place or whether, ultimately, he will be able to strike a fundamentally different balance between American security and the legal rights of detainees than was struck by Bush or by previous presidents in times of perceived national security threats? It probably won't be all that different. But Obama hopes that by displaying earnestness to change American practices, he can build an image of greater moral authority and that this in turn will produce diplomatic results that have hitherto eluded us.
It is conceivable that this theory may prove correct. Certainly, it will soon be tested. But let us not call it realism. The last president who sincerely pursued this approach was Woodrow Wilson. He, too, believed that the display of evident goodwill and desire for peace, uncorrupted by the base motives of national interest or ambition, gave him the special moral authority to sway other nations. And Wilson was as beloved around the globe as Obama is today, possibly more beloved, at least for a moment. Millions took to the streets in the great cities of Europe when he crossed the Atlantic in 1918. His gifts to persuade, however, proved ephemeral, and the results of his efforts were, from his own perspective, an utter failure. Not only the nations of Europe but his own United States proved more self-interested and less amenable to moral appeals. We will see whether Barack Obama, the most Wilsonian president in a century, fares better.
Source: Woodrow Wilson's Heir
Sunday, June 7, 2009
Restless China
As the global economic crisis worsens and Chinese exports shrivel, thousands of factories are closing and already 20 million Chinese workers have lost their jobs. Is the global financial downturn creating potential political and social unrest in China?
101East - Restless China - 26 March 09 - Part 1
101East - Restless China - 26 March 09 - Part 2
Source:
AlJazeeraEnglish
101East - Restless China - 26 March 09 - Part 1
101East - Restless China - 26 March 09 - Part 2
Source:
AlJazeeraEnglish
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