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So interesting how an existential threat — near-term: Russia/Ukraine; longer-term: China/Taiwan — helps focus the national mind.

The Biden Administration announced on Tuesday that, in rapid-fire sequence following the launch of the multi-lateral Indo-Pacific Economic Framework (IPEF) in Tokyo last week, the U.S. Government is making a decisive step, through Executive Action, in the direction of a bilateral U.S.-Taiwan Free Trade Agreement (FTA).

The economic logic in support of a U.S.-Taiwan FTA was evident 20 years ago. Here, dusted off, are two publications which make that point:

Now, finally, U.S. domestic political logic is swinging in line with the geoeconomic imperatives. If it comes to pass, it will have been worth the wait.

On February 4th, at the conclusion of their day-long summit in Beijing, Vladimir Putin and Xi Jinping declared that the friendship between Russia and China “has no limits.” That same day, the Beijing Winter Olympics officially began, ending a little more than two weeks later on February 20th. On February 24th, Russia’s full-scale invasion of Ukraine began.

There has been extensive analysis of the three major miscalculations Putin has made up to this point: (1) his overestimation of the readiness and effectiveness of his military machine; (2) his underestimation of the resilience and fighting spirit of the Ukrainian people; and (3) the speed and scale with which NATO and EU countries, along with many others, have come together to sanction Russia and to support Ukraine (in all ways short of direct military involvement on, or in the air above, Ukrainian territory). It is too early to tell whether a fourth major miscalculation may have to do with Putin’s misplaced faith in the degree of economic, financial and trade support which China would provide Russia to backfill against these sanctions).

But what about Xi Jinping? What is his calculus for advancing (his interpretation of) China’s interests through this crisis? And what miscalculations has he appeared to have made so far?

Xi’s first miscalculation was immediate and damaging. He is known to have had some discussion with Putin on Feb. 4th about the imminent “special operation” in Ukraine. It is not clear whether Putin lied to him or Xi simply failed to ask the right questions to take Putin’s measure. In either case, Xi Jinping is known to have been caught by surprise and ‘perturbed’ by the scale, duration and ruthlessness of Putin’s “special operation.” As described in my February 4th post “Four Seismic U.S.-China-Russia Shifts,” Putin’s move forced Xi, unexpectedly and very publicly, to choose between his new-found friendship without limits and adherence to China’s mantra-like stated policy of non-interference in the affairs of sovereign nations, as enunciated in 1954 in Zhou Enlai’s Five Principles of Peaceful Co-existence (and championed explicitly with regard to Ukraine’s territorial integrity following Russia’s annexation of Crimea in 2014)

Evidence of Xi’s miscalculation of Putin’s intentions in Ukraine became apparent in the initially hesitant and fence-sitting response by the PRC officials during the first two weeks of the crisis. On the one hand, Chinese officials refused to refer to the invasion publicly with any term other than Putin’s Orwellian “special operation” terminology; pivoted reliably to blaming the crisis on NATO rather than Russia aggression; blocked a series of actions from being taken against Russia in the U.N. Security Council; amplified Russian disinformation about the U.S. operating bio-military labs in Ukraine (a play out of the FSK, formerly KGB, playbook which suggests that Putin is contemplating the use of bio- or chemical weapons and is ready to throw sand in the world’s eyes by blaming the U.S. and/or NATO for their eventual use); and has even embedded Chinese journalists with Russian military units on the ground in Ukraine. On the other, China says its the friend of both Ukraine and Russia; talks about the need for the cessation of violence; offers publicly to mediate between the two sides while not actually taking any steps toward a mediation effort); and repeats the mantra of its Five Principles of Peaceful Coexistence as if Putin’s actions in Ukraine were taking place in some parallel universe.

There have been other related miscalculatiions. For instance, the PRC Government has been repeatedly caught off balance by the Biden Administration’s aggressive use of classified U.S. intelligence findings, with his Administration quickly de-classifying key reports and pushing the information out into the public sphere, both domestically and internationally. This began with President Biden’s sharing in real-time with the world the U.S. intelligence community’s pre-invasion assessments that Putin had made the decision to invade. This very public use of previously hush-hush intelligence findings marks a clear break from past White House precedent and has also been aimed at China in recent weeks: first, in divulging the fact that Xi Jinping had prior knowledge of the invasion from his Feb. 4th meeting with Putin and that Xi had, in fact, asked Putin to hold off on initiating that military operation until after the conclusion of the Beijing Winter Olympics; and, second, in disclosing publicly on the eve of Secretary of State Anthony Blinken’s March 14th meeting with China’s top diplomat Yang Jiechi the fact that Beijing had received requests from Moscow for military and economic assistance to aid its war effort. These and other revelations have punctured China’s contrived public posture and shown that, behind the peaceful resolution rhetoric and thin veil of neutrality in the conflict, the reality is that China is not sitting on the fence but has indeed been coming down on Russia’s side.

The initial confusion in China’s response and now the growing evidence of China’s support, up to a point, for Russia were probably to be expected : under-the-table support for Putin was inevitable given the top-down nature of Chinese government decision-making and the personal investment which Xi had made in Putin and Russia just weeks earlier. Just as powerfully through, China wants to keep some fig-leaf semblance of its Five Principles of Peaceful Coexistence policy because its repudiation would roil China’s international relations, among others, with its Belt & Road Initiative partner countries. Equally, it does not want to run afoul of the trip wire of U.S.-led financial and economic sanctions by aiding Russia overtly with military aid, financial relief or with trade in sanctioned commodities like microchips, especially following the stern warning delivered by Secretary Blinken earlier this week.

Over the last week, there are signs that the Beijing leadership is trying to “elevate” its initial indecision and aloofness into what it believes can be a long-term winning strategy for coming out ahead of the West when flames die out and the dust settles from the Ukraine conflagration. The Zhongnanhai thesis is that it is not worldwide supporters of post-WWII liberal democracy that are rallying to support Ukraine as much as it is a “civilizational” struggle between a Russian identity promulgated by Putin and a Western identity and set of values represented primarily by the U.S. and Europe. The thinking goes that, if China stands back from this clash, it can pick up the pieces and emerge stronger than either of the two depleted civilizational antagonists. This accords with Xi Jinping’s decade-long championing of the rejuvenation, and even superiority, of Han identity and the Chinese model. In Xi’s thinking, this policy of studious and disciplined aloofness — limited to cheering on Russia with “dog-whistle” encouragement and forms of back-channel support it can get away with while seizing opportunities to denigrate the West to his domestic audience and to countries in Central Asia, the Pacific, and Africa — has two clear advantages: (1) it avoids any risk for Xi in decisively backing ‘a loser’ in Putin, an outcome already sealed in his international pariah status and increasingly likely on the battlefield even if Kiev is taken and the war shifts to an insurgency; and (2) it gives Xi space to attend to the many immediate challenges facing him in the run-up to the critical Party Congress this fall where he is bidding for a third, controversial term as President. Those challenges include: a sharp fall-off in economic performance (brought on in part by excesses of his own Common Prosperity policy introduced over the past year; rapidly rising Covid case-counts and lock-downs in Shenzhen and Donguan in the south, in Shanghai and in Jilin to the northeast; and the recent hardening of attitudes toward China throughout much of the world as ably analyzed by Elizabeth Economy in The World According to China and in her Jan/Feb 2022 article in Foreign Affairs.

The jury is out but I submit that this policy of official aloofness may well prove to be Xi Jinping’s biggest and longest-lasting miscalculation with regard to Ukraine. Xi may think in ethno-nationalist terms, but much of the world’s response is underpinned by non-Western allies such as Japan, South Korea and Singapore who have benefitted from, and are committed to upholding, the post-WWII order based on national sovereignity and the rule of law. In fact, it is Taiwan which represents and symbolizes the fullest repudiation of Xi’s thesis. Absent some mis-adventure by North Korea (which is a disturbing possibility) or a premature move by Xi to extinguish the symbol Taiwan represents (which I consider very unlikely in the near-term), Xi’s official ‘aloofness’ and sub-rosa support for Putin will be remembered by the world in the wake of the Ukraine conflict. There are times when a person, or a nation, must choose sides. Not choosing sides in such situations is, in fact, a choice that is noticed and remembered. Pretending not to choose sides while actually backing the ‘wrong side’ is morally repugnant. There is not a middle way.

Founding of the PRC on October 1, 1949

Throughout WWII, the U.S., the Soviet Union and the Kuomintang (KMT) Party of China were formal allies. But in 1949, Mao Zedong’s Chinese Communist Party (CCP) forced the KMT to flee to Taiwan. On October 1st 1949, Mao formally announced the founding of the People’s Republic of China. The strategic triangle shifted as the U.S. lost a putative (and highly authoritarian) KMT ally in China and the Soviet Union gained a Communist comrade-in-arms with the CPP.


Sino-Soviet Split 1956-1964

The chumminess of this 1958 photo of Mao Zedong and Nikita Khrushchev belies the deep rifts — both ideological and geopolitical — which had been developing in the Sino-Soviet relationship since 1956. Despite efforts to patch over the differences, the divisions continued to grow until Mao announced the split in 1964 followed by a series of formal statements. Monolithic global Communism had ceased to exist.


Zhou Enlai Greets the Nixons after Air Force One Lands 2/21/1972

Fifty years ago today, Air Force One touched down in Beijing bringing President Nixon and the First Lady for their historic meeting with Mao Zedong. The Nixons’ visit to China lasted from February 21-28, 1972. It was then followed by years of rapprochement efforts — including the historic performance by the Philadelphia Orchestra in 1973 — and culminated in the establishment of formal diplomatic relations between the U.S. and China under President Carter in 1979. The Soviet Union was left out in the cold.


Xi & Putin seal partnership of “no limits” at 2022 Winter Olympics

Today — February 21, 2022 — Russia announced its formal recognition of two breakaway, largely Russian-speaking enclaves in eastern Ukraine. The post-WWII order of sovereignty, rule of law, and cooperation is being challenged. Two weeks earlier, Xi Jinping chose to support Putin’s Ukraine power-play, overturning decades of official “Five Principles of Peaceful Coexistence” policy. The U.S.-China-Russia ground has shifted yet again.


Looking back on these seventy-five years of U.S.-China-Soviet/Russia relations, I expect that I will always pause to reflect on February 21 as each year passes. February 21, 1972 was deeply promising. February 21, 2022 is deeply foreboding. In a professional sense, today’s date will likely be for me somewhat like what I feel personally as other calendar days each year remind me of my mother’s and father’s deaths (and of their lives). Artificial and arbitrary dates on a calendar which nonetheless carry deep and lasting human meaning and consequence.

President Biden’s first in-person appearance on the world stage included a tense but business-like meeting with Vladimir Putin, a NATO meeting in which NATO solidarity was vociferously reaffirmed and a meeting of G7 leaders in which the perceived threats of climate change and China both loomed large.

The final agreement announced at the conclusion of the G7 last Sunday featured two elements with direct bearing on China and, particularly, on China’s Belt & Road Initiative (BRI): a commitment to phase out coal-fired electricity generation and a revived commitment to provide $100 billion in green finance assistance to developing countries.  Both commitments were, however, long on symbolism and short on substance.

Today’s post looks at why the headlines for both announcements were printed in such large banner font, why the accompanying stories were so short in column-inch detail and why both stories serve to center on China at a meeting – involving the heads of state of the U.S., Canada, the U.K., Germany, France, Italy and Japan – where China is not represented.

The electricity generation commitment undertaken by the seven leaders was specifically that their governments would provide no new support for thermal coal power generation except in cases where carbon capture and sequestration (CCS) technology is deployed in tandem to neutralize the greenhouse gas (GHG) emissions produced by coal-firing.  This undertaking supports a previous G7 commitment to halve emissions by 2030 (against a 2010 baseline) on the way to achieving net-zero emissions by 2050.

The green finance commitment announced announced Sunday – to provide $100 billion annually to help developing countries decarbonize – was not in fact a new commitment but a reaffirmation of an earlier commitment which had lapsed during the Trump years. It was rolled out on Sunday with a new name – the Build Back Better World Initiative – but with no new funding attached.

Seen from a global perspective, both commitments are intended as a direct response to China and its Belt and Road Initiative.  China’s trajectory of domestic high-growth has resulted in it recently surpassing the GHG emissions of the entire developed world combined, according to a recent report by the Rhodium Group.  Compounding this unfavorable trend, China continues to support its Big Coal industry by encouraging exports of coal-fired power generation equipment to its less developed BRI partner countries.  The G7’s electricity generation commitment is therefore intended to draw a sharp contrast in climate change global leadership between the G7 group of democracies and the China’s competing, more authoritarian model.  Similarly, the green financing commitment is intended as an alternative pool of financing for developing countries to draw on separate from Chinese government lending and the BRI-focused Asian Infrastructure Investment Bank (AIIB).

So what accounts for the splashy headline but dearth of detail?  Two factors. The first is the very evident desire of the other six countries to welcome the U.S., post-Trump, “back into the club” by explicitly amplifying in the international arena President Biden’s domestic Build Back Better theme; and, more importantly, by presenting a show of implicit support for Biden’s “Summit of the Democracies” strategy for countering China. In short, the symbolism was more important than the actual substance for achieving this goal.

Hammering out the details of the power generation agreement and expanding on the scope of the green finance commitment eluded the G7 leaders at this meeting due to a lack of confidence, especially among the three leaders from Continental Europe, that detailed and expanded agreement will stick. There are three levels of doubt contributing to this lack of confidence.  In order of ascending importance, there is:

  • Uncertainty over how Biden and his National Security Council deputies Kurt Campbell and John Kerry are going to square heightened competition with China in the technology space with attempted renewal of cooperation with China in addressing climate change;
  • Doubt over the ability of the Administration to get its proposals through a closely-divided and highly-partisan Congress; and
  • Concern that the American public’s fling with climate science denial and Trumpian America First thinking might not be a one-time affair and could come to the fore again in the 2022 mid-term election and the 2024 Presidential election.

Given these doubts, any effort to provide substantive detail for the power generation agreement and to expand the green financing agreement would have been prone to failure and could have undercut the paramount goal of projecting renewed G7 solidarity and democratic unity.  Looked at from another angle, this result shows how much effort and hard work will be required to reestablish the global momentum toward 2050 climate goals following Trump’s decision to pull America out from the Paris Accord Conference of Parties (COP) process.

Crackdown or Startup w border

 Henry “Hank” Paulson — former Chairman of Goldman Sachs, former Secretary of the U.S. Treasury and creator of the U.S.-China Strategic & Economic Dialogue — was in Philadelphia last Wednesday.  He came to publicize his new book Dealing With China: An Insider Unmasks the New Economic Superpower.

The media frame for the talk and Q&A which he gave to the World Affairs Council of Greater Philadelphia was:  ‘Hank, you’re a real patriot. Why are you helping China?”

In response, Hank Paulson was very clear that his interest in promoting a better understanding of China is rooted in his desire to do what is best for America.

You can read the full article here but, for the purposes of this post, I’m going to focus on one small, but important, piece of the big contemporary China puzzle:  Is Xi’s ongoing crackdown (on corruption but also on foreign businesses, NGOs, press freedoms, social media, connectivity to the global knowledge-pool, etc) flashing green, yellow or red for China’s paramount challenge of rebooting its economy on a more sustainable basis?

China’s ‘old software version’ of infrastructure build-out, inbound investment and export of cheap stuff is clearly no longer operating smoothly on the new global hardware system.  China’s future – and Xi Jinping’s for that matter – depends on a smooth updating to a ‘new software version’ of consumer-led spending, outbound investment and innovation up the product value-chain.   Under any circumstances, that’s a tall-order to pull off in just a few years.  For those of us who believe that helping China matters to America’s future, the key question is whether the crackdown on political thought in China is – or is not — inimical to the desperately needed surge of commercial innovation needed to upgrade China’s economy to version 2.0.

It is perhaps not entirely a coincidence that, in the same week that Hank Paulson was wrestling with this question in Philadelphia, so were two other leading experts on the trajectory of China’s globalization elsewhere:  Shaun Rein and Tom Friedman in respective articles.  If Hank Paulson occupies the pivot point as a U.S. patriot committed to helping China, Shaun Rein is a self-acknowledged China booster and Tom Friedman a “color me dubious” observer of China’s steep road ahead to globalization.

Here’s what each of them has had to say over the past week on the ‘sword of Damocles’ question facing Xi and China:  crackdown or start-up?  (Click on the name below in order to source the original publication from which the following excerpts are taken):

Hank Paulson

Paulson

“Paulson believes the Communist Party has reached a simple accord with the Chinese people: prosperity in return for continued state control. The question, of course, is whether China can have it both ways – economic freedom without cultural freedom, a subject I raised with Paulson at the World Affairs Council.

‘In today’s information economy, I don’t know how economies can innovate and do the sorts of things they do to stay on top without having a free flow of ideas and information,” Paulson replied. “I’ve run a global company, and, boy, you need to be connected. You can’t have an Internet that’s not connected. You need to know what’s going on politically, regulatory systems, economically, in terms of ideas all over the world.’

He added: ‘But understand what’s going on right now. Xi Jinping . . . is focusing on the things that the people care about the most. So, corruption. He recognizes the party won’t survive unless he curbs corruption. So he’s focused on corruption, the environment, dirty air, and water.’

“So . . . managing China, just think what it’s like because they have to deal with the kinds of issues that afflict developed countries at the same time they have to deal with issues that developing countries are dealing with because a big part of the country is still poor. It would be like, . . . looking at Europe, Germany and Slovenia. They are both European, vastly different stages of development, they need different economic policies. So think about managing both of those in a single country under one party, and I mean that’s sort of the challenge.’”

 Shaun Rein

rein-circular

“China´s much needed anti-corruption drive has now put the country into a lock-down mode, and new projects have halted,” tells business analyst Shaun Rein at CNBC.  “The cut in the reserve ratio ratio (RRR) this weekend is one way for a kickstart, although nobody know what will really work.”

 China Herald:  “What does the Chinese market need to stimulate the economy and if this growth continues to disappoint then would you expect an additional benchmark rate cut in the next couple of quarters, something that many experts are now talking about?”

Rein:  “I think what we need to look at is not gross domestic product (GDP) growth but we need to take a look at unemployment and the second reason why I am more concerned about the economy is in the last month urban unemployment has been hovering around 5 percent – that’s really a problem. So the unemployment rate in areas of manufacturing are still fairly strong and you can easily stimulate that by forcing state owned enterprises to do heavy investment; train construction, airport construction and you can get jobs there but the issue is urban unemployment is weak and there aren’t a lot of easy remedies. The government is trying to switch from manufacturing oriented economy more towards one of technology and innovation as I outlined in my new book ‘The End of Copycat China’ but it is not easy to do that. You cannot get companies that are producing things all a sudden to become innovators, so there is definitely going to be some weakness, some problems in the economy over the next three-four months and frankly there are no easy answers on how they stimulate the economy.”

Tom Friedman

friedman-circular-thumbLarge-v3

“Americans … are asking of President Xi: “What’s up with you?” Xi’s anti-corruption campaign is clearly aimed at stifling the biggest threat to any one-party system: losing its legitimacy because of rampant corruption. But he also seems to be taking out potential political rivals as well. Xi has assumed more control over the military, economic and political levers of power in China than any leader since Mao. But to what end — to reform or to stay the same?

“Xi is “amassing power to maintain the Communist Party’s supremacy,” argued Willy Wo-Lap Lam, author of “Chinese Politics in the Era of Xi Jinping: Renaissance, Reform or Retrogression?” Xi “believes one reason behind the Soviet Union’s collapse is that the party lost control of the army and the economy.” But Xi seems to be more focused on how the Soviet Union collapsed than how America succeeded, and that is not good. His crackdown has not only been on corruption, which is freezing a lot of officials from making any big decisions, but on even the mildest forms of dissent. Foreign textbooks used by universities are being censored, and blogging and searching on China’s main Internet sites have never been more controlled. Don’t even think about using Google there or reading Western newspapers online.

“But, at the same time, Xi has begun a huge push for “innovation,” for transforming China’s economy from manufacturing and assembly to more knowledge-intensive work, so this one-child generation will be able to afford to take care of two retiring parents in a country with an inadequate social-safety net.

“Alas, crackdowns don’t tend to produce start-ups.

“As Antoine van Agtmael, the investor who coined the term “emerging markets,” said to me: China is making it harder to innovate in China precisely when rising labor costs in China and rising innovation in America are spurring more companies to build their next plant in the United States, not China. The combination of cheap energy in America and more flexible, open innovation — where universities and start-ups share brainpower with companies to spin off discoveries; where manufacturers use a new generation of robots and 3-D printers that allow more production to go local; and where new products integrate wirelessly connected sensors with new materials to become smarter, faster than ever — is making America, says van Agtmael, “the next great emerging market.”

“It’s a paradigm shift,” he added. “The last 25 years was all about who could make things cheapest, and the next 25 years will be about who can make things smartest.”

President Xi seems to be betting that China is big enough and smart enough to curb the Internet and political speech just enough to prevent dissent but not enough to choke off innovation. This is the biggest bet in the world today. And if he’s wrong (and color me dubious) we’re all going to feel it.”

President Xi Jinping’s anti-corruption drive — known for its signature vow to target both ‘tigers’ (top-level officials) and ‘flies’ (low-level functionaries) — shows no sign of abating.  It may even be gathering momentum with the early April announcement that former Politburo Standing Committee member (and security portfolio chief) Zhou Yongkang will be standing trial in Tianjin on charges of bribery, abusing power and disclosing state secrets,  This announcement followed a slow-motion public ensnarement of Zhou as, for almost two years, a tightening noose methodically drew in business associates from Zhou’s time with China National Petroleum Corporation, provincial associates from his time as Party Secretary in Sichuan Province, associates from the security establishment and close family members.

As a member of the PSC for five years from 2007-2012, Zhou Yongkang was one of the seven most powerful people in China.  Not since the 1976 arrest and subsequent trial of Jiang Qing and the Gang of Four at the end of the Cultural Revolution has such a high-level Chinese official been brought to public trial by the Chinese Communist Party.

The beginning of Zhou Yongkang’s fall is associated with Chongqing, a provincial-level ‘city’ (see Direct Controlled Municipalities) in China’s far west immediately adjoining Sichuan Province and erstwhile power-base for Bo Xilai, Zhou’s protégé.  Until the death of British citizen Neil Heywood followed by the failed attempt by Bo’s police chief to seek refuge in the U.S. Consulate in Chengdu (capital of Sichuan Province) followed by the conviction of Bo’s wife on charges of ordering Heywood’s poisoning, it had appeared likely that Zhou would be able to get Bo onto the Standing Committee, thereby protecting his ‘retirement flank’ after stepping down.  Bo’s candidacy faltered under the weight of these events just as Xi Jinping was consolidating power and his new Standing Committee taking final shape.

xijinping_tiger-flies_adolfo-arranz (modified)

Now that formal charges against Zhou Yongkang have been announced, attention is swinging to Tianjin, another of China’s four Direct Controlled Municipalities (直辖市) and venue for Zhou’s upcoming trial.  It is perhaps not surprising that, for months now, the mood in Tianjin —  Philadelphia’s Sister City (since original establishment of “Friendship Cities” link in 1980) — has turned decidedly grim.  As reported by my friend Tim Weckesser and his fine team of professionals at Sino-Consulting International (SCI):

(begin extract from SCI Report)

The city of Tianjin, our main base in China, recently became a focus in the news media as it fell under scrutiny by Beijing’s powerful anti-graft campaign. This happened not only because of the sudden downfall of Tianjin’s long time police chief, Wu Changshun, based on corruption charges, but also because Tianjin courts have been chosen for the trial Zhou Yongkang, the highest ranking official ever to be charged with corruption. China’s state prosecutors formally charged Zhou, the country’s former top security czar, with accepting large bribes over a long period of time. At the height of his power, Zhou controlled China’s police, spy agencies, court systems, and prosecution offices all across the country. And he wasn’t shy about using these powerful assets to crush dissent in the name of “preserving social stability.”

 And now, to add to Tianjin’s notoriety, the city’s former mayor, Dai Xianglong, is “cooperating” in an “investigation”. From 1995 to 2002, before becoming Tianjin’s mayor, Dai was already well-known as the governor of China’s central bank, the People’s Bank of China (PBoC). The investigation, so far, is focused on the vast wealth amassed by Dai’s relatives, not on Dai himself. But this may well be just a tactical move with Dai himself as the real target. This new investigation comes on the heels of the 15 year prison term meted out to Nanjing’s former mayor, Ji Jianye, for corruption. The court found Ji guilty of accepting 11.3m yuan ($1.9m) in bribes between 1999 and 2013, when he was dismissed.

 President Xi Jinping’s anti-corruption campaign aims at trying to clean up China’s graft-riddled government at every level, with examples being set at the top. And so far, we have to say it is successful. In our experience, government officials as well as executives in state-owned enterprises (SOEs) are all keeping their heads down. No big banquets, no gifts – given or received – and strictly limited international travel are basically the norm, at least for now. The question is – will this nationwide campaign eventually help China’s economic development? We hope so. Here is some very recent China market news taken from a variety of public sources.

(end extract from SCI Report)

These then are the dangerous riptides which have been tugging at our PHL-TEDA EcoPartnership‘s Chinese partner, TEDA, since the end of 2014.   Given the fathoms-deep nature of Chinese political and legal process, many of these currents have been swirling in hidden depths while the surface continued to appear placid.  The U.S. side of our PHL-TEDA EcoPartnership has unmistakably felt the power of these currents, though.

While Xi Jinping’s anti-corruption drive remains immensely popular with the general public, there is a growing concern among many close observers of Chinese politics inside and outside China that these hidden forces can as easily become uncontrollable and destructive as they can be purging and restorative.  At the heart of all this is the crucial difference between ‘rule of law’ (with due process, standards of proof, checks and balances, etc) versus ‘rule by law’ (political power plays being managed under a thin veneer of legal process).  As Liz Economy wrote in an earlier post on this blog (see “Time for Xi to Reform his Reforms” in Feb. 6, 2015 post):

“Certainly, (Xi’s) anti-corruption campaign has hit its target—hundreds of thousands of them to be exact—and shows little sign of slowing down. He has cast a wide net, leaving little doubt that no sector of society—party, military, business, or other—is completely safe. Still, Xi remains vulnerable to accusations that the campaign is at least partially politically motivated, given that almost half of the senior-most officials arrested are tied in some way to his political opponents, and none of his Fujian or Zhejiang associates have been detained. He might want to bring some transparency to the process: uncertainty and fear of running afoul of some regulation or another are driving many officials to avoid making decisions or taking action.”   

by Elizabeth C. Economy

February 6, 2015

A book vendor reads a book as he waits for customer next to portraits of Chinese President Xi Jinping (L) and late Chairman Mao Zedong, at an open-air fair in Juancheng county, Shandong province January 30, 2015. REUTERS/Stringer (CHINA - Tags: SOCIETY POLITICS) CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA
 ( Photo: Stringer/Courtesy Reuters).

As Xi Jinping nears the two-year mark of his tenure as president of China, he might want to take stock of what is working on the political front and what is not. Here are some early wins and losses.

Certainly, his anti-corruption campaign has hit its target—hundreds of thousands of them to be exact—and shows little sign of slowing down. He has cast a wide net, leaving little doubt that no sector of society—party, military, business, or other—is completely safe. Still, Xi remains vulnerable to accusations that the campaign is at least partially politically motivated, given that almost half of the senior-most officials arrested are tied in some way to his political opponents, and none of his Fujian or Zhejiang associates have been detained. He might want to bring some transparency to the process: uncertainty and fear of running afoul of some regulation or another are driving many officials to avoid making decisions or taking action.

Xi’s ideological war has also taken hold far more rapidly than anyone might have imagined. The Internet as a forum for lively political discourse has virtually closed down, and his crack team of propagandists are constantly coming up with new ideas to turn back the information age for the average Chinese citizen. Banning foreign textbooks, blocking Gmail and VPNs, and putting cameras in classrooms to report on professors are just some of the initiatives underway. It is hard to reconcile Xi’s desire to support China’s most creative and innovative thinkers—much less attract back those who have made their lives abroad—to jumpstart the economy with policies designed to block communication and access to information. If he doesn’t reign in the Liu Yunshan’s and Lu Wei’s soon, he should probably expect a wave of China’s best and brightest to get their passports in order.

Xi has had less success in his efforts to reform social policy. Perhaps nothing is as surprising as the failure of the relaxation of the one-child policy to encourage young Chinese couples to have more children. In late 2013, Beijing issued new rules that permitted couples to have a second child if either parent was an only child. The government saw relaxation of the policy as a win-win—addressing both a significant source of societal discontent as well as the challenge posed by an aging population and shrinking labor force. Initially, the government estimated that with the reform, approximately eleven million additional couples would be eligible to have a second child. They anticipated that roughly two million new babies would be born each year. Instead, only one million couples applied, and as one Chinese expert estimates, there have been only 600,000 to 700,000 newborn second babies—roughly one-third of what the Family Planning Commission had anticipated. Analysts suggest that there are a number of reasons for the baby shortfall: no preschool for children under three, toxic environmental conditions, economic concerns, and even too much success in inculcating the value of a one-child policy.

Reform of the hukou, or residency permit, system is struggling as well. Launched in July 2014, hukou reform technically allows migrant workers to establish residency and receive benefits, such as education for their children, in the cities in which they work. Yet restrictions in the plan mean that only a small percentage of the more than 200 million migrant workers will likely benefit from the policy. Cities such as Beijing, Shanghai, Chongqing, and Guangzhou, which are home to the largest numbers of migrant workers, are excluded from the policy. Indeed, the new regulations only permit migrants to receive full urban residency benefits if they move to towns and cities of less than 500,000. Cities in between 500,000 and the most popular megalopolises have a range of restrictions on their residency requirements. As Chinese demography expert Kam Wing Chan has noted, it makes no sense to exclude the largest cities or set the barriers too high in other large second-tier cities—that is where most migrant workers currently live and, most importantly, where work is available. Given current restrictions in the policy, Chan estimates that to bring the migrant population to zero—the objective of the reforms—will require three to four more decades.

Policy reform is challenging under any circumstance, but all of Xi’s reforms share a common problem: a fundamental misunderstanding of social dynamics. The lack of restraint in the anti-corruption campaign and ideological war create a climate of fear that will undermine success in achieving other policy objectives over the long term, while a failure to recognize the actual needs of young Chinese couples and migrant workers means that the one-child policy and hukou system reform will continue to deliver sub-optimal results. For Xi Jinping it may well be time to reform his reforms.

Yes, You’re On The Road to Paris

Let’s take the second question first.  How did you find yourself on the road to Paris?  Well, that’s because you’re a human being sharing in the planet’s oxygen, foodstuffs and other resources, and because you, like your other human planetary co-habitants, have ceded some of your autonomy to governments since the dawn of civilization.  From that view, the 2015 Road to Paris is the effort being undertaken by all the nations in the world to take their first meaningful step together toward averting the risk of planetary environmental destabilization.  It’s encouraging that this first big step looks likely to happen in 2015, because the nations of the world have been talking about the step, without taking it, since 1995.

What is this step?  Essentially, it’s the world all signing on together to a insurance plan at the global level. The insurance plan hedges against the increasingly clear and present danger of climate change tipping us into a non-sustainable (for humans and most mammals, that is) future.

Before describing the Paris destination in December 2015 (and detailing the circuitous route we have been traveling since 1995 to arrive in Paris), let’s dispatch one canard forthwith: there is no certainty.  The climate change discourse is all-too-often framed in the media and our daily conversations as a dialogue of the deaf between passionate proponents and equally passionate deniers. For most, the weight of scientific data — as well as their intuitive, non-scientific “felt experience” — has been clearly elevating the possibility, if not the probability, that  self-reinforcing cycles of warming are being triggered as a result of the post-industrial patterns of carbon and other greenhouse gas (GHG) emissions.  (see the Introductory chapter of The God Species: Saving the Planet in the Age of Humans for a clear-headed discussion of our risks of overstepping nine particular boundaries that are required for maintaining human-friendly planetary balance).

Here’s the point:  None of us should be talking about certainty.  No environmentalist, no matter how committed, can say with certainty that we are headed toward human-triggered environmental disaster. No skeptic of climate change can say, at least not with credence, that there is zero risk.  The focus needs to be on the twins facts that (a) there is clearly some risk and that (b) the consequences of inattention to, or mismanagement of, this risk are so high as to be unaffordable at every level  .  No general fighting for military survival can wait until all of the pertinent facts of the battlefield are known before engaging in battle. Choices have to be made, and actions taken, in the absence of perfect knowledge.   I submit that we all should be able to agree — or, at least, enough of us for an effective consensus — to taking steps at the local, national and global level to mitigate this imperfectly understood risk while there is still time to do so.

Road to Paris

So What Is ‘The Road To Paris’ in 2015 (and how did we get here)?

The ‘Road to Paris’ refers to this year’s leg of the global journey we have been on since 1995.  This somewhat quixotic journey has been to try to address, as a community of nations, the risks of climate change.  Since this is, by definition, a supra-national effort, this journey has been undertaken under United Nations auspices (since the United States and the other leading Allied nations coming out of World War II set up the United Nations precisely as the forum to deal with this type of supra-national, global challenge).

This being the U.N., there is some mind-numbing nomenclature and an alphabet soup of acronyms to deal with.  There is also the inherent frustration embedded in dealing with the world (where, if you’re a non-diplomatically inclined person, it’s frustrating to find that people don’t latch on to what you think is the right way of doing things right away).  As to the nomenclature and acronyms, I’ll just cover the three most important ones for present purposes:  The framework which has governed this process since it got going in 1995 with “The Berlin Mandate” is known as the United Nations Framework Convention on Climate Change (or UNFCCC).  The framework is carried forward through yearly conferences, sometimes at the head of state level and sometimes at the ministerial level, which are called Conference of Party meetings (or COP).  Finally, the groundwork for the UNFCCC & COP meetings was originally prepared, and continues to be scientfically led, by the Intergovernmental Panel on Climate Change ( or IPCC).  Established by the United Nations Environment Programme and the World Meteorological Organizaiton in 1988, the IPCC acts as the leading international body for the scientific assessment of climate change to guide the poltiical work of the UNFCCC and its COP meetings.

Got that?  Good.  It gets easier to follow the roadmap from here on in.

As mentioned, The Berlin Mandate in 1995 was the starting point for the global effort to come up with some form of global response to the emerging global threat of climate change.  That led after two years of talking to high hopes at Kyoto that the world community would agree to an action plan (the so-called Kyoto Protocol). An action plan did in fact take shape but left unresolved key issues between the industrialized countries (who were being asked to underwrite most of the cost for the various action mechanisms) and developing countries (who were being asked to implement these mechanisms at possible risk to their economic growth prospects).  As a result of these tensions, the U.S. Congress refused to ratify the treaty after President Clinton signed it and the Bush Administration subsequently repudiated the treaty explicitly.

Without U.S. participation, the UNFCCC bus careened around various COP destinations (Buenos Aires, Bonn, Marrakech, New Delhi, Milan, Montreal, Nairobi, Bali, Poznan, Copenhagen, Cancun Durban, Doha and Warsaw — with repeat forays to some) for the next 17 years without any fundamental resolution to the “who pays” question and without any real semblance of  full global consensus emerging.

This changed on November 11, 2014 when Presidents Obama and Xi Jinping made surprise joint announcements on U.S.-China Cooperation on Climate Change and Clean Energy.  This breakthrough  —  involving the world’s two largest economies, two largest carbon-emitters, and de-facto leaders of the two contending blocs within the UNFCCC process  — was then further consolidated at the next scheduled COP meeting, scarcely a month later, in Lima, Peru (COP 20).

As a result of the November 11th breakthrough between the U.S. and China and the further COP20 institutionalization of this breakthrough on a global basis, the world community is finally on the threshold of a full consensus of action steps to take following the December 2015 heads of state COP meeting in Paris.  Currently, all the countries in the world are committed to preparing their voluntary plans (based on loosely-shared parameters and metrics).    Those plans are expected to be delivered in the spring of 2015 for discussion, review and fine-tuning during the remainder of the 2015 calendar year.  In December, the heads of state of the world community will convene to formally agree and commit to this set of  national action-plans representing the entire world community.

Conclusion (and Teaser for Next Installment)

It’s not perfect, but it’s a start.  As someone who rowed crew, I’m a believer in everybody pulling their oar in the same direction even if the level of output varies.  At the global level, the United Nations is far from perfect but it’s all we got (and we in the United States need to recognize that we had a disproportionate voice in making it what it is).

President Obama’s State of the Union address today will lay out some of the roadmap — past and future — which I’ve more minutely and ponderously described here.  He will do so because the risk of de-stabilizing climate change perennially jostles with global terrorism at the very top of the country’s national security threat-list.  He’ll do so for other reasons, though — reasons that go beyond U.S. national security interest.  At the individual level of morality, we each need to think about the impact of our decisions and our actions for those we live with and for those who will follow later.  At the species level (where morality does not really play a part but evolutionary survival does), it would be nice to emerge a winner — a species that figures out how to survive and, in doing so, recognizes its interdependence with the rest of the planet, sentient and non-sentient.

Having tried to do the big picture here, I’ll be back soon to focus on the U.S.-China element of this global equation.  That’s the part of this formula that I have been working with since 2006.  I hope that my broad brushstrokes in this piece help bring focus to understanding how important the U.S.-China piece of this global puzzle really is.  Later on, I’ll get into the fine brushwork of how well Philadelphia is positioned on the global stage to play a leading role in the U.S.-China clean energy story and, by extension, the bigger global climate change story.

The summer’s over and the new work-year has begun. No better way to kick it off than with a reprise of our summer’s big news — China Partnership of Greater Philadelphia and the City of Philadelphia were recognized at the annual high-level U.S.-China talks in Beijing this summer with one of six new U.S.-China EcoPartnerships.  Our partner is the Tianjin Economic-technological Development Area or TEDA.  Our PHL-TEDA EcoPartnership focuses on funded projects in Tianjin for smartgrid online monitoring systems (OMS), wetlands urban water management (WUWM), and green building energy efficiency (GBEE).

EcoPartnership w Kerry, Baucus & PodestaBack row: Philadelphia Delegates Terry Cooke, CPGP (4th from left) and Gary Biehn, White & Williams (2nd from left)

Front row (from right to left) China’s State Councilor Jiechi Yang , Sec of State Kerry, Amb. Baucus & Counselor to the President, John Podesta

 

In other posts to follow, I’ll share some more background on what the five-year old U.S.-China EcoPartnership program is (and why it matters), give thumbnails on the other five EcoPartnership awardees in 2014, and provide a listing of the twenty-four active EcoPartners since the inauguration of the program in 2014.

 

In the meanwhile, here are links publicizing our new three-year PHL-TEDA EcoPartnership:

U.S. State Department Press Release

Secretary Kerry remarks at July 10th EcoPartnership signing ceremony

U.S. Government website for the U.S.-China EcoPartnership program

Official photo from U.S. Department of State

City of Philadelphia Press Release (on City’s blog)

City of Philadelphia Press Release (on City Facebook page)

 

Happy Year of the Snake!

I have some major catching up to do so let me begin here with a link to my book which the Wilson Center launched on September 24, 2012.  (Note: if you want to download the PDF of the book, just right-click and use the Save As option).

Book Cover

More 2012/3 updates to follow in rapid sequence.

Thanks for hanging in there,

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