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The 1990s - Japan's lost decade economically, and politically?

This is my reply to Jing Zhao's comments on my earlier comments on "The rise of China: the impetus behind Japanese regionalism", http://www.eastasiaforum.org/2009/07/26/the-rise-of-china-the-impetus-behind-japanese-regionalism/, 31/07/2009

Jing, I take your point that the 1990s is also a lost decade of the Japanese politics, although I don’t understand politics much.

From economic point of view, the Japan’s lost decade should have a deep cause not noly in its policy makers and their abilities, but in my view also and perhaps more importantly in the US-centric economics and its failure in providing theories to deal with that sort of economic problems that Japan had at that time.

Now the world, or the west major economies are having a similar sort of economic problems as Japan had in the 1990s. Hopefully the economic profession will do something useful and relevant for this sort of problems. For at least, this time it involves the US.

So far, policy makers have avoided the total collapse of the international banking system and the worst of the global financial crisis appears to be behind us. That was a huge success and the world can breath a collective sigh of relief. Hope more of this nature is coming.

Carbon trading versus carbon tax, and other issues

Comments on Robert Gottliebsen “Four carbon controversies”, 31/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Four-carbon-controversies-pd20090731-UFSZY?OpenDocument&src=sph

The science of greenhouse gases and its effects on global warming must show it is correct without reasonable doubts. There is a danger that it is spurious science, because of the short period of data and some possible other reasons that may highly correlate to carbon gases emissions.

A universal carbon tax in a country and using that revenue to subsidise some consumers and businesses are a better way than carbon trading, in terms of universal coverage, efficiency, minimised costs and avoiding the arbitrary allocation of emissions permits. It has its drawback in that it is not known how much the tax should be to achieve a certain reduction target, similar to using interest rate for macroeconomic control.

Nuclear should be debated. Australia is deeply contradictory in its approach to the nuclear issue. It has been a matter of being indulgent because of its lucks with natural endowments, its immature emotions and lack of understanding of nuclear safety and wastes. It needs a change and it is time to change.

Arvi Parbo is correct in one narrow sense, but is plainly wrong. It is correct that in the long term, if developing countries don’t join the actions, there is no hope to achieve emissions reduction to a desirable level. But that does not mean that they have and must join the actions immediately as required for developed nations. Once the developed nations start reducing their emissions seriously, then it is the time to discuss with the developing nations for their participation and the mechanisms for doing that.

So Arvi Parbo is confusing the issues unnecessarily and risks muddy the water and undermining the global efforts all together, unless that is his / her intention to do so.

Balance jobs and low wages

Comments on Michael Stutchbury “Old IR tribunals don’t work”, 31/07/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/old_ir_tribunals_dont_work/

Michael, while there is some logic in maintaining the minimum wages level unchanged by the Fair Pay Commission, there is also logic in the 2.8% increase for low paid by NSW Industrial Relations Commission. It is a matter of balance, and views of course.

You applauded the FPC decision and criticises NSW IRC decision. That is understandable, but wrong.

Just think about this question, if it will reduce the welfares of 1000 low paid workers to keep or increase 1 job, is it still good enough from public policy point of view?

Besides, what if all other wages than the minimum wage increase? Is it fair for the lowest paid?

Further, there is also a responsibility for employers to be fair and share some costs of bad times.

Yes, it would be always good to keep as many people work as possible and it is beneficial, but one has to recognise there are costs of doing it and balance the costs and benefits.

To argue just purely for jobs at no costs is not good enough.


Wrong diagnose, focus, and prescriptions

Comments on Eswar S. Prasad “REBALANCING GROWTH IN ASIA”, July 2009, http://www.nber.org/papers/w15169, quoted in fancunhui的日志, 美国经济研究局论文:亚洲再平衡式增长, http://www.pinggu.name/space-11768-do-blog-id-17325.html

It seems to be a useless study from an equally incompetent economist, disguised as something to help high savings countries.

They should be focusing on how to rebalance the high consumption countries, especially the US economy. It has been a real problem of theirs, but they blame for high saving countries.

If they don't import, how could other countries export to them? If they don’t consume much, how can other countries force them to do so?

If they can sort out their own behaviour, the issue of international imbalance will be solved.

What is the main difference between high and low income countries from economic point of view? It is the difference in their productive capacity, and in turn their physical capital stocks on a per capita level.

How to reduce that difference rapidly? By investment and capital accumulation. Investment requires savings and that is why developing nations need to have higher saving rates.

Carbon capturing is testing

Comments on Keith Orchison “Capturing the carbon debate”, 30/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/CCS-pd20090730-UF2U7?OpenDocument&src=sph

The carbon capturing thinking seems simple enough to get people’s imagination and I personally very much hope that can work.

It, however, may eventually be proven to be a fanciful thinking from existing heavy carbon emitters like coal fired power plants.

The world needs to make a concerted effort in making sure whether carbon capturing can work quickly, because investment decisions for many power plants are urgently pending on it.

How long has this technology been discussed already? How much progress has been made so far? Where or what are the difficulties or sticking point for further progress?

A need for an effective world central bank

Comments on Suman Bery “The wisdom of Professor Calvo”, 30/07/2009, http://www.eastasiaforum.org/2009/07/30/the-wisdom-of-professor-calvo/

There seems a badly need for an effective world central bank.

Professor Calvo’s points, like the one on national international reserves, are profoundly thought provoking, particularly in the mist of what many countries are now worrying how to manage their international reserves to avoid potential losses if the US dollar devalues, due to its ever increasing budget deficits and government debts. One can have quite different perspectives for the same issues when looking in a different scope.

That is important in terms of thinking among competing “theories” for both economic or financial theorists and policy makers alike.

In addition to that, one might look at issues from an international perspective as opposed to a national perspective for managing the so called “sudden stop” of international capital inflow to a country. This would require a “world central bank”, an international last resort, to manage a sudden change in sentiments, similar like a run on a bank. It could provide emergence loans in whatever currencies to a country with reasonable prospects of success. Such loans can be quasi commercial, with reasonable interest rates.

The need for such a world central bank should be strong, because now international capital flow in and out of a country can be very large and the impact of a sudden change is very dramatic for most country to deal with along, simply because it is out of the capacity of any single country.

The Asia financial crisis in the late 1990s and the recent world financial crisis all prove the need for such a world central bank. The responses of some Asian countries following the Asia financial crisis was for individual countries to increase their international reserves and some attempts to establish an Asian regional financial institution with roles similar to those of the IMF with a focus on Asia. The latter is in the right direction, although the former has been said to have contributed to serious international imbalance.

Further, a private bank may be insolvent and bankrupt and be out of business forever, but a nation or country will stay in “business” forever, if you like. So it will have the ability to pay back any reasonable debts it incurs when in such emergence.

A pigeon and galas

A funny, but certainly not lonely pigeon!

While I was driving my car to park along the curb of a roadside, a grey pigeon was just on the ground in front of the car and behind the car parked in front. It quickly flew up and away to the nearby roadside lawn strip where a group of also grey galas were there and joined them.

The galas were busy digging the lawn for food, presumably. They paid little notice to the new and strange comer. The pigeon apparently felt nothing strange either, and as a matter of fact, quite ease about it. Of course, it did not and cannot dig the lawn as those gala companions do. But that did not bother the pigeon.

It is just as happy in the similarly sized and equally similar coloured companion of the galas! Well don a new family. Certainly they can find peace together without interfere with other’s business, and don’t seem to fight with each other.

A nature’s wonder.

Older people working - a pool of treasure

Comments on ABC news report “Older Australians the hidden unemployed: study” by Dina Rosendorff for AM, 30/07/2009, http://www.abc.net.au/news/stories/2009/07/30/2640430.htm?section=justin

It is hidden unemployment, and it is a huge waste of valuable human resources.

The government has increased the pension age from 65 to 67 in the 2009 budget, in the name of dealing with a long term structural budget issue related to population aging. While I personally do not agree it is a good public policy measure and I like to provide more choices to people especially older people as opposed to forcing on people, it can be understandable why the government is doing it.

What is more important for the nation in dealing with population aging and demographic changes is a cultural change and a change in our thinking. Nowadays most people work in office or as a clerk or salesperson type of job. Most is not doing hard labour type job. Given the increase in longevity and health, most people are still capable of continuing working well into their late 60s or even early 70s.

Even those doing hard labour type jobs should still find other less labour demanding type of work to suit their physical health conditions.

The more people who are engaged in working, the higher the average income and national welfare. But more importantly, when people especially older ones are engaged in working voluntarily they are happier and living a better life, while reducing the pressure of aged pension.

All Australians, especially employers, need to tap into this pool of national treasure. It is and should not a difficult issue. It is a conceptual issue. It is an attitude issue. It is a cultural issue. And it is a thinking issue. It can be easily changed. And we can make that change and improve the lives of our older people and ours as a result.

What are we waiting for? Let’s do it, and start doing it now!

Luke Nottage's reply appreciated

Reply to Luke Nottage’s reply to my comments on his article “China, national security, and investment treaties”, 24/07/2009, http://www.eastasiaforum.org/2009/07/24/china-national-security-and-investment-treaties/comment-page-1/

Thanks, Luke.

What I thought was there had been missing links in the whole drama of that detention. Each side has been left with speculations, misinformation and misunderstanding.

Another point was that it was highly likely that Stern Hu was caught in Chinese wider measures to clean up its internal management issues and in that process Stern Hu was a party to some of those issues.

There is more to be hoping for a better Chinese legal system we'd like to, and for the Chinese people too. It is them to bear that legal system much more than we Australians. The Stern Hu case, while being taken so seriously in Australia and with a lot of publicity, it is highly likely to a drop in the ocean in China as there are many more, much more serious cases that may be unfair from our point of view, or even may also be unfair within that complex and sometimes not clear legal system.

Your colleague's argument is impractical even to raise at a bilateral discussion. Even it could be done, probably there are always ways to bypass it, I am afraid.


Two giants see eye-to-eye on 'ideas'

Comments on the report “US-China see eye-to-eye on 'ideas'” in the Canberra Times, 29/07/2009, http://www.canberratimes.com.au/news/world/world/general/uschina-see-eyetoeye-on-ideas/1581595.aspx

It is not a bad start. The two very different world giants are at least talking on issues of importance.

As the title implies, they see eye-to-eye on 'ideas'!

Let's hope good deeds will follow.

See the interesting picture here, isn't the man charmingly courting the lady there, with an interesting reply?

Aging population - strengths or weaknesses?

Comments on zhangyiduo的日志【转载】印度超越中国的两件秘密武器, http://www.pinggu.name/space-124928-do-blog-id-17298.html

It is never a good strategy to worry about other nations may exceed you one day.

The correct strategy is to learn to become and be the best and stay at best, always.

The contribution of language should be fairly trivial to the success of otherwise of a nation. Japan, Germany, for example, did not rely on English to succeed.

As to population age composition, it is as less important as one can put it to be. Time has changed. Nowadays, it is human "capitals" not labour force per se that is important for the economy. Population aging is a red herring. If you can tap into the wisdom and knowledge and skills of older population, you will get wealth of strengths, as opposed to weaknesses.

We need to analyse issues. It is not enough to just believe what you are hearing or have heard.

New time and new issues require new strategies. Don't fall into the trap of some conventional fallacies.

Is Morici's argument about China-US relations correct?

Comments on Peter Morici “China's illusory power”, 29/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Chinas-illusory-power-pd20090729-UDTEW?OpenDocument&src=sph

This is a very interesting article from a professor at the University of Maryland School of Business and former chief economist at the US International Trade Commission. No wonder the US has been in trouble economically, when one thinks about the quality of its economic professionals like this one.

It is a cooperative game between the US and China, given the current need of the US for funding of its unprecedented government deficits and debts, and China’s very large official reserves and possibly increasing. In such a game, the outcome will need to be win-win following cooperation by both sides. Otherwise both are likely losers, with the US likely to be the main one.

China should have other options or avenue to pursue for additional or new increases of its official reserves. For example, it can lend them to other nations that need US dollars, or sell them for other major currencies to buy other countries’ official debts.

It is silly to think that China has no other options, now that China has realised the potential danger with ever large reserves in US dollar and large holding of US Treasury bonds. It is the US, not China that has fewer options.

It does not take a professor who served as the chief economist of the US International Trade Commission to make such a poor argument to confuse himself and others. Anyone with a sane mind that can do elementary logic would understand the issue and come to a more sensible conclusion than what he did.

A remarkably poor professor, or economist, indeed!

The US needs much more competent ones to get it out of recession now, with some urgency. The welfares of the Americans are at stake now.

Safety of overseas students and Australian principle of equality

Comments on Luke Slattery “Education debacle to cost us badly”, 29/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25850835-5016677,00.html

It is not just the revenue but also what we Australians stand for are important and at stake. Yes overseas students generate revenue for our universities and contribute to our education exports. That is important and there is no question about it

However, what is even more important is what we Australians stand for. We are a nation and people proud of the principles of equality and egalitarian society. We are also proud of our human rights record. As such a nation, we should welcome other people coming to our country, no matter they are visiting, studying or permitted working. We should and must provide as safe an environment to our visitors as to ourselves.

We should treat them as equal and afford them with the decent human rights we so dearly cherish, love and defend. Only by doing that truthfully with our warm hearts, we can really be proud of ourselves as an equal society that is characterised by the equalitarian principle.

The attacks on Indian students are a reflection of some problems that needs not only close attention but also serious actions by governments, universities and the public at large. While those attacks have been made public, some much more serious incidents, including killings of overseas students and visitors have not received anywhere enough attention or reporting.

We must face them, confronting them and resolving them.

War in Afghanistan and strategy to defeat terrorists

Comments on David Miliband “Taliban can be beaten”, 29/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25849657-5013479,00.html

It is important to recognize the extreme complexity of ethnic, religious, historical and geographical situations of what is Afghanistan. It appears that from this complexity and from many historical lessons and / or experiences that at some stage national reconciliations will have to be given a prominent role in resolving the conflict in Afghanistan.

Foreign troops, mainly Western NATO troops, must have a workable definition of fighting and defeating terrorists and a clear and effective strategy to do it.

While it was understandable that the war the NATO troops engaged in Afghanistan to overthrow the former Taliban regime in power of Afghanistan, because it had harbored Al Qaeda, the main international terrorist group that was responsible for some major terrorist attacks worldwide including the 9/11. But even within that regime it was unlikely to be all the same and there could be different groups with different views, aims and objectives.

It is unlikely to be a correct policy to destroy all the people who may support Taliban, or some elements of the Taliban, like the Pashtuns. That may potentially be “ethnic cleansing”, or close to it.

For some time, the current Afghanistan government/president has called for reconciliations with the Taliban people, asking for dialogue with them. If the Western countries still refuse to accept or accommodate what the Afghanistans are asking, one would really wonder what the west what to do in Afghanistan.

The west must stabilize Afghanistan and contain potential threats from some elements within Afghanistan for international security. We must let Afghanistan people govern Afghanistan and work with them to achieve our objectives.

The Western forces have caused damages to the Taliban, but also paid a significant price. Even the military reality requires a strategic rethink of how to achieve peace and stability, as opposed to emotional revenge for the sake of ill defined military victory.

Unless we totally and thoroughly isolate the most extreme elements of extreme organisations that may pose terrorism, it will be extremely difficult to defeat terrorists and we will pay heavy prices for the wrong strataeies and tactics aiming at achieving our very objective.

Asian Union versus APC concepts

Comments on Jia Qingguo “Realizing the Asia Pacific Community: geographic, institutional and leadership challenges”, 28/07/2009, http://www.eastasiaforum.org/2009/07/28/realizing-the-asia-pacific-community-geographic-institutional-and-leadership-challenges/

It seems that the first and far most important question to ask is whether it is an Asian regional community type organisation, or an Asia Pacific community. Different people, with different purposes, are calling for quite different things. The two are quite different and would serve equally quite different purposes, and likely have quite different membership and governance structure.

Asia is itself a very large mass in terms of both population and geographical land, as well as diversity. There seems a need to have an Asian Union type community that will look after and advance the affairs and fairs of all Asian nations. The membership should be open to all Asian nations on voluntary basis.

There are regional organisations for all other regions, EU for Europe, African Union in Afric, American Summit in all America, and a Pacific forum for Pacific nations. Interestingly and ironically, the only region that does not have an effective regional organisation is Asia, the largest continent.

It will be difficult to establish such a community, given the size of Asia and its diversity. But it is by no means impossible. Some existing Asian smaller regional organisations can be the core for such a development.

A further Asia Pacific cross regional organisation, such as what Rudd’s Asia Pacific Community proposal or concept, appears to have a nature of super-regional or cross-regional. There is a need for such an organisation, because the very different dynamics across the Pacific. This type of cross-regional organisation will be important in shaping the global affairs in the next 50 years. The membership of this type of organisation is highly likely to be selective as compared to inclusive.

Further, within this cross-regional organisation the sort of questions of existing alliances of different sorts, as raised by Jia, will have to be addressed. Otherwise non-alliance members would have natural concerns of equality and fairness, if such an organisation is to address regional security issues at all.

Cold war has ended long ago. Everyone needs to consider whether there is any need for any cold war era structures or products or legacies to exist anymore. For what purpose do they need to exist? This will be a serious question for people to consider and answer.

One needs to be clear about the differences in these two equally needed but quite different organisations.


Chinese laws and some Australians' reactions to the Stern Hu case

Comments on Peter Yuan Cai “The long arm of the Chinese State Secrecy Law”, 27/07/2009, http://www.eastasiaforum.org/2009/07/27/the-long-arm-of-the-chinese-state-secrecy-law/
It is an interesting piece to have some look at the Chinese State Secrecy Law.

We live in an imperfect world, don’t we? And many people would probably say that it is even much more less-perfect in many respects in China.

Laws are notorious areas of imperfection. Even here in Australia, there is no short supply of examples of this imperfection, with some being very seriously so.

For example, it is often said that the Australian taxation laws are opaque and unnecessarily complex in its totality, even though some may say every bit of it may be simple and understandable if one has the time and patience to study them. Doesn’t it run into thousands (or at least hundreds) of pages, or I got my memory wrong on this?

Australia is an industrialised and highly developed country. Income laws are so important to every taxpayer. Yet we have been and still are resigned to this complexity and obscurity in our lives for many, many years.

The US, the undisputed leader of the free world, has detained so many people without charges in its Guantanamo Bay military prison in Cuba, with suspicions of terrorism, although the new administration has pledged to close that prison camp. I don’t know whether its laws are perfect or not.

Further, it has been reported that the American intelligence agency, the CIA, has used inhuman, outlawed or illegal interrogation methods, with drowning simulation like water-boarding being applied to some people dozens and possibly hundreds times.

China is a vastly different country. It has been undertaking reforms to many areas, including many of its laws. But that reforming processes are far from perfect. It has a long way to go, though its economic reforms have resulted in remarkable economic growth that raised the living standards of many ordinary Chinese. In the interim, it is not only people outside China like us, but also the billion plus Chinese themselves have to live with those applying laws when relevant matters arise, just as we live with the complex and opaque Australian income laws.

Yuan’s argument that “For the time being, Mr. Hu and his colleagues have assumed the unfortunate mantle of being sacrificial lambs on the altar of China’s national security”, may be true in the sense that China’s State Secrecy Law may be different in the future and in a different law they may not necessarily be accused of what they have been now.

Unfortunately, from what the foreign minister here, Mr Stephen Smith said, the Chinese authorities are pursuing other matters than espionage of state secrecy. That is another different area of the Chinese laws that we at here hardly understand.

I'd like to add another brief point about the outages shown by some journalists and politicians here in Australia regarding to the Stern Hu detention case as mentioned in passing by Yuan.

They were understood by many Australians as condemnations for the Chinese authorities’ abuse of Mr Stern Hu’s Australian rights, in the context of a potential retaliation to either the failed Chinalco Rio deal, or the difficulties of the iron contract price negotiations between the major miners including Rio, with China, with Mr Hu as the miners’ chief negotiator.

It may also reflect a poor understanding of the Chinese laws foreign to Australians of course by those people. Further some of those people showed remarkable hypocrisy in the most astonishing fashion. For example, the federal opposition leader, Mr Malcolm Turnbull, has called for the prime minster to personally intervene and phone his Chinese counterpart to get Mr Stern Hu released, because of the detention an Australian executive.

Firstly, are Australians having the same or different rights? Should a business executive be having more rights than other Australians?

Secondly, should Australians be above the Chinese laws and should be released by the Chinese authorities because they are Australians?

Thirdly, should the matter potentially involving serious charges including possibly criminal charges be handled by the interventions by politicians, or should it be dealt with according to the prevailing and residing laws?

Fourthly, Mr Turnbull has been so forceful in condemning the Chinese authorities now, did he mention a word in terms of the US detention of Australian citizens in Guantanamo Bay military prison? Why is he acting so strong and statesman like towards the Chinese and so timid and coward towards the US?

Same person, very different and very interesting behaviours and actions, indeed.

A complex and multiple personalities.

Nothing short of remarkable, astonishing and confounding.

But he is aspiring for the future Australian prime ministership. Good luck to him for his endeavour.

Better doing what you are good at, Mr Rudd

Comments on Michael Stutchbury “No market reform on Rudd’s recovery road”, 27/07/2009, http://blogs.theaustralian.news.com.au/currentaccount/index.php/theaustralian/comments/no_market_reform_on_rudds_recovery_road/

With all respect for his prime ministership, Rudd seems, unfortunately, to be acting like a confused man at the best, or an extreme opportunist always seeking popularity at worse.

The question is why he has been so interested, eager and daring in venturing into an area he does not have the expertise to say or do anything in that field.

While he has used the excuse of the lack of the relevant language skill to veto the appointment of a senior diplomat as Australia’s ambassador to Germany, that itself was extraordinary, then why hasn’t he apply similar criterion on himself in terms of whether he understand economics and economic history?

Rudd would do credit to himself and good to the Australian public, if he can concentrate on managing his government better and on managing the country’s affairs based on sound advices from experts, as opposed to publish half-cooked economic essays.

That is what he was elected for. The voters voted for an alleged economic conservative, but did not vote him for doing an incompetent economic essay writer.

Self aware is important, not only for ordinary people, but more importantly so for politicians holding high offices.


Are we in for another period of stagnation?

Comments on Wolfgang Münchau’s commentary “No exit”, on Financial Times, see http://www.businessspectator.com.au/bs.nsf/Article/No-exit-pd20090727-UBS7F?OpenDocument&src=sph 27/07/2009

After a severe financial and economic crisis as the world has just experienced or is still experiencing, there will be many painful adjustments to realign the elements in the system.

While the concerted efforts by governments and central banking authorities have averted the total collapse of the international banking and financial system (and it is good indeed), we are just at the beginning of the long process of adjusting and realignment.

The first oil shock may have marked an important milestone as the beginning of the so called stagnation period that ran for many years. Stagnation was an adjustment process, a painful price to pay for that oil shock from the supply side. That lesson may be relevant for the current predicament we are having.

There were no effective policies, and for that matter, economic theories, that could solve that stagnation back then. We seem to be no different now from then, lack of effective policy tools to deal with this kind of so called balance sheet recessions.

There are some scenarios the matter would play out. The first one is that the world, especially the advanced countries, just wear the consequences of the recession and its aftermath of long and painful adjustment and realignment process, and sooner or later they will emerge from that process as the 1970 and early 1980s indicated, and return to a new and normal growth path afterwards.

The second scenario is that the governments and central banking authorities accidentally discover a magic cure in terms of policies and led the world out of that painful process. As a result, the total economic losses could be minimised. But the likelihood of that happening is fairly low.

The third scenario is that economists, academic or otherwise, develop new theories that can be used effectively to deal with these new economic challenges and minimise the total economic losses in that process. It is possible for this to happen, but main stream economists have to work hard and be innovative not dogmatic about it.

Let’s hope that either scenario 3 or 2 occurs and occurs as early as possible. This is trillions and trillions involved public work. We have got to accomplish it. Otherwise, stagnation may be here with us for a long period to come.

Observations of interesting legal arguments from expert

Comments on Luke Nottage “China, national security, and investment treaties”, http://www.eastasiaforum.org/2009/07/24/china-national-security-and-investment-treaties/

I am an amateur economist and not a legal expert as Luke Nottage is. As a result, I would like to seek some clarifications from the expert on some of the points in this article, legalistic or otherwise. I hope that I can learn something useful from doing this.

I find the following statements fascinating. Nottage says “... If so, however, we are likely to see more cases like that involving Stern Hu. That is, the (more broadly frustrated) home state of a frustrated investor reacts – even in a later context – against what it may have perceived as over-eager invocation of the national security exception. The irony in this case, perhaps intentional, is that China is now using its own national security law against a citizen of Australia. But it would be particularly unfair to be making an example of an individual for the actions of his country, particularly when employed by a firm (Rio Tinto) not involved in Australia’s original invocation of the national security exception currently retained in its FDI legislation.”

Does this mean a link between the detention of Stern Hu by the Chinese authorities and an Australia’s invocation of the national security exception exists? On which ground or reliable information to prove that was the case?

What does “unfair” mean there? Does it mean it is known for sure that the individual involved is completely innocent of those accusations by the Chinese authorities?

Thirdly, while the firm (Rio Tinto) seemingly was not involved in Australia’s original invocation of the national security exception (I don’t know for which one), was that absolutely true that it didn’t involve in any undisclosed discussions with the government in relation to the matter? What would be Rio’s tactics in those discussions?

Fourthly, didn’t the firm’s board short-change in the background the proposed investor and contribute to the collapse of the deal? Of course by no means I would argue that that should be used as an excuse to detain its employees without their violations of the laws.

An interesting but likely misleading view

Comments on Jing Zhao’s comments on “The rise of China: the impetus behind Japanese regionalism” by Takashi Terada, 26/09/2009, http://www.eastasiaforum.org/2009/07/26/the-rise-of-china-the-impetus-behind-japanese-regionalism/comment-page-1/#comment-45172

Japan, in a sense, may have always been a deformed giant of dwarfs, largely due to its actions in the War time and as its defeat in that War and under the US occupation and influence.

It had few friends in Asia after the War, although it rose very rapidly economically. Others may have loved Japanese money, they don’t have the same attitude towards it people. The sentiments in Gao’s comments reflect something of that kind.

Could Japan be different and more forceful to China following June the 4th? Yes, it could. But could that change anything, either in terms of Japan’s international standing, or its subsequent economically lost decade? I doubt it.

I understand Jing Zhao’s sentiment, given what happened back then. But I am sorry to say that I am not sure his arguments are correct.

The rise of China economically and the relative decline of Japan, irrespectively whether it could or cold not avoid the lost decade, has been, is and will be inevitable, similar as Japan’s rapid rise and the change of its relative economic position internationally from the 1950s to the 1980s. Developing countries, or at least some of them will catch up and move to the production frontier of human technologies where the industrialised countries are.

Japan’s lost decade, just like the current financial and economic crisis, had its own domestic causes. But it had nothing to do with its attitude towards China at that time. To say otherwise is a bit far-reach.

Jing Zhao seemed to argue that could be averted by Japan’s actions and attitudes along. It is far from convincing logically.

Financial crisis, scapegoat and regulations

Comments on Jagjit S. Chadha “Is the love of finance the root of all evil?” 24/07/2009, http://www.eastasiaforum.org/2009/07/24/is-the-love-of-finance-the-root-of-all-evil/

I like this article. I find it fascinating and can’t help from commenting, though I didn’t rush in doing it earlier on after my first noting it.

Although it is against the current wind blowing heavily, it appears to be more sober analysis than most very loud noises calling for this and that.

While there may well be a case for strengthening some financial regulations, there is a real danger of overdoing it and over-regulation of the financial sector, at the expenses of efficiency and suffocation of innovations.

It is true that the world main financial and banking system came near collapse. But what were the main direct causes? It was the subprime problems and the malpractice of selling subprime mortgages in the US to the largest degree, wasn’t it? Imagine what would have been if there had not been those malpractices in which people without the ability to pay were given more 100% loans of the equities they bought, at very low interest rates.

International imbalance in saving and consumption may have contributed to the financial problems in the US. But, I would argue that the causal relationship is by no means inevitable and what had occurred in the US should have been avoidable in the first place.

For example, the US could have used the low interest rates afforded by excess international savings to invest in more productive sectors and areas, or even other countries, that would generate much higher returns and enhance the well beings not only in the US, but also other countries.

This in an indirect way would be similar to the argument of readdressing the patient and non-patient internationally discussed by Chadha in this article.

So I agree with Chadha that the size of the financial sector was not necessarily the problem. If looking at the worldwide, savings are not necessarily too high, because there are so many countries, mostly developing ones, have extremely low level of physical capitals and need to increase investment and accumulate them. Even in some advanced economies, infrastructures may need to be upgraded or replaced.

I find the argument that too much savings amusing, but can’t help laughing at it. When there are problems, it is easy and tempting to find a scapegoat, whether there is any justice to it or not is irrelevant to most people.

The financial and economic crisis is such a case in unprecedented scale.

Same effects, different causes - Asia, EU and the US

Comments on Wendy Dobson “The financial crisis and East Asia”, and Guy de Jonquieres’ comments, 26/07/2009, http://www.eastasiaforum.org/2009/07/26/the-financial-crisis-and-east-asia/

While what Guy de Jonquieres says may be true, there seems to be a big difference between the Asian case and other cases, that, there has no clear regional governance mechanism or structure formally in place.

In the EU or Eurozone cases, the main causes for lack of policy coordination or mutual assistance may be that the region lacked the financial capacity as a result of the financial and economic crisis, as opposed to other things.

While in the Asian case, they had the capacity to do something, but the lack of clear governance structure or consensual agreements was more likely to be the cause of inaction.

The geopolitical issues for regional influences, especially Japan’s attitude (see “The rise of China: the impetus behind Japanese regionalism” by Takashi Terada earlier on in the EastAsiaforum), have made Asia’s regional institutions building more complex.

Asia needs to overcome geopolitical rivalry within itself and builds truly cooperative regional bodies to advance its welfares.

Issues surrounding the "Labor's China Inc" need through investigation

Comments on Glenn Milne “Labor's China Inc is starting to smell fishy”, 27/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25838637-33435,00.html

This article has raised serious issues related to the “Labor’s China Inc”. The Rudd government should establish an anti-corruption commission style inquiry to clear the air, either to prove its parliamentary members are innocent, or to take actions, including possibly criminal prosecutions to rid the government off any serious corruption.

Some sequences of the facts presented in this article raises serious possibility of “inside trading” involving possibly government or commercial information before what was occurring latter on. Whether government officials were involved or not, it must be investigated.

This article and the issues it raised also put some further clouds over the affair of Mr Stern Hu’s detention by Chinese authorities. If implications of this article are true that “Labor’s China Inc”, potentially, could have been involved in improper business conduct in Australia here, then what could it happen in China? One has to wonder.

Some facts on China's actions on emissions - lessons for Australia

Comments on Keith Orchison “Chinese energy is greener than ours”, 27/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25838638-5015664,00.html

This is an interesting article. We need to know the real and hard facts like what are described in this article to understand what is really happening in the world. Politicians may present us a picture that may or may not be true.

China is a big emitter of greenhouse gases and there is no question about that. That is because China is the world largest country in terms of population, 5 times as large as the US.

This article points out that China, a developing country, has been taking actual actions in reducing its impact on emissions.

At home here, we have been constantly hearing from some people especially politicians that we should wait to see what China decides to do on its emissions. While ,China has been doing much more than we, a rich country, have done.

So there it is, dear politicians, you have it now. What you should and need and must decide to do in terms of emissions?

Action, action and action. Don’t just find excuses, don’t delay actions any more. Start doing something now.


Money supply, inflation and growth - more complex relationship

This is comments on 李俊 "依靠通胀保八是一场灾难", 18/07/2009, http://www.pinggu.org/bbs/thread-498677-1-1.html

还是要:搞懂理论,把握实际,搞清统计,解决问题, 为好。

Wake up to reality, union leaders

Comments on Janet Albrechtsen “Buy Australia sells us short”, 26/07/2009, http://blogs.theaustralian.news.com.au/janetalbrechtsen/index.php/theaustralian/comments/buy_australia_sells_us_short/

The intelligence of union leaders have not advanced much from the old days in the long past. Their less interest in keeping up with the changed reality means increasing irrelevance to modern Australians. Less relevance means falling memberships.

They need to wake up to the reality of the 21st century to be relevant and to best represent the interests of their members. The world is increasingly integrated and trade plays a very important role in improving the well beings of all nations including Australia.

Some recent studies have shown that trade with China increased Australians’ real income by thousands dollars. Australia is the only advanced countries that has avoided technical recession so far, largely due to China’s imports of minerals like iron ore from Australia.

What the unions want to do is to undermine those benefits. If they continue to push their silly ideas, they will be left completely behind by Australians.

Grow up, union leaders.

Interesting Japan and its regionalism push

Comments on Takashi Terada “The rise of China: the impetus behind Japanese regionalism”, 26/07/2009, http://www.eastasiaforum.org/2009/07/26/the-rise-of-china-the-impetus-behind-japanese-regionalism/

This is an interesting article to describe Japan's motives behind its regionalism push.

It provides some supports to the argument that Japan has been unwilling to see other developing nations to improve their living standards and catch up with Japan and be equal with it.

I remember someone blamed that China was ungrateful to Japan's aid in comments to an article earlier on. If Japan was like this, how and why could China be grateful to it?

It is complex regionalism, international economics and politics. This article can serve as a potential reference.

We need true and sincere international cooperation, not the kind of one undermining another or others.

As a by-product, this article also potentially increases the difficulties of Rudd’s push to establish an Asia Pacific Community, because it could be perceived as another tool to contain China.

All nations need to be rational and mature.


Comments on Yang Xiaokai's points

Comments on sulei08 "杨小凯谈经济", 25/07/2009, http://www.pinggu.org/bbs/thread-504300-1-1.html


Inflation and money supply - more complex

Comments on 李俊 "通胀已经归来", 24/07/2009, http://www.pinggu.org/bbs/thread-503449-1-1.html

大人物的话可以用来吓人,但不一定都是对的, 或是不分情况的乱用。

A strategic game that Rio can't win

Comments on st_sem的日志 "力拓“抛弃”中国市场 中方损失更大", 24/07/2009, http://www.pinggu.name/space-994566-do-blog-id-16670.html

This is a purely argument based on logic and does not reflect my personal view. I hope both China and Rio can settle their differences and have a fair and cooperative relationship.

The reason for a logic argument was that I saw that article had some problems in terms of fear unnecessarily.

The worst thing is to have unfair games and I personnally don't like that, no matter which side tries to take advantages of the other. I support a fair game.


Trade and politics

Comments on Philippa Dee “Can the global financial crisis actually deliver Doha?” 23/07/2009, http://www.eastasiaforum.org/2009/07/23/can-the-global-financial-crisis-actually-deliver-doha/

It is true that trade improves the well beings of all trading nations. It is also true that when an economic hard time or crisis hits, the pressure becomes higher to sacrifice trade for domestic political purposes. So Jagdish Bhagwati has a point to make.

It, however, does not mean that it is less important for world leaders to make greater efforts to bring the Doha round to a successful conclusion. They need to show true and greater and stronger leadership, especially in this harder economic environment. Although politically less popular, improved international trade is good for more speedy recovery from the crisis.

What puzzles me is why trade has been affected much more severely by the financial and economic crisis. Trade in some quarters in some countries declined by 40 or even 50 per cent. Surely their economies would not have fallen by that much in those quarters.

Dee has argued the role of finance. Maybe that is the case that finance plays a greater role in international trade than in domestic trade, so when finance becomes difficult, international trade is hit harder.

I would appreciate that someone can explain the relationships between finance and trade, both external and internal.

Biggest economic upheaval in most lifetimes ahead? - you must be kidding

Comments on Dennis Shanahan “Biggest economic upheaval in most lifetimes ahead”, 25/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25832139-17301,00.html

Shanahan says:

“AUSTRALIA now faces its biggest economic upheaval since the war with the introduction of an emissions trading scheme designed to push up the price of carbon and cut greenhouse gas emissions.”

“This is because the Coalition, under the threat of a double-dissolution election, has blinked and will pass Kevin Rudd's emissions trading scheme in some form, and soon.”

I doubt the alarming headline will reflect the truth. The Australian legislation is not necessarily more radical than the US one, or the most likely policy positions of the Europe Union countries.

It is unlikely that all these countries will see the “biggest economic upheaval in most lifetimes ahead”. So how could it happen to Australia if it takes a similar approach to emissions reduction? It is unconvincing, to say the least.

The federal opposition’s position to wait to see what the other countries – China, the US and India, will do is purely a disguise. The US has past its legislation in the House already. Neither China nor India is likely to reduce their emissions until the rich countries reduce theirs by a significant degree. Yes they may agree to reduce emission intensity. But it is very different from reducing emissions.

So what the oppositin is waiting for? They just don’t want to take any actions in reducing emissions. Nothing more than that.

They will fail, one way or another, because most Australians want to take real and realistic actions. The opposition will be left behind, or dragged along, unwillingly though.

Abbott solution to federation no solution

Comments on Paul Kelly “A blueprint for rule” – comments on Tony Abbott’s new book, 25/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25831896-12250,00.html

Mr Abbott experienced some of the problems of the Australian federation and seemed to be frustrated, not only or necessarily by those problems or failures, but by the Liberals loss at the last federal election in 2007.

His solution appears to be a response to Rudd’s election promise of a national takeover of public hospitals from the States if they do improve by the middle of 2009.

Both reflect Abbott’s further failure as a federal politician and his inability to lead the national health portfolio. It is regrettable for him and for the nation.

As a result, both Abbott’s diagnose of the problems or failures and his solution are knee-jerking reactions, as opposed to careful analysis and true leadership based on a rational vision for a better Australian federation.

There is neither a need to change the Australia constitution, nor an abolition of States, nor an increase of the Federal government. There are better and more effective solutions.

For example, the national public hospital system has mostly been funded by federal healthcare grants, a special purpose payment (SPP). The national government should have been able to specify conditions for State governments to meet, or to make changes by the federal government. The federal government have the power to do it and there is no need to change the constitution or federation.

Even for other untied federal grants to the States, the federal government should be able to change them to SPPs and attach conditions.

Australia federation works reasonably well in international standards. Short term politics should not be used to change the constitution.

Abbott had a nice try, but that was not enough.


Funny things with the Chinese currency

This is a short comment (in Chinese) on h8631986j "人民币升值出现拐点?" 23/07/2009, http://www.pinggu.name/space-535507-do-blog-id-16588.html

That article is funny in many ways.

既不是真正市场,有何走向和拐点可谈, 不可笑?


读江湖依旧的日志 - 一篇短文,道出万本股票书之精华 - 有感。 23/07/2009。


Water consumption and sustainable development in China

This is a short comment (in Chinese) on zhongwei1983062 "王则柯:应向供水地区发放干旱补贴", 24/07/2009, http://www.pinggu.name/space-578405-do-blog-id-16583.html


Interesting Australian mix of emotions and rationality

Comments on David Penberthy “SA should stop worrying and learn to love yellowcake”, 24/07/2009, http://www.thepunch.com.au/articles/sa-should-stop-worrying-and-learn-to-love-yellowcake/

Everyone has emotions and rationality. They are not necessarily always consistently related to things.

The nuclear issue in Australia provides an excellent example to illustrate this point.

On the one hand, it has allowed to have a few uranium mines. On the other hand, new uranium mines are opposed almost at all costs and irrespective their cases, for fear of its environmental effects.

On the one hand, uranium (or uranium ore?) is exported to other countries to be used in their nuclear power generations. On the other hand, no nuclear power stations are allowed to be built in Australia for fear of safety.

On the one hand, it was allowed to be used as a nuclear boom test site. On the other hand, it opposes any of its vast and geologically very stable land to be used to store nuclear waste.

On the one hand, it wants to reduce carbon pollution emissions. On the other hand, nuclear power with almost zero carbon emissions is not allowed to play a role in that noble endeavour.

They are an interesting mix of emotions and rationality (or irrationality). But that is what Australians have been for quite a while and still are. No one knows how long that interesting mix will last for and when there will be some reconciliation.

Only time can tell.

The unions should be smarter to survive

Comments on ABC report “Unions bury hatchet for 'Buy Australian' push” by Alexandra Kirk, 24/07/2009, http://www.abc.net.au/news/stories/2009/07/24/2634983.htm?section=justin

It is reported that “The nation's two biggest blue collar unions have not always got along, but they are burying the hatchet in a bid to save jobs in Australia's manufacturing industry, which has lost more than 70,000 positions in the past year.”

“The unions - one from the right, the other from the left - have bridged their ideological divide and will appear as a united front at next week's ALP national conference to maximise pressure on the Government to back their manufacturing strategy and to give priority to locally produced goods.”

The unions have done good and bad things over its history to date. But they should learn or evolve fast in the 21st century. They should embrace globalisation and improve and maximise the well beings of Australians through specialisation and trade according to Australian's comparative advantages. They should not live in the past and ignore the modern reality.

They say 76,000 jobs have lost out of industry over the past 12 months. But why don't they say how many have been saved due to higher than expected demand from China? Why Australia is having a much lower unemployment rate than most other OECD countries?

If Australian governments do what the unions ask, then other countries will retaliate. What will be the consequences of those actions and interactions? Did they say anything count that?

They should reasonable and rational.

If they want to last, they'd better be strategic and truly smarter than they are.


What to do when exports falls?

Comments on huangyihello “扩大需求、恢复经济也可以在供给上做文章”, 23/07/2009, http://www.pinggu.name/space-1125736-do-blog-id-16296.html

I am delighted to read this article. huangyihello has raised a very good point in the current debate.

In addition to those two points, there is also an important point very few people have discussed, that is, to increase investment (physical capital) for future more rapid growth. This is a more difficult issue at a higher level than just considering consumption along. It is a change of product mix at another level.

Also, even when using cash handouts to people, consideration should be given to how they are distributed and whether there are other better options than pure cash handouts. For example, government may provide interest-free loans to people to buy goods. The latter can reduce the potential burden for future people, because cash handouts increase government debts and any government debts will have to be repaid.

Government does not have free money, although it can print money. Even printing money has its costs of inflation and devaluation of current assets for their owners.

Reform the electionsystem to a fixed term

Comments on Arthur Sinodinos “PM may regret a spend now, pay later strategy”, 23/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25821434-5017272,00.html

Reform the election system and have a fixed term election please!

The flexibility of PM in choosing the election time to suit one’s own political purpose is a mockery of Australian’s modern democratic system.

It is out dated. It is not good for good governance by government. It is not in the interests of Australians. It is not only a waste of national resources from more frequent election, but also results in more myopic policies and political opportunists.

Above all, it needs reform. A fixed term election is needed and will put a much harder constraint on government.

Australia should wake up to the 21st century. We, as a nation, needs to be mature. We should not tolerate obvious inefficiencies and irrationality.

Incredibly arrogant Mr Sheridan will be disappointed

Comments on Greg Sheridan “Don't kowtow to Beijing bully”, 23/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25821436-5013460,00.html

Mr Sheridan, you have done a fantastic job to win the prize for the most foolish and arrogant writing in Australian history. Congratulations! Well deserved.

You think you are bigger than god and invincible, don’t you? You think China will bow and kowtow to your bully, don’t you? What a day dreamer! One has to question you are sane or insane when you think in that way.

I wonder whether there is anyone outside your narrow circle of self-righteousness and self-supremeness will pay a cent to your view.

You will duly be disappointed by the hush and unfortunate reality for you. The world has change a lot from your days when the cold war was earnest. The balance of international power has changed and will continue to change, most likely against your own will.

God bless you for you to have some peace in your confused mind.


Apollo 13 and Kay's idea of financial system designs

Comments on John Kay “Economic lunacy”, 22/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Economic-lunacy-pd20090722-U7CQ9?OpenDocument&src=sph

Kay’s idea sounds interesting and innovative. It deserves to be carefully analysis to see if that can work. It would be nice if the economy and financial system can be designed according to the modular approach that used in appliance and the Apollo 13 system.

The financial and economic systems are definitely more complex and the trade off between safety and efficiency gains are much greater. That can be a key difference between the financial and economic systems and other much smaller system.

A key issue in the financial system is the asymmetric risks and rewards. A person may gain many millions or more as rewards, but may lose little such as lost a job as risks. This kind of asymmetry results in people work in a way that maximise their rewards but can leave the accordingly high risks for others to bear. Any system designs need to address this asymmetry issue between risks and rewards for people working in it.

It may be the case that one’s rewards should be partly held until sometime well after the time period that can be said risks were not increased due to their efforts in achieving those rewards. Alternatively, there should be some retrospect civil and criminal responsibilities that are applied to people who had contributed to failures before.

Any system designs need to be clear, so people understand them and always take due risk management in their work. They should also avoid undue adverse effects on incentives for individual innovations.

Rupert Murdoch on economic forecast

This my comments on (参加就奖)中国是否即将面临高通胀?【辩论帖】, 22/07/2009, http://www.pinggu.org/bbs/thread-483033-1-1.html. The context is:


Is it scientific to say one way or another, or to support or against the argument?

News Corporation Chairman, Mr Rupert Murdoch said not long ago: "Economists just make the weatherman looks better."

Inflation, as economic growth, is endogenous and affected by so many variables, including government policies and responses by other market agents. They are difficult to forecast, because they can change as other things including policies change.

To say one way or another is not meaningful and is not different to betting. It does not make any sense, although so many people are interested in doing it. There is no science in it.

Enjoy freedom and don't ask for too much government intervention please

Comments on IAN KIERNAN “Move on bottled water inspires”, 22/07/2009, http://www.canberratimes.com.au/news/opinion/editorial/general/move-on-bottled-water-inspires/1574349.aspx

While government may have a role to play in the issue, it is not clear what the government should or should not do just responding to the single issue bottled water alone.

Ultimately it is each person's responsibility for their own finance. It is generally better for government to interfere with everyone's own life as little as possible. We don’t want the government to become the police looking over our shoulders all the time, do we?

There might be a market failure or externality in the issue of bottled water that may justify for a government intervention. But government may have more important and far-reaching jobs to do than looking at minor individual or specific issues.

We should not think to ask government to intervene in this or that so freely. We should respect ourselves and others to make our own decisions for our own sake.

Senators Fielding and Wong and climate change

Comments on a news report by the Canberra Times “Can't negotiate with 'divided rabble': PM”, 22/07/2009, http://www.canberratimes.com.au/news/national/national/general/cant-negotiate-with-divided-rabble-pm/1574816.aspx

If what Senator Fielding said recently is true, then Senator Wong and the government clearly have a job to explain to Fielding and Australians about the relationship between human activities and climate change.

One would not assume it should be a difficult job, but it is shocking to see the government is not forthcoming on this issue. It is disappointing, to say the least.

What has been happening? Australians at least have the right to have an answer.

Still a need for new macroeconomic tools

Comments on Alan Kohler “Policy without ammunition”, 22/07/2009, http://www.businessspectator.com.au/bs.nsf/Article/Out-of-the-game-pd20090722-U6SPS?OpenDocument&src=sph

There is a big gap in macroeconomics in terms of policy responses to such scenarios. The Fed, and some other central banking authorities have used quantity easing, a creative response that stabilised their and the world financial markets. The world avoided the complete shut-down of key national and the international banking system. That was good.

But now there is still a deep problem of how to get the economies going forward and avoid the Japanese experience of the lost decade in the 1990s, which requires equally creative thinking.

Economists or otherwise, people need to come up with new policy tools for dealing with the so called balance sheet recessions.

Need to argue consistently and correctly, Ms Janet Albrechtsen

Comments on Janet Albrechtsen “Be like Garrett, ditch your ideals”, 21/07/2009, http://blogs.theaustralian.news.com.au/janetalbrechtsen/index.php/

The arguments by Janet Albrechtsen may be convincing if Garrett really did what he now believes and actually ditched his earlier ideals. But judged from what Garrett said to the media, he did what was required by a team player, not according to his ideals. So the whole arguments of Janet Albrechtsen’s look very shaky indeed. As a result, the title of that article does not fit into the story, or is a misfit.

What Garrett has been through is nothing short of a tragedy. He should not have been put into that sort of troubles in the first place. That reflects a misjudgment by the Prime Minister Kevin Rudd. Garrett should have been given a different role in the government, as opposed to the environment minister.

It also reflects some potential lack of leadership skills by Garrett himself. He should be able to negotiate a better and more suitable role for himself.

They have not been done in the first place and that was regrettable. But it is not too late to make a change to relieved Garrett from his agony.

Rethink the war in Afghanistan

Comments on Paul Kelly “PM must think like a war leader or quit field”, 22/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25816658-12250,00.html

It is important win the war in Afghanistan, but it is even more important to think about and formulate the best strategies to win it.

The experience of the war so far seems to suggest that the war strategies have not been successful, or even the right ones. Obama and other world leaders must reflect on that and rethink their approaches.

It seems that the focus of the war there needs to change. Rather than fighting the Taliban as a whole, it is better to fight the real core of terrorists within that group. It is likely that not all Taliban fighters are terrorists. They may have a religious belief that is different or a bit more radical than others, as long as they don’t engage in terrorism, they should be allowed to have their belief.

Further, it may need to be carefully considered if it would be better to even accept a conditional peace with the Taliban fighters to end terrorism.

There is a need for fresh thinking in the war in Afghanistan and Pakistan. World leaders must show leaderships.

Mankind's space travel

Comments on Jack the Insider “A giant leap for grasping our destiny”, http://blogs.theaustralian.news.com.au/jacktheinsider/index.php/theaustralian/comments/a_giant_leap_for_grasping_our_destiny/

Returning to space or moon or going to Mars are all admiring goals of mankind. We need to pursue them one way or another.

However, given the extremely high costs even going to the moon, there is an important question of how mankind should pursue space travel.

Although it may sound like impossible, mankind needs to focus on new ways of travel to lower the costs of space travel. It means a different race, with the same goals.

We need to reconcile our aspiration goals with the costs of realizing them and come up with better ways of doing things.

Free trade in books and promotion of local culture

Comments on Bob Carr “Low prices open fresh chapter for readers”, 15/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25784280-5013480,00.html

The Productivity Commission has done the right thing in its recommendations. Free trade in books will be good for readers in Australia for two things. The first is it will result in lower book prices and more readers will read more books. The other is that with more people reading more what is going on worldwide, the knowledge of Australians as a whole will be enhanced and will bring benefits with them.

However, there is also a point of promoting local culture. Free trade and the promotion of local culture are not necessarily conflicting with each other. Promotion could be done in terms of subsidies to local writers on local cultures.

So there are policies that can achieve both objectives. Australian government should pursue those best policies to achieve the best outcomes for Australians.

Complexity of high quality and inequality education in Australia

Comments on Glyn Davis “Fix school performance or poor won't get into uni”, 22/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25816657-5013480,00.html

The "high quality education and low equality" issue sounds very disturbing. But what its real causes are remains an important question but unclear. It is important to provide a truly equal opportunity for every kid or student to go to university, or higher education in an environment of limited resources.

The ability of State, or government is limited and government alone cannot solve all social issues existed. We need efforts from all walks of life or society. Parents have an important and irreplaceable role in their children education and the outcomes. Students themselves also have an important role.

I have not read the new book of “A New Federalism in Australian Education” by Jack Keating for the Education Foundation. I hope the book can provide some new insights into the issue of inequality of education in Australia.

However, from this article, some proposals of Keating seem to run the risk of introducing new inequality. For example, “strengthening of upper secondary pathways to further education and training that do not rely solely on academic results” would undoubtedly put down some students with better academic results and would be unfair to those students. One would ask the question: why aren’t their efforts recognised?

Inequality in education is an issue and that needs to be fixed. It is, however, important to introduce new inequality when fixing inequality.

Trade and growth - an interesting twist

Comments on Ron “PNG: Trade Policy and Trade Agreements”, 21/07/2009, http://www.eastasiaforum.org/2009/07/21/png-trade-policy-and-trade-agreements/

It is discouraging to hear that "there is no convincing evidence of a positive relationship between trade openness and increased growth". The comparative advantage theories of trade are one of the most agreed areas in economics by economists, but now it is in question.

But on the other hand, "other factors, particularly so-called ‘institutional’ factors, are important in whether removing trade restrictions leads to faster growth", we are hearing. Is this another area of the conflicts between micro and macro economics? Does that mean we need a macro intervention of the type of traditional macro economics on trade issues by government, as opposed to free trade?

Economics is complex and increasingly becomes more so, it seems. Education and re-education of economics.


Australia China economic relations and international order

Comments on Peter Drysdale “Weekly editorial – Stern Hu and the Chinese steel industry”, 20/07/2009, http://www.eastasiaforum.org/2009/07/20/weekly-editorial-stern-hu-and-the-chinese-steel-industry/

The recent world financial and economic crisis and the roles different economies have played in dealing with the challenges posed by the crisis suggest that the world is in a verge of a significant reshape of international economic order, or a new framework of economic governance.

Developing economies are increasingly having more economic weight or clout, while the relative weight of industrialised economies are on the decline. The relative shift of economic weight between the two camps and the current international institutions governing international economic affairs in which the past powers dominate the say requires reconciliation and realignment to reflect the changed and changing world reality.

In that broad context, it seems that the Australia China economic relations are a small part of it in a strange and interesting sense, i.e. equality (or inequality) and respect in dealing with each other.

The Stern Hu case has the feature of coincidence in that context, although many commentators and the public have made all sorts of speculations and comments, based on limited information and own systems of thinking. How much are correct and relevant remains to be seen for a long time.

The comments or demands by some politicians in Australia on the case reflect a deep rooted misunderstanding or contempt of another country and its system. That is where inequality and disrespect were shown and could be felt by others.

Of course, information through official channels was also strangely scarce. But it requires good analysis to see whether it was the beginning of a new process, or it was a response in a process.

But it is important for any new international economic order and governance to be fair to all, irrespective the past justice or injustice, equality or inequality, as well as sizes of the economy. It should be a new beginning to reflect universal justice and equality.

The international community needs to work in that direction, with great efforts and speed.


Who is trying to fool others?

Comments on David Burchell “The great gall of China has us fooled”, 20/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25805432-5013479,00.html

Whether the China experts that Burchell talked about have fooled us or not, or whether they have claimed a false moral high ground or not, remain to be seen. However, one thing is certain that Burchell is trying to claim the even higher moral ground.

It is a bravery act, one against many experts. It is commendable on this ground.

One, however, may want to see if David Burchell is trying to claim the moral high ground of the glorious power of past British imperialism. If that is what Burchell tries to do, he may have lost that battle before he even started, since the United Kingdom itself has long given up that status.

Zhao’s book may be useful in understanding some very limited aspects of China at a particular time of Chinese history. There are, however, many valuable Chinese books, especially history. In that context, Zhao’s book is a drop of water in the ocean and it should be understood in that context. Using that book may or may not help Burchell’s cause.

If Burchell wants to claim a moral high ground relating to Chinese issues, it may help if he understands more Chinese books and history and culture.

Stern Hu forgotten by Rudd?

Comments on Glenn Milne “Stern Hu forgotten in Kevin Rudd's hopeless UN quest”, 20/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25805431-33435,00.html

It is understandable that the PM has been seeking higher status for him and for Australia. The idea, though having an element of vanity, is not too bad itself. Most people do, not to mention politicians and government heads, like Rudd.

However, a wish is one thing and whether it is practically realisable or not is another. Hence one needs to be realistic about that kind of quest and make the most appropriate decisions on what to pursue and whether to pursue for a UNSC seat, if one is bound by the normal cost and benefit analysis.

However, there is a significant difference in this case. The costs to bear in such a pursuit are tax payers’ money, while the results may enhance the PM’s personal profile. So why not to pursue it, especially many Australians may feel proud too?

But to the issue that the article’s title suggests, I don’t share that conviction as Milne does. Unfortunately many Australians believe that Rudd has not done enough for Mr Stern Hu, as if it would assist his release from China. That is an interesting and understandable thought, given Rudd’s background and past involvement in China. But, a series of events meant that Rudd has been in a helpless situation in dealing with this specific issue.

In fact, Rudd has probably done too much already, when he warned China that the world is watching the Stern Hu case when he was with former US vice president Mr Gore. That open comments is likely to hinder rather than help the Stern Hu case, because China is unlikely to take that very kindly.

The intervention by the US secretary of commerce was unhelpful either. That intervention is likely to be seen by the Chinese as Australia’s use of the US to pressure China, whether Australia had discussed the issue with the US or not. Unless China can be bullied by Australia or the US, those actions are unlikely to help.

Kevin Rudd did not and has not forgotten Stern Hu. The real question is whether he understands the Chinese enough to take the most appropriate actions that can really help Stern Hu.

That remains to seen and will continue to be a test.

Stern Hu, Chinese steel industry and Sino-Aussie relations

Comments on Peter Yuan Cai “The China ‘spygate’ affair and China’s steel industry chaos”, 19/07/2009, http://www.eastasiaforum.org/2009/07/19/the-china-spygate-affair-and-chinas-steel-industry-chaos/

There has not been much official information from China regarding Mr Stern Hu case that has frustrated many in Australia, including the foreign minister and the prime minister probably. So most if not all people have to speculate on what is happening according to own thinking and draw own conclusion. That is regrettable, to say the least.

On the one hand, it may reflect the complex and different Chinese legal system and the varying interpretations and difficult implementations of that legal system. On the other, it may also be a very complex situation, likely to be much more complex than most people have thought, that China has been in recent time, with potentially very broad implications.

If I were to speculate, I would link this to a wider context, like China’s (and other big developing economies too) demand for a more equal recognition and treatment in world economic affairs, such as IMF voting weights. Further, China also appears to be seeking to broaden international reserve currencies.

Reports have said that China officials say China treats Mr Stern Hu case as a business case and state that it will not affect China Australia relations. That may be the official line spoken in the open, just like the Australian Prime Minister and Treasurer said openly after the collapse of the Chinalco Rio deal that it was a business case and Australia welcomes Chinese investments in Australia.

Are there any unofficial lines that have not been spoken openly here in both countries? Or are there any different interpretations of what have happened, or at least misunderstanding of what have happened in both cases? What are happening below the table? Were they kicking each other?

In the case of the international iron ore market, China is the largest iron buyer, but it has not been treated as such, with the help of people who understand “how to deal with the Chinese”, such as using the tactics of “divide and conquer”. As some commentators have said, it may be difficult to be sure whether one has crossed the line between what is legal or illegal in pursuing business dealings that often can involve gifts and bribery and possibly more.

In terms of the Chinese steel industry, the “wars” between large steel firms and small ones can occur from time to time. When the economy is booming and demand for steel is strong with supply shortage, many small steel and mining firms spring up like new green shorts, and presumably making some profit from high steel and iron ore prices. But when the economy slows and demand for steel exceeds supply, the industry body and the government would like to close some small firms they say are inefficient in energy and intermediate inputs consumption and produce low quality products and damage the environment.

There are people who profit from the market conditions and make a lot of money. Many people here would say, why not, it is entrepreneurship, right? However, it is a situation in China where and when corruptions can occur and law and regulations can be breached.

It is a complex issue. In a reform era and constantly changing environment, what is appropriate and inappropriate today may be different tomorrow. Otherwise how can reforms be undertaken?

Most people involved may be lucky enough not being caught. But from time to time some of those people are caught by a crack-down by the authorities.

It cannot be said that China’s legal system is perfect. So such a system exists. One has to live with that system if you deal with China, although people may ask that China improves its legal system.

It is not unusual that corruptions and briberies may happen in China. In fact, it is more prevalent than in Australia. Some involves very high level officials.

Many Australians assume that Mr Stern Hu have not involved in appropriate business dealings in China. That is a still open case. Australian politicians have tried to use political pressures on China.

Maybe that is what China like to see them to do and also to show them it is not working.

As Paul Kelly’s article in The Australian on Saturday says it is a tussle that we cannot win and China may want to dictate the relationship.

We Australians need to treat the Chinese fairly and equally. We cannot continue to assume that they can be treated as second class people internationally and they will accept that. We cannot assume that we are better than playing games than the Chinese are.

I have said before that it is hard to know which side will win if strategic gaming is played out between the two governments.


Arguments of a yesterday man

Comments on Kim Sung-han “Keeping the KORUS FTA alive”, 17/07/2009, http://www.eastasiaforum.org/2009/07/17/keeping-the-korus-fta-alive/comment-page-1/

It appears there are some inconsistency and contradictions in the arguments in the article as a whole. Further, it seems also suffers some logic problems.

The author says in the second paragraph that: “trans-Pacific economic interdependence has been the backbone of prosperity for the last few decades and will constitute the single most important factor determining the region’s economic order in this century.” Many people would say that the 21st century belongs to Asian century. The latter has been underpinned by the dramatic development of China and India, both of which are very large nations with over a billion people and a rapidly growing economy.

At a time of the great recession when many most advanced economies are in serious trouble that would accelerate the international transfer or transformation of economic weights geographically, most people would feel puzzled or maybe perplexed by the claim that trans-Pacific economic interdependence will constitute the single most important factor determining the region’s economic order in this century. Isn’t this 21st century? Aren’t we live in the 21st century now? Are we dreaming in the last century? Or, maybe the author would suggest that people should say the 21st Asian century is lead by the US, because otherwise the trans-Pacific interdependence can’t be THE SINGLE MOST IMPORTANT FACTOR determining the region’s economic order in this century. Or can it, one begs?

The confusion between bilateral and regional issues is not so subtle or unclear in the third paragraph. The KORUS FTA is bilateral one, while both ‘East Asian regionalism’ and ‘Asia-Pacific regionalism’ are regional. They can all exist without denying each other. So can WTO exist, a world wide. They can overlap to some degree, just as bilateral ones with WTO. One wonders why South Korea should be trouble in choosing which one, because it can choose to participate in all three of them. Is that a difficult decision to make for anyone?

Yes the author emphasises the point of the KORUS FTA for wider regional importance. One can’t help getting a sense of the past era of cold war rhetoric. Maybe that is the author’s key message. However, even president Obama has criticised others for cold war era thinking. So the author has an impossible mission and seemingly insurmountable task in convincing the key player, that is, the president himself.

Let’s keep eyes wide open and see if he can achieve the “mission impossible” in the 21st and Asian century. And wish him good luck!


Whatever they are from, no nuclear weapons should be in Japan

Comments on Tobias Harris “Who’s afraid of the conservatives in Japan?” 15/07/2009, http://www.eastasiaforum.org/2009/07/15/whos-afraid-of-the-conservatives-in-japan/

While North Korea's nuclear program poses a threat to every country in the East Asia region, why does it improve Japan's security by having US nuclear weapons in Japan, given that Japan has been under the US nuclear umbrella?

It should be noted that the 1960 secret agreement was made during the cold war era, obviously. It reminds people of the Cuba missiles crisis in 1962, not too long after 1960. If it were not a secret agreement, the Cuba missiles crisis may have had been different.

How did the US take the missiles in Cuba then? Why didn't it allow them to stay there? What are the implications of having US nuclear weapons in Japan for other countries in the region? How China and Russia will react, given that the way the US reacted to the Cuba missiles? Will it be a stabilising or destabilising to the regional security?

While it is important to prevent nuclear proliferation, to have US nuclear weapons in Japan would hardly contribute to that cause.

It would be a much more serious regional security issue than just that of a reaction to the North Korea’s nuclear program and would have much wider implications. If that happens, it would have the potential to shift the focus away from North Korea to a whole new issue.

Achieving permanent peace in the Korea peninsular

Comments on Hitoshi Tanaka “The North Korea nuclear crisis: Five guiding principles”, 14/07/2009, http://www.eastasiaforum.org/2009/07/14/the-north-korea-nuclear-crisis-five-guiding-principles/

The essence of Tanaka’s five guiding principles seems good. They need to be applied very carefully, though. For example, while Tanaka says that “the joint statement released during the recent summit in Washington between President Obama and South Korean President Lee Myung-bak is a fine example of what is necessary” for the first principle, that is, North Korea must never be recognized as a nuclear state. However, some people say that the North sees the part on Korea unification with hostility, because it implies the vanish of the North with the style of German unification.

Secondly, it is important to have a clear consensus among all parties on how to achieve “the establishment of a permanent peace regime on the Korean Peninsula,” under the fourth principle of “a comprehensive, negotiated settlement is the only practical way forward”. What would be such a peace regime? How would peace in the peninsular be safeguarded? Would US troops still remain in the South?

Thirdly, would the fifth principle, “the Six-Party process must continue with informal negotiations before the talks resume”, be workable and potential bilateral talks not undermine the six party approach and be used by the North to play the other members against each other? The party members need to make sure the two processes are consistent with each other.

Understand North Korea?

Comments on Andrei Lankov “Pyongyang strikes back”, 15/07/2009, http://www.eastasiaforum.org/2009/07/15/pyongyang-strikes-back/

While the arguments in this article are seemingly logic, I wonder whether there could be other explanations or reasons behind the North Korea's changing behaviour in the recent past.

It appears that there are still some unanswered questions.

I had thought it was the fault of the North's political leaderships that caused all this, but then I encountered the comments by Richard Broinowski that shed some different light, suggesting that some other parties also contributed to that (see http://www.eastasiaforum.org/2009/07/05/obamas-north-korea-policy-and-the-june-15-south-north-joint-declaration/#comments).

The fear of the potential destabilisation of a rich South on the North sounds attractive. But didn’t the leadership think about that during the relatively relaxed period in the first place?

Further, how the North leaderships think strategically about the future of the North? Do they really think they can hide the different realities between the two Koreas forever?

Japan's insecurity and its relations with China

Comments on the comments by Aurelia George Mulgan on “Australia, and managing Japan’s insecurity”, 13/07/2009, http://www.eastasiaforum.org/2009/07/13/australia-and-managing-japans-insecurity/

Obviously, there have been some untrust between China and Japan, from time to time.

I understand that Japan provided aid to China, although I don't know how much over the years.

I also don't know the normal international practices regarding war compensations, although I understand that China did not ask for war compensations from Japan. I also know that many Chinese are or were unhappy with that.

While Japan may feel that China is ungrateful to its aid, there have been impressions among many Chinese that Japan was half-hearted in providing assistance to China and did not like to see China to develop or become strong and rich, although it wanted to benefit from some opportunities. Was that because of its insecurity?

In terms of security, it is understandable that China did/does not like to be contained internationally, with Japan as part of the containment and as the deputy of a superpower in doing it.

So both sides may have their own stories and reasons to feel unhappy.

But past is past and few can change the history. What is important is today and tomorrow. Both sides need to look to the future relations.

Countries should respect with each other, no matter rich or poor, large or small, strong or weak. The relations between China and Japan should be based on mutual respect and trust.

There have been periods when the relations between the two countries were good. Both should reflect on how they can have long-last good relations.

China needs to remain a peaceful nation forever and an important international force for peace and stability of the region and the world, even when it becomes very strong in the future.

Japan needs to realise that sooner or later China will become a very powerful country and few individual countries will be able to match its power, even probably the US.

So the important issue is not to try to use the US to contain China, rather it is important to establish a peaceful, secure and stable international order where countries don't threat each other with force, as it has been so often in the past.

UN and some other regional forums as opposed to military alliance should be promoted as the mechanism to resolve any issues between countries. Will the alliance, even with the current most powerful country be always effective into the future?

So what is important for security? Every country needs to have a rational, strategic and realistic view.

I hope both China and Japan will choose the correct one and always have a good relation. They are two most important countries in the region. It is in the interest of each country.


Is Australia any better internationally?

Comments on Matthew Stevens “Grumpy dragon rears its head”, 14/07/2009, http://www.theaustralian.news.com.au/story/0,25197,25778651-5013894,00.html

The US has been a model of democracy and freedom in West countries. What happened under the US system?

The US, against the opinions of the international community represented by the UN, initiated and led the pre-emptive invasion of Iraq with the pretence of WMD which has been proven to be false, if not fabricated by the West. The US locked up hundreds people, the so called terrorist suspects, in the Guantanamo Bay prison camp for a long period without charges against many of them and some are still be detained there now. The US has used tortures in the last few years. Do those accord with acceptable international rules?

Australia has been proud of its alliance with the US and has been a member of the coalition of the willing in invading Iraq. So who are responsible for the so many lives of the innocent Iraqis who were killed by the invasion forces including Australian troops? And those who have been killed in US subsquent air strikes? Were those an acceptable international rule?

Aren’t we hypocritical in accusing or intimidating the Chinese when at this stage they are using their law? China has prosecuted many of its own citizens using the same law for bribery. Why should it be treated differently if an Australian businessman breaches that law inside China?

Let’s not be hypocritical. Let’s not be advocating Australians should be above the Chinese law. Let’s respect others, if we want to be respected by them.