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Funding hukou reforms associated with real urbanisation in China

Comments on Cai Fang and Wang Meiyan, Chinese Academy of Social Sciences, and Guo Zhenwei, National Research Institute for Health and Family Planning of China: "A new model of urbanism will help China boost growth", 6/09/2016

It is understandable that a more free and mobile population from both regional and sectorial perspectives will be conducive to national economic growth.

It seems that local governments may also have a more immediate difficulty than purely demand side driven growth in granting guest workers the local resident status, that is, the expenditure needs associated with providing equal public services to them and their families, e.g. kids school education, or social security.

As a result, it should be a top priority for innovative ways to enable local governments the capacities to meet those service needs related to hukou reforms to grant local residence status. Different local government may have different levels of needs, so the central government may need to provide some funding to local governments.

Unless local governments have the financial capacities to fund the services that are required of them by those migrant workers, it would be very difficulty for them to carry out the required reforms to the hukou system to accept the migrant workers as local residents.

White may suffer from illusions on NFU

Comments on Hugh White "A second strike on nuclear ‘no first use’", 6/09/2016

It seems that Professor White may have developed his argument based on possibly incorrect premises.

One is the concept of illusion by US allies. Are those countries really that low intelligence?
The second is the logic that some of the US allies will develop nuclear weapons should the US do a no first use (NFU).
I would question the soundness of both.
A nuclear weapon free world is a much higher goal for all human beings than the possible use of such weapons by a hegemonic sole superpower!


Briexit may not necessarily be as bad as many people think!

Comments on Editors, East Asia Forum "Can Asia shield the world against Europe’s Brexit woes?" 28/06/2016

While there is no question that the Brexit has and will continue to be a source of uncertainty, particularly for financial market, the scenarios presented in this post may appear to be too and overly pessimistic.

While the EU integration in general has been a good thing, the economic woos in some Euro zone economies in the wake of the GFC undoubtedly suggest there is a need for an exit mechanism for a member of an integrated regional organisation, such as the Euro zone or, for that matter EU. Such a mechanism, with good wills and intentions of all involved, would allow the exit of a member with either some difficulties or political determinations.

Such a mechanism should be friendly, as opposed to punitive.

Greece, with its painful economic, political and social problems, would have benefited if a helpful exit mechanism allowed it to use a national currency as an adjustment tool, as opposed to cuts to nominal wages, social securities and pensions.

Married couples may divorce and most countries have laws allow that to happen. Then why not allow a member of an integrated organisation to exit?

We should not just think in only one direction, that is, to integrate with no exist possibility and mechanism. That way of think is problematic itself. And that is one of the key sources of uncertainty in the wake of the Brexit vote outcome.

It is unhelpful and unproductive to blame or complain the Brexit.

I believe that Britain and the EU will negotiate creatively with mutual benefits for a successful Britain exit. They should and will create a workable framework to facilitate the Britain exit.


Changes in the terms of trade should be reflected in GDP measure

Comments on Peter Martin "Election 2016: GDP growth nowhere near as good as it seems, but it'll do for the prime minister", 1/06/2016

It seems there is a need to incorporate the very different effects on the living standard of changes in the terms of trade in the GDP measure. This is because that changes in the terms of trade is quite qualitatively different from changes in domestic relative prices irrespective they are inflationary or deflationary.

While changes in prices generally have the effects of transfering wealth from one group to another, the effects have quite different impacts if they occur through changes in the terms of trade.

Changes in prices purely domestically, the transfer of wealth is within a country and therefore they total wealth of the nation has not changed.

When changes in the terms of trade, the transfer, however, is between two different nations. As a result, the nation's wealth will increase if the terms of trade increases and it will decrease with the deterioration in the nation's terms of of trade.

To conclude, there should be some measure to distinguish these two kind of changes in relative prices to capture the changes in the terms of trade on a nation's living standard for any given real GSP growth as currently measured.

Australian dollar, industry policy and economic transition

Comments on Shiro Armstrong "Asian integration a key part of Australia’s economic transition", 29/05/2016

The author argues that “As the dollar strengthened and productive resources shifted to the mining sector, manufacturing became less competitive and many industries suffered or shut down.”

That can only be partly true, as the falling Australian dollar in recent two years will not in any way to stop the closure of the only remaining car manufacturing plants in Australia.
As a result, there are more important factors than the fluctuating Aussie dollar in determining manufacturing in Australia.
The issues with the future submarines to be manufactured by the France, possibly with some part of that making process in Australia, may not necessarily represent a good policy, if Australia can not maintain a car manufacturing plant while attempts to be part of manufacturing and maintaining submarines. It may be actually a loss if Australia does not have that comparative advantages in doing the submarines, if the standard trade theories are to be believed!
It could be an example of poor industry policy at the taxpayers expense.

Australia do need to find its comparative advantages!

China still searching for an effective governance system

Comments on Neil Thomas "The Cultural Revolution will not be revived", 1/06/2016

The statement by the author that “‘What the Cultural Revolution did was to teach the Party not to trust its own people’”, does not seem to be a correct characterisation of the Party’s official line. The party’s official line on the key lessons from the Cultural Revolution has been to prevent excessive personal power and authoritarian at the expense of collective leadership style, at all levels, particularly at the very top level of party leadership. It was Mao’s huge popularity with the people and with people’s trust through the revolutionary struggle against Guomingdang regime led by Jiang Jieshi and the establishment of the PRC that made it possible for Mao to launch the Cultural Revolution in the mid 1960s.

However, personal power has the power of addiction, not just in China but also in the west (e.g. JH’s stay as the prime minister until he lost his seat and the changes to prime ministership in the past few years in Australia, as good examples), even though the Communism system has made it much easier to occur. The person, whoever is on the top, would like to continue that power.

Having said that, China has developed and established a system of power transition at the party’s very top, as the past three transitions indicate. It will still be a long way to go for China to have a complete system where power transition is not just a matter for the elites but the people to have a true and more effective democratic voice in deciding who will be the leader or in the leadership team.

No system is perfect and that is why we have see the Trump factor in the USA now and surprises many people have and have expressed worldwide.

The above mentioned changes in the prime ministership in Australia, in conjunction with the difficulties for the government to carry out much needed reforms to further raise living standard and improve equality, also reflect some shortcomings in the west system.

China is still searching for an effective and stable system of governance. How long it will take to have it is a question of interests by many.


China's SOEs should be seen in factual light

Comments on Paul Hubbard "China’s global economic impact is no longer state-owned", 5/05/2016

Thank you Paul Hubbard for a fact based, balanced and well argued article in this particular field.

The point on China’s SOEs’ overseas investment reflected in the following statements are excellent:

“Foreign engagement with SOEs provides an opportunity for Chinese state business to experience and be subject to the discipline of competitive markets, without special privileges, in well-regulated economies.

“Foreign investment into China helped align China’s nascent private sector with the rules of the global trading system. Likewise, Chinese state investment overseas can be a channel to take back to China international standards for transparency, corporate governance and market behaviour.”

I highly appreciate and commend this article.

PS: More importantly, the point on the fact that SOEs exist in virtually all countries including advanced western economies. The differences are a matter of degree not a matter of having or not.

Understandably, there have been a privatisation process in many countries, particularly in advanced western economies. In Australia, for example, a number of big former SOEs have been privatised, such as the Commonwealth Bank of Australia, Qantas, Telstra (formerly Telcom).

Notwithstanding the privatisation process, there are still SOEs in western economies.

In Australia, for example, you still have SOEs including Australia Post, Medibank Private and Defence Housing at the national level, some electricity and water enterprises owned by the State and Territory government at the state level. The Snowy Mountain hydro electricity is jointly owned by the federal and some state governments. Some ports, rails and buses in Australia are government owned entities.

Poor understanding on China’s e-commerce rules

Comments on Ryan Manuel "Why China’s e-commerce rules have exporters in a flurry", 4/05/2016

They, exporters to China. should not be worried, because the new rules, as you described, just aims at close loopholes, so importers, particularly consumers are treated the same whether the purchases are from special zones or not, as long as China imposes duties on those imports.

I don’t see any reasons for concerns. It is no worse and arguably better than the fact that Australia is imposing GST on online imports, because GST is a sales tax and the sales didn’t happen in Australia.

There is no need to exaggerate on what China does and to paint it to something it is not.

The title of this post, understandably, reflects a poor interpretation of the China’s e-commerce rules at its best, and is more likely at its worst to show the potentially China bashing sentiments in some circles in the West. It is regrettable at least.

I am surprised it is from the Australian Centre on China in the World, The Australian National University. It may reflect very poorly on the poor understanding of the author on China.

RCEP conducive to Asia’s next growth frontier

Comments on Peter Drysdale "Asia’s next growth frontier", 5/05/2016

The current participants of the RCEP, particularly those excluded by the TPP, should have some sense of urgency to accelerate the negotiation processes, so they are not too disadvantaged by their exclusion by the TPP.

I would suggest that they should aim at conclusion as early as possible and have provisions that whichever member countries ratified it, they could apply to those countries, so to avoid unnecessary delays in the ratification processes, in case some countries encounter difficulties of some sort.

Given the fact some of the RCEP members are also TPP members, all members must be aiming at helping the conclusion of RCEP and avoid any drag for other purposes.

And by achieving a non-regional exclusive and growth enhancing RCEP as early as possible, it will be not only for the region and members but also for the whole world.

In the context of maintaining continued and rapid regional economic growth, I appreciate the title of this post.


Such superiority does not necessarily mean everything

Comments on the comments by YOSHIMICHI MORIYAMA26TH APRIL, 2016, 11:10 PM, on
Hugh White "Need to face the facts in Asia", 18 April 2016

You have sated the following: “America will keep its military superiortity over China for an idefinite time, and it seems that it can deter China in the South China Sea.”
So what?

With all the respect, the US and its allies were equally, if not more superior during the Korea War as compared to China. The fact is that China didn’t lose that war and that America together with its allies didn’t win that war either.

And further (on his/her second comments), with all the possible respect to you, I have to say that your central interpretation of “中華人民共和国” is incorrect.

Voters even in the West may not have many choices

Comments on Nathan Attrill "China’s leadership model goes back to the future", 22/04/2016

Just as voters in any countries may choose different parties if they have the freedom to choose, the Chinese people may change their views about their political leaders, both past and present.

For example, when people see continually increasing inequality even in the context of huge economic growth, as well as rampant corruption over the past 20 years or so, many and possibly the majority may have fond memories of the Mao era when there was little corruption and people were virtually equal in income even though everyone was poor, equally poor.

The Chinese also would like to have more freedom, that is for sure. Equally, they are likely to prefer a strong, and just, government.

People outside China need to understand the whole of Chinese people, their way of lives and their way of thinking. There is no point to lecturing them in our own way.

Commenting on the comments

by RICHARD22ND APRIL, 2016, 7:33 AM

The two upheavals you said were facts and there is no question about it. The first one, the so called Great Leap Forward, however, was not the fault only of Mao even though he should have the greatest responsibility to it. It was the collective work of the then whole leadership including Deng Xiaoping and Liu Shaoqi, with Mao as the top leader. Most people in the leadership were carried away by the huge success of its first 5-years plan and thought, wrongly though, they could accelerate the development in China.

There was an interesting contrast between China and Japan while the latter had two decades of double income plans for every decade at that similar time. One adopted the correct method, while the other went astray. It took a few years to recover from that disaster, before the second, equally if not more disastrous, Cultural Revolution.

I agree with GODFREE ROBERTS that China had seen great changes due the Mao era, even though they were disrupted severely by the two mentioned disasters.

"Dark period" is a over exaggeration

Comments on Editors, East Asia Forum "The limits to Chinese political power"

While many may have concerns regarding China’s direction in many fronts but particularly in its political direction, the use of the words “dark period” by Minzner to describe the current development and situation in the Chinese political system and governance is a bit unfortunate.

Yes President Xi has centralised certain controls, but that may be a over correction to the previous ineffective central leadership. I am not particularly knowledgeable of the central governance in China under President Hu, but there is saying that, in Chinese, “政令不出中南海“ (in English, it roughly means government commands does not go outside the Zhongnanhai, the Chinese Communist government’s Headquarters location) that may bear some truth of that ineffectiveness.

Whether it is collective leadership, or otherwise, that kind of ineffectiveness, if true, can be problematic for any country.

My best hope would be that the current development represents what in Chinese “矫枉过正”, that is, an overcorrection.

Good answer to"Japan and Australia ramp up defence engagement in the South China Sea"

Comments on Tomohiko Satake "Japan and Australia ramp up defence engagement in the South China Sea", 28/04/2016

The award of building the 12 submarines for Australia to the French provides the best answer to this post.

I happened to met some people who were doing some jobs for the Australian government and they jokingly put it: "we are back to the Second World War when we were allied with France and fighting against Japan and Germany".

Afterall, history may repeat itself in a crude and unrelenting way! It is ironic, isn't it?

That perhaps summarises the insanity of the former Prime Minister Tony Abbott's earlier failed approach to the big project. Some have said that that was one of the issues that Abbott was seen as unsound and prong to funny and poor judgement.

Were Mr Abbott got his own funny way, Australia would lose out greatly. Some may say that Australia's interest would be sold out.


生         走
冯林通 李跃 冯晓博

No need to do make-ups for the ugly intention behind the TPP

Comments on Patrick Mendis and Dániel Balázs "When the TPP and One Belt, One Road meet", 28/04/2106

While it may be the hopes and more like wishes of the authors of this post, one has to face the reality that President Obama’s clear statement on his purposes of TTP in terms of the relationship between the US and China. His TPP is to deliberately exclude China and make it extremely difficult for China to join. The TPP is not aimed at promote the benefits of trade and to promote regional growth and prosperity.

On the other hand, the One Belt One Road initiative by China is to strengthen economic growth for the whole region at least covered by that initiative and does not purposefully exclude any countries if they wish to join.

There is a strong and unambiguously contrast between the two, reflecting a declining and difficult power versus a rising, friendly and hopeful and helpful power.

There is no point to ‘make up’ things to make an ugly thing falsely appearing looking good and to wishfully think in almost the manner of the ’emperor’s new cloth’. One should be able to see and say what it is or what they are.

The authors should expose the ugly truth of the TPP, or more precisely, some of the ugly intention behind it, as it is.


US increasingly waning capacity to be the world policeman

Comments on James Curran "Trouble at sea for the US and its Asian allies", 20/04/2016

This post appears to suggest that the US confrontational style approach in the context of maintaining US supremacy is justified. Ironically, the US has a choice to make and it is interesting to know that not every American shares the author’s view.

While many people both outside and inside the US may find that the Trump phenomenon puzzling and frightening, the very phenomenon certainly reflects some uncomforting reality.

One has to consider whether the US will continue to have the capacity to be the world policeman, irrespective whether the policeman has done a good job or not.

Another question is whether it is in the US interest to attempt to continue the role of world policeman. It is not costless to the US. At some point it may find that it will no longer be able to afford it.


悼友妻圆圆 (In memory of Yuan-Yuan)

出国赴澳多英豪, 均千圆圆为世交。
均妻不幸离世早, 妻去悉尼问谁好?
天杰地灵人最高, 生死离合谁可逃?
瞬间万变千秋事, 地动天移逝英豪。


Time for wisdom, judgement and courage now for the PM

Comments on Michelle Grattan "It’s certain – Australians off to the polls on July 2 for double dissolution", 18/04/2016

It now will be a test of Turnbull’s wisdom, judgement and courage, possibly in the two opposite ways, that is, to call or not to call a double dissolution election.

Yes, he has threatened to have a double dissolution election and now has got the trigger. But that does not mean a double dissolution is in his and the government’s favour of winning the election if it goes for such one.I

f he really cares about winning the election, wisdom in conjunction with the most recent polls may suggest that the best action to take may not be a double dissolution election and that requires courage to reverse his earlier threat for having one.

Will he do it or not, that will be the question now until he announces one way or the other.

in that respect, it may not be that certain at all, but we will see what happens from now on.

Importance of justice and the foundation of justice

Comments on Editors, East Asia Forum "Australia’s fraught decision on submarines", 18/04/2016

This editorial is well balanced.

The following point from Tatsumi's post this week was quoted: ‘the bid for SEA1000 is important for Japan in the overall context of deepening security ties with Australia’. Japan’s ‘2013 National Security Strategy identified Australia as an important security partner not only as a fellow US ally, but also as a regional partner that shares Japan’s key strategic interest in upholding an international order based on the fundamental norms that have underpinned the post-WWII world. Such norms include the rule of law, freedom of navigation and the non-use of coercive measures to assert diplomatic positions’.

The norms mentioned there are based on the so called post-WWII world international order, as Tatsumi stated. Some of the foundations were unjust, because some territories which had belonged to different countries were given by the Americans to its allies including Japan, particularly as the world gradually became divided into the American led and the Soviet led two opposing camps, with some in between. Certainly some Chinese have held the view that some of its former territories were dealt with in such deals between the Americans and some of its allies or its controlled subordinating countries.

If the foundation of the current international order is unjust, then is the argument to maintain this order just or justified?

We can write another story in which someone has stole other peoples' properties then after that that person argues for the rule of law and the protection of existing property rights, a seemingly quite 'just' prevailing order. We also have some accomplices has a strong force and police the existing order!

New emperor's new cloths re security order in Asia

Comments on H. D. P. Envall from ANU "Strategy under the surface of the Australia–Japan sub deal", 18/04/2016

I sense the undertone of this post is to strengthen the so called 'trilateral alliance' of the US, Australia and Japan to encircle or tackle China.

The author may benefit from reading the following by a respected Australian journalist or media commentator, Michael Pascoe: "Australia shouldn't pay price for 'pivot', available on the Canberra Times website, April 18 2016 - 12:50PM, http://www.canberratimes.com.au/business/world-business/australia-shouldnt-pay-price-for-pivot-20160418-go8rat.html.

It presents facts as opposed to the often argued and hyped what is 'right' under existing security order in Asia.

Those hypocrites have been exposed as another version of Emperor's new cloths story.

Michael Pascoe's article should be republished on the Eastasiaforum, as a well respected and independent Australian journalist and current affairs commentator.

The Eastasiaforum has, regretablly and unfortunately, published many distorting articles, not based on facts but reflecting biased views serving the purposes of some circles.

It is unclear whether the editors have thoughtfully and dutifully sought factual based responses to those articles.

Important for ministers to work smart than hard

Comments on Michael Koziol "Election 2016: How Michaelia Cash became the new Eddie Everywhere of Australian politics", 18/04/2016

While that phrase is not wrong and admirable for many, it should also be combined with work smart and work smarter. However, this is also a case similar to the political correctness, most people probably have a feeling that it would not be correct to say otherwise, just as the minister has done.

For a federal politician and government minister, she has got a lot of resources to work for her and that is for sure. What that means is she needs to stand on top of those resources and make sure they are well used to assist her in making the right decisions.

She does not need to, and does not have to, work her butt off. The main thing is her judgement and the ability/capacity to make informed decisions. Some political operability would help in getting things done and achieve.

Early election will be a loser for the government

Comments on Peter Hartcher "Fairfax-Ipsos Poll: Malcolm Turnbull a cautious PM, and voters are punishing him for it", 18/04/2016

I suspect that the best action for the Mr Turnbull the PM from now on would be defer the early election push, so to give the himself and the government a bit more time to reverse the decline in its popularity and to return to a more certain winning position late this year.

I would certainly advise the PM to go down this road and to have some thing done to impress the public and the voters. The following would contribute to that:

1. Have the budget well prepared and done to be an excellent budget for the election year, not only in terms of election sweetening, but also containing some election winning measures or policies.

2. Do something to win the public over for the next six months, including things like a tax reform package or at least one or some important and memorable item

3. Have a meaningful and achievable reform item to the federation

4. Make some inroad into the development of Northern Australia

5. Identify weaknesses of the opposition and nail down on them, to make the opposition on the run

If the above can be done successfully, the election will be unlosable and will be in the bag. It will be a revival of the PM's satisfactory rating once he would have shown real actions.

On the other hand, it would be extremely uncertain to win the election on early July and the most likely outcome is a hung parliament that would be damaging not only to the current government but also the nation.

So there is so much at stake and I hope the PM will be wise enough to have the election late this year as opposed to an election in July.

Having said that, I am politically neutral to the two main political parties.


Commenting on 'What might a new Asian order look like?'

Comments on Robert A. Manning and Jim Przystup "What might a new Asian order look like?" 12/04/2016

This article is really lacking of imagination, to say the least, because its real aim was probably to maintain the continued dominance of the US which they seem to have a strong interest.

The rise of the US following Britain may serve as a path if the US and the authors will try to do what the British did when it faced challenges from the US.

Could Britain in any way to stop the rise of the US and the change in the world order, given the economic power of the latter and its strengths in military or the ability to transform part of its economic power into military power if and when it was needed?

Could there have been an alternative and better trajectory than what was then? Could Britain have possibly been able to contain the USA forever?

Further, did all the former masters of former colonies adopted the best and fair strategies when their former colonies began to ask for independence? Were they really all caring the interests of those colonies instead of leaving some tricky and divisive legacies behind?

Would that have always been justified to maintain the status quo at those times?

One may like the certainty of the present time, but future will definitely be different from the present, although sometimes it is harder to predict what it will be exactly.

The following is the second part of my comments on the article:

The authors seem to think Asian people cannot come up with an Asian order that benefit all Asians. If that is true, they run the serious risk of being significantly estimating the intelligence and creativity of Asians.

What might a new Asian order look like?

Firstly, a simplest answer would be if the Americans are wise enough to not interfere with Asian affairs, that would be a big part of a new Asian order. Asians can live well by themselves without their interference. The US can do a rebalance back to its own country in America!

Secondly, a new Asian order would be that where all Asian countries are proud members of their regional organisation and being respected not by each other themselves but by other interregional plays, big and small.

Thirdly, a new Asian order would be where the Chinese, the Indians, the Japanese, the Koreans, the Russians, and ASEAN people and all other Asian people are masters of Asia and work together toward the rise of Asia, beyond the rise of of any single or small group of countries in Asia.

Fourthly, the Americans, the Europeans are no longer able to arrogantly regard themselves as the first and second world and treat Asians as the third world people. They will not be able to monopoly that status for themselves.

The above are elements of a new Asian order and of an Asian dream.

It would be a proud Asian dream similar to but more than what King's dream was, because Asians have shown some of that already.

Yes, there are some Asians who like to beg their uncle Sam because it is now still the superpower but they don't have true Asian characters.


Ideas on the "ideas to fix Australian taxes"

Comments on Miranda Stewart "Ideas for Australia: Five ideas to help fix Australia’s tax system", 11/04/2016

While many points in the post are probably valid and good, some points are debatable.Firstly, in terms of income tax, why not consider a flat or much flatter tax structure to simplify the current income tax?

This is particularly in the context where the author also argued for broadening the GST base to cover everything and to increase the rate to 12.5%. To do that with the GST is not too different to have a flat income tax.Secondly, company income tax rate, there should be a debate what is best in terms of the tax rate.

I personally have significant doubt on the often argued benefits of lowering company tax rate, notwithstanding the capital mobility argument.The argument on tax on superannuation contribution is highly questionable and dubious, particularly in terms of using individual’s marginal tax rate.

The argument on negative gearing is also questionable. So much for now and may comment further down the track.

For the universal paid parental leave of 6 months and universal childcare for those who working, what would be the pay rate for the mothers or fathers for that matter, and what level of assistance for universal childcare from the government using taxpayers' money? The rates are the key and without appropriate rates such talks are pointless.

Further, the equal share in both personal income tax and the GST between the federal and state governments may give too much revenue to the states. And yes, any increase from the current federal revenue to the states should definitely contingent on the states to abolish some the most inefficient taxes.

The states have not delivered the promise or requirement as specified in the inter-governmental agreement for the GST. As a result, the public is justified to be suspicious of promise to abolish taxes without actions undertaken.

The relative shares of income tax and the GST should be based on some objective measures in terms of services and other obligations of each levels of government and should not left to the politicians alone. There should be an independent body to decide that, or to have referendums to decide.

Income tax should be indexed to the total income level, so the the ratio of total tax revenue to the income is virtually fixed. Again, if there is a need to increase tax, let referendum, that is, the voters to decide.

PS: in reply to comments on the first part of my comments by Robert:
"Lincoln, I don’t know about you, but for the last 50 years my taxation has been calculated by a computer, and automatically deducted and passed on to the ATO - again by a computer.
I have never once been fussed by a regressive or progressive tax calculation. Computers can handle any of them. The real issue is whether you think taxes should be paid by those who can afford them, or by those who cannot.
As to the GST, yes, it is a flat tax applied to pretty much whatever you chose to spend your after-tax income - unless you are rich, of course, in which case the tax you pay is pretty much voluntary.
You need to be more specific in your comments.

Robert, please see more comments from me below that may clear some of your questions. Progressive taxes are more than for high income earners to pay more taxes, they are paying proportionately more from their income. A flat tax means the more one earns the more tax they would pay.


Chinese dream's broad implications

Comments on Shaheli Das "The awakening of Xi’s Chinese Dream", 7/04/2016

To me, the China or Chinese dream, as advocated by President Xi, is largely domestic oriented as opposed to be used as a key principle in its external diplomatic relations. It is a way to unify and inspire the Chinese people, with a key focus on the mainland people, but also those Chinese in other Chinese regions, such as Hong Kong, Macao and Taiwan. It is mainly a domestic narrative, connecting to the past both long (the ancient glories when China was estimated to be among the world best) and short (the past decades particularly the reform era) with the aspiring future (a projected reaching to high income countries). One may interpret it as a way to justify the communist rule under the Chinese Communism Party.

The so called socialism with Chinese characters could be interpreted in a number of different ways, as China has undergone so many reforms and changes yet at each stage it has always been said to be socialism with Chinese characteristics.

Yes, given that the Communist party has always been in power, one of the most common interpretations is under communism rule, although one needs to bear in mind those reforms and changes in China and the huge differences between China now and China nearly a few decades ago.

My interpretation of the Chinese dream is, similar to the author's, that it has both individual and collective two dimensions as opposed to the largely individualistic approach embedded in the American dream. This has something to do not only with the current Communist rule, but also rooted to a degree in its history of Confucius tradition where the State was given a very important role as compared to individualism.

Does that mean communist rule forever? No one knows for sure, because it is difficult to predict what the socialism with Chinese characteristics will be in 20 to 30 years in the future, similar to the situations back 35 years ago!


Why China should not join the INF Treaty

Comments on Petr Suchy and Bradley A. Thayer "Why China should join the INF Treaty", 6/04/2016

The proposal in this post is unworkable at best. That treaty seemed to be the product of either the cold war or the two then super powers.

Firstly, the two treat members had and still have vast numbers of superior nuclear arsenals than China.

Secondly, now there are so many countries beside the two existing treaty members that have the capability to produce or possess the weapons banned by the treaty and China is only one of them. It would be futile to just ask China to join the treaty when it is much inferior in its nuclear weapons and other similar countries are not asked to do the same.

Thirdly, China faces constant security threats, as demonstrated by the flights and sail for the so called freedom of navigations by the US and other US allies.

Fourthly, should China join the treaty and destroy its such missiles, it would have no effective defence of itself in the context of so many aircraft carries that pose significant threats to its security if not to its very existence.

What a joke of such a proposal is, given the uneven military powers in both nuclear and conventional weapons between China and the two super powers!

I don’t think China will go for such vanity as described in this post at the expense of its own security, because the threats are real.

Farcical headlines and discussions about federal student loan debts

Comments on Timothy Higgins et al "Higher education policies could result in big increase to federal debt: experts respond", 6/04/2016

The headlines in the presses and news reports are all about the 500% increase in the so called costs to the government, such as this statement in this post: "the annual cost of HELP loans to the government will rise more than six-fold over the next decade, to $11.1 billion in 2025-26", but few have talked about the side of the savings associated with those deregulation policies and the increase in the interest rates for indexation of the students' debts.

For example, the effects of increase in the interest rates for indexation would be to increase the government's return with the same amount of student debts and that is compounded year after year. Why people don't point that out that would be good for the government if one look at purely from the point of nominal returns in the investment in higher education. Just imagine if the government could charge an infinite interest rate and how much return that would be!

Secondly, with the deregulation to allow universities to charge higher fees, the government's current level of subsidy to higher education will be decreased, right? And that will be a huge saving for the government.


Thirdly, the effects on students and their life in the future will need to be considered. All talks are about the effects (and that is focused on only a small part of that unfortunately, as I mentioned above), and few have included on how that will impact on students and also its equity effects on different people including the likely flow on effects on whether the same level of participation in higher education could be maintained and whether some particular groups particularly disadvantaged one will be impacted disproportionately.

Integration alone is no panacea to development

Comments on Wing Thye Woo "ASEAN integration can keep region above US–China fray", 6/04/2016

While this post is undoubtedly very constructive in its intent and analysis, there are a number of points I would like to make.

Firstly, the likelihood, between the US and China, of a US-Soviet style cold war as we saw in the past in the foreseeable future up to two decades away is extremely unlikely. To the most, the two world powers may get into a mild cool war as opposed to a cold war. Any suggestions of such a cold war is either too much a concern bordered on paranoid, or exaggeration.

Secondly, ASEAN as a regional organisation is very useful and constructive to both its own members as well as to regional peace, stability and cooperation. Its integration process will undoubtedly strength its regional role and influences. However, one must realise the enormous difficulties of the task to develop the economies of any regional bodies. It is no less in the degree of difficulties in develop any single country. The author has mentioned some of the more advanced ASEAN members have unfortunately fallen into the so called middle income trap. If they have had difficulties in managing their own individual countries to overcome that trap and to advance to the rank high income countries, then it is not too had for one to see the difficulties ahead for ASEAN, as a group or whole, to achieve faster development. While one may argue the positive effects of integration in terms of trade, investment and resources movement with a more integrated region, the task to coordinate common policies and actions are not insignificant and are not easily delivered.

Then one has to realise that while a more integrated ASEAN may provide some boosts to its members in terms of development, each member would also need to take all opportunities that may be available to them and many of those opportunities may lie outside ASEAN itself. That may result in some natural differences in each member's priority in the real term. After all we have seen and are still seeing the case where the UK is debating and having a referendum on whether it should stay in or out of the EU, not along for its to abandon its own currency to join the Euro. This interesting example may serve as a does of sobering medicine for those who may argue for the positive effects of 'integration' without analysis its costs.


APS underperforming senior executives

Comments on Henry Belot "John Lloyd warns underperforming public servants on individual accountability", 2/04/2016

It is not just junior staff may under-perform, some managers including fairly senior ones also undoubtedly under-perform that cause the whole units under them to under-perform. Many senior managers don't have senior management skills and cannot innovate either. They have not graduated from a lower manager role.

Further, there is a culture for senior managers to protect their close friends of men/women. As a result, they blame other staff for their own incompetency.

Vertical and horizontal fiscal imbalance and the PM policy process bubble

Comments on Richard Eccleston "Modelling shows why premiers are wary of Turnbull’s tax proposal", 3/04/2016

The PM's proposal for the States and Territories to levy their own income taxes, unsurprisingly, hit snags of State and Territory leaders, not just because of many of its potential faults, but more importantly also because of the poor processes the PM has got into.

How could such a significant change to Australian taxation and federation financial relations labelled by the PM as a reform to the Australian federation in generations be announced by the PM only one day before the COAG meeting, with no prior consultations at all?

It reflected either unprecedented creative genius, or perhaps sheer stupidity!

Certainly it was not the way national policies should be made at the top of the Australian government.

Having said that, virtually all the issues raised in this post could potentially resolved without too much difficulty. That is to say, the States and Territories could be allowed to have the capacity to raise their own income taxes in whatever rates they each deem as suitable and desirable, then the federal government only provides enough fund for horizontal fiscal equalisation.

Giving the States and Territories the capacity to levy their own income tax would resolve vertical fiscal imbalance. Horizontal fiscal equalisation, in a way similar to what Canada does, would achieve horizontal fiscal imbalance.


Our national political leaders need leadership skills

Comments on Michelle Graton "The implosion of Turnbull’s ‘big idea’ will raise further doubts about his substance and style", 2/04/2016

To resolve the so called vertical fiscal imbalance is one issue and defining both expenditure and revenue responsibilities and make each government responsible to their actions/policies (accountability) is another and a different issue. The mistake by the PM is that he wanted to hit such two birds with one stone and the State and Territory Premiers and Chief Ministers didn't like the PM approach. As a result, the PM failed badly.

I think the States and Territories would probably only like to focus on the first issue, that is, to get more revenues from the Commonwealth as untied grants, that is, a fixed share of income tax. They clearly didn't like to be seen as having to raise more revenue in their own name to pay the bills for education and health.

The PM should now be a bit of more statesman like, and agree with the States and Territories for them to have an agreed and fixed share of revenue from personal income tax, and possibly the revenue from company income tax. If that is done, it would be possible to resolve the vertical fiscal imbalance, should the shares are appropriately determined.

The PM, however, needs a better and carefully considered approach to the second and more thorny issue of real and effective accountability, that is, linking spending responsibilities with revenue responsibilities. What occurred this past week was simply not good enough for the PM.

Where was his leadership and judgement for him to rush such a ill-prepared tax and federation reform plan? Where is the role played by his advisers including from both the POM and the PMC?

I suspect they were probably not well consulted or not consulted at all. If that is true, that would not be too different from the chaotic situations that was accused of the former PM Rudd, as reported or argued by some of his ALP former colleagues.

It seems that our national leadership is lacking leadership skills and is failing the nation badly, when the nation's top political leader behaves like what they have shown us! It is so miserable and pitiful, not just for themselves but for the nation as a whole, because the nation suffers as a consequence!

Pongsudhirak's misinformation

Comments on Thitinan Pongsudhirak "China’s its own worst enemy in regional relations", 2/04/2016

I find that this post is highly biased and it does not seem to be based on factual analysis. Building dams along the Mekong River, for example, has been or is being done not only by China but by almost every country where the river passes through, while he author seems to argue only China has done it. China has built many dams in many of its own rivers, not just on the Lancang river.

Further and again, China is not alone in terms land reclamation in the South China Sea, but the author seems wanting to creating an impression that it is along.

Perhaps, the EastAsiaforum editors should be aware of this and should exercise editors responsibility to not allow misinformation to be presented by anyone!

I remember there was a post earlier about countries building dams in the Mekong River on the EAstasiaforum not long ago that provided a much more balanced and detailed exposition of dam building. See here, for example, "New rule-based order needed to save the Mekong" by Nguyen Khac Giang 29 March 2016.


Economists should not just assume all realities would fit their existing theories

Comments on Shiro Armstrong and Tom Westland "Escaping the middle income trap", 30/03/2016

Some comments point out some unsaid issues, including what a new Asia order would look like and how to bring that peacefully.

While I am an economist as opposed to international strategist, I would venture a hypothesis that the best scenario for a new Asia order to appear peacefully would be for China to work not only for its own interests but also for the interests of all Asian countries, so that Asia is truly for all Asians as a whole, irrespective for China to confront the US or not.

The underlying assumption is that Asians will benefit from a new Asia order.

If you don’t look after your neighbours, they will not support you in your endeavours.

I think that will need China to make some hard decisions and choices, including to make some compromises and perhaps sacrifices in the process for it to rise as a true and powerful leader in Asia. America will naturally fade from Asia or its assumed uncontested leadership in Asia will be diluted, in that process.

It will be wise for China if it can do that. I think there will be enough wise people in China for it to realise that is the best option forward.

Reasons beyond demographic factors behind Japan's lost decades?

Comments on Naohiro Yashiro "Is Japan caught in an upper income trap?" 30/03/2016

Although demographic factors are important factors to unleash Japan’s aggregate productivity as a whole, there would be other important factors that are equally important if more so.

For example, Japan seems to have fallen behind in the competition of contemporary technologies such as smart mobile phones, for example. Japan used to be very innovative, but it has lost much of its edge in the past two decades or so, it seems.

It would be important to understand the reasons behind those sort of issues.


China, Asian countries and new Asia order

Comments on Hugh White "Can Asia break free of great-power dynamics?" 29/03/2016

Some comments point out some unsaid issues, including what a new Asia order would look like and how to bring that peacefully.

While I am an economist as opposed to international strategist, I would venture a hypothesis that the best scenario for a new Asia order to appear peacefully would be for China to work not only for its own interests but also for the interests of all Asian countries, so that Asia is truly for all Asians as a whole, irrespective for China to confront the US or not.

The underlying assumption is that Asians will benefit from a new Asia order.

If you don’t look after your neighbours, they will not support you in your endeavours.

I think that will need China to make some hard decisions and choices, including to make some compromises and perhaps sacrifices in the process for it to rise as a true and powerful leader in Asia. America will naturally fade from Asia or its assumed uncontested leadership in Asia will be diluted, in that process.

It will be wise for China if it can do that. I think there will be enough wise people in China for it to realise that is the best option forward.

Price setter, middle income trap and China

Comments on Editors, East Asia Forum"China’s two big challenges", 29/03/2016

While I agree with almost all major points in this editorial, some points seem to be a little contentious. Firstly, the Singapore experience among those experiences points out some diversity in the road to rich, at least it is not that high degree of universality in terms of political freedom. One might argue that was an exception as opposed to a rule, but nevertheless it existed.

Secondly, while the size of the Chinese economy may present some challenges for specialisation to be an option on the road for it to be rich, it could also mean some opportunities. For example, it may mean if China can focus on it economy better, that will be probably and comparatively enough for it to go rich. In other words, a price setter, as opposed to price taker, is relatively less affected by external factors purely because of its price setter status.

So if China can manage its own economy well, perhaps modelled on those economies ahead of it (and taking into account emerging technologies and trends), it is advantageous to be a price setter.

In that context, I would recommend caution in planning too grandiose international schemes, given the difficulties for any country to make good decisions, let along many countries to make the right decisions at the same time, where China has little control of them.

Finally, the so called middle income trap is as much a challenge as a myth. Some of the countries that have fallen into that trap can perhaps all find its fundamental causes, particularly some Latin American countries which may have coincided with the Oil Crisis and subsequent change in the world economic structure including high inflation and high interest rates when those countries were having high debt associated with their exploration of their natural resources.

One should not be too pessimistic about the potentials for countries to develop and to join the ranks of the rich in the world.

Having said that the continued slowing of the Chinese economy may have reinforced the pessimism. But I hope the Chinese leaders will wake up to the potential dangers of excessively slowing of its economy.


What is "New Confucianism"

Comments on Niv Horesh "Understanding China’s rise", 14/03/2016

While I have apparently seen signs of China adopting some of of revival of Confucianism, I am not sure what the core concepts of the so called New Confucianism.

Yes, Confucianism played an important role for about 2000 years in the Chinese history. But there were also many crises over that period, typified by inter dynastic changes as well as intra dynastic upheavals. Those also included, from period to period, multi states at times.

The Chinese Communists, as well as the May Fourth movement, for a long period were probably against Confucianism.

Is the New Confucianism new stage in terms of reconciling the traditional Confucianism with the current Chinese Communism (Confucianism with Chinese characteristics)?

Or is the New Confucianism a blind of a number of main ancient Chinese philosophies with Confucianism as the core, then all that subject to the current Chinese Communism?

Or is the current Chinese leadership using Confucianism to present a historically and relatively prosperous, well governed Eastern (Chinese) image to facilitate its narratives of China’s rise, a return to its ancient place of a more advanced country?

An interesting but distorted analysis

Comments on Mie Oba "Japan and the new wave of regionalism in Asia", 15/03/2016

It seems the author has an interesting but highly questionable interpretation or statements of certain events.

For example, the third paragraph reads “China’s new regionalism is not limited to economic cooperation. In a May 2014 speech, Xi outlined a new perspective on regional security, insisting that ‘it is for the people of Asia to run the affairs of Asia, solve the problems of Asia and uphold the security of Asia’. This perspective stresses the necessity of China’s leadership in building a new Asian security structure.”

The last sentence, “This perspective stresses the necessity of China’s leadership in building a new Asian security structure”, would certainly represents a distorted meaning of what “it is for the people of Asia to run the affairs of Asia, solve the problems of Asia and uphold the security of Asia”.

The fact is that Asia does not equal China alone and the people of Asia is not Chinese alone! It is hard to understand how that could be interpreted as “This perspective stresses the necessity of China’s leadership in building a new Asian security structure.”

Then, there is the following paragraph: “RCEP is an effort to promote ASEAN-centred regional economic integration. Compared to the TPP, RCEP emphasises the importance of economic developmental cooperation in the region. Some analyses tend to characterise the TPP and RCEP as reflecting a confrontation or competition between the United States and China for hegemony in Asia.”

One the one hand, the author acknowledges RCEP is ASEAN-centred and on the other hand the author seems to also imply or at least accept RCEP is a Chinese tool to confront or compete with the US for hegemony in Asia.

Is that simply an oversimplification? I am not sure.


It would be for China to peg the RMB to a basket of major currencies

Comments on Yu Yongding "China still has room to move on RMB" , 7/02/2016

While it is the conventional economic wisdom that the exchange rate should be determined by the market, the tendency of exchange rate overshooting and the generally observed excessive fluctuations (partially due to speculations) even in major currencies, as well as the impact of exchange rates on international trade and business costs (disruptions to businesses as either costs or prices) (consumption of traded goods and services should probably be included too), probably suggest that it would be desirable if exchange rate movements truly reflect relative economic fundamentals.

Economists' reliance on market is because it is regarded as efficient. However, the faith in the foreign exchange market should be tested by the relative importance of its rationality and irrationality. When market is predominantly irrational, that is, generating bubbles, its efficiency should be questioned, and perhaps ways to correct inefficiency or find a better alternative. If one still argues for rely on the market when the market has clearly lost its efficiency does not represent good logic.

As such, it would be an appropriate strategy for China to adopt a compromise between free floating and a hard peg to the US dollar, that is, to peg, with some margins to move, the RMB to a basket of major currencies with weight reflecting relative trade and capital account positions with those countries.

In this way, the RMB is not fixed with any major currencies, but the relative movement against any single major currency would be smaller than some other major currencies.

Yes, the Chinese central bank still needs to keep an eye on the peg and has to use foreign currency reserves to balance the peg, but the costs would be much lower than to defend a currency against the US dollar as it has been doing in the last couple of years as Yu mentioned in the post.


Payroll tax and company tax, and informed tax reform

Comments on Michelle Grattan "Turnbull points to problems in raising GST", 5/02/2016

It is strange for the PM to argue that payroll tax is efficient and at the same time also argue that company tax rate should be reduced. The two arguments are contradictory. It appears that the PM has been ill advised or not been advised but he only talk out of his own intuitive feel.

Comparing payroll tax with company income tax, the only difference is the degree of the impact on business, with payroll having a greater impact on business. That is because when without payroll tax, that amount would be profit and business pay income tax on that amount as opposed to pay the full amount when payroll tax is imposed.

It would be better if significant tax reforms or increasing taxes be put out much earlier in an election cycle, so it give plenty and adequate time to the public to consider them and make their mind on whether they would support or not support them.Leaving significant reform policy proposal to the last minute does not show enough respect to the voters!


Maybe China can improve its environment in 2016

Comments on Kerry Brown "China’s challenges in 2016", 4/02/2016

On the foreign policy front, the formal launch of the Asia Infrastructure Investment Bank should also qualify to be a very significant achievement.

The bilateral summit meeting between China and Taiwan, while highly symbolic, is questionable in terms of foreign policy achievement, particularly in the context of the anticipated change in the governing party from the Nationalist Kuomintang Party (KMT) to the Democratic Progressive Party (DPP) in Taiwan and the subsequent confirmation in the January election. It was and still is unclear what purpose and effect of a meeting with a losing party.

While China, in 2016, faces the same very challenging task in term of rest its slowing economic growth in this year as in the last two years did, given the not so promising world economy and domestic rebalancing, maybe it is having a reasonably good opportunity to do something in improving the environment, particularly air quality when it forces the closure of some inefficient and high energy consuming plants in the steel and other industries. But the deficit in environment is so large, it would be difficult for people to feel it probably.

China probably needs a bit more active fiscal policy to arrest the slowing economic growth rate, although any fiscal stimulus must be well targeted.

While it has been a big thing inside China when it set up the Shanghai Free Trade Zone, it is unclear to me what that can really achieve, particularly in the context of economic rebalancing. It may improve the efficiency of importing, but that could also be a drag to domestic growth, as imports are subtracted from growth.


Regional food challenges and world production

Comments on R. Quentin Grafton, John Williams and Qiang Jiang "Food security: Asia’s critical balancing act", 3/02/2016

This post seems to argue the challenges of crop production in Asia, particularly South Asia on the one hand, and the apparently success worldwide in crop production in meeting world demand. If that is the case of regional challenge, then trade will feel the uneven distribution in crop production between regions/countries, unless some countries are so poor that they cannot afford to import grains. So one of the solution/strategy is to boost the income level of poor countries as an alternative to increase their domestic crop production.

Another factor that will exacerbate food security is the change in the family planning policy in China that will shift from one to two children per couple from the past one child per couple. Given China's population size, future population will be greater than most past projections. Higher population means the demand for food will be greater too. That means any baseline population projection needs to be updated.

Another point is generically modified food. Is the issue of safety of generically modified food for human consumption completely settled?


Hedging, alliance and dynamic developments

Comments on Darren J. Lim, ANU and Zack Cooper "Are East Asian states really hedging between the US and China?" 1/02/2016

The main argument or conclusion in this is likely to depend on the relative dynamic development of China and the US in terms of political, economic and military strengths. The argument may be currently valid, but can be problematic if the growth of China’s military strengths follows the same path of its economic development of the last three decades, particularly the last two decades.

Just as few had imagined or foreseen the rise of China economically three decades ago, it is difficult to predict what China’s military strengths will be in two to three decades into the future.

Another is whether China will maintain its current and long held policy of non alignment. Arguably, China could have options in that respect.

Should China, either alone or with reliable partners, have stronger or at least the same military strengths, the argument in this post could be significantly discounted.

Some rational choice now could be changed when the circumstances and assumptions change.

Further, the US, though strongly committed to its alliance partners now, at least apparently, will also need to calculate the costs of a direct war against a rising power.

During the cold war, the threat of mutual destruction made the US and the former Soviet avoid direct war. Arguably, the US may have had superiority in conventional weapons. The Soviet invaded Afghanistan, though eventually it had to withdrawal or it was defeated there.

The point is that few countries will go to war without considering the costs it would incur, particularly it is to fight for a partner country.

Changed relationship between QE and inflation

Comments on Masanaga Kumakura "Japan is sinking in a sea of money", 28/01/2016

The recent QEs in the US, European Central Bank and Japan appear to have cast doubt on the conventional economic theory, i.e. the monetisation of government debt is a recipe for fiscal profligacy and hyperinflation. Whether it is because the special circumstances or other reasons, the QE in the US played a useful role in averting more nasty economic depression. Economists should revisit that conventional economic theory, perhaps.

China unlike to catch up with the US on per capita income in three decades

Comments on Peter Robertson and Longfeng Ye "China’s greatest challenge will be escaping the middle income trap', 30/01/2016

The terms of the richest and most powerful country in the following paragraph is confusing. China will not be the richest country in many decades to the future. One should not be confused by the size of a nation and the average income or per capita income. Most powerful or not, it is also debatable. “China’s slower growth figures have caused jitters in world financial markets. Nevertheless its growth remains at miracle levels. At this pace, China would appear to remain on track to become the richest and most powerful country in the world, bar none.”

Further, the following paragraph is questionable, the implied calculation seems to be incorrect: “In a scenario where Chinese “miracle” growth continues around 5-6% for three decades and gradually slows to the average world growth rate, the average Chinese citizen would be as wealthy as the average American.”Per capita income in China is around one fifth of that in the US. Growth rate of around 5-6% is at the best only 2-3 percentage points higher than the US. Three decades of that greater growth rate does not give a factor of 5!

China in its current stage of development shares more similarities with Japan and Korea in their relative developmental stage than with Brazil or Turkey, in culture and economic characteristics, such as saving rates, education state role in growth. Purely from that perspective, China is more likely to avoid the middle income trap, barring disastrous government policies.

PS: Professor Robertson replied to my earlier comments with the following: "Hi Lincoln
I think you have overestimated the US growth rate and underestimated China’s current per capita GDP in $PPP.
The growth rate gap is more likely to be around 4 percentage points as the US per capita income growth unlikely to exceed 2 percentage points per year.
Also China’s per capita income (in $PPP) today is closer to 26-27% of the USA’s.
Obviously one can question the assumptions but I hope that answers your question.

My tcourtsy to Professor Robertson "Thanks Professor Robertson for your reply and clarification that clears some confusion that I had."

PSS: Notwithstanding Professor Robertson's clarification, I still doubt China could practically catch up with the US on per capita income in three decades. While it is possible for a small economy like Singapore or Hong Kong, it is unlikely for a large economy. Japan's per capita income ($37,500 in 2014, re CIA World Factbook) is still quite a bit below the US's ($54,400 in 2014), not to mention South Korea's (interestingly also $35,400 in 2014).

Both Japan and Korea, with reasonably large economic size, are two of the best examples of catching up in the post war era and up to now as well.

One may argue that Japan has had a period of lost decades, but that is exactly part of the parcel of economic development and catch up processes, and reflects the difficulties for a large country to catch up in a short period.

Beeson's bizarre comparison of China with Japan's military past

Comments on Mark Beeson "What China did and should learn from Japan", 30/01/2016

This article, though probably good in economics, is unfortunately overblown in terms of comparing China’s current military stance, or even its or approach in the South China Sea or East China Sea, with that of Imperial Japan in the second half of the 19th century and the first half of the 20th century. Japan was then a militarised country, expansionary and aggressor, invaded quite a number of countries in Asia.

It is hard to understand the author could get the comparison so wrong. Even in economic and developmental aspects, it is doubtful that the China model is similar to the Japan model.

In terms of development stage, China is now far from the stage of 1990 Japan. As a result, there is still a long way for China to go to ‘exhaust’ the role of state in maintain rapid growth, if the argument of the different roles of state (institution reforms) needs to evolve.

PS: That piece by Beenson, shows some economists may get very strange perspective when they apply their economics knowledge to something new to them, even though I am an economist too.


The failures of the six parties on North Korea nuclear

Comments on Stephen Costello "US North Korea policy should acknowledge past success", 14-15 January 2016

The following are comments on the article and on some comments by others.

In hind sight, efforts of the five parties involved in the attempt to prevent and limit the North Korea’s nuclear programs achieved very little. China may need to bear a greater share of responsibility, given the reliance of North Korea on China in terms of trade and other support. However, blaming China for the current North Korea nuclear situation overstates the limited influence of China on North Korea. Further, China has probably faced with huge uncertainties in terms of how to best deal with North Korea and potential consequences of a failed state should North Korea collapse. Nevertheless, China should review its policy towards North Korea and its effects. Maybe a tough love approach is needed.

From the conventional geopolitical point of view, I would agree to the point that Chinese leaders do “have a vested interest in using the DPRK as a cushion between them and the South/USA.” Any independent minded person would say, why not?

Don’t the US have, at least from time to time, attempt to contain China? What the current US president said on at least couple of occasions, that he does not like for China to write the rules and the US’ exclusion of China in the TPP negotiations, re the TPP in the context of economics and trade?

Even in that context, China did not and does not like to see the development of the North Korea’s nuclear program that is not in China’s interests.

Any link for China’s policy to the North Korea’s nuclear program is misguided and wrong. It is to blame China but that is wrong and unlikely to be helpful.

China have probably been hoping that the North Korea leader may heed its hope not to go forward with its nuclear program, given its support to North Korea. But the later obviously has not been following China’s wish.

I would argue China’s policy amid uncertainties regarding North Korea has not achieved its objectives. It should have long ago reviewed its policy effectiveness and changed course. In real world, its never too late to adopt a better policy.

Corruption crackdown should be on corruptions

Comments on Kerry Brown "Xi widens corruption crackdown" 20/01/2016

From the description in this article, it seems the Lu case is a little disturbing: it appears to be more political, that is, different views, as opposed to corruptions. If this becomes a trend, then the anti corruption may stray into suppressing differences from the top views. As a result, it may run the risk of losing its popular support.

China's demographic challenges

Comments on Zhongwei Zhao "Tackling China’s demographic challenges", 21/01/2016

It is stated that: “Instead in the 1980s China’s Total Fertility Rates (TFRs) fluctuated between 2.2 and 2.9 children per woman. But by the early 1990s, the strong family planning program and profound socio-economic transformation led China’s fertility to fall below replacement levels for the first time. Since the mid-1990s, TFRs have generally remained below 1.6 children per woman.”

Those rates are far from the target of family planning policy, one couple one child, even taking into account children mortality rate. Are they correct?
In the last paragraph, it is remarked that: “Yet, whether this, and other development strategies, will be sufficient to cope with the great socio-demographic changes brought about by China’s rapid urbanisation, ageing population and persistently low fertility rate remains a debatable question.”
Surely, the persistent fertility rate will change after the change in the family planning policy to allow two children per couple, though it may take time to see real effects.

REply to comments by Rechard: I agree it will take long time, a generation’s perhaps, for the new born to become labour force. However, it is possible that people may have different incentives/motives in relation to supporting their old parents and raising children. That means people with another children may work harder or smarter if they can to raise the child. That, though tangentially, be positive to the economy, I would reckon.

How will the government provide more schools for them? That is part of the challenges China will face, though it is not insurmountable. China is transitioning to a more service dominated economy and the education sector will be part of that. Financially, China, like any or at least most countries, must prioritise government spending and education should be a priority due to its many positive effects and spill overs, not to mention its role as part of people’s basic “rights”.

How to tackle people living longer and population aging? In theory, it should not be too hard to do actually. When people live longer, their economic productive life will be longer accordingly. So government can introduce policies/incentives to encourage people who can still work to work longer.

One may say some people may not be able to continue their labour types of work. That may be true, but with adequate retrain, they Further, if old people have adequate superannuation, like the policy in Australia, most of them can live off their own superannuation, though it may take time, indeed very long time.

Having said that, what I mentioned is easy said than done. General policy prescriptions is not hard, but get them in place and implement them in the right way are much harder.

Initiatives of AIIB and One Belt One Road should be commended

Comments on Amitav Acharya "Building Asian security", 25/01/2016

It seems that the author may be premature in the view reflected in the follow paragraph: “Similarly, China professes a deep interest in enhancing regional economic interdependence. But its own initiatives, the Asian Infrastructure Investment Bank (AIIB) and One Belt One Road, challenge long-standing modalities of regional economic cooperation.”

As Andrew Sheng described in his post on 23 January 2016, the AIIB is an initiative after the refusal by the US congress to ratify the 2009 G20 agreement to widen the voting rights distribution of the IMF. It is a rational reaction to an irrational behaviour by the US congress.

China’s One Belt One Road initiative should be commended as opposed to be labelled as something abnormal.

The world is changing. As it happens in many countries, reforms are necessary to progress. In that contest, new world modality is not necessarily wrong.

Further, while the majority of the following statement seems correct, it is unclear or confusing in the part “stability in the balance of power”. What does it mean in a changing world? If the world is changing and the relative power changes with it, is it still “stability in the balance of power”?

No one can hold the world not to change.

Lack of leadership on democracy by world leader of democracy

Comments on Andrew Sheng "Navigating the rocky road to a multipolar order", 25/01/2016

The refusal to ratify the 2009 G20 agreement to widen the voting rights distribution of the IMF by the US Congress appeared to show hypocrisy on the part of the world leader of democracy. It showed that the US congress did not accept democracy when its influence is going to wane. It did not show leadership on its part. The fact that so many major EU countries joined the China initiative of Asian Infrastructure Investment Bank reflect the US congress is losing support from its traditional allies on its irrational behaviour on IMF voting rights reform.


There are more reasons for Taiwan's economic failures

Comments on J Bruce Jacobs "Taiwan’s democracy grows stronger as KMT falters", 7/01/2016

In the second last paragraph, it is stated: “President Ma’s China plans have fallen apart. His Economic Cooperation Framework Agreement, signed with China in 2010, has not produced the forecast economic prosperity.”

What are the main reasons for this failure of producing the forecast economic prosperity? Do they have anything to do with the slowing Chinese economy and difficulties/challenges international economies have faced?

Realistically, would Taiwan be better off or worse off economically when it have a better relationship with China, given the size and its regional and international role of Chinese economy?

Dilemma for Taiwan's next president choice

Comments on Peter Drysdale "Taiwan’s political choice", 12/01/2016

From the following statement from this post, it seems to be indeed a real irony purely from the point of view of Taiwan’s economy: 

In fact, the profound political shift in Taiwan is more closely associated with the economy’s failing struggle to re-invent itself. With per capita income around US$22,000, Taiwan is above the middle income threshold, but it has been unable to emulate its neighbours like South Korea and Japan in Asia in climbing up the income scale. Its export-dependent manufacturing sector faces competition from South Korea from above and emerging economies, like China, from below. GDP grew a measly 1 per cent in 2014; wages are stagnating and unemployment, at 4 per cent, is considered high. The irony is that Taiwan’s tortured, ‘one-sided’ economic relationship with China — which Ma had been trying to correct — might well be a core element in Taiwan’s economic woes. While direct trade has opened up across the Strait, Taiwan has continued to restrict Chinese imports and investment, essential to enjoying the fruits of fuller integration into the regional and global economy. South Korea has imposed no similar burdens on its international competitiveness.

Is the restriction on Chinese imports and investment and its impact on its international competitiveness the key factor to Taiwan’s economic stagnation in the past up to now? If it is, then the expected new president will face a serious dilemma: accountable to an electorate that may like to see a more distant relationship with the mainland, and to develop strategies to kick start the economy where a distant relationship may work in an opposite way.
Yes, it is possible to diversify its economic relationship, but it will take time to achieve. More fundamentally, defying an inherent international comparative advantages under the current circumstances is likely for Taiwan to continue to pay a price.