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.

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.

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.

"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.

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.

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.

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.

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.

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.

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.

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.

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.