Demonizing China for Fun and Profit

Mike Daisey is the latest but not likely the last to attain fame and fortune by making up stories about China. Daisey’s case was a widely acclaimed monologue entitled “The Agony and Ecstasy of Steve Jobs” supposedly based a six-day visit to Shenzhen China and his encounters with various factory workers—except as we were to find out very little of it actually happened.

Daisey’s performance on stage was a hit and he became a media celebrity that talked about his China experiences. This American Life a radio program on National Public Radio dedicated an hour on Daisey and excerpts of his monologue. Up to this point, his monologue was considered to be a factual presentation of his encounters in China since he never qualified it in any way.

Unfortunately for Daisey, some of his more flamboyant assertions on his one-man show rang hollow to those that know China. This American Life then retroactively did some fact checking and found that Daisey had lied to the program. In the end, This American Life made a full retraction of the story they carried about Daisey. In the retraction, the listener could hear Daisey’s awkward and embarrassing retreat as Ira Glass disassembled Daisey’s lies step by painful step.

By the end of the hour program, Daisey apologized to Ira Glass for appearing on his program and misled the American public into thinking that he was doing journalism when he was only doing theater—a medium where mixing facts with fiction are permitted.

An important reason for Daisey’s initial success is his choice of topic. Much of American public are susceptible and open to hearing anything negative about China. I have reduced the formula of success as ABCDEF: Americans bash China by distortion, exaggeration and fabrication.

The earliest known example that came to my attention was the so-called human rights activist, Harry Wu. He made a decent living talking about China’s human rights conditions based on half-truths and lies. He has had the good fortune of never appearing on a stage visible enough that someone was inclined to give him a once over fact check.

Hey China! Stop Stealing Our Stuff

The cover article in latest issue of Bloomberg Businessweek has the above subject as the title. A provocative piece that is likely to be cited in months ahead by congressional spokes persons and law enforcement officers whenever China is in the cross hairs of public discussion about China's bilateral relations with the U.S.

One of the Sino American business relationships described in the article that went off the tracks involved Sinovel, a Chinese maker of wind turbines for wind farms and AMSC, an American maker of electronic systems that control the operation of the turbine. Ostensibly this was a match made in heaven; the Chinese with low labor cost to put the hardware together and the MIT spinoff to supply the sophisticated electronics.

Indeed, Daniel McGahn, the CEO of the American side said, "We always saw it as a symbiotic relationship of having China's low manufacturing cost coupled with Western technology. We would grow as they grew." It didn't hurt that Sinovel was a market leader and dominant supplier in China.

Unfortunately, as was the case with cellular phone, energy saving light bulbs, solar panels, wind turbines or other fashionable products of the day, whenever one company makes a high profile entry, others follow suit and soon China is overloaded with too many manufacturers with too much output and everyone having to resort to price cutting in order to stay in business.

In 2008, the electronics from AMSC accounted for 12% of Sinovel's cost of the turbine system. Three years later, the AMSC package made up 18%. "Everybody was getting squeezed except AMSC," according to an American consultant quoted by Business Week.

In my view, McGahn missed an opportunity to proactively re-balance the AMSC partnership with Sinovel that could have forestalled the ugliness that ensued.

Instead of assuming that his company would continue to enjoy the margin of 2008, he could have empathized with his partner's plight and share some of the pain of eroding margin. Perhaps he could have seized on the opportunity to restructure the business relationship in such a way that Sinovel would own equity in AMSC and vice versa. Perhaps he could have proposed a joint venture to develop export sales of complete turbine systems with hardware from Sinovel and control system from AMSC and thus expand the pie for both parties.

Just the information presented in Business Week is not sufficient to come up with a definitive solution that could have headed off the Chinese side from trying to steal the technology, but the principle is obvious. Namely as with any partnership, one needs to constantly think of ways for both parties to win and make sure that the cost of doing business together is more appealing than going separately.

One particular aspect of doing business in China that is especially difficult for western executives to understand is that the best way of not getting screwed is to develop real friendship with their business counterparts. Chinese value face and yiqi（义气）. The dictionary defines yiqi simply as personal loyalty but it's much more. To behave without yiqi is to dishonor oneself and suffer a great loss of face and self respect.

As AMSC's case showed, keeping the crown jewels, in this case the source code, outside of China did not prevent theft and the attempt to go it alone. If the parties had found a way to remain in the same bed and share the same dream, they might still be living happily ever after.

The Myth of China Dominating the American Economy

Despite recent hue and cry about China taking unfair advantage of trade with the U.S., an analysis revealed that the amount of Chinese goods and services being consumed by the Americans in 2010 accounted for (gasp) 2.7% of America's total personal consumption. Not only that, but 1.2% were actual costs of imports from China. The other 1.5% were accounted by the U.S. business transporting, selling, and marketing of the made-in-China goods. By contrast, 88.5% of the total personal expenditures were spent on goods and services made in the U.S.

This study was performed by the Federal Reserve Bank of San Francisco and can be read in its entirety here. Ostensibly the reason for conducting this study was to determine how inflation in China might impact on the U.S. economy. Obviously, if Chinese imports only account for 2.7% of our total personal expenditure, it won't matter if China experience inflation in the near future. For that matter, it is immaterial whether China is manipulating its currency or not.

Keep this study in mind, the next time some politician or pundit makes a mountain out of this mole hill or indulge in flights of runaway imagination on how China is ruining our economy. Your response should be simply: Nonsense.

Debunking Cyber Warfare and Other Illicit Derring Do

Accusations of evil doers lurking in cyber space seem to fall into the following categories.

(1) Some warn of frightening cyber attacks in order to sell their network security expertise.

(2) Some describe lurid tales of evil doing in cyber space to sell books, fiction or not.

(3) Some attributes acts of cyber sabotage to other nations in order to demonize them, most often targeted being China and Russia.

(4) Of course, threat of cyberwar is another way to justifying budget allocation from the federal government to the defense industry.

Along comes in latest issue of Foreign Policy an article that should calm matters down and lower the scare meter by a notch or two. Below are some excerpts from the piece written by Thomas Rid, ridding us of some of the amorphous fears.

Cyberwar is still more hype than hazard. ...act of war has to be potentially violent, has to be purposeful and has to be political. So far we have not seen any that meet those criteria.

In his 2010 book, "Cyber War," former White House counter-terrorism czar Richard Clarke invokes the specter of nationwide power blackouts, planes falling out to the sky, trains derailing, refineries burning, pipelines exploring, poisonous gas clouds wafting, and satellites spinning out of orbit. The only tangible result so far is the establishment of the U.S. Cyber Command in 2010 with an annual budget exceeding $3 billion.

Development of a cyber weapon would require a lot of resources. The weapon has to be target specific in order to be effective. Once used defense measures would be put in place and the weapon would lose its potency. In other words, the cost effectiveness of such a one-shot weapon is problematic and doubtful.

While Rid's article provides a balancing perspective, it will not deter others to scare monger.

China's Reminbi as a Global Currency

Since the collapse of Lehman Brothers and the ensuing tsunami from Wall Street that almost swamped the financial world in 2008, China has been busy signing bilateral currency swap agreements in order to minimize the exposure of holding too many dollars.

Such swap agreements allow the two signatory nations to do business with each other using their own currency and skip having to buy dollars and settle the trade invoices in dollars.

This article co-authored with Henry Tang posted in China-U.S. Focus apropos on leap year day can be read in its entirety here.

On going tracking of bilateral swap agreements China has entered can be found here.

Linsanity too late for Soldiers Chen and Lew

An edited version appeared on February 26, 2012 in the New America Media.

On a recent Sunday morning, I was glued to the boob tube watching a professional basketball game from the opening jump ball to the last waning second. Haven’t done this for years but suddenly I too have been swept up by the global phenomenon of linsanity.


By now, everybody knows linsanity refers to Jeremy Lin, the basketball star from Harvard, undrafted by any of the NBA teams, who warmed the bench for two other professional teams before coming off the bench for the NY Knicks in an act of desperation by the coach. Lin promptly led his team to a win, the first of nine wins in the next eleven games. He became the toast of New York and an instant worldwide sensation.


The Knicks took on Dallas Mavericks, last year’s NBA champ and I saw a real deal. Lin drove through a forest of opponents for layups or passed to wide-open teammates. He sank long-range three pointers in crucial moments or he drew the defenders so that his teammates were unimpeded as they threw in three point bombs. He was fearless and physical as the game dictated.


In the post game analysis, the great Magic Johnson unequivocally declared that Lin’s star presence would be in the NBA for a long time. None of his fellow panelists disagreed.


Lin’s heroics on the court immediately drew a following from the Asian communities of the world, heretofore thought too small, too short and too frail to play this contact sport. But Lin didn’t just become a role model for Asian Americans. He has won the ultimate accolade: every kid--black, brown or white--on the neighborhood playground now aspires to be a Jeremy Lin.


Linsanity also caused me to reflect on the tragic fate of Danny Chen and Harry Lew, two American soldiers who took their own lives in Afghanistan. These were two unrelated victims of hazing by their fellow soldiers. Sadly the misery they experienced was so brutal and unrelenting that they found ending their young lives the only way out of their torment.


These incidents reflect a failure of American values and the leadership of the military: The former because America continues to regard people of Asian ancestry as not American, but as the other; the latter because the military not only failed to prevent such racism from their ranks but also failed to impose appropriate penalty on the perpetrators for the hate crimes.


Hate crimes against African Americans evoke high decibel outcries but hardly a murmur when perpetrated against Asian Americans.


It will be up to the Asian American community to make noise in order to rectify the wrong. During the first Gulf War, friendly missiles shot down two American helicopters. The pilots who pulled the trigger were exonerated but not Captain Jim Wang of the Awac flying surveillance.


The late Sam Chu Lin, a mainstream media star who became a voice of conscience, rallied the Chinese American community and with the help of the Committee of 100 made sure that Captain Wang had proper defense counsel leading to dismissal of all charges against him.


Wen Ho Lee was the designated scapegoat and sacrificial lamb in the political struggle between the Republican Congress and Democrat President Clinton. He would have rotted in jail as a spy for China had the Asian American community not come to his support. Sam played an active role in this case as well.


In this case, the American public took no pains to make the distinction as to whether Lee, who came from Taiwan, was Chinese or not. To this day, some still considers him a spy though the court found him not guilty of any espionage charges. Those that still accuse Lee of spying have also forgotten that the court did find the FBI lying in court under oath.


Maybe Jeremy Lin with his continued success will erase some of the prejudices that reside in America against Asians. Perhaps linsanity, had it occurred a couple years earlier, could have blunted some of the bias of the American soldiers and caused them to regard ethnic Asian in their ranks as less gook and more fellow soldiers.


But we can’t count on Jeremy Lin to carry entire load for racial equality on his shoulders. We, the Asian American community, must stand up and demand our rights as full fledged, tax paying, law abiding citizens to all the respect pertaining thereto just like the next person.

The Making of Renminbi on Becoming a Global Currency

In 2002, I remember visiting the Leaning Tower of Pisa as a tourist. I was surprised to see a souvenir stand displaying a prominent sign: "Your Reminbi are welcome here" written in Chinese. This was significant on two counts. One, there were already significant amount of tourists from China visiting Europe and two, the Chinese yuan was becoming a global currency, albeit unofficially.

After the financial crisis of 2008, it became obvious that the dollar was on a long term path of declining value. While China has not been the only country to want to avoid holding on to too many dollars, China has been the busiest in entering currency swaps with its many trading partners. Bilateral currency swaps allow the participating nations to pay their trade invoices with their own currency and not with dollars.

Here is a compilation of swap agreements China has entered to date.
2008, December - South Korea, 180 bn yuan since extended
2009, January - Hong Kong, 200 bn yuan since doubled to 400 bn in Nov 2011
February - Malaysia, 80 bn yuan, extended 2/12 & increased to 180 bn yuan
March - Indonesia, 100 bn yuan
- Belarus, 20 bn yuan
- Argentina, 70 bn yuan
June - Brazil, no exact amount known
2010, June - Iceland, 3.5 bn yuan
July - Singapore, 150 bn yuan
2011, April - Uzbekistan, 0.7 bn yuan
- Mongolia, 5 bn yuan, doubled to 10 bn yuan in March 2012
June - Kazakstan, 70 bn yuan
December - Thailand, 70 bn yuan
Pakistan, 10 bn yuan
Japan, no exact amount known
2012, January - U.A.E., 35 bn yuan

February - Turkey, 10 bn yuan
March - Australia, 200 bn yuan

Other imminent swap deals currently under discussion include Nigeria and South Africa. The number of deals are likely to accelerate. As more countries hold and accept Reminbi, the more appealing the yuan will become as the alternative to holding too many dollars and more bilateral swap agreements will result.

Even if all the swap agreements were drawn down in full, there might be as much as two trillion yuan circulating outside of China. This might be enough liquidity for the renminbi to act as a de facto global currency but not enough to replace the dollar as the hard currency.

We can be sure, however, is that the dollar will cease to be the only global currency because no one will be satisfied with owning a currency that decrease in value with time. Japan has entered a currency swap deal not just with China but also with India, and Turkey with Malaysia. These are some examples how others are looking for ways of going around the dollar.

Keeping Manufacturing in America Won't be Easy

In his State of the Union, President Obama stressed the importance of keeping manufacturing in America. The reasoning is that in order to continue to innovate and develop the next generation must-have products, the US needs manufacturing that uses leading edge technology. Nothing wrong with the reasoning, but it may be too late.

A lengthy analysis on why jobs are flowing to China based on the Apple iPhone experience appeared in the New York Times. One of the most important findings of the NYT piece was that America simply no longer has the skill sets to meet Apple’s demands for a high quality, technology product. America has lost the edge to make things.

Advanced manufacturing depends on staffing the factory floor from the production line to the line supervisors with people possessing technical skills. The training programs Obama talked about might serve as temporary Band-Aids that might keep certain production from leaving in the short term. But to maintain a world leadership position, the US will need far more technicians, engineers and scientists than the country is producing.

For many years long before the 2008 financial meltdown, the smartest and brightest of American graduates were pursuing careers on Wall Street rather than careers in science and engineering. Making financial products was easier and more lucrative than manufacturing hard goods. Value was created more rapidly and more profitably by financial manipulation than by selling hard goods.

During the height of Japan bashing in the 1980’s, the late legendary Akio Morita, CEO of Sony, said America was good at moving money from one pocket to the other but not in making anything.

For decades the majority of Americans, most of the so-called 99%, have been getting a basic education inferior to what their parents received. Although politicians readily acknowledge the importance of public education, budget allocations did not follow lip service. Classroom size got bigger and kids were taught fewer hours in a day and fewer school days in a year.

To meet the required budget cuts, schools are forced to cut out arts, music and other non-core courses and after school activities. Bare bones programs leave students uninspired as they sleep walked to graduation not much wiser than when they started. Teachers waved the students through rather than making sure that the lessons took hold.

Of course, there are pockets of exception. Perhaps 5% of the Americans can afford to subsidize their local school budget out of their pockets and help raise the quality of education for their children or send their kids to better quality private schools. But that leaves a lot of untrained minds that will not realize their full potential.

In some parts of America, pro science is regarded as anti-religion, or worse yet pro religion is ipso facto considered as antithetical to science. The local sentiment that religious concepts should be taught on same footing as science, such as creationism vs. evolutionism, would leave young minds poorly prepared for a productive adult life in a technology driven world.

Out of the forty 2012 finalists of Intel Science Talent Search, 14 have been identified as ethnic Chinese, 7 with South Asian surnames and 5 others with some other Asian surnames. For many years now, more than half of the finalists, high school students with outstanding aptitude in sciences, are first generation immigrants or sons and daughters of immigrants from Asia.

Immigrants from China, India and Russia, in particular, come from cultures with deep respect for learning and science. They have not been in America long enough for the anti-science mentality to rub off.

So long as we are not able to turn out enough science and engineering graduates of our own, then President Obama is correct when he said we need to welcome foreign students to stay after they graduate and not push them away.

But even if immigrants lead in the development of innovations, as we see in Silicon Valley, America still needs a solid pyramid base of people with skills that would turn innovations into commercial successes. President Obama spoke of keeping and building leading edge manufacturing in the US. This is not going to happen unless there is a fundamental shift in the American attitude about the importance of math and science.
__________________
An edited version appeared in New America Media and Nation of Change.

Lesson from Taiwan's Recent Election

Much to the relief of the US, China and of course the majority of Taiwanese who voted for him, Ma Ying-jeou was re-elected as president for another four years. His re-election means no disruption in the building of cross straits relations and corresponding reduced likelihood of flare-ups and incidents that would raise cross strait tensions. Stability across the straits was highly sought after by Washington, Beijing as well as Taipei.

Ma won by a 6% margin, less than the 17% landslide from his first election but nonetheless a surprisingly comfortable lead considering the widely anticipated wire photo finish with his opponent from the opposition party. There were no last minute shenanigan, such as an election eve assassination attempt, to interrupt the proceedings. Some observers have even gone to proclaim that Taiwan's orderly exercise in democracy should inspire their brethren on the mainland.

Actually, I think Taiwan could serve as a lesson for America. Essentially three out of four voters in Taiwan turned out to vote. In the US, one out of two would be doing good. Nearly 200,000 Taiwanese flew back from the mainland, where they were working to vote in the election. Uncounted thousands even flew from the San Francisco Bay Area to vote. Since Ma won by more than 800,000 votes, the oversea returnees can't be said to spell the difference.

But we can say, they went back to Taiwan to vote because they cared. We have not seen such voter concern and passion in the US for many elections. Just the opposite is happening. We are inundated with negative lies and deliberate distortions funded by the rich to the point that we no longer give a damn. For decades America has not been a democracy of the people but has become corrupted by highest bidders.

Time to Hold US Congress Accountable

When I was starting out in my career, one of my bosses had a favorite saying," Your next pay increase becomes effective when you are." I think it's time we hold our Congress accountable using this logic.

One of the viral email that I received gave me the idea for this blog. According to this email, Warren Buffett, in a recent interview with CNBC, offers his solution to the debt ceiling: "I could end the deficit in 5 minutes," he told CNBC. "You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election."

The 26th amendment (granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified! Why? Simple! The people demanded it. That was in 1971...before computers, e-mail, cell phones, etc.

Of the 27 amendments to the Constitution, seven (7) took 1 year or less to become the law of the land...all because of public pressure. This is one idea that really should be passed around.

Let's call it the Congressional Reform Act of 2012:

1. No Tenure/No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.

2. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

Whether Mr. Buffett actually voiced the ideas above doesn't matter to me. The ideas stated in this email have merit in their own right irrespective of who gets credit for originating them. I have already seen an op-ed in a major daily that essentially presented the same view (without acknowledging possible role by Buffett).

We need to hold Congress accountable and if there is enough ground swell in favor of such a movement, we may then begin to institute some real change.

Autumn in Jiuzhaogou， 九寨沟

The natural scenic beauty of Jiuzhaigou was not "discovered" until modern times. The Tibetans that reside in the nine villages of this "Y" shape valley knew about its breath taking scenery, of course, but this valley is located in such a remote northwest corner of Sichuan that it was unknown to the Chinese in ancient times. For this, today's visitors are blessed with the total absence of man-made edifices and calligraphy carved into rocks. All one sees is mountains, and strings of mirror smooth lakes connected by cascades, water falls and running stream.


To visit Jiuzhaigou during the autumn foliage colors is to take a out of the world journey. The serenity and beauty literally takes ones breath away. Most of the fall color comes from the oily pine tree, a pine tree that is not evergreen and the color change only lasts about two weeks. Thanks to the advice of Dragon Delight, our tour operator, we were in Jiuzhaigou in the last week of October and witnessed the peak of nature's display.

The Chinese authorities deserved all the kudos for taking the most ecologically friendly route in developing this valley into a tourist attraction. Some examples of their green policy: Only park operated buses are allowed inside the park. Visitors are allowed to walk only on designated walkways. Hundreds of miles of footpath were constructed out of wooden boardwalk. The wooden planks were grooved to improve slip resistance. Plenty of rest pavilions, toilets and trash receptacles dotted along the parthways. Unlike toilets in many other parts of China, these toilets were oder free and even featured water less urinals.

On our first day, our group of 12 rented our own park operated minibus and driver. It was a particularly crowded day and by renting our own vehicle, we could skip around various stops and alight where it was least crowded and avoided the jostling crowd. The next day, a few of us went into the park on our own. We got off the park bus about mid way and walked downhill, following the path along the strand of lakes. It was a magical walk to be savored especially for the time when we've become too old to tour again.
The town of Jiuzhaigou came into existence because of the park. There are now a large assorment of hotels to choose from. There are however only two 5-star hotels in the area. The Sheraton is within walking distance to the entrance of the park. The Intercontinental is more than half hour drive from the entrance. The feeling of staying in the latter is more like staying in a self-contained integrated resort because of its isolated location.

To get there: There are direct flights from many of China's major cities to JiuHuang airport. Or, fly to Chengdu and connect from there. You can also drive from Chengdu but that would be a long ride requiring a very long day.

Review of US China Bilateral Relations for 2012

US China bilateral relations had an up and down year and most indications point to more of same or worse for 2012, a presidential election year in the US. I have written an analysis exclusively for China-US Focus which can be read in full at their website.

One of the most contentious issues bedeviling the bilateral relations has been the proper value of the Renminbi and its alleged impact on the placement of manufacturing jobs, i.e., whether jobs have fled the US because an undervalued yuan.

My chat friends have called attention to a series of articles that would shed light and dispell much of the confusion surrounding this subject.

A professor of economics from Tokyo presented a careful deconstruction of the cost of an iPhone (3G) designed in the US and made in China. The value added in China in assemblying the iPhone was $6.50 out of a total export price of $179. The difference between China's value add and the export price represents the cost of bill of material consisted of parts and components purchased from Germany, Japan, Korea and the US. In calculating the trade deficit, the entire $179 is credited to China's account and not just 3.6% of the total.

Another analysis revealed that Apple captured 58.5% of the profit from each iPhone sold while China's share of the profit was 1.8%. In other words, for every dollar China made on the iPhone, Apple made $32.50. Both authors went on to say that with more than 60% margin, Apple could afford to make a little less and have the iPhone made in the US but choose to have it assembled in China to maximize its profit.

The same case can be made about Apple's latest "insanely great" product, the iPad. China's value added is about $8 out of $499 cost of the product. Apple's share of the cost for design and marketing is about $150. Ironically because the iPad sells for a higher price inside China, Apple makes even more money for the iPad made in China and sold in China and it doesn't even show up in trade statistics--except of course for those made in America parts and components that were imported by China to put into the iPads.

Basically iPads make in China and sold in America inflates the trade deficit while iPads sold in China reduces the actual deficit by the amount of made in America parts put into the iPad. This is not a new story. When Zhu Rongji was premier and was asked about the trade deficit, he pointed out then that a pair of Nike sneakers that retail for over $100 in the US contained only a couple of dollars of value added from China.

Maybe Congress and the watchdogs of Washington can be fooled by derivatives and home mortgage swaps, but it doesn't take advanced degrees in rocket science to understand that trade deficits are greatly exaggerated. Politicians are not stupid enough to not understand, they just don't want to.

As agent for change, Obama is a disappointment

President Obama ran on the promise that he represents the agent for change and as president he would do things differently. So far he has delivered mostly more of same.

Banks that were too big to fail under the previous adminstration continues to be too big to fail.

Wars too costly to fight has lingered and America continues to bleed.

Most recently, Obama has joined the chorus that blamed the US economic woes on an undervalued Renminbi, as if a sudden valuation would solve his problems at home. Fact of the matter is that the US has been printing greenbacks faster than China could keep up with, even if they wanted to.



Last week a column written by a former military person in NYT proposed that Obama approach China with the offer to swap American disengagement of Taiwan for the American debt China is holding. The logic behind this piece is that if the US leaves the room, then the two parties across the Taiwan Strait would natually sit down and negotiate a peaceful settlement.

This is certainly a bold and provocative idea that stands no chance of getting Obama's attention. He has to date shown no inclination to make any bold and thus potentially risky moves.

There you go again, Senator Schumer

Dear Senator Chuck Schumer and your esteemed colleagues, to quote a famous US President, “There you go again.” Since nothing else was working very well coming out of Congress, it was mighty clever of you to beat up on China again. It might even convince your constituents that you are doing something to right the floundering US economy.

It’s hard to know if you have any other ideas about what ails our country but you sure know to put the hurt on China by calling them currency manipulator. You started to accuse them of currency manipulation when the renminbi was 8.3 to a dollar. Somehow you figured that yuan was 40% undervalued. Now that the exchange rate is 6.3 to a dollar, or nearly 30% appreciation since China took the yuan off the peg, you believe that the yuan is still 40% undervalued. That’s the kind of dogged insight we admire in our elected officials.

It looks like you didn’t let House Speaker, Congressman Jim Boehner, in on your joke. He simply dismissed your attempt to brand China a currency manipulator as “not the way to go.” Apparently Mr. Speaker believed there are more urgent matters to deal with. But congratulations to you because this means there won’t be any downside consequences such as a trade war and you get to jerk China’s chain for free.

Has it occurred to you that the one manipulating the currency is our very own Fed, weakening the dollar by design? Paying off our massive debt with dollars of declining value is so clever on the part of our Fed, don’t you think?

As for China taking jobs away from America, you should have talks with the major multinationals headquartered in your home state. Ask them why they are sitting on the sidelines with their billions of cash and not investing at home to create new jobs.

Maybe they will tell you that the wage rate and cost of doing business in New York is just too high. Maybe they will say that the incompetence and impotence of Congress evokes so much uncertainty of the future that they are afraid to invest.

Actually China is losing jobs too. Many of the low-end, labor intensive jobs such as in textile and shoes are leaving China. Faced with economic reality, the Chinese companies in the labor intensive industries are taking the lead and locating their plants in nearby lower cost countries such as Bangladesh, Cambodia, Myanmar and Vietnam.

No way, of course, that such low paying jobs could hope to come back to America—does water flow uphill—but Chinese companies sitting on ample cash reserve would like to invest in America to take advantage of certain comparative advantages available here. As you probably know, investments of virtually any kind are good for the local economy because they really do create jobs.

However, Chinese investments face such a dauntingly hostile reception in America, thanks in no small part to creatively fanciful objections from members of Congress. As a revered member of this august body, you really can help stimulate the US economy by becoming more welcoming of direct investments from China.

Up to now, American multinationals have been the major beneficiary of trade surplus enjoyed by China. That’s because most of the inputs that goes into their plants in China are from the outside and most the profits earned when exported from China though credited to China's account ended up in the bottom line of the multinationals.

But, dear Senator, that’s about to change. Native Chinese companies, not foreign invested enterprises, have learned to move up the value chain and make products with better profit margins that are not as labor intensive. They may not be making products that can directly compete with an iPad or Tesla yet, but they can make price attractive products to sell in less demanding markets.

The Chinese companies will learn from their experience selling lower end products just as Toyota had and Hyundai had with lemons before they became fierce competitors that almost put GM out of business. The Chinese companies can count on endless supply of well trained and highly motivated graduates to fill their ranks and they can count on a government that supports their goal of becoming global companies.

Dear Senator, with all due respects, you should be concerned about the future of America but calling China the currency manipulator isn’t going to fix the problem.
____________________

An edited version ran in New America Media on Oct 14 and Global Times and on the China-US Focus blog.

See my response to video interview on RT.com.

The Diverging Trajectories of China and America Since 9-11

Before September 11, 2001, China looked at the U.S. with a bit of awe, envy, admiration and even affection that was rooted from the days of being comrade-in-arms against the Japanese Imperial Army. Some of the positive vibes could be traced even further back to the 19th century when the western powers were carving up China and the Americans were the least rapacious.

After 9-11, China’s attitude gradually turned skeptical tinged with condescension as China along with the rest of the world saw America embark on a path of self-destruction.

Immediately after the tragic implosion of the twin towers, China’s then president Jiang Zemin called the White House to express his concern and sympathy. Then China watched with amazement as the U.S. used the tragedy of 9-11 to launch a war against Iraq.

As if reasserting American values over Al-Qaeda were sufficient pretext, the Bush Administration became obsessed with the so-called liberation of Iraq. The search for fictitious weapons of destruction became the excuse to hunt for Saddam’s head.

Sadly, America’s subsequent fumble at nation building in Iraq was for the world to see. The gross incompetence, waste, and corruption severely eroded the U.S. prestige and credibility. Mao used to call the U.S. a paper tiger; many in China began to think he may have had a valid point.

Even so, the lesson for China was to witness the American war machine in action. American advanced weapons, especially the missiles and drones remotely controlled by former video game jockeys safely ensconced in bunkers thousands of miles away, were not to be trifled with.

Confrontation with the U.S. was never in China’s national interest; after 9-11, staying out of the way of the American ire definitely was. Rather than casting the veto at the Security Council over issues where they disagreed such as Iran or North Korea, China was more likely to abstain than openly disagree with the U.S.

By surprising an American flotilla surrounding the Kitty Hawk with a quiet running submarine and shooting down one of its own satellites, China demonstrated enough military capability to send an occasional signal to the U.S. that the cost of any arms conflict would be too dear to contemplate.

China also began to actively practice soft power around the world, making investments in Africa, Asia, Australia and Latin America. Those investments not only made economic sense but also benefitted the local economy and made friends with the people. There were no strings attached such as imposition of moral values or insistence on what constituted acceptable forms of government.

The day that truly jolted China was September 15, 2008, the day Lehman Brothers collapsed. Suddenly the prospect of holding onto trillions of dollars of questionable value confronted China’s central bankers.

Treasury Secretary Hank Paulson in the waning days of the Bush Administration had to fly to Beijing to reassure the Chinese leaders that the value of the dollar would be protected. Secretary of State Hilary Clinton and Treasury Secretary Timothy Geithner at the beginning of Obama administration had to do the same.

Most recently, Vice President Joe Biden had to make the pilgrimage to Beijing to once again reassure the Chinese that their dollars will continue to have value even after Congress nearly put the U.S. in default of its sovereign debt.

Of course both sides understood that the grand gesture of reassurance while necessary for appearances sake was an empty one. Until the U.S. economy recovers and the government can generate a budget surplus, the only way the federal government can repay its debt obligations is by printing more money. Printing more money will cheapen the value of the dollar. There is no way to defy this law of fiscal gravity.

The manner in which the U.S. federal government handled the debt crisis offered no assurances to China that the U.S. will find a way out of their financial quagmire. What China has seen was the incredible pettiness of Congress and the inability of the Obama administration to accomplish anything.

Ironically the only time in recent memory that the U.S. Congress unanimously rallied in support of the president (except for one dissenting vote) was to go to war in Iraq. All the other times, politics and paralysis ruled.

Since that fateful 9-11, the value of the dollar has fallen by nearly 20%. The aftermath of the home mortgage induced financial collapse and the flirting of U.S. default have not evoked confidence that a done-little, changed nothing President can find a way to work with the do-nothing Congress and turn the American economy around.

When China began its economic reform more than 30 years ago, the U.S. was the gold standard to aspire to. In the decade since 9-11, the U.S. by any measure has found itself on a downward spiral with no prospect of reversal in sight.

China, on the other hand, has found its own way up. During the recent decade, China has surpassed Germany to be the leading export nation and its economy has surpassed Japan to be the second largest in the world.

China built the Qing-Zang Railway at an elevation that experienced Swiss engineers said couldn’t be done. Then China built the largest network of high speed rail in the world and is now offering their technical expertise to the world.

In face of budget cuts, the U.S. has discontinued its space exploration program. China is just beginning theirs. Perhaps this is an apt metaphor for the future of the two nations.
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See edited version in New America Media and China-US Focus and People's Daily online.

Like Father, Like Son--Taiwan's Long Running Saga of Shame

Chen Shui-bian, Taiwan's first freely elected president that served two full terms, freely helped himself to any under the table gold he can grab and is now in jail serving time for his many convictions.

Throughout Chen's ordeal leading up to his final court appearance and sentencing, he fought his case publicly. Rather than covering his face from public view, he relished every public exposure into attempts to turn the proceedings against him into a farce.

He even boasted that all the tainted funds he was alleged to have in Swiss bank accounts would magically reappear in Taiwan within days of his release from detention. No shame, no slinking away for this man.

It appears that Chen Chih-chung is taking a page from his father's book. Chen junior the son has been convicted of perjury and sentenced to three months in jail. He fought the conviction all the way to Taiwan's Supreme Court and lost.

Chen Jr. promptly went public and unabashedly proclaimed that his sentence was politically motivated. He thought the Supreme Court of Taiwan should have cut him a deal where he could perform public service and pay a fine in lieu of going to jail.

According to Taiwan's law, a felon cannot hold a government post and Chen Jr. was stripped of his seat on the Kaohsiung City Council. Chen Jr. protested that said law was full of loopholes--no doubt he knows them all--and he should have received some sort of exemption.

The people of Taiwan are probably relieved to know that Chen Jr. will not run for the legislature upon his release from jail. This family does not know impropriety from their personal holes in the ground and is constant reminder of disgrace to the embarrassed people of Taiwan.

Nouveau Art is Thriving in Tibet

Most people get their information on Tibet based on declarations from Dalai Lama or his exiled followers residing in the west. Since these sources have not been to Tibet for decades, people can be expected to have at best a partial idea of what today's Tibet is like.

Those that have visited Tibet are likely to have a more well-rounded impression of what Tibet is like today. By touring various temples and souvenir shops, visitors would have been exposed to the richness of traditional Tibetan art embedded in religious objects and takeaway thangkas.

Very few, however, would know that there is such thing as modern Tibetan art and the art is dynamic and evolving in dramatic directions. My good friend, Dr. Cyrus Hui knows. A PhD economist and former banker, he became fascinated with Tibet, its culture and people, and he visits there often. He has written a historical fiction based on his Tibetan experiences.

He got to know some of the artists and had decided to help promote the new Tibetan art by opening an art gallery in Lhasa in late June 2011. See his eloquent discussion of the evolution of Tibetan art on the website of his gallery.

Many years ago, Cyrus was the first to recognize the universal appeal of paintings from Vietnam by artists trained in French impressionism. He bought the first collection of paintings back to Hongkong that became the seed for Galerie LaVong, the first gallery to launch its business exclusively on Vietnamese art.

Owned and operated by Shirley Hui, Cyrus' wife and good friend, the gallery in Lan Kwai Fong, has become the place where trendy new art is first unveiled. Prior to opening of the Lhasa gallery, a selection of Tibetan art was shown at Galerie LaVong with a gala in mid June. A selection of Tibetan art depicting its versatility and diversity can be seen at the end of the blog.

By opening an art gallery on Tibetan art, Cyrus is doing more than introducing today's Tibetan culture to the world. He is also explicitly saying: "Look, Tibet is a thriving place where its artists are free to experiment, innovate and create." Can we say the same for the residue of Tibetan culture eking out an existence in Dharamshala?







From top to bottom and left to right, the paintings are
Thousand Buddhas by Ang Sang
Story from Ruins by Penba
Deliverance by Sonlang Tsering
Longevity by Han Shuli
Shepherd Weavers by Bama Tashi
Posted with the permission of Cyrus and Shirley Hui.

non Book Review: Tiger Trap by David Wise

This is the first time I am reviewing a book I have not read. Instead my review is simply based the author's willingness to espouse the same ludicrous assertion that China conducts espionage differently from other countries by relying on the so-called grains of sand approach. This approach alleges that instead of relying on professional spies and dastardly derring-do, China collects tidbits of data from the millions of cooperative Chinese in America. Putting all the scrapes of information together and incredulously, China gets the design of the latest multihead missile system or some other equally devastating secrets.

The FBI has been claiming this theory for decades to justify their indiscriminant and racially prejudiced actions taken against Chinese Americans in America. No one has seen fit to challenge the notion that bits and pieces of information could possibly add up to the secrets the U.S. holds dear. Since J. Edgar Hoover first made this claim as a cattle prod to hit over the heads Chinese Americans, this bit of racist rant has persisted within the law enforcement community.

Whatever the merits of his book, that the author would continue to promote this myth about the Chinese way of spying calls to question as to his intelligence and integrity. Some years ago, I have written a summary of the well known bias of the FBI towards Chinese Americans.

See the book review in the Wall Street Journal for an actual review that attempts to explain the grains of sand hypothesis. The review mentioned FBI expert Paul Moore, a prominent proponent of this hypothesis. As I have pointed out in the past, Moore is the car pool buddy of Robert Hanssen, a senior FBI official and eventually convicted for leaking secrets to the USSR. Yet Moore who never smelled a rat sitting next to a real spy can readily speculate that any two ethnic Chinese talking at a cocktail party could be passing secrets.

America narrowly missed being a deadbeat--this time

The last time the world faced a financial tsunami in 2008, smart money looked for safe harbor and that was to buy U.S. treasury bills. Even though it was the American financial market running amuck that led to the financial collapse, everybody remained convinced that the dollar as the safest place to be. So much money piled into the U.S. that, for a while, the dollar actually rose in strength relative to other currencies.

After the latest fiasco from Washington, will the rest of the world continue to have faith and confidence in the value of the dollar? After watching Congress played politics and care not a whit about upholding the honor of United States, can the world assume that America is not about to become a deadbeat to beat all deadbeat nations in history?

Even if the US Treasury honors its obligations this time after undergoing the tortuous exercise between House, Senate and the White House, can any investor feel assured that there would be a certain outcome the next time? Who is to say that some fringe group won’t successfully hijack the government and decide to renege on the government obligations?

China holds more US federal debt than any other foreign country. What has China done about this situation other than wringing the collective hands in Beijing? Actually, quite a lot.

On the one hand, even at the outset of the financial crisis, Beijing asked Washington to keep the value of the dollar from sliding. Members of the Obama administration serially assured China that the US will uphold the integrity of the dollar, maintaining as deadpan a demeanor as possible all the while knowing that printing more money is inevitable.

Of course, no one in Beijing took the U.S. assurance to the bank. Instead, China has been actively investing declining dollars into hard assets, such as oil fields and mineral deposits in Africa, Australia and Latin America. (China would make more investments in the U.S. as well except for Washington's generally frosty reception.)

Since the activity of China’s central bank is not transparent to outsiders, we can only speculate that China has also been diversifying their foreign exchange holdings into other currencies. However, no other currency has large enough circulating volume to allow China to fully divest out of dollars by exchanging into it.

The other means of not depending on the dollar is to conduct bilateral trade based on bilateral currency swap agreements that would allow the use of Chinese yuan rather than the dollar to settle the trades. China has entered such agreements with selected countries such as Brazil, Russia and South Korea. This is considered a step towards internationalizing the Renminbi.

In May, I attended an international conference on global financial security in Beijing. All the speakers from outside of China as well from inside China expressed concern on what action the U.S. will take to stabilize the world financial market. None anticipated that the American politicians would play political chicken and brinksmanship with the U.S. national debt and throwing America’s prestige and image down the sewer.

Since America’s financial collapse that drag the world down, which China side-stepped with its own considerably more effective economic stimulus plan (one that does not require bailing out banks), China has been looking at the U.S. with skepticism. Now that China has seen America’s much touted democracy in action, China is even more certain not to follow the U.S.

China’s economic stimulus meant more superhighways and bridges as well as a high speed rail system becoming the envy of the world, recent accident notwithstanding. In contrast, America’s superhighways need repairing and bridges that threaten to fall down.

Since 2008, China has formulated a national development plan that placed reduced reliance on export, especially away from labor intensive, low cost goods but aimed for higher valued added manufacturing. Recent Wall Street Journal article reported that multinational corporations are placing their high value manufacturing investments near foreign markets where they are making profits, not in the U.S.

China has continued to invest in education and allocated more of the national budget for R&D. Hundreds of thousands of graduates, mostly in technical disciplines, have gone overseas for graduate education. Many have returned to China to found companies that are competing on the global market such as Baidu, Huawei, and Suntech.

These companies compete on their proprietary innovations. With a pipeline of well trained technologists, there will be more coming from China. The U.S. with an increasingly dilapidated education system will need a steady infusion of foreign students to keep pace.

It’s not at all certain that the eventual accord reached by Congress will create jobs and restore the dignity of the millions of Americans seeking employment. The next time the U.S. lectures China about human rights, the spokesperson should be careful lest he/she is accused of wearing no clothes.

The U.S. is mired in two wars it doesn’t know how to win. Now the dysfunction of Washington has been laid open for all to see. While China is too diplomatic to question America’s vulnerability, will the rest of the world continue to see America as the sure footed hegemonic power that can be counted on to step in as the ultimate peacemaker?

There are pundits that still insist that America remains a great power and that eventually the country will pull out of this downward spiral. I would like to know how.
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A shorter version ran in New America Media. The New America Media version was also picked up by Xinhuanet and Global Times.

See interview on Russian TV.

Zatoichi's legacy is beautiful

When I was more or less a young man, I was introduced to the Japanese screen character, Zatoichi. The basic premise of Zatoichi films was that though blind, he could see right and wrong with faster clarity than the sighted; with heightened sense of hearing, he ably compensated for not seeing as he cut down his opponents in massive scale; and, with his bow legged gait and plain face, he was decidedly unheroic.

On a recent flight to Asia, I was surfing through the menu of films selections when "Ichi" caught my attention. The film began with a woman in rags stumbling alone in a blinding snowstorm. It was not immediately apparent that she was connected to Zatoichi.

As the story unfolded, the woman turned out to be a beautiful blind young girl who had been kicked out of the “goze” troupe. In medival Japan, goze troupes went around northern Japan entertaining gatherings with their singing and while strumming the shamisen. In flash backs, it was revealed that the manager of the troupe who was male and not blind had raped her. When he tried again, she accidentally killed him with her sword sheathed in her cane.

The movie actually started with her wandering in the countryside and ended up in a temple. One of three members of gangsters had sex with another blind goze woman and did not pay as promised. When she protested, they beat her and then they saw Ichi and started to harass her with obviously evil intentions. This is when a young good looking samurai came along and offered money to the gangsters in exchange for leaving Ichi alone.

Make long story short, the young samurai, Toma, had a psychological block and cannot pull out his sword from the scabbard and Ichi had to killed the three gangsters herself. The villagers thought it was Toma who killed the gangsters that had been terrorizing them. The rest of the gang of bandits too thought it was Toma who killed their comrades.

Ichi has been searching for a blind masseur (the film implied that this was Zatoichi but never said so) who raised her and taught her how to fight. She wanted to know if he was her father. Banki, the gangster leader, before defeating her and taking her prisoner told her that the blind masseur was the one person he wanted to meet who had died of natural causes.

Toma who was hired by the village to defend them was a colossal disappointment because he never could pull his sword from the scabbard. Banki was rejected by society because of his severely disfigured face. Everybody suffered from psychological problems.

There was a final bloody, sword-play confrontation between the villagers led by Toma and Banki and his gang. Of course, having fallen in love for Ichi, Toma was finally able to unsheathe his sword but the climatic ending is typically Japanese and not western.

The cinematography was exquisite and the story line more complex than the old Zatoichi stories. I hope we will see more of Ichi in the future.

Her Mother Remembers Iris Chang

Ms. Ying-Ying Chang has written a book (The Woman Who Could Not Forget) about her daughter and gifted author, the late Iris Chang, and about their mother-daughter relationship. Iris was at the top of her game as an amazing writer of history and non-fiction when she shocked the world by taking her own life. Many speculated about the cause of her death. Her mother was driven to write this book to set the record straight and preserve the memory of her daughter.

I got to know Iris when she became a member of The Committee of 100 after the publication of her worldwide bestseller, The Rape of Nanking. I found her to be passionate about the subjects she wrote about and highly intelligent in how she saw the world. As her mother described in her book, Iris was outraged by injustices in any form and was particularly sensitive to the rights and equality of women.

I was among the minority that did not read her book on the Rape of Nanking. In my case, I simply could not bear the thought of again reading the graphic descriptions of Japanese atrocities already known to me and becoming enraged once again by Japan’s refusal to apologize for the crimes against humanity that they committed in WWII. From Ying-Ying’s book, I came to appreciate that Iris identified herself with the heroic action of Minnie Vautrin in protecting the lives of Chinese civilians--eventually at the cost of her own life. I had read about Minnie Vautrin before I met Iris.

When Iris decided to write the history of Chinese immigrants in America, I was delighted. It was a subject dear to my heart whose scope and complexity needed someone of Iris’ skills and dedication to do it justice. When the book came out, I read it promptly and wrote a review on my own volition. Iris contacted me and asked for permission to use a portion of my review as part of the blurb on the cover of the paperback edition. Naturally, I was flattered that she thought enough to want to include it.

I also organized a book signing for Iris at Ming’s, a restaurant in Palo Alto. Many came to hear her and talk to her. I recalled a set of parents originally from China that brought their young daughter and had photos taken of their daughter beaming with pride standing next to Iris. At the time, I remember thinking to myself that although Iris said all the right things and was gracious toward her audience, she seemed a little stiff and awkward. Upon reading Ying-Ying’s book, I now understand that Iris had suffered the stresses of a frenetic book tour and was beginning to experience the strains of her illness.

The news of her suicide surprised and shocked us all and was beyond any comprehension. I got to know Iris’ parents after her death as a member of the team working to preserve her memory by staging a worldwide annual essay contests on war crimes and atrocities. During the three years that the essay contest was held, Ying-Ying spoke about her resentment of a series of specious speculations on the cause of Iris’ death. She eventually took time off to write a book that revealed the intimate details of a strong bond between a loving daughter and a devoted mother.

Ying-Ying made a strong case that lack of sleep and nutrition led to Iris’ initial mental illness. Improper psychiatric diagnosis led to prescriptions of antipsychotic medications that not only did not help her but the side effects actually pushed her into the abyss. Mental illness is considered shameful and difficult in the Chinese culture to admit and owned up to. It took a lot of mother’s love and courage to want to address Iris’ illness and document her tragic end as a warning for the benefit others.

If you want to understand how Iris became a hugely successful writer, read this book. If you want to learn about the uncertainties of current state of psychiatric medicine and the perils of antipsychotic treatment, you need to read this book. If you believe that successful daughters need not spring from Tiger Moms but from warm, loving and supportive parents, this is a book for you and an effective antidote to rampant Amy Chua-ism.

World Financial Security and the U.S.

Last week, I attended an international symposium on “Financial Security: China and the World,” held in Beijing and sponsored by China Institute for International Strategic Studies and the Katie Chan Foundation. Speakers came from all over the world including a former President of the European Commission, a former First Secretary of State of the UK and a former President of China’s Export and Import Bank.

Chen Fengying, George Koo & Katie Chan

Inevitably, the status of the U.S. financial health was on the minds of most of the speakers. They raised concerns over the mounting national debt and expressed skepticism as to whether any real solution has been proposed. One economist pointed out that interest payment could take up 20% of the US government revenue now and debt service by 2040 could amount to 58% of the total revenue, clearly an unsustainable proposition.

The US budget deficit continues to increase with no end in sight and counting on foreigners to continue to buy 70% of the US debt remains a keystone to the US strategy. But the foreign appetite for US treasuries cannot keep up with growing supply. As America having to print more money as the only resort becomes more obvious, foreign buyers will avoid buying rather than increase their purchase which will exacerbate the debt crisis.

Concerns were also raised over the prospects of the financially strong nations in the European Union having to bail out the weak yet again. The Germans in particular may face having to bail out the bad debt nations or bail out the over-exposed German banks that carried too much sovereign bad debt in their books. Eventually, the EU will have to create a bail out mechanism that does not look like bail outs in order to overcome domestic political pressures among donor nations.

The speaker from Australia announced that his nation suffered least from the financial tsunami and experienced no recession from 2007 to 2010. Australian banks continue to lend and provided the highest shareholder return among the world’s leading banks. In addition to having China as its major customer, he attributed strong regulation and close government supervision as the cause of the success of the banking sector.

There was universal agreement among the speakers that the world needs regulatory reform in order to prevent another financial meltdown. The speaker from Singapore pointed out that having Standard & Poor or Moody’s provide sell side credit rating for a fee is basically flawed. He offered a not-for-profit organization to compute creditworthiness based on scientifically sound methodologies and offer access to the ratings free of charge to users.

Comments by Mme Chen Fengying, Director of World Economic Studies, China Institute of Contemporary International Relations made quite an impression on me. She said while 9-11 radically changed the U.S. perspective on terrorism, 9-15 (the date Lehman Brothers filed for chapter 11) has led to financial terrorism. Heretofore the world looked up to the US financial model. Now the world needs to look for another.

Ms. Chen went on to say the US debt has now exceeded its GDP by over 30 fold*. She wondered how this could be sustainable but then she professed not to understand how 98% of dot com companies in the US could lose money and not suffer in the price of the their stock. She labeled the US as a credit card economy.

Only 11% of the US GDP comes from manufacturing while nearly twice that percentage comes from financial services sector of the economy. “Wall Street is supposed to serve the economy,” Ms. Chen said, “And not to hold the White House hostage.”

One veteran America watcher from China commented on the current US budget and debt service crisis and speculated that the two political parties will begin by taking on extreme and polarized positions but hopefully in the last minute the Congress will end brinksmanship and do the right thing. If the US government actually collapses, the financial terror that will strike the collective hearts of the world would be beyond comprehension.

I spoke by comparing the economies of Macao with Singapore and it is reported on Peoples’ Daily Online.

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* A friend who read the blog commented that total US debt, public + business + financial + household, amount to approximately 52 trillion, which is 3.6 times GDP. Accounting for all public and private sector assets, US probably has a net worth about 5 times its GDP. In other words, the US debt crisis is serious but not so dire as presented by Ms. Chen.

A counterpoint to the Three Gorges Dam Controversy

China's Three Gorges Dam was first conceived by Dr. Sun Yat Sen in the early republican period. It was finally realized in recent times when China had the resources to build the dam. As with any high profile project, the dam attracted a lot of attention. Most from the west tend to be critical including a recent spate of them. I came across a well reasoned arguments that presented the positive sides of this project. With the author's permission, I am posting his comments below:
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Some three years ago, I recall a similar article on the Three Gorges Dam by Shai Oster, in the Wall Street Journal, suggesting that disaster will soon befall the Dam. Alas, no catastrophe happened to the Dam in the intervening years, but it seems that there remains a clan of people in America anxious to see the “demise” of the Dam in some way.

If we roll back the history of the Dam, we will recall that when China applied to the World Bank for a loan to build the Dam nearly twenty years ago, it was the U.S. who exerted strong pressure on the Bank to deny loan to China. As a result China had to foot the bill herself. But China persevered. Not only did it managed to come up with the huge sum to pay for the enormous job of building the world’s largest dam (which it still is), but it also managed to finish the job on time.

Fast forward to the time of the article of Mr. Oster; at that time the Dam was not yet finished, but there was a significant carping chorus from the U.S. who cited all the factors mentioned in the present articles and more, and strongly suggested that the Dam will be a failure.

At that time I wrote a response which basically said: “Cool it!” I mentioned that from all the reports from within China, and all those who took the Yangtze River cruise through the Dam seemed to say that while the project encountered some problems, they were not such as to slow the project or to impact the project negatively.

Now to the present; I am very sad to see that the carping chorus has not been quieted. Both of the articles forward by Roger quote a “brief statement” from the Communist Party, but then try to play it up like a doomsday announcement.

It happened that Premier Wen Jiabao himself also made a brief statement a few days ago. The gist of it was that the Dam is now finished and doing its job, but that China should not forget the few problems uncovered during the building of the Dam and should work to overcome them.

The editorial from the Washington Post did acknowledge that: “Though the project has generated much-needed electric power and helped control floods, ….” But power generation and flood control were in fact the two major reasons for China to build the Dam in the first place. In all respects, the Dam seems to have carried out these two functions very well. It is now capable of generating enough electricity to power a city the size of Shanghai; and last fall it showed its mettle in helping to relieve the potential big flood plaguing the upper part of the Yangtze.

For a project of unprecedented magnitude, it should not be surprising that it encountered various difficulties. The important question is whether they are surmountable. The “numerous problems” (actually five) cited by Venetia Rainey appear to be all readily solvable if they are seriously addressed. For example, the “small earthquakes” actually were shifting of the ground experienced by some localities because of the added weight of water. I believe the frequency of these incidences is decreasing, and by moving people away from areas where the incidences were more frequent, the problem is essentially overcome. Landslides also occurred in some of these areas, with rocks and earth falling at the side of the river. Again these occurrences are rarer now.

The silt deposits at the upstream side of the dam was something the experts in China worried about ever since the first large dam was built on the Yellow River (which infamously carries a huge volume of silt from the Loess Plateau up stream). However, the Chinese engineer devised a “silt flushing” mechanism which was first successfully applied at the Xiolangde dam, the largest on the Yellow River. The same method has been built into the Three Gorges Dam and the silt threat has been basically removed (the amount of silt on the Yangtze is much less than on the Yellow River to start with).

It will be time-wasting to refute the charges of these articles point by point. But from reports of those who visited the Dam lately via cruises or other mean, the Dam, fully operational, is looking majestic, and is enjoying a booming tourist trade. Where previously only 3000 ton ships can go from Shanghai to Chongqing, now the River can accommodate ships up to 10,000 tons. It has already played a role in flood relief on at least two occasions. In short, the Dam is alive and well, thank you!

I do however hope that the nay-sayers find better things to do. If they still want to carp, how about writing articles on the sad state of American infrastructure, where a great deal of it is old and decrepit and hardly any new construction is taking place.

Jay Hsu

Is Gary Locke America’s Answer to China’s Anson Burlingame?

Assuming that he is an unworthy target for obstructionist politics and is confirmed by the Senate, Gary Locke will be first American of Chinese ancestry to serve as ambassador to China.

Over 140 years ago, Anson Burlingame became the first American to be appointed by the Qing imperial court to serve as ambassador from China to Washington.

There are some interesting mirror image parallels in these two historical appointments and some important differences.

Burlingame was first appointed Ambassador to China by Abraham Lincoln. After six years in that capacity, Prince Gong, the regent behind the throne approached Burlingame and asked if he would accept the appointment as China’s ambassador to the West and help China renegotiate the many unequal treaties signed with the western powers.

Burlingame known for his integrity and highest sense of right and wrong immediately submitted his resignation to Washington and accepted the appointment to represent China. He was credited with the Burlingame Treaty of 1868 between China and the U.S. which recognized the sovereign rights of China.

In 1870, Burlingame died of pneumonia in St. Petersburg while negotiating with the Russian Czar on behalf of China. Less than a decade after his death, the U.S. began to renege on the terms of his treaty but that’s another story.

Locke did not come from China, his father and grandfather did. Locke was born and raised in America. His qualifications to be ambassador come from his past service as governor of Washington and as Secretary of Commerce.

Washington was one of the most active states in building trade relations with China, long before China emerged as a world economic power and predating Locke’s terms as governor. As governor, he was certainly engaged in those initiatives and can rightly claim a leadership role.

Then as Secretary of Commerce, Locke has been one of Obama’s key players in the bilateral relations with China. He can certainly claim ample experience with and knowledge of China

However as the next ambassador, Locke will face some challenges that might be uniquely his because of his being an ethnic Chinese.

In some circumstances, a foreign country does not always welcome a native born who have immigrated to America to return as the ambassador from America. Sometimes such appointments are regarded as a put-down—the psychology of “aren’t we important enough for Washington to send a real American envoy?”

Locke is unlikely to encounter such a form of reverse snobbery because of the strength of his credentials and stature. Instead the Chinese officials might expect more from him because of his presumed cultural affinity than a “real” American.

Even for a Mandarin speaking Jon Huntsman, the Chinese officials would never think of him as one of them but looking at Locke, they might, even if his Mandarin is not as fluent as Huntsman, his predecessor.

The Chinese officials may presume Locke to possess certain cultural empathy and can pick up the nuances and innuendoes that a white person cannot and they would expect Locke to be more sympathetic to the Chinese points of view.

Such a presumption would put Locke in a delicate position since his duties and obligations are to represent America’s interest, not necessarily that of China. Inevitably he will be call on to occasionally deliver hard-nosed messages from Washington, whereupon he would have to exercise his diplomatic skills to moderate America’s traditionally imperious approach.

Locke also risks being challenged by select members of Congress and other Americans on occasions when they are having xenophobic fits and demanding to know, “Whose side are you on?”—a question that would never be asked if Locke were white.

On top of all this, Locke is also becoming America’s envoy to Beijing in a new era when the basis of bilateral relations is shifting from big brother/little brother to one of equals between peers.

While America may not willingly relinquish its position as the senior partner, the reality suggests that the next envoy will have to. As holder of over a trillion dollars in American IOU’s, China expects to be treated with the respect of someone the US is beholden to.

The US China bilateral relation has arguably become the most important in the world. As ambassador, Locke’s priority will be to enhance closer cooperation despite the expected bumps on the road when the two sides cannot agree. Obama faces plenty of challenges for the remainder of his term of office and he does not need China to be among them.

Even though no other American ambassador to China had become a turned-around envoy from China since Burlingame, nearly all, since George H. Bush was appointed by Nixon, have returned from their posting to share their understanding of China with the American public and reject simplistic lambasting frequently indulged by Congress.

Many became proponents and supporters of less confrontational and closer bilateral relations. Whether Locke’s term is two years or more, we can expect him to join the ranks of positive emissaries when he returns from China.

A version of this post appeared in New America Media and subsequently picked up by China-US Focus.