Quotulatiousness

September 10, 2013

China’s historical model for naval strategy

Filed under: China, History, Middle East, Military, Pacific — Tags: , , , , — Nicholas @ 09:16

At The Diplomat, James Holmes explains the odd fact that China is a “good citizen” in their coalition work with other countries fighting piracy away from home, but bullies its neighbours in the waters closer to home:

The analogy is the doctrine of “no peace beyond the line” practiced in late Renaissance Europe. To recap: in a nifty bit of collective doublethink, European rulers struck up a compact whereby nations could remain at peace in Europe, avoiding the hardships of direct conflict, while assailing each other mercilessly beyond a mythical boundary separating Europe from the Americas. In practice this meant they raided each other’s shipping and outposts in the greater Caribbean Sea and its Atlantic approaches.

It feels as though an inverse dynamic is at work in the Indo-Pacific theater. Naval powers cooperate westward of the line traced by the Malay Peninsula, Strait of Malacca, and Indonesian archipelago. Suspicions pockmarked by occasional confrontation predominate east of the South China Sea rim, a physical — rather than imaginary — line dividing over there from home ground.

A non-Renaissance European, Clausewitz, helps explain why seafaring powers can police the Gulf of Aden in harmony while feuding over the law of the sea in the East China Sea and South China Sea. It’s because the mission is apolitical. Counterpiracy is the overriding priority for the nations that have dispatched vessels to the waters off Somalia. Few if any of them have cross-cutting interests or motives that might disrupt the enterprise. It’s easy to work together when the partners bring little baggage to the venture.

[…]

You see where I’m going with this. The expedition to the Gulf of Aden is an easy case. It proves a trivial result, namely that rivals can collaborate for mutual gain when they have the same interests in an endeavor. Now plant yourself in East Asia and survey the strategic terrain within the perimeter separating the Indian from the Pacific Ocean. China views the South China Sea, to name one contested expanse, not as a commons but as offshore territory. Indeed, Beijing asserts “indisputable sovereignty” there.

Such pretensions grate on Southeast Asian states, while the United States hopes to rally coalitions and partnerships to oversee the commons. But if Beijing is serious about the near seas’ constituting “blue national soil” — and our Chinese friends are nothing if not sincere — then outsiders policing these waters must look like invaders. How else would you regard foreign constables or armies roaming your soil — even for praiseworthy reasons — without so much as a by-your-leave?

South China Sea claims

September 4, 2013

Air-Sea Battle as a response to Chinese military expansion

Filed under: China, Military, Pacific, USA — Tags: , , , — Nicholas @ 13:18

The Diplomat‘s Amitai Etzioni looks at the US Air-Sea Battle plan:

On the face of it, the Pentagon’s Air-Sea Battle plan makes eminently good sense; it is a clear response to a clear challenge. China has been developing a whole slew of weapons (especially anti-ship missiles) over the past two decades that are of great concern to the U.S. military. These weapons, known in Pentagon-speak as anti-access/area-denial (A2/AD) capabilities, could undermine the international right to free passage in China’s surrounding waters or, in the case of a conflict over Taiwan or contested islands in the South and East China Seas, prevent the U.S. from making good on defense commitments to its friends in the region.

In response, the Pentagon developed Air-Sea Battle (ASB), the employment of which entails, according to position papers developed to promote it, a blistering assault on China’s mainland. A report by the Center for Strategic and Budgetary Assessments (CSBA) gives a detailed account of how an ASB-style war with China would unfold. In the opening “blinding campaign,” the U.S. attacks China’s reconnaissance and command-and-control networks to degrade the PLA’s ability to target U.S. and allied forces. Next, the military takes the fight to the Chinese mainland, striking long-range anti-ship missile launchers. Given that this is where the anti-ship missiles are located, it is only logical that the U.S. would target land-based platforms. And to go after them, one of course needs to take out China’s air defense systems, command control centers, and other anti-access weapons. In short, ASB requires a total war with China.

[…]

The main flaw Air-Sea Battle it is not merely that it is a particularly aggressive military response to the anti-access/area-denial challenge. The problem is that ASB is developing in a foreign policy vacuum. If the U.S. were to conduct a thorough review of China’s military capabilities and its regional and global ambitions — and found that the Chinese were planning to forcefully expand their territory or unseat the U.S. as the global power, perhaps Air-Sea Battle might be deemed appropriate.

August 22, 2013

Chinese government philosophy in the headlines

Filed under: China, Government, Media — Tags: , , , — Nicholas @ 12:57

Jon, my former virtual landlord, sent me this link and said “Does this sort of thing really matter any more? Aren’t all governments doing this?”

Under Tocqueville’s Influence, China Chooses Despotism
Paul A. Rahe

In the last few days, the national press has been full of reports suggesting that China’s new President, Xi Jinping, is orchestrating a revival of Maoism and a crackdown on those in China who would like to introduce within that country the procedures, practices, and institutions that distinguish the West: the rule of law, constitutionalism, freedom of the press, judicial independence, civil associations, and “universal values” – which is to say, a respect for human rights. The Wall Street Journal, which broke the story on Saturday, claims that Xi is receiving strong support from former President Jiang Zemin; and on Monday The New York Times filled in some of the details:

    Communist Party cadres have filled meeting halls around China to hear a somber, secretive warning issued by senior leaders. Power could escape their grip, they have been told, unless the party eradicates seven subversive currents coursing through Chinese society.

    These seven perils were enumerated in a memo, referred to as Document No. 9, that bears the unmistakable imprimatur of Xi Jinping, China’s new top leader. The first was “Western constitutional democracy”; others included promoting “universal values” of human rights, Western-inspired notions of media independence and civic participation, ardently pro-market “neo-liberalism,” and “nihilist” criticisms of the party’s traumatic past.

    Even as Mr. Xi has sought to prepare some reforms to expose China’s economy to stronger market forces, he has undertaken a “mass line” campaign to enforce party authority that goes beyond the party’s periodic calls for discipline. The internal warnings to cadres show that Mr. Xi’s confident public face has been accompanied by fears that the party is vulnerable to an economic slowdown, public anger about corruption and challenges from liberals impatient for political change.

[…]

The evidence now suggests the contrary — that Wang Qishan is by no means alone in his convictions, that Xi Jingpin and his lieutenants take quite seriously the possibility that China is in a pre-revolutionary situation, and that they are intent on putting a lid on everything. Where Tocqueville might have suggested that the way forward was for the country’s leaders to embrace the “seven subversive currents,” to carry out a revolution from above, and to gradually introduce into the country the rule of law, constitutionalism, freedom of the press, judicial independence, civil associations, and a respect for human rights, they have decided in this year — the 120th anniversary of Chairman Mao’s birth — to return to the path he charted more than 60 years ago.

August 14, 2013

Ignore the inconsistencies in official Chinese statistics at your peril

Filed under: China, Economics — Tags: , , — Nicholas @ 08:40

It’s been a while since I reminded everyone that the official Chinese government statistics can’t be trusted. Here’s Zero Hedge on the same topic:

How Badly Flawed Is Chinese Economic Data? The Opening Bid is $1 Trillion

Baseline Chinese economic data is unreliable. Taking published National Bureau of Statistics China data on the components of consumer price inflation, I attempt to reconcile the official data to third party data. Three problems are apparent in official NBSC data on inflation.

    First, the base data on housing price inflation is manipulated. According to the NBSC, urban private housing occupants enjoyed a total price increase of only 6% between 2000 and 2011.

    Second, while renters faced cumulative price increases in excess of 50% during the same period, the NBSC classifies most Chinese households has private housing occupants making them subject to the significantly lower inflation rate.

    Third, despite beginning in the year 2000 with nearly two-thirds of Chinese households in rural areas, the NSBC applies a straight 80/20 urban/rural private housing weighting throughout our time sample. This further skews the accuracy of the final data.

To correct for these manipulative practices, I use third party and related NBSC data to better estimate the change in consumer prices in China between 2000 and 2011.

I find that using conservative assumptions about price increases the annual CPI in China by approximately 1%.

This reduces real Chinese GDP by 8-12% or more than $1 trillion in PPP terms.

Regular visitors to the blog know that I’ve been rather skeptical about the official statistics reported by Chinese government and media sources.

August 12, 2013

The controversy over Japan’s latest “destroyer”

Filed under: China, Japan, Military — Tags: , , — Nicholas @ 10:32

Apparently our eyes can deceive us. For most people looking at this image — at least if they know much about naval vessels — the description that comes to mind is “aircraft carrier”:

JS Izumo DDH-183

JS Izumo DDH-183

However, for constitutional reasons she is officially classified as a “destroyer”. In the South China Morning Post, Stefan Soesanto explains why this classification matters:

The Izumo‘s distinctive features certainly do not resemble anything one would typically classify as a destroyer. Indeed the warship currently under construction in Yokohama harbour is an aircraft carrier in anything but in name. Its size, tonnage and speed are closer to the US Essex aircraft carrier class, than to any of the two previous helicopter destroyers Japan has built so far.

At a cost of US$1.14 billion, the Izumo is officially conceptualised to host up to 14 helicopters whose missions would range from anti-submarine warfare and maritime border surveillance to humanitarian relief operations. In this regard, the Izumo‘s objectives are identical to the two Hyuga-class helicopter destroyers that were put into service in 2009 and 2011.

The current discussion among analysts and military brass as to whether Japan’s helicopter destroyers are considered aircraft carriers is not new. According to The Japan Times, Maritime Self-Defence Force chief of staff Admiral Keiji Akahoshi stated in 2009 that the Hyuga-class falls outside the conventional definition of an aircraft carrier because it lacks a fair degree of offensive functions. This argumentation has been notably employed by the Japanese government to circumvent Article 9 of the peace constitution to portray its helicopter destroyers as purely defensive military assets.

While Beijing’s criticism towards the Hyuga-class has been largely used as a means to support its own aircraft carrier expansion plans, the unveiling of the much larger Izumo has prompted widespread fears in China. Major Chinese media outlets went to great lengths to link Japan’s militaristic past to plans by the Japanese government towards constitutional revision. Indeed, the Chinese defence ministry even put out a statement saying that it is “concerned over Japan’s constant expansion of its military equipment”.

Reflecting on its own aircraft carrier plans, however, Chinese experts such as Li Daguang, professor at the National Defence University of the People’s Liberation Army, seem to make a simple leap of faith by suggesting that “the Chinese aircraft carrier Liaoning was mainly built for training purposes while the Izumo was built for real war”.

Of course, this isn’t a new thing, as a quick glance at the JS Hyūga also shouts “aircraft carrier” rather than “destroyer”:

JS Hyūga

JS Hyūga

August 6, 2013

Second Chinese aircraft carrier appears to be under construction

Filed under: China, Military — Tags: , — Nicholas @ 14:40

Strategy Page has the details:

Recent photos from a Chinese shipyard appear to show a section of a new Chinese aircraft carrier under construction. This appears to be a carrier similar to the American Nimitz class ships (100,000 ton vessels using a catapult rather than a ski jump flight deck for launching aircraft). Large ships, including warships, are often built in sections than the sections are welded and bolted together. The section of what appears to be a carrier does not indicate the exact size of the new carrier other than that it appears larger than the new carrier China commissioned at the end of 2012.

Last September China commissioned its first aircraft carrier, the Liaoning. At the time China was believed to be building the first of several locally designed aircraft carriers but the Chinese officially denied this. The only official announcements have alluded to the need for two or three aircraft carriers, in addition to the Liaoning. Construction of such large ships had not yet been seen in any shipyard. That has changed with the appearance of these new shipyard pictures.

[…]

The new Chinese “larger carrier” apparently means something like the recently decommissioned American USS Enterprise (CVN 65). This was the first nuclear powered carrier and it served as the prototype for the subsequent Nimitz class. It’s unclear if the new Chinese carrier will be nuclear powered. The Enterprise was an expensive design, and only one was built (instead of a class of six). While a bit longer than the later Nimitz class, it was lighter (92,000 tons displacement, versus 100,000 tons). The Enterprise was commissioned in 1961, almost 40 years after the first U.S. carrier (the Langley) entered service in 1923. In the two decades after the Langley there were tremendous changes in carrier aviation. While the innovation slowed after World War II, major changes continued into the 1950s (jet aircraft, nuclear propelled carriers, SAMs). But in the ensuing half century there has been no major innovation in basic carrier design. This has not been a problem because the carriers have proven useful, at least for the U.S. Navy (the only fleet to use such large carriers) and no one else has maintained a force of these large carriers. Only the U.S. has felt a constant need to get air power to any corner of the planet in a hurry. More importantly, no navy has been able to give battle to the U.S. carrier force since 1945. The Soviets built new anti-carrier weapons and made plans to use them but that war never occurred. China is building carriers but is not committed to having a lot of them to confront the U.S. but to intimidate its neighbors.

BBC News has a series of photos of the Liaoning from purchase to commissioning:


Click to see full-size images at the BBC website

Earlier reports on the progress of the Liaoning (under the name Shi Lang) can be found here.

Update: James R. Holmes on why China might be interested in becoming a 21st century naval power.

A couple of years back, when Beijing made its aircraft-carrier aspirations official, the fine folks at Foreign Policy asked me to explain why a historic land power like China cared about flattops. Being a bear of small brain, I reached into my mental bag of tricks and came up with Thucydides’ claim that fear, honor, and interest are three of the prime movers for human actions. Beijing feared U.S. containment, a relic of the Cold War; saw an opportunity to recoup honor lost during the century of humiliation at the hands of the imperial powers; and hoped to add to the naval power it was amassing to advance China’s interests in maritime Asia.

What’s changed since then? Fear and honor are emotional needs. It may be that sending the carrier Liaoning (formerly the Soviet Varyag) to sea helped satisfy China’s need to banish bad cultural memories. But who knows when fear will be at bay? The United States and its allies have ruled the sea in East Asia long enough that their navies may inspire fears disproportionate to their actual margin of supremacy. Or, the Chinese leadership may see value in protesting too loudly, and thus making Western powers fearful of creating a self-fulfilling prophecy, namely Sino-American antagonism.

Most importantly, it may be that having ameliorated anxieties arising from honor and fear grants Beijing the luxury of operating mostly from calculations of interest. Simply deploying a carrier, Liaoning, may forestall fears while satisfying Chinese society’s desire for a capability that every other great power enjoys.

July 27, 2013

Jiangsu might as well be the Chinese name for Detroit

Filed under: China, Economics — Tags: , , , , — Nicholas @ 11:02

The South China Morning Post on the economic troubles of the provincial, municipal and local authorities in Jiangsu:

The nightmare scenario for China’s leaders as they try to wean the country off a diet of easy credit and breakneck expansion is a local government buckling under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China’s most indebted local government.

Hefty borrowings through banks, investment trusts and the bond market by Jiangsu’s provincial, city and county governments have saddled the province north of Shanghai with debt far higher than its peers, public records show.

Many of the province’s mainstay industries, including shipbuilding and the manufacturer of solar panels, are drowning in overcapacity. Profits are dwindling, and the government’s tax growth is braking hard.

[…]

Little public information is available on the total debt of Chinese local governments. Indeed, earlier this month China’s Vice-Finance Minister Zhu Guangyao said Beijing did not know the precise level of their debts either.

But from what ratings agencies and think-tanks can piece together, Jiangsu may be the standout debt risk among China’s 31 provinces.

Looking at bank loan books, they can see that China’s eastern provinces including Jiangsu have the highest concentration of government debt. Jiangsu then looms large because of its reliance on costlier and alternative forms of financing, which they said suggested that cheaper bank loans and land sales are not giving the authorities the funding they need.

The risk that Jiangsu might pose to the Chinese economy in a crisis is clear. On its own, the province would be a top 20 global economy with GDP greater than G20 member Turkey. Its 79 million population tops that of most European countries.

July 18, 2013

Chinese museum woes – “80 of the museum’s 40,000 objects had been confirmed as authentic”

Filed under: China, History — Tags: , , , , — Nicholas @ 09:22

Tom Phillips on the sudden closure of the Jibaozhai Museum:

The museum’s public humiliation began earlier this month when Ma Boyong, a Chinese writer, noticed a series of inexplicable discrepancies during a visit and posted his findings online.

Among the most striking errors were artifacts engraved with writing purportedly showing that they dated back more than 4,000 years to the times of China’s Yellow Emperor. However, according to a report in the Shanghai Daily the writing appeared in simplified Chinese characters, which only came into widespread use in the 20th century.

The collection also contained a “Tang Dynasty” five-colour porcelain vase despite the fact that this technique was only invented hundreds of years later, during the Ming Dynasty.

Museum staff tried to play down the scandal.

Wei Yingjun, the museum’s chief consultant, conceded the museum did not have the proper provincial authorizations to operate but said he was “quite positive” that at least 80 of the museum’s 40,000 objects had been confirmed as authentic.

“I’m positive that we do have authentic items in the museum. There might be fake items too but we would need [to carry out] identification and verification [to confirm that],” he told The Daily Telegraph.

Mr Wei said that objects of “dubious” origin had been “marked very clearly” so as not to mislead visitors and vowed to sue Mr Ma, the whistle-blowing writer, for blackening the museum’s name.

July 1, 2013

The rise and fall of economic powers

Filed under: China, Economics, History, Japan — Tags: , , , , , — Nicholas @ 10:30

Charles Hugh Smith has a guest post at Zero Hedge, talking about the theme of economic decline of great powers:

Our collective interest in the rise and fall of empires is not academic. The meteoric rise of China and the financialization rotting out global capitalism are just two developments that suggest we are entering an era where some great powers will collapse, others will remake themselves and others will gain ascendancy.

[. . .]

In 1987, pundits were predicting that Japan’s “5th generation” computing would soon dominate what was left of America’s technological edge. They were spectacularly wrong, as the 5th generation fizzled and Japan became an also-ran in web technology, a position it still holds despite its many global electronic corporations and vast university research system.

Japan’s modern economy was set up in the late 1940s and early 1950s to exploit the world of that time. Sixty years later, Japan is still a wealthy nation, but its relative wealth and power have declined for 20 years, as its political-financial power structure clings to a model that worked splendidly for 40 years but has not worked effectively for 20 years.

The decline is not just the result of debt and political sclerosis; Japan’s vaunted electronics industry has been superseded by rivals in the U.S. and Korea. It is astonishing that there are virtually no Japanese brand smart phones with global sales, and only marginal Japanese-brand sales in the PC/notebook/tablet markets.

The key dynamic here is once the low-hanging fruit have all been plucked, it becomes much more difficult to achieve high growth rates. That cycle is speeding up, it seems; western nations took 100 years to rapidly industrialize and then slip into failed models of stagnation; Japan took only 40 years to cycle through to stagnation, and now China has picked the low-hanging fruit and reverted to financialization, diminishing returns and rapidly rising debt after a mere 30 years of rapid growth.

There is certainly evidence that China’s leadership knows deep reform is necessary but the incentives to take that risk are low. Perhaps that is a key dynamic in this cycle of rapid growth leading to stagnation: the leadership, like everyone else, cannot quite believe the model no longer works. There are huge risks to reform, while staying the course seems to offer the hope of a renewal of past growth rates. But alas, the low hanging fruit have all been picked long ago, and as a result the leadership pursues the apparently lower-risk strategy that I call “doing more of what has failed spectacularly.”

Though none of the historians listed above mention it, there is another dangerous dynamic in any systemic reform: the very attempt to reform an unstable, diminishing-return system often precipitates its collapse. The leadership recognizes the need for systemic reform, but changing anything causes the house of cards to collapse in a heap. This seems to describe the endgame in the USSR, where Gorbachev’s relatively modest reforms unraveled the entire empire.

June 30, 2013

“It’s very difficult to regulate greed”

Filed under: Business, Cancon, China, Law, Wine — Tags: , , , — Nicholas @ 11:30

Icewine is what originally put Canadian wine on the international map. Icewine is an expensive thing to produce, and therefore has drawn a lot of cheaters into the market:

Canada is tightening the rules for producing its popular icewine, a sweet dessert wine that is only made in cold climates, to crack down on fraudsters who sell mislabeled bottles that don’t make the grade.

In regulations published this week, the Canadian government said any bottle labeled and sold as icewine must be made only from grapes that have frozen on the vine.

[. . .]

Because the frozen grapes only yield a tiny amounts of sweet liquid, the dessert wine has a high cost and a high price. Grapes are left on the vine until the temperature falls to -8C (18F) over a prolonged period, and usually harvested overnight.

“It’s liquid gold,” said Paszkowski.

In China, where icewine has become hugely popular, a thriving counterfeit industry is flooding the market with wines that don’t live up to the label, he said.

“It’s very difficult to regulate greed,” said Paszkowski. “We’ve identified counterfeit icewines even in five-star restaurants and hotels.”

H/T to Elizabeth for the link.

June 23, 2013

Two remarkable press releases on the Snowden case

Filed under: China, Government, Law, Russia, USA — Tags: , , , , , — Nicholas @ 10:46

First, here’s the official Hong Kong government’s statement:

Mr Edward Snowden left Hong Kong today (June 23) on his own accord for a third country through a lawful and normal channel.

The US Government earlier on made a request to the HKSAR Government for the issue of a provisional warrant of arrest against Mr Snowden. Since the documents provided by the US Government did not fully comply with the legal requirements under Hong Kong law, the HKSAR Government has requested the US Government to provide additional information so that the Department of Justice could consider whether the US Government’s request can meet the relevant legal conditions. As the HKSAR Government has yet to have sufficient information to process the request for provisional warrant of arrest, there is no legal basis to restrict Mr Snowden from leaving Hong Kong.

The HKSAR Government has already informed the US Government of Mr Snowden’s departure.

Meanwhile, the HKSAR Government has formally written to the US Government requesting clarification on earlier reports about the hacking of computer systems in Hong Kong by US government agencies. The HKSAR Government will continue to follow up on the matter so as to protect the legal rights of the people of Hong Kong.

And here’s a statement from Wikileaks:

Mr Edward Snowden, the American whistleblower who exposed evidence of a global surveillance regime conducted by US and UK intelligence agencies, has left Hong Kong legally. He is bound for a democratic nation via a safe route for the purposes of asylum, and is being escorted by diplomats and legal advisors from WikiLeaks.

Mr Snowden requested that WikiLeaks use its legal expertise and experience to secure his safety. Once Mr Snowden arrives at his final destination his request will be formally processed.

Former Spanish Judge Mr Baltasar Garzon, legal director of Wikileaks and lawyer for Julian Assange has made the following statement:

“The WikiLeaks legal team and I are interested in preserving Mr Snowden’s rights and protecting him as a person. What is being done to Mr Snowden and to Mr Julian Assange — for making or facilitating disclosures in the public interest — is an assault against the people”.

To the vast amusement of many commentators, the reported route out of Hong Kong leads to Russia, with other stopping points including Cuba and Venezuela. It’s like a free press/civil liberties tour of the planet!

June 22, 2013

US charges against Snowden were filed on June 14th

Filed under: China, Government, Law, USA — Tags: , , , , — Nicholas @ 09:10

It apparently takes a week for the US government to publicize that it has laid charges…

Federal prosecutors filed espionage charges against alleged National Security Agency leaker Edward Snowden, officials familiar with the process said. Authorities have also begun the process of getting Snowden back to the United States to stand trial.

The charges were filed June 14 under seal in federal court in Alexandria, Va. — and only disclosed Friday.

Snowden has been charged with three violations: theft of government property and two offenses under the espionage statutes, specifically giving national defense information to someone without a security clearance and revealing classified information about “communications intelligence.”

Each of the charges carries a maximum of 10 years in prison.

Snowden, who is a former employee of defense contractor Booz Allen Hamilton, leaked details about far-reaching Internet and phone surveillance programs to The Guardian and The Washington Post earlier this month. He revealed his identity while in Hong Kong, where it is believed he is still hiding.

It’s not clear whether the extradition will be straightforward:

Andy Tsang, Hong Kong’s police commissioner, said that if an extradition request was sent from a country that had a “mutual legal assistance agreement” with Hong Kong, its government would “handle it in accordance with current Hong Kong laws and systems.”

Simon Young, a professor at Hong Kong University’s faculty of law, suggested it was unclear whether Snowden would win or lose any attempt to fight extradition.

He said theft was listed in the U.S.-Hong Kong extradition treaty. “There is an offence listed in the treaty of unlawful handling of property, but this raises the question as to whether information is property and the answer is not clear,” he said in an email.

June 20, 2013

The world map of modern slavery

Filed under: China, Law, Liberty, Russia — Tags: , , , , , — Nicholas @ 14:05

In The Atlantic, Olga Khazan talks about the countries that appear on this US State Department map of human trafficking:

World Map of Slavery, 2013

China, Russia, and Uzbekistan have been named among the worst offenders when it comes to human trafficking, according to a State Department report released Wednesday, joining Iran, North Korea, Cuba, Sudan, and Zimbabwe on the bottom “tier” of the U.S. human trafficking rank.

Their lower designation means the U.S. may sanction those countries with measures like cancelling non-humanitarian and military assistance, ending exchange visits for government officials, and voting against any IMF or World Bank loans.

China, Russia, and Uzbekistan had previously been on the “Tier 2 Watch List,” a middling designation for countries that show little progress in making strides in preventing forced labor. Because they had been on the “Watch List” for four years, the State Department was obligated to either promote or downgrade them.

In China, the one-child policy and a cultural preference for male children perpetuates the trafficking of brides and prostitutes.

“During the year, Chinese sex trafficking victims were reported on all of the inhabited continents,” the report found. “Traffickers recruited girls and young women, often from rural areas of China, using a combination of fraudulent job offers, imposition of large travel fees, and threats of physical or financial harm, to obtain and maintain their service in prostitution.”

However, the State Department also singled out the country’s epidemic of forced labor, in which both internal and external migrants are conscripted to work in coal mines or factories without pay, as well as its continued use of re-education hard labor camps for political dissidents.

However, it’s also worth keeping in mind that there are two common definitions of human trafficking in use, one of which is an outrage to common decency while the other is an attempt to conflate sex work with slavery:

1) The transport of unwilling people (usually women, but of course can at times be either men or children) into forced prostitution. This is of course illegal everywhere: it’s repeated rape just as a very start. It is also vile and we should indeed be doing everything possible to stamp it out.

2) The illegal movement of willing people across borders to enter the sex trade. Strange as it may seem there really are people who desire to be prostitutes. People would, other things being equal, similarly like to be in a country where they get a lot of money for their trade rather than very little. Given these two we wouldn’t be surprised if people from poorer countries, who wish to be in the sex trade, will move from those poorer countries to richer countries. And such is the system of immigration laws that many of them will be unable to do this legally: just as with so many who wish to enter other trades and professions in the rich world. You can make your own mind up about the morality of this but it is obviously entirely different from definition 1).

June 19, 2013

Even the Chinese statistics office couldn’t accept these numbers

Filed under: Bureaucracy, China, Economics, Government — Tags: , , — Nicholas @ 07:57

In the Wall Street Journal‘s ChinaRealtime section, an amusing story about a local Chinese government whose official statistics were so unrealistic that the central statistics office called them out on it:

It’s typically advisable not to accept Chinese economic data at face value – as even the country’s own premier will tell you. Figures on everything from inflation and industrial output to energy consumption and international trade often don’t seem to gel with observation and sometimes struggle to stack up when compared with other indicators.

How the figures are massaged and by whom is as much a secret as the real data itself. But in an unusual move, the National Bureau of Statistics – clearly frustrated with the lies, damn lies – has recently outed a local government it says was involved in a particularly egregious case of number fudging, providing rare insight into just how we’re being deceived.

According to a statement on the statistics bureau’s website dated June 14 (in Chinese), the economic development and technology information bureau of Henglan, a town in southern China’s Guangdong province, massively overstated the gross industrial output of large firms in the area.

[. . .]

The statistics bureau doesn’t say why Henglan inflated its industrial output numbers. But indications that a local economy is sagging could reflect poorly on the prospects for promotion of local officials, and China’s southern provinces have been particularly hard hit by the global slowdown in demand for the country’s exports. Factories have closed, moving inland and overseas in search of cheaper labor, denting local government revenues.

“When governments are looking to burnish their track record, that can put the local statistics departments in a very awkward situation,” said a commentary piece that ran Tuesday in the Economic Daily (in Chinese), a newspaper under the control of the State Council, China’s cabinet. The article said that one of the biggest obstacles to ensuring accurate data is that the agencies responsible for crunching the numbers aren’t independent from local authorities. Moreover, it argues that penalties for producing fake data were too mild to act as a deterrent.

June 16, 2013

Chinese banks have a “hidden second balance sheet”

Filed under: China, Economics — Tags: , , — Nicholas @ 10:40

It’s been a while since I posted one of my links to articles about the Chinese economy. Time to redress that now:

“There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling,” she told The Daily Telegraph.

While the non-performing loan rate of the banks may look benign at just 1pc, this has become irrelevant as trusts, wealth-management funds, offshore vehicles and other forms of irregular lending make up over half of all new credit. “It means nothing if you can off-load any bad asset you want. A lot of the banking exposure to property is not booked as property,” she said.

[. . .]

Fitch warned that wealth products worth $2 trillion of lending are in reality a “hidden second balance sheet” for banks, allowing them to circumvent loan curbs and dodge efforts by regulators to halt the excesses.

This niche is the epicentre of risk. Half the loans must be rolled over every three months, and another 25pc in less than six months. This has echoes of Northern Rock, Lehman Brothers and others that came to grief in the West on short-term liabilities when the wholesale capital markets froze.

Mrs Chu said the banks had been forced to park over $3 trillion in reserves at the central bank, giving them a “massive savings account that can be drawn down” in a crisis, but this may not be enough to avert trouble given the sheer scale of the lending boom.

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire US commercial banking system in five years,” she said.

The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.

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