Beijing Briefs

by Alexandra Stevenson

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Chinese Central Bank Warns Against US “Excuses” for Protectionism

January 30th, 2009 · Business, Politics

People’s Bank of China vice governor Su Ning responded to “persons in a Western country [who] have said China is manipulating the yuan,” in an announcement reported by Chinese news agency Xinhua. “These remarks are not only inconsistent with the facts but they are misleading about the reasons for the financial crisis.” All this was in response to US treasury secretary Timothy Geithner and former treasury secretary Henry Paulson’s allegations that China’s currency is undervalued and that China has contributed to current financial crisis.

The Chinese government fears American trade barriers amidst already slowing demand for Chinese exports. In his statement, Su Ning also warned against “excuses” for protectionist trade barriers under the new Obama administration. How this blame game progresses will set a precedent for Sino-American trade relations under the Obama administration. While not yet accusing China of being a “currency manipulator” (which, by US law, would require the treasury department to engage in “expedited” negotiations with the Chinese government) the new Obama team are courting potential future trade hostilities.

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Chinese media respond to Geithner

January 23rd, 2009 · Business, Politics

The new American treasury secretary’s comments last week seem to indicate that the new presidency will take a protectionist stance towards China. In a written Timothy Geithner said “President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency.” While comments in the Chinese papers and media have been reactive, the government and the People’s Central Bank have yet to comment officially.

A quick glimpse at the China Daily, a mouth-piece for the Party media machine, however, makes the Chinese position clear; the list of op-ed titles include: “Logic of blaming China for US crisis “bizarre’”, “US has itself to blame for financial meltdown”, “Blaming China for crisis is an irresponsible act.”

Geithner’s comment is not the first example of such ‘blame’ rhetoric. Earlier in the month former treasury secretary Henry Paulson announced that the accumulation of huge savings in Asian countries like China helped to put America in it’s current financial crisis. “This view is extremely ridiculous and impossible and it’s ‘gangster logic,’” says Chinese central bank researcher Zhang Jianhua in Xinhua, the Chinese news agency.

Galaxy Securities analyst Zuo Xiaolei echoed Zhang’s sentiments in Xinhua calling the two Treasury secretaries’ commentary “cliche” and simple rhetoric to stoke protectionist fire. While recent comments from the US are, for now, just testing the Chinese waters, Xiaolei said trade protectionist policies would be a serious concern for China.

China has long asserted that it has its own mechanism for renminbi exchange rates and denies artificially keeping the currency low. The US wants Beijing to increase its holdings, which would mean more liquidity but, “if China toes the line, its economy will worsen,” says China Daily.

Chief Economist for China Construction Bank told Bloomberg that the conditions for appreciation of the yuan no longer exist as a result of global financial hits that have slowed demand for China’s exports.

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China’s Labor Contract Law One Year On

January 8th, 2009 · Portfolio

From the article:

Since its inception in January 2008, the Labor Contract Law (LCL) has garnered a great deal of attention from international and local media alike.

Some have hailed it as a major step forward for workers’ rights, while others blame the law for contributing to high production costs and causing factory shutdowns across the country. On paper, the LCL is comprehensive. Yet while it offers up drastic changes for foreign and domestic businesses operating in China, it has so far been inconsistently enforced. Brought in to reduce the instances of employee abuse, the law is aimed at empowering workers to take matters into their own hands if their rights have been violated.

The trouble is that few employees, or employers for that matter, understand the different aspects of the law, and even if they do, it’s hard for them to determine which sections are being properly enforced.

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Chinese Call for Truth in Past and Present

January 2nd, 2009 · Politics

Green Kings in waiting

2008 marked the 30th year since China’s economic reform and so-called ‘opening up.’ In his New Year’s speech, Chinese  President Hu Jintao remarked on China’s progress and called for Chinese to  “uphold the great banner of socialism with Chinese characteristics.” We know what much of the Western world thinks about China, but what does China think of itself? With its massive trade surplus, can China offer an fresh ideas in a new age of economic chaos?

I interviewed two authors who have recently published books that, in different ways, have provided a major contribution to understanding China’s recent culture. Along with a third woman, Singaporean-Chinese filmmaker who made the film Boomtown Beijing, these women help to offer a nuanced view to contrast the often simplistic analysis of China’s past and future.

China is offered democracy from a Western menu Chinese find indecipherable, says Xinran, author of China Witness, which recounts her twenty years interviewing China’s ’silent generation’ of seniors who survived Chairman Mao. After Deng Xiaoping opened economic free zones in the late 70s, China was a hungry child, given a choice between a rich menu and a slice of bread. The child choose bread because “the menu was just a meaningless piece of paper.”

China today still does not fully trust a menu which offers freedom and human rights. Xinran forced herself to forgive those who made her suffer for crimes she did not commit and whose own real crimes were left unpunished. Now she urges the West to be patient. Living both in London and Beijing, she says, “Outsiders talk about China in monochromatic and political terms.”

Zhang Lijia, author of Socialism is Great, grew up in the 1980s when China was slowly opening up to the West, a phase she thinks of as the country’s coming of age. Zhang worked at a missile factory for what she calls ‘iron rice bowl’ security. She sought refuge in ideas of democracy and individual freedom, staging a workers’ protest in support of the 1989 Tiananmen student demonstrations.

She says that since the 1980s, Chinese leaders have orchestrated a capitalist frenzy without acknowledging those earlier Maoist crimes. “I don’t just want to be a dissident,” she says, but she feels compelled to tell the truth, “China today is still a cage, but today it is much bigger so people don’t always feel the limits of it.”

Despite her rebellious past, Zhang, like Xinran, nonetheless condemns the West’s “blind criticism” like that expressed in April of 2008 in demonstrations against China’s policy in Tibet. She argues that the situation is oversimplified by young people who know little of China’s recent history.

Both Xinran and Zhang voice concern that China’s own youth do not understand the level of despair to which their country sank because they have received no education on Mao’s disastrous Cultural Revolution.

This void puts the China of today in an uncertain state, explains filmmaker Siok Siok Tan who is both Singapore and Chinese. Tan and Beijing Film Academy students documented the impact of the Olympics in Boomtown Beijing. Tan sees China as a teenager “looking at herself in the mirror,” unsure of her own identity.

It remains to be seen how a mix of national pride combined with an undefined modern identity, largely the result of the denial of history under Mao, will shape China’s future. The big question is how that teenager looking in the mirror, will respond to the often hawkish and self centered foreign response to China largely on the part of the US. That $ 1.9 trillion surplus, which has effectively made China the banker of the US, is unchartered territory for both.

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Bringing the Undefined to China through Dance

November 24th, 2008 · Culture

Picture from LDTX 2006-2008 Beijing Dance Brochure

Picture from LDTX 2006-2008 Beijing Dance Brochure

In a culture where human relationships are valued but not expressed publicly, modern dance - which uses complicated human interactions as its inspiration - might be considered an unusual form of art. Yet, creative expression is emerging in China through rhythm, and specifically in this one particularly interesting and traditionally ‘western’ form. Beijing has been the breeding ground for China’s own modern dance movement. One of the most original of these is LDTX, which stands for Lei Dong Tian Xia,  or Thunder Rumbles Under the Heaven. It is the first non-government professional dance company in China

On November 22, 2008 LDTX performed two pieces - Moment of Color and Undetermined Domain. The programme says it’s a “raw display” of life’s narratives and human relations. An ambitious goal given its choreographic style; 48 chairs remain on the stage in various formations, and at one point are thrown into the center of the stage, as dancers slam into each other and then calmly and fluidly navigate their partner’s body. The overall effect is strangely halcyon and, indeed, ultimately a “raw display” of life’s narratives and human relations. Both pieces, performed at the Minorities Cultural Palace Theater, were compelling, fresh and a revival of creative expression that for over half of the last century had not been allowed.

The first of the two, Moment of Color, choreographed by artistic director Willy Tsao, opened with color coded male-female duos negotiating the their bodies and their emotions while literally being conducted by a sole dancer in black. Tsao later explained that humans have three different types of relationships with music (mirror interaction,
dissociated interaction and dialogue interaction.) It seemed that his third articulation of a dancer’s interaction - that of dialogue - was what could best describe the choreographed moves of the dancers as they danced to the melancholic voice of a violin, music composed by Arvo Part and Astor Piazolla.

The second performance didn’t leave one with the same feeling. Undetermined Domain - choreographed by Ma Bo and Li Hanzhong - is at once abrasive, disturbing and painfully beautiful. All fourteen dancers begin uniformed in white on stage with a large metal cage. A harsh clinical light carves a spotlight which is ignored by the
dancers. They seem to be distracted, or better, trapped. They bang on the metal
cage, climb in and out of it and contort their bodies, trying to break unseen barriers. With the harsh surroundings of a barren stage, it appeared a psychological barrier that these dancers were violently dancing against.

It was a more beautiful dance than the first, but in the same way that accidental beauty can captivate. In the weighty music of an oratorio by Elliot Goldenthal and the cringe-worthy clanging of Bang on a Can there was softness; in the stark contrasts between bright light and dark elongated shadows of dancers against a shiny metal backdrop, there was gracefulness. Most impressive of all was the perfect coordination of the dancers, despite the breakneck speed at which limbs flew, torsos spun and heads turned.

For a dancer, one of the best parts about modern dance is the feeling of freedom its repertory of moves allows for. One of the greatest achievements of a modern dancer and the choreographer is to convey that same feeling to an audience member who remains seated throughout the performance. In this way, the dancers from LDTX Dance Company are the finest - they inspire movement in those who watch them. Hopefully, they will also inspire a new generation of Chinese dancers.

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Closing The Gates: A look at China’s new foreign currency control regulations

October 3rd, 2008 · Business

China’s already tough foreign currency control regulations have just gotten tougher

The Chinese market has gotten a little chillier for foreign investors. A new regulation recently publicized by the State Administration of Foreign Exchange (SAFE), now bans Foreign Invested Enterprises’ (FIE) from using foreign capital, converted to RMB, for the purpose of equity acquisitions. Simultaneously, a new amendment to tax regulations eases the way for domestic Chinese corporations looking to invest abroad.

This move is in line with other policies as of late, which have aimed to clamp down on the influx of Foreign Capital looking to buy an undervalued RMB and at the same time flee recessions in developing countries. Still, slowing foreign currency influx has up until this point not targeted enterprises and legitimate investing, making it something of an about face from China’s long standing support for foreign investment, which helped kick start the country’s economic boom 30 years ago, and the official policy of opening up markets.

The new regulation, Circular 142, was issued on August 29, 2008, though it wasn’t fully publicized until October. The circular, besides prohibiting equity investment with foreign capital, also restricts investment in “non-self-use” real estate properties, or investment in securities if those are outside the company’s business scope.

While not stopping all foreign investment, the regulation will severely limit those who can invest in China. Venture and private equity lawyer Rocky Lee explains that this new development “makes acquisitions and expansion capability hard” for FIEs.

An official source in the Ministry of Foreign Commerce, who spoke on conditions of anonymity, said that while he thought the circular contradicted China’s open market policies, there were enough loopholes to keep foreign investment flowing into China. He noted that domestic equity approved by SAFE and individual transactions that have “otherwise been provided for,” are excluded from the prohibition of foreign converted capital buying Chinese equity. These “otherwise provided for” transactions have not been defined. In addition, Circular 142 only defines the purchase of Chinese equity as prohibited, ignoring the purchase of assets altogether. In a note to clients, Janet Tang from the law firm Akin Gump Strauss Hauer & Feld, pointed out another loophole in the poor definition of what is “outside a company’s business scope.”

Economic Worry

The influx of foreign currency has caused China’s foreign reserves to skyrocket, which has fueled inflation, and put pressure on the currency to appreciate. In September alone, China’s reserves climbed USD 21.45 billion, putting China ’s surplus at $1.9 trillion. Though the currency hasn’t appreciated greatly since April of this year, remaining at around 6.85 to the dollar, the central bank has had to issue large amounts of notes to sterilize the reserves and keep the currency down, a process that can often only be done incompletely.

In the first half of the year large amounts of “hot money” - money chasing speculative gains - entered the country, putting pressure on the exchange rate. Amidst Chinese interest rate hikes and a falling dollar susceptible to US interest rate cuts, the conditions for foreign investors to hedge their capital in Chinese investments were perfect. Speculators played the currency arbitrage game under the guise of foreign investment, most commonly pumping money into stock and real estate markets.

At the same time the Chinese economy was under threats from falling international demand,and chaos in the stock and real estate market. The newest foreign exchange regulations aimed to help keep the exchange rate steady in the current tough market environment, easing the pressure on exporters, and hopefully calming some of the market volatility.

“Apparently, with these measures, the Chinese government will possess more accurate firsthand knowledge about the actual amount injected in China and converted into RMB int he name of foreign direct investment,” said lawyer Tang. “This information will also presumably help the government obtain authentic and reliable statistical data regarding foreign investment,” she added.

Istvan Pribilovics, former Chief of Budget for the Inter-American Development Bank, theorizes that the government doesn’t want foreign companies coming in and controlling the market, but “at the same time they also don’t want to create a situation where no foreign investors can come in.” This is why a loophole has been left in the new regulation, allowing for interpretation on a case-by-case basis.

Go West young corporations!

The government is at the same time encouraging spending abroad by Chinese companies. Another foreign exchange regulation, released around the same time as Circular 142, removes the need for approval from the Foreign Exchange Bureau for outward investment, requiring instead only registration with the bureau.

The regulation is aimed at encouraging Chinese companies, flush with cash, to invest in undervalued foreign companies, which are being devastated by the financial crisis. Many Chinese companies need intellectual property and foreign market access, which they can often only acquire through mergers and acquisitions.

Tom Kirkwood, of Kirkwood and Sons, says that over the past twenty years more than USD 500 billion has been invested by Chinese entities abroad, but that this is changing. Kirkwood predicts that in the next twenty years USD 2 trillion will leave the country in the form of overseas non-liquid asset purchases, which he calls COBI (China outbound investment).

Many Chinese corporations are currently engaging in the financial institutional partnering and acquisition stage of COBI. Recent examples include Shanghai Automobile Industry Corp.’s acquisition of a 20% stake in South African Standard Bank for USD 5.6 billion, and Bank of China bought a 30% stake in hedge fund Swiss Fund Management to facilitate private banking opportunities. “Many Chinese corporations are looking to buy expertise, rather than build it up themselves,” Kirkwood says. He notes that once they buy a stake in the company, the simple parts are often shipped to China to be manufactured, while the expertise stays abroad.

Things change

Many of the problems that Circular 142 was put in place to fight have suddenly and spectacularly changed over the past few months. With hot money inflows dropping considerably, and the balance sheets of some of China’s mightiest corporations dropping into questionable health, it is quite possible that within a few months China will be looking for more foreign investment, not less.

SAFE said in a recent announcement that it would clarify these regulations within six months, in order to ease the investment process for legitimate investors. We will have to wait until then to see what comes of it.

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Art Commercialized

September 22nd, 2008 · Art, Culture, Portfolio

Taken from Off the Press Bus Blog on About.com, Saturday August 16, 2008:

Both wearing shades and speaking in low voices, the Gao brothers, two
of the most famous contemporary artists in China today, tell me that
the art district where they exhibit their work has become a main
tourist attraction and has lost its subversive edge. I look down from
the rooftop patio of their gallery and watch tourists, carted in on
giant tour buses, pose outside galleries without going in and can only
imagine how the brothers must feel. They show me a book full of photos
of art that has been banned from their gallery, and all I can think is,
why do the police even bother censoring when no one is looking at the
art? Actually, by publicizing the district as the government has by its
random raids, it has successfully made it too trendy to be subversive.

Gao Brothers on the roof of their gallery

Gao Brothers on the roof of their gallery

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Opening Ceremony Rehearsal, Beijing Olympics 2008

August 3rd, 2008 · Olympics

Last night the second rehearsal (open to the public) for the Olympic opening ceremony took place at the Bird’s Nest in Beijing. The spectacle was incredible but the most interesting aspect were the performers, all proud to be a part of such an important part of their country’s modern history. Below are images of just a few of the 10,000 performers in the show.

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Capitalism with Chinese Characteristics

July 30th, 2008 · Portfolio

From the article:

Congress may be beating up on China to
improve its safety standards - but maybe it doesn’t have to: Chinese
citizens are doing that on their own. As the October 2007 Consumer
Rights and Corporate Responsibility Annual Conference held by the
Beijing Center for Business Ethics (CIBE) demonstrated, there is an
emerging, strong movement in China for better product safety standards.

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Where have all the people gone?

July 27th, 2008 · Olympics

With less than two weeks to go before the Olympic opening ceremony here in Beijing, the mood is less than lively. Not because security is tight, and not because everyone is waiting in nervous anticipation, but rather, because no one seems to be here. It’s a ghost town (I say this relative to the usually over-crowded capital). I arrived yesterday afternoon from a three week break in Singapore to find that everyone has left the city. With all the anticipation and noise abroad about the Olympics, I was expecting a little more hustle and bustle.

There is an explanation for fewer cars on the road. Just a week ago (July 20th), in yet another attempt to lower the pollution level to one acceptable by IOC standards, the Beijing government instituted an odd-even license plate registration system. This means odd and even license plates are banned on alternate days. Beijing’s major roads, typically big and brimming with cars can accommodate three car lanes and one bicycle lane on each side. They are now more empty than full. So, that explains half the number of cars on the road. What about the people? Where have they all gone?

Fortunately for yours truly, a cab driver was nearby to answer some questions. According to him, much of the Beijing migrant workers demographic (mostly construction builders and housekeepers) have been told to leave the city for three months this summer. This has been done in order to prepare for the ‘massive influx’ of tourists descending upon Beijing for the 2008 Olympics.

Many foreigners who, in the past, were able to stay in Beijing on the wrong visas have been asked to leave or have been deported, adding to the number of people leaving the capital. This includes large numbers of English teachers who, aided by work agencies, were given the wrong visas to work as teachers. Other foreign Beijing residents have been denied visa renewals too. All this has been done for the sake of security and clearing out the place to make room for Beijing’s new guests.

So, where are those guests?

Then there’s another small detail. According to official figures from the BTA (Beijing Tourism Administration) about 400,000 to 450,000 foreign tourists are expected to arrive for the Olympic Games. That’s significantly less than originally predicted (according to The Straits Times about 50,000 less). Tighter visa requirements for tourists, officials claiming unprecedented Olympic terrorist threats, and the negative publicity China has received in the media may be to blame. Many would be tourists just don’t want to deal with any hassles.

Fear not, there will still be many Olympic goers this August. The largest tourist contingent expected will be domestic tourists. Officials predict anywhere between 1.2 and 1.6 million Chinese tourists to arrive in Beijing.

So, with that in mind, for now I will sit here in my apartment and enjoy the relative silence. I’m also going to take my bike outside for a nice, traffic-free ride.

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