China: Growing Pains

It is of passing interest to those interested in karmic events that both Burma and China have experienced cataclysmic disasters within a week of each other. Does repression carry its own energy?

I’ve talked about Burma but for China this is becoming a very difficult year. It was supposed to be a huge celebration, the coming out party for the slightly post-communist leviathan and a party to show the world what an amazing country it was. Alas the Tibet demonstrations rained on that parade and now the earthquake has really taken away the focus. Indeed many Chinese were unhappy that the Olympic torch procession was carrying on as normal and this saw an immediate response by the authorities who scaled back the daily relay.

This shows that the Chinese government is very senstive to public feeling within China and is keen to always be on the right side of its citizens if not those who live outisde its borders. This sensitivity has been increasing over the last 10 years and with the Olympics putting China centre stage, the rallying call for a strong sense of nationhood has been blasted out from all points. From all accounts it seems to be working.

It’s nearly 20 years since the Tiananmen Square massacre. It holds memories for me because I was in Northern Pakistan at the time, coming to the end of nearly 2 years away backpacking and working during my OE from London, and getting ready to cross the Khunjerab Pass into Western China. The idea was to head across China and catch the Trans Siberian home. It didn’t happen. I was with my Kiwi girlfriend (now my wife!) and we met an English guy who had just crossed over from China and told us the news. We were completely cut off and had no idea what ws going on. This was from the days of getting your post from the GPO Poste Restante service. Oh for an internet cafe. It was clear then that it wasn’t a good idea to cross over so we abandoned that idea and headed back down.

China has come a long way in 20 years. Sure it still is pretty ruthless when it comes to repressing dissent or “dangerous groups” like Falun Gong. And yes it still executes a lot of criminals though they say that rate is falling. It has built an enormous economy with a massive trade surplus which has enabled it to move overseas to secure resources and assets. It is however still unsure of its rightful place in the world. It’s military continues to expand posing a threat to Taiwan as well as giving itself plenty of muscle in the worlds’ oceans historically the preserve of the US Navy and before that the Royal Navy.

2008 is a big year for China. How it handles it should give us some idea of how it will turn out in the years ahead. Can it open itself up and with that accept the good and the bad, the praise and the criticism or will it revert to control and repression. Let’s hope its the former.

Chinese Diaspora Mobilizes

The Olympic Torch continues to trip and stumble its way to Beijing. That there would be protests along the way was never in doubt but what has been a surprise is the mobilization of Chinese citizens along the way. In Australia there were clashes between Chinese supporters and pro-Tibet protesters. The same thing happened in Japan yesterday.

This is a new phenomenon and one that should be taken note of carefully. There are a lot Chinese living overseas, many of whom were glad to get way in the bad old days of communism and repression. Now things have changed. China is open for business and the most dynamic economy in the world. Suddenly its cool to be Chinese (well sort of) but just as India was “in” a few years ago, China is now all the rage. With this has come a new sense of purpose and national identity both in China and overseas. It certainly gives rise to a lot of comment and opinion.

Where this ends up is anyone’s guess but a resurgent China will be a shock for many people used to browbeating and looking down on China as simply a repressive regime with super cheap labour.

The Chinese vice commerce minister said on Friday “Chinese enterprise should transform themselves from purely from being exporters and importers to being multinational companies through overseas acquisition and production”. That’s a big statement. We’ve already seen this approach with  stakes being taken in US banks and industries but these guys are not messing around. With $1.6trln in reserves they can pretty much buy anything.

They are smart. Why buy US treasuries when you can buy US companies? They can spread influence using economic rather than military means and of course secure a constant supply of the resources required.

It’s a fascinating developmental process to watch and the ramifications are bewildering to imagine.

We certainly do live in interesting times.

Free Trade:China and New Zealand

So New Zealand have signed the first Free Trade Agreement with China. It’s quite a big deal really and there is no doubt New Zealand has been chosen by China as an easy country to do business with and there is a fairly long and open history between the two countries.

There’s been a bit of concern over the human rights aspects of the deal and what it means for workers conditions but it’s really simple to deal with that if it is a concern of yours:

Buy goods that you are happy to buy. Buy Kiwi made or buy ethically certified. But ultimately as a consumer you have the final say on what you purchase. So ask more questions and you’ll find your enquiries work their way up the chain. Business is business and the customer is always right. Over time wokplace conditions will improve and as China becomes more wealthy they will be able to move towards standards we take for granted here.

Lance, Jim and the NBR have all commented on the ins and outs of the deal but I think it’s a positive step to open up markets as it breaks down barriers.

However consumers will always have the final word so we’ll wait and see what the actual impact is.

Air New Zealand: Sweatshop in the Sky

Big story out today about Air New Zealand and the rates they are paying their Chinese cabin crew. Shanghai based crew flying on the Shanghai-Auckland route, alongside NZ cabin crew, are being paid less than the NZ minimum wage.

This is nothing short of disgraceful and ANZ will get a deserved roasting in the media. Given that they are majority owned by the Government one can expect a serious review of policy.  But it raises some serious issues: where should the line be drawn?

What about staff working locally on the ground? I would say they are in a local designation and so should be paid local rates but the cabin staff are working in an international space and should be paid the same rates as their NZ based counterparts.

Whilst this issue seems clear cut and a PR fiasco for ANZ, how the international labour market works is not so clear. We send manufacturing offshore, an issue that rankles with many,  in order to take advantage of cheaper labour and other costs. So one could argue that ANZ should be employing as many Chinese cabin staff as possible as their labour is cheaper.

One could also take the argument that working for ANZ is a great opportunity even with the local rates of pay and as the local Chinese airline market expands, as it surely will do, then pay levels will rise as competition kicks in.

The internationalisation of labour is going to bring some interesting issues to the surface as well as unexpected consequences. Previously we have had huge barriers to the movement of labour but with the EU expanding and both China and India developing huge domestic markets, the door will be opened wider to a freer and more efficient labour market.

We’ve had the polish plumber in London so how about the Chinese electrician in New Zealand.

As Ben says “welcome to the global village”.

Reverse Takeover: A Post-Imperial World?

I read today of Tata’s impending purchase of 2 of Ford’s great brands, Jaguar and Land Rover. Only last year Tata Steel paid $12bln for Anglo-Dutch steelmaker Corus. What’s going on here? What happened to the East India Company and all that? Queen Victoria would be spinning in her grave. It seems the plunder of Asia is over. And now it’s payback.

The Arabs are at it as well having bailed out Citibank not long ago and lets not forget the Chinese pumping in $5bln to keep Morgan Stanley afloat.

Those trade and petro dollars are finally being put to good use. The Arabs in the Emirates are showing their cousins the way foward by buying real assets instead of partying away the cash as they did in the 80s. The Chinese, always astute and long-term, are making obvious in roads into the US whilst continuing to make it hard the other way around.

Reverse colonialisation anyone?

Emission Trading Schemes

A couple of weeks ago I attended a PM forum in Christchurch. It was a chance to hear Helen Clark and her Ministers talk about the new Emissions Trading Scheme that they had just put out. I’ve tried to wean myself off climate change conferences because in the end they are all pretty boring and generally say the same thing: the world may end in a flood of seawater and we need to get cracking by x% right now.

What always surprises me is that no matter how many calls for action there are very little has been done to really restrain emissions. Why is this? Well quite simply this is a very tricky issue. Economic growth is not going to be sacrificed on the altar of environmentalism or, more to the point, an outcome where there is uncertainty. So it drags on. China continues to expand its economy at a fierce pace and shows little interest in reining in its emissions insisting that it’s full steam ahead.

So in come emissions trading schemes: carry on as normal but buy your way to heaven via a piece of paper saying “1 tonne of carbon”. If it sounds like a papal remission that’s because it’s pretty close.  It’s a piece of paper you get for money which blesses your wins away.

The problem is quantifying and packaging a tonne of carbon or equivalent. How can we be sure that people will get what they pay for. This is where certification comes in. We need an agreed international standard and a single market. After all there’s only one type of carbon just like there is one type of gold. Its not like crude oil where there are different prices for different types.

Another issue is the changing science. For example, if forests are used as credit generators because of their ability to sequestrate carbon, there is a possibility that the amount the sequestrate may change over time either due to ecological reasons or a change in the understanding of how and how much they actually lock up and over what time period.

As a business having to purchase carbon credits on paper I would be crossing my fingers and hoping it all works out otherwise i might be out of business.

There is also a concern about the over issuance of paper credits. As readers will know they fractional reserve money system we have started life in a similar fashion: an underlying quantity of a commodity on which paper bills were issued. We know the outcome of that, a money system with no control.

From what i have seen this issues haven’t been covered in enough detail. I can still envisage a scenario where the carbon credit market takes off but overall emissions are not reduced. The goal of all this is to reduce emissions not create a huge market in carbon. But for now its the easy way out and politically more acceptable. Trees can take the slack for now and maybe technology can takeover at a later date.