Red Links, 4-16-11
All-East Asia, No Liberties Post
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Unusually in a democracy, a “real-name” system is now in effect for those posting on popular online forums: any participant signing up to websites must use their national identity number. So would-be Minervas are now easily traced. The spread of false information carries a maximum punishment of five years’ imprisonment and a hefty fine.
What is more, since 2008 a supposedly independent Korea Communications Standards Commission has had the remit to promote a “sound and friendly communications environment”. Critics argue that the commission serves as the government’s de facto internet censorship body. It is supposed merely to “advise” portals to remove articles believed to contain falsehoods, obscenity or statements in favour of North Korea that infringe the National Security Act. In fact it may issue administrative orders backed up by law, forcing content to be deleted. Unsurprisingly, its “advice” tends to be followed.
Chang Ha-joon of Cambridge University, whose free-trade critique, “Bad Samaritans”, is on a list of books the defence ministry has banned troops from reading, argues that such efforts are counterproductive. “This is not the 1980s, when you could just cut a few telephone lines,” he says. Blocking free speech in one place would simply “start a bushfire” somewhere else.
Much of the desire to control the flow of information and ideas can be traced back to longstanding fears over the spread of North Korean propaganda, which remains illegal. The administration of President Lee Myung-bak has additional suspicions about the power of IT thanks to massive, internet-driven protests against imports of American beef that brought Seoul to a standstill in 2008. Yet South Korea’s mild paranoia about controlling information harms its reputation as a liberal democracy and undermines its potential as a creative powerhouse
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In the short term at least, these troubling developments undermine the comforting idea that economic openness necessarily leads to the political sort. All the more reason, then, for the West to hold China to account. America and the European Union are right strongly to condemn Mr Ai’s detention, though it would have been better had they taken a stand sooner. Speaking out might just help constrain the regime’s behaviour. It will certainly give succour to those in China working bravely to create a better future.
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In the odd way these things work in China, word has trickled out that on April 7th an appeal court in Zhejiang, a famously entrepreneurial coastal province, conducted a five-hour hearing on a death sentence handed down to Wu Ying, a prominent 29-year-old businesswoman, on fraud charges. Before her arrest Ms Wu had seemed to personify the miraculous business success that could be achieved by people from even the most humble background in modern China.
The revelation that she faces execution is the latest in a string of dramatic events surrounding her case, including the arrest of several prominent bankers and officials from information she is said to have given, and her own reported suicide attempt. Details are murky because much of the case, including the appeal, has taken place behind closed doors, with restrictions on direct press coverage. That, however, has not stopped Chinese newspapers and internet opiners from discussing avidly a case that has clearly caught the public interest.
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The authors are careful to say that there is no iron law of slowdowns. Even so, their analysis is unlikely to cheer the leadership in Beijing. China’s torrid growth puts it on course to hit the $16,740 GDP-per-head threshold by 2015, well ahead of the likes of Brazil and India. Given the Chinese economy’s long list of risk factors—including an older population, low levels of consumption and a substantially undervalued currency—the authors suggest that the odds of a slowdown are over 70%.
It is hazardous to extend any analysis to a country as unique as China. The authors acknowledge that rapid development could shift inland, where millions of workers have yet to move into manufacturing, while the coastal cities nurture an ability to innovate. The IMF forecasts real GDP growth rates above 9% through to 2016; a slowdown to 7-8% does not sound that scary. But past experience indicates that slowdowns are frequently accompanied by crises. In East Asia in the late 1990s it became clear that investments which made sense at growth rates of 7%, say, did not at expansion rates of 5%. Political systems may prove similarly vulnerable: it has been many years since China has to deal with an annual growth rate below 7%. Structural reforms can help to cushion the effects of a slowdown. It would be wise for China to pursue such reforms during fat years rather than the leaner ones that will, eventually, come.
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Princelings and the Goon State:
China is entering a period of heightened political uncertainty as it prepares for changes in many top positions in the Communist Party, government and army, beginning late next year. This is the first transfer of power after a decade of rapid social change. Within the state, new interest groups have emerged. These are now struggling to set the agenda for China’s new rulers.
Particularly conspicuous are the “princelings”. The term refers to the offspring of China’s revolutionary founders and other high-ranking officials. Vice-President Xi Jinping, who looks set to take over as party chief next year and president in 2013, is one of them. Little is known about his policy preferences. Some princelings have been big beneficiaries of China’s economic reforms, using their political connections and Western education to build lucrative business careers. Other princelings are critical of China’s Dickensian capitalism and call for a return to socialist rectitude. Some straddle both camps. Prominent princelings in business include President Hu Jintao’s son, Hu Haifeng, who headed a big provider of airport scanners; and Wen Yunsong, a financier who is the son of Wen Jiabao, the prime minister.
Cheng Li of the Brookings Institution in Washington, DC, argues that a shared need to protect their interests binds these princelings together, especially at a time of growing public resentment against nepotism. Since a Politburo reshuffle in 2007, princelings have occupied seven out of 25 seats, up from three in 2002.
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Japan’s Post-Tsunami Politics:
The quake and tsunami that devastated north-eastern Japan, and the nuclear disaster that followed, have disrupted the economy, with power shortages and stricken factories. Ordinary Japanese have cut back on inessential spending, in a mood of sacrificial restraint. Much has changed. Yet one constant remains: petty political bickering.
As the government has attempted to deal with the mess, the opposition Liberal Democratic Party (LDP) has picked on minor gaffes to justify exaggerated displays of outrage. Mr Kan’s offer to the LDP’s leader, Sadakazu Tanigaki, to form a “grand coalition” with his Democratic Party of Japan (DPJ) was rebuffed. The opposition thinks Mr Kan is flailing and his prime ministership, which was in trouble well before the earthquake, is in danger.
In opinion polls, Mr Kan’s personal support has increased slightly since then, but around two-thirds of voters are disappointed with the government’s handling of the crisis, particularly at the Fukushima nuclear plant. On April 12th the nuclear accident there was upgraded to level seven, the highest rating on an international scale of severity. That places it on a par with the Chernobyl disaster 25 years ago this month (though the radiation released at Fukushima is only a tenth of Chernobyl’s, and nobody has died from it yet).
On April 10th the DPJ’s troubles took their toll in regional and local elections. The party lost all three of its races for prefectural governorships to the LDP. It failed to gain a plurality in any of 41 prefectural and municipal assemblies that were up for grabs. The drubbing has emboldened LDP politicians to resist more collaboration. As ever, they aim to oust Mr Kan and precipitate an early general election.
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Window-Shopping with China’s Central Bank:
China’s central bank has a lot of money but not a lot of imagination. It keeps a big chunk of its reserves in boring American government securities. That means it can count on getting its dollars back. But it frets about how much those dollars will be worth should America succumb to inflation or depreciation.
So what else could China do with the money? Instead of the dollar, China might fancy the euro. China could buy all of the outstanding sovereign debt of Spain, Ireland, Portugal and Greece, solving the euro area’s debt crisis in a trice. And it would still have almost half of its reserves left over.
It might, alternatively, choose to abandon debt altogether and buy equity. China could gobble up Apple, Microsoft, IBM and Google for less than $1 trillion. It could also follow the lead of those sheikhs and oligarchs who like to buy English football clubs. According to Forbes magazine, the 50 most valuable sports franchises around the world were worth only $50.4 billion last year, less than 2% of China’s reserves.
Another favoured sink for the world’s riches is property. Perhaps China should buy some exclusive Manhattan addresses. Hell, why not buy all of Manhattan? The island’s taxable real estate is worth only $287 billion, according to the New York City government. The properties of Washington, DC, are valued at a piffling $232 billion. China is accustomed to being Washington’s banker. Why not become its landlord instead?
China could also allay its fears about energy, food and military security. Three trillion dollars would buy about 88% of this year’s global oil supply. It would take only $1.87 trillion (at 2009 prices) to buy all of the farmland (and farm buildings) in the continental United States. And China could theoretically buy America’s entire Department of Defence, which has assets worth only $1.9 trillion, according to its 2010 balance-sheet. Much of that figure is land, buildings and investments; the guns, tanks and other military gear are valued at only $413.7 billion.
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The percentage of business-school graduates choosing finance as a career has dipped only slightly since the crisis, no doubt largely because pay in the industry has held up remarkably (some would say obscenely) well. But within the industry career priorities are changing, at least when it comes to location. Talent and transactions are migrating from London and New York to faster-growing markets, particularly in Asia. Though some headhunters predict indigestion in Hong Kong, Singapore and Shanghai this year after an overzealous bout of hiring, most are bullish on the region’s long-term prospects.
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Filed under: Business/Economy, East Asia, Korea, Link Dumps, Politics, Subscriptions Tagged: BRICs, censorship, china. japan, naoto kan, South Korea, the economist, wu ying
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