Biking in Beijing - perhaps the best way to get around

By Susan Fishman Orlins

Dear President Obama,

As I bike around Beijing this week, during a short trip to see my daughter who works here, I’ve been thinking about some local attractions you might enjoy during your visit.  I’ve also been thinking about how the ratio of bicycles to automobiles appears to have flip-flopped from the first time I arrived in China, thirty years ago.  When you inhale the acrid smell of motor vehicle fumes and view this smoggy city–as though through gauze or an organdy curtain, soiled with age–you may decide that you too would prefer getting around on a two-wheeler rather than waiting in traffic jams, adding to the pollution.  You can rent a bike at any of several subway stations and drop it off at any of the others.  Just be aware of the rule of the streets:  the bigger you are, the more you have the right of way.  At intersections, cars will turn from all four directions, seemingly at once, without slowing down.

I like starting off my stay here with a foot massage.  Side by side in oversized, cushy club chairs with high backs that recline, you and President Hu Jintao can first soak your feet in a barrel of milk, herbs and Chinese medicine.  Then, in the privacy of a room for two, you can watch CNN on the flat-screen TV or discuss human rights, while young men knead your shins and toes with Healthy Spa Life Cure Professor massage lotion. 

Afterwards, you might want to buy some gifts for Malia and Sasha.  Head to trendy Nanluoguoxiang, lined with coffee bars and boutiques and where you can pick up a couple of Oba-Mao t-shirts with your own image donning a red-star cap. 

Beijing's Hutong Life

I suggest quickly making your way out of there through the crowds of Chinese yuppies and foreign tourists.  To witness something of life as it has been here for decades (try to mentally delete all the cars), head south and turn into any hutong and lose yourself in the maze of narrow lanes lined with low courtyard houses with sloping tile roofs, most of which–unlike in earlier times–provide shelter for several families.  Some hutongs are quieter than others, with maybe only a cat stealthily creeping along the edge of a courtyard wall and a few rusty bikes leaning below.  Then you turn a corner and there unfolds a row of tiny, old shopfronts, many of which are selling dough in its endless forms:  fried, flat, squishy, steamed, noodly.  A bun–that looks like a large cream-colored ball you squeeze to exercise your hands–might be empty inside or filled with bean paste or minced pork.  Or you can get dumplings floating in broth. 

Hutongs are where I most like to watch the bustle.  Watching the bustle is a typical Chinese activity;  they call it kankan renao, literally look at bustle.  I could steer you to the hutong where I talked to a baby and bought striped socks from her grandmother, while a guy in a hard hat working nearby secured a shelf I’d bought to the back of my bicycle with some electrical wire.  But that would take away the fun of discovery.  No matter which way you turn in these lanes, you’ll get a sense of community, especially for elderly folks, whereas at home in the U.S. my sense of life for the elderly is often one of loneliness.

In fact, when I asked a retired Chinese friend what she does all day, she replied, “Wanr,” which is Beijingspeak for play and means hang out.  She hangs out in the park with her friends.  Just north of Jingshan Park, you can experience an inviting “playground” for senior citizens, one of many throughout the city.  Don’t be surprised if the rows of ping pong tables are all in use.  At a small cement table by the fence, some lao touzi, or old men, will probably be playing Chinese checkers with a ring of onlookers that sometimes grows to three-deep.  Meanwhile, lao tai tai, or old women sit on benches chattering.  Try out some of the colorful exercise contraptions:  stand on one to swing front to back, side to side on another.  Some have bars that stick out for leaning against to massage your back.  Ahh, lovely.  Maybe if we provided more recreation like this for our elderly, we could reduce health-care costs.

Another way the Chinese promote good health is by drinking tea.  My favorite teahouse in Beijing is Stone Boat, located in zen-like Ritan Park.  This being an embassy area, the setting is quiet, though you occasionally hear strains of someone practicing Peking Opera.  The teahouse is the shape of a shortened train car painted with intricate designs in which Chinese reds and greens dominate.  The carved wooden window frames open to a pond where a few men may be fishing, bare willow branches weeping over them.  Try for some solitary moments here, an opportunity to think quietly or take some notes, while sipping ginger tea.

If Michelle were with you, and if it were date night, I would suggest dinner at Lan in the business area, more for the exotic atmosphere than the expensive food.  In any case, it’s worth going there just to have a look at how lavish New China can be.  But be forewarned of sensory overload:  there are even paintings on the ceilings.  The blend of contemporary design with baroque and whimsy gives an overall Alice-in-Wonderland effect.  My favorite displays are on glass shelves that line the walls on either side after you enter:  a rainbow of fabrics stacked alongside cones of brightly colored thread, mock elaborately decorated pastries and cakes, Jesus candles of various sizes and shaped burnt down to different heights.  And sprinkled throughout, photographs of Marilyn Monroe and Audrey Hepburn. 

For more down-to-earth dining, I’d have a meal at Liu Zhai Shi Fu, located in a hutong behind The National Art

A feast at Liu Zhai Shifu - ma dofu is on the bottom right

Museum of China.  Though it can be a bit chilly, sit in the enclosed area that used to be the courtyard of this family-run restaurant, where silk vines hang overhead.  Be sure to order ma doufu, a dish of old Beijing and, though it looks like chopped liver mixed with wet cement, it’s the most delicious dish made from a soy bean I’ve ever tasted:  sour, spicy hot, smooth on the palate.

Before you leave Beijing, why not drop in on the National Resources Defense Council (NRDC) offices and chat with the young Chinese employees there as well as with Princeton Fellows and other American interns who are doing all they can to safeguard the earth?

I hope you have a great and productive trip.

Warm regards,

Susan Fishman Orlins

By Marcy Nicks Moody

Stephen Roach of Morgan Stanley Asia

One of the keynote speakers of “China 2025” was Stephen Roach, Chairman of Morgan Stanley Asia, who discussed China’s economic outlook. Roach opened his speech with two observations which formed the basis for his comments on the Chinese economy. First, he said, we should not forget that China’s growth benefits not just itself, but also the economies of Asia and the global economy more broadly. The second observation was not his originally, but Premier Wen Jiabao’s (pronounced When Gee-a Bao), who in March 2007 apparently described his country’s economy as being “unstable, unbalanced, uncoordinated, and unsustainable.”

Roach agreed with the Premier’s characterization. China has a supply-focused economy, with production of goods focused on external markets. Indeed, 80 percent of Chinese GDP goes to exports and export sector-led fixed investment, Roach said. Chinese economic growth has also been commodity intensive, requiring vast amounts of outbound investment to access resources and fuel further growth. The fragmentation of governance, corporate control, and the financial system makes the Chinese economy uncoordinated, and with increasing levels of pollution, the unsustainability of China’s growth model is further exacerbated.

After painting a broad picture of the Chinese economy, Roach went on to argue that China’s stimulus package, announced in November 2008, will only compound current imbalances. Seventy-two percent of the package, which had a headline figure of 4 trillion RMB ($586 billion), has gone to infrastructure, and fully 1 trillion RMB ($147 billion) have been allocated for post-earthquake reconstruction in Sichuan province. Not entirely surprising88 percent of growth was driven by fixed investment in the first half of 2009.

The approach is not novel for the Chinese. Similar packages were dispatched in response to the Asian financial crisis in 1997-98 and the slowdown of 2000-01. The general strategy, Roach said, is for growth to be “jump started” by fixed investment, after which the export machine takes over as external demand recovers. But this strategy will not work this time, Roach argued, since external demand—namely the demand of U.S. consumers—is not going to return to previous levels. For these reasons, Roach is predicting a slowdown in the Chinese economy around mid-2010.

Though the argument has some strength, there are also shadows. First,  the stimulus package did include some measures to stimulate household consumption and improve the social safety net which Roach did not mention. Roach should not have so lightly brushed off these measures, as it indicates China’s recognition of current imbalances and the political will to begin remedying them. Second, and related, is Roach’s implication that China either expects external demand to recover to its previous rate of growth or is too naïve to realize this is not going to happen. Arguing that China is either ignorant or in denial seems, to this author, at best unhelpful and more likely a mistake. U.S.-China cooperation over the course of the financial and economic crisis has been close, and China is well aware that the United States will likely not return to the spending patterns that directly preceded the financial crisis. The third issue that was ignored is that of exigency. Might some of the infrastructure spending prove to be inessential, or even superfluous? Will the spate in bank lending lead to a deterioration of credit? Might Beijing deem the stimulus to be ‘worth it’ anyway? Might we? It’s an open question without a clear answer, but was not addressed.

But beyond the stimulus, how will China escape from this unstable, unbalanced, uncoordinated, and unsustainable pattern of growth? One common argument is that the Chinese economy needs to shift away from its current focus on investment and exports, and towards a model based more on private consumption. But as Roach noted, households’ saving in China remains high, because families need to hedge against uncertainties over the provision of healthcare, education, and pensions. To increase consumption and therefore rebalance the Chinese economy, then, one of the key structural changes required is the strengthening of the social safety net, Roach argued.

Also of note is the fact that household incomes in China have not been rising as quickly as national income. That the Chinese government needs to strengthen the social safety net is irrefutable, but measures to increase household incomes, which are not limited to policies that would increase government transfers to households—such as addressing weaknesses in the financial sector, for example—will also play an important role as China seeks to rebalance its economy.

Happy Wen Jiabao

In closing, Roach outlined five of the benefits that would accompany a rebalanced Chinese economy. First, shifting the pattern of growth from a supply to a domestic demand-oriented model would create more stable growth. It would also broaden support for consumer demand, reduce external imbalances, lower the resource intensity of Chinese GDP, and encourage the growth of China’s services sector. In brief, it could help create a Chinese economy that is more stable, balanced, coordinated, and sustainable. Wen would be happy.

China set to rule the world?

China Goes Global or Thinks Local?

by Marcy Nicks Moody

The second panel in last week’s “China 2025” conference covered a range of topics related to China’s foreign policy, falling under the loose rubric of “China Goes Global.” Michael A. Levi and Adam Segal, both of the Council on Foreign Relations, discussed two functional areas of Chinese foreign policy, namely climate and technology policy, while Ambassador David H. Shinn of George Washington University and Evan A. Feigenbaum of the Council on Foreign Relations addressed regional issues.

Though he was not the first to speak, Ambassador Shinn provided a useful framework for understanding not just China-Africa relations, but Chinese foreign policy-making more broadly. Three of China’s core interests in Africa, he argued, are its needs for (1) resources, (2) political support, and (3) productive commercial ties. With regard to the first of these, China has of course sought access to a range of Africa’s natural resources such as petroleum, timber, and minerals. In terms of China’s second need, though political support from African nations may not seem, on its face, as though it would be of extraordinary importance to China, Ambassador Shinn noted that four of the 53 African countries have diplomatic relations with Taiwan. For China, eliminating support of policies at odds with the “one China” policy is imperative, and Beijing spends a relatively large amount of time and effort in attempt to woo these four countries away from their current policies. Third, though Africa is not among China’s largest trading partners, China is Africa’s second largest trading partner, after the United States. And, China will likely become Africa’s largest trading partner next year, said Shinn.

Locating these three drivers of Chinese foreign policy – access to resources, political support, and an international environment conducive to economic growth – provides a useful understanding of what motivates China in its approach to the rest of the world.  Indeed, as an authoritarian government with sometimes questionable legitimacy, much of the Party-state’s justification for a continuation of its rule is now located in its abilities to increase the economic wealth of its citizens and to gain respect and exert influence internationally. Accessing the tools and conditions for economic growth as well as gaining outside political support therefore become crucial to the life of the Party-state. Though perhaps easy to ignore, the role of China’s domestic needs in its foreign policy decisions should not be underestimated.

As we seek to better understand Chinese foreign policy, its ‘go global’ policies, and their possible effects on U.S. interests, there are other myths which need to be dispelled. In their presentations on climate and technology policy, both Levi and Segal made particular note one of the idiosyncrasies of U.S. discussions and media presentations of China—that is, of the propensity for focusing on gross numbers and their Brobdingnagian dimensions. All numbers in China, both noted, are huge. But that does not necessarily make them meaningful. Segal noted, for example, that there has been an enormous increase in spending on research and development in China, but that innovation is more than simply spending. And expectations that China will become a technological superpower by 2025 are likely overblown. Similarly, China should not be viewed as eating U.S. lunch on clean-tech just because it is producing enormous quantities of solar panels, or has calls in its 11^th Five Year Plan for reductions of 20 percent in energy intensity. With regard to the latter, China has created targets, not outcomes, and few, if any of these are on track to be achieved.

In sum, Adam Segal’s argument that China has embraced but will not profoundly change the global science and technology system is perhaps the most balanced view of Chinese ‘go global’ policies more generally. Many such policies and pronunciations are aspirational, but not, by 2025, achievable.

Lingerie entrepreneur Zhou “The Wolf” Yu from Win in China. Could more wolves make better governance?

The Center is Holding, with Troubles at the Periphery

by Marcy Nicks Moody

As discussed in a previous post, the October 1 celebrations of the 60^th anniversary of the founding of the People’s Republic were spectacular. President Hu Jintao’s updated Mao jacket, the Mount Everest float, and the female soldiers with fuschia miniskirts and submachine guns were all flawless, if unlikely. Mostly a parade of military weapons systems, the celebrations were an extraordinary display of pride in what China has accomplished over the last 60 years, and confidence in what it will accomplish over the next.

Since the beginning of ‘reform and opening’ (the period starting in 1978 when new leader Deng Xiaoping first instituted China’s economic reforms), China has consistently defied expectations about what it can accomplish. When considering where China will be in 2025, then, thinking not about where we, the outside observers, expect China to be, but rather where China itself aspires to be is perhaps the more apt starting point. And the National Day parade may offer some insight into these aspirations: the Chinese Communist Party-state of October 1, 2009 is strong and confident; it clearly sees an important role for the People’s Republic internationally, and little release of political control nationally.

But this picture stands in contrast to the China of September 2009, during which dissidents were detained, social networking websites were blocked, and civil society was suppressed. Or the China of March 2009, when a Christie’s auction of Chinese antiquities elicited an uproar among the Chinese people as a symbolic attack on its culture. Last year, Bjork, the Icelandic pop singer otherwise known for her off-beat sartorial choices, produced a similar response from the Chinese people when she called for independence for Tibet. Similar with Carrefour, the French big box store, which became the victim of a nation-wide boycott of foreign goods at the behest of a single Chinese blogger. The China of these moments finds disagreement unbearable, and portrays itself as easily harmed by the actions of relatively minor interlocutors. Strong and confident are not the appropriate descriptions of this picture.

How does one make sense of this divergence in tone?  At Monday’s “China 2025” conference, the first presenter, Minxin Pei of Claremont McKenna College argued that it is reflective of China’s domestic circumstances, which may be characterized by a combination of macro-level stability and micro-level instability. On the macro-level, there is no organized opposition to the Chinese Communist Party (CCP). China’s response to the economic crisis has been capable and robust, and there is increasing interest in the propagation of Chinese “soft power.”

Though center is holding, there are problems elsewhere. Four hundred CCP members are found guilty of corruption every day, said Professor Pei. There are 300 riots per day. Concerns about food and product safety cause great anxiety, and there is a major water pollution incident every three days. Kelley Currie, a Non-resident Fellow at the Project 2049 Institute and another speaker on the panel, noted tensions between the Han and other ethnicities at the periphery, including Tibetans, Uighurs, Manchus, and Mongols. Though none of these problems has occurred at the locus of CCP power, this dynamic, which Yanzhong Huang of Seton Hall University described as the central-local capacity gap in Chinese governance, poses a serious challenge to the effectiveness of domestic policy in China.

How, then, will micro-level instability affect China’s aspirations for and its path to 2025? To be sure, the Party-state currently has few effective methods for systematically addressing a range of local-level issues, including corruption, environmental degradation, ethnic unrest, and labor-related issues, which could eventually pose a more serious threat to the Party-state. More of an optimist, director of the documentary film Win in China Ole Schell observed that increased business and commercial activity may also drive increased transparency in China, while Professor Pei calls himself a cautious pessimist. This author, however, would rarely bet against China.

By Adam Bobrow

Last Friday, President Obama announced his decision in response to the first China-specific safeguard petition of his term.  The U.S. International Trade Commission (USITC) recommended imposing tariffs of 55%, 35%, and 25% ad valorem, for one year each to compensate for a market disruption to the domestic industry caused by a surge in imported car and light truck tires.  The President was predictably Solomanic:  he accepted the USITC’s framework, but substituted a tariff of 35%, 30%, and 25% ad valorem, in each of those years.  The President’s move upset many observers and interest groups—as it would have if he had imposed the relief recommended or no relief at all.  (In each case, a different distinct group would have applauded while the others jeered.)  To perhaps a greater extent than with most Presidential choices, this was a no-win situation.  In fact, the safeguard will not have a large impact on the U.S. economy.  So why spill so much ink over it?

This decision has taken on heightened importance because it is the Administration’s most important action related to trade policy to this point.  As such, it will be interpreted as a statement of trade policy, rather than as a single, and possibly singular, event.  In deciding to impose the safeguard, the Administration does not seek to make a general statement concerning its trade policy, but because the President has taken no other high-profile actions nor made a clear statement of his trade policy (routine reports to Congress don’t count), observers must treat this decision as trade policy by proxy.

But what could this Administration have done on trade in the first 8 months that would have made a difference today

Made in China - Tires

and avoided some of the avalanche of criticism that the safeguard has engendered?  Even more important, for a President who has claimed to be nominally in favor of trade liberalization but with supporters in Congress and organized labor who are not, how could the President enunciate a trade liberalizing agenda that might succeed?  First, a primer on the politics of trade policy is in order.

During the last half of the 20th century, there was a centrist consensus on trade in the United States.  Based on a general understanding of the economic implications of comparative advantage, the memory of the “beggar thy neighbor” policies of the 1930’s, and the benefits conferred by successive rounds of multilateral trade liberalization, the center held through the Clinton Administration.  That center crumbled in the last 8 years during an Administration that believed in trade liberalization but reflexively opposed any policy that could be construed as intervention in the economy.  Ultimately, the Bush Administration mismanaged the economy and undermined the consensus on trade liberalization in which its officials believed.

The situation now, with the Democrats in control of Congress and the White House, challenges the premises of the centrist consensus on trade liberalization more directly than did the divisive style but nominally free trade ideology of the Bush Administration.  According to Public Citizen, all the races in which trade played a part in 2006 favored the Democratic candidate, the one Public Citizen identified as favoring “fair trade,” a term that embraces a policy with less liberalization, more tools to protect existing workers in domestic industries, and less autonomy for Executive Branch trade negotiators.  (The results in 2008 were similarly one-sided from a trade perspective, if not quite as dramatic.)  As a result, a significant part of the majority caucus now believes in opposing continued trade liberalization and will fight for that position.  Assuming that the White House would like to rebuild a centrist consensus around the continued benefits of trade liberalization, the current make-up of the Congress poses a tremendous challenge.  The partisans on President Obama’s side of the aisle do not believe in trade liberalization and potential allies on the other side of the aisle have been unwilling to support any White House initiative in any meaningful numbers thus far.  How to thread this needle?

The way forward is a trade policy that embraces the entire economic impact of increased globalization throughout the U.S. economy and does not remain tied exclusively to the issue of lowering tariffs and eliminating non-tariff barriers alone.  Freer trade makes good economic sense:  in the common parlance, trade is a win-win economic deal.  But while economies experience trade as win-win, there is no guarantee that those benefits will reach all communities—and in almost all cases, some communities will lose because of freer trade meaning that the economic pain felt by some is both undeniable and due to trade.

The key is to find a way to lessen the economic pain and insecurity in those communities.  The answer lies not in instituting protectionist policies and raising barriers or in trying to impose standards on our trading partners that they cannot meet.  The answer lies in changing two things right here at home:  the framework in which we view trade and the way in which we manage our economy.

With regard to adjusting our lenses on trade, the issue must become one that recognizes the extent to which trade policy is not an arcane subject but one that touches everything about the U.S. economy.  As such, the trade policy debate should embrace fiscal policy:  fundamentally, the benefits of trade must be spread more widely.  A dramatic expansion of the Trade Adjustment Assistance programs that would allow for worker retraining and provide support to businesses transitioning due to losses in their communities arguably related to trade.  The health-care debate currently underway in Washington should be harnessed to support a liberalizing trade policy at the level of the individual worker:  given the dynamic and ever more productive job market in the United States, it is critical to down-sized workers to provide an affordable option to employer-based health care.  Longer term goals would include specific support for the industries of the future instead of simple protection for the industries that have trouble meeting globalized competition and a tax code designed to distribute the benefits of increased national wealth attributable to trade to more of the population.

These proposed measures are all political; all would be designed to create a grass-roots environment in which the benefits of trade permit the political space for elected representatives to continue trade liberalization.  While the idea of exporting jobs will always cause problems politically, removing the fear of job losses in which the entire community faces a different economic future is essential to create that political space.  By addressing trade through a fiscal policy lens, difficult reciprocal liberalization will also be easier, albeit still hard.  Completing the Doha Development Agenda at the WTO will offer many of the traditional benefits familiar from previous rounds of trade liberalization, but it will require that the United States address the inequities in its agricultural support system.  With the disproportionate weight in the Senate given to farm states, without a political consensus on the benefits of trade liberalization, such an initiative will never progress.

Perhaps President Obama sought to pursue such a paradigm shift in trade policy with the failed attempt to convince Representative Xavier Becerra to take the job as USTR.  This Latino Democratic Member from Los Angeles is the first to serve on the House Committee on Ways and Means and is one of the most senior Latinos in Congress as well as a member of the Democratic leadership.  As USTR, he would have had the opportunity to discuss the fiscal elements of rebuilding a centrist trade consensus based on improved fiscal and immigration policy.  Although generally in favor of trade liberalization, Representative Becerra has opposed recent trade measures, from bilateral free trade agreements (FTAs) to any extension of trade negotiating authority to President Bush.  As USTR, he would have shaken up the trade bar but would have actually represented a fresh face and a fresh approach to trade policy.

Representative Becerra reportedly refused the position.  Although speculation, the tenuous nature of the White House support and the difficulties inherent in trying to link so many important policy areas as USTR, traditionally one of the least powerful cabinet positions, certainly factored into his decision to decline the nomination.  Thus far, given that the Administration has not embraced a far reaching trade policy and has let its §421 decision speak louder than its policy prescriptions on trade, it appears that Representative Becerra made the right choice.  The question is, will the Administration learn from this criticism and make the right choice to broaden the trade policy debate beyond the China-specific safeguard.

Adam Bobrow is an international trade lawyer in Washington, DC.  He has experience working on trade policy, especially the U.S-China trade relationship, for the federal government in both the Executive Branch and on the Hill.  He has several years of experience advising companies and individuals doing business in China.  He can be reached at afb3@georgetown.edu.