Posts tagged: CCP

Don’t Take Financial Advice from Tom Friedman

By , January 24, 2010
Thomas Friedman, Shorting the CCP

Thomas Friedman

It is dangerous to use financial analogies to describe a non-financial event; the comparison usually misses the mark and often overly simplifies a complex issue.  Thomas Friedman fell into this trap last week when he recommended short selling the Chinese Communist Party (CCP) in his op-ed.  In attempting to predict the CCP’s fall, Friedman failed to do his due diligence and realize that like most things in China, it’s not all black and white.

First, the metaphor of “shorting” non-financial products has to stop.  Or at the very least be explained.   For readers of this blog and Friedman’s column who are not day-traders, “shorting” is a specific financial term.  When you “short” a stock, you borrow shares of the stock from a third party and sell these borrowed shares on the assumption that the price will decline in the near future.  When the stock is trading lower, you purchase it and return the shares borrowed, thus making a profit.   In essence, “shorting” implies that the product is presently overvalued and the value will decrease in the near future.

While you can’t actually “short” a country or a ruling party, Friedman uses the analogy to imply that the CCP is currently overvalued and its value, or in this case its power, will eventually decline.  According to Friedman, the CCP’s power will decrease because of its insistence on suppressing the Chinese public’s freedom to information, specifically over the internet.  For Friedman, this pits two different segments of Chinese society against each other: “Command China” which he defines as “traditional state-owned enterprises” and other extensions of the CCP and “Network China” which is made up of “highly entrepreneurial” companies that feed off of the creative energy of a free internet.

In drawing this distinction, Friedman paints with too wide a brush.  If the Chinese business world could easily be divided into decrepit, state-owned industries run by the Party and vibrant, Silicon Valley-like companies that are independent of the Party, the CCP’s demise likely would have already occurred.

Network China is not as independent of the CCP as Friedman makes it out to be.  A company’s success in China, even a

Shorting the CCP?

Shorting the CCP?

small technology company, is often dependent on the owners’ connections with government officials.  The companies of Network China are not outsiders to the system; they are very much insiders and largely profit from good relations with the CCP.  Take for example Baidu, China’s homegrown search engine.  Although Google’s search engine is at least as good as, if not better than Baidu’s, due to Baidu’s close relations with the government, it has a much larger share of the Chinese market.  Government and Party connections are important assets on a company’s balance sheet and, at times, are instrumental to a company’s success.  The companies of Network China continue to profit from their connections; it is unlikely that they will be the ones to seek change.

Furthermore, Command China and Network China are inextricably linked.  The Chinese banks that provide loans to the start-up companies of Network China are state-run and members of Friedman’s Command China.  When it comes to loaning money, the Chinese leadership has more than a bully pulpit; it can out right force its banks to provide these loans, as it did for much of 2009 while banks in other parts of the world constricted their lending.  In many ways, the government’s control of the state-run banks has been a boon for Network China.  Why change it?

The Chinese government’s increasing censorship of the internet is troubling, and not just for those of us abroad.  The Chinese people themselves have been in an uproar about Google’s threat to leave China and realize the damage that a censored internet can have on their development.  Just don’t expect change to come from Friedman’s Network China; these companies are already co-opted by the system.  If change is to come, expect it to come from average Chinese netizens and expect it to be a long process; not exactly ideal for short selling.

Obama’s Town Hall in Shanghai – Reading Between the Lines

By , November 18, 2009

Chinese Students applaud after President Obama's Town Hall in Shanghai on Monday

Chinese Students applaud after President Obama's Town Hall in Shanghai on Monday

Originally Posted on the Huffington Post.

Beijing, China – With scripted questions from the audience and a speech lacking particulars, President Barack Obama’s Shanghai town hall on Monday likely looked like a flop to the American audience. At the very least, it was a far cry from the free-wheeling town halls during Obama’s primaries and general election battles.

But this is not Iowa or Virginia. This is China, where the concept of the people questioning their leaders, holding them accountable or even talking directly to them is so foreign that there isn’t even a word for it. Monday’s event was translated as “mian dui mian” or face-to-face, which seems more apt for a talk show than a discussion with a world leader.

The very fact that President Obama was able to host a town hall in China should be viewed as a huge accomplishment. But more than anything, the town hall should be seen as a coming attraction of the new Administration’s China policy and China’s likely response. Below are some important takeaways from President Obama’s Shanghai town hall.

Takeaway #1 – Hosting a Town Hall in China is, In and of Itself, a Success
Town halls just do not happen in China. In an authoritarian state, there is little need for the leadership to answer directly to the people. This is not to say, however, that China’s top officials are completely immune from the citizenry’s complaints. The fact that, after extensive uproar in online chatrooms, the Chinese government lifted its requirement to install the spyware software Green Dam on every computer, shows that it sometimes does respond to public demands, albeit in a rather circuitous way. But direct accountability or accessibility is not common.

But while the Chinese leadership would prefer to keep it this way, it is questionable if the Chinese people will continue to agree with this approach. Premier Wen Jiabao’s (pronounced When Geeah-bao) popularity among the Chinese people is unparalleled precisely because he has been more accessible and accountable (In January 2008, Premier Wen, after a fluke snowstorm in the south shut down the railroads, went to various train stations to apologize to the millions of people stranded during the Chinese new year festival).

Thus at such a critical juncture, President Obama’s town hall provides the Chinese people with a look at an alternative form of leadership. What’s more, President Obama chose to speak to the young and educated, the segment of society that likely feels the grip of the government the most and likely the most idealistic for change. It is no wonder that the Chinese side gave a tremendous amount of push back to the President’s request for a town hall, only agreeing to it a few days before the event. In a relationship where it is often just best to lead by example, a town hall with the President of the United States is perhaps the best example of accountable leadership.

Takeaway #2 – China’s Increasingly Tight Grip – Comparing the Obama & Clinton Visits
But it is questionable if the President achieved his goal of speaking to the Chinese public, showing the Chinese government’s continuing control over the people’s access to information. The Chinese government refused to

Watching the President's Shanghai Town Hall on the Internet in a Starbucks in Beijing

Watching the President's Shanghai Town Hall on the Internet in a Starbucks in Beijing

broadcast the event on the government run China Central Television (CCTV), and then reneged last minute on broadcasting it live on the Xinhua News Agency’s website (the Beijing morning papers on Monday all reported that the event would be broadcast late that morning live on Xinhua’s website). Even clips of the town hall have not been shown on Chinese evening news. Ultimately, the event could only be watched through the White House’s website, giving only those Chinese people who know there is a White House website access to the event (Youtube is a blocked site in China).

In 1998, when President Bill Clinton visited Beijing, his speech to the students of Peking University received top billing from the Chinese government. The state-run media discussed his Peking University appearance for days prior and the speech was broadcast live on CCTV as well as on radio. Additionally, President Clinton appeared on a radio show in Shanghai to answer questions directly from call-ins.

So why the change? Is it that the Chinese government fears Barack Obama’s popularity more than Bill Clinton’s? Maybe, but not likely. President Clinton was very popular in China during his presidency and remains extremely popular today. In some ways, President Clinton’s speech at Peking University focused more directly on the need for greater human rights in China than even President Obama’s recent town hall.

Bill Clinton's State Visit to China, June 1998

Bill Clinton's State Visit to China, June 1998

The change has more to do with the Chinese government’s increasing ambivalence toward moving forward on the fronts of access to information, development of a civil society and greater political freedom for its people. By now, the Chinese Communist Party (CCP) must realize that greater independence for its people means less control for them; the CCP remains afraid to give up this control and not just for selfish reasons. For the past 30 years, this control has enabled the Chinese government to lift hundreds of millions out of poverty, better the lives of a billion people and in record-breaking time become an economic power horse. Its formula has worked, there is no doubting that. But as its growth plateaus, which it inevitably will, as the gap between rich and poor continue to grow, and as certain segments of society press for greater freedoms, whether the CCP can continue with the current ruling philosophy of control remains to be seen.

Takeaway #3 – Obama’s Human Rights Agenda – It’s There but It’s Not What You Think
This brings us to the third and final takeaway from President Obama’s town hall – where the Administration stands on human rights in China and what the U.S. should being doing to promote these rights.

Obama discussed another great wall on Monday - China's internet firewallIn terms of human rights, President Obama discussed the source of America’s core values, the positive results of such core values to the American experience, and stated that he believed some of these values are universal. However, his focus on the American context of these values belied their universal nature. Many of the values President Obama listed, such as freedom of religion and of expression, are protected by the Chinese Constitution; the difference lies in each countries’ restrictions. President Obama likely could have made a stronger case for these principles’ universalities by pointing to the fact that China itself has stated its commitment to these values, but still has a ways to go to get there. In his speech in 1998, President Clinton did an excellent job of citing to the revered Chinese political philosopher Hu Shi (pronounced Who Shi) in his call for greater democratic freedom.

But in terms of specifics, President Obama went for a decidedly more modern human right – freedom of expression on the internet. First, some background. When the U.S. and China agreed to have a town hall, knowing that the students present at the town hall would likely be hand-selected by the government and would have scripted questions, the U.S. side requested that questions be submitted via the internet. The Chinese side agreed and Xinhua News Agency opened its website to questions for President Obama. However, internet chat rooms are often no less scripted in China, especially for politically-sensitive matters. The CCP hires a large number of people to police these chat rooms and steer the discussion in a direction more agreeable to the CCP.

And that is where the U.S. found itself when it allowed Xinhua news agency to organize the internet questions, a discussion of soft-ball questions like what was it like to win the Noble Peace Prize. As a result, the U.S. Embassy began its own webpage, encouraging Chinese people to send in their questions to their unregulated site. The vast majority of these questions pertained to the Chinese government’s censorship of the internet, blocking out politically sensitive information and shutting down social networking sites like Twitter and Facebook (this is not surprising since the Chinese people who knew to access the U.S. Embassy website are the most internet-savvy and thus likely the most frustrated with the Chinese government’s control.). Ambassador Huntsman’s question about President Obama’s stance on internet censorship came from the U.S. Embassy’s website.

President Obama’s response to the question, while veiled, was shockingly strong. In no uncertain terms, he expressed the belief that a free internet has made America a strong country, made him a better leader, and allows the people to hold their leaders accountable, thus implying that a censored internet has the opposite effect. The implication was likely not lost on the Chinese students.

It appears that the Obama Administration’s human rights agenda for China will focus around internet censorship. The Chinese government has spent a tremendous amount of time and resources in controlling the internet, and has largely been successful at stamping out content it deems objectionable, so it likely did not take too kindly to President Obama’s answer. But will this be enough to help China live up to many of its ideals? Can the internet solely replace the need for a functioning civil society, another area that the Chinese government is clamping down on? Or will it just be a place to shop like it is in many other countries? This remains to be seen. I for one would have very much liked it if President Obama, in answering the question about the path to being a Nobel Peace Prize winner, mentioned his role as a public interest attorney and acknowledged the importance of public interest law to a secure and functioning society. I only hope that this was mentioned at the very least behind closed doors in his meetings with President Hu.

Happy Birthday China!

By , September 30, 2009
Chairman Mao Zedong proclaims the founding of the PRC, Oct. 1, 1949

Chairman Mao Zedong proclaims the founding of the PRC, Oct. 1, 1949

October 1 marks the 60th anniversary of the People’s Republic of China and to all our friends in China, China Law & Policy wishes you a happy birthday!

China’s history spans over 2,000 years, but the existence of China as a communist country has only been for the past 60.  Up until 1911, China was ruled by various different Chinese dynasties.  The last imperial dynasty, the Qing, ruled China from 1644 until its overthrow in 1911 (The Last Empror tells the story of the final days of the Qing).  While the Kuomintang (pronounced Gwo-Min-Dang and also known in English as the Nationalist Party) nominally ruled China, control really rested with the various Chinese warlords.  It was not until 1927 that Nationalist leader and Republic of China president, Chiang Kai-shek, was able to eliminate the warlords and truly unify a modern China.

However, while the Nationalists unified the country, the Chinese Communist Party (CCP), which was founded in 1921 as

The Last Emperor of China, Child Emperor Puyi, 1909 (3 years old)

The Last Emperor of China, Child Emperor Puyi, 1909 (3 years old)

an urban intellectual movement, was quickly becoming a revolution in the countryside under the leadership of Mao Zedong.  Soon, the Nationalists had to contended with the growing forces and guerilla tactics of the CCP, beginning the Chinese Civil War.  However, both sides came to a truce in order to fight the Japanese invasion and World War II (1937-1945).

At the conclusion of the War, the Nationalists and the CCP resumed their civil war.  By 1949, CCP victory was all but certain and the Nationalist forces began to flee to Taiwan.

Sixty years ago, On October 1, 1949, Mao Zedong stood on the gate of Tiananmen in Beijing and declared the People’s Republic of China.

60th Aniiversary festivities have already started in Beijing and will continue throughout the day Thursday.  Pictures have yet to be released from the celebrations (it started 10 AM Beijing time), but Reuters has a great live blog going.  According to Reuters, President Hu Jintao has dusted off his Mao suit and is going retro!  Only question remains – is it a blue, green or a black Mao suit? Inquiring minds want to know.

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