CHINAwatch

Rail to Play Crucial Role in Chinese Expansion Despite Crash

Live interview on Worldwide Exchange with CNBC on 25 July, 2011

Click here

Premier Wen Jianbao with Fareed Zakaria on CNN

Rare, exclusive, wide-ranging and in-depth interview with Premier Wen Jianbao by Fareed Zakaria of CNN on 3 October, 2010. Nine months on, this remains surprisingly up-to-date.

Click here

China to build a special economic zone in Idaho?

China is reported to propose building a "self-sustaining city'' in a 50 square-mile 'special economic zone' south of Boise, Idaho Click here 

I am truly intrigued. The Chinese must have fallen in love with the famous Idaho potatoes and hot springs. But seriously, national sensibilities aside, quite a few countries have been toying with the idea of copying China''s success story with Special Economic Zones, e.g. Russia and India. But they are doing so without much help or involvement from Beijing.

On the other hand, China is already building five regional 'Special Economic Zones' across Africa - in Egypt, West Africa, Zambia, Tanzania,and Mauritius. (Martyn Davies, China into Africa, Trade, Aid and Influence, Robert Rotberg (Editor), Brookings Institution Press, Washington D.C., 2008, pp. 137 - 154.)

The African model consists of cooperative partnerships with the respective host governments, whose laws apply intact. There are of course special tax and other concessions for businesses inside the zone to attract the right mix of technologies, skills, and jobs. Usually, China is responsible for constructing the zones and selecting experienced Chinese enterprises to manage these zones. Businesses selected to operate inside the zones can be local, international or Chinese.

It would be interesting to see how Idaho hopes to get out of this. But there cannot be any extraterritoriality. Ironically, that happened in the 19th century when a weak China was forced at gunpoint to cede various city or port concessions to various foreign powers (including the United States) where foreign laws applied in lieu of Chinese laws.

The following from a link may help to throw some light on this intriquing idea -

"This ambitious, long-term proposal would start with a manufacturing and warehouse zone tied to the airport, and could signify a shift in the economic relationship between the two superpowers -- a relationship once defined by U.S. companies like the J.R. Simplot Co., Hewlett-Packard and Morrison-Knudsen that would head to China to build and develop.

"I think China's coming over here shows they are willing to collaborate on the reinvigoration of the American industrial base," said Jeff Don, CEO of Eagle-based C3, which is acting as an Idaho representative for the Chinese company, called Sinomach for short.

Sinomach is just one of an increasing number of companies and investors showing interest in Idaho.

Hoku Materials Inc., a subsidiary of a Chinese energy firm, already has 500 people building its $400 million plant to make polysilicon for solar panels in Pocatello. It expects to begin production in 2011, employing 250 people, said Scott Paul, Hoku's president and CEO.

China surpassed Japan as the second largest economy in the world in 2010. And in June, Gov. Butch Otter traveled there to tell anyone who would listen that Idaho is open for business.

EAST IDAHO PROJECT COULD COME FIRST

Sinomach is China's third-largest contractor, with more than $14 billion in sales last year. It has been active in more than 130 countries in Asia, Africa, Latin America, Russia and Eastern Europe as general contractor for large infrastructure and building projects.

Sinomach executives told Southeast Idaho Energy, which is planning to build a $2 billion fertilizer plant in Power County, they want the contract for engineering, procurement and construction. Their access to financing is their deal sweetener.

Southeast Idaho Energy hopes to turn coal into gas to produce nitrogen fertilizer and sulfur. The company expects to hire 700 to 1,000 people during construction with 150 permanent workers.

The company also would separate the carbon dioxide that contributes to climate change and ship it to Wyoming, where it can be pumped underground to enhance the extraction of natural gas.

While Otter was in Beijing in June, he spoke about the project with Jin Kening, chairman of the China National Chemical Engineering Corp. -- a different government-owned company. Don said Chinese national companies do compete with each other, but won't let their own competition get in the way.

"Whatever makes the deal go forward," Don said.

Doug Sayer, president and CEO of Premier Technology, worked with Otter in Beijing to build long-term relationships with China National. His company could bid on some of the work to build the fertilizer plant.

"Anything we can do to work toward having good industry opportunities for investment is important whether we get a piece of that work," Sayer said.

The state's efforts have been critical to the discussions, said Pat Sullivan, a Boise lobbyist who works with Southeast Idaho Energy.

"One thing these Chinese see is we have a governor here who has a great big open-door policy, and I think that's making a difference in this Sinomach project," he said.

AN UNUSUAL IDEA THAT MAY BECOME COMMON

Sinomach is not looking only at Idaho.

The company sent delegations to Ohio, Michigan and Pennsylvania this year to talk about setting up research and development bases and industrial parks. It has an interest in electric transmission projects and alternative energy as well.

The technology zone proposal follows a model of science, technology and industrial parks in China -- often fully contained cities with all services included.

But Don and other local supporters have recommended fitting the idea into the kind of planned unit development used for local approval here.

Sinomach officials met with Boise city and airport officials -- including Mayor Dave Bieter -- to discuss developing a first phase for the technology zone that would set up a base of operations for Chinese companies doing business in the United States.

City officials were cautious, since the idea is at an early stage.

"We understand they are at a preliminary stage. We are waiting to hear back from them with a proposal for where they want to go from here," said Cece Gassner, assistant to the mayor for economic development.

The proposal could get a boost from this year's voter-approved constitutional amendment that allows the airport to borrow money to build facilities that can be leased to companies on a long-term basis. The airport commission also has the authority to grant long-term leases and landing rights to air carriers, including those from China.

Sinomach is not the only Asian company looking at Boise, Gassner said.

"We're getting calls from investors from all across Asia who are interested in Idaho," she said.

Idaho's location, only another 45 minutes farther by air than Seattle from Asia, will open many opportunities, state and local officials said.

The state's low cost for doing business will help, too.

Sinomach is attracted to Idaho, in part, because of the lack of infrastructure here, which means it has more opportunity.

"Idaho's the last state that should say we don't want to do business with Asia," said Lt. Gov. Brad Little. "Asia's where the money is."

Yeh Ling-Ling, executive director of the Alliance for a Sustainable USA, said U.S. businesses should be cautious about making contracts that give Chinese companies the best jobs -- though she is more worried about investment programs that encourage immigration, which Idaho also has jumped into this year.

"I believe that Idaho or other American companies should first seek investments from America and employ American engineers first," said Ling-Ling, a naturalized citizen from Orinda, Calif., who was born in Vietnam of Chinese parents.

Little, who met with Zhang Chun, director general of Sinomach, and other company officials, said he thinks the state and the company are a good fit.

But that doesn't mean the state won't stick up for its own interests.

"We're sure not going to favor a Chinese company over an Idaho company," Little said."

http://s190893980.onlinehome.us/eastidahonews/…

There is also some talk of the investment being linked in some way to a Green Card (US Citizenship) program.

At the moment, the idea, quite understandably, has further fueled a 'China-phobia' with alarm bells all over the place that 'the Commies are tryiung to come to a neighbourhood near you!''

Definitely the Idaho government, as Lt. Gov. Brad Little says, needs to stick up for the interest of the state and its people.

This idea may be a threat or it can be turned into a truly dynamic opportunity for much needed trust -building between the United States and China. If mishandled, it could spur a much wider Cold War syndrome that will be no good for any country. If handled wisely, this could well usher in a new era of leadership in international cooperation that augurs well in grappling with some of the global challenges like sustainable development and job creation not only in developing countries but in the West as well.

We seem to be witnessing a historical inflextion point where a new world order may well emerge for the two great powers of the 21st century to cooperate closer together to create a win-win situation for both countries and the broader world.

Best regards,

Andrew

www.andrewleunginternationalconsultants.com

Why the UN Report on Agroecology offers a perfect agrarian recipe for China and Africa

The UN Report dated 20 December 2010 Click here is on the merits of sustainable agricutlure based on small farms in overcoming many of today's agrarian challenges in the developing world. Its recommendations appear to match the agricultural profiles of both China and Africa perfectly.

Many of China's agronomical hurdles resonate with Sub-Sahara Africa's litany of problems: fragmented small-holder plots, lack of proper tenure, want of affordable fertilizers and technology, backward infrastructure, subsistence-level competition with animal husbandry, soil erosion, drought and dearth of water management, prevalence of pests, disease and weeds, dearth of improved crop variety, workers in quest of higher urban wages, diminishing arable acreage, and inadequate financial support and R & D. The UN model of sustainable yet productive farming should provide a holistic solution to many of these problems.

To cope with the huge food demands of her massive population, China has reasonably been successful in raising her agricultural productivity, mainly through adotpion of better seeds and fertilizers. In 2008, China enacted a law to promote a 'Cirular Economy' which covers such practices as recylcing of nutrients in the agrarian economy. With mounting water scarcity and ecological contraints, there is much the UN can do in helping China and Africa to overcome their agricultural challenges.

China has been very active in agricultural aid in Africa. China has also actively participated in the United Nations Food and Agriculture Organization (FAO) Special Program on Food Security in a number of
African countries. Such engagement is timely as funding for agriculture in international aid agencies like the World Bank has plummeted from 23% of loans in the early 1980s to 5% just before the millennium. Some donors, such as the United States, have channeled funding more into food aid. So China should do well in Africa by working more closely with the UN to promote sustainable farming.

The Earth Institute has also launched a series of Tropical Agriculture and China 2049 programs, which is beginning to attract private sector strategic partners - see
http://blogs.ei.columbia.edu/2010/08/09/...

With a looming global food crisis, there is much to be said for China, as the country with the largest population, and Africa, as a potential Food Basket of the world, to work with the UN and indeed other national, corporate and civil society stakeholders to help bring more food for the world in a way that not only improves farmers' income but spreads good sustainable farming practices across the globe.

The success of an experimental farm in Shandong conducted by the Chinese Academy of Sciences Click here should give ample cause for hope that eco-farming will prove to be the key to increasing agricultural productivity, profitabilility, sustainability, as well as long-term food security for China and the rest of the world.

Andrew

SEA POWER AND THE CHINESE STATE: CHINA'S MARITIME AMBITIONS

An analysis by Dean Cheng, Research Fellow in Chinese Political and Security Affairs in the Asian Studies Center at The Heritage Foundation dated 11 July, 2011

Click here

‘As Number One, China to Face Hour of Choice’

That's the headline of an article dated 30 June in YaleGlobal Online by Richard Bush, Director of the Center for Northeast Asian Policy Studies and a senior fellow of foreign policy with the Brookings Institution. Click here

Back in 2003, China commissioned a study on ‘Rise of the Great Powers’ during the past 500 years. The study involved interviewing a variety of leading Chinese scholars and Western thinkers. The conclusion emphasized ‘the importance of (a) internal unity; (b) market mechanisms; (c) related ideological, scientific, and institutional innovation; and (d) international peace.’ The outcome was made into a popular TV series broadcast nationwide and is available in DVDs. Click here

Deng Xiaoping’s famous 24-character dictum used to inform China’s foreign policy (“Observe calmly; secure our position; cope with affairs calmly; hide our capabilities and bide our time; be good at maintaining a low profile; and never claim leadership.”) This policy of ‘Nursing strengths behind a low-profile’ has become increasingly challenged. In a world turning more multi-polar, China with growing geopolitical and geo-economic gravitas is increasingly expected to play a more proactive role as a ‘Responsible Stakeholder’. Moreover, this dictum risks giving the misguided impression that China harbors some sinister ambitions behind a low-profile façade. So there is a growing perception that this ‘lying-low’ foreign policy seems to be giving way to a more assertive stance.

Elizabeth Economy , C. V. Starr Senior Fellow and Director for Asia Studies at the Council on Foreign Relations, argues that China is now ‘The Game Changer’, seeking to remake global norms and institutions. ‘China is transforming the world as it transforms itself. Never mind notions of a responsible stakeholder; China has become a revolutionary power.’ In particular as China surges ahead to create a greener and more urban economy, her mercantilist trade and investment practices as her approach to what the West regards as universal human values are often seen to be at odds with international norms. Miss Economy advocates that America’s long-term strategic objectives need to be carefully defined with a view to engaging China both bilaterally and multi-nationally towards those objectives. Click here

Notwithstanding China’s seemingly inexorable rise, her GDP per capita, now ranking about 100th, is destined to be no higher than a middle-income country like Turkey even by 2050, when China’s economy could be 70% bigger than the US or India (by then ranking neck-to-neck). Such is the paradox of a population the size of a fifth of mankind. Moreover, China’s economic trajectory is by no means pre-ordained, beset as she is by a rising host of domestic and global resource, environmental, social, technological, economic and political constraints. At the end of the day, China’s aging population profile means that she is more likely to get old before she becomes rich. Moreover, China's comprehensive military power is generally perceived to be some 30 years behind the the United States, including integrated fire-power, technology, expertise, training, surveillance, logistics, response time, and global outreach.
 
China has a long and well-established Confucian culture of non-confrontation and harmony – harmony within one’s individual being, within the family, within the society, within the nation, between peoples and between Man and Nature. In an Age of Scarcity and ecological threats, there is no more critical time in history when this philosophy should continue to inform China’s developmental trajectory. What is equally if not more important is that a zero-sum thinking by China or the West will reinforce itself in a classic ‘Security Dilemma’, which could only lead to global catastrophe. Perhaps the challenge lies in how China’s own legitimate national interests and aspirations, with her unique historical, cultural, socio-economic and political background, can best be accommodated in engaging China together to re-shape a new world order for a better tomorrow for all.

Best regards,

Andrew