CHINAwatch

Explaining China's Foreign Policy Reset

Contrary to Deng Xiaoping's famous dictum of "Hiding strengths and Biding time", as a ten-ton panda, China has no option but to emerge from hiding under the bushel. Click here

But what shapes China's new-found more assertive foreign policy? Is it purely reactive and devoid of any grand design? How does China view relations with a resurgent Japan and the United States as the world superpower? Does China have a "periphery strategy"? How does China's recent Silk Road Strategy fit into these calculations?

A Special Issue of April 2015 of the European Council on Foreign Relations (ECFR) based in London summarizes succinctly what some of China's foremost strategic scholars think on these critical questions.

Download ECFR April 2015 Special Issue - Explaining China's Foreign Policy Reset

US forbids Intel from exporting chips to China for updating world's currently most powerful supercomputer

The story is captured by BBC online on 10 April. Considering the growing perception that America's supremacy is increasingly being challenged by a rising China, the proscription is perhaps only to be expected.

The official reason given for the Intel chip export ban is that China's supercomputer may be used to develop more powerful nuclear weapons. While there is no doubt that supercomputers may have military applications, they are also capable of being harnessed for commercial and peaceful space explorations. Please see my live interview on RT on 13th April.

China unveils roadmap to judicial, social reform

According to the online version of the People's Daily, Click here, China has rolled out a road map to judicial and social reform, with a timetable and verifiable targets.

The 48 reform measures are divided into three categories: litigation reform to prioritize trials, letting judges assume lifelong responsibility for cases they handle and holding them accountable for any miscarriages of justice; jury reform and public supervision reform .

A strong team of legal personnel will be fostered, including improving the professional threshold and encouraging exchanges between legal practitioners and researchers.

According to the timetable, reforms already initiated should achieve "greater progress within this year," such as cross-regional courts and procuratorate, as well as circuit courts.

Other reforms are expected to start and register initial progress by the end of this year such as setting up a system to record and report any officials' meddling in legal affairs. 

More complex reform measures are to be studied, debated and launched in the future.

 

 

Communist Youth League to recruit over 10 million volunteer netizens by end of June

Hong Kong's Chinese press and the BBC (Chinese online version) reported that the Communist Youth League is trying to recruit over 10 million volunteer young netizens by the end of June from universities and other sectors across the country. The idea is to nurture more positive energy on the internet and to balance against the spread of biased or false information and ideas. 

Apart from some sporadic reporting here and there, it is perhaps surprising that this bombshell has not created a storm in the international press. It is only too easy for it to be seized upon as yet another example that President Xi is clamping down on dissent and as evidence that he wants to be Mao. Click here

At the outset, the growing influence of the internet in shaping hearts and minds in China can no longer be treated lightly. See Social Media Activism: All the Rage in China, a blog of the China Policy Institute of Nottingham University. The following extract is instructive - 

"For instance, QQ, the leading instant-messaging service across PC and smartphone platforms, now boasts over 800 million active user accounts. Sina Weibo, China’s most popular microblogging platform, has an active user base of over 280 million and is being accessed by 76 million individuals on an average day. Weixin, the fast-rising smartphone-based text and voice messaging social networking service, reaches over 600 million users, 100 million of whom are outside of China. The magnitude of the network size poses an enormous challenge for state censors, and makes it possible for various contentious activities to exist and thrive across Chinese network space".

Another blog The Reawakening Rebelliousness of Chinese Youth shows how much more independently-minded China's youths have now become. 

China's national mouthpiece China Daily hastened to clarified that - 

"the increasing number of critical appreciations that netizens have been coming up with shows that they are paying greater attention to public affairs and have higher expectations of social progress. Their increasing numbers have made netizens an important part of public supervision over government work."

"Therefore, there is no need to worry about their straightforward views and criticisms. The praise and criticism as long as they abide by law, both pass on positive energy in the increasingly plural society."

Nevertheless, Beijing has seen fit to recruit over 10 million young "good" netizens quickly so as to ensure that China's cyberspace is at least not dominated by what is perceived as negative energy. 

Shedding light on China's shadow banking

The Fung Global Institute, an independent think-tank in Hong Kong, publishes the following two in-depth reports designed to throw some light on the vexing topic of China's shadow banking - 

Bringing Shadow Banking into the Light: Opportunity for Financial Reform in China

Bringing Light Upon the Shadow: A Review of the Chinese Shadow Banking Sector 

Highlights of the above reports include the following observations -   

(a) Ratios of non-performing loans in the shadow banking sector range from 4.4% to 23.9% according to various scenarios. A collapse in confidence could well accelerate this to as much as 50%. 

(b) Nevertheless, shadow balance sheet shows a positive net asset position after accounting for a gross liabilities both at the central and local government levels. Local governments have assets equivalent to 129% of GDP against liabilities equivalent to 61% of GDP. 

(c) The overall shadow banking asset size is still moderate compared with the size of the financial sector and GDP. At the end of 2014, China’s total shadow banking risk assets rose to RMB 32.2 trillion, or 51% of GDP, compared with a global average of 117% of GDP. 

(d) China has an exceptionally high level of corporate deposit holding equivalent to 90% of GDP, compared with only 7% of GDP in the United States. As loans are often recycled back to the lending bank as deposits, this enables the banks to earn high interest spreads and acts as a cushion against any exigencies. 

(e) China’s household debt (and gearing) remains comparatively low and does not support the contention of a massive mortgage crisis. 

(f) Despite rise in credit volumes, China’s economy is not over-indebted while the government possesses adequate capacity to absorb losses. There are also massive private savings offering scope for the corporate sector to undertake debt-equity swaps. 

(g) Nevertheless, shadow banking has morphed into a roundabout-way of funding local government and private sector investments in real assets with moral hazard implications. China’s slower growth and adjustments in the property sector could escalate domestic financial risks impacting foreign banks and investors.

(h) China’s shadow banking sector is now closely monitored by various regulatory authorities. Nevertheless, more systemic reform and improved governance remain a critical issue. 

The following papers may help further comprehension -

China: from shadow banking to full currency convertibility by 2020 Click here

Debt-to-GDP ratio country ranking 2Q14 Click here

Is China's property market heading towards collapse? Click here

Under the Dome 穹顶之下 - a cri de coeur of civil society

Under the Dome 穹顶之下 (English sub-titles subsequently added) - a new TED-style 104-minute video documentary on China's air pollution challenges, was passionately delivered by celebrity Chinese lady journalist and former CCTV presenter Chai Jing on Saturday 31st January on People.com, the website of the state's mouthpiece People's Daily. It carries a tagline "the conscience of a senior journalist and the social responsibility of an ordinary mother 一位资深记者的道义良心; 一个普通母亲的社会责任),  The cri de coeur went viral in China and has since been viewed online some 200 million times.See commentaries in the New York Times and the South China Morning Post.

 

During the sensitive period when both the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) are in session, commonly referred to as the "Two Sessions", the video was taken off home pages of websites in China. President Xi, meanwhile, took pains to reiterate the leadership's determination to root out pollution on two fronts - both environmental and political. Click here

 

Claims of self-financing notwithstanding, the video's production and release would not have been possible without high-level support. It's instructive that they coincided with the appointment of a new Minister for Environmental Protection. 

 

Yet, the subsequent removal of the video from Mainland Chinese websites has raised speculation about internal political rivalry or possible changed policy towards civil society. Jessica C. Teets, Assistant Professor at Middlebury College and author of Civil Society Under Authoritarianism: The China Model thinks that the apparent clampdown on the video reflects, in some measure, a continuation of very cautious civil society policy under Xi's predecessor Hu Jintao, rather than any dispute about policy directions on how to combat pollution or growing a greener economy. Click here

 

However viewed, the video speaks volumes on how serious and deep-seated China's air-pollution challenges are and how they could become a game changer in defining China's energy mix and the country's greener future. 

 

View the following for background on how China is beginning to tackle the impossible - 

 

Dark days ahead but blue skies could return to China's cities by 2030's Click here 

Blue Skies for China’s Cities - A multi-dimensional strategy Click here

China's new environmental law more promising than expected Click here

Can China really reach its ambitious goals for clean energy? Click here  

Cleaning up China's Coal Power Click here