Lisbon China File 1 (0.2), 26 April 2009
Editor: Daniel Alvarenga

Analysis – How Jackie Chan captured China’s characteristics as an Emerging Power

The week started with the polemic revolving around Jackie Chan’s comments where he wondered whether in fact Chinese people have the need “to be controlled”. Although it is hard to sympathise with anyone’s doubts over if it is good to have freedom or not, Jackie Chan’s comments, albeit not very sophisticated or academic in nature, do shed light with its crudeness on some of China’s strengths and weaknesses as an emerging power.
It has been government’s control, bureaucratic centralization in key sectors and protective assistance to its “global champions” that have helped boost China’s growth in the last few years. These global champions is the expression used to describe China’s “dearest” top companies to whom government has provided all different incentives and measures to facilitate their expansion abroad and their rise as top global multinationals.
China’s attractiveness as a political and economic model lies precisely in its obsession for control, coordination and slow, progressive change. This is easily noticeable in the recent debates regarding the rising influence of a so-called Beijing Consensus. The Beijing Consensus contrasts with the Washington consensus when it comes to privileging the domain of public ownership as the dominant and guiding force in the political economy of a state. It also prefers steady reforms and slower change to what Cheng Enfy from the Chinese Academy of Social Sciences calls “shock therapy” of more traditional neoliberal economic policy. There is one last fundamental difference between the Beijing Consensus and the Washington Consensus. Beijing believes that while countries’ cannot escape a progressive march towards an open globalized economy and easier integrated trade across nations, states should still thread carefully and attempt to be self-reliant in their economic growth strategies. This trend in the behaviour of China in its business and foreign affairs is likely to continue to be its trademark in the near future
At the same time that China and other BRIC countries are now pushing extremely hard for greater say in a revamped IMF which has come out very strong out of the G20 meeting and out of the financial crisis an extremely relevant phenomenon unfolds. Developing countries, particularly those with stronger ties to China are increasingly distancing themselves from the US dollar. Clearly further evidence of the global power shift in finance and political influence. Take the Indonesian Energy giant for example, Perusahaan Listrik Negara. In a telling example of how the dollar is slowly losing its weight and influence, the state electricity company is planning to swap its $2.36 billion in foreign currency needs into Chinese yuan this year with the objective of protecting itself from US dollar volatility and reduce foreign exchange transaction fees.


Daniel Alvarenga
Editor, Lisbon China File,

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China International
Russia, China ink Energy Pact
Jiang Yu – China and Russia have agreed to a package of deals on oil pipeline construction, crude-oil trade and financing and other projects pertaining to oil cooperation.

China car companies upstage leaders
Elaine Kurtenbach – Sales hit a monthly high of 1.1 million in March, outpacing US sales for the third straight month despite double-digit declines in other markets

Crisis Giving China a chance to assert itself
Ariana Eunjung Cha – As the global economic crisis has eroded faith in US-style capitalism, there is growing talk that a new “Beijing Consensus” will replace the long-dominant Washington Consensus on how developing countries should manage their economis.

BRIC nations want more power in IMF
Reuters- BRIC countries, including China, are insisting that the IMF consider issuing bonds as a way to raise capital. The countries would buy the IMF bonds, rather than extend support in loans.

China at Home

Chinese Company plans year’s top Initial Public Offering
Tina Wang – China’s biggest maker of extruded aluminium products by capacity is offering 1.4 billion new shares in Hong Kong at between 6.80 and 8.80 Hong Kong dollars each.

Macau’s Q1 Casino Revenue Rises, Suggesting Rebound
Bloomberg – Macau’s casino revenues rose in the first three months of 2009, signalling a recovery from the global economic slowdown and visa controls imposed on mainland Chinese visitors.



China recovering, Government says
Yi Gang – The economy is going forward as the stimulus package started working, the second quarter and remainder of this year will continue this recovery trend.

One way to boost US-China military cooperation
Kent Butts & Geoffrey Dabelko – Environmental security issues – and climate change in particular – could be among the most productive avenues for US-China military cooperation. The world's largest per capita emitter (the United States) and its largest total emitter (China) of greenhouse gases should identify specific areas for cooperation before the upcoming climate negotiations in Copenhagen, Denmark.

China disavows nuke energy co-op with North Korea
Wang Yiren – China has never had any cooperation with the DPRK in nuclear energy development

China and CPLP

China to Finance Angola’s Housing, Agriculture
Xinhua – Angolan Prime Minister Antonio Paulo Kassoma and the Chinese ambassador in Luanda on Wednesday discussed China's financial aid to Angola's housing and agricultural projects.

China File Extra

The China Blog
Time Magazine – A varied collection of daily blog cuts from Time Magazine political and economic China contributors. The themes range from China’s economic and political affairs to its social issues and daily life affairs including art and lifestyle.

Lisbon China File 1 (0.1), 19 April 2009

Editor: Daniel Alvarenga dgalvarenga@gmail.com

Analysis – a Mixed Set of Signs from China’s Economy – Uncertainty at a High

China’s dollar reserves are now increasing at a much slower pace than in the past, this trend adds to Washington’s nervousness and economic concerns. Indeed, China’s foreign-exchange reserves witnessed their smallest rise in eight years as exports keep going down and Foreign Direct Investment drops. Such trend further presses the United States to be swift and decisive in adapting and adopting an alternative economic growth model. One that no longer remains dependent on uncontrolled overspending by its consumers at home and on China’s purchase of its treasury bills abroad. Add to this Beijing’s increasingly watchful eye over its currency exchange rate, unfavourable to the United States, and we got ourselves a potential escalation of an ongoing “trade war”. Debates will become more frequent and “louder” as the United States gets more nervous and China more assertive in their respective economic diplomacies and policies. China has put in place its very own contemporary version of the “New Deal” with a US$586billion dollar stimulus package directed at its internal market. It was the most generous stimulus packages of any country in the world when measured relative to size of the economy. Through large construction and public projects China seeks to more effectively shield itself from the global downturn and achieve greater self-reliance for its economic system. This bet has already yield some initial positive results with consumer spending rising 15 percent in the first quarter of this year. The country’s trade surplus keeps improving despite a 17 percent drop in exports in March thanks to an even greater drop in imports (25.7 percent). At the same time some of this money has been leniently lent to somewhat inefficient industries and projects which don not always deserve to receive their share of the financial package. These inefficiencies are something that China’s policy-makers need to watch carefully in the coming months and correct where possible for the sake of the stability of future economic growth. On another positive note, figures for bank lending in China are once again rising as the credit crunch squeeze seems to be easing, at least internally. The concern remains however that much of these fluxes of liquidity are going into stocks, asset-led inflation and speculative capital instead of going to the real economy. The medium-term availability of this capital will show to what extent China and its investors have been attentive and learning their lessons from global recession. At the end of the day even if the second half of the year is expected to be stronger for China with more investment and more spending there is much that escapes its hands and sphere of influence. China might aim to quickly restore its export capacity and maintain the competitiveness of its businesses, it can even do everything right and put all the right policies in place but there is not much the country can do if the rest of the world economy keeps spiralling down.

Daniel Alvarenga

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China International

China says N.Korea Talks Alive

Xu Guangyu – It’s a difficult situation, but I think China will remain restrained and low key, China will wait until the United States has a new proposal on the table. Link

China plans $10b ASEAN investment funding

Lee Kuan - China is going to take the opportunity of this crisis to further establish itself in Asia. All this will have a huge political and diplomatic impact in the region, in addition to the economic impact. Link

China wary of US-Myanmar “détente”

Jian Junbo - The US will quickly find it is difficult to engage Myanmar. So at this moment China is not worried about the US's seemingly rapid penetration of the Southeast Asian region. Although possible, geopolitical competition is not imminent. Link

Forging Asia’s missing links

Fidel Ramos- it was at last year’s Boao Forum that Chinese President Hu Jintao began to express public optimism about the positive trends in Mainland China-Taiwan relations. That rapprochement was possible because Taiwan’s then newly elected vice president was given permission by China to attend the forum, where he was able to meet informally with President Hu. Link

China at Home

Slower Growth Masks the Good news in China

Willy Lam – The Leadership will be happy that the economic downturn has not been as bad as anticipated. Link

Signs Suggesting China’s recovery remains fragile

Tao Wang – We believe China’s stimulus-led recovery is well underway but lending is growing so fast Beijing’s next move should be taming credit growth to reduce risks of wasteful investment and bank bad debt. Link

China Foreign Exchange reserves at US$1.95 trillion

Andy Xie – Inflow through buying properties and speculation was a big part of foreign exchange increase in the past few years, and we are seeing a bit of unwinding as new money is not coming in. Link

China and CPLP

Mozambique refurbishes Maputo Airports with sights on 2010 World Cup

Angop – A new US$75 Million contract has been signed with a Chinese company for the renovation of the airport in Maputo to be ready to welcoming greater influx during the 2010 World Cup in South Africa. Link

Greater frequency in flights from Angola to China

The Angolan Air Transporter TAAG has increased the number of flights to Beijing to 3 flights a week, evidence of growing economic ties between the two countries. Link

Angola eyes more loans from China

Severim de Morais - Angola is set to secure more loans from China to rebuild infrastructure and diversify its economy away from oil according to the Angolan Finance Minister Severim de Morais. Link

China File Extra

China’s Growing Role in UN Peacekeeping - International Crisis Group – This report explores and discusses a particular dimension of China’s growing engagement with the institutions of international governance. China now has over 2,000 peacekeepers serving in ten UN peacekeeping operations, making it the second largest provider of peacekeepers among the five permanent members of the UN Security Council. Link

Lisbon China File 1 (0), 12 April 2009

Editor: Daniel Alvarenga

Analysis – China’s Two Hats: Great Power and Developing Country

An observation of China’s recent behaviour at the world stage reveals two particular “hats” that stand out. China has been strategically switching between the hats of “developing country” and of “great power” according to each specific need and challenge. On the one hand, when it comes to extending its influence within international financial institutions such as the IMF and at the Doha trade negotiations, China “brands” itself as a World Power. A Great Power unjustly kept back by outdated international structures and decision-making processes that privilege old powers. On the other hand when it comes to environmental calls for China to curb its emmission or pressures to value the Renmibi more quickly, China resorts to the developing country “hat”. In the case of CO2 emmissions it claims it cannot, in the short term, afford to sacrify slower development prospects just to solve a problem that was historically created and perpretrated by developed countries. As for a quicker appreciation of the Renmibi, this would hurt China’s exports and subsequent economic development prospects. Given the current financial crisis, China is now extra vigilante of any hints of instability and revolt at home. Central government knows sustained economic growth and keeping its middle classes happy is imperial for being successful in achieving so and, most importantly, the leadership increasingly understands that its fate is intimately connected to what happens at the international level. So, despite a tradition of “quiet diplomacy” and of a self-professed “peaceful rise”, we are destined to see more and more of this China’s “quiet” diplomacy, expanding and transforming itself beyond the issues of Tibet and Taiwan. Diplomacy is transforming itself to become more and more assertive, particularly in the field to economic diplomacy. It is the cheer functional need to reduce levels of economic and political uncertainty at home that propels China to actively partake in the redesign of International financial institutions of the fast-changing architecture of International Political Economy. China knows that it can have a big influence in terms of how serious and deep the global recession can become. It also knows that it needs to be proactive if it wants the structure and “rules” coming out of the global economic restructuring to be in line with its own economic development strategies at home. Leaving the Great Power hat” on for longer periods is only the natural step towards managing its interconnected economy and, subsequently, successfully containing the varied set of centripetal forces menacing to dilute the grip of central government at home.

Daniel Alvarenga

Editor, Lisbon China File

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China at Home

Ackgnowledging the threat of Ultra-Nationalism

Jonathan Manthorpe - The government-run weekly magazine Oriental Outlook printed a blistering editorial against radical nationalism. This is the latest in a raft of official condemnations of excessive patriotism. Link

Deconstructing China’s Real Estate Overbuilding bubble

Chan Akya - Two numbers stand out about China’s Real Estate sector: 100 million square feet of office space and a "14 years' supply" at the best possible take-up rate. This shows as it does the rampant overbuilding that went on across the Chinese capital. Link

China’s Healthcare system holds back domestic consumption

Hu Xiaoyi - There are still over 200 million people that are not covered by medical insurance system. Cautious Chinese saving in case of illness is one of the factors keeping domestic consumption relatively low, complicating Beijing's efforts to ride out the global financial crisis. Link

China’s CO2 emissions as “subsistence emissions”

Yuan Si – Within current climate change debates there is a set of arguments used by China to defend labeling its emissions as “subsistence emissions”. Link

China International

China, the IMF and post-G20 International Finance

Song Zhe - China has now supported the IMF by quota funding, purchasing bonds from the World Bank, including private bonds for trade financing. Link

New Tax Breaks and Internal Incentives may anger Washington and other Trade Partners

Joe Macdonald - Alarmed by falling trade, Beijing is trying to boost exports and avert more job losses by giving companies tax breaks and other aid - a tactic that could anger Washington and other trading partners. Link

China is making Yuan payments easier amidst growing concerns over its dollar reserves

Bob Chen and Judy Chen - China’s leaders, increasingly concerned about the nation’s $740 billion of U.S. Treasuries, are making it easier for trading partners and consumers to do business in yuan. Link

Calls for a G2 are heard while Obama and Hu Jintao schedule vital economic dialogue for this Summer Li Xing - The China-US Strategic Economic Dialogue (SED), initiated by Hu and former US president George W. Bush in September 2006, served mainly as a bridge in bilateral economic relations and resolving trade disputes. Link

France is now emphasizing recognition of the one-China policy

Sharon LaFraniere and Alan Cowell - France went to some lengths to emphasize that its position on Tibet in particular was not a shift from its long-held policy. Link

Intra-Asian trade remains hostage to China and associated extra-regional demand

Jong-Wha Lee - Although within Asia has grown rapidly, much of it has been feeding China's assemblers who export final goods outside Asia meaning that intra-Asian trade remains hostage to extra-regional demand. Link

Despite concerns about North Korea’s projectile test, China opposes new sanctions

James Bone and Richard Lloyd Parry - China and Russia, which have veto power in the Security Council, signaled they would oppose any new sanctions, especially as North Korea said that the projectile was the vehicle for a satellite, not a missile. Link

China File Extra

China’s Communist Party – Atrophy and Adaptation, University of California Press - 2009

David Shimbaugh digs deep into how the CCP has evolved, presenting us an inside view into how this complex institution has adapted itself to changing circunstances at the internal, national and international levels.