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Sunday, April 6, 2008

The Economists: The New Colonialists
Link: http://www.economist.com/opinion/displaystory.cfm?story_id=10853534

THERE is no exaggerating China's hunger for commodities. The country accounts for about a fifth of the world's population, yet it gobbles up more than half of the world's pork, half of its cement, a third of its steel and over a quarter of its aluminium. It is spending 35 times as much on imports of soya beans and crude oil as it did in 1999, and 23 times as much importing copper—indeed, China has swallowed over four-fifths of the increase in the world's copper supply since 2000.
What is more, China is getting ever hungrier. Although consumption of petrol is falling in America, the oil price is setting new records, because demand from China and other developing economies is still on the rise. The International Energy Agency expects China's imports of oil to triple by 2030. Chinese demand for raw materials of all sorts is growing so fast and creating such a bonanza for farmers, miners and oilmen that phrases such as “bull market” or “cyclical expansion” do not seem to do it justice (see special report). Instead, bankers have coined a new word: supercycle.
Not all observers, however, think that China's unstinting appetite for commodities is super. The most common complaint centres on foreign policy. In its drive to secure reliable supplies of raw materials, it is said, China is coddling dictators, despoiling poor countries and undermining Western efforts to spread democracy and prosperity. America and Europe, the shrillest voices say, are “losing” Africa and Latin America.
This argument ignores the benefits that China's commodities binge brings, not only to poor countries, but also to some rich ones, such as Australia. The economies of Africa and Latin America have never grown so fast. That growth, in turn, is likely to lift more people out of poverty than the West's faltering aid schemes. Moreover, China is not the only country to prop up brutish regimes. Witness the French troops scattered around Africa, some of whom recently delivered a shipment of Libyan arms to Chad's embattled strongman, Idriss Déby.
A new nuance
China could—and should—use its influence to curb the nastiest of its friends, including the governments of Sudan and Myanmar. And it is beginning to do so. It has ceased to resist the deployment of United Nations peacekeepers in Darfur, and is even sending some of its own military engineers to join the force. Wen Jiabao, China's prime minister, has called publicly for democracy in Myanmar—which, even though Chinese officials' understanding of democracy is different to Westerners', is a bold step for a government that claims not to meddle in other countries' internal affairs. The more business China does with the rest of the world, the more nuanced its foreign policy is likely to become.
Still, China's hunger for natural resources is creating plenty of problems. Most of them, though, are in China, not abroad.
China is hoovering up ever more commodities not just because its economy is growing so quickly, but also because that growth is concentrated in industries that use lots of resources. Over the past few years, there has been a marked shift from light manufacturing to heavy industry. So for each unit of output, China now consumes more raw materials.
That may sound like a minor change, but the implications are dramatic. For one thing, it has encouraged the sort of foreign entanglements that are now causing China such embarrassment. More worryingly, it is compounding China's already grim pollution. Heavy industry requires huge amounts of power. Steelmaking, for example, uses 16% of China's power, compared with 10% for all the country's households combined. By far the most common fuel for power generation is coal. So more steel mills and chemical plants mean more acid rain and smog, not to mention global warming.
These are not just inconveniences, but also an enormous drag on society. Each year, they make millions sick, cause hundreds of thousands of premature deaths, sap agricultural yields and so on. Pan Yue, a deputy minister at the government's environmental watchdog, believes that the costs inflicted by pollution each year amount to some 10% of GDP.
No fire without smoke
It is no wonder, then, that pollution is the cause of ever more protests and demonstrations. There were some 60,000 in 2006 alone, by the authorities' own count. Some are led not by impotent peasants but by well-organised burghers from Shanghai and Xiamen, a development that must horrify China's rulers. And the potential for even more disruptive environmental crises is great: northern China is already running out of water, and the glaciers that feed its dwindling rivers are melting, thanks to global warming.
The government is aware of these problems, and is trying to address them (see article). It has used this month's People's Congress to raise the status of Mr Pan's agency to a ministry. It has increased fines for pollution, reduced subsidies on fuels and scrapped tax breaks for heavy industry. It is also promoting cleaner sources of power, such as windmills and natural gas. Yet despite frantic efforts to clean up Beijing in time for the Olympics in August, athletes still doubt the air will be fit to breathe. The world's fastest marathon runner, for one, has threatened to drop out of that race because of pollution.
All the government's green schemes are being undermined by an artificial abundance of cheap capital, and by bureaucrats' enthusiasm for channelling it to grubby industries. Chinese banks, with the government's blessing, pay negative real interest on deposits and so can lend to state-owned firms very cheaply. Many of those firms also benefit from free land and pay negligible dividends to the state, leaving lots of money to invest in more dirty factories. Chinese depositors and taxpayers are subsidising the very industries that are slowly poisoning them.
China is bound to consume enormous amounts of raw materials as it develops. But given how polluted the country already is, and how much unrest that pollution is causing, it should curb its hunger for resources. A less wasteful development strategy would be a healthier one.

Comments:

I think that this is a very good article as it summarises the problems that is being felt in China today as China hunger for resources continues to grow. The intense amount of energy that Chinconsumes had led to huge amount of pollution in China which inturn led to demonstrations. The pollution problems had caused millions of people to be sick each year and this will affect the performance of China economy. Also, other than the pollution problems, the Chinese banks are also facing a huge problem. pay negative real interest on deposits and so can lend to state-owned firms very cheaply. Many of those firms also benefit from free land and pay negligible dividends to the state, leaving lots of money to invest in more dirty factories. The Chinese people are saving money in banks that are not making money at all as the have to lend it to firms that are also not making profits. This proves to be a huge problem in China as this could eventually lead to the collapse of the financial institutes in China.

Labels: posted by Terence

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The Economists: Where is everybody?
Link: http://www.economist.com/research/articlesbysubject/displaystory.cfm?subjectid=478048&story_id=10853627

Manufacturers struggle in southern China's industrial belt
AT FIRST, the managers of the factories spread throughout Guangdong province thought the lack of returning workers after the Chinese New Year break in early February was merely because they had been delayed by the huge blizzard that disrupted rail and power lines, and left roads impassable. But now that the mess has now been cleaned up, it is clear that the vast annual migration of around 20m people that has fuelled the manufacturing boom in southern China over the past two decades is beginning to diminish.
The Guangdong Labour Ministry reckons 11% of the workers did not return after the holiday; other estimates are as high as 30%. Whatever the precise number, many factories are reeling. Wages were already rising; now they will surely go up further, adding to surging costs for credit, materials, energy, environmental compliance and health care. Meanwhile, revenues are falling due to slowing demand from America and a reduction, following pressure from other countries, in China's complex system of export subsidies.
A survey of conditions in southern China conducted in the aftermath of the Chinese New Year, covering 162 members of the Federation of Hong Kong Industries, produced reams of gloomy figures. Members estimated 10-20% of the 70,000 factories in Guangdong province had closed in the past year, and expected a similar number to close within the next two years. Two-thirds of those polled said they were unsure whether to invest more in the region; one-third planned to cut investment. Only one respondent was optimistic.
To some extent the upheaval in southern China follows a government plan to force dirty, low-paying industries out of business or into poorer interior regions that have so far missed out on the country's growing industrial wealth. The hope is that the gaps in Guangdong will be filled by factories producing more sophisticated, high-value products that are cleaner and less energy-intensive to produce. There are signs that this is indeed happening.
Factories are opening up in China's interior, providing opportunities for those in rural areas to find employment closer to home, rather than having to leave their families for an entire year. This may explain the reduced flow of migrant workers. At the same time, discriminating industrial parks are popping up in Guangdong and Suzhou, among other places, that will only permit factories producing sophisticated electronics and medical equipment. The factories in deepest trouble are said to be in low-cost, low-skill areas: toys, plastics, shoes, clothing and so on. Many are sweatshops with poor working conditions.
Firms that provide relatively high wages and good working conditions do not seem to have problems attracting employees. Nike's sneaker factory in Dongguang, one of the grimier sections of Guangdong, has 27,000 workers, including 4,500 that have returned over the past year and 40% who have been around for at least three years. The workers receive 1,400 yuan a month ($200), well above the minimum wage, receive subsidised food and (for the 7,500 living inside the factory) clean dormitories. Nike is not competing for the low end of the market: shoes produced its is Dongguang factory can cost as much as $185 a pair.
But Nike has been steadily spreading manufacturing from southern China to the rest of the country, and the rest of South-East Asia. Indeed, the idea of shifting away from China seems to be gaining adherents. A study by Booz Allen Hamilton, a consultancy, on behalf of the American Chamber of Commerce in Shanghai, says more than half of foreign firms believe China is losing its edge over other low-cost Asia countries, and 17% intend to relocate.
This shift will be a good thing, as production shifts to Bangladesh, Indonesia, Malaysia and even Africa, spreading wealth and deepening manufacturing skills. Whereas China was once desperate to grow through exports, it is now developing its own domestic economy and has other ways to thrive beyond merely producing cheap goods. But these shifts are at the very least disruptive. Hundreds of thousands, if not millions, of unskilled workers still depend on southern China's low-cost factories for their livelihoods.
And as the rusted hulks of manufacturing plants throughout the Western world attest, the transition to higher-value products can be difficult. Clement Chen, the chairman of the Federation of Hong Kong Industries, says the Chinese government is understandably clamping down on lots of dirty industries—leather tanning, dyeing, finishing, electroplating, and the like—but that this can disrupt the broader manufacturing supply chain, including industries China wants to develop. Business environments, like ecosystems, can be fragile—and once lost, competitive advantage can be hard, if not impossible, to regain.

Comments:
This article provided shocking news about the manufacturing industries in China. Many people believe that the manufacturing industries are doing very well in China and that it will continue to grow. However, this article proves that it may be wrong. The labour ministry estimates that 11% of the workers did not return after the Chinese New Year holidays and that others estimate it to be at 30%. Furthermore, it also state that many of the factories are starting to close down as most of them are starting to shift their operations to other parts of China and increasingly other parts of the world. This shows that China may well be losing their comparative advantage in the manufacturing sector. Mnay factories are relocating their plants to Malaysia, Indonesia and even to Africa. Cost of production in China is strating to increase and many investors are not willing to invest in China. However, this report is only looking from a one sided point of view. China may be losing out to some countries, however, they still remains as the world largest receiver of FDI and that even though factories are rrlocating, there are still tons of factories in China which employs millions of people. Thus we can just conclude from just a few cases that China is strating to lose out to other countries.

Labels: posted by Terence

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Wednesday, April 2, 2008

TIMES Magazine: Postcard China
Link: http://www.time.com/time/printout/0,8816,1704405,00.html

The west side of Beijing's venerable Workers' Stadium is ground zero for the capital's party animals. Stretching south of the stadium gate is a row of huge dance clubs with names like Babyface, Coco Banana, Cargo and Angel, each competing with its neighbors to be bigger, brighter and louder. But on the other side of the road, the offices and shops are shuttered by late evening. Only one discreet neon sign is visible above a small stairway: Destination — Beijing's premier gay club.
Despite its unassuming exterior, the long lines of young men waiting for entry on most weekend nights are a giveaway. And inside it's all action. On a recent Saturday night, hundreds of men milled around the outer rooms drinking and flirting. Around the tennis-court-sized dance floor an Eminem concert looped on half a dozen video screens, and pulsing lasers and strobe lights flashed over the writhing, sweating bodies. It has been like this every weekend for the past couple of years, the club's manager says.
Xiao Wang, as he is introduced to me, is propped up against a wall in one of the bars. The 29-year-old architect, who sports a stud earring and a fresh razor cut, looks puzzled when I ask him about the drawbacks of being gay in Beijing, and whether he gets hassled by the authorities. "Hassled for what? Being gay?" He laughs. "Why would they want to do that?"
There has never been a better time to be gay in China, but as Destination's somewhat schizophrenic combination of outer reserve and inner exuberance demonstrates, it still pays to be careful. Beijing's attitude has been described as a "Triple no" policy: no approval, no disapproval, no promotion. That sort of "Don't ask, don't tell" system is emblematic of the delicacy with which the communist regime is learning to deal with many of the personal-liberties issues being raised by the country's growing middle class. For their part, homosexuals in China seem perfectly happy to live within the boundaries allowed by the government, albeit not without the occasional snipe at the authorities. It's no coincidence, for example, that the once ubiquitous term tongzhi — comrade — is now slang among young Chinese for gay men.
Historically, Chinese society was relaxed about male homosexuality, which was tolerated so long as it didn't interfere with the Confucian duty to raise a family. Although an imperial decree was issued (likely under the influence of Christian missionaries) banning homosexuality in 1740, it was not until the advent of the communists that gays and lesbians were driven underground. The communist government once viewed gays as disruptive to social order and strictly enforced laws against homosexuality, imprisoning and even executing those convicted. But as China's economy opened to the world, the authorities' stance softened. A law banning sodomy was dropped in 1997, and in 2001 homosexuality was removed from the country's official list of mental illnesses. "It gets freer every year," says Bernie, a fortysomething who takes a longer perspective. "And every year more and more gays come out of the closet. In Beijing and the big cities, you can see couples walking around the shopping malls holding hands. In the smaller cities, I hear it's getting better all the time."
Still, Beijing is no San Francisco. Openly gay filmmaker Cui Zien says it's still easy to cross an invisible line when it comes to publicly celebrating gay culture. "I organized a gay film festival and the authorities warned us not to advertise the location and the date, not even on the Internet." Despite the restrictions, the festival was allowed to go ahead (unlike some in previous years) and was well attended. Also, since the SARS outbreak in 2003, the government has become more enlightened about AIDS. Cui notes that "there are lots of education programs on safe sex and HIV prevention in gay communities and on the Internet, and there is also lots of funding available to safe-sex campaigns."
Back at Destination, Xiao Wang is still struggling to explain how things work. A friend in a leather jacket grabs his shoulder and pulls him toward the dance floor, but he hesitates. "If you do something wrong, of course you can get into trouble. But that's not just for gays. That's true for all Chinese. Other than that," he says, turning to follow his friend, "we're free to live our lives."

Terence Commentary:

From this article, we can see that the Chinese government is more relaxed towards the gay culture in China. The stretch of area that is home to the gay bars is a sign that China is progressing towards a developed country as most developed countries in the world today do have a stretch of area that is home to such bars. The perception of people are also changing and they are starting to accept gays even though there is still a strong stigma against gay. However, the relaxation of the chinese government control meant that the number of people getting infected with sexual diseases will increase at an alarming rate which is not healthy for the chinese society. The mindset of people is changing against homosexuality meant that chinese culture is evolving and that can also be a bad sign as the chinese will let their cultural aspect take a backseat as they focuses more on economic growth. Both the relaxation of control from the government as well as the changing of mindset from the people will bring both positive as well as negative effect to China, I believe that what can be done to minimise the damage is that to re-introduced Confucius concept into the people which the Chinese government is trying to do so. However, I believe that such policy should be concentrated more in the urban areas as people in the rural area are still against the idea of homosexuality or it don't even exist at all.

Labels: Culture, posted by Terence

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Tuesday, April 1, 2008

Can China and India Be Friends?
Link: http://www.time.com/time/printout/0,8816,1697595,00.html

To understand the significance of 100 Indian soldiers spending a week running around southwestern China alongside troops from that country's People's Liberation Army in mock battles against imaginary terrorists, it is worth noting that Operation Hand in Hand is the first-ever joint exercise between these two armies. They fought each other in 1962, and have not exactly warmed to one another in the decades since, for much of which India was close to China's erstwhile communist rival, the Soviet Union, while China has been a reliable ally of India's arch-foe, Pakistan. "The two sides will be like two porcupines facing each other," says Delhi-based security analyst C. Uday Bhaskar, "They have had little contact for 40 years, and a negative perception of the other still prevails, more so, perhaps, on the Indian side."
The joint exercise follows a series of smaller steps to break the ice, including a joint mountaineering expedition and joint naval exercises. In 2006, Beijing and New Delhi signed a memorandum of understanding (MoU) providing for regular war games and annual defense summits. The thaw in the long-time Sino-Indian cold war began with the 1996 visit of Chinese Premier Jiang Zemin to New Delhi. Since elevating the relationship to a "strategic partnership" in 2005, the two countries have seen bilateral trade exceed $20 billion last year, and have worked together to voice common concerns in such international forums as the WTO and the Bali climate-change talks. "Sino-India relations are definitely on an upswing," says Dipanker Banerjee, director of the Delhi-based Institute of Peace and Conflict Studies. "The army exercises are a result of a natural progression of events, so they are a welcome step."
Not everyone is as optimistic. Chief among the irritants to the relationship is a continuing border dispute: India accuses China of illegally occupying 43,180 square kilometers (16,672 square miles) of territory belonging to the Indian state of Jammu and Kashmir, including 5,180 square kilometers (2,000 square miles) ceded to China by Pakistan. China, on its part, accuses India of occupying some 90,000 square kilometers (34,749 square miles) of Chinese territory, mostly in the northeastern Indian state of Arunachal Pradesh. Recently, Indian security experts have raised alarm over China's alleged military build-up near India's north-east, while India's Indo-Tibetan Border Police has revealed that there have been 141 border incursions by the Chinese in the past year.
"The Chinese have actually hardened their stance regarding the border issue," says Brahma Chellaney, a strategic studies expert with the Delhi-based Centre for Policy Research, "Last year, the Chinese Ambassador reiterated the Chinese claim on Arunachal Pradesh, and since then they have been trying to put the onus for settlement of the border issue disproportionately on India."
India is also concerned by China's burgeoning and secretive defense expenditure, its building of road and rail links along the border, and its "string of pearls" strategy of setting up naval bases in the Indian Ocean. But China has its own strategic concerns, particularly the fact that India is being courted by the U.S. in a strategy aimed at forging a regional alliance comprising India, Japan, Australia and the U.S. To that end, last September, India held joint naval exercises in the Bay of Bengal with the U.S., Australia, Japan and Singapore, soon after China's military exercises with Russia and the Central Asian members of the Shanghai Cooperation Organization. China has also been protesting against India's refusal to allow Chinese direct investment in Indian ports, telecommunications and other sectors for security reasons.
This week's Sino-Indian military exercises are aimed at defusing some of this tension. "The exercises will help build military confidence between two nations that have a record of supporting dissidents on the other side — India in Tibet and China in India's North-East," says foreign affairs expert C. Raja Mohan. "They both now share a counter-terror agenda, and it is an important step forward for the two to collaborate." On the domestic political front, the exercises also offer the Indian government an opportunity to quiet criticism from its leftwing coalition partners over its pro-U.S. tilt.
Given its scale, Operation Hand in Hand is essentially symbolic, although it may set the stage for bigger and more regular war games in future. "However," says Chellaney, "Sino-Indian relations need to move beyond mere symbolic gestures towards more substantive steps to resolve outstanding issues." As the economic and security architecture of Asia is re-drawn, competition for resources and influence is likely to grow between Asia's second and third biggest economies. But this need not necessarily lead to tension, as Bhaskar points out: "What matters is how China wants to see India in the long run — as a worthy global power, or as an antagonist that must be mired in South Asia. In the past China has leaned towards the latter approach; it has been arming Pakistan to bog India down. But the way things are evolving, particularly with continuing economic globalization, that may not continue to be the case." Both India and China realize that they need peace to stay on their high growth trajectories. And for this, hand-in-hand will work better than fist-to-fist.

Posted by: Terence Tan

Labels: articles, posted by Terence

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China's Perfect Storm
Link: http://www.time.com/time/printout/0,8816,1708575,00.html

Bedraggled and wet, Gao Biao stands in front of the Guangzhou train station with an umbrella in his hand and stares glumly at the crush of people in front of him. For the past year the 27-year-old has worked for a cosmetics factory in this southern Chinese city, and now he's trying to get home to see his mother near Suzhou in eastern China, 20 hours away by rail. He's going to miss his connection. Around him hundreds of people, all hoping to find seats, push toward an opening in the metal fence surrounding the station as a police officer shouts into a megaphone, calling for order. The hands of the giant neon green station clock tick closer to Gao's 9:56 p.m. departure time, but the line is as frozen as the temperature. "There's nothing I can do," he says. "I don't think I'll be getting on that train."
Gao is one of more than half a million travelers who were stuck outside the station in the closing days of January after some of the most severe weather in decades brought China to a virtual standstill. Unusually frigid weather and heavy snowfall severed crucial transport arteries including major rail lines, highways and airports; power outages rolled across 17 provinces, forcing factories and businesses to close. The southern part of the country, which hadn't seen snow like this since 1954, was woefully unprepared. Even more northerly cities such as Shanghai, which is near the coast, were staggered by winter's wallop. At least 49 deaths were blamed on the storms.
The weird weather hit at a particularly bad time. Every year, in what is often called the world's largest annual migration, an estimated 180 million mainlanders go on holiday or travel home to be with their families to celebrate the Spring Festival, also known as Chinese New Year. Millions of these travelers are migrant workers — the real dynamo driving China's economic boom — who leave behind their jobs in factories and construction sites across the country for one of the few vacations many are allowed to take. But this year is different. Bad weather is making travel impossible; millions have been stranded on their journeys home, and with meteorologists predicting more snow in the days ahead for the country's already reeling central and southern regions, the crisis only looks set to worsen.
In a country depicted these days as an economic superpower, the storms were a reminder that for all its gleaming new airports and 2.1 million miles (3.4 million km) of highways, China remains a developing nation with vulnerable, overtaxed infrastructure. Officials said the snow caused more than 100,000 buildings to collapse. Some 6,000 vehicles carrying 20,000 passengers were stranded on a highway linking the provinces of Anhui and Zhejiang. A rail line that serves as the main link between Guangzhou in the south and the capital Beijing in the north was disabled when heavy snow and ice in Hunan province knocked out power lines, leaving at least 136 trains idled, according to Xinhua, China's official news agency. In neighboring Hubei province, some 100,000 people were without drinking water for several days. In rural Guizhou province, an electrical tower collapsed under the weight of the snow, cutting off power for 41 cities and counties. The supply of coal to dozens of regional power plants was disrupted, resulting in electricity outages throughout the country.
A Shock to the EconomyAlmost 500,000 troops were deployed to help restore transportation links and clean up the devastation, the largest military deployment for a natural disaster since devastating floods almost a decade ago. But the economic damage is already done. The Chinese government estimated storm-related losses at about $3 billion. Economists say this figure is bound to rise. "I'd guess in the end [the crisis] will shave a couple tenths of a percentage point off China's GDP growth this year," says Ben Simpfendorfer, a China economist with the Royal Bank of Scotland in Hong Kong. That's not much considering that the country's GDP growth rate was 11.4% last year. But the situation may have been made worse because factories were forced to close and shipments disrupted just as the country's industrial base typically cranks up production to make up for the one- or two-week breaks many manufacturers take for the New Year holiday.
Exporters will get off relatively lightly, because most are located in warmer coastal provinces near ports, says Stephen Green, senior economist at Standard Chartered Bank in Shanghai. Hardest hit will be producers that rely heavily on electricity such as aluminum and steel makers. But few companies will escape unscathed. Million Freight, a logistics company based in the normally balmy southern city of Shenzhen, was forced to stop taking new shipments on Jan. 28 because existing freight was stacking up. "Nearly all trains coming in and leaving from Shenzhen are delayed by seven or eight hours," says an executive at the company surnamed Feng. The company also owns more than 200 trucks but the snow "affects our highway transportation more than it does railways," Feng says. "We used to ship two 40-foot containers daily, but given the weather conditions, we stopped our truck traffic completely on the 25th." Although it's hard to give an exact number for the losses the company faces, they "will no doubt be substantial," Feng sighs.
The Inflation FactorStorm-related economic problems are likely to be temporary, but they are still worrisome because the nation is already facing the possibility of reduced growth if the U.S. slumps into a recession. In China, "risks to growth also inevitably mean risks to [social] stability," says Patrick Horgan, China managing director for Washington, D.C.-based consultants APCO Worldwide. "On a big scale like this, it's no longer just about the weather but about the ability of the government to govern." And if you had to pick one area of the economy that scares the authorities in China the most it would have to be inflation, which hits citizens where it hurts most — in the wallet. The country's consumer price index hit an 11-year high of 6.5% in October due largely to rising food and fuel costs. The storms will almost certainly cause another spike. Frigid temperatures across 14 provinces in China are destroying vegetable crops and will "push up food prices further in January and February," says Jun Ma, chief China economist at Deutsche Bank in Hong Kong. The consequences could be serious, says Simpfendorfer of the Royal Bank of Scotland. "Even if [inflation] creeps up to 7.5%, that grabs the headlines and will affect expectations."
There have been no reports of protests, but consumers are testy. On Jan. 29, Zhang Liying, a 36-year-old mother of one, shuffled into the supermarket near her apartment outside Shanghai, knocked snow off of her boots and started shopping for dinner. Bundled up against bitter temperatures, she had ridden her scooter to the store and was "frozen now," she said. But when Zhang got to the vegetable section, you could practically see the steam coming from her ears. Half a kilo of greens now cost 1.09 renminbi (about 15?). "Before the snow, a week ago, it was only 0.59 renminbi!" she said. "How can that be?"
The government has imposed price controls on some goods to keep inflation in check, but such policies may be making matters worse. For example, Beijing imposed price controls on utilities in early 2006, stabilizing electricity rates. But at the same time the price of coal, used to generate some 80% of the country's electricity, was left to be set by market forces. With coal prices rising, some power companies curtailed purchases because their profit margins were being squeezed and they were unable to compensate by hiking rates. With reduced stockpiles, the utilities were unable to generate enough electricity when the cold snap hit and power demand soared — and transport disruptions made it difficult or impossible to replenish supplies. Official media say plants that produce 10% of China's power are now reduced to less than three days of coal reserves. To cope with the problem, authorities have banned exports of coal mined in China and diverted shipments bound for factories to power plants. A more lasting solution — allowing utilities to pass on at least part of the price rises to consumers in order to reduce demand — simply isn't an option now because of the political sensitivity of inflation.
Damage ControlGovernment officials — perhaps mindful of the criticism that was heaped on U.S. President George W. Bush's Administration after it was slow to react to the 2005 Hurricane Katrina disaster — are keenly aware of the importance of managing China's big freeze. "This government has made competence a cornerstone of their administration even more than their predecessors," says Horgan, the APCO consultant. So the state propaganda machine has been working flat out to show how officials are trying to ease the crisis. The main China Central Television channel regularly airs a special program called "Battling the Blizzard." An often repeated news clip shows Premier Wen Jiabao picking up a bullhorn and apologizing to a crowd of disgruntled travelers trapped in the train station in Changsha, the icy capital of Hunan province. (Even the Premier was inconvenienced by the weather: his plane couldn't land in Changsha and was forced to divert to Wuhan, 180 miles away. Wen arrived in the capital by train.) "I'm very sorry that you are stranded and not able to go home earlier," Wen told the throng. "We are doing our best to fix things so that you will all be home."
With tens of millions still on the road and forecasts predicting more bad weather, Wen may have committed the political sin of overpromising. But one political sin can often be expunged by another: deflecting the blame. A news clip airing on state television features an interview with a young migrant worker who insists loudly — and to the beaming approval of the collected cadres — that the crisis is "a natural disaster, not caused by administrative or leadership problems." True enough, but in a country where the public is constantly reminded of the omnipotence of the central government, some citizens may not be easily convinced that China's top leaders are not somehow responsible for the weather, too.
— with reporting by Bill Powell/Shanghai and Austin Ramzy/Guangzhou

Posted by: Terence Tan

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