Chinese Military,Political and Social Superthread

[tomahawk6]

They might be right.

 

[tomahawk6]

Found by a former CIA analyst while using Google Earth in China's Kashgar Desert.

http://tinyurl.com/am4536y

 

[a_majoor]

Instapundit joked (?) it is the Chinese ORION project (the 1950's version of ORION, where nuclear bombs were detonated under massive steel pusher plates to propel a spacecraft into orbit and then on to Mars).

Weirdly, it reminded me of the Nazca Lines in Peru, although these are certainly not mythical or animal figures in the Chinese desert.

 

[a_majoor]

Long and interesting article on China's pension program(s). The effects of the "one child" policy and cultural factors will make China's experience through the age bust different in many ways than Europe and Canada's (the United States, despite its economic problems, still maintains a replacement level birthrate).

http://thediplomat.com/2013/01/11/has-china-become-an-entitlement-society-too/?all=true

What Happens When China Goes “Gray”?

January 11, 2013
By Mark W. Frazier

Developed economies are beginning to struggle with aging populations and more retirees. China may soon join them.


As China's major trading partners try to control rising public pension and health care costs, they may not realize they also have an important stake in China's ongoing struggle to fashion a safety net for its own rapidly aging population. Many observers assume China has no pensions or healthcare insurance for the 185 million people over the age of 60 (13.7% of population), the highest official retirement age for most workers. They may well believe this explains why Chinese families save so much–more than 30% of household income–and therefore spend less on consumer goods, including imports from trading partners.

But this line of reasoning is faulty because China already has large and rapidly growing public pension and health insurance programs in the cities, and is in the process of extending them to rural areas. It's time that China's trading partners, especially the United States, understand what this means for China's economic future and, by extension, their own.

For all the criticism of outgoing President Hu Jintao for presiding over a “do-nothing” administration, he did manage to oversee a substantial increase spending on China's public support systems.As a result, pensions have now become the most expensive function of the Chinese government—which already spends a lot on infrastructure, housing and defense. In 2011, pension expenditures rose to 1.28 trillion renminbi (RMB, U.S.$205 billion), up from only 489 billion RMB in 2006. These and civil service pensions cover only about half of those over age 60, but at current rates of growth universal coverage—and vastly higher expenditures—are not far off. The number of urban workers (including migrants from rural areas who in theory are in the cities temporarily) contributing to the public pension system now exceeds 290 million, while rural pensions are also growing rapidly. With so many new people paying in, the government's future pension obligations are rising quickly. A recent report issued by the Bank of China and Deutsche Bank estimated that China’s pension system will have a U.S.$2.9 trillion gap between assets and liabilities by the end of 2013. By 2033 the gap is expected to reach U.S.$10.9 trillion, or 38.7% of GDP.

What happened in the past decade or so to cause China, with an annual per capita income of around $5,000 (adjusted for purchasing power), to begin to acquire pension burdens found in richer and heavily indebted industrial states? What will this mean for trading partners who keep urging the Chinese government to rebalance its economy toward greater consumption (and imports) and away from relying so heavily on exports?

Essentially what happened is that Beijing designed a pension system in the late 1990s that will leave households with much less to spend than many observers assume. Urged by World Bank economists and foreign pension experts, the Chinese government put in place a hybrid pension arrangement that relies on both traditional pay-as-you-go collections from employers and mandatory individual accounts, from which workers were to finance anywhere from one half to two-thirds of their retirement needs. (They also were expected to buy pension and annuity products from commercial providers). But that pension design has resulted in a double whammy: households consume less in order to save for retirement needs, while the government's long term pension debt is escalating rapidly because local governments raided the individual accounts to pay benefits to current retirees.

The central government has tried to prevent local governments from tapping current pension assets, but has done so only by allowing them to accumulate further debt. Moreover, many local administrations bristle under the requirement that pension assets must be invested in low-interest bonds and bank deposits. Don't be surprised if future pension scandals like the one that rocked Shanghai in 2006 are exposed as local administrations seek a higher, though riskier return on their pension assets.

As China's population ages, scholars and officials are seriously considering proposals to phase out the one-child policy that is beginning to curb the flow of new workers into the economy, as well as raise retirement ages (currently 60 for men, 5 or 10 years earlier for women). But such adjustments are just as politically difficult in China as in in Western democracies because, as it turns out, not wanting to work longer is a widely held preference. Many Chinese also view the relatively early retirement age as a way to make vacancies for the millions of young people who enter the labor market each year. If older workers continue working into their twilight years, young workers may encounter greater difficulty in trying to find employment. This would pose its own issues for the country.

What does all this mean for the Asian, European, and American economies that trade with China? First, they should understand that China's aging problem is a slow-motion fiscal crisis. China is not Greece, but local debt burdens are already enormous, and these calculations do not include the mounting pension obligations that local governments have incurred. Just as in America and Europe, the tendency in China is for local officials running state-level pension funds to ramp up current benefits and let future generations pay for them. China's National Social Security Fund is the largest in the world at $150 billion, but these assets (some of which are permitted to be invested in stocks) still fall well short of the liabilities racked up by provincial and city pension funds.

Second, we should realize that as China moves towards universal pension and medical coverage (a likely prospect under its 2010 Social Insurance Law), the effect on household savings will be limited. True, families may no longer need to save for the high costs of catastrophic illnesses. But it is quite plausible that any reduction in household savings arising from the new safety net will be offset by mandatory payments by both workers and employers into the new welfare programs. In other words, don't count on the new safety net to rebalance China's economy, because it won’t give discretionary income much of a lift. This means that countries that have large bilateral trade deficits with China should not expect a turnaround at some uncertain date when Chinese households suddenly have imagined new spending powers.

Finally, we must consider the larger implications aging has on China and major economies such as the United States, Europe, and Japan. Aging trends don’t make the decline of these economies inevitable, of course, but it is time to calibrate expectations. Aging will curb or even reduce household consumption, which is the primary driver of Chinese exports to industrialized economies and what many hope will fuel future exports to China. All these governments need to find ways to slow the growth of health care and pension costs. In the United States and China, for example, insurance and other financial services providers (state-owned in China) make large profits on fees and other administrative charges for handling the funds that pass through their accounts. Cutting these costs is essential. More broadly, all these societies will be compelled to rethink the outdated notion that work is over and retirement begins at some arbitrary age defined by law.

Aging and the policies to cope with a graying population are first and foremost domestic issues, but, as is so often the case, the consequences of Beijing’s pension policies will resonate far beyond its borders. Those who manage economic relations with China should focus less on trade deficits and exchange rates and spend more time thinking through the long-term implications of aging, and what it will mean for patterns of trade and investment among the world's largest economies.

Mark W. Frazier is Professor of Politics and Co-Academic Director of the India-China Institute at the New School.and the author of: Socialist Insecurity: Pensions and the Politics of Uneven Development in China (2010).

 

[Nemo888]

Are we really short sighted enough to sell controlling stakes in our strategic national resources to a country that has a massive military infrastructure for live harvesting organs of thousands of it's own citizens annually?


http://chinhdangvu.blogspot.ca/2013/01/organs-seized-from-uyghurs.html

 

[Edward Campbell]

I'm not sure how well document this story is, but it is reproduced under the Fair Dealing provisions of the Copyright Act from Business Insider:

http://www.businessinsider.com/china-buys-tu-22m3-david-cenciotti-the-aviationist-2013-1

China's Buying A Fleet Of Russian Bombers Perfect For Taking On The US Navy

David Cenciotti and Richard Clements, The Aviationist

Jan. 20, 2013

Chinese websites are again reporting that Russia has agreed to sell Beijing the production line for the Tupolev Tu-22M3 bomber at a cost of $1.5 billion.

Once in service with the Chinese Naval Air Forces the Tu-22M3 will be known as the “H-10″.

The deal struck with Russia includes 36 aircraft: a batch of 12 followed by a second batch of 24 additional bombers.

The Aviationist

The Tu-22 will be employed in the maritime attack role and used to attack targets from low levels to avoid radar detection.

The Tu-22 is a Soviet supersonic, swing-wing, long-range strategic and maritime strike bomber. It was developed during the Cold War and is among the closest things to a modern stealth bomber. However, it will get updated with indigenous systems and an extended range making it a significant threat to many latest generations weapon systems.

That's even more true if the deal with Russia includes the Raduga Kh-22 (AS-4 ‘Kitchen’) long-range anti-ship missile, in which case this could be a significant change in the strategic balance of the region.

The Tu-22 bombers will give China another tool to pursue the area denial strategy in the South China Sea and the Pacific theatre; a fast platform to launch cruise missiles, conventional or nuclear weapons in various regional war scenarios.

In other words, a brand new threat to the U.S. Navy in the region.

More on the TU-22M3 Backfire C here.

 

[larry Strong]

Thats going to raise the stakes some.



Larry

 

[Edward Campbell]

I'm beginning to think I am wrong about the Diaoyu Islands dispute: neither China nor Japan seems willing or able to back away from their hard line, frankly ridiculous, public positions and settle on something akin to the eralier, sensible, Chinese proposal of joint management (resource (oil) exploration and development) while (peacefully) debating sovereignty.

I think (fear actually) that soon ships will "bump" shots will be fired a ship will sink, some aircraft will be downed and all hell will be very close to breaking loose.

My guess (hope?) is that one incident will be enough for the cooler heads in both Beijing and Tokyo to regain control of the agenda but there is a joker in the deck: the USA which has a nasty habit of making mountains from molehills.

 

[tomahawk6]

Something has to give.The PRC cannot claim sovereignty over any island they please.

 

[Edward Campbell]

The Chinese are, in many instances, on the wrong side of the UNCLOS which they, unlike the US, have signed, so they are basing their claims on history. It's a stretch, but in the case of the Diaoyu Islands the argument against the US handing the islands over to Japan (1971) might have some merit.

But it is a murky situation: too many countries have overlapping claims in the region ~ no one has any friends.

 

[cupper]

Something has to give.The PRC cannot claim sovereignty over any island they please.

They can have St. Pierre and Miquelon. :nod:

 

[Edward Campbell]

Here is an interesting piece, reproduced under the Fair Dealing provisions of the Copyright Act from China Digital Times, a California based news aggregator, reflecting the Chinese leadership's concerns about their position:

http://chinadigitaltimes.net/2013/01/leaked-speech-shows-xi-jinpings-opposition-to-reform/

Leaked Speech Shows Xi Jinping’s Opposition to Reform

January 27, 2013

While a recent crackdown on wrongdoing by officials has encouraged those who want to see an end to official corruption in China, hopes are diminishing over the prospects for more substantive political reform under incoming president Xi Jinping. A speech Xi gave in December has recently been distributed inside the Party and appears to indicate that Xi will not encourage any systematic reforms that will threaten the leadership of the Party. Seeing Red in China has translated an essay by veteran journalist Gao Yu, who spent time in prison after the 1989 protest movement, in which she analyzes Xi’s speech:

    As if to clear up the political smog, Xi Jinping’s “new southern tour speech,” made in early December, began its circulation last week in the party. To my surprise, Xi’s speech reads like a perfect confirmation to MacFarquhar’s
    prediction. The new leadership’s “honeymoon” is hardly over, but it has already become clear that the Party and the people don’t share the same “China Dream,” as the Southern Weekend incident has abundantly indicated.

    The most striking part of Xi Jinping’s “new southern tour speech” is his revisiting the topic of the Soviet Union’s collapse. He said, “Why did the Soviet Union disintegrate? Why did the Soviet Communist Party collapse?
    An important reason was that their ideals and beliefs had been shaken. In the end, ‘the ruler’s flag over the city tower’ changed overnight. It’s a profound lesson for us! To dismiss the history of the Soviet Union and
    the Soviet Communist Party, to dismiss Lenin and Stalin, and to dismiss everything else is to engage in historic nihilism, and it confuses our thoughts and undermines the Party’s organizations on all levels.”

    “Why must we stand firm on the Party’s leadership over the military?” Xi continued, “because that’s the lesson from the collapse of the Soviet Union. In the Soviet Union where the military was depoliticized, separated
    from the Party and nationalized, the party was disarmed. A few people tried to save the Soviet Union; they seized Gorbachev, but within days it was turned around again, because they didn’t have the instruments to exert power.
    Yeltsin gave a speech standing on a tank, but the military made no response, keeping so-called ‘neutrality.’ Finally, Gorbachev announced the disbandment of the Soviet Communist Party in a blithe statement. A big Party
    was gone just like that. Proportionally, the Soviet Communist Party had more members than we do, but nobody was man enough to stand up and resist.”

    [...] Xi Jinping didn’t mention “political reform” in the new southern tour speech. In fact, he has not made any reference to it since after the 18th Party’s Congress. Instead, in his southern tour speech,
    he laid out his ideological bedrocks: “Only socialism can save China. Only (economic) reform and opening-up can develop China, develop socialism, and develop Marxism.”

See also: “Xi Jinping’s opposition to political reforms laid out in leaked internal speech” by John Kennedy on the South China Morning Post blog. Gao Yu’s full essay, in Chinese, is available here.

[This post was edited to clarify that Xi's speech was released inside the Party but not publicly.]

The "MacFarquhar" referred to in the second paragraph is Harvard University professor, China watcher and former UK MP, Roderick MacFarquhar.

 

[cupper]

China's Coal Usage is Blowing the Kyoto Protocol to Shreds

http://www.thedailybeast.com/articles/2013/01/30/china-s-obscene-addiction-to-coal.html

Remember the Kyoto protocol? That treaty to restrain greenhouse gas emissions, negotiated back in the 1990s, exempted China and India on the grounds that they were developing countries.

Boy, does that idea look obsolete. From Scientific American, quoting the U.S. Energy Information Agency:

[T]he 325-million-ton increase in Chinese coal consumption in 2011 accounted for 87 percent of the entire world's growth for the year, which was estimated at 374 million tons. Since 2000, China has accounted for 82 percent of the world's coal demand growth, with a 2.3-billion-ton surge, the agency said.

"China now accounts for 47 percent of global coal consumption -- almost as much as the rest of the world combined," EIA said of the latest figures.

http://www.scientificamerican.com/article.cfm?id=chinas-soaring-coal-consumption-poses-climate-challenge

Chinese coal consumption surged for a 12th consecutive year in 2011, with the country burning 2.3 billion tons of the carbon-emitting mineral to run power plants, industrial boilers and other equipment to support its economic and population growth.

In a simple but striking chart published on its website, the U.S. Energy Information Administration plotted China's progress as the world's dominant coal-consuming country, shooting past rival economies like the United States, India and Russia as well as regional powers such as Japan and South Korea.

In fact, according to EIA, the 325-million-ton increase in Chinese coal consumption in 2011 accounted for 87 percent of the entire world's growth for the year, which was estimated at 374 million tons. Since 2000, China has accounted for 82 percent of the world's coal demand growth, with a 2.3-billion-ton surge, the agency said.

"China now accounts for 47 percent of global coal consumption -- almost as much as the rest of the world combined," EIA said of the latest figures.

The rising consumption numbers reflect a 200-plus percent increase in Chinese electricity generation since 2000, with most of the new power coming from coal-fired power plants. Chinese growth averaged 9 percent per year from 2000 to 2010, more than twice the 4 percent global growth rate for coal consumption. And when China is excluded from the tally, growth in coal use averaged only 1 percent for the rest of the world over the 2000-2010 period, according to EIA.

U.S. coal exports contribute
Although Chinese coal is largely sourced from domestic mines, EIA figures show that U.S. coal shipments to China have dramatically risen in recent years, punctuated by a 107 percent jump from 2011 to 2012. Chinese imports of U.S. coal surged from 4 million tons in 2011 to 8.3 million tons last year, according to the agency. Only Argentina and Austria saw larger percentage increases in U.S. coal shipments, but on much smaller volumes.

The National Mining Association this week projected that overall U.S. coal exports should total roughly 111 million tons in 2013, down 10 percent from last year. But demand should remain strong in China, India and other fast-growing countries for thermal coal used in power generation and metallurgical coal for steelmaking, NMA said.

"It's really a global story, global in the sense that as we look across the world we see that developing economies are accounting for three-quarters of the economic growth," Hal Quinn, NMA's executive director, explained to a Monday meeting of industry observers and energy reporters in Washington, D.C.

In addition to coal, Quinn said U.S. iron ore production should benefit from new and ongoing construction projects and the stimulus of spending in China, the world's largest buyer of iron ore and the purchaser of 40 percent of the world's base metals.

The growth of U.S. coal exports to China and other Asian-Pacific countries will also depend in part on the planned construction of new and expanded Pacific Ocean coal export terminals in the Pacific Northwest from Oregon and Washington to British Columbia (ClimateWire, Jan. 17).

Such efforts, considered vital to expanding the United States' global market share for coal, have been slowed by political and environmental opposition, including groups that argue China's voracious burning of coal will exacerbate climate change.

Growing world use 'not good news'
According to the Paris-based International Energy Agency, China's share in global coal consumption is more than twice that of the demand for oil in the United States. And last year China reigned as both the world's No. 1 coal producer (3.7 billion metric tons) and the world's top buyer of foreign coal, with an estimated 270 million tons of imports, according to the China Coal Transportation and Distribution Association.

 

[Edward Campbell]

The Chinese are, in many instances, on the wrong side of the UNCLOS which they, unlike the US, have signed, so they are basing their claims on history. It's a stretch, but in the case of the Diaoyu Islands the argument against the US handing the islands over to Japan (1971) might have some merit.

But it is a murky situation: too many countries have overlapping claims in the region ~ no one has any friends.

Just watching the news on a Taiwan channel (I'm visiting friends who speak Mandarin): Japanese Coast Guard ships have just engaged Taiwanese civilian "patrol" vessels with smoke and water cannon. Taiwanese Navy patrol vessels stood by - crews shouted insults at Japanese but there was no contact or engagement between government vessels. The Taiwanese civilian vessels are part of a Diaoyu Islands Sovereignty Force funded by some Taiwanese nationalists, they are unarmed.

Chinese patrol vessels are also in the area; the Japanese gave them a wide berth and both the other sides broke off/backed off when the Chinese vessels entered the disputed waters.

Not a good situation.

 

[57Chevy]

9/11 Irony ?

On 11 September 2012, the Japanese government nationalized its control over Minamikojima, Kitakojima, and Uotsuri islands
by purchasing them from the Kurihara family for ¥2.05 billion.

China's Foreign Ministry objected saying Beijing would not "sit back and watch its territorial sovereignty violated.

Small Islands = Big Problems
Why ?

Why do Japan and China want the Senkaku/ Diaoyu Islands?   is shared with provisions of The Copyright Act
...
According to Seokwoo Lee’s “Territorial Disputes among Japan, China and Taiwan Concerning the Senkaku Islands,” it was evidence of the existence of oil deposits under the East China Sea where the islands lie that prompted China and Taiwan’s interest in the islands. The U.S. Energy Information Administration (EIA) says estimates range from 60-170 billion barrels of “undiscovered” oil by the Chinese to 60-100 million barrels of proven/ probable reserves by the EIA. Additionally, there are believed to be trillions of cubic feet of natural gas reserves under the East China Sea.
...

 

[tomahawk6]

Meanwhile China continues to have safety issues on the homefront.

 

In these photos provided by China's Xinhua News Agency the damage is seen on an expressway bridge which partially collapsed due to an truck laden with fireworks exploding in Mianchi County, Sanmenxia, central China's Henan Province, Thursday, Feb. 1, 2013. Fireworks for Lunar New Year celebrations exploded on a truck in central China, destroying part of an elevated highway Friday and sending vehicles plummeting 30 meters (about 100 feet) to the ground. The human toll from this explosion stands at 26 dead. (AP Photo/Xinhua, Xiao Meng)

 

[Edward Campbell]

What you are seeing in the above photos is the inevitable result of endemic corruption in almost every single aspect of Chinese life: construction standards, transportation permits ... it goes on and on and on at every level.

 

[Edward Campbell]

And the tensions in the East China Sea/Diaoyu Islands dispute continue to escalate according to this report which is reproduced under the Fair Dealing provisions of the Copyright Act from the BBC:

http://www.bbc.co.uk/news/world-asia-21337444

Japan protest over China ship's radar action
A Chinese navy frigate has locked its weapon-targeting radar on a Japanese ship, Tokyo says, amid mounting tensions over a territorial row.

5 February 2013

Japanese Defence Minister Itsunori Onodera said the incident happened on 30 January near islands claimed by both nations in the East China Sea.

He said this had prompted Tokyo to lodge a formal protest with Beijing.

The row, over islands known as Senkaku in Japan and Diaoyu in China, has escalated in recent months.

Taiwan also claims the island chain (known as Diaoyutai in Taipei), which is controlled by Japan.

Last week, tensions between Tokyo and Beijing appeared to be easing after a Japanese delegation met senior Chinese leaders and both sides later expressed hopes that relations could improve, the BBC's Rupert Wingfield-Hayes in Tokyo reports.

But on Monday China sent patrol ships back in to the disputed waters around the islands, our correspondent adds.

'Dangerous situation'

"On 30 January, something like fire-control radar was directed at a Japan Self-Defence Maritime escort ship in the East China Sea," Mr Onodera told reporters on Tuesday.

The minister said Japan's Yuudachi vessel and the Chinese frigate were about 3km (one mile) apart at the time, Japan's Kyodo News reports.

Asked about the delay in filing the protest, Mr Onodera said it took the ministry until Tuesday to determine that a fire-control radar had indeed locked on the Japanese ship.

He added that a Japanese military helicopter was also targeted with a similar type of radar by another Chinese frigate on 19 January.

"Directing such radar is very abnormal. We recognise it would create a very dangerous situation if a single misstep occurred," he said.

Radars use radio waves to detect the intended target and then guide missiles or other weapons.

China's UN move

Also on Tuesday, the Chinese ambassador to Japan rebuffed an earlier protest over continuing Chinese patrols off the disputed islands, according to China's state-run Xinhua news agency.

Ambassador Cheng Yonghua said the islands and the surrounding waters were China's "inherent territory".

The dispute over their ownership of the islands has continued for years, but it reignited in 2012 when the Japanese government purchased three of the islands from their private Japanese owner.

The move triggered diplomatic protests from Beijing and Taipei, and sparked small public protests in China, affecting some Japanese businesses operating in the country.

Chinese government ships have since sailed many times through what Japan says are its territorial waters around the islands.

Late last year, a Chinese government plane also flew over the islands in what Japan called a violation of its airspace.

In response, Tokyo has moved to increase military spending for the first time in a decade.

The eight uninhabited islands and rocks lie close to strategically important shipping lanes, offer rich fishing grounds and are thought to contain oil deposits.

In December, Beijing submitted to the UN a detailed explanation of its claims to the disputed islands.

A UN commission of geological experts will examine China's submission but does not have the authority to resolve conflicting claims.

Neither party has, yet, found a face saving way to back down; absent that tensions may rise until someone makes a fatal mistake.

 

[a_majoor]

Suspicion continues to grow over Chinese statistics, and analysts are using a multitude of techniques to try to tease out the truth. The really frightening part is if the numbers really are being cooked to the extent somepeople fear, then the global repercussions will be devastating.

A similar effort is underway in Argentina to discover the real statistics, which the government there is more crudely attempting to hide,and of course the BLS unemployment statistics released by the United States do not count various categories of people who are not working (and also make no mention of the labour participation rate). Reality is not to bemessed with,and the truth has strange ways of manifesting itself:

http://www.washingtonpost.com/world/asia_pacific/chinas-economic-data-draw-sharp-scrutiny-from-experts-analyzing-global-trends/2013/02/04/f4de4b84-6ae0-11e2-af53-7b2b2a7510a8_print.html

China’s economic data draw sharp scrutiny from experts analyzing global trends
By William Wan, Published: February 4

BEIJING — When China announced better-than-expected trade numbers last month, the statistics were met with outright suspicion from international powerhouses such as Goldman Sachs, Swiss financial firm UBS and Australian bank ANZ. The disbelieving scoffing only mounted days later, when the government unveiled numbers showing yet another positive trend — a narrowing income gap between China’s rich and poor.

Numbers in China have long faced suspicion, from optimistic recordings of visibly hazy air to the age of its Olympic gymnasts. But the credibility of its economic data is now coming under particular scrutiny, at a time when China’s growing global role weighs on investors, analysts and governments worldwide, even as the country’s economy is slowing after years of unbridled growth.

“The issue is less important when everything’s rosy,” said Patrick Chovanec, a business professor at Beijing’s Tsinghua University. “It gets more sensitive when people are trying to assess just how deep this downturn is and whether China’s facing a hard landing.”

For foreign economists, suspicions about why such numbers are off — and by how much — often boil down to a Rorschach test of sorts for how they view the Chinese government: as a developing nation honestly struggling with statistical challenges or as a sinister actuarial force always prepared to stretch the truth to meet its goals.

Regardless of motivation, some experts say the biggest danger in all this inaccurate data may be domestic, especially if it leads to bad policy decisions by Chinese leaders wrestling with how to manage a complex, dynamic economy.

“It’s like driving a car on a road where the traffic lights don’t work,” said Wei Yao, an economist at Société Générale bank in Hong Kong. “How do you make monetary policy for example if you can’t accurately tell if inflation is too high or too low? It all relies on statistics.”

The latest round of accusations over trade data began in January after analysts compared China's reported December exports to other available information, including corresponding import numbers from surrounding countries. Little of it matched up. Analysts’ characterizations ranged from the gentle, noting “anomalies,” to insulting cries of “ridiculous” and “obvious errors.”

Amid such uncertainty, a booming cottage industry of analysis has sprung up, mostly produced and sold by by foreign analysts. They sift through obscure though often more reliable government data — looking at things such as electricity usage, rail freight traffic, air travel and the footage of floor space being built.

Even the man taking over China’s economy — incoming Chinese premier Li Keqiang – supposedly disparaged his government’s Gross Domestic Product figures, calling them “man-made,” according to a leaked U.S. diplomatic cable from 2007, and saying he too relies on rail-cargo, bank-loan and power-consumption data.

But that information can also be manipulated. Once power consumption became a favored indicator, for example, news reports began circulating last year that tallies of coal usage and other elements of energy production were being tampered with.

Part of the reliability problem is the government’s near-total control over numbers, in some cases meaning an outright ban on all others collecting competing data, experts say.

“You take something as innocent as weather data,” said Anne Stevenson-Yang, co-founder of J Capital Research, a Beijing-based equities analysis firm. “It’s treated like a national security issue. . . . No one can collect or release numbers but the government.”

Another problem is the lack of transparency for statistics that are released. Methodology is never disclosed, and the underlying data used to arrive at the final numbers are equally rarely revealed.

For that reason, there are some who believe China’s leaders deliberately manipulate the numbers with firm goals in mind: They push the GDP up to meet pre-announced targets and keep unemployment and income gap numbers down to avoid embarrassment and public rage.

Question of interpretation

Others have a more charitable view — that China’s long-ridiculed National Bureau of Statistics is trying its best, in a chaotic market transitioning from a socialist economy dominated by monolithic state enterprises to a more modern and market-driven one, to provide numerical disclosures closer to international standards.

Take the GDP, for example – long a politically fraught number in China. For decades local leaders have sent unrealistically high figures to Beijing to look good and secure promotion. But the national GDP figure is always lower than the combined total of the provinces’ numbers.

Does that mean that someone in power is trying to get a more accurate reading by somehow adjusting for their exaggerations? Or does it simply prove the arbitrary nature of China’s GDP as it’s adjusted to follow prescribed targets?

Similarly open to interpretation is the latest rich-poor gap measurement. The mid-January release of the figure, called the Gini coefficient, came as a shock to many because it’s been more than a decade since authorities have posted new estimates. Many believe officials feared such data would provoke a populace already angry about inequality and the opulent lifestyles of government officials.

When China unveiled a new figure for last year showing improvement over the past few missing years, there was no shortage of skeptics. The government pegged China’s Gini coefficient at 0.474 on a scale of 0 (for a perfectly equal society) to 1 (for utter inequality). Critics quickly pointed to a study released just one month earlier by a Chinese university research center estimating the 2010 Gini at 0.61.

“I can’t say why their result was so much lower than ours since the national bureau didn’t make their sampling procedure public,” said Yin Zhichao, vice director of the research center at Southwestern University of Finance and Economics.

Obstacles to accuracy

Even skeptics of the government, however, acknowledge the inherent difficulties that its statisticians face in China.

Determining the rich-poor gap, for example, requires knowing the real wealth of China’s uber-rich – a Sisyphean task given the large amount of “gray income” that goes unreported because it’s earned through shady or outright illicit means.

Between the black and white views of China’s numbers, however, is a popular middle-road assessment: that China’s statisticians are reforming over time, and they’re deliberately smoothing out the data to avoid jarring comparisons.

“Say they do calculate one year’s stats perfectly,” said Yukon Huang, former China director for the World Bank. “It might make last year’s look horribly wrong, completely incongruous, because to correct your calculation you’ve changed definitions, measurements. So what do they do? Adjust it gradually, smooth out the trends.”

For economists in this camp — the stats are bad, but getting better — all the attention on China’s numbers can only lead to good.

“I think they’re under a lot of heat right now,” Huang said. “But because of the scrutiny, the hope is you’re going to get better numbers as a result.”

Liu Liu contributed to this report.

 

[Edward Campbell]

Here is a very interesting, and encouraging report which is reproduced under the Fair Dealing provisions of the Copyright Act from the South China Morning Post:

http://www.scmp.com/news/china/article/1144908/beijing-and-taipei-plan-exchange-government-officials

Beijing and Taipei plan exchange of government officials
Representative offices on both sides of strait will house government officials, who may be granted privileges enjoyed by foreign diplomats

Thursday, 07 February, 2013

Taipei and Beijing plan to exchange government officials and station them in representative offices in the near future, a unimaginable move not long ago for the political rivals, who are still technically at war.

The two sides would also not rule out the possibility of issuing travel permits and granting each other's representatives something similar to the immunity from prosecution enjoyed by foreign diplomats, a senior Taiwanese official said on Wednesday, but that would be the next step for discussion after the establishment of the offices.

Wang Yu-chi, chairman of the island's top mainland policy planning body, the Mainland Affairs Council (MAC), told a news conference in Taipei on Wednesday: "Under our initial plan, as soon as the Straits Exchange Foundation (SEF) sets up a representative office on the mainland, the Mainland Affairs Council will also post officials there at the same time."

That would be based on the principle of dignity and equality, he said, given that most mainland officials who dealt with Taiwan did so in a semi-official or non-official capacity. Some staff at the mainland's Association for Relations Across the Taiwan Strait (Arats) are also government officials at the mainland State Council's Taiwan Affairs Office.

Arats and SEF - nominally private - were set up in Beijing and Taipei respectively in the early 1990s to represent their governments in cross-strait matters in the absence of formal relations.

Cross-strait relations improved after Ma Ying-jeou became Taiwan's president in 2008 and adopted a policy of engaging Beijing.

The two sides have signed 18 non-political co-operation agreements since then and have also set up some lower-level tourism and trade representative offices on the other side of the strait. These officials, however, are non-government.

With the rapid increase in the number of non-political exchanges, the two sides found the need to set up more authoritative offices. They finally touched on the issue late last month, when Beijing sent senior Arats officials to Taipei to discuss the issue.

If the two sides needed to discuss the issuance of travel documents, that would be possible, Wang said, adding that he believed representative office officials would enjoy immunity status similar to foreign diplomats "in order to facilitate their work in each other's place".

He said he did not want to give a timetable, but early establishment of the offices would meet the hopes of at least 70 per cent of Taiwanese people.

This is part of a long term project to reunify China, peacefully.