Ai Weiwei’s taxing conundrum | The World | International affairs blog from the FT – FT.com

The Chinese are voting again. Having lost their chance to determine the outcome of Happy Girls, an audience-participation talent show that has mysteriously vanished from next year’s schedules, they are voting instead for Ai Weiwei, the artist and thorn in Beijing’s side.

Mr Ai was recently slapped with a tax bill of $2.4m, a financial summons that followed several months’ imprisonment earlier this year. But Chinese people in their thousands are offering to help the controversial artist pay. The BBC reports that, according to Liu Yanping, a volunteer at the artist’s studio in Beijing, nearly 20,000 people have donated a total of $790,000, and counting.

Most have done so by electronic transfer. Some – presumably technophobes – have simply lobbed money over the wall and into the artist’s compound. A few notes, folded into paper planes, have sailed over the wall too.

Last week, Mr Ai, whose release from prison was conditional on his not talking to the press, told the FT: “When Chinese people have no other way to express themselves, this is the way they feel they can vote to express their dissatisfaction.” That probably constituted talking to the press. In fact, he has done several recent interviews in defiance of the ban.

Whether Mr Ai will have the last laugh is not yet clear. The Global Times, an English-language tabloid owned by the People’s Daily, wrote: “This event has been interpreted by some foreign media as the Chinese people donating to Ai’s cause. The action has also been regarded as a special protest by the artist.” But it cautioned: “Since he’s borrowing from the public…. some experts have pointed out this could be an example of illegal fundraising.”

So China’s most famous artist, known for his humorous, provocative and occasionally puzzling art, may be damned if he pays his taxes and damned if he doesn’t. Now that’s just surreal.

China imposes curbs on buying property

The southern Chinese city of Zhuhai has introduced restrictions on housing purchases in a sign of the government’s resolve to rein in the property market.

The move on Tuesday came even though prices have started to decline across much of the country.

Similar restrictions have been rolled out in other big cities since last year, including limits on the number of units households can buy, curbs on purchases by non-residents and caps on the amount developers can charge for apartments.

But a big drop in sales volumes and recent price falls in leading markets had led many to assume Beijing would start to ease restrictions.

Shares in most leading Hong Kong-listed Chinese property developers rebounded by between 30 and 80 per cent in the fortnight to last Friday on expectations of imminent easing, although most were still down by more than a third since the start of the year.

Shares in listed developers such as Evergrande, Longfor and China Vanke fell on Tuesday in Hong Kong and Shanghai on news of the Zhuhai restrictions and reports in Chinese media that some large developers were offering big discounts on developments.

Many in the sector fear such discounts could trigger a wave of price cuts amid weak demand just as a large number of new apartments is expected to come to market across the country.

Adding to those fears, data from the China Real Estate Index System released on Tuesday showed average residential property prices across 100 leading cities in China fell 0.23 per cent in October from the previous month, the biggest decline so far this year.

Average prices were still up 5.21 per cent on the same month a year earlier, but this was a slower increase than the 6.16 per cent rise in September.

For most Chinese citizens the rapid price rises of the past few years have put apartments in big cities far out of their reach and the government wants to bring prices down gradually to make them more affordable.

But because of the importance of real estate to the wider economy – housing construction is estimated to make up one quarter of investment and 10 per cent of the country’s gross domestic product – Beijing is wary of triggering steep price declines.

On Saturday, Wen Jiabao, the Chinese premier, said Beijing was looking for a “reasonable correction” in prices and would resolutely continue its property tightening strategy while forcing local governments to implement existing housing purchase restrictions.

Zhuhai, an industrial city in Guangdong province, announced on Tuesday that people who had not paid taxes or social insurance in the city for more than a year could not buy apartments there, while local families were limited to buying one home unit each.

It also imposed a cap on home prices of Rmb11,285 per sq metre for the rest of the year. Any developer asking for higher prices would not be given permits to sell their developments.


via ft.com

Chinese property buyers get BMW thrown in

employee polishes the hood ornament logo of a BMW

The sudden downturn in China’s property market is bad news for many global companies, but luxury German carmakers stand to benefit, at least in one city.

In Wenzhou, where house prices have fallen sharply, a real estate developer said that from Wednesday it would throw in the keys to a BMW with each apartment at a new residential complex for the first 150 buyers.

The deal is a sign of the desperation felt by developers in China’s once-booming property market, which has been pounded by government measures aimed at heading off a bubble. The slowdown is a matter of international concern, with Chinese house construction driving demand for commodities and propping up growth in the sputtering global economy.

Chinese developers have been reluctant to cut prices as transactions have slowed this year, but some are finally capitulating after dreadful sales in October. Others, afraid of the stigma of slashing prices, are offering giveaways such as extra garden plots, Louis Vuitton handbags, cruise vacations and now cars.

“Whoever signs a contract and makes the downpayment will be able to drive away in a BMW,” said the sales assistant at Central Mansions, a cluster of brown towers with 868 apartments that have just come on to the Wenzhou market.

“No, it doesn’t mean that sales are bad. It’s just that we’re trying to attract customers,” she said.

Home to legions of entrepreneurs and speculators, Wenzhou’s economy soared when China was flush with cash. But it has been hit harder than most cities by the government’s shift to a much tighter monetary policy to control inflation, as well as the property clampdown.

Wenzhou’s housing sector is now the weakest in the country, with prices falling 1.4 per cent in September month on month. Its smaller firms have suffered from a lack of bank credit, triggering dozens of bankruptcies and prompting the government to

But while Wenzhou is an extreme case of the stress in China’s property market, it is certainly not alone. Housing prices have started to fall nationwide, according to the China Real Estate Index System.

That has been tough to digest for many Chinese who had come to believe that house values could only rise. When several developers in Shanghai cut their asking prices last month, homeowners protested, ransacking showrooms and demanding refunds.

Fearing similar fallout, many developers are trying to entice buyers with special deals instead of discounts. The BMWs in Wenzhou cost Rmb300,000 locally, equivalent to about 10 per cent of the price for an apartment, the sales assistant said.

Xiaoyunli No. 8, a development in Beijing that has sent workers to leaflet cars at busy intersections, said there would be no discount and no car for buyers.

“But you’ll get a deal and it will be no problem for it to amount to the tens of thousands. It will be like giving you a car,” the receptionist said.

via ft.com


Qualcomm and Life Care Networks partner to battle cardiovascular disease using mobile phones || via @imedicalapps

Qualcomm and Life Care Networks have partnered to launch an initiative called the Wireless Heart Health project to aid in the prevention and treatment of health conditions such as cardiovascular disease in underserved communities in China. According to the World Health Organization (WHO), chronic diseases, such as cardiovascular disease, are a major problem in China with close to 3 million deaths a year.

Because of the prevalence of mobile phones in China, an idea formed that would allow critical medical care to be given in areas of China that would otherwise never have access.

“With a grant from Wireless Reach, the Wireless Heart Health project is deploying a 3G-enabled cardiovascular screening and monitoring system, developed by Life Care Networks, for resource-scarce community health clinics in Shandong, Anhui and Sichuan provinces, as well as the Chongqing municipality.  Community Health Association of China is assisting in clinic selection, project implementation and impact analysis.”

The smartphones contain added sensors (such as ECG) that aid in diagnostics.

“The new 3G system includes smartphones with built-in electrocardiogram (ECG) sensors; web-based, electronic medical record software; and 3G wireless workstations located within the clinics.  Each workstation includes a computer terminal with Internet access, providing health care workers with instant access to electronic patient records, including ECG data.  The project also includes training sessions for all participating community health center clinicians.”

The Wireless Heart Health project allows smartphones to automatically send critical patient data to a cardiac specialist at a call center.  This call center contains doctors that provide feedback to patients and clinic staff over the phone or through text messages. Physicians can remotely provide service for simpler cases or suggest a specialist follow-up in-person. Finally, Qualcomm expects to make some of the ECG-enabled smartphones available for patients to rent and take home.

For further reading, please view Yahoo Finance.



Qualcomm takes their wireless health technology and vision to China for wireless ECG experiment called Wireless Heart Health in western China.


Ai Weiwei China's Best Known Artist Arrested in Beijing


Ai Weiwei, designer of the "Bird's Nest" Beijing's 2008 Olympic stadium, was detained today in Beijing as he attempted to board a flight to Hong Kong. His Beijing studio was also raided and his staff and family taken into custody. Ai had apparently been making plans to relocate his studio to Germany and has long experienced government pressure to silence his creative expression. I think this is a huge mistake by the Chinese government. If they want to avoid the fate of the Middle Eastern and North African governments that have seen their people rise up against autocracy they would be wise to not so blatantly harass the country's most revered artist.


Dubai a willing host as Chinese go cruising || The National

Dubai a willing host as Chinese go cruising

Daniel Bardsley (Foreign Correspondent)

Last Updated: Mar 27, 2011

Dubai is established as a global tourist destination but its importance as a stopping-off point for cruise ships is relatively new.

In 2001, just 7,000 cruise ship passengers visited the city, a mere drop in the ocean compared with the 3.6 million tourists in total who arrived that year.

The emirate last year hosted 8.7 million hotel guests, well over double the figure of a decade ago. This increase, while impressive, is put into perspective by the 55-fold growth in cruise ship tourists over the same period, with 390,255 enjoying Dubai as a port of call last year.

The total number of passengers last year was nearly 50 per cent up on 2009's figure of 262,740, with the increase no doubt helped by the launch of Dubai's new cruise terminal.

In future, more of the hearty seafarers who stride happily along their ship's gangway to enjoy a few hours or days of desert safaris and shopping in Dubai are likely to come from China.

Some cruise lines are already offering 25-day no-expense-spared voyages that begin in China and end in Dubai

Other Chinese tourists are splashing out on fly-cruises that see them jet in to the Middle East and then go cruising for a few days - with Dubai often the place where the voyages start and end.

It has been much easier for Chinese travellers to visit the UAE after Beijing's decision in 2009 to give the Emirates "preferred destination status", meaning visa and other red-tape restrictions have been made less onerous.

"In the recent spring festival, we had several groups who travelled to Dubai to take a cruise to Oman or Qatar, then back to Dubai," says Eric Li, the manager of the Middle East and Africa section of Beijing Jin Jiang International Travel.

Increases in the number of cruise-ship visitors from China are part of a wider expansion in the popularity of cruises among residents of the Asia-Pacific in general. Growth is outstripping expectations.

In 2005, UK-based consultants predicted that 2 million people would be taking cruises annually in Asia by 2015.

Late last year, Soo Kok Leng, the chairman of the Singapore Cruise Centre, said these estimates had proved to be way out, forecasting instead the figure would be closer to 7 million.

Less than a year ago, several countries in the region, among them China, Japan, Taiwan and South Korea, formed the Asia Cruise Terminal Association to allow the region to pool expertise and improve standards.

It is no surprise that China's business capital, Shanghai, has seen dramatic increases in the number of cruise ship tourists sailing in.

The cruise operator Royal Caribbean said passenger volumes at Shanghai increased more than 250 per cent in 2009, and as with Dubai, increases have been encouraged by the opening of an international cruise terminal. The number of cruise passengers visiting Chinese sea ports is now running at about 600,000 a year.

Reports indicate China has encouraged growth by making it easier for Chinese ship operators to run cruises, by simplifying customs procedures and by easing the paperwork burden on foreign companies sailing into its ports.

Yet there remains vast scope for further expansion of the industry in Asia. Up until now, the numbers of people taking cruises around the continent has been modest compared with the global total.

The Cruise Lines International Association predicts 16 million people worldwide, three quarters of them from North America, will embark on cruises this year, up 6.6 per cent on last year.

That Chinese are more keen and financially able to travel outside their country is beyond doubt. Last year, 56 million tourists from the mainland travelled abroad, an increase of 8.3 million or 17.5 per cent on 2009's figure of 47.7 million.

Regional destinations, including Taiwan, South Korea and Japan, were the most popular, and many cruise operators are catering to this fondness for relatively local destinations. "A lot of people choose to cruise from Tianjin or Shanghai to Korea or Japan," Mr Li says.

While the much higher cost of European or Caribbean trips is one barrier, language is another reason why Chinese cruise ship passengers like to take shorter cruises from their home country. Chinese travellers taking voyages on the other side of the world often find that few passengers or crew can speak their language.

Things might however be easier for Chinese travellers in future. Just as many UAE hotels have hired Chinese staff to cater to guests from the world's most populous country, so cruise companies have indicated, in discussions with Mr Li's firm, a willingness to employ more Mandarin and Cantonese-speaking crew. This is vital, he says, if they are to attract Chinese passengers.

"There are [Chinese] people who are interested in European and North American cruises, but they fear the language barrier," Mr Li says.

"Sometimes the films and other things are all in English. They feel bored because there's nothing in Chinese."



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Very interesting article about the Chinese adventuring abroad as they growth wealthier. Few people appreciate the fact that foreign travel for leisure purposes is a very new concept to mainland Chinese. In fact, I believe it was only made "legal" to travel on vacation to the US within the last 5 years.


Latest Directives From the Ministry of Truth, March 10-18, 2011

The following examples of censorship instructions, issued to the media and/or Internet companies by various central (and sometimes local) government authorities, have been leaked and distributed online. Chinese journalists and bloggers often refer to those instructions as “Directives from the .” CDT has collected the selections we translate here from a variety of sources and has checked them against official Chinese media reports to confirm their implementation

State Council Information Office: Article from China-Tibet Web

March 18, 2011

From the State Council Information Office: All websites are requested to repost, in its entirety and in a prominent location, the article from China-Tibet Web, “Can Seeds of Enmity Bear Fruits of Harmony?”  It is not permitted to change the title, and the article must remain up until March 19, 10:00 am.



State Council Information Office: Radiation Levels in Urban Areas

March 16, 2011

From the State Council Information Office: Starting on March 17, all websites are requested to prominently repost on their front pages information regarding radiation levels in main urban areas, provided by the Environmental Protection Department.  This information must be placed in a fixed location, and note that it must be updated every day.  All provincial-level Internet surveillance and propaganda Departments are requested to strictly examine websites under their jurisdiction, and strictly enforce the demands of this notice.

Every day, all websites that provide cell-phone reports must also issue, “Daily Radiation Levels in Main Urban Areas From the Environmental Protection Department (Office of National Nuclear Safety).”  All mobile phone companies must understand that this is a political duty, and immediately implement it.




Central Propaganda Department: Property Taxes

March 14, 2011

From the Central Propaganda Department: Regarding Shanghai’s and Chongqing’s experiments with initiating property taxes, opinions that property taxes steal money are not to be reported or hyped.



State Council Information Office: Unilateralism, Hillary Clinton style

March 14, 2011

From the State Council Information Office: All websites are requested to repost, on the front page and in a prominent position, the story, “Internet Freedom: Unilateralism, Hillary Clinton style.”  It is not permitted to change the title, and the article must stay on the front page until March 15, 6:00 am.



State Council Information Office: Concern and Love for Tibetan Students

State Council Information Office: Concern and Love for Tibetan Students

State Council Information Office: All websites must post on their front page news section the article, “For 33 years, 75-year-old Professor Yang Changlin has Shown Concern and Love for Tibetan College Students in Almost 10,000 Instances.” Leave this article up until the day after tomorrow (the 15th) at 6 pm.


March 13, 2011

From the State Council Information Office:

Central Propaganda Department: Large Earthquake in Japan

March 13, 2011

From the Central Propaganda Department: Media must solidly grasp reporting on disaster conditions after the large earthquake in Japan, and objectively and quickly report on trends as they develop.  Place particular emphasis on grasping the relationship between anti-seismic and relief efforts for the Japan and Yunnan earthquakes and propaganda reporting for the national meetings of the “Two Congresses.”  Do not weaken the theme of reporting on the Two Congresses.

We must fully propagandize the state of the rescue work that our teams have initiated in Japan.  We must closely follow the circumstances of Chinese people and overseas Chinese in Japan.

Do not deliberately criticize or champion the actions of the Japanese government, and do not make any comparisons with anti-seismic and rescue efforts in our country.  Give scientific explanations of the explosions and leaks at the nuclear facilities.  Do not play up or casually speculate and analyze the influence of leaks on China.





Central Propaganda Department: An Illegal Gathering in Shandong

March 12, 2011

From the Central Propaganda Department: On March 13, there will possibly be illegal gatherings and activities in Jinan, Qingdao, Yantai, Weifang, and Rizhao.  Do not give interviews or reports.



Central Propaganda Department: The Super Moon

March 12, 2011

From the Central Propaganda Department: Media are not to hype the super moon.  It is not permitted to draw connections between the moon, earthquake, fires, and other natural disasters.  It is allowed to use scientific explanations circulated by the Xinhua News Agency, and purely astronomical information issued by expert Departments can be published.



Central Propaganda Department: Housing Rationing in Shenzhen

March 12, 2011

From the Central Propaganda Department: Media are not to hype questions about housing rationing in Qiaoxiang Village and Shenyun Village, Shenzhen.  Related information should use information from Shenzhen authorities as the standard.  Do not give independent interviews or commentary.



Central Propaganda Department: The Yunnan Earthquake and the Two Congresses

March 12, 2011

From the Central Propaganda Department: For the Yunnan earthquake, we must mainly report on the active rescue activities of political leaders.  We absolutely must not allow the earthquakes to dilute the message of the Two Congresses.  We cannot report on representative members being absent from the meetings.



Central Propaganda Department: Cultural Industrialization

March 12, 2011

From the Central Propaganda Department: In related reports, media cannot use the term “cultural industrialization.”


中宣部: 媒体在有关报道中不要使用文化产业化的提法

Central Propaganda Department: Family Planning

March 12, 2011

From the Central Propaganda Department: Media are not to hype family planning problems.  Do not report on the issue of having two children.  Policy changes on famiy planning will use information issued by authorities as the standard.



The State Administration of Radio Film and Television: Direct Television Broadcasts From Outside our Borders

March 12, 2011

From The State Administration of Radio Film and Television: It is not allowed to directly broadcast television programs originating from outside our borders.  If there are currently any such broadcasts reporting on the earthquake in Japan, immediately cut them off.



Central Propaganda Department: The Earthquakes in Yunnan and Japan

March 12, 2011

From the Central Propaganda Department: When reporting on the current earthquakes, media are not to compare the earthquake in Yunnan with the earthquake in Japan.



Shanghai Propaganda Department: Han Han

March 12, 2011

Shanghai Party Committee Propaganda Department: Activities and comments related to Han Han, beyond his car racing, are not to be reported.



Central Propaganda Department: He Hongsang, Macau Gambling King

March 11, 2011

From the Central Propaganda Department: Do not report on the partitioning of household assets of He Hongsang, the gambling king of Macau.



Central Propaganda Department: Taxi Strike in Lanzhou

March 11, 2011

From the Central Propaganda Department: Do not report on the taxi strike in Lanzhou.



Central Propaganda Department: Exchange Student in Norway Injured While Parachuting

March 11, 2011

From the Central Propaganda Department: Do not report on the incident of an exchange student in Norway injuring himself after parachuting from a tower at the Chinese Academy of Science.



Central Propaganda Department: Xu Commits Suicide

March 11, 2011

From the Central Propaganda Department: Do not report on the suicide and death of Xu, Assistant Director of the Testing Center at the National Administration College.



Central Propaganda Department: Delegate Absences at the Two Congresses

March 11, 2011

From the Central Propaganda Department: Do not report on the absences of delegates from the Two Congresses.



Central Propaganda Department: Tax Evasion by Ma Zhongqi

March 11, 2011

From the Central Propaganda Department: Do not report on the case of tax evasion by Ma Zhongqi in Huaiyuan county, Ningxia.



Central Propaganda Department: Standardization of Proposals at the Two Congresses

March 11, 2011

From the Central Propaganda Department: Do not report on the need to standardize responses to proposals and motions at the Two Congresses.



Central Propaganda Department: Coal Mining in Shanxi

March 11, 2011

From the Central Propaganda Department: Do not report on the sinkholes caused by coal mining in Shanxi.



Central Propaganda Bureau: Mismanagement of the Automobile Industry

March 11, 2011

From the Central Propaganda Department: On March 9, China Management Report (Zhongguo jingying bao) and Southern Metropolis (Nanfang dushi bao) report on Huang Qifang’s criticism that some people have mismanaged the automobile industry.  All newspapers are not to re-publish or report the story.



Central Propaganda Department: Chunxiao Gas Field

March 10, 2011

From the Central Propaganda Department: Do not report on extractions in the Chunxiao gas field by the China National Offshore Oil Corporation (Zhonghaiyou).



In China, several political bodies are in charge of Internet content control. At the highest level, there is the , which ensures that media and cultural content follows the official line as mandated by the CCP. Then there is the State Council Information Office (), which has established an “Internet Affairs Bureau” to oversee all Websites that publish news, including the official sites of news organizations as well as independent sites that post news content.

This “Internet Affairs Bureau,” sends out very specific instructions to all large news websites daily, and often multiple times per day. Those instructions do not always mean that related contents are completely banned online, but they instruct websites to highlight or suppress certain type of opinions or information in a very detailed manner.

Chinese journalists and bloggers often refer to those instructions, as well as other type of censorship orders to media and websites, as “Directives from the .” The  (or Minitrue, in Newspeak) is one of the four ministries that govern Oceania in George Orwell’s novel Nineteen Eighty-Four. In the Chinese blogosphere, it is the online nickname for the  and generally speaking, all other subordinate propaganda agencies including Internet supervision departments.

Today, it’s been said that news does not break, it tweets. For the officials in the the , the news is that their supposedly confidential instructions get tweeted as well.

How’s Your Chinese Coming Along?

China’s 12th Five-Year-Plan – Will It Help With the Global Trade Imbalance?

Amongst all the political upheaval in the Middle East and North Africa, with people rising against dictatorial regimes in Tunisia, Egypt, Libya, Yemen and elsewhere, this week China embarked on its annual legislative session.  The legislative session of the National People’s Congress, which officially enacts legislation, will rubber-stamp the government’s 12th Five-Year-Plan (2011-2015), which was decided at the Communist Party meeting in October, 2010.

Details won’t be made public until the conclusion of the legislative session (which usually lasts 10-14 days), but some elements of China’s next five-year economic plan have been made public.  The three elements worth highlighting are a lower growth rate and a more balanced/sustainable economic model, meaningful reductions of pollution through better energy conservation, and a more aggressive fight against inflation.

A New Growth Model:

  • Set a GDP growth target of 7% (down from the current actual GDP growth rate of 10%).  To do that, the government will have to divert money away from construction and corporate subsidies, and instead use public funds to increase household incomes.
  • Cut import tariffs to reduce input-costs, while boosting consumer demand and reducing China’s reliance for growth on exports which generates trade surpluses and contributes to the global trade imbalance.
  • Improve the income of farmers and migrant workers, who have benefited the least from China’s phenomenal economic growth, by increasing minimum wages.  In particular, provinces across China have announced a string of double-digit wage increases this year as part of the government desire to increase incomes among the rural regions and migrant workers in the cities.
  • Increase spending on health-care and full nationwide social welfare insurance to reduce the need for “precautionary savings” and encourage more Chinese consumer spending.
  • Raise the minimum threshold for personal income tax.  This could exempt hundreds of millions of people from having to pay taxes, and boost household spending.

New Energy Priorities:

  • Introduce targets for energy efficiency and consumption that will push China’s energy consumption from non-fossil fuel sources to 12% by 2015.  Key sectors expected to benefit include: hydro and nuclear power, power grid technology.
  • In particular, there will be significant growth in nuclear power (from 10 GW to 40 GW), 63 GW of new hydroelectric power, 48 GW of wind capacity and 5 GW of solar power.  Unfortunately, coal generation will continue to provide 260 GW, although its share of China’s energy mix is expected to fall from 72% to 63%.
  • Double the share of natural gas in Chinese energy consumption to 8% by 2015, up from 4% that it was last year.  This will make China a natural buyer of large quantities of Russian gas, and an inevitable competitor to Europe, which already relies heavily on gas from Russia.
  • Introduce taxes of up to $820 (up from just $100) on vehicles with larger than 2 liters (energy inefficient) engines.
  • Introduce a tax linked to carbon emissions, first via pilot programs in special regions and industries.

Fighting Inflation:

  • The most important short-term priority for the government is to address increases in food price, which Beijing intends to do through price controls.
  • In order to control inflation, the government intends to keep using the tools and methods that it has been employing thus far: manage liquidity, use price controls, curb real-estate speculation, and “adjust and improve” property tax policies.  Furthermore, the budget for this year shows a 35% increase in spending on low-income housing.
  • However, no specific lending targets for banks have been outlined by the government yet.  New loans topped a 7.5 trillion RMB ($1.1 trillion) ceiling last year and excessive bank lending is considered by some to be a contributing factor to China’s inflation.

Analyst are already predicting that this Five-Year-Plan will be the most significant in China’s modern history, marking the moment that China finally decided to abandon its fast export-led growth strategy in favor for a more sustainable growth model.  However, this new effort by China to rebalance its economy in not addressing the root cause of its monetary problem (inflation), and will not facilitate the rebalancing of global trade, which has been so critical to the overall world recovery.

The root cause of China’s inflation is its weak-currency policy, which is feeding an artificially large trade surplus.  This policy hurts both China by producing an overheated, inflation-prone economy, and the rest of the world by increasing unemployment in many other countries.

Theoretically, inflation is the market’s way of undoing currency manipulation.  According to Paul Krugman, China has been using a weak currency to keep its wages and prices low in dollar terms; market forces have responded by pushing those wages and prices up, eroding that artificial competitive advantage.

China’s leaders are trying to prevent this outcome, to protect exporters’ interest, and because inflation is even more unpopular in China than it is elsewhere.  Don’t forget that it was inflation that fueled public discontent with the government, bore the 1989 protests in Tiananmen Square.

China is already hurting its citizens through financial controls.  For example, interest rates on bank deposits are limited to just 2.75 percent, which is below the official inflation rate of 4.9%.  Rapidly rising prices, even if matched by wage increases, are making the situation much worse for Chinese consumers.

Unfortunately, Beijing is not willing to deal with the root cause and let the RMB rise.  Instead, they are trying to control inflation by raising interest rates and restricting credit.  This is destructive for China, because credit limits are proving hard to enforce and are being further undermined by inflows of hot money from abroad.  With efforts to cool the economy falling short, China has been trying to limit inflation with price controls, which also rarely work.

Furthermore, this is destructive from a global point of view as well: with much of the world economy still depressed, the last thing the world needs is major players pursuing tight-money policies.  The solution to China’s monetary problem (and to the global recovery) is to let the currency rise!

But, any rebalancing efforts will face serious opposition from special interests domestically, primarily the State Owned Enterprises and regional and local officials.  The SOE’s benefit from lax environmental regulations, cheep energy and government subsidies, and an overall export led growth strategy.  On the other hand, local officials are not always willing to change, have old ideas about growth and tend to favor pet projects that need massive investments.  Couple that with China’s one-party state that refuses to do anything that looks like giving in to U.S. demands, and you have a recipe for certain continuation of the status-quo.

The focus of the new Five-Year-Plan is promising, but its success is questionable.

Very interesting...


Don’t Look For Jasmine Revolution Or Tea In China || YaleGlobal

Grounded: Chinese security in plain clothes deal with a foreign journalist hoping to cover the ‘Jasmine’ protest

HONG KONG: If you’re looking for good jasmine tea on Baidu, China’s biggest search engine, you may be in for a surprise. As soon as you type in “good jasmine tea,” Baidu flashes a message: “In accordance with relevant laws, regulations and policies, part of the search results are not shown.”

It’s not that the government discourages the tea, but the word “jasmine” has become toxic – even a song about the beautiful jasmine flower sung by Kenyan students along with President Hu Jintao is censored.

All this stems from the “Jasmine Revolution,” which began in Tunisia last December, leaped to Egypt and now spreads across North Africa and the Middle East. Beijing finds the fall of authoritarian governments in distant Africa embarrassing, recalling scenes of student-led protests in Tiananmen Square in 1989, crushed by the Chinese military.

There are attempts to launch “jasmine rallies” in China, although the anonymous online organizers have little to show for their efforts.

Even worse, there are attempts to launch “jasmine rallies” in China itself, although the organizers, who are anonymous and send messages online, have little to show for their efforts after three weeks. This may well be because China is more economically secure than the countries in the Arab world that are experiencing unrest. After all, it has gone through more than 30 years of rapid economic growth in which hundreds of millions of people have been lifted from poverty and people’s lives have improved dramatically.

In fact, a 22-nation Pew Global Attitudes Survey made public last June showed that while most people were unhappy with the direction of their country, China was an exception. “Only in China,” the survey reported, “does an overwhelming portion of the population (87%) express satisfaction with national conditions.”

So, on the face of it at least, China does not seem ripe for a Jasmine Revolution.

Those organizing “jasmine rallies” in China evidently think otherwise. In an open letter published on overseas website Boxun.com, the organizers called on people to gather every Sunday at 2 pm to demand an independent judiciary, a government supervised by the people and an end to corruption.

On February 20, it
was difficult to tell protesters from shoppers since the designated sites in Beijing and Shanghai are busy shopping areas.

On February 20, the first Sunday, it was difficult to tell protesters from ordinary shoppers since the designated sites in Beijing and Shanghai are busy shopping areas, but the police were out in force, overwhelming foreign journalists out to cover the event, or non-event as it turned out to be. Before that day, the police had preempted any protest by rounding up more than 100 activists. Despite no signs of protest outside MacDonald’s on the busy Wangfujing shopping street, designated as the site for a rally in Beijing, police and security agents tried to stop the journalists from reporting.

Since the first protest was pretty much of a fizzle, one might have assumed that the Chinese authorities would relax. But the next Sunday there was an even bigger turnout of police and security agents who declared war on foreign journalists.

In one case, the Wall Street Journal reported, a Bloomberg television journalist was grabbed by five plainclothes officers, “dragged along the ground by his leg, punched in the head and beaten with a broomstick.” BBC footage showed plainclothes men roughing up the reporter and his colleague, throwing them into a van.

The police removed foreign news staff from the Associated Press, the BBC, Voice of American, German state broadcasters ARD and ZDF, and others from the scene.

Police ferocity was in sharp contrast to the behavior of protesters, told by rally organizers to participate by “strolling…or pretending to pass by.”

The New York Times reported that at least half a dozen journalists and photographers were visited in their homes, repeatedly warned not to cause trouble or, as one officer put it, try to “topple the party.”

Reporting rules were tightened. “No reporting” zones were established in Shanghai and Beijing. The Los Angeles Times reported that journalists were privately told that they could be expelled if caught reporting on protests without permission.

These moves constitute a big step backwards from the more moderate regulations for foreign correspondents introduced before the Beijing Olympics in 2008, which are theoretically still in force. The police ferocity was in sharp contrast to the behavior of protesters, told by rally organizers to participate by “strolling, watching or pretending to pass by” without shouting slogans or displaying placards.

The organizers, who remain anonymous, originally stipulated 13 cities for the rallies, which they quickly raised to 27 cities and, on March 6, claimed that their movement had spread to more than 100 cities. Since the only cities with a substantial presence of foreign journalists are Beijing and Shanghai, it’s impossible to verify such claims.

Reacting in such a disproportionate manner to mild forms of civil protest exposes a government that does not enjoy the trust of
its people.

Moreover, because posts are typically immediately deleted on online message boards and  forums within China, it’s likely that few people in the country actually know about the call for defiance of the Communist authorities.

On March 6, the third Sunday, Beijing was quiet. But uniformed and plainclothes policemen were out in force in Wangfujing, Xidan and other crowded commercial areas.

Mobile phone service was shut down in parts of the city during the three Sundays.

The Chinese leadership evidently feels confronted with a dilemma: If they allow “strolling” to take place unhindered, then such gatherings will likely expand over time. If they clamp down hard, they may be seen as an illegitimate government able to stay in power only through force.

Clearly, China decided to crack down hard early so that a feeble movement does not gain strength.

In fact, budget figures disclosed on Saturday during the annual session of the National People’s Congress showed a sharp increase in funding for domestic security. For the first time, such expenditures exceed the amount spent on national defense.

Total budgeted spending for police, state security, armed civil militia, courts and jails amounted to 624 billion yuan, or US$95 billion, compared to 601.1 billion yuan, or $91.5 billion, for defense. Apparently, the government sees the domestic threat as being graver than any external threat despite the findings of  the Pew Survey.

In fact,  the government admits that people are unhappy. The China Daily, the official English-language daily, reported last week that a survey conducted by Gallup World Poll ranked China 125th among 155 countries when measuring people’s overall satisfaction with their lives. The newspaper pointed out that “only 6 percent of Chinese people see themselves as happy” even though 36 percent of respondents said their lives had improved during the past five years.

Moreover, according to the government’s own statistics, unrest is widespread with the number of “mass incidents” rising in recent years and may now exceed 100,000 a year.

By all accounts, most people still have confidence in the central government, with which they rarely come into contact. But many have little confidence in officials at the local level, the people who seize their land, evict them from their homes to make deals with land developers and lock them up if they lodge petitions.

The way to respond to public dissatisfaction is to deal with legitimate grievances. Reacting in such a disproportionate manner to what’s at most a mild form of civil protest exposes a government that does not enjoy the trust of its people. And browbeating – actually beating – foreign reporters will result in that message being magnified rather than muffled.

Political stability maintained through coercive means may well result in political instability. China’s leaders should recall the saying of their founding father, Mao Zedong, “Where there is oppression there is resistance.”


China's economy: Bamboo capitalism || The Economist

FEW would deny that China has been the economic superstar of recent years. Thanks to its relentless double-digit annual growth, it has become the world’s second-largest economy and in many ways the most dynamic. Less obvious is quite what the secret of this success has been. It is often vaguely attributed to “capitalism with Chinese characteristics”–typically taken to mean that bureaucrats with heavy, visible hands have worked much of the magic. That, naturally, is a view that China’s government is happy to encourage.

But is it true? Of course, the state’s activity has been vast and important. It has been effective in eradicating physical and technological obstacles: physical, through the construction of roads, power plants and bridges; technical, by facilitating (through means fair and foul) the transfer of foreign intellectual property. Yet China’s vigour owes much to what has been happening from the bottom up as well as from the top down. Just as Germany has its mighty Mittelstand, the backbone of its economy, so China has a multitude of vigorous, (very) private entrepreneurs: a fast-growing thicket of bamboo capitalism.

These entrepreneurs often operate outside not only the powerful state-controlled companies, but outside the country’s laws. As a result, their significance cannot be well tracked by the state-generated statistics that serve as a flawed window into China’s economy. But as our briefing shows, they are an astonishing force.

Related itemsRelated topics

The Mittel Kingdom

First, there is the scale of their activities. Three decades ago, pretty much all business in China was controlled by one level of the state or another. Now one estimate—and it can only be a stab—puts the share of GDP produced by enterprises that are not majority-owned by the state at 70%. Zheng Yumin, the Communist Party secretary for the commerce department of Zhejiang province, told a conference last year that more than 90% of China’s 43m companies were private. The heartland for entrepreneurial clusters is in regions, like Zhejiang, that have been relatively ignored by Beijing’s bureaucrats, but such businesses have now spread far and wide across the country.

Second, there is their dynamism. Qiao Liu and Alan Siu of the University of Hong Kong calculate that the average return on equity of unlisted private firms is fully ten percentage points higher than the modest 4% achieved by wholly or partly state-owned enterprises. The number of registered private businesses grew at an average of 30% a year in 2000-09. Factories that spring up alongside new roads and railways operate round-the-clock to make whatever nuts and bolts are needed anywhere in the world. The people behind these businesses endlessly adjust what and how they produce in response to extraordinary (often local) competition and fluctuations in demand. Provincial politicians, whose career prospects are tied to growth, often let these outfits operate free not only of direct state management but also from many of the laws tied to land ownership, labour relations, taxation and licensing. Bamboo capitalism lives in a laissez-faire bubble.

But this points to a third, more worrying, characteristic of such businesses: their vulnerability. Chinese regulation of its private sector is often referred to as “one eye open, one eye shut”. It is a wonderfully flexible system, but without a consistent rule of law, companies are prey to the predilections of bureaucrats. A crackdown could come at any time. It is also hard for them to mature into more permanent structures.

Cultivate it, don’t cut it

All this has big implications for China itself and for the wider world. The legal limbo creates ample scope for abuse: limited regard for labour laws, for example, encourages exploitation of workers. Rampant free enterprise also lives uncomfortably alongside the country’s official ideology. So far, China has managed this rather well. But over time, the contradictions between anarchic opportunism and state direction, both vital to China’s rise, will surely result in greater friction. Party conservatives will be tempted to hack away at bamboo capitalism.

It would be much better if they tried instead to provide the entrepreneurs with a proper legal framework. Many entrepreneurs understandably fear such scrutiny: they hate standing out, lest their operations become the focus of an investigation. But without a solid legal basis (including intellectual-property laws), it is very hard to create great enterprises and brands.

The legal uncertainty pushes capital-raising into the shadows, too. The result is a fantastically supple system of financing, but a very costly one. Collateral is suspect and the state-controlled financial system does not reward loan officers for assuming the risks that come with non-state-controlled companies. Instead, money often comes from unofficial sources, at great cost. The so-called Wenzhou rate (after the most famous city for this sort of finance) is said to begin at 18% and can even exceed 200%. A loan rarely extends beyond two years. Outsiders often marvel at the long-term planning tied to China’s economy, but many of its most dynamic manufacturers are limited to sowing and reaping within an agricultural season.

So bamboo capitalism will have to change. But it is changing China. Competition from private companies has driven up wages and benefits more than any new law—helping to create the consumers China (and its firms) need. And behind numerous new businesses created on a shoestring are former factory employees who have seen the rewards that come from running an assembly line rather than merely working on one. In all these respects the private sector plays a vital role in raising living standards—and moving the Chinese economy towards consumption at home rather than just exports abroad.

The West should be grateful for that. And it should also celebrate bamboo capitalism more broadly. Too many people—not just third-world dictators but Western business tycoons—have fallen for the Beijing consensus, the idea that state-directed capitalism and tight political control are the elixir of growth. In fact China has surged forward mainly where the state has stood back. “Capitalism with Chinese characteristics” works because of the capitalism, not the characteristics.

Cleverly written piece by an obviously bright Sinophile - 'Bamboo Capitalism' - finally a much preferred alternative to the often easily misread moniker 'Red Capitalism'! I love the term Mittel Kingdom too!

The Chinese entrepreneur is a misunderstood and underestimated factor in the emerging global economy and they must be engaged aggressively by their western counterparts to create global ventures. America will remain the epicenter of innovation and entrepreneurship for many decades because American culture glorifies the entrepreneur and encourages risk to a degree that may never be possible in a place as communally oriented as China. However, only the entrepreneur can create a sustainable economic growth story in the Mittel Kingdom, because the state by its very nature undermines the true entrepreneurship, this is true even in the US.


There's A 60% Chance Of A Chinese Banking Crisis By 2013 - Fitch Ratings

china bankChina's financial system have been classified as MPI3 since last June. That means there's a 60% chance of a banking crisis by mid-2013, according to comments today from Fitch Ratings senior director Richard Fox to Bloomberg.

Historically an MPI3 classification suggests that crisis will occur within three years, as it did in Ireland and Iceland.

China's vulnerability is related to out of control real estate lending. Fox tells Bloomberg:

Fitch sees the risk of “holes in bank balance sheets” should a property bubble burst...

Chinese banks fueled record property-price gains by extending a record 17.5 trillion yuan ($2.7 trillion) of loans over 2009 and 2010 under the stimulus program that propelled the nation through the financial crisis. Regulators’ efforts to contain the risks for lenders have included stress tests for declines in house prices and a crackdown on lending to local- government financing vehicles.

Don't Miss: Amazing Satellite Pictures Of Chinese Ghost Cities


Swimsuit contest to enter college || Danwei.org


Chutian Jinbao,

Today the front page of Hubei newspaper Chutian Jinbao is a hodgepodge of news, a wonderful snapshot of contemporary China:

10,000 officials to go to 10,000 villages and 10,000 homes
The top headline describes a new program of the Hubei provincial government: officials plan to visit rural and urban households to check on the people's situation and listen to their concerns.

This seems to be part of a nationwide move for the government to be or seem to be more responsive to citizen concerns (see also Wen Jiabao's chat with netizens). While such efforts are not new, there does seem to be an increase in media reports about such citizen outreach programs, possibly connected to the protests in the Middle East and the so far unheeded calls for similar demonstrations in China.

Bikini beauty contest to enter college
The large photo is captioned: "Performance major competition: 
Yesterday, there was a lively atmosphere at the entrance tests for modeling and design majors at the Hubei Institute of Fine Arts…

… More than 400 middle school students from across the nation took part in the competition for 24 places."

Bikini beauty competitions seem to be catching on as a form of entrance examination: this gallery of photos of a similar college course entrance competition in Qingdao has been circulating widely on the Internet since it was published a few weeks ago.

March 15, Consumer Day
The smaller pink headline announces that Chutian Jinbao's Consumer Day activity is starting. March 15 is a date that large companies that sell consumer products in China have grown to hate: newspapers and TV programs use the date to organize investigations into companies suspected of harming consumers.

Although there is plenty of legitimate consumer activism, some media have the reputation of using threats of negative Consumer Day coverage to extort advertising fees from companies.

Links and Sources

We should have these types of contests in the US.

FT.com || FT Magazine - Who will be China’s next leaders?

China's Politburo Standing Committee in 2007
Vice-premier Li Keqiang (second from left) and vice-president Xi Jinping (second from right) on their accession to the Politburo Standing Committee in 2007, a key step in their rise to the top. Other members include current premier Wen Jiabao and current president Hu Jintao (fourth and fifth from left respectively)

The streets at the centre of Beijing are eerily quiet over the week-long Chinese New Year holiday, which fell in early February this year, but outside one old house a few blocks from the Forbidden City, a steady stream of cars pulled up.

The holiday is a time to pay respects to family elders and mentors. I know people in their forties and fifties who still visit their -favourite school teacher over the break and among the upper -echelons of the Chinese Communist party, respected older comrades are given their due. The flurry of activity was outside the family home of Hu Yaobang, the former leader of the Chinese -Communist party who died in 1989. Among the dutiful visitors were Xi Jinping, the man slated to be the next president of China, and Li Keqiang, the likely next premier.

Calling on the widow of a former leader might seem run-of-the-mill, but Hu Yaobang is far from a run-of-the-mill figure in Communist party history. During the 1980s, the party split over whether its economic reforms should be combined with political opening. After pushing a liberal line, Hu was dramatically ousted from office in 1987 by more conservative members of the leadership. It was news of his death in April 1989, by then a broken man, that sparked the Tiananmen Square protests. In official celebrations of the party’s history, his name is never mentioned. Along with Zhao Ziyang, the leader who succeeded him and who was then purged after Tiananmen, Hu was China’s Gorbachev.

Next year, China will start a leadership transition, which will give the country a new president in place of Hu Jintao, who is also the head of the party and the military, and a new premier to replace Wen Jiabao, who runs the day-to-day business of the government. In 2007, a key party meeting in effect chose the next leadership team, when Xi -Jinping (pronounced Shee Jin-ping) and Li Keqiang (pronounced Lee Ke-chiang) were both promoted to the country’s top body, the nine-man Politburo Standing Committee. Xi, now aged 57, became vice--president and 55-year-old Li one of four vice-premiers (the most senior, with responsibility for the economy, climate change, health and the environment), giving both five years to play understudy to their bosses.

Crowds gather at a shrine to Hu Yaobang at Tiananmen Square in 1989
Tiananmen Square, 1989: shrine to reformer Hu Yaobang, whose death sparked the protests

The names of the next leaders may already be pencilled in, but the easiest way for them to sabotage their promotion would be to start ­discussing bold ideas now. Instead, they have to spend five years in a form of political purdah, going out of their way to avoid controversial topics. As a result, little is known of their views about many of the big issues that China faces – how to keep the economic boom going, how to manage ties with the US and, perhaps most important of all, whether the Communist party should maintain its iron grip on the country’s political system. Politics in China is often expressed through coded gestures, rather than bold statements, which makes their visits to the family home of Hu Yaobang so symbolic. Were China’s next leaders behaving as dutiful party members, paying respect to a senior comrade in a system that values displays of loyalty, or are they secret liberal sympathisers who are waiting for the right moment to restart the debate about political reform that died in Tiananmen?

There is always an element of wishful thinking to such discussions. For the past two decades, -western observers and governments have projected these questions on to leadership changes, in the hope of finding the new Chinese Gorbachev figure, one who has yet to appear. Yet this is not just a change in leadership but a shift in generations. The stolid engineers who dominate senior positions in China today will be replaced by a group who -studied law, economics and, in a few cases, journalism, and who came of age during the 1980s, a time when China was assailed by western ideas and influences after the intellectual deep freeze of the Mao years. It will be a new era.

. . .

Xi Jinping
Xi Jinping Age: 57, current position: vice-president

At 6ft 1in and barrel-chested, Xi towers over most of his fellow Chinese. He has an avuncular manner and is good at the sort of glad-handing that is important for political networking, the Communist party version of a good bloke. Among senior party members this makes him more personally popular than Hu Jintao, a dour figure who has cultivated an almost anti-cult of personality. “He is comfortable in his own skin,” as one western politician who has spent a lot of time with him puts it.

A self-confessed fan of American movies with a daughter enrolled at Harvard, Xi is married to a popular folk singer, which will bring a touch of glamour to the post. Peng Liyuan, who also holds the rank of major-general in the army’s song and dance troupe, used to be a regular on the huge television spectacle that airs every year on the eve of the New Year holiday. Her most famous song, “Mount Everest”, has lines such as: “You are warming the Motherland with fresh breezes.”

Ever since he was a young official in the provinces in the mid-1980s, when he created a theme park based on the Chinese fable, Journey to the West, Xi has energetically supported reforms to open up the economy. But it is his family history that brings Xi to the house of Hu Yaobang every year – a -history that raises a lot of questions about his real political beliefs. Xi is one of the nearest things there is to aristocracy in China. His father, Xi Zhongxun, was a communist guerrilla leader in the 1930s and played an important role in the later stages of the Long March, the central event in the civil war. In the 1950s he became a powerful figure in Mao’s China as the youngest vice-premier.

Yet the Xi family soon confronted the worst aspects of Mao’s capriciousness. Xi’s father was purged in the early 1960s, the victim of one of the endless power struggles, and suffered even more during the Cultural Revolution, which started later in the decade, when he was tortured and imprisoned. Xi Jinping was sent at the age of 15 to work as a farmer in a village in the north of the country and remained there for six years, according to his official biography.

When Deng Xiaoping took control after the death of Mao, Xi Zhongxun was rehabilitated, along with tens of thousands of other comrades. (The official who organised the rehabilitation drive was Hu Yaobang, then the head of the party’s organisation department.) From there, Xi became one of the key members of the pro-reform faction during the fierce political debates of the 1980s. As party secretary in Guangdong province in the south, he was one of the fathers of the special economic zone in Shenzhen, the city near Hong Kong that became the symbol of China’s economic take-off. He sided with Hu Yaobang when the leader was forced out in 1987, and after he publicly opposed the military crackdown in Tiananmen Square in 1989, he was pushed into semi-retirement.

“The tantalising thing about Xi Jinping is that here is a guy who really suffered during the Cultural Revolution, much more than most, and whose father actually condemned the killings in Tiananmen,” says a professor at a university in ­Beijing who knows the family. “That, to say the least, is an interesting biography.”

Li Datong, a liberal journalist, says there may have been other indications of possible liberal sympathies. On the death in 2005 of Zhao Ziyang, the pro-reform leader purged after Tiananmen and who spent the rest of his life under house arrest, the Xi family sent a wreath to the funeral. “That could be a hint that Xi has some respect for Zhao,” says Li. “But we cannot be sure. There are no documents connecting him to Hu Yaobang or Zhao Ziyang, no substantial evidence of a political inheritance. In this system, everyone is acting, everyone is fake, so we cannot really tell.”

Xi Zhongxun
China’s likely next president is the son of Xi Zhongxun, a key member of the pro-reform faction of the 1980s

Indeed, there is also another reading of Xi’s climb up the ranks that marks him as a very conservative figure, a careerist who has hugged close to the party’s orthodoxies. In the words of a vividly written US diplomatic cable released by WikiLeaks and based on conversations with a close family friend, Xi decided at an early age to get on by “becoming redder than red”. As the cable points out, Xi actually joined the Communist party while his father was still in prison for falling foul of Mao.

Again, it is his background that holds the key. In the 1950s China of Xi’s birth Mao was trying to forge a classless society, but in the Beijing compounds where the families of senior officials lived, there was a highly stratified sense of status – the schools you went to, the shops you could visit and the car your family drove all depended on your exact -position in the bureaucratic hierarchy.

It is an environment that appears to have inculcated in Xi a sense of being a member of a narrow elite whose duty and right it is to rule the country. After the trauma of the Cultural Revolution when, as the WikiLeaks cable describes, many of his peers found relief in drink, sex and debates about the west, Xi started plotting a path to the top of the political system. Using his father’s contacts, he became the mishu, or personal assistant, to defence minister Geng Biao and wore army uniform to the office every day. Sensing that resentment of his connections might block his career if he stayed in Beijing, he took the unusual step of opting to work in the provinces, starting first as an official in a rural backwater in central China, and ending up as the party boss of the booming east coast province of Zhejiang and then briefly in Shanghai, before being promoted to his current post.

The ambition was evident from an early date. Before he married Peng Liyuan in 1987, Xi was first married to Ke Xiaoming, the daughter of China’s ambassador to the UK in the late 1970s. According to two people who know the family, their often difficult relationship came to a head when she insisted on moving to London to study. Xi is said to have replied that one day he wanted to be a member of the Politburo Standing Committee and that meant there was no way he could live in the west.

One of his university degrees is in Marxist -theories and he is still comfortable spouting the sort of ideological platitudes that remain at the heart of the party’s liturgy, but which are now alien to most Chinese. An article he published last autumn in Qiushi, the party’s main theoretical journal, was entitled: “Study the Theoretical System of Socialism with Chinese Characteristics and Master the Marxist Stand, Viewpoint and Method”.

As his succession approaches, he appears to be trying to consolidate support among the old party families and in the military – elements of the system most attached to the status quo. In the past, talk of a “princeling faction” among the children of revolutionary leaders was often exaggerated because it ignored the intense rivalries within this group. In the early 2000s, Xi’s rise was temporarily stymied by Bo Yibo, another revolutionary hero close to Deng who wanted to push the claims of his own son, Bo Xilai, now the party boss of the central Chinese city of Chongqing. But with his position now stronger, Xi has been laying to rest some of these rivalries and building a base among the princelings. At the end of last year, he visited Chongqing and offered strong support for Bo’s controversial campaign against corruption, which has won him broad popular support but appalled liberals after he had the lawyer of an alleged gangster imprisoned. Bo has also encouraged the public singing of revolutionary songs and has sent out millions of “red” text messages with Maoist slogans – a nostalgic appeal to an era many Chinese see as less corrupt. Xi applauded the propaganda drive, saying that “these activities have gone deeply into the hearts of the people and are worthy of praise”.

During his stints as an official in the provinces, Xi made a point of remaining close to senior officers and over the past few years he has been strengthening his contacts in the military. His wife is also very popular with rank-and-file soldiers, which enhances his prestige. How these close ties will impact on his leadership, however, is harder to judge. Over the past year, there has been an increase in hard-line rhetoric from sections of the military, which appears to have influenced the tougher foreign policy positions China has taken. Some analysts believe this reflects the fact that President Hu, who had little military experience before taking office, is less able than his predecessors to rein in the military. With his good personal contacts, Xi might find it easier to impose his authority on the armed forces, yet the same background could also make him more willing to channel their nationalist instincts. In one of his few unguarded moments since 2007, he ranted at a dinner in Mexico City that “there are a few foreigners, with full bellies, who have nothing better to do than try to point fingers at our country”.

. . .

Li Keqiang
Li Keqiang Age: 55, current position: vice-premier

Beijingers like political gossip as much as residents of the next capital city, yet little is known about the private lives of China’s leaders. They are literally walled off from the rest of society, operating from the large Zhongnanhai compound just west of the Forbidden City, which accommodates both government and party offices. Mao Zedong lived inside the compound in rooms next to the swimming pool and it boasts several modest flats and houses, although these days the leaders are believed to actually live elsewhere in the city, in part because of the security risk of having them all in one place. Although Wen Jiabao has gone out of his way to craft a particular political persona, the family life of the leaders is off-limits – there are no photos of Michelle-and-Barack-style date nights around town. Given the considerable fortunes that the family members of some leaders have amassed, this is more than just a tactic to maintain a little bit of mystery.

The distance that the leaders keep means that there is little concrete information about how Xi Jinping and Li Keqiang get on. But what can be said is that, within the range of the sort of people who prosper in the Communist party, it would be hard to find two men less alike in background or personality. For Li Keqiang, the speculation about his political views is rooted in his university years. The son of a low-level official from the poor, rural province of Anhui, he was also sent to work – for four years – as a farmer during the Cultural Revolution. During that time, China’s universities only admitted those with a suitable proletarian class background, but in 1977, the competitive entrance exam was restored. A total of 11.6 million people applied. Li was one of 401,000 to win a place, making him a member of the famous “Class of 1982”.

When he arrived at the law department at Peking University, the country’s most prestigious and -liberal university, the campus was becoming a hotbed of discussion about long-banned western political ideas, China’s equivalent of -glasnost. Li studied under Gong Xiangrui, a professor who had studied in the UK and who gave a popular class on constitutional democracy. Along with several other students, he helped to translate The Due Process of Law by Lord Denning, the -campaigning British jurist known as “the people’s judge”.

In this heady intellectual atmosphere, he was an active participant in the many debates with fellow classmates, some of whom became leading figures in political dissident circles. They included Wang Juntao, who was jailed for five years for his role as one of the “black hands” in the Tiananmen Square protests and now lives in exile in the US, and Yuan Zhiming, one of the main writers of the 1988 television series River Elegy, a polemical attack on the ills of Chinese civilisation, which was a big influence on the 1989 protests.

Despite strong opposition from conservative elements in the party, the Peking University campus started to experiment with elections for posts in the different student bodies. According to Cheng Li, an expert on Chinese leadership politics at the Brookings Institution, Li was heavily involved in the democracy experiments, winning election as head of the student assembly. In an article written a few years ago, Wang Juntao recalled Li’s support for the student elections and a later meeting with him during the 1989 protests. Li had lost some of his independence, he said, but “was still active and open-minded”. Wang concluded: “He said he still valued the spirit of people from our university, and if he one day became a leader, he would welcome criticisms from all his classmates.”

The perception of liberal sympathies held back Li’s career for a number of years, but he soon began to show a rare talent for moving up the system’s rigid hierarchy. He managed to win a position in the bureaucracy of the Communist Youth League of China, which has also been the power-base of Hu Jintao. As well as becoming one of Hu Jintao’s protégés, he used an interest in tennis to curry favour with other influential party elders.

Yet although he is widely praised for his sharp intellect, even temper and ability to turn potential enemies into allies, Li has not yet managed to inspire widespread confidence, either within or outside the party. Some of this is rooted in a feeling that he suffers from bad luck – a slight that is surprisingly important among superstitious -Chinese. During his time as governor of Henan province, there was a series of huge fires, including one at a shopping mall in Luoyang which killed 309 people. Shortly after moving to be party secretary of Liaoning province in the north-east, 214 miners died following a massive explosion.

He has also not managed to shake off the more substantial charge that he is a passive leader, who reacts to events rather than getting ahead of them. Li moved to Henan just as the first reports began to appear about a major outbreak of HIV/Aids, which was caused by unhygienic blood-collection practices. The government response was hugely inadequate, trying at first to block news about the epidemic and providing minimal support to victims. The result was a series of mass protests and there were even reports from Henan of Aids victims threatening to infect passers-by with needles. According to China’s New Rulers, a 2003 book allegedly drawing on leaked party personnel evaluations, “many senior leaders in Beijing blamed this desperate behaviour on the ineffectiveness of Li Keqiang”.

Indeed, this sense of indecisiveness has been the reason for some of the behind-the-scenes pressure in Beijing for Wang Qishan, the vice-premier in charge of financial issues, to get the premiership in 2013, instead of Li. However, the campaign in favour of Wang seems to have lost support, especially after Li’s successful trip to Europe in January. (If the contest between the two were decided by nicknames alone, Li would lose out. In Henan province, he became known as “Three Fires Li” after the string of disasters, while Wang’s capacity for handling major problems, such as the 2003 Sars outbreak, has led insiders to call him “The Firefighter”.)

The same negative impressions inform the scepticism of many in the reform camp about whether Li and the other new leaders will seek to push bolder ideas about politics. “We are not expecting much from this next generation of leaders,” says Ai Weiwei, the artist and persistent government critic. “Maybe the generation after. After another decade, they will be more open in their ideas.”

Shanghai flyovers and motorways at night
Shanghai, a city transformed in a generation by China’s economic reforms

Even if Xi and Li do have big plans of their own, they will be heavily constrained by the system they are taking over. The orderly leadership succession process that is bringing them to power is part of a drive initiated by Deng Xiaoping to create a more predictable political structure that could never again produce the quixotic, centralised control that Mao exercised. In its place is a collective leadership with the Politburo Standing Committee as the main focus. That means there is much less chance of China suddenly shifting direction, but it has also meant a system less able to take hard decisions, more cautious and interested in defending the status quo.

As it happens, when Hu Jintao and Wen Jiabao were assuming power nearly a decade ago, there was also widespread speculation that they were closet political reformers. Indeed, one of the clues insiders pointed to at the time was their own strong links to Hu Yaobang, who was a mentor to Hu Jintao (no relation), while Wen was one of his senior aides. Both men also visit Hu Yaobang’s widow every year over the New Year holiday.

During the Hu-Wen years, there has been a series of attempts to kickstart a discussion about political reform that has gone nowhere. A 2005 white paper on the Chinese political system concluded that democracy is “the common desire of people all over the world”. Last year, Wen published an article in the People’s Daily extolling Hu Yaobang, which many observers took as a coded appeal for political reform. In the article, Wen recalled a trip he made with Hu in 1986 to a rural area of the poor south-west province of Guizhou. “Every time I think back on this, Comrade Yaobang’s sincere, magnanimous and amiable expression keeps appearing before my eyes. Cherished feelings stored in my heart for all these years swell up like a tide, and it takes a long time for me to calm down,” Wen wrote. He followed this up with a series of speeches and interviews about the importance of “universal values” and on the need for the political system to keep up with the changes in the economy. Yet the initiatives have had little impact. Indeed, some of Wen’s comments about political reform received only cursory coverage in the state media, which is controlled by another official on the Politburo Standing Committee.

Xi and Li will have to navigate the same thicket of vested interests. One western diplomat, who has observed Chinese leaders close-up since Deng Xiaoping in the 1980s, describes how each generation has been better prepared and educated when it took office, but less able to actually exercise real power. Short-term problems are approached with ever-greater professionalism, he argues, but the bigger questions are left for another day. “It is a dictatorship without a dictator,” he says.

Geoff Dyer is the FT’s Beijing bureau chief

To comment on this article, please e-mail magazineletters@ft.com


A hard act to follow

Wen Jiabao

Within hours of the massive earthquake in Sichuan in May 2008, current premier Wen Jiabao was on a plane to the disaster site. For the next few days, he was constantly filmed tramping around collapsed buildings in an old pair of training shoes. “This is Grandpa Wen here,” he called down to one child trapped in the rubble.

Among political and business circles, Wen has plenty of critics who see him as unwilling to take tough decisions. But among the public he is by far the most popular of the senior leaders, the result of a flair for public relations that many western politicians would envy. The son of rural teachers, he always manages to spend some time over the New Year break in poor, rural areas, cameras on hand. It is a new style of politics for China, which some fear could become a form of rabble-rousing populism. But Wen’s ability to stand out from a pack of leaders, who would all be called grey were it not for their immaculately dyed hair, makes him a hard act to follow.


WikiLeaks on the leaders-in-waiting

Xi Jinping:

According to a long cable based on extensive conversations with a childhood friend, after the Cultural Revolution Xi “chose to survive by becoming redder than red”. Through his father, he had a sense of entitlement as one of “the legitimate heirs” of the revolution and was a member of a generation of princelings who “deserve to rule China”.

He has a sister who lives in Canada and a brother who at one stage lived in Hong Kong.

In his early career he “was quite taken with Buddhist mysticism” and fascinated with “Buddhist martial arts, qigong and other mystical powers said to aid health”.

Li Keqiang:

When he was party secretary of a north-east province, he confessed to the US ambassador that he did not believe official figures for GDP. They were “for reference only”.

Lee Kuan Yew, Singapore’s founding father, told a US official in 2009 that Li might lose out on the premiership to Wang Qishan, also currently a vice-premier, whom he described as “an exceptional talent”.

via ft.com

Fascinating portrait of China's next generation of party leaders. Xi Jinping appears to be a much more formidable leader than his predecessor Hu Jintao, but Wen Jiabao will be a very tough act to follow and Li Keqiang has an uphill battle to wage to fill "Grandpa Wen's" shoes.