The Time

Economies don’t grow indefinitely.  Low cycles follow high cycles and after 30 years it is about time. China cannot break the laws of economics, so the recession must necessarily come in the next X years. The country hasn’t prepared itself politically and psicologically to face this period. In the end, we are sure to have trouble.

Of course, this argument is of little value without the X, and many proponents of a time limit have failed in the past. This is the field of technical analysts and other mystical thinkers. Mythology also plays a role:  In Chinese history, cataclysms mark the end of a cycle. An earthquake preceded this crisis, and a solar eclipse is coming in July, the dynasty has lost its virtue. These arguments tend to work better with a bit of hindsight.

The Markets

The World’s economies are interdependent today. China’s economy is largely dependent on exports and FDI. The weight of these external factors in China’s growth has been much discussed, but regardless of the exact numbers, few doubt that it is a significant motor of the economy. External motors failing, China turns to internal ones: investment and consumption. Today, strong public investment, mostly in infrastructure and energy, is making up for the loss.

But infrastructure on its own does not move an economy, an empty highway is dead weight. Its value lies in the economic activities that are created or improved by using it, and those activities need markets to get them going in the long term. Optimists have pointed out that the crisis might turn developed economies to cheaper products, but international markets are saturated with cheap Chinese wares, and the latest news are discouraging. This leaves the Chinese consumer.

The People

Since the urban consumer was already developing at full speed, it is to the masses of Chinese peasants that all the eyes turned when a new market was needed to replace the failing exports. The peasants had been left out of the economic miracle, and measures were announced to get them back in.  But few of those social measures have materialized in any significant way, and the government seems to realize that this is a long term effort, not to be mistaken with an emergency financial package.

 Chinese peasants don’t like to spend money. They like to save it.  Some argue this is an immutable principle of a post-confucian society, others attribute it to the lack of “safety nets”, such as  health care plans, and the fact that poverty is still seen as a very real option.  Perhaps Chinese have too much common sense, and in the face of all evidence, they continue to act as if working hard and being thrifty will make you richer.

Meanwhile, the optimists of internal consumption see hope in the low-tier cities, the segments of the population that have already abandoned the peasant lifestyle, but still have a long way to reach East Coast level. 

The Government

China’s authoritarian system has some advantages over Western systems. The executive can take strong, quick measures unhindered by parliament debate and popularity surveys. A good example is the stimulus package. China was the first major country to announce it, and it is has been the biggest  relative to the size of the economy. Government technocrats tend to know more of economics than voters.

But some see in the system the seeds of disaster. The Son of Heaven is human, and bound to the wheel of favours, factions, patrons and clients. The lack of checks and balances makes it easy  for personal interests to take precedence over the common good. Some have a stake in the stock market, others in real estate, there are ways to pump up these markets with the connivance of Beijing. One day they might all decide it is time to cash in, and the rest of the population will be caught by surprise, watcing the CCTV report with the 8% growth spreadsheet. Lack of transparency usually works well to bubble up crises. 

The Package

China has a good package, timely and sizable. Few doubt now that it has delivered the desired stimuli. The thrust in infrastructure and energy investment is spilling its effects over the rest of the economy, and the feared legions of the unemployed are still nowhere to be seen today. 

But the package can only be a temporary patch, as we have seen above, and its function is just to cover the gap until the economy gets back to normal. In the meantime, the investments should be preparing the path for the return of sustainable growth.

Optimists point at the positive parts of the package, such as social measures, education, or development of new sectors of the economy in biotech or renewable energies. Pessimists note that the bulk of the package is actually flowing into very few sectors related to heavy construction, and this will cause unbalances and excess capacities the minute the financial tap is turned off.  In their view, the package is just postponing/aggravating the consequences. Some mention the devastating and unpredictable specter of deflation.

The Chest

China has also a nice chest. It is a war chest, and it is full of foreign-exchange reserves denominated in dollars. Optimists and lovers of logic alike see salvation in these reserves. They like to point out that China has room to go on with its package for a long time, thanks to all the years that the country has spent saving saving money and acting as “Americas banker”.

From a plain logical point of view, this makes sense, but unfortunately financial logic is anything but plain. The specialists in the area are quick to remind us that these reserves are not unencumbered wealth, and not free for the government to use. The central and provincial governments finances are already under stress, and the banking system is channeling all financial resources to the package SOEs, with the consequence of drying up available finance for other sectors of the economy.

The Riots

One of the main subjects in the Crisis discussions has been the possibility of large scale riots caused by unemployment. These riots could have the effect of destabilizing the system, with consequences in politics as well as in the economy. Perhaps because of the political derivations, unemployment has attracted a lot of attention from Western observers. Around the turn of the year, when the Western Christmas season was over and many semi-seasonal workshops were closing, the discussion reached the peak of popularity.

But the package has kicked in, and for the moment unemployment doesn’t show signs of getting out of control. The riots have increased in number, but they remain essentially local in nature, directed to claim arrears from a particular company, or against local authorities. There is a climate of relative optimism among the Chinese, and it looks like the the propaganda package that came with the financial one is having the desired soothing effects.

Inflation/Deflation

Predictably, another high point will come when the investment package is left behind, or when the financial situation makes it unsustainable to continue pushing it. At this point, we might see more passionating discussions, with the added appeal of possible deflation risks. 

Inflation has historically been a major cause of riots and wars, so a logical mind would assume that its opposite -deflation- has opposite effects, forcing everyone to stay in at home reading self-improvement books and drinking green tea. I doubt very much the economists will let us get away with this theory. In the meantime, I will stay tuned to the blogosphere for any interesting development to add to this list.

And in the meantime, we have read so much about her that the debate gets old, the initial guessing game we merrily joined some months ago giving way to a phase of weary expectation.

So, finally, is there going to be trouble in China or not – Will the Wall Fall? I have my own opinions about this, but I’ll keep them clear off this post. Instead, I want to  summarize some ideas appeared in the sinosphere, list the main arguments from each side, and let the reader choose which make sense.  Luckily, this is the kind of discussion where the same arguments are fluently used to support all views, so the list can be made manageable.

But first of all, let’s examine the parties. In this business of Chinese Crisis Watching there are 3 main schools of thought,  which can be roughly classified as follows:

A. The Optimistic Executives:  Old China hands with long memories, bullish consultants with short ones. Optimistic people with or without a stake in the optimism of their clients. Just to list some recent ones.

B. The Academics of Doom:  Everybody knows the highest fulfilment of a dismal scientist is to announce doom and then have doom come. On the other hand, there might be something in what they say…  some examples.

C. The Rosy Men of the Republic: This 3rd group is endemic to China. It consists of a set of highly prepared bureaucrats who resolutely believe in the Feelings of the Motherland, in Santa Claus and in the Theory of Scientific Development. You can see here some of their latest achievements.

The English-speaking sinosphere is a little world, and we rarely see the big names that populate other provinces of the internet. But we do have a great advantage: debate here is relatively free from partisan politics.  There is not much in the way of left-wing China blogs, for instance, and American republicans don’t go about throwing  green tea parties just because grandpa Wen announced a healthcare plan. 

In fact, the left and the right in China are conveniently concealed behind the red walls of Zhongnanhai. There are few leaks, and the real data which analysts use is pretty much available to anyone with an internet connection and some notions of mandarin. This is a level field where you can browse around, draw your own conclusions, and enjoy your tea leave reading with Armstrong’s great cover of  ”La vie en rosy“.

But enough if the rosy chit-chat. Here’s the points.

Chinese ultra-blogger Han Han is starting a magazine. He announced it previously on his blog, and his last post is already giving the details to send in article drafts and job applications. I learned this last night from my friend 2Ting, who was eagerly preparing her CV and intro letter. The literati of the post-80s are very excited, it appears.

Han’s magazine, which still doesn’t have a name to avoid imitations, is presented in this blog post. A very Chinese and a very Han Han announcement, interesting for several reasons. But before I speak of it let me give some background on Han Han. I’ve been planning to write about him for ages, and never found the time until today.

The man

Han Han is 2Ting’s idol. He is also the idol of thousands of others post-80s Chinese, and he has become – in spite of himself-  a symbol of this often caricatured generation. His bio is interesting: while attending middle school he won a first prize in a famous literary contest, then he dropped out of high school and started writing  popular novels and driving race cars. By now he has become one of the best selling authors in China, and, if I got my stats right, the most read personal blogger in the World.

Han Han’ s appeal to the Chinese youth is based on his character and his life as much as on his incisive writing style. For modern day Chinese students, stifled by a cut-throat education system and the high expectations of their parents, there is no room for the big ideals. It is not Communism or Democracy that worries them, but rather the daily struggle to improve their grades. And  the fairness of a system that should allow them in the future to find a job according to their efforts.

In this world, dropping out of school has to be the ultimate rebellion. Han Han fought the system and Han Han won.  And not only he won, but he took to denouncing the gaps in the establishment, directly challenging the older generations that hold the power today. Add to this that – I am informed- Mr. Han is “hot”, and you got the bearings to start to understand the Han Han phenomenon.

The blog

Like a sort of Robin Hood of the Sinosphere, Han Han writes about injustice. He complains and makes fun of things that are wrong, by people who have power (political or other) in the older generations. Like his readers, he is not interested in the big words, you do not see “Charter” or “democracy” on his blog. You see a mayor in Chengdu who spent too much for a luxury “earthquake relief” car, or a rant against some older writer who sold his soul (some of his feuds with artists and critics are legendary).

By my own estimate, Han Han’s blog must be the most read personal blog in the World. The numbers are baffling. Each of his posts has hits in the hundreds of thousands, and comments are counted in the thousands. According to the stats on sina.com.cn, he is long past the 200 million hits. Impressive, even if we discount the part driven by returning low-value commentators. Typically, the 100 first comments on a post are whining about not being the first (the “sofa!”). Then it quickly degenerates into a series of ecstatic “chichis” and “jiayous”, which is the way Chinese express their cheering approval.

The lack of explicit political involvement is what makes many foreign readers ignore Han Han and turn to other -smaller- bloggers who write in tune with their expectations. This probably also explains why Han Han has managed to get away with so much, while being censored so little. The Censors have barely touched his blog, only once in a while blocking the occasional post.  Like the thousands of tolerated protests organised in the countryside, most of the times he is just writing  against a case of local injustice, and he rarely crosses the line of attacking Beijing.

But westerners and officials alike might be underestimating Han Han’s influence. His fans  belong to defined and very concentrated sectors of the population, including one that has been identified as potentially conflictive in times of crisis: the young graduates from university that are unable to find a job. Looking further down the line, the post 80-s will start entering their 30s next year, and gradually they will gain some power and cease to be ciphers. Han Han is in a strategic position.

It has been said that his writing lacks a message, or that he is just a student fad, perhaps because he doesn’t fit our mould of a”chinese intellectual”.  But he never was meant to be an intellectual. He is a man of action, who hops from high school to the race cars and on the way home plots his next witty line. He is the kind of man that makes change happen, rather than theorising it. The following extract of his magazine announcement can give a taste of what I mean.

The magazine

This is the bold announcement posted on the 1st May, approximatively translated and abridged by Uln:

The magazine I edit is calling for manuscripts. Any kind of documents, including novels, short stories, news, essays, commentary, etc. For this magazine, I have decided to give the highest salaries in the field. 2000RMB/ 1000 characters for original cover stories. 1000RMB for other original stories, etc. These prices are around 10 to 40 times higher than average of the industry.

The magazine will also have a section for the points of view we completely oppose. The magazine considers the author is mentally disabled. These will include articles against humanity, against common sense, against justice and freedom. We will publish these articles and remunerate them  250*RMB/1000 characters. And this is also a high standard, for 250s don’t fall from heaven, and there is also a cost for the 250s to be born.

(*NOTE:  For some reason, the number 250 in Chinese means “stupid”)

That is already a promising declaration of intentions. Fighting injustice with irony, that is very much the style of Han Han. In a country like China this kind of writing can go a long way. Until, of course, one of the 250s is powerful enough to take away their publishing licence.

The texts will only be paid 15 days after publication, to give enough time to the readers to find any plagiarism. If this is the case, a note will be published in the cover and compensation of 1000RMB/character given to the original writer, and 500RMB/character to the one who finds it. The magazine will not admit original authors that plagiarize themselves under a different name to claim both payments.

The salaries for the staff editors will be of 6500RMB/month, which will increase if we manage to keep the business afloat.

Some people advised me against this kind announcement, but  I didn’t listen to them. When I asked some guys in other publications what was their monthly budget for writers, they said it was negligible. I am fed up of the situation in this country and I want to help improve it. I am a well known writer and a champion driver and with my income I can hardly buy a flat in Shanghai. In other countries these professions are more respected and you earn enough to buy Ferraris, etc.  I want to ensure in my magazine that writers receive the proper compensation for their work.

Remarkable announcement, and, as I said, very hanhan. Also very Chinese, showing the money straight from the first paragraph. The likes of Han Han are not ashamed of  what  they are, and I can’t see a better way of getting his hordes of fans feverishly updating their CVs. I wonder how he is going to deal with the avalanche of manuscripts.

A funny paragraph is the one about plagiarism. It is a recurrent theme in Han Han’s posts, as he has been himself a major victim. The whole system of low wages for creative jobs is partly due to traditionally low awareness of intellectual property. To understand the extent of the problem, just consider that Han Han’s novels are plagiarized before they are even written: some crook commissions a writer to put together a novel with the bits of information that leak about Han’s next work, and in a week it is on the tricycle market.  In these conditions, original books in libraries rarely sell for more than 15RMB (2$). Any increase would get the tricycles flocking to your doorstep.

But finally, one might ask, what is the magazine about? In the world of Han Han, the particular theme doesn’t seem to matter so much. As we saw above, humanity, freedom, justice and common sense are the principles that will guide it. Principles without capital letters, because there are none in Chinese. Perhaps the following phrase, which sounds better in the original, can give some more hints:

We don’t have a standpoint, we just discern right and wrong. Too many people around us have standpoints, they don’t discern right and wrong.

So be it.

This article is dedicated to my friend Ting.  I really wish you can make it into the Han magazine

THE TAMADE STATUES - We have heard more than enough of those ugly statues that are clearly not worth the noise, so I will be brief. Here’s what the forums say.  On the West side: it’s a clever PR coup by the CPC;  on the East side: indignation, history, insults and record participation.  In the middle, the French, who are so used to being bashed by both Americans and Chinese for any possible reason that they don’t seem to mind  anymore.

I can understand the indignation of the Chinese public, these statues have come to symbolize the humiliation of the colonial times.  But I am sure that, regardless of the legal basis, the Chinese government could use some of its famous patience, diplomacy and political leverage to get those lumps of bronze safely back home were they belong. And, in the long term, to reach a general agreement for the repatriation of art works.

The trouble is:  that would’t solve the problem.  Because this is not about art, it is about national honour and about a debt with the past. And the past, however unjust it may have been, is not ours to change anymore. So some excited Chinese just need to get over these things. Carrying your wounded country in your heart is romantic and tempting, but in the long term it only leads to blindness, conflict, and the neglecting of important issues.