ANTI-JAPANESE PROTESTS IN CHINA:

Sarah,

As a result of a territorial dispute between China and Japan over some uninhabited islands, Anti-Japanese protests are raging throughout China.  The LA Times described some ways in which the Chinese are protesting:

1.  Commentators are urging a boycott on all Japanese goods.

2.  One man drove his Honda Civic back to the dealership and set it on fire.  Other Japanese cars have been smashed throughout China.

3.  Tour groups are cancelling visits to Japan.

4.  A couple cancelled a wedding photo shoot because the cameras to be used were Japanese.

5. Citizens are downloading Japanese porn illegally to deprive Japanese porn studios of money.

6. A famous Chinese actress canceled an appearance at the Tokyo premiere of Resident Evil to show support for her country.

(click this article for a better description of the dispute)

Source: LA Times, “Isle Dispute Fuels Offbeat Protests by Chinese”, 9/14/12

UPDATES IN THE CHINA-JAPAN CONTROVERSY:

Sarah,

Last week I gave some background on a dispute dispute between China and Japan over a chain of uninhabited islands.

Here are the latest developments:

1. Last week, the Japanese government bought the islands from the Japanese family that supposedly owned them for $26 million.  The deal was spearheaded by Tokyo’s Governor, a strident nationalist.

2.  Today, China announced that it is sending paramilitary ships to the island for “surveillance”.  China also announced that it has plans for safeguarding the islands and that it considers the sale of the islands to the Japanese government illegal and invalid. (because China owns the islands)

SOME RESPONSES FROM CHINA:

Sarah,

I recently started reading the China Daily; a state-controlled daily newspaper from China.  It is interesting because it states the Chinese government’s opinions about world events.  Today there was an editorial responding to criticism from America.  I’ve listed three American accusations and China’s responses:

Accusation: China engages in unfair trade practices.

Response: China buys American goods.  Last year, in 420 out of 435 US congressional districts, exports to China rose faster than exports to any other country on Earth.

 

Accusation: China is escalating conflict in Syria by blocking UN resolutions to place sanctions on the Assad regime.

Response: Proposals that would help arm the rebels will only lead to more bloodshed.  More aggressive steps in Syria will lead to invasions like the ones in Afghanistan and Iraq.  The U.S. “failed miserably” in both of those campaigns. (The editorial states that there is “conflict in Syria” but does not call it a civil war)

 

Accusation: China is a warmonger that is aggressively building its military.

Response: China has not been involved in a war since the one with Vietnam in 1979.  In contrast, America has been fighting wars continuously for the last three decades.

The rest of the article accused Republicans of trying to sow the seeds of hostility when there is no actual reason for hostility.

Source: China Daily, “An end to the revival of hostilities”, August 31, 2012

CHINA AND AMERICA ARE CRASHING AN OBSCURE MEETING OF PACIFIC ISLAND NATIONS:

Sarah,

The geopolitical contest over the Pacific Ocean is heating up.  Last week I wrote about China’s squabbles with its neighbors over the South China Sea.  This week, I’ll describe the politics of the Pacific a little more generally.

 

 

The Pacific Island Forum:

The Pacific Island Forum is a meeting of 16 South Pacific countries.  Other than Australia and New Zealand, almost all of the members are small island nations.  This year, the meeting will be hosted by the Cook Islands which have a population 11,000.  To put that number in perspective, Dodger Stadium holds 55,000, five times the entire population of the country.

This year, China and the United States, who are not members, have decided to crash.  Hilary Clinton, our Secretary of State, bluntly described why: “Let’s just talk, you know, realpolitik.  We are in a competition with China.”  To accommodate Clinton’s entourage, the Cook Islands will be asking individual citizens to lend their cars to her motorcade. 

Why Are They Crashing the Party?

As China grows, it is exerting is political and military influence outwards over the Pacific.  This expansion adds to the already existing disputes.  Here are some of the current flashpoints in the Pacific:

1. South China Sea: China vs. Singapore, Malaysia, Vietnam, Brunei, Taiwan and the Philippines:

China claims all of the South China Sea.  The other countries in the South China Sea hate this.  America is intervening against China and providing military aid to both Vietnam and the Philippines.

2. Diaoyu/ Senkaku Islands: Japan vs. China:

Although these islands are uninhabited, they are fishing grounds that may have oil and gas.  In 1895 Japan beat China in a war and took control of the area.  China still considers the islands their territory because China discovered them.  Recently, Japanese activists planted flags on the islands.  This led to waves of violent anti-Japanese protests throughout China.  Last week, Chinese activists landed on the islands and were deported by Japanese authorities.

3. Liancourt Rocks: South Korea vs. Japan

Japan conquered a large amount of area in World War II.  After it was defeated, Japan renounced claims to much of its Asian territory.  There is a dispute as to if this group of islands is included in the renunciation.  There are also a number of competing historical claims to the islands.

4. Kuril Islands: Japan vs. Russia:

In 1855 Russia gave Japan ownership of the Southern Kuril Islands.  At the end of World War II, Russia reconquered the territory and deported its Japanese citizens.  After the war, a dispute as to who owns the islands was never diplomatically resolved and as a result Russia and Japan never signed formal peace treaty to end World War II.  Technically, Russia and Japan are still at war.

5. Competition for Influence: Everyone vs. Everyone:

Almost all major powers compete for influence in the smaller countries of Asia.  Even Australia, a seemingly peaceful country, maintains a fierce rivalry with China for influence in the islands of the South Pacific.  The two countries aggressively offer loans for everything from roads to stadiums in far flung places like Tonga and Fiji.

Given the number of reasons for political instability, both China and America feel the need to compete for influence in the Pacific Ocean.

Bottom line: I can’t believe Russia and Japan never signed a peace treaty after World War II!

CHINESE GANGS IN AFRICA:

Sarah,

I write a lot about China, I write a lot about Africa, and I write a lot about crime.  So I definitely can’t pass up a story about Chinese gangsters in Africa.  Last week, 37 people were extradited from Angola to China to face charges of kidnapping, armed robbery, human trafficking, and extortion.  Let’s start the story with Angola:

 

Angola:

Angola lies on the Atlantic Coast in Southern Africa.  Portugal arrived in Angola as early as 1500 because Angola was on the way to India and the Portuguese were some of the first explorers.  You might remember from 4^th grade that Bartolomeu Dias, a Portuguese explorer, was the first to round the Cape of Africa.

Portugal ruled Angola for about 500 years and engaged in the slave trade enthusiastically.  Portugal spent most of this time near the coast, but around 1900 they attempted to consolidate their hold on the whole country.  In 1961, a war for independence broke out and lasted until 1974.  Immediately after Portugal left, a far more brutal internal civil war erupted and lasted until 2002.  So basically, the country was at war from the time of JFK’s presidency all the way to the attacks on 9/11.

Since the end of the civil war, Angola’s economy has grown incredibly fast.  This is because the country has an extraordinary amount of oil, diamonds, copper, and gold.  Almost all of Angola’s economic growth stems for the export of these commodities.

Unfortunately, the wealth from these exports has remained in the hands the elite.  A handful of powerful government officials and insiders have managed to enrich themselves at the expense of the rest of the population.  As a result, Angola suffers from staggering social inequality.  The differences between the cities and the countryside are arguably more dramatic than anywhere else in the world.  This rural poverty is compounded by the fact that the countryside is still littered with landmines from 40 years of war.

China:

When peace came, the Chinese entered and brokered deals with Angola’s corrupt government.  Since 2002, China has loaned Angola billions of dollars and managed to become Angola’s main trading partner.  As a result, most of Angola’s oil, gold, and copper end up in China. 

Because of this trade, many Chinese have migrated to the country and thousands of Chinese citizens currently live there.  However, not all of these migrants are successful Chinese businessmen.  Many are poorer, uneducated Chinese citizens that have roots in Chinese gang culture.

These gangsters thrive in Africa because of a general lack of security and political instability.  It’s much easier to kidnap and ransom a wealthy businessman in Angola than in Beijing.  Accordingly, many businessmen operating in Angola are forced to hire bodyguards and buy bullet proof cars.  Some have even abandoned their businesses.  Further, the gangsters allegedly operate human trafficking schemes in which young women are promised jobs in Africa but are immediately sold into prostitution once they arrive.

Now China is taking steps to fight back and defend its image.  It sent a special police force to Angola to target 12 different gangs and rescue victims.  As a result of their efforts, 14 victims were freed and 37 Chinese gangsters are now back in China and awaiting trial.

Bottom line: Exporting crime to Africa?  That seems really messed up.  Also, I bet the officers in that special Chinese police force were total bad asses.  This story would make a great action movie.

RISING SOYBEAN PRICES AFFECT CHINA’S POOR:

Sarah,

Sorry, I have to post another article about food prices.  Last week I posted about America's drought and how it is affecting the the price of corn in South Africa.  Now I want to tell you about soybeans in China:

America is the largest producer of corn and soybeans.  This year, a historic drought devastated America’s harvest.  Accordingly, the price of corn and soybeans is soaring.

Soybeans are pressed to create cooking oil.  The Chinese consume a lot of cooking oil because they fry most of their food.  As a result, China buys more of America’s soybean crop than any other country.

In the coming months, the higher price of soybeans will likely drive the price of cooking oil higher.  This will affect China’s poor disproportionately because China’s poor spend a high percentage of their income on food. 

China’s government is scrambling to prevent this price increase because rising food prices fuels social discontent.  They are warning their biggest oil producers to keep prices in check and are tapping into government reserves of food.

Bottom line: Weather in Iowa directly affects the Chinese government’s ability control discontent among its citizens.

THE NAVIES OF CHINA AND THE PHILIPPINES FACE OFF OVER SOME ROCKS IN THE OCEAN; AMERICA WANTS IN

Sarah,

Last week, I posted about some problems facing China.  I forgot to add an interesting one: the fact China is bickering with every single one of its neighbors over territorial rights to the South China Sea.  China claims nearly all of it.(see the map below)  This really annoys the countries of Vietnam, Brunei, Malaysia, Taiwan, Singapore, and the Philippines because China is laying claim to islands and waters directly off their coastlines.

China’s recent spat with the Philippines exemplifies the larger dispute.  Here is what’s happened:

The Scarborough Shoal:

China and the Philippines are fighting over a shoal that is located 123 miles off the coast of the Philippines.  A shoal is a patch of shallow water which is created when a reef lies just below the surface of the ocean.  Shoals are great for fishing because fish live in reefs and the shallow water provides fishing vessels with calm water.

China claims they own the shoal because they discovered it and have been fishing there forever.(sometimes it helps to be an old country- China is over 2,000 years old)  The Philippines claim they own it because international law states that all ocean within 200 miles of a country’s coast belongs to that country. (the shoal is well within this buffer zone)  Both claims have at least some merit.

How Did the Drama Start?

Earlier this year, the Philippine Navy was patrolling the reef and attempted to arrest a Chinese fishing boat for illegal fishing.  Upon hearing the news, a couple of enormous Chinese warships, that just happened to be in the region, intervened and prevented the arrest.  Despite subsequent agreements about a fishing ban, the Chinese Navy is still there.  Today there are about 30 Chinese ships patrolling the area.  When Philippine fishing boats (or anyone other than the Chinese) enter the shoal, they are chased out.

Enter America:

America cried foul and immediately sent their navy to the region.  Because the Philippine Navy wouldn’t stand a chance against the Chinese Navy, the Americans are conducting drills with the Philippine Navy and providing them with training.  This development is part of a larger trend of South-East Asian countries looking the America for protection against China’s rapidly expanding military.

China hates this development.

Instead of directly threatening China, America has called for a “multilateral solution”.  This basically means that America wants any negotiation about the South China Sea to happen between a whole collection of Asian countries and China as opposed to China and the Philippines by themselves.  America, (and other Asian countries) thinks this will put smaller Asian countries in better bargaining position.

China refuses to negotiate claims to the South China Sea multilaterally and wishes to discuss each dispute individually. (what chance does the tiny country of Brunei have if it goes up against China by itself?)

Failure at the ASEAN Summit:

Recently, an annual summit was held that involved all of the South-East Asian countries.  Cambodia hosted and many of the smaller Asian countries were optimistic they could create standard for resolving territorial disputes.  After days of political wrangling, no standard was adopted.  This was a major victory for China because China did not want to discuss territorial issues while all of its adversaries were in the same room at the same time.  The Philippines and other aggrieved Asian nations accused Cambodia of manipulating the meeting on China’s behalf.  Cambodian manipulation is probable because Cambodia is in China’s pocket.

What are the Consequences?

For now, an actual fight is not likely, but the standoff will not be ending soon. 

America is nervous about getting embroiled in a conflict but is happy to see Asian countries flocking to its side.

China is annoyed by America’s presence but is happy for a chance to show off its growing navy.

The Philippines are caught in the middle.  Most Filipino’s are upset about China but many are still hesitant to embrace American influence. 

As is often the case in geopolitical disputes, the real loser is the little guy.  Filipino farmers rely heavily on agricultural exports to China.  Since the dispute began, China has stopped buying Filipino bananas.  This is really hurting the agricultural sector of the Philippines.

Bottom line: China is becoming more and more aggressive.  This is concerning, but at least its preventing them from allying with their neighbors.

CHINA’S DOCTORS ARE UNDER ATTACK

Sarah,

Last week the Economist had a really interesting article about attacks on doctors in China.  Last year there were 17,000 incidents of violence against Chinese doctors.  Two incidents highlight the magnitude of this trend:

First, a man in the city of Harbin stabbed four hospital workers after complaining about his treatment.  One of the hospital workers died.

Second, there was a huge brawl in a Chinese hospital that pitted medical workers against the family of a man who died during an operation.  The fight was so intense that 100 medical workers were forced to arm themselves with sticks and mace.

The reasons for these attacks are the lack of redress for medical malpractice, the cost of medicine, and corruption within the hospitals.  Because doctors are poorly paid in China, they often supplement their income by taking on extra surgeries or charging patients for unnecessary tests or medicine.

Source: “Heartless Attack”, The Economist, July 21^st to July 27^th issue. 

THE BRICS ARE SLOWING DOWN:

Sarah,

Several years ago some economist came up with the term “BRIC” to use as shorthand when referring to Brazil, Russia, India, and China.  These countries are grouped together because they are huge and have experienced rapid economic growth over the last decade.  Now, all except Russia are witnessing an economic slowdown- China’s growth is the lowest in three years, India’s growth is the lowest in 7 years, and Brazil’s growth has dropped to zero.  Here’s an extremely oversimplified summary of why:

1.  Economic growth in China and India relies heavily on manufacturing.  The primary markets for these manufactured goods are Europe and America.  Europe is in a never-ending financial crisis and America’s economy is not growing.  Thus, demand for China and India’s goods has been weak.

2.  Relatedly, investment from European and American investors fuels growth in BRIC countries.  Since Europe is being forced to bailout its own economies, there is less money to invest in developing countries.

3.  China and India rely on manufacturing and Russia and Brazil rely on exporting commodities.  Commodities are essentially raw materials- metals, crops, wood, and oil.  When production at Chinese and Indian factories slowed down- so did the demand for these raw materials.  For example, Brazil has exported iron to China for the last decade.  Currently, a drop in demand for iron has led to a drop in Brazilian exports of iron to China.

4.  When economies grow, the wages of workers usually rise.  If a factory has to pay its workers more, it is less competitive globally.  For example, rising wages in China have made Mexican factories more competitive.  Although Chinese workers still earn less than Mexican workers, Mexico’s proximity to the United States allows for lower transportation costs.  When you even out the costs, Mexico may end up with the cheaper product in the American market.

4.  There is also a rash of country-specific problems.  For example, India cannot seem to maintain quality infrastructure.  Infrastructure in this context means roads, railroads, and electricity.  When companies cannot rely on the roads or power supply of a country, they are reluctant to build new factories.

5. I mentioned Russia is still growing.  This is because Russia’s main exports are oil and gas.  Demand for oil and gas has remained steady.  If demand for energy drops Russia’s economy will also suffer.

PFIZER, THE DRUG COMPANY, GOT BUSTED FOR BRIBING FOREIGN DOCTORS

Sarah,

Pfizer is a large pharmaceutical company.  Recently, Pfizer reached a $45,000,000 settlement with the Securities and Exchange Commission to resolve charges of bribing doctors overseas to write prescriptions for Pfizer medicines.

The Law:

In 1977, the United States passed the Foreign Corrupt Practices Act.  This law prohibits companies from bribing foreign officials.

The Offense:

The offenses are pretty egregious and were committed in countries around the globe.  In China, a Pfizer subsidiary created a “point program” in which points were given each time a doctor prescribed Pfizer drugs.  The points could then be exchanged for cellphones or tea sets.  I call this the Chuck E. Cheese business model.  In other parts of China, Indonesia, and Pakistan, Pfizer dispensed with formalities and made cash payments to government doctors.

In case you were wondering, other drug companies are doing this as well and are currently cooperating with investigations.

Bottom line: Drug companies do what they want.

Source: “Pfizer Settles U.S. Charges Of Bribing Doctors Abroad." New York Times, 8/8/2012

CHINA IS ABOUT TO CHANGE LEADERSHIP; HERE ARE SOME PROBLEMS CHINA FACES:

Sarah,

China has dominated the last decade economically.  However, China has problems too.  Here are some of them:

Drama Within The Communist Party:

China is ruled by top officials in the Communist Party.  Top officials become top officials by being promoted from within the party.

China’s top leadership has decided that Xi Jinping will succeed Hu Jintao as president of China.  The transition should go smoothly.  However, there have been several political hiccups in the last year.

First, Bo Xilai, the ex-governor of Chongqing, an absurdly large Chinese city, has recently been purged from the party.  This is significant because he was enormously popular and once thought to be in contention for a top leadership position.  The drama started when a British acquaintance of Mr. Bo named Neil Heywood was found dead in a hotel room.  Now, Mr. Bo’s wife is now on trial for murdering Mr. Heywood. (given China’s 98% conviction rate she will surely be imprisoned or executed.)   Additionally, Mr. Bo loudly campaigned against China's growing economic inequality and this caused a rift with other party members.  In a system that values consensus, his dramatic expulsion is a big deal.

Second, China’s military is seeking greater influence over political decision making.  Many generals are grumbling that China’s military should be more assertive.  For now, Mr. Hu (the current president) serves as chairman of the Military Commission and may continue to do so even after he steps down.  This may create tension between Mr. Hu and the incoming Mr. Xi once he is president.

Economic Slowdown:

China’s economy is slowing down.  Its property prices have fallen and local government debt has grown.  Imports and exports are down and the government is taking steps to encourage banks to extend more loans.  Does this mean anything?  Maybe, I don’t know, I’m not an economist.  I do know that the overall economy is still growing at around 7.5%, more than three times faster than America’s economy

Rising Discontent In The Middle Class:

In the past decade, the number of people in China’s middle class has exploded.  This group of people is now connected to the internet and they are starting to complain about food safety, product safety, pollution, and corruption.  Thus far, protests have been manageable, but they seem to be growing.

Migrant Workers In The Cities:

At least 225 million people have left China’s countryside to find work in China’s wealthier coastal cities. (the total population of the United States is 314 million)  These migrant workers are not afforded the same rights as permanent residents and struggle to find housing, medical care, and education for their children.  As a result, there is a widening wealth gap between incoming workers and China’s emerging middle class.  Over the last year, migrant workers have rioted several times.

An Aging Population:

In 1978, China adopted a one-child policy restricting married, urban couples to one child.  Although it is not universally enforced, the policy has slowed down the birth rate.  Accordingly the percentage of the population that is over 65 is rising rapidly.

Pollution:

There is a consequence to having most of the world's factories.  Air and water pollution in China is bordering on ridiculous.  This will catch up with them sooner or later.

Bottom line: China is still growing, but it is facing more problems.

FAKE DRUGS IN CHINA

Sarah,

China is notorious for producing knock-offs.  The latest story is pretty egregious.  This last week the Chinese government arrested thousands of people for selling fake medicine.  Some of the counterfeiters even advertised in the newspaper. 

Supposedly the trade is growing in popularity because it is safer than dealing real drugs like heroin, but it is important to remember that China does not fuck around.  In 2007, the government EXECUTED the director of a food and drug watchdog agency for failing to supervise the marketplace.  In America we can’t even fire our public officials when they mess up.