| How to Fix China’s Income Inequality Posted: 22 Feb 2013 12:44 AM PST China's much-anticipated plan to tackle income inequality has struggled to reach a consensus, writes the Carnegie Endowment's Yukon Huang in The Wall Street Journal: The debate was unusually broad, ranging from the need for property taxes and agricultural support prices to the role of the state in influencing returns to firms and labor. Given the lack of details and firm targets, it's not clear whether this plan will effectively tackle the sources of inequality that are most harmful to development. Rapidly growing economies tend to experience widening disparities. China's growth has lifted some 600 million out of poverty even as its Gini coefficient, a measure of income inequality, has soared to 0.47 today from 0.25 in the mid-1980s. Although high, China's Gini is comparable to that of the U.S. and other relatively successfully Asian economies such as Singapore and Malaysia. The Gini number is less important than the reasons behind it. Inequality is positive when it emanates from productivity increases, entrepreneurial risk-taking and structural changes that produce sustained growth. Harmful inequality comes from distortions that ultimately undermine the development process. It is the latter kind of inequality that Beijing has been slow to address. First, policy distortions have exaggerated geographical disparities. Second, the government budget has failed to provide equal access to social services. And finally, links between government-party officials and commercial activities have led to excessive rent-seeking.
For The Diplomat, Eve Cary writes that time will tell if the Communist Party can execute on its plan and preserve its legitimacy: Indeed, the plan, in development for several years, is quite ambitious. It is the specific points–such as garnishing more profits from SOEs and spending more on social services–that have a better chance of success, though at first they may face considerable political pushback. It will be interesting to see how far these reforms go, considering that the new Politburo Standing Committee is dominated by the Jiang faction, with 6 of the 7 protégés of the former president, according to Brookings Institution scholar Cheng Li. Of those 6, 4 are princelings, or sons of Chinese Communist Party revolutionary heroes. In general, Jiang's faction- sometimes referred to as the Shanghai gang- and the princelings promote the interests of the middle class, entrepreneurs, and the coast, as opposed to the populists, who tend to promote the interests of the common people. There are other reforms in the pipeline, as well. Last November the State Council backed policy changes that aim to strengthen the property rights of farmers, including such measures as identifying and registering land, and issuing land ownership certificates to farmers. This policy was pushed through by outgoing populist premier Wen Jiabao. Affordable housing has also been a hot issue: in 2012, the central government allocated 37.1 billion dollars (233.26 billion yuan) for subsidized housing projects, up almost 40% from the previous year. Of all the problems that China faces in the next 25 years, the income gap–and all of the associated issues–is perhaps the most dangerous for the Communist Party and future social stability. For example, in its 2013 Social Development Blue Book, the Chinese Academy of Social Sciences notes that there have been 100,000 "mass incidents" (large protests) every year for several years, and that half of these protests are related to land grabs. It has become a commonly-held belief among China watchers that the CCP has remained in power through a Faustian bargain with its people–it retains power as long as it maintains economic growth. With so many left behind, there is a growing contingent who are left out of this deal, and they are become increasingly vocal. Despite the elitist bent of the new Standing Committee, one hopes that they have the foresight to continue to focus on this critical issue, and develop effective solutions to it.
See also previous CDT coverage of China's income inequality.
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Post tags: communist party, economic reform, income inequality, political reform, reform, wealth gap
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| Cultural Revolution Murder Trial Captivates Netizens Posted: 21 Feb 2013 11:10 PM PST A Chinese octogenarian is reportedly facing trial for a murder he committed during the Cultural Revolution, according to The Telegraph's Tom Phillips: The defendant, from Zhejiang province in east China, was accused of killing a man he believed was a spy in 1967, according to an online report by the state-run China News Service that was later deleted. The man, named only as Mr Qiu, stands accused of using a piece of rope to strangle his victim, who was named as Dr. Gong. After committing the murder, Mr Qiu allegedly hacked off the man's legs and buried his body. While the alleged murder took place more than four decades ago, Mr Qiu was reportedly only arrested in July last year. He was put on trial this week at his home in Zhejiang. So far no verdict has been made public.
The story had already reached several large news sites and web portals by the time China News Service removed the story from its web site, according to the South China Morning Post. The Wall Street Journal reports that news of the trial has sent ripples through Chinese social media: Unlike with the Tiananmen Square massacre in 1989 or the Great Leap Forward in the late 1950s, the Communist Party has tolerated a certain amount of discussion of the Cultural Revolution. Numerous stories of the brutal violence the country's youth perpetrated on their elders and each other have earned the approval of censors, creating a body of cathartic "scar literature" and its cinematic equivalent, "scar film." Still, very few of the crimes committed during the Cultural Revolution were prosecuted—an omission some Internet users were happy to see addressed in Mr. Qiu's case. "Every Cultural Revolution criminal should be resolutely pursued and held responsible. Murderers, instigators – not a single one should be left behind," wrote one anonymous user of Sina Corp. Weibo microblogging service. "They can be treated leniently, but they must be made to take responsibility. Only then will we truly be able to come to terms with the Cultural Revolution." Many, however, criticized the pursuit of Mr. Qiu, arguing that there were others more deserving of punishment for the blood spilled in that era. "The prime culprits of the Cultural Revolution get away scot free and decades later they chase down a minor murderer," wrote Liu Xiaoyuan, a Beijing-based lawyer. "There were so many homicides during the Cultural Revolution, to pursue one little old man is a failure of judicial justice and political wisdom."
Did Kirsten Tatlow wrote in The New York Times on Thursday that "some are angry that a little guy is being punished, and not the masterminds of the violence:" "Have the main culprits who started the Cultural Revolution been punished?" asked a person with the handle Sansu dage, who added an angry red face to the posting. "Actually, the biggest criminals of the Cultural Revolution have not been held responsible," wrote a person with the handle Keji huangdan menwei chuangxin. "To pursue an ordinary criminal, decades later, is absurd." A_Jing wrote: "There should be mandatory courses in universities to talk clearly about the crimes against humanity during the Cultural Revolution!" Wrote another: "All the cases from the Cultural Revolution should be tried."
Read also about the memoirs of businesswoman Ping Fu, which contained personal accounts from the Cultural Revolution and caused controversy over its authenticity.
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Post tags: China News Service, Cultural Revolution, history, microblogging, murder, online public opinion, sina weibo, Zhejiang
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| Photo: Harbin Ice Festival, by Sy Smith Posted: 21 Feb 2013 09:55 PM PST |
| Grading Xi Jinping’s First 100 Days Posted: 21 Feb 2013 07:56 PM PST With the first 100 days of the Xi Jinping regime in the books, Xinhua News took time on Thursday to reflect and look ahead: Xi and the other six newly elected members of the Standing Committee of the CPC Central Committee Political Bureau have followed a very tight timetable in their first 100 days of rule. They made many inspection tours of poverty-hit rural areas, sitting on brick beds, chatting with farmers and learning the real situation. They convened many efficient, down-to-earth but frugal meetings, and promulgated a series of practical and to-the-point policies and measures. Their jargon-free speeches have become popular soundbites. The new CPC leaders also used their public appearances in various occasions — inspection tours, meetings and speeches — to deploy political, economic, diplomatic and national defense work, showcasing their ruling principle and concept. These moves were hailed by media from home and abroad as the "new deal."
Singapore's Straits Times also spoke to a number of China observers and put together a report card for Xi: Asked to grade Mr Xi on a scale from "A" to "F", Singapore-based observer Li Mingjiang gave him an "A minus". "Xi has done a fairly good job so far. First of all, he has created a new and positive political atmosphere in China," he added. Professor Li cited Mr Xi's efforts such as cutting back on lavish ceremonies and receptions for officials, encouraging local governments to be less wasteful, and taking tougher steps against graft. … Mr Xi got a "B" grade from Nottingham University analyst Steve Tsang, who credits the leader for taking on corruption and abuse of power verbally. "He has also projected an image of taking these issues seriously by appointing Wang Qishan to this portfolio," he added. … But Hong Kong-based analyst Willy Lam gave Mr Xi "a mere pass" – a "D" grade. He said Mr Xi has been disappointing in not saying much so far about economic and especially political reform, and has also continued the illegal treatment of dissidents such as the house arrest of jailed Nobel laureate Liu Xiaobo's wife Liu Xia.
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Post tags: CCP 5th generation, chinese communist party, Xi Jinping, XInhua News
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| New Chinese Leader to Make Moscow His First Visit Posted: 21 Feb 2013 02:15 PM PST The New York Times reports on the upcoming visit to Moscow by incoming president Xi Jinping and its significance for U.S.-China relations: Mr. Xi's predecessor, Hu Jintao, also chose Moscow as his first overseas stop after assuming office, but this time, Mr. Xi's journey to Russia has a special significance, analysts say, coming as China tries to answer the Obama administration's pivot to Asia. That American policy is viewed with suspicion in Beijing and is broadly interpreted unfavorably by the Chinese government as containment of China. By going to Russia, Mr. Xi will be working to ensure that China's relationship with Moscow, a sometimes prickly affair and one in which the balance of power has dramatically tilted in favor of China, is in good shape before he meets with President Obama later in the year, analysts said. There have also been indications that Mr. Xi and the Russian president, Vladimir V. Putin, would try to hammer out a long-sought energy deal that would provide China with Russian oil and gas. "China wants to consolidate its position with Russia before dealing with the United States," said Jin Canrong, associate dean at the School of International Studies at Renmin University. In particular, he said, China will likely look for Russian support in its territorial dispute with Japan, an American ally, over islands in the East China Sea.
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Post tags: Russia relations, U.S. Asia, Xi Jinping
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| Bo Said to Be Uncooperative as Trial Delay Lengthens Posted: 21 Feb 2013 01:08 PM PST With the former flood of news about fallen Chongqing Party chief Bo Xilai slowing to a trickle, rumors have rushed in to fill the gap, even in China's own state media. According to some of the more recent mutterings, Bo's trial has been held back by his uncooperative behavior. Reuters reported on Thursday that anonymous sources have confirmed Bo's lack of cooperation, which has taken forms including two hunger strikes and the growth of a chest-length protest beard. Meanwhile, the delay is undermining official efforts to portray the case as a model of impartial and effective justice. From Benjamin Kang Lim and Ben Blanchard: "He was on hunger strike twice and force fed," one source told Reuters, requesting anonymity due to the sensitivity of the case. It was unclear how long the hunger strike lasted. "He was not tortured, but fell ill and was taken to a hospital in Beijing for treatment," the source said, declining to provide details of Bo's condition and whereabouts which have been kept under wraps since his downfall. […] The recent lack of information about the case – Bo has not been seen in public since last March – harms the government's credibility in the eyes of the people, said Bao Tong, the most senior official jailed over the 1989 Tiananmen protests. "It's not normal, too much time has past," Bao told Reuters, referring to the lack of information from the government about the case. "This is not good for the party's image. They have not thought about this clearly. If they are able to properly deal with a big shot like Bo Xilai then they will increase people's trust in the party," he added.
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Post tags: 1989, Bao Tong, Bo Xilai, hunger strike, justice, rumors, Tiananmen, trials, trust
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| Government Imposes Carbon Tax to Curb Emissions Posted: 21 Feb 2013 12:45 PM PST China now burns almost as much coal as the rest of the world combined. As the world saw vividly this year, the effects are deadly. Many in the U.S. and elsewhere have long blamed China for not cooperating with global efforts to limit greenhouse gas emissions, but a recent move by the Ministry of Finance to impose a carbon tax has changed the conversation. From Xinhua: The government will collect the environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon dioxide emissions, Jia Chen, head of the ministry's tax policy division, wrote in an article published on the MOF's website. It will be the local taxation authority, rather than the environmental protection department, that will collect the taxes. The government is also looking into the possibility of taxing energy-intensive products such as batteries, as well as luxury goods such as aircraft that are not used for public transportation, according to Jia. To conserve natural resources, the government will push forward resource tax reforms by taxing coal based on prices instead of sales volume, as well as raising coal taxes. A resource tax will also be levied on water.
The Responding to Climate Change website looks at how this new effort will work with the current trial cap-and -trade program that China announced early this year: Joanna Lewis, assistant professor at Georgetown University and an expert in Chinese energy policy told RTCC it is unclear how the two would work together. "The government has been discussing the implementation of a carbon tax for several years so it will be interesting to see if it happens this year," she said. It is also not yet clear whether the tax would apply to the same facilities covered under the pilot cap and trade programs for CO2, and if so how the two programs would interact." "Further regulation of CO2 could help to address current air pollution challenges if the environmental protection tax includes a range of pollutants, or if facilities curbing emissions through means that end up reducing other pollutants as well.
At the Atlantic, James Fallows summarizes several of the main points worth considering when discussing the carbon tax: Here are your talking points for the next time this topic comes up at a dinner party:
Environmental carnage of all sorts is a truly major emergency in China, both in the short term and as a potential limit on the country's development; Chinese emissions are a problem not just for its own people but also for the world. It has now overtaken the U.S. as the biggest carbon emitter; most of the coal that is burned anywhere on Earth is burned in China. Contrary to what you might think, China's economy is relatively less efficient, and more polluting, than those of rich countries. It takes more energy to heat and cool the standard Chinese building than one in Europe or the US; Chinese farmers use more water, fertilizer, and pesticide per unit of output than is typical even with mechanized farming in the US; Chinese factories put out more air and water pollution per dollar of production than rich-country counterparts. On a per capita basis, the Chinese economy uses less energy than America's. On a per dollar (or per RMB) basis, it uses more. Simplest way to remember this point: China's economy is nowhere near as large as America's now, but it puts out more emissions.
In a blog post, Ella Chou raises several questions that come up with the announcement: The point of a carbon tax, be in China or elsewhere, is to set the price signal straight. We tax income; we tax property; we tax goods and services — all the things we want more of, so wouldn't it be logic to actually tax the thing we want less of: pollution? My environmental law professor Jody Freeman, who served as Counselor for Energy and Climate Change in the Obama White House before coming back to Harvard, told us that she used to say two words to almost everyone she met at the White House – "carbon tax", and they would look at her as if she was crazy. This needs to be changed. If the giant climate rally in DC this past Sunday is any indication, that is we need a sensible policy to address the reality and challenges of climate change now. And in the case of China, I think starting with adjusting the distorted price signals, while giving due consideration to the widening income gaps and social injustices, is essential. [...] As previously stated, this environmental tax is mainly converted from pollution discharge fees. Previously, pollution discharge was inspected by and the fee was charged by environmental protection bureaus. The environmental tax, however, is collected by the tax bureau according to the amount of pollution discharged by factories, and that amount is corroborated by the environmental protection bureau. That is to say, the environmental protection bureau becomes an agency that collects statistics for tax purposes.
Chou also points out the proposed tax itself would be "puny" (10 yuan [US $1.5] per ton of carbon dioxide in 2012, with gradual increase to 50 yuan [$7.9] per ton by 2020). For Forbes, Tim Worstall writes that even though it is small, the tax could still be effective: But there's two things which should be pointed out about even this lower number. The first is that there's a reasonable assumption that if the Chinese Government starts taxing fossil fuels then it will also, at the same time, stop subsidising them. And it does indeed subsidise the use of fossil fuels in a very large way. So the effect would be much larger than just the tax itself: it would also include the removal of the subsidies. And do note that the International Energy Authority has stated that simply removing those fossil fuel subsidies (not just in China, but in Russia, Iran, Saudi and so on as well, the places which cumulatively spend hundreds of billions a year on such subsidies. And no, we, the advanced or industrialised nations, we really don't offer such subsidies, not in any great amount at least and all entirely dwarfed by the taxes we impose on such fuels.) would take us one third to one half of the way to controlling climate change all on its own. So that's good news, even given the low level of the tax. And it is a low level: lower than Tol or William Nordhaus would suggest for example. And yet it is obeying another basic rule which both would advocate. That a tax should start small and then grow. The reason being that this allows industry to adjust along with the capital cycle.
A post on the Washington Post blog points out that the economic impact of the tax will likely reach beyond's China's borders: Much of the cost of China's carbon tax would be borne by other countries. Last year, John Lee of the Center for International Security Studies argued that any carbon tax in China would mostly fall on the country's exporters, who would in turn pass the cost on to consumers in the United States and Europe. "Beijing has consistently argued that the end-consumer country, and not the producer country, should bear the burden of paying for carbon emissions," Lee notes. Now, that's still a significant step. Export manufacturing is responsible for anywhere from 20 percent to 50 percent of China's greenhouse-gas emissions, after all. But it does help explain why Chinese officials are relatively sympathetic to this idea.
But, as the post also points out, China's proposal is larger than anything under consideration by the U.S. Congress.
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Post tags: carbon tax, greenhouse gas emissions, sustainable development
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| Five Charged for China-U.S. Honey Smuggling Posted: 21 Feb 2013 12:00 PM PST Five people have been charged in the U.S. for smuggling honey from China to evade $180 million in anti-dumping duties. The investigation that snared them was part of a years-long campaign to protect both beekeepers and honey consumers in America. Phil Mattingly at Bloomberg News: The charges from the probe, called "Project Honeygate," mark the culmination of a two-part investigation that began in 2008 and included U.S. Customs and Border Protection and the U.S. attorney's office in the northern district of Illinois. In the first phase, federal authorities charged 14 individuals for allegedly evading about $80 million in anti-dumping duties. The latest phase of the investigation included an undercover agent, who took a role as director of procurement with a cooperating honey supplier. The resulting investigation led to two of the nation's largest honey suppliers — Honey Holding and Groeb Farms Inc. — entering into deferred prosecution agreements with the government and paying $1 million and $2 million in fines, respectively. […] U.S. Senator Charles Schumer, a New York Democrat who has pushed federal officials to crack down on counterfeit honey imports, said the "successful sting operation is sure to be a buzz kill for would-be honey smugglers." "We need a zero-tolerance policy when it comes to honey laundering," Schumer said in a statement. The Associated Press' Alexa Olesen examined the debate over anti-dumping tariffs and problems associated with honey smuggling in 2010 (via Tom Hancock): Honey-laundering is just one of many unsavory practices that have besmirched China's vast honey industry and raised complaints from competing American beekeepers. China produces more honey than anywhere else in the world, about 300,000 metric tons (660 million pounds) a year or about 25 percent of the global total. But stocks are tainted with a potentially dangerous antibiotic and cheaper honeys are increasingly getting passed off as more expensive varieties. Earlier this month, the U.S. Food and Drug Administration seized 64 drums of Chinese honey tainted with chloramphenicol, an antibiotic, at a warehouse in Philadelphia. Last year, the agency said two Chinese honey shipments were found to contain the drug, which is approved for medical use but banned in food products because in rare cases it can cause aplastic anemia, a potentially fatal illness. Experts say quality problems are hard to avoid in a business dominated by small manufacturers, many of whom are poor and uneducated. […] "If their bees got sick, the first thing in their mind is saving their bees instead of caring about the quality of honey," said Wei, a honey dealer from Chengde in central China's Henan province. "They can't afford the loss of bees." In the more recent case, according to the AFP, ICE deputy director Daniel Ragsdale "was quick to insist there was 'no health and safety risk' despite some of the 4,900 barrels of seized honey being adulterated with antibiotics not approved by the US Food and Drug Administration." Besides the dangers of direct ingestion, agricultural antibiotic use can accelerate the development of drug-resistant bacteria: see recent posts at CDT and IHT Rendezvous.
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Post tags: agriculture, anti-dumping, antibiotics, honey, honey laundering, smuggling
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