China: What Goes Around, Comes Around

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August 8, 2010:  Chinese leaders are increasingly worried about another revolution. The signs are ominous, for the Chinese are avid students of their own history, and how it constantly repeats itself. So while China is getting rich, there is much corruption in the government, the military and even the universities. This has created a growing number of unhappy Chinese, and they have a lot of unemployed (often because of corruption) college graduates, and people who are cheated and exploited by corrupt officials on a regular basis, talking about change. Attempts to fix the core problem, corruption, are not working, and that is seen as menacing by many Chinese, as dynasties usually fall because they were weakened, and torn apart by rebels enraged by the corruption. That's how the communists gained power in the 1940s. But their virtuous new government began to show signs of corruption within a decade, and it's gotten much worse since communist economic policies were dumped three decades ago. What goes around, comes around.

One of the more glaring aspects of the corruption is the amount of counterfeiting going on. Patents, copyrights and trademarks are largely ignored, making it difficult for Chinese entrepreneurs to start companies producing innovative, and profitable,  products. It's too easy make more profitable counterfeits. Some are quite good, or at least adequate. They range from DVDs of hit movies, to spare parts (for autos, airplanes and industrial machinery) and fake iPhones and other high-tech items. This includes military equipment and weapons. The only thing that keeps quality up among  counterfeiters is the domestic market, which will stop buying if the fake is absolute crap. Thus your fake iPhone or iPad has to work. Not as well as the real thing, but enough to be worth the money (usually less than a third of what you'd pay in the U.S.). DVDs have to be watchable and the fake watches have to tell time, if not as accurately as the real thing and using less durable components. This lax attitude towards quality turns very ugly when the counterfeit truck or aircraft parts cause fatal accidents. And in earthquake prone China, cheating on construction standards has killed many thousands of people. This caused popular outrage, but the shady practices are expected to continue, because they are too profitable for too many people.

The corruption is everywhere. University degrees, and other education credentials, for example, cannot be taken at face value. There's simply too much cheating. So employers have to carefully examine job candidates. This often includes administering lots of tests, and making sure there is no cheating, or that the test monitors are not bribed. In effect, the most honest aspect of the country is business. You can't run any kind of profitable company without a fair degree of honesty and dependability. There is cheating going on (like the contaminated baby formula that actually killed a few babies), but that sort of thing puts you out of business (and got some of the baby food executives executed). Thus market pressures keep a lot of Chinese honest, but not so government officials.  

With military equipment, lax standards  are an even greater problem. That's because military equipment doesn't really get put to the test unless there's a war, and China has not been at war since 1979 (where outnumbered, but experienced, Vietnamese troops beat the crap out of the Chinese invaders). So second rate military equipment is all the rage. Manufacturers make more money, a lot of which is used to bribe purchasing officers to buy the flawed gear. The Chinese leadership, or most of them, are aware of this, and this leads them to make military threats, with the realization that actual military action could be disastrous for China. The best stuff is often exported, because foreign users are less likely to tolerate shoddy standards, and will not order more stuff.

Many in the West don't pick up on the smoke and mirrors aspects of Chinese defense policies. Case in point is the legendary Chinese ballistic missile that can hit American aircraft carriers. For nearly five years, there have been stories (in the West) about how China was working on targeting systems for its ballistic missiles, that would enable them to seek out and hit aircraft carriers. Such sensors would use infrared (heat seeking) technology. This sort of thing had been discussed for decades, but China appeared (according to pundits and headline hungry media) to be putting together tactics, and missile systems, that could make this work. The key was having multiple sensor systems that could find the general location of the carrier, before launching the ballistic missile (like a DF-21, with a range of 2,100 kilometers). The latest rumors have even given the carrier killer missile a name; the DF-21D. This wonder weapon hasn't even been tested yet, much less seen or officially announced. The road between rumor and reality is long and twisting, and often takes you to a dead end, or a punch line.

The government is losing their war to control the Internet in China. The chief reason is the cell phone. More to the point, the problem is that more Chinese access the Internet via their cell phones, than from a PC. Nearly 40 percent of Chinese use their cell phones to get to the Internet, versus less than 30 percent of American cell phone users. You don't need an expensive smart phone to surf the net. Most cell phones allow such access, and as Chinese find the net more useful, they upgrade to more powerful handsets to take advantage of their new Internet skills. This includes the ability to get around government information controls. Much to the government's dismay, attempts to control the flow of information (especially stuff about corruption and government malfeasance) fail when it comes to cell phones. With just about every adult Chinese (and a growing number of kids) equipped with a cell phone, the real news not only gets out, but it gets out faster, and to more people, than ever before.

Many Chinese are not surprised that the government is shutting down the freewheeling lending to real estate investors. Corruption in this sector has led to a lot of substandard construction, too much of it unable to find a buyer. Fearing a construction bubble like the one that hit Japan two decades ago, the government has made it harder to borrow. This has slowed growth throughout China. That should mean more unemployment, but that isn't happening. This is because the shortage of young workers. This is all because of the "one child" policy that prevented China's population from spiraling out of control over the last few decades. It means that there will be too many old people and too few workers in another decade. But the shortage of young workers is already here, as the first "one child" generations come of age. These workers demand more money, and attention. Wages are moving up rapidly, and there's still a shortage of workers. There's also a shortage of skilled people in the armed forces. Plenty of low skilled or inept volunteers, but not the ones that are most needed, and in demand.

Chinese media are making much of the approaching displacement of Japan as the second largest economy in the world, with China moving into that position. This will happen before the end of the year. This is a big deal, and not just for Chinese pride. More economic activity means more tax money for the government to play with, and more diplomatic power overseas. But China still has serious economic problems at home. That's because Japan, although now only the third largest economy in the world, is still much richer than China. That's because the average Japanese per capita income (about $38,000) is ten times what it is in China. But it's worse for China, because about a quarter of the population are making several times the average, and getting a taste of the good life that Japanese (and Taiwanese) take for granted. This is causing growing discontent among the less well off majority of Chinese.

July 30, 2010: China has sentenced three Uighur (Turks from western China) men to prison (3-10 years) for running web sites that promoted Uighur autonomy (and other Uighur matters). The government accused the three of endangering state security. This is part of an ongoing effort to suppress Uighur unhappiness with the growing number of Han Chinese moving to traditionally Uighur areas, and taking over the economy, and most of the good jobs.  Same thing is happening in Tibet, where the government is using the same tools to keep everyone under control.

 

 

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