I’m too sorrowful to come up with a clever name. Talk amongst yourselves. Mourn if you are so inclined…

From Other Lisa…

The Christian Science Monitor features an article today about Beijing’s attempts to “tame its wild taxis” in time for the 2008 Olympics:

Yi is not a real taxi driver – yet. For the next 40 days, he’ll practice again and again, seven hours a day, six days a week at a taxi school here on the outskirts of Beijing. This is where etiquette and English collide with a no-holds-barred street culture that Chinese officials are determined to tame before the 2008 Olympics.

As the China Daily has noted, the quality of service at the Games will make a lasting impression, and that means doing more than “putting forward a bunch of beautiful young ladies in skin-tight cheongsam, wearing programmed smiles to greet guests at hotel entrances, as we often see in China.” It also means not undoing years of urban reengineering in one harried cab ride.

The taxi school faces a considerable challenge:

The number of cars in Beijing has doubled in the past five years or so, meaning that taking to the streets can feel like going to war. Right-on-red morphs into right-whenever-I-feel-like-it. Horsepower rules. Pity the poor pedestrian who believes he has the right of way.

Even more challenging is figuring out where to go. Beijing is changing daily as it undergoes a massive face-lift. Only half the candidates here pass the licensing test on the first try. Geography is often the culprit.

But perhaps there’s hope, if candidates like Tian Chuyan, a young mother, are as good as their words: “I am very excited to become a driver,” she says. And, she adds, “Rudeness won’t happen in Beijing. Taxi driving is a service business, so we will keep people happy.”

Taxi stories, anyone?

By Martyn…

A new report, Conventional Arms Sales to Developing Nations 1997-2004 by the Congressional Research Service (CRS) points out that Asia has now replaced the Near East as the world’s top conventional-weapons market. The annual report is written by CRS expert Richard Grimmett and is considered to be one of the most authoritative sources on the conventional arms trade as it’s based on both classified information and public data. Some of the report’s findings might leave some people wondering why China requires so much conventional and high-tech military hardware for it supposedly “peaceful rise”. This question could also be asked of India. Tom Lobe writes in the Asia Times Online:

While the Near East has historically been the largest arms market in the developing world – accounting for 49.2% of the value of all developing-country arms agreements in 1997-2000 – Asia took its place in 2001-2004, accounting for some $35 billion in new arms during the period. Led by purchases by China and India, the world’s most populous region accounted for nearly 50% of the total value of all new arms-transfer agreements with developing nations from 2001 through 2004.

For the eight-year period 1997-2004, the report found that India was the leader, with $15.7 billion worth of new deals, followed by China ($15.3 billion), the United Arab Emirates ($15 billion), Egypt ($12.8 billion), Saudi Arabia, ($10.5 billion), Israel ($9.8 billion) and South Korea ($8.2 billion).

But that statistic hid the emergence of China as a major arms buyer over the past three years. Ranked number seven in the 1997-2000 period, when the UAE and India led the lists, China jumped to the top spot in 2001-2004, buying $10.4 billion worth of weaponry, most of it from Russia, which has been India’s most important supplier as well.

The US and Russia continue to dominate the market which supplies arms to developing countries by a significant margin. Their combined total of US$7 and US$6 billion accounted for nearly 60% of the $21.8 billion arms-supply market to developing countries in 2004. Other major arms suppliers are Britain, France and Israel. However, Israel’s appearance in the top five was mainly due to India’s one-off purchase of an airborne radar system called “Phalcon” earlier this year. Israel has recently complied with US requests to stop selling military and dual-use technologies to China, a lucrative market for Israel going back at least a decade:

In actual arms deliveries for 2004, the US dominated the market with nearly $18.6 billion worth of transfers – or 53.4% of all deliveries to developing countries – far ahead of Russia, the number two supplier, with $4.6 billion in deliveries, or France, which made $4.4 billion worth of arms transfers.

One of its major findings is that the nearly $22 billion in new arms agreements signed between developed and developing countries last year marks a sharp increase over the previous year, when the total came to $15.1 billion. Last year’s sales were indeed the highest since 2000, according to the report. Actual arms deliveries during the year were also the highest since 2000.

The change from the Near East to Asia is partly due to the decline of major arms purchases by Saudi Arabia and other Gulf states following the first Gulf War in the early 1990s. The US and, to a lesser extent, Britain were traditionally the main arms suppliers to the Middle East. However, in the case of Asia, Russia dominates:

Russia’s share of Asia’s arms market is more than twice that of the US and appears to be growing. While Washington was the supplier in nearly two-thirds of all new arms agreements in the Near East in 2001-2004, it accounted for only about 21% of the Asia market in the same period. Russia sold 48.1% of all conventional arms sold to Asian clients in 2001-2004, up from 37% in 1997-2000.

Aside from those two countries, the report found that Moscow appears focused on Southeast Asia, where it has had “some success in securing arms agreements with Malaysia, Vietnam and Indonesia”.

Elsewhere in the world, certain Latin America and Africa nations have expressed interest in modernizing their military forces but are constrained by finances, a factor that will be exasperated by the recent spike in oil prices. However, arms purchases by Latin American countries also increased from US$3.3 billion in 1997-2000 to US$4.7 billion in 2001-2004.

China in the 80s was a large arms supplier to the Third World, particularly to Iran and Iraq during their long and bloody war during that period. Long-time ally Pakistan was also a large recipient of Chinese made arms. During the 80s and 90s, China’s total annual arms sales averaged about US$600 million peaking in 1999 at US$2.9 billion. However, in 2004 the figure had returned to US$600 million as China became increasingly focused on modernizing its own People’s Liberation Army with advanced combat aircraft, submarines, warships and missile defense systems, principally from Russia.

The timing of the report, just days before President Hu Jintao makes an official visit to the US, highlights the contradiction that “China’s Peaceful Rise” also coincides with the well-financed and strongly government-backed modernization of the People’s Liberation Army, Navy and Air Force.

From Martyn…

Millions of quota-exceeding “Made in China” garments piled up at US and European customs have caused fractious meetings between Chinese trade representatives and their overseas counterparts recently. However, US and European trade representatives might take heart from a new research report by the National Development and Reform Commission which warns that China will soon struggle to maintain its booming export levels and a slowdown is forecast for either later this year or early next, from the unlinkable South China Morning Post:

“The fast growth in exports cannot be sustained and the turnaround could happen later this year or early next year,” China Securities Journal yesterday quoted the research report as saying.

The report suggested that the central government should “appropriately relax its control over credit and focus on readjusting supply [issues] to avoid the problem of overcapacity of production facilities as a result of excessive growth in investment”.

The report doesn�t specify how the government should ease control over credit and bank loans but some analysts claim that a recent small rise in lending growth may reflect a slight easing of credit by the banks under the guidance of the People’s Bank of China.

The reasons for the slowdown, according to the report, are a slackening in international demand combined with excessive growth in China’s production capacity that has taken the steam out of export performance:

“The phenomena of an obvious slowdown in foreign trade, continuous contraction in the growth of imports and the negative growth of utilised foreign direct investment all indicate that the momentum of export growth is diminishing,” it said. Since much of China’s export growth came from processing trade, a sustained slowdown in imports inevitably would hurt exports, the report said.

Chinese officials have said repeatedly that although the economy is still growing at more than 9 per cent this year, excessive retrenchments and a credit crunch could lead to a recession. The report warned of the need to guard against high investment growth in the power, coal and transport sectors, which could cause serious oversupply problems.

In 2003, concern about overheating in the steel, cement, aluminium and property sectors prompted the central government to introduce controls such as a tightening of requirements for obtaining bank loans and limits on the conversion of farmland for property development.

To date, China�s economy has benefited greatly from a formula of subsidized inputs, including raw materials and oil, huge amounts of FDI (Foreign Direct Investment) and tax benefits for exporters. This led to an export-driven economy and high levels of export-driven growth. This method was always unsustainable in the long run and now it looks about time for China to look for another formula for continued growth.

From Other Lisa, cross-posted at the paper tiger

Other Lisa’s note: this is not the kind of thing I would normally post here, but I’m afraid that it’s all I can think about, right now…

The year I turned thirty, one of my best friends and I decided to commemorate the occasion (she had turned thirty six months prior) by reverting to our childhood tomboy selves and buying skateboards. My friend, also named Lisa (she is one of the reasons that I am “Other Lisa”) had skated as a kid. I had not. But neither of us had experienced this new generation of skateboards, with their shock-absorbing wheels and maneuverable trucks. We both bought lovely Lance Mountain boards, customized them with stickers and proceeded to spend our lunch hours cruising around grotty Hollywood streets, trying to master jumping off curbs.

The climax of this summer of experimentation came when we booked train tickets on Amtrak that would take us across the country on a three-week vacation. Our ultimate destinations were New York City and Washington DC, with a stop for me in Princeton NJ. Our itinerary was in part dictated by the presence of former relationships in several of these stops, guys who had played far too important a role in our lives (unresolved, ambiguous roles at that). So we called our adventure, “The Old Boyfriends Tour,” and set out with our skateboards and dufflebags.

It was an amazing trip in so many ways. But the part I’m remembering now is the 24 hour layover we had in New Orleans. Both of us had come from traumatic encounters with the aforementioned old boyfriends. Licking our psychic, and in my case, literal wounds (I’d had a truly spectacular, nasty crash on my board in Princeton, trying to keep up with the Blast from My Past, who was on Rollerblades), we pulled into New Orleans on an ageing Amtrak and plotted what we’d do for the next day and night.

We had that whole, starving students mentality back then. We weren’t going to spend money on anything so bourgeoise as a hotel room, not when we’d be in the place less than a day. Besides, wasn’t New Orleans a party town? Why not stay up all night instead, we reasoned?

You know how there’s that theory about how teenagers’ brains aren’t mature in the judgment centers? Maybe we were reliving that part of our pasts as well.

We spent the day wandering around the French Quarter, the river promenade, Jackson Square. We visited Marie Leveux’s Voodoo Emporium, the Absinthe Bar, drank Hurricanes from plastic cups, ate beignets and sipped chicory coffee at Cafe Du Monde. The French Quarter had a funky scent, mossy river mixed with stale water and just a hint of sewage. The wrought iron balconies, the flowers, the sense of tradition and secrets and decadence – all the tacky souvenirs on Bourbon Street didn’t take away from my impression that here, at last, was a place that lived up to my every romantic expectation of it. I took note of the “For Rent” signs in the Quarter – “check it out, Leese – this place is cheap! I could move here.”

I knew the reality of New Orleans wasn’t all that romantic, for many of her citizens. I knew that a huge percentage of them were desperately poor, that there were no jobs, that the crime rate was brutally high. But still. I knew also that this was a singular city, a special place. A treasure, really.

Some time after midnight, both of us crashed, big-time. The combination of sleep-deprivation, emotional stress and Hurricanes, I guess. All the chicory coffee at Cafe Du Mond couldn’t keep us awake any longer.

We parked ourselves and our skateboards on a bench in front of the Cathedral. It was about 3 AM. Our plan was, one of us would stay awake while the other slept.

Lisa fell asleep immediately. It fell to me to keep the first watch.

I tried. I really did. But my eyes kept closing of their own volition. My head would suddenly loll to one side, and I’d jerk awake. This happened several times.

Then, as my eyes drifted closed once more, I heard a soft voice next to me.

“Don’t you worry,” he said.

I turned to look. Standing there was a security guard, a young black man.

“Don’t y’all worry,” he repeated. “You go ahead and get some sleep. I’ll make sure nobody mess with you.”

“Thank you,” I said. We smiled at each other, and then I closed my eyes. I knew I was safe.

There’s not a single word I can add to this NYT editorial. Except to say that I’m so ashamed, and wonder why more Americans aren’t cringing in embarrassment and demanding better from our commander in chief.

George W. Bush gave one of the worst speeches of his life yesterday, especially given the level of national distress and the need for words of consolation and wisdom. In what seems to be a ritual in this administration, the president appeared a day later than he was needed. He then read an address of a quality more appropriate for an Arbor Day celebration: a long laundry list of pounds of ice, generators and blankets delivered to the stricken Gulf Coast. He advised the public that anybody who wanted to help should send cash, grinned, and promised that everything would work out in the end.

We will, of course, endure, and the city of New Orleans must come back. But looking at the pictures on television yesterday of a place abandoned to the forces of flood, fire and looting, it was hard not to wonder exactly how that is going to come to pass. Right now, hundreds of thousands of American refugees need our national concern and care. Thousands of people still need to be rescued from imminent peril. Public health threats must be controlled in New Orleans and throughout southern Mississippi. Drivers must be given confidence that gasoline will be available, and profiteering must be brought under control at a moment when television has been showing long lines at some pumps and spot prices approaching $4 a gallon have been reported.

Sacrifices may be necessary to make sure that all these things happen in an orderly, efficient way. But this administration has never been one to counsel sacrifice. And nothing about the president’s demeanor yesterday – which seemed casual to the point of carelessness – suggested that he understood the depth of the current crisis.

While our attention must now be on the Gulf Coast’s most immediate needs, the nation will soon ask why New Orleans’s levees remained so inadequate. Publications from the local newspaper to National Geographic have fulminated about the bad state of flood protection in this beloved city, which is below sea level. Why were developers permitted to destroy wetlands and barrier islands that could have held back the hurricane’s surge? Why was Congress, before it wandered off to vacation, engaged in slashing the budget for correcting some of the gaping holes in the area’s flood protection?

It would be some comfort to think that, as Mr. Bush cheerily announced, America “will be a stronger place” for enduring this crisis. Complacency will no longer suffice, especially if experts are right in warning that global warming may increase the intensity of future hurricanes. But since this administration won’t acknowledge that global warming exists, the chances of leadership seem minimal.

Not minimal. Nil.

Update: James Wolcott is even tougher on the Codpiece in Chief. Dipping his pen in battery acid, Wolcott tears him apart limb by limb.

From Martyn…

An already very jittery world oil market went into apoplexy on Wednesday as the fallout from Hurricane Katrina sent crude oil prices surging above $70 a barrel – 60% higher than a year ago. The simple reason is because very little excess capacity exists around the world to adequately offset any production losses in a time of high demand. This makes a lot of countries, particularly countries like China that have a negligible amount of reserves, very nervous indeed.

As an update to an earlier post, the very latest on the petrol crisis in Guangzhou: as of yesterday it was still very difficult to buy No. 90-octane grade petrol (used by taxis) and the supplies of No. 93 petrol have become very tight indeed. Many petrol stations still remain closed. The potentially dangerous stand off between the government and the city’s taxi drivers has been eased slightly by the local government further reducing the monthly management fee collected from each taxi and also planning a one-yuan (US$0.12) fuel add-on fee for each taxi ride.

So far, the petrol crisis has been prevented from spiraling out of control by the bringing in of supplies from smaller cities, which, in turn leaves them short of fuel. This hasty and stopgap solution will almost certainly result in further shortages this winter.

The problem is that, here in China, a barrel of oil is about US$25 cheaper than Monday’s closing crude price of over US$70 dollars on the New York Mercantile Exchange.

Put simply, the government can’t continue to arbitrarily keep domestic prices low if global oil prices remain at very high levels. China relies heavily on cheap fuel and other subsidized raw materials to prime its manufacturing growth and keep its exports the cheapest in the world. Indeed, low-cost inputs have been one of the cornerstones of China’s economic growth, much to the chagrin of competing economies. However, any rise in domestic prices would have a huge and negative impact on the economy, as an AFP report from Shanghai explains:

Soaring global crude prices have backed China into a corner, where it faces the tough choice of risking serious damage to its own oil industry or allowing surging inflation that could devastate the economy.

With prices now more than double the levels reached in 2003, China is finding it difficult to handle a two-tiered oil pricing system that was to blame for recent severe shortages in Guangdong province, analysts say.

Under the system, Beijing fixes oil prices by using a basket of the previous month’s global trading levels in London, New York and Singapore and then allows the price to float within eight percent of daily trade.

As the price of crude being paid on the international market has became impossible to recover at the wholesale and retail level, refineries in Guangdong refused to replenish supply because they were losing money.

Guangdong Province accounts for 11% percent of China’s 1.6 trillion dollar economy, double that of Shanghai. This huge contribution to the nation’s GDP will be directly threatened if high oil prices continue. This is the problem faced by the government on a national level and is what the refiners SinoPec and PetroChina know only too well. The only solution would be to loosen the domestic caps on petrol prices and risk spiraling inflation:

“If prices — adjusted for inflation — were to go above those of the 1970s oil crisis, then China would face a trade off. It either lets its refiners go bankrupt or it sacrifices its inflation target.”

In theory, artificially low prices protect the consumer against inflation, a key worry for a government obsessed with macro-economic expansion.

“It forces the oil refineries to subsidize fuel so consumers in China don’t feel much of the pain of high energy prices,” said Victor Shum, partner at Purving and Gertz, a US-based global energy consultancy.
The problem is that an inflationary scenario elsewhere in the world would likely act like a slow puncture, seeping into the Chinese economy.

Inflation remains one of the Chinese Communist Party’s biggest fears. China has not suffered from high inflation since the early 90s, although it did reach a slightly worrisome 5% in 2004 due, partly, to a spike in domestic food prices. The rate has since dropped following a rare interest rate rise by the central bank in October 2004. The central bank isn’t keen to raise interest rates again, which, in China’s only partially-free market economy, does not have the same economic impact as in free market economies. Therefore, the choice the Chinese government faces is to either run the risk of its refiners going bankrupt or face rising inflation.

However, the threat of social unrest is never too far away:

That would not just dull the shine of three years of China’s otherwise glowing GDP growth, but have a powerful ripple effect through society from consumption to unemployment and social unrest, analyst say.

For three decades China’s insular, Stalinist-modelled economy allowed Beijing’s mandarins to escape the sometimes capricious volatility of globally integrated trading.

But today it is one of the main drivers of global growth, and a sharply slowing Chinese economy would impact Asia’s export-driven economies and even provoke world recession, analysts warn.

A growing number of its 1.3 billion people are already disenfranchised, many angry enough to come to blows with police over rampant party corruption, health-destroying pollution and widespread housing evictions and unemployment.

Also, just to add to the fun, America’s trade deficit spiked in June as oil prices pushed petroleum imports to record levels. The politically sensitive deficit with China also saw a new record, hitting US$17.6 billion in June, beating the previous high of US$16.8 billion set last October. In 2004, America’s deficit with China reached US$162 billion, the highest imbalance ever recorded with any country. This year’s imbalance is already running 32% above that of 2004.

The skyrocketing international oil prices are not only effecting China but also other Asian economies, excluding perhaps oil-producing Malaysia. High fuel prices have sparked protests in Thailand and Indonesia; governments have subsequently slashed growth estimates for the year. In Japan and the Philippines, the governments are hastily implementing energy conservation measures to try and stem the effect of oil prices. India is also expected to raise domestic prices and faces the very real threat of political instability and social unrest.

It’s surprising that the rest of the world is yet to fully appreciate this looming problem in the world’s most populous nation, because, if it does spiral out of control, the effects will almost certainly be felt far beyond the borders of the People’s Republic of China.

Your proletarian open thread to start the work-week…