“For years China has been the world’s cheap assembly shop. Now, it is laying the groundwork to become a global power in more sophisticated, technology-intensive industries.”
Zhang Jun
China Centre for Economic Studies

That’s the general idea anyway, but China remains wholly unprepared and unequipped for such a smooth move up the value chain. China is starting from a very narrow base and its financial share of the entire manufacturing process is growing smaller. The SCMP’s Jake Van Der Camp recently turned his eye to the problem of China’s manufacturing squeeze:

About 150 years ago England went through an industrial revolution and you probably still recognise names associated with that period – Watt, Brunel, Stephenson, Wedgwood for instance. Just over 100 years ago it was the turn of the United States and you know the brand names – Ford, Westinghouse, Standard Oil and so on. You also know the brand names from Japan’s industrial emergence – Sony, Toyota, JVC. Even the recent ones from South Korea are recognised round the world – Hyundai, Samsung, LG.

Can you give me a brand name from China recognised round the world? Haier, you say? Sorry, not in Dogdung, Nebraska or Chienmerde, France.

China has so far been the world’s cheap assembly shop, using foreign technology, foreign components, foreign know-how and foreign brandnames. Exports from foreign invested enterprises as a percentage of China’s total exports stood at just over 20% in 1993 (source CEIC), that figure hit 50% around 2000 and now stands at over 60% and rising. After all, if a large country is willing to allow its people to be an underpaid manufacturing slave-labour force, well, the rest of the world will naturally take advantage of it.

The rest of the manufacturing process, i.e. product design, brand ownership, sources of required components, marketing, finance, insurance etc. is largely based overseas. Unfortunately for China, these stages are where most of the money is made.

Also, unfortunately for China, it’s already small slice of that earnings pie is growing smaller. As the prices of China raw materials have shot up in the last couple of years, the prices of Asian imports into the U.S. have gone down at a similar rate (U.S Import Index, China). This is termed ‘margin squeeze’. Companies like Wal-Mart, for instance, demand lower prices every year for consumer goods that it sources from Asia.

Professor Zhang Jun warns China, reform before it’s too late: “The country first needs domestic structural reform that encompasses the gross inefficiencies of the financial system, massive misallocation of capital and the dead weight of state enterprises“. If Beijing wants to make the next step up, they should take a few lessons from how Henry Ford did it with Ford Motor and Akio Morita with Sony. They will never get their sophisticated brands with a short-term focus on headlong growth.

And he doesn’t like them. Welcome to the club!

This transcript is a living, breathing example of just how dangerous and bizarre a phenomenon Fox News is. Watch as Bill O’Reilly and Ann Coulter jerk each other off, breaking every rule of journalism and not even trying to hide their prejudice and loathing. (They’re going on about David brock’s Media Matters, which has the audacity to provide actual transcripts of what O’Reilly and his thugs say, much to their embarrassment.) That last section about “Bad people” — too, too much.

O’REILLY: In the “Unresolved Problem” segment tonight, as we told you last week, we are closely watching the far-left smear websites to make sure they are held accountable for damaging people, something they do on a regular basis.

Now, our policy is to not name the websites, because, well,

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Outrageous.

At least five Catholic nuns resisting a government plan to sell land claimed by their church to a real estate developer are hospitalized in the Chinese city of Xian after thugs armed with sticks and clubs assaulted them, a witness and others familiar with the incident said Thursday.

One of the nuns, identified as Cheng Jing, 34, was blinded in the attack and has recovered the use of only one eye, and another nun was scheduled for surgery on her spine, according to people who have visited them. A third was recovering with a broken arm, and two others incurred serious head injuries.

The attack occurred on the night of Nov. 23 on a parcel of disputed land in downtown Xian adjacent to the city’s main state-sanctioned Catholic church, the Southern Cathedral. About 30 to 40 nuns were trying to stop workers from demolishing an elementary school there when the thugs began beating them, injuring at least 16, the sources said.

Any excuses? Any justifications?

Update: The Vatican is pissed.

There’s a long, painful article in today’s WaPo on Chinese tobacco farmers whose rage against local corrupt (and murderous) officials finally reached the breaking point. At first glance, it looks like the government was stepping in to curb illegal tobaco sales, but there’s far more to it – the “crackdown” was more likely revenge for the villagers failing to pay the required bribes. In the crackdown, two of the villagers were killed, apparently beaten to death with iron bars.

Local officials described the deaths as a pair of freak accidents. But the villagers of Shangdeng said they were convinced the two men were killed deliberately by members of the anti-smuggling squad who were carrying iron bars. Outraged by the news, relatives, friends and fellow smugglers gathered shortly after dawn in front of Yantang city hall, demanding an explanation from municipal authorities with jurisdiction over local villages.

The white-tiled building was padlocked tight and nobody came out to face the crowd, recalled Deng Suilong, 54, Deng Silong’s older brother. The number of protesters swelled quickly to several hundred, he said, which meant that most of the men from among Shangdeng’s 1,000 residents were on hand and angry. “They were all yelling and screaming,” said one of the men present, who declined to provide his name for fear of prosecution.

Their rage growing, the peasants broke down the door to city hall and burst inside, witnesses said. They rushed up to the main offices on the second floor, and some of them began sacking everything in sight. The building’s blue-tinted windows were shattered on several of the five stories, the witnesses said, and tables, chairs and desks were broken into pieces.

When the Yantang Communist Party secretary, Liu Tangxiong, showed up with several other officials to try and calm the mob, a local official said, the peasants knocked his front teeth out and continued their rampage unhindered until it was time to go home for a late breakfast.

The violence in Yantang, although small in scale, was part of what officials say is a growing trend of assaults against police, officials and government property in China. The Public Security Ministry estimates that more than 1,800 policemen were attacked in the line of duty in the first six months of this year, sharply up from previous years. A ministry spokesman, Wu Heping, was quoted by the official party organ, the People’s Daily, as saying that 23 policemen were killed in a broad range of clashes with “criminal suspects or people intending to interfere with law enforcement through violence.”

Much of the damage to cars or buildings, and injuries to police and other officials, occurred during riots and other violent disturbances that have broken out in towns and villages across China with increasing frequency. The ministry estimates that 74,000 such incidents erupted in 2004, involving 3.76 million people.

The unrest has become a major concern for the government of President Hu Jintao and Premier Wen Jiabao. Most of the uprisings have exploded in reaction to economic complaints, such as land confiscations or pollution, as China evolves swiftly but unevenly under the impetus of market reforms. But the disturbances — and the willingness to clash with police or civilian officials — also have revealed a growing sense of disillusionment with local Communist Party administrations, suggesting a politically significant break in trust between those who govern China’s towns and villages and those they govern.

It’s the corruption, stupid. Read the article’s last two paragraphs about the perversion of the local election, and see for yourselves how the system is rotten and corrupt to its very core. As long as the people are given no true representation, wounds like this will fester and ripen.

The controversy shows no signs of abating.

It was a summer publishing sensation, an 814-page biography of a man the authors depict as the worst mass murderer of the 20th century, with 111 pages of notes and bibliography.

Mao: The Unknown Story, by Jung Chang, celebrated author of the world bestseller, Wild Swans, and her husband, historian Jon Halliday, was hailed by reviewers, most of whom were not specialists on China. The book was described as ‘a triumph’, ‘stupendous’ and ‘awesome’ when it was published in Britain. UK sales have reached 60,000.

But now the authors find themselves in a bitter battle with some of the world’s leading China experts, who have united to unleash a barrage of criticism of the book in general, and, in particular, of its sourcing – the subject of a ten-point reply from the authors in the forthcoming edition of the London Review of Books.

The central thrust of the book is that Mao was a sadistic monster, worse than Hitler or Stalin, and responsible for 70 million deaths. His Marxism was a shallow mask for selfishness.

His reputation as a military leader and champion of the peasants was a sham, argue the book’s authors. Portraying Mao as a creature of Stalin, the authors say that, far from moving China forward, he did nothing good, ruthlessly eliminating rivals, starving millions, provoking wars and treating his wives abominably.

By concentrating on the man and his misdeeds, critics say, the book does not explain the context of Mao’s rise, his ability to hold power for 26 years and his international impact. ‘More needs to be taken into account than a simple personalisation of blame,’ one leading historian, Jonathan Spence of Yale, wrote in the New York Review of Books

Yesterday Jung Chang and Jon Halliday told The Observer: ‘The academics’ views on Mao and Chinese history cited represent received wisdom of which we were well aware while writing our biography of Mao. We came to our own conclusions and interpretations of events through a decade’s research.’

There are elements in the story on which there is general agreement. Nor do the book’s critics deny that Mao was a monster. But a 14-page review article to appear next month in the China Journal, by Gregor Benton of Cardiff University and Steve Tsang of St Antony, Oxford, contends that the methods used by the authors ‘make for bad history and worse biography’.

Andrew Nathan of Columbia set off the debate in the LRB with a review last month, headed ‘Jade and Plastic’. He acknowledged that the ‘unknown stories’ in the book ‘if true, will be big news for historians’. But he said it was difficult to know which of the multiple sources often given for an event were relevant. He claimed, ‘that many of Chang and Halliday’s claims are based on distorted, misleading or far-fetched use of evidence.’

The academic critics have focused on around 20 specific events where the book provides a fresh account of events, including its sensational claim that the Chinese Nationalist leader, Chiang Kai-shek, intentionally let the Red Army escape on the historic Long March of 1934-5 when Mao led his communist forces across China to a safe haven in the north. In their defence of their book, the authors point to their detailed references, such as the 26 sources for the claim about the Long March.

Nathan replies in a response below their letter: ‘Of these 26 items, which one, two or three unequivocally support the improbable claim that Chiang let the Reds escape intentionally?’

Dispute also surrounds the book’s account of the battle of Luding Bridge, during the March, celebrated in communist lore as a heroic feat by the Red Army. Chang and Halliday say it never took place, basing themselves on the lack of casualty reports, evidence from the curator of a museum, and testimony from a 93-year-old woman they met at the scene in 1997 who had lived there at the time. In their letter to the LRB, they point to seven written sources for their account.

But an Australian journalist recently found an equally aged witness who claims the battle did take place. The Long March, a book by two Britons in China who walked the route, claims the account by Chang and Halliday is ‘wrong on almost every count’. The book, to be published in March, recounts a meeting with another old woman who accounts for the low death toll among communists by saying the Red Army used peasants as a human shield. ‘They were all shot and killed,’ she said. Their deaths weren’t recorded.

A commenter here named Ivan offered a simple and elegant solution to the whole mess: Have the CCP open the archives on Mao so the historical anomalies can be cleared up. It wouldn’t answer every question, but it might help separate facts from fantasy. Until then, expect the back-and-forth arguments to continue, with a dearth of hard evidence to back up either side.

I’m getting bored of these threads! Let’s post some interesting comments and convince me the threads are a good idea.

Kunming seagulls courtesy of my favorite freelance Chinese photographer.

A readers sent me these photos he took from the window of his shanghai apartment.

The time between the two photos (which you can click to enlarge) is a mere 24 months. Amazing to consider that this kind of dizzying development is ocurring all over Shanghai; who knows what it will look like in a few years?

Krugman highlights the tools Bush is employing to attain victory in Iraq: talking points, platitudes and slogans. It’s literally embarrassing to see the world’s greatest power grasping at such tenuous straws to keep its head above water.

Bullet Points Over Baghdad
By PAUL KRUGMAN

The overthrow of Saddam Hussein was supposed to provide the world with a demonstration of American power. It didn’t work out that way. But the Bush administration has come up with the next best thing: a demonstration of American PowerPoint. Bullets haven’t subdued the insurgents in Iraq, but the administration hopes that bullet points

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No way you can spin this to make thte officials look good.

The reason that officials in northeastern China decided not to announce that a 50 mile slick of toxic benzene was headed downriver toward the city of Harbin earlier this month was their fear of damaging tourism and investment in the region, sources tell TIME. Instead, as the potentially lethal spill approached the metropolis of 10 million people, the city said in an online statement that the entire water supply was being shut down for “water main maintenance and repair.”

The spill had occurred on Nov. 13 when an explosion at a state-owned chemical factory in the province of Jilin released huge amounts of benzene into the Songhua river. But for the next nine days the government balked at telling citizens of Harbin, in the neighboring province of Heilongjiang, about the approaching pollutants, despite the fact that the river is the source of drinking water for the center of the city. The crucial decision to keep the spill secret was explained to provincial officials by Heilongjiang governor Zhang Zuoji at an internal meeting in Harbin’s Peace Village Hotel on November 22, according to one attendee who spoke to TIME and shared his notes about the meeting on condition of anonymity.

Chinese Communist Party officials have been frequently criticized for trying to cover up bad news after the fact, but in this case they chose to withhold what they knew even while the danger persisted. As the poison flowed downstream, information flowed in only one direction: up. While the public remained in the dark, officials reported to their superiors, who in turn reported further up the command chain. At each level, officials understood that there was less risk of official censure in awaiting orders than in making snap decisions that might have enabled residents to prepare.

Read the whole depressing thing, and then tell me about all those lessons learned from SARS about transparency and coming clean and protecting their people.