China Translated

Dear Readers,

After 2 years, 287 posts, and approaching half a million hits, I am taking a break from Chinatranslated.

I have recently started work with the Wall Street Journal’s Beijing Bureau as the China correspondent for Heard on the Street.

For those of you who want to continue following my work you can do so in the WSJ, on the website, and in the China Real Time Report blog.

You can see my first article, which is on China’s recalculation of the CPI basket, here, and first blog post, which is on provincial 5 year plans, here.

Many thanks to all of you that have visited the site, left comments, or emailed me.  Especial thanks to sometime guest contributors Duncan Innes-Ker and Don Johnson.  Thanks also to our friends at the excellent China Law Blog - who put a lot of traffic our way.

Don has very kindly volunteered to maintain the site for the immediate future, and may continue posting occasional items.

For my final translation, a poem from the Tang dynasty:

‘House on the hill, a hundred meters high

From the roof, pluck the stars from the sky

But don’t dare to speak too loudly

For fear of disturbing the immortals.’

I think it has a hidden meaning, but my Chinese teacher disagrees.  You can see the original here.

Best wishes and happy China watching,

Tom Orlik

Uncategorized

The standard narrative about the career of Chinese film director Zhang Yimou is that he has sold out.  Early films like The Story of Qiu Ju, Raise the Red Lantern, and To Live, shone a light on difficult periods of China’s recent past, or continued injustices in its present.

Later work has either uncritically celebrated China’s rise (like the opening ceremony for the Olympics - which he choreographed) or been long on scenery but short on political content (like The House of Flying Daggers).

At first sight, his latest film appears to fit into the same pattern.  Under the Hawthorn Tree, released late last year, is a story of love set against the background of the cultural revolution.  The story is centered on the relationship between Jing Qiu and Lao San.

Jing Qiu is in her final year at high school.  The daughter of a family deemed to have a bad class background, she lives a life of hardship and poverty, her father disappeared, her mother at the whim of the capricious authorities of the school where she teaches.

Lao San is slightly older and works in an archeological team.  He is the son of a high ranking cadre, and lives a life of relative ease and affluence.  They meet on Jing Qiu’s trip to the countryside to ‘learn from the peasants’, fall innocently in love, and have a brief courtship before Lao San’s tragic death from a mysterious poison he encounters in the course of his excavation work.

At first sight, the charge leveled against Zhang of whitewashing a painful period of China’s recent history appears well justified.  Jing Qiu’s life is hard, but there is no evidence of the cruelty, craziness and brutality that are present in other accounts of life during the cultural revolution.  Some of the horrors that occur in the book on which the film is based are airbrushed out of Zhang’s version.

In the book, one of Jing Qiu’s classmates is beaten to death for transcribing a Mao Zedong quote incorrectly.  Jing Qiu’s brother is sent to the countryside to learn from the peasants and beaten near to death by his hosts.  The local party secretary is indifferent to the plight of her family, too busy at a banquet to hear their case.  Jing Qiu’s work mate on a construction site is so jealous of her new rubber boots that she accuses her of prostitution.  Lao San’s mother commits suicide after a public humiliation.  At the end of the book, after the cultural revolution is over, Jing Qiu leaves China to spend her life in the USA.  None of these events appear in the film.

But on closer examination, there is also evidence that there is some darkness in Zhang’s account.  Two points stand out:

-Lao San dies, and dies in a horrible way and at a young age.  The implication is that even a love as innocent as that of Jing Qiu and Lao San cannot survive the horrors of the age.  Perhaps this is fanciful on my part, but his death from poisoning as a result of his work in excavation also appears like a coded comment on the dangers of looking too deeply into the affairs of the past - history is toxic and needs to be treated with caution

-The flowers of the Hawthorn Tree are white, not red.  In one of the opening scenes of the film, Jing Qiu’s teacher explains that the leaves of a certain Hawthorn tree bloom red because the tree was watered with the blood of martyrs that died during the Japanese invasion.  At the end of the book, Jing Qiu fancies that she does indeed see red flowers blooming on the tree.  At the end of the film, the tree blooms and the flowers are white.  The implication is that reworkings of the past do not change the reality.  If the leaves are white, they are white, and no amount of patriotic tales will make them red.  If the cultural revolution was a time of terror, it was a time of terror, and no number of romantic fables will make it otherwise.

Culture, History

A little-noticed milestone in the history of China’s technological development was passed this month. On January 10, a train testing the new Beijing-Shanghai high speed rail line was clocked at 487 km/hour, setting a new conventional rail speed record for China and handily beating the Shanghai maglev’s top operating speed of 431 km/hour. While the daily operating speed of the new line will certainly be lower – the maglev was itself tested at 501 km/hour before it entered service – the new record on the flagship route served to underscore how the maglev, which was intended to be only the demonstration portion for a much longer line and a contender for the technology that would compose all of China’s new high speed rail system, has instead become an orphan. Like the Concordes now on display at aerospace museums, the maglev is well on the way to becoming both futuristic and obsolete at the same time.

I ride the Shanghai maglev whenever I can, and as a frequent business traveler with my rolling carry-on, I feel lucky to be in one of the few traveler market segments for whom riding the maglev actually makes sense. For groups, or travelers with big bags, a taxi is cheaper and/or more convenient, and for those on a budget the airport buses and the metro are much cheaper. Even many of my colleagues less excited by high-speed public transportation just pay the extra money for a taxi and avoid the inevitable transfer – because, after all, the maglev whisks you quietly and at very high speed to… a subway station on the edges of urban Pudong. The maglev went into service at only half capacity and repeated fare cuts were necessary to bring the system to its current level of use. Shanghai has over twenty million residents, but I’ve never had any trouble finding a seat.

But of course, this was supposed to only be the beginning. The maglev was planned to continue on and connect to Shanghai South railway station and then the new Hongqiao Transportation Hub – making it possible to connect seamlessly between any number of new transportation modes without the bother of actually arriving in the city of Shanghai. A further route to Hangzhou was long in the plans and was finally approved in 2007, after it was already clear that actually building it would encounter the ferocious community opposition such projects invariably engender outside China, but which shocked government officials here. And there was strong consideration for making all of China’s new high speed dedicated passenger rail lines – eight cross-country routes making up a 12,000 km system – magnetic levitation trains. These were to be faster and less maintenance-intensive than conventional tracks, but, according to reports, Siemens would not share the technology and in 2006 regular high speed rail was chosen instead. (Characteristically for China, only four years after the choice of basic technology was made, many thousands of kilometers of these routes are already in service.)

And yet, the maglev can’t yet be lumped in with zeppelins, autogyros, hydrofoils and other transportation technologies that never quite found a role. While undoubtedly expensive, the US$40 million/km published price tag (including trains, shops and other costs for the whole system) is comparable to conventional rail line systems, and cheaper than some. A 2004 article quotes the former president of the Shanghai Maglev Transportation Development Corp. saying that at 7,000 riders/day, below initial projections, the maglev still covers its operating costs (a statement I personally would like to see some detail to.) Proponents still tout low maintenance requirements, and there are two low speed maglev projects still in the works for metro lines in China, one in Beijing and one in Shenzhen. Outside China, Japan has already committed to its own maglev technology for the new Chuo Shinkansen line between Tokyo and Osaka, although this has been plagued by schedule overruns and will now not open even in part until 2025. In the meantime, Shanghai remains the only place where you can go 30 kilometers in eight minutes on public transportation, and it looks like that will be true for some time to come.

- Don Johnson

Guest contributor, Infrastructure

Oil at around USD70/barrel over the course of the last year has taken energy prices off the agenda.  But with the global recovery now apparently on track, and exploration for new sources of crude on hold over the course of the crisis, the question regarding oil prices is not if they will start to rise, but when.

When they do, China’s role as the world’s second largest and fastest growing consumer of oil will once again come into sharp focus.  My knowledge of the China oil sector is woefully lacking, so in this post I try and pull together some baseline information as a way into thinking about the issues.

China’s annual consumption of oil has increased rapidly from 848mln barrels a year in 1990 to 2700mln barrels a year in 2007.  Over the same period, with domestic supply struggling to keep up, China has become increasingly reliant on imports.  Imports grew from 6% of total oil consumption in 1990 to 57% in 2007.

China’s demand for oil and oil products is met by three companies.  Petrochina dominates onshore oil production and is also a significant presence in refining and distribution of gasoline and diesel.  Sinopec has its own reserves but is mainly focussed on downstream refining and distribution.  CNOOC is the main presence in offshore and overseas exploration. 

The original intention was for Petrochina onshore and CNOOC offshore to play the dominant role upstream in exploration and production, and Sinopec to play the domoinant role downstream in refining and disribution.   But those roles have become blurred as Petrochina as started to look for sources of oil overseas (pushing into CNOOC’s territory) and extended its refining and distribution business (Sinopec’s beat), and Sinopec has extended its presence upstream (pushing into Petrochina’s area of business).

Despite the blurring of traditional roles, Petrochina remains the dominant presence upstream.  Reserves of 21,800mln barrels at end 2009 are significantly larger than those of Sinopec (3,900mln barrels) or CNOOC (2,600mln barrels).  Petrochina is also in the lead when it comes to production, pumping out 2.3mln barrels a day in 2009, significantly more than Sinope’c 0.8mln or CNOOC’s 0.5mln.

All three organisations have managed to maintain their reserves at a stable level for the last few years, partly by tapping new sources around existing wells and partly through new discoveries.   For Petrochina, the largest source of reserves at Daqing has been steadily drawn down, but they have been able to increase their reserves in Xinjiang and  Changqing. 

Despite the stability of reserves in absolute terms, relative to China’s oil consumption, reserves have been steadily falling.  According to my calculations, in 2002 China’s 3 oil companies boasted total reserves equal to 8.6 years of national consumption.  In 2009, that number was down to 6 years.

Downstream, it is Sinopec that retains the dominant role, producing 68.9mln tons of diesel and 34.4mln  tons of gasoline in 2009, significantly more than Petrochina, which churned out 48.8mln tons of diesel and 22.1mln tons of gasoline.  Sinopec also dominates in retail distribution and, significantly, has superior access to the markets in South and Eastern China, which are more lucrative than Petrochina’s base in the North East.

Different positions in the oil supply chain mean that changes in international oil and domestic gasoline and diesel prices (which are set by the National Development and Reform Commission) have significant implications for the profitabilty and share price of the three companies.  The oil price spike in 2008 provides an illustration.  In 2008, international oil prices spiked above USD140/barrel but the NDRC kept domestic gasoline and diesel prices at an artificially low level. 

-For CNOOC, a pure crude oil exploration and production play, that was good news, profits rose in line with rising crude oil prices, up 41% in 2008 compared to the previous year. 

-For Petrochina, mainly focussed upstream but also with significant downstream refining and distribution interests, it was not good news, but neither was it terrible news.  Profits were down 18%. 

-For Sinopec, with limited upstream and extensive downstream intrerests, it was terrible news.  Sinopec’s profits fell  49% for the year.

All three firms are listed, but controlling stakes are retained by the parent company, which is 100% owned by the state.  In the case of Petrochina, the China National Petroleum Corporation owns 86.285% of the firm.  Sinopec is 75.84% owned by Sinopec Group Company, and the parent company CNOOC retains a 64.41% stake in the listed CNOOC ltd. 

In terms of leadership, the Chairman of Petrochina is Jiang Jiemin, 54.  Jiang has spent his entire career in the oil industry in China, with a brief pause to serve as the Deputy Provincial Governor of Qinghai from 2000-2004.

The Chairman of Sinopec is Su Shulin, 47.  Su has a bachelors degree from the Daqing Petroleum Institute and a masters in engineering from Harbin University.  He has spent his entire career in the oil industry in China, moving between Petrochina and Sinopec and their parent companies.  In addition to his role in Sinopec, he also has some political responsibilities in Liaoning province.

Finally, Chengyu Fu at CNOOC is 59 years old.  He has a bachelors in geology from the  Northeast Petroleum Institute in China and a masters in petroleum engineering from the University of South California in the USA.  He has spent his entire career in the Chinese oil industry.

Energy, Industry

Is China a market economy or a socialist economy?  On the surface, it looks a lot like a market economy.  At the street level, the diversity of offerings available to consumers in the food, clothes, and electronics sectors testifies to thriving competition.  In the commanding heights of the economy, the main oil, power, steel, telecoms and banking  firms have all been listed and present the veneer of modern corporations.

But scratch the surface of the commanding heights and it is clear that the state is still large and in charge, retaining a controlling interest in enterprises, and using the legal and regulatory structure, and access to scarce resources, to further their interests.  In a recent issue of China Reform - the academically minded sister publication of New Century - economists from the Unirule institute spell out the dangers for the Chinese economy of the state’s continued monopoly control of the commanding heights.

This is my translation of the main points:

‘There are two types of monopoly operating in China.  First, there is the direct control by the government of the main firms in the energy, power, media, banking and other key sectors.  Second, there is efforts by local government to prevent outside firms accessing local markets.

The second type of monopoly is illegal and is slowly being rolled back.  The first type is not only legal, it is a key feature of the Chinese economy and shows no sign of changing.

Monopolies operating in the commanding heights of the Chinese economy are more pernicious than monopolies operating elsewhere in the world.  They benefit not just from the ability to set output prices at an artificially high level, but also from buying inputs at an artificially low level - both add to their monopoly profits at the expense of social welfare.

The costs of state monopolies to consumers and to society at large is difficult to estimate.  One study estimated that the transfer from consumers to state sector monopolies in 2002 was in a range between CNY213.5bln and CNY241.7bln - or around a third of the operating income of the sectors in the survey.

Another way into thinking about the costs to consumers of China’s state monopolies is to make cross country comparisons.  Take the telecoms sector, in the USA the average profit margin for telecom service providers is around 1%.  In China it is around 20%.  That 20% profit represents a transfer from telecom users to telecom companies.

The monopoly position of state owned firms in key sectors is not being eroded.  We looked at industry concentrations (the market share of the largest firms) in 2002 and 2007.  Over that 5-year period, the ferrous and non ferrous metals, electrical machinery, tobacco, chemicals, plastics, and Chinese medicine sectors became more not less concentrated.’

A couple of counter points that I would throw in to nuance the Unirule argument:

-It’s not all bad.  Network effects and economies of scale mean that many of the sectors under discussion are natural monopolies.  Keeping these sectors under the thumb of the state might be better than the alternative of allowing the private sector in and attempting to regulate it in the public interest - not an easy task as the experience in numerous other countries testifies.

-The government does not always make decisions in the interests of the state sector.  For long periods of time the oil companies have operated at a loss because the government has set the price of domestic gasoline and diesel below cost.  Sinopec and Petrochina did not like it, but there was little they could do about it.  The same with the power companies - squeezed between high cost for coal and low price for electricity.

But in general there is little to argue with in the Unirule paper.  With the government searching for new sources of growth and ways to put more money in the pockets of consumers, they could do a lot worse than introduce greater competitive pressures into some of the sectors currently dominated by state giants.  Some analysts hope that the 12th 5-year plan will be the vehicle for delivering much needed reform.  But with these same state giants also powerful players in the political process, the chances of progress are slim.

Competition, Energy, Industry

2010 was not a bad year for Vanke.  Despite two attempts by the government to pop the property bubble, China’s biggest real estate developer still managed to shift more than CNY100bln in apartments, 80% more than in 2009 and almost double the chasing pack of Evergrande, Greeen Town, and Coli.

In an interview with China Entrepreneur magazine, Wang Shi - Vanke’s Chairman - attributes his company’s success in navigating a challenging policy environment to the lessons learned from a similar property crackdown in 2007-8.  The main points I took from the interview are:

‘At the time it was tough, but with the benefit of hindsight, Vanke has three reasons to thank the government for its 2007-8 crackdown on the property sector:

First, the controls prevented Vanke from overextending itself which meant it was in better shape going into 2009.

Second, a period from harsh criticism from the public for a company that appeared to be covering the entire country in concrete forced them to acknowledge their status as industry leader and reexamine their public image.

Finally, harsh treatment from local government encouraged them to rely more on improving the quality of the property they build - so even if they are out of favor with the government they can rely on support from their customers.

The 2007-8 crackdown also taught Vanke the importance of being nimble.  The company now operates according to the ‘5986′ formula:

-Not more than 5 months after buying land begin construction

-Not more than 9 months after buying land go to market

-Not less than 80% of property aimed at mid-range price point and below

-Not less than 60% of apartments sold in the first month after a development goes to market

The reason Vanke did better than its peers in 2010 is because a business built on rapid turnaround of new properties could respond more nimbly to the changing environment.

In addition, Vanke’s mid price point properties continued to attract buyers even as the government’s controls on speculation turned customers off the luxury apartments being produced by their competitors.  90% of apartments Vanke builds are less than 140sqm, 70% are less than 90sqm.

Vanke also cite the importance of partnerships as a way of accessing land and capital.  They have a long term strategic partnership with China Air, which for various historical reasons has a significant endowment of land.  In Beijing, they have partnerships with 8 different state owned enterprises on different developments - typically with the partner firm providing land and capital and Vanke providing the brand and managing the project.

Though Vanke is China’s largest property developer its share of the market is small (3%) and its geographical coverage incomplete (developments in 42 cities nationwide).  As Vanke pushes into 3rd and 4th tier cities in search of new markets it will encounter problems dealing with backwards local governments.’

A few points about this article that struck me as interesting.  Vanke is a private sector firm, but relationships with local government and with state owned enterprises remain essential for success in the property sector.

The involvement of these myriad state sector interests (China Air!) in the property sector explain the difficulty the government faces in clamping down on bubble prices.

Vanke might have been better positioned to navigate the government’s 2010 property controls than most.  But it was the failure of the government to properly implement those controls, and the resulting continued speculation in the sector, that really saved the day for the property sector.

You can visit the China Entrepreneur website here, though the Vanke article does not appear to be up yet.

Property

A recent article by General Luo Yuan of the Chinese Academy of Military Science published in the Global Times has been attracting a lot of attention for its call for a revival of China’s military spirit.  This is my translation of the main points:

‘A great country must not only have a strong economy and a solid legal system, it must also have a surging masculinity and a military spirit.

China has for many generations dreamed of being a strong country.  Only in this generation or the next will we achieve that dream.  In my view, a strong country is not just rich in wealth, it also has a strong army.

Being rich on its own is no guarantee of strength.  In past times, China was richer than its neighbours.  But because it was weak militarily, it was invaded and humiliated.  The new China born out of the Communist revolution was poor, but because we were strong and resolved in our military we were able to stand up to US imperialism.

Military power is the synthesis of will, cohesion, exertion, resources, and science.  Our founding fathers fought successfully with little resources, and had the wounds to prove it.  How much more can be done now, if the military spirit of the founding fathers could be combined with the resources and technology of modern China.

30 years of peace have made China’s military spirit numb, and convinced many that all problems have peaceful solutions.  We must revive the military spirit so we are not blind to the threats that surround us and the opportunities that accompany our economic rise.

Some people say I am hawkish, but I am a soldier, and if soldiers do not talk about war then who will?’

General Luo has a reputation for mouthing off, and the Global Times is famous for its jingoistic tone.  But this does seem unusually out of step with the party line on China’s ‘peaceful rise.’

I am no expert in military affairs, but I believe that in the run up to the war in Iraq, at least in the UK, the military was cautioning against, and the civilian government was pushing for - apparently this is because soldiers know what war is like (blood, death, horror) and civilians do not.  Maybe 30 years of peace have helped General Luo forget.

Chinatranslated is taking a break for the holidays and will be back at the beginning of January.

Culture, International Relations

China is currently suffering from another nasty bout of inflation, with speculation that the CPI will push up close to 5% yoy in November, and the Central Bank will make another pull on the interest rate lever. 

One of the reasons for doubting that the Central Bank will raise rates is that inflation appears well confined to food prices, and raising interest rates will do little to make vegetables grow faster or pigs fatten more quickly.

But that does not mean that food prices are in a cycle of their own, controlled only by the vicissitudes of the weather and the seasons.  In an interview with the China Securities Journal earlier this week, Ba Shusong of the State Council research center, makes the obvious but prevously overlooked (at least by me) point that growing vegetables is labor intensive:

‘The increase in labor costs is an inevitable trend.  The simplest example is the increase in vegetable prices.  Production of vegetables is very labor intensive.  Planting, irrigating, applying fertilizer, and protecting vegetables freshness all requires labor.  From this point of view, with labor costs continuing to rise, food price increases are a long term trend.’

Increases in wage costs reflect a change in the balance of supply and demand in labor markets as China’s population ages, and higher off-farm wages as the export sector enjoys a better year.  Higher vegetable prices are an expression of inflationary pressures elsewhere in the economy, which causes labor costs to rise, rather than as a result of a dynamic unique to the farm.

Another reason to believe that the current bout of food price inflation is not just a product of the weather comes from a research note from Morgan Stanley economist Qing Wang.  

Qing makes the example of a country which produces two products, food and clothes.  In the clothes sector, massive investment has led to overcapacity.  In the food sector, there has been less investment and so supply is constrained.  An increase in the money supply adds to demand. 

In the clothes sector, there is a supply response which keeps prices level.  In the food sector, there is no supply response, so prices rise.  Seasonal factors and bad weather might increase the supply constraint, but it is the increase in the money supply that is the cause of higher prices.

Higher labor costs or an increase in the money supply - whichever way you cut it China’s food price inflation is not just an agricultural phenomenon.  Even if government price controls manage to squeeze inflation out of the food sector, price pressure might be here to stay.

You can see the Ba Shusong article here.

Agriculture, Labour markets, Monetary Policy, inflation

The Chinese government might do a decent job of presenting a united front on economic policy.  But in reality, on the major issues, there are a fierce debates between different interests and institutions.  On the exchange rate, the main institutional cleavage is between the People’s Bank of China and the Ministry of Commerce.

The People’s Bank of China supports appreciation of the exchange rate to increase their freedom of movement in monetary policy and to accelerate needed reforms of the domestic economy.  The Ministry of Commerce supports stability of the exchange rate because their main constituency are the exporters that feel the most pain from appreciation.

Today, an article in the Financial News, shows the PBOC attempting an outflanking manouvere on their old enemy.  The Central Bank publishs the results of a survey of 2,181 small and medium sized exporters conducted in November of this year, which shows that the exchange rate is not the major for issue for businesses that the Ministry of Commerce claim.  The key results of the survey are:

-Most small firms are in a strong operating position and have the capacity to control the impact of fluctuations in the exchange rate on their business

-80% of respondents can live with the current pace of yuan appreciation

-Employment numbers have not fallen

-Small businesses list their main difficulties as 1) higher costs for raw materials 2) higher costs for labor and difficulty finding workers and 3) the exchange rate - with the exchange rate ranked as least important

-67.5% of respondents said they could live with appreciation of 3% or under in the next year.  Another 26.5% said they could live with 3-5%

If they are to be believed, the results of the PBOC survey take a lot of the wind out of the Ministry of Commerce’s sails.  The Commerce argument is always that exporters margins are razor thin, appreciation will lead to bankruptcies, and from there to mass unemployment.

The results of the survey suggest that even for the small exporters who should feel the most pain, appreciation so far has not caused major problems, employment numbers remain high, and further appreciation within a 3% margin would be acceptable.

The point that neither the survey nor the surrounding article in the Financial News acknowledge, is that though the yuan is up 2.5% against the dollar since appreciation resumed in the summer, it is down on a trade weighted basis.  Exporters focused on markets outside the US would not be feeling any pain from appreciation because the yuan is flat or down against other major currencies.

Quibbling aside, it’s an interesting survey for what it says about the state of the small export sector, for what is says about the impact of exchange rate reform, and for what it says about the ongoing turf war between the Central Bank and the Commerce Ministry.

I read the article in the print edition of the Financial News but it should also appear on their website at some point.

Exchange rate, Trade

A hundred years of national humiliation for China, stretching from the Opium Wars in the middle of the 19th Century to the Japanese invasion in the middle of the 20th, has prompted a prolonged period of self reflection.  What made China so weak that it could be humiliated by foreign powers?  And what could be done to prevent it from happening again.

In a recent speech at Beijing University, Chinese Academy of Social Science philosopher Zhou Guoping reflects on what has been missing from this period of national reflection, and what this means for China today.  This is my translation of the main points of the opening section of his speech:

‘Reflections on a hundred years of relection - what China lacks’

‘The title for my talk today is borrowed from an essay by Nietzsche on ‘What Germany lacks?’.  When Nietzsche wrote his essay, he did not make any comparisons between Germany and other countries, but simply spoke to the shortcomings that he perceived in Germany in and of itself.

But for China, the question of what China lacks always prompts a comparison with Western countries.  It is only in the light of the Western invasion that Chinese people start to think about their shortcomings.

We are not a reflective country.  We have always considered ourselves the center of the universe, not given foreign cultures the time of day.  Were it not for the Opium wars and the beatings that followed, we would not have embarked on a journey of relection and introspection. 

But we did suffer those beatings, and as a result reflection on the differences between Western and Chinese culture became the focal point of intellectual life in the 20th Century.

By the time I came onto the scene, everything that needed to be said on the subject of China and the West had already been said.  Perhaps because I was never involved in the period of reflection, I have an outsiders view.  I came to believe that this hundred years of reflection itself needs to be the subject of a period of reflection.

We started a period of reflection because we were beaten, the reason for the reflection was to discover the reason we were beaten, and to prevent it from happening again.  The obvious reason we were invaded and humilated is because we were weak and poor.  Western countries were rich and strong.  To avoid further beatings we needed to become rich and strong.

So the objective of the 20th Century became the pursuit of national strength.  Our best workers were sent overseas in search of the secrets of Western flourishing.  According to some reformers, the secret was constitutional monarchy, others believed the republican model was the secret, still others focused on the virtues of science or the importance of democratic rights. 

The state of knowledge might have improved, but the pattern of behaviour has not.  China’s reflection on its weaknesses continues to focus solely on how to identify and remove obstacles in the path to wealth and power. 

I cannot say that this has been the wrong approach.  Pressing circumstances demanded action and perhaps there was little choice but to follow this path to self strengthening.  But in the course of this hundred years of reflection, one of China’s traditional weaknesses has not only escaped itself becoming the focus of reflection, but also been elevated to the status of an unshakable truth.  That weakness is to place too great an emphasis on practical value, and too little an emphasis on spiritual value.’

It’s actually rather a long speech and that is just the opening section.  But Zhou seems to be onto something, and his speech has got a lot of traction on the Chinese internet.  I’ll try and come back to the rest in a later post.  If you can’t wait that long the entire speech is available in Chinese here.

Culture, History