Showing posts with label china. Show all posts
Showing posts with label china. Show all posts

Saturday, May 10, 2014

China moves to free-market pricing for pharmaceuticals, after price controls led to quality problems & shortages

China Scraps Price Caps on Low-Cost Drugs. By Laurie Burkitt
Move Comes After Some Manufacturers Cut Corners on Production
Wall Street Journal, May 8, 2014 1:15 a.m.
http://online.wsj.com/news/articles/SB10001424052702304655304579548933340544044

Beijing

China will scrap caps on retail prices for low-cost medicine and is moving toward free-market pricing for pharmaceuticals, after price controls led to drug quality problems and shortages in the country.

The move could be a welcome one for global pharmaceutical companies, which have been under scrutiny in China since last year for their sales and marketing practices.

The world's most populous country is the third-largest pharmaceutical market, behind the U.S. and Japan, according to data from consulting firm McKinsey & Co., but Beijing has used price caps and other measures to keep medical care affordable.

Price caps will be lifted for 280 medicines made by Western drug companies and 250 Chinese patent drugs, the National Development and Reform Commission, China's economic planning body, said Thursday. The move will affect prices on drugs such as antibiotics, painkillers and vitamins, it said.

The statement said local governments will have until July 1 to unveil details of the plan. In China, local authorities have broad oversight over how drugs are distributed to local hospitals.

Aiming to keep prices low, some manufacturers cut corners on production, exposing consumers to safety risks, said Helen Chen, a Shanghai-based partner and director of L.E.K. Consulting. Many also closed production, creating shortages of low-cost drugs such as thyroid medication.

"It means the [commission] recognizes that forcing prices down and focusing purely on price does sacrifice drug safety, quality and availability," said Ms. Chen.

Several drug makers, including GlaxoSmithKline PLC, didn't immediately respond to requests for comment. Spokeswomen for Sanofi and Pfizer Inc. said that because implementation of the new policy is unclear, it is too early to understand how it will affect their business in China.

The industry was dealt a blow last summer when Chinese authorities accused Glaxo of bribing doctors, hospitals and local officials to increase sales of their drugs. The U.K. company has said some of its employees may have violated Chinese law.

The central government, which began overhauling the country's health-care system in 2009, has until now largely favored pricing caps and has encouraged provincial governments to cut health-care costs and prices. Regulators phased out five years ago premium pricing for a list of "essential drugs" to be available in hospitals.

Chinese leaders want health care to be more accessible and affordable, but there have been unintended consequences in attempting to ensure the lowest prices on drugs. For instance, many pharmaceutical companies registered to sell the thyroid medication Tapazole have halted production in recent years after pricing restrictions squeezed out profits, experts say, creating a shortage. Chinese patients with hyperthyroidism struggled to find the drug and many suffered with increased anxiety, muscle weakness and sleep disorder, according to local media reports.

In 2012, some drug-capsule manufacturers were found to be using industrial gelatin to cut production costs. The industrial gelatin contained the chemical chromium, which can be carcinogenic with frequent exposure, according to the U.S. Centers for Disease Control and Prevention.

"Manufacturers have attempted to save costs, and doing that has meant using lower-quality ingredients," said Ms. Chen.

The pricing reversal won't necessarily alleviate pricing pressure for these drugs, experts say. To get drugs into hospitals, companies must compete in a tendering process at the provincial level, said Justin Wang, also a partner at L.E.K. "It's still unclear how the provinces will react to this new national list," Mr. Wang said.

If provinces don't change their current system, price will remain a key competitive factor for drug makers, said Franck Le Deu, a partner at McKinsey's China division.

"The bottom line is that there may be more safety and more pricing transparency, but the focus intensifies on creating more innovative drugs," Mr. Le Deu said.

  —Liyan Qi contributed to this article.

Thursday, December 26, 2013

Views from Japan: Abe Visit to Yasukuni Shrine

Views from Japan: Abe Visit to Yasukuni Shrine

1  Abe Visit to Controversial Japanese Shrine Draws Rare U.S. Criticism. By George Nishiyama
Visit to Yasukuni Raises Concern Premier Shifting Focus From Economy to Nationalistic Goals
Wall Street Journal, Dec. 26, 2013 3:04 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304483804579281103015121712

[...]

Mr. Abe visited Tokyo's Yasukuni Shrine on Thursday, triggering strong criticism from Beijing and Seoul, but also a rare disapproval by Washington, which has pushed the Asian neighbors to mend ties that are strained by territorial disputes and differences over wartime history.

Many Asian nations that suffered from Japan's wartime actions view Yasukuni as a symbol of Tokyo's past militarism because it honors not just Japan's war dead but also some convicted World War II war criminals, including Hideki Tojo, who was prime minister for most of the war.

"The United States is disappointed that Japan's leadership has taken an action that will exacerbate tensions with Japan's neighbors," said the U.S. Embassy in Tokyo on its website, in an unusual direct criticism of Japan's leader by its main ally.

Mr. Abe has repeatedly said he regretted not visiting the shrine during his first tenure as prime minister from 2006 to 2007 and said his critics misunderstood his intentions. "I offered my respects to those who lost their precious lives for our country, and prayed that their souls may rest in peace," he told reporters after the visit. "I have no intention at all of hurting the feelings of the Chinese or the South Korean people."

Although a well-known conservative who has stated that changing the pacifist constitution drafted by the occupying U.S. forces was his "life's work," Mr. Abe had adopted an economy-first policy after taking office in December 2012, putting his nationalist agenda on the back burner.

His so-called Abenomics policy featuring government spending and monetary stimulus has spurred consumption, resulting in the Japanese economy recording the strongest expansion among industrialized nations in the first half of this year, although the country's growth rate slowed in the third quarter.

The improved economy has helped make Mr. Abe one of the most popular Japanese leaders in recent years, with his support ratings hovering around 60% for most of the past year.

All of that has come as a relief to Washington, which faces a rising military power in China and is wary of the regional tensions developing into physical confrontations. The U.S. has also tired of a revolving door of short-lived Japanese prime ministers.

During an October visit to Tokyo, U.S. Secretary of State John Kerry and Defense Secretary Chuck Hagel paid respects at the Chidorigafuchi National Cemetery, a tomb for Japan's unknown war dead, in a move widely seen as a message to Mr. Abe that there are alternatives to Yasukuni.

While Mr. Abe had refrained from going to Yasukuni until Thursday, on the anniversary of his taking office, some of his cabinet ministers had visited, each time inviting protests from China and South Korea. Mr. Abe's visit, the first by a prime minister in seven years, drew angry responses from the neighbors.

China's foreign minister summoned Japan's ambassador to protest and criticized Thursday's visit as the latest attempt by Mr. Abe to gloss over Japan's militaristic past. "Under these conditions, not only does the Japanese leader not show restraint, but instead makes things worse by manufacturing another incident over history," spokesman Qin Gang said in a statement. "Japan must bear all the consequences arising from this."

Seoul also decried the move. "Our government cannot but deplore and express anger about Japanese Prime Minister Shinzo Abe's visit to the Yasukuni Shrine despite concerns from neighboring countries and the international community," said Yoo Jin-Ryong, a South Korean spokesman.

Analysts in the region agreed the move would further deteriorate relations. The development is severe, said Wang Shaopu, director of Japan Institution at Shanghai Jiao Tong University. "It will worsen China-Japan's already bad-enough relations."

Others said Mr. Abe had gone ahead with the visit because he felt he had nothing to lose given that ties were already frayed. While he has visited all of the Association of Southeast Asian Nations, he has yet to visit China or South Korea nor has he held formal bilateral meetings with their leaders.

"Mr. Abe probably thought that a visit to Yasukuni at this point wouldn't have too much of an impact on prospects of future summits with Beijing and Seoul considering how chances already seemed slim," said Masafumi Kaneko, a senior research fellow at the Center for International and Strategic Studies at PHP Institute.

Mr. Abe's aides said what they cared about most was the U.S. reaction. "The biggest, or should I say, the only concern is what the U.S. would say," said a senior government official who was aware of the prime minister's plans in advance. He expressed confidence that the ties between the allies wouldn't be affected, noting that President Barack Obama was relying on the prime minister to help seal a deal over a trans-Pacific free-trade forum and to move forward plans to relocate U.S. troops in the region.

The government official said Mr. Abe intended to stick to making economic recovery the top priority, stressing how investors would start to see deregulatory measures—the last of the three pillars of his economic policy—in action in the new year. "We intend to keep the ball rolling for Abenomics," the official said.

But Mr. Abe may have miscalculated the U.S. response, analysts said. "The U.S. reaction was unexpected. Mr. Abe is moving to bolster the Japan-U.S. alliance, and the focus is whether they can move beyond just a military alliance, and share values," said Koji Murata, a political-science professor and the president of Doshisha University. "The U.S. may be frustrated at Mr. Abe, who is obsessed with history issues."

Diplomatic feuds have shown they can affect business interests in the region. After the previous Japanese government nationalized disputed islands in the East China Sea in September 2012, Chinese consumers boycotted Japanese products, dealing a serious blow to Japanese firms, including car makers.

But the Tokyo stock market took Mr. Abe's visit to the shrine in stride on Thursday, finishing higher. Investors said other factors, including a weaker yen, were more important than diplomatic issues.

[...]

—Alexander Martin, Kosaku Narioka and James T. Areddy contributed to this article.



2  A Japanese citizen weighs in:
hello,

this is a pretty simple issue... it's a thing about "mind" or "philosophy" for Japanese and "political" for China or Korea. it'd not been a problem until middle of 80s indeed. they are just always looking for something to claim or criticize Japan to let us compromise us one-sidedly. they are just trying to do this in the name of human-right. Japan has to be 100% evil, and they have to be 100% victims forever. so they will never forgive us no matter how we apologized.
if PM Abe didn't do it, they would find something another.

it's not known very much in other countries, but Japan's already apologized many times, paid much and supported in many ways even the countries didn't let their citizens know about that. 
major Japanese started to think it looks waste of time and effort to make a good relationship with them any longer.

more than 70% of Japanese agree with PM Abe's Yasukuni visit this time in a survey of a TV channel (this is so-called "liberal" channel). we all know he just wants to thank people who worked and died for this country, and wishes peace. 
personally, i go to the shrine when i'm in Tokyo (my grand father died in WW2).

have a good new year!

Sunday, December 1, 2013

Views from Japan on the air-defense zone recently claimed by Beijing

Views from Japan on the air-defense zone recently claimed by Beijing

1  Excerpts from Japan Questions China's Policing of Defense Zone. By Yuka Hayashi
Officials Also Address Apparent Differences With U.S. Over Response
Wall Street Journal, Dec. 1, 2013 11:50 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702303562904579230894060384128

"I was taken aback when I heard this," Yukio Okamoto, a former senior foreign ministry official, said in an interview Sunday with NHK. "I can't think of any case like this in the past where the U.S. took a step that hurt Japan's interests over an issue related directly to Japan's national security in a way visible to the whole world."
 
"We have confirmed through diplomatic channels that the U.S. government didn't request commercial carriers to submit flight plans," Prime Minister Shinzo Abe said Sunday during a visit to a regional city.

Speaking privately, Japanese officials say Washington has yet to coordinate views among different branches of the government and come up with a unified stance that can be conveyed to Tokyo properly.
[...]

Satoshi Morimoto, a former defense minister who teaches security at Takushoku University, said defense minister Onodera's remarks suggest China wasn't able to "conduct a scramble against American planes even as they flew through its new zone." Japan must determine whether China has the capability to monitor the whole expanse of its new ADIZ using radar located on the mainland and whether its pilots have the experience and expertise to go after foreign planes, Mr. Morimoto said on the NHK program.


2  a Japanese citizen:

実際この問題は簡単ではないと思われるが、日本としては、アメリカには中国の理不尽な行為及び要求を一切認めないよう望んでいる(日本政府は各航空会社に対して、中国の要求に答えないよう通達した)。日本とアメリカが一枚岩でこの件に対処すべきだとの考えが支配的である。ただ、アメリカと日本では航空会社に関する事情が異なるのは理解できる。
今後のバイデン副大統領との会談で日米の協力を確認することを期待する。まさかアメリカが中国に宥和的に方針変換することはないと信じたいが...。
この問題には韓国も絡んできており、複雑化している。今後どうなっていくのか注視せざるを得ない。
[transliteration: Jissai kono mondai wa kantande wa nai to omowa reruga, Nihon to shite wa, Amerika ni wa Chūgoku no rifujin'na kōi oyobi yōkyū o issai mitomenai yō nozonde iru (nipponseifu wa kaku kōkūkaisha ni taishite, Chūgoku no yōkyū ni kotae Nai yō tsūtatsu shita). Nihon to Amerika ga ichimaiiwa de kono-ken ni taisho subekida to no kangae ga shihai-tekidearu. Tada, Amerika to Nihonde wa kōkūkaisha ni kansuru jijō ga kotonaru no wa rikai dekiru. Kongo no baiden fuku daitōryō to no kaidan de Nichibei no kyōryoku o kakunin suru koto o kitai suru. Masaka Amerika ga Chūgoku ni yūwa-teki ni hōshin henkan suru koto wa nai to shinjitaiga.... Kono mondai ni wa Kankoku mo karande kite ori, fukuzatsu-ka shite iru. Kongo dō natte iku no ka chūshi sezaruwoenai.]

honestly, we Japanese has been sick and tired of China's movements lately... some journalists analyze Xi _jinping can't control the force any longer. and underground disorder's coming overground.

a citizen

China Unveils IPO Guidelines - Regulator Says It Will Leave Judging Value, Risks to the Market

China Unveils IPO Guidelines Ahead of Expected New-Offering Flood. By Amy Li
Regulator Says It Will Leave Judging Value, Risks to the Market
Wall Street Journal, Dec. 1, 2013 1:21 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304017204579229691357340398

China moved closer to ending a 13-month moratorium on initial public offerings, releasing guidelines on fundamental changes to the way companies will raise funds in the country's stock market.

At the same time, China unveiled rules that will allow listed companies to issue preferred shares, offering firms—especially banks—a fresh channel for funding to shore up their capital bases.

The long-awaited launch of the IPO reform plan indicates an imminent restart of the country's IPO market, where more than 760 firms are queuing for listings. The China Securities Regulatory Commission, which issued the guidelines, said companies might begin listing as soon as January.

China shut the door to IPOs in the country in November 2012, just before a once-in-a-decade leadership transition, in an effort to support the long-suffering stock market, analysts said.

Two weeks ago, China's top leaders had promised, in a blueprint for economic and social policies over the next decade, that they would push for reforms of the stock-issuance system while promoting fundraising activities in the equity market through a variety of channels.

The reform plan marks a significant easing of government control over China's IPO market, which channeled 488 billion yuan ($80 billion) to issuers in 2010.

The plan shifts toward a so-called registration-based IPO system, widely used in developed markets, in which the regulator focuses on whether a firm seeking a listing meets the requirements for information disclosure.

Currently, China has an approval-based IPO system where the regulator focuses on whether an issuer can sustain its operations and whether it will be able to stay profitable. One criticism of the current system is that it can take years for some companies to get listed while the regulator has often given preferential treatment to the country's large but poorly managed state-owned enterprises, allowing them to jump the queue and float shares within just a few months.

In most Western markets, regulators determine if companies have met specific legal and financial requirements, and then allow them to list, leaving it up to investors whether to buy the stocks.

"We believe the reform laid out the groundwork for an introduction of a registration-based IPO system," the CSRC said in a transcript of answers to questions from reporters on the overhaul plan.

China's current approval-based IPO system has long been criticized for distorting supply and demand and artificially inflating valuations of new listings in one of the world's largest stock markets. Listing aspirants have had to endure an application process that can include roughly 10 rounds of reviews lasting as long as several years to receive approval from the country's securities regulator, which determines whether the company has met thresholds in terms of revenues, profits and the like.

Even after a company has secured listing approval, the fate of its IPO still lies in the hands of the regulator. When market conditions are strong, the regulator tends to release the supply of IPOs, often resulting in frenzied buying and high prices. But when investors' mood is poor, authorities can halt new listings to avoid further depressing the market.

The CSRC said it would focus on reviewing compliance by companies planning IPOs, while it will let investors and the market judge the value and risks of IPOs. Once a company gets the go-ahead to seek an IPO, the commission said it would allow the market to decide the timing of it and how the issue will work.

Following the release of the guidelines, firms seeking IPOs will need around one month to prepare, the commission estimated. Around 50 firms are expected to have IPO preparation done in time for them to list by January 2014, the commission added.

The review of stock offerings will focus on the information disclosure of the issuer, according to the guidelines. Also included in guidelines were rules about the pricing of stocks, share placements, responsibilities of market participants, and measures to crack down on fraudulent listing.

"The market-oriented reform will make the issuer and intermediaries shoulder more responsibility while strengthening the protection for smaller investors," said Wang Jianyong, a partner with Haiwen & Partners, a law office that advises companies seeking a listing in China.

Issuers, underwriters and other intermediaries should commit to compensate investors that suffer losses because of falsehoods, misleading statements or major omissions in IPO documents, according to the guidelines.

The new rules say controlling stakeholders, as well as board members and senior executives who own shares, should commit that they won't sell shares below the IPO price for two years after a six-month lockup period during which they can't sell shares. If the shares of a firm close below the IPO price six months after listing, these shareholders must promise to extend the lockup period by at least another six months.

An increase in the supply of shares from new listings is likely to cause short-term pain to the prices of small stocks trading on the country's startup board, ChiNext, said Sinolink Securities 600109.SH +0.18% analyst Huang Cendong.

Mr. Wang of Haiwen said, "The sentiment in the stock market will likely be hurt with the coming IPO restart."

However, Beijing's effort to push forward market-oriented reforms could enhance investors' expectations for the longer term, Mr. Wang added.

The guidelines also clarify the time span of the review procedure. The commission will make a decision on whether to approve a listing in three months after accepting an IPO application.

With the new rules, a listing could happen as early as two or three months after the commission accepts an application, based on current administrative procedure, an investment banker said.

The commission said it may take around one year to review the IPO applications of more than 760 firms that are queuing for listing.

It gave underwriters more freedom in stock offerings, allowing them to reserve a certain amount of new shares to select investors, potentially benefiting brokerage firms with a strong institutional client base. Previously all new shares were sold through auctions.

But the commission also will require an underwriter to take on more responsibility, saying it will stop reviewing any applications submitted by an underwriter if a company it underwrites posts a net loss or a drop in profit of more than 50% in the same year as its IPO.

Along with the lifting of the IPO moratorium, Beijing moved to allow listed firms to issue preferred stock publicly, in a bid to give issuers a flexible direct financing tool, optimize the financing structure of firms and further mergers and acquisitions of firms. Currently, Chinese companies aren't allowed to issue preferred shares.

Under the guidelines on the trial issuance of preferred stocks, the State Council, the country's cabinet, said the private issuance of preferred stocks would also be available to listed firms, including those incorporated in mainland China but listed overseas, as well as unlisted public firms.

Preferred stock has priority over common stock in the distribution of corporate profits and upon liquidation, but shareholders of such stock have limited rights on corporate decision making, according to the definition provided by the guidelines.

Sunday, November 10, 2013

El cost de l'intervencionisme a Hong Kong

El cost de l'intervencionisme a Hong Kong. WSJ Editorial
En contra de les afirmacions del govern, les taxes dificulten més els negocis a les petites companyies.

Wall Street Journal, 5 nov 2013 11:16 a.m. ET
Translation of The Cost of Hong Kong's Interventionism to Catalan. By Un Liberal Recalcitrant


El govern de Hong Kong s'ha resistit fortament a acceptar els crítics que suggereixen que els seus esforços per frenar l'activitat del mercat immobiliari local perjudica la seva reputació de polítiques de lliure mercat i pro-creixement . Potser és hora que s'ho pensin de nou. Vegin el nou informe que mostra que la intromissió del govern en aquest mercat està danyant el clima dels negocis en el Territori .

Encara que Hong Kong figura en el segon lloc en l'informe Doing Business 2014 del Banc Mundial, publicat la setmana passada, la posició d’aquest territori a la categoria "facilitat per registrar propietat" es va desplomar del lloc 60 al 89. La caiguda reflecteix l'increment fins al 7,5% al febrer, un 100%, de les taxes aplicables a les transaccions immobiliàries comercials (no d'habitatges). El govern ha pres aquesta decisió després de diversos intents per refredar el mercat residencial amb impostos especials que simplement van desviar el capital al mercat no residencial.

L'informe Doing Business ressalta el que aquests impostos signifiquen per a petites i mitjanes empreses en termes pràctics. De mitjana, la transferència d'una propietat comercial ara costa el 7.7% del seu valor després d'afegir impostos i taxes. Abans que entrés en vigor la nova taxa estava en el 4%, si bé només és aplicable a les transaccions de més quantia. Encara que altres aspectes de la política econòmica de HK són pro-creixement , això representa un innecessari cost afegit sobre les petites empreses , que solien ser les més beneficiades de la senyera política de Honk Kong de mínima interferència en l'economia .

Això hauria de ser una crida al govern, el qual ha intentat argumentar des del començament, en aquest assumpte de la nova taxa, que aquestes mesures eren excepcionals i afectarien només als immobles. Els crítics van advertir en aquell temps, 2010, que la primera taxa especial sobre propietats residencials posaria al Territori en una pendent relliscosa per l'abandonament del que un antic ministre d'economia anomenava "no intervencionisme decidit". Com a resposta, el portaveu del govern, Michael Wong, va escriure una carta al director d'aquest diari prometent que el nou impost "no tindria més implicacions per a les polítiques de baixos impostos pro-empreses", qualificant les crítiques com "clarament de magnitud incorrecta".

La relliscada del govern cap els impostos especials per a la propietat comercial ha demostrat que els crítics tenien raó i l'informe del Banc Mundial indica que les petites empreses estan pagant el preu d'aquesta ficada de pota. Per mor dels emprenedors del Territori, és hora que el govern de HK porti de nou les seves polítiques immobiliàries al decidit “no-intervencionisme” que funciona tan bé en altres sectors de l'economia.

---
Original, etc.: http://www.bipartisanalliance.com/2013/11/el-coste-del-intervencionismo-en-hong.html  

Thursday, November 7, 2013

El coste del intervencionismo en Hong Kong

El coste del intervencionismo en Hong Kong. WSJ Editorial

En contra de las afirmaciones del gobierno, las tasas dificultan más los negocios a las pequeñas compañías.
Wall Street Journal, Nov. 5, 2013 11:16 a.m. ET
Translation of  The Cost of Hong Kong's Interventionism to Spanish
http://online.wsj.com/news/articles/SB10001424052702303482504579179251139447562

El gobierno de Hong Kong se ha resistido fuertemente a aceptar a los críticos que sugieren que sus esfuerzos por frenar la actividad del mercado inmobiliario local perjudica su reputación de políticas de libre mercado y pro-crecimiento. Quizá es hora de que se lo piensen de nuevo. Vean el nuevo informe que muestra que la intromisión del gobierno en ese mercado está dañando el clima de los negocios en el Territorio.

Aunque Hong Kong figura en el segundo lugar en el informe Doing Business 2014 del Banco Mundial, publicado la semana pasada, la posición del Territorio en la categoría "facilidad para registrar propiedad" se desplomó del puesto 60 al 89. La caída refleja el incremento hasta el 7.5% en febrero, un 100%, de las tasas aplicables a las transacciones inmobiliarias comerciales (no de viviendas). El gobierno ha tomado esa decisión después de varios intentos por enfriar el mercado residencial con impuestos especiales que simplemente desviaron el capital al mercado no residencial.

El informe Doing Business resalta lo que esos impuestos significan para pequeñas y medianas empresas en términos prácticos. En promedio, la transferencia de una propiedad comercial ahora cuesta el 7.7% de su valor tras añadir impuestos y tasas. Antes de que entrase en vigor la nueva tasa estaba en el 4%, si bien solo es aplicable a las transacciones de mayor cuantía. Aunque otros aspectos de la política económica de HK son pro-crecimiento, esto representa un innecesario coste añadido sobre las pequeñas empresas, que solían ser las mayores beneficiadas de la señera política hongkonesa de mínima interferencia en la economía.

Esto debería ser un llamamiento al gobierno, que ha intentado argumentar desde el principio de sus escarceos en el asunto de la nueva tasa que estas medidas eran excepcionales y afectarían solo a los inmuebles. Los críticos advirtieron en aquel entonces, 2010, que la primera tasa especial sobre propiedades residenciales pondría al Territorio en una pendiente resbaladiza por el abandono de lo que un antiguo ministro de economía llamaba "no intervencionismo decidido". Como respuesta, el portavoz del gobierno, Michael Wong, escribió una carta al director de este periódico prometiendo que el nuevo impuesto "[no tendría más implicaciones para las políticas de bajos impuestos, pro-empresas]", calificando las críticas como "[claramente de magnitud incorrecta]".

El deslizamiento del gobierno hacia los impuestos especiales para la propiedad comercial ha demostrado que los críticos tenían razón y el informe del Banco Mundial indica que las pequeñas empresas están pagando el precio de esta metedura de pata. Por mor de los emprendedores del Territorio, es hora de que el gobierno de HK lleve de nuevo sus políticas inmobiliarias al decidido no intervencionismo que funciona tan bien para otros sectores de la economía.

---
Translation to Catalonian: http://www.bipartisanalliance.com/2013/11/el-cost-de-lintervencionisme-hong-kong.html

---
The Cost of Hong Kong's Interventionism
Contrary to the government's claims, stamp duties are making it harder for small firms to do business in the city.WSJ, Nov. 5, 2013 11:16 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702303482504579179251139447562

Hong Kong's government has steadfastly resisted any suggestion that its efforts to curb the local property market dent its reputation for free-market, pro-growth policies. Maybe it's time they reconsidered. Witness a new report showing that government meddling in property is harming the territory's business climate.

Although Hong Kong ranked second in the World Bank's 2014 Doing Business study released last week, the territory's rank in the ease-of-registering-property category plummeted to 89th from 60th. The drop traces to Hong Kong's doubling of stamp duty on commercial property transactions to 7.5% in February. The government levied this after its earlier attempts to cool the residential market with special taxes merely shunted capital into the commercial real-estate market.

The Doing Business report highlights what these taxes mean to small- and medium-sized businesses in practical terms. On average it now costs 7.7% of a property's value to transfer a commercial property when you include fees and taxes. That's up from 4% before the special stamp duty was implemented, though the duty only applies to larger transactions. Even though other aspects of Hong Kong's economic policies are solidly pro-growth, this represents a needless cost on small firms. They used to be among the biggest beneficiaries of Hong Kong's longstanding policy of minimal interference in the economy.

This should be a wake-up call to the government, which has tried to argue since the beginning of its stamp-duty forays that the measures were unique and would affect only property. Critics warned at the time that the first special duty on residential properties in 2010 put the territory on a slippery slope from its history of what a former financial Secretary called "positive noninterventionism." In response, government spokesman Michael Wong wrote a Letter to the Editor of this paper promising that the new tax would not have "wider implications for the territory's low-tax and business-friendly policies," calling these suggestions "well wide of the mark."

The government's slide into special duties on commercial property proved the critics right, and the World Bank report suggests small businesses are paying the price for this property fumble. For the sake of the territory's entrepreneurs, it's time Hong Kong's government returned its real-estate policies to the positive noninterventionism that works so well in other corners of the economy. 

Monday, October 28, 2013

When he was in power, he was unreasonable and arrogant and considered citizens' rights and the law to be nothing

Rejection of Bo Xilai's Appeal Concludes Chinese Drama. By Jeremy Page
'This Is the Final Verdict,' Court Says om Widely Expected RulingWall Street Journal, Oct. 25, 2013 9:51 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702304799404579157354280260862



Edited:

Mr. Bo burnished his political reputation there by presiding over a sweeping campaign against organized crime that many lawyers and rights activists say disregarded legal norms and [other things we won't mention in this blog.]

"When he was in power, he was unreasonable and arrogant and considered citizens' rights and the law to be nothing," wrote Zhou Yongkun, a professor at Suzhou University's law school, on his microblog.

"As soon as he became a prisoner, he realized the importance of rights, and that the law was his umbrella. But it was too late."

Wednesday, October 23, 2013

Hong Kong's Policies of Impoverishment - A poverty line is another step on Hong Kong's road to serfdom

Hong Kong's Policies of Impoverishment. WSJ Editorial
A poverty line is another step on Hong Kong's road to serfdom.WSJ, Oct. 14, 2013 1:02 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304106704579134973249439240

Hong Kong's decision to create a poverty line puts us in mind of John Cowperthwaite, financial secretary from 1961-71 and one of the chief architects of the territory's free-market system. Sir John famously refused to collect basic economic data on the grounds that statistics only increased the temptation for government to meddle. An arbitrary measure of poverty is a perfect example, since it encourages policies that will undermine the social mobility and economic growth needed to reduce poverty.

Hong Kong's new poverty line was set at one half the median income, which means that 20% of the population is considered poor. The most obvious objection to such a cut-off is that the number of poor will remain relatively stable regardless of their real conditions. If the government gives out money, this will tend to raise the median income and hence the poverty line, necessitating yet more handouts.

Then there's the problem of using income to measure poverty, since many residents, especially the elderly, live on their savings. Those without savings may rely on help from family members. So while poverty is a real problem in Hong Kong that deserves attention, this poverty line is a crude attempt to quantify it.

Nevertheless, many politicians in both the pro-Beijing and pro-democracy camps are eager to expand Hong Kong's small welfare state, and they will no doubt use this new tool to lobby for more benefits. Also, in 2011 a minimum wage came into effect, with the reassurance that it was set low enough to minimize job losses. Now the poverty line is a talking point for raising the minimum wage.

Those in favor of tempering Hong Kong's capitalism with socialist institutions common in the West often argue that they will do less harm since the territory's population has a strong work ethic and the government budget is in surplus. They little consider that these are the results of Sir John's laissez faire framework.

Ironically, the Chinese Communist Party appreciates Hong Kong's capitalist strengths more than local leaders. In the 1990s, after the last British Governor Chris Patten increased social welfare spending 88% in five years, Chinese diplomats warned that "Eurosocialist" policies were like "putting people on a F1 racing car which runs so fast it crashes and kills all its passengers."

Zhou Nan, Beijing's representative in the territory, complained, "The price of the future Special Administrative Region government being forced to live beyond its means would be budgetary imbalance, tax hikes, reduced financial market liquidity which will result in eroded foreign investors' confidence." Sir John couldn't have said it better himself.

Tuesday, August 13, 2013

Views from Japan: Nuclear Weapons

Views from Japan: Nuclear Weapons

Questions to a Japanese citizen:

konnichiwa, dear [xxx]-san

I was reading the book "Strategy in the Second Nuclear Age: Power, Ambition, and the Ultimate Weapon" by Toshi Yoshihara and James R. Holmes (Editors), and there is a chapter on Thinking About the Unthinkable - Tokyo's Nuclear Option

We'd like to publish a post and would like:

1  to have arguments in favor and against (specially in favor, since we never see them published) such nuclear option, made by Japanese politicians;
2  to have your opinion on this.

[...]

Thank you very much, sir.

[signature removed]


---
Answer (edited):
konnichiwa,

how are you going? it's been incredibly hot these days... I almost start melting.

sorry, I haven't read the book. so i'm not very sure my opinions match to your point. anyway, I give you what I see and think. is it about nuclear weapons? (or total nuclear power?) i refer nuke weapons for this moment. please let me know if you need more about nuclear in japan.

1.it seems 3 big opinions among politicians (and citizens too) :

#1. it's better to have nu-bombs. because we are facing dangers of Chinese and North Korean nukes. it's the only way to be against nukes.

#2. let's talk and think about nuclear weapons to possess seriously now. it's actually been the biggest taboo in japan even only to talk about the option because of our experiences of Hiroshima, Nagasaki and recently Fukushima which are big trauma for us. I can call it "nuclear allergy". but we are indeed surrounded and threatened by nu-weapons of China and Korea now. it's the time to think about it... and even just the debates will be able to restrain China and Korea (they know our technology is good enough to make nu-weapons immediately if we try).

#3. nobody should even talk or think about it. all nuclear in the world just should be thrown away and banned. because we've learnt from the past



#2 seems the most major opinion, #1 is a sort of extreme... #3 is mainly supported by liberal people. extreme on the other side.


2. my opinion: I used to think like #3, but slightly have changed to #2. I'm sure #3 is right, but too much ideal. no matter how japan says this to the world, no countries will abandon them (at least near future).

japanese people's been used to live in peace by American forces, however people's started to realize no peace for free. i think we are on the way to "normal" country.

please don't understand me, I believe almost all of people don't want to have nu-weapons in real, people's just getting more serious to think about what our country is and what is the best for us.


I wish I got points you need. mail me if you have something not sure.

best regards(^_^)/

[signature removed]

Wednesday, July 10, 2013

Riot after Chinese teachers try to stop pupils cheating. By Malcolm Moore

Riot after Chinese teachers try to stop pupils cheating. By Malcolm Moore
What should have been a hushed scene of 800 Chinese students diligently sitting their university entrance exams erupted into siege warfare after invigilators tried to stop them from cheating. The Telegraph, Jun 20, 2013
www.telegraph.co.uk/news/worldnews/asia/china/10132391/Riot-after-Chinese-teachers-try-to-stop-pupils-cheating.html

The relatively small city of Zhongxiang in Hubei province has always performed suspiciously well in China's notoriously tough "gaokao" exams, each year winning a disproportionate number of places at the country's elite universities.

Last year, the city received a slap on the wrist from the province's Education department after it discovered 99 identical papers in one subject. Forty five examiners were "harshly criticised" for allowing cheats to prosper.

So this year, a new pilot scheme was introduced to strictly enforce the rules.

When students at the No. 3 high school in Zhongxiang arrived to sit their exams earlier this month, they were dismayed to find they would be supervised not by their own teachers, but by 54 external invigilators randomly drafted in from different schools across the county.

The invigilators wasted no time in using metal detectors to relieve students of their mobile phones and secret transmitters, some of them designed to look like pencil erasers.

A special team of female invigilators was on hand to intimately search female examinees, according to the Southern Weekend newspaper.

Outside the school, meanwhile, a squad of officials patrolled the area to catch people transmitting answers to the examinees. At least two groups were caught trying to communicate with students from a hotel opposite the school gates.

For the students, and for their assembled parents waiting outside the school gates to pick them up afterwards, the new rules were an infringement too far.

As soon as the exams finished, a mob swarmed into the school in protest.

"I picked up my son at midday [from his exam]. He started crying. I asked him what was up and he said a teacher had frisked his body and taken his mobile phone from his underwear. I was furious and I asked him if he could identify the teacher. I said we should go back and find him," one of the protesting fathers, named as Mr Yin, said to the police later.

By late afternoon, the invigilators were trapped in a set of school offices, as groups of students pelted the windows with rocks. Outside, an angry mob of more than 2,000 people had gathered to vent its rage, smashing cars and chanting: "We want fairness. There is no fairness if you do not let us cheat."

According to the protesters, cheating is endemic in China, so being forced to sit the exams without help put their children at a disadvantage.

Teachers trapped in the school took to the internet to call for help. "We are trapped in the exam hall," wrote Kang Yanhong, one of the invigilators, on a Chinese messaging service. "Students are smashing things and trying to break in," she said.

Another of the external invigilators, named Li Yong, was punched in the nose by an angry father. Mr Li had confiscated a mobile phone from his son and then refused a bribe to return the handset.

"I hoped my son would do well in the exams. This supervisor affected his performance, so I was angry," the man, named Zhao, explained to the police later.

Hundreds of police eventually cordoned off the school and the local government conceded that "exam supervision had been too strict and some students did not take it well".

Additional reporting by Adam Wu

Thursday, June 6, 2013

Why China Frets Over America's Retreat. By Daniel Blumenthal

Why China Frets Over America's Retreat. By Daniel Blumenthal
The Wall Street Journal, June 6, 2013, on page A17
Usually Chinese leaders decry Washington's foreign-policy aggression. That won't be an issue at this week's summit.
http://online.wsj.com/article/SB10001424127887324412604578515853119610968.html

When Chinese President Xi Jinping meets with President Obama in California at week's end, Mr. Xi will confront a new strategic reality: America in retreat. Chinese leaders normally complain that Washington is too aggressive. But what should really worry Beijing is the opposite—a bipartisan U.S. consensus for a foreign policy of retrenchment. As much as China aspires to global leadership, Beijing has neither the wherewithal nor the desire to take on the responsibilities that come with that role.

Since the Cold War ended in the early 1990s, Sino-American summitry has followed a pattern to which both countries have grown accustomed. Beijing complains of U.S. heavy-handedness. Washington complains that it shoulders all the burdens of global leadership and asks China to play a more responsible and prominent role in world affairs.

Neither country is serious while doing this minuet. At best Washington is conflicted about a greater leadership role for an authoritarian China. For its part, China has become accustomed to the benefits of a post-World War II American-led (and paid-for) global compact that includes freer markets, more peaceful international relations and more liberal governments.

The temptation to repeat this dance will be great this week. Presidents Xi and Obama will be meeting during a period of deep mutual suspicion. The downward spiral of distrust began in 2009 over escalating tensions about territory between China and its Southeast Asian neighbors, and it reached a new low when then-Secretary of State Hillary Clinton announced a "pivot" toward Asia in 2011.

The pivot strategy has two pillars. The first is a positive desire to deeply embed the U.S. in all of Asia's increasingly vibrant political and economic life. The second is a reaction to growing Chinese dominance in the region, and the resulting clamor—from America's regional allies and in the U.S.—for Washington to counterbalance predatory Chinese military power.

China chose to hear only the second part of the pivot strategy, reacting to it as Cold War-style containment with Asian characteristics. Relations between the two powers have been frosty since then.

Yet if Mr. Xi examines U.S. foreign policy more closely, he will see that Beijing is worried about the wrong things. The problem is not too much American power. It is too little.

Consider recent events in Washington: Mr. Obama announced the end of the war on terror without evidence that the conflict had ended and denied leaks suggesting the imposition of a no-fly zone in Syria. He ignored a new International Atomic Energy Agency report suggesting that Iran is making huge progress in developing nuclear weapons, and refused efforts to restore draconian cuts to the U.S. military budget.

In response—a few outliers notwithstanding—Congress, including Republicans, remained silent. This marked a significant shift. Once the tribune of American global leadership, much of the right now marches in foreign-policy lock step with a left that has little interest in the exercise of U.S. power. This left-right neo-isolationist alliance is a recipe for global chaos—an outcome more harmful to China than the big-footed America that China is used to complaining about.

Why? Because despite China's politically correct paeans to international institutions and multilateralism, Chinese leaders well know that international politics needs a prime actor willing to provide global public goods such as secure maritime trade, peace between great powers, nonproliferation, counterterrorism and leadership on international trade and investment.

If the U.S. abdicates its role, China is the only other nation in line for the post of prime power. Is China ready to assume primacy in the international community? The answer is no.

Granted, China is active on the world stage. Recently President Xi announced proposals for Arab-Israeli peace and a Syrian cease-fire. Once again, Beijing prodded North Korea to open up and reform its economy. But peace proposals, state visits and commercial diplomacy cannot maintain world order.

Taking the global leadership reins from the U.S. would require incurring real costs, taking big risks, using political capital and, if necessary, expending blood and treasure. If China wanted to lead the world, it would build a navy capable of protecting—rather than disrupting—sea lanes. It would contribute to the fight against terror and help to keep cyberspace an open commons for commercial transactions and the sharing of ideas. It is doing none of these things.

Think of it this way: Does China wish to anger anyone in the Middle East by taking sides in Syria or pressuring Iran? Manage the collapse of North Korea? Steward a new era of free trade? Push back al Qaeda?

Chinese leaders appear not to give much consideration to taking on these tasks, nor has Washington thought through what a world with no leader would look like. Does a global system of anti-democratic regional hegemons, spheres of influence, and exclusive trading blocs really appeal?

For all of these reasons, this could be a truly pivotal summit. As counterintuitive as it may seem, for the first time since the Soviet collapse China has an interest in America acting more, not less, assertively in foreign affairs.


Mr. Blumenthal is the director of Asian Studies at the American Enterprise Institute.

South Korea: National Security or National Pride Regarding Japan?, by Krista E. Wiegand

South Korea: National Security or National Pride Regarding Japan?, by Krista E. Wiegand
Asia Pacific Bulletin, No. 214
Washington, D.C.: East-West Center
May 22, 2013
http://www.eastwestcenter.org/publications/south-korea-national-security-or-national-pride-regarding-japan

Krista E. Wiegand is Associate Professor of Political Science at Georgia Southern University and a recent POSCO Visiting Fellow at the East-West Center. She explains in this bulletin that "The South Korean government will not be able to deal with the larger issue of security relations with Japan until disputed issues symbolized by Dokdo/Takeshima are sufficiently resolved—and the likelihood of this happening anytime soon is fairly low."

Excerpts:
The first official state function of newly inaugurated President Park Geun-hye was a ceremony on March 1 commemorating Independence Movement Day—celebrating Korean resistance in 1919 to Japanese occupation—where she appealed: “It is incumbent on Japan to have a correct understanding of history and take on an attitude of responsibility in order to partner with us in playing a leading role in East Asia in the 21st century.” Her speech outlined a hard line stance regarding ROK-Japan relations. It also did not help that at the end of March, the Korean Foreign Ministry summoned a high ranking Japanese official in Seoul to strongly protest the inclusion of the islets as being called Takeshima in newly released Japanese school books. Japanese cabinet members then went to Yasakuni Shrine in April which further exasperated matters, resulting in South Korean Foreign Minister Yun Byung-se cancelling a proposed visit to Japan.

If Park wants to maintain high approval ratings and not lose credibility regarding her tough position towards Japan, she will have to take into account domestic public opinion on any future security plans with Japan, even under US pressure. Yet, taking this tough approach causes unconstructive tensions in the ROK-Japan-US security relationship, and at a time of recent unprecedented heightened tensions on the Korean Peninsula. Moreover, Korea’s role as an increasingly important actor in regional security indicates that Japan and South Korea will have to cooperate more in the future.  They are both democracies, have shared values and interests, and each looks to the United States as the preferred security partner. Park will have to balance Korea’s security interests with domestic opposition to closer ties with Japan, an extremely difficult challenge under current circumstances.

Even if Korean officials are not as supportive of the GSOMIA as their counterparts in Japan and the United States, moving forward on security relations with Japan is critical. Yet, domestic opposition to issues related to Japan has effectively prevented such cooperation. The South Korean government will not be able to deal with the larger issue of security relations with Japan until disputed issues symbolized by Dokdo/ Takeshima are sufficiently resolved—and the likelihood of this happening anytime soon is fairly low. The United States has encouraged better bilateral relations between its two closest allies in East Asia, yet at the same time, the US government has been hesitant to take sides in a dispute that the United States itself inadvertently created as a result of its ambiguity in its role as mediator of the 1951 San Francisco Treaty. President Park and future Korean presidents will have a tough time successfully pursuing any plans of security engagement with Japan as long as the Dokdo/Takeshima dispute and related issues flare up. The United States is in a unique position to influence both Korea and Japan and it should continue to pressure both states to work toward reconciliation.

Saturday, May 25, 2013

Reading Hayek in Beijing. Bret Stephens on Yang Jisheng

Reading Hayek in Beijing. By Bret Stephens
A chronicler of Mao's depredations finds much to worry about in modern China.The Wall Street Journal, May 25, 2013, on page A11
http://online.wsj.com/article/SB10001424127887324659404578501492191072734.html

On Yang Jisheng

In the spring of 1959, Yang Jisheng, then an 18-year-old scholarship student at a boarding school in China's Hubei Province, got an unexpected visit from a childhood friend. "Your father is starving to death!" the friend told him. "Hurry back, and take some rice if you can."

Granted leave from his school, Mr. Yang rushed to his family farm. "The elm tree in front of our house had been reduced to a barkless trunk," he recalled, "and even its roots had been dug up." Entering his home, he found his father "half-reclined on his bed, his eyes sunken and lifeless, his face gaunt, the skin creased and flaccid . . . I was shocked with the realization that the term skin and bones referred to something so horrible and cruel."

Mr. Yang's father would die within three days. Yet it would take years before Mr. Yang learned that what happened to his father was not an isolated incident. He was one of the 36 million Chinese who succumbed to famine between 1958 and 1962.

It would take years more for him to realize that the source of all the suffering was not nature: There were no major droughts or floods in China in the famine years. Rather, the cause was man, and one man in particular: Mao Zedong, the Great Helmsman, whose visage still stares down on Beijing's Tiananmen Square from atop the gates of the Forbidden City.

Mr. Yang went on to make his career, first as a journalist and senior editor with the Xinhua News Agency, then as a historian whose unflinching scholarship has brought him into increasing conflict with the Communist Party—of which he nonetheless remains a member. Now 72 and a resident of Beijing, he's in New York this month to receive the Manhattan Institute's Hayek Prize for "Tombstone," his painstakingly researched, definitive history of the famine. On a visit to the Journal's headquarters, his affinity for the prize's namesake becomes clear.

"This book had a huge impact on me," he says, holding up his dog-eared Chinese translation of Friedrich Hayek's "The Road to Serfdom." Hayek's book, he explains, was originally translated into Chinese in 1962 as "an 'internal reference' for top leaders," meaning it was forbidden fruit to everyone else. Only in 1997 was a redacted translation made publicly available, complete with an editor's preface denouncing Hayek as "not in line with the facts," and "conceptually mixed up."

Mr. Yang quickly saw that in Hayek's warnings about the dangers of economic centralization lay both the ultimate explanation for the tragedies of his youth—and the predicaments of China's present. "In a country where the sole employer is the state," Hayek had observed, "opposition means death by slow starvation."

So it was in 1958 as Mao initiated his Great Leap Forward, demanding huge increases in grain and steel production. Peasants were forced to work intolerable hours to meet impossible grain quotas, often employing disastrous agricultural methods inspired by the quack Soviet agronomist Trofim Lysenko. The grain that was produced was shipped to the cities, and even exported abroad, with no allowances made to feed the peasants adequately. Starving peasants were prevented from fleeing their districts to find food. Cannibalism, including parents eating their own children, became commonplace.

"Mao's powers expanded from the people's minds to their stomachs," Mr. Yang says. "Whatever the Chinese people's brains were thinking and what their stomachs were receiving were all under the control of Mao. . . . His powers extended to every inch of the field, and every factory, every workroom of a factory, every family in China."

All the while, sympathetic Western journalists—America's Edgar Snow and Britain's Felix Greene in particular—were invited on carefully orchestrated tours so they could "refute" rumors of mass starvation. To this day, few people realize that Mao's forced famine was the single greatest atrocity of the 20th century, exceeding by orders of magnitude the Rwandan genocide, the Cambodian Killing Fields and the Holocaust.

The power of Mr. Yang's book lies in its hauntingly precise descriptions of the cruelty of party officials, the suffering of the peasants, the pervasive dread of being called "a right deviationist" for telling the truth that quotas weren't being met and that millions were being starved to death, and the toadyism of Mao lieutenants.

Yet the book is more than a history of a uniquely cruel regime at a receding moment in time. It is also a warning of what lies at the end of the road for nations that substitute individualism with any form of collectivism, no matter what the motives. Which brings Mr. Yang to the present day.

"China's economy is not what [Party leaders] claim as the 'socialist-market economy,' " he says. "It's a 'power-market' economy."

What does that mean?

"It means the market is controlled by the power. . . . For example, the land: Any permit to enter any sector, to do any business has to be approved by the government. Even local government, down to the county level. So every county operates like an enterprise, a company. The party secretary of the county is the CEO, the president."

Put another way, the conventional notion that the modern Chinese system combines political authoritarianism with economic liberalism is mistaken: A more accurate description of the recipe is dictatorship and cronyism, with the results showing up in rampant corruption, environmental degradation and wide inequalities between the politically well-connected and everyone else. "There are two major forms of hatred" in China today, Mr. Yang explains. "Hatred toward the rich; hatred toward the powerful, the officials." As often as not they are one and the same.

Yet isn't China a vastly freer place than it was in the days of Mr. Yang's youth? He allows that the party's top priority in the post-Mao era has been to improve the lot of the peasantry, "to deal with how to fill the stomach."

He also acknowledges that there's more intellectual freedom. "I would have been executed if I had this book published 40 years ago," he notes. "I would have been imprisoned if this book was out 30 years ago. Now the result is that I'm not allowed to get any articles published in the mainstream media." The Chinese-language version of "Tombstone" was published in Hong Kong but is banned on the mainland.

There is, of course, a rational reason why the regime tolerates Mr. Yang. To survive, the regime needs to censor vast amounts of information—what Mr. Yang calls "the ruling technique" of Chinese leaders across the centuries. Yet censorship isn't enough: It also needs a certain number of people who understand the full truth about the Maoist system so that the party will never repeat its mistakes, even as it keeps the cult of Mao alive in order to preserve its political legitimacy. That's especially true today as China is being swept by a wave of Maoist nostalgia among people who, Mr. Yang says, "abstract Mao as this symbol of social justice," and then use that abstraction to criticize the current regime.

"Ten million workers get laid off in the state-owned enterprise reforms," he explains. "So many people are dissatisfied with the reforms. Then they become nostalgic and think the Mao era was much better. Because they never experienced the Mao era!" One of the leaders of that revival, incidentally, was Bo Xilai, the powerful former Chongqing party chief, brought down in a murder scandal last year.

But there's a more sinister reason why Mr. Yang is tolerated. Put simply, the regime needs some people to have a degree of intellectual freedom, in order to more perfectly maintain its dictatorship over everyone else.

"Once I gave a lecture to leaders at a government bureau," Mr. Yang recalls. "I told them it's a dangerous job, you guys, being officials, because you have too much power. I said you guys have to be careful because those who want approval from you to get certain land and projects, who bribe you, these are like bullets, ammunition, coated in sugar, to fire at you. So today you may be a top official, tomorrow you may be a prisoner."

How did the officials react to that one?

"They said, 'Professor Yang, what you said, we should pay attention.' "

So they should. As Hayek wrote in his famous essay on "The Use of Knowledge in a Society," the fundamental problem of any planned system is that "knowledge of circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess."

The Great Leap Forward was an extreme example of what happens when a coercive state, operating on the conceit of perfect knowledge, attempts to achieve some end. Even today the regime seems to think it's possible to know everything—one reason they devote so many resources to monitoring domestic websites and hacking into the servers of Western companies. But the problem of incomplete knowledge can't be solved in an authoritarian system that refuses to cede power to the separate people who possess that knowledge.

"For the last 20 years, the Chinese government has been saying they have to change the growth mode of the economy," Mr. Yang notes. "So they've been saying, rather than just merely expanding the economy they should do internal changes, meaning more value-added services and high tech. They've been shouting such slogans for 20 years, and not many results. Why haven't we seen many changes? Because it's the problem that lies in the very system, because it's a power-market economy. . . . If the politics isn't changed, the growth mode cannot be changed."

That suggests China will never become a mature power until it becomes a democratic one. As to whether that will happen anytime soon, Mr. Yang seems doubtful: The one opinion widely shared by rulers and ruled alike in China is that without the Communist Party's leadership, "China will be thrown into chaos."

Still, Mr. Yang hardly seems to have given up hope that he can play a role in raising his country's prospects. In particular, he's keen to reclaim two ideas at risk of being lost in today's China.

The first is the meaning of rights. A saying attributed to the philosopher Lao Tzu, he says, has it that a ruler should fill the people's stomachs and empty their heads. The gambit of China's current rulers is that they can stay in power forever by applying that maxim. Mr. Yang hopes they're wrong.

"People have more needs than just eating!" he insists. "In China, human rights means the right to survive, and I argue with these people. This is not human rights, it's animal rights. People have all sorts of needs. Spiritual needs, the need to be free, the freedoms."

The second is the obligation of memory. China today is a country galloping into a century many people believe it will define, one way or the other. Yet the past, Mr. Yang insists, also has its claims.

"If a people cannot face their history, these people won't have a future. That was one of the purposes for me to write this book. I wrote a lot of hard facts, tragedies. I wanted people to learn a lesson, so we can be far away from the darkness, far away from tragedies, and won't repeat them."

Hayek would have understood both points well.

Mr. Stephens writes "Global View," the Journal's foreign-affairs column.

Wednesday, May 8, 2013

Can a Growing Services Sector Renew Asia's Economic Growth?

Can a Growing Services Sector Renew Asia's Economic Growth? By Marcus Noland, Donghyun Park, and Gemma B. Estrada
AsiaPacific Issues, No. 109
Honolulu: East-West Center, April 2013
Pages: 8
http://www.eastwestcenter.org/publications/can-growing-services-sector-renew-asias-economic-growth

To continue Asia's economic growth the focus for expansion and improvement must move from export manufacturing to the services sector--primarily to cross-border trade in such modern services as finance, information and communication, and professional business services. As the Asian services-sector economies have historically been dominated by personal services rather than by more information-intensive services, serious concerns exist about their ability to rapidly and successfully grow these modern services. While Asia does have some well-known services-sector success stories--such as in India and the Philippines--most Asian services economies have a history of relatively slow developmental change. Removing internal and external policy and structural constraints will be key to productivity growth in modern cross-border services trade. Improving educational opportunities and strengthening infrastructure and capital and labor markets will all be needed complements to regulatory reform if Asia is to grow new and innovative service providers.

Saturday, April 27, 2013

South Korea: Give Nukes a Chance. By Denny Roy

South Korea: Give Nukes a Chance. By Denny Roy
Asia Pacific Bulletin, no. 204
Washington, D.C.: East-West Center
March 27, 2013
http://www.eastwestcenter.org/publications/south-korea-give-nukes-chance

Excerpts:

It is only a matter of time before North Korea fields an actual nuclear-tipped missile that works. With the persistent security threat from North Korea seemingly worsening, recent public opinion surveys show that a majority of South Koreans favor getting their own nuclear weapons. There is no doubt that South Korea is capable of making its own nuclear weapons, probably within a year. Indeed, the Republic of Korea (ROK) has explored this possibility occasionally since the 1970s, each time backing off under outside pressure.

There are some good reasons why, in principle, the world is better off with a smaller, rather than larger, number of nuclear weapon states. Nevertheless, there are two additional principles that apply here. First, nuclear weapons are a powerful deterrent; they are the main reason why the Cold War remained cold. Second, there may be a specific circumstance in which the introduction of a new nuclear weapons capability has a constructive influence on international security—call it the exception to the general nonproliferation rule.

Given the ROK’s present circumstances, Washington and Seoul should seriously consider the following policy change. Seoul gives the required 90 days notice required for it to withdraw from the Nuclear Nonproliferation Treaty, which allows for deratification in the case of “extraordinary events” that threaten national security. The ROK announces its intention to begin working toward a nuclear weapons capability, with the following conditions: (1) the South Korean program will match North Korea’s progress step-by-step towards deploying a reliable nuclear-armed missile; and (2) Seoul will commit to halting and shelving its program if North Korea does the same. For its part, Washington announces that US nonproliferation policy is compelled to tolerate an exception when a law-abiding state is threatened by a rogue state—in this case North Korea—that has both acquired nuclear weapons and threatened to use them aggressively. Pyongyang has repeatedly spoken of using its nuclear weapons to devastate both the ROK and the United States.

This policy change is necessary because US, ROK and (half-hearted) Chinese efforts to get North Korea to denuclearize are not working. [...]

An ROK nuclear weapons capability would impose a meaningful penalty on the DPRK for its nuclear weapons program. Aside from the sanctions ordered by the United Nations Security Council, which have proved no more than a nuisance and are amply compensated for by the growing economic relationship with China, Pyongyang has suffered no significant negative consequences for acquiring nuclear weapons. A South Korean nuclear capability would change that. The North Koreans would understand that their act brought about an outcome they very much do not want [...].

ROK nukes, furthermore, will help deter North Korean provocations. A capacity to attack a neighbor with nuclear weapons provides North Korea with cover for limited conventional attacks. Pyongyang has established a pattern of using quick, sharp jabs against South Korea. The goal is to rattle Seoul into accommodating North Korean economic and political demands. Seoul insists that future North Korean attacks will result in military retaliation by South Korean forces. Since South Korea has not hit back after previous incidents, it is uncertain whether this pledge will deter Pyongyang from trying this tactic again. A DPRK nuclear weapons capability worsens this already dangerous situation. North Korean planners might conclude that Seoul would not dare retaliate against a DPRK strike out of fear that the next step would be a nuclear attack on the ROK. A South Korean nuclear capability, however, would redress this imbalance. If ROK conventional military capabilities are superior to the DPRK and equal or superior at the nuclear level, deterrence against a North Korean attack is stronger.

South Korean nukes would close the credibility gap in the US-ROK alliance. The “umbrella” of America’s nuclear arsenal covers South Korea and theoretically negates the DPRK nuclear threat. However, South Koreans have always questioned the reliability of this commitment which potentially puts a US city at risk in order to protect a South Korean city. The doubts are growing more acute now that a North Korean capability is apparently close to realization. An ROK nuclear arsenal would remove this strain on the alliance and give the South Koreans a sense of greater control over their own destiny.

Pyongyang would not be the only target audience for Seoul’s announcement of intent to deploy nuclear weapons. Like the North Koreans, the People’s Republic of China (PRC) is deeply opposed to an ROK nuclear capability. The announcement would also signal to Beijing that the cost of failing to discipline their client state is rising dramatically. The Chinese are already debating whether the status quo of a rogue DPRK has become so adverse to Chinese interests that China must pressure Pyongyang more heavily even at the risk of causing regime collapse. South Korea’s imminent—and reversible—acquisition of nuclear weapons would strengthen the argument that the PRC must get tougher with the DPRK.

To be sure, this policy change would create its own problems. An ROK nuclear capability would pressure Japan to follow suit. A US-friendly, stable, law-abiding, liberal democratic country getting nukes is not necessarily a bad thing. But if so, the solution is for Washington and Seoul to emphasize that South Korea’s nuclear capability would be temporary and contingent, so Tokyo can remain non-nuclear.  Thankfully, there are precedents for middle-sized states giving up their nuclear weapons.

South Korea’s security situation is deteriorating and for the ROK’s leadership, national security is job number one. It is now time to get past the visceral opposition to proliferation and recognize that in this case, a conditional change of South Korea’s status to nuclear-weapon state can help manage the dangers created by a heightened North Korean threat.

Monday, April 1, 2013

China's Demography and its Implications

China's Demography and its Implications. By Il Houng Lee, Qingjun Xu, and Murtaza Syed
IMF Working Paper No. 13/82
Mar 28, 2013
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40446.0

Summary: In coming decades, China will undergo a notable demographic transformation, with its old-age dependency ratio doubling to 24 percent by 2030 and rising even more precipitously thereafter. This paper uses the permanent income hypothesis to reassess national savings behavior, with greater prominence and more careful consideration given to the role played by changing demography. We use a forward-looking and dynamic approach that considers the entire population distribution. We find that this not only holds up well empirically but may also be superior to the static dependency ratios typically employed in the literature. Going further, we simulate global savings behavior based on our framework and find that China’s demographics should have induced a negative current account in the 2000s and a positive one in the 2010s given the rising share of prime savers, only turning negative around 2045. The opposite is true for the United States and Western Europe. The observed divergence in current account outcomes from the simulated path appears to have been partly policy induced. Over the next couple of decades, individual countries’ convergence toward the simulated savings pattern will be influenced by their past divergences and future policy choices. Other implications arising from China’s demography, including the growth model, the pension system, the labor market, and the public finances are also briefly reviewed.

China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency

China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency. By Il Houng Lee, Murtaza Syed, and Liu Xueyan (Xueyan Liu???)
IMF Working Paper No. 13/83
March 29, 2013

http://www.imf.org/external/pubs/cat/longres.aspx?sk=40446.0

Summary: This paper proposes a possible framework for identifying excessive investment. Based on this method, it finds evidence that some types of investment are becoming excessive in China, particularly in inland provinces. In these regions, private consumption has on average become more dependent on investment (rather than vice versa) and the impact is relatively short-lived, necessitating ever higher levels of investment to maintain economic activity. By contrast, private consumption has become more self-sustaining in coastal provinces, in large part because investment here tends to benefit household incomes more than corporates. If existing trends continue, valuable resources could be wasted at a time when China’s ability to finance investment is facing increasing constraints due to dwindling land, labor, and government resources and becoming more reliant on liquidity expansion, with attendant risks of financial instability and asset bubbles. Thus, investment should not be indiscriminately directed toward urbanization or industrialization of Western regions but shifted toward sectors with greater and more lasting spillovers to household income and consumption. In this context, investment in agriculture and services is found to be superior to that in manufacturing and real estate. Financial reform would facilitate such a reorientation, helping China to enhance capital efficiency and keep growth buoyant even as aggregate investment is lowered to sustainable levels.

Friday, March 29, 2013

America's Voluntary Standards System: A 'Best Practice' Model for Asian Innovation Policies? By Dieter Ernst

America's Voluntary Standards System: A 'Best Practice' Model for Asian Innovation Policies? By Dieter Ernst
East-West Center, Policy Studies, No. 66, March 2013
ISBN: 978-0-309-26204-5 (print); 978-0-86638-205-2 (electronic)
Pages: xvi, 66
http://www.eastwestcenter.org/publications/americas-voluntary-standards-system-best-practice-model-asian-innovation-policies


Summary

Across Asia there is a keen interest in the potential advantages of America's market-led system of voluntary standards and its contribution to US innovation leadership in complex technologies.

For its proponents, the US tradition of bottom-up, decentralized, informal, market-led standardization is a "best practice" model for innovation policy. Observers in Asia are, however, concerned about possible drawbacks of a standards system largely driven by the private sector.

This study reviews the historical roots of the American system, examines its defining characteristics, and highlights its strengths and weaknesses. A tradition of decentralized local self-government has given voice to diverse stakeholders in innovation. However, a lack of effective coordination of multiple stakeholder strategies constrains effective and open standardization processes.

Asian countries seeking to improve their standards systems should study the strengths and weaknesses of the American system. Attempts to replicate the US standards system will face clear limitations--persistent differences in Asia's economic institutions, levels of development, and growth models are bound to limit convergence to a US-style market-led voluntary standards system.

Wednesday, March 27, 2013

How Effective are Macroprudential Policies in China? By Bin Wang and Tao Sun

How Effective are Macroprudential Policies in China? By Bin Wang and Tao Sun
IMF Working Paper No. 13/75
March 27, 2013
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40425.0

Summary: This paper investigates macroprudential policies and their role in containing systemic risk in China. It shows that China faces systemic risk in both the time (procyclicality) and cross-sectional (contagion) dimensions. The former is reflected as credit and asset price risks, while the latter is reflected as the links between the banking sector and informal financing and local government financing platforms. Empirical analysis based on 171 banks shows that some macroprudential policy tools (e.g., the reserve requirement ratio and house-related policies) are useful, but they cannot guarantee protection against systemic risk in the current economic and financial environment. Nevertheless, better-targeted macroprudential policies have greater potential to contain systemic risk pertaining to the different sizes of the banks and their location in regions with different levels of economic development. Complementing macroprudential policies with further reforms, including further commercialization of large banks, would help improve the effectiveness of those policies in containing systemic risk in China.


ISBN/ISSN: 9781484355886 / 2227-8885

Tuesday, March 5, 2013

Reef and Relations: Is the Philippines-US Alliance Finally Maturing? By Julio S. Amador III

Reef and Relations: Is the Philippines-US Alliance Finally Maturing? By Julio S. Amador III
Washington, D.C.: East-West Center. February 26, 2013
Asia Pacific Bulletin, No. 202
http://www.eastwestcenter.org/publications/reef-and-relations-the-philippines-us-alliance-finally-maturing

Julio S. Amador III, Foreign Affairs Research Specialist at the Foreign Service Institute of the Philippines, explains that the recent grounding in Filipino waters of the USS Guardian, "[s]hows just how delicate managing alliances can be, and the response by the Filipino and US governments also demonstrates a level of maturity in managing the issue."

Excerpts:

The two countries have had a long history of working together and the military aspect of the alliance is an important facet of the overall relationship, but further cooperation in other areas should be emphasized and supported. The incident in Tubbataha opens up a new opportunity to cooperate on environmental protection, which is an issue that strikes a chord among citizens of both countries. Already, there are reports that the US government is willing to provide additional assistance including radar and communications equipment to help the Philippines’ reef rangers and coast guard improve their capacity to protect Tubbataha. This would be of great value in ensuring the reef’s survival. Further collaboration should be encouraged such as scientific partnerships between marine science institutions in the United States and the Philippines, environmental tourism, and investment in coral reef conservation.

Protocols that cover US naval movements near protected areas could also be adopted so that future accidents can be avoided. As a result of this incident, such a move could allay any fears that the United States is running roughshod over the Philippines. Acknowledging local expertise and information should also be something that US naval officers take into consideration when navigating through Philippine waters. On the Philippine side, coordination among the various government agencies involved should be emphasized so that there are no conflicting messages. A
lead agency should be designated that addresses this issue on behalf of the government. A comprehensive rehabilitation plan for Tubbataha also needs to be developed to showcase how serious both two sides are in managing the aftermath of the incident.

Going forward, managing the alliance should not be too difficult for the Philippines and the United States, as both states have a long history of working and cooperating together. That does not detract from the fact that US officials should be more respectful of Philippine navigational laws and restrictions regarding its sovereign territory. Nor should it make the Philippine side complacent with regard to implementing its environmental laws. However, what this incident illustrates is the capacity of the allies to be more mature in managing a potentially serious diplomatic incident.

That the United States has already acknowledged some responsibility is an indication of its respect towards its ally. The Philippine side, meanwhile, has demonstrated a pragmatic and principled stance to an otherwise incendiary issue; thus, the government’s ability to be firm with regard to the implementation of its environmental laws and its capacity to separate this issue from the military relationship is commendable.

How the two allies will work together after this incident will be a good indication of the maturity and future direction of the alliance. Looking at the current situation, the outlook is positive.