Liu Xiang

Every August of the last three years I have written an entry about the Chinese track-and-field star Liu Xiang.  Here are the earlier such entries:

2008
2009
2010 

Here is a trip down memory lane from the China Herald, their thoughts back in 2008 about "what killed Liu Xiang's Olympic ambitions?"

There is some news about Liu.  This year he is expected to be the PRC's star in the IAAF World Championships, to be held in Daegu, from August 28 to September 4.  The IAAF, by the way, the the International Association of Athletics Federations, and Daegu is the fourth-largest city in the Republic of Korea.

Apparently, in the hurdles, Liu has adopted a new technique since his injury, approaching the first hurdle in seven strides instead of -- as in his earlier days --  in eight.  Here is a discussion from China's Xinhua News Agency.

In that event Liu will face tough competition in the 110 meter hurdles from a US star, David Oliver, who has a season best in this event of 12.94 seconds. Liu's season best is 13 seconds flat.

Here's an Oliver biography.

Due respect to Oliver, but this blog has adopted Liu as its track-and-field fav, and we'll be cheering him on.  Besides, it's a good bet he won't be suffering from jet lag the way Oliver might be at the Daegu competition!

And there's London next year, i.e. the 2012 Olympics.  I'm psyched already.

Chimerica: An Exchange

Two valuable pundits, Niall Ferguson and James Fallows, last month discussed the question what is wrong with Chimerica, and how may it be fixed.

The premise of this discussion is that the People's Republic of China and the United States of America have entered into an implicit alliance, with China supplying the cash for the implicit hegemon.

So the world is run by Chimerica and Chimerica still has to figure out how it is to be run.

That is all the background you need. Click on the link and decide what you think. Thanks.

Why Didn't Liu Run

I've been enjoying the Olympics. I hope you have, as well, dear reader.

There was something of a disappointment for aficionados of track and field events around the world, and especially in the host country, early this week. Liu Xiang withdrew from the men's 110 meter hurdles.

At the last Olympics, in Athens, Liu won the gold in that event. It was a stereotype-shattering event, too. He became the first athlete not of African descent to complete that event in less than 13 seconds. The stereotype of Asian men, of course, is "brainy, not athletic."

Liu has expressed himself in terms that acknowledge the stereotypes. "I want to prove to the world that Asians can run very fast."

Consider it proven. Indeed, in 2006, at an event in Lausanne, Liu set a new world's record in this event at 12.88 seconds.

But while his home country is hosting the Olympic games, the reigning king of the sport has withdrawn! And the gold went this week to a Cuban athlete who -- if I may say so without giving offense -- does look like the stereotypical track-and-field star. That winner, Dayron Robles by name, ran the course in 12.93 seconds. Intriguingly, then, Robles ran slower than Liu's best (but a bit more quickly than Liu had run when winning in Athens).

Why did Liu pull out? There seems to be some confusion about that point. The Epoch Times, claims there's a cover up.

Epoch Times has its own political agenda here. It's a China-themed periodical printed in New York City, in both Chinese and English editions, specifically for the purpose of tracking human rights violations by the PRC, and it is sometimes seen as a mouthpiece for the Falun Gong. Some scholars have reportedly been impressed by the network of sources the paper appears to have cultivated within the country.

So coverage of an injury to an Achilles tendon would seem rather trivial for The Epoch Times, wouldn't it? Ah, but they've run an article suggesting that Liu had some sort of "leg injury" even before the games, and that authorities knew that he wouldn't repeat at the gold, but hid this from the public until the last possible moment, staging the pull-out to minimize the popular discontent it was expected to create.

Do I care when precisely Liu was injured? No, but if the paper is at all right, then it is on to a broader point: the kind of extensive information control the State there seeks to exercise over everything does seem chilling.

Personally, I'd just like some day to see Liu and his very best and Robles at his very best running down the same track at the same time, taking the hurdles. With the same wind at their backs.

The Beijing Olympics

Opening ceremonies take place tomorrow.

Since the number 8 itself is considered lucky in China, the idea of opening their games on 8/8/08 especially appealed to the hosts.

Just free-associating here, but hey, it's my blog: the comic strip Doonesbury has used the Olympics as a way of re-uniting Duke with "Honey," the woman who served as his aide and gal-Friday when Duke was ambassador to China in the 1970s.

Duke is now a public-relations consultant for tyrants. In particular, he is trying to refurbish the image of a dictator from a central Asian country with a name that ends in "-stan," trying to make the world forget some nasty bit of ethnic cleansing there.

In the service of that goal, Duke has built up the -Stan country's Olympic team with some ringers, and accompanied the lot of them to China. That of course is where he re-encounters Honey, who is in charge of Olympic credentialing.

Of course, they've run into each other repeatedly since the 1970s. I believe their most recent encounters involved post-hurricane Katrina recovery efforts on the Gulf of Mexico three years ago. That is what honey refers to in yesterday's strip.

Now she's a "powerful sports bureaucrat" who feels no "sexual tension" while in the room with Duke. I love it.

Let the games begin.

Development and the Tibet Riots

This is a passage from the latest issue of "Robert Hsu's China Strategy," a newsletter for actual or potential investors in that country.

"There is ... wide resentment among the poor Tibetans due to the economic disparity between the elite -- comprised of enterprising Chinese migrants and upper-class Tibetans -- and the impoverished masses. With the billions of dollars that China has flooded into Tibet over the past decade, many upper-class Tibetans and Chinese migrant entrepreneurs prospered greatly. The majority of Tibetans, however, were left out of the economic prosperity.

"The Tibet economy has grown around 12% per year for the past seven years. But due to the region's harsh environment and weak economy, Tibet is still one of the most underdeveloped regions in China."

It sounds like Mr. Hsu is buying the Chinese government's 'line' here. The growth of 12% a year would be a pointless abstraction to most of those "impoverished masses" if they aren't sharing in it.

Also, why has China (meaning, presumably, the government of China) "flooded" those billions of dollars into Tibet, if the "harsh environment" condemns the economy to weakness anyway? Is it a continuing subsidy for the "Chinese migrant entrepreneurs?

I often find Mr. Hsu's newsletter informative (though I don't personally invest in China and don't suggest it unless you really have money you could do without) -- still ... still, I think his discussion of Tibet/China politics leaves much to be desired.

SFAIK, all the real development in China in recent years has taken place along the Pacific coast -- the further from the coast one gets, with Tibet as the limit, the less visible the 21st century itself becomes. If the government is actually putting billions into Tibetan development, it will almost certainly fail, and accordingly to the facts as Mr. Hsu states them IS failing, to achieve any effect other than the enrichment of some of its cronies. Furthermore, logically the money for such a transfer must be coming from the dynamic economies of the coast -- youcan only take wealth from where it is. So the 'development' plans might be killing the proverbial goose.

'Tis ever thus.

The Path of the Olympic Torch

Here, just in case you're wondering, is a selective chronology of the Olympic torch's meandering progress toward Beijing.

March 24, the lighting ceremony in Greece, followed by six days of relays within that country, before the torch bearer flies to Russia. The final day's events have to be cut short due to Tibet-related protests.

April 6, Britain. The first major disruption as the flame is passing through London. Bobbies make 37 arrests.

April 9, the US. Authorities make a last-minute change in the route through San Francisco (the only US city visited) in order to confuse protestors.

April 10, The president of the IOC dismisses suggestions that the relay be curtailed.

April 13, Tanzania, The only stop on the continent of Africa. Itinerary takes torch through the capital city, Dar es Salaam. No incidents.

April 17, India. At least 170 Tibetan monks are arrested near the relay route in New Delhi.

April 22, Indonesia. The torch paraded at an invitation-only event in Jakarta held under very heavy security. It sputters out and has to be re-lit.

April 26, Japan. There are scuffles in the ski-resort town of Nagano, where more than 85,000 people packed the streets, and at least 4 people were injured, despite the presence of 3,000 police.

May 2, China. Flame arrives at the destination country (though there's a good deal of travelling ahead for it.) Hong Kong.

May 3, Macau. (This was yesterday, as I'm typing these words on the other side of the date line from Macau.) No disruptions -- the torch was guarded through Macau by two columns of paramilitary police. Spectators chanting "Go China."

The flame is scheduled to visit Tibet in the middle of June. That may be interesting.

U.S. Trade Deficit

Okay, so not everything I have to say about economics and finance will go onto my other site, despite the bifurcation.

Proxypartisans.blogspot.com will get the micro-economic stuff, which will free me up to be macro when I write here.

Today, let's say a little something about the U.S. trade deficit, which is the one of our nation's problems that troubles me the most -- the war saddens me, but the trade deficit troubles me.

I'll begin with what must be the least controversial statement possible on the subject. The trade deficit comes about because, by definition, the US is selling to the rest of the world less than what we collectively are buying from the rest of the world.

The US/China trade deficit has caused the greatest amount of angst, although to talk about these things in bilateral terms always risks distortion. Consider my relationship with my barber. He cuts hair for a living, I write about economics for a living. He doesn't have any need of my services -- except perhaps very indirectly -- I have regular need of his. So I'm in a drastic condition of trade deficit vis-a-vis my barber.

Fortunately, I'm in a condition of trade surplus vis-a-vis my employer, so I use the proceeds from the labor I sell to pay for the haircuts I buy.

The problem arises, though, when I'm in a trade deficit as against the rest of the world. And the problem compounds as that trade deficit preserves itself year after year, decade after decade, and I have to borrow from the rest of the world in order to finance my purchases from the rest of the world.

This is a dynamic situation. On a national level, its the de-something-or-other. Deindustrialization? Maybe not. But de-something. And on a national level, too, it is worth noting, whatever the particular terminology you wish to adopt for it.

Fortunately, things may be improving. The US trade deficit decreased somewhat in August 2007, the last month for which statistics are available. But it decreased to the still quite impressive number of $57.6 billion. In other words, in August the United States sold the rest of the world goods and services worth $138.3 billion. We bought from the rest of the world goods and services worth $195.9 billion.

Blaming "the media" doesn't cut it. Don't shoot the messenger. That is real news about which there ought to be more reporting, not less. This sort of deficit has become almost taken for granted over the last twenty years or so. Google the phrase "Plaza Agreement 1985" and you'll see what I mean.

WTO

The US has several outstanding complaints against China before the World Trade Organization.

In conjunction with Mexico, the US has complained for example that China is providing illegal subsidies to its paper industry. Separately, the US claims a failure on China's part to protect intellectual property rights, and has joined with the European Union to object to China's tax system which effectively blocks the import of foreign-made auto parts.

Some of this is simply political cover. The administration wants to be able to make the case that its addressing the trade imbalance. The fact, though, is that the imbalance has macro causes and the WTO offers only micro solutions.

"So what is a solution" you might ask. I don't know that there is one, certainly not on a bilateral basis. To use an example I've picked up from George Will: I have a grave trade imbalance with my barber. I regularly pay him for a haircut and a shave, and he never buys anything from me - because he has no need of a writer.

The trick is to be in balance over-all. If my writing -- or Mr. Wills' -- brings either of us enough income to buy haircuts and everything else we want to buy, we needn't worry about bilateral balances.

Unfortunately, the US isn't in that situation either. We have an over-all trade deficit, and have had one for a long time. It amounted to $190 billion dollars more spent than received in the second quarter of 2007. That is worrisome.

Should I now act like a responsible citizen and propose something that can be done about it? Nah. I'm an anarchist, after all. An anarcho-capitalist, to be exact. Sovereignty is at the heart of the world's problems, and what to do about all of them is to free our minds from the grip of that premise.

Still ... such statistics do indicate to me that we in North America have a rocky road ahead of us and we continue to fall into debt buying the rest of the world's stuff. The bills will come due. And complaints to the WTO won't help us much.

Time after Time

I'm back in town.

So, what should we talk about today? This: someone asked me recently, pretty much out of the blue, what I would list as the ten most important events in the world since 1993. I was allowed to interpret the word "important" any way I wanted to.

I composed a list. But I'm not going to share that with you until tomorrow. Today, I want to discuss the nature of such questions.

I can only understand such a question as an effort to predict which events will make it into the history books of our posterity, and how much text or emphasis each will receive there. Of course a phrase like "our posterity" is still vague, but we might just for fun pick the date 2107. What will a historian, writing then, regard as most important to know about the years 1993-2007?

I suspect that history will remain a matter of constructing narratives, and won't deteriorate into a mere data base. Narrative history responds to the human love of stories, of plots, and adds the assurance, "by the way, it really happened." Contrary narratives keep the blodd boiling and the word processing software upgrades selling.

Furthermore, I'm going to indulge for now in the supposition that anarchists aren't going to prevail in the world any time soon, and that the central narrative of history books written in 2107 will continue to involve sovereignty. Various governments claiming sovereignty over various chunks of the earth, and their clashes with rebels who deny that authority as well as with foes from outside their chunk. History will continue to be largely (though it won't of course be entirely) a matter of past politics, past military actions, past diplomacy.

Other sorts of history (the stories of technical inventions, of commerce and finance, of everyday life) will continue to make contributions, but developments in each will be perceived as "important" to the extent that they feed into the central narrative of sovereigns, rebels, and foes.

To illustrate, here are ten events from the period 1842-1856.

We'll start with international war and diplomacy:

1. The Anglo-Chinese, or Opium, Wars.
2. A wave of revolutions, 1848-49, swept the occidental world from Brazil to Hungary.
3. November 1853, a battle between the Russian and Ottoman fleets ended in a clear victory for the former and began the Crimean War.

Now let's say something about the national politics (narrowly understood) of some of the leading powers of the day.
4. May 1846, the UK repealed its "corn laws," allowing the unimpeded importation of agricultural products. This became a key victory of free trade as a political/ideological platform.
5. December 1851, Louis Napoleon dissolved the National Assembly in France, effectively ending the life of the Second Republic.
6. 1855, the first legislature of the territory of Kansas in the US convened, and started enacting pro-slavery legislation.

What else? Well, let's try a bit of everything else.
7. 1844, in Illinois, religious leader Joseph Smith is murdered
8. 1845, the beginning of the potato famine in Ireland
9. 1848, the Seneca Falls Convention, in New York
10.1849, a Russian court sentences Fyodor Dostoyevsky, student activist/revolutionary, to death. (The sentence is later commuted, and the experience has enormous traumatic consequences for the budding artist.)

-----------

This is a thoroughly objectionable list, surely. You might object for example that I've given scientific and technological achievement no place at all. Morse's telegraph, Siemens' improvements upon it, and the creation of the Siemens corporation in 1847, all have one might argue importance as great as that of anything I've listed.

Or what about the discovery of gold near Sacramento in 1848 and the subsequent rush of would-be prospectors?

And so it goes, on and on. At least in arguing about inclusion and exclusion we have the benefit of the practices of contemporary historians to work from. We aren't forced to speculate about the contents of texts still unwritten. Tomorrow then, we'll do just that. We'll return to the original question, most significant world events from 1993 to the present.

Questions for Senator Dodd

I recently wrote a piece for an eMag my employer publishes in which I discussed China's investments in the US and related matters. Two of the experts I interviewed for this story made unflattering references to a bill on "currency manipulation" now before the US Senate, a bill sponsored by Senator Christopher Dodd, of Massachusetts.

Naturally, I offered the Senator, through his office, every opportunity to respond to these comments. In fact, I formulated the gist of them into five specific questions.

The replies I got from his staff members were unfailingly polite and unfailingly unproductive of any reply, either in time for inclusion in the eMag piece or subsequently.

Okay, the Senator's a busy guy. He's busy managing a much-ignored Presidential candidacy and all that. Still, I'm going to post the questions here, because its as good a form of typing practice as any.

1. Is currency manipulation (or misalignment) really a large factor in the US/China trade imbalance? Wouldn't there be a huge imbalance in wage levels at any plausible yuan/dollar rate of exchange? And if China disappeared from the picture, wouldn't a lot of the manufacturing/outsourcing simply move to Vietnam, Indonesia, or elsehwhere -- again for wage rather than for currency-specific reasons?


2. One view I encountered, in discussing the matter with experts, is that the US has made a virtue of necessity by making a diplomatic push for the free float of every currency against every other currency. From the Bretton Woods period until the Nixon administration, fixed rates of exchange were US policy, after all. Does your bill assume that everything must float freely against everything else? If so, why? Given the volatility such a situation allows (as exhibited starkly in east Asia just ten years ago) aren't there good reasons why a particular sovereign nation might want to avoid convertibility altogether?


3. I understand that the Financial Times may soon run a letter-to-the-editor from several economists -- including, for example, T.J. Marta, fixed income analyst, Royal Bank of Canada -- who maintain that Senator Dodd and the other sponsors of the bill "audaciously pretend to have a certainty over something that's fundamentally uncertain." The bill, the letter says, is plainly directed at China, yet there is no certainty that the yuan and dollar are badly misaligned, intentionally or otherwise. Would you like to respond to that general critique?


4. Although there seems to be a majority view, among observers of the question, to the effect that if the yuan were freely convertible and allowed to float, it would strengthen vis-a-vis the US dollar, there is also a contrarian view expressed by some experts, that the yuan would fall. This is (the contrarian theory goes) in part because China's elites would likely prefer to keep their own money offshore, and in other nation's denominations, and in part because foreign corporations doing business in China would likely find it easier to repatriate their profits by holding them in dollars, or something other than the yuan. If the yuan is in fact over-valued already relative to the dollar, isn't any alleged manipulation working in favor of the US?


5. Do you see the investment this year by a China state agency of $3 billion in an American investment fund management firm as a good sign of mutual interdependence, of the repatriation of dollars, etc.? Or is it ominous, as many thought when China considered the purchase of Unocal? Are the Blackstone/Unocal cases markedly different?

Fossil Fuels

I'm going to give you the benefit of three stories hot off the wires without much of a common thread to them, except that (a) if you get your news from television, or just from the front page of your local paper, you probably won't hear of any of these, and (b) they all involve the world's fossil-fuel energy industries.

1) Moody's upgrades Qatar. Moody's Investor Service said that it now regards Qatar Petroleum's senior unsecured bonds as an Aa2 investment, an upgrade from an Aa3. Qatar Petroleum is a government-related business, but its bonds aren't sovereign bonds. Still, Moody's says the reason it is more confident in Qatar Petroleum now is that it is more confident in Qatar. More confident than ... when? Well ... more confident than it was in February, which was the heighth of a Qatar-related terrorism scare.

2) China to go homegrown. An agency headquartered in Beijing, the National Development and Reform Commission, has put out a draft report on how to encourage the homegrown petroleum and petrochemical equipment industries. It isn't obvious how much clout within the government as a whole this commission has, or what effects this development will have upon the huge energy market that the PRC is, and the even more huge market it promises to become. Still, it is evidence that "energy independence" as a policy goal isn't a distinctively American idea.

3) Civil actions against Amaranth, some of its traders. Meanwhile, in the US, both the Federal Energy Regulatory Commission (Ferc) and the Commodity Futures Trading Commission (CFTC) have this week brought actions against the corporate shell of Amaranth, and against its infamous 6-billion-dollars-losing trader, Brian Hunter. Hunter's disastrous trades were in natural gas futures. FERC has jurisdiction over the markets for the gas itself, the CFTC has jurisdiction over the market for commodity futures contracts. Mr. Hunter seems to have been trying to play them off against one another to avoid such an action, but to no avail. He seems only to have persuaded them to team up.

To what does all this add? Damned if I know. I put them together because they illustrate the difference between the speculation around an industry and the fundamentals, between the wagging tail and the standing dog. My instinct is that the speculators (like Mr. Hunter) don't really drive the fundamentals. Whether or not Qatar's energy-related facilities are well-protected from terrorist strikes: that's a fundamental. That's the dog that wags the tail of speculation.

The news from China is somewhere in the middle of the spectrum: whatever plans they have for stiffening up their home industry are too tentative to be fundamentals yet, but the issue that commission addressed does seem to be more real than the personal fate of Mr. Hunter. So I guess the lesson from my three random tidbits is simply the difficulty, in the crush of industry news, is distinguishing which is which. What's the dog, and what's the tail?

Chrysler's deal

On Independence Day 2007, Chrysler – no longer a division of Daimler-Chrysler, and once again a US headquartered operation – announced a deal with a Chinese auto company -- a company that has a name that oddly echoes its own, Chery.

The is the first-ever deal in which one of the US “big three” has agreed to have a car built in China and then sold here in the U.S. Everything else has been outsourced, but the actual assembly of the cars has hitherto always been done here for sale here.

The cars that Chery builds under this deal will be compacts, sold under the “Dodge” brand, yet assembled in China.

You can look at this deal in any of a number of ways. On the one hand, you might see it as a triumph for Cerberus, the venture-capital investor that bought 80% of Chrysler in May. Cerberus made the deal with Daimler so that it could take Chrysler private (meaning that ordinary folk can't simply call up a broker and buy a piece of Chrysler through a stock exchange now). Perhaps the Chery deal is precisely the sort of move that needs to be made to save Chrysler, and the sort of deal that can't be done in the context of a publicly traded corporation, with the regulations, transparency, and the general games-playing that status can bring.

Or maybe you can look at the deal through a somewhat more jaded pair of glasses. Maybe it'll go down in history as a landmark in the rise of China and the decline of the United States as economic powers. I'll discuss that possible reading further in tomorrow's entry.

China's Foreign Reserves

The People's Republic of China is sitting on cash. It is holding foreign-exchange reserves of more than $1 trillion (pronounce that "t"!). That is twice the amount of the PRC's reserves just two years ago.

According to The Economist, that $1 trillion is enough money to buy all the gold in all the vaults of the central banks of the world.

Such games-playing with numbers is fun, but there would be operational problems with the gold-buying spree as a policy. Might the money be used for infrastructure projects -- roads, bridges, water treatment plants? The problem is that by employing such money domestically China would inflict upon itself an inflationary spiral (inflation, remember, is too much money chasing too few goods).

China wants to invest its reserves in the rest of the world, and has decided to do something more adventurous than just buying U.S. Treasury bonds. In recent days, it announced that it's buying billions of dollars worth of non-voting equity in a US based private-equity firm, The Blackstone Group LP. Its important to note that this isn't an investment into one of the funds that Blackstone manages, but an investment in the management firm itself. (Its like buying stock in a bank rather than simply opening an account there.)

The easiest observation to make about all this is that a country still formally Communist in doctrine is now investing in a quintessentially capitalist institution. But of course the PRC's devotion to communism has been mostly lip service now for a long time, so this surprises no one.

A more speculative line of thought: what now happens to the market for US Treasuries? It's been my impression that China's enormous appetite for the stuff has been a large part of the market demand, and that this market demand is what has allowed the US government to deficit-spend itself silly in recent years with no real detrimental consequences. But what if China doesn't want the IOUs from Uncle Sam anymore? Who else will?

That's not a very pressing concern, though, because China's foreign reserve is plenty large enough to absorb those IOUs and leave a stray three billion on the side for the Blackstone deal, too. But if its a straw in the wind, then the wind could be troubling.

We should also say that China and Blackstone were both very careful, in the announcement of the deal, to specify that these were non-voting shares. The PRC thereby avoids the diplomatic consequences of appearing to 'take over' an important US based company. It learned this lesson, I'm guessing, from the recent Dubai port-management imbroglio.

It'll be nearly 10% of Blackstone's equity, though. So, whatever the formalities of voting, I suspect that the Chinese agency involved will have a seat at the table when important decisions are made.

This is a fascinating straw, at the intersection of a lot of different winds. The integration of the economy of the PRC into that of the rest of the world might prove to be the big economic/financial story for decades to come.

The Shanghai Auto Show

The Shanghai Auuto Show opens this Sunday, and runs through April 28.

Shanghai is important to carmakers because they realize that the Chinese consumer market has outlived its bicycles. There are lots of Chinese with the money and the desire to buy cars.

The auto show is using the motto, 'Technology and Nature in Harmony.'

General Motors, Toyota, Mercedes-Benz, BMW and Ford will offer their battery-powered and hybrid models in accord with that theme. But its Volkswagen that seems to be going all out presenting a wide range of cars with what it calls "vanguard" technology. It says the gas consumption and emissions from VWs sold in China will decline by more than 20% by 2010.

Let a thousand flowers bloom.

(Did I just quote Mao Zedong?)