Category Archives: Governance

by East by Southeast | December 11, 2014 · 10:49 am

How’s it Going, Thailand?

In the late afternoon of May 22, 2014–about the time when many people were leaving their offices–many TV screens turned frozen. The tunes behind put many in reminiscence: patriotic songs that once were ubiquitous in Thailand 50 years ago came alive. The screen was dominated by the color of blue with “National Council for Peace and Order” appeared under five logos of the military.

A few hours passed, the screen remained the same but a different song was playing. Every channel was painted with the same six words. Occasionally, for another day or two, a young man in uniform–possibly in his forties–sat behind a table and started to read word by word from the sheet of white A4 paper in front of him. As he read along, the screen scrolled down simultaneously to show what was typed on the letter.

They were orders. More than a dozen orders were issued to Thailand with immediate effect. The head of the military, General Prayuth Chan-Ocha, assumed the head of Thailand’s government. A curfew between 10pm to 5am was set nation-wide. Media was seized and controlled. All to maintain “peace and order.”

The next day, the young man was accompanied by a young woman, each had a few sheets of white paper in front of them. They switched to read over a hundred plus names of high position leaders who were summoned by the new Thai leader. These people were demanded to report within 24 hours.

At this time, no domestic news was reporting what was happening to Thailand. Much of the updates were acquired via social media and foreign news agencies. Videos of uniformed soldiers’ invasion into many media offices were recorded and posted online. People were furious at what was happening. But they were only those who were following the coup’s movement at every step. Others whose main–and possibly the only–channel of news was the television, remained sheltered with messages by the NCPO.

The violence has not broken up yet. Some wanted their voices to be heard so they gathered by Bangkok’s core to claim their stance. Bangkok Arts and Culture Center became the first occupy, followed by the Victory of Monument, and a famous conspicuous shopping street the following days. The “No-Coup” crowd had their signs written and their mouths taped black. A few hours later, the military came to disperse the crowd and instead claimed the territory theirs with their arms. For the next couple days, Bangkok continued to be surprised by more crowds in various spots around the city yelling “No Coup!” Other provinces started to see crowds gathering in the city centers. “No Coup” movement became contagious.

Human rights groups issued their statements condemning the coup and demanding summoned individuals to be released or returned. But their voices never made it to the television. Other Thais–whose source of news wasn’t only the television–reprimanded these protestors as “destroyer of peace.”

The nation is still divided and fragmented.

A week–and months–after the coup’s entrance, every local channel still had NCPO’s logo audaciously pressed at the top right corner. Media was mostly reporting financial news and showing nightly soap operas. Updates on the coup were briefed on May 28, 2014 to foreign media with a strong confirmation that Thailand was too unstable for an election. The last coup last two and a half years before an election of recycled familiar faces.

Hidden in the midst of the coup’s dominating scene over Thailand, rural folks and environmentalists are facing another layer of turmoil overpowering their livelihoods. The new authority is pushing Thailand’s newest Power Development Plan and forest/land kleptocratic programs to the decision-maker’s plate while Nature-dependent communities are squeezed off the cliff. Deals are being made behind closed doors and those who dare to say different risk being detained by the armed force.

“We will keep our promises. Give us some more time. And our beautiful country will return…” This new song, composed by the coup leaders, has become Thailand’s most played song on TVs, radios, public media. Mornings, recess, mid-days, afternoons, late afternoons, nights, midnights, twilights, dusks, dawns.

Six months is how long the coup has taken over. The clock is still ticking.

Thailand no longer has a constitution. If you want to hold an event commenting or expressing your different views on the nation’s policy, either ask for a permission in advance or risk being arrested. Or might as well, just self-censor your existence.

But some university students can no longer remain patient. 5 students, each wearing a black t-shirt with a word on it jumped between a crowd of khaki uniforms and the stage where Prayuth Chan-Ocha was orchestrating about “drought and water management plan for E-san.” Five persons to challenge the military’s order which prohibits an assembly of 4+ persons group. An index, a middle finger, a ring finger to symbolize your support for the “No Coup” wave. A combination of these components will conceal your freedom in the police and the military’s territory.

This is Thailand’s time to test its people. No one knows when fear will stop pressing our faces to the ground. No one knows when curiosity will trigger someone to start questioning reality. Indeed, no one knows if most people will just forget and move on, leaving the minority screaming–in mute.

The author of this essay is a concerned Thai citizen choosing to publish anonymously.

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Filed under GMS, Governance, Regional Relations, SLIDER, Thailand, water

Tagged as Bangkok, Military coup, NCPO, Thai king, Thai kingdom, Thailand

by Daniel Thiel | November 18, 2014 · 8:31 pm

The Illicit Drug Industry & Counter-Narcotics in Southeast Asia

Drug enforcement officials in Burma. Image: The Irrawaddy

On 5 October 2011, when Thai river police investigated reported gunshots on the middle reaches of the Mekong River, they discovered two cargo vessels and their 12 Chinese crew members, all of whom had been executed and their bodies dumped in the river. The ships were determined to have been hijacked to transport illicit cargo, and they contained over 920,000 amphetamine tablets, locally referred to as yaba, which were subsequently confiscated by Thai authorities.

Over the past 70 years stories like this have become commonplace in the notorious Golden Triangle, a delta area at the confluence of the Mekong and Ruak Rivers that takes up approximately 150,000 square kilometers of land in the tri-state Thai, Lao and Burmese (Myanmar) border region. Drug production and trafficking has brought this locality to international infamy, and it remains the world’s second largest cultivator of opium poppy, second only to Afghanistan. Faced with rising heroin and amphetamine-type stimulant (ATS) addiction levels, drug-related violence, and an expanding HIV epidemic, Southeast Asian governments have recently begun to intensify their efforts to combat this endemic problem. Using bilateral agreements and the frameworks of the Association of South-East Asian Nations (ASEAN), the Greater Mekong Subregion (GMS), and the Asian Regional Forum (ARF), actions by these governments have met varying levels of success.

Colonial Roots of the Southeast Asian Drug Trade

Opium poppy is native to the lush and remote Yunnan and Sichuan Provinces of China’s southwest. For hundreds of years small-scale cultivation by hill tribes in the region met the modest needs of Chinese opium-smokers, but in the early 19^th century a powerful competitor arrived in Southeast Asia: the British Empire and its waves of merchants and imperialists, all trying to find new markets for seemingly unlimited supplies of India-grown opium. At the humiliating conclusion of the 1842 Opium War the British forced the Chinese emperor to accept opium imports, thereby unleashing one of the most devastating drug epidemics in history: a mere thirty years later, British opium imports were supplying an estimated 15 million Chinese opium addicts.

Social upheaval in China during the 19^th and 20^th century caused massive emigration of Chinese refugees to all parts of the world, and where they went, their opium habits followed. The large Chinese immigrant populations in Thailand, Burma, and Vietnam provided lucrative opportunities for the opium industry, and despite the protests of indigenous rulers, one by one state-mandated opium franchises were forced into being by British and French imperialists. It was also in this time that fleeing Chinese merchants and hill tribe people arrived in the Golden Triangle area and introduced poppy cultivation to the local populations.

In British Burma, the imperialist government lacked the ability to administer the western Shan States and so instead provided them with autonomy in exchange for loyalty. This autonomy provided a foundation for a thriving opium economy and a fiercely independent political consciousness, both of which would have strong legacies long after the British withdrawal. In French Indochina, the government-run Opium Monopoly worked industriously to incorporate Laotian poppy-growing hill tribes, and helped to sponsor the Yunnan-Tonkin railway, which provided a valuable link to the well-established opium cultivators of southwest China.

In the years following World War II, almost all of the world’s major opium producers, the largest being Turkey, Iran, and India, brought an end to their legal opium exports to Southeast Asia, which created an enormous vacuum in the opium industry. Newly Communist China, independent Burma, and restored French Indochina all cracked down on local production, further choking supply. Eradication of the drug industry was not achieved however, primarily thanks to the actions of Chinese Nationalist Kuomintang (KMT) remnants in northern Burma, the corrupt Thai National Police Force, and the French and American covert intelligence agencies.

About 1,500 battered KMT troops entered Burma in 1949, fleeing the advance of the People’s Liberation Army into Yunnan Province. This weak force was nearly crushed by the Burmese army, but in 1950 they began receiving airdrops of weapons from the CIA, which was frantic to arm groups on the southern borders of the People’s Republic of China in case Mao Zedong had expansionist ambitions. Reinforced by additional troops flown in from Taiwan, the empowered KMT army executed several failed invasions to retake Yunnan, but afterward decided to remain in northern Burma and hold the line against the Communist threat. This well-armed army proceeded to force the local tribes-people into opium cultivation, and with the help of the corrupt Thai police force, created one of the most robust drug production and trafficking systems in history.

Opium produced in northern and eastern Burma was transported across the Thai border and down to Bangkok, where it was exported out of the rest of Southeast Asia. In 1961, provoked by aggressive expansionism on the part of the KMT, the Burmese Army and the PLA jointly ousted the Nationalists from Burma and forced them into Thailand and Laos, where their communities remain today. Although the KMT forces no longer directly controlled the opium cultivation, the system was in place and ethnic Chinese, then later various Burmese insurgent traffickers, maintained the lucrative trafficking network into Thailand.

Drug enforcement officials in Burma. Image: Business Week

In French Indochina, the under-financed French intelligence community covertly took over management of the formally illegal opium trade in order to continue their efforts in suppressing Ho Chi Minh’s Viet Minh. The Laotian opium industry that they nourished would later find its greatest successes during the American GI heroin epidemic of the Second Indochina Conflict, and following that, in its international spread into the continental US and Europe.

Currently, the vast majority of Southeast Asian illicit narcotics are produced in the semi-autonomous, rebel-administered eastern states of Burma, while smaller amounts also come from the remote areas of western Laos and northern Thailand. It is trafficked in two main routes: the southern route goes through Thailand to Bangkok for distribution, and the northern route enters China’s Yunnan Province, headed for Kunming and then all of East Asia. Recently, Golden Triangle supply has been unable to keep up with skyrocketing Asian demand for heroin and ATS, and approximately one third of East and Southeast Asia’s narcotics now originate in Afghanistan.

Source: UNODC Southeast Asia Opium Survey 2013: Lao PDR, Myanmar

Temporarily successful eradication programs and sustained crackdowns brought Southeast Asian drug production to a historical low in 2006, but since then there has been a consistent increase in cultivation, production, trafficking, and consumption, with levels returning to those of the 1970s and 1980s. This steady expansion of the drug trade is occurring despite a 2005 self-imposed opium cultivating ban in the territories of the United Wa State Army (UWSA) in Burma, a rebel group that previously accounted for the lion’s share of Burma’s opium production. This worrying trend has many consequences for Southeast Asian society.

Threats Posed by the Illicit Drug Industry

The streaming supply of narcotics from the Golden Triangle into China and Thailand has negative impacts on myriad areas of Southeast Asian life. Mass drug addiction and drug trafficking causes the breakup of families and increases in crime rates, spreads diseases like HIV, burdens the economy through lost productivity, imposes financial costs on the state, spreads law enforcement thin, overwhelms justice systems, encourages corruption, and funds violent groups. As production continues to increase, these problems are becoming more pronounced and demand strong preventative action.

The United Nations Office on Drugs and Crime estimates that an average of 13% of injected-drug users are HIV positive, and more than half have hepatitis C. Coupled with China’s annually growing number of registered opioid users (official figures reported 1.3 million users in 2012, with actual rates likely almost double that), this situation makes the threat of a massive HIV epidemic in the world’s largest country ever more likely. Recent trends in China suggest that methamphetamine use is slowly overtaking heroin use as China’s most problematic drug, and just in China 228 meth labs were dismantled in 2012. Widespread amphetamine use continues to be a regional dilemma, as more than 8,980,000 people in East and Southeast Asian used ATS tablets in 2013. The Greater Mekong Subregion has the highest rate of crystal meth use in the world, and this drug use is exacting large tolls on society, as addiction-fueled crime expands and as families and communities spend time and resources helping addicts.

Source: UNODC Transnational Organized Crime in East Asia and the Pacific: a Threat Assessment, April 2013

The criminals and insurgents that operate the drug trade are making enormous windfalls from their work: the value of all consumed East and Southeast Asian heroin was estimated at $16.3 billion USD in 2011, with methamphetamine and amphetamine consumption valued at an additional $15 billion USD. The traffickers and their associates encompass a wide variety of individuals: ethnic Chinese syndicates, Nigerian and Iranian criminal groups, high-ranking Southeast Asian officials and military personnel, and Burmese insurgent and paramilitary forces. Although on average 50,000 people are arrested each year for trafficking illicit narcotics in Southeast Asia, the high profits of the drug trade continue to lure thousands more into the business. In the case of Burmese fighters, drug earnings are usually spent on weapons, helping to intensify violence in those areas.

Source: UNODC Transnational Organized Crime in East Asia and the Pacific: a Threat Assessment, April 2013

Some of the drug trade’s worst victims are the poverty-stricken opium cultivators in the Golden Triangle. Lacking other economic opportunities and desperate for income, many rural farmers are forced into dealings with violent traffickers and become trapped in a cycle of drug cultivation, slowly becoming more and more dependent on poppy income. They are prevented from growing crops that can benefit society, and oftentimes their communities are hit hard by addiction. Unfortunately, these rural villagers only make up a small portion of the people whose lives are destroyed by the drug trade.

International Cooperation and Efforts to Eliminate the Drug Industry

The governments of Southeast Asia have been working to combat the narcotics trade ever since their post-colonial independence, but unfortunately the vast majority of these efforts have been restricted to unilateral measures. Law enforcement is usually by definition national in character, but the drug trade is a transnational and regional problem, and increased cooperation on the part of Southeast Asian governments is critical for its sustainable reduction.

Thanks in large part to the prodding of the US government, which had recently declared its own War on Drugs, the 1976 ASEAN Bali Summit saw the adoption of the “ASEAN Declaration of Principles to Combat the Abuses of Narcotics Drugs.” Although mainly filled with rhetoric and containing few concrete measures, this declaration showed consensus among the ASEAN governments and kicked off the modern wave of counter-narcotics policies in Southeast Asia.

Thailand can be considered one of the more successful cases of sustainable reduction in illicit cultivation. Starting in 1984, the Thai government embarked on a 30-year intensive program of crop replacement, which has resulted in bringing opium cultivation in northern Thailand to negligible levels.

In contrast, the efforts of Burma’s Central Committee for Drug Abuse Control have been snared in the frequently contradicting objectives of the government’s anti-insurgent policy. Despite the ambitious 1999 declaration by the ruling regime to eliminate all illicit drug production by 2014, the Burmese government often turns a blind eye towards the narcotics industry in its efforts to co-opt various rebel groups. In the 1980s and 1990s the weak central government began signing ceasefire agreements with the numerous insurgent armies that control the Burmese borderlands, and many of those autonomy-granting agreements contained clauses permitting (and even encouraging) drug cultivation and production by the groups in exchange for their loyalty to the regime. Subsequently, drug enforcement policy became a tool of the state, and it was used both as a carrot and a stick to bring insurgent groups into the legal fold. When a United States grand jury indicted several leaders of the United Wa State Army, which had signed a ceasefire agreement and was the largest Burmese opium producer in the early 2000s, the government refused to arrest them or crack down on their illegal businesses. This lack of enforcement can be seen as a way of repayment for loyalty, and is in direct contrast to the government’s actions towards the Myanmar National Democratic Alliance Army (MNDAA). The MNDAA, another major opium producer, had refused to make peace with the government, and when the government attacked them in 2009, drug enforcement was the justification given. These two examples show how the central regime manipulates drug policy to its advantage in its state-building efforts, and explains the lack of sustained progress in eliminating the narcotics industry.

In addition to the unilateral efforts of individual states, regional organizations and agreements have been crucial to the evolution of drug enforcement in the Golden Triangle. In the late 1990s, ASEAN began examining anti-narcotics and other issues such as human trafficking and smuggling in the context of transnational crime, and started putting greater emphasis on regional cooperation. The expansion of ASEAN in 1997 to include the Lao People’s Democratic Republic and the Union of Myanmar allowed the other ASEAN governments to exert more diplomatic pressure on the newcomers to clean up their drug exporting regions, demonstrated in the ASEAN Declaration on Transnational Crime. Although the declaration contained no binding measures, it set up several communication and monitoring bodies, including the ASEAN Ministerial Meeting on Transnational Crime (AMMTC), the ASEAN Chiefs of National Police (ASEANAPOL) and the ASEAN Senior Officials on Drug Matters (ASOD). These bodies mainly monitor the progress of the 2000 Bangkok Political Declaration in Pursuit of a Drug-Free ASEAN 2015, but they also work to encourage development of bilateral extradition treaties, international criminal justice institutions, and cooperative border control, legal assistance, and data sharing.

The Future: Regional Integration and the Effectiveness of Anti-Narcotics Policy

2015 is marked to be the year in which the ASEAN Economic Community is brought into being, and many hope that it will bring with it great advances in regional trade, infrastructure, and cooperation. Already projects such as the North-South Economic Corridor, running from Kunming to Bangkok, and the building of ports and bridges along the Mekong River are generating enormous economic benefits. However, advances in regional integration also provide opportunities for those who would exploit them for illegal purposes. The increasing ease of transporting illicit narcotics and the improving communication technologies of criminal groups present a strong challenge to the national law enforcement agencies of ASEAN countries. Equally innovative and efficient use of new capabilities and technologies, as well as increased intelligence sharing and coordination must be implemented for Southeast Asian governments to effectively meet these new threats.

In November 2011, just a month after the “Mekong Massacre,” China, Laos, Burma, and Thailand agreed to cooperate on river patrols and law enforcement along the Mekong River. Their Joint Statement detailed numerous confidence building measures between the various national police forces, but mainly focused on the responsibility of each individual nation to properly patrol its own sovereign waters. This aspect reveals the major weakness of all ASEAN counter-narcotics efforts to date: ASEAN nations are caught in a paradoxical situation where despite the damaging effects of the drug industry and transnational crime on national sovereignty, the only way to effectively counter those threats is by each nation giving up some measure of their treasured sovereignty. Sovereignty and non-intervention are the two defining pillars of the “ASEAN Way,” and yet those two concepts desperately need to be reevaluated if transnational crime is to be confronted.

Confidence building measures and increased regional communication is a critical first step, but in order to make real progress in fighting the rising threat of transnational crime ASEAN nations need to accept the reduction of their sovereignty. A hopeful example is provided by the official conclusion of the Mekong Massacre: Naw Kham, the Burmese drug lord who supposedly masterminded the murders, was captured by Burmese counter-narcotics forces and extradited to China, where he and three of his subordinates were tried and executed in March 2013. Extradition treaties like these form the basis of effective cooperation, and similarly collaborative measures must be actively pursued by ASEAN governments if they are to successfully tackle the deeply-entrenched and continually evolving menace of the drug industry in Southeast Asia.

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Filed under China, Cold War, Current Events, Economic development, ethnic policy, GMS, Governance, Laos, Mekong River, Myanmar/Burma, Regional Relations, SLIDER, Thailand, USA, Vietnam, Yunnan Province

Tagged as ASEAN, counter-narcotics, drug enforcement, drug use, Golden Triangle, Mekong Murders, methamphetamine, opium, poppy

by GoKunming | November 16, 2014 · 9:20 pm

Growth slowing in Yunnan and Kunming, economy still deemed healthy

Quarterly provincial financial reports used to be cause for celebration across China — a way to tout the wonders of Socialism with Chinese characteristics. The days of double-digit growth have seemingly passed, but much of the country still lays claim to some economic indicators that would make other nations jealous.

Among these places is Yunnan, which this year is on track to post strong, yet simultaneously disappointing, year-on-year (YoY) gross domestic product growth. So far in 2014, the province’s economy is valued at 821 billion yuan, which puts it on track to increase by roughly eight percent over the first three quarters of 2013.

While expansion of this magnitude may sound encouraging, eight percent is a significant drop from the 12.1 percent gain Yunnan enjoyed in 2013. Similar reports have come from all corners of China. “None of the 31 provinces and municipalities are matching growth goals set at the start of the year” by Beijing, according to financial projections made by news outlet Bloomberg.

Such numbers can be a bit esoteric when it comes to how they actually affect the average person. Despite the overall decline in economic performance in Yunnan so far this year, many residents of the province are actually seeing their incomes grow at robust rates.

Through the first three quarters of 2014, the average income of urban residents in the Spring City has grown 9.6 percent YoY. A report released earlier this week by the National Bureau of Statistics (NBS) shows the median yearly income for urban residents of Kunming now stands at 21,754 yuan. Those who live in rural areas under jurisdiction of the Spring City earn significantly less — 7,480 yuan annually — but still saw their incomes grow by 11.2 percent over the same period last year.

At the same time incomes are growing, so too are commodities prices, a combination often signaling a healthy economy. The consumer price index (CPI) — a metric cataloguing price fluctuations in the cost of 84 food-related retail goods kept by KNBS — rose 2.8 percent YoY, led most notably by serious increases in the prices of all types of meat.

Huang Bin (黄斌), lead analyst at NBS, characterized the increase in CPI as steady and moderate when compared to rising incomes, perhaps indicating Kunming’s economy, at least, has yet to succumb to the economic deflation Bloomberg reports is hitting other parts of the country. “From an analysis of the data, the incomes of rural residents grew faster than urban residents [in Kunming]. In terms of promoting the growth of consumption, this is good news.” Huang said.

This article was posted by Patrick Scally in on the GoKunming website on November 11, 2014

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Filed under Economic development, Governance, SLIDER, Trade, Yunnan Province

Tagged as real estate, Yunnan economy, Yunnan GDP

by Xiangming Chen | November 5, 2014 · 4:28 pm

A Different Global Power: Understanding China’s Rise in the Developing World

By Xiangming Chen and Ivan Su

China is now the largest trading nation in the world with strong ties to Africa, Latin and America and the Middle East. This once impoverished and isolated nation has lifted several hundred millions of its own people out of poverty and is now reshaping the developing world. This article looks at China’s involvement in four developing regions to assess China’s influence as a rising global power.

The China where the first author grew up through college in the early 1980s was the largest and one of the poorest developing countries. The China where the second author left to attend high school in the United States was about to pass Japan to become the world’s second largest economy, in 2010. Over the past three decades, China has lifted over 500 million of its people out of poverty. Globally, China has just surpassed the United States to become the largest trading nation in the world and is expected to soon overtake the latter as the world’s largest economy (in terms of purchasing power parity or PPP). More importantly regarding the focus of this essay, China is now the largest trader and investor in Africa, with its footprints spreading and seeping into all corners of the developing world.

How did the once impoverished and isolated “Third World” country become a powerful force in shaping a new developing world in the 21st century? What are the positive vs. negative consequences of China’s inroads into developing countries by exporting its urbanism to Africa, for example? These questions highlight China’s global impact that matters a great deal to the everyday life of millions of poor people in developing countries. In this essay, following China’s global footprints in four developing regions, we offer a broad comparison of both the different and consistent economic impacts of China within and across these regions.¹ Figure 1 shows China’s investment in energy and infrastructure in the four regions, while Figure 2 breaks China’s investment into four specific sectors of one major country in each of the four regions. Guided by these comparative data and focusing on four developing regions, we present a broad picture of China’s widespread but mixed role in developing countries, thus offering a preliminary assessment of whether China’s influence as a rising global power may differ from the traditional or established Western powers in how they approach the developing world.

China in Asia: Exerting Neighboring Influences

Back in the last decades of the 20th century, the drivers and role models for development in Asia and beyond were the “Four Tigers”: Hong Kong, Singapore, South Korea, and Taiwan. The onset of the 21st century began to position China toward the epicentre of the Asian economy, with its influence spreading across the continent through more trade, outward investment, and other outgoing initiatives such as cross-border infrastructure development.

In Southeast Asia, China has been trying to integrate with the Greater Mekong Subregion (GMS), which consists of China’s Yunnan Province, Guangxi Autonomous Region, Cambodia, Laos, Myanmar, Thailand and Vietnam. “China’s trade with each of the GMS countries has grown since 1990, most rapidly since 2000.”² In addition to increasing trade, China exerts strong influence on the GMS through various development projects. In Myanmar, China has reached a $20 billion agreement to construct an 800-kilometre rail link between Myanmar’s Chinese border and its western coast.³ In addition to investing in infrastructure, China is also helping its neighbors to generate energy. Since 2005, China has invested over $87 billion in the energy sector across Asia, and about one quarter of these investments went to Malaysia. In 2010, an $11 billion energy deal signed between China’s State Grid Corporation and Malaysia Development Company included four hydroelectric mega-dams that are capable of generating up to 28,000 megawatts of power, an aluminum-smelting plant, exploitation of coal mines containing 1.5 billion metric tons of coal, and a 40 billion-cubic-feet natural gas development project. “With Malaysia reeling from an exodus of capital over the past two years, the projects have strong support at the state and federal levels. Officials hope the plan will attract foreign investment to the region.”⁴

China’s investment in Asia is not limited to Southeast Asia, as countries in South and Central Asia have also been affected by China’s direct investment. In 2013, China established a strong foothold in South Asia when it took over the upgrading and operation of Pakistan’s Gwadar Port from Singapore. The Gwadar project serves China’s “Go West” policy while allowing Pakistan to “look east.” China is building a road from Gwadar all the way north to Kashgar, the westernmost large city in Xinjiang. At the same time, Pakistan and China have also planned to connect the port via the Indus Highway, which will provide China with a land-based supply of oil from Central Asia. Given Gwadar’s geographical location, Gwadar cuts China’s distance from the Persian Gulf, from which China gets 60% of its oil, by thousands of kilometres.⁵

Compared to the other energy projects sponsored by China, the Central Asian vector of China’s energy policy has become more important due to the region’s abundance of oil and natural gas. While China sees Kazakhstan’s energy supply a key to its “Go West” program, Kazakhstan has used Sino-Kazakh cooperation to balance against Russia’s influence in its energy sector. China is also constructing a 1,800-kilometre natural gas pipeline from one of the world’s largest natural gas exporter, Turkmenistan, which benefits from doubling its energy supply to China and circumventing its biggest competitor – Russia. Beijing wins by securing new gas supplies and thus enlarging its already hefty investment in energy projects in Asia (see Figure 1).

China in Africa: Reaching Maximum Impact

Through increasing trade and investment, China’s growing presence has reshaped the landscape in Africa. While negligible two decades ago, China-Africa trade reached $200 billion in 2013, which makes China Africa’s largest trading partner today. With only limited investment in Africa before the 2000s, China’s cumulative investment in Africa exceeded $150 billion by the beginning of 2014. Of these investments, close to $100 billion has gone into energy and infrastructure projects.⁶

China’s unprecedented economic growth requires an increasing amount of oil to sustain it. In 2012, close to one-third of China’s total oil imports came from Africa, and China is looking to expand its energy presence in Africa. Nigeria has received the most Chinese direct investment over the past decade. While many Western energy firms are reluctant, China reached a $10 billion hydrocarbon deal with Nigeria at the beginning of 2014 (see Photo 1). In addition to exploiting crude oil and natural gas, China has been involved in constructing an additional refinery in Baro, Nigeria.⁷ Although critics have attributed China’s heavy footprint in Africa’s energy sector to its energy and resource demand back home, evidence suggests otherwise. China Africa Sunlight Energy Ltd. recently invested $2.1 billion in developing a 2,100-megawatt plant to help ease electricity shortages in Zimbabwe, which is only capable of generating 1,320 megawatts against a demand of 2,200 megawatts of electricity. “China Africa Sunlight Energy is looking at the possibility of pumping gas to the port city of Beira in neighbouring Mozambique, using an idle pipeline that the National Oil Co. of Zimbabwe once used to bring fuel into the country.”⁸ This power plant is expected to produce 300 megawatts by mid-2015, and the number is looking to double by the end of the year. While much of the media attention has focused on China’s investment in Africa’s energy sector, China is reshaping Africa’s landscape through large-scale infrastructure development.

Photo 1: Drilling Oil in Nigeria

Since 2005, China has invested more in Africa’s infrastructure than in any other part of the developing world. More than $44 billion has been spent to build roads, airports, and housing that are essential to the continent’s economic development. In Angola, China is helping the country’s reconstruction effort after the devastating civil war. One of China’s major investments in Angola is the rebuilding of the Benguela Railway, “an 840-mile transcontinental railway that links the Atlantic port of Lobito in Angola with rail networks in the Democratic Republic of Congo and Zambia. The project is expected to cost $300 million, and it will provide a much-needed cheap outlet for Congolese and Zambia copper, tin and coltan.”⁹ In Nigeria, China is helping to build Africa’s largest free trade zone in its commercial capital, Lagos. “A total of 16,500 hectares of land bordered by the Atlantic Ocean and the Lagos and Lekki lagoons has been earmarked for the whole free zone, which will include a deep-water sea port and a new international airport in close proximity.”¹⁰ The Lekki Free Trade Zone is aiming to cut down the country’s reliance on imports, and it will cost $5 billion to complete the first phrase of the project, which will cover 3,000 hectares of land. The construction will also include roads, power plants, and water plants. This evidence reinforces China’s substantial investment in building Africa’s infrastructure relative to the energy sector in comparison with the other developing regions (see Figure 2)

However, concerns arise on whether Africa is too dependent on China as results of “high commodity prices and investment inflows.”¹¹ With China-Africa trade looking to hit $280 billion by 2015, some worry that African economies depend too much on China. Some urge African countries to diversify their economies and decrease their dependence on China. There are also calls for China to focus more on human rights and community engagement. As such a dominant investor in some African countries including those with an authoritarian government like Zimbabwe, China struggles to balance between the return on its huge investment, helping local development and living up to international norms of engagement.

China in Latin America: Extending the Reach

Ever since the 1960s, China has been providing limited development assistance to a small number of Latin American countries such as Chile. Fast-forward to the 21st century, China has considerably expanded its economic ties with Latin America through greater trade and more diverse investment.

“Trade between China and Latin American countries has grown exponentially over the past decade. Although Sino-Latin American trade continues to remain a relatively small share of their respective global trade, growth has exceeded many expectations. From 2000 to 2009, annual trade between China and Latin American countries grew more than 1,200%, from $10 billion to $130 billion, according to the United Nations statistics.”¹² In 2012, Latin America accounted for 13% of China’s total outbound investment – about $11.4 billion, a significant increase from the $120 million of 2004.

Like in Asia and Africa, China has favored the energy sector in Latin America (see Figure 1), targeting Venezuela for its oil and Brazil for its hydropower. Of China’s $100 billion investment in Latin America since 2005, more than half has been energy and infrastructure related. In 2010, China’s State Grid announced a $1 billion buyout of seven Brazilian power transmission companies. Two years later, in 2012, China’s State Grid was chosen by the Brazilian government to build a $440 million power-transmission project. And at the end of 2013, China’s State Grid led a group to win the rights building a $21 billion hydropower plant in Brazil. Set to become the world’s third-largest hydropower plant and take around 46 months to complete, it will also create a 2,092 km hydropower transmission line and two energy converter stations that will be able to take energy from the State of Pará, along the Xingu River in the Amazon Basin, to Brazil’s Southeast region, with a planned capacity of 11,233 megawatts. Brazil’s economic acceleration in the past decade led to a surge in the country’s energy demand. Given Brazil’s geographical endowment, as much as 80% of its total energy comes from hydropower generation.¹³ With power generation operating close to the limit, Brazil is urgently constructing more power plants using the Amazon’s abundant hydro resources and transmitting it to its Southeast region, especially Rio de Janeiro where much more energy is needed in light of the upcoming World Cup and Summer Olympics in 2016. To do so, Brazil has turned to China for its expertise and experience in building long-distance power transmission towers or the so-called electricity pylons (see Photo 2).

Photo 2: High on an Electricity Pylon in Eastern China Source: China Daily/Reuters

Besides its growing economic presence in Latin America, China has made some cultural inroads as well. Since 2012, China has opened 32 new Confucius Institutes all over Latin America, a Chinese foreign ministry deputy announced. Hotels in the region have begun to prepare for the increasing number of Chinese tourists by making the menus available in Mandarin.¹⁴ This confirms the larger trend of more Chinese tourists going to developing countries beyond Asia and advanced economies in North America and Western Europe, making China the world’s number one tourist-sending nation in 2013 with approximately 100 million overseas trips.

China in the Middle East: Reviving the Silk Road

Tracing what China is doing in the conventionally defined developing world has taken us to Asia, Africa and Latin America. Yet given China’s huge demand for external energy, we are not surprised at all to see China’s growing presence in the Middle East, whose energy sector ranks second behind Asia in absorbing Chinese investment (see Figure 1).

Despite China’s massive efforts to secure energy from Asia and Africa, as well as from Venezuela in Latin America, its dependency on Middle Eastern oil has risen over time. The Middle East is currently the largest exporter of crude oil to China. The share of oil imported by China from the Middle East was 48% in 1990, 49% in 2005, and 51% in 2011. It is expected that China’s crude oil imports from the Middle East will reach 70% by 2020 and continue to grow until 2035, according to the International Energy Agency. Saudi Arabia is China’s largest energy supplier with about one million barrels per day, accounting for 20% of China’s crude oil imports. Iran, another big oil supplier, contributes about 10% to China’s overall oil imports as well (see Figure 2). China has maintained a friendly relationship with both Saudi Arabia and Iran. A number of top Chinese leaders including Hu Jintao and the current president Xi Jinping have visited Saudi Arabia. And China has been dragging its feet on the UN sanctions against Iran.¹⁵ These diplomatic postures toward the Middle East conform to China’s pragmatic economic policies and interests in other energy- and commodity-rich regions such as Africa and Latin America.

But China’s interest in the Middle East does not stop with oil. “As with other regions, China has rapidly expanded its economic ties with the Middle East through trade. From 2005 to 2009, China’s total trade volume with the Middle East rose 87%, to $100 billion and reached approximately $222 billion in 2012, according to China’s official statistics. This surge pushed China to surpass the United States as the top destination for the Middle East’s exports in 2010. China’s exports to the Middle East are primarily low-cost household goods that benefit the average Middle East consumer. An example is growing numbers of Egyptians being able to afford inexpensive Chinese cars. Also, residents in the Gaza Strip suffering from the Israeli blockade depend on cheap Chinese goods in their daily lives.”¹⁶

As many African countries have done, some Middle Eastern governments have brought Chinese contractors in to work on major infrastructure projects. Egypt has also partnered with China to develop its Suez special economic zone, a development strategy that China had used itself and promoted in Africa and the least developed parts of Southeast Asia like Laos. While China has diversified its investment in the Middle East, it is much more concentrated in the energy sector than in infrastructure (Figure 1). This further establishes China’s significant dependency on the Middle East for energy resources, namely oil. However, once we factor in the non-oil related Chinese economic activities, China’s footprint in the Middle East becomes somewhat similar to the large scope of China’s economic influence in the other three developing regions, especially in several major countries where China has moved beyond energy into infrastructure and commodities (see Figures 1 and 2). In this sense, the Middle East still marks the old destination for China’s new effort to revive the ancient Silk Road through Central Asia.

China’s Ambitious and Uncertain Role

Judging by a sampling of evidence across the four developing regions, we characterize China’s role as very ambitious and yet uncertain. The ambitious aspect is increasingly fueled by China’s abundant surplus capital in both private and public hands that may have a stronger effect on the urban landscape and transport infrastructure of developing countries than on its quest for the latter’s energy and commodities.

On the bank of the Mekong River in Cambodia’s capital city Phnom Penh, the $700 million Diamond Island Riviera, a joint venture mixed-used development project involving a Chinese company, includes three 33-story condominium towers, a shopping mall, a hospital, an international school and two pedestrian shopping streets with signs in Mandarin. Before its scheduled completion in 2017, Chinese buyers, especially Shanghainese, are already buying the condos in cash as investment properties.¹⁷

It is again in Africa where the transport infrastructure is the poorest in the developing world that China is scaling up its investment most aggressively. On his recent four-country tour of Africa, Chinese Premier Li Keqiang committed to set aside $2 billion for an African Development Fund and promised his support for a high-speed rail network connecting African capitals. As a start, China Railway Construction Corporation made a $13.1 billion deal to build an 860-mile high-speed railway in Nigeria that would employ more than 4,000 workers during construction, and 5,000 more afterward.¹⁸ Claiming no-strings-attached, China’s ambitious effort can deviate from the precedent of Western colonial powers who had built highly limited transport infrastructure for shipping out their craved commodities from Africa. Yes it is uncertain that the Chinese will succeed where the earlier powers largely failed.

As further evidence on its ambition to build the developing world’s urban and transport infrastructure, China is funding and building Nicaragua’s lifelong dream in having its own canal since the 19th century, when it rivaled Panama for control of the waterway. In August 2013, President Daniel Ortega announced that a $40 billion contract had been signed with a Hong Kong-based Chinese company that would design a route and start construction in December 2014 and manage the canal for 50 years. Estimated to cost as much as $60 billion, an infrastructure project of this massive scale is very uncertain in terms of returning investment to China. Yet China might not be looking for a quick return on investment, but to control a trade route independent from U.S.-managed Panama.¹⁹

The uncertain aspect of China’s strong role has also run into trouble in the Middle East. Despite China’s political advantage in taking a somewhat neutral position regarding Iran under West-imposed sanctions in order to continue buying its oil, Iran’s Ministry of Oil has recently removed China from the project to develop the South Azadegan oilfield because of long delays. This puts China’s non-political or no-strings-attached approach to dealing with developing countries, especially those with an authoritarian domestic system and a precarious international status, to test or at risk.

While ambitious and already far-reaching and powerful, China’s role in reshaping the developing world will only grow and remain uncertain over time. It highlights the ongoing debate about whether China merely exploits commodity and energy resources in developing countries as the old West or truly promotes national and local development through its overseas infrastructure construction and other positive means as a new global power. This debate will not be settled for a long time as we continue to scrutinize China’s powerful role in shaping the developing world during the 21st century.

About the Authors

Xiangming Chen is the founding Dean and Director of the Center for Urban and Global Studies and Paul E. Raether Distinguished Professor of Global Urban Studies and Sociology at Trinity College, Connecticut, and a distinguished guest professor at Fudan University, Shanghai. He has published extensively on urbanization and globalization with a focus on China and Asia. His several books include Shanghai Rising: State Power and Local Transformations in a Global Megacity (University of Minnesota Press, 2009; Chinese Edition, 2009).

Ivan Su is currently a third-year student at Trinity College, Connecticut, majoring in Public Policy and Law and Urban Studies. His interests are situated at the intersection of city planning, city economic development, and legal studies. He speaks fluent Mandarin and Cantonese, and carried out a field research project in the southern Chinese city of Guangzhou in summer 2014. He has been a student researcher at the Center for Urban and Global Studies at Trinity College since 2012.

References

For this culminating article, we have drawn heavily from the series of articles on China and the developing world that has appeared in this magazine since the February 2013 issue. See Kayla Chen and Xiangming Chen, “China and Latin America: Connected and Competing”,The European Financial Review(February 2013): 56-58; Fakhmiddin Fazilov and Xiangming Chen, “China and Central Asia: A Significant New Energy Nexus”, The European Financial Review (April 2013): 38-43; Xiangming Chen and Curtis Stone, “China and Southeast Asia: Unbalanced Development in the Greater Mekong Subregion”, The European Financial Review (August 2013): 7-11; Xiangming Chen and Garth Myers, “China and Africa: The Crucial Urban Connection”, The European Financial Review(December 2013): 89-93; Abbᾱs Varij Kᾱzemi and Xiangming Chen, “China and the Middle East: More Than Oil”, The European Financial Review(February 2014): 40-44; and Xiangming Chen, Pallavi Banerjee, Gaurav Toor, and Ned Downie, “China and South Asia: Contention and Cooperation Between Giant Neighbours”, The European Financial Review(April 2014): 10-16.
Xiangming Chen and Curtis Stone, ‘China and Southeast Asia: Unbalanced Development in the Greater Mekong Subregion’,The European Financial Review(August 2013): 7-11.
Ibid.
‘Malaysia and China agree to $11 billion deal to build mines, dams in Borneo’; accessed from http://news.mongabay.com/2010/0112-sarawak.html.
Xiangming Chen, Pallavi Banerjee, Gaurav Toor and Ned Downie, ‘China and South Asia: Contention and Cooperation Between Giant Neighbours’,The European Financial Review(April 2014): 10-16.
Xiangming Chen and Garth Myers, ‘China and Africa: The Crucial Urban Connection’,The European Financial Review(December 2013): 89-93.
John C.K. Daly, ‘China’s bold $10 Billion investment in Nigerian hydrocarbons’; accessed from http://thediplomat.com/2014/01/chinas-bold-10-billion-investment-in-nigerian-hydrocarbons.
Godfrey Marawanyika, ‘China Africa Sunlight to invest $2.1 Billion in Zimbabwe Power’; accessed from http://www.bloomberg.com/news/2013-09-03/china-africa-sunlight-to-invest-2-1-billion-in-zimbabwe-power.html.
Michail Vafeiadis, ‘China buying out Africa: Top five destinations of Chinese money’; accessed from http://www.csmonitor.com/World/2012/0301/China-buying-out-Africa-Top-5-destinations-of-Chinese-money.
‘Nigeria embarks on vast free trade zone with China’; accessed from http://www.reuters.com/article/2010/09/01/nigeria-china-idUSLDE67U24K20100901.
Accessed from http://www.ibtimes.com/imf-worries-chinese-slowdown-could-damage-sub-saharan-economies-1576706?ft=3aj78&utm_content=xiangming.chen@trincoll.edu&utm_medium=Apr_27_2014_0401_194973&utm_source=TailoredMail&utm_term=China+Economic+Slowdown+Impacts+Reach+To+Africa&utm_campaign=Apr_27_2014_0401.
Kayla Chen and Xiangming Chen, ‘China and Latin America: Connected and Competing’,The European Financial Review(February 2013): 56-58.
Ze Jin, ‘China’s 21 billion investment in Brazil’s hydropower’; accessed from http://wallstreetcn.com/node/75689.
‘China’s influence in Latin America is increasing’; accessed from http://www.dw.de/chinas-influence-in-latin-america-is-increasing/a-17156409.
Ibid.
Ibid.
Chris Horton, ‘Giant development in Cambodia hinges on Chinese buyers’,The New York Times,May 6, 2014; accessed from http://www.nytimes.com/2014/05/07/realestate/commercial/giant-development-in-cambodia-hinges-on-chinese-buyers.html?_r=1.
Kathleen Caulderwood, ‘Chinese Premier Li Keqiang vows to help build a railway through Africa ‘with no strings attached’,International Business Times,May 6, 2014; accessed from http://www.ibtimes.com/chinese-premier-li-keqiang-vows-help-build-railway-through-africa-no-strings-attached-al+African+Railway+No+Longer+A+Pipe+Dream&utm_campaign=May_09_2014_0700.
Patricia Rey Mallén, ‘Is the partnership between China and Latin America paying off’?International Business Times, May 8, 2014; accessed from http://www.ibtimes.com/partnership-between-china-latin-america-paying-off?

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Filed under ASEAN, China, Current Events, Economic development, Energy, Foreign policy, GMS, Governance, SLIDER, USA, Yunnan Province

Tagged as China energy, China GMS, China in africa, China investment, China Latin America, china rise, China trade, GMS

by East by Southeast | November 3, 2014 · 11:30 am

In Anti-Corruption Campaign, Top Yunnan Officials Pay Steep Price for Graft, Political Relationships

During dynastic times, Yunnan was known as a place where disgraced mandarins were sent to live out their days and where the local officials maintained a large degree of independence from the capital. As the saying goes, “the heavens are high and the emperor is far away.” However, as new highways and railroads have linked Yunnan to the rest of China over the past century, Beijing is not as distant as it used to be, and the days of the province’s freewheeling officials seem to be at an end. If that were ever in doubt, a recent string of high profile corruption cases have confirmed Beijing’s grip on its representatives in the land south of the clouds.

President Xi Jinping

Since President Xi Jinping took office more than a year ago, the Communist Party of China (CPC) has undertaken the herculean task of ridding itself of graft, collusion and anything that would diminish the public’s already low level of trust in its leaders. By going after both high-ranking party leaders and petty bureaucrats, or ‘swatting flies and hunting tigers’ (拍苍蝇，打老虎) in the modern parlance, the current anti-corruption drive has yielded impressive results.

To date, over 50 high level party members have been arrested, 182000 government officials punished, and as of July 2014, 6,000 officials have been placed under investigation this year. Among the ‘tigers’ caught in the campaign are former mayor of Chongqing, Bo Xilai, former Minster of Railways, Liu Zhijun, former vice-chairman of the Central Military Commission Xu Caihou and former Minister of Public Security, Zhou Yongkang, also a member of the Politburo Standing Committee under Hu Jintao.

Thousands of officials from every region have been swept up in the campaign and Yunnan Province has indeed seen its fair share, with hundreds of local public servants investigated since the 18th Party Congress almost two years ago. However, in recent months, a number of high profile officials in the province have found themselves in the cross hairs of the Central Commission for Discipline Inspection.

Shen Peiping, former vice-governor of Yunnan Province

The first major official to fall was Shen Peiping, former vice-governor of Yunnan Province. Shen, a native of Baoshan, Yunnan, worked in various government posts before becoming Mayor of Pu’er City in 2007. Dubbed ‘Mayor of Tea’, Shen gained fame in promoting the local Pu’er tea to the rest of China and the world, leading to quick economic development of the region. However, Shen was also known locally for his heavy-handed tactics in dealing with petitioners and shady relationships with local businessmen.
After spending a little over a year as the vice-governor, Shen was officially investigated in March of this year and in August, he was charged with using his post for personal benefit, accepting large bribes and committing adultery. Traditionally, intra-Party disciplinary investigations almost always lead to a court case, where the conviction rate is above 99%. Therefore, few expect Shen to recover from these accusations.

It was not long after Shen Peiping’s investigation began that Kong Chuizhu, a personal friend, began his demise, albeit under much more scandalous circumstances. The provincial vice-governor from 2003 to 2013, Kong was known to share mistresses with Shen Peiping and the two would often frequent high-end brothels together. For Kong, the consequences were grave.

Kong Chuizhu, former vice-governor of Yunnan Province

Following the announcement that Shen was being investigated in early March, Kong, in Beijing attending meetings at the time, attempted suicide in his hotel room. The attempt, however, was unsuccessful and Kong was admitted into a Beijing hospital for recovery. Following medical tests, he was found to be HIV positive. The central government immediately opened an investigation on Kong and ordered him back to Yunnan to lay low while undergoing treatment. Two months later, he unsuccessfully attempted suicide for a second time and was admitted into the Provincial Armed Police Hospital. Finally, Kong jumped to his death from his hospital window on July 12.

Days after Kong Chuizhu’s death, the Central Commission for Discipline Inspection announced it was investigating Zhang Tianxin, former Party Secretary of Kunming. Zhang’s Party membership and posts were immediately revoked as a result of the investigation.
Zhang, the CPC Party Chief of Yunnan’s Wenshan Prefecture from 1999 to 2006, was apparently involved in corrupt practices in the prefecture’s mining industry. In addition, it is significant to note that Zhang was taken down just two weeks after an exposé aired on CCTV revealing plans for a number of illegal housing developments on the shores of the famously polluted Lake Dianchi, plans that Zhang reportedly approved.

That Zhang Tianxin was investigated is not surprising to many Yunnanese. According to one local government employee who wished to remain anonymous, “Everyone knew Zhang Tianxin and (former Yunnan Provincial Party Secretary) Bai Enpei were corrupt. Once (the Central Commission for Discipline Inspection) started looking at Yunnan, they were done.”

Zhang Tianxin, former Party Secretary of Kunming

Indeed, Bai Enpei did not have much time left. On August 29, it was reported that an investigation was being opened on him and that he was suspected of “serious discipline and law violations,” Party jargon for ‘corruption’.

Bai, Provincial Party Secretary from 2001 to 2011, oversaw a period of rapid growth for the province. He was a vocal supporter of hydropower development and campaigned intensely in favor of damming western Yunnan’s Nu River, also known as the Salween. Following 10 years as the CPC’s top man in Yunnan, Bai assumed the post of deputy secretary for the Environmental Protection and Resources Conservation Committee.

His tenure there, however, was cut short. According to a report from YiCai, the former vice-secretary for the People’s Political Consultative Conference of Yunnan, Yang Weijun submitted to Beijing an official complaint regarding Bai’s corruption in mid-August in which he detailed Bai Enpei’s extensive dealings in selling off mining contracts in the province.

In the most grievous case, Bai sold sixty percent ownership of China’s largest zinc and tin mine for a mere one billion yuan, despite the mine having an estimated value of fifty billion yuan. The shares were sold to a relative of Liu Han, a Sichuanese mining tycoon and close friend of Zhou Yongkang. Mr. Liu was sentenced to death earlier this year for murder, among other charges.

A map of Bai Enpei's relationships with other corrupt officials. An asterisk next to the name indicates that official has been investigated. (Infographic originally produced by Sohu.com August 2014)

A map of Bai Enpei’s relationships with other corrupt officials. Click to enlarge. (Infographic originally produced by Sohu.com August 2014)

As the above infographic shows, Bai Enpei was at the center of corruption among Yunnan’s political elite and closely tied with Zhou Yongkang and Liu Han. What’s more, when Bai was the party secretary of Qinghai from 1997 to 2001, he had dealings with Jiang Jiemin, a former executive of the notoriously corrupt Sinopec who is currently under investigation for embezzlement of state funds. Many of Bai’s former colleagues from his days in Qinghai have also met the same fate as him and currently face investigation by the Central Commission for Discipline Inspection.

Bai Enpei, former Party Secretary of Yunnan Province

The dominoes did not stop falling with Bai Enpei, however. In mid-October 2014, state media announced that Yunnan Party Secretary Qin Guangrong had been relieved of his duties and would be replaced by sitting governor, Li Jiheng. Qin will now assume the post of vice-secretary of the State Organs Work Committee. However, local Kunmingers interviewed see the job transfer as more of a demotion with possible serious consequences. “(Qin’s) new position is meaningless, he has no power there. The central government just put him there until he’s formally charged… and that should be coming soon,” Yang Mouren, a local teacher, claimed. He may be right. While Qin was well-liked by many locals, he had close ties to a number of disgraced officials and it is probable that like his colleagues, Qin also had his hands in corrupt resource deals. However, unless he is formally investigated, details regarding any corruption Qin took part in will not be publicly released.

Qin Guangrong (R) with his replacement as Yunnan Party Secretary, Li Jiheng (L)

With so many high officials, and hundreds of local bureaucrats, investigated, it’s clear that the central government has its sights on Yunnan’s corrupt officialdom. But, with countless other corrupt officials scattered across China, many locals are asking ‘Why Yunnan?’ The reasons are twofold.

The first has to do with Yunnan’s natural resources. Of the two provinces that have so far been cleaned out by Beijing, Yunnan and Shanxi, one important commonality is their abundance of resources. With such wealth in natural resources come opportunities for massive corruption. In the case of Shanxi, its army of ostentatiously wealthy coal bosses were known nationwide, as were their close relationships with their political patrons. At the same time, Yunnan’s reserves of aluminum, lead, zinc and tin are the largest in China and it’s clear from the cases of Bai Enpei and Zhang Tianxin that provincial power brokers were heavily involved in the illegal distribution of these resources.

Also significant is the fact that all of the high officials mentioned in this article have ties to the disgraced Zhou Yongkang and his mining tycoon friend, Liu Han. With his power base in Sichuan, Zhou’s influence on officials in neighboring provinces, including Yunnan, was deep. Shen Peiping, Bai Enpei and Qin Guangrong especially were known to belong to the same political clique that formed under Zhou Yongkang. Shen and Qin were heavily rumored to engage in business with Zhou’s family members worth tens of millions of renminbi, while Bai Enpei sold off control of a western Yunnan mine to Liu Han’s family at a cut rate. In addition, Bai and Qin were Zhou Yongkang’s unofficial hosts when he visited the province in 2007, and Bai accompanied the Politburo Standing Committee member on his 2011 trip to Laos, all implying very close relations. For their part, Kong Chuizhu and Zhang Tianxin were intimately connected to Bai Enpei and as his power grew in the province, so did theirs. As is often the case within Chinese bureaucracy, underlings rise and fall with their leaders. Bai Enpei, and those who came up with him, were intimately connected to Zhou Yongkang; they are now paying the price for their political associations.

Former Minister of Public Security, Zhou Yongkang

Xi Jinping’s anti-corruption drive has rocked the national bureaucracy, clearing out the upper echelon of Yunnan politicians in the process. It isn’t just top officials that have felt the squeeze however; there have been noticeable effects for local bureaucrats as well. According to one university administrator who wished to remain anonymous, his college’s office environment has changed in the past year. As he explained, “Before, you just had to show up, sit in your office, drink tea and chat with the other teachers from time to time. Now, a lot of people are very nervous at the school because we’re known to be pretty corrupt.” However, the corruption crackdown has led to some unexpected opportunities. “I actually have more freedom with my job now. Because all of the higher officials are so worried about their own jobs, I can consult for other companies on the side, and they’re too busy to notice. Plus, I wasn’t too corrupt to begin with so I’m not worried.”

The changes may not be over yet, however. When asked about corruption in Yunnan, locals still doubt the effect of the current campaign. “In Yunnan, nine out of ten officials are corrupt,’’ Mr. Yang, the school teacher, claims “and it’s the same everywhere else in the country. The story isn’t over yet.”

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Filed under China, Current Events, Governance, SLIDER, Yunnan Province

Tagged as anti-corruption campaign, Bai Enpei, corruption, graft, Kong Chuizhu, Liu Han, mining, Qin Guangrong, Shen Peiping, Xi Jinping, Yunnan, Yunnan Party Secretary, Yunnan Provincial Government, Zhang Tianxin, Zhou yongkang

by William Feinberg | October 18, 2014 · 5:44 pm

8 Killed, 18 injured in Yunnan construction fracas

Police respond to the incident in Jinning County

According to local government sources, eight people were killed after a fight broke out between construction workers and villagers in Jinning County, located 60 km south of the provincial capital Kunming.

The county government reported the incident on its Sina Weibo account on October 15, a day after the fight occurred. According to sources, the incident happened at a construction site for the Jincheng Transasia Industrial Logistics Center in Fuyou Village. The fight broke out after a dispute over farm land used for the logistics center. Police reported that of the eight people killed, two were villagers and six were construction workers.

However, local villagers interviewed by Caixin said that the so-called construction workers were actually an unknown group of people. They reportedly attacked the villagers using knives and tear gas. The alleged attackders were clad in black and some carried shields that bore what looked to be police symbols. According to unconfirmed reports online, four of the unknown attackers were burned to death by the farmers. Police were called, but arrived after the fighting had stopped.

Disputes over land requisition are a common theme in rural China and Southeast Asia, as industry expands outside previous city borders and into traditional farm land. In China, most of the thousands of protests and riots that happen annually are linked with disputes over land requisition. Oftentimes, compensation given to rural villagers is also an issue, as has been documented by ExSE in its series on hydropower development on the Yalong River.

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Tagged as Fuyou village, Jinning county, Kunming, land grabs, land requisition, violence, Yunnan province

by GoKunming | October 16, 2014 · 11:39 pm

Yunnan government weathers unexpected power shake-up

Li Jiheng (left) has taken over for Qin Guangrong (right) as Yunnan Provincial Party Secretary

The government of Yunnan completed a reshuffle of its top members a bit more than two and half years ago amid some confusion. At the time, Kunming’s golden boy partysecretary, Qiu He (仇和), received what appeared to many to be an improbable demotion. It’s déjà vu all over again as the Communist Party’s top man in the province has been relieved of his office without an accompanying explanation.

During a high-level meeting of provincial party cadres held October 14 in Kunming, it was made public that Qin Guangrong (秦光荣), party secretary of Yunnan, would be replaced by sitting governor Li Jiheng (李纪恒). Generally, such power handovers are quickly followed by news of a departing bureaucrat’s next job posting. In Qin’s case, no such announcement has been forthcoming.

The news seems all the more odd because until very recently, Qin was tabbed by many to be in line for a promotion to Beijing. The South China Morning Post is reporting that before Tuesday’s meeting, “speculation was rife […] that he could become deputy head of the party’s Working Committee of Organs Directly Under the State Council.”

Qin’s departure was conducted without any apparent rancor and the outgoing party boss gave a lengthy speech in which he said he was thankful for his 16 years of public service in Yunnan. He first arrived in the province in 1999 after a governmental stint in Hunan. Qin was then named governor in 2007 and provincial party head six years later.

The newly anointed Li also addressed the meeting and thanked his predecessor for what he deemed Qin’s “practical” approach and “heartfelt and sincere” service. Li also took the time to welcome his heir-apparent and relative newcomer, Chen Hao (陈豪). Chen had previously been deputy-head and party secretary of the All-China Federation of Trade Unions (中华全国总工会), the largest organization of its kind in the country.

Qin’s time in office will most likely be remembered for environmental issues. During the entirety of his time as provincial party head, Yunnan suffered from a recurring and often crippling drought. Qin was a vocal proponent of rerouting water from the Jinsha River (金沙江) towards Kunming in the dual hope of alleviating city water shortages and flushing away the algae blooms that have become a permanent feature of Dianchi Lake.

The secretary also had a hand in aggressively implementing Beijing’s Bridgehead Strategy — a multifaceted program aimed at strengthening the province’s economy through international business and trade. However, when all is said and done, history may judge Qin guilty by association with several governmental colleagues — including his predecessor — who have recently been embroiled in corruption scandals.

This article was written by Patrick Scally and originally published in GoKunming on October 15, 2014.

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Tagged as CCP, Chinese politics, Li Jiheng, Qin Guangrong, Qiu He, Yunnan Party Secretary, Yunnan Provincial Government

by Brian Eyler | August 19, 2014 · 10:55 am

The Red Line, Bottom Line, and Direction of State-Owned Enterprise Reform (translation)

China’s president Xi Jinping discussing State-sector reform in December 2013.

Translators note: This essay was first published in Qiushi’s online journal Red Flag in early June and then recirculated on various CCP and government websites/publications including the official CCP News website, SASAC website, and most recently SinoPec’s official site. Its analysis provides key insight into the both the nature of China’s coming state-owned enterprise reforms and challenges to launching reforms.

The author, Zhu Jidong, first outlines that the reforms will not be a massive sell-off or a granting of private and foreign firms access to state assets as many pundits have suggested, but rather a reform that re-introduces corporatization and mixed-ownership structures to China’s state-owned firms. The essay continues with a discussion of the connection between the importance of state-owned industries and the survival of the Chinese state and Communist Party. It touches on the dangers and risks of reform going off in a wrong and misguided direction and hints that power currently is unevenly distributed in the state-owned sector and that managers of state-owned industries could continue to use their power to make arbitrary decisions, engage in corrupt practices, and take advantage of reform. The author calls on the Party and governments from the central to local level to promote the supervisory powers of various societal sectors to ensure the coming reform process is fair and transparent. He encourages Party commissions and local governments to set up hotlines using various forms of social media for observers and whistle-blowers within the state-sector to utilize in reporting malfeasance and corrupt practices that occur during the coming round of state-owned enterprise reform.

The timing of this essay’s release is critical as state-owned enterprise reform should be a key issue discussed at the coming 4th Plenary Session of the 18th Party Congress this fall. To date this is the essay’s only known English language translation.

The Red Line, Bottom Line, and Direction of State-Owned Enterprise Reform

Deepening state-owned enterprise reform is a major undertaking and is a major issue gaining attention and controversy around the future fate of the party and the state. During the “two sessions” of 2014, General Secretary Xi Jinping stressed that state-owned enterprises cannot be undercut but rather must strengthen. State-owned enterprises must absorb the experience and lessons of past reforms and state assets cannot turn into an opportunity for speculative profiteers amidst the wave of reform. The underlying spirit of this essay is to further advance the definition of state-owned enterprise reform’s red line, identify the bottom line, and clarify its direction.

Drawing the red line: Speculative profiteering opportunities cannot be made in the name of State-owned enterprise reform

“Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform,“ the document produced during the CCP’s Third Plenary Session of the 18^th Party Congress clearly states for the positive development of a mixed ownership economy. There are those who advocate the position that the development of mixed ownership economies will serve as a big push to advance privatization, to permit more private and foreign enterprises to control the shares of state-owned enterprises while at the same time allowing state-owned enterprises to retreat away from competitive sectors. This has created a certain mindset of confusion throughout society. Looking back at more than 30 years of Reform and Opening, the loss of state assets during the process of state-owned enterprise reform has been a controversial topic which triggered many problems.

Some people say that the purpose of reform is to sell state-owned enterprises, as if success is only delivered through wholesale sell-offs and the price of the efforts of privatization is the laying off of large quantities of employees. A sentiment exists that not only can state employees not share fruits of this kind of reform, but they also serve as the sacrifices of reform; further the state must shoulder the welfare burden of this heavy issue. Correspondingly a minority state-owned enterprise upper management who once carried the torch of reform have become billionaires. Now there are even those who advocate “To mix is to sell, if you don’t sell you can’t mix.” If the name of reform is to forcibly make state-owned enterprises sell off rights and assets to private and foreign enterprises, then state-owned enterprises are not strengthened, rather they are weakened..

Developing a mixed ownership economy calls for open and transparent principles. Some people stress that the process of developing mixed ownership is to allow private enterprises to participate in the affairs of state-owned enterprises. But if upper management of some state-owned enterprises take up this slogan and combine it with the efforts of private managers, then the possibility of “state assets becoming opportunities for private exploitation in the wave of reform” will arise. The crux of reform is openness and transparency and it is a reform to be carried out under the supervision of the masses.

The basic policy of developing a mixed ownership economy is already clear and its essence, as well as its success and failure, is in the details of regulation. It is imperative for the transfer of state ownership and assets to be an open and transparent process. Financial assets should be made known to exchange markets. Transfers should be public knowledge. State-owned enterprises should engage in open, fair, and just exchange. The state should establish an institution with the sole purpose of managing, supervising, and quickly establishing a platform for the transfer of state ownership and assets and mandate all state-owned enterprises regardless of reputation to openly, fairly, and justly execute the transfer of state assets. The private transfer or third party management of the transfer of state assets is impermissible. At the same time, this platform must be built to be as transparent as a glass window in order to put a stop to end all under the table dealings.

In order to develop mixed ownership economies it is necessary to guard against foreign capital controlling the pulse of the Chinese economy. In accounting for the livelihood of the Chinese people, China’s state-owned industries not are not only the key sector for economic stabilization and boosting the economy, but these firms also bear the load of fending off the control of International monopolistic capital controlled by multinational corporations. They take on the heavy task of protecting the security of the national economy, and because of this, frequently are a target in the eyes of Western countries and multinational corporations. If foreign capital and foreign firms are to enter the reform of the state sector, we must first consider the question of the security of the economy and the security of the entire country. Otherwise after foreign capital and foreign firms enter this sector, it is possible they will spy on the state sector’s confidential policies and strategic decisions. One can easily imagine that this will influence the security of China’s economy.

A 2006 report issued by the State Council’s Development Research Center expressed that among industries already open to foreign capital investment, each of the top five firms in those industries were nearly completely under the control of foreign capital. Particularly among twenty-eight major industries, foreign capital exploits the controlling rights to multiple forms of assets of twenty-one industries. It can be said that foreign capital controls these twenty-one industries. Today this data should be even more shocking. Because of this, we must guard against foreign capital from taking advantage of mixed ownership economies to control the lifeline of the Chinese economy and threaten China’s economic stability. We must take strict precautions against foreign capital from seizing the opportunities of national defense, railways, energy resources, telecommunication, public industries, and those that are associated with national security and major industries associated with the economic pulse of the state and people.

The development of mixed economies needs to allow for the participation and supervision by the masses. We must appeal for the positive activation of the masses to supervise the whole process of the development of mixed ownership economies and absolutely cannot allow for the invaders to embezzle from and take advantage of state industries. The party committees and governments at the central and local levels have all installed hotlines, mailboxes, and websites and are positively ready to receive reports on neglect, malfeasance, and corrupt activities associated with state enterprise reform. We will positively investigate and make public the clues reported by the masses pertaining to the loss of state assets. Toward the actions and behavior of those who embezzle state assets, we will investigate resolutely and severely punish. Through dissecting case studies involving the loss of state assets, we will establish and strengthen the institutions to protect state assets and the benefits of workers during the process of state sector reform.

In the development of mixed ownership economies, we must prevent the torchbearers of this reform from carving up state assets for their own purpose. The selling of shares to managerial levels and to employees is a topic that will attract much attention during this round of state-owned enterprise reform. Some locals are already implementing models for share distribution, so this direction has already been established. State assets are legal assets owned by the people of the socialist state of China, and the spirit of state assets cannot be violated. No one has the right to turn these assets into the private assets regardless if they are at the managerial level or a common employee. Importantly the leaders and employees of state-owned enterprises cannot grant distribution of shares to themselves or transfer all of the people’s assets into private assets. To permit or even encourage employees and managerial levels to hold shares or to institute models for the holding of shares is a means to permit these people to buy enterprise shares using their own money – not to carve up state assets for their own usage.

Identifying the bottom line: State enterprise not only cannot weaken, but it must strengthen

In the Communist Manifesto, Marx and Engels pointed out that: “The question of ownership is the fundamental issue of the movement.” The common means of production is the economic base of the socialist system and state-owned enterprises are the principal part and pillar of the common means of production. The Constitution of the People’s Republic of China clearly stipulates common ownership economy is the guiding power of the economy of the Chinese people and the state. The state must guarantee the strengthening and development of the state economy. The development of a strong state economy is assured by the state economy’s controlling the economic lifeline of the people and the state. In order to express the superior characteristics of the socialist system as well as provide national defense and social cohesion, it is critically important to strengthen the power of China’s economy.

Through controlling the economic lifeline of the people and the state, the state-owned economy can keep the entire national economy running and serve as the engine of development. The state-owned economy is the effective means for macro-economic adjustment, adjusting market inefficiencies and for realizing the prerequisite conditions of national strategic planning. Because of this CCP General Party Secretary Xi Jinping has emphasized, “State owned enterprises not only must not weaken, but they must strengthen.” Regardless of the manner of reform, we cannot go beneath this bottom line, otherwise we will end up on the wrong road.
Even after if the many years of privatization and liberalization in Europe, the state owned economies of many countries in many still occupy dominant positions in key sectors and state-owned enterprise investment takes up approximately 20% of total national investment. For example, state-owned enterprise investment is more than 27% in France. Moreover the French national government owns more than fifty-one enterprises and employs 838,000 people. The income of these enterprises contributes approximately 15% of France’s GDP ranking sixth in Europe. Norway’s government owns forty-six firms which employ 230,000 and contribute about 9.4% of national employment, levels these firms’ incomes comprised nearly 70% of Norway’s 2008 GDP, an increase of 10% from 2004. Although post-Soviet economies went through a spurt of privatization, by and large, the state-owned sector of many powerful former Soviet states is extremely large. Russia’s state-owned fixed assets account for 40% of total state assets and state-owned enterprises control nearly 50% of the economy, and state-owned enterprises account for 31% of total employment. Moreover, the state owned economy comprises more than 70% in Belarus. Perhaps this is the reason why Russia and Belarus have the confidence to not fear the West and even dare to stand up to Western hegemony.

A few foreign friends have also provided advice for the reform of China’s state-owned economy. On February 15, 2012, German Prime Minister Schmidt reminded China in an interview that the question of ownership reform is one of hundreds of trillions of RMB. Currently most state enterprises are monopolistic and relate to state security. These firms should develop in the interest of long-term stability and are not for the purpose of profit-seeking as top priority. The profits of state-owned enterprises are the profits of the people; if these state-owned enterprises privatize, they will not necessarily become more competitive, and they will not necessarily provide more benefit. Schmidt used the railway system as a case in point: some of China’s western railways are seriously bearing too much weight and collecting too little in fees. If the railway firms privatize, these railways might halt transportation or raise their price. This will bring major (negative) impacts to the development of the country’s interior. If foreign friends can clearly see the danger, should their words fall on deaf ears?

China’s 2012 GDP was 51.9322 trillion RMB and per capita income 38,354 RMB. This is already higher than 6000 USD. This makes China the world’s second largest economy. Moreover the rapid development of China’s state-owned economy was the major guarantor of China’s reaching the rank of the world’s second largest economy. It is also the major motivational fountainhead of China’s economic development. The CCP’s “Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform” calls for the transitioning of a portion of state-owned capital to enrich social welfare funds, improve the budgetary system of state capital operations, improve the rate of contribution of state-owned enterprises to public finance. The decision sets the goal of 30% contribution to public finance by 2020 in order to guarantee welfare benefits for the people. Further, this reveals how state capital relates to all people, and it is only through the strengthening of enterprise that the broad masses can enjoy the benefits of state capital.

Let me ask, can the state enrich social welfare funding through foreign capital and private capital? Can foreign capital and private capital act without conditions, not seek return on investment, invest in the infrastructure of impoverished areas or fend off earthquake, floods, and other natural disasters? The answer is obviously no. Because of this, if China is to strengthen and is to allow the people to better enjoy the fruits of reform and development, it must demonstrate the guiding function of the state-owned economy, continuously increase the state economy’s vitality, controlling capabilities, and influence, and make this bottom line clear to the world.

Many people think of the selling off of state production rights and assets when they hear of mixed ownership economies and envision the single possibility of private enterprises and foreign enterprises entering into state-owned enterprises. Actually the development of mixed ownership in no way should be or is a one-way concept. Moreover, the development of mixed ownership is two-directional and even multi-directional. Private and foreign enterprises can enter the state owned sector by purchasing production rights and assets, and state-owned enterprises can also purchase the production rights and assets of private and foreign enterprises and even control the shares of some private and foreign enterprises. This is the true meaning of mixed ownership economy.

If the development of a mixed ownership economy means only the selling-off of state production rights and assets then the obvious result is the weakening of state-owned enterprises and not their strengthening. Because of this we certainly need to clarify that the development of a mixed ownership economy is not for the purpose of weakening state-owned enterprises and surely is not to privatize. We need to promote dual directional and multi-directional mixed ownership structures of state-owned enterprises, private enterprise, and foreign enterprise and not simply sell off the production rights and assets of state-owned enterprises to private and foreign enterprises.

Setting the Course: Continuously strengthen the vitality, controlling abilities, and influence of the state economy

In order to promote national modernization, guarantee power the mutual benefit of the people, the continuous development and strengthening of state-owned enterprises is the major force that supports the rise of the Chinese economy. It is also the guarantor of the endurance, strength, and perfection of the party leadership. “To continuously strengthen the vitality, controlling abilities, and influence of state-owned economy” is the direction set forward for reform in the state sector by the CCP’s 18^th Party Congress.

State-owned enterprises should take steps of self-improvement and like a phoenix rising from the ashes take on social responsibilities, establish a proper image, and increase the degree of promoting the processes of reform. This requires us take a serious look at the existing challenges to the current development of state-owned enterprises and persevere to strengthen and perfect the party leadership and realistically strengthen the positive characteristics which promote the working class as masters of society. We should take action in accepting the supervision of multiple levels of society, severely punish graft and corruption, and in the deepening of state-owned enterprise reform promote the continuous improvement of modern enterprise system.

At the high strategic level we must prioritize and continuously strengthen the vitality, controlling abilities, and influence of state-owned industries. As the corporatization of state owned industries attracts strategic investors and key groups, state owned property rights are diversified, and the vitality, controlling abilities, and influence of the state economy continuously strengthens. But at the same time we can see that the existing problems within state-owned industries are many. The salary differences in some state-owned enterprises are comparatively large even to the point of great disparity. Disparities exist in the execution of corporate social responsibility programs within some state owned enterprises. The management method of some state-owned enterprises is careless and accidents have occurred, some state-owned enterprises’ modern enterprise systems are just for show or have large degrees of patrimony. Some leaders of state-owned enterprises make arbitrary decisions, their lives are extravagant and degenerate, they practice nepotism, and even will sell off state interests for their own personal benefit.

These issues not only influence the initiative of employees, but also damage the vitality, controlling capabilities, and influence of the state-owned economy. The report of the 18^th Party Congress calls to stimulate new energies in various market sectors and calls for all state-owned enterprises to adopt a specific and realistic focus. Thus the increase, stimulation, and demonstration of these new energies is a major challenge that all state-owned enterprises and their leaders must face directly, and this challenge must be highly respected at the strategic levels. The issue of how to continuously reform and increase the state-owned economy’s vitality, controlling capabilities, and influence is for the relevant departments, work units, and experts located within the Central level’s Leading Groups on Comprehensive Deepening of Reform to deepen research and determine the right path, polices, and regulations.

We must clearly see that from the distribution of industries, to date 90% of state-owned enterprise are outside the realm of competitiveness. A slogan such as “Allow state-owned enterprises to leave the realm of competitiveness” is a covert argument of those who support privatization, and the basic motive of those who support privatization of state enterprises is to destroy our party’s economic base. We must prioritize at a high degree how to scientifically develop a mixed ownership system while preventing new losses of state assets and guard against people from taking advantage of state assets in a new round of privatization. To develop mixed ownership economies, we should select a portion of firms within a portion of industries as demonstration sites and expand the scale of development after summarizing experience and learning. We must act accordingly to the path, policies, and regulations set by the central government in order to orderly develop mixed economies and prevent a mad rush.

We must persevere to strengthen and perfect the party leadership of state-owned enterprise reform. General Party Secretary Xi Jinping has stressed many times “China is a major power, and we absolutely cannot allow any subversive errors.” What are subversive errors? It is those errors of directionality which depart from the fundamental characteristics of socialism. And it is on this point that the 3^rd Plenary of the 18^th Party Congress stresses that comprehensive deepening of reform must strengthen and perfect party leadership. Serving as the resolute leadership core of China’s socialist cause, the CCP naturally also forms the leadership core of China’s economic construction and serves as the leadership core of state-owned enterprise reform.

During the coming reform of the state-owned sector, we must demonstrate the offensive and defensive functions of party organs and the vanguard and model nature of party members. Further we must dare to shoulder responsibility and resolutely confront all erroneous words and deeds. It is only through perseverance in strengthening and perfecting the party leadership that the existing degeneration, extravagant waste, and nepotism within state-owned enterprises can be solved. We must unite and lead the masses the struggle against the activities of those who would embezzle state assets in order to maintain the right direction of state-owned enterprise reform. The nature of mixed ownership economies is decided by who controls shares. This is the central issue. The Central government should not give up shareholding rights in the name of state-owned enterprise reform. Moreover, the Central government cannot change the characteristics of strategic enterprises. This is what is meant by persevering to strengthen and perfect the party leadership as a strong base and powerful safeguard.

We must strengthen the master status of the working class. Strengthening the master status of the working class is to continuously strengthen the vitality, controlling abilities, and influence of the state-owned economy’s solid base. The working class is China’s leading class. It is the representative of China’s advanced production force and production relationship. It is our party’s most solid and most reliable class base and the comprehensive construct of a moderately prosperous society. Lastly, the working class is the main force of upholding and developing socialism with Chinese characteristics. To uphold and develop socialism with Chinese characteristics, we must rely on the working class with our whole hearts and whole minds and strengthen the master status of the working class to realize the full function of the working class as a main force.

In recent years the issue of corruption has arisen within state-owned enterprises and within some industries to the point of extreme severity. A contributing factor to this corruption is that the master status of the working class is wrongly viewed. Some leaders and cadres within state-owned enterprises do not take supervision by the working class and the interest of workers to heart, and for their own personal benefit, these leaders will sacrifice the interests of workers and the state. Relevant documents have expressed that the gap between actual average salaries of leaders of centrally owned enterprises to their employees is exponentially widening. This has raised questions and criticisms in some enterprises. When developing the mixed-ownership structure, state-owned enterprises should consider the raising of employee’s salaries. Actually many centrally owned enterprises achieved rapid improvement and synergy in increasing industrial efficiency and employee’s salaries when shifting to mixed ownership.

Chen Jieyuan, Party Secretary and Board Chairman of the Shanghai Port Group LLC said, “In recent years, The Shanghai Port Group, through has experience the sweet taste of mixed ownership. From 2006 when we fully listed on the market, our net assets have doubled, profits have basically doubled, and employees’ incomes have doubled. These three “doubles” mark the direction in which state-owned enterprise reform should persevere especially in the process of developing mixed ownership, priority should be placed on promoting the distribution of shares to employees, establish a modern enterprise system, and fully raise income of employees.

The data shows that in 2010 the average income of an employee in a state-owned enterprise was 38359 RMB, 5% higher than the national average. The average income of an employee in a private enterprise was 20759 RMB, 43% lower than the national average. It is obvious which kind of enterprise serves as a better model for increasing the incomes of workers. Because of this, the only way to strengthen the master status of the working class is to continuously increase the income levels of employees in the private sector, not the other way around. Relevant organs at the central level should come up with a proposal for the distribution of shares to employees based on rigorous surveying and research and make this a major breakthrough point for feasibly strengthening the master status of the working class.

We must require state-owned enterprises to accept supervision from many levels of society. This is the major guarantor for the continuous strengthening of the vitality, controlling ability, and influence of state-owned enterprises. We must open various channels of supervision, promote and accept the supervision of the masses, and accept and participate in supervision of the process of mixed ownership reform. We must also draw from the concepts and management experience of private enterprises and foreign enterprises. Party committees at the central and local levels and governments should set up whistle-blower hotlines, mailboxes, and websites and accept reporting from all levels of society on malfeasance, dereliction of duty, and corruption during the process of state-enterprise reform. Concerning state-owned enterprise reform these committees should take advice and suggestions from various societal levels, and make use of the body of people’s wisdom and power to make good on state-enterprise reform.

Especially with the rapid development of the internet, online news, Weibo, Wechat, forums, blogs, podcasts, these broadcast formats provide the best arena and platform for the people to supervise government and fight corruption in an ever-strengthening manner. Relevant organs should organically integrate educational experiences from the mass party line and pure and clean frameworks into the reform of state-owned enterprises. These organs should positively involve the participation of the masses, make progress in using the internet, and widen and open to the masses channels for reporting corrupt practices. Anti-corruption departments must especially focus on clues related to the loss of state assets which are revealed through reporting from the internet, and encourage and direct the masses to report on the egregious ways and issues of corruption through legal methods. Those who would attempt to transfer state assets into personal exploits should be called out and swatted like mice crossing the street. This is the way to uphold the core status of common ownership.

About the author: Zhu Jidong is a researcher at the Qinghua University Research Center for College Moral Education. Holds a post-doctorate in Marxism Theory, is Head of China Academy of Science World Socialism Research Center and General Secretary of National Cultural-Security and Ideology Research Center.

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Filed under China, Current Events, Economic development, Energy, Governance, SLIDER

Tagged as 18th Party Congress, 1994 Company Law, China, deepening reform, Industrial policy, Red flag, Sinopec, SOE reform, state-owned enterprise reform, Xi Jinping

by David Volodzko | July 31, 2014 · 1:05 pm

Understanding China’s housing reforms

Xinhua News Agency reported in late July on the government’s planned hukou reforms, which will begin by facilitating the urban settlement of roughly 100 million people who do not hold urban IDs and which will ultimately lead to the elimination of discrete registration systems for urban and rural residents.

The hukou (huji or ‘household register’) system is about 4000 years old. Early in its inception it became an instrument for tax collection and by the 7th century BCE administrators in present-day Shandong were levying different regions according to different standards. The present system serves to maintain census data and severely limit migration into urban areas, making it analogous to the North Korean hoju or former Soviet propiska systems and earning it criticism as China’s apartheid by BBC News, The Independent and South Africa’s The Star.

Citizens currently registered in rural areas must follow a tortuous bureaucratic path in order to qualify for non-agricultural work and unless they successfully do, they will not receive the same educational or medical benefits as their city-dwelling compatriots. Government officials have defended the system by citing the need for stability but some, like Tim Luard of BBC News (here), have suggested the restriction of urbanization preserves a rural population in order to furnish state enterprises with low-wage workers.

Jasper Becker, former Beijing bureau chief of Hong Kong’s South China Morning Post, has written an engrossing account of the Great Chinese Famine entitled Hungry Ghosts: Mao’s Secret Famine in which he describes how local administrators, eager to impress, oversold the output of their districts. Corresponding taxes claimed the bulk of food production in many rural communes and, as a result, holding a rural hukou became a death sentence for millions even while urban residents dined well.

But officials remain wary of reforms that may trigger massive nationwide urbanization, leading to spikes in urban crime and stressing the limits of municipal resources and social services. So while the government works to improve the system, it does so with deliberate speed. Rural residents were given the right to work in urban centers years ago by purchasing temporary urban visas and Beijing has now announced plans to allow the movement of 100 million workers, roughly half the total number of illegal residents.

Major cities like Shanghai will retain tighter controls whereas urban districts with less than three million people will become easier for rural resident to move into, thus encouraging growth in mid-sized cities while protecting larger ones from overpopulation. The government’s stated long-term hope is the standardization of the nation’s system by 2020, allowing rural and urban residents to enjoy the same benefits and opportunities.

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Filed under China, Current Events, Economic development, Governance, SLIDER, Yunnan Province

Tagged as China, China economic reform, housing reform, real estate bubble, real estate sector

by GoKunming | July 18, 2014 · 8:19 pm

Yunnan to Spend 70 Billion on Infrastructure Development

Yunnan lawmakers were busy over the past seven days, earmarking billions of yuan for building projects across the province. The vast majority of the money will be used to fund the ongoing construction of 26 major highways. Other money has been set aside for waterway maintenance and “disaster mitigation” projects.

The Provincial Highway Bureau expects to initiate or continue work on 1,500 kilometers of highways in the next two years, it announced in a July 14 press release. In total, the new roadways will cost 100 billion yuan (US$16.1 billion), spaced out in annual 50 billion increments over the next two years.

Stretches of road scheduled for completion this year include highways connecting Lijiang toShangri-La, Ruili to Longling and Huaping to Lijiang — which is a segment of the road linking Lijiang to Chengdu.

Obtaining loans for massive infrastructure ventures has become increasingly difficult as China’s once-humming economy continues to slow. Statistics published by news outlet Kunming Information Hub show that in 2011, the province experienced a two billion yuan shortfallbetween toll road revenue and what it owed in loans for highway construction.

To avoid a repeat of that deficit, provincial planners voted to implement tolls on many of the new roads, effectually passing the bill on to automobile owners. People traveling by bus will also pay a share of the costs. Currently, a 0.5 yuan surcharge is attached to the price of every long-distance bus ticket purchased in Yunnan. That fee will now be raised to 0.9 yuan to help fund highway expansion. Long-distance transport trucks will also face higher fees based on load tonnage and distance traveled.

An additional twenty billion was pledged for waterway upgrades. Details have not been fully disclosed, but some monetary allocations will fund canals connecting rivers to reservoirs as well as maintenance on dams and hydropower stations across the province.

Although highways and water infrastructure projects comprise the lion’s share of the recently allocated money, two billion yuan (US$322 million) was also designated for the prevention of ecological disasters. Surveyors have identified thousands of “hazard points” in Yunnan — places where roadside cliffs are prone to rockslides or where villages are threatened by mudslides due to deforestation. Over the past fifteen years, Yunnan has suffered a reported 17,258 geological disasters. These claimed the lives of 1,394 people and led to more than seven billion yuan in economic losses.

This article written by Patrick Scally was first published here on 7/15 on GoKunming.

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Filed under China, Economic development, Environment and sustainability, Governance, SLIDER, Yunnan Province

Tagged as corruption, economic stimulus, highways, infrastructure development, Lijiang Shangrila highway, shovel ready projects, Yunnan

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