Friday, April 10, 2015

Watch "Under the Dome", the best ever documentary on China's air pollution

Closely connected with the topic of my last post, I now bring you "Under the Dome" (穹顶之下), the groundbreaking documentary on China's air pollution by Chai Jing. Rather similar in style to Al Gore's "an inconvenient truth", it gives you some of the frightening facts about the country's air pollution in an accessible fashion.

After its release, "Under the Dome" got over 100 million views in a single weekend on China's main video-sharing websites, and sales of air purifiers shot up as a result. Although it was obviously made with the cooperation of some government departments and was initially praised by the Minister of Environment, after about a week the video was taken down from all Chinese websites by decree, meaning that most Chinese no longer have easy access to it.

Here is a YouTube version with English subtitles:

Monday, April 6, 2015

New Delhi's air pollution worse than Beijing's

Delhi's Red Fort blanketed in smog.

Beijing's air pollution is unquestionably one of the factors which most affects quality of life in the Chinese capital. The smog which is visible to the naked eye on a majority of days is both unpleasant and harmful. The city's yearly average level of PM 2.5 is estimated to be around 100, many times over what WHO deems to be an "acceptable" level of air pollution. By way of comparison London's average level of PM 2.5 is only 16, and many Londoners see this as a serious problem.

In a public admission of a frankness which is rarely seen in this country, Beijing's mayor Wang Anshun recently stated that air pollution has basically made Beijing unlivable. The air quality is one of the main reasons that in the last few years there has been something of an exodus of foreign expats from Beijing. Tourism has also been affected. The documentary "Under the Dome", which got 100 million views in a single weekend before the government banned it, has now made many ordinary Chinese a lot more worried about the effects of air pollution on their health as well.

Those who live here tend to think of the air pollution in Beijing and other Chinese cities as the worst in the world, and I must admit that I also assumed it to be almost unparalleled. It was thus with some surprise that I read today that a WHO survey has declared New Delhi to be the city with the world's worst air pollution.

Apparently Delhi's annual average PM 2.5 level reaches 153, although it is very much concentrated in the winter months. The main culprits of Delhi's air pollution appear to be identical to those in Beijing: the large-scale burning of coal, cars using sub-standard fuel and dust from construction sites. In the winter Delhi's slum dwellers often start fires on the roadside to stay warm, making the air even worse. 

The fact is that severe air pollution in big cities affects many of Asia's "emerging" powers, and is not limited to China. Cities in India, Pakistan and Iran often record worse air pollution than Chinese cities. Beijing's air pollution attracts the most international attention, but this is probably due to the city's cosmopolitanism and prosperity.

China is clearly not alone in its woes, and this does lend some credence to the argument, often heard in the Chinese media, that pollution is just a "natural" result of being a developing country. All the same, this should not excuse the authorities from working towards solutions. Given today's clean production technologies, it should be possible to considerably reduce the air pollution without even affecting economic growth too much. Policies which simply remove the sources of Beijing's air pollution to Hebei province are also not an acceptable solution, since Hebei's 73 million inhabitants have an equal right to clean air as Beijing's jet-setters do.  

Thursday, April 2, 2015

Capitalism with Chinese characteristics

Some of the most insightful books on China that I have read were written by Chinese academics who work in Western countries. Able to draw both on their insider understanding of the Chinese system and on the outside perspective which comes from living abroad, and liberated from censorship, they are sometimes able to provide real insight into the workings of this perplexing country.

I have recently finished one such book: an original and interesting study of China's economy called "Capitalism with Chinese characteristics". It was written a few years ago by Huang Yasheng, a Beijinger who teaches at Harvard. Analyzing China's economy is an arduous task due to the opaqueness and ambiguity inherent in the system. As Huang points out in the introduction, while in the US a study might focus on the effect of a tax raise, a similar study on China might focus on the question of whether China's government really has raised taxes or not.

All the same, Huang's book makes a pretty convincing case in favour of a thesis which, as far as I know, is new: according to him, the economic policies which China followed during the eighties were substantially different from the ones it followed in the nineties and later on, and much more conducive to the Chinese people's general well-being.

Huang claims that during the eighties, the Chinese government was following a clear path towards greater liberalism. Economic reform was focused on the countryside, where enterprising peasants were enabled and encouraged to start their own private businesses. Growth was fueled by the so-called "Township and Village Enterprises" (TVEs), which according to Huang are usually misunderstood by Western observers to have been state-owned enterprises, when in fact they were usually private companies begun by individual peasants. Rural residents were allowed to poll money informally to set up their businesses, or they were enabled to borrow money from the banking system.

Although the protection of property rights in China was sketchy (as it remains today), it was still far better than it had been under Chairman Mao before 1978, and this was sufficient for the Chinese to feel encouraged to take risks and make money. People felt that things were changing for the better, and they had faith in Deng Xiaoping's determination to keep it that way.

After the events of 1989, however, the conservative faction within the government gained the upper hand (especially the so-called "Shanghai clique"), and the country significantly changed course. Most Western scholarship assumes that after 1989 there was just a brief setback in the liberalization of China's economy, knows as the "Tiananmen interlude" (1989-1992), and that after Deng Xiaoping's famous "Southern Tour" China's reform once again picked where it had stopped in 1989.

Huang claims that this is a misunderstanding. In reality, China's policies never again veered in the same virtuous direction as they had done in the eighties. Instead, during the nineties what was created was a model of development based on a clear bias in favour of the cities, state-owned enterprises and foreign investment.

The policy environment became much less favourable to small indigenous entrepreneurs, due to restrictive regulations and policies which made it much harder to get credit from the banks. Instead of following in the path of other East Asian economies like South Korea, China became a "commanding heights" economy in the South American style, with economic growth fueled by imposing infrastructure projects mandated by the government, including all the first-class amenities and skyscrapers in the big cities which are superficially so impressive.

This mode of development has also been able to produce spectacular GDP growth, and it has continued to make the country more prosperous. On the other hand, it has been much less beneficial for the well-being of the Chinese people. Income disparity has become huge, and private incomes have become a smaller proportion of national GDP. Rural residents have become nothing more than a pool of cheap labour for the cities. Huang attempts to demonstrate that the provision of educational and health services in the rural areas suffered as a result of the strong urban bias of the policy makers, and that literacy rates actually declined in the countryside in the early 2000s as a result.

Huang also claims that the few big Chinese companies which are starting to make a name for themselves in the world are either not really private or not really based in Mainland China. For instance Lenovo, China's biggest computer company, has long been controlled and run mainly from Hong Kong, out of the reach of the Chinese system, where it has access to world-class financial and judicial institutions. 

Huang repeatedly calls China's current economic system "crony capitalism", and uses a compelling example to prove his point: the case of Beijing's famous (or infamous) "Silk Street". The Silk Street is a large shopping center near Beijing's embassy district, always extremely popular with tour groups. It is notorious for its wide selection of counterfeit designer goods.

Tourists haggling in Beijing's Silk Street

Although I have been there a few times, what I didn't know was the history behind the place: the market was apparently started spontaneously in 1985 by a group of small Beijing traders. By 2004 it was a thriving outdoor market which attracted dozens of thousands of visitors a day. Then the city government suddenly decided to close down the outdoor market and build the nearby indoor market which exists currently. They claimed this was to clamp down on the selling of fake products, but the problem with this explanation is that ten years later there are still just as many fakes on sale as before.

The government arbitrarily awarded the right to operate the new market to a private entrepreneur who did not have a stall in the old market. There was no bidding, and no rationale for the decision was ever made known. It is reasonable to suspect that this person did not win the deal just for making the best offer. The original traders were not allowed to keep their stalls, and the valuable right to own a stall in the new market was auctioned off. The bids fetched millions of Yuan. 

In essence, the hundreds of traders who had created the valuable "Silk Street" brand were expropriated out of it, in favour of an entrepreneur with political connections. As Huang points out, this is obviously not any kind of socialism, as the authorities did not retain control of the market themselves, but gave it away to a private businessman. Rather, it is "crony capitalism built on systemic corruption and raw political power", in which property rights are not properly guaranteed by the legal system. 

Huang also dedicates an entire chapter to Shanghai, or rather to attacking Shanghai and all it stands for. He claims that the infatuation of many foreign observers with the city is based on a superficial view. In reality, Shanghai represents all the worst of China's economic system. Contrary to popular perception, it follows policies which are deeply inimical to home-grown innovation and entrepreneurship, but friendly to foreign FDI and state companies. The share of the city's wealth which goes to private households is low even by China's standards. Shanghai's impressive skyscrapers and luxury amenities have actually been heavily subsidized by the rest of the country, especially its more productive parts like Zhejiang and Guangdong.
Huang's indictment of China's system is certainly heartfelt, and based on an enormous amount of research of Chinese statistics which would have been impossible without a deep knowledge of the language and culture. His description of China's ills will chime with anyone who has lived in the country for long.

At the same time I think he has a misplaced faith in what he calls a "virtuous" form of capitalism, one driven by private entrepreneurs which protects property rights, to deliver social equity and fairness on its own. After all this form of capitalism is well established in his country of residence, the United States, but there is relatively little fairness and equality there when compared to other industrialized countries.

I think that a government which redistributes wealth through taxation is a necessity in order to achieve a just and fair society. I also think that, as the 2008 financial crisis has shown, a totally liberalized and unchecked financial system can also distort the economy and cause a lot of harm. All the same, government intervention should take place within a framework of clearly defined rules and rights, which is what is lacking in China.

Shanghai's famous skyline: does this represent all that is wrong with China?