Your Guide to the Latest Depressing News Out of China

On democracy in Hong Kong and economic reforms in Beijing
Crowds in Hong Kong protest the Chinese government's edict on voting rules. (Reuters)

First, for fair-and-balanced purposes, if you'd like to start with some depressing trends out of the U.S., be sure to read The punditry vs. the presidency, by Michael Cohen in the NY Daily News. It is about the destructive, non-accountable pundit pressure on Barack Obama to prove his strength by “doing something” about the crises underway around the world. Ah, it brings the "why we hate the media" days back so vividly.

On to China.

1. Politics. Last night my wife and I heard the cheering news on (state-controlled) China Central TV that universal suffrage was coming to Hong Kong. Great! And, yes, we actually watch this channel a lot of the time.

Unfortunately, as everyone except the state-controlled Chinese media pointed out, the announcement was part of a deal that ensures that the right to vote won't really matter. The Hong Kong electorate will be able to cast its vote only for one of several Party-approved candidates. As an illustration of the contrast in coverage, reader Rick Jones sent this screen shot:

On the overall situation, here is a useful assessment by Richard Bush of Brookings. For instance:

China's 2012 promise [of universal suffrage by 2017 for Hong Kong] created hopes among the public that the chief executive would be picked through a truly democratic election. Those hopes have now been dashed, and it is likely that China has bought itself more instability, not less.

After the jump, an email from a long-time foreign resident in Hong Kong about some local reaction to the decision.

2. Economics. If you want the big picture on why the challenge now facing China’s economic leaders is different from, and even harder than, ones they have dealt with in the past three decades of rapid growth, you could start with Minxin Pei’s China’s Trapped Transition. It came out six years ago, and it foresaw a structural crisis for China's economy within six or seven years. Or, you could even read China Airborne, which is on this exact theme. For now I suggest that you start with two online postings by Michael Pettis, in Beijing.

One is a guide to the four stages of development the political-economic system has gone through, from the poverty of the 1970s to the mixed success-and-crisis situation of the country today. Here is what Pettis thinks a not-yet-realized fourth step would mean: 

What China needs now is another set of liberalizing reforms that cause a surge in social capital such that Chinese individuals and businesses have incentives to change their behavior in ways that generate greater productive activity from the same set of assets.

These must include changing the legal structure, predictably enforcing business law, changing the way capital is priced and allocated, and other factors that determined the incentives, so that Chinese are more heavily rewarded for activity that increases productivity and penalized, or at least less heavily rewarded, for rent seeking. 

But because this means almost by definition undermining the very policies that allow elite rent capturing (preferential access to cheap credit, most importantly), it was always likely to be strongly resisted until debt levels got high enough to create a sense of urgency. This resistance to reform over the past 7-10 years was the origin of the “vested interests” debate.

The other Pettis article is this new item on the very bad, and less bad, options for a Chinese fiscal/financial transition. 

3) Sociology. My friend Eric Liu points out in a WSJ essay (drawn from his very good new book A Chinaman's Chance) that China has practically no naturalized citizens: some 941, as of the 2000 census. No doubt there are more now, but by comparison the U.S. has somewhere in the vicinity of 18 million. Like Eric Liu, I view this as reason #1 that the long-term strategic assets of the United States vastly exceed those of China. Also, see the report from Frank Langfitt of NPR on a much-discussed recent episode in which a foreigner keeled over, unconscious, on a Shanghai subway and everyone on the train ran away rather than offering help.

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James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.

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