James Fallows

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.

James Fallows: China Menace

  • Clash of the Titans: Chinese State Media vs. United Airlines

    Why does this make me think of the Iran-Iraq war?


    This is now more than a week old, but in case anyone has missed it I wanted to take note.

    I bow to no one in my devotion to the works of the Chinese state media. And I bow to very few in my accumulation of miles on United Airlines over the decades, with resulting expertise in its corporate culture and the pre-flight-video stylings of its CEO, Jeff Smisek.

    I had intended to give both themes a well-deserved rest. But they have come together in an irresistibly delicious combination. 

    Over the past few months, the (state-run) People's Daily in China has launched a lovely series called "Dishonest Americans."  Supposedly this is meant to give Chinese readers a more balanced and "objective" picture of American life, when juxtaposed with their own overly rosy impressions. Or so the PD editor has claimed: "Most Chinese people think that Americans are honest, reliable, and righteous. However, once you live in that country for a while, you may discover the descriptions above are a bit misleading."

    For me the irresistibly delicious part was the recent Those Dishonest Yanks item about a bad experience a Chinese family had had with United Airlines. And the People's Daily conclusion was that the family had endured huffy and put-upon-seeming treatment from a United rep  ... because they were Chinese!  

    Yes, I am sure all members of the U.S. traveling public will agree that this is the only possible explanation for passengers having a less-than blissful experience on America's largest airline. 

    Humiliation.jpgYou can read the whole account here. If you need to crank out a "China and the world" seminar paper this weekend, I recommend these extra-credit points:
    • The "disrespect and humiliation" angle. As I've argued many times, in a country as huge, shambling, and diverse as China, flat-out nationalistic tension is rarely the first thing on people's minds. Before someone responds as "a Chinese," he or she is likely to react as "a person from Sichuan," or as "a member of the Wang family," or as "a school classmate of Mr. Chen," or as "your friend," or as "someone who sees a chance of profit," or any other natural sub-unit of a billion people. But the ever-present apprehension about "disrespect" from the outside world, especially the mighty and mainly white North American/European world, always has the potential to evoke a purely nationalistic/tribal response. Bonus reading on this point: Never Forget National Humiliation, which always seemed as if it should have an exclamation point at the end of the title. 

      Thus I am fascinated that this is exactly the context in which the United problem is presented: as a matter of "insulting" and "bullying" the Chinese travelers. The next time I have an airline-hell experience, I will have to protest about being "bullied" and "humiliated."

    • The "hey, wait a minute" angle. The growth of the Chinese economy is of course now supporting a surge of outbound Chinese tourism, which I view as beneficial for just about everyone involved. (Good for foreign economies; good for the Chinese to see more of the world first-hand.) But it also means that China is encountering its version of the "Ugly American" backlash that U.S. tourists and expats started experiencing long ago. Early this month, a prominent politician, Wang Yang, warned his fellow citizens that their boorish behavior overseas was hurting the whole country's image. A few days later, a huge uproar began in Egypt about a Chinese teenager who etched his name and "I was here!" in Chinese characters on an ancient temple at Luxor. It is coincidence that the Chinese media are portraying Chinese travelers as pushed-around innocents at the moment when the contrary impression is growing. (And, for the billionth time, among such a big and varied populace, there are plenty examples for any impression you'd like to find.) But the coincidence is interesting.

    • Truth squads and the netizens: The most significant part of the whole episode may be the backlash from much of the online Chinese populace, examining why the state media are making this case just now and whether national stereotypes about dishonesty make sense at all. Here are English-language summaries in Global Post, the NYT and China Digital Times.

    That is all. Now if only the family had tried to sneak a boiled frog, or a leafblower, or an open bottle of beer, or an Atlantic subscription card (etc)  onto the flight, it would be the ideal item I have been hoping for lo these many years. Thanks to Adam Minter, Damien Ma, Ben Carlson, and many other friends in and around China for the leads.

  • Two Bits of Life-Getting-Better Tech News

    America is not in decline! Latest evidence.


    1) Amtrak suddenly has much better Wi-Fi service on some routes -- starting with the Acela I am taking right now from DC to NY. Of course I admit that griping about the speed and reliability of a (free) Wi-Fi service, on a moving train, epitomizes having too few real problems to gripe about. But until recently the service really had been so slow and unreliable that I wished Amtrak would not even advertise it. That way, people who got any connection at all would feel lucky, rather than people expecting connections staring in frustration at their screens.

    Now, it seems fast! And still free. Impressive, and congrats.

    2) Twitter introduces two-step verification. Good for Twitter! I won't lead you down the path of my 739 previous posts about why you really should turn on Google's free two-step verification system for your mail account and other online data. Instead I will simply refer you to the report released today by the Commission on Theft of American Intellectual Property, headed by former Ambassador/ Governor Jon Huntsman and former Director of National Intelligence Dennis Blair. If you read that and don't then turn on two-step protection, you are some kind of commie. Or terrorist. You have been warned.
  • On Criticizing China, Cont.

    A fast-growing country is doing a lot wrong -- and right.

    ParadiseBeijing-thumb-620x465-121132 thumbnail.jpgThis follows my dispatch last weekend on the proper and improper bounds of foreigners finding fault with a big, contradictory, quickly changing, disorderly-but-progressing society.

    1) Yesterday the ChinaFile project had a four-installment answer to the question, "What's Going Right With China?" One of the responses was from me; others, from Orville Schell, Michael Zhao, and Jeremy Goldkorn. The answers ranged from high policy to an appreciation of the ingenious fapiao system, which you can (begin to) understand here and here. I agree with all the "China is doing XX right" points made in this discussion.

    2) From a reader on the U.S. context:
    What concerns me most about US criticism of China, is the existence of a military-security lobby in Washington that seeks enemies and would like to have China in that status.  

    Those who comprise this lobby vary widely in their motivation, from weapons production and sales to racial paranoia.  But collectively they are dangerous.  

    Finally, stepping back, the arrogance of the US in dictating to the rest of the world is stunning, especially as in the last 20 years we are further and further adrift from our alleged principles and from acting on best scientific knowledge.  The US is lacking in the ability to reverse-think.  My favorite example is imagine how the US would react if China declared Tibetans and Uighurs to be terrorists and decided to strike such groups with drones in the United States, offering $500 to the families of anyone killed as collateral damage.
    3) From a foreigner in China:
    I'm an American and have lived in China since the fall of 2004, mostly in the capital of [a westerm province] but with a 15-mointh stint in [an eastern province] in 2009-10. I've been teaching English as a foreign language all these years (surprise!) at universities and at private training centers.
    The rant you linked to in your piece was interesting to me insofar as I've shared many of the same experiences as that disaffected writer, but he lost his argument as soon as the piece descended into incoherent and rambling sentences. It reminded me of a post I could have written on a "bad China day," the expression many of us expats here use when we have troubling experiences or the culture shock is just too much. In those cases, I think it can be healthy to vent to other expats or Chinese friends, but I certainly wouldn't want to publish something in that frame of mind. It wouldn't be well-thought out, would be rife with shaky-at-best conclusions based on anecdotes and stereotypes, and would be the mirror-image of the "you Americans are like this" one hears from many Chinese that may be an interesting data point but worthless as any sort of constructive addition to the conversation about China.
    I much prefer to take the long view. China is still a developing country, and as such it is experiencing the same advancements and their subsequent challenges the rest of the world deals with. In the western Chinese city in which I live, in 2004, traffic as a problem was something that only existed in the news for rich, eastern cities. Now, traffic is a huge problem here. The city is fairly aggressively trying to address certain problems with barriers separating sides of the streets, pedestrian bridges and tunnels, and more traffic light-governed intersections. However, much more needs to be done. I sincerely believe this because I've seen so much waste in terms of time and money in countless accidents of the fender-bender variety. On my bicycle (my preferred mode of transportation), I see one or two of these almost every day. Often these accidents appear inexplicable as they occur in broad daylight and there's no evidence that there was a vehicle malfunction. Instead, as locals and expats alike will tell you, drivers frequently weave in and out of lanes and make turns without looking.
    But then you think about traffic policing, and you realize that if the authorities only punish speeding caught on camera or lack of proper paperwork (which they do by setting up random check points and then stop random vehicles), and not the breadth of moving violations that constantly occur, how can we expect people to think of the consequences of reckless driving? Same goes for the reckless behaviour of pedestrians, whom I've never seen ticketed for crossing against green lights or jumping barriers even when there's a traffic police officer present.
    A school that I've worked with started teaching "moral lessons" last year. Among my favorite moral lesson topics were "always flush the toilet" and "red light stop, green light go." So, okay, the school made a translation error by calling these moral lessons, but I respected the intent. I suggested to a local colleague that while "red light stop, green light go" is certainly useful, perhaps we could have also encouraged students to look both ways before they cross a street. This, among other ways to behave within my surroundings and society, was drilled into my head from a young age at home and in primary school. This way of preparing to cross a street seemed like a revelation to my colleague.
    I know that sounds crazy to an American audience. How do people just not know that you shouldn't throw yourself into oncoming traffic? The point is, if you've never heard of these concepts, how can you be expected to live by them? Is the old Chinese lady crossing the street against a green light with her eyes firmly looking down at the pavement doing this because she's rude and lacking in character, or may it have something to do with the fact that she recently moved into a new high-rise apartment with her family and the chaos of a city and its traffic are totally new to her?
    I'd argue the latter. And look, it's up to China and its people whether they want to change these behaviours. But China and its people have undergone mind-boggling, rapid change. To expect American behaviour, when we've had a car-dependent culture for 60 years now, is folly. I've focused on just this one narrow detail in that Chinese American's rant, but I'd argue that this applies to its other aspects. China is busy negotiating the messy details of rule-of-law, government accountability and private citizen responsibility. This is not a character defect issue.
    4) From another foreigner:
    I think that it is wise to separate "criticism of China" into criticism of the government and criticism of the people.  It is easy and correct to criticize a kleptocratic regime which seems to run the country merely to line its own pockets but is smart enough to let sufficient crumbs fall from the table to keep the bulk of the population happy.  We (and by we, I include tens of millions of Chinese people) are all familiar with stories of corruption and intrigue that reach right to the top of China's government, and we are also familiar with the knowledge that when officials fell threatened, they will brutalize and even murder those they fear...

    I think that many, maybe all, foreigners living in China, and for that matter, many Chinese nationals, are aware of certain aspects of Chinese society that are not flattering.  I refer to the absence of basic norms (not by all people, but by enough to make aspects of life here annoying) of common courtesy and common sense.  To the obvious examples with a high "eeew factor" - the expectorations, the spitting, the "snot rockets", the use of any public space by all age groups as a toilet (be it for urination or defecation). [JF note: a very senior Chinese official has himself been making some similar points.]

    But there are other things that can leave you scratching your head.  Things such as people jamming the entrance to a lift (or a subway car) and blocking the exit for those waiting to get off [JF note: this has gotten better over the years, especially in post-Olympics Beijing], standing in the middle of a doorway while engaged in a phone conversation, bellowing into their cellphone while holding said phone 3-4 inches from their ear because the person bellowing at the other end is hurting their ear... Car owners who feel that the car is an extension of their body and that if they want to barrel down a packed city street at 50 using the horn to blast obstructions out of their way, because a set of wheels gives them the right.  The fact that across large parts of China, cars are allowed to share sidewalks with people and that those sidewalks are not constructed to allow for cars and so quickly disintegrate to become pot-hole strewn assault courses ready to soak the foot or snap the ankle of unwary pedestrians.

    I want to make the point that in a country of people and crowds, there seems to be a general uncertainty of how to behave in such crowds.  Is this a legacy of Communism, where for hundreds of millions of peasants the only thing they actually owned was themselves and they were going to use that thing the way they damn well wanted?  Or is it because China is a new urban society, and that standards of behaviour that might have suited village life simply aren't suitable in cities?  Or is it because that while many Chinese are unhappy about the things I have outlined, there's a feeling of powerlessness and that the only thing they can do is keep their head down and get on with their own life?
    5) And:
    Not sure if you noticed it but at least two mainland Chinese were intimately caught up in the Boston Marathon bombing - first, the poor girl, Lu Lingzi, who got killed, and second, "Danny" the man who got carjacked but escaped from the Tsarnaev brothers. Extraordinary coincidence and yes, Boston is among the most cosmopolitan cities in the US, but still, it shows the degree to which the US and China are inter-linked at the most basic human level, even in tragedy.
  • On Criticizing China

    A unified field theory on assessing goods and bads


    The day just ended, Friday, May 10, was an absolutely beautiful day in Beijing. Warm, clear, sunny, fresh -- the kind of moment I celebrated when living here as representing "Paradise Beijing." What you see above is a random shot I took through a bus window this afternoon on the west side of town.

    That's probably a useful context for a long note from a reader now based in the Boston area, who is taking me to task for the tone of recent commentary about China. I disagree with a lot of his incidental points but actually agree with where he ends up. I'll explain after giving him his say -- and after adding some interior reference numbers for later discussion. This reader writes:
    I've been thinking quite hard about the amount of negative China articles that have appeared on your blog, usually in the form of links to Western laments about Chinese life and culture, as well as, of course, pictures of Beijing's pollution [1]. This is part of what I view as a general media trend of China-bashing [2]. Clearly, you love China, so I'm not accusing you in any way of being anti-China or malevolent, but I think you would agree there has been a rise/change in tone in coverage of China over the last year and a half.[3]

    A prime example is the piece you linked to two days ago, where the author made sweeping generalizations based on singular anecdotes that paint the entire Chinese populace as rude, shallow and sub-human (or at least sub-Western.)[4] In analyzing a country of over a billion people, how can we take seriously someone who can paints with such a biased (and shockingly untruthful, if we were going to compare anecdotal memories) brush? Wouldn't it be similarly possible to write a similar anecdotal and nonfalsifiable story about America? Or any other country? Would we assume a fair appraisal if a Chinese person did the same to us?[5] I doubt it.

    So why does this piece get coverage from you and the rest of the internet? I believe it's because it fits a media narrative that has been growing in strength over the last year or year and a half. I would summarize this narrative  as: "News Stories That China is Not As Good As The West."[6] Examples of these stories include the story making the rounds the last week on the quality of lamb in restaurants,[7] ubiquitous reports on various degrees of Chinese corruption and of course, pollution pictures.[8]

    Now these are big important stories (except the lamb one,) but the focus on on China as opposed to say, India seems particularly acute. I am assuming that this is due to the news media's need for a rival to the United States in the post Soviet Era.[9] As China actually has some potential to pass the US in GDP (kind of meaningless) and perhaps have a say in regional (and maybe global?) security matters, I guess this is makes for news? I am assuming it's the present version of the Cold War Era "look how long the Soviets had to wait in line for bread" stories.[10] 
    But at least China is open for Westerners to visit,[11] as opposed to the USSR of the 70s, leading to a particularly annoying narrative: the disgruntled foreigner leaving China because of excess pollution/corruption/hurt feelings. What kills me about this type of article is the total lack of acknowledgement of a huge advantage any Westerner gets when living in China: a five or ten fold increase in purchasing power.[12]

    Some small examples from my time there:
    • You can ride the Beijing subway, whose frequency and coverage exceeds all American lines with the possible exception of New York, for 30 cents (2 yuan.)
    • You can take a taxi for 2 miles (maybe 3 or 4?) for an initial fee of 10 yuan in Beijing, or $1.60.
    • You can swing into a hutong restaurant and order enough (incredible) food for 4 easily for 80 yuan, or maybe 3$ a person.
    • You can hire a maid for 50/100 yuan to clean your likely cheap apartment. 
    So why wouldn't someone expect a tradeoff if they moved to China between prices paid and living standards? And why isn't it explained by China watchers that while Chinese GDP per capita is 1/6th the US? That China is not a developed country, and that it's nowhere close to being one, despite it's massive growth of the last few decades? That Westerners who travel or live there that are expecting the comforts of home are fooling themselves?

    Excuse the rant. I'm not sure why I'm responding to you about this. I think it's my fear that over the coming decades, the US and China will be thrown into an antagonistic relationship that will be an antagonism of choice.[13] And people who do not share the love for China and the Chinese people you and I do, will  look to this rising negative tide for rationalization of fear and hatred of the other. But in doing so, both countries will be turning their backs on incredible places and peoples that offer so much to each other. 

    Thanks for listening. And here's hoping you have many future sunny Beijing days. The mountains ARE beautiful when you can seem them.

    On the assorted points of disagreement:

    • I should probably underscore the context of the "I hate China, and that's because I hate the Chinese people" rant I provided a link for [4]. The initial surprise value is that it comes from a site whose usual tone is "We hate foreigners, and that's because they criticize China." This post, equal in fury though opposite in direction to what normally appears, was from an ethnically Chinese foreigner who was having difficulty in his several months of living here.

      Thumbnail image for QingdaoBeer.pngThe central message of that post was: the Chinese people are worse than their system. As I pointed out in linking to it, my view has been the reverse: "Even though a thousand aspects of modern Chinese life drive me crazy, I still can't help liking the openness, the vim, the life of most of the people I meet here. That is, I find it easier to get along with the people than with the whole system." For instance, see a moment from one of my early visits to the Qingdao Beer Festival, at right.

    • What's the reason for noting harshly critical material like this at all? It is because modern China -- like America, like Israel, like Turkey, like Mexico, like any other place that matters or any topic that deeply engages people -- is the subject of ongoing, passionate debate. People have strong views pro and con; opinions interact with one another and evolve; realities are so complex that many contradictory statements can all be "true" at the same time. I didn't agree with this (pseudonymous) writer or think that he had provided a "fair" [5] overview of everything Chinese. But I thought his venting was worth noting as part of the mix.

    • Anyone, including me, needs to struggle against being defensive when criticized, and I realize that the reader-in-Boston is going out of his way to say that he doesn't think I agree with the ranting guy. But for record, the balance I've tried always to convey, and that I actually believe, is this: China is a society with enormous problems and probably-greater strengths and assets; life in China was, for my wife and me, usually harder than in other places, and usually more rewarding; the relationship between China and America involves very serious disagreements, but much more numerous areas of common interest; and so on. Check out here or here or here for chapter and verse.

    Skipping past a bunch of other incidentals, here is the big point of agreement: Like the reader in Boston, I think it's possible (1) that the U.S. and China could end up in a snarling position of mutual suspicion and hostility, (2) that if this happened it would be self-induced, since it is not inevitable, (3) that a mainly hostile rather than mainly collaborative US-China relationship  would be bad for people in the two countries and everywhere else, and so therefore (4) it is very important that it not occur.

    Where I differ from that reader is on whether "critical" stories about China -- carefully alarming ones, about food safety or pollution, or insanely hostile ones like the "I hate China" rant -- are driving the countries apart. To me, on balance, they suggest a properly realistic portrayal: neither too rosy and credulous, nor too resentful and suspicious. This is why in everything I write and everything I say I urge Americans to "take China seriously, without being afraid of it." Americans understand the realistic mix of goods and bads in our own country. Of course it's easier to maintain that balance about your own self/family/country than to apply it externally. But I think the range of good and bad coverage of China now being presented to the world -- like the mixed goods and bads about America that have long been on display to everyone  -- is in the long run indispensable to, rather than destructive of, a real relationship.

    Enough in that vein. The book-length version of the argument above is China Airborne. For the record, specific annotation points:

    [1] It is worth harping on pollution, because (according to me) "sustainability" in all its aspects is the major threat to China's continued development, and the major challenge China's economic growth poses for the world as a whole.

    [2] For the record, I'm against any variant of the term "bashing" to describe international discourse -- Japan-bashing, China-bashing, America-bashing, etc. It assumes, rather that argues, that any criticism reflects prejudice rather than actual grounds for complaint. Saying that America has a Guantanamo problem -- or a social-class-divide problem or a drone-warfare problem -- is not America-bashing. Saying that China has problems of its own is not China-bashing.

    [3] I think there has been both "good" and "bad" coverage (ie, both positive and negative stories) about China in that time. It is inarguable that in 2010 and 2011 China's foreign policy claims (based on its increased economic confidence) provoked reactions in many other Asian countries. Similarly, the Bo Xilai case occurred in this time; pollution levels rose; etc.

    [4] Yes, this was a rant, revealing as much about the author as about the subject.

    [5] Yes, but people make extreme complaints about America all the time -- I do it myself. For a subject as vast as America, or China, no single assessment can be perfectly "fair." If it tried to be, it would be really boring. You hope that the  flow of info and argument in its entirety will be enlightening and thus "fair" over time.

    [6] Speaking personally, I have zero interest in whether China is "better" than America, or vice versa. It's like asking whether a car is better than a baseball game. These are societies with some points of similarity and a lot of points of difference. Even the Cold War-era arguments on whether the "American model" or the "Soviet model" offered a better path to development don't apply here. For reasons of scale, history, geography, and other factors, China and America are each a category-of-one internationally. Neither offers a realistic model for others to apply.

    [7] The lamb-meat-or-is-it-rat? stories are important rather than trivial, because they're connected to larger concerns about food-safety that matter to much of the Chinese public.

    [8] Again: pollution and the environment constitute Issue Number One.

    [9] As I argued in a long story here, during America's era as a world power, it has often projected fears about its own economy or society onto foreign rivals. I think it's a big mistake to do so with China. Whatever is wrong with America now would be just as wrong if China didn't exist. The converse is mainly true for China. The right way to use the Chinese "challenge," in my view, is the way Obama has in some of his big speeches. That is, as a positive challenge: If China can develop wind energy, so can we, etc.

    [10] I agree on this. Whether from Americans or Chinese or anyone else, the "well, what about your problems" reflex gets you nowhere. China has pollution problems; to say, "Well, America has too many schoolyard shootings" doesn't get you anywhere. America has violence problems; to say "Well, China is polluted" also does no good.

    [11] China is more open than the Soviet Union generally was, and more than it used to be. It is not as fully "open" as it should be. Ask the Western journalists and scholars whose visas are denied or yanked on purely political grounds. (Yes, I know, the US also has a visa problem, but one of different nature and scale.)

    [12] For what it's worth, the China-as-bargain-basement angle is, for me, not a significant part of its appeal. Some things are very cheap; others are expensive. Mainly, as noted, it is the life and vividness of the typical day in China that attracts me.

    [13] Back to our agreement. From Richard Nixon's through Barack Obama's, an otherwise completely different sequence of American administrations has adopted policies based on the premise that the United States and China need to find ways to work together rather than become enemies. That the relationship between China and America has been as constructive as it has been reflects credit on people on both sides. It's worth working to continue it.

    Now preparing for the trek back to the U.S. -- and in the knowledge that the airport from which I begin the trip, Beijing Capital, will be far more convenient, modern, and pleasant than the one where I'll arrive, Washington Dulles. I suppose you could fairly call me a Dulles-basher.

  • Two Sobering China Reads—and Some Cheer

    A society that has huge problems -- and that many outsiders are nonetheless drawn to

    1) Recently I mentioned some of the obstacles that might slow China's path to ever-greater prosperity and influence. In a similar vein, consider an essay from Ely Ratner, of the Center for a New American Security, on "China's Victim Complex." Ratner's item examines recent tensions between China and its neighbors in the region, and asks what the episodes teach us about China more generally. Some of the conclusions are parallel to those I offered in this article and this book, especially about the awkwardness China's leaders reveal as they they try to adjust to their country's new prominence. As Ratner puts it:

    If domestic politics continue to drive Chinese diplomacy, ... the result will be an increasingly isolated China. Perhaps the best hope is that [new president Xi Jinping] will begin confronting the reality that Beijing's heavy-handed foreign policies are the principal cause of its rapidly deteriorating security environment...  But [this] would also require a serious discussion with the Chinese people that is at odds with the current government's jingoist rhetoric. In the meantime, whatever China's defense white paper has to say, the U.S. rebalancing to Asia is not containing China. Besides, a U.S. policy of containment is hardly necessary when China is so effectively containing itself.
    2) The Hidden Harmonies blog is known for stoutly defending anything Chinese against criticism from any outsider (the authors are not big fans of my work). Now it offers a bracing "what's really wrong with China" essay by an ethnically Chinese foreigner, writing under a pseudonym, who has moved to China and is alarmed by what he has seen. I've frequently noted that, even though a thousand aspects of modern Chinese life drive me crazy, I still can't help liking the openness, the vim, the life of most of the people I meet here. That is, I find it easier to get along with the people than with the whole system. This blog writer sees things differently:
    After living here for more than 9 months, I have come to a most repugnant conclusion. It pains me to even think about it for I am a Chinese person who has often defended the traditions, institutions, values and dignity of the Children of Heaven. But the truth is often painful at first. I realize now that much of the problems in Chinese society, and a plethora of problems there are, are not from the Chinese government (not a surprise to me since I am a long time China watcher suspicious of the anti government rhetoric of the west).  What is surprising is that the myriad problems within Chinese society comes from the behavior, values and the beliefs of its people, a people that with all their traditions of wisdom behave in the most atrocious, despicable manner towards each other today. In a sense, I'd always expected this but were perhaps too proud to admit it and needed first hand experience for verification. Now I cannot escape that basic truth.
    I know just what writer is talking about, and touched on the theme here. But he goes a lot further with the complaint, which is worth reading.
    3) On the brighter side, please check out this new video, or this one (both in Chinese), about Brian and Jeanee Linden, the couple I wrote about four years ago in the Atlantic. The Lindens are the "village dreamers" I described in a magazine piece of that name -- Americans who semi-accidentally found their way to a remote corner of China and now have devoted their lives and fortune to restoring a historic villa in a small settlement in Yunnan. The new clips tell about some of their latest projects. I can't figure out how to embed those latest videos, so you can click on the links to see them -- perhaps after watching the video of the Lindens that we ran in the Atlantic in 2009 (it now has a pre-roll ad):

    The Lindens' experience illustrates the air of anything-could-happen possibility and adventure that still attracts many people to China, notwithstanding ireal-world problems like those mentioned in the first two items. 
  • Today's China Notes: Dreams, Obstacles

    Is China just getting going? Or is the tough part just beginning? Here's a strong statement of the latter case.

    In reverse order, obstacles first: There's not much debate about the scale or impressiveness of what China has achieved in the past 30+ years. Through that time its economy was (largely) opened, and its political controls were (selectively) removed. As a result hundreds of millions of people moved from rural poverty to the middle class and beyond; the country regained its pride; the landscape was covered with factories and skyscrapers and shopping malls and high speed trains; and a thousand other aspects of life were changed. This really has happened, and the achievement commands respect.

    The interesting question is what comes next. The two main, opposing points of view boil down to "they're still gaining momentum" versus "now the hard part begins." The first camp leads to graphs like the one below, typical of the "New Chinese Century" / "Bow down to your Chinese overlords" books and articles that periodically appear. (The graph was taken from a particularly credulous version). Essentially this view assumes a straight-ahead, compound-interest, years-into-the-future extrapolation of China's recent growth trends.


    The contrary perspective holds that things are about to become harder for China -- in economic, social, and political dimensions all at once. The main reason for the increased friction is that the very traits that have sped China's development over the past 30+ years may impede the next phase of growth. For instance: to-hell-with-the-environment development policies made China the world's factory; but now they have to be reversed -- even while the country is still, on average, quite poor -- lest it become the world's cancer ward and birth-defects center. The kind of intellectual-property laws that make it easy to buy pirated movies, music, or software on any Chinese streetcorner were a catch-up advantage. Now they're a handicap to ambitious, high-value Chinese firms. Control of the Internet, media, and political discussion has been convenient for the leadership. But those same controls make it harder for China to develop "real" universities, retain first-rate researchers, and bring the best out from its own most talented people. (See Matt Schiavenza's new item on this point.) And on down the list.

    Not to be coy about it: almost everyone I'm aware of in the first, China-uber-alles camp knows China mainly via charts, and at a distance. Most people I know on-scene are instead in the "anything is possible, but it's going to be a lot tougher" category. And that is the case I argue at length in China Airborne, where I look at the country's ambitions in highest-tech and -value industries as proxies for its potential.

    To wrap this up, there's is a good three-part presentation statement of the "getting tougher" case by George Magnus, in The Globalist. Part One is called China and the End of Extrapolation, and you can follow links to the next two. Judge for yourself, but I think he presents the "tougher" case very well. And if you'd like the most amusing presentation of the "holy moley, they're going to take over everything" original view, I refer you to the immortal "Chinese Professor" TV ad.


    DebBook.jpgNow, dreams. The Atlantic Wire has an item today saying that frequent references to "the Chinese Dream" by Xi Jinping, the new Chinese president, may reflect the global influence of the NYT's Thomas Friedman, who wrote a column back in December to the same effect.

    I can't prove that this correlation is wrong, but (no offense to Friedman) I'd bet any amount of money that it is. As several commenters, including me, have noted on the Wire item. It certainly is true that Xi Jinping has been talking about the "Chinese Dream," and it's true as well that Friedman wrote a column about it a few months ago. But the "Dream" formulation has been a familiar one in China for years, including explicitly in Xi's own speeches for more than a year. Back in 2008 the motto for the Beijing Olympics was "One World, One Dream" (一个世界同一个梦想), and for a few years before and after the Games there was a lot of chatter in China about the meaning of its dream.

    LemosCover.jpgThe title of my wife's book Dreaming in Chinese (above), which came out two years ago, was based in part on the importance of this theme; a recent book by Gerald Lemos was called The End of the Chinese Dream (right). I had a long essay on this site a year ago with the title "What Is the Chinese Dream?", and most people who have written about China have similar items in their inventory. There's no reason the Wire writer would be aware of this background; I mention it because it's worth underscoring the fact that a national dream is not a unique American concept.

    Update: Whoa! I see via Isaac Stone Fish at Foreign Policy that Thomas Friedman is saying he deserves "only part credit" for the use of the term by Xi Jinping, saying that the rest belongs to (a friend of both Friedman's and mine) Peggy Liu. I'll leave it at that, and with the note that maybe Xi is catching up with the many other people in China whom I have heard talking about this concept for years and years.

    And I just remembered that I'm actually headed back to Beijing tomorrow for a short trip, so this will be one more thing to ask when I arrive.

    Update-update: And via Jeremy Goldkorn and Danwei, here's a similar speech from back in 2009. 
  • Shanghai vs. Beijing, in One Image

    One city warns about sunspots. The other, about political tensions.

    My wife and I have spent the past several nights at a hotel in Beijing, and we've just arrived at one in Shanghai. Both of the hotels are very nice and welcoming, and on check-in each of them provided a special notice about communication problems guests might encounter during their stay. Here are the notices side-by-side. You probably can't read the tiny print, but there is an explanation below.


    On the right, the notice in Shanghai: Because of sunspot and sun flare activity from late February through mid March, TV reception will be spotty during predictable brief intervals. For instance, today the interference was predicted between 12:25 and 12:39 China time.

    On the left, the notice in Beijing: Because of the "twin meetings" of China's main political bodies this week and next, Internet service will be slow or blocked altogether, online web and video may not be available, and "international TV stations will also be restricted in all public areas during this time."

    Two pieces of paper, two of the mentalities and forces at work in this moment's China. One of them is open, except as constrained by forces of the cosmos. The other is defensive and reflexively closed-down. I won't go on and spell out the implications, but this juxtaposition was too neat to resist.

    On the general subject of closed-mindedness, I got this answer from a technical-virtuoso reader who is very closely involved in how the Chinese "Great Firewall" works:
    Encrypted traffic, especially [a certain protocol] is being focused on. China operates like one big LAN as best they can muster. If they outright block all encrypted traffic they go off the grid and no one is willing to do business there. Their choice?  Randomly detect and disrupt encrypted traffic that has a high probability of being non-business traffic. If I were them, I would also be "white-listing" corporate data streams.

     So, China is like a company with an IT director bent on stopping anything but official corporate business from being conducted on their network. That's the way to think of it.... China is doing nothing to [foreign] servers directly, but is disrupting the protocols they all use.

    Thousands of users can connect to VPNs with no issue in China, so it definitely varies regionally and by ISP.

    It's fun to be back in Shanghai. And if you're at the M on the Bund Shanghai Literary Festival tomorrow (Friday), please be sure to see Deborah Fallows at noon. I'll be there on Sunday.

  • Glad That's Cleared Up: Chinese Military Resolutely Deplores Hacking

    Good to know that at least one of the world's governments is on top of cyber crimes.

    I've mentioned over the years the difficulty official Chinese spokesmen frequently have in engaging outside-world opinion. The heart of the difficulty is that it is too easy to confuse a real, hyper-earnest government response with what the Onion would say. 

    Judge this one for yourself. The Chinese government assures us that it "never" condones cyber attacks, that it "always" cracks down on cyber crimes, and that it bans "any" such unwholesome activities.  OK. 


    There's an ongoing discussion of the reported attacks, and America's options for response, at the ChinaFile site of the Asia Society.

    Update also this important item at Quartz on the Chinese government's reported decision to tax carbon emissions. As I was arguing yesterday, what China does or doesn't do on the environment really matters more to everyone than cyber-combat of any kind. For years it has resisted taking steps on carbon when the United States, already so much richer, says that it can't afford to do so. Details are still to be clarified, but this could be significant.
  • Is There a There, There for the Chinese Military?

    Are we seeing China's counterpart to General Jack D. Ripper?

    Following this item last night on the latest Chinese-hacking reports, readers discuss a fundamental question about Chinese "policy." That question is how we balance the contradictory, but simultaneously true, realities of coordination and chaos in interpreting actions of the Chinese state. Some things the Chinese government does are very carefully planned and controlled. Many others arise from confusion, insubordination, laissez-faire, mistake, and plain old Brownian motion. This tension applies to many things in life but, to me, is especially dramatic in China. For a reminder,* compare recent news about focused Chinese-military spying efforts with this feature from the People's Daily:

    Thumbnail image for SoldierBeauty.png

    One reader who has experience in American politics and in China policy writes in response to my mention that the U.S. military is no slouch when it comes to cyber-war capabilities (cf STUXNET):

    Of course we are very capable in the cyber area, and do apply our tools to collect against more traditional intelligence targets.

    However what the Beijing is doing, brazen intrusions into corporations, media, legal offices, etc is far beyond the scope of our activities.  The Chinese State is involved in outright systematic theft of our IP, technology, M & A plans, and so forth.  And yes historically this has always been part of industrialization process, think of America vis-a-vis the UK during the late 18th early 19th century but that was spontaneous, this is top down state led and on a totally different scale.

    What I like about this note is the reminder that many troublesome aspects of China now -- environmental ruin, dangerous factories, government bribery, and intellectual-property theft -- have their counterparts in the rapid-development phases of America, England, and many other countries. But the difference in scale, speed, and degree in China's case put it in a different category. (Plus, the other stuff was then; this is now.)

    Another reader stresses the opposite reality:

    Is the Chinese military a monolithic perfectly formed hierarchically controlled entity?

    My last stroll by the base on Xixi Rd. in Hangzhou was the usual blasting in and out by neon-camo paint job-pimped out Range Rovers of the top brass.  Army personnel blasting around in camo pimpmobiles probably do lots of stuff the ruling faction doesn't know or like.  I suppose there are are multiple factions involved with hacking.  China could have a few Jack D. Ripper types.

    Or, more than a few.  I kinda think the hacking could be all sorts of stuff that's only slightly understood.

    And what I like about this note is the reminder that even the PLA is full of several million Chinese people many of whom are pursuing their own dreams and schemes. Both perspectives are true, which makes the PLA hard enough for people in China to figure out, let alone outsiders.

    If you've been wondering what our friends at Next Media Animation, in Taiwan, would make of the situation, here is your answer:

    * I go into many other examples in my book. For instance: before the Beijing Olympics, the Chinese Foreign Ministry successfully lobbied for the creation of an "authorized protest zone," where people could air their grievances before the world press. This would show China's mature openness. But the whole scheme backfired, since the security ministries turned down requests for "authorized" protests and arrested many people who applied. You could read this as a super-cynical scheme to locate dissidents all the more easily. But I think the more likely explanation is simple disagreement, chaos, and internal bureaucratic struggle.

    ** Any Chinese readers or others confused by the headline can check here.

  • What Do We Make of the Chinese Hacking?

    We've heard these warnings for years; this seems to be more specific than before.

    Today's China topics:

    cyberwarriors.jpg1) Chinese hacking, as reported in the lead front-page story of today's NYT (and a fascinating story in Bloomberg Bus Week). Is this really something new? Or merely our old friend "threat inflation,"* cued both to the impending sequestration menace and last week's SOTU mentions of new efforts in cyber-security?

    We're all working with limited info, but at first impression this reads to me like something new, specifically in the degree of traceability to the Chinese military.

    Here's the background: Through the years, anyone who's looked into this topic has gotten used to threat inflation -- but also the reverse, in the form of caveats and cautions about how much is unclear. Yes, public and private facilities in the U.S. and elsewhere are subject to nonstop electronic probes and assaults. Yes, a lot of the attacks seem to come out of China. Still, I've heard time and again how hard it is to tell how much reflects "coordinated" military actions and how much  is from on-their-own hackers, rival corporations, or ordinary profit-seeking crooks. Apart from China, there's plenty else to worry about. When I did an Atlantic article about the problem three years ago (source of the illustration above), this is what I heard, emphasis added:

    Next, the authorities stressed that Chinese organizations and individuals were a serious source of electronic threats--but far from the only one, or perhaps even the main one. You could take this as good news about U.S.-China relations, but it was usually meant as bad news about the problem as a whole. "The Chinese would be in the top three, maybe the top two, leading problems in cyberspace," James Lewis, a former diplomat who worked on security and intelligence issues and is now at the Center for Strategic and International Studies, in Washington, told me. "They're not close to being the primary problem, and there is debate about whether they're even number two."

    Number one in his analysis is Russia, through a combination of state, organized-criminal, and unorganized-individual activity. Number two is Israel--and there are more on the list. "The French are notorious for looking for economic advantage through their intelligence system," I was told by Ed Giorgio, who has served as the chief code maker and chief code breaker for the National Security Agency. "The Israelis are notorious for looking for political advantage. We have seen Brazil emerge as a source of financial crime, to join Russia, which is guilty of all of the above." Interestingly, no one suggested that international terrorist groups--as opposed to governments, corporations, or "normal" criminals--are making significant use of electronic networks to inflict damage on Western targets, although some groups rely on the Internet for recruitment, organization, and propagandizing.

    If you'd like to see that kind of "well, how much can we really prove here?" analysis applied to the current NYT report see this post from Jeffrey Carr, and a related article in Business Insider

    I agree that there's a lot we still don't know; I'll also say, having seen more of the "Chinese cyber-threat" reports than most people, that this one seems more specific** than before, and the flow of recent evidence has pointed increasingly to China. It's worth reading the whole story, and the underlying Mandiant report. Also see Evan Osnos's good run-down of reasons to think this could be something new.

    Two other points of context:

    • First, before any readers in China write in to inform me, of course the U.S. government has its own extensive cyber-teams. In this as in most other military areas, I would assume that its capabilities are far ahead of the PLA's -- and no U.S. official I've asked has ever led me to think otherwise. 

    • Second, the Chinese embassy's earnest but boilerplate response is one more reminder of the uneven level of everything involving China, including savvy in dealings with the outside world. We're told that the technical probes being sent out are extremely sophisticated. On the other hand, the language of the diplomats traces back to the era of "resolutely condemning" foreign hegemony etc: 
    Contacted Monday, officials at the Chinese embassy in Washington again insisted that their government does not engage in computer hacking, and that such activity is illegal .... [JF note: pirate videos are also "illegal" in China. So is speeding, bribery, etc.]

    ''Making unfounded accusations based on preliminary results is both irresponsible and unprofessional, and is not helpful for the resolution of the relevant problem,'' said Hong Lei, a ministry spokesman. ''China resolutely opposes hacking actions and has established relevant laws and regulations and taken strict law enforcement measures to defend against online hacking activities.''

    2) The real problem for, and with, China. My friends at Danwei have a report, drawn from the Chinese media and Chinese studies, showing that groundwater in nearly all Chinese cities is polluted, and that in about two thirds of them it is "severely" polluted. That is what the big Chinese headline below says.

    To put this in context:
    • Environmental disaster is the gravest threat to China's continued development. That's according to me, but it is not some wacko view.
    • The Chinese government is trying very hard to deal with these problems, and is even unleashing the press to do more. The question is whether anyone can do enough, fast enough.
    • This latest report closes a circle. The air that people breathe in many Chinese cities has become dangerously polluted. Their food supply is subject to constant contamination scandals. Now it appears that not merely stagnant ponds but the water people draw from deep underground is already tainted. This is a giant problem -- for them, and for everyone.
    I mention this because I worry about it and its implications a lot more than whatever the Chinese cyber-sleuths might have in mind, damaging as the cyber-assaults can be.

    * For the record: I am not suggesting that the NYT reporters, whom I know and respect, are "inflating" anything. But it is a reality that certain reports, interviews, disclosures come into reporters' hands at some times -- and not at others.

    ** Eg, this part of the NYT story, about a building in Shanghai that by chance I have seen, though I have not gone inside. (I'll look for it when I'm there next month):
    Mandiant [a security firm] discovered that two sets of I.P. addresses used in the attacks were registered in the same neighborhood as [the military's] Unit 61398's building....

    "Either they are coming from inside Unit 61398," said Kevin Mandia, the founder and chief executive of Mandiant, in an interview last week, "or the people who run the most-controlled, most-monitored Internet networks in the world are clueless about thousands of people generating attacks from this one neighborhood."
  • Worth Reading: ChinaFile Discussion on 'Airpocalypse'

    The Chinese system confronts its toughest challenge ever

    Guomao.jpg-jpgChinaFile is a new venture by the Asia Society, for which the Atlantic will be a partner and to which I will be one of many contributors.

    The discussion today genuinely is worth noticing. It's about the reasons for, and likely consequences of, the "Airpocalypse" that is now evident through so many big Chinese cities. For reference: That's our old neighborhood in Beijing, in a picture shot from a 30th floor window last week.

    The long introductory post by Alex Wang, whom I knew in Beijing when he represented the Natural Resources Defense Council there, and who is now at UC Berkeley, sets out all the reasons why the current emergency matters for China and the rest of the world. Other contributors elaborate on some of the even worse ramifications, and possible responses.

    As I argued last month -- here, here, and here -- the nearly unendurable conditions that Chinese growth has brought to many Chinese people represent a kind of challenge that the system and its leaders have not reckoned with before. Apart, of course, from the effects on the rest of the world. I think you'll find this discussion valuable and clarifying, if not exactly encouraging. (I have a cameo entry at the end, saying essentially what I've just said here.)

  • More on the Chen Guangcheng Speech

    'Chinese law clearly forbids hacking attacks.'

    1) Here is a beautiful photo by Patrick Yuen, used with his permission, that captures the mood and drama of Chen Guangcheng's presentation at the National Cathedral last night.


    The picture is from more or less the place where I was sitting and distills the hold that Chen Guangcheng had over the audience as he spoke.

    2) In addition to the Washington National Cathedral's own webcast of the event, another MP4 video of the whole session is available here.

    When I find a transcript of the speech as a whole, I will mention it. But here is another sample section, about the role and potential influence of foreigners:

    I'm often asked what the international community can do to help promote democracy and rule of law in China. I sincerely hope that people around the world will lose their fear of offending China because it's rich and powerful. I want people to stop turning a blind eye to the abuses that people throughout China are suffering. Stop supporting the myth that anyone who urges the Communist Party to abide by their own laws will be retaliated against and be treated as an enemy of the state. Don't do anything on the basis that China's rulers will be pleased or not pleased

    In the last part of the panel discussion, Jerome Cohen, Cheng Li, and Dorinda Elliott enlarge on what this means in practice. The Democracy Report

    3) The latest Chinese-based hacking attacks against the New York Times, the Wall Street Journal, CNN, and other news outlets may well have occurred at a level where passwords on individual accounts don't offer protection. Nonetheless, I've used this as an occasion to change all my important passwords, which I've done today. (Background point one: this piece. Background point two: I use and like LastPass.)

    Of course, we must maintain an open mind about these episodes. Heed the words of the Chinese foreign ministry, which says that the idea of Chinese hacking is "groundless":

    "To arbitrarily assert and to conclude without hard evidence that China participated in such hacking attacks is totally irresponsible," said spokesman Hong Lei.

    "China is also a victim of hacking attacks. Chinese laws clearly forbid hacking attacks, and we hope relevant parties takes a responsible attitude on this issue."

    Noted. For the record, here is Chen Guangcheng last night on what Chinese laws "clearly forbid." Let's hope his assessment proves too harsh:

    In China, the law is optional, something that those in power use when it suits them and ignore when it doesn't. The law in China is nothing more than empty words, just scraps of paper. 
  • Alan Tonelson: 'The Insourcing Boom That Isn't'

    A trade-trends expert challenges the premise of our current cover story.


    The current issue of our magazine (a subscription makes a perfect gift!™) has a two-part cover-story package. One is Charles Fishman's "The Insourcing Boom," which concentrates on GE and argues that U.S.-based manufacturing companies are finding it more attractive to do more of their work within our borders. The other is my "Mr. China Comes to America," which says that increasing costs and friction of doing business in China, and shifts in technology that allow very rapid-cycle production close to the market inside the United States, will encourage new companies to do more of their manufacturing work here rather than outsourcing it to China.

    Alan Tonelson, of the US Business & Industry Council, is a long-time friend with whom I have often agreed on questions of U.S.-Japanese trade frictions. He completely disagrees with the premise of these two articles. In the spirit of free-and-full discussion, I turn the floor over to him. I have a brief response at the end. 

    The Insourcing Boom that Isn't
    By Alan Tonelson [right]

    According to the two feature articles in December's Atlantic, manufacturing in the United States is making an historic comeback.  In particular, changes in wages, energy costs, and technology around the world mean that China and other Asian locations no longer hold all the cards as manufacturing locations.  Even better, large and small American businesses increasingly are recognizing that producing - and innovating - back in the United States has become their most lucrative option.

    Moreover, both "The Insourcing Boom," by Charles Fishman and "Mr. China Comes to America" by James Fallows state that much more is involved than domestic manufacturing's cyclical rebound from an historically painful recession.  As the former contends, the manufacturing revival "cannot be explained merely by the ebbing of the Great Recession, and with it the cyclical return of recently laid-off workers."  In the latter's words, domestic industry's outlook is better today "than at any other time since Rust Belt desolation and the hollowing-out of the American working class came to seem the grim inevitabilities of the globalized industrial age."

    Both authors provide numerous and seemingly impressive examples of insourcing and corporate start-ups that support these claims. They also present statistics on energy prices, U.S. and Chinese wages, and the post-2010 rise in American manufacturing employment.  But neither gives their readers the most important information they need to know about domestic industry's current circumstances and future prospects - that virtually no national- or global-level data show that American manufacturing is even continuing its recovery from recession, much less stealing the march on Chinese and other foreign rivals.  Indeed, nearly all of the most comprehensive statistics portray U.S. industry as still slipping further down the international ranks.

    For example, during an historically sluggish American recovery, a U.S. manufacturing sector in renaissance mode should be growing faster than the rest of the economy.  That was true in 2010 and 2011.  But the out-performance is already over.  This year, the entire U.S. economy has expanded by only 2.06 percent after inflation.  Manufacturing output, however, has actually fallen - by 0.54 percent.

    A manufacturing sector engineering a big secular rebound should be gaining share in its own home market - the world's largest single national market, and the one its companies should know best.  Yet new government data analyzed by the U.S. Business and Industry Council show that more than 100 advanced domestic manufacturing industries collectively lost American customers to imports worldwide last year.

    In 2011, foreign-based producers supplied a record total of 37.57 percent of total American purchases in industries ranging from semiconductors to pharmaceuticals to ball bearings to machine tools and dozens of other capital-and technology-intensive sectors.  In 2010, when the industrial renaissance supposedly was stirring, the import penetration rate was 37.07 percent and in 1997 - the earliest data year - only 24.49 percent.   In fact, imports accounted for half or more of everything Americans bought in nearly a third of these industries, including construction equipment, metal-cutting  machine tools, laboratory equipment, turbines and turbine generator sets, and of course autos and heavy-duty trucks alike.

    Companies losing market share rightly are almost never described as winners or viewed as promising.  Do industries losing market share deserve better reviews?

    Nor is the growth of exports compensating for these losses.  Since plummeting during the Great Recession as American economic demand nosedived across the board, America's manufacturing trade deficit has rebounded much faster than the economy as a whole, and indeed hit a monthly record earlier this year.  This shortfall's strong comeback is an especially important and bearish indicator of U.S. industry's global competitiveness, since mainstream economic theory teaches that trade flows are the means by which market forces create the optimal global division of labor.  In other words, the countries that trade a given product most successfully are those that eventually will produce it most successfully, and vice versa.

    The China story told by these data also clash with that told in the December Atlantic articles.  As fast as imports worldwide have been grabbing share of U.S. advanced manufactures' markets, the inroads being made by imports from China have been much faster.  And although these shipments started from a considerably lower base, they supplied more than six percent of all American purchases of these capital- and technology-intensive products last year.

    As robustly as the overall U.S. manufacturing trade deficit has risen recently, the China deficit has recovered just as dramatically, and from a much shallower trough.  In fact, so far this year, the manufacturing trade gap with China has increased more four times faster than America's global trade gap.

    Signs of American industry's weakness also emerge from comparing its growth rate with those of leading competitor countries.  Last week, the U.S. Labor Department reported that between 2009 and 2011, American manufacturing output expanded more slowly than industry in Germany, Sweden, Korea, Taiwan, and Singapore, and only slightly faster than manufacturing in Japan, whose industry is widely described as hemorrhaging competitiveness.  These years of course cover the period when the U.S. manufacturing renaissance allegedly was well underway.

    Data for China were not provided in this survey of high-income countries.  Yet the consulting firm IHS reported this earlier year that in 2010 and 2011, America's share of world industrial output not only has fallen behind not only China's, but has been falling faster than that of the 27-nation European Union, whose economic problems are by now all too well known.

    Other major problems with the articles revolve around insourcing claims themselves.  Do the new investments in U.S. manufacturing mean that outsourcing has stopped or has slowed significantly?  None of this essential context is presented.  But last July, a major Bloomberg News investigation spotlighted a study reporting that continuing outsourcing neglected by the news media has entirely offset the job creation credited to insourcing.

    In addition, improved American competitiveness is far from the only reason for insourcing.  Scratch an instance of reshored manufacturing, and significant federal, state, and local government subsidies can often be found beneath the surface.  For example, according to GE official Kim Freeman, the $800 million Louisville appliance investment detailed in "The Insourcing Boom" was keyed by $100 million in such supports.  Over the last year, two New York Times articles have made clear that subsidies have been "increasingly important" spurs to new and retained domestic manufacturing investments.

    Using taxpayer dollars to pay manufacturing companies to move or stay may make perfect sense in many cases.  And certainly most of America's major trade competitors engage in such practices pervasively.  But relying substantially on government inducements is likely a losing proposition for domestic manufacturing advocates.  After all, industrial rivals like China, Germany, and Japan are financially strong.  The United States remains saddled with enormous debts - many owed to these very countries, and is unlikely to win a worldwide subsidy competition.

    American manufacturing still retains many strengths.  Some of it, moreover, may boast considerable growth potential.  But no one should underestimate the continuing weaknesses and challenges made clear by the most comprehensive, most detailed data.  Without presenting this readily available big-picture evidence, accurately describing domestic manufacturing's present circumstances and realistically assessing its prospects simply is not possible.

    Alan Tonelson is a Research Fellow at the U.S. Business and Industry Council, which represents nearly 2,000 small and medium-sized domestic U.S. manufacturers.  The author of The Race to the Bottom (Westview Press, 2002), Tonelson contributes to the Council's AmericanEconomicAlert.org website, and can be followed on Twitter @AlanTonelson and on Facebook at Tonelsonontheeconomy. 
    I will leave to Charles Fishman any response to the specifics in his article. For my part I will say that I don't think Alan Tonelson engages the main point I was making. 

    As my article said, we have been through a relentless decades-long period in which every observable trend seemed to be, and was, working against the feasibility of manufacturing within the United States. Alan Tonelson and his USBIC have been in the vanguard in chronicling those pressures. But, I explained, people close to the factory-floor realities in both the United States and China told me that changes beginning to be visible now seemed likely to alter those pressures. I wrote the story because people whose track record and judgment about technological trends I have learned to trust, over the years, told me these changes were worth noticing. Since they were talking about shifts that are just getting underway, the early trends they were talking about would not be captured in past manufacturing statistics, even those from 2011.

    If the pattern of decline that Alan Tonelson lays out still prevails in 2015 or 2018, then the people I quoted will prove to have been wrong. If the pattern changes, their explanations will be part of the reason why. Thanks to Alan Tonelson for laying out his case.
  • Foxconn and Apple Come (Back) to America

    Apple and Foxconn shifting some manufacturing to America.... Hmmm, where have I heard this concept before?


    Boy, am I glad that the current issue of our magazine came out a week ago, rather than a week or two from now. Today we hear that:

    In case you might possibly want a little context on developments like these, I give you Charles Fishman's "The Insourcing Boom," about the factors that a company like Apple -- or GE, which Fishman examines at length -- weighs in deciding whether to shift assembly back to a high-wage home-market company. And also my "Mr. China Comes to America," about some of the deliberations going on within Foxconn as it considers how to handle a younger, more sophisticated, more demanding, overall less compliant work force in China -- while also responding to ever-faster cycle times in product development, which make it more attractive to have designers, engineers, and production workers located close together and close to their markets.

    Why do I mention this? Because the point of a magazine like ours is to give you advance warning of, and context for, items you're going to see playing themselves out in the news; and this turns out to be a particularly tidy example.

    Also, the Bloomberg story quotes Louis Woo of Foxconn, who also plays a featured role in my story. Tim Culpan of Bloomberg quotes Woo thus:

    "Supply chain is one of the big challenges for U.S. expansion," Woo said. "In addition, any manufacturing we take back to the U.S. needs to leverage high-value engineering talent there in comparison to the low-cost labor of China."

    There is a lot about America's job-creation problems -- and potential -- in those two sentences. For a guide to what lies behind them, I gently re-direct your consideration to the December issue of our magazine.

  • More on That Ominous Chinese Maritime Announcement

    A(nother) high-stakes guessing game about exactly what the Chinese government has in mind

    NineDashSCS.pngLast night I mentioned the weirdly aggressive-sounding declaration from officials in Hainan, China's southernmost island, that starting January 1 they would assert the right to stop and board vessels passing through anything they considered "Chinese" waters. That's the entirety of the area shown within the red line at right, which covers many of the world's major sea lanes.

    Soon thereafter Peter Lee, who writes the China Matters blog, forwarded me the Chinese-language transcript of a Q-and-A at the Chinese Ministry of Foreign Affairs. In that session, the (Chinese) reporter asked about a change in policy toward "foreign fishing boats" (外国渔船), not seaborne traffic in general. But the spokesman's answer -- spokesmen have the same skills worldwide! -- was vague.

    Lee follows with a very detailed parsing of what is known, and not, about the thinking behind the new Chinese policy, based on available Chinese-language texts. I offer it for two reasons: For people following the substance of this dispute, it should be interesting; and for everyone else, it helps illustrate the ongoing difficulty of being sure exactly what "signals" different parts of the Chinese government are sending to the outside world (and to other groups in China) and why. Lee writes, starting with the "fishing boat" question:

    The Ministry of Foreign Affairs website press conference transcript is lovingly redacted and edited to conform to the message MOFA is trying to put out.  If the question as posted said "fishing boats", I would like to think it's because that's what MOFA wanted it to say.

    But, having said that, looking at the reports on the new regulations, they don't appear to be targeted at fishing boats (or transit vessels or the 7th Fleet for that matter):

    1) They are part of an upgrade/clarification of coast guard regs throughout China.  Media reports show that, for instance Hebei and Zhejiang have also issued new regulations at the same time.

    2)  It appears their target is nationalist demonstrators from neighboring nations intent on island-related mischief.  The main purpose of the new regs is to establish a clear public policy allowing for the Coast Guard to take action against people who try to land on the islands or sail around the islands and piss off the PRC (like the Taiwanese and Hong Kong demonstrators did to Japan around the Senkakus).  I'm assuming that's the reason why the Coast Guard announced it is not going to permit any "hooliganism" (寻衅 滋事)inside China's claimed territorial waters (a catchall term for activity without a clearly identified legitimate purpose, according to the PRC and in this case probably includes spraying coast guard vessels with fire hoses, hotdogging, etc.).

    3)   So the new regs forbid crossing borders or entering ports without permission; illegal island landings; messing with facilities on islands China claims; propaganda that violates China's sovereignty or national security.  The regs are written not to impinge on lawful freedom of transit.  The Coast Guard is only supposed to go after ships that illegally "stop or drop anchor" while transiting.

    4)  I think the reason why the Hainan regulations were given such prominence is because the PRC wanted to put the Philippines and Vietnam on notice that sending out nationalist armadas/landing parties to contested islands would elicit an escalating response from the Chinese.  Going after demonstrators in an organized, legalistic way (instead of ad hoc reactive response) is a relatively cheap and easy way for the PRC to assert and demonstrate effective sovereignty of the areas it claims.  One could call this escalation, and/or an attempt to set clear ground rules to help avoid conflict.  

    5)  I see the  intent of the regulations as written is to promote the PRC's idea of routine, lawful maritime enforcement.  It will be interesting to see how energetically this is spun as "PRC violates freedom of navigation".

    6) Maybe MOFA screwed up, or maybe they wanted a chance to frame the question as a low-key issue of "fishing boats" to keep the disruptive "island demonstrators" issue off the table.

    Now you know -- or at least have a sense of the triangulating / guessing / thread-following exercise the rest of the world goes through in assessing Chinese developments. For a more ominous reading, see the reaction today from an ASEAN diplomat.

    Update; Another let's-calm-down assessment is here.


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