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Which British individual has done the most good for the world during the last half century or more since the Second World War? I nominate Sir John Cowperthwaite, Financial Secretary of Hong Kong from 1961 to 1971, who died last Saturday.

By applying laissez faire ideology to Hong Kong with greater inflexibility than anyone else was at that time even attempting, anywhere, he became, in Patrick Crozier's words, the father of Hong Kong's economic boom.

And that, if you think about it, makes Cowperthwaite the grandfather of the Chinese economic boom.

Without the shining example of Hong Kong, and the economically benign influence that Hong Kong has for a long time now had on nearby places still governed by Beijing, who knows what economic – and political – state China would be in now?

Cowperthwaite was criticised during his time in office for not taxing the people of Hong Kong more, and for ignoring, in particular, education. But has there ever been a more stupendous exercise in business education and everything-else-you-can-think-of education than Hong Kong? Hong Kong has been a University of How To Do It for millions upon millions of Chinese, Chinese who are now struggling to turn China itself from a suicidal and murderous world threat into a creative contributor to the world. The productive and trading templates now being followed in China were mostly devised in Hong Kong, and Hong Kong still provides a huge connection between China and the rest of the world.

So, there is at least a decent chance that China will emerge onto the world stage not as a belligerent superpower in the Soviet mold, but as a creative superpower more like nineteenth century Britain or nineteenth century USA.

Of course China still faces severe problems, as has been well explained here. It could all, and quite soon, go horribly wrong. China's creatively earned wealth and strength might yet – following some kind of economic melt-down – be cashed in to pay for the means to make only mischief on a huge scale.

But China's economic strength is not a total illusion, any more (well, maybe a bit more) than the USA's economic strength was wholly illusory in the late 1920s. (The worry about that comparison being that the USA proved that it could be the engine of world economic growth only after a huge depression and a huge world war.) And if, in a hundred years time, historians are able to look back on a century of (mostly) Chinese creativity and progress rather than of Chinese chaos and ghastliness, Sir John Cowperthwaite will arguably deserve more credit for that happy outcome than any other single individual.

The nightmare always was that the Chinese people would feel that they had to fight and to destroy to get the world's respect. Cowperthwaite's Hong Kong showed the Chinese people that they were capable of unleashing a better and more creative way to be respected, a way that the whole world is already benefiting from.

Patrick Crozier, to whom thanks for the link, picks out this particularly choice quote from the Telegraph obituary of the great man:

As for the paucity of economic statistics for the colony, Cowperthwaite explained that he resisted requests to provide any, lest they be used as ammunition by those who wanted more government intervention.

The state is not your friend. The less it knows, the better.

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This story is old hat by now, but it reminded me of an unusual anomaly when I was in China recently. Most readers are probably aware that some time ago China erected a firewall that censors parts of the internet it deems too sensitive for ordinary Chinese to view. Consequently, the more uncontrollable realms of the internet (like Blogspot.com) that could be exploited by computer users with a dissenting streak - as well as sources of critical news and the like - cannot be accessed within China. Wikipedia is also out of bounds.

Whilst in the Middle Kingdom, I visited a Sinophilic friend of mine. I would go so far as to say he has a case of the old rose-tinted glasses regarding China and the nature of its administration - needless to say we enjoyed a number of discussions about the direction China is heading in. Apart from being a China enthusiast, he is also an Apple Macintosh fanatic, and he owns one of those rather handsome new and expensive Apple Powerbook laptops. In one of our debates about Chinese freedom - or lack thereof - I parried with an example of China's neutered internet access. Why, I was not even able to access my own (and now defunct) Blogspot blog in the country! Rubbish, cried my friend. He read my blog all the time on his Macintosh.

Of course, I had to see for myself, and sure enough it was able to be accessed on his computer. I know that sometimes the firewall does not work and once in a while you can view sites that are normally off limits. Then the firewall kicks in again and the illicit page is unable to reload. However, I accessed a number of different Blogspot sites on his Mac several times over a period of days without the slightest bit of hindrance, even though all Blogspot sites I tried to visit were blocked across the country on computers that ran Windows platforms. I even tried using a different browser - Firefox was no different to MSIE. I would have liked to have been able to test the theory further and Google up some Falun Gong links, but this did not seem prudent on someone else's machine, given the Chinese government's attitude to that group.

The above got me thinking - when the story broke about Microsoft shutting down that Chinese blog, I wondered if Microsoft and the Chinese government had colluded in the construction of the Great Internet Wall. In the eyes of the computing world, this would surely be a far more heinous crime. Since the Windows platform enjoys considerably less competition in China than it does in the MS-dominated West, ensuring Chinese Windows machines cannot access sites the Government disapproves of means the job is pretty much done.

I admit, if China and Microsoft did work together to construct the wall, it seems like an unusual and inelegant solution - relying on the software of the end user to filter out content. Surely some specific backdoor entrance would need to be engineered into the programme. I am certainly no computer expert - there could be a perfectly reasonable explanation for the above, and there are some pretty switched on people who comment here. Ideas?

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I have been wandering through the fascinating nation of China of late, so I have not had much time to peruse the blogosphere - I guess this means that for a month I had a life. I was fortunate enough to spend a few days in the beautiful city of Lijiang in Yun'nan province. This mid-sized Chinese town is famed for its wonderfully restored 'old city', a cobbled and confusing maze of shops, traditional inns with gorgeous courtyards and a grid of small canals filled with luminous fish and gushing clean water. A beautiful place to while away a few days, but Lijiang is not really known for its nightlife. So on the evening of the 25th of December, I got trawling through some of the past articles on Samizdata. Reading through the comments section on this post, I noticed that an article I wrote early in 2005 got a mention. It was a pity I was not around a computer regularly, because a debate raged in the comments section that I would have very much liked to have been a part of. For all my appreciation of China, I am one of the few Sino sceptics.

I should explain. I am not a sceptic of the aspirations of the billions of Chinese people who sense greatness in the Chinese identity. After all, I'm mentioning a deeply rich culture backed up by a vast talent pool on the mainland and in the diaspora that has the capacity to change the world radically in the future. I am, however, deeply pessimistic about China in its current nominally Communist incarnation, for reasons I have outlined in a previous post. I will not go into specifics; if you're curious, please read my rationale here.

Some interesting developments have taken place between now and then, however. These merit further analysis. One or two of the commenters in the mentioned Samizdata piece stated that they were keeping abreast of banking developments in the Middle Kingdom. In 2002, Chinese officials admitted that 25% of the loans written by the state owned banks were non-performing. Standard and Poors and a number of others said it was closer to 50%, and possibly more. Within the space of four years, the Chinese administration has revised its estimation of the rate of non-performing loans down to an average of about 12%. How can this be done so fast? I'm not really sure. We are, of course, talking about the writing down or otherwise accounting for of many hundreds of billions of dollars of bad loans. I assume that it's due to the fact that most or all of the bad loans have been transferred to special "asset management" companies set up by the government. I suspect that the banks have been able to revise their non-performing loans (NPL) ratio down so quickly by performing a debt-to-equity swap with these holding companies. The article linked to immediately above believes the asset management companies have taken a chunk of the banks' loans and issued them with 10 year bonds in return.

This solution is clearly economic sophistry. At the end of the day, someone has to pay the tab - at some stage depositors are going to want their money. The equity in these holding companies is effectively (if not nominally for the time being) worthless - after all, their assets consist of a bunch of loans that will never be repaid. What is being done about the essentially state-owned industrial sector, which was - and most likely still is - the major recipient of these loans? There's a saying in China that goes something like "The mountains are high and the Emperor is far away". I have no doubt that this thinking pervades China's provincial administration and its state-owned industrial sector, and it explains the pervasive corruption that is, contrary to official publications, as rampant as ever. For every high-profile trial and execution of an apparently "senior" official on corruption charges, there are hundreds of thousands more who not only escape undetected, but are also politically untouchable into the bargain. Quite simply, the central government cannot be everywhere at once, and its reach is frequently limited by local powerbrokers. Consider this case in Guangdong, one of China's more prosperous provinces, where the central government could not exercise its will due to local political considerations, even though humiliating international media attention was beaming down. And who is to say that the central government is not as corrupt as its provincial counterparts? It is hardly unreasonable to say that corruption probes have a definite glass ceiling when it comes to the powers that be in Beijing.

I believe that the Chinese banking sector's dire straits constitute the gravest threat to global stability in the coming years. The Chinese government is always harping on about its "deepening" banking and state-owned industrial enterprise reforms, and this is a mantra is being repeated across the world. Unfortunately, the Chinese state is so opaque that it's impossible to verify the veracity of such claims, and the unrealistic numbers being thrown at us by the Communist party (like the drop of NPLs from 25% to 12% in less than five years) and the shonky juggling of bad debt from one insolvent bank to another woefully undercapitalised holding company do not inspire much confidence in the nature of the reforms. Frankly, I believe the banking sector is too far gone to reform without collapse. In international terms, the crisis in the Chinese banks and SOEs is an elephant that stands in the middle of the room, but everyone is either perceiving it as a mouse or trying to pass it off as a mouse. I believe the Australian government is in the latter category, as are a great many others around the world.

I speculate that governments like Australia's are acting as they are because they realise the Chinese state is very brittle and unlikely to withstand economic collapse. The massively stimulating US$50 billion or thereabouts annual injection of foreign direct investment is holding the Chinese state together for the time being. Thus, a number of states such as Australia have an interest in talking up Chinese economic reforms - and concealing the parlous nature of the Chinese economy - in the hope that investor confidence will not flag and the Chinese will trade and consume their way out of their problems. Our current economic health is due to huge demand in booming and resource-hungry China. Thus we see documents like this (pdf) that echo the "deepening reforms" mantra consistently spouted by the Chinese administration. Puff pieces like this create and sustain the irrational exuberance that swirls around the legend of the Chinese economic miracle, and inevitably amplifies economic pain when the collapse eventuates. The strategy of our governments may work, but it is an extremely high-risk gamble. The more investment in and commercial intertwinement with China increases, the more outsiders will suffer if the system unravels.

And perhaps the cracks are already becoming evident even to the man on the street. When I was in China in late 2005, ATMs were frequently out of order. I work in the banking sector in Australia, and when an ATM is out of order this nearly always means the machine has dispensed all its money. This was not a problem in late 2004 during my previous Chinese visit - ATM operations at that time were indiscernible to those in Australia. I am speculating here, because I'm not really an expert on this kind of money velocity issue, but perhaps the sudden patchiness of the ATM network is a sentinel of a solvency crisis.

And the collapse could come sooner than we think. In 2007, as per the agreement China entered into upon joining the WTO, it must open up its retail banking sector to foreign banks. This is a potential tripwire. Even if only a small number of Chinese are concerned about the health of their local banks (and thus their savings), when Citibank opens up next door the run on Chinese banks could easily spin out of control. I am assuming that the government is trying to spread the notion of confidence and stability in the retail banking sector. If the Chinese do not panic come 2007 or any time in the subsequent 20 years or so, the banks should be able to reduce their NPL rate to a "more manageable 5%". It wouldn't be the first time that people have left their money in a bank that is essentially insolvent because they believe the government will cover any losses incurred. This is a questionable assumption, however, and if I was Chinese I probably would not run the risk.

I am concerned by the consequences of a Chinese economic collapse, and these concerns reach far beyond any short to medium term economic pain. I fear a worldwide economic slump prompted by the collapse of China and its supposedly free market will provoke a popular backlash against globalisation and the liberal market reforms carried out in the 80s in the most successful economies of the West. Capitalism and liberalism will be blamed if people create a nexus between China's collapse, its market reforms and its intertwining with the greater world economy. There is no shortage of people who will quickly jump to the fallacious conclusion that the free market sunk China - those who protested in Hong Kong and other places would grab plenty of (misguided) ammunition from such a catastrophic event. Ask any one of those economic curmudgeons about post communist Russia's economy, and I will bet you penny to a pound that their standard response would be "capitalism failed Russia". This is about as sensible as saying that modesty failed Paris Hilton, for anyone who knows anything about post-Soviet "free market reforms" will know that they were in fact nothing of the sort. This type of thinking could very well gain traction because it makes sense prima facie. Policy reversals may follow and suddenly we're staring down the barrel of a neo-Keynesian revolution. Consider what the average person knows about China's economy. We're all told about China's free market reforms and its burgeoning capitalist class in the mainstream media - we're not told about the Chinese government's meddling in the economy and its mandating of compulsory totalitarian-style imposts on big private companies like internal "political cells", its retention of control over huge swathes of industry, its equity market (there is currently a ban on IPOs on Mainland bourses) which is stuffed with companies who are controlled by local governments and even the military, rather than shareholder, the board and a CEO. Most importantly, we're not told about the largely intractable problems with China's banking sector. Most people truly think China operates under a free market economic system. If the dog's breakfast that is China Inc fails with all the accompanying pain and fallout, there's a real danger that free market liberalism will be made the scapegoat internationally.

As I speculated above and in my previous article, Chinese economic collapse will probably preface political revolution. This is in itself an interesting, though disturbing proposition. What would post-communist China look like? Firstly, I should mention that a democratic revolution seems fanciful at best. There is no ANC-type shadow opposition waiting in the wings. The Party is the State, and the Party brooks no opposition. Here are what I consider to be the two most likely outcomes:

1) The military will overthrow the Party. If the banking sector collapses, so too will large chunks of the state-owned industrial sector that are afloat solely due to loans from the state-owned banks. Millions upon millions will be out of work - millions more will lose their pensions and benefits. Many tens - perhaps hundreds - of millions of people will pour onto the street to vigorously and violently protest their loss of savings and/or employment. In its death throes, the Communist Party will order a brutal military crackdown. Trouble is, a military is made up by people with aspirations, families, hopes etc. People who would have lost their savings, too. People whose parents, family and friends are suddenly out of work and without benefits. Most of the officers and soldiers will have no end of sympathy for their countrymen under such circumstances, and it's difficult to imagine the chain of command will survive under such conditions. The Communist top brass will lose control of the military, which will regroup under a new command. The old political order will be drawn and quartered, Mao will be evicted from his mausoleum and his portrait ripped down from the gate of the Forbidden City. There is no democratic tradition in China, however the country is steeped in a history of rule-by-decree. Expect this for many years to come. Perhaps the best outcome would be highly imperfect democratic elections in several years time.

2) The country breaks up along the lines of regional powerbrokers. Along with rule-by-decree, China also has a long history of warlordism and disunity. Due to the lack of any credible and widespread opposition movement in China, the possibility of a complete breakdown of central control is high if the Communists depart the scene and the military doesn't fill the vacuum. Hong Kong would almost certainly go its own way. Those provinces with large populations of non-Han citizens like Tibet and Xinjiang may declare their independence - perhaps bloodily ejecting the old order. Inner Mongolia may reunite with Mongolia. There is scope for large-scale dismemberment of the modern Chinese state. That left over will be fractured and ruled perhaps by the old regional party bosses reincarnated as warlords or whoever is able to wrest power from them and maintain it.

Some mention Taiwan as a wildcard that could be used as a distraction by the Central government. I think this unlikely. If the economy collapses, a war with Taiwan is not likely to distract anyone from their sudden poverty. Militarily, it seems unrealistic, too. The military will be stretched to breaking point in an attempt to reign in the chaos on the Mainland, so a massive invasion or attack on Taiwan looks unfeasible.

I truly hope that I am wrong about my bleak assessment, mainly due to the turmoil and potentially massive loss of life that would undoubtedly accompany such an event. I am also deeply concerned about the potential illiberal and protectionist measures that may be enacted in the West and elsewhere in the wake of a Chinese meltdown. The world has made a grave error of judgement in heavily backing an economy designed, constructed and administered by a group of ostensibly reformed Communists. This fact alone should have cooled the foreigners' ardour. As it stands, the potential for unprecedented economic losses from Chinese investments is enormous. I think we could be facing a very painful depression, which may very well be "cured" with a protectionist, welfarist New Deal-like solution. Scary times ahead.

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The best possible antidote to ignorant and irrational Indonesian Muslim clerics forcibly imposing Sharia and claiming the tsunami was punishment for women not wearing veils would be for people to respond to their violence in kind and simply run the bastards out of town.

The religious police have not always had it their own way. In one incident on the island of Sabang, attempts to humiliate a bareheaded girl backfired when angry villagers turned on them. By the time the civil police arrived to rescue the enforcers they were surrounded by an angry mob flicking lighted cigarettes at them.

This is an encouraging start but they need to get rather more serious than flicking a few cigarettes at them.

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The Chinese economy is set to be bigger in GDP terms than that of Britain by the end of this year, according to this report. Of course, raw statistics, such as aggregate economic numbers, do not tell the entire story, such as the degree of upward mobility, quality of life, extent of personal opportunity and so forth, but even so, China's growth remains for me the most compelling economic story of the past year. It is interesting to speculate just what the world economy would be like without the dynamo of China.

What remains to be seen, of course, is whether China's economic dynamism is eventually reflected in greater individual liberty. The jury is well and truly out on that question. Meanwhile, this article in Forbes is worth a look.

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In an emerging democracy like Indonesia, progress towards an open society is rarely easy and often has many setbacks. To make things worse in Indonesia's case, this polyglot island nation is one of the main theatres of the war on terrorism. Though the main Islamic terrorist group in the region, Jemiah Islamiah, is small considering the size of Indonesia, it has been able to launch powerful and deadly attacks in Indonesia.

Under pressure from its public to crack down on Jemiah Islamiah, the Indonesian government is reverting back to the old ways of the one-party state. This story details a plan to fingerprint students at Islamic schools, thought to affect over 3 million pupils. This move has caused outrage in Indonesia, although sadly this opposition is mostly from conservative muslim groups rather from people concerned about civil liberties.

Also reflecting bad old habits is the revival of the 'Ministry of Information', which played a sinister role of controlling the media in the 'New Order" regime of President Suharto. The Ministry has come out with regulations that clearly breaches Indonesian broadcasting law, but in a cynical move it has made sure that the regulations will remain in place while the regulations are challenged in the creaky and slow moving court system. The regulations are quite cynical.

Not only did the ministry grace itself with the final say on licensing issues, but it also put boundaries on content -- a clear violation of the broadcasting law, according to experts.

Among them is the prohibition on private broadcasters to relay regular news programs from foreign broadcasters, thus limiting sources of information to the public.

Old habits die hard, media analyst Hinca Panjaitan said, referring to the irresistible desire by those in power to control the information received by the public.

"All the fears about the ministry are turning into reality. The media is supposed to control the government, but how is it supposed to do so when its life lies in a minister's hands?" he said.

For Indonesia, the path towards liberty and accountable government is clearly a long and windy road, with many detours along the way.

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I don't know how long this fascinating New York Times article about blogging in China will survive as something you can read without any payment or other complication, so I quote from it now at some length.

Chinese Web logs have existed since early in this decade, but the form has exploded in recent months, challenging China's ever vigilant online censors and giving flesh to the kind of free-spoken civil society whose emergence the government has long been determined to prevent or at least tightly control.

Web experts say the surge in blogging is a result of strong growth in broadband Internet use, coupled with a huge commercial push by the country's Internet providers aimed at wooing users. Common estimates of the numbers of blogs in China range from one million to two million and growing fast.

In my opinion, that is the key to this development. What matters most is its sheer scale. Sure, censorship works, in the sense that you are not allowed to say that the entire government – listed by name – are a pack of corrupt scoundrels who should be replaced by this other group of virtuous persons, again listed by name. You cannot praise democracy, or freedom, or Falung Gong, or whatnot. But how do you stop this kind of thing?

"The content is often political, but not directly political, in the sense that you are not advocating anything, but at the same time you are undermining the ideological basis of power."

A fresh example was served up last week with the announcement by China of five cartoonlike mascot figures for the 2008 Olympics in Beijing. They were lavishly praised in the press - and widely ridiculed in blogs that seemed to accurately express public sentiment toward them.

"It's not difficult to create a mascot that's silly and ugly," wrote one blogger. "The difficulty is in creating five mascots, each sillier and uglier than the one before it."

Answer: you stop it. But only after countless thousands of bloggers have had their chuckle, and after many dozens of them have copied it and pasted it.

By far the biggest category of blogs remains the domain of the personal diary, and in this crowded realm, getting attention places a premium on uniqueness.

For the past few months, Mu Mu, the Shanghai dancer, has held pride of place, revealing glimpses of her body while maintaining an intimate and clever banter with her many followers, who are carefully kept in the dark about her real identity.

"In China, the concepts of private life and public life have emerged only in the past 10 to 20 years," she said in an online interview. "Before that, if a person had any private life, it only included their physical privacy - the sex life, between man and woman, for couples.

"I'm fortunate to live in a transitional society, from a highly political one to a commercial one," she wrote, "and this allows me to enjoy private pleasures, like blogging."

What those concluding paragraphs hint at is the real punch of something like blogging. It is not that defiantly political things are being shouted from the rooftops. That is still far too dangerous. What blogs are doing is enabling an alternative attitude to assemble itself, as it were, and an alternative tone of voice to develop and to be communally celebrated. What is at stake here is not only what is said, but how it is said. Friendly chat around the table replaces the booming official megaphone. (Thought while proofing this: banning overt politics may actually amplify this particular contrast.)

Once assembled, these blog communities develop their various code phrases and metaphors, so that they always know what they are saying but so that the censors are running around in a state of permanent confusion, mostly because they now, suddenly, are faced with just too damn much stuff to censor. (One of the things that the cryptic metaphors will refer to will be links by means of which the censors can be got around.)

Beneath and behind all this is the brute fact of economic development. The CHinese government has bet the farm on this. So, although I am perfectly sure that groups of censors get together in their corridors and shout in chorus: "Shut the whole f***ing thing down, you idiots!", the government is in no position to do that. I further bet you that among the ranks of the censors are to be found some of the Chinese government's most thoughtful and well-informed critics, because nobody understands the weaknesses and foolishnesses of a weakening system better than the people who are paid to try to keep it going. (I well remember in the old Alternative Bookshop, that some of our best and best informed and most rabidly anti-statist customers were the ones working in the middle to upper reaches of the British Civil Service. They knew it was crazy.) The Chinese government wants its cake, economic development, but to eat it too, to keep the commercial classes and their children politically docile. Hm. How can it do this? Difficult, very difficult.

So, blogs form an alternative attitude, and they simultaneously sap the will to power of the ruling elite. All that is then needed is some genuine – although not especially outrageous – outrage to be committed by the government, and the whole Chinese blogosphere (now many millions in number) may then erupt with more explicit rebellion, on a scale which again overwhelms the censors. If and when that happens, the blogs will then do something else unprecedented. They will report what is happening, to each other, and to the outside world, such as to the New York Times person, Howard W. French, who wrote this article. Some will report what is happening while simultaneously saying that they oppose what is happening. Makes no difference.

And yes, if you are thinking this, this story does indeed illustrate that the much maligned Mainstream Media can indeed make a big difference in circumstances like these. Although, saying that the MSM are essential is something else again. I am sure that there are plenty of English language blogs out here - "web experts" is all that French calls them, no doubt in many cases being vague about it for very good reasons – where all these possibilities are understood and explained in great detail, and by using which French did a lot of his background research. Besides which, I only read French's article because Instapundit linked to it.

Meanwhile, French notes, the Chinese censors have resorted to leaving critical comments, supportive of the government, on Chinese blog entries. They might as well just put: "We surrender!" Now, suddenly, they must persuade the bloggers and their readers. Talk about reversing the burden of proof. So all the bloggers have to do is keep their peckers up. Many will not last. Having come, they will fade. But others will persist.

No doubt I am being, as is my taate, too optimistic about how well things in China might turn out. But I really do not see how the Chinese government can now expect anything better (for them) than merely to manage the demise of even the pretence of communism, and the emergence of a more participatory and democratic political culture. The idea that they can indefinitely sustain the communist power monopoly in the face of a new communicational world strikes me as far too pessimistic.

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This Chinese banning of electric bicycles is placed firmly in the stupidity column at Beyond Brilliance Beyond Stupidity. Bicycles good, cars bad.

It is hard to disagree with BBBS when they oppose this particular piece of partiality towards cars and against bikes. My only uncertainty concerns the fact that someone has to decide about how roads are administered, and there just might be good reasons for this, besides trying to hurry along the making of a big home market for cars in China, and clearing the proles off the roads, to speed things up for fat cat limos.

That hesitation aside, this certainly looks like a classic case of a law to stop the potential future from competing with the established present. Cars are already big business. Electricity for transport has a long way to go, but will surely go that long way, if allowed to. Batteries, to name just one crucial aspect of electric transport technology, seem to be progressing well, judging by how much better digital camera batteries have got lately. So is China wise to be deliberately trying to rebuild old Detroit?

The libertarian line on all this, which of course is the one I prefer, is that road owners should price the use of roads, and then the market would decide whether electric bikes are a reasonable proposition or too much of a bother to other road users, such as cars. Something tells me that this solution will not be unleashed in China any time soon, although that something may be misinformed.

Whatever you make of this story, it is an interesting angle on China now. My personal policy towards China is (a) trade with it by buying cheap stuff, and (b) learn about it, good and bad, and (c) blog about it, ditto. And one interesting thing I learned from reading this story is that in China they apparently have something called the China Bicycle Association. Concerning this ban on electric bikes, the China Bicycle Association is "enraged". Good to hear that associations in China are allowed to be enraged. I could not find any China Bicycle Association website though.

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Details are still sketchy, but there has been another terrorist outrage in Bali, targeting tourists in Jimbaran beach and Kuta beach. There seems to have been at least three separate explosions. As I write, the television is reporting that AP news agency is saying that 19 people have been killed and at least 51 more injured.

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Via Daniel W. Drezner, I read this story about the new rules that China has established to regulate news reporting on the Internet.

"The state bans the spreading of any news with content that is against national security and public interest," the official Xinhua news agency said in announcing the new rules, which took effect immediately.

The news agency did not detail the rules, but said Internet news sites must "be directed toward serving the people and socialism and insist on correct guidance of public opinion for maintaining national and public interests."

That is a nice touch in the way they do not define what is against 'national security and public interest'. In effect, it is whatever the Chinese Communist Party says it is.

The Chinese government is also getting quite adept at regulating Internet content in its own country, not least through help from US Internet and software companies. Dave Kopel writes that these companies might well have broken the law in selling this technology to the Chinese government, but the current administration refuses to apply it, and thinks that only pressure from consumers and shareholders will cause these companies to mend their ways.

Foreign companies that invest or do a lot of business with China are going to have more and more ethical headaches of this nature in the years ahead.

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I love the internet. I went from this, which I posted here, to this, to this, to this, to this:

. . . to this:

. . . . which is the work of Ha Qiongwen. Of this particular poster, Stefan Landsberger says:

The design reproduced above was at the root of Ha's problems: why had he depicted a bourgeois woman instead of a female proletarian? Where was Chairman Mao? Why didn't the poster praise the Chairman more explicitly? Every time the literature and arts world held a criticism session, he was dragged out as an object of public abuse. As a result, Ha was publicly beaten and humiliated more than thirty times.

Personally I think the Red Guards were on to something. I think these delightful and amazing Chinese propaganda posters and China's current, rampantly aspirational and bourgeois rise towards superpowerdom are cause and effect.

I offered further thoughts along these lines in this ASI blog posting . This is the bit that is relevant:

I recently encountered, in a remainder shop, a big book containing hundreds of Chinese Communist propaganda posters, much like these ones. They depict a vivid and colourful fantasy world of industrial excellence and economic triumph, of collective progress and personal fulfilment, of joy. The people who now preside over China’s current economic miracle were teenagers when posters like these were at the height of their influence, and I think this is no coincidence. It makes perfect sense to me that the more imaginative and impressionable people brought up on imagery like this would turn away in disgust from the lumbering state centralism that these posters were intended to sell, once they realized that state centralism could never deliver such wonders, and instead switch to being enthusiastic pro-capitalists and even capitalist entrepreneurs. After all, only if China switched to capitalism could a real future like this be even hoped for, let alone rationally anticipated.

If you follow the link in that and scroll down to the bottom, you get to this:

Red Guards eat your hearts out.

(I now possess that book.)

Did Ayn Rand have anything to say about these Chinese posters? She should have.

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The European Union has agreed an "equitable" outcome with China over the vexed issue of whether the Chinese should be allowed to sell textiles to us at those oh-so unfair low prices. It looks like a pretty fudged deal to me, possibly not as draconian as the original quotas demanded by protectionist lobbies in Europe, but still a slap in the face for principled free trade.

While I have my concerns about China - it has a lousy record on human rights for starters - the development of the country's economy along hopefully free market lines is surely one of the most positive developments of its kind in the world at the moment. Europe's economy can only benefit in the long run if China becomes prosperous and hence generates a large middle class with a keen appetite for consumer goods and services.

And some of the poorest people in Europe surely stand to gain if they can buy garments for far less than the amount they would otherwise pay. If the case for free trade is to succeed, it is vital that this point is rammed home time and again.

Let Adam Smith have the last word on this from his Wealth of Nations:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce

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Boris Johnson, the Tory MP and magazine editor, occasionally bugs me with his latter-day Bertie Wooster routine, which has become a bit of a self-parody, but it is hard not to like a man who writes a wonderfully clear-headed, cant-free article on China like this.

The Member for Henley-on-Thames is unimpressed by the current vogue for getting all upset about matters Chinese, whether it be terrors about Avian flu, dread of ultra-cheap clothes (low-price bras, oh the horrors!) and so forth. Boris is particularly harsh on the European Union's bout of protectionist folly against cheap Chinese textile exports and the role of that lowlife, EU Commissioner Peter Mandelson:

It is all stark staring nonsense, and founded on the same misapprehension as Peter Mandelson's demented decision to slap quotas on Chinese textiles, so that the mouths of the Scheldt and the Rhine are apparently silting up with 50 million pairs of cut-price Chinese trousers. It is idiocy, and not just because it is unlike Mandy to come between a British woman and her knickers.

And again:

The emergence of China and its integration into the world economy has been a major spur to growth and a deterrent to inflation. It is an unalloyed good, and it is sad to see our politicians responding with such chicken-hearted paranoia.

UPDATE: I put the wrong article in the link and have changed it. Mea culpa.

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Matt Devereux sees reasons to be cheerful in the land of the Rising Sun

Statist hero of the week? On Monday Japanese premier Junichiro Koizumi announced that he would make plans to privatise the national postal service his key election pledge. After losing the privatisation motion to the House of Councillors (upper parliamentary house), Koizumi decided to call a snap election to ask the Japanese public "whether they think the same way." Early indications show that the strategy might well have paid off, with the Prime Minister's approval rating rising 9 points thus far on the back of this single issue. In practical terms, the privatisation process will be long and hard.

Japan Post is far more than just a stamp and mail operation. Its $2.9 trillion held in savings and insurance effectively make it the world's richest bank. With approximately 8,000 more post office outlets than in the UK, the prospect of opening the Japanese state monopoly to market forces make our plans to privatise Royal Mail pale in comparison. It's not the statistics that impress, however. It's the extent to which Koizumi has dared to stake his future on a subject recently lacking in North Atlantic political relations.

Take the 2005 Conservative Manifesto - the word "privatise" does not appear once. This despite Michael Howard's half-baked promise to allow private treatment at NHS prices (and standards) for those willing to pay. It's as if ideas of free trade and free enterprise have abandoned mainstream UK politics altogether. It's been left to us crazies on the sidelines to remind the public that high taxation/high spend is not necessarily the only policy.

President Bush fares a little better, though even in the US the semantic goal posts have changed. Pre-election, Bush actively used the term "privatisation" in relation to his proposed shake up of Social Security. It was, he said, a "top priority". Then, when the election campaign took full swing, privatisation became "reform". The top priority of Social Security became no priority in Bush's victory speech. Iraq was everything. Democrats picked up the "p" word as a term of disgust for the administration's strategy and continue to run with it. The most recently published Rose Garden press conference transcript proves the extent to which Bush is careful not to mention the "private" in relation to the "social".

What is it that has forced this anti-privatising doublespeak onto the Western political right? Perhaps if our leaders were more eloquent in their defence of the things we hold dear we'd vote for them again. By making a free trade issue central to his election campaign Koizumi is asking for a mandate to dismantle a state monopoly. In this at least the Japanese PM deserves our respect. Now, Mr. Koizumi, about Kyoto...

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Piracy in the Straits of Malacca has been a serious problem for many years now and shipping companies have grown tired of waiting for governments in the region to do something effective to stamp it out.

So they are hiring private companies to do it instead. Sounds like an exciting line of work.

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It seems just a tad perverse that whilst uttering rhetoric about supporting freedom and democracy, the US is sending its military to help train Communists in Vietnam.

Why, exactly?

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What did you do to help the victims and survivors of the Asian Tsunami? Did you help to raise money. Did you don your jogging bottoms and wheeze your way through a sponsored run? Did you sit in bathtub full of maggots for twenty-fours hours? Did you gladly humiliate yourself by joining in with a charity sing-a-thon? Did you run around like headless chicken collecting cuddly toys, blankets and unwanted packs of paracetamol?

Or maybe you just plunged your hand generously into your own pocket, scooped out a chunk of change and handed it over with the (understandably) sincere intentions of doing just a little to help ease the plight of the unfortunate victims of that catastrophe.

If you did any of those things, well, you have certainly provided relief to some quarters:

Oxfam has had to pay £550,000 in customs duty to the Sri Lankan government for importing 25 four-wheel-drive vehicles to help victims of the tsunami, The Daily Telegraph has learned.

The sum was levied by customs in Colombo which have refused to grant tax exemptions to non-governmental organisations working to repair damage caused by the giant Boxing Day wave.

The Indian-made Mahindra vehicles, essential to negotiate damaged roads and rough tracks, remained stuck in port at Colombo for almost a month as officials completed the small mountain of paperwork required to release them. Customs charged £2,750 "demurrage" for every day they stood idle.

So there we have it, good people. Kindly Westerners care more about the sodden, bedraggled, impoverished masses of Sri Lanka than their own government which has made a priority of cutting off its own pound (or several hundred thousands of pounds) of flesh first. And this is only the stuff that is being reported. Try to imagine, if you can, the graft and pilfering that is going on underneath the radar.

As for Oxfam, I can spare no words of comfort. Their incessant mewling about 'fair trade' means putting even more power and looted wealth into the hands of the kind of third-world government spivs who have just royally shafted them. I doubt very much if they will learn anything useful from this object lesson. These people seldom do.

If I had suggested, in the days following the disaster, that all those munificent donations were going to be stolen then the comments section of this blog would have experienced a mini-tsunami of its own as a wave of furious readers flooded in to inform me that I had "reached new lows". Too cynical? There is no such thing as 'too cynical'. Allow me to put the record straight: every penny of that relief fund is eventually going to worm its way into the pockets of state officials and professional Western poverty-mongers.

The Emperor was always naked but now he's running around flashing his genitals as well.

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I realise that to do business in China means having to deal with the realities of the Chinese state, but when Microsoft becomes yet another direct collaborator with Chinese repression by adjusting its blog tools to help block online speech using words such as "democracy," "freedom," or "human rights," then clearly Microsoft has become a party to the trampling of human rights in China and is not just a bystander.

Next time you hear of all the philanthropic work done by MS and Bill Gates, just keep in mind that there is a very nasty flip side to the Giant from Redmond. It would appear that even Gates has a price at which his principles are clearly 'negotiable'.

Update:: There is some question of whether or not this is actually true according to a commenter who has set up a Chinese MSN Space blog. I will try to contact Voice of America and see what they have to say.

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Chen Yonglin, a Chinese diplomat with inside knowledge of his country's large scale espionage activities within Australia, has revealed that the Chinese intelligence services sometimes 'forcibly repatriate' (i.e. kidnap) political enemies in Australia and bring them back to China. He has also just tried to defect in order to tell his story and has, with indecent haste, been refused political asylum within only 24 hours of asking for it.

Why? Because too many members of the Australian ruling class are in the pockets of Chinese business interests and allowing Chen Yonglin to defect could cause the Chinese government to threaten lucrative trade deals with Australian companies.

Our Australian Samizdatistas have often told me just how cynical and corrupt the people at the top of Australian politics are but I still find this deeply disturbing. These are shameful days down-under and I hope a lot of Australians are angry as hell.

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Much has been said and written (some of it by me) on the growth of the Chinese economy and the rise of China as an economic power, and of the growth of an immense manufacturing region on the sides (particularly the east side) of the estuary of the Pearl River between Hong Kong and Guangzhou (Canton). If there is a workshop of the world today the way there was in the north of England in the mid 19th century, then this is it. I have for a while wanted to go and look at it, but I have usually lacked either the time or the money. Ideally I would like to start in Hong Kong, work my way upstream through Shenzhen and Dongguan to Guangzhou, and then back down the other side of the estuary via Zhongshan and Zhuhai to Macau, on the opposite side of the estuary to Hong Kong.

But alas I have still not been able to do this. However, in March I arranged a trip to Australia to visit my family. And I was able to manage a stopover in Hong Kong for three days. Although I was not going to be able to do the trip up and down the estuary that I had hoped to do, I was at least able to spend one day doing something a little interesting, which was to cross the border from Hong Kong to Shenzhen in China proper.

Well, sort of in China proper.Shenzhen is a "Special Economic Zone". China gave Shenzhen this status in 1980 . (The status was subsequently given to Zhuhai across the border from Macau, the port of Shantou north of Hong Kong, Xiamen in Fujian provice across the water from Taiwan, and the southern island province of Hainan). These areas were given more economic freedom that the rest of China, and more importantly were open to investment from and trade with the rest of the world. This was convenient with the people of Hong Kong, as at that time Hong Kong was undergoing the transition from poor to rich, and labour in Hong Kong was becoming too expensive for the traditional textiles and other low cost manufacturing base to survive in Hong Kong. What happened was that the manufacturing moved across the border to Shenzhen, a boom ensued, and people (to the extent that they were allowed to) flocked to Shenzhen from other regions of China. Since then, much the same thing has happened to Shenzhen as happened to Hong Kong,although Shenzhen remains a less sophisticated place.

A lot of trading and lower level services, including that with slightly more questionable business practices, has moved to Shenzhen. Labour has become too expensive in Shenzhen for a lot of the low cost manufacturing to take place there, so it has moved further upriver, particularly to Dongguan. (Capacity constraints are much more stretched on the east bank than the west, which is the impetus for a proposal for a huge bridge connecting Lantau island in Hong Kong with Macau and Zhuhai on the other side of the estuary, construction of which is scheduled to commence later this year).

In any event, on Sunday morning I got the train from Kowloon to Lo Wu and (after a few hassles with getting a visa at the border) crossed over into Shenzhen.

Initially it felt like sleazy border towns everywhere, but it ultimately turned out to be far more interesting that that.

Compared to Hong Kong, the place was dirty. I was approached by a myriad number of people trying to sell me cheap counterfeit DVDs, a smaller but still significant number attempting to sell me cheap prostitutes, and one or two people offering to be my "guide" for the day.

The shopping malls nearest the border crossing were filled with with all kinds of cheap crap. Certain things were familiar, however.

A walk a couple of blocks further I found a nicer looking shopping mall filled with a mixture of genuine western medium to high brand name stores and a variety of other stores selling similar goods but with brand names and styles so close to the western ones that they would not be allowed in most western countries due to violating local trade mark law. There were relatively few customers. Most of who there were appeared to be Hong Kong Chinese looking to buy stuff for less than they could in Hong Kong.

Some of the advertising was good, though.

Disappointment so far. Where was this legendary city of economic vibrancy? At the bottom of the shopping mall was a subway station. The length of the lines and the number of stations made it obvious that Shenzhen consisted of a lot more than just the bit closest to the Lo Wu border crossing, so I decided that I would do something I do in many foreign cities, which is get on and off public transport almost randomly and see where it takes me.

Now, Shenzhen is physically an odd city. Rather than being densest in its centre and having less dense suburbs around that centre, the city is a long and narrow line of towers that essentially follows the border with Hong Kong. And when you look at the subway map, you see this. It consists of one long thin line with other shorter lines crossing that one at right angles. After buying a subway ticket and noting that a place where there is a staff member standing at each ticket machine to assist customers is one where labour is still cheap, I got on a train, observing my fellow passengers and what they were doing and carrying, and looking at the advertisements on the statiions on the walls of the tunnels

After about three stops, I reached a station where (a) there was a surge of people onto the train and (b) that one person who was getting on the train was clutching a box containing a computer keyboard and that another was carring something that looked about the size of an ATX tower. These struck me as good signs that I was near somewhere interesting, paritcularly if I was looking for stuff related to great centres of electronics manufacturing, so I jumped off the train and walked up into the street. Bingo. Large, modern looking shops, mainly devoted to electronics, disappearing into the distance in either direction. Great.

The closest building to the railway station was something described as an "Electronic World". I walked in, and my eyes, used to the British retail scene, were immediately blown away. This building had five floors, each of them about the size of a floor of a large department store.

While I was immediately impressed by the scale of this, the products for sale on the lower two floors were a little too low level for me. Integrated curcuits, cables, detached earphones, more integrated circuits, LEDs, magnetic tape, antennas, capacitors, all sorts of other things that are no doubt fun if you are an electronic engineer, but which I don't know how to put together.

However, ascending a couple of floors, I found the sorts of computer components I could do something useful with: motherboards, hard drives, optical drives, CPUs, graphics cards, DIMMs, cases, power supplies. It was really PC builder's heaven. And the scale of the place was just glorious. It was so enormous. THere was so much to choose from.

None the less, it was still clear that I was in a place poorer than London, or Hong Kong itself. Most of the CPUs on sale were actually Pentium 3s . While I would like to believe that the meaning of this was that the people of CHina had evaluated more recent options carefully, had concluded that the Pentium 4 Prescott core was an unspeakable abomination, and had thus descided not to upgrade for reasons of good taste, in reality this was not likely to be it. A lot of the components on sale were made locally, and these were really cheap compared to what I would pay in England. However, CPUs are sufficiently high up the food chain that they have to be bought from American companies, and they thus cost much the same in China as they do in America. And even in Shenzhen, incomes are not that high by western standards. (One the other hand, it could have been that the people of Shenzhen just wanted to be able to run