In the Dollar I trust
Tuesday, July 11, 2006 at 2:04PM ARTICLE: "China's Golden Cities," by David Dollar, Newsweek, 10 July2006, p. 65.
Reading all this back and forth among bloggers on the China book "Will the Ocean Sink the Boat," [Ed. mainly in an email thread] I am reminded of my simultaneous criticism and praise of old buddy Minxin Pei's recent work on corruption among the party in China: good and solid stuff that I do not deny, I just don't extrapolate as much of China's future on that one parameter as he chooses to.
An article that serves as partial counterbalance to both Pei and the "Boat" book is this neat one by the always impressive David Dollar from the World Bank (his co-authored book on globalization was a mainstay source for my work with Cantor and my first book for PNM--he is just stunning good on whatever he produces).
His article just attacks the notion that the impact of China's boom, both good and bad (as he puts it) is concentrated just in the coastal cities.
His article leverages interviews by the WB of 12,400 firms in China spread out over 120 cities.
Biggest point: no correlation between fast growth and the "breeding of corruption or pollution."
Basic notion: Cities that feature best climates for investment tend to be ones with lower state-run enterprise quotients. Those more burdened by SREs tend to be heavier in content (thus more polluting), plus they tend to resist reforms to protect what they've got and don't want to lose.
Meanwhile, the really positively blooming cities are those that were all industrial backwaters back in 1978, when this all began, and thus they were able to work off a cleaner slate, thus keeping it all cleaner both corruption- and pollution-wise. That's why the cities with the most square meters of green space per capita are also the best places for investors.
But getting to the "Boat" argument: I think it just shows the growing pressure to extend private land ownership rights to the rural areas, as I've blogged earlier. The speculation driving the corruption is feeding off that lack of a rural rule set, which has long existed in the urban areas. Once land in the countryside gets properly revalued, watch Chinese ag really take off from the shot of new capital and watch the population shift to the cities pick up even more speed.
All this says that China, as Zenpundit points out [Ed. in the aforementioned email thread], has a huge rural population with a huge development claim on China's emerging wealth creation. So does China get old before it gets rich? Sure. Does it also get hugely urbanized before it gets rich? Sure. Do those sequences make it that much harder for China to be confrontational with the outside world? You bet.
I don't expect the land reform to happen in Hu/Wen's second term. Really see it breaking in first term of 6th generation, primarily in response to Hu and Wen's tepid efforts and the overall mounting pressure described in things like the "Boat' book, which--again--I think is good and accurate. It just needs to be contextualized a bit.
These are not questions re: China's future civil wars or break-up. This is what I mean by caboose braking, or the rural interior of any state tending to set the lower speed limits on globalization, which --as always--is overwhelmingly a domestic policy question.
Reader Comments (4)
I apologize that this is slightly off topic. I have a question that has been lingering on my mind recently. When Dr. Barnett writes (regularly!) about the how the U.S. should engage (connect with) China more completely and ask/use THEM to help resolve the N. Korea matter I find myself in complete agreement. Now, I happen to read a LOT of blogs written from, in and about China. Lately many of them (especially the excellent albiet unsettling China Confidential,(http://chinaconfidential.blogspot.com/)(I have no affiliation with them)have been writing that China does not WANT to help. That they are using the situation to keep the US preoccupied, distracted etc.
I guess my questions are:
1) Does Dr. Barnett agree with this assesment? and
2) Assuming it is true, what should the US being doing?
Thank you. Always enjoy the blog
Jason - I would suggest that the idea that there is one desire of a country is only true for very strong dictatorships or very small countries. I have no doubt in my mind that *both* points of view command the adherence of various factions in the PRC. Our problems as outsiders are that it is difficult to tell the players without a program and when are you talking to somebody representing a tiny, uninfluential fraction or a huge political force that doesn't get out much? It is difficult. I confess that I don't have the knowledge to actually provide an accurate assessment of the reality on the ground. I suspect that political faction strengths are still in the "state secret" category as far as the PRC is concerned.
So your bloggers may be honestly speaking their minds and I'm sure that TPMB is also making an honest evaluation based on what he has read and the people he has met. But everybody is playing "blind man feeling the elephant" because political transparency is a lagging reform effort in the PRC and this causes fear and empowers factions outside the PRC who are not the PRC's friends.
Regarding N. Korea, I expect that a drowning N. Korean regime will engage in more and more international flailing and as that flailing endangers the economic health of the PRC (perhaps through higher shipping insurance fees if N. Korea turns to piracy) the PRC will move to help end the regime *despite their not wanting to*. The N. Koreans are starting to engage in humiliating gestures like expropriating PRC rolling stock carrying food aid and claiming that the trains that aid was coming in on were part of the aid itself. That's got to sting and it's also going to have consequences elsewhere as others test to see how far the PRC can be taken advantage of.
jason,
be extremely careful in reading 'china confidential'. i followed you link and saw this recent post "PLA Seen Supporting North Korean Threats to Japan".
1) there are always some hawk in PLA, as we have in Japan, US as well. hawks are not in mainstream in china. e.g. zhu chenghu made a speech that violated the 'no first use' of nuclear weapon, and was quickly renounced by the govt
2) china confidential took liberty of no-source, no-link 'confidential' source, which is dubious in my view
3) he said "a Japanese military buildup would also fuel Chinese nationalism--an increasingly potent and useful force for a regime that has based its entire claim to legitimacy on continued material progress", quote the rhetoric from japan's far right wing. precisely the opposite, china has recently made some compromise to resume dialogues with japan.
4) i will give you one example of 'editing'. he said 2 PLA commissar "actually praised the tactics of Al Qaeda leader Osama Bin laden". in reality, the book 'unrestricted warfare' has been widely discussed. it is a book of a academic approach and theory. all it said was al qaeda was an example of unrestricted warfare. the author inserted his own word "praise" to twist the words.......this is a common trick, used by michael pillsbury/etc.
aside from the quality of that post, i think it is not impossible that some within PLA are extremely hawkish, acting like the Russian crazy generals in james bond movies where both US/UK and USSR wanted to chase after. but the fact that these people are 1)rare; 2) not in power; makes his whole post rather trite.
all i would say is, one needs to be very careful when a blog does not quote source and view things as black and white -- in reality most objects are colorful or grey.
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sorry for the digression, back to your comment of China's approach to NK. in my view it is more likely a result of incompetence in dealing with kim jong-il. china also seems to have little control on NK. That US still pragmatically leverage China to deal with NK is because US does not want to deal with it directly, for whatever reason.
Dr. Barnett has several times referenced the existence of private land ownership rights in Chinese cities; however, it is my understanding that the Chinese constitution still provides that the state owns all land in the cities. Rather than allowing outright private land ownership, the Chinese government instead leases land to individuals or companies for long periods of time--often for more than fifty years. Of course this allows for the private use of land that ends up looking on the surface like ownership, but it is different from ownership in the US, which lasts forever--unless of course the land is taken via eminent domain.