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Post of the Day
May 24, 1999

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Subject: Sinology
Author: hedden

I've returned from a two-week stay in Beijing, China. Interesting trip. The plane I was on landed the same day that the Embassy bombing in Belgrade occurred, and I was attending a conference at the Chinese Academy of Sciences during the protests at the American Embassy. I was staying on the west side of Beijing, opposite of the American Embassy, which is in the southeast. Actually, most in my group felt quite safe, apart from the feeling of "I might as well be green" (as one of my companions put it) from all the stares. But such staring is normal for a Westerner in Beijing - it happened the last time that I went back in November as well. Some of the students at the Institute that hosted the conference put up a large poster written in English protesting the bombing and expressing support of the Chinese government. It was obviously put there for us to read, as there was also a version written in Chinese, but no one explicitly mentioned the incident until the last day of the conference. At that time, the main host of the conference expressed his sorrow at the conflict between our countries and his hopes that our work and collaboration would continue in spite of such political incidents.

In some private conversations with him, our host told us that the protests were largely orchestrated and condoned by the government. Protestors had to apply for a permit, which they did on the day of the bombing, and it was granted within a few hours. This quick turnaround is highly unusual, indicating that the party officials wanted the protests to happen. They were allowed to continue for a few days, but the soldiers kept protestors from climbing the embassy walls, actually beating them down a few times (as shown on CCTV, the Beijing channel). Then, on Tuesday just 4 days after the bombing, the protests abruptly ended. On a drive through Beijing University, I saw that the Big Character posters (large banners expressing political slogans - a part of every political movement since the Cultural Revolution) denouncing NATO and the bombing had been removed. The campus, a starting a point for nearly all large student-led movements in China, seemed serene, as though no protests had ever occurred. The television showed pictures of the street in front of the American Embassy, formerly filled with tens of thousands of protestors, now empty except for a cart picking up trash and long lines of soldiers at attention.

I later found out that one of the measures the government took to ensure that the protests ended was to have teachers at the universities take strict attendance, with investigation into anyone missing from class. Since the students and workers were the main attendees of the protests, this kept the students away from the embassy. I assume that similar measures were taken to restrain the workers.

Reading through the China Daily, the government-run English language newspaper, I saw continued daily exhortations of the alternately "barbaric" and "atrocious attack" by the "US-led NATO forces". The Chinese government downplayed Clinton's apology, attempts to contact the PRC president, and admission of a mistake. Instead, they continued to call for a contrite and "sincere public apology". They also took the opportunity to make several demands of the US and NATO concerning the incident and the Kosovo bombing. In addition, they made 3 "decisions": to postpone high-level military contacts with the US; to delay consulations with the US on arms control and international security; and to suspend dialogue with the US on human rights issues. In my opinion, these 3 decisions are stances that the Chinese government has wanted to take for quite some time. If the embassy bombing truly was a mistake, the carelessness of NATO's military effort presented China with the perfect opportunity to break off military, arms control and human rights contacts.

During our time there, the Chinese government issued several statements, including one printed in the China Daily, that they would guarantee the safety of foreign tourists, including US citizens. Several news reports spoke of the way that the Chinese people, while denouncing the actions of the US government, realized that the average American citizen was not responsible for their government's actions. The government also issued several statements speaking directly to the people of China, asking them to maintain lawfulness and to refrain from expressing anger toward foreigners.

Due to the political turmoil, the State Department issued a travel advisory stating that they could not guarantee the welfare of US citizens traveling in China. Britain also issued such a warning, causing a large tour group staying in the same hotel as us to cancel their plans and confine themselves to the hotel for 2 days until they could schedule flights back to Britain. They had only been in China for 5 days of a 3-week trip. After talking with our Chinese friends and hosts, we decided to stay on to continue our work and to do a little sightseeing as planned. The rest of our trip went without incident, and two other groups from our university reschedule cancelled trips, in part because of the reports that we sent back saying how safe we felt.

All in all, a very productive and highly informative trip during a minor historical event. I learned a great deal about the way the Chinese government operates and how this control filters down through the various channels.

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For those here at KP, you may be interested in a few of the economic lessons I learned during my travels. First, China is very intent on joining the World Trade Organization (WTO). Although they are breaking off contacts with the US on certain issues, I expect that they will continue to maintain economic ties in order to gain US support for their entry into WTO. In talking with some of the Chinese people, however, the main reason for wanting to join WTO is to gain legitimacy as an economic power and to stop certain foreign price controls and import restrictions on their goods. Currently, foreign governments can set country-specific import restrictions on Chinese goods. If China joins WTO, these restrictions will have to follow general WTO guidelines. On the other hand, China itself will no longer be able to impose arbitrary import restrictions on foreign goods - it currently has very severe restrictions and taxes on imports. These taxes cause, for instance, name-brand computers to be from 15-33% more expensive in China than in the US. Similarly, a Honda Accord sells for about $20,000 USD in China.

The Chinese government also holds check and credit card transactions from 1-3 months. What happens is that the money is deposited into a government account, on which they earn interest. After 1-3 months, the money is released by the government to the payee of the check or credit card. Many tourist industries that deal with foreign accounts on a regular basis take this all in stride and make the transactions, knowing that they will eventually get the money. Smaller firms, however, will not release their goods until they actually receive the money in their account, meaning that you may have to wait 3 months to actually acquire certain goods unless you pay in cash. Much of this will likely be curtailed if China joins the WTO, making trade much more accessible. Until it does however, the Chinese government will have a tight reign on economic transactions and any attempts to more fully develop a market economy.

As for the internet, I spoke with a few people, and they told me that internet activity is not restricted. However, access to the internet is somewhat difficult. You can go into an Internet caf� and log on to the Web, but this is expensive for most people. Others in universities and corporate positions may have ready access to the internet. However, all e-mail activity is monitored by the Chinese government. I was told that they did not think access to web sites was monitored merely because there are simply too many. As it stands, only a miniscule proportion of the Chinese people have easy access to the internet, and those who do feel somewhat restrained by governmental monitoring of e-mail. As access becomes more available, which may take a decade or more, there will be an extremely large internet market in China.

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Returning after being cut off from market news and internet access for two weeks, I find over 500 messages here at KP to catch up on, IFK's partial migration to Wizard's Call, TMF censors going hogwild, Linda fab BP rundown makes POD, and all that jazz. Lots going on in absentia, but it's good to be back. I've been sort of a non-contributor for over a month now given that I was preparing for the China trip and then actually in China. But I'll try to drop in a thought or two a little more often as things (hopefully) calm down for me over the summer.

As for the market itself, no big changes that I can detect. PFE continues to drift downward, creating more buying ops. I was trying to figure out why NITE had such a precipitous drop until I came across a mention of the split. And tech continues to bob and weave. Same as it ever was, time isn't holding us, time isn't after us (or is that the more cryptic "time is an asterix"?)...

-TH