Some updates on China

Over at Econlog, I have a post discussing China’s recent decision to beef up the enforcement of intellectual property rights.  Check it out.

In other news, China is about to roll out a major land reform:

“This is the first time I’ve owned an industrial property,” said Mr Shi, 48, who had rented in seven locations before settling down in Dongheng. “I don’t have to worry about getting kicked out by landlords any more.”

Mr Shi’s good fortune is the result of an experiment in land reform that has been rolled out in 33 counties across China. It allows semi-autonomous collectives to sell certain types of rural land to third parties and to keep the bulk of the proceeds.

The model, which will be extended to the rest of the country at the beginning of next year, has been lauded as a means of bringing prosperity to rural businesses and communities and stimulating China’s flagging economy.

The article also points to some downsides with the plan, and I don’t know enough to comment on the specifics.  In the past, however, real estate reform has been a big deal in China.  In the late 1970s, they began giving farmers more property rights, and a couple decades later they allowed urban residents to own their own home.  Both changes had a massive (positive) impact on the Chinese economy.

China is loosening rules on foreign investment:

BASF has broken ground on a $10bn petrochemical complex in southern China, becoming the latest foreign company to increase its presence in the country as Beijing gradually relaxes restrictions on overseas investment. . . .

Beijing loosened restrictions that excluded foreign companies from investing or taking ownership stakes in industrial and financial sectors after the pace of growth of foreign direct investment into China slowed to just 3 per cent last year. 

Foreign companies have long been excluded from several high-growth sectors or forced to form joint ventures with Chinese companies. US and European chambers of commerce have called on Beijing to accelerate access for foreign investment. 

The BASF facility, in the city of Zhanjiang, is the first of its kind in China that will be fully owned by the company after Beijing allowed full foreign ownership of chemical “cracking” facilities used to produce plastics. 

Global stocks are up today, partly due to expectations of a phase one trade deal with China.  Another factor was the Hong Kong elections:

The Stoxx Europe 600 Index advanced, with all 19 industry sectors in the green. Equities climbed across Asia, led by those in Hong Kong, where local elections brought a landslide victory to pro-democracy candidates. 

It seems like the markets hope that this leads to fewer protests:

A record turnout helped pro-democracy parties win a majority in 17 of 18 district councils. [Stock market] Bulls hope the poll result will inspire disaffected Hong Kongers to focus on conventional politics rather than street protests.

In my view, Hong Kongers would be wise to continue the street protests, but in a non-violent fashion. Unfortunately, the recent escalation of violence plays right into Beijing’s hands. The Chinese government would prefer not to intervene in Hong Kong, and strangely enough the violence might actual make them less likely to do so.

Some people predicted blood in the streets, similar to Tiananmen Square in 1989. That may still happen, but Beijing may also be content for there to be blood in the streets from clashes between protesters and police. Recall that China doesn’t want to give democratic rights to Hong Kong because they fear it would cause urban Chinese on the mainland to demand similar rights. As long as there is “blood in the streets”, then mainland Chinese will not be attracted to the Hong Kong model.

A better option would be to adopt a two track strategy. Continue the street protests and have their newly elected officials (who admittedly have little power) do as much as they can to improve the economic situation in Hong Kong, especially housing. That should be combined with non-violent street protests to keep the pressure on.

I strongly recommend this Bloomberg article, which points out that violent protests can lead to a counterproductive rise in nationalism:

I, for one, do not mind the fact that my hometown Shanghai has doubled in size, or that my local dialect is no longer the only one heard on the streets. In exchange, I’m exposed to more diverse cuisines when I visit and meet more interesting people. And thanks to the wonderful, hard-working “little brothers” — almost always migrants — I can get bubble tea delivered to my doorstep within half an hour. 

In that sense, the most cosmopolitan Chinese cities now resemble New York. It doesn’t matter where you’re from; as long as you live there, you can call yourself a New Yorker. Hong Kong, on the other hand, has grown bitterly divided into tribal camps — locals, expats, mainlanders and domestic helpers. . . .

If the central government had qualms about taking a hard line against the protesters before, it surely doesn’t now that they enjoy negligible support from mainland Chinese. An even simpler strategy would be to let Hong Kong decline slowly. Neighboring Shenzhen, home to local champions such as Huawei Technologies Co Ltd. and Tencent Holdings Ltd., is already keen to steal away high-tech firms. Corporate tax rates at the Qianhai free trade zone, for instance, are lower than Hong Kong’s.

And this is not just a question of money. I am not the only liberal mainlander living in Hong Kong. We naturally root for the city’s democratic advances. After all, why did we leave China in the first place? Why shouldn’t Hong Kong, one of the world’s wealthiest and most global metropolises, be governed by its people?

Yet, our support for the protests is rapidly dwindling because we suspect that the anger on the streets has less and less to do with the city’s political system, and more to do with a nativist dislike of mainlanders and immigrants — not unlike the anger driving populist protests in the U.S. and Europe.

Of course, mainland China is to blame for Hong Kong’s divisions, but nonetheless the local Hong Kongers should avoid playing into China’s hand. Beijing wants it to look like self government in Hong Kong has failed.

Actually, it’s never been tried.



20 Responses to “Some updates on China”

  1. Gravatar of Lorenzo from Oz Lorenzo from Oz
    25. November 2019 at 14:39

    Prolonged protests can have a radicalising momentum of their own, so maintaining the discipline to keep it non-violent can be hard. Especially when Beijing has an obvious incentive to infiltrate and encourage undermining behaviour.

    Xi clearly wants to have the world’s most powerful economy. Some tricky trade-offs involved, given that the object is to impose a Beijing-centred world order so as to protect the Beijing regime itself.

  2. Gravatar of Lorenzo from Oz Lorenzo from Oz
    25. November 2019 at 15:07

    My favourite blogger on China has a review in Foreign Policy of a very good book on Xi.

  3. Gravatar of ssumner ssumner
    25. November 2019 at 15:34

    Loeenzo, You said:

    “given that the object is to impose a Beijing-centred world order”

    I see no evidence for that. But then I’m not really sure what it means.

  4. Gravatar of Benjamin Cole Benjamin Cole
    25. November 2019 at 16:07

    Housing. Hong Kong has the most-expensive housing on the planet, relative to incomes. It is rather pompous pettifogging to suggest that Hong Kongers should embrace immigrants. Weee, bubble-tea delivered!

    When housing becomes expensive in Shenzhen, the Communist leaders develop housing programs in the millions of units— and they have in the past and will in the future, I suspect, execute on their plans.

    Hong Kong leaders think they have made a big step by proposing new housing in the few thousands of units.

    Western democracies, developed nations are failing to provide housing for their populations. The simple solution would be to eliminate property zoning and let market forces work. That solution is not the topic of polite conversation.

    There was an old joke that the best place to live is one where Northern Europeans are the administrators and Southern Europeans run the restaurants and entertainment venues.

    Going forward the best lot in life will be to live in a capitalist nation but where housing markets are controlled by communists.

  5. Gravatar of dtoh dtoh
    25. November 2019 at 17:20

    I think you are misreading the situation is HK.

    1. There is no option for non-violent protest. The HK government will not allow it. Watch detailed video of what’s happened in HK. Virtually all of the violence was initially instigated by the police against peaceful demonstrations. It is not in the nature of despotic regimes to allow dissent.

    2. Your let them eat cake (“do as much as they can to improve the economic situation in Hong Kong,”) will not work. The citizens of HK already have cake, now they want liberty.

    3. I don’t know how this ends. The CCP will never allow democracy in HK (it’s an existential threat to their power.) The protesters won’t give in unless violently suppressed. If HK police increase their use of violence, the protests will get much worse and beyond the ability of the police to suppress them. If the CCP intervenes, trade sanctions will crush the mainland economy.

  6. Gravatar of P Burgos P Burgos
    25. November 2019 at 23:10


    I would expect that the CCP looks at the HK protests as something like a siege, except what they want to do is starve the protestors of public support. So it may be a very long siege. However, I would think that time is on Beijing’s side, especially if the CCP is willing to shower HK with money in the form of new housing and related infrastructure. If those protestors have a career, a nice new home in the suburbs, a spouse and a kid, who will have time to protest? Moreover, if the protestors double the length of your commute, such that you have very little time to spend with your family and friends, who isn’t going to be angry at the protestors?

    So if Beijing can wait, and dramatically improve the economic (and matrimonial) prospects of young folks in HK, I think the protests will gradually die down, so long as Beijing doesn’t try to increase its control too overtly.

  7. Gravatar of dtoh dtoh
    26. November 2019 at 08:26

    P Burgos,

    I think the problem with your argument, is that.

    1) The “let them eat cake” approach doesn’t work, because the people want liberty not cake, and….

    2) The front-line protesters are not the home-owning parents, it’s the kids.

    I don’t have a crystal ball, and maybe the CCP can wait this out, but if anything the protests have been steadily intensifying, and the HK police continue to exacerbate the situation with their complete lack of discipline and professionalism. They should have been directing traffic and handing out bottled water instead of attacking the peaceful protesters with chemical weapons.

  8. Gravatar of ssumner ssumner
    26. November 2019 at 08:56

    Ben, You said:

    “When housing becomes expensive in Shenzhen”

    Is this a joke?

    dtoh, Of course peaceful protest is possible. And while police are the biggest problem, violence has been instigated by both sides. The protesters have burned down buildings. One man was killed for arguing with the protesters. Yes, the overwhelming majority of protesters are peaceful, but those who are violent end up hurting their cause.

    I agree that “liberty” is what they want and what they deserve. The question is how best to get there. Violence is not the answer. Throughout history, violent revolutions almost always fail and evolutionary change is what produces progress.

    Burgos, I worry that Beijing no longer wants HK to succeed, they want them to fail.

  9. Gravatar of dtoh dtoh
    26. November 2019 at 09:50

    Look at the raw video footage. Protesters have responded with violence, but in nearly all instances in has been in response to violence instigated by the police. Do you think you would have seen the landslide results in the recent elections if the protesters were responsible for the violence?

    If you don’t believe me, go look at the raw video footage.

  10. Gravatar of Lorenzo from Oz Lorenzo from Oz
    26. November 2019 at 14:47

    “I see no evidence for that. But then I’m not really sure what it means.”
    Take the current world order. Swap whatever role the US plays and then put China in that role. That would be a China-centred world order and it is clearly what the Beijing regime is aiming for. Read the review in Foreign Policy, read the book it is reviewing.

    China becomes the lead Power, people defer to its preferences, it can lean on states to block any attempt to encourage political change in China.

    Xi regards the US-led West as the exporter of revolution, which engaged in such successful subversion, it took down the Soviet Union. The aim is to ensure that cannot happen in China.

  11. Gravatar of Lorenzo from Oz Lorenzo from Oz
    26. November 2019 at 14:56

    Australia is having real problems with attempts of subversion from China, and the large population from China is part of the issue.

    One (ALP) Federal Senator has already had to resign. Now a (Coalition) MP is under doubt.

  12. Gravatar of Lorenzo from Oz Lorenzo from Oz
    26. November 2019 at 15:13

    And then, from the Philippines, this little chestnut:

  13. Gravatar of Benjamin Cole Benjamin Cole
    26. November 2019 at 21:21


    Shenzhen unveils drastic housing reform – EJ Insight › 20180615-shenzhen-unveils-drastic-housing-reform
    Jun 15, 2018 – Shenzhen has revealed plans to build 1.7 million housing units by 2035, with government housing accounting for up to 60 percent of the new …

    I do not understand your comment. The communists plan huge housing program for Shenzhen.

    A one-bedroom apartment in Shenzhen city center is about $722 a month, but less outside city center. Cheaper than Hong Kong or LA, but expensive by China standards.

    The commies are doing the right thing and putting up those housing towers. The US should put up about 4 million units in California, but they don’t have commies running housing. The commies are sometimes better at housing.

  14. Gravatar of Christian List Christian List
    27. November 2019 at 21:45

    How ridiculous it is to criticize the democracy movement in Hong Kong and give them advice on what to do and what not to do. People who risk their health and lives every day against one of the most powerful and repugnant regimes the world has ever seen. They are on the spot and know for themselves what is best, they do not need smart aleck advice from a guy who loves to spread CCP propaganda.

    Western countries should be sweeping their own doorsteps. They must stand up to the Chinese regime and adopt clear laws, automatisms and sanctions that will come into force as soon as the Chinese regime moves even a millimeter in the wrong direction.

    The democracy movement from Hong Kong has expressed very clear wishes and demands towards the Western countries, and in these weeks and months it is once again evident that the US remains the one and only country in the world that stands up for freedom and democracy in a serious way. Even with Trump in the lead. So sad but true.

  15. Gravatar of ssumner ssumner
    28. November 2019 at 08:51

    dtoh, Explain to me how burning down buildings constitutes a response to police violence.

    Lorenzo, You said:

    “China becomes the lead Power, people defer to its preferences, it can lean on states to block any attempt to encourage political change in China.”

    I agree that China will try to prevent outsiders from trying to cause political change in China. I thought you were claiming that China would try to force their system on other countries, as some claim the US does.

    Christian, You said:

    “once again evident that the US remains the one and only country in the world that stands up for freedom and democracy in a serious way.”

    Trump? Thanks for some comic relief.

    BTW, the US plans to respond to China cruel treatment of Hong Kong not by punishing China, but rather by punishing the victim—Hong Kong. Is there any government the world stupider than the US government?

    Everyone. People are responding as if they don’t think I support the protesters. Please read more carefully.

  16. Gravatar of ssumner ssumner
    28. November 2019 at 08:52

    Christian, BTW, when are you going to stop apologizing for evil governments like Saudi Arabia?

  17. Gravatar of dtoh dtoh
    29. November 2019 at 01:22


    You know of course that the shops that have not gotten torched were owned by mainland Chinese businesses and/or vocal supporters of the CCP/HK regime. Everything else was untouched.

    I would put it to you this way. If the police beat you up. Would you try and burn down the police station and get killed or would your burn down the house of the person who paid the police to beat you up. Or would you just go home and give up because you know the police will beat you up again if your try to engage in peaceful protest.

    Again, there was no violence from the protesters until the police started using chemical weapons and beating up peaceful protesters.

  18. Gravatar of Larry Larry
    1. December 2019 at 10:25

    My Hong Kong friends tell me that the protestors are all paid by the CIA(except for the one who is protesting.)

  19. Gravatar of Christian List Christian List
    3. December 2019 at 16:43


    your “point” about Saudi Arabia alone is so terrible.

    Even if Saudi Arabia was as powerful and important as China (which it isn’t by a long shot) and even if I would support it (which I don’t), it would still be really terrible red herring bullshit with no connection to the actual topic at all. A ten-year-old could do better.

    The fact that you take such desperate measures over and over again proves that you have no real arguments.

  20. Gravatar of Christian List Christian List
    3. December 2019 at 17:09

    rather by punishing the victim—Hong Kong.

    A well-known diversionary tactic of the CCP. Fake news.

    The measures were promoted and supported by the democracy movement of Hong Kong. Political decisions are never optimal, there is always theoretical room for improvement, but the most important thing right now is that we had this unanimous support in Congress in the first place. The other Western countries unfortunately do nothing at all. That is so much worse.

    You quoted me to talk about Trump, but you didn’t use my Trump quote, did you read and understood it at all?

    It is true that Trump is currently the weakest link regarding the proposed political measures. This seems obvious, and in part for similar reasons as yours:

    He’s got a very mechanical, unemotional mind. He overestimates the trade issue, which is above anything else for him.

    He doesn’t want to connect the trade issue and the other freedom issues, but that’s the only lever the Western world has. China has made itself dependent on exports, if the Western countries were to join forces, they could demand small political reforms in a step-by-step approach.

    Even the US alone can make a huge difference. There are good reasons why China is so afraid of losing all these export markets. It would be a nightmare for China.

    From the beginning it was a mistake (by Nixon, etc.) not to demand political reforms in addition to the economic opening. There are hardly any examples where economic freedoms could be enforced, but political freedoms were completely ignored. Now we have created a monster and no one knows how this story will end.

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