China’s oligarchy versus Liu Xiaobo

By Sushil Seth

Much has been written about the award of Nobel Peace Prize to Liu Xiaobo, who is serving an 11-year prison sentence for his advocacy of democratic rule in China. We know that he is China’s leading political dissident and has authored the alternative blueprint, Charter 08.

But the more we know about him the more you understand why China’s ruling oligarchy is so deadset against him.

First of all, the Charter succinctly exposes the contradictions of the existing political system—a cruel Orwellian joke on its people. It says, “…the political reality, which is plain for anyone to see, is that China has many laws but no rule of law; it has a constitution but no constitutional government…”

Not surprisingly: “The stultifying results are endemic official corruption…weak human rights, decay in public ethics, crony capitalism, growing inequality between the wealthy and the poor, pillage of the natural environment… and the exacerbation of a long list of social conflicts…”

Which would lead to the logical conclusion that, “The decline of the current system has reached the point where change is no longer optional.”

The Charter 08 then goes on to propose the enactment of a new constitution based on the democratic principles of separation of legislative, judicial and executive power as well enshrining guarantee of human rights, freedom of expression and a whole lot more.

Such a prescriptive Charter will be the death knell of the political monopoly of the Communist Party of China. No wonder, China’s rulers went ballistic against Norway and the committee that awarded the prize. And, at home, they rounded up some activists.

Beijing has stopped dialogue with Norway on furthering trade relations, and demanded an apology from the Nobel committee for awarding the Peace Prize to a “criminal”, thus showing disrespect for China’s legal system.

These days China is big on demanding apology. Japan too was asked to apologize over the detention of the captain of a Chinese fishing trawler that collided with a Japanese patrol boat in the East China Sea. But that is another story.

However, Professor Liu Xiaobo is one of those rare people who is not for turning when he believes in what is right. The Party would like to see the back of him if he were to leave China for comfortable pastures abroad, where he has had academic stints in prestigious universities in the United States and elsewhere.

But he keeps coming back to pursue his passion and commitment to change his homeland. Though his current 11-year stint in jail is the longest so far, he is not new to such persecution at the hands of his country’s communist oligarchs.

He was jailed for 20 months in 1989 when he went on hunger strike to support the democracy movement. He spent another three years at a re-education camp from 1996 for his criticism of the party’s monopoly on power.

After serving his current 11-year mandatory sentence at the sheer pleasure of his country’s communist cabal, he would have spent 16 years in jail.

Still, Liu remains unbowed with his indomitable will to pursue the cause of political reform for his country. If democracy has to succeed in China at some point, men like Liu are the ones who would keep the torch alive.

Speaking at his trial on December 23, 2009, he recalled, “…[after] I was imprisoned [in 1989] for ‘counter-revolutionary propaganda and incitement to crime’… I was never again allowed to publish or speak in public in China.”

He went on to say that, “ But I still want to tell the regime that deprives me of my freedom… I have no enemies and no hatred… For hatred is corrosive of a person’s wisdom and conscience…”

Speaking on a note of hope, he said, “I hope to be the last victim of China’s endless literary inquisition, and that after this no one else will be jailed for their speech.”

Because:” Freedom of expression is the basis of human rights, the source of humanity and the mother of truth…”

From a perusal of the text of his statement at the December 2009 trial, Liu comes out as a towering personality of immense courage and compassion.

It is hard to believe that he is regarded as a “criminal” in his own country for exercising his right to free speech and saying the things which some of China top leaders have also said at times.

For instance, President Hu Jintao reportedly said in 2003 that the Communist Party faced “inevitable extinction” if it did not increase press freedoms.

And more recently Premier Wen Jiabao told CNN that, “Freedom of speech is indispensable for any nation. China’s constitution endows the people with freedom of speech.”

He added, “The demands of the people for democracy cannot be resisted.”

If so, why is Liu Xiaobo in one of Premier Wen’s jails for exercising his right to free speech under the Chinese constitution? Or is it all a charade?

Liu’s Noble peace prize created a bit of excitement among some Chinese party elders and a group of scholars, making renewed calls for democratic reforms.

In an open letter, 100 Chinese scholars urged “China should join the mainstream of civilized humanity by embracing universal values.” Because: “Such is the only route to becoming a ‘great nation’ that is capable of playing a positive and responsible role on the world stage.”

All this activity urging political reforms was probably intended to influence the deliberations of the Communist Party plenum just held. But it was ignored, as has happened in the past.

The only passing reference to this in the communiqué read: “Great impetus should be given to reform of the economic system, while vigorous yet steady efforts should be made to promote reform of the political structure.”

Which is neither here nor there.

Some China-watchers were heartened by Premier Wen’s support for political reforms. But Wen’s background as an aide to Zhao Ziyang during the tumultuous days preceding Tiananmen massacre and his conversion thereafter, is a testimony not only to his great instinct for political survival but also coming out a winner.

Therefore, one shouldn’t read too much into his rebirth as a political reformer.

But Liu and his band of political dissidents could one day become the rallying point of a popular movement against the party’s corrupt and politically suffocating rule.

China’s Middle Kingdom syndrome

By S.P.SETH

China has been firing salvoes in all directions, asserting its sovereignty/power over South China Sea, East Asia Sea and Yellow Sea, and as far away as the Antarctica.

According to Wei Wenliang, who heads China’s Antarctic program: with China’s increased scientific and maritime capability, it is now equipped to “shoulder responsibility” to administer the region.

As in the regional seas where other countries have competing claims, China will have to contend with quite a few countries about their respective claims in the Antarctica.

But closer to the region, it is a much more serious matter. For instance, China-Japan scuffle over their disputed sovereignty in East China Sea, where a Chinese fishing trawler collided with a Japanese patrol boat and its captain detained, created quite a serious crisis in their bilateral relationship.

The subsequent release of the captain, followed by a meeting between premiers of the two countries on the sidelines of an international conference, has calmed things down a bit, but the potential for a flare up is always there.

Even though Japan’s wartime record generally weighs against it in the region, it would appear that this time China’s reaction appeared to be a bit over the top, threatening “consequences” and what not.

Kosuke Takahashi of the Jane’s Defense Weekly, who follows these matters closely, has said, “If you look at the editorials in Southeast Asia and the US in major newspapers, you can see China overreacted.”

Expanding on it, he added, “South Korea also has issues with China over the Socotra Rock. The Philippines and Vietnam have territorial issues with China. Those countries look at the Chinese reaction and they are worried.”

China has been virtually telling its regional neighbors that they have no option but to lump China’s claims of sovereignty. As Dr Malcolm Cook of the Lowy Institute, an Australian think tank, has said, “It’s certainly given an example of China’s actions that don’t fit a ‘peaceful rise’ narrative…”

This is creating a new nexus between the United States and Southeast Asian countries, worried about China’s assertive sovereignty claims, with no provision for peaceful resolution of disputed issues. This is particularly reflected in closer strategic relations between the US and Vietnam, and renewal of military ties with Indonesia.

At another level, China is facing intense pressure from the United States and Western Europe in trade matters, particularly its undervalued currency.

Even though there is a reluctance in official quarters to brand it as “manipulation of currency” to give China a trade advantage in flooding the world with its cheap goods and accumulating vast currency reserves from trade imbalances, there is no ambiguity in the message about the need for China to revalue its currency.

This is starkly reflected in the US House of Representatives’ recent legislation to enable the US to impose retaliatory counter measures against China. The US Congress has been exercised over this issue for a long time, and, finally, the House has acted on this. The Senate still has to take up the issue. It will do so after the mid-term elections in November.

And it is high time too, according to the New York columnist and Nobel laureate, Professor Paul Krugman. In his recent column, he writes: “Diplomacy on China’s currency has gone nowhere, and will continue going nowhere unless backed by the threat of retaliation.”

He adds, “The hype about trade war is unjustified—and, anyway, there are worse things than trade conflict. In a time of mass unemployment [in the US], made worse by China’s predatory currency policy, the possibility of a few new tariffs should be way down on the list of worries.”

China’s response is contradictory. At one level they say that their currency value has nothing to do with China’s trade surpluses.

At the same time, Premier Wen Jiabao has reportedly said, “We cannot imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs.” In other words, China’s undervalued currency is a hidden export subsidy for China’s exports.

At the official level, the US is trying to hose down the danger of a looming trade war, while keeping up the pressure on China for a significant appreciation of its currency.

According to Timothy Geithner, US Treasury Secretary, “We’re not going to have a trade war. We’re not going to have currency wars.”

(Geithner might not think so but even IMF is worried about it, with different countries seeking export advantage through a possible bout of competitive devaluation of their currencies.)

He believes, though, that it is in China’s “own interest to allow its currency to appreciate in response to market forces.”

Will China do it significantly? Doesn’t look like. In other words, political, strategic and economic factors are converging to make for uncomfortable times ahead.

Europe too is worried about China’s undervalued currency. Beijing, though, is working to wean away Europe from a united front with the United States. Both the US and Europe have trade deficits with China.

Premier Wen Jiabao was recently in Europe on a charm offensive. He maintained China’s position on its currency value; arguing that his country needed rapid growth to pull millions of its people out of poverty.

But he assured that China would help maintain euro’s value by buying European bonds to help them refinance their struggling economies.

Speaking in Greece, during a one-week tour of Europe, he said, “I have made it clear that China supports a stable euro.” He added, “We will not reduce our holdings of European bonds in our foreign exchange portfolio.”

The choice of Athens as the starting point of his recent European tour, and remarks about supporting euro, is significant as China recently entered into a wide-ranging set of agreements for economic cooperation between the two countries.

Like Greece, which is in considerable trouble because of its indebtedness, the message is also meant for other similarly placed European economies like Portugal, Spain and Ireland to create closer economic links with China.

As some of the weaker economies in euro zone are struggling to keep afloat, China’s assurance on buying euro bonds will be a welcome relief.

At the same time, it might distract them somewhat from the issue of China’s undervalued currency, where the US is much more concerned because of its huge recurring trade deficit with China. The seemingly united front between the United States and Europe might, therefore, be susceptible to Chinese machinations.

At the same time, China’s increased investments in European bonds will give it even greater leverage over Europe, as it becomes beholden to China’s extended credit line, and a web of new and expanded economic linkages.

Even Europe’s largest economy, Germany, is increasingly becoming dependent on China for its exports. Anthony Faiola recently reported in the Washington Post that, “China passed the US last year as the No I overseas market for big-ticket German machinery, with titans from Siemens to Volkswagen—which so far this year has sold 1.3m cars in China, five times as many as it has in the US…”

However, it is not smooth sailing for China. Its provocative assertion of regional dominance is worrying its neighbors. And its under-valued currency is creating global fear of currency wars.

China needs two things to solidify its great power status. First, it needs a decade or more to consolidate and strengthen its position. Its recent loud declarations to be the master of the Asia-Pacific region were premature.

The United States still remains the world’s strongest military power. And even with its myriad economic problems, it still is the world’s largest economy and China’s major export market.

Second, and more importantly: without corresponding political reforms with wider popular representation and accountability, China’s economic edifice is built on very weak foundations subject to social and political eruptions.

Witness, for instance, China’s hysterical reaction to the awarding of Noble Peace Prize to Liu Xiaobo, who is languishing in jail for his advocacy of human rights and democracy in China.

Will US hit back at China?

By S.P.SETH

Over the years China has learnt how to play hard and soft with the United States, depending on the situation. After hectoring and warning the United States recently about China’s territorial sovereignty over the South China Sea, and Yellow Sea (objecting to the joint US-South Korean military exercises), and generally making a claim for regional primacy, Beijing is reversing the gear slightly to calm Washington’s ruffled feathers.

This was apparent at the high level reception accorded early this month for Larry Summers, President Obama’s senior economic advisor and Thomas Donilon, deputy national security advisor. They were apparently there to discuss economic and security relations.

These two officials were received by President Hu Jintao, and a bevy of government and party heavy weights like Premier Wen Jiabao and others. While the content of their conversations with the Chinese leaders is not revealed, they are believed to have been “frank” and “productive”--- whatever that might mean.

Considering that the US-China bilateral relationship has been quite tense lately, it might be assumed that the US officials went there to do some straight talking, both on economic and security issues.

On the economy, the high value of Chinese currency is a major issue in the United States. And on the security front, China’s recent saber rattling must have figured prominently.

If the US officials did some tough talking, Beijing wasn’t showing its discomfiture. Indeed, some Chinese (non-official) sources reportedly sought to put the best spin on the visit: that it might lead to improved military ties, and that the recently upgraded ties with North Korea weren’t based on friendship but on realpolitik.

As Zhu Feng, a Chinese academic, reportedly said, “Kim Jong-il wants to be spoiled over a new cold war between China and the US. They think it’s a very big chance to earn big aid and support from China.”

He added that the US officials’ visit and their high level reception would, “…be a very big message to the Dear Leader that China and the US are staying on course and there will be no new cold war.”

What Beijing seems to be conveying, albeit through non-official sources, is that its upgraded ties with North Korea are only a tactical shift and might be reversed for a quid pro quo from the United States like, for example, the withdrawal of US support for Taiwan.

In other words, if the US were to recognize China’s regional primacy, Beijing would be more cooperative.

The point, though, is that in that case Beijing would have achieved almost all of its objectives in Asia-Pacific, with the US losing face and credibility in the region.

At this point of time, it doesn’t look like that the US would be prepared to pay such a high price for China’s friendship.

Even if China’s softer face with the visiting US officials is intended to reassure the United States on political and security issues, the undervalued yuan remains as intractable as ever.

There are moves in the U.S. Congress for legislating levies on Chinese exports into the United States because of the unfair advantage China has from its undervalued currency.

As Paul Krugman recently wrote in his New York Times column, “Right now, China is following a policy that is, in effect, one of imposing high tariffs and providing large export subsidies, because that’s what an undervalued currency does.”

Krugman argues that, “…what China is doing amounts to a seriously predatory trade policy, the kind of thing that is supposed to be prevented by the threat of sanctions.” And he is for going all the way to force the issue with China.

As he says in his column, “I say confront the issue head on and if it leads to trade conflict, bear in mind that in a depressed world economy, surplus countries [like China] have a lot to lose…while deficit countries may end up gaining.”

The US administration is under considerable pressure in the Congress on the question of China’s unfair trade advantage from an undervalued currency. To relieve that pressure it is simultaneously moving the World Trade Organization to look into China’s unfair trade practices like, for instance, blocking US steel exports into China.

According to Ron Kirk, US trade representative, “The duties imposed by China have raised the price of hundreds of millions of dollars’ worth of American steel headed into China, with the practical effect of reducing or blocking exports of our steel to that country.”

And he warned that, “This case makes clear that the United States will not permit China to threaten American steelworkers’ jobs by using anti-dumping and countervailing duty proceedings to harass US exports.”

It is quite clear that until and unless there is some resolution of China’s undervalued currency, and lifting of its measures to restrict and block US exports, US-China economic relationship might be headed toward a trade war. Certainly, the US’ yearly trade deficit with China of over $200 billion is unsustainable.

Many in the US Congress are highly agitated calling for countermeasures, like imposing high tariffs and other penalties on Chinese goods headed to the US.

According to Senator Charles Schumer, “China’s currency manipulation is like a boot on the throat of our recovery and this administration refuses to try to get China to remove that boot.”

The Obama administration is still reluctant to call China’s undervalued yuan as a case of currency manipulation; even though candidate Obama had no hesitation in using this terminology during his election campaign.

China is trying to lower the heat by allowing a small appreciation of its currency. But that wouldn’t solve the problem.

As Treasury Secretary, Timothy Geithner, told the Senate Banking Committee, “We’d like to see a sustained period of appreciation”, designed to largely erase the yuan’s undervaluation.

China’s response is, as it has always been, to show small gestures (like minor appreciation of yuan) to hopefully relieve internal pressures on the US administration. It is part of the pattern to soften the US while still holding on to a hard line position.

Will it work? China has certainly managed it well over the years, while it continues to build up its economic and political power.

The strategy seems to be that as China gets stronger, the US might not have much leverage to influence its policies from a weaker position.

On the other hand, China’s brinkmanship over a whole range of economic, political and security issues might push the US into a situation where it has no option but to hit back.

China is obviously taking a calculated risk, emboldened by the United States’ timid response so far for fear of escalating the developing crisis in US-China relations.