Lunar New Year Yum Cha: 2018 Leftovers for Australia

Lunar New Year installation in Sydney, NSW. Photo by G Neilson

As opposition leader in 1971, Gough Whitlam made a risky move to visit Peking (just a few days before Henry Kissinger), and once he subsequently became Prime Minister made Australia an early partner with China. In contrast, under the leadership of Prime Minister Robert Menzies, former External Affairs Minister Paul Hasluck used to repeat the prhase, “At the end of the road, there is always China,” to warn about the threat of Communism. The extensive cultural and political relationship that has developed continues to shape both the good and bad sides of domestic politics in Australia.

China’s decades-long rise across economic, political and strategic dimensions hit a turning point in 2018 in the Asia-Pacific. In 2017, Western political presence in and commitment to the Pacific began to pick up its pace in light of China’s perceived expanded presence. Over the course of my first full year living in Australia, this tension came to the forefront. Specifically, Australian leaders have tried to balance the drive for foreign investment and celebration of culture with avoiding overt political influence and over-reliance on a single trading partner.

With February 2019 marking the start of the Lunar New Year, in this post, I take a look back at several key 2018 events by the numbers that have dragged into 2019. The bite-sized dishes (like yum cha) are served up in categories of the environment, governance, international trade, economy, and security. Many (but not all) of these events were influenced by China.

ENVIRONMENT

1.3 million tonnes of waste materials no longer sent from Australia to China.

  • In late 2017, we heard about China’s “ban” on foreign waste that took full effect in early 2018, for 24 categories of solid waste that centred on recycling. In the short term, there was a crisis in local councils, increase in costs, and much of the waste may have gone to landfill; state governments still are not openly addressing the challenge of current recycling waste. Yet China’s “ban” presented an opportunity for Australians to thoughtfully consider their consumption habits and the amount of plastics they consume (such as bags, packaging or bottles), and for companies to employ new practices. The ABC ran a second season of its popular series War on Waste to challenge public and business perspectives, major retailers and states banned single-use plastic bags (with much media frenzy), and a movement to ban plastic straws picked up steam. This all led to development of the 2018 National Waste Policy which sets out to reduce Australians’ waste by 2030.  
  • While Australians have cut down on some plastic waste (see next point below), the need for a circular economy continues to go unanswered. States and territories have differing regulations but there are calls for unity as recycling domestically helps create more jobs than exporting the problem.

1.5 billion fewer plastic bags were consumed over 3 months in Australia thanks to a ban by major supermarket retailers Coles and Woolworths.

  • By charging 15 cents per bag instead of giving them away for free, Coles and Woolworths have experienced an 80 percent reduction in their usage. As of 1 July 2018, Queensland and Western Australia banned single-use, lightweight plastic bags from major retailers. All states and territories have now phased out the bags, except in the two largest states. Victoria has started a plan, while in New South Wales, they are still commonplace!
  • In 2019, Victoria’s phase-out of plastic bags will start. With an election in New South Wales, the issue may gain traction.

$444 million was granted to the Great Barrier Reef Foundation by the Turnbull Government.

  • While most everyone in Australia wants to protect the Great Barrier Reef, the grant, announced in April 2018, was controversial because it was not put through a competitive tender process per usual government practice, and at the time the Foundation had only six full-time staff. For a noncompetitive process, the auditor-general found that the grant’s objectives were to broad, such as “improved management of the Great Barrier Reef”, and disagreed with the department’s assessed value for money. The first project was awarded to the Australian Institute of Marine Science and started in January 2019.
  • Despite the controversies, to remain a viable tourist destination and thriving ecosystem, the Great Barrier Reef will benefit from additional scientific attention and funding. The area faces threats from climate change and an Adani Carmichael coal mine that still faces opposition. Overall in Queensland, 2018 was a booming year for Chinese investment and boosted state leaders’ hopes for tourism.

GOVERNANCE

$18,390,818 estimated total cost (provided by the ACT Commission) for 9 by-elections since the 2016 federal election.

  • There were 7 by-elections in 2018 for federal positions due to resignations, 8 countbacks, 1 vacancy filled by the Labor selection process; these were preceded by 2 by-elections in December 2017. Between 2016 and 2017, at least 9 Senators and 2 members of the House of Representatives resigned due to the “dual citizenship crisis” in Australia. Section 44(i) of the Constitution states that those who have conflicts of interest, or loyalties to other countries such as citizenship are ineligible for Parliament. This included, among others, Former Deputy Prime Minister Barnaby Joyce (who is now a backbencher due to his love affair scandal and not the citizenship crisis).
  • Across the country, by-elections were seen as a referendum on the Government. Former Prime Minister Malcolm Turnbull was the most high profile politician to resign, and his was the one seat to change parties (from Liberal to Independent). A national election is due by May 2019, and already we’ve seen a movement toward more independent candidates stepping forwarding and rejecting the major parties.

85% of Australians think most or all federal Members of Parliament are corrupt, andsupport creation of an anti-corruption body, according to a 2018 report by Transparency International and Griffith University.

  • It was quite a year for local and federal corruption and foreign influence. Labor Senator Sam Dastyari was pressured to resign after a scandal over a relationship with a Chinese donor. He allowed a company owned by a Chinese billionaire to pay a legal bill and made comments about the South China Sea that went against party policy. At the local level, Queensland was particularly rocked. In Ipswitch, the entire City Council was sacked in July 2018 after 15 people with links to the council faced at least 75 charges by the Crime and Corruption Commission, including two former mayors and chief executive officers. While Ipswitch former mayors were primarily facing charges for fraud, the Gold Coast mayor was at the centre of a corruption investigation over potentially influencing council decision-making while holding interests in Chinese-owned property developments. Also, Logan City Mayor Luke Smith was charged on allegations of corruption based on receiving a boat from a Chinese property developer who donated to his election campaign fund. In a message to China, the Australian Parliament passed legislation to limit foreign interference in politics. MPs and former ministers must publicly reveal any influence by foreign governments. Separately, in contrast to Australian politicians’ recent anti-Huawei sentiments (for example, the cable controversy), the Australian Strategic Policy Institute showed in 2018 that Huawei was the biggest corporate sponsor of international trips for Australian Members of Parliament (7 trips for Liberals and 5 for Labor).
  • States maintain anti-corruption commissions, but there is still no agreement about a national body. Meanwhile, a 2018 report showed that since 2012 Australia’s GDP has potentially been reduced by 4% due to corruption. Foreign interference, on the other hand, was agreed upon as a problem due to its national security implications. The 2019 Federal Election will have its first test with its new registration portal to show forms and sources of foreign influence in Australia’s political system.  

INTERNATIONAL TRADE

500,000 tonnes of grain and 575,000 live cattle could be exported to Indonesia under the Australia-Indonesia Comprehensive Economic Partnership that was supposed to be finalised in 2018.

  • Negotiations for the FTA began in 2012, and it was supposed to be a crowning achievement of the Turnbull Government. Prime Minister Scott Morrison has damaged the deal and delayed its signing – due to the fallout from his consideration of moving the Australian embassy in Israel late last year. Elections are also looming for both countries. The deal is highly sought after by agriculture and education groups, two of the most important sectors for Australia’s exports. Australian beef farmers have faced difficulties with a devalued rupiah and competition from Indian buffalo meat; fewer tariffs (and eventually zero tariffs) and raised caps for live exports were intended to lift business in the face of a drought. Despite the proximity, Indonesia is Australia’s 13th largest trading partner, and two-way trade was worth $16.4 billion in 2016-17.
  • Free trade agreements are non-partisan in Australia, so either Labor or the Coalition Government could take credit for a finalised deal with Indonesia.

187,547 Chinese international students were enrolled to study in Australia in 2017-18.

  • Education is Australia’s third largest export behind iron ore and coal, and students from China make up 30 percent of Australia’s international student population.Together, they brought in over $10 billion to the economy, almost a third of the total income of $32 billion. Chinese students are being called out by U.S. intelligence agencies among others for allegedly “spying” or thieving intellectual property (knowingly or unknowingly) on behalf of Beijing. Criticisms have also been laid on Confucius Institutes in Australia and abroad. Further, Australian universities continue to build relationships with Chinese companies, universities, and government departments like the UNSW China Centre and UNSW Torch Innovation District in order to boost rankings and research outputs, strengthen their base for international students, and commercialise research.
  • Under the Coalition Government, universities have been encouraged to seek external funding through partnerships overseas and with the private sector, with the most opportunity found in China (particularly for engineering, science, and business fields). Universities will likely continue to balance the need for funding and striving for academic freedom. 

ECONOMY

$1.8 billion committed by the Morrison Government to drought preparedness, emergency support, and low interest loans. States of NSW, Queensland, and Victoria committed an additional $1.684 billion.

  • In 2018, the drought particularly across NSW and Queensland, was called “the worst in living memory.” Rain levels in some parts of NSW were the driest on record, and the entire state was declared to be in drought. Former Prime Minister Malcolm Turnbull said in June while touring a drought-affected area: “I don’t know many people in rural New South Wales that I talk to that don’t think the climate is getting drier and rainfall is becoming more volatile.” In October, in one of his first actions as new Prime Minister, Scott Morrison held a National Drought Summit; notably one of the objectives to guide future Drought Reform: “farming businesses and farming communities prepare for, and adapt to, climate change and variability and their effects, including drought and high temperatures.” As of October 2018, 854 farm businesses were issued concessional loans worth $490 million.
  • Long-term action to combat climate change and cope with drought will be needed in order for farmers to succeed. Meanwhile, Australia remains committed to producing and exporting coal (its #2 export).

2.2 million temporary visa holders reside in Australia, including roughly 669,000 New Zealanders on 444 visas and 391,000 graduate students.

  • As the number of students increases, apparently over 200,000 students per year switch to other visas to continue staying in Australia. The increase in students in major cities of Melbourne and Sydney has partly contributed to a strain on transportation and other public resources (but is certainly not the only cause). Additionally there are 176,000 people on bridging visas due to the Government policy of “slowing immigration.” The number of people on bridging visas has grown by almost 40,000 in the past year.
  • Prime Minister Scott Morrison wants to cut permanent city migration; in a speech in November 2018 he said: “The roads are clogged, the buses and trains are full, the schools are taking no more enrolments.” Labor and the Coalition government and state leaders are entertaining ideas on how to cut immigration.

9.9 percent drop in house prices in 2018 in Sydney and 3.5 percent nationally.

  • According to a Domain report, house prices have fallen 11.4 percent since their peak in mid-2017, with the median price at $1,062,619. Demand fuelled by population growth outstripped supply leading to the previous years of double-digit growth. Chinese purchases of Australian real estate softened overall in 2018 due to capital controls introduced in 2017, additional taxes, and difficulty in getting financing for foreign buyers. Bank lending has also tightened due to investigations from the Royal Commission.
  • In 2019, house prices are predicted to continue to fall and may impact consumer sentiment. If Labor is able to end negative gearing, it will further support those wanting to purchase their first home.

SECURITY

>$100 million spent on Australian support for APEC hosted in Papua New Guinea.

  • Australia underwrote many costs of the 2018 APEC meeting, with a price tag of over $100 million; almost half of it supported the Australian Federal Police security commitment. According to the ABC, Australia deployed special forces soldiers and had Royal Australian Navy warships sitting off the coast to protect cruise liners that accommodated many APEC delegates. The final bill is not yet known. By comparison, China’s contributions included gifting a $35 million overhaul of the International Convention Centre and upgrading a major road with signs declaring “China Aid.”
  • Both Labor and the Coalition Government have announced plans to “step up” aid and security commitments to Pacific island neighbours to counter Chinese influence. In February, Foreign Minister Payne was the latest in a flurry of high profile Australian visitors to the region, traveling to the Solomon Islands, Vanuatu, and Tuvalu.  

$2 billion in concessional loan and grant schemes were allocated by the Morrison Government for infrastructure projects in the Pacific. Another $1 billion will be able in export financing.

  • In November, Australia’s announcement of an infrastructure bank, Australian Infrastructure Financing Facility, is in line with the U.S. announcement in July of USD$113 million in new infrastructure initiatives in the Indo-Pacific region. In July 2018, Australia, Japan, and the U.S. announced a trilateral partnership to “enhance peace and security in the Indo-Pacific” by mobilising investment in transportation, energy, tourism, and technology infrastructure. This pact seeks to combat China’s Belt and Road Initiative and the Asian Infrastructure Investment Bank (AIIB). Meanwhile, whether or not anyone believes it, Labor leader Bill Shorten said that his planned infrastructure spending increase in the Pacific is not about China. According to the Asian Development Bank, emerging economies in the region will require at least USD$26 trillion for infrastructure by the year 2030. This figure has been adjusted for climate change and is more than double their 2009 estimate.
  • Still, an increase in frequency and strength in natural disasters may worsen infrastructure prospects; leaders in Australia will be called upon to do more than throw money at projects that can be considered climate change adaptation.

1,587 U.S. Marines were stationed in Darwin.

  • A record number of U.S. Marines were in Darwin for six months in 2018 to train alongside the Australian Defence Force. Troops from Japan, Malaysia, the Philippines, Singapore,  France, and Thailand also were invited to take part in 15 training exercises in the area.
  • In the future, more U.S. troops may be in the area to support redevelopment of the PNG naval base at Manus Island. The AFR considers the PNG base a counter to “Beijing’s aspirations for military facilities of their own in PNG.”

Plastic Battle in the Pacific: Is it too late to win the bin war?

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There’s no time like the present to reduce consumption of plastics, and at minimum reuse and recycle. In the Pacific, we are facing questions on what to do with our own rubbish and imports that continue to float onto our shores. Recent reporting about the well-known “Great Pacific Garbage Patch” estimates that there are more than 78,000 tonnes of plastic in an area of about 1.6 square kilometers. The rubbish patch has grown substantially, helped by extreme events like the 2011 tsunami in Japan.

This year, for better or for worse, certain trends are creating a momentum of impact on the plastic landscape. At the national level, some governments are refusing to take notice. Leaving recycling up to the market and local level to regulate has meant inconsistencies in costs and infrastructure across districts and states and impeded an effective national movement in many countries.

In addition to what is floating in the ocean, plastic and other recycling is piling up on land in Australia, the United Kingdom, Samoa, the European Union, and elsewhere as China’s restriction on imports of waste takes effect. According to the ABC, the ban will impact about 619,000 tonnes of materials worth $523 million in Australia alone.

But, when one recycling bin closes, sometimes, another one opens. This presents an opportunity to transform the industry and societal behaviours, take leadership, and call out harmful practices.

We’ve heard positive news from industry recently, who noticed rubbish piling up in the Pacific. Rather than leaving the Pacific islands with empty shipping containers after unloading exports, China Navigation wants to pick up rubbish and recyclable materials for free. It is still figuring out where and how to process the recyclables. Pacific Recycles in Samoa is the only major recycling operation in the Pacific islands, and is aiming to improve quality of materials so that New Zealand or other countries will accept the rubbish.

Unsurprisingly, Pacific island leaders are acting. Governments of Vanuatu, Palau, Marshall Islands, and American Samoa have signed on to banning single-use plastic bags. Some have also adopted levies on bags or bottles. In New Zealand, a petition to ban plastic bags was accepted at Parliament in February.

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In Australia, waste industry and environmental advocates are calling on the government to take action on regulations to encourage a circular economy or ensure purchasing of recycled products in government procurement. The federal government has signaled it is an issue for state and local governments; so for now at the lowest levels, local governments like the Hornsby Shire Council in the Sydney suburbs have it on their agenda to find new solutions for recycling and to consume less plastics.

While China has framed the ban on imports of recycling as a way to improve its environment, it could lead to an increase in new production of the same plastics. China’s demand for some plastics, particularly polyethylene, are forecast to rise to make up for the loss of recycled plastic.  Producers, then, should take more responsibility for managing the environmental impact of the full lifecycle of their products. Consumers can also refuse to create demand for certain plastics, recycle, and utilise the local resources available to understand lifestyle habits.

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Clean beaches don’t necessarily mean a clean ocean. Manly Beach, Australia.

It seems no beach or stream is free from pollution, but there are plenty of groups and individuals working to fix that. For example, the organisation Clean Up Australia has more than 7,000 registered clean up sites, empowering local communities with tools, networking, and knowledge. We know that commercial fishing gear make up a significant portion of ocean rubbish and have their own harmful impact on wildlife; recycling nets and other gear has turned into an effective business for more more than a few startups, converting them into carpets and other consumer products.  Bringing government, industry, and community groups together is essential to not only creating projects like those funded by the Australian Packaging Covenant but also to understanding global needs and expanding possibilities.

Negotiating Dominance: China in the 21st Century

Will China Dominate the 21st Century? By Jonathan Fenby.

Polity Press, 2014, 139 pp.

In Will China Dominate the 21st Century? author Jonathan Fenby seeks to dispel myths about China’s economic and strategic rise as it relates to the United States and the international order. He does not understate the significance of the rise of China, but rather calls it the “most important event since the end of the Cold War” (5). He attempts to renegotiate the reader’s understanding of China’s history and its foreign policy ambitions. While Fenby provides examples to support claims about China’s foreign policy direction, his evidence is selective and promotes an inflexible view of China. Fenby determines that, while China has and will continue to become a formidable state with economic and strategic potential, its lack of soft power compared to the United States will have negative implications for alliance-building and its relationship with international institutions. Fenby frames the discussion by explicating the political, economic and social constraints that will hamper China’s ability to “dominate” the 21st century. Importantly, the factors which helped China to rise – primarily the centralized nature of governance – will now stand in the way of its progress and speed, and will inevitably lead China to focus on internal structural issues.

In the opening pages, Fenby sets out to debunk myths that he sees as central to the international community’s understanding of the foreign policy. First, Beijing perpetuates the ideas of Chinese unity and continuous Han rule. Fenby disputes these myths by pointing to periods of division in Chinese history and the rule of non-Han including the Manchus and Mongols. Second, Fenby confronts the myth that Confucianism is China’s guiding ideology. This perception of China downplays the “doctrine of legalism, which uses the law to cow citizens into submission” (4). Fenby’s biggest quarrel concerns the myth that China is re-emerging as a global power. He argues that Imperial China “did not play a global role in the way of European empires” (4). However, his approach to contemporary China conflates re-emergence with soft power, or “global influence,” while downplaying the relation to China’s economic clout. Fenby has two reasons to attempt to debunk these myths. First, he seeks to discredit the myths that “China breeds” in order to delegitimize the ideology of the Chinese Communist Party (CCP) and its authority. From the outset, he instills a perception of Beijing and the CCP as deceptive and manipulative and suggests that the leadership’s ultimate goal is to secure their position. Second, the book is a sharp response to those, primarily Western, authors who promote the concept of Chinese dominance.

Domestic Impediments: Political, Economic and Social Factors

For Fenby, domestic politics are the main reason why China will not dominate international affairs. Foremost in the political sphere, domestic structural factors prevent China’s political machine from evolving into a state capable of matching its economic progress. The CCP is central to all official affairs including business and infrastructure and both local leaders and leaders in Beijing bring their personal interests, historical inheritance related to Party membership and biases to decision making. Further, the centrality of state enterprises means that political and business leaders have an interest in maintaining the status quo. Membership in the CCP presents itself as integral to financial success, and the Party maintains a tight and embedded control with propaganda campaigns warning against foreign influence and flaunting the CCP as the single and ultimate choice for rule. Reforms are always planned in such a way that they maintain one-party rule.

Fenby claims that a central aim of Chinese leadership is to maintain power. He illustrates his claim that maintaining power is “more important than the necessary maturing of the nation,” for the CCP leadership through a comparison between Bo Xilai and Xi Jinping (52). Bo used populist policies in an attempt to create his own power center free of constraints and to pressure Beijing’s new leadership. Becoming a “crowd-pleaser” in his local role in Chongqing, Bo challenged the standard way of managing affairs in Beijing; for this he was removed and “brought down as the result of a murky affair” (39). On one hand, this example shows that the model of embedded control has become more difficult to maintain in an evolving society that includes more vocal interests and divergent stakeholders (51). On the other, Beijing’s purge of Bo and others that are not faithful to its patron-client system confirms Fenby’s argument that leaders seek tightly managed governance and are threatened by challenges to their authority.

In contrast to Bo, Xi Jinping insists on the maintenance of CCP’s hold on power. A recurring question given the economic progress of China has been “why should China change?” According to Fenby, this reluctance to change will constrain China’s ability to succeed on the international stage. However, changing public expectations about what the government should provide raise questions about the longevity of China’s single-party rule. Fenby presents a paradox whereby individuals support the regime and its benevolent rulers, but lack faith in the system. He contends that “it is the bureaucrats with whom people come into contact in their everyday lives who are seen as the villains” (48). However, Fenby’s emphasis on wholesale change to a Western style democracy is implausible and no analyst should expect such change to occur overnight. Further, he does not consider the gradual and grassroots-level transitions which include the increasing authority given to local governments and localized democracy. His focus on the top-down approach for change is consonant with his emphasis on the power of Beijing, but neglects other realities.

Not only do potential reforms face political obduracy, but they will lead to subsequent problems. Despite its unprecedented growth over the past decade, China faces many economic challenges. Fenby uses Wen Jiabao’s “four uns” to argue that Beijing leaders understand the troubled state of its economy and potential harm that sustaining the status quo could instill: unsustainable, uncoordinated, unbalanced and unstable. First, China’s economy is unsustainable because of its heavy reliance on imported raw materials, and could become reliant upon food imports if faced with droughts or other environmental disasters. Second, China has a heavy reliance on exports and construction projects for growth; export profits proceed to the central government, often leaving fewer funds available for local authorities, leading the economy to be uncoordinated. Third, the economy is unbalanced because it focuses on special economic zones, coastal and eastern areas. Fourth, social unrest due to income inequality causes the economy to be unstable. As head of the government for a decade and promoter of China’s economic policy Wen Jiabao proves to be on the right side of Fenby’s arguments; he grasps the difficulties ahead for Beijing and contradictions of the status quo.

Fenby belabors the point that inefficient state-owned enterprises, like Party officials, have been cushioned for too long; reform then is a double-edged sword for China’s economy and state institutions. For example improving benefits for migrant workers in the face of the hukou system would improve workers’ bargaining power, which would spell trouble for factories and hence conflict with market principles. Internationally, China’s model as the world’s factory is being challenged; other countries including developed states increasingly compete with China’s labor force as the country attempts to move up the value chain.  Ultimately, Fenby states that China’s economic problems are normal for a state its size and at its development stage. He purports that China’s economic challenges necessitate a “degree of realism” concerning its “prospects for dominating the globe given the systemic risks” (76). Nevertheless, China’s economy has continued to grow in the face of the global downturn, without the market reforms insisted on by Western commentators like Fenby.

Fenby recounts anecdotes of attempts at market-oriented reforms by Wen Jiabao and Li Keqiang in the face of Party opposition. Wen and Li put forth the goals of market reform but inevitably those enlisted to pursue reforms hesitated to pursue policy which would weaken the regime (63). Fenby, like many China skeptics, advises Beijing to release its tight grip on the Chinese economy, from agricultural land policy to currency and capital accounts. He supports a preconceived notion of how China should implement market reforms. However, Western market reforms run counter to CCP ideology of state control which means that top-down proposals come up against political and systemic forces seeking to maintain the status quo.

In the chapter “Behind the Dream,” Fenby details how an increasingly transaction-based economy has infused a capitalist mentality into society and perpetuated corruption and mistrust of officials, creating a conflict with state ideology; greed and individualism are concepts which the CCP set out to remove from society. While some commentators claim that Confucian principles helped to thrust China into global dominance, Fenby argues that Confucianism’s disdain for money-making runs counter to Beijing’s focus on economic growth. In Chinese politics, career potential is tied to delivering economic growth. In some instances this breeds corruption; for example, officials have turned a blind eye to factories that pollute as long as GDP figures improve. For the public, an emphasis on material prosperity results in criticism of the wealth gap and the loss of moral standards among public officials. This conflict identified by Fenby is important in the public and private spheres in China and contributes to debates about China’s foreign policy motivations.

Beijing remains aware of popular sentiment through frequent public opinion surveys; however, Fenby reiterates that there is a separation between the Party and citizens due to the grandiose nature of the PRC combined “with the omnipotent claims of its ruling apparatus and lack of space for adaptation of the basic structure” (99-100). To demonstrate his claim that there is a popular disapproval of officials, Fenby mentions several times in the book that annually there are between 150,000 and 180,000 protests in China. In light of protests, the government budget for internal security continues to increase while, to keep the peace, it cancels controversial construction projects that may be unsettling or harmful for communities. Alongside this, Fenby justifiably raises the issue of “where politics stops in China” (99). Consultation with the public does not occur effectively, because meetings with protestors occur after the Party decides to begin a project.

According to Fenby, the public’s discontent with Beijing poses a threat to the CCP’s rule and raises a number of questions. He asks, “Why has the priority been so overwhelmingly on building hardware rather than improving the quality of life?” (52) Why can the state not provide basic necessities to everyone and why are corners cut? Fenby remarks that traditionally Chinese popular reverence for the state “is based on the bargain that the state will act as a protector, and the PRC has not been doing a great job in this respect” (79). Whereas previously people relied on an “iron rice bowl” to provide a minimum level of comfort, now they find support outside of the Party system, in religions and belief systems such as Christianity, Daoism, Buddhism and even feng shui and Falun Gong. China’s social problems have a distinct impact on foreign policy and its national priorities. With each food scandal, corruption case, pollution incident and other events that garner negative publicity in the global media, respect for CCP leadership wanes (99-100). Fenby argues that Beijing’s ability to control internal social dynamics impact its ability to manage its image both domestically and internationally and may even impede its capacity to act in the international arena.

Pressures in International Relations

On several fronts, Fenby offers hope for those fearful of China’s rise and a counterweight for American declinists. Foremost, Fenby suggests that China’s rise must “be kept in perspective” (102). By comparing factors of China’s domestic and international situation with that of the United States, Fenby frames the debate in terms of competition. China still has a long way to go before it will catch up to the United States in economic, strategic and international political realms. The author reiterates China’s problems with corruption, safety standards, pollution, and “a weak record in innovation” (104). Meanwhile, in part due to its legal system and economic policies, the US remains top destination for FDI. Fenby contrasts the hard power of the U.S. with China, pointing out that the U.S. maintains 39% of global military spending. With China’s military spending still only one quarter of U.S. spending, any comparison of military power is overwhelmingly skewed toward U.S. dominance. The US also maintains an unparalleled global cultural appeal. For instance, compared to U.S. companies, Chinese companies do not have the same brand recognition or global reach, which Fenby deems important for dominance. All of these factors are mobilized by Fenby to dispel myths that China is at the doorstep of the U.S. However, by keeping China clearly in the rearview mirror of the U.S., Fenby acknowledges some degree of competition. He briefly mentions that the world is not dominated by a single power, while simultaneously asserting factors contributing to U.S. dominance and minimizing multilateral institutions.

China lacks several factors required to be a global power. Notably for Fenby, the Beijing Consensus is not replicable, and there are scant states that seek to model themselves after it. In part this is due to China’s perceived avoidance of major conflicts and dispute resolution and influence of its Sino-centric history. He disapproves China’s deference to state sovereignty as a guiding principle. Further, China’s close political and strategic relationship is with North Korea, an autarkic state and volatile state, is viewed with suspicion and disdain by the international community. China does not maintain alliances which Fenby believes are important for global dominance. He contrasts U.S. alliance networks, for example Japan and NATO countries, with China’s fluid international relations. In examining soft power, Fenby goes so far as to state that “There is scant evidence for the thesis that the world will become more Chinese” (114). English remains the dominant language globally and the West has a dominant influence on global culture. Chinese people continue to move or travel abroad and bring back international influences. Furthermore, in international public opinion polls “warmth for China seems to be somewhat on the wane” (115-116). Despite its economic clout and membership status in institutions such as the UN Security Council, Fenby believes that China has yet to become a geo-political stakeholder, least of all a responsible one (105).

Fenby argues that China should have no interest in disrupting the status quo because it is a dependent power. The international order facilitates China’s rise and provides advantages for its ability to “trade and to exclude external influences” (106). China’s neighbors meanwhile rely on the U.S for security and continue to elude falling under China’s protection. China’s economy relies on foreign investment and imported energy and technology. Further, compared to the US, China has a more limited cultural influence. With international affairs as with international business, the global trust deficit continues outside of China’s small sphere of influence because of its history of corruption, food scandals and low environmental standards.

Fenby waits until late in the book to address the global ‘rules of the game,’ that have been set by the West and any challenge to these rules that China may pose. China’s strategic influence has remained reasonably localized. For instance, it has exacerbated tensions with neighbors Vietnam and Japan through territorial disputes, while simultaneously holding “back from assuming a global role,” (124). Fenby contends that China resents not being able to reframe set the rules that Western powers have established for the global system and that it is short-sighted to believe that China will quietly adhere to these rules. He claims that China risks placing itself as an outsider to “a world system it has joined and needs” but where it has not fully engaged (125). But, it is naïve for Fenby to preclude changes in the rules given shifts in economic power toward the global South. Further, the author denies the potential of a cooperative, ‘G-2’ model between the United States and China; he views events such as the U.S. pivot to the Pacific and Trans-Pacific Partnership Agreement which currently excludes China as features of containment. Fenby’s skepticism about China-U.S. relations and China’s role in international institutions doesn’t account for the CCP’s concept of a “peaceful rise” and U.S. public diplomacy efforts of welcoming China into the international sphere.

Conclusion

Throughout the book Fenby paints a picture of a troubled China, struggling to cope with domestic challenges. He cautions the reader “against being swept away by Sinomania based on a combination of ancient civilizational claims and crude GDP numbers” (102). For Fenby, China is a revisionist power, but domestic political, economic and social constraints will hamper any capacity for China to threaten U.S. hegemony. Fenby encourages Beijing to implement political and economic reforms as a way to “rule more effectively,” but he is aware that his proposed market reforms are not in the short term interests of Party officials (121).

While Fenby provides a concise contribution to debates surrounding the rise of China, his approach is framed by a limited definition of “domination” that predetermines his answer to the question “will China dominate the 21st century.” Fenby’s implicit definition of domination, as an active role in multinational institutions and influence in shaping the rules of the system differs considerably from the goals of the CCP and tends to downplay China’s impressive economic growth. In fact, the concept of dominance may be losing its descriptive power in the current state of international relations. At the end of the text in “Further Reading” Fenby engages with others in the debate on China’s rise and presents his account as an argument against those who believe an ameliorative change will arise from China’s domestic development and increasing participation in multinational institutions. Fenby advises that “The scale and momentum of the mainland’s growth should not blind us to the strengths of the rest of the world” (113). However, Fenby’s critiques of China should not blind us to a potential reorganization of international affairs in light of a more capable and influential China and global South.

Political Risk Analysis of the 2008 Sanlu Melamine Scandal and 2013 Fonterra Botulism Scandal

This post is part of a longer research paper.  It was adapted for the Australia and New Zealand Studies Association Conference at the University of Texas in Austin on February 8, 2014.

New Zealand’s agricultural sector not only makes up the majority of its exports but also constitutes an important part of the country’s cultural identity. Risk events related to Fonterra can have significant impacts and spillover effects as the world’s largest dairy exporter. An initially localized quality problem can lead to the perception of risk on a global scale. Fonterra’s experience with two major health risk events exemplifies the imperative of risk communication and management strategies for businesses and governments to cope with risk and show accountability to stakeholders.[1] Tools of political risk analysis can help organizations to evaluate multi-layered risk situations, create risk communication strategies and mitigate spillover effects caused by social amplification. This essay compares the 2008 Sanlu melamine scandal and 2013 Fonterra botulism scandal through a risk analysis approach from the behavioral sciences. The latter provides political risk analysts a valuable tool to understand how society responds to new and unfamiliar technologies and risks, and how to manage them. In 2008, Sanlu’s information vacuum led to health problems and widespread social reactions, damaging firms and individuals. In 2013, early risk communication benefited public health but was detrimental to reputations of Fonterra and the New Zealand dairy industry; long-term effects of Fonterra’s risk communication are still unknown but are likely to be positive, displaying a desire for transparency and risk avoidance.

Risk Terms

The field lacks a unified definition of political risk, but the term implies a change in circumstances, usually a loss, for a defined actor or set of actors. Charlotte Brink’s definition of political risk analysis is aimed toward foreign investors, encompassing

the probability that factors caused or influenced by the (in)action or reactions of stakeholders within a political system to events outside or within a country, will affect investment and business climates in such a way that investors will lose money or not make as much money as they expected. [2]

Importantly, Brink shows that risks can be caused by lack of action, such as withholding information.

For public and experts, risk perceptions are built primarily using three factors: 1) degree to which the risk is understood; 2) level of dread; 3) number of people exposed.[3] People use ‘affect heuristics,’ or mental shortcuts, to process judgments about the “positive or negative quality of a stimulus.”[4] The affect heuristic is important in changing perceptions of a hazard, as access to more information can sway perception.[5] Whether risk communication seeks to inform or advocate, it is important to inform early, regularly and with accurate information to gain maintain trust, and encourage desired behaviors from the target audience.[6] The social amplification of risk framework exemplifies how risk events interact with various psychological and cultural factors in ways that affect public perceptions of risk; the portrayal of an event through different channels including, for example, media, and corporate and government releases can lead to ripple effects which can be more damaging to firms and individuals than the original impact.

Adapted from Kasperson & Kasperson (1996).
Adapted from Kasperson & Kasperson (1996).

Background on Sanlu and Fonterra

In 2008 and 2013, public health risk events rocked two of the world’s largest dairy companies. Fonterra is the world’s largest dairy exporter, a multinational cooperative owned by more than 10,000 farmers. To expand its networks in China, in 2005 Fonterra signed a joint venture with Sanlu, acquiring a 43% stake.[7] As a state-owned entity with close ties to government officials and China’s former largest seller of milk powder, Sanlu was expected to self-regulate quality control and was not subject to the same regulations as other firms. Moreover, Sanlu was critical to the economy of Hebei Province, employing 10,000 workers. As two of the world’s largest dairy producers combined forces, the reputations of their brands became intertwined while they retained separate operations.

2008 Sanlu Melamine Scandal

The 2008 Sanlu melamine scandal was China’s worst food contamination disaster; until the central government intervened, risk communication efforts were non-existent. The company, which had built up its reputation over five decades, became bankrupt as a result of the scandal. At least 6 infants were killed and 300,000 developed kidney stones due to melamine contamination of infant milk powder. As early as March 2008, Sanlu and the media received complaints about ill children, suspected contamination and performed its own testing. The media was unable to warn the public or probe complaints by parents due to government restrictions on reporting before and during the Olympics. Fonterra was not informed of the contamination by its local partner until a board meeting in August. Shortly thereafter, Fonterra notified local authorities in Shijiazhuang, Hebei Province about suspected contamination but were constrained by other Sanlu board members. When Sanlu refused to recall the products or inform the public, Fonterra contacted the New Zealand government on September 5 to pressure Beijing which then recalled all Sanlu milk powder and embarked on a campaign. [8] The scandal impacted the entire dairy industry, hundreds of thousands of individuals and two national governments.[9] Earlier risk communication efforts and a product recall by the Chinese government and dairy industry actors may have lessened the damage caused by contamination.

Risk Perception: Threat to Children Breeds Panic?

In both cases, characteristics of the hazard combined with the public’s heuristic thinking, leading to social amplification. In the Sanlu scandal, risk perception factors of understanding, level of dread and number of people affected contributed to a high public perception of risk. The Chinese public was familiar with melamine; in 2007 there was a similar contamination scandal in the pet food sector and in children’s toys.[10] Specifically, the risk to children, close proximity and that it was man-made were important dread factors.

Risk Communication and Amplification: Multiple Interests Impair Efforts

Sanlu withheld communication and responsibility as long as possible and influenced media outlets to conceal the risk. In return for suppressing negative publicity, Sanlu purchased NZ$640,000 of advertising on Chinese search website Baidu. Additionally, Sanlu used a public relations executive to act as a reporter; using propaganda techniques, they promoted positive stories of Sanlu.[11]

The increasingly decentralized political system in China and Sanlu’s unwillingness to inform the public contributed to poor risk communication. Local officials hid the problem and lacked proper standards and supervision to regulate the industry; officials were informed on August 2 but took no action until September. Beijing announced the contamination after the Olympics ended by apologizing, ensuring communication was transparent, clear and individuals were held accountable.

Beijing’s response was to “curb the risks, punish the perpetrators and help victims.”[12] Government agencies enacted a full product recall and punished many of those responsible. But, scores of children were already affected. After the government issued a warning on September 15, and Premier Wen Jiabo embarked on a media campaign in late September visiting sick infants in hospitals, journalists felt safe reporting about the scandal.[13]

Impacts and Ripple Effects of Social Amplification

Impacts of the Sanlu melamine scandal were widespread. Due to compensation claims, Sanlu went bankrupt only a few months later in December 2008; a previously little-known company unconnected to the scandal, Sanyuan, eventually purchased Sanlu. Overall, Fonterra lost NZ$139 million. More than 22 companies were implicated in the melamine scandal, which included other dairy products and eggs. Among other arrests and firings, high-profile punishments included life imprisonment for Sanlu chairman Tian Wenhua and death sentences for three men.[14]

In addition to the immediate impacts, consumers lost confidence in the domestic dairy industry, requiring government action. Consumers took weekend trips to Hong Kong to purchase large quantities of infant formula, believing it was safer than those on the mainland.[15] Beijing enacted emergency subsidies to combat further bankruptcies. To repair the industry’s damaged reputation, “local authorities were urged to reinforce technical guidelines on cow feeding and epidemic control.”[16] China’s relatively managed economy with strong state-owned enterprises enabled Beijing to exert influence and rescue smaller dairy farmers. The government also rescued a failed risk communication effort and saved its reputation by prosecuting individuals, being clear about the risk and helping victims.

Impacts of the scandal were less immediate and acute for Fonterra because the contamination did not originate from Fonterra’s farms in NZ and the company held a minority stake in Sanlu. Yet spillover effects continue to emerge. NZ Prime Minister Helen Clark publicly criticized Fonterra for mishandling the crisis. Fonterra followed a protocol which put the responsibility on their partners. Delayed notification, number of people affected and desire to expand profits in Asia led to a corporate social responsibility effort. To combat brand damage, the company donated NZ$8.4 million to a Chinese charity establishing rural clinics for mothers and infants.[17] Association with the 2008 scandal has become part of Fonterra’s record, impacting public perception and framing of the 2013 botulism scandal.

2013 Fonterra Botulism Scandal

As early as March and confirmed late July 2013, thirty-eight tons of whey protein were thought to be contaminated with clostridium botulinum, bacteria that can lead to botulism. On August 3, 2013, Fonterra issued a precautionary recall, and countries including China subsequently banned the sale of a range of Fonterra’s products; by the end of August secondary tests showed that the products contained no clostridium botulinum, but instead had clostridium sporogenes from a dirty pipe, which presents no food risk. Fonterra “blamed systematic glitches and the use of non-standard equipment for the botulism contamination scare.”[18] The immediately affected product was an ingredient sold to third parties rather than a finished product, impacting big-name infant formula and beverage. While Fonterra’s August 2013 botulism scandal turned out to be a false alarm, the risk event significantly impacted its international image as well as that of NZ dairy products, leading to a decline in sales and legal suits from customers.

Risk Perception: Affect Justifies Product Bans

The affective association of Fonterra products with harm was readily available in memories due to Fonterra’s connection with the 2008 Sanlu scandal. Botulism was a less familiar hazard for consumers than melamine but because it was new and had the potential to impact infants and children, the risk was perceived as high. Decisions to ban imports of Fonterra products added to the proximity of the risk. The comprehensiveness of Fonterra’s risk communication efforts contributed to conflicting public perceptions of its products.

Risk Communication and Amplification: Early Efforts to Prevent Worse Fallout

Fonterra amplified the risk by alerting consumers to a problem which did not exist, and the company’s early, forward efforts had mixed reviews. The public felt they were receiving incomplete information from an unorganized source, using inaccessible language; moreover, Fonterra did not apologize until days later. It was unclear how much of the public knew the event was a false alarm. A survey quoted one respondent “That this happened at all was unbelievable. Everyone was taken by surprise and they couldn’t reassure consumers.”[19] Farmers, shareholders and market analysts meanwhile were comforted by Fonterra’s communication efforts and agreed: “They did the right thing going public and the media whipped it into a frenzy.”[20] Overall, stakeholders agreed that communications improved after the first 72 hours of the recall.

Despite the launch of four independent inquiries into the botulism scare, public perception of Fonterra products has been altered. The media in both NZ and China maintained significant coverage of the product recall and announcements of potential contamination; however, after the risk was found to be a false alarm, the story only received minor coverage. In China in particular, an unknown portion of the public may still believe the products were contaminated due to lack of closure.[21]  However, there is a segment of microbloggers in China that maintain confidence in NZ products and are cynical about their own national media.

Impacts and Ripple Effects of Social Amplification

Because no consumers became ill or died of botulism, the event’s impacts centered on financial and reputational losses for Fonterra and its partners: the NZ dollar declined, the head of Fonterra’s New Zealand milk products business, Gary Romano, resigned,[22] and total damages in the case are still to be determined. In September 2013, NZ exporters claimed they were losing up to NZ$2 million in Chinese sales per week.[23] As a result of the precautionary recall, Fonterra’s supplier Danone, the world’s largest yogurt manufacturer, is suing Fonterra “after an estimated loss of 300 million euros (NZ$407 million) of free cashflow.”[24] Before the Danone suit, Fonterra estimated a loss of NZ$14 million from the event and claimed its legal liability to Danone was minimal.[25] Additionally, Fonterra reduced payouts to shareholders by about 20 NZ cents per share. Widespread publicity of the recall and import bans across Asia due to social amplification impacted companies further along the supply chain and cast doubt on standards in NZ’s largely self-regulatory dairy industry. Among other ideas, Fonterra’s review recommends strengthening crisis communications as well as processes, culture, and governance.

Concern for falling Asian consumer confidence in the New Zealand dairy industry led to government action. Unlike the Sanlu case, the NZ government did not have to step in to ensure a recall, but officials were called upon to save Fonterra and NZ’s face due to its premature communication. The initial government report claims the risk event was not due to a failure in the regulatory system but rather a failure in managing the situation. Yet a key recommendation is “establishing a food safety and assurance advisory council to provide high-level independent advice and risk analysis.”[26] Despite currently acceptable standards, the NZ government allocated $NZ8 to 12 million per annum to follow the report’s recommendations to tighten food safety and improve standards and regulations.[27]

Conclusion

Decision makers in private and public sectors employ multi-disciplinary political risk analysis to understand probabilities of losses or gains in specific scenarios. Increasingly analysts use the tools within political risk analysis that include risk perception, risk communication and social amplification of risk to build risk mitigation and communication strategies to a more advanced and connected audience. The 2008 Sanlu melamine scandal and 2013 Fonterra botulism scandal exemplify how different organizations approach a risk event, who they identify as their stakeholders and what they consider as responsibilities. A more thorough analysis of this case may examine additional factors including cultural and organizational dynamics.

In both cases, perceived risks were amplified by manufacturers and media. In 2008, amplification occurred out of the initial information vacuum created by local officials and Sanlu, a domestic history of melamine poisoning and because children were the primary targets. For Sanlu, risk communication should have occurred at the time of known contamination or confirmed cases; pressure from Beijing, producers and local government meant the public was uninformed. In 2013, Fonterra’s risk communication efforts were early, with multilevel communications reaching shareholders, customers and governments. After the fact, Fonterra sought to understand customers’ risk perception and opinion of communication efforts. The importance of Fonterra to the NZ economy meant the government was interested in a swift, transparent reaction. Undoubtedly Fonterra did not want a repeat of 2008. Fonterra in the short term must deal with economic losses and potential brand damage; however the global recall and communication efforts may be perceived as beneficial for public health concerns especially when compared to Sanlu’s experiences.


[1] Ragnar Lofstedt and Asa Boholm, “The Study of Risk in the 21st Century,” in The Earthscan Reader on Risk, ed. Rangar Lofstedt and Asa Boholm (London: Earthscan, 2009), 11.

[2] Charlotte Brink, Measuring Political Risk: Risks to Foreign Investment (UK: Ashgate Publishing, 2004), 1.

[3] Paul Slovic, “Perceptions of Risk,” in The Perception of Risk, ed.  Paul Slovic (London: Earthscan, 2000).

[4] Slovic, Paul, Melissa L. Finucane, Ellen Peters and Donald G. MacGregor. “Risk as Analysis and Risk as Feelings: Some Thoughts about Affect, Reason, Risk, and Rationality.” Risk Analysis, Vol. 24, 2 (2004). 312.

[5] Slovic, “Perceptions of Risk,” 222.

[6] Regina Lundgren and Andrea McMakin, Risk Communication: A Handbook for Communicating Environmental, Safety, and Health Risks (New Jersey: John Wiley & Sons, Inc., 2009).

[7] Duoqi Xu, “Tax Planning and Tax Policy in China: Case Study of the Tainted Milk Scandal.” Frontiers of Law in China. June, Vol. 6, 2 (2011): 192-218.

[8] Castellino and Green, “Media freedom in China.”

[9] Danielle Castellino and Lelia Green, “Media freedom in China as reflected in the development of the Sanlu milk scandal, 2008,” Australian Journal of Communication, Vol. 37, 3 (2010): 88-102.

[10] Castellino and Green, “Media freedom in China.”

[11] Castellino and Green, “Media freedom in China,” 96.

[12] E.Y.Y. Chan, S.M. Griffiths and C.W. Chan, “Public-health risks of melamine in milk products.” The Lancet; October 25, 372 (2008): 1444.

[13] Castellino and Green, “Media freedom in China,” 92.

[14] Ibid.

[15] Xu, “Tax Planning and Tax Policy in China,” 194.

[16] Xu,“Tax Planning and Tax Policy in China,” 194.

[17] Elizabeth Wishnick, “Of Milk and Spacemen: The Paradox of Chinese Power in an Era of Risk.” The Brown Journal of World Affairs, Spring, 15, 2 (2009): 213-214.

[18] Maggie Zhang, “New Zealand Minister to Rebuild Trust in Kiwi Quality.” Shanghai Daily. (11/12/13)

[19] “Report of WPC80 Independent Inquiry for Fonterra Board.” (10/23/13), 147-149.

[20] “Report of WPC80 Independent Inquiry,” 147.

[21] Christopher Marquis, “China State Broadcaster’s Attack on Foreign Brands Fuels Citizens’ Skepticism of Government.” Forbes. (12/17/13) [http://www.forbes.com/sites/christophermarquis/2013/12/17/how-much-do-the-chinese-people-believe-their-government/]

[22]  Reuters. “Fonterra’s milk products chief resigns after botulism scare.” (8/14/13)[http://www.reuters.com/article/2013/08/14/ us-fonterra-romano-idUSBRE97D04C20130814?feedType=RSS&feedName=topNews&dlvrit=992637]

[23] Christopher Adams. “China milk scare ‘needs – big PR drive’” (9/23/13) New Zealand Herald. [http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11128539]

[24]Adam Brockett and Lapeyre, Morgane. “Danone Seeks Compensation from Fonterra Over Botulism.” (1/9/14) Bloomberg News. [http://www.bloomberg.com/news/2014-01-09/danone-seeks-compensation-from-fonterra-over-recall.html]

[25] Ibid.

[26] Adam Bennett. “Botulism scare report calls for better tracking of products.” (12/12/2013) New Zealand Herald.  [http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11171048]

[27] Xinhua News Agency Economic News. “Interview: Minister assures Chinese consumers of New Zealand food safety.” (12/11/2013) Xinhua Economic News.

Labor Activism and Democracy in China

Han Dongfeng: collective bargaining a “Win-win-win solution”

Worker in a factory outside of Guangzhou, China. Photo Credit: Genevieve Neilson
Worker in a factory outside of Guangzhou, China. Photo credit: Genevieve Neilson

Factory-level collective bargaining can serve as a pathway toward democracy in China, according to prominent Chinese labor rights activist Han Dongfeng. On Monday April 1, George Mason University hosted Mr. Han Dongfeng for a discussion about labor movements starting from the Tiananmen Square protests in 1989 to the contemporary situation in China. Since economic reforms by Deng Xiaoping in the 1980s liberalized trade and focused on obtaining foreign investment, workers have increasingly relied on industrial action to advocate for higher pay and better working conditions, disrupting production. Because strike organizers have generally been imprisoned or blacklisted and the labor system lacks organization due to a government monopoly on unions, workers have hesitated to take what Han calls “personal responsibility” to lead movements locally or regionally. In free market capitalism as well as China’s state capitalism, the relationship between workers, employers and the state has much room for improvement; instituting widespread collective bargaining is a “win-win-win” solution for China according to Han. The process of democracy has begun in China, and the labor movement provides a model lesson for how democracy can be institutionalized in workers’ lives.

Worker identity as essential to collective action

A leader of industrial labor movements, Han spoke with emotion and conviction about historical and current labor tensions and the slow progress toward democracy in China. As a railway worker, Han founded the Beijing Autonomous Workers’ Federation (China’s first independent, non-state trade union) during the Tiananmen Square protests of 1989. Because of his role in the protests, Han was arrested and held for nearly two years without trial. In 1993 after leaving China for medical attention, he was not allowed to return. Han moved to Hong Kong, and in 1994 founded the China Labor Bulletin, a nongovernmental organization that protects and promotes the rights of workers in China.

Chinese workers are proud to keep their identity as working class. Their ability to successfully act collectively, however, has been hampered by the stripping of protective measures in the 1980s and strong state control over economic and political spheres. The removal of protections has led to a chaotic system of sporadic industrial action. Workers in China do not legally have the right to strike – that right was removed from the Constitution in 1982. What Han calls “wild cat” strikes continue to occur when workers demand higher wages or better working conditions from their employers, but have no option other than stopping work.

Workers in a factory outside of Guangzhou. Photo Credit: Genevieve Neilson
Workers in a factory outside of Guangzhou, China.  Photo Credit: Genevieve Neilson

 While workers become more willing to strike as a group, they still often lack representation through independent unions. Workers’ right to collective bargaining should be legislated to enable unions to adequately represent workers in negotiations with employers. According to the International Labour Organization, “Collective bargaining allows both sides to negotiate a fair employment relationship and prevents costly labour disputes…Countries with highly coordinated collective bargaining tend to have less inequality in wages, lower and less persistent unemployment, and fewer and shorter strikes than countries where collective bargaining is less established.” Organizations such as the China Labour Bulletin and nonprofit organizations take up cases and help improve conditions and individual factories, but competition for workers in central versus coastal areas (city versus rural), improved work-life balance and consistent and rising wages could benefit from adequate public policy measures by the central government. To effect change, workers must continue their fight to force the CPC to make these reforms.

Furthermore, workers can still face retaliation from their employers if they participate in or discuss strikes in the media. The China Labour Bulletin provides an example: “five workers who had taken part in a strike at Guangdong International Paper on 19 February said they were fired simply because they had given interviews to the media. They were neither the organizers of the strike nor even active participants in it.” It is then up to the workers to keep their elected representatives accountable. Earlier this year workers at the Ohms Electronics factory in Shenzhen petitioned for a recall and reelection of their union chairman after he failed to protect their interests with management in two disputes over contracts. As workers and representatives gain more confidence in negotiations with employers they continue to face difficulties that require legislative protections.

Finding a path forward for reforms

Compared to 5 or 6 years ago, the government leadership in China has moved in a new direction regarding labor activism. Protestors and strike organizers now rarely go to prison for industrial action. According to Han, labor is one of the “least sensitive issues” for the Communist Party of China, even less so than environmental issues; by backing away from restrictions on labor rights and media freedoms, the CPC is strengthening civil society and allowing for more voices to be heard. These developments are encouraging for improved labor rights and standards.

In contrast to Han, the new generation of workers does not remember the events of Tiananmen Square in 1989 and so are living without fear, particularly without the “fear of government.” Instead of fighting for freedom of assembly and political rights of the previous generation, new workers – who some say “lost their spirit” – seek improved economic status and the ability to purchase the goods that they produce.

Han says with collective bargaining, he “can see some light at the end of the tunnel.” In Guangdong province, which includes major manufacturing and exporting cities Shenzhen and Guangzhou, the local government is starting to support collective bargaining initiatives. Official unions in China are another form of control, so enabling independent unions and programs to flourish in Guangdong will, Han believes, make the case for widespread collective bargaining within the next 2 to 3 years.

Democracy as a process

As the market economy develops in China, workers will continue to demand more economic, political and social opportunities. Han believes that there should be more emphasis on labor rights at the start of democratic movements. By enabling workers to elect their own union representatives to negotiate on their behalf, they will be given a taste of the election process, creating a positive political habit.

Others, in contrast, believe that organized workers will be the biggest force against the market economy by demanding more economic protections; but China can follow its own democratic path without instituting a classical market economy that mirrors the US. Local politics in China remains a product of local representatives’ personal interests; therefore workers must pursue their own interests to gain progress.

When people ask Han “when will China be a democracy?” He answers, “What is the reference for a democracy?” In the United States and Europe, democracy is “still processing” as states battle with election fraud and strained political rights. China is at the early stages of developing a democracy; rather than answer the question of when China will reach democracy, Han prefers to answer when China will begin the democratic process, which he believes is starting now. “We cannot afford to advance our dream in one step. It is a long process and may not be achieved to the level that we want in our lifetime.” In comparison the Tiananmen Square protests and other large movements in other countries, the labor movement requires grassroots efforts that obtain small victories to build momentum. Historically these individual efforts have had more success and are proving more effective than a fast-sweeping movement.

International implications of Chinese labor movement

In their efforts, the China Labor Bulletin focuses primarily on internationally-owned factories to help create a model for future reforms. Some internationally-owned factories may already have higher standards than Chinese-owned factories, but they are also more profitable and garner more media coverage; the increasing media spotlight on particular factories such as Foxconn that serve international companies, combined with support for industrial action can help to improve domestic standards for working conditions.  

Worker in a factory outside of Guangzhou, China. Photo Credit: Genevieve Neilson
Worker in a factory outside of Guangzhou, China. Photo Credit: Genevieve Neilson

While labor movements in the United States and Europe are on the decline thanks to government reforms with pressure from business, the labor movement in China is on the rise and has significant international implications. As the world’s factory, “China made the race to the bottom possible,” but “that chain is about to break” according to Han. When asked about the future prospects for labor movements in the United States given right-to-work laws, Han agreed that workers in the US and Europe were in trouble. However, Han displayed optimism that the US will have a chance to restore its domestic production process; once an ever-increasing number of China’s 500 million workers raise their own working conditions and pay through labor activism, the price of goods will rise and, internationally, production will become more competitive. Chinese consumers will be hungry for American-produced goods and a more equal balance will be restored. Financial analysts agree that this “tipping point” will bring jobs back to American shores or other destinations closer to consumers.

 “Everything is ready”

In the clash between workers, employers and the economy, Han believes that “everything is ready.” The current economic and political system cannot sustain itself; as international consumer demand has dropped, China needs internal growth from wider working and middle classes to boost consumer spending. Han is positive about the prospects for economic and political reform in China, seeing the new party leadership as “sincere in dealing with these issues.” Han and China Labor Bulletin are placed to help collective bargaining turn many of the 500 million Chinese working class producers into consumers. By continuing to highlight workers rights in China through high profile cases using international companies (like recent engagements with Wal-Mart and Apple) improved working conditions and pay increases can be fought for with collective bargaining and perhaps in the future freedom of association and other democratic practices.

Collective bargaining is the sharp edge in a push toward increasing democratic practices in China. If Chinese labor activists can stake out a legal space for collective bargaining then this will establish democratic practices in Chinese workplaces and provide a safe space for workers to assert their allegiances and interests. Further, workers, employers and the Chinese government stand to gain from the stability that comes from having satisfied workers who have reasonable means for negotiations. The pursuit of improved material conditions for laborers and their families is a necessary motivation toward democracy. Employers will benefit from more stable labor relations, and “Economically [collective bargaining] is the gold mine for the government;” higher wages and benefits come from employers, but the government will get the credit for improving labor standards. While increased labor costs will likely raise the price of goods in the West, the global community and workers around the world could benefit from a more democratic and egalitarian China.

Can Wind Energy Clear the Air in China?

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Xioa Yan Kou Farm, China. Photo: Danish Wind Industry Association

Beijing’s record-breaking air pollution is making global headlines, and the hazardous air quality is “putting a lot of pressure on the government to protect the environment.” China already invests more in renewable energy – wind, solar, and hydro power – than any other state, and part of Beijing’s plan to cut national carbon dioxide emissions by 45 percent before 2020 relies on wind energy.  But how did the local wind power industry develop and what are the future constraints? On January 16 I attended Georgetown University’s book launch for Dr. Joanna Lewis’ work Green Innovation in China: China’s Wind Power Industry and the Global Transition to a Low Carbon Economy.  Lewis presented her empirical study of the growth of the wind energy industry in China by focusing on methods of international technology transfer, international cooperation and domestic government policies.

Lewis examined China as a way of understanding the global wind energy industry and the political economy of the clean energy sector. China is the largest emitter of CO2, with more than a quarter of global emissions due in part to the country’s heavy reliance on coal, and will continue to produce a greater share of global CO2 emissions despite its large scale forays into the clean energy sector. Along with new hydropower plants and wind farms, China continues to build coal plants; two-thirds of China’s current energy consumption utilizes coal. Wind is only 2% of energy generated in China but still ranked third among sources.

The wind power industry in China transformed over the past ten years in line with China’s development as foreign firms saw an opportunity for a new market. Lewis looked back to 1993, when there were few foreign firms and even fewer Chinese firms with domestic market share. Foreign firms such as Vestas and Nordex imported their European-produced wind turbines into China. Over time, foreign firms and domestic policy had a marked effect on the ability of Chinese firms to gain domestic market share. In 2003 Vestas merged with NEG Micon to become the largest wind manufacturer in the world; however many of the workers laid off due to the merger were hired by Chinese manufacturers, helping them to gain skilled workers formerly trained in the best factories in Europe.

Additionally, Chinese government policies and laws such as the Power Concession Program (2003), Requirements of Local Content (2005) and Renewable Energy Law (2005) enabled local factories and encouraged the development of new wind farms. In 2005, the government mandated that 70 percent of turbine parts (for eligibility in the wind concession program) be locally sourced. With much pressure from the US, in 2009 China dropped its heavy local sourcing requirements for the wind energy sector, but the law had already served its purpose – it had a significantly positive impact on three domestic producers in particular, who are now among the world’s top 10 wind turbine producers.

While top wind energy industry producers have since built factories in China for the Chinese market, not all have transferred technology to share innovation. From the start, American giant General Electric utilized its large Chinese manufacturing supply chain rather than importing wind turbines from the US. There are now more than 80 Chinese firms in the wind energy sector focused on local consumption. They benefit from licensing agreements, mergers and acquisitions and joint development as means of technology transfer. Chinese firm Goldwind is an example of a local star in the Chinese market that follows what Lewis saw as a pattern of developing country firms: begin with licensing agreements, then move on to joint development; and to gain maximum market share, act with mergers and acquisitions. In 2010 Goldwind maintained 90% of domestic market share.

China was the largest investor in clean energy in 2010 and 2012, with wind industry investments outranking others. Wind energy is no longer on the fringe of research and development funding in the renewable energy sector and China has embraced the technology as a way to curb emissions, drive innovation and contribute to its economy. China is far ahead in deploying wind capacity; there are now many active firms in the Chinese market, and China is within the top 5 countries securing patents for clean energy. Whereas solar power manufacturing is targeted for export, the wind power industry is intended for domestic consumption because the Chinese market is so large that there is sufficient demand.

As countries develop, advancement in the clean energy industry is possible in a relatively short amount of time (India and Korea provide additional examples as demonstrated by Lewis). Technology transfer is a positive way to spur innovation and bridge knowledge gaps. Licensing can be inexpensive, but the structure and information is limited with market restrictions. There is still an important role for government to encourage technology transfer, particularly where there have been problems with operations and maintenance of wind turbines in China. After all, the story of the wind energy industry still goes on after the equipment is built; machines need to be used and maintained effectively to enable power production with lower carbon emissions. Northern China and specifically Inner Mongolia has been the primary area of success for wind farm activity and growth; however, connectivity and curtailment issues remain.

The US and China should try to balance policies that foster innovation while enabling sharing of technology that is critical for reducing carbon emissions, protecting the environment and improving livelihoods. China began as a ‘late’ producer in the wind energy industry but through government policies, strong domestic demand and international collaboration has secured many achievements. However coal still dominates the energy sector in China and there is still much room for international collaboration. There are many US-China bilateral operations, with the US-China Clean Energy Resource Center (founded in 2009) providing a path for genuine technology collaboration. Some policies conflict with international trade law (see Canada, as an example for local content) affecting bilateral cooperation. This problem could, according to Lewis, “blow up if not addressed by governments”. Much larger barriers exist for next generation disruptive technologies such as carbon capture and potential solutions such as carbon trading. One hopes that we will not have to wait for the fabled emergence of ‘clean coal’ technology for governments to have policies that adequately balance innovation and cooperation to share in the benefits of clean, renewable energy.

Comparing the Economic, Political and Strategic Rise of China and India

As modern states, China and India should not be examined in isolation, but rather placed within the context of an international system dominated by unequal and competing states.  The rise of two developing nations – which together comprise one-third of the global population – in economic, political and strategic realms of international relations provides ample content for scholars and strategists.  Factors enabling and perpetuating the rise of China and India are dissimilar; the differences in the two states’ strengths and weaknesses emphasize the power disparity between them.  First, China has a larger economy and is experiencing faster economic growth than India; this economic prowess, when combine with China’s status as a major power within the United Nations and other international institutions enables Beijing to minimize India’s international political capabilities despite its period of ‘shining’.  Finally, Beijing’s comprehensive grand strategy and increasing military planning and spending compared to India’s muddled strategy and slower spending have given China a strategic advantage.

The end of the twentieth century was tumultuous for China and India.  Since economic reforms in 1978 and 1991, respectively, China and India focused on state-building to perpetuate regime legitimacy.  The arrival of the United States as the global hegemon at the end of the Cold War caught the attention of both China and India; India aspired to limit its vulnerabilities by improving relations with the United States while encouraging the construction of a multipolar order, and finding its own place in the international system.  Asia was transitioning to a regionally unipolar order, however, dominated by China. (Mohan, 2007)  This essay examines the economic, political and strategic differences between the rise of China and the rise of India. 

The contrasting economic growth models of both China and India underlie their emergence as rising powers.  Whereas China achieved growth through blue-collar, manufacturing-driven growth, India’s development has included white-collar, service labor. Interestingly, Brahma Chellaney notes, “in India the private sector continues to fuel economic growth while China’s economic growth is largely state-driven.  India performs poorly wherever the state is involved, while the strength of the Chinese state as the primary catalyst of accumulating power carries significant strategic ramifications.” (Chellaney, 2008, p. 34) 

Since the leadership of Deng Xiaoping, China’s ultimate national goal has been to create a ‘relatively well off society’. (Lieberthal, 2007, p. 31)  Over the past three decades, China has established average real growth in excess of 9% annually, and in peak years had growth rates around 13% and 14%.  China now has the world’s second largest economy, and is projected to overtake the United States in size of GDP during the first half of this century. (Tellis, 2011, p. 3) China’s economy relies largely on foreign investment and export markets; because of the global recession, China has relied increasingly on the domestic market. Rapid growth must continue to avoid massive domestic instability. The “leadership’s mentality, Beijing’s resulting grand strategy and the actual spillover effects of the dynamics of China’s domestic system…are shaping the international consequences of China’s rise.” (Lieberthal, 2007)

India meanwhile grew its economy on the back of internal sources, leading to a potentially more stable level of trade. (Lieberthal, 2007, p. 4)  India’s economic rise has coupled with its security interests in its relations with the United States and how others think of the state.  The Indian economy has grown at a rate of about 7.5% over the past decade; however economic reforms to continue this growth have been hampered by political contestation over reforms and lack of domestic political consensus.  (Tellis, 2011, p. 4)  By being inward-oriented India’s economy has weathered the global financial crisis, and enabled it to work on creating an international agenda.  However, when viewed in the bilateral context, India “is not a rising power in material terms compared to China.”  In 2010, China’s GDP ($5.88 trillion) was more than three times as large as India’s ($1.73 trillion). (Fravel, 2011, p. 78)  The economic gap between China and India continues to widen, causing China to see India as a non-competitor in this realm.

In the contemporary political sphere, China and India face competing priorities within their region and internationally.  Because of China’s ability and desire to enter new markets in search of energy security, trade relations and strategic partnerships, China’s rise poses a potential threat to the stability of India, whereas India’s rise has left Beijing relatively unaffected.  In fact, China’s major power status has helped it to minimize the role and capabilities of India.  Chinese leaders believe it is in the national interest to become a major power, and that China should be treated as such when participating in international institutions. Although for China being a major power does not undermine its status as a developing nation when it comes to shrinking its carbon footprint.  China’s status as a permanent member of the United Nations Security Council is a clear advantage over India; not only can Beijing impede efforts by India to gain a permanent seat, but it can offer political protection to rogue regimes such as Iran and now historically Myanmar through its veto power.  Thus China’s rising political clout has enabled it to hold India back within the United Nations while also getting an advantage in gaining energy resources: “Beijing’s ability to provide political cover is a fundamental element of China’s thriving commercial ties with a host of problem states.” (Chellaney, 2008, p. 26) Diplomatically, China has closer relations with its East Asian neighbors than India has with its South Asian neighbors.  In border disputes and relations with Pakistan, China also has the upper hand.  Moreover, China has been constructing trade and transportation links with India’s neighbors in order to benefit China’s greater interests, bringing India under strategic pressure.

In part because India is a democracy and has a history of nonalignment, contemporary United States foreign policy is more trusting of India than of China; “that China remains governed by an authoritarian regime, has a long history of subordination in East Asia, and nurtures a troublesome streak of nationalism domestically only accentuates” American anxieties about “what China’s rise implies for regional security.” (Tellis, 2011, p. 16, 32)  Therefore the potential for a significant India-United States partnership has increased with the rise of China.  The George W. Bush Administration’s decision in 2005 to sign a major atomic energy pact with India underscores the importance that Washington attaches to the partnership in countering China’s influence in the region. (Er and Wei, 2009, p. 2)  Increasingly US-China and India-China relations are plagued by mistrust.  It is India’s ‘culture of strategic restraint’ and democratic values that perpetuate the United States-India partnership. (Sinha and Dorschner, 2010)

In terms of strategic capabilities, planning and military spending, China yet again has a profound advantage over India.  While both the rise of China and India led to goals for military modernization, the difference in scale and type of funding has been notable.  In April 2012, India launched its first inter-continental ballistic missile (ICBM), joining an elite group of states; China, meanwhile, developed its first ICBM in the 1970s.  Washington was notably silent when India launched the ICBM, whereas Beijing reacted with caution. (Times of India, 2012)   Based on percentage of GDP, military spending in China has risen the fastest in the world: for two continuous decades, Beijing had persistent double-digit increases in military spending.  During the same period, defense spending in India declined as a percentage of the country’s GDP.  In addition to the scale disparity between the two states, “China apportions 28% of the country’s military budget for defense-related research and development, India apportions just 6% for research and development.” (Chellaney, 2008, p. 35)  During its rise, China has become one of the largest arms exporters globally, while India relies on arms imports for primary defense needs.  China’s top arms clients (Pakistan, Burma and Bangladesh) neighbor India and have been a cause of concern for New Delhi. (Chellaney, 2008, p. 35)

Pursuing an “omnidirectional diplomacy combined with military modernization,” China and India have in different ways come to terms with the implications of their rising power for their national and international interests.  (Fravel, 2011, p. 70) To the dismay of scholars and strategists, India has not proclaimed a consistent strategic vision of its goals within the international arena.  Aseema Sinha and Jon P. Dorschner (2010, p. 77) argue that “India’s strategic vision and behavior at the international level are marked both by change and remarkable continuity.”  In contrast, China seeks “a peaceful and stable external environment,” “peaceful development,” and “aims to maximize its autonomy in the international system to limit the constraints of unipolarity.” (Fravel, 2011, p. 69)  The difference in preparedness between China and India is evident in their plans for naval power projection in the Indo-Pacific region.

In the economic, political and strategic realms of international relations, China has been the more aggressive and dominant player during its rise when compared to India.  (Chellaney, 2008, p. 31)  Although the rise of China and India are often mentioned together, there are substantial differences between them.  India, overall, presents a potential force, “while China is active in the here and now.” (Sinha and Dorschner, 2010, p. 77) China’s rapid pace of perpetual development has placed it well ahead of India in terms of domestic infrastructure and development, military and economic strength, and hence political clout.  Each of the numerous factors and implications surrounding the rise of China and India are significant topics of discussion in their own right. 

Works Cited

“Agni-V launch: India demonstrates ICBM capability; China reacts cautiously, says India not rival.” (4/19/2012)  [http://articles.timesofindia.indiatimes.com/2012-04-19/india/31367133_1_agni-v-k-saraswat-wheeler-island] (6/24/2012)

Er, L.P. and Wei, L.T. (2009) The Rise of China and India: A New Asian Drama. Singapore: World Scientific Press.

 Fravel, M.T. (2011) “China Views India’s Rise: Deepening Cooperation, Managing Differences,” in Ashley J. Tellis, Travis Tanner, and Jessica Keough, eds., Strategic Asia 2011-12: Asia Responds to Its Rising Powers, China and India. Seattle: The National Bureau of Asian Research.

 Lieberthal, K. (2007) “How Domestic Forces Shape the PRC’s Grand Strategy & International Impact,” in Ashley J. Tellis and Michael Wills, eds. Strategic Asia 2007-08: Domestic Political Change and Grand Strategy. Seattle: The National Bureau of Asian Research.

 Mohan, C.R. (2007) “Poised for Power: The Domestic Roots of India’s Slow Rise,” in Ashley J. Tellis and Michael Wills, eds. Strategic Asia 2007-08: Domestic Political Change and Grand Strategy. Seattle: The National Bureau of Asian Research.

 Schweller, R. and Pu, X. (Summer 2011) “After Unipolarity: China’s Visions of International Order in an Era of U.S. Decline.” International Security, 36/1, pp. 41-72.

 Sinha, A. and Dorschner, J. (January 2010) “India: Rising Power or a Meer Revolution of Rising Expectations?” Polity, 42/1, pp. 74-99.

 Tellis, A. (2011) “The United States and Asia’s Rising Giants,” in Ashley J. Tellis, Travis Tanner, and Jessica Keough, eds. Strategic Asia 2011-12: Asia Responds to Its Rising Powers, China and India. Seattle: The National Bureau of Asian Research.