Brad Setser

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Maybe China is a typical creditor after all

by Brad Setser
July 9, 2008

Creditors through the ages haven’t liked to take policy advice from debtors. They generally tend to think that borrowers should listen to the advice offered by those lending them money. And they often think debtors fail to pay sufficient attention to the concerns of their creditors when formulating economic policies.

Sound familiar?

China believes that the US hasn’t paid enough attention to the dollar’s value. That isn’t exactly news. Wen more or less said as much in November. Nor should any American be surprised that China no longer the US financial sector offers the best model for the future development of China’s own financial sector. Securitizing risky mortgages loans into complicated financial structures no longer looks like the highest stage of financial evolution.

But I was still struck by Edward Wong’s front page New York Times article several weeks ago. It highlighted China’s new assertiveness — and China’s increased willingness to criticize US economic policies.

Steven Weisman’s C section article that followed the completion of the Strategic Economic Dialogue wasn’t that different than Edward Wong’s big front page story. The governor of China’s central bank now argues that China needs to learn from the United States’ mistakes as well as its successes. Clever rhetoric. Those who think that the United States needs to learn from its own recent mistakes would have trouble disagreeing with Mr. Zhou.

These articles raise some fundamental issues about how China’s economic and financial relationship with the US will evolve. Right now China has lent — according to the US data — about $1.1 trillion of its savings to the US. Realistically, it has lent a bit more — let’s say $1.3 trillion. The US data tends to undercount Chinese holdings of US assets.

That is a large sum by any measure — it is roughly 10% of US GDP, and it is more like 30% of China’s GDP. given the extraordinary pace of growth in China’s foreign assets — and its large current account surplus — China’s financial exposure to the US is set to increase rapidly.

Many — see Gideon Rachman as well as the FT’s Alphaville — have argued that the growth in financial interdependence between the US and China will reduce political tension between the two. China has a large and growing financial stake in the US economy; the US relies on Chinese financing. Their economic interests consequently largely converge.

I was never fully convinced by this line of argument. The United States and Latin America were financially intertwined for much of the twentieth century. That didn’t mean that the US and Latin American countries always saw eye to eye. Latin debtors and their American creditors often had different interests. That created conflict, or at least tension, in the United States’ relationship with Latin America.

This is true more generally: creditors and debtors often have conflicting interests.

For example, China would like to see the US place more of a priority on maintaining the dollar’s external value — and thus the value of China’s large dollar holdings. That is code for higher US rates. Higher US rates would also make the PBoC’s life easier by reducing the incentive to sell dollars and buy RMB. Falling US rates have combined with the RMB’s appreciation against the dollar to pull huge sums of hot money into China.

The US would prefer to direct US monetary policy at stabilizing the domestic US economy rather than stabilizing the dollar’s external value.

Other areas of potential conflict also aren’t hard to see. The US may believe that China’s institutions for managing its governments external investments should converge with US norms for managing public money (think the norms governing state pension funds or Alaska’s permanent fund). China may prefer to develop its own institutions for managing its external investments — institutions that, for example, may be more inclined to support state firms as national champions than comparable pools of public money in the US.

The US might change its domestic financial regulations in ways that reduce the value of Chinese investments in US financial institutions. Or it could refuse to bailout a bank or broker dealer that China has invested in. CITIC, remember, came close to buying a small stake in Bear Stearns.

Or China may simply want to buy assets that the US doesn’t believe China’s government should own.

China’s policy makers face a particularly difficult challenge. They have invested an enormous share of China’s savings in low-yielding, fairly long-term, dollar-denominated bonds. The value of those bonds — expressed in RMB — is likely to fall over time. Those losses are the cost of subsidizing China’s exports. They were baked in, so to speak, when China decided to hold its currency down and thus overpay for US financial assets.

As Dean Baker noted a while back, Chinese policy makers knew full well that they were taking on the risk of huge (paper) losses when they bought so many dollars. They effectively choose to take large financial losses rather than allow the RMB to appreciate to its market value.

But it isn’t at all clear that China’s public expects to get hit with the (deferred) bill for the last six years or so of export subsidies — and is willing to swallow the huge losses that will be revealed as China lets its currency appreciate relative to the dollar and euro. We can debate whether or not these losses are real or not some other time. Central banks can operate with negative capital, so China doesn’t need to issue bonds to recapitalize its central banks and “realize” the loss any time soon. But it seems clear — at least to me — that there is an opportunity cost associated with using the funds raised by issuing RMB bonds to buy depreciating dollars rather than make domestic investments. And for that matter an opportunity cost associated with holding large government deposits at the central bank (rather than spending those funds at home) to help sterilize rapid reserve growth.

When those losses are realized, there will be a strong temptation for China’s policy makers to argue that the losses reflect bad US economic policy — not bad Chinese currency policy. That worries me.

There are many ironies in the current situation.

The US still acts more like a typical creditor than a typical debtor.* It believes other countries should adopt its economic model to succeed. But if China adopted the US practice of allowing its currency to float, the US might lose access to the financing that allows it to sustain large deficits at low cost. Even analysts — like me — who believe adjustment is essential don’t want it to happen over night.

China increasingly argues that other countries should emulate its own economic policy mix. Yet it isn’t clear that it really wants the rest of the world to model all their policies on China’s own policies. If the US adopted China’s restrictive policies toward foreign portfolio investment or China’s policy of limiting foreign firms ability to take over existing Chinese firms (as opposed to making greenfield investments), China’s government would face serious limits on the kind of US assets it could buy …

* In some ways, the US is a creditor. It has a large accumulated stock of foreign assets – and many Americans want the opportunity to trade some of their stock of existing US assets for assets abroad. In that way, it has much different interests than many other big debtors. But it unquestionably is a big global borrower too.


  • Posted by Howard Richman


    You won’t have to wait until later this year to see the yuan stop strengthening. The pace that the People’s Bank of China was strengthening their currency slowed suddenly at the end of March, as shown in the following graph:

    That was probably when the People’s Bank of China got wind that the US Treasury Department was about to tell Congress that China was not manipulating its currency (see ) despite China’s $1.3 trillion collected as a byproduct of these “nonexistent” currency manipulations.

    And even when the yuan was strengthening ever so slightly as a result of Bush Administration pressure, the yuan never strengthened fast enough to reduce China’s trade surplus with the United States. In fact 2007 was their biggest surplus year yet up $23 billion to $252 billion.

    Howard Richman
    co-author Trading Away Our Future
    published by

  • Posted by Twofish

    Huizer: as was the previous owner. In order to have ofices in the US, a foreign bank/BHC itself must comply with the Basle accords, and its domestic governance and regulation must also be in accordance with those accords.

    There really shouldn’t be a major issue with this, since China has agreed in principle to the Basel accords, and I don’t see anything within the CIC structure that would prohibit it from acting as a BHC under Federal Reserve supervision.

    Also there are lots of Chinese banks that aren’t owned by CIC.

    One issue here is that a lot of the regulations on foreign banks operating in the US are discretionary, which gives a lot of power to the regulator to prohibit a license if they just don’t like you. Also in the case of the US, there are so many different regulators, that it’s easy for one to just say no if they don’t like you. One of the goals of WTO was to reduce this problem, and a lot of the standards that China agreed to was to reduce regulatory discretion. However, when the WTO accords were being negotiated, no one really thought about or cared Chinese banks operating in the US, so the agreements that China made in opening up the financial services markets aren’t reciprocal.

    Keeping on topic (heh, heh) that might be one of the larger consequences of China as creditor in that the issue of opening up the US financial services market to Chinese banks is now on the table, whereas it was not before. The concept until this year was that US banks would be the intermediaries for Chinese savings since they were supposedly much better run than Chinese banks.

    As a side note, German Landesbanks were a major buyer of mortgage-backed securities. They were required by Basel to have reserves consisting of “high quality” securities, and guess where you can get AAA bonds paying very high interest……. Ooppps….

    Huizer: But that leaves the problem that these banks are, part of the same BHC.

    Hypothetically, the Chinese government could split up ownership of the banks with different holding companies, however in that case, it’s not unclear that this would satisfy US regulators since the different holding companies would ultimately answer to the Communist Party.

    However, this is another consequence of last years events, since last year you could argue that having Chinese banks under the ultimate control of a quasi-governmental agency was a bad thing that would automatically disqualify a bank from operating in the US, since private banks were obviously much better at risk control. You can’t make that argument now without people laughing at you.

    Also, there is a spectrum of effective control among Chinese banks. There are banks that are more controlled by the Party and Central Government and banks which are less controlled by the Party and Central Government. It’s not necessarily the case that the banks that are less controlled are better run.

    Looking at broader issues, the big obstacle I think is to have the US government more or less accept that the Chinese economic system in which the Communist Party makes a lot of the decisions is legitimate way of running a country. It’s not that China is explicitly trying to export its system of government, but rather there is this psychological block that says that the US can tolerate a system of government run by “evil Communists.”

    There is much less of a block on the other side, since there is no psychological block that I can see for the Chinese government to adopt practices by “evil capitalists” if they can see it as being able to keep themselves in power. But there was in 1980. Coming up with theories of government which would allow China to adopt “capitalist” ideas without calling into question the legitimacy of the whole system was a major challenge.

    I suppose what will come out of this is likely the notion that the United States can tolerate a Party run economy, without tolerating the way that the Party treats political dissidents, but even accepting this idea is going to require some time.

    This is the only unique thing I can think about the Chinese situation. There are a lot of challenges in getting the German and Japanese banking system to work the US, but in the case of Germany and Japan, the US can accept that they are not being run by “evil Communists.”

    The problem that the US faces is that if it goes the route of saying “we aren’t going to let the evil Communist Chinese set up banks in the US” it goes against a lot of the other norms that the US has stated it believes in like regulatory transparency or creation of an impartial legal system.

    Huizer: In fact an interesting situation, taxing the routinely adversary lawyers mentality of US regulators in the face of foreign authorities that are skilled in not taking no for an answer and (falsely or rightly aware) that they have financial leverage.

    Also if you have money, you can hire your own lawyers. One thing that is happening is that Chinese banks are very actively recruiting Chinese Wall Street bankers with deep knowledge on how the system works. There have been a number of recruiting efforts in NYC by Chinese banks, and at one of them, I was struck that the bank had recruited into its top management one of the legendary people in Wall Street.

    One problem is that there is still something of a “Cold War” mentality lurking in the US, which is a problem since the issues that China is posing are ones that are very different from the Cold War Soviet Union. The Soviet Union was never in a position to set up banks in the US or to recruit high level US bank executives to run its economy, and there never was a de-facto alliance between American capitalists and Soviet Communists. The Chinese Communist Party has embraced markets and international trade in a way that the Soviets were never able to for the reason that markets generally work better than central planning, but the fact that the CCP has been market-oriented for a generation is now posing some a lot of new issues.

    Huizer: he more I think of it, the spirit of assertiveness and nationalism (see also the Olympics/Tibet display of public sentiment) is probably catching on in Beijing.

    It’s actually not “catching on.” Chinese have been assertive and nationalistic for the last 150 years, and popular Chinese nationalism in 2008 is actually much, much less anti-American than it was in 1994. You have people demonstrating against CNN media bias, but those people are trying to get into American schools so that they can get jobs with American companies. Also in 1994, there were a lot fewer Mainland Chinese in the US.

    The reason this has come up is that people in the US had the expectation that Chinese nationalism would decline over time, when Chinese youth are probably much more nationalistic than their parents since Chinese youth today grew up in a time in which China has been rising.

    The other thing that Americans are not aware of is the degree to which the ideals of “1989 Tiananmen students” have been completely discredited in China. One rough analogy to what has happened in China is a socialist hippie flower child living in the middle of the Reagan revolution. One reason for this is that the Communist Party has embraced markets and globalization, whereas their opponents have tended to be anti-market and anti-globalization (i.e. trade sanctions on China). This is a big problem since it put the Tiananmen students on the wrong side of the tide of history.

    Huizer: As a non-Chinese with too little knowledge of Chinese history I would nevertheless tend to dispute claims that Zhonghua is/ has been permanently peaceful.

    As a Chinese with a lot of knowledge of Chinese history, I would also strongly dispute those claims. You can write a history book in which China has been always peaceful and defensive, and that is the history book you give to elementary school students to indoctrinate them. However, there are other ways of telling the story. If your goal is to make Chinese look evil and warlike and a danger to civilization that must be crushed, yeah, you can write a history book that says that.

    My own view is that to effectively advance Chinese interests in a global world, you *must* read these negative histories so that you can understand how people perceive China negatively, so that you can effectively counter those perceptions.

    I should point out that I don’t think that the type of political indoctrination that Chinese elementary school students get is worse or more factually incorrect than the type of political indoctrination that American elementary school students get. One of the purposes of elementary schools of any national-state is political indoctrination.

    Huizer: During periods of foreign domination (the Yuan and Qing dynasties) the abject foreign rulers forced China into territorial acquisition which the Chinese people gallantly sabotaged, but not with immediate results.

    What gets interesting is when you have multiple and contradictory versions of history within the same book. In the version of history that I tell my kids, the Yuan and the Qing were not “foreign” dynasties, and the Mongol and the Manchu rulers of China were Chinese. Different Chinese, but Chinese nevertheless.

    I do have some personal motives here. First is that the broader you define Chinese, the less likely it is that I’m excluded.

    The second motive, is that by reading about how the Manchu rulers of China were able to be both “Chinese” and “Manchu” and how they were ultimately able to define the term “Chinese” it gives me a notion of what to do in my situation. I’ve found myself in the ruling power elite of the United States, and the strategies that I’ve ended up using to be both Chinese and American and to define what an American is are very similar to the ones that the Manchus used.

  • Posted by Judy Yeo

    Interesting how $ seems such a weapon.

    Mr Richman : forced loans on another

    How? Did China force the Treasury to sell paper for $? Would the rest of the bonds/paper buyers, think Japan and Europe like to buy more?


    What would you think of the fact that much of modern europe evolved from states bandied together by former foreign occupiers?

    Sympathy seems that much easier when the issue is a distant one, culturally, socially and historically.


    The American model has been upheld as the model poltically and certainly economically for the rest of the world to emulate, not quite surprising that criticism should emerge stronly when chinks in the armour are exposed.

  • Posted by Rien Huizer

    Thks 2 fish and Judy,

    JUst trying to put some ignorant perspective on things. Of course people do not like to be kicked around for 150 years, but that was not you as an individual, OK. And my japanese neighbour (I do not have one) did not spend time in the Imperial Army during the precautionary occupation of Nanjing, OKJ. We all live in the present and we will ahve to solv some problems cooperatively, or gamble on the possibility that some of us will not be around to play the zero or whatever sum game.

  • Posted by RebelEconomist

    Howard Richman: “The United States never asked China for these loans”, “another thing when a country forces loans on another”

    This is what actually happened: Democratically elected US governments asked the market for a loan by selling debt so that they could do some popular spending while minimising unpopular taxes. The US made that debt freely marketable, because it would have cost the US more if it had restricted its liquidity. Asian central banks bought that debt at market prices in good faith.

    No coercion needed; you are trading away your future quite freely.

  • Posted by Howard Richman

    Judy asks whether China was forcing loans on the United States when it bought US Treasury Notes.

    The answer is “Yes.” China did so by buying dollars in the foreign exchange markets in order to “sterilize” those dollars from trade so that yuan would not rise relative to the dollar. The main effects of these loans upon the US have been: (1) to increase imports, (2) to reduce exports and (3) to lower real interest rates. The higher imports and lower exports in turn reduced the investment opportunities available for US businesses causing lower fixed investment in America’s productive sectors. Since Investment = Foreign Savings + Domestic Savings and the increase in Foreign Savings took away investment opportunities, the main effect of the inflow of sterilized dollars was to reduce US domestic savings.

    Howard Richman

  • Posted by Howard Richman

    Rebel Economist:

    I agree with you that the government should increase domestic savings by running smaller budget deficits (except where fiscal stimuli might be needed as was the case in the 2002 recession).

    However, in the age of mercantilism, moving budgets toward balance does nothing to reduce trade deficits, as was proven during the Clinton administration. Moves to increase domestic savings do not balance trade unless the United States tackles mercantilism at the same time.


  • Posted by Howard Richman

    RebelEconomist and Judy Yeo:

    A basic principle of economics is that when a change in demand causes an increase in quantity, the price goes up. When a change in supply causes an increase in quantity, the price goes down.

    The interest rate is the price of loans. If US demand for foreign funds (caused by our budget deficits) were causing the incrased inflow of foreign savings (i.e. the increased trade deficits), that real US interest rates would be going up. However, they have been going down since 1996, proving that an increase in supply of foreign funds has been causing them, not increased

    Howard Richman

  • Posted by don

    “Judy asks whether China was forcing loans on the United States when it bought US Treasury Notes.”
    Chinese currency policy forces addtional saving on its local population, which produces a net capital outflow. Although initially denominated in dollars, the U.S. doesn’t have to accept the inflow. For example, during the last oil price boom, much of the oil savings came to the U.S., but instead of staying here, U.S. banks funneled much of it into LDC loans (resulting later in the LDC loan crisis.) There is, however, a tendency for the loans to stay here, because currencies are not perfect substitutes.

  • Posted by Howard Richman

    “not increased demand for foreign funds.” — Somehow my sentence got cut off.

  • Posted by aim

    China a typical creditor? Usually creditors expect to get a return on their investments. It seems to me that China’s demand for US debt was to support the devaluation of the yuan against the dollar. They never cared that much about the return. This twisted demand for US debt is the root cause of easy credit in the US which created the current US credit crisis. What the US needs is balanced trade or no trade.

  • Posted by Rien Huizer


    My apologies for making myself misunderstood. Europe has had warfare betwen literate, Christian societies (perhaps it is time to say, in hindsight, civil war, especially WW II) since the breakdown of the roman empire. The past 60 years must have been the most peaceful in history. One lesson for Europeans has been that chauvinism and nationalism belong on the soccer field. Of course I do not want to diminish any feelings of personal grief people may have, but, look at the Middle East, Kashmir, etc. These may be noble causes but in the end it is the the innocent laobaixing who suffers. But I’ve learned my lesson, on this blog, thou shalt not try to be lighthearted about Chinese history and the many views the literature on that subject affords.

  • Posted by Howard Richman


    You are correct in everything you wrote in #62. But I would would vastly prefer balanced trade to no trade. Balanced trade is the best of both worlds. It retains the efficiency that comes from globalization while attaining the mutual benefit that comes from comparative advantage.

    Moreover, a system built on balanced trade is stable. It prevents mercantilism which eventually destroys the economies of the victim countries, ruining the market for exports.

    It would actually be very easy for the United States to switch the world to a system based upon balanced trade. All we would have to do is insist that our mercantilist trading partners reduce their trade surpluses with the United States by 20% per year. Import Certificates to balance trade (originally proposed by Warren Buffett) can force the issue if necessary. (We lay out a plan for achieving balanced trade in our book Trading Away the Future.)

    Balanced trade has the advantage that it discourages government subsidies and tariffs because whenever a country gives preferential treatment to one industry, it hurts its other industries. The current system tries tries to reduce export subsidies and tariffs through international regulation, but fails since every system of regulations has loopholes. The largest loophole, at present, is the one that permits currency manipulations.

    Howard Richman

  • Posted by Twofish

    Richman: Balanced trade is the best of both worlds. It retains the efficiency that comes from globalization while attaining the mutual benefit that comes from comparative advantage.

    The trouble is that it is inherently unstable since while it might collectively benefit everyone, people have very strong incentives for very unbalanced trade. There are about a dozen ways of dealing with this problem that have been tried.

    The way that Bretton Woods envisoned things, you’d have balanced trade through fixed exchange rates.

    Trying to deal with this through bilateral negotiations has tended not to work, because trade limitations are inflexible and because bilateral agreements don’t include third parties.

    Richman: Import Certificates to balance trade (originally proposed by Warren Buffett) can force the issue if necessary. (We lay out a plan for achieving balanced trade in our book Trading Away the Future.)

    I very much prefer tariffs over import certificates. If you slap an 80% tariff on something, your local industry will still feel some competitive pressure. Also import certificates or any other administrative limits are very inflexible. Suppose that there is sudden surge in demand for Japanese cars. If you have a tariff, the system is self-adjusting whereas if you have import certificates, it won’t.

    Also don’t kid yourself about the political realities. You might support balanced trade, but the industries that the tariffs and certificates protect are going to insist that they be kept in place long after trade becomes balanced or highly imbalanced in their favor. Eventually you have more and more certificates and restrictions until the economic just chokes to death, which is what happened in a lot of developing nations.

    This is one big problem with using the threat of tariffs and import certificates as negotiating tools. In a negotiation, you say, if you do X, we do Y, if you stop doing X, we stop doing Y. The trouble is that most of the people who want trade restrictions want them in place regardless of what the other side does. So if you impose restrictions on car imports to force the other side to reduce restrictions on grain imports, and the other side says “fine you win, we’ll remove grain import restrictions” then your car manufacturers will still want the trade restrictions in place.

  • Posted by Twofish

    Huizer: One lesson for Europeans has been that chauvinism and nationalism belong on the soccer field.

    IMO, the post-WWII European system only worked because you had outside policeman the United States which kept order and a common enemy in the Soviet Union. My opinion is that Europeans don’t quite notice this and so draw some lessons which I think are incorrect (namely that you can have a system of law and order without the threat of military force in the background.)

    Huizer: These may be noble causes but in the end it is the the innocent laobaixing who suffers.

    Or maybe not. One reason that Chinese nationalism is tremendously popular in China is that there is a consensus that it has been highly beneficial to the average person. The notion that nationalism is a evil trick by the ruling classes to enslave the poor is not that popular in China.

    To seek what China would have looked like with no nationalism or a “failed nationalism”, just look at the Arab world or for that matter the Soviet Union. Note that regardless of how bad things are in China, no one is crashing planes into skyscrapers.

  • Posted by RebelEconomist


    If trade is balanced, how are countries that are willing to be net importers to expand their capacity to do so? And how would countries that wish to save for the future do so?

  • Posted by Howard Richman

    Twofish: “I very much prefer tariffs over import certificates. If you slap an 80% tariff on something, your local industry will still feel some competitive pressure.”

    The Import Certificate plan that we advocate and the one that Buffett advocates do not apply to specific products, but to the overall value of imports from a specific country. They auction the right to import a value of goods from the country without specifying which goods. Your objections do not apply to our plan.

    RebelEconomist: “If trade is balanced, how are countries that are willing to be net importers to expand their capacity to do so? And how would countries that wish to save for the future do so?”

    If trade is balanced countries can’t follow the practice of mercantilism (maximizing exports and minimizing imports) as a development strategy. They can still grow their exports, but the result will be a corresponding increase in their imports. The result will be that both they and their trading partners will grow and both countries will benefit from comparative advantage and specialization.


  • Posted by Howard Richman

    Actually, Twofish, I misspoke in #68. Warren Buffet’s plan does not just apply to a single country, but our does. Ours is just designed to combat mercantilism. His is designed to balance trade overall. As you might expect from a business genius like Buffett, he’s got the incentive angle completely covered.

    You really ought to read Buffett’s article; it’s very straightforward and a good read:

    By the way, we’ve had numerous exchanges on this message board lately and I have found all of your comments to be polite and respectful without sarcasm or twisting of words. I have very much enjoyed these discussions.


  • Posted by Howard Richman


    By the way, in that article, Warren Buffett announced that he was starting to selling the dollar and it was exactly at the top of the dollar’s exchange rate. Pretty amazing!


  • Posted by Judy Yeo

    Not sure if anyone’s still reading this particular thread, but, thought some response was in order


    Hmm, the football field huh? Didn’t common belief state that football had it roots in the violent game played by the Inca or Mayan civilisations? Considering how football violence turns into violence in the streets , hard to see the progress!

    Actually, aren’t you forgetting the 1990s conflict in Croatia? Or the fact that the Basque people are still fighting for a Basque homeland?


    The equations who support your argument work more as a backflow check. Look, if demand didn’t exist (for those higher imports), the importers on the US side would reduce orders, Would they stockpile excess supplies? Surely not. If you don’t want something, be they cheap or expensive items, collective lack of demand will show up, the importers will find excess stock, they will reduce orders and suppliers will get the message through reduced orders and reduced profits, everyone’s in it for the $. Similarly, if debt levels go down, the Treasury issues less paper, there won’t be the paper to buy, heaven forfend, they might buy something else, more Chrysler buildings perhaps?

  • Posted by Rien Huizer

    Once again Judy, all I wanted to say is that nationalism is not my taste. Neither my own country or anyone else’s. I think that it is OK if associated with games. I am interested in economics and in the politics of international policy making, which is what this blog is about. And sometimes there i a reason to explain fundamental views on isues like nationalism, because I feel that that may spoil the discusion.

    Part of my comments re ironic, and if you have followed the discusion on the CIC, you may have red my comments re mr Lou, who ws in one of his former jobs deputy governor of the province of Guizhou. Now, if you know your Chinese history, you should know that Guizhou, home of the Miao, was historically an area colonized by the Han, but worthless. However, the empire’s benevolence required tht these people would not be returned to barbary. Of course the ferocious Miao tribesmen had their own views on benevolence and they fought for centuries for their “independence”. Hence my pleasant surprise that the CIC has a leader whose final provincial career step, was like President Hu, in an area not traditionally inhabited exclusively by the Han. I hope this satisfies.

    Incidentally, I did mention the conflicts in the Balkans, which includes Croatia. I guess the Basques their cause is even less noble than that of the Miao) are not only fighting for their homeland, the Basques that are fighting (actually blowing things up) are in the business of being terrorist. They need the conflict for their private livelihood, so to say. Nothing romantic about those thugs at all. Anyway, I hate arguing with people about these sorts of things, It just occurred to me that on this blog there are quite a few comments by people who are apparently sensitive to China being talked about in less than flattering terms. I am not Chinese nor American, and I have no prejudice against one or the other. All I want is to stay clear of economic train wrecks and sometimes blogs like this one can help important people to see things a little clearer. Anyway, if you re Singaporean, I let you win. Too Kiasu for my taste.. Cheer up!

  • Posted by Judy Yeo


    Oh please, if you’re still going on about Hans and non-Hans, that brings things down to the ethnic level, which, as a Singaporean, I object to.That’s the ugliest side of nationalism – where distinction turns into discrimination, positive or negative discrimination , both are just triggers for trouble, and this I object to. Look, the Balkans comment as well as the Basque comment were not meant to romanticize either, God forbid. I’m strictly against such conflicts , whatever their cause. Sensitivity, which entails keeping off potentially explosive issues and generally not stomping on people’s toes for the fun of it , is very different from defensiveness, as perhaps detectable in your comments.

    If I were a typical Singaporean or fancied myself a non-typical Singaporean, I might have been offended by your last comment. Problem is, I’m neither. Besides, when did this blog become a contest? Oh dear, kiasuism seems to have gone global ;p

  • Posted by Rien Huizer

    Great comment Judy (honestly) and apologies for my allegation of kiasuism. Could not resist . For some reason, my jokes do not get across, but so be it. Singaporeans live in (again honestly) one of the most blessed places (such an incredible difference in living standards with nearly every other large city in the tropical part of Asia) on earth and a lot of that has to to with unusual but effective policies to suppress ethnicity as a political theme, rather than exploit it as some neighbours do. In fact that is one of the reasons I spend quite a bit of time still following what goes on there. It is not quite proper in Western academia to be a fan of this unusual political economical beast, but I find it fascinating, requiring an open mind and a great laboratory for advanced public management. Something which will take China quite a while to attain, if ever. However, I am really not defensive about chauvinistic comments between Americans and (sorry!) ethnic Chinese, because I am neither. But slighting the Ruritanians would get me very cross..