China

Live Chat: Christina Larson on China and the Environment (Tuesday, Noon ET / 9 am PT)

admin — Mon, 16 Nov 2009 16:55:00 -0500

As Barack Obama embarks on his first trip to Beijing as president -- and with less than a month to go before the Copenhagen climate change summit -- it's worth asking: Is China's rapid economic growth ravaging the environment? Or are that nation's massive investments in green technology an environmental lifeline -- not to mention a huge headstart in a sector that could drive the economy of the 21st century?

New America Foundation Schwartz Fellow Christina Larson will be discussing these questions Tuesday, Nov. 17, in this week's New America Foundation / Politico live web chat.

Update: This chat has concluded, but a full transcript is archived below.

New America's Christina Larson on China's Environmental Paradox

* * *

Past Chats

Previous New America/Politico chats have their full transcripts archived:

Schwartz Fellow Dayo Olopade on the Obama Administration's faith-based initiatives
Education Policy Program staffers Lisa Guernsey and Christina Satkowski on the future of Head Start
Health Policy Program Director Len Nichols on the current state of health reform
Energy Policy Initiative Director Lisa Margonelli on the prospects for real progress with climate policy legislation.
Schwartz Fellow Nicholas Thompson on Cold War lessons for Afghanistan
Global Assets Project Deputy Director Jamie Zimmerman on savings as a path out of poverty
Bernard L. Schwartz Fellows Program Director Andres Martinez on "President Obama: Pragmatist or Ideologue?"

Carbon Poker

Terry Tamminen — Thu, 08 Oct 2009 23:38:00 -0400

I had a dream about watching one of those high stakes poker games that you see on TV these days. There were bit players who you knew, from the few colored chips in front of them, would soon fold - - but the two "whales" at the table were Barack Obama and Hu Jintao. They each had so many chips on the table that you could barely see their cowboy shirts, but the purpose in their deadly stares could not be obscured, even by the dark black Ray Bans that shaded their eyes.

Obama wasted no time putting his ante smack in the middle of the green felt for all to see - - roll back greenhouse gases to 1990 levels by 2020 and 80% lower by 2050 (a statement made just 14 days after he was elected). Hu countered with a commitment to reduce energy consumption by 20%. Cards were dealt and the players tugged on their caps (Hu's read "Made in China" and Obama's proclaimed "Copenhagen", an obscure reference to either the failed Chicago bid for the 2016 Olympics or the upcoming climate talks).

The American Prez made the first bet - - adopting California's greenhouse gas limits on tailpipes as the national standard. The crowd murmured as they realized this meant he was betting on executive power instead of Congress. The Chinese Prez countered with a commitment to replace 15% of dirty fossil fuels with clean energy, like wind and solar, by 2020. The crowd gasped audibly, realizing that this would double China's current renewable energy supply.

Mr. Cool and Mr. Harmonious took and tossed cards, each betting bold plans to measure and register greenhouse gas sources; out-compete each other on a carbon market; and save more trees than anyone thought possible - - raising the stakes higher and higher, a pile of loot that made it hard for one to even see the other, let alone get a real read of their respective poker faces. Aides tugged at the sleeves of each man, whispering words of advice or caution, but the shrewd observer knew these competitors needed no guidance - - they were playing for keeps.

As often happens in dreams, reality and fantasy merged - - the closer I looked at the loot on the table, the more it resembled a blue, spinning globe. Were the Presidents playing for wealth, the future of a planet, or both?

I awoke with adrenaline pumping, the final result unknown, wondering if anyone else had distilled the words and deeds of these two world powerhouses into anything resembling my dream, or if most people had failed to see the high-stakes poker game that was going on in world capitals, UN speeches, and government announcements day by day. The media has largely failed to add up what's going on in both countries already, which allows Hu and Obama to make these pledges, so how would average citizens or investors know?

Yes, carbon will soon have more than a penny-ante price, but if we play the game shrewdly at Copenhagen and beyond, this may be a game with many winners and a dream for a more sustainable, resilient economy come true.

Time to Focus on the Great Powers

Patrick Doherty — Wed, 05 Aug 2009 15:45:00 -0400

By Patrick Doherty and Ben Katcher

While the media are drawn to the story of the day, which today means the killing of Baitullah Mehsud in Pakistan and the longevity of the "cash for clunkers" program here at home, it is essential for the Obama administration to keep its eye on the strategic ball. In short, while the administration was absolutely right to triage the domestic economy and global crises like Iraq and Afghanistan during its first six months, the President and his most senior advisors must now turn to the great questions of statecraft: great power relations and America's role in the world.

The reality is that the post-war global order, in which the United States asserted a de facto strategy of hegemony, is now irretrievably dysfunctional and, when it comes down to it, triggered the domestic and foreign crisis that consumed the president's agenda until now. That old strategy, as our colleague Michael Lind has written, was founded on a simple bargain: Washington would let the rest of the world export to the American consumer, hollowing out our own manufacturing base but subsidizing our consumer lifestyle. In return, we would assert a kind of global hegemony, using the tools of foreign policy to dissuade the rise of peer competitors (our military budget and capabilities), to reassure the world's powers that we would take care of common threats (Iraq, Afghanistan, Serbia), and in those cases of resistance to our hegemony, to coercively disarm them (Iran, North Korea).

It was always a time-limited gambit and time finally ran out a year ago when the economic foundation of the strategy collapsed spectacularly in the U.S. housing crisis. Addicted to the false security of bundled American home mortgages, Wall Street built a house of un-priceable derivatives on the sand of irresponsible sub-prime mortgages -- fueled by easy access to credit provided by exporting nations like China, Japan, Germany and the Gulf States. Borrowing against rising home prices to keep consumption high, American households lost trillions in home value and cut back dramatically on consumption--such that Chinese exports fell 30 percent.

At the same time, our over-stretched military was finding it harder and harder to find the budget and the manpower to match the operations tempo that hegemony required. And despite today's confirmation of Baitullah Mehsud's death, it looks increasingly like that operations tempo will only remain high, if not get higher.

Furthermore, the basic strategic facts on the ground have changed dramatically since the early 1990s when hegemony was proffered during the George H. W. Bush administration. China is now a massive economy whose GDP is more about building China then exporting cheap goods to the West. Russia is no longer the post-Soviet basketcase it was under Boris Yeltsin, for Vladimir Putin has marshalled its energy resources and nuclear arsenal to make it a real force in the many strategic issues along and beyond its incredibly long frontier. Europe, meanwhile, used the last two decades to absorb Eastern Europe and along the way avoided getting into a balance of trade trap with Asia. Japan remains a major creditor of the United States and is increasingly concerned that American security guarantees in East Asia are not what they once were. Indeed, the combined economies of Russia, China, India and Brazil are likely to outstrip those of the G-7 in twenty years time, according to Goldman Sachs Chief Economist Jim O’Neil.

Luckily, this new reality points directly to the major issues that require a new great power agreement: global macroeconomic rebalancing, the need to adapt and manage global energy markets, and establishing global and regional collective security architectures.

The most immediate challenge is to begin rebalancing the global economy in a way that promotes sustainable global growth. The American consumption-led model of global growth is not coming back. The great powers must work together to create and balance new sources of domestic demand within their own territories. The United States and China in particular must conceive a new economic relationship that reduces the massive trade and capital flow imbalances at the root of the present economic recession. This will require a combination of policies that reorient China’s economy toward domestic demand and develop a new economic engine to power the United States for the coming decades.

Of equal importance is energy. The United States’ Energy Information Agency 2009 Energy Outlook predicts that global energy consumption will increase 44% from 2006-2030. Anticipating this increase in demand and the corresponding increase in prices, the great powers have so far conceived of energy security as a largely zero-sum game, and competed with one another for access to hydrocarbon resources from Africa to Central Asia to the Arctic Pole.

Russia, China and the United States all rely on a highly volatile and fragile global energy system. Such volatility, however, has had negative impacts in each of the great powers in recent years. The rise in oil prices accellerated the financial crisis in the United States, in China, high energy prices forced government energy subsidies that, for a while, took the profit out of their export sector. While in Russia, falling prices undercut government subsidies to its uncompetitive industries and massive pensioner class.

With Russia and Europe competeing over access to Caspian and Central Asian energy, with Russia, China, and the United States competing over Iranian energy resources and the U.S. and China signing a memorandum of understanding committing both to work towards a "low carbon economy," the geopolitics of energy will continue to shape the strategic outlook of great powers unless something changes. A new energy order that allows economies to develop, transform and function while facilitating global stability and prosperity is in all the powers' interest but as of yet is hard to discern.

Finally, the security arrangements and institutions that guided the United States through the Cold War must be updated to reflect current power realities. This requires a serious effort at global institutional reform as well as the creation of capable regional security structures that allow for rules-based regional resolution of threats to international security. At the global level, the UN Security Council and the International Financial Institutions need to reflect the realities of today, not 1945. Looking to models like NATO and the EU, regional organizations like ASEAN, the African Union, and the Rio Group need to increase their capability to promote regional stability and sustainable economic integration. Governor George W. Bush was right: the United States should not be the world's policeman.

As President Obama emerges from his first six months of domestic and global triage, conventional wisdom believes that his next priorities should be the usual laundry list: health care, climate change, Iran, Afghanistan, and North Korea. But a deeper look at these issues, we believe, reveals that most of them can be made much more tractable if the President first strikes a durable great power bargain with Russia and China.

The reasons for focusing on Russia and China should be clear. Russia because of the leverage provide by its energy resources and infrastructure and its nuclear arsenal, and China because of its rising economy and massive population. Europe, Japan, India and Brazil are, of course, real or rising world powers and must be accommodated in any new global concert, but their interests, capabilities, outlook and strategies are simply do not cross the great power threshold.

Of the three great powers, the United States is in the strongest position to lead such an agenda. Our post Cold War grand strategy has met its natural death and the Obama administration came into office with a mandate to not only deliver change we can believe in, but specifically to "change the mindset" that led the United States to war in Iraq. Meanwhile, China and Russia are in the opposite position: their ability to adapt their grand strategies to a new American agenda is extremely limited, giving the United States a significant silver lining.

But there is not much time. Grand strategy must be conceived of and executed well in advance of political judgment days. There are less than three years before the Obama administration must report on its progress to the American electorate and Russia and China's current strategies are every day reducing American maneuverability and options. It's time to focus.

WORLD VIEW: Another Look at the Chinese Path

Veronica Valdez — Fri, 12 Jun 2009 15:21:00 -0400

I've written about health reform in China on this blog before. This week, on the Foreign Policy website I have a more in-depth analysis of China's health care system, its path towards health reform and the impact reform will have on China's 1.3 billion citizens. Check it out!

WORLD VIEW: The Weakest Link - China's Health Care Sector

Veronica Valdez — Tue, 19 May 2009 20:47:00 -0400

As a student at Peking University in Beijing in 2005-06—China's version of Harvard, without the Ivy—I was honored to be amidst some of China's best and brightest minds. I often wondered whether the person I was sitting next to at the school cafeteria eating noodles and baozi would be a future finance minister or a scientist that will cure cancer. I never once thought that some of these students would be unemployed. And uninsured. But in today's economic climate, some of them are.

After China's revolution, people got a basic level of medical care for free. That system was dismantled in the 1980s amid the economic reforms. Now China has gaps between the quality and access of care in rural and urban areas. And China has uninsured people—about 200 million of them. And costs are rising, as they are here. (NEJM had a great brief history of modern China's health system called "Privatization and its Discontents.")

So when the Central Committee of the Communist Party of China and the State Council, or the Cabinet, recently announced a three-year action plan on health reform (and a longer-term plan through 2020 as well), it brought welcome relief to many college graduates and millions of migrant workers in urban areas. This means job creation. It also means affordable heath care services for 1.3 billion citizens. Health care has become a source of tension in China today and often dubbed by the Chinese as its weakest link. Now health care will be thought of as a "public service."

Xinhua News writes:

The core principle of the reform is to provide basic health care as a "public service" to the people, which requires much more government funding and supervision.

By 2020, the world's most populous country will have a basic health-care system that can provide "safe, effective, convenient and affordable" health services to urban and rural residents, according to the tone-setting document.

This will be supplemented by a more detailed implementation plan for the three years until 2011. The plan has yet to be published, but the State Council announced earlier this year an investment plan of 850 billion Yuan ($124 billion U.S.) for the reform in three years.

See details on the plan here and here.

China's health care system has been strongly critiqued in the past for its increasing costs and poor coverage, driving many citizens to ‘alternative' treatments that are often illegal. "Medical care is a huge drain on every Chinese family," Wall Street Journal Asia writes. A Gallup Poll last November showed that the Chinese worried more about being able to pay for health care than about education, retirement or maintaining living standards. With little or no social safety net coupled with a global economic crisis, many families are driven to save more rather than spend more. That's a big problem for the Chinese government.

Like many of us here in the US, the Chinese believe that reforming health care will strengthen the economy and encourage growth. (We have written about this before). Health reforms in China may well provide opportunities for health-service providers, insurers, pharmaceutical companies and the IT industry.

While many in China are happy about this reform package, some are skeptical. It remains uncertain whether this package is enough to ease the financial burdens of 1.3 billion Chinese and get people spending again. But many of my friends, who are still living in China, tell me they are optimistic. And some hope that one day health care can change from being China's weakest link to its strongest.

China's Exports Soar and the Government Promotes Domestic Consumption

Sam Sherraden — Wed, 15 Oct 2008 02:52:00 -0400

China's export surplus in September set a new record at $29.3bn, despite the global slowdown. But, Chinese government officials and economists agree that exports will fall in coming months. The Chinese leadership issued a report saying that the country would rely more on domestic demand as a source of growth as consumers in Europe and the US cut back on spending.

The Central Committee's report promised better healthcare, more education, housing, pensions, land rights for rural peasants, and a doubling of rural incomes by 2020. The strengthening of the social safety net, which has deteriorated in recent years, and providing higher wages, is thought to increase domestic Chinese demand.

Snapshot asks, does China's central leadership have the will and capacity to boost consumption?

Bloomberg - China's Trade Surplus Widens to Record $29.3 Billion
AP - China looking inward as foreign economies slow
Bloomberg - China to Double Rural Incomes to Boost Consumption

The Chinese Get Fiscal Stimulus

Sam Sherraden — Wed, 27 Aug 2008 17:56:00 -0400

China's leadership is contemplating a RMB 400bn ($58bn) stimulus package that includes large spending on a backlog of transportation projects like subways and railroads, according to JPMorgan. The Chinese government, unlike that of the United States, understands the benefits that infrastructure investments have on increasing efficiency and stimulating a slowing economy. JPMorgan predicts Chinese leaders will release the stimulus once we see more signs of a weakening economy and commodity prices fall further, which would reduce the input costs for strained Chinese producers. If exporters, which make up 37.5% of GDP, are badly hit and shed jobs, infrastructure investment may even prop up private consumption, which has held up remarkably well despite inflating food prices and a falling stock market.

Snapshot asks, can we learn how to invest in public infrastructure and stimulate a slowing economy from the Chinese government?

JPMorgan - Assessing China's Near Term Growth Risks
China Financial Markets Blog - Making sense of what comes after the Olympics
Managing the Dragon - ATO (After The Olympics)
Caijing - A Proposed Economic Stimulus Package

Beijing's New Polluter Pays Car Tax - Good Idea?

Annette Nellen — Wed, 13 Aug 2008 19:32:00 -0400

Tax systems get used for a lot more than raising revenue for the government. They are also often used to help change behavior and to make prices reflect costs of "negative externalities." If you want to discourage something, raise the tax on it. If you want to encourage something, lower the tax or offer a special deduction or tax credit.

One activity we want to discourage today is greenhouse gas emissions, such as CO2 from burning fossil fuels - like the gas in your car. So, despite some elected officials calling for ways to lower the cost of gasoline, we should really be looking to increase the cost because:

The higher cost will encourage people to drive less or find other ways to use less gasoline.
What we pay for gas at the pump is not the true cost. When we drive and burn gasoline, we cause air pollution, create GHG emissions that contribute to global warming, wear out roads, and cause congestion. These activities have costs - such as cleaning the air or refurbishing roads. When that cost is not included in the price we pay, the government doesn't get the money needed to deal with the problems - the negative externalities of driving.

Beijing seems to have the idea right. It was reported in several news outlets that on August 13, Beijing announced that there would be a much higher sales tax on large cars and a lower tax on smaller cars (see abcnews.go.com)

The US has something similar with the gas guzzler tax enacted in 1978. However, that only applies to new cars so trucks and some heavy SUVs are not covered. You can find a list of covered vehicles from the EPA (here).

A flaw with both approaches is that the tax is only assessed at time of purchase. This doesn't do a good job of tying the tax to the cost of the negative externalities or help modify behavior. Once you've paid the gas guzzler tax, on the purchase of a $350,000 Lamborghini Murcielago, are you going to care how much you drive it every year? On the purchase of an expensive gas guzzling car, is someone even going to notice the up to $7,700 gas guzzler tax tacked onto the price tag? Will it cause someone to not buy the car? Of course, the gas guzzler tax also applies to some less expensive cars and it does seem to have caused carmakers to avoid mass producing cars that are subject to the tax.

Even if you buy the gas guzzler and keep it in your garage without driving it, you owe the tax.

A solution to better encourage less driving of gas guzzlers and discouraging their purchase (and manufacture) would be to have an annual tax on their ownership in addition to a higher gasoline excise tax.

The funds generated from a gas tax increase could be used for environmental research and clean-up, education on how to help the environment, and to provide relief to low-income taxpayers, as well as to some hard hit industries which they retool to use less gasoline. The use of a polluter pays tax to reduce another tax is called a "tax shift."

Another stick to help discourage production of gas guzzlers would be to deny companies the manfucturing deduction for them (IRC Sectoin 199) or impose an excise tax on some part used in these cars.

As federal and some state governments start serious work on reforming their tax systems to make them work better in supporting economic, societal and environmental goals, polluter pays taxes and tax shifts need to be part of that discussion.

ASP In the News | August 4-6

Ian McAllister — Wed, 06 Aug 2008 20:23:00 -0400

Associated Press (08/06) cites William Hartung on potential cooperation with China on energy security.
Washington Post (08/06) quotes Flynt Leverett on Iran's continuing uranium enrichment.
National Interest (08/01) cites Peter Bergen on Washington's evolving strategy against terrorism.
Somerville Journal (08/01) quotes Daniel Levy's analysis on Israel negotiating through Turkey and Egypt.

Let’s Look Beyond the Haze

Terry Tamminen — Wed, 06 Aug 2008 16:12:00 -0400

I was in Beijing last week and noticed the smog, of course, but as China grapples with Olympics and air quality I also saw something much more important. China is serious about energy efficiency and reducing greenhouse gases.

In recent months, the Chinese government has closed over 21 gigawatts of the dirtiest, most inefficient power plants. They didn't do this just for a temporary clean air benefit around Beijing - - it was done permanently all across the country. They also closed inefficient foundries, furnaces, and cement makers in huge numbers.

The government is in talks with major manufacturers, provincial leaders, and experts from places like California's Energy Commission (the agency that is largely responsible for making the Golden State 40% more energy efficient than the rest of America) to squeeze out all of the inefficient machinery, power generators, and heating/air conditioning equipment. They're also doing the obvious - - one official told me that the government will replace 2 billion incandescent light bulbs in the next year with more efficient ones.

It looks like China has learned a lesson that we are slowly grasping in the US - - that efficiency is the cheapest form of energy supply and is good for the environment and economy simultaneously. The big difference is that too many US businesses still resist state and federal efficiency or renewable energy policies in the misguided belief that a short term cost is harder to bear than a long term benefit. Maybe after the Olympic fever subsides, it might be useful for execs from some of those entrenched businesses to take vacation in China and see/hear for themselves.