How we see American politics and society from our vantage in Beijing

WSJ Picks Up the Pom-Poms and Drops the Ball

In the Hutong
Listening to trance
1217 hrs.

The editors of The Wall Street Journal ran a laudatory article about U.S. SecTreas Hank Paulson, whom they are crediting for singlehandedly preventing a US-China blowup.

Whether the Secretary deserves sole credit for that effort or not is a matter of debate.

What IS clear is that The Wall Street Journal is getting a little lax on checking its facts:

So has China “cheated” in the trade arena by holding the yuan artificially low relative to the dollar? The yuan has been pegged at 7.92 against the dollar since the mid-1990s, and Beijing has begun to allow a modest fluctuation in the last year or so.

Um, no. I think they’re confusing Hong Kong and China. Just to clarify: the Hong Kong dollar has been pegged at around 7.7 to the US dollar since the mid-1990s, and the Chinese Yuan spent most of the past decade somewhere in the general neighborhood of 8.3 to the U.S. dollar (officialy, of course. The last half of the 1990s saw a burgeoning black market in dollars that pushed the actual exchange rate to 9.5 to the dollar on the streets of Beijing.) The Renminbi has already been allowed to depreciate 5% against the dollar, and IMHO Paulson’s predecessor gets whatever credit goes to the U.S. Department of Treasury for that, not Hank.

Gotta watch it guys. This kind of thing can blow the credibility of an important Op/Ed.

I Don’t Understand How Congressional Leaders Sleep At Night

In the Hutong
2048 hrs.

Tom Lantos earns himself the sobriquet of Chief Demagogue of the Democratic Party with his much reported remark to representatives of Cisco, Yahoo!, Microsoft and Google about their operations in China:

“I do not understand how your corporate leadership sleeps at night.”

The executives look suitably chastened. My suggested response?

“Trust me, congressman. I make fewer ideological compromises in a year than you do in a day.”

Yes, this is one of those comebacks that will never get used, but it underscores an important point: we all find ideological compromises odious. But sometimes they must be made in order to reach your eventual goal.

Nobody should understand that better than a legislator like Mr. Lantos. And that makes his statement disturbingly hypocritical.

America’s Weakness: The Coming Power Transfer from East Coast to West

Returning to the Vision that Brought Me Here
0019 hrs.

The Grouch is back from the U.S., and his tales of our mutual homeland leave me worried for the future of the nation. My three week trip to America Norte last September, driven by a desire to allow my mother to get to know her grandson a bit better, left be with an ill-defined foreboding. Initially, I wrote it off as little more than the disgust – nay despair – of a lifetime Republican who has watched The Party of Lincoln sold off in bits to wildcatters, fundamentalists , and robber barons.

But The Return of the Grouch has confirmed for me that my concerns were more general in nature. This goes deeper than Bush and his cronies and the war in Iraq – it goes to the hubris, the introversion, the moral collapse, the loss of purpose. If I were called upon to describe America today, it would be a nation that from all accounts feels like it has lost its way.

And yet, I remain decidedly optimistic.

Because what I think we might be seeing is the end of an era in America, not the end of America.

Let me explain.

Vision Quest

I spent the summer of 1985 in a fourth-floor one-bedroom apartment in an old building at Haste and Telegraph in Berkeley. I was there to take the cram session in Mandarin at Cal (two semesters of Chinese in ten weeks flat), and if that’s all I had taken away from that summer, that would have been enough.

The rigors of the course, long, solitary hours, the immersion in Chinese culture, and a view that took in a vista that included San Francisco, the Golden Gate Bridge, the Bay, and Mount Tamalpais from the huge windows behind my Kaypro 4 computer made a combination as remarkable as that of any drug. The whole summer was a bit of a vision quest, three remarkable months that set me on my life’s course and that left me completely changed.

On a late but sunny summer afternoon made cool by the breezes through The Gate across the bay I was struck by a vision of an America remade, a nation wrested out of its slumber by the economic onslaught of Dai Nippon and invigorated by Four Little Tigers and a Waking Dragon. And the clearer I saw this vision, the more I realized that the power structures guiding America, those that C. Wright Mills, F. Scott Fitzgerald, and Tom Wolfe described so eloquently, would never, NEVER get it.

I realized at the age of 21 that the foundation upon which American society, power, enterprise, culture, and martial thinking had been built for over two centuries was based fundamentally on the assumption of a world where the decision makers clustered around the North Atlantic ocean.

This is not simply a matter of geography – this, as anyone who has spent any time on both coasts of the United States will agree, is a matter of two radically different cultures.

And the cultural crucible that has produced ten generations of American leaders is no longer relevant to the nation. It has been so for a while, but Japan’s rise from ash-bucket to economic ass-kicker was the first sign that something was wrong.

I have to give it to the Eastern Establishment – they pretended to get it. They wrote and read books. They joined The Asia Society. They made trips to a place they still called “the Orient.” And they mouthed the same platitudes about the rise of the Pacific.

But they never realized that the emergence of Japan, then China, then India, meant that the Rules of the Game they and their families had played since the Mayflower were wrong. Even when their good buddies in Europe flipped them the bird over Iraq, they didn’t get it. Over the last quarter century, everything they knew about America and themselves went from right to wrong. All of the reasons that the people who have led America for 250 years have been allowed to run the show no longer make any difference.

(This is what Tom Barnett calls a “rule-set reset.” Big time.)

The conclusion I reached in this moment of clarity two decades ago was that IF America was going to play any kind of role at all in the New, New World Order, at some point the Eastern Establishment would lose it, and a Western Dynasty would have to rise to displace it.

America could no longer be run from the towers of New York, led from the marble halls of Washington, and taught by the ivy-covered brick of Boston. No way.

San Diego – LA – San Francisco – Portland – Seattle would replace Boston – New York – Philadelphia – Washington as the new axis. I-5 trumps I-95.

Pac-10, not Ivy League.

All those guys back East would slowly fade away. In their place would rise Out West.

Yeah yeah, I KNOW you’ve heard this all before. Lots of people have.

But were they really listening? Were they – are they – tuned into just what this is going to mean?

So I think back to my vision that day in Berkeley, and I think that maybe, just maybe, we’re seeing the ending of the old before the new emerges. This is NOT the decline of the American Empire – it is the fall of The Atlantic Empire. This could mean the end of America as a world power, not so much militarily but socially, economically, culturally. I’m not talking about the end of American socio-econo-cultural hegemony – that’s dead anyway, regardless of what Tom Friedman has to say about McDonalds.

If those of us who GET the new Imperium Pacifica step up and start talking about this, we have a chance to ensure that America as a distinctive, prosperous nation has a chance in the near future. Otherwise, it will go the way of the establishment that has led it.

A New China Hand Witch Hunt is Brewing in Washington

Silicon Hutong Command Post
Nearly Midnight

The Washington Times, that bastion of neocon thought, is running a story on a report that has been laid on the desk of Thomas Finegar, the personal analyst to U.S. Intelligence Czar that looks set to start a battle inside the intelligence community.

The report details over a dozen major U.S. intelligence failures over the last decade or so vis-a-vis China’s military improvements. That’s not the big deal.

What is scary is the blamestorming that has begun, with some blaming poor collection (a common complaint about the U.S. intelligence community,) and others, more ominously, are blaming a small coterie of China Hands in the community who ostensibly hid these developments in order to curry favor with China.

This is a dangerous accusation. We’re sliding into McCarthy territory here, regardless of whatever may have motivated the reports authors. It stretches credulity to believe that such a conspiracy existed – and it will be miserably difficult to prove.

In the meantime, the U.S.’s ability to monitor China will take a hit as the analysts andcollectors spend more time worrying about saving their jobs than doing them.

Attention Journalists: Please Don’t Ask Any Questions. Just Write Down What Executives Tell You

The Bunker in the Hutong
2141 hrs

The San Francisco Chronicle, once again earning its sobriquet of “Pravda-by-the-Bay,” published an article on tomorrow’s Hua Yuan Science and Technology Conference in Santa Clara. As a part of that interview, it published two quotes that a little healthy journalistic skepticism might have questioned, and turned into a better story.

First, the reporter, Vern Kopytoff, couldn’t even bother to get the name of the organization right (he spelled it “Hua Yan.” Hello? Fact check? As an aside, he also missed the point that Hua Yuan is a modern-day equivalent of a Chinese self-help association that taps U.S. companies with lots of money and big China aspirations for support. Dig a bit there, boy. There’s an interesting story here…Is this organization legit and above board, or is there something Masonic happening here?

Second, Mr. Kopytoff dutifully took down every word when Fang Deng, the VP for Strategy of Juniper Networks, regurgitated the standard party-line that:

U.S. firms expanding Into China can’t expect immediate success. Rather, it could take a U.S. firm years to turn a profit after learning the Chinese way of doing business.

With respect, wrong on two counts.

Companies don’t have to spend years to build a business in China. If they hire smart people and get professional advice they can accomplish a lot it a little time. It’s the ones that assume they need to lose money and be stupid for 35 years that never seem to get their business in China off the ground. Your average well researched, well-thought out business plan that incorporates the kind of savvy a company SHOULD have before investing a nickel in China should be cash-flow positive within 18 months.

That does NOT mean that there is some special Chinese way of doing business. Now, the locals will try to convince you of that – they’ve been singing that tune for over a century, and to a culture-shocked executive from San Jose or Dayton, that sounds reasonable. It’s also the first step toward disarming you and then taking you for all you’ve got.

Any U.S. executive (and I count Mr. Deng as one, despite his surname) who tries to convince you otherwise either a) buys into that because he’s trying to justify his company’s own crappy performance in China, or b) is being disingenuous and saying that in the hopes that his competitors are listening and won’t try to come into China. Given Juniper’s more than satisfactory performance in China, I would vote for him spreading disinformation.

I don’t blame Mr. Kopytoff for that oversight. I blame the Chronicle for sending a reporter who clearly does not have enough knowledge about China to write a decent story. Which of cours assumes the Chronicle even has a reporter who understands that there are differences between Stockton St. and Jianguomenwai Avenue.

It gets worse.

Then we have Charles Zhang, CEO of Sohu.com, who proceeds to dis U.S. Internet firms in China, suggesting they’re not doing quite well. One would think that the reporter would hear a voice in his head saying “hmm, but this is a guy talking about his competition. Of COURSE he’s going to say that.”

No evidence of healthy, journalistic skepticism.

No wonder more people are turning to blogs for information and ignoring traditional media.

You’ll Be Happy to Know

In The Hutong,
Prior to Sunset on Friday

While I am professionally constrained from making any form of comment about the departure of Carly Fiorina from H-P, I will say that I had a good laugh at this Dow Jones piece quoting Kevin Rollins suggesting that there was “probably” an opportunity for Dell in the H-P turmoil.

In other words, we can’t really see one, but now that you mention it, we’ll do all we can to sow fear, uncertainty, and doubt in the marketplace, and thanks for your help.

Not that it will make any difference here. As far as consumers are concerned in China, Dell is in headlong retreat, regardless of their worldwide market share numbers. And consumer sentiment tends to be pretty catching in these parts.

Shrimp Joins Steel as a Sino-U.S. Irritant

One week after the U.S. gets all steamed about the revocation of Pfizer’s Viagra patent in China, sending China’s critics into a media tizzy, the United States government masterfully demonstrates its possession of the free-trade moral high ground by slapping 100% duties on Chinese shrimp, then turning around and passing that money directly to American shrimpin’ boat captains (thanks to the Byrd Amendment, which the U.S. has been ordered by the WTO to revoke and which even Forbes excoriated on its passage) This largesse for America’s fishermen comes on top of state subsidies they receive. BusinessWeek suggests that this will raise the cost of shrimp to the American consumer by 44%.

Notwithstanding whatever case there may be to offset hardships felt by U.S. fisherman and China’s fairly mild initial reaction , the move is the latest in a series of rulings likely to complicate the job for U.S. trade negotiators seeking to protect a broad range of industries by opening the door for trade in China, and will likely raise the tit-for-tat battle for mutual market access with the PRC.

While the case for an industrial policy is still weak in the U.S. (given that to many Americans such an approach would reek of favoritism, which is ostensibly un-American,) the U.S. is going to have to begin making unpleasant choices. A world of free trade does not permit a nation to demand open access for some of its industries and protect others. Somewhere, somehow, something is going to have to give, whether it is textiles, cotton, steel — or shrimp — in the name of access for automobiles, aircraft, high-technology, and a host of other industries.

Interesting reading on this is Robert Lawrence‘s seminal debunking of the hollow-America myth in his 1984 work Can America Compete . I’m not normally a fan of Brookings Institute authors, but this little gem is a rare and worthy exception, and Lawrence (currently a senior faculty at the Center for Business and Government at Harvard’s Kennedy School) defies the liberal bents of his institutional affiliations as one of academe’s leading free trade advocates. He quite nearly makes a convincing case for an industrial policy, and this was at a time when there weren’t very many major U.S. industries to favor — in 1984, IT was a tiny fraction of its current size and Microsoft wasn’t even a public company.