One of the topics of last Thursday’s presidential debates was the issue of setting preconditions before meeting with foreign heads of state.  Senator John McCain believes preconditions are necessary before sitting down with the likes of Mahmoud Ahmadinejad or Kim Jong Il, while Senator Barack Obama said he would not necessitate preconditions for his meetings with foreign heads of state.  Personal politics aside, the rhetoric was atypical for presidential debates.  I put the policy standpoints into my little store of information and then promptly forgot the information until today.

As many people know, yesterday was China’s 59^th Anniversary.  For the occasion, United States Deputy Secretary of State John Negroponte said some very nice words about China and U.S.-China relations.

Imagine my surprise when I read in Xinhua news that China’s Ambassador to the United States Zhou Wenzhong, although stating his good tidings to U.S.  Chinese relations, had some very interesting words to attach to his speech about the future of U.S-Chinese relations.  According to Xin Hua news, Zhou Wenzhong told U.S. guests that as long as both sides always bear in mind their strategic and long-term interests, abide by the three Joint Communiques, respect each other’s central interests, increase exchanges, dialogues and cooperation, handle differences appropriately, “we have every reason to expect an even better China-U.S. relationship in the future.

http://news.xinhuanet.com/english/2008-09/30/content_10134859.htm.

Perhaps I have not forgotten the presidential debate topics as aptly as I would have liked.  The words that Zhou Wenzhong used sounded strongly like preconditions to U.S.-Chinese relations. I had an instant flashback to the McCain-Obama debate.

Of course, these are not the types of preconditions that McCain and Obama were talking about when referencing Iran and North Korea, but they sound a bit threatening especially after the article harps on how the United States thinks China is the greatest thing since sliced bread.  Even though I am a great supporter of U.S.-China relations and trade, my American sensibilities are a bit perturbed.  The article made it sound like Zhou Wenzong was saying that U.S.-Chinese cooperation and trade would not continue amicably if Americans did not remember the basis of the relationship. Perhaps we have finally reached the time when there has been a shift in the power relationship between the United States and China.  Then again, maybe it’s just Xin Hua news.

Now that we’ve all gotten our fill of mooncakes in celebration of the Autumn Moon Festival, three very lucky Chinese Colonels are getting a little closer to the moon.  The three Colonels, Zhai Zhigang, Jing Haipeng, and Liu Boming, all fighter pilots of the PRC military, blasted off from Jiuquan spaceport in the northwest of China on Shenzhou VII yesterday.  It was the first time that the Chinese have sent a person into space since 2003.

For the last couple of years, the Chinese space program has done something extraordinary in the month following the Moon Festival (this might just be coincidence).  Last year, they practiced shooting a missile down.

While Russian and American enthusiasm for space exploration has cooled a bit in the last several years, Chinese enthusiasm is just getting off the ground.  Not only is there great general interest and great pride in the program, the Chinese are also willing to foot the bill even when they don’t know the numbers.  Because the Chinese space program is part of its military spending, the exact amounts spent on its space program are unknown.

In response to the successful mission, many American reporters asked the questions: will this spark another cold war, and should the United States be worried?

To the first question I would ask, with whom?  The Chinese are developing a space program.  Today, they achieved a space walk.  A space walk in itself is a big deal; however, let’s put this in perspective before Americans start getting scared.  Neil Armstrong walked on the moon in 1969.  I am not saying that the Chinese do not have the manpower and the resources to catch up quickly, but I am wondering with whom the space race would be.  The United States is so embroiled in its own financial crisis to even give space exploration a second thought right now.  The current economy just does not want to pay for another multi-million dollar rocket.  Russia remembers the collapse of the USSR too strongly to want to foot the bill for that race again.  Who’s going to race the Chinese into space?  Japan?  Germany?

To the second question, I refer you back to my answer to the first question.  The United States should recognize that the Chinese military power and technology is gaining on American technology.  Should we be scared? Perhaps its naivety, but I don’t see what there is to worry about.  Were we planning on fighting the Chinese?  I hope not because China own’s most of the United States securities and is one of our biggest trading partners. Especially with our financial situation, we can’t go to war with one of the hands that feeds us.

So, why do people get nervous when China starts shooting its rockets into space?  I’m not sure why Americans do, but the Taiwanese are a different story.  With missiles already pointed at the tiny islands and being under threat since 1949, the PRC’s showings of might have always made the Taiwanese nervous.  Even though good relations, such as the plane from Shanghai to Taipei, have been developing since the Guomingdang came back to power, there is always a chance that the PRC’s exhibitions of military might might actually throw Taiwan-China relations back to early 2000′s status.  Now that is something to worry about.

China has debated the role of foreign investment in its economy with a varying degree of intensity for many years, and a more restrictive view of foreign investment seems to be gaining traction.  The Antimonopoly Law seems to be a good example.  The law contains provisions that some mergers and acquisitions could be reviewed and halted in the name of national security, echoing earlier Chinese government rules calling for review of foreign acquisition of certain Chinese enterprises to judge whether they endanger national economic security.

Coca-Cola Co. plans to seek approval under China’s antimonopoly law for its $2.5 billion bid for top domestic juice maker Huiyuan, the final obstacle to what would be the largest foreign takeover of a local firm.

The European Union Chamber of Commerce in China said earlier that rising economic nationalism was deterring investment by European companies and hampering access to the domestic market.  In addition it stated the Huiyuan deal would be a litmus test of Beijing’s attitude toward foreign business.

Reuters has a backgrounder from a few days ago:
Some industry experts argue Beijing has no interest in killing a non-sensitive deal, but others say a public outcry will have regulators scurrying to protect a beloved national brand.

Chen Yuan, a lawyer at legal firm Linklaters, argued the high-profile acquisition may tweak nationalistic sensibilities but the government is unlikely to kill the deal without good reason, partly because the world is watching…

Donald Straszheim, vice chairman of Roth Capital Partners, was skeptical the deal would be allowed noting a regulation protecting “famous brands” from foreign acquisition.

Meanwhile, the Times of London mentions the vociferous discussion in China on whether this takeover would injure national pride:

Witness the current uproar in China over Coca-Cola’s bid for the Huiyuan Juice Group, dubbed by protesting nationalists a dragon head enterprise and saying that it would be traitorous to let it pass into foreign ownership.

Will Coca-Cola be turned down via the Antimonopoly Law?  We’ll soon see as the Chinese Ministry of Commerce will hand down its decision in a months’ time.

According to China.Org.Cn, the approval process for Foreign Invested Commercial Enterprises has changed for a second time this year.  The Circular on Delegation of Approval Authority on Foreign Invested Commercial Enterprises (FICEs) (Circular No. 51) went into effect on September 13, 2008.  It will have an affect on retail and wholesale enterprises in the television, telephone, mail order, internet and automat, and wholesale of audio-visual products industries, as well as commercial enterprises dealing in books, magazines, and periodicals.  Because of MOFCOM’s new national focus and the national need for censorship, the choice of industries that must continue to undergo a two-step process of approval is not surprising.  However, I digress.

Before Circular No. 51, all FICEs had to register with provincial COFTECs and then went through a final review by MOFCOM.  Now, everyone still has to register with the COFTECs, but only those industries listed above need to go through final approval with MOFCOM.

Xinhua News Agency stated that the change was made to simplify procedures.  In many cases, efficiency will probably result.  However, the Xinhua article released regarding Circular No. 51 was rather vague.  Some FICEs will most likely experience faster approval times.  However, it’s doubtful that the above listed industries will be the only industries that have a longer approval process.  MOFCOM has been trying to delegate its responsibilities to provincial COFTECs while focusing on matters of national importance.  Therefore, MOFCOM will most likely reserve the rights of final approval for larger FICEs and FICEs that take the form of large mergers and acquisitions.

Sam Crane at The Useless Tree posted two very interesting articles on multiculturalism in China, available at:

http://uselesstree.typepad.com/useless_tree/2008/09/can-a-black-man-be-chinese.html and http://uselesstree.typepad.com/useless_tree/2008/09/can-a-black-woman-be-chinese.html.

This newly vibrant topic is not limited to the blogging world.  The Economist also pointed to the growing Brazilian population in Dongguan in its article Brazilians in China at http://www.economist.com/business/displaystory.cfm?story_id=12209081.

Crane highlights several different issues of multiculturalism: (1) The existing nationalities within China including the Han Chinese and the 56 officially recognized minorities.  (2) People of mixed race who will likely appear in the future. These include the children of mail order brides from neighboring countries which has started to become popular to a growing, male-dominated population, as well as those children with a parent from the West or Africa and a parent from China.  And (3) The increased immigration of laborers, for example, the Brazilians discussed in the Economist article. In a culture which separates within its rhetoric the people of the Middle Kingdom (Chinese) and outside people (foreigners), the thought of acceptance might seem difficult.  Crane asks the question, How will China deal with the pressure to expand the racial and cultural definition of Chinese-ness?

I am reminded of the book Peony, by Pearl S. Buck, wherein the famous writer tells the story of a Jewish merchant family who had made its way to China after the Diaspora.  The novel tells the story of a young Chinese servant in the house who watches as the Jewish son assimilates with the Chinese population against the wishes of his mother, who is disparately attempting to keep the family separated from their Chinese neighbors.  The son must make a choice.  He chooses to be part of the only culture he knows while retaining parts of his mother’s culture.  As time goes on, the son and his sons become more and more Chinese, mixing with the Chinese around them until they have almost forgotten their own history.  Peony is based on the true story of Jewish merchants who entered China as early as the 8th century via the Silk Road.

Although well written, the articles at The Useless Tree make it sound as if multiculturalism in China is something of a novelty that should be expected to become common place in the future. Although the population of multicultural people might be growing or expected to grow at a faster rate than it has in the past, the Chinese have had immigrants come to their country for thousands of years. The interesting aspect of historical immigration to China is that it has usually ended with the foreigners’ assimilation into Chinese culture. This is what has happened in the past, and this is probably what is expected to happen in the future.
So, what is different now? Has technology changed the way that individuals identify themselves? Has a global society changed the way that individuals identify themselves? I would argue that nothing has changed in the department of immigration.
Although Crane says that China’s experience will be different from the experience of western colonial powers who have allowed the immigration of their colonized people, I would argue that China is not very different when it comes to immigrants because the immigrants are not very different. History will repeat itself. As time goes by and families stay in a country, they will become more and more Chinese.  We could take America as an example. You could ask most people in New York City, What are you in reference to their ethnicity?  You might get Italian, Irish, Egyptian, anything really. However, if you ask, have you ever been there?  The person might get offended, but the truth is many have not been to the country from which they state they originate.  Or if they have traveled there, it is typically a quick visit where they had the experience a typical American tourist would appreciate.  (I am not only generalizing, but I am speaking of people whose families have been in America for two or three generations.)  Although they have held onto bits of the culture within the family, the truth is they have become American and do not really know anything else.

There are people who have moved to China with no plans to return, who have children who are born in China, and plan to stay in China.  Those children are Chinese.  They will no doubt hold on to pieces of their parents’ culture, which will get handed down, but they are culturally Chinese.  Even if one parent is American, European, African, or Middle-Eastern, their children will be Chinese if China is all they know as home.

What the government classifies as Chinese is always different than the cultural expectation.  However, even if classified as a minority in China, strictly legally, that individual should not be treated any differently than a Han Chinese.  The Constitution of the PRC guarantees equal rights to all ethnic groups in China.  It also promotes the economic and cultural development of ethnic minority groups.  It might even be a perk not to be labeled a Han Chinese because ethnic minorities are not subject to the One Child Policy.

The point is that China is no different than other countries in their experiences with immigrant populations.  There are some immigrants that will come and go.  There are some that will stay.  Most of those that will stay will most likely assimilate.  The level of the assimilation might make a difference to the government when it comes to how Chinese one must be before the One Child Policy is applied.  However, that is a policy that the Chinese will no doubt come up with when it is time for it to be considered. Perhaps China will take its turn with the 1/16th rule.

Forbes and the Economist have recently ranked the business attractiveness of China’s bigger cities. The surveys looked at the quality of the labor force, business costs, market size and capitalization to find the top business cities in the country.  Via China.org.cn:

 
The national Bureau of Statistics (NBS) has published its own list of the 100 top cities with the best environment for foreign investment.  Seventy-one of the top 100 cities are eastern cities, with Shanghai, Nanjing, Suzhou, Hangzhou and the southern Shenzhen and Guangzhou ranking in the top ten. China’s central region has 16 cities in the top 100, while the western region has 13 Cities with lower external trade exposure have performed well during the recent slowdown in global growth, and are likely to continue to do well over the next decade as a maturing Chinese economy becomes less dependent on exports for growth.

All these lists may help remind people that there is more to China than Beijing, Shanghai and Guangzhou. China’s second-tier cities definitely offer tremendous opportunities for smart and resourceful U.S. businesses.

After 13 years on the drawing board, the Anti-Monopoly Law passed by the Standing Committee of the National People’s Congress, China’s top legislature, has come into effect on Aug. 1, 2008.  It is viewed as a milestone of the country’s efforts in promoting a fair competition market and cracking down on monopoly activities.

However, the first anti-monopoly case filed under the new law has been dismissed by the court.  Xin Hua reported on September 5th that [t]he No. 1 Intermediate People’s Court of Beijing on Thursday rejected an anti-monopoly case considered the first of its kind in China.  In a first-instance trial ruling, the court cited a factor that the plaintiffs filed litigation after its validity period expired as the reason for turning down the case. 

The plaintiffs were four Chinese anti-counterfeiting ventures led by Beijing Zhaoxin Information Technology Co., Ltd.  The plaintiffs claimed the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), an industry regulator, violated two Chinese laws including the anti-monopoly law in the latter’s efforts to popularize an online network known as Product Identification Authentication and Tracking System (PIATS) Xin Hua reported.

The fact that the Chinese Government was the defendant in the very first anti-monopoly case did not surprise me.  Although China is working on establishing a fair competition market economy, to date they have yet to do so.  The government authorities can easily and often utilize the administrative resources to control the market in major industries in China. I believe it to be the mindset of many Chinese that a monopoly in China is equivalent to an administrative monopoly.  Governments being sued in an anti-monopoly case under the new law are not by chance, and I expect to see more of the same in the very near future.