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China Analysis n°27 Climate Policies after Copenhagen
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China Analysis n°24 China and India: Rivals always, Partners sometimes
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Asia Centre: From Inception to Future
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To order Shaping China's Energy Security : The Inside Perspective
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Forum on China-EU Strategic Partnership: Turning Challenges into Opportunities
CLIMATE POLICIES AFTER COPENHAGEN 1. Lessons for China from the Copenhagen Summit 2. Carbon tax: an appraisal of the debate 3. Towards a low-carbon economy? 4. The Copenhagen summit viewed as a success.
[download China Analysis n°27]
Information - registration: chinaanalysis@centreasia.org
June 16, 2010, ecfr.eu
A new policy brief: "A Global China Policy" by ECFR Senior Policy Fellow Francois Godement.
The paper outlines the recent assertive turn in Chinese diplomacy and recommends the EU to reframe its China policy in global terms. It urges Europe to consider the role of China in all foreign policy issues and world regions, whilst stressing the need for more effective EU cooperation in dealing with Beijing. The brief also calls upon the EU to build coalitions with others affected by China's rise and suggests that it should reach out to those new actors within the Chinese system that may share European interests.
According to Francois Godement, the EU should take advantage of the few areas where it has real leverage, and focus its relationship with China around the following five issues: trade and investment policy, industry and technology, climate change, nuclear proliferation, and human rights. Ahead of September's European Council discussions on relations with strategic partners such as China, Francois Godement advises Europe's leaders to waste no time in understanding how to get the most out of relations with Beijing.
The results of the research conducted by Asia Centre are published and distributed to its members and partners.
- E-bulletins, China Analysis – Les Nouvelles de Chine and Japan Analysis – La Lettre du Japon, collectively written based on the local press providing unique access to current affairs and opinions from the region;
- An Asian Outlook in association with the Documentation Française publishing house analysing political, economic and social events from a middle and long term perspective and offering a wider view of the Asia Pacific;
- Notes and Event Summaries: In depth thematic studies followed by an expert debate, and reported concisely.
April 16, 2010, voxeu.org
The delayed announcement of a US decision over China’s exchange-rate policy has stoked the fire of debate over trade relations. This column argues that the efforts of China’s main trade partners – the EU as well as the US – would be better spent on ensuring a steady rebalancing of China’s economy towards greater private consumption and imports rather than simply currency revaluation.
Up to the summer of 2008, qualifying China’s economic strategy as a case of mercantilism looked like an open and shut case. China’s global trade surplus had been snowballing, particularly with the EU and the US. Its external account surplus exceeded 10% of GDP, a unique case made even more unique by the huge population size of China – we are not talking about a city emporium economy such as Hong Kong or Singapore, where re-export is a way of life and external trade a multiple of GDP. Since 1994, a peg to the currency of the US, which had the largest symmetrical trade deficit and current-account deficit, literally ensured that the trade imbalance would only get larger until something gave way in either economy.
In the race to the bottom that characterises competition under conditions of globalisation, China seemed to lead the way. Household income relative to GDP had declined to a record low share of 34 %. That China had conceded, after years of stonewalling, a crawling revaluation of its own currency against the dollar looked suspiciously like an indirect admission of guilt. The revaluation was certainly not on the scale of what was needed to take care of the problem, but it was a political recognition of its existence. This revaluation did reach 21% between 2005 and 2008, but at a time when the dollar had entered into a steep decline against the euro, the yen and other currencies. China’s competitive advantage was mostly preserved, albeit redirected.
Even then, various arguments were used to counter the accusation of a mercantilist use of currency valuation to capture surplus value. China was really assembling final products from goods and parts imported from the rest of East Asia, resulting in a triangular trading pattern. Foreign firms were involved in as much as 60% of China’s exports – and the slice of added value accruing to China could be quite small. The classic example used to be the Nike shoe, where design, process, distribution and advertising made up most of the costs, and manufacturing in China was trivially low. The contemporary example is Apple’s iPhone, assembled in China by a Taiwanese firm from imported parts, where it is claimed the Chinese added value is no more than $4 per phone.
Two macroeconomic arguments were also used to defend China’s trade surplus. One was the asymmetry resulting from the conditions of China’s admission to the WTO. As a developing country, it had not had to open up services, capital markets and public procurement, while its massive labour supply ensured a nearly flat level for wages in the assembly sector. The second argument, still widely used, results from the asymmetry with the US itself. For cognoscenti, the argument is not about currency manipulation and mercantilism or protectionism. “It’s the imbalance, stupid”, is the prevailing assumption. Since the US had chosen to run a deficit and favour spending and borrowing over saving and producing, the resulting financing need had by definition to be made up by a corresponding supply from China. The imbalance between US spending and Chinese saving was the factor behind the trade surplus, and not a mercantilist monetary policy. And US economic policy was driving the trend, not China’s own decisions.
This argument was never correct, since other major economies also run major currentaccount surpluses with the US, but not necessarily a trade surplus. Japan may not be a good comparison point, since one can argue that a large share of its trade surplus with the US is acquired indirectly, via reexports through China. But Europe – which has a strong private savings rate and where private capital flows to the US have always been at least as substantial as China’s public flows – nonetheless does not run a major trade surplus with the US, and it now experiences the same level of trade deficit with China as the US. By providing capital to the US and a market for China’s exports, Europe may in fact have unwittingly been the third party that bears a large share of the adjustment in the global economy. Today’s situation for Europe’s public deficits results from what appears superficially as a balance. Large European private savings are exported rather than invested, and lowpriced imports from China are preserving consumer purchasing power. In the short term this is a balance. Lower spending allocation is compensated by lower prices for coin summer goods. But in both cases, the diminution in economic activity impairs public fiscal resources.
Sharpened focus
Until 2008, the USChina imbalance has only mattered politically as a bilateral issue, with the EU, Japan (and others) as bystanders, even when they bore some of the adjustment. Politically, the goals of the Bush administration with China were such that monetary and trade complaints came a distant second, after strategic constraints such as Iraq, Iran, and North Korea.
The global crisis of 2008 has changed all this in a fundamental way, and the case for or against China must be revisited in view of new trends and policies. First, 2009 has been an exceptional year for China’s growth, where net foreign trade has made a negative ( 4.8 %) contribution to GDP, while domestic growth has skyrocketed (+13.9 %). This was made possible by China’s low level of central public debt. The giant size of China’s stimulus and lending “plan” in 2009 (in fact, an irrational and exuberant unleashing of bank lending on top of a powerful programme of public infrastructure and consumer incentives) was made possible, and is hostage to, a policy of nearzero interest rates in China. This is what makes the sterilisation of massive foreign trade surpluses into dollar reserves painless for China’s central bank, because the interest it pays on domestic borrowing remains lower than the interest it receives on its dollar lending. This policy is biased towards domestic hyper growth, since it allows for quasifree access to capital resources, much like the Japan of the late 1980s. Hence the talk about a giant lending and real estate bubble. In turn, China’s gigantic foreign currency reserves insure the country against a crash landing. However large the true lending liabilities of China may now be (and they include a lot of local indebtedness as well as crosslending by banks at unlimited levels), the possibility of buying back yuans and draining bad debt remains. Opacity and centralisation also make it highly unlikely that a Chinese Lehman Brothers case might happen.
On the surface also, China’s growth has began rebalanced towards domestic consumption, as evidenced by huge growth rates for housing and auto industries, by a rise in social outlays, and by an increased share for private consumption in China’s GDP. Helped by a global trade recession, China’s political economy might be entering a virtuous circle, where the dependence on external growth is slowly decreasing. The currentaccount surplus has fallen from 9.4% to 5.8% of GDP in 2010, a high but not unsustainable rate.
Yet the devil is the details. China’s household income is decreasing relative to GDP, even in 2009. What is increasing is borrowing by households (as well as by companies and administrations), and also massive infrastructure spending– which includes outlays indistinguishable from individual spending. China has made a huge and concerted effort to buoy its domestic economy, and as such it has contributed to increase global demand minus China (when in all preceding years it decreased global demand minus China). But it is a voluntary and artificial policy, which carries with it bubbles and excess investment. The size of China’s infrastructure investment is such that it has fuelled a new boom for global energy and raw material prices.
Ridiculous consequences
Here we come to a ridiculous consequence. The US Treasury was not asking seriously for a renminbi revaluation when China’s policy was decidedly mercantilist. Now it is doing so in the very month when, for the first time in six years, China’s trade balance turns negative, and China is giving unofficial hints it might resume a crawling peg to the dollar. True, there is an artificial element in this trend. To a degree, China can turn on and off its purchases of energy and raw material, stocking and destocking when it sees fit. Timing purchases and a trade deficit for Secretary of the Treasury Tim Geithner’s visit to Beijing seems astute. Nonetheless, China’s macroeconomic policy and balance have changed. Public, banking, and private indebtedness are growing. Wage flexibility downwards – to retain an external edge – reached a peak in late 20082009. It may well be that China’s huge leap forward in infrastructures (25 airports, 50,000 kilometres of bullet trains, a gigantic expressway system, all of it underpriced to users) brings with it a new advance in productivity. Nonetheless China is consuming everincreasing amounts of capital investment. With it have also come wage increases, particularly in the exportprocessing sector. This is only the second time in the past 25 years that these wages rise quickly, the last occasion had been in 20072008.Labelling China as a currency manipulator or to stick the label of mercantilism on its economic policies is not without validity. But the consequences should be clearly seen. Either the label comes with no penalties and it simply undercuts future bargaining power visàvis China, or it does trigger trade sanctions with teeth. The EU, which has no permanent need for Chinese public lending, might well enact them before the US does. The economic and psychological shock from a ceiling on external demand would prick China’s confidence bubble, particularly the socalled “middleclass” borrowing and housing boom. The resulting bust for debtors – public and private – would precipitate the sale of currency reserves by China’s central bank in order to shore up domestic reserve ratio and bail out some imprudent lenders. True, in previous cases China has shored up banks with foreign currency reserves. But this time, the magnitude of the debts and the claims that can be made would necessitate a conversion of the reserves into domestic currency. Since an investmentled domestic boom would end at the same time, deflation would occur much more surely than inflation. Rebalancing towards domestic growth and consumption would end. Freed from excess currency reserves, the renminbi would be likely to fall, not to rise. China’s export competitiveness would increase again, bringing exactly what we are trying to avoid – another phase of exportled growth.
There is every indication that China’s leadership is trying to steer a middle path – a token adjustment to the exchange rate, with a widened exchange band (we don’t know if it will be a fixed or crawling exchange rate). Given the present trade results, it is likely that this will result in almost no currency appreciation. So long as these trends remain incremental, Chinese purchases of US public debt will not diminish substantially, thus helping to stabilise international finance.Justified by their own investment and lending bubble, helped by an apparent trade deficit and by the reluctance of China’s neighbours to bear the consequences of a trade war on their own investment in China, the country’s leaders are unlikely to accept a significant revaluation of the renminbi. That semiofficial spokesmen and second track figures are hinting a measure of goodwill is mostly a show of public diplomacy in advance of Secretary Geithner’s China trip.
A better solution
The efforts of China’s main trade partners – the EU and US – would be better invested at this point on ensuring a steady rebalancing of China’s economy towards genuinely private – e.g. household purchasing power and consumption. Reaching a “second opening” of the Chinese market (after the “first opening” with WTO accession in 2001), with better access to China’s capital market and service sector, public procurement, carries more promise than the simple tool of currency revaluation.Diversifying the domestic avenues open to China’s savers would likely be the greatest service that China’s partners could render to achieve both a rebalancing of China’s economy and ultimately a sustainable rise in domestic consumption and imports. Until now, China’s savers have been the biggest losers in the game, and a trade war would exacerbate their losses, as they are ultimately the deep pockets into which the Chinese government is digging to sustain economic growth.
ANALYSIS OF CURRENT AFFAIRS
1. Strengthening the political leadership
– Guibourg Delamotte, Asia Centre
2. The proposed reform to the Japanese civil code: should the age of majority be 18?
– Isabelle Konuma, Lecturer at the National Institute of Oriental Languages and Civilisations
POINTS OF NEWS
Yamaguchi Jirô, «The democratisation of the Japanese Democratic Party», Sekai, March 2010, pp. 47-53 (translated from the Japanese by Pierre Fauquet, Asia Centre).
Wada Haruki, Fujiwara Kiichi, and Kan San-jung, «The reality of Japan’s colonisation of Korea» Sekai, January 2010, pp. 144-158 (translated from the Japanese by Guibourg Delamotte, Asia Centre).
Takahashi Tetsuya, «Discussing Japan’s wartime responsibility in 2010», Sekai, January 2010, pp. 181-192 (translated from the Japanese by Guibourg Delamotte, Asia Centre).
For more information or to sign up: japananalysis@centreasia.org
ANALYSIS OF CURRENT AFFAIRS
1. The Minshutô defeats the LDP
2. The Minshutô’s first reforms
3. An anti-American posture?
4. The post-electoral balance in the Minshutô
5. The LDP prepares for a come-back
6. Towards a renewal of the political scene?
POINTS OF VIEW ON CURRENT AFFAIRS
Asai Motofumi, «Leaving behind an international political outlook based on power - a close look at the Democratic Party’s diplomacy and security policy», Sekai, November 2009, p. 147-156 (translated from the Japanese by Pierre Fauquet, Asia Centre).
Îo Jun and Nonaka Naoto, «In what ways will the merging of the government with the majority party lead to policy changes?», Chûô kôron, November 2009, p. 74-83 (translated from the Japanese by Guibourg Delamotte, Asia Centre).
Tsuji Takuya, «Ranking prefectures in terms of birth rates and population growth», Chûô kôron, October 2009, pp. 72-81 (translated from the Japanese by Pierre Fauquet, Asia Centre).
Ishiba Shigeru, «The LDP will not be able to recover by appealing to hidebound nationalism», Chûô kôron, November 2009, p. 92-99 (translated from the Japanese by Guibourg Delamotte, Asia Centre).
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CLOSE UP ON THE NEWS
1. The electoral prospects of Minshutô’s (not so) new leadership
2. The repercussions of the North Korean crisis
POINTS OF NEWS
Kitaoka Shin’ichi, «The end of the Tanaka style of politics, and the newdirection», Chûô kôron, May 2009.
Gabe Masaaki, Maeda Tetsuo, Kamaki Kazuhiko, and Koseki Shôichi, «Re-thinking the policy on national security», Sekai, July 2009.
Okada Katsuya, «Devising a ‘Japan in Asia’ policy on national security»,Sekai, July 2009.
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December 8th 2009
Did anybody notice the recent EU-China summit that took place at the end of November in Nanjing? No? The media seemed more concerned with the nominations at the Commission and EU Council. Yet the summit was seen as important enough to warrant Jose Manuel Barroso, along with Sweden's prime minister Fredrik Reinfeldt and foreign minister Carl Bildt, making the trip to see Premier Wen Jiabao.
Continue reading on www.ecfr.eu
November 19-20, 2009, Beijing
The strategic significance of the China-EU partnership
by François Godement, Professor and Director, Asia Centre at Sciences Po, Senior Fellow of the European Council on Foreign Relations
Strategic partnerships are not self-evident enterprises in international relations, especially between states with different political systems and societies. To make a few comparisons, China and Russia have had indeed since 1996 a strategic partnership “of coordination”. Certainly, the strategic nature of the relationship cannot be put in doubt: important arms transfers, joint stands on many important strategic issues are proof enough. Yet the partnership itself is limited. Its economic content is dwarfed by far by China-EU or China-US, or China-Japan relations, and even the energy content of the relationship proves certainly a complement, but not a foundation, for China’s energy security. With the US, precisely, China has had a partnership after 1996, but it has never been deemed “strategic” until President Obama, on the eve of this week’s trip to China, declared that this was his intent. With Europe as well as with the United States, China has a strategic dialogue. It is worth noting that China and Asean also have a “strategic partnership for peace and cooperation”. Yet Asean, by virtue of its own charter, is not designed to be a strategic actor in the full sense of the word. On the contrary, its spirit and intent have been to promote multilateralism in the regional context, neutrality and literally all non-strategic means of international relations, starting from confidence-building and interpersonal relations. From these comparisons, we should perhaps reflect on the fact that a “strategic partnership” may have different meanings in different contexts. To add to the confusion, one might note that Europe and the US have never concluded any formal “strategic partnership”. Yet there is little doubt their relations are both strategic and substantial on every front. Between China and Europe, a declaration of intent on a strategic partnership was affirmed by both sides in October 2003. Subsequently, this has remained an objective to which both sides refer from time to time, but it is not fully established in name, nor perhaps in reality.
Should we care? Yes and no, or rather, no but yes.
This issue of China Analysis, jointly published with the European Council on Foreign Relations (ECFR) focus on the latest developments of the China / India relationship at a time of increased territorial tensions.
CHINA AND INDIA: RIVALS ALWAYS, PARTNERS SOMETIMES 1. A fraught political relationship 2. Despite strong growth, trade remains modest 3. US and India: a partnership at China’s expense 4. Betting on Pakistan.
Information - registration: chinaanalysis@centreasia.org
October 2009: A special edition of the Journal of Current Chinese Affairs - China Aktuell compiling the contributions at the international seminar on contemporary China organized by Asia Centre during June 2008 within the framework of its brainstorming group on contemporary Chinese affairs, “Politics in the Hu Jintao Era : CCP’s Adaptation to Domestic and Foreign Challenges.”
Articles recognized for their academic value by their authors’ peers, and designed to give an account of current academic expertise concerning the most important issues of contemporary China: Cheng Li « The Chinese Communist Party : Recruiting and Controlling the New Elites », Heike Holbig, « Remaking the CCP’s ideology: determinants, progress and limits under Hu Jintao», Jean-Pierre Cabestan « China’s Foreign and Security Policy Decision-Making Processes Under Hu Jintao », Chao Chien-min, Chang Wu-yue « Managing stability in the Taiwan Strait: non-military aspects of policy towards Taiwan» ; Karl Halding, GUOYI Han, Marie OLSSON, « China's Climate and Energy Securities Dilemma: Shaping a New Path of Economic Growth».
Journal of Current Chinese Affairs - China aktuell
China’s Politics under Hu Jintao
Mathieu Duchâtel, François Godement
Abstract
This special issue focuses on Hu Jintao’s first mandate in power, between the Sixteenth and the Seventeenth Party Congress (2002-2007). It considers two intertwined issues: power viewed through the lens of party politics, and actual policy changes that may have emanated from a mandate initially loaded with expectations. Besides the domestic dimensions of elite politics and ideological change, two central aspects of Chinese politics, the key question tackled in this issue is the ability of a new general secretary to transform past policies, especially in the realms of foreign affairs and national security since they are by tradition – and constitutionally – the responsibility of China’s paramount leader.
The Chinese Communist Party: Recruiting and Controlling the New Elites
Cheng Li
Abstract
This article explores two interrelated aspects of the new dynamics within the CCP leadership – the new elite groups and the new ground rules in Chinese politics. The first shows profound changes in the recruitment of the elite and the second aims to reveal the changing mechanisms of political control and the checks and balances of the Chinese political system. The article argues that the future of the CCP largely depends on two seemingly contradictory needs: how broad-based will the Party’s recruitment of its new elites be on the one hand and how effective will the top leadership be in controlling this increasingly diverse political institution on the other. The emerging fifth generation of leaders is likely to find the challenge of producing elite harmony and unity within the Party more difficult than their predecessors. Yet, the diverse demographic and political backgrounds of China’s new leaders can also be considered a positive development that may contribute to the Chinese-style inner-Party democracy.
Remaking the CCP’s Ideology: Determinants, Progress, and Limits under Hu Jintao
Heike Holbig
Abstract
Two decades after the predicted “end of ideology”, we are observing a re-emphasis on party ideology under Hu Jintao. The paper looks into the reasons for and the factors shaping the re-formulation of the Chinese Communist Party’s (CCP) ideology since 2002 and assesses the progress and limits of this process. Based on the analysis of recent elite debates, it is argued that the remaking of ideology has been the consequence of perceived challenges to the legitimacy of CCP rule. Contrary to many Western commentators, who see China’s successful economic performance as the most important if not the only source of regime legitimacy, Chinese party theorists and scholars have come to regard Deng Xiaoping’s formula of performance-based legitimacy as increasingly precarious. In order to tackle the perceived “performance dilemma” of party rule, the adaptation and innovation of party ideology is regarded as a crucial measure to relegitimize CCP rule.
China’s Foreign- and Security-policy Decision-making Processes under Hu Jintao
Jean-Pierre Cabestan
Abstract
Since 1979, foreign- and security-policy-making and implementation processes have gradually and substantially changed. New modes of operation that have consolidated under Hu Jintao, actually took shape under Jiang Zemin in the 1990s, and some, under Deng Xiaoping. While the military’s role has diminished, that of diplomats, experts, and bureaucracies dealing with trade, international economic relations, energy, propaganda and education has increased. Decision making in this area has remained highly centralized and concentrated in the supreme leading bodies of the Chinese Communist Party (CCP). However, China’s globalization and decentralization, as well as the increasing complexity of its international interests, have intensified the need to better coordinate the activities of the various CCP and state organs involved in foreign and security policy; hence, the growing importance of the CCP leading small groups (foreign affairs, national security, Taiwan, etc.). But the rigidity of the current institutional pattern has so far foiled repeated attempts to establish a National Security Council.
Managing Stability in the Taiwan Strait: Non-Military Policy towards Taiwan under Hu Jintao
Wu-ueh Chang, Chien-min Chao
Abstract
China’s Taiwan policy has been one of coupling intimidation (the “stick” approach) with coercion (the “carrot” approach), a policy mix which, in the near term, is not likely to change, as is evidenced by the passage of the “Anti-Secession Law” in March, 2005. However, under Hu Jintao, the focus has been on pragmatism. The warm atmosphere that presently reigns in the Taiwan Strait area is unprecedented. Further talks are expected before the two cross-Strait leaders are slated to step down, simultaneously, in 2012. An era of reconciliation and negotiations has dawned. For the first time there is consensus regarding norms of interaction between the two sides. Cross-Strait relations have stabilized after years of tumult. More open, stable and predictable cross-Strait relations are in the interests of both sides. Difficulties surely lie ahead, but they will be dealt with in a different manner than what has been witnessed in the past.
Book review from Kun-Chin Lin, National University of Singapore.
Shaping China's Energy Security: The Inside Perspective, edited by Michael Meidan. Paris: Asia Centre/Centre etudes Asie, 2007. 239 pp. €22.00 (France), €25.00 (Europe), €26.00 (elsewhere) (paperback).
This edited book contributes significantly to our understanding of energy policies and politics in China. Divided into four parts, it covers a broad range of topics and analytical approaches, including institutional analysis of the regulatory framework, sectoral analysis of the coal, oil and power industries, policy analysis of energy tax and environmental regulation, and normative discussions of China's potential contributions to international diplomacy on global warming. Prominent scholars from the UK, France, the US, China and Japan provide a lIseful representation of the range of research on China's energy sector...
The overarching theme is the Chinese state's capacity to address the growing sense of energy insecurity-defined as "strategic threats" posed by supply disruptions, efficiency and sustainability in energy usage, price volatility, and environmental degradation (p. 16). The authors encourage us to think beyond the conventional emphasis on supply-side policies and procurement, to investigate the political choices emerging from the key regulators' strategic interactions with stakeholders and to incorporate the macroeconomic, social and foreign policy, and fiscal and legal dimensions of energy security. They highlight the unresolved issues of corporate governance and economic efficiency in the aftermath of the restructuring of the national oil and petrochemical corporations (NOCs) and privatization of coal sectors in the late 1990s.
Chapter 1 by Michal Meidan, Philips Andrews-Speed and Ma Xin proposes an analytical framework for energy policy-making, listing and briefly characterizing the central state regulators and a variety of stakeholders. Not surprisingly, the main relationship affecting policy output is that between ministries and state-owned firms such as the national oil corporations. The chapter could benefit from greater clarity about the interests of the regulators, in particular by differentiating clearly between economic and technical concerns on the one hand and fiscal imperatives on the other. This neglect of the fiscal aspects of energy policies is a problem throughout the book.
Meidan, Andrews-Speed and Ma are absolutely right that the cherished "fragmented authoritarianism" model of bureaucratic politics does not account adequately for the emerging regulatory landscape on energy policies. Simply stated, there are more autonomous interests and energy-related issues to consider today than there were in the late 1980s. The issue linkages implied in this more inclusive analytical framework are laid out for three policy bundles encapsulating different statist priorities-energy supply, the relationship between energy supply and efficiency, and the relationship between energy efficiency and environmental protection (pp. 58-61). I would have liked to see a critical assessment of the key predictions of the fragmented authoritarian model; however, this chapter serves as a reference point for future theory-building.
Erica Downs' work on the relative autonomy of NOCs is highly respected; in Chapter 2 she turns to the supply side of policies and regulation. Her account adopts the language of the fragmented authoritarian model, but her findings push the model's boundaries. I would have liked to see more precision about the current functions of the National Development and Reform Commission (NDRC), and an assessment of the relative rule-making activism and enforcement presence of the agencies across issue areas would be informative. Downs underscores the continuing usefulness for elite promotion of work experience in the oil sector - does this pattern suggest factionalism with an "oil clique" as its base? Do regulators consider job prospects in the NOCs when they design or enforce policies? These questions relate to an important debate on the emergence of the regulatory state in China.
In Chapter 3 Brian Ricketts of the International Energy Agency analyzes the international and domestic market characteristics of coal production and trade. While coal pricing and coalmine ownership have been significantly more privatized than in the oil and petrochemical sectors, Ricketts rightly points out that coal trade remains under the oligopolistic control of state-owned trading companies. In addition, serious shortcomings in health, safety and environmental regulation and in transport infrastructure have discouraged investors. A greater focus is needed on the responses of local governments to Beijing's attempts to consolidate the market, favor large-scale mines and increase regulatory enforcement; the concluding chapter mentions the need to consider the local state (p. 226).
Chapter 4 by Shi Dan, a leading expert on China's energy, hints at the redistributive conflicts behind domestic-international price gaps and Beijing's adherence to administrative controls over price adjustments. This chapter captures succinctly the essence of the structural problems facing the oil industry since the last market consolidation and asset restructuring of NOCs in 1998. As China moves toward price convergence with global prices while keeping the NDRC firmly in control of price-setting, it exposes itself to contentious redistributive politics in times of price fluctuations. The oligopolistic market structure has also impeded the emergence of private competitors and the adoption of technology and production methods to improve efficiency in subsidiaries. Her suggestion that the government allocate funds for strategic petroleum reserves is particularly apt in the current context of depressed oil prices, but her additional suggestions for market-determination of oil prices and encouragement of private capital in exploration would be difficult to implement. If, as Downs has argued, the NOCs have leveraged their autonomous political influence, then such changes would be possible only if they can provide private gains for the NOCs.
Chapter 5 by Wei Bin on the power industry reflects the official perspective on the key reform measures in the past decade and the future reform agenda. Chapter 6 by Yang Lan, Mao Xianqiang, Liu Zhaoyang and Xing Youkai applies a general equilibrium model (using the base year 2000) to simulate the effects of an energy tax on macroeconomic indices, energy consumption, saving and demand, and the environment. The model's assumptions are certainly open to dispute. The prediction, not surprisingly, is that the higher the level of the energy tax, the greater the negative impacts on the national economy, but also the more likely that industries and households will adjust their energy usage and technology toward cleaner fuel. The authors argue that the energy tax should be supplemented by short-term side-payments to disadvantaged users and additional incentives to promote green technology. This has not been done with the recent implementation of the national fuel tax.
Chapters 7 to 9 adopt a legalistic perspective on China's energy policy in a broader geopolitical context. In Chapter 7, Wang Mingyuan identifies an interesting paradox in the legal foundation for China's implementation of "clean development mechanisms" (COM): the core domestic laws on CDM rest on China's commitments as a contracting party to the Kyoto Protocol. Furthermore, the 2004 Management Measures invite bureaucratic entanglements involving many major and supporting agencies. The chapter's faint condemnation of private interests unfortunately precludes a more thoughtful discussion of incentivizing firms and encouraging private-public partnerships in CDMs.
Chapter 8 by Yu Hongyuan provides an overview of China's involvement in international regimes concerning climate change. The central theme is China's willingness to recognize the negative impacts of its rapid growth and to come to terms with other countries' demands. I would have liked to see a discussion of whether China's position on climate change is either complicated or facilitated by participation in general multilateral institutions such as ASEM and APEC. Yu rightly points out that domestic empirical understanding of the actual impact of climate change remains woefully inadequate, hindering informed and accountable pol icy-making.
The final chapter, by Tadakatsu Sano-a former vice-minister of the Japanese Ministry of Economy, Trade and Industry (METI)-with Mikiko Fujiwara, offers lessons from the Japanese experience in managing energy insecurity. This comparison has many limitations and may overstate China's potential problems, since for China the development of domestic resources is a viable option. Sa no does not consider the Japanese government's mixed record of environmental protection, or innovative Japanese carmakers' critical contribution to meeting consumer demand for fuel efficiency. The chapter's relevance to China would also have been enhanced by further analysis of Japan's bureaucratic reorganization, along the lines of Steven Vogel's work on reregulation.
Despite its limitations, this book represents the state of the art in Western scholarship on the elite politics and institutions of China's energy security. It is appropriate for undergraduate study and graduate research on the political economy of development. I would recommend it to anyone with an interest in China's energy policy and environmental protection, as well as its developmental bottlenecks and elite policy-making in general. The Introduction and individual chapters provide adequate background information for the general-interest reader and concise literature reviews on specific topics of China's energy policy and industrial structure. It would be good to see further volumes on closely related topics such as fuel tax implementation and other tax incentives to promote the restructuring of domestic automobile manufacturers and consumption patterns of industries and households, or the roles of private capital, foreign investors and local governments in the energy sectors.
A new report, resulting from the cooperation between the European Council on Foreign Relations and Asia Centre at Sciences Po, is challenging EU policies towards China and recommends profound changes. The report is authored by John Fox, ECFR policy fellow, and François Godement.
[Download: A Power Audit of EU-China Relations]
The rise of an energy-hungry China is influencing economies, decision-makers, and industrial policies worldwide. Within China, important debates are taking place on the institutions governing energy, on, pricing reforms and the issue of market liberalization. Abroad, questions are raised about the implications of China’s fast-growing energy demand, its quest for resources and its policies addressing environmental degradation. Understanding the actors that shape China’s energy sector and their diverse perceptions is now essential. It is also needed by those who interact with the Chinese administration, companies and market, or who seek to influence China’s global energy footprint.
This book provides the first comprehensive view of the factors that constitute China’s energy security. It sheds light on the importance of diverging domestic interests, lobbies and interest groups as well as bureaucratic interactions in China’s energy policy-making. It also assesses the country’s international energy strategy through this prism. The dynamics of China’s energy choices are essentially domestic. But their impact - rational or psychological - is now global.
This volume is the outcome of a research project conducted by Asia Centre - Centre études Asie in Beijing between September 2006 and December 2007. Five workshops and roundtables brought together leading Chinese and Western experts from the fields of energy economics, law, political science as well as industrial and foreign policy actors.
Information: contact@centreasia.org
Asia Centre has succeeded in providing a forum for presentations and discussions, with the cooperation of a great numbers of French and non-French institutions involving some fifty researchers, analysts and professionals of the Asia-Pacific, dealing with such major issues and questions as: the return of national strategies and economic globalization, the prevention of conflict and regional integration policies, and the challenges of democracy and governance concerning the whole region and its international partners. The major transversal and sectoral concerns – the quest for energy, nuclear proliferation and its crises, financial markets and systems, as well as changes to political and social systems, also lie at the core of our research and public debates. […]
This report offers an outline of our activities for the period 2005-2007, in line with the new architecture of Asia and the major questions raised by ongoing events around us, and sometimes, we hope, ahead of those events. […]
François GodementDirector of Asia Centre and Professor, Sciences Po, Paris
Download Asia Centre’s activities report
Table of contents:
THE MISSION Research and debate with first hand actors from the field l A permanent source for information and analysis l Cooperation with Asia-Pacific networks l Resources for business: analyses, contacts and practical recommendations l Partner institutions
STRATEGIC AFFAIRS AND INTERNATIONAL RELATIONS The major Asian powers l China l Focus: Transatlantic Views on China l India l Japan l Focus: Sino-Japanese Relations l The «hotspots» l The Korean peninsula, Taiwan and cross-strait relations l Multilateral security mechanisms l European participation in CSCAP
COMPARATIVE POLITICS Internal dynamics and global issues l China l Japan l South-East Asia l Focus: Tribal Politics and the Future of Pakistan l Regional dynamics l China’s rise and the regionalisation process l Europe-Asia l Focus: the first East Asia SummitENERGY / ENVIRONMENT
ECONOMICS / BUSINESS
THE ASIA CENTRE TEAM
FINANCIALS