Asia Centre

On January 29th 2007, the Chinese government published its Document n° 1 for 2007 on the theme of "the three rural questions" (三农san nong)[1]. At the press conference that followed, Chen Xiwen, in charge of the working group on rural areas within the Central Committee, talked about the protest movements in the countryside, mainly in connection with the problems of land requisition (土地征占问题 tudi zhengzhan wenti). For the journalist Qiu Feng, this situation shows that there cannot be a successful development of the countryside without a real guarantee   of peasants’ rights.

Chen Xiwen acknowledges that the requisition of land is very commonly behind the petitions (上访 shangfang), in which the peasants express their grievances, as well as incidents by groups in the countryside, which have been on the rise since the mid-1990s.

According to him, local governments are directly responsible for this situation. They behave like veritable landowners and make no bones about using their power of constraint (强制性的权 qiangzhixing de quanli) to proceed with land requisitions, in order to attract industrial investors and to develop the cities. Renting out land to industries enables them to become rich, since they levy industrial taxes as well as land taxes. Accordingly, no distinction is made between land used for public purposes and land for commercial use when they proceed with expropriations[2].

The government has adopted various political measures to improve the situation. In 2004, the State Council published its Document n° 28, which provides for the upward reevaluation of the standard procedures for compensating peasants in cases of expropriation, providing them with a range of services and, in particular, training for "landless peasant farmers" (失土农民 shitu nongmin), so that they can move into a new branch of employment, and enable them to benefit from the social welfare system, normally reserved for farmers working the land.

The State Council furthermore published Document n° 31, in August 2006, whereby all cash income stemming from the sale of land (土地出让金的收入 tudichurangjin de shouru) must be held in reserve and incorporated into the budgets and finances of the local authorities, in order to guarantee compensation, training and social security expenses incurred by landless peasants. This document also indicates that the lands used by industries must not be sold off cheaply, but should be subject to a tender process (招拍挂制度 zhaopaigua zhidu).

In pratice, however, these protective policies are barely applied, given the shortcomings in the current institutional and legal system.

Institutionally, although villages are in theory "autonomous organisations", townships and the governments of district municipalities (县市 xianshi) intervene as they please in the collective affairs of the village, including in terms of expropriation. Moreover, rural collectives (农民集体 nongmin jiti), which are theoretically the sole owners of rural lands, have in reality no legal or administrative right of recourse for the recognition of their rights to the land.

Finally, the rights of peasants to the land are incomplete, for whilst they have the right to use it or sub-let it, they do not have the right to dispose of it[3].

Accordingly, the governments of district municipalities impose their own rules of expulsion and compensation on landless peasants, the latter have no recourse other than to make petitions, for want of any legal or administrative avenue available.

In such a tense, social context, the journalist Qiu Feng is sorry that the measures adopted by the government are limited to compensation (补救 bujiu). He deplores the fact that these measures do not settle the heart of the problem, what is more, these measures are not even being applied systematically. In his view, the government must reform the present system, define and gurantee the rights of peasant farmers, particularly their rights over land, and reconcile two different logics, that of “well-being”, (福利逻辑 fuli luoji), and that of “rights” (权利逻辑 quanli luoji). The protection of peasant rights must, according to him, be a pre-condition of any consideration of well-being and development.

A better protection of their private rights would be beneficial, if it were to sanction the local authorities in case of the illegal disposal of arable lands (sales, requisitions, etc.) as well as in the case of non-payment or under-evaluation of financial compensation granted to peasants whose lands are being occupied. Such sanctions would also constrain local governments to better respect the peasants and would allow a fortiori the easing of social tensions in the countryside.

A few days before the opening of the annual session of the National People’s Congress, Wen Jiabao published an article in The People’s Daily in which he offered his vision for the future of the Chinese reforms, both in economic and, especially, political terms.

The article entitled "Some questions pertaining to the historical tasks in the initial stages of socialism and some international issues[1]" briefly describes the gains made by the economic reform of the country, the rise in living standards and the partial eradication of poverty, but deals more particularly with the announcement of challenges as well as the question of the pursuit of the political reform process.  The article set the tone for the press conference called at the close of the session of the National People’s Congress. The Prime Minister displayed his concern by the economic situation which he described as being "imbalanced, uncoordinated, unstable and unsustainable".

In preparation for his next term as Prime Minister, Wen gave only a brief overview of his government’s achievements so far, and chose to centre his comments on the programme for the next five years, setting out his objectives for the country’s economic and political life, with his message being aimed at the Chinese people as much as at the Party’s cadres.

The press took up the issues raised in this article, drawing special attention to the development of the economic work programme[2], as well as to the ongoing concertation with various groups (academic experts and cadres not from the ranks of the Party) and the importance of making the general population aware of this programme: "If the masses do not feel concerned by the governmnet’s report to the National People’s Congress, and if they do not wish to discuss it or offer their opinion or ideas, then the report will be a failure."

Although the "social productive forces" are more developed than in the past, China remains a highly populous country, with structural imbalances between urban and rural areas, and between provinces. The fundamental structure of the "under-developed productive forces" has not been resolved. Whilst there are still some acheivements to be made in the economic sphere, this structural reform needs to be accompanied by political reform. This is, however, where Wen Jiabao nuances his discourse, both for the Party cadres and for the reformers in academic and political circles[3], since his article goes on to spell out the success of the political and legal reforms, whilst maintaining that, in China, the "structure of the socialist market economy is imperfect, democracy and the legal system do not have a sufficiently strong basis. Problems remain in the area of social injustice, corruption and a socialist system that is not yet mature enough". For these reasons, the Prime Minister concludes, "China has not yet emerged from the initial stages of socialism and remains a developing country".

Given the growing number of intellectuals calling for political reform, Wen Jiabao takes a cautious line. In attributing the cases of social injustice and corruption to "the imperfection and the immaturity" of the current socialist system, he assures the conservatives that the Party is not abandoning the socialist path, while warning the reformers that only moderate progress can be made through political reforms.

This, for Wen, does not exclude continuing along the path of political reforms. In his view, international power is not measured solely by military force, but also by the "cultural level", which is assessed through "institutional culture" (制度文明). This term remains vague, but could include "democracy, the legal system, freedom and human rights", which are not "the monopoly of capitalism". It seems to mean essentially, for China, becoming "a democracy governed by the rule of law within a socialist system".

On 27 February last, "Black Tuesday", the two mainland Stock Exchanges which trade in stocks and shares, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) experienced historic falls of 8.84% and 9.29% respectively.

The Chinese Stock Exchanges were at their lowest since 2001, yet they bounced back, following a 2005 reform. Growth was such that in recent weeks the authorities were talking more and more of a speculative bubble and of the need to calm things down. The fall at the end of February was China’s most significant since the death of Deng Xiaoping (1997). Even the rare blue-chip shares fell, as shown by the steel, car manufacturing, finance and oil sectors, as well the major enterprises such as China Petroleum, Minsheng, Baogang and Changjiang.

The movement in the Stock Market indices on 27 February 2007

Furthermore, and this is undoubtedly the most important point, for the first time in its history, the fall in stocks and shares in mainland China brought in its wake a fall on the other Asian Stock Markets. At the time, these markets seemed even to have been more seriously affected than China’s[1].

However, Chinese shareholders started buying shares again as early as the next day, 28 February[2]. Since then, the Chinese Stock Market has resumed its bullish trend: the SSE and SZSE had experienced a boom on March 6 and 7 and the SSE index was hoping to pass the symbolic 3000-point barrier again, as compared with the 2700-odd points to which it had dropped on Black Tuesday[3]. Then, quite recently, the market dropped back again, following fiscal measures introduced by the government aimed at reducing speculation[4].

This analysis is mainly based on three series of articles: the first is from Zhongguo Guoqing Guoli that were published prior to the crash. It already stigmatised the behaviour of shareholders as irrational and dangerous. The second series, which appeared in the Nafang Daily, is an on-the-spot analysis of the crash, with attempts to provide explanations. Finally, the third series, which appeared later, assesses the impact of the reforms (according to the 21 Century Business Herald) and the impact, especially of globalisation, on the operation of the Chinese stock markets.

The causes of the crash

On the day following the crash, the Nanfang Daily reported several possible interpretations for this fall, based on interviews with market experts. One analyst from Xingyye Securities put forward the theory of an "accident" (偶发事件). For him, the accumulation of profits ended up being too great, bringing the market down with it (利空).

-          For other analysts, it is all about a natural phenomenon (自然现象). The stock markets experienced good growth in 2006, and it can be expected that such growth should slow down today. The respective drops in the Hong Kong, Singapore and Taiwan exchanges are symptoms of this.

-          Another related interpretation is that of a correction (正常调整): as the SSE went past the 3000 point mark, the pressure on profits began to be too great, and confidence in even higher future profits led to a necessary correction. According to this logic, as the SSE should vary between 2500 and 3000 points, the market should have dropped again (instead of going back up, as it did since publication of the article being analysed here).

-          Other analysts believe that the reason for the 27 February crash is to be found in the excessive profits expected by the various investors. They define this crash as merely a normal consequence of the bullish market (牛市常态).

-          Finally, there is the interpretation which consists in seeing in the crash a willingness on the part of the government to slow down a growth that had got out of hand, in order to build up a healthy stock market. This is the theory of a deliberate slowing down (调低预期). Worth noting is the fact that one of the causes often put forward to explain the fall is the rumour about government action to reduce the amount of trading on the stock market. To illustrate this theory, one could cite the most recent fiscal measures aimed at reducing market speculation.

A market that is still immature

However, one article by Xiao Jun published a few weeks before the crash (in January) seems to give ex ante other reasons for the crisis.

It is based on academic literature dealing with the behaviour of investors to explain the workings of the Chinese Stock Market. Among the works used (and very roughly quoted) are those by Bikhchandani and Sharma (2000), Lakoshinok, Shleifer and Vishny (1992)[5], Scharfstein and Stein (1990). Xiao Jun refers to them to insist on the dangers of the mass behaviour pattern (here called "羊群行为", a sort of sheep herd behaviour) of Chinese shareholders. Such behaviour has two characteristics. It is driven by information (one would be tempted to say rumour, but the term is not used), without paying any attention to its quality (and therefore to its true value). As the shareholders cannot verify the information, they adopt a mimetic pattern of behaviour, acting in the same way as other investors. The investment funds are therefore driven by a search for short-term profit and move only en masse. Admittedly, this behaviour pattern enables the Stock Market to generate profits more quickly, but it also leads to the creation of a bubble effect[6].

Another problem is that investment funds have a virtual monopoly over the Chinese Stock Market. Witness the six enterprises Boshi, Southern Securities, Huaxia, Jiashi, Hu’an and Yifangda which alone have 40% of the shares held by funds.

The problem therefore remains that, in spite of the reforms of the past few months, the market is not yet mature. It remains encumbered by a still insufficient liquidity, policies that lack coherence, listed companies that are often mediocre, insider trading that is still all too common, a weak return on investment …

Is this a market tied in with the rest of the world?

Beyond the Chinese Stock Market’s lack of maturity, the thing that undoubtedly struck many Chinese is the international nature of the 27 February crash. This was the first time that a Chinese-based Stock Market shake-up had spread to financial markets elsewhere.

However, on the Chinese side, what the press picked up on was not the fact that the fall started in markets on the Mainland, but rather its international character. In other words, in what is a turnabout, some people seem almost to accuse the rest of the world for being responsible for the Chinese crash. Even the governor of the central bank, the reformer Zhou Xiaochuan, was also of this opinion, when he stated that globalisation was the cause of the crisis (球化致)[7]. For his part, the highly respected Shi Yinhong, of the People’s University (interviewed by Huangqiu Shibao), points out that the world is closely watching China’s growth, which creates a strong  interdependence. As for He Maochun of Tsinghua University, he regards China as an engine powering the world economy. The only ones to emphasise the disproportionate nature of this interdependence are researchers from the Chinese Academy of Social Sciences. They remind us that the value of the Chinese stock market is 1,000 billion dollars, that is, about 50% of GDP.  Conversely, the US Stock Market represents 130% of its GDP. The Stock Markets in Japan, India and South Korea each represent 100% of their country’s GDP. This ratio drops to 70-80% for South-East Asia. Hence, in their view, one must see China’s influence in relative terms.

What is in store for tomorrow?

Yet, the very next day investors started buying shares again, as if nothing had happened. The subtext of this was the idea that the authorities would not let a stock market crisis tarnish the 2008 Olympic Games[8]. At the present time, the Chinese stock market remains hard to predict…

Russia and the West

The lack of sympathy which Russia is "again" experiencing from the countries of the West is presented as a struggle between the media on the two sides of the divide. The article's essential preoccupation with this aspect is emphasised by its terminology ("illusion", "image", and even a reference to "the Western subconscious"). The appearance of this idea of a Russian menace is as precisely dated ("since 2006") as it is imprecisely characterised (it takes "numerous and different forms"). Moreover, it would seem that for these three writers, its imaginary character spares them the need to draw up a complete list, so its mutating incarnations are just scattered throughout the article. To be brief, these Western "assumptions"[1] represent the Russians as "agents of the Kremlin", "upstart bandits", and "racists and xenophobes" living under "a tyrant's yoke" who stifles human rights. Subject to the temptations of fascism, and backed up by their oil weapon and their military might, they are capable of exercising "a potentially despotic influence in the field of European politics". In short, Russia is a corrupt totalitarian State, shot through with ferocious imperialist ambitions.

The reappearance of these standard Cold War figures is dated explicitly from last year, after the fading of the illusions arising from the fall of the Berlin wall when Westerners "imagined that Russia, by rejoining the democratic States, would cease to threaten them"[2]. It is therefore "the economic take-off" which, "by transforming Russia overnight from being the sick man of Europe to being its strong man", has brought about a revival of the theory of the Russian threat in a Europe which likes nothing better than a weak Russia kept in its place.

But the three writers then depart from this logic of mirroring, which constrains the Russian media to oppose the negative image marketed by the West point by point, and here their rhetoric takes a remarkable turn.[3] They argue that this image, however "unacceptable"  it may be, provides a helpful mirror to the politicians who, by means of "overt diplomatic reactions" to it, may be able to rectify it. In their view, that is what the Russian government does, by "giving the lie" to these distortions, by "showing themselves capable of improving their international image", by using such "non-coercive weapons" as the "common history and culture" which it shares with its neighbours, in order to regain its lost influence. For example, the Russian President himself has no hesitation in entering the fray by responding to questions from the Western press, or in publishing a signed article in the Financial Times. Reading the words of these three journalists soon makes you wonder which takes precedence over the other in their minds, diplomacy or image presentation.

What about China?

Naturally, the question of the conclusions to be drawn by China is quietly addressed throughout the article, owing to the parallelism between its title and the "China Threat Theory". Indeed the three writers are not content with providing a simple account of Western mistrust. After all, China would have good grounds for welcoming a distraction of attention towards Russia, which would favour its own peaceful development.

The studied prudence which the writers show in choosing examples which are not applicable to China (such as the oil weapon, or the Litvinenko affair) is therefore not quite sufficient to dispel the reader's temptation to make the comparison. Because of some of the issues which they associate with the " Russian Threat Theory" (such as the human rights' issue, or relations with rogue states), it comes quite close to that of the "China Threat". It is likewise difficult to resist making the comparison between the two when one reads that Russia, "if it wishes to use the rebirth of its power to the best ends, must properly manage the strategic difficulties facing it".

Seen in this light, the insistence on Russia's active response to Western media attacks, whether the facts were "properly established or not", cannot fail to call to mind such examples as the unpleasant aftertaste left by the official Chinese communiqués referring to the anti-satellite rocket test on January 11th this year.[4] Finally, the sense that there is a link between the stigmatisation of the West and their own "prejudices" (to use their own term) in favour of Russia, is supported by some of their own supplementary remarks:

-   The Europeans appear to them motivated by evil intentions insofar as they have apprehensions about the Russian president, and "set traps"[5] for him.

-   Picking up on the language used by another anonymous source, the writers explain that "Russian émigré lobbies" play a "controlling role" in the Western media, lumping the USSR and present-day Russia together in the same onslaught[6].

-   And finally, there is a sting in the tail: in the concluding lines, responsibility for Russia's threatening attitude is partly laid at the door of the United States since "to a certain extent, it draws inspiration from American diplomatic strategy, which proceeds through aggression to consolidate its sphere of influence".

Could this be the first step in a collaborative "American Threat Theory?"

Since the beginning of 2007, three issues have dominated domestic Taiwanese politics: the corruption cases, the selection by the political parties of their candidates for the 2008 presidential elections, and the desinicisation campaign (去中國化) orchestrated by the island's authorities. This last issue is shaped by strategic and ideological dimensions. Since the foundation of the DPP, desinicisation has represented one of the principal demands of the more independence-minded wing of the party. For its defenders, it represents the result of a legitimate effort to refocus the regime of the People’s Republic of China on Taiwan. It aims to correct the forced sinicisation of the Taiwanese by the Kuomintang and to liberate a national identity suffocated by an authoritarian regime devoted to the Greater China myth. For its detractors, on the other hand, this desinicisation effort is based on populist calculations and on an underlying independence ideology. It will end up impoverishing Taiwanese culture by cutting it off from its Chinese roots. Some critics even go so far as to affirm that complete desinicisation would result in a total cultural void. In this context of a profound division among the elite, the reform of history textbooks announced in January 2007 by the minister of education, Tu Cheng-sheng,[1] has provoked, as on every political initiative of the DPP government, a hue and cry from the opposition and a volley of applause from the “pro-Taiwanese” political forces. This stormy debate intensified even more when the government announced at the beginning of February the resumption of its campaign to “rectify names”(正名) for state-owned enterprises, which consists in replacing the reference to China in their names by a reference to Taiwan. In its English appellation, the Chinese Petroleum Corporation (CPC) has become CPC Taiwan. From now on, the China Shipbuilding Corporation will be called CSBC Taiwan. The Chunghwa Post Corporation (Chunghwa means “China”) has been renamed the Taiwan Post Corporation.[2] In the Chinese-language versions, the use of the word China has been completely abandoned in favour of Taiwan.[3] At the end of February, the authorities discussed the practical forms for renaming the Chiang Kai-shek Memorial Hall, one of the major tourist attractions in Taipei, the Taiwan Democracy Memorial Hall.[4]

This summary is based first of all on the commentaries by the island's pro-independence press to take stock of the nation-building movement orchestrated by the DPP government and the logic that rules it. Nation-building is distinct from “state building”. While seeking to maintain stability in the Taiwan Strait, Chen Shui-bian and his successive governments have been extremely prudent as far as state building is concerned, while devoting considerable energy to “Taiwanize” Taiwanese society, considering that it was necessary to “desinify” it for that. This analysis then sets out to take stock of the criticisms scourging this desinicisation policy, based on an editorial and two opinion articles published by renowned academics in the opposition's daily newspaper Lienhebao. Interestingly, if the three texts selected are not totally devoid of cynicism or blistering barbs against Chen Shui-bian, they seem to forearm themselves against any accusation of being anti-independence and are keen to provide reminders of their commitment to the independence of the Republic of China on Taiwan. Faced with “two Chinas” or “one China, one Taiwan”, the principle of one China preached by Beijing is attractive to no more than a silent majority in Taiwan.

The new history textbooks used in high schools from the beginning of the second term in the 2006‑2007 school year have gone through the grinder of the name-change campaign, one of the hobby-horses of the more independence-minded wing of the DPP. Thus Sun Yat-sen will no longer be called the “Father of the Nation” (國父), but Sun Yat-sen, which, the political opposition says, boils down to delegitimising the Republic of China. Moreover, all the qualifiers traditionally used in the Republic of China to designate mainland China, such as “the Chinese communists” (中共), “our country” (本國), or even “the mainland” (大陸), will be replaced by “China”. The founding events that led to the overthrow of the Qing dynasty and to the establishment of the Republic of China are similarly targeted, such as those at Wuchang, which will no longer be termed the “Wuchang rebellion” (起義), but the “Wuchang insurrection” (起事), a term voluntarily more neutral that no longer seeks, in contrast to the previous expression, to confer a moral justification on the revolution against the Qing dynasty. On the other hand, the episode in which the emperor Qin Shihuang united the Warring States in 221 BC will no longer be taught. The period of the Japanese occupation (1895‑1945) will also see a change in description, with the abandonment of the term “occupation” (日據), judged too negative, and its replacement by the wording “Japanese administration” (日治). Finally, the number of lessons dedicated to Chinese history will once again be reduced. In reality, this “rectification of names” in the history textbooks is an amplification of a reform of greater scope that, starting in 2004, has definitively integrated a dividing line between the history of Taiwan and the history of China.

The editorialist of the Liberty Times accepts the criticism of an opposition legislator, according to whom this reform can be compared to a “cultural revolution”. In his view, however, this is a cultural revolution based on democratic values and on a “Taiwaness”, and is intended to return to the Taiwanese their right to see the world from Taiwan, rather than through the prism of a Chinese nationalism imposed by force on the Taiwanese by the Kuomintang. For this editorialist, who picks up on a key argument of the Taiwanese independentists, Taiwanese society has experienced several invasions: the Dutch, the Spanish, the Ming loyalists of Zeng Chenggong (Koxinga), the Chinese empire during the Qing dynasty, the Japanese and, finally, the nationalists of Chiang Kai-shek. According to this argument, each invader brought with them a set of practices that contributed to the formation of a specific Taiwanese culture. From this point of view, Chinese culture is only one component among several others making up Taiwanese culture. But under the authoritarian regime of the Kuomintang, all the resources of the one-party state were employed to “brainwash” the Taiwanese by imposing a Chinese identity on them, by crushing any specific characteristics of Taiwanese culture and by suffocating its diversity. Thus the teaching of history under the Kuomintang not only reflected the cultural imperialism of the Chinese, that “power derived from the outside” (外來政權), it personalised the dictatorial nature of the occupying regime. In contrast, the reform of the history programmes adopted by the DPP government is part and parcel of the democratisation of the island. Now, according to the Liberty Times editorialist, Chen Shui-bian has a mandate to implement this reform. His victory in the presidential elections of 2000 and his re-election in 2004 have committed him to consolidate the “Taiwanisation” undertaking and to reinforce the “Taiwanese subjectivity”. Chen is president of the Taiwanese. Given that, it is normal that he should enshrine their right to perceive history from their own point of view.