No place like home
The government needs to stop pandering to property developers and address the home ownership issue

Stephen Vines
Nov 06, 2009           
     
      

  



Nothing is more likely to stimulate a small avalanche of hypocrisy than discussion about land and property in Hong Kong. Property developers, allegedly speaking in the name of community interests, arrive in their chauffeured limos to lobby officials for a greater supply of cheaper land. Free-market ideologues, rattling around their lavish apartments, pontificate about why making property purchase accessible to those on low incomes distorts sacred non-intervention policies. Meanwhile, hapless members of the government oscillate between repeating the long-dead mantra of "positive non-interventionism" while busying themselves with finding new ways to intervene in the property market.

All this is taking place in Hong Kong - the only avowedly free-enterprise society where the government retains total ownership of all land with the anachronistic exception of St John's Cathedral. Furthermore, Hong Kong houses a higher percentage of its population in public housing than any other capitalist society. In case anyone gets carried away with the idea that the origins of this vast housing programme were purely altruistic, it is worth remembering it was widely supported by industrialists keen to keep wages low by removing the pressure of high housing costs.

Fast forward to today and we see Chief Executive Donald Tsang Yam-kuen promising to intervene to avert a property bubble and we see calls for reform of the land sales policy from self-interested property developers.

At the upper end of the property market, the government thinks it is moving decisively to cool the market by imposing a 60 per cent lending cap on loans to this sector. This is no more than vaguely amusing to cash-rich buyers who have no need to borrow. Many of them are from the mainland and are holding hot cash that they are keen to offload into property.

Meanwhile, anyone who has taken more than a few moments to study the government's land sale policy knows perfectly well that it is expressly designed to favour a small clutch of larger property developers. Alone or in concert, they are the only ones able to bid for the large land plots, which tend to be offered in government land sales alongside smaller plots at sites adjacent to the developer's existing holdings.

This encouragement of monopolistic practices is carried out under the banner of the free market and ensures competition is severely limited. Unsurprisingly, the larger property developers are keen to prevent changes that threaten their monopoly, but they are still pressing for ways of acquiring land at lower cost.

While the developers understandably focus on increasing profitability, the one serious method of creating a bigger property-owning class in Hong Kong has been firmly ruled out by the Tsang administration. It says that the Home Ownership Scheme, which juddered to a halt in 2002, will not be revived although some still-unsold HOS properties will be offered for sale.

Hong Kong has never had another scheme to seriously address the issue of property ownership by low-income groups. Naturally, it is loathed by property developers and self righteously condemned by the better off, who can't stand seeing ordinary people getting a stake in the property market.

However, the HOS no more distorts Hong Kong's property market than it is distorted by all other forms of government intervention. Alone among government measures, the HOS increases access to the market as opposed to preserving the asset value of those already in the market.

The government's refusal to revive the HOS is largely a reflection of its determination never to upset Hong Kong's most influential people. But official opposition to helping the less off acquire homes stands in direct contradiction to Tsang's constantly repeated goal of preserving stability.

Countless studies have shown that the most stable societies are those with the widest degree of property ownership. Giving people, excuse the pun, a concrete real stake in society is the surest means of ensuring stability.

What works elsewhere will work here; all it needs is for the government to plough through the narrow self-interest of those who have benefited most from the existing system and not be deflected from the objective of bringing property ownership within the reach of more people.

Stephen Vines is a Hong Kong-based journalist and entrepreneur


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Wake up to reality


MICHAEL CHUGANI

Nov 09, 2009           
     
      

  



Our chief executive says he doesn't lose sleep over the scandals that hound him. Maybe he should. Granted, lying awake at night prevents the necessary recharging of body and mind, but the tossing and turning has its own benefits. It forces you to think about the worries that keep you awake. And Donald Tsang Yam-kuen has plenty to worry about.

The late US president Ronald Reagan slept so soundly through the many scandals he should have worried about that he left office looking younger than when he went in. The difference was that the people loved him. That cannot be said of Tsang. Some have actually started comparing him unfavourably with his unpopular predecessor, Tung Chee-hwa. That alone should keep anyone awake.

By Tsang's own admission, only about half of the people like him. That's actually quite good for a leader of a free society in his second and final term. The trouble is, the people who don't like him dislike him intensely. They think he is arrogant, in cahoots with the tycoons, subservient to Beijing and oblivious to their many problems. They think he just doesn't understand them any more, that he can't see things from their perspective. This is not necessarily true, but it is what half the people believe.

That should be Tsang's greatest worry - that half the people are convinced he has lost the credibility to be their leader. He needs to lose some sleep over the fact that he's past the stage when he can convince them otherwise. Hong Kong is now, more than ever, such a divided community that no one wants to compromise any more on the big issues.

At least in Tung's time, the people were so united in despising him that the solution became simple. Beijing dumped him. But not all the people despise Tsang. Half the people think he's doing a good job. They believe the Tsang-haters are troublemakers out to get him.

This great divide has forced Tsang into lame-duck status well before his time. There is now a growing impression, even among some of his allies, that he can no longer govern effectively.

When even a nonsensical scandal manufactured by political opponents can force a leader to back off from such a basic policy as encouraging community use of energy-saving light bulbs, it shows how weak that leader has become. Too many people were too ready to believe Tsang pushed the policy solely to benefit distant in-laws in the light-bulb business. He has lost the benefit of the doubt. And that spells big trouble for any political leader. No leader can govern effectively without the people's trust.

The troubling thing about Tsang's troubles is that he is actually not a bad leader. His style may be lacking but his substance is not. He was in the right place at the right time when Beijing ousted Tung, and he proved his worth as leader in his first few years. But he is now leader at the wrong time. The people are restive. The recession has spotlighted the harsh gap between the haves and the have-nots. Bitterness is fanning animosity among the deprived towards the wealthy class. The once revered tycoons are now despised for their open greed. People believe the government is not on their side. There is only so much Tsang can do. Beijing calls many of the shots, yet the anger is directed at Tsang. He has become the fall guy.

Tsang is a victim of Hong Kong's freedoms. The people have all the freedoms of democracy without actual democracy. They can use, or abuse, democracy's freedoms without the restraint that democracy demands. And they're only too willing to do this to take it out on Tsang but not Beijing.

Our politics have become directionless, almost unreal. We blame Tsang's supposed failures on the lack of democracy. Yet we resort to ways that insult democracy in trying to undermine his leadership. The nauseating frenzy over the light-bulb scandal is one example. It makes you wonder if we're actually ready for real democracy.

Michael Chugani is a columnist and broadcaster. [email protected]


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Net can be tolerated or turned off, not tamed


David Eimer
Nov 10, 2009           
     
      

  



Business is booming in Dunhuang, a historic desert town in western Gansu province. But the visitors packing out its hotels and coffee shops aren't tourists, but businesspeople from nearby Xinjiang. With internet access across that province still cut off after the July riots in Urumqi, Dunhuang is now the closest place to Xinjiang to get online.

Beijing claims that the July disturbances were partly organised over the internet and fears further trouble, which is why, four months later, Xinjiang's 20 million residents remain unable to check their e-mail. Uygur exiles have denied using the Net to instigate the riots, pointing out that Beijing is quick to shut down any website or chat room that might be promoting sedition.

But amid rumours that internet access will not be restored until after the Lunar New Year, Urumqi's business community is getting used to the commute to Dunhuang. Nor is Xinjiang the only place that is currently internet-free. It emerged last month that officials in Guanxian county, Shandong province , had shut down all internet cafes in the county, supposedly because too many children were skipping lessons to play computer games. "Our purpose is to improve the quality of life for local residents," a local official said of the ban.

Only on the mainland would the government claim that preventing people from using the internet is making their lives better. In the West, the opposite is true, because freedom of information is regarded as a basic right.

This, though, has been a bad year for the mainland's 338 million internet users. These days, anything connected to Tibetan or Xinjiang independence, or human rights or democracy advocates, is blocked. Networking sites like Facebook and Twitter are inaccessible because the authorities fear they could be used to organise protests against the Communist Party.

Blaming the internet for the rise of dissent on the mainland is as futile as shutting down internet cafes because teenagers are skipping school to play World of Warcraft. It is a reflection of poor parenting, rather than of the insidious nature of the Web. Blocking internet access in Xinjiang, and social networking sites everywhere, because people are allegedly using them to challenge the authorities, is like holding the water company responsible when you forget to turn off your taps.

The Xinjiang internet ban signals a new desperation on the part of Beijing. It's an acknowledgment that officials have failed to tame the Net, despite the estimated 40,000 people paid to monitor it and to plant pro-communist-party comments in chat rooms. Now, Beijing has boxed itself into a corner where, having failed to control the internet, its only option is to shut it down completely.

Only a real optimist would suggest that the Xinjiang internet shutdown might lead to a reappraisal of the way the mainland controls information. Beijing faces a stark choice; either allow access to the internet, or close it down. And with hundreds of millions of people dependent on the Net more than ever for work and play, preventing them using it will create far bigger protests than were seen in Xinjiang.

David Eimer is a Beijing-based journalist


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Beware of those seeking to manipulate public opinion


Albert Cheng
Nov 11, 2009           
     
      

  



Since the release of his policy address last month, Chief Executive Donald Tsang Yam-kuen has been under fierce media attack over allegations of favouritism. These sensationalist, negative reports dominated the front pages of several mainstream Chinese dailies for more than two weeks, creating a well of public discontent against Tsang and his administration, his popularity hitting a new low.

According to a University of Hong Kong opinion poll in mid-October, public distrust almost doubled, from 14.3 per cent in August to 28 per cent last month. On the other hand, public trust in the government fell slightly, by one percentage point, to 45 per cent, over the same period. Tsang's popularity rating fell to 48.4 per cent, his lowest since taking office in 2005.

Two damning allegations quickly became scandals for Tsang. The first was that his son's father-in-law would benefit from the subsidy voucher scheme for energy-saving light bulbs announced in his recent policy address. Tsang was criticised for failing to declare that his in-law was a distributor of Philips light bulbs in Hong Kong. Second, it was claimed that a legislator had assisted Tsang's sister-in-law to secure early compensation to recover a portion of her Lehman Brothers investment months before most other victims.

Even veteran politician Allen Li Peng-fei said he was bewildered by the resoluteness of the media. He said it was extraordinary for two leading Chinese dailies to mount such a concerted anti-government attack by carrying front-page stories continuously for more than 10 days.

Li said that, while the media might have been overly confrontational, Tsang should rectify his mistakes before it's too late. He suggested a good place to start would be to look at the performance of his administration, especially whether his political spin doctors have done a competent job. More importantly, have they been truthful in relaying the true depth of public sentiment to their boss?

I agree with Li that it's time for the chief executive to do some soul-searching. But we shouldn't be misled by his remarks and allow the media to pull the wool over our eyes with reports that are based on false information. Sensational news does not represent public opinion.

In any event, those accusations have turned out to be untrue. Regarding the light-bulb incident, it was confirmed that Tsang's in-law was not the sole distributor, and had sold most of his company shares years ago. Tsang's sister-in-law was not given preferential treatment because many other investors received early settlements, some before her.

The danger is that sensational news and false reports can be used to manipulate public opinion. Because the media has been so aggressively hounding Tsang, it is not difficult to understand why both his and the administration's popularity ratings have plunged.

But most unexpected was the prejudiced analysis played up by the director of HKU's public opinion programme, Dr Robert Chung Ting-yiu, who said that, if Tsang's popularity rating hit the 45 mark, it would be equivalent to public support of only 20 per cent. He also warned that, in the West, such low ratings almost certainly force leaders to resign.

Such scaremongering perpetuated by an esteemed academic is mind-boggling. Chung's job is to conduct public opinion surveys, which are just academic studies.

Has Chung forgotten the controversy he sparked over the alleged government interference of his public opinion programme in 2000? At that time, he claimed that he had been under political pressure from the government and his university to discontinue his opinion polls on the then-chief executive, Tung Chee-hwa, and his administration.

Chung alleged that such interference would hinder academic freedom. If he truly treasures academic freedom, he should recognise that he has a responsibility to maintain political impartiality at all times.

Albert Cheng King-hon is a political commentator

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Predicting the past


ALEX LO

Nov 12, 2009           
     
      

  



China's critics like to point to the many repugnant aspects of its one-party rule and, by and large, they are mostly true. The nation's defenders, or apologists, prefer to focus on the things it has done right, and castigate those who fail to acknowledge its many genuine achievements. One group sees the Chinese state as nothing more than a dictatorship, whether communist or fascist. The other considers it the vanguard engaged in nation-building and, in doing so, charts a new course for the Asian economic-developmental model - and a viable alternative to Anglo-American democratic capitalism. Both perspectives are not so much wrong as intellectually limiting and morally unimaginative.

It is far more fruitful to consider the central government as a one-party adaptive machine. As a one-party state, it has imposed party discipline and unity as the precondition for its survival. Yet, it also allows free discussion and debate behind closed doors - and among some outside experts - to better recognise the most pressing problems, and formulate long-term strategies and policy responses, without the need to seek periodic electorate mandates. Beijing's ability to adapt to dire, changing circumstances and survive crisis after crisis has confounded critics and friends alike.

Take, for example, Beijing's response to the debate on global warming in the run-up to the Copenhagen talks on climate change next month. It is another classic instance of how it works to outmanoeuvre foreign critics while devising a long-term strategy dictated by national interests as Beijing defines them. In late September, President Hu Jintao scored a major public relations coup in New York when he announced it was national policy to achieve a low-carbon economy. This was pledged with a "notable" carbon reduction by 2020.

Just two years ago, China reached the low point when scientists calculated it became the world's worst greenhouse-gas emitter, exceeding even the US. Instinctively, it hit out at developed nations' past emissions and accused them of conspiring to try to slow the growth of developing nations. India and Brazil voiced similar complaints.

But, now, Beijing has found its footing. An increasing number of foreign sceptics and experts are being won over by Beijing's fundamental policy shift on energy demands and climate change. This has gone so far that there are now new western critics arguing that China is pursuing state industrial policy - presumably unfair by free-market principles - in developing nuclear, solar and wind power to become an alternative energy powerhouse. There is just no pleasing everyone! Far from being set up as the fall guy, should the Copenhagen talks fail, Beijing is positioning itself as the new climate crusader.

It is so easy to criticise China but difficult to get it right. Too often, critics identify a trend - usually a crisis or a major problem - and then project it onto the future. Hence, you have predictions about China's impending collapse or the Chinese state's inevitable need for political reform to halt its own demise. Two years ago, Elizabeth Economy, an expert on China's environment and a senior fellow of the Council on Foreign Relations, published a major essay in Foreign Affairs about the country's "coming environmental crash". We now know Beijing was, by then, well aware of the environmental problems and costs she enumerated and was working to tackle them in a major policy overhaul.

All linear predictions or projections neglect a basic principle in chaos and complexity theory. It is that trend reversals are almost impossible to predict and hard to spot even after they have occurred. Think stock markets. Thus, when the Chinese communist state reached its nadir after the Tiananmen Square massacre, the fall of the Berlin Wall and the collapse of the Soviet Union, many people were predicting its destruction; yet the 1990s was to be the decade when China's economy soared.

Couple historic trend reversals with a centralised government that is relatively nimble and eminently adaptive, and no wonder you have so many run-of-the-mill critics with egg on their faces.

Alex Lo is a senior writer at the Post. [email protected]


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Spotlight on Obama's China policy
Summit will test signalled moves towards era of co-operation

SINO-US RELATIONS
Cary Huang
Nov 13, 2009           
     
      

  



When it comes to the big foreign-policy issues of the day, Barack Obama's White House has tended to live in an opposite world to that of his predecessor George W. Bush. China policy appears to be no different, as will be seen when the US president touches down in the country for the first time on Sunday.

Obama rose to power on a platform of major domestic and international policy change, and it is becoming apparent that he wants a new era in Sino-US relations. China, in turn, is warming to a more prominent role in global affairs.

At its core, the summit will be about creating a new level of co-operation. Initially, Obama's approach to China was built on aspects of Bush administration policy, which then deputy secretary of state Robert Zoellick defined in September 2005 as a "stakeholder" relationship.

All indications are that the Obama administration intends to move the relationship to the next level, making it more of a partnership, diplomats and observers of Sino-US affairs say.

Diplomats familiar with preparations for the summit said the two sides had agreed on an eight-item agenda. A Chinese diplomat said that among them, Beijing proposed Tibet and Taiwan issues, while the US demanded arms controls and non-proliferation, military transparency and co-operation. Other topics include counterterrorism, trade and climate.

Issues to be watched are disputes stemming from China's scorching economic growth, such as trade disputes, the yuan exchange rate and China's request for the US to approve it for market economy status. Another is an agreement on climate change, which would be crucial for the success of next month's climate summit in Copenhagen.

But atop the agenda is the desire to discuss a framework that could help address nagging suspicions between the two sides, diplomats said.

Dr Jin Canrong , of Renmin University's School of International Relations, said Obama's China policy was putting into action the new US "vision for a China partnership" outlined by Deputy Secretary of State James Steinberg in September. In the language of diplomacy, it was coined "strategic reassurance".

Jin said: "That was the most eye-catching statement by any Obama administration official. It suggested the US intention to move towards a more closed partnership."

Steinberg said strategic reassurance rested on a "core, if tacit, bargain": China's "arrival" as a prosperous power would be welcomed; in turn, China "must reassure the world that its rise will not come at the expense of [the] security and well-being of others". Bolstering that bargain, Steinberg added, "must be a priority in the US-China relationship".

But he failed to spell out details, setting the stage perhaps for Obama to expound further when he meets his counterpart Hu Jintao next week. Obama's first Asia trip as president takes in Japan, Singapore and South Korea. He arrives in Shanghai on Sunday and leaves Beijing on Wednesday.

Brookings Institution China researcher Dr Cheng Li said no administration wanted to appear as if it had no vision, so Obama would try for something new: "In a departure from his White House predecessors, this president has already signalled a more respectful US posture towards China."

US assistant secretary of state Dr Kurt Campbell, the top US diplomat on China affairs in Beijing recently to lay the groundwork for Obama's visit, spoke of US hopes of upgrading dialogue in strategic issues and developing "rules of the road for how we co-operate in the future" at the summit.

Professor Tao Wenzhao , a senior follow with the Chinese Academy of Social Sciences' Institute of American Studies, said Obama's statement of "strategic partnership" last week was the latest evidence that his administration wanted very much to upgrade ties to a new level.

"There is plenty of obvious recent evidence that suggests the Obama administration's approval of China's rising power and the White House's desire to give it a bigger say and larger role in global affairs," Tao said.

At a recent news conference, Obama spoke approvingly of the rise of China and said it was a good thing decisions were no longer made by "Roosevelt and Churchill sitting in a room with a brandy". While he was referring to decisions made by the US and Britain during the second world war, the idea of a special relationship, dubbed the G2, has been floated in US academic circles since 2006.

It was raised again this year by former US national security adviser Professor Zbigniew Brzezinski in Beijing, against the backdrop of the financial crisis and a world scrambling to find an antidote through existing groups such as the G8 and the G20.

Ben Simpfendorfer, a chief economist at the Royal Bank of Scotland, said the crisis meant both economies should work together to lead the world out of the mess as they are responsible for global imbalances - the main source of the worst financial woes since the Great Depression.

"The United States and China are central to global imbalances, so there is good reason to talk of a G2," he said.

Tao said the idea had attracted interest, particularly since the G20 meeting in April in London where Obama and Hu launched the so-called annual strategic dialogue. This was an upgraded version of the economic dialogue under Bush, as it had "added a strategic content" to "strengthen ties at all levels".

While both governments rejected the G2 concept publicly, diplomats said both nations had the desire to build a new intellectual framework that allowed both powers to consult and seek consensus or agreement to disagree on major issues before they are put into open debate globally.

That is not to say the long list of concerns held by both sides has vanished. Li, Tao and Jin all acknowledged, however, that Steinberg's thesis had accurately identified the nub of the problem: strategic mistrust.

US suspicions range over China's fast military build-up and human rights to its massive export sector and the country's "mercantilist approach" towards acquiring resources and energy. In Beijing, many believe, for instance, that Washington wants to contain China's rise by denying it access to markets, energy sources and high-end technology.

Steinberg said transparency and co-operation were important in three areas. "The risks of mistrust are especially acute in the arena of strategic nuclear weapons, space, and in the cyber realm.

"Achieving mutual reassurance in these areas is challenging but, as we learned during the cold war, essential to avoiding potentially catastrophic rivalry and misunderstanding. Both sides need to devote creative thinking into how we might address these thorny challenges."

Vice-Minister of Foreign Affairs He Yafei made no secret of China's concern last week, saying US pledges to recognise China's sovereign rights over Tibet and Taiwan "were most important to the political foundation of their relationship".

In response to a report by the South China Morning Post (SEHK: 0583, announcements, news) last Friday that Beijing was pushing for Obama to state during his trip that Tibet was part of China's territory and the US opposed Tibetan independence, he said: "That is because a key issue in laying the political foundation is mutual respect for each other's core interests, and for China an important part of our core interest is sovereign integrity and security."

Li said it was also likely that progress would be made in discussing global and regional security threats, including nuclear non-proliferation in North Korea and Iran, and on other issues such as combating terrorism, and stability in Afghanistan and Iraq.


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Congress' crazy scheme to enfeeble the Fed


David Ignatius
Nov 16, 2009           
     
      

  



Among the cherished prerogatives of members of the US Congress is the right to second-guess. That ritual is now playing itself out with a vengeance as they attack the Federal Reserve for its role in last year's financial crisis.

The Fed made its share of mistakes in creating the bubble economy. But, once the crisis hit, it was the Fed's innovative, try-anything response that saved the country from what might have been another Great Depression. Fed chairman Ben Bernanke deserves a public "attaboy" for finding ways to pump liquidity into credit markets that were on the verge of freezing up tight. Instead, he's getting a congressional raspberry.

Bernanke's creative policies last year were possible because of the Fed's political independence and its wide-ranging authority. Those broad powers are now under attack: Congress is proposing new limits on the Fed's role as financial supervisor and "lender of last resort" that could prevent it from responding as aggressively to the next crisis as it did to the last one.

The political challenge to the central bank's authority comes at an especially delicate moment - as the economy begins to rebound and the Fed considers future tightening of monetary policy. It will need public support to combat inflation. But, as The New York Times noted in a recent front-page article, the Fed is now "under more intense attack than at any time in decades", from both left and right.

Wall Street so far appears unfazed by the criticism of the Fed, perhaps because investors assume the protests are political posturing. But this could change. "If Congress even appears to be politicising the Fed's monetary policy function, rest assured two market developments are inevitable - a collapsing dollar and higher long-term interest rates," warns David Smick, a Washington financial consultant.

Fed-bashers have an unlikely new champion in Senator Chris Dodd, who last week introduced a bill that would strip the central bank of most of its supervisory functions. The Democrat said the Fed had been "an abysmal failure" as a regulator and that its powers should go to a new supervisory agency.

How did Dodd, the gentlemanly Banking Committee chairman, suddenly become a neopopulist? The answer is that Fed-bashing seems to be good politics; Dodd faces re-election next year.

Dodd's newfound scepticism is symptomatic of the central bank's larger problem. Unemployment is above 10 per cent, the public is angry - and looking for people to blame. The Fed is just elitist enough, and Bernanke is just enough of a professorial egghead, to make them targets for popular anger.

Bernanke's supporters offer a simple argument for maintaining the Fed's current role in supervising banks. Without it, they say, the Fed would lack the information - and the "feel" for the markets - to intervene effectively in a crisis.

Perhaps it's a harbinger of good times that Congress now wants to reassert its authority. But it would be stupid, even by congressional standards, to enfeeble the Fed - one of the few institutions that actually rose to the challenge in this crisis.

David Ignatius is a Washington Post columnist



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Beijing refuses to bow to calls for higher yuan
Stable, predictable currency policy reiterated

Cary Huang in Beijing
Nov 17, 2009           
     
      

  



The Ministry of Commerce yesterday rebuffed calls for the yuan to appreciate, setting the scene for tough talks on the currency hours before United States President Barack Obama touched down for his first visit to the country.

Before Obama sat down with President Hu Jintao at a state dinner last night, the head of the International Monetary Fund added pressure on Beijing by calling on it to let the yuan rise after more than a year of being nearly frozen against the US dollar.

Last week, the People's Bank of China tweaked its description of how it manages the currency, setting off a storm of speculation that it might be willing to give the yuan some room to run.

"Either from the perspective of promoting stable global economic development or promoting a recovery in Chinese exports, we must provide a stable and predictable environment for our enterprises, including macroeconomic policy and currency policy," Yao Jian, a ministry spokesman, told reporters yesterday.

Although China's economy has outperformed nearly all others in its recovery from the global financial crisis, many analysts believe a sustained upturn in exports - a core concern of the ministry - will be required for Beijing to let the yuan rise.

The yuan rose 21 per cent against the dollar between July 2005 and July last year. Since then, as the financial crisis gathered force, the currency has been virtually repegged at 6.83 to the dollar. Yuan forwards indicate the currency will climb 3.6 per cent in the next year.

But Yao rejected criticism that the currency was undervalued, saying the exchange rate had little to do with trade imbalances with the US and that Beijing should keep it stable.

IMF managing director Dominique Strauss-Kahn said a stronger yuan was part of the reforms that Beijing needed to implement to increase domestic consumption and help ease global imbalances.

"Allowing the [yuan] and other Asian currencies to rise would help increase the purchasing power of households, raise the labour share of income and provide the right incentives to reorient investment," Strauss-Kahn said in remarks prepared for a financial conference in Beijing.

Obama said on Tuesday that he would raise the currency question on his trip, joining the call from the European Union and Japan. He will hold talks with Hu and Premier Wen Jiabao today and tomorrow.

This week, US business and labour groups urged Obama to live up to his campaign promise that he would "insist that China stop manipulating its currency, because it's not fair to American manufacturers, it's not fair to you [the American people], and we are going to change it when I am president of the United States of America".

US manufacturers say Beijing deliberately keeps its currency undervalued against the dollar to give its companies an unfair advantage. The trade deficit with China is the widest the US has with any country, and it jumped to a record high of US$268 billion last year.

Jing Ulrich, chairman of JP Morgan's China equities and commodities, said Beijing had maintained a stable exchange rate to allow domestic manufacturers and exporters to adjust to market conditions.

"With China enjoying current and capital account surpluses - and with the export downturn bottoming out - it is logical for the yuan to eventually resume gradual appreciation against the dollar to alleviate pressure on domestic money supply," Ulrich said.

She said the appreciation of the yuan would be one solution to trade disputes and imbalances but that Beijing was unlikely to allow it to rise immediately.

"We believe the value of the yuan will only rise to 6.60 against the dollar by the end of 2010," she said.

Additional reporting by Reuters



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Spirit of a G2 haunts European leaders


François Godement
Nov 18, 2009           
     
      

  



The spectre of a Group of Two - a China-US condominium - is haunting European governments as much as the spectre of revolution haunted its courts in the days of Karl Marx's Communist Manifesto. When US President Barack Obama mentioned a "strategic partnership" on the eve of his departure for Beijing, anxiety was mounting.

The words haven't been used officially since 1996, when secretary of state Warren Christopher talked about a "partnership" but rejected the "strategic" adjective. What concern about a G2 does show is insecurity among major countries in the absence of a clear power order.

Of course, every official or officious spokesperson in the US or China will deny that "G2" bears any resemblance to reality. The Obama administration has emphasised "multiple partnerships". Its most decisive international actions so far have been gestures to reach out towards difficult partners, such as Russia over the issue of anti-missile defence and forward basing of interceptor radars, or partners where there was no established channel of dialogue: Iran, Burma and Sudan.

Washington also reconfirmed the strategic partnership started with India by a 2008 nuclear agreement, a heritage guaranteed to annoy Beijing. The Chinese could not have failed to notice the many holdovers from the George W. Bush era in the area of defence and even at the State Department, along with no significant cut in defence spending.

For their part, Chinese leaders and experts abstain from any emphasis on bilateral Sino-American co-operation.

Even if Chinese experts talk of a long-term decline of American influence and strategic leverage, they are the first to point out, defensively, that the US is still in the driver's seat. Clearly, China prefers to sit back and eventually criticise from a distance, in keeping with its strategic conservatism.

But beyond praise for Obama from high-brow Chinese experts, and calls by the new administration for a "comprehensive relationship", there is simply no basis for a strategic convergence between the US and China. So why is it that the G2 is such a spectre?

For one, appearances matter. At the Pittsburgh G20 summit, Obama usually addressed President Hu Jintao before anybody else during the leaders' meeting. And when Secretary of State Hillary Rodham Clinton visits Beijing, the Chinese government upgrades the relations with the US as "our most important relationship".

In truth, there may be less mutual mistrust than political shyness, on each side, about ignoring widely different political systems and admitting to a G2. You don't have to agree on every topic to run a G2: you just have to be the two most efficient political actors on the block, with a potential to hurt as well as to help others by your actions.

That's why everybody else is talking about a G2, and why debates about a G8, G13, 14 or 20 must result in a workable new design for global governance. Failing this, the mix of Sino-US interdependence and competition will define our world.

François Godement is director of the Asia Centre at Sciences Po. Reprinted with permission from YaleGlobal Online. http://yaleglobal.yale.edu


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Playing with fire
Forget China, the US Federal Reserve is the world's biggest currency manipulator

Andy Xie
Nov 19, 2009           
     
      

  



As US President Barack Obama glided through China, a chorus erupted in New York and Washington: the problem with the global economy is China's exchange-rate policy, and Obama's No 1 job is to slay it. It's sad that these people actually believe what they are saying: the same "logic" got the world into the current mess. In the feverish hallucination of salvation, they think that moving China's currency policy would right all wrongs.

The US Federal Reserve is the biggest currency manipulator in the world. Not only does it keep the short-term interest rate at zero through its vast purchase programme for mortgage-backed securities, it also keeps credit spreads and bond yields artificially low. Its manipulation stops money, bond and credit markets from pricing either the Fed's policy or the US economic plight. All the firepower is packed into the currency market, giving speculators a sure bet on a weaker dollar and everything else rising. Here comes the biggest carry trade ever: the Fed is promising no downside for shorting the dollar.

The US Treasury writes an annual report, judging if other countries are manipulating their exchange rates. It should look in the mirror. Even though the Fed is not directly intervening in the currency market per se, its manipulation is equivalent to pushing down the dollar by non-market means.

The Fed is playing with fire. With such massive speculative outflows, the dollar could collapse, sparking hyperinflation, like in Russia in 1998. The main reason this is not happening is because China's currency is pegged to the dollar. The speculators believe that there is no downside, only upside from holding yuan. Hence, China's foreign-exchange reserves are bulging on the inflows. The increases are mostly ploughed back into the US financial market, keeping the dollar up. The dollar's decline has been "orderly", falling 40 per cent from the peak without panic selling, because China has been recycling the dollars. The hot money is targeting emerging economies. The last time this happened was between 1990 and 1994 when the Fed kept interest rates low to cope with the Savings and Loans Crisis. The scale is much larger now. The Fed is keeping the funds rate at zero, compared to 3 per cent then, and manipulating the credit cost and yield curve at the same time through its US$1.2 trillion purchases of mortgage-backed securities. The massive hedge fund industry has magnified the transmission mechanism. The huge inflows into emerging economies are inflating dangerous asset bubbles there: we are seeing the strange combination of skyrocketing asset prices and anaemic economic performance. The foundation for another emerging-market crisis has already been laid.

The Fed may think it is fighting a good battle: the overleveraged banks must not collapse, and the millions of unemployed need a growing economy to get their jobs back. But it has the causality wrong. By feeding the unreformed financial system with zero-interest-rate funds, it is feeding a monster with steroids. The asset bubbles in the emerging economies are pumping up their economies in the short term, which supports US exports on the margin. The consequences down the road could be horrific, even for the US. Emerging-market crises have happened in the past when the US economy was strong. The immediate trigger for such a crisis is usually high US interest rates in a strong US economy.

However, inflation, rather than a strong economy, will force the US to increase interest rates. If an emerging-market crisis happens in such an environment, the US economy would suffer from collapsing external demand, with no strong domestic demand at the same time.

Yes, there is an employment crisis in the US. However, monetary stimulus won't solve the problem. During the globalisation of the past decade, the US economy has lost manufacturing jobs and replaced them with "bubble" jobs in finance, property and retail.

The bubble has popped, and yesterday's jobs are gone. Tomorrow's jobs will be created by entrepreneurs who discover new technologies and new sources of demand. This process will take time and no stimulus can be a substitute for it.

During economic restructuring, it is reasonable to keep monetary policy on the loose side. But, how loose? What the Fed is doing is quite crazy. But the policymakers there don't see the impact in terms of their bubble, even though their policy was mostly to blame for the last crisis. They justify their policies on their immediate benefits. Maybe the Fed thinks that the bubble is on the other side this time and won't cause much damage at home.

Maybe it thinks that the hot money would force China to appreciate its currency and shrink its manufacturing sector to send jobs back to the US. Such opportunistic thinking is shortsighted and won't bear fruit.

The Fed should stop its irresponsible actions now and raise interest rates to 3 per cent immediately. There is still time to prevent another global crisis. But I don't think it will do this. No punishment has been meted out to those responsible for the last crisis. The current policymakers don't have any incentive to do the right thing for the future. And, because the same people are still in charge, we are destined for another crisis.

Andy Xie is an independent economist


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Survey of Pakistan's youth a warning to us all
British Council report foresees a nightmare scenario

SOUTH ASIA
Sabrina Tavernise
Nov 23, 2009           
     
      

  



Pakistan will face a "demographic disaster" if it does not address the needs of its young generation, the largest in the country's history, whose views reflect a deep disillusionment with government and democracy, according to a report.

Commissioned by the British Council and conducted by the Nielsen research company, the report drew a picture of a deeply frustrated young generation that feels abandoned by its government and despondent about its future.

An overwhelming majority of young Pakistanis say their country is heading in the wrong direction, the report said, and only one in 10 has confidence in the government. Most see themselves as Muslim first and Pakistani second, and they are now entering a workforce in which the lion's share cannot find jobs, a potentially volatile situation if the government cannot address its concerns.

"This is a real wake-up call for the international community," said David Steven, a fellow at the Centre for International Co-operation at New York University, who was an adviser on the report. "You could get rapid social and economic change. But the other route will lead to a nightmare that would unfold over 20 to 30 years."

The report provides an unsettling portrait of a difficult time for Pakistan, a 62-year-old nuclear-armed country that is fighting an insurgency in its western mountains and struggling to provide for its rapidly expanding population. The population has risen by almost half in just 20 years, a pace that is double the world average, according to the report.

The despair among the young generation is rooted in the condition of their lives, the report found. Only a fifth of those interviewed had permanent full-time jobs. Half said they did not have sufficient skills to enter the workplace. And one in four could not read or write, a legacy of the country's abysmal public education system, in which less than 40 per cent of children are enrolled in school, far below the South Asian average of 58 per cent.

While most do not trust their government, they attach their loyalty to religion. Three-quarters identified themselves primarily as Muslim, with just one in seven identifying themselves as Pakistani.

The demographic power of this generation represents a turning point for Pakistan. Its energy, if properly harnessed, could power an economic rise, as was the case in many East Asian countries in the 1990s, Steven said.

But if the opportunity was squandered by insufficient investment in areas such as education and health care, the country would face a demographic disaster, the report said. To avoid that, the authors of the report calculated that Pakistan's economy would need to grow by 36 million jobs in the next decade - about a quarter the size of the US economy - an enormous challenge in an economy that is growing by about a million jobs a year.

Pakistan has a long way to go. The study interviewed 1,226 Pakistanis aged 18 to 29, from different backgrounds across the country, in March and April. More than 70 per cent said they were worse off financially than they were last year. This year's budget earmarks just 2 per cent of the economy for education, about half the percentage spent in India and Turkey.

Life in rural areas is rudimentary. The report cites data showing that 40 per cent of households have no electricity, and that animal dung and leftover waste from crops account for more than 80 per cent of the country's energy use.

Young people's biggest concern - far above terrorism - was inflation, which rose to 23 per cent this year, pushing 7 per cent of Pakistanis back into poverty, the report said. More than 90 per cent agreed better- quality education was a priority.

There were bright spots. The young people were civic-minded, with a third saying the purpose of education was to create good citizens. They were also more interested in collective action and volunteer activities than their parents.

Nevertheless, they were deeply disillusioned with politics, which they saw as corrupt and based on a system in which personal connections mattered more than merit.

That sentiment is borne out by the global competitiveness index of 133 countries produced by the World Economic Forum, which this year put Pakistan in slot 101, two notches below Nigeria.

"Here a student struggles day and night, but the son of a rich man, by giving money, gets higher marks than him," the report quoted a young man in Lahore as saying.

That led to one of the report's most surprising findings: Only a third of those polled thought democracy was the best system for Pakistan, equal to the number that preferred Islamic law, in what David Martin, director of the British Council in Pakistan, called "an indictment of the failures of democracy over many years".

Only one in 10 said they were "very interested" in political events in Pakistan, while more than a third said they were not interested at all.

The highest-ranking institution was Pakistan's military. Sixty per cent of those interviewed said that they trusted it. Second-highest was religious educational institutions, trusted by about 50 per cent of respondents. The national government came last at 10 per cent.

If the government has failed to channel the energy of Pakistan's youth, militant groups have succeeded, drawing educated and uneducated young people with slogans of jihad (holy war) and social justice.

The findings were sobering for Pakistani officials. Faisal Subzwari, minister of youth affairs for Sindh province, who attended the presentation of the report in Lahore, said: "These are the facts. They might be cruel, but we have to admit them."

Young Pakistanis have demonstrated their appetite for collective action, with thousands of people taking to the streets last spring as part of a movement of lawyers, who were demanding the reinstatement of the chief justice, and Steven argued that the country's future would depend on how that energy was channelled.

"Can Pakistan harness this energy?" he asked. "Or will it continue to fight against it?"

The New York Times


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Growing status
Following Barack Obama's visit, it is clear that the US sees China as much more of an equal than before

Shen Dingli
Nov 24, 2009           
     
      

  



With US President Barack Obama's visit to China just finished, there's much to contemplate with regard to the dynamics between the two nations that many, rightly or wrongly, are calling a G2. Obama came to China attempting to settle the direction of America's relationship with the People's Republic, and left with increasing China's international standing by mostly accepting the Chinese terms of the relationship.

Seen from a historical context, for the first time, China is much more equal to America, partly through its rise and partly due to America's stagnancy. Obama's visit reaffirmed the recognition that the two countries share far more common ground than differences, and they aspire to expand co-operation and handle differences respectfully rather than in a confrontational manner.

The two countries made encouraging headway on a number of issues. The US vowed not to contain China, and China welcomed America to make the Asia-Pacific region more peaceful, stable and prosperous.

On the most perennially thorny issue of Taiwan, Obama and President Hu Jintao agreed to respect national sovereignty and territorial integrity as the fundamental principle - a code for recognition of China's unchallenged rule of Tibet and Xinjiang .

There is delicate balancing on the Taiwan question. Obama mentioned the Three Communiques but not the Taiwan Relations Act (the congressional mandate requiring the US to come to Taiwan's defence in case of need), when answering a question in his town-hall meeting in Shanghai, but he balanced this at the press conference in Beijing.

However, in the joint statement, again the Taiwan Relations Act didn't surface, probably due to Beijing's opposition.

The US and China agreed to lift their military exchange next year to a higher level and with greater frequency, and to resume the dialogue on human rights. They also agreed to exchange intelligence on transnational crime. China and the US agreed to assure the success of the Non-Proliferation Treaty review conference next year, and will each push for the ratification of the Comprehensive Test Ban Treaty. Indeed, if they will ratify the treaty, Indonesia, India and Pakistan are likely to feel compelled to do so.

At a strategic level, China and the US agreed to continue to push for North Korea's nuclear disarmament. Beijing welcomes a pending high-level contact between the US and North Korea, in the hope that this could help resume the six-party talks.

But the outcome of successful co-operation could turn out to be slim, as Pyongyang is not likely to accept US terms that Obama made in Seoul after his Beijing visit. That is, America is ready to help the North integrate into the international community only as long as Pyongyang dismantles its nuclear weapons programme comprehensively, verifiably and irreversibly.

Surprisingly, some vital issues for the US, like currency exchange, which loomed large before the summit, were shelved for future negotiation. Obama didn't seem to be interested in pushing hard for China to appreciate its currency, which is viewed as undervalued. It is understood that China would not make a tangible commitment to appreciating its currency.

Instead, the two sides decided to take a "forward-looking" currency policy, linking domestic currency to the global economy.

Regarding economic development, China and the US made it clear that Beijing would adjust its economic structure and raise family income, increasing the contribution of domestic consumption to its economic output.

For America's part, Obama committed to increasing private saving to advance sustainable development. Despite the pledge of co-operation in the joint statement, the two countries remain apprehensive of each other's defence build-up.

Obama's "courtesy diplomacy" seemed to win favour among the general public in China. However, while his visit demonstrated the ever-strengthening bond between them, the US and China still differ on many crucial areas, such as human rights, Taiwan, Tibet, currency exchange and trade protectionism.

In the end, the general tone of Obama's visit was positive. When addressing some of their tough differences, both governments expressed a desire to deal with each other with respect, and to deepen strategic ties. When Obama announced that the US will promote a programme to send some 100,000 American students to China in the next four years, his administration appeared to pay respect to a rising power.

China is on the verge of becoming the world's second-biggest economy. A realistic US president has to form a partnership with this rising power with more equality and mutual respect. Not only has his visit helped enthrone China as a more equal power, but the recent concession on the US Federal Aviation Administration certification of Chinese commercial jets - so far denied - could allow China to compete with Boeing. The world is truly entering a new stage where the US and China collaborate for the common good, but compete when their national interests diverge.

Shen Dingli is a professor and director of the Centre for American Studies and executive dean of the Institute of International Studies at Fudan University in Shanghai. Reprinted with permission from YaleGlobal Online. (http://yaleglobal.yale.edu)


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Health care debate is really about values


David Brooks
Nov 25, 2009           
     
      

  



It's easy to get lost in the weeds when talking about health care reform. But, like all great public issues, the US health care debate is fundamentally a debate about values. It's a debate about what kind of country we want America to be.

During the early decades of America's existence, it was a wide-open, dynamic country with a rapidly expanding economy. It was also a country that tolerated a large amount of cruelty and pain - poor people living in misery and workers suffering from exploitation.

Over the years, Americans decided they wanted a little more safety and security. This is what happens as nations grow wealthier; they use money to buy civilisation.

Occasionally, our ancestors found themselves in a sweet spot. They could pass legislation that brought security but without a cost to vitality. But adults know that this situation is rare. In the real world, there's usually a trade-off. The unregulated market wants to direct capital to the productive and the young. Welfare policies usually direct resources to the vulnerable and the elderly. Most social welfare legislation, even successful legislation, siphons money from the former to the latter.

Early in this health care reform process, many of us thought we were in that magical sweet spot. We could extend coverage to the uninsured but also improve the system overall to lower costs. That is, we thought it would be possible to reduce the suffering of the vulnerable while simultaneously squeezing money out of the wasteful system and freeing it up for more productive uses.

That's what the management gurus call a win-win.

It hasn't worked out that way. The bills before Congress would almost certainly ease the anxiety of the uninsured, those who watch with terror as their child or spouse grows ill, who face bankruptcy and ruin.

And the bills would probably do it without damaging the care the rest of us receive. In every place where reforms have been tried, people come to cherish their new benefits. The new plans become politically untouchable.

But, alas, there would be trade-offs. Instead of reducing costs, the bills in Congress would probably raise them. They would mean that more of the nation's wealth would be siphoned off from productive uses and shifted into a still-wasteful health care system.

The bottom line is that we face a brutal choice.

Reform would make us a more decent society, but also a less vibrant one. It would ease the anxiety of millions at the cost of future growth. It would heal a wound in the social fabric while piling another expensive and untouchable promise on top of many such promises we've already made. America would be a less youthful, ragged and unforgiving nation, and a more middle-aged, civilised and sedate one.

We all have to decide what we want at this moment in history, vitality or security. We can debate this or that provision, but where we come down will depend on that moral preference. Don't get stupefied by technical details. This debate is about values.

David Brooks is a New York Times columnist


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Dollar's rise a precedent for the unstoppable yuan


Barry Eichengreen
Nov 26, 2009           
     
      

  



China is making a big push to encourage greater international use of the yuan. It has an agreement with Brazil to facilitate use of the two countries' currencies in bilateral trade transactions. It has signed yuan-swap agreements with Argentina, Belarus, Hong Kong, Indonesia, South Korea and Malaysia. Last summer, it expanded yuan settlement agreements between Hong Kong and five mainland cities, and authorised HSBC Holdings (SEHK: 0005, announcements, news) to sell yuan bonds in Hong Kong. Then, in September, Beijing issued in Hong Kong about US$1 billion worth of yuan-denominated bonds.

Such initiatives aim to reduce dependence on the US dollar by encouraging importers, exporters and investors to make more use of the yuan. The ultimate goal is to ensure that China eventually gains the flexibility and financial prerogatives that come with being a reserve-currency country.

No one questions that the yuan is on the rise. And no one questions that, one day, the yuan will be an important international currency.

The question is when. Cautious observers warn that making the yuan a true international currency will take time. Making it attractive for international use will require China to build deep and liquid financial markets. This will mean the development of more reliable and transparent clearing and settlement systems. This takes time.

Those markets will have to be open to the rest of the world: China will have to fully open its capital account. This will require putting banks and state-owned enterprises on a fully commercial footing, and moving to a more flexible exchange rate. Such fundamental changes in the Chinese growth model will not be completed overnight.

But America's own history suggests that the process can be completed more quickly than is sometimes supposed. As late as 1914, the dollar played no international role. No central bank held its foreign reserves in dollars. No one issued foreign bonds in dollars. Instead, they all went to London.

This changed in 1914, with the creation of the Federal Reserve System. One of the Fed's first actions was to encourage the development of a market in trade acceptances, the instrument used to finance imports and exports. As a result of this official support, private investors gained confidence in the new instrument, and the market in trade acceptances became more liquid.

New York surpassed London as a source of trade finance by the mid-1920s. At this point, the Fed could give the market over to private investors. Where private investors led, central banks followed. By the late 1920s, they held more of their reserves in dollars than sterling. The rise of the new international currency had taken barely a decade.

China has targeted 2020 as the date by which Beijing and Shanghai should become leading global financial centres. By implication, that is the date by which they want to see the yuan become a leading international currency.

Can that happen in as little as a decade? Only time will tell. But US history suggests that this schedule, while ambitious, is not impossible.

Barry Eichengreen is professor of economics and political science at the University of California, Berkeley


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The politics of rage in a jobless society


David Ignatius
Nov 27, 2009           
     
      

  



For a political horror show, fast forward to the summer of 2010: the US jobless rate is stubbornly high, hovering in a range between 9.3 per cent and 9.7 per cent. Companies are wary about hiring more workers because the economy remains soft. Small businesses, which normally power a recovery, are caught in a credit squeeze.

In this scenario, the jobs outlook will remain bleak for another year. Unemployment will remain well above 8 per cent in 2011. And the US economy won't bounce back completely for another five years.

The Democrats, in our scary 2010 movie, will be heading towards the mid-term elections hoping to keep their 81-seat margin in the House. Vulnerable incumbents will be clamouring for more economic stimulus, but the administration will be constrained by the huge budget deficits needed to bail out the economy after the 2008 crisis.

I wish this economic forecast were just a bad dream after too much Thanksgiving turkey. But it's drawn from the minutes of the Federal Reserve's November 3-4 meeting, released last week. It's a genuinely troubling document, as much for its political implications as for its number-crunching. It draws a picture of a nation of unfair and unequal sacrifices, where Wall Street is recovering even as Main Street continues to pay the bills.

If the Fed's projections are right, the public is going to be very angry next year - at big business and at the elected officials who have spent trillions of dollars without putting the country fully back to work.

The Fed struggled to answer the basic question that is haunting policymakers: Why has unemployment remained so high, even as the economy has started to grow again and the stock market has been on a tear? The Fed's answer is that businesses, having been burned by the recession, are wary about adding more workers or making new investments. Like consumers who have just discovered the virtues of saving, their prudence - however sensible on an individual basis - is a collective drag on the economy.

"Business contacts reported that they would be cautious in their hiring," the Fed minutes note. "[They] expected that businesses would be able to meet any increases in demand in the near term by raising their employees' hours and boosting productivity, thus delaying the need to add to their payrolls."

If hiring hasn't bounced back, neither has lending. "Bank loans continued to contract sharply in all categories," the Fed reports.

Putting the figures together, the Fed predicts that, despite a growing economy, unemployment will be between 8.2 per cent and 8.6 per cent during 2011, down only about a percentage point from 2010. And here's the scariest line of all in the Fed minutes: "Most participants anticipated that five or six years would be needed for the economy to converge fully to a longer-run path" and a normal job market.

The politics of rage aren't pretty. But, in this case, it's hard to argue that the anger isn't justified. The Fed's analysis shows what we see in the daily stock-market summaries. People on the top are recovering their losses; people on the bottom are out of work and out of luck.

David Ignatius is a Washington Post columnist


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Blurry line between brain and machine


Jens Clausen
Nov 30, 2009           
     
      

  



We are so surrounded by gadgetry today that it is sometimes hard to tell where devices end and people begin. From computers and scanners to mobile devices, an increasing number of humans spend much of their conscious lives interacting with the world through electronics, the only barrier between brain and machine being the senses - sight, sound and touch - through which humans and devices interact. But remove those senses from the equation and electronic devices can become our eyes, ears and even arms and legs, taking in the world around us and interacting with it through software and hardware.

This is no mere prediction. Brain-machine interfaces are clinically well established - for example, in restoring hearing through cochlear implants. And patients with end-stage Parkinson's disease can be treated with deep brain stimulation. Experiments on neural prosthetics point to the enormous potential of similar interventions, whether retinal or brain-stem implants for the blind or brain-recording devices for controlling prostheses.

Non-invasive brain-machine interfaces have restored the communication skills of paralysed patients. Animal research and some human studies suggest that full control of artificial limbs in real time could further offer the paralysed an opportunity to grasp or even to stand and walk on brain-controlled, artificial legs, albeit probably through invasive means, with electrodes implanted directly in the brain. Advances in neurosciences, and microelectronic miniaturisation, will enable more widespread application of brain-machine interfaces. This could be seen to challenge our notions of personhood and moral agency. And the question will arise that, if functions can be restored for those in need, is it right to use these technologies to enhance the abilities of healthy individuals?

But the ethical problems that these technologies pose are conceptually similar to those presented by existing therapies.

To make the distinction between enhancement and treatment requires defining normality and disease, which is notoriously difficult. For example, Christopher Boorse, a philosopher at the University of Delaware, defines disease as a statistical deviation from "species-typical functioning".

From this perspective, cochlear implants seem ethically unproblematic. Nevertheless, Anita Silvers, a philosopher at San Francisco State University and a disability scholar and activist, has described such treatments as "tyranny of the normal", aimed at adjusting the deaf to a world designed by the hearing, ultimately implying the inferiority of deafness.

We should take such concerns seriously, but they should not prevent further research on brain-machine interfaces. Brain technologies should be presented as one option, but not the only solution, for, say, paralysis or deafness. In this and other medical applications, we are well prepared to deal with ethical questions in parallel to, and in co-operation with, neuroscientific research.

Jens Clausen is research assistant at the Institute for Ethics and History of Medicine, Tubingen, Germany. Copyright: Project Syndicate



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Good policies prove to be bad politics


J. Bradford DeLong
Dec 01, 2009           
     
      

  



From the day after the collapse of Lehman Brothers last year, the policies followed by the US Treasury, the Federal Reserve, and the Bush and Obama administrations, have been sound and helpful. The alternative - letting the markets handle things - would have brought America and the world even higher unemployment.
The fact that investment bankers did not go bankrupt last December and are now profiting immensely is a side issue. Every extra percentage point of unemployment lasting for two years costs US$400 billion. A recession twice as deep as the one we have had would have cost America US$2 trillion - and cost the world four times as much.



In comparison, the bonuses at Goldman Sachs are a rounding error, and any attempt to make investment bankers suffer more last autumn and winter would have put the entire support operation at risk.

The Obama administration's fiscal stimulus has also significantly helped the economy. Though the jury is still out on the effect of the tax cuts, aid to states has been a job-saving success.

And the cost of carrying the extra debt incurred is extraordinarily low: US$12 billion a year of extra taxes would be enough to finance the fiscal-stimulus programme at current interest rates. For that price, American taxpayers will get an extra US$1 trillion of goods and services, and employment will be higher by about 10 million job-years.

The valid complaints about fiscal policy over the past 14 months are not that it has run up the national debt and rewarded the princes of Wall Street but, rather, that it has been too limited. Yet these policies are political losers now: nobody is proposing more stimulus. This is strange because usually, when something works, the natural impulse is to do it again.

With respect to Obama's stimulus package, there has been extraordinary intellectual and political dishonesty on the American Right, which the press refuses to see.

Obama's Republican opponents, who claim that fiscal stimulus cannot work, rely on arguments that are incoherent at best, and usually simply wrong, if not mendacious.

A stronger argument, though not by much, is that the fiscal stimulus is boosting employment and production, but at too great a long-term cost because it has produced too large a boost in America's national debt. If interest rates on US Treasury securities were high and rising rapidly as the debt grew, I would agree. But interest rates on US Treasury securities are very low and are not rising.

Those who claim America has a debt problem, and that a debt problem cannot be cured with more debt, ignore (sometimes deliberately) that private debt and US Treasury debt have been very different animals since the start of the financial crisis.

What the market is saying is not that the economy has too much debt, but that it has too much private debt. The market is also saying the economy has too little public US government debt, which is why everyone wants to hold it.

J. Bradford DeLong is professor of economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research


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Too much too young


ALEX LO

Dec 03, 2009           
     
      

  



Hong Kong parents are sick, sick, sick. Many project their own profound ignorance, twisted values and phobias onto their children in the hope of turning them into geniuses or CEOs, giving them a head start on everyone else or at least making them into their clones.

Predictably, this translates into heavy school work coupled with an insane amount of extracurricular activities. What's a kid to do after school? Take extra language lessons, learn two or more musical instruments and start doing maths a grade or two ahead of the rest. Children in poor countries are often made to work long hours; we should count ourselves lucky we make our children study for those hours.

This kind of all-work-and-no-play lifestyle for children has gone on for years, but the children who are subject to this de facto abuse are getting younger and younger. Not content with a normal kindergarten session, many parents are now sending their children to a second school in the afternoon. So now we have three- to six-year-olds who work longer hours than you or me at the office each day. And they may well have more homework to do.

The latest trend of enrolling children in two kindergartens stems from the free voucher scheme introduced by the government two years ago. It means: pay one, get one free, courtesy of the government. I do not blame the scheme for causing this new trend. It has many flaws, but one cannot argue against a programme that tries to extend free or subsidised schooling to kindergarten. It's the right thing for the government to do.

But, like everything else about the government's education reform, poor planning and implementation enable vested interests and parents to twist them into more child torture. The pre-primary voucher scheme entitles each child attending a non-profit kindergarten offering a Chinese-language curriculum - subject to a price ceiling - to receive a voucher worth HK$12,000.

So, parents send their children to a local school in the morning for free or the cost is partially subsidised, depending on the fees. And they use their own money to pay for an international or English-language kindergarten in the afternoon. Far from discouraging this practice, many kindergartens actively encourage it by ending some morning sessions early to enable pupils to change uniforms and prepare for afternoon classes at another school. And why not? Everyone gets a bigger slice of the pie.

An anonymous parent defended the practice on the parenthood website baby-kingdom.com: "After leaving half-day school, children raised by helpers and grannies usually just watch TV, play video games or take afternoon naps for the rest of the day. It is time wasting." Perhaps he should spend more quality time with his own children.

The practice also points to something deeply ugly about many Hong Kong people. When there is a free lunch, not taking it would be a crime. If you send your child to an international or English-language kindergarten, you forfeit your voucher. What fool would do that? Doubling kindergarten sessions can be seen as an easy way out of the dilemma, even if that means experimenting with your child's development.

Most parents mean well. They may well produce superior human beings this way. But I rather think they will create more stunted children who - when they reach teenage years - become profoundly incurious, self-centred, emotionally underdeveloped and lack independence. When they reach adulthood, their problems and inadequacies are transferred to the job market and the larger economy - a lack of entrepreneurship, curiosity, and communication and other interpersonal skills, as well as an inability to think independently and take risks. The life of the mind is not cultivated by mindless drilling. Nowhere else is Philip Larkin's infamous poem, This Be The Verse, truer than here:

"They f*** you up, your mum and dad.

They may not mean to, but they do.

They fill you with the faults they had

And add some extra, just for you."


Alex Lo is a senior writer at the Post. [email protected]


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Dubai's opulence part mirage, part miracle


Kenneth Rogoff
Dec 04, 2009           
     
      

  



Global investors are in a giant huff over Dubai's decision to allow its flagship private company, Dubai World, to seek a six-month standstill (implying at least partial default) on payments on some US$26 billion in debt. What exactly did investors expect when they purchased bonds in companies with names like "Limitless World", one of Dubai World's bankrupt property subsidiaries? Talk about a bubble mentality.

The idea, I guess, was that the emirate's government would stand behind every loan, no matter how risky. And if the oil-poor Dubai government didn't have the money then, somehow, its oil-rich sister state, Abu Dhabi, would cough up the cash.

An absurd expectation, one might think. But it is hardly more improbable than many of the other massive bailouts we have seen around the world in the wake of the recent financial crisis. What really upset investors, of course, was the realisation that, yes, some day, untenable debt guarantees will have to be withdrawn. Eventually, an overleveraged world is going to have to find a way to cut debt burdens down to size, and it won't be pretty.

There are those that revel in what they see as a comeuppance for brash Dubai's outsized ambitions. I, for one, do not share this view. Yes, Dubai, with its man-made islands and roof-top tennis courts, is a real-world castle in the sand. Yet Dubai has also shown the rest of the Middle East what entrepreneurial spirit can accomplish.

Yes, Dubai is certainly an autocratic state where finances are tightly and secretively controlled. But, in many ways, Dubai's rulers have been remarkably tolerant of free expression.

Of course, other countries in the Gulf also have some stunning accomplishments to their credit. Saudi Arabia's national oil company has achieved home-grown expertise in oil drilling that is widely admired in the West. Qatar has had success in the media with Al-Jazeera, while Abu Dhabi has helped sponsor remarkable advances in artificial intelligence though its support of computer chess. But Dubai, with very little black gold of its own, has done more with less than any other state in the region.

Unfortunately, Dubai ultimately proved subject to the laws of financial gravity. This time was not different. Massive speculation and borrowing led to excessive debt burdens and, ultimately, to default.

Is this the end of the road for Dubai's epic growth? I doubt it. Countries throughout the world and throughout history have defaulted on their debts and lived to talk about it, even prosper. There is no way around the need for Dubai to restructure and prune its excesses before it can resume a more sustainable growth trajectory, though achieving this will take time.

Will there be contagion to vulnerable countries in Europe and elsewhere? Not just yet. While the Dubai case is not different, it is special, so the effect on investor confidence should be contained for now. But investors are learning the hard way that no country's possibilities and resources are limitless.

Kenneth Rogoff is professor of economics and public policy at Harvard University


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Time and distance are the invisible enemies


Jim Hoagland
Dec 07, 2009           
     
      

  



US President Barack Obama's expansion of the war in Afghanistan meets the tests of strategic necessity abroad and political equilibrium at home. He can reasonably hope that his surge will buy time for things to improve, particularly in Pakistan, the war's vital theatre.

But even the dispatch of 30,000 new US troops to Afghanistan does not buy the president the power to change things there on his own. He is still the prisoner of context, an area he neglected in explaining his revised Afghan strategy last week.

Obama fights the invisible enemies of time and distance as well as the fanatics of al-Qaeda. US polls show falling support for the war, which can only reflect a lessening impact of the memory of the events of September 11, 2001.

Many of us experience this lessening, I suspect, even if we resist it. Albert Einstein suggested that the splitting of the atom changed everything except the way we think. Perhaps the same will be true of  9/11. In his speech, Obama recognised the challenge presented to his policies by the passage of time: "It's easy to forget that when this war began, we were united ... I refuse to accept the notion that we cannot summon that unity again."

But his speech did not immediately have that unifying effect. Most members of Congress quickly found points on which to disagree. He also received modest support from Nato, led by Italy's contribution of 1,000 new soldiers and new Polish and British deployments. But Germany stalled and France said it could not spare any more of its overstretched forces. Left unsaid was the fact that French President Nicolas Sarkozy is in no mood to do Obama favours after a series of ill-advised rebuffs by the US leader to the Frenchman.

More significantly, Sarkozy is increasingly concerned about the "Americanisation" of the war in Afghanistan. The influx of GIs will compound command-and-control problems for other foreign units and make them even more dependent on US tactics and strategy.

That is part of the context that Obama's new strategy does not directly address. An even more striking omission in his speech was any in-depth discussion of the civilian surge that is supposed to accompany the military build-up and provide improved living conditions and better governance.

The subject was minimised, I suspect, because there is not yet agreement among the president's advisers or Nato members on how to reorganise the present ineffective flow of financial aid and technical support for President Hamid Karzai's government.

Finally, Obama's new strategy fails to emphasise that the context of the events of September 11 endures, and constrains his actions, even as the force of that day's events fades.

It is a context of Islamic extremism nurtured not only in Afghanistan and neighbouring Pakistan, but also in Saudi Arabia, Yemen, Egypt and other countries that the US finds impossible to invade or strike. We are condemned to fight al-Qaeda on the ground in Afghanistan with greater and greater force because we cannot fight it directly on the battlefield elsewhere. Welcome to Obama's Catch-22.


Jim Hoagland is a Washington Post columnist



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Advantage America


GREG TORODE

Dec 08, 2009           
     
      

  



About the best thing that can be said about US President Barack Obama's push into Afghanistan after eight years of war is that he has played the strongest cards from a bad hand of options. Outright positives are hard to spot. Even the word "victory" was conspicuous by its absence in Obama's appeal last week to his war-weary nation.

Yet, for regional strategists who fear that China's military build-up makes conflict with the US inevitable at some point, it may still produce an advantage for Washington - and a reason for Beijing to be cautious.

The prospect of a quagmire may play right into China's script that the US is a declining power, but such a view overlooks a key point. Washington's strength, reach and influence may indeed be on the wane but recent years of war on two fronts make it a battle-hardened foe and one able to make full use of its resources. The vast US military machine is now steeped in active warfare, far beyond anything experienced in more than a generation.

Military strategists of all shades know that this kind of experience is invaluable; it cannot be bought, or forged simply through the rigours of training and discipline. Hundreds of thousands of troops now have frontline experience, along with their officers - even America's "weekend soldiers", the volunteer National Guards, are battle-tested. Less visibly, nearly a decade of war also means the hard business of supply and logistics, and the computerised linking of command, control and communications with reconnaissance and intelligence assets, has been refined.

Significantly, those being promoted across the US armed services, including in the navy, tend to have experience in the Iraq or Afghanistan theatres, preferably both. That means the leadership for years to come will have experience of the demands of combat.

During the long decades of the cold war, the Pentagon prepared to fight in two hemispheres at the same time - a doctrine that became as much theoretical as practical. Now it has nearly a decade of fighting on two fronts and has learned the hard way just how difficult that is. Obviously, that experience has come at great expense to Washington - a bill in terms of political will and public exhaustion that has yet to be paid. But, in strategic terms, the future military importance of that experience is difficult to underestimate.

That experience feeds into the two great military questions of our age. "Great Power" theorists tell us history dictates that conflict between a power on the rise and a power on the slide will happen. It is a question then of when and how, rather than if.

Then there are the imponderables about how the Chinese military would perform, from the question of how the People's Liberation Army can link up its increasingly impressive array of assets, to doubts about leadership.

Certainly, any Sino-US conflict over, say, Taiwan, North Korea or a naval dispute that gets out of control, would be a world away from the counter-insurgency action mounted by the US in recent years. Yet, for all that, the region remains a strategic priority for Washington. Its Hawaii-based Pacific Command is its biggest, and it is growing.

Intriguingly, Beijing has faced a battle-hardened foe in the recent past. In early 1979, PLA forces surged across China's border with Vietnam under orders of Deng Xiaoping to "teach Vietnam a lesson" for its invasion of Cambodia. The battle raged for just a month but proved exceptionally bloody. Despite having their best units tied down in Cambodia, Vietnamese soldiers and village militias killed tens of thousands of Chinese troops in a resolute defence honed during three decades of constant war.

The impoverished but highly motivated forces of Vietnam three decades ago are obviously a different proposition to today's US military, just as the PLA is a much more advanced creature.

But whether the lessons of its last military adventure have been relearned, however, is a question that a nervous region hopes will remain theoretical.

Greg Torode is the Post's chief Asia correspondent. [email protected]


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Reforming harsh system is better than nothing


LEADER

Dec 09, 2009           
     
      

  



When it comes to economic development, there is not one China but several. The rich coastal regions are the envy of those who live in the rural and much poorer interior. This has caused an unprecedented mass migration in the past two decades by people in search of jobs and a better life. But the pace of urbanisation, breathtaking though it is, cannot keep up with the population pressure. Draconian measures - based on the old permanent household registration system - or hukou - not only fail to stem the tide but make migrants more vulnerable to exploitation.

The hukou, introduced in the 1950s, forces people to stay in their designated areas, outside of which they are denied essential social services and even job opportunities. Some of its harsher measures are now being reversed, especially in Guangdong, which has more migrant workers than any other province. Rudimentary pension, unemployment and industrial injury insurance have been introduced since the start of the financial crisis. These are a step in the right direction, but need to be extended much further to truly benefit Guangdong's 26 million migrant workers. Other provinces should follow its example.

Now Guangdong plans to experiment with a points system by which qualified migrants can earn permanent residency. The scheme targets migrants with higher education, special skills and financial resources. It largely resembles the qualified migrant scheme used in Hong Kong to screen for applicants whose presence or skills are considered beneficial to the city. Under the Guangdong system, migrants who score high points will enjoy social services. The more points earned, the more benefits become available. For example, those who accumulate 70 points will qualify for health care not only for themselves but for their children. Eighty points will enable one's children to attend free public schools. But only those with a full 100 points will qualify for household residence. To the extent that the system, believed to be a first on the mainland, will extend social welfare to more people, it should be welcomed. But it aims to benefit only a small number of privileged migrants.

Most migrant workers simply lack the special skills and resources the system looks for. Such workers have laboured for years outside their hukou and find themselves, along with their spouses and children, treated like second-class citizens. Their sweat and blood have helped build the glittering cities along the mainland's southern coast. Yet without a social safety net, they are easily exploited by unscrupulous bosses who realise they are under pressure to keep their jobs to feed themselves and their families. In major cities such as Shenzhen, up to half the working population is made up of migrant workers.

Unfortunately, the hukou is likely to be retained in the near future. Like the mainland's one-child policy, it has, to an extent, helped maintain social stability and avoid widespread disruption. But its strict application is often seen by critics as a gross violation of human rights. Realistically, though, the mainland is not rich enough to enable people to move and work freely across the country. Still, this does not justify denying basic rights and services to long-time migrant workers. They deserve better for the back-breaking contributions they have made to the nation's economy. Mainland authorities need to extend the social safety net and devise a more equitable welfare system to mitigate the harsher effects of the hukou system and, eventually, to replace it.


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Africa's central role in fighting climate change


Jean-Michel Severino
Dec 10, 2009           
     
      

  



Although the responsibility of industrialised countries and emerging economies in the battle against carbon emissions is well known, Africa's place in the climate agenda has been largely neglected. Sub-Saharan emissions, estimated at only 3 per cent to 4 per cent of global man-made emissions, are deemed of little interest. Yet Africa is central to the global environmental crisis in two important ways.

First, Africa would be the first victim of major climate disturbance - with side effects on the whole planet. Experts predict that the continent will experience some of the gravest changes, whereas the capacity of African societies to respond to them is among the weakest in the world.

Several African countries are already experiencing reduced rainfall, soil degradation and the depletion of precious natural resources, which has a direct impact on the livelihoods of two-thirds of sub-Saharan Africans. The economic, social, migratory and security consequences of such vulnerability on the rest of the world cannot be ignored.

Second, Africa is one of the important actors in the global environmental crisis. Because of its vast natural heritage, the continent contains some of the most potent solutions to climate change. The Congo Basin represents the second-largest mass of tropical forest in the world, with 220 million hectares. This gigantic carbon-capture machine is, like agricultural land, one of the essential elements of climate control. And, yet, Africa's forest coverage fell by 10 per cent between 1990 and 2005 - more than half the recorded global shrinkage. Moreover, Africa will experience by far the largest growth in energy requirements of any world region in the next 50 years. The fight against climate change will be waged in large part over whether Africa's energy needs are met with fossil fuels or renewable energies.

It is vital that the Copenhagen delegates promote Africa's contribution to the world's delicate climatic balance. Efforts to preserve Africa's natural resources and to exploit the vast potential of its renewable energies are not free. But if Africa's carbon-storage capacity is viewed as a global public good, as it should be, then everyone should contribute to its provision.

Three promising tracks will have to materialise rapidly. The first consists of increasing the use of existing tools, such as clean development mechanisms, which enable actors from rich countries to promote projects that reduce emissions in developing countries.

The second track is official recognition of the carbon storage of African lands and forests, as well as rewards for "avoided deforestation". Africa has much to gain by making itself the guardian of a heritage that is essential to humanity's survival.

Finally, the "climate justice" plan, sponsored by France and others in Copenhagen, which aims to increase Africans' access to clean energy, is crucial. Linking public and private efforts to provide 2 billion Africans with renewable energy will therefore be one of the major challenges of the coming decades.

Jean-Michel Severino is the CEO of the Agence Française de Developpement. Copyright: Project Syndicate

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Too big to fail in the fight against fanaticism


Jim Hoagland
Dec 14, 2009           
     
      

  



In the streets of Tehran, young Iranians shout "Death to the Dictator" instead of "Death to America". Across the border, Iraqis worry that new violence, after months of relative calm, will undermine the political process they adopted under US pressure. But they also voice renewed determination to repel the sadists and killers who once dominated their land.

In Pakistan, a weak and unsavoury civilian president, Asif Ali Zardari, seems with US help to be prodding his duplicitous military to abandon its complicity with al-Qaeda and the Taliban and fight them as an existential threat to Pakistan and Afghanistan.

None of these developments is a cause for victory celebrations. They are still tentative. But, when measured against the conventional wisdom of a few years ago about the likely results of foreign intervention in a region that has been locked in turmoil and despotism for centuries, these events represent at least temporary progress.

They help underline US President Barack Obama's defence of his Afghan policy in his Nobel Peace Prize speech as a watershed event. In four decades, Americans have gone from the national certitude that there should be no US combat troops stationed in what was once called the "arc of crisis", to broadly accepting the notion that it is possible to devise an optimal US military presence in the Middle East and the Gulf.

Obama's aides have even sold the narrative that, through disciplined presidential quizzing of his own policymakers, we can arrive at the answer to whether 20,000, 40,000 or some other number of new troops will bring success in Afghanistan.

Today we are told by no less than a presidential Nobel laureate that there are, in fact, worse things than waging war in this region and we must fight in even the most unpromising circumstances to prevent them. History suggests that Obama is right in principle but will see much go wrong in practice.

This proved true of the non-intervention policy of the past, as well as the recent US-led invasions of Afghanistan and Saddam Hussein's Iraq. We wind up without control of the oil fields, which have created ruinous transfers of oceans of money to corrupt Middle East regimes and terrorist organisations, and with Iran seeking a nuclear weapon that will cause a region-wide atomic arms race.

The US would benefit from an independent, broad-ranging examination of its interests and policies in the greater Middle East undertaken by a presidential commission of former officials and academics. It would at least remind us that history does not march in a straight, predictable line.

In Oslo, and earlier this month at West Point, Obama sketched the stakes of the US war on fanaticism centred now in Afghanistan. He is challenging the world to assess the global consequences of permitting the US to fail there without significant help. In the end, the international community should decide that the US is too big - and too important to global stability - to fail.

Jim Hoagland is a Washington Post columnist


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Two similar sets of laws, one basic difference


Frank Ching
Dec 15, 2009           
     
      

  



Following Portugal's Carnation Revolution of 1974, the new socialist government in Lisbon offered to return Macau to China but the offer was turned down. China knew that, if it took back Macau, there would be alarm in Hong Kong. The fates of Macau and Hong Kong were, and still are, very closely connected. In the end, China did not take Macau back until after the handover of Hong Kong from Britain.

Both Hong Kong and Macau were provided with a Basic Law by the National People's Congress. These mini-constitutions are largely similar, but with some significant differences. Each, for example, contains an Article 23 obliging the local government to enact laws prohibiting treason, secession, sedition and subversion against the central government.

With the 10th anniversary of the establishment of the Macau Special Administrative Region approaching on Sunday, a symposium was held in Beijing a week ago to mark the coming into effect of Macau's Basic Law.

Wu Bangguo, the NPC chairman, had words of praise for Macau that, to many, seemed like veiled criticism of Hong Kong. For one thing, he praised Macau's people because they "did not politicise conflicts and problems" and had properly handled relations between Macau and Beijing.

He also praised the patriotism of Macau's people and said they agreed that "Macau affairs are China's internal affairs" and they "resolutely oppose and resist interference by external forces". Furthermore, he said that the promulgation of Macau's state security law, in line with Article 23, had further strengthened local people's concept of nationhood.

He did not have to mention that Hong Kong has still not implemented Article 23 legislation after the fiasco in 2003, when half a million people marched to oppose the proposal.

No doubt, in Beijing's mind, many people in Hong Kong have not properly handled relations with the central government and so are not even allowed to travel to the mainland. They have also invited "interference by external forces" and politicised "conflicts and problems".

Of course, Chinese officials denied that the words were directed at Hong Kong. Li Gang, a deputy director of the central government's liaison office in Hong Kong, rejected the idea that Wu's remarks were actually criticism of Hong Kong.

Nonetheless, many Hong Kong politicians - and, no doubt, government officials - are interpreting Wu's remarks as pressure on the former British colony to implement Article 23. If this does not happen in the remaining years of Chief Executive Donald Tsang Yam-kuen's term, no doubt the next chief executive will see it as one of his primary missions.

There are other striking differences between the Macau Basic Law and that of Hong Kong. For one thing, while Hong Kong's legislature is technically fully elected, albeit in various ways, Macau's has appointed members. The Macau Basic Law, speaking of the legislature, says simply: "The majority of its members shall be elected."

Unlike the Hong Kong Basic Law, which says the ultimate goal is the election of both the chief executive and all legislators by universal suffrage, the Macau Basic Law is silent on that point. Since China had two more years to ponder the provisions in the Macau Basic Law, it seems likely that they more accurately reflect Beijing's preferences.

The British lobbied hard for an elected legislature to be put first in the Joint Declaration, and then implemented in the Basic Law. The Portuguese, it seems, did not consider it important. The result is that Macau's much tamer population, which can probably be counted on to return chief executives and legislators acceptable to Beijing, have been denied such a right. Ironically, Hong Kong's much more assertive population is demanding such a right, and Beijing clearly does not feel comfortable about granting it.

Frank Ching is a Hong Kong-based writer and commentator

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