Chen Guangcheng, the blind Chinese lawyer who escaped house arrest and fled to the U.S. embassy in Beijing, has left the embassy for medical treatment and has been reunited with his family after U.S. negotiators received assurances from the Chinese government that Chen and his family would be safe and that he could continue studying law at a university.

Chen, though, now says he left the embassy due to threats to his family:

But in a telephone interview with The Associated Press from his hospital bed late Wednesday evening, Mr. Chen said American officials told him while he was under American protection that Chinese authorities had threatened to beat his wife to death unless Mr. Chen left the American embassy, and that Mr. Chen therefore left under coercion.

U.S. officials deny this and say that, instead, his wife would be sent back to Shandong, their hometown, by the Chinese government (and no one could offer her protection there) unless Chen left the embassy to see her. That may well be the case, but U.S. officials seem to be intentionally clouding the issue. Perhaps Chinese officials never explicitly threatened to beat his wife to death, but that doesn’t matter—sending her back to Shandong is threat enough, because once there, she will be under control of local police—the same local police which placed Chen, his wife and daughter under house arrest and beat him. Threatening to send her back with no protection is little different than explicitly threatening to beat her to death.

Chen has also now stated that he regrets losing American protection and now wants to leave China for safety abroad. Chen’s reversal seems contradictory, though, because when he arrived at the U.S. embassy last week, he was said to not want asylum, but rather assurances from the Chinese government of his safety and the safety of his family, which he has received. Moreover, while leaving the embassy for the hospital, Chen reportedly told Secretary of State Hillary Clinton “I would like to kiss you,” apparently in reference to her advocacy on his behalf and on the behalf of other human rights activists. Perhaps he simply wanted to thank her for her work, despite the circumstances of his leaving the embassy. That’s possible, but it seems to be a strange comment to make while leaving the embassy’s protection under duress.

Or perhaps Chen was threatened later, after arriving at the hospital and after U.S. officials had left. That seems plausible and would fit with the Chinese government’s interests: make promises for his safety and future so he’ll leave the embassy, and once he’s outside U.S. protection, make threats so he’ll shut up and the problem can go away. Of course, Chen kept talking, and did so to international media, no less, so who knows.

This story has taken a very strange turn, because Chen left the embassy so abruptly, his desires have apparently flipped and now U.S. officials are disputing his account of events. I hope the U.S. acted in good faith here, and I hope that if Chen and his family are now in danger, or will be in the future, the U.S. advocates on his behalf. As the days and weeks pass, media interest in this story will pass as well, and at that point the Chinese government could have the upper hand. And it is at that point they could place him under house arrest again, or some other kind of scheme to prevent him from making trouble. We can’t let that happen.

Bob Fu says the U.S. must fight for Chen Guangcheng:

This is a pivotal moment for U.S. human rights diplomacy. The United States must stand firmly with this broadly popular individual or risk losing credibility as a defender of freedom and the rule of law.

I understand being cautious about harming relations with China. But what I also understand is the Chinese government brutally represses individuals who have done absolutely nothing wrong, and uses the law as a tool to advance the government and party’s interests, rather than to provide for justice. When someone who suffers under the government’s arbitrary rule stands up to it, we should support them. And we should support them when they are silenced, too, because that’s especially when they need spoken for.

The Chinese government argues that advocating on behalf of persecuted lawyers, human rights activists and dissidents is meddling in their own domestic affairs and is an attempt to violate their sovereignty. That’s bullshit. We have every right to, in the course of our relations with a country as large and powerful as China, to demand that basic human dignity be respected, and the rule of law operate unfettered. Not only do we have a right to, we have a responsibility to recognize and oppose repression of people whose only crime is pointing out the government and party’s wrongs. It isn’t about politics or advancing our interests. It’s about respecting human dignity.

Chen Guangcheng, a blind Chinese lawyer and human rights activist, escaped extralegal house arrest last week and is believed to be hiding in the U.S. embassy or somewhere else in Beijing. The event, and the U.S.’s involvement, could stir up tensions once again between the U.S. and China.

I hope that Chen is indeed in the U.S. embassy, because no where else is safe. Chen’s escape is highly problematic for Beijing because it makes house arrests—one of China’s favorite tools for silencing dissidents and something they’d much rather not discuss at all—very public, and it weakens the government’s perceived power. After all, if even a blind man can escape police cordons and evade capture in the nation’s capital, how capable is it?

Worse, it means how they will deal with Chen will be very public, too. Do they allow Chen to go free, and weaken their perceived strength even more? Do they put Chen in prison, and receive international condemnation? And if Chen is in the U.S. embassy, do they risk relations with the U.S. by demanding that the U.S. hand him over?

There’s no good answer for Beijing. Their preferred approach, I would assume, would be to imprison Chen and let the controversy fade away, but with his escape being such an incredible story and embarrassment to the government, that may not be possible. Moreover, the government (and party) already feels particularly wounded after Bo Xilai’s downfall, so Chen’s escape piles on. This may be the most destabilizing period for the CCP since 1989.

The Economist reports that over the last thirty years, China’s fertility rate (the number of children a woman can expect to have throughout her life) has fallen from 2.6 to 1.56. This means China’s population will peak sometime around 2026 and then begin to decline. Worse, though, their population will continue getting older:

The differences between the two countries are even more striking if you look at their average ages. In 1980 China’s median (the age at which half the population is younger, half older) was 22. That is characteristic of a young developing country. It is now 34.5, more like a rich country and not very different from America’s, which is 37. But China is ageing at an unprecedented pace. Because fewer children are being born as larger generations of adults are getting older, its median age will rise to 49 by 2050, nearly nine years more than America at that point. Some cities will be older still. The Shanghai Population and Family Planning Committee says that more than a third of the city’s population will be over 60 by 2020.

Think about that. China is a developing (that is, still relatively poor) nation with an average age comparable to developed (rich) nations, and it will only get older in the coming decades. This means two things: first, China’s cheap labor advantage—which was largely responsible for China’s remarkable record of economic growth since the 1980s—will dry up as their youth decline as a percentage of population; and second, their aging population will require significant financial support. Traditionally, this support comes from the elderly’s children, but because the country’s birth rate is declining, they will be less able to do so.

In other words, China is growing old before it grows rich. That presents profound challenges both for China1 and the rest of the world2.

1. How do they quickly move from an unskilled labor-fueled economy toward a more productive, value-add economy? do they import workers to help augment their declining workforce? If so, how do they adapt their rather exclusionary society to help integrate workers? As economic growth inevitably slows, how will they decide to split up limited funds between government interests and costs for supporting the elderly? [↩]
2. As China’s ability to manufacture products cheaply declines, consumer product prices could rise as a result—which means that unless wages increase commensurately, consumers will face lower real wages. China’s rise has effectively subsidized the poor and middle class in the U.S. and Europe by making goods cheaper. [↩]

John Garnaut in an excellent piece about Wen Jiabao and a long-running schism within China’s Communist party:

“In the past I did not have a fully positive view of Wen Jiabao, because he said a lot of things but didn’t deliver,” says a leading media figure with lifelong connections to China’s leadership circle. “Now I realize just to be able to say it, that’s important. To speak up, let the whole world know that he could not achieve anything because he was strangled by the system.”

Hu Yaobang’s most faithful protégé, who carried his funeral casket to its final resting place, is building on the groundwork laid by Hu and his children ostensibly to prevent a return of the Cultural Revolution. Wen Jiabao is defending the party line set by Deng Xiaoping’s 1981 historical resolution against attack from the left. Between the lines, however, he is challenging the Communist Party’s 30-year consensus from the liberal right.

If you have any interest in China (or would just like to learn about a very opaque country), this is a must-read. Garnaut uses Wen Jiabao’s recent speech where he warned that a similar tragedy to the Cultural Revolution could reoccur if there are no political reforms and Bo Xilai’s sacking to consider a long-ranging debate that’s fractured the CCP: should the party open China’s government, push for greater rule of law, and eventually allow democratic elections? Or should it solidify the party’s control and use it to shape Chinese society toward revolutionary, communist ideals, and crush those who oppose it?

On the very far left, you have Mao Zedong, who pioneered the latter argument, and Bo Xilai, who advanced that argument; on the a-bit-closer-to-the-center-but-still-the-left, you have Hu Yaobang and Zhao Ziyang, who both pushed for a smaller role in society for the government and party, separating the government and party, fighting corruption and free markets, and Wen Jiabao, China’s outgoing Premier and protégé of Hu Yaobang, who has quietly continued his legacy.

This debate cuts to the core of the party and to China’s future, and it’s been thrown into the public sphere in a way that I’m sure makes many in the party extremely uncomfortable by Wen’s speech and the downfall of Bo Xilai. This is especially important because China is transitioning now to its next set of leaders, so this debate—and the very-public show of what happens behind closed doors when certain leaders lose favor and are removed—couldn’t have popped up again at a more pertinent and sensitive time.

China is increasing repression of Tibetans once again:

Communist Party leaders have also introduced a “monastic management” plan to more directly control religious life. As part of the plan, 21,000 party officials have been sent to Tibetan communities with the goal of “befriending” monks — and creating dossiers on each of them. Compliant clergy members are rewarded with health care benefits, pensions and television sets; the recalcitrant are sometimes expelled from their monasteries.

At some temples, monks and nuns have been forced to publicly denounce the Dalai Lama, the exiled spiritual leader whose name is often invoked by self-immolators. The freedom of movement that allowed monks to study at distant monasteries across Tibet and four adjacent provinces has been curtailed.

Protests have increased, and there have been 29 self-immolations—where someone sets themselves on fire as a form of protest—in the past year, seven in the last month.

Bo Xilai, the son of a CCP official from when the CCP was still fighting the KMT for control of China, was removed from his position as party chief of Chongqing for a scandal surrounding his police chief. Here’s more on what happened. (It’s worth reading if you’re interested, by the way. It’s a weird story.)

Bo was, until this scandal, considered not just a rising star in Chinese politics, but almost guaranteed a seat on China’s politburo. Bo’s politics are, even by Chinese standards, far to the left—using his position, he favored state-owned enterprises and tried to create a revival of communist culture by promoting Mao quotations, singing “red” songs (including some from the Cultural Revolution), and by encouraging youth to work in the countryside. His rise in Chinese politics was seen as a possible sign that China’s next generation of leaders could move away from the relatively liberal views of current Premier Wen Jiabao and the country’s general progression toward a more free economy since Deng Xiaoping. His removal makes that shift less likely.

His fall also provides a look into China’s opaque political system that we rarely get. The Economist writes:

Welcome, too, is the little window the affair opens into the corrupt, fratricidal ways of party politics. Mr Bo’s downfall was precipitated by the flight to an American consulate of Wang Lijun, his former police chief and right hand in the anti-mafia drive. Mr Wang is now under investigation in China. Mr Bo, too, may soon find himself answering awkward questions. That Chongqing’s dirty linen was aired in front of American diplomats on his watch may matter more than the dirt itself. But his sacking will not herald a new era in which party and government officials are to account for their actions. Crimes and misdemeanours, like ideology, are merely weapons in a power struggle. Winners can still get away with it.

China’s leaders like to pretend that the party is a singular thing, and that China’s politics are very orderly and harmonious. But they’re far from it. Clausewitz wrote that war is the continuation of politics by other means, but in China, threats, harassment, house arrest, being jailed and being killed are all a part of political struggles within the party. Because the party has primary power at the expense of a civil system, and political struggles happen behind closed doors, those struggles inevitably involve the rest of society. When there is no transparent system for transferring political power nor the rule of law enforced by an independent judicial system, everything in society is, necessarily, political.

A Chinese immigrant whose aunt worked for Foxconn wrote David Pogue about Foxconn’s factory conditions:

If Americans truly care about Asian welfare, they would know that shutting down “sweat shops” would force many of us to return to rural regions and return to truly despicable “jobs.” And I fear that forcing factories to pay higher wages would mean they hire FEWER workers, not more.

Anyway, now my aunt has been living in New York for one year after saving up money for a plane ticket and visa, and she is wonderfully happy to have escaped Asia and reunited with our family. None of this would be possible if it wasn’t for that “sweat shop.”

The “jobs” he refers to? Prostitution, which is what his aunt did before working for Foxconn.

Working in Foxconn’s factories certainly isn’t “good” work, or enriching work, or enjoyable work. But it’s work, the conditions are much better for most workers than working in rural China, it pays relatively well, and it provides opportunities for people whose families have been locked in poverty in the countryside for generations.

There’s nothing unethical about Apple’s practices. They use Foxconn to manufacture their products and push them rather aggressively to improve working conditions. What we’re seeing in China is what occurred in the Western world during the nineteenth century—a poor country is being transformed into a wealthier, developed country, and that’s what this process looks like. When nations are poor, they compete on the cost of labor, because their workforce is uneducated and unskilled, and that’s what they have.

Conditions are poor during this stage, because reducing cost is the main focus, and because workers have no ability to demand better conditions, because productivity is low and each worker is replaceable. As the economy develops further, worker productivity rises, and wages rise along with it.1 As productivity increases and wages along with it, two things happen: first, workers become relatively more affluent and expect a better standard of living, and second, workers have more leverage over their employer to demand better working conditions.

That’s how economies develop and working conditions increase. Labor laws help, but a labor law that isn’t economically feasible for the country will either do nothing, or do more harm than good. There is no magic way for China’s working conditions to instantly match the Western world’s. It is a process which takes time, but it is a process which makes people’s lives much better. It’s very hard to understand just how poor China is, but developing brings opportunities to people whose families haven’t had much of any for centuries. And that’s no exaggeration.

Others have argued that Apple is acting unethically because they use a company with relatively poor working conditions rather than manufacture their devices in countries with better conditions. The implication people make is that Apple only does this because China provides low-cost manufacturing, and since they don’t manufacture their products in countries with better conditions, they’re only concerned with reducing cost and maximizing profit.

Perhaps Apple’s management is only concerned with maximizing profit. That’s certainly possible, but it is also irrelevant, because the core of this argument is absurd. By using Foxconn, Apple is providing employment for hundreds of thousands of people who need opportunities to get out of the countryside and provide for their families. Moving their manufacturing to, say, the U.S. would certainly be good for the U.S. economy, but possibly disastrous for those workers. Other manufactures may hire some of these suddenly unemployed, unskilled workers, but it’s difficult to see all of them being hired. And even if they were, they would be working in precisely the same conditions they were before, or worse, so the net result is this: hundreds of thousands of unskilled Chinese workers lose their job, are forced to seek employment at other factories with similar or worse conditions, and may not find a job which pays a comparable amount at all.2

That’s Apple acting unethically? People making this all-too-common argument are making judgments before thinking through their reasoning for it, or the implications of their preferred outcome. That’s irresponsible, and that’s a charitable characterization.

The net result here is that Apple is contributing to a process which will improve the lives of hundreds of millions of people, and they are aggressively pushing Foxconn to improve working conditions. No, there’s nothing unethical about what Apple’s doing. Maybe they could be even more aggressive. But it is absurd to say they’re acting unethically.

1. Think about what happens as a worker becomes more productive—that is, they can do more work, or more effective work, within the same amount of time. If a worker’s productivity increases, the company benefits because they can produce the same output for less cost. If a worker who is paid $2/hour and produces 1 unit/hour of output now produces 2 units/hour, the company’s cost per unit has declined from $2/unit to $1/unit. That productivity supports higher wages (say, $2.50/hour), and if the worker’s current employer won’t increase her wage, another company certainly will. Wages tend to increase as a result. [↩]
2. Imagine if all large Western companies followed this principle and chose not to use Chinese manufacturing. China’s economic growth would come to a screeching, painful halt, and hundreds of millions of people would be denied the chance of a higher standard of living. How the hell is that ethical? [↩]

Walmart has made significant steps to make themselves, and their operations in China specifically, more environmentally-sustainable:

Acknowledging that Walmart customers “need low prices,” he said he also believed that “more and more, they will be looking at the entire life cycle of a product: How is it made, how is it sold, how is it used, and how is it reused? To meet these customer expectations, we need to ask ourselves: Is a product made in a factory that is a responsible steward of the environment and our natural resources?”

Interesting report by Orville Schell for The Atlantic. His point that Walmart and the Chinese Communist Party are made of similar, if not the same, cloth is a bit vapid, but it’s worth reading for discussion about how Walmart is exerting pressure on its manufacturers in China to become more environmentally-friendly.

In China, children learn smoking’s value early:

In dozens of rural villages in China’s western provinces, one of the first things primary school kids learn is what made their education possible: tobacco.

“On the gates of these schools, you’ll see slogans that say ‘Genius comes from hard work — Tobacco helps you become talented,’” said Xu Guihua, secretary general of the privately funded lobby group Chinese Association on Tobacco Control. The schools are sponsored by local units of China’s government-owned monopoly cigarette maker. “They are pinning their hopes on young people taking up smoking.”

Aren’t state-run businesses lovely?

China decided to create a tobacco monopoly in the 1980s when the industry supplied more than 10 percent of government revenue, said Wang Shiyong, the World Bank’s senior health specialist in Beijing. Today, tobacco contributes 6.7 percent, according to figures from Yang and Hu’s report.

It’s almost like the government has an interest in people smoking.

Bizarre:

Only minutes into Biden’s remarks, Chinese officials had begun to direct reporters toward the exits. Most reporters and the vice president’s staff objected, saying it was important to cover the entirety of Biden’s opening statement, as had been the agreement between officials beforehand.

A Chinese press aide said Biden was going on far too long for their liking. But in fact, including the consecutive translation of his comments from English to Chinese, Biden spoke only two or three minutes longer than Xi had.

Soon the stern shooing turned into forceful shoving. As reporters tried to stand their ground, Chinese officials locked arms and pushed forward in a show of overwhelming force. Soon enough Biden did finish, but reporters had difficulty hearing the entire thing because of the fisticuffs.

Michael Pettis argues China’s miracle growth won’t last much longer:

Can China rebalance away from investment and toward domestic consumption as the main engine of growth? Yes, but with great difficulty. Chinese households consume only about 35% of gross domestic product (GDP), far less than any other country. Such a large domestic imbalance has no historical precedent.

Some in Beijing understand how lopsided their development has been. So over the next 10 years, policy makers have said they will try to raise consumption to 50% of GDP. Even that is a low number; it would put China at the bottom of the group of low-consuming East Asian countries.

But achieving this goal is problematic, since it requires that household consumption grow four percentage points faster than GDP. In the past decade, Chinese household consumption has grown by 7% to 8% annually, while GDP has grown at 10% to 11%. If one expects Chinese GDP to grow by 6% to 7%, Chinese household consumption would have to surge by 10% to 11%.

Basically, China’s growth over the last two decades has been due overwhelmingly to state-directed investment in infrastructure development, and they’re reaching the end of the road for economic growth from investment. China needs to readjust their economy to be a more consumer-based economy to succeed in the coming decades.

The PRC is trying, of course. But as Pettis points out, households only hold 35 percent of GDP. Getting that percentage up to a safer level will require significant adjustment and slower overall economic growth.

China’s path to world economic domination is not an easy one.

China’s high-speed rail—held up by many as an example of how the rest of the world is passing us by—isn’t doing so well:

Liu exploited the communist leadership’s fascination with bigness and national prestige. Among the benefits he promised was a chance to squeeze foreign companies for bullet-train technology so that China could build and export its own. What happened next suggests that he — and others — also saw the potential for graft in such a vast undertaking.

…

Word went forth that state-owned banks and local governments were to give Liu all the money, land and labor he required. When Chinese journalists found that Liu’s ministry was using cheap, low-quality concrete, creating a safety hazard, the Communist Party’s propaganda department quashed the reports, according to a January piece in the South China Morning Post.

Students and other humble citizens greeted the first fast trains with complaints about high ticket prices. They crowded aboard buses instead. According to a recent report in China Daily, the government was forced to deploy 70,000 extra buses during the Chinese New Year celebrations in February.

It is so unfortunate we don’t have China’s autocratic rule and enlightened group of leaders so they can just impose these policies on us, as Thomas Friedman wishes.

iPhone sales are growing fastest in China:

As fast as U.S. sales of iphones keep growing, it is not the fastest growing region. In “Greater China,” iPhone sales were up 250 percent. Sales of all products across Asia Pacific were up 151 percent to $4.7 billion. In contrast, Europe is a $6 billion region for Apple, and the Americas is $9.3 billion. “Greater China” (which presumably includes Hong Kong, Taiwan and other Asian markets, could soon become Apple’s second largest region.

That’s incredible, and there’s a lot of growth left in China. The current “race” between Android and iOS is only a prelude to what’s going to happen in the next decade.

China is considered by many to be the defining example of state-run capitalism, but the Economist reports that not only are most companies majority privately-owned, but they are driving China’s economic growth:

China’s state-controlled entities are not particularly profitable. A study by Qiao Liu, a professor at the University of Hong Kong, concludes that the average return on equity for companies wholly or partly owned by the state is barely 4%, despite the benefit of cheap leverage provided by government-controlled banks. According to a recently published paper by Mr Liu and a colleague, Alan Siu, the returns of unlisted private firms are no less than ten percentage points higher.

That’s rather incredible, because it’s very difficult for private businesses to get loans through official channels. Operating outside the law is a significant risk for them:

Nevertheless, this form of business has inherent limits. To the extent that firms operate outside the law, they are vulnerable to shakedowns from local officials and mood-swings in Beijing. Although success brings praise, too much of it can invite envy and scrutiny. Each new list compiled of China’s greatest tycoons is often accompanied by stories about those on earlier lists who later fell foul of the law. In his remarks last year Mr Zheng, the provincial party official, said that the significance of private business was not understood: businessmen were often criticised (perhaps a veiled reference to being jailed) without good reason and if continually squeezed, would emigrate, sapping China’s vitality. The prospect of expropriation undermines the willingness of these entrepreneurs to make the long-term investment needed to develop brands, novel products and capable middle-management.