Who Is the Guilty Party?

by Anonymous

(Note: I got this from a friend in China who asked to remain anonymous. – Xujun)

[In translation]

CHINA — Two years ago, I bought a tiny flat from a stranger. While making some minor changes to the old interior, the electrician I hired found problematic wires, and that the electricity meter outside did not work. The electrician, who had more than 20 years of experience, concluded that the previous owner had messed about with the meter in order to steal electricity. He pointed to a jumble of wires and tried to explain – why this wire did not connect to the meter and that wire did not connect to ground – only to make me further confused. Finally I got the gist of what he was saying: the previous owner installed a very small switch inside the apartment, and reconnected the meter to the switch, which fully controlled the meter's readings. As the result, if he had used 100 kwh of electricity, the meter would only read 10 kwh.

This was the first time I heard of such a thing, so I was at a loss as to what to do. I asked the electrician, "Could you please rewire the meter to its original design for me?" He teased me, "Why should I? Isn't it better for you to save electricity cost?" I waved my hand and said, "Drop it, I'm a coward, I won't be able to sleep if I steal. The money saved this way wouldn't even be enough to buy me sleeping pills."

The electrician fiddled with the meter, but in the end couldn't do much to help, because there was a red seal in it that said, "Do not remove seal, Electricity Bureau only; otherwise bear full consequences." He said he couldn't take the responsibility.

I called the previous owner, who neatly denied everything. His voice was full of surprise: "Really? Really? I had no idea! How could it be?"

With no choice, I went to the housing estate's property management, hoping they would help me solve the problem. The director was a young man who looked like he was just out of college. He patiently heard me out and calmly said, "Things like that are not our responsibility. We wouldn't dare to touch that seal either. Why don't you call the Electricity Bureau, perhaps they will send someone for you? But…" he hesitated a few seconds and then said, "For this kind of thing, you know, the Electricity Bureau is very hard to deal with…" He stopped again, his expression looked restrained.

Coming out of the property management office with a foggy head, I ran into Manager Zhou of the real estate agency. After listening to my story, he warned me against acting rashly. "I have heard things like this before," he said, "the Electricity Bureau only holds the current owner accountable. Change electricity wires without authorization? Fine 5000 yuan. You don't pay? They cut your electricity immediately."

I argued, "Can't they be reasoned with? I haven't even moved in, how can it be my doing? Plus, if it were me who did it, why would I take the trouble telling them? It only makes sense for them to consider it the previous owner's responsibility!"

Manager Zhou laughed in surprise: "My God! Are you from an alien planet? China's electricity is a monopoly trade, they are the boss, who do they fear? What's there to reason with them? They don't care to figure out who's right or wrong; it is the most convenient to just grab you. You want to live in this house? Then you have no way to escape. Even going to the court it is 100% your fault. Believe it!"

I didn't believe, but I took his advice to make the call from a public phone a few housing estates away. I explained the situation to the Electricity Bureau. The woman who answered had a flat tone like machine: Please provide your name, phone number, and address.

With Manager Zhou wagging his head to signal me, I hurriedly said this was for a friend, who just wanted to know what she should do in this case.

The woman's tone was unchanged: 5000 yuan fine. After the fine is paid we will send someone to fix the wires.

I couldn't help but raise my voice: "But this wasn't my friend's fault! It was the previous owner, don't you understand? Wouldn't you be wronging a good person and letting a bad one go?"

The woman's same cold voice held to the end: We only hold the current owner accountable. This is the procedure.

I almost cried out: Fuck the procedure! Are you a robot?

I also wanted to say, Are you forcing an innocent girl to prostitute herself (逼良为娼)?

Manager Zhou looked at me sympathetically: "You really don't need to care, let it be. It's not just one or two households stealing electricity. To tell you the truth, the house I rent now has the same situation. In our building 60% of apartment owners do this."

I was speechless for a while. Then I said, "No way! Thieves are in the open, and a moral person must sneak around, this is turning things upside down! I don't care what others do, I must correct the meter. Please help me find a way."

Manager Zhou gave me a wry smile: "Never seen one as stubborn as you are. Go look in the famers market, there may be someone specialized in this sort of thing."

I suspected he was toying with me. I often went shopping in farmers market, how come I never saw such a person?


In a corner of the market, I asked a fish seller if there was an electricity master who could change wires. He pointed behind without lifting his head. A fat man wearing oil-stained clothes took the hint and came to me, asking directly: "Where do you live?" and then simply said: "500 yuan."

I glared at him: "Are you robbing me? At most 200."

He did not get upset, but smiled: "What a temper! 200 then. Deal."

The fat man made a call, lowering his voice to give the other end my address. He then told me "Go wait at home. Arrival within an hour."

In less than half an hour, a slight man wearing the work robe of Electricity Bureau arrived. Within a minute of opening the electricity meter, he was done. Seeing suspicion in my look, the man said: "Rest assured. Wires corrected and the seal replaced. I'm from the Electricity Bureau myself and have done this job often. There will be no problem."

I was curious: "You are often asked to change wires?"

He said frankly: "Illegal changes are naturally more than corrections. I do all. 500 yuan for an illegal change, not a penny less. For corrections I can give better prices."

I saw a big wad of seals in his bag and suddenly understood: When the electricity meter was changed in the first place, the seal must have been removed; why did I see one that was intact? The only answer is: the Electricity Bureau's staff must be the thief who steal what they are guarding (监守自盗). Who knows, perhaps the one who changed the wires last time was the same man today?

I sighed about the shadiness when I handed the man the money.

He said modestly: "We are just giving a hand to help everyone, otherwise what's to be done? Everyone needs to be fed, right?"


Nearly two years passed. On a hot day last month, the power went off at noon. I called the Electricity Bureau, and a worker arrived in 5 minutes. He said the fuse was burned and needed to be changed to a thicker one. Then he discovered something and said: "The meter has been messed around with."

The adage goes that "A thief's guilty consciences make him cowardly (做贼心虚)." I wasn't the thief but was cowardly all the same. I tried my utmost to deny.

The worker said: "Come and see – someone changed here. The ends are still here. We experts can tell with one glance. No need to deny. I'm going to call the Bureau and have them handle this."

He started to dial his cellphone. I was forced to ask pardon. I told him the whole story and hoped he would let me go.

I bet the man was just a big boy not even 23 years old. With plump cheeks and shining eyes, his face was full of innocent smile. He said: "I believe you. But the other guy did not do a thorough job. He must have been posing as an Electricity Bureau staff. Also possible he's a relative of a staff member, got the work robe, and used it to make money. You found me by calling the Bureau, so I can't be fake. I can redo the correction for you and ensure you can sleep in peace from now on."

Now seasoned, I asked: "How much?"

He said calmly: "At least 300 yuan."

I said: "At most 200. Please give me your name and cellphone number. I don't want to be endlessly extorted by you Electricity Bureau people."

He smiled brightly: "Don't get angry, we are only taking money to remove ill fortune (拿人钱财替人消灾)."

Two minutes later he declared everything was OK now. He left his cellphone number and told me to call him if there was any problem. "But there won't be any problem. Rest assured, there'll be problems no more." His smile was very warm.

Sichuan: Land of Abundance or Emptiness?

For thousands of years Sichuan, "Land of Abundance," has been recognized as China’s most fertile agricultural base. A new development model being pushed by the provincial government may forever change that. Yesterday I received an email from Maple describing a “pilot program” :

(In translation; 阅读中文原文)

My husband and I were in Chengdu’s Qingcheng Mountains last week, and visited some newly built peasant residences, all beautiful two-story small villas. A woman in her thirties very politely invited us into her house, and answered all my questions in detail.

Monument for a new peasant residence (photo by Maple Xu)

These new peasant residences were built after the [2008’s] earthquake. They look very handsome, however the residents are not victims of the earthquake – they did not have personal or property losses from the disaster. Rather, the new houses are the result of a pilot project taking advantage of the post-disaster rebuilding momentum. These “urban-rural synthesis overall planning” developments are government programs currently ongoing in Sichuan and Chongqing. Simply put, the peasants provide the land, and the government selects a developer to do the unified planning, design, and construction in an urban style. Each participating peasant contributes 2 fens(133.3 square meters) of land, and after the construction is complete, each gets 35 square meters of housing in return. The developer can use the remaining land in any way he wants. Thus, neither the peasants nor the government have to pay a penny, and the developer also gets practical benefits. All are happy.

The family we visited is a household of five. Using 10 fens (666.7 square meter) of their land, they exchanged for a small villa of 175 square meters with a beautiful interior. When asked how they’d make a living without land, the woman replied: 打工- migrant work. They still have a small portion of their land left, and they use it to plant vegetables for sale. Apparently, the woman and her family are very satisfied with their current living condition. After visiting her, I talked to two other people in the neighborhood, and got similar answers.

New peasant residence in Chengdu's Qingcheng Mountains
(photo by Maple Xu)

No farmland could be seen around the residences. There were only a few stalks of corn planted by the “rural home inn” (农家乐) where we stayed, in a small yard, probably smaller than your flower garden.

In my eyes, their life style is no different from that of city people. The peasants themselves also work in the city. But I don’t know if this is a good change. Farmland all turning into villas, vegetable patches become parking, where do we get food and vegetables from? My husband disagrees. He says peasants have the right to live the city people’s life. It is a trend of China’s agricultural reform: centralizing peasants’ scattered residences, and centralizing rural land management so as to bring it to scale. He also says nowadays China imports lots of grains, because the cost is lower than domestic production.

I can only speak intuitively that, when rural is not like rural, city is not like city, it is problematic. Now if you go to Sichuan’s rural areas, you rarely see a piece of farm land, let alone pigs and cows. That’s why when tourists come to Hainan, a relatively backward region, and see water buffaloes pulling plows in paddies, they exclaim, "Exotic!" The media and propaganda keep shouting about building great metropolises, about bringing China’s economy more in line with world standards, about world as one community and the earth as flat, et cetera – I can agree with none of them. If one day Shanghai becomes a clone of Paris, Chongqing a mirror of New York, wouldn’t life becomes meaningless? Look at today’s Chongqing, where hills are dynamited to flatten land, the rubble is used to fill in valleys, and the numerous high rises stand up like a forest. The “mountain city” has no mountain. The “fog capital” has no fog. Isn’t this extremely sad?

And here is a headline from last week’s media: “Sichuan forcefully advances rural tourism and the development of vacation agriculture.”

“Vacation agriculture”: instead of working the fields, peasants take care of tourists from the city. Nothing gets growing – can you call that agriculture at all?

The Cultural Revolution on Wall Street

by Larry Mongoss, guest blogger

I figured I had either heard of, or conceived in my own imagination, every possible way one might think about the current financial crisis. Thus my surprise and delight, while watching Charlie Rose, to hear David Faber of CNBC compare it to China’s Cultural Revolution.

Well, in all fairness to Mr. Faber he didn’t actually mention the Cultural Revolution, and probably would be baffled by the comparison, but he said something that really resonated. For a CNBC special on the financial meltdown called House of Cards he had been talking to many people. Lots were mad, he said, but also said that both the victims on Main Street and the culprits on Wall Street must carry some of the blame for what happened. Without borrowers willing to take on houses beyond their means the bubble would not have been there to pop in the first place. Or more thematically, given the name of the special, the cards would not have been stacked so high.

And that brings me back to the Cultural Revolution. The borrowers and the Wall Street bankers believed in the miracle, that prosperity will yield prosperity. Somewhere in the excitement, common sense went out the door. It is human nature to get caught up in the moment, and this time the factions, instead of fighting amongst themselves, were all pulling together till the cards began to topple.

So if the bankers and the borrowers where different Red Guard factions, then who was Mao? That one is pretty easy, and he is one of the featured speakers in the special. Even today, Alan Greenspan basically says he could not have taken any action to make this adjustment less painful. It is kind of funny to hear him say that. If you ever chewed bubble gum as a kid, and can remember back to that time, you can probably see the bubble forming in front of you. Some of those bubbles were amazing: huge, round, perfect. Others did not look so good: lopsided, weak and just plain ugly. When I saw that things were not working out I would suck the air out, and chew some more. Some of my friends, however, would simply blow hard and force the bubble to pop. Apparently Mr. Greenspan was like them.

Getting past Mao to the Gang of Four is a little bit more of a stretch, but Mr. Bernanke certainly seems like he ought to be included. Then, given Mr. Geitner’s much awaited, and astonishingly underwhelming, announcement of his plans, or lack thereof, I have to add him to the roster. Rounding that out with Mr. Paulson and Mr. Summers seems to make sense, though I wouldn’t care to hazard a guess as to which of them is Jiang Qing. They are, it seems, unhappy allies in this boondoggle we find ourselves in.

Ridiculous and absurd you say? Though that is true, there may actually be something in the comparison beyond what is, hopefully, a bit of comic relief in the face of so much dour news. And that is what happens next.

The end of the Cultural Revolution marked the beginning of China’s emergence as world economic power. A very important ingredient in that spectacular rise has been the development of businesses, activities and really just ways of doing things that simply did not exist before. This has been done in the face of a large and well established bureaucracy that, at first glance, should have doused any attempt of the country to lift itself.

A similar situation exists in America today. Too big to fail is something that people might have said about the Chinese Communist Party, but in America it is banks, car companies and insurers that get the tagline. The number of entrenched interests in America is substantial, and they are guided by very powerful people. So the challenge is similar to that faced by China in the 80s, to keep all that from standing in the way of progress. This is always difficult, but has become much more so as the very existence of many of yesterday’s most powerful institutions is threatened.

Can Barack Obama, through reason and persuasion, accomplish what Deng Xiaoping did through concentrated power? It seems unlikely, but I am ever hopeful. So I will watch the drama on Wall Street and Main Street as well as in Washington unfold with that picture in my mind.

Valentine's Madness in Shanghai

by Maple Xu

[in translation]

On Valentine's Day, Shanghai went mad! No parking available at squares, restaurants or karaokes; to eat out one had to wait in a long line; streets were unbearably jammed by cars.

Strangely, since the financial crisis began, it seems my countrymen's consumption power has been growing intensely. In the past years on Valentine's Day, at most the price of roses went up and Western-style restaurants got more customers. This year, the old and the young all came out to join in the merry-making. Even Chinese-style restaurants had long lines. Movie theaters were explosively filled. Rose prices surged from 2 yuan to 15 yuan a stem; people still grabbed them like a free-lunch, buying 99 stems at a time.

I suspect my countrymen are having the fin-de-siecle anxiety, smashing the pot that has already cracked. Why wait for inflation, why not indulge in flowers and wine now and buy that one-time happiness. But most of my friends think this is because Chinese have bank deposits; in addition, people are irritated by the American financial crisis, so they spend just to show you they can spend.

In this year's Spring Festival Gala, Zhao Benshan (note: a famous skit and sitcom actor) had a stage speech "we are not short of money; give me whatever is good." Now people around me often say "not short of money!"

The Silk Road to Recovery

by Larry Mongoss, guest blogger

It was interesting to see Xujun’s post on consumer activity in China. Her observations suggest some interesting developments may be coming in the years ahead. Curious about this, I contacted a couple of my friends in Shanghai to get their take on consumer activity. Their personal observations were consistent with hers, but they were prudently reluctant to draw any conclusions from that, especially given the Spring Festival splurging going on. When it comes to officially reported numbers, all were viewed with skepticism.

With all those disclaimers, it is still seems that the Chinese consumer is far more confident than his or her American counterpart. Could this mean that China will help rescue the US?

China and America have had an odd relationship over the past 20 years. Things get produced in China and sent to America. Then, instead of sending back other things of equal value, America sends an IOU. Lots of people, including me, have worried endlessly about what will happen when those IOUs come due. But we have been missing the point.

Now that America doesn’t want so much of the stuff it was not paying for, the Chinese will have to turn elsewhere, most notably to themselves. It sounds like the government, by simple admonishment, can cause a jump in consumer spending. The effect of that may dwarf their 500 billion dollar stimulus package announced last year. A pretty cool technique if it works, especially if it is possible to turn consumer spending back down as well.

Telling Americans to spend more, on the other hand, is not at all likely to work. Many would need to borrow money to make that happen, and right now those that can borrow don’t want to and those that want to can’t – or so it seems. Most Chinese, in contrast, only spend money that they have saved, and many have built up modest accounts over the past decade. Thus, narrowly from the perspective of consumer sentiment and ability to spend, China is much better positioned to grow consumption, and there are signs they are doing just that.

Put simply, the Chinese are taking care of themselves. Domestic consumption appears to be compensating for the fall off in exports, not magnifying it as is happening in Japan. And that consumption, though with a different focus than the export production, is related. All of this is good for China, at least in the short run, but what about America?

Since the 1980s, China has seen amazing economic advancement, in large part from catching up to western manufacturing techniques. Some people have belittled this as just being the activity of copycats, but that was exactly smartest thing to do. It is much faster to copy what is being done than to reinvent it. Giving stuff away, and manufacturing to the needs of the developed world, has allowed China unprecedented growth in both activity, and sophistication.

That sophistication is good news for America, because it also carries over to consumers. Chinese consumers love things that are made in America, and growing consumerism in China is a golden opportunity. In the past, the Chinese government has discouraged consumption to keep the export driven economy from overheating. Now, it will need to discourage exports, to keep the consumer driven economy from overheating.

An exaggeration most likely, but we have a very real possibility to see more exports from America to China. We may, in fact, see the huge American trade deficit turn into a trade surplus. America will be producing things, and giving them to the Chinese along with the money to pay for them. Only this time through, it will be because the money is being paid back by America instead of lent by China.

Unlike the past situation, which was clearly not sustainable, the present situation is. If America can become proficient at producing more than it consumes, it will pay back its foreign debts. Once those debts are paid back, America can turn back to itself, and use that excess production to take care of its retired people. China becomes the training ground for dealing with the social security crises people keep talking about.

For China the path is somewhat more convoluted. They are facing an even stronger demographic adjustment than America. In addition to doing something for the rural population, the Chinese need to temper their domestic consumption with the knowledge that people will be retiring without replacement in the near future. Developing the equivalent of a social security system is critical to keeping China functioning smoothly. Luckily for them, there is no shortage of poor people to practice on.

The Sky Is Not All Grey

Postcards from Tomorrow Square: Reports from China
by James Fallows

A review by Xujun Eberlein

1.
A proprietary approach I use to help assess English journalism books about China is to measure how much they tell me, a Chinese, what I don't already know. This, needless to say, lacks objectivity, and it can easily undervalue an otherwise excellent book. As an example, Out of Mao's Shadow by Philip Pan consists essentially of stories I had already read from the Chinese media or the internet. Not new to me, but that doesn’t mean the book is not worth reading for Western readers (in fact, it is).

On the other hand, this approach raises a high bar for journalists writing about China. To find stories not broadly known even to the Chinese requires not only extraordinarily acute ears, but also the admirably open mind of a deep thinker. Thus, I can narrow down my reading list to a few outstanding books. James Fallows' new book, Postcards from Tomorrow Square: Reports from China, is one of them. Many things he writes about are new to me, but that's the least of the delightful surprises. Continue reading on The China Beat >>

How Can China Support America

by Larry Mongoss, guest blogger

When China lowered its interest rate on October 8^th, people outside of China attributed the action to an attempt to fall in line with what the central banks in Europe and the United States had done. There was actually no reason given for the change, and it was done in conjunction with a reduction in reserve requirements, suggesting that the effort was part of an attempt to buffer the Chinese banking system rather than really fall in step.

(photograph by Maple Xu, ©2008, all rights reserved)

Regardless of the motivation, however, there was some negative reaction inside China on the grounds that China should forge its own path, and not follow the lead of the West. When later there was a rumor that the Chinese were considering injecting $200 Billion into the US financial system by buying Treasury notes, that reaction heightened immensely. Unfortunately, I have to bug other people to look at Chinese web sites so I never really got to the bottom of where that rumor started, though I do find it ironic that adding $200 billion to the current Chinese holdings would give the central bank $700 billion, just matching the size of the bailout plan.

More to the point, though, people started asking the question what China should do to help in this crisis. The very fact that people are asking that question is breathtaking to me. Some ten years ago, during the Asian Financial crisis, China did its best (pretty successfully for the most part) to simply avoid the pain. The current attitudes are a testament to the progress China has made economically, its own housing boom, and the much higher reach of the internet. People not only hear about, but talk about, almost everything and almost all of them are thinking about home ownership.

The most prevalent answer, if you are curious, is no, the Chinese should not be worrying about the rest of the world. Not a big surprise, most concerns are closer to home, quite literally. There is more interest in figuring out whether the experience in the US housing market has some lesson in it for the people in China. If past experience worldwide is any indicator, the answer is almost certainly yes, but almost none will learn it.

What is really interesting about all this though is that the real lesson may be exactly the other way around. The US, and European governments responded loudly, and hopefully effectively, panic stricken that the financial markets would collapse and leave everyone jobless. To look at the Shanghai Stock Exchange Index, which dropped from 6000 last October to 2000 this October, you would definitely conclude that China is headed into a depression. Not so. Nobody is talking about anything except for abnormally low, which is to say less than 10%, growth in the next year. While things may yet turn out less rosy than people expect, the connection between stock prices, and housing prices, is much weaker in China than it is in the US. Part of this is relative size – a much bigger portion of the US economy is represented by these two things – but part of this disconnection is the command nature of the Chinese Economy.

Though many people are calling for the Chinese government to do something about the stock market, it has not been quick to take drastic action. I have no doubt though, that should producers find demand dropping away for their product, the government would step in. Certainly such steps would be clumsy, the norm for a command economy, but they would be strong. The knowledge that this would be done might very well be enough to mean the action never needs to be taken. McCain and Obama talk about hatchets and scalpels. What the Chinese government holds in reserve is more like a bulldozer. That level of control is often problematic, but at times like this it comes in handy.

Bailing Out the Leaky Boat

by Larry Mongoss, guest blogger

(Photo by nikok)

Everyone keeps talking about the bailout, but it is interesting to me that nobody continues with the analogy to talk about the leaks in the boat. On the water, when you bail out a boat because something has gone wrong, it only makes sense to do so if you can get the water out faster than it is coming in. If that is the case, you get to keep bailing until the boat gets to shore, or it can be repaired. So, if we are going to have to keep bailing in order to forestall catastrophe, the real question people should be asking is how long that 700 billion will last.

On and off over my lifetime I, like many other people with a background in economics, have spent a great deal of time thinking about the great depression, its causes and ways it might have been avoided, even the desirability of avoiding it. On the financial side, some of these are obvious and fairly well understood. Large scale insider trading, which was business as usual at the time, loose credit, and a general adolescent feeling of invulnerability caused a remarkable run up in stock prices that eventually collapsed. On the real side – what politicians are calling Main Street these days – things are a lot more muddy, a funny thing in a time we associate with the dust bowl. While there is some consensus that there was not enough demand to keep up economic activity, why is not so obvious. Some say there was simply not enough money. Others point to a disconnect between what America was tooled to produce, and what people wanted.

The bailout is, to my mind, an absolutely fascinating, and incredibly expensive, test of the theory that there was not enough money. A long time ago, back when Paul Volker was heading the Fed, there was a great headline in the wall street journal that read something like “What happens if you throw a credit crunch and nobody comes?” The reigning assumption then, as now, was that easing credit will allow people and businesses to borrow money and get things moving. But really, beyond a few anecdotal assertions, there has not been much evidence presented that those who want to borrow money can’t. Just listening to the radio, and the ads from banks that want to lend me money, seems to suggest otherwise to my simple mind. If credit is eased, and still nobody borrows, what then?

While people in America are painfully aware that the price of gasoline is high, all of the talk is about how to make it lower. Almost nobody wants to acknowledge even the possibility that there is a new game afoot. But what if it is just that, a new game, rather than the turmoil in the financial markets, that is really driving down Main Street. What if, what we are feeling now, is the fundamental mismatch between and unlimited ability to consumer and a finite ability to produce. Mark Twain is often attributed with the saying “buy land they aren’t making any more of it,” and in his time others were buying people. Well guess what, they are still making people and in the world of supply and demand that means they should be getting cheaper.

Stepping out of slavery, all this boils down to less going into the hands of those that do the work. While this effect can be lessened, potentially even avoided, by rapid changes in technology, there is no guarantee, or evidence, that this will be sustained. In fact, if you look at the last 20 years in America, the amount earned by most people has not allowed them to lead increasingly better lives. More ironically, if you look at China over the same period, land is probably the single biggest factor in concentrating the wealth into a tiny fraction of the population. It is ironic, because the land was socialized when the communists took over precisely in order to prevent that.

So perhaps the bailout can be paid for by the Chinese who are now rich because land, in fixed supply, is getting progressively more expensive while labor, with unlimited supply, is relatively cheaper and thus Wall Street can keep itself intact while the residents on Main Street and Renmin Road work their butts off just to survive.

A postscript on this. After reading through the proposed bailout bill, the whole activity is being put under the acronym TARP for Troubled Asset Recovery Program. I am not sure if the new metaphor is intentional. But if it is, apparently those in the know think all of this is simply the result of too much rain, and has nothing to do with a leaking boat. Funny though, I did not see anyone named Noah involved in writing the bill.

Gas Prices and China’s Feast from Famine

by Larry Mongoss, guest blogger

Last year when I was in Chengdu, a bicycle brushed by me as I was walking along the sidewalk. I was surprised to see the rider was not pedaling. A second look brought my attention to the two wheeled things that I remember so fondly and I noticed that most had batteries and a little electric motor down where the business gets done. I was also surprised at how quiet the scooters were until I realized that they too were battery operated. I had fun counting old fashioned bicycles – still lots around but it seems like there were more of the new kind. So I went window shopping and saw that they were available everywhere and, while not downright cheap, priced quite reasonably. A nice convenience for those that can't afford cars.

So what does this have to do with the price of gas in China?

When the Chinese government recently announced that gas prices were going up, I, like many people, was surprised. Mostly, cynics that we are, we didn’t expect something that might anger people to happen before the Olympics. But I guess, when the alternative is long lines at the pumps, and taxis that won’t go, the early price increase seemed reasonable.

Taking a longer term perspective, which is what I am more interested in talking about anyway, gasoline and diesel prices are on the rise. This recent 20% increase is pretty muted relative to what we have seen in the US, but things will catch up. There is enough market influence in China now that having a state set price on anything that effects more than a few select cadres is no longer practical. Make the oil companies sell cheap and they simply stop refining. The days of rice coupons and rationing, though not forgotten, are looked back upon and not part of the future. Expensive oil, on the other hand, is.

High energy costs are not new to China. In fact for anyone over 30, both energy and the things that use it have been generally costly. I can remember taking a taxi in China some 20 years ago and being surprised at how quickly the driver would shift into third. I was thinking dirty valves and poor acceleration; he was thinking two more kilometers on my tank of gas. Though prices have gone up, the steadily increasing income of the rising middle class has made energy, cars and air conditioners seem affordable.

Most likely, though, that flirtation with cheap energy is coming to an end. In China cheap oil has just started its seduction of a generation. This is in contrast to the US where, since the Second World War, we have been shaping our lives to the idea that traveling farther-faster-cheaper is what we do. Our highways, suburbs and shopping malls all have the reliance on cheap oil built into them. While China’s growth over the last two decades has been frenetic, and much of it imbued with this same bigger-faster-further mindset, there are few in China who do not know what a shoulder pole is used for.

So – and this is a question I have been pondering for the last five years – what happens when gasoline finally reaches $10/gallon in the US and China? For me the obvious answer has always been bicycles and trains – and that brings the US right back to China as I first met it. I may be wrong about the exact technology. It is electric cars and not bicycles that people talk about in the US. While, as I pointed out in the opening, in many of China’s cities electric scooters and bicycles significantly outnumber the pedaled kind. But this latter observation kind of makes my point. China is, ironically, much closer to a reasonable end state for dealing with high energy costs than the United States.

The real question, then, is whether the leaders of China, both political and business, will recognize this and change course. It is actually a tricky thing to do, because the technology is not all there. China, like Japan in the 1960s, is quickly gaining on the richer countries copying the way things are done in those countries, but that path is becoming obsolete. The current increase in the price of oil makes it a dead end. Copying what works in the US to deal with this would mean a very long wait. Grappling with the issue head-on, however, is something that China is well positioned to do. The solutions, from a social perspective, resemble more closely China of two decades ago then America of today. The technology required to make it work is still unknown, but it is knowable, and China is a great place to try it out. Perhaps then, the US can start copying what happens there.