Blogg

Chinese authorities estimate that 3,2 billion trips, including intercity flights, trains, boats, and local buses to remote villages, will take place during the six weeks around the national holiday starting on Monday. An estimated 250 million people are going home by train, which already made the online booking system for railway tickets slow and even crash when it got 1,66 million hits once.

Mainland transport, energy and security authorities have been put on high alert by Beijing to make the return of migrants run smoothly. Likely, the authorities also hope that there will be no huge snow storms as in the Chinese New Year back in 2008 when millions of migrants got stuck in southern China unable to return home.

To many Chinese, the Chinese New Year holiday is the only time during the year when they can return home to their home villages and hometowns. This is especially important for the rural migrants who have left the rural, poorer hinterlands for the coastal, more prosperous regions to get better paid jobs in factories, construction sites and urban service sector where they work as maids or custodians.

Chinese New Year begins on Monday with the Year of the Water Dragon.

Many rural peasant migrants have left their children behind in the rural areas as it is hard for rural children to enroll in urban schools, which requires an urban registration. Instead, the rural children stay with their grandparents in the countryside and hope to join their parents when they are old enough to work in the cities. Sometimes, the parents only return home once every second year, making the trip back home even more important.

The coming two weeks, China is basically closed down as the Chinese families congregate making dumplings, jiaozi, sticky rice cakes, nian gao (which sounds like “a year higher” in Chinese) or spring rolls, depending on where in China you live. Jiaozi are especially popular in northern China, and there is also a saying that the more jiaozi you eat during the New Year celebration, the more money you will make the coming year.

Chinese New Year is also celebrated with massive use of fire crackers, which are said to scare away the old year, this time the old rabbit. To a Westerner like myself, it feels like being in a war zone as the fire crackers never seem to end, and accidents are common despite SMS-warnings from the government to be careful when setting them off.

Chinese employers usually pay out a 13th month of salary to its employees and there are big New Year’s parties with food and karaoke. Gifts are also important and the Chinese are estimated to spend 17 percent of their annual spending on gifts for the New Year celebrations. Popular gifts include expensive liquor, nicely boxed in chocolate, food specialties and of course the hong bao, the red envelope with money that people give to children.

Despite the joy of celebrating the Chinese New Year, not everybody is happy. According to some surveys, many Chinese worry about the high expenses for gifts, heavy traffic and the troubles getting back home safely, not to mention the social pressure singles feel as they return home and their parents want them to get married. But on the Chinese Internet, there are now ads for renting a fake boyfriend or girlfriend over the holiday to keep your family happy, at least this year.

China managed to control its inflation in 2011 as it successfully handled the porcine diseases that put high pressure on pork prices last summer, as well as implemented several restrictions on the real estate market (read more in Karine Hirn’s blog) and encouraged vegetable growth as well as water conservation projects to increase vegetable yields.

This year, growth is in focus, and the new slogan of the Chinese government is “Promote growth”. The major reasons for this are the tightening of the Chinese economy which has slowed the GDP growth in 2011, but also the softening of global demand.

Trade statistics were released earlier this week, showing that export growth was 13.4 percent in December compared with a year earlier, down from 13.8 percent in November. Import growth significantly decelerated to 11.8 percent, from 22.1 percent growth in November.

The weaker imports are mainly due to falling commodity prices, especially of iron ore and crude oil, while imported volume actually  increased. Lower imports are likely also a product of seasonal adjustments for the Chinese New Year holidays, which starts early this year, on January 22nd.

Yangshan Deep Water Port south of Shanghai ranks as the largest cargo port in the world.

The lower import figures made the Chinese trade surplus increase to USD 16.5 billion in December, compared to USD 14.5 billion in November. Totally, the trade surplus in 2011 ended at USD 155.1 billion. Even if the trade surplus is still huge, its trend is declining: in 2010 the trade surplus was USD 183 billion, to be compared with the record year 2008 when it was USD 295 billion.

In December 2011, China celebrated the tenth anniversary of its entry into the World Trade Organisation (WTO), and trade has since then increased almost five times. Today, China is the world’s largest exporter and the world’s second largest importer (after the US). Trade has been an important component of the economic growth in China during the last decade and in 2007, it accounted for 18 percent of the economic growth.

The global economic crisis in 2008/2009 hit China quite badly initially as its economic growth was so dependent on exports, and over 20 million migrant workers lost their jobs. Since then, the Chinese economy has shifted its dependency on exports. In 2011, it is the internal economic motor of China that appears to take over more of driving the economic growth.

Fixed asset investments are still high at almost 50 percent of GDP, and private consumption is increasing: for most of 2011, monthly retail sales have increased with around 17 percent year-on-year in urban areas. 2012 is seen by many analysts as the year when China will show its sincerity in shifting its economy from export-driven to consumption-driven, although transforming into an economy dominated by consumption like the American economy will take many years.

If exports would fall dramatically and cause a surge in unemployment similar to what happened in 2008 and 2009, it is probable that China will embark on a new stimulus package, although likely in a different shape than the massive stimulus package and credits of 2008/2009. That stimulus package, which accounted for totally RMB 9 trillion (or USD 1,32 trillion) including credits, was one reason for inflation pressure in 2011 and also increased local government debts. Instead, one could expect a smaller stimulus package, probably focusing on water conservation and social housing.

Until then, the Chinese government will continue its way to promote growth by selective easing including for example increasing required reserve ratios (RRR) at the banks and easing the current purchasing restrictions of the real estate markets.

At 1 AM Sunday, the North Korean border to China was ordered to be closed with no further comments. On Monday, the news came: "The Dear Leader, Kim Jong-il, is dead". Like his father, Kim Il-sung, he suffered a heart attack and had passed away suddenly on Saturday.

That Kim Jong-il’s health was in bad shape was well known and the South Korean stock market KOSPI only fell with 10 points at the news. On Tuesday, it recovered fully. Even Kim Jong-il himself had prepared his death for a couple of years following his alleged stroke in 2008.

Already in 2009, he travelled to China with his youngest son, Kim Jong-un, to make sure that the two countries would keep their friendly relations after he had passed away. Most likely, he gave similar instructions back home in North Korea, where Kim Jong-un was named vice chairman of the Central Military Commission and given the grade of a four star general in late 2010.

"The Respected Comrade", as Kim Jong-Un is now called in North Korean press, has a tough task ahead of him dealing with an impoverished country and facing global politics being the leader of a nuclear nation. Even if the young Kim Jong-un has his secondary education from Switzerland, a military degree from the Kim Il-sung Military Academy in Pyongyang, and is supposed to not only speak Korean but also English, German, and French, he is still inexperienced.

Many analysts believe that his uncle, Kim Jong-il’s brother in law, Jang Song-taek, will rule behind him. To keep the Kim dynasty and the North Korean Juche ideology alive, it is important to have a Kim as leader. Having Jang Song-taek behind him most likely means no big changes in North Korea: no economic or political reforms are likely in the near future. The North Korean attacks on South Korea last year, including the sinking of a South Korean corvette, were seen as part of the succession process in the North, and similar attacks are not probable at this stage.

Even if there have been a degree of marketization in North Korea during the last decade, this has been due to state failure rather than state induced economic reforms, which China would like North Korea to embark on. The UN claims that 50% of the calories consumed in North Korea come from private, informal markets.

In late 2010, a currency reform was carried out in North Korea to control inflation, but also to eradicate income disparities that had occurred due to these informal markets. Two zeros were to be deleted on the Won in the new currency and little money allowed to be exchanged into the new Won. Petty traders that had made money through the black market could not keep their savings, and it was a hard blow for potential economic reforms. The currency reform did in fact generate social unrest and the high cadre in charge was later executed for his deeds. Currently, the conservative military forces that appear to be in charge in North Korea seem less interested in Chinese style economic reforms as this would threaten the whole system.

The so called grasshopper traders between North Korea and China are bringing in more information from the world outside and it will be hard to keep the Hermit Kingdom closed forever. Even today, many manufacturers are talking about moving production from China to North Korea, which has lower labour costs. This will likely open up the country further.

In international politics, North Korea is indeed “a shrimp between whales”, to quote the eternal president and so called Great Leader Kim Il-sung. However, none of the whales, China, Russia or the US, want an unstable North Korea. China wants to avoid refugees crossing the border and the US wants an end to a nuclear North Korea, which is likely cooperating with Iran on missile and nuclear technology. China also prefers to keep North Korea as a buffer zone against the US military forces in South Korea.

China is one of the most important trading partners to North Korea accounting for approximately 50% of its exports and 40% of its imports with trade totaling USD 2.69 billion in 2009. North Korean exports mainly consist of minerals, metallurgical products, manufactures (including armaments), textiles, agricultural and fishery products.

Even if North Korea is of importance for China politically, South Korea is a much more important trade partner. In 2010, Chinese trade with South Korea was USD 207.2 billion. South Korean popular culture is also fashionable in China, where the Chinese enjoy watching South Korean soap operas, listening to South Korean pop music and go weekend shopping to Seoul.

Beside a currently unlikely nuclear attack from North Korea, the greatest cost for a change in North Korean politics would be a reunification with the South. Estimates of costs for a Korean reunification range between tens of billions to a trillion USD, which is roughly equal to South Korea’s GDP today. Currently the GDP per capita in South Korea is 17 times larger than the GDP per capita in the North. This is to be compared to West Germany having a GDP per capita that was four times the one in East Germany before the reunification.

Even if North Korea and South Korea claim that they want reunification, this is not very likely and it keeps on being unlikely as time goes by. Already today, young South Koreans are less interested in a reunification than the older South Koreans, and even if a reunification would help an aging South Korea, the cost is viewed as too big, not to mention the mental cost merging an isolated country with a capitalist international country. Instead, it is more likely that South Korea will continue to make use of cheap North Korean labour in free trade zones similar to Kaesong close to the border.

I have been arguing that the elections (parliamentary and presidential) would not change the political situation in Russia in any fundamental way in the short term but that the increasingly assertive middle class represent the best hope for real change in Russia in the medium term.

I was partly right because the formal political set-up has not changed (United Russia won a majority in the Duma and Putin is still expected to become President) and the middle class could now become an engine of change. But it all happened sooner than expected and something did change the week after the parliamentary election on 4 December. The protests and vocal discontent with the ruling elite in general and Prime Minister Putin in particular suddenly became a political force too strong to be easily dismissed or repressed by the Kremlin. 

This force has been described as urban, middle class, young, and frustrated with the ruling elite. All that is probably true but that is also where the easy categorization ends. There is no single organization or leadership but rather a mix of groups with different interests that have united through social networks on the internet based on what they don’t like.

It is therefore difficult to predict how this frustration will play out. But given the fact that the protests so far have been larger than expected and calmer than feared, there is reason to believe this force will not go away anytime soon. Indeed, new demonstrations are scheduled on 24 December.

This should be welcomed as it will put pressure for free and fair elections, more plurality and increased transparency. But given the absence of a single organization, leadership or ideology behind the protesters, it is difficult (although not impossible) to see how this force can challenge the current leadership.

Putin and United Russia are, after all, popular (albeit not as popular as the official election results suggest) among a large share of the Russian population after more than a decade of rapid economic growth and increased stability. Some of the leaders behind the protests have been suggested as potential rivals to Putin for the presidency and an oligarch announced his candidacy this week. More names may appear in the near future but I doubt anyone will have the capacity to unite the protesters and become a serious challenge to Putin in March. 

The political situation in Russia has become more complex and uncertain, but there is also reason to believe things will change for the better even though it is too soon to speculate exactly how things will evolve. In the meantime, I believe one should be careful in comparing this with the color revolutions in Eastern Europe or with the uprisings in the Middle East.

I believe the inevitable change in Russia will follow its own logic, but I dare to say that it has started.