Since Japan detained Chinese fishing trawler captain Zhan Qixiong in the sea around the disputed Diaoyu/Senkaku islands on 7 September, Sino-Japanese relations have reached their lowest ebb in five years. On 24 September, a prosecutor from Naha City in Okinawa Prefecture, where the captain was being detained, decided to release the captain ‘in consideration of Sino-Japanese relations’.

This decision came after a number of attempts by China to protest against Japan, including repeatedly summoning the Japanese Ambassador in China, Niwa Uichiro, to an audience with State Councillor Dai Bingguo; cancelling planned top-level government contacts, a planned trip by 1000 Japanese youth to the Shanghai Expo, China-Japan talks at a scheduled APEC meeting, and the sale of tickets to a concert given by Japanese pop group SMAP, to name a few. China also halted exports of rare-earth minerals to Japan. The released captain returned to China to a hero’s welcome, not unusual given the coverage this matter has received in the Chinese media. The Chinese government now demands a Japanese apology.

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It’s official now. China has passed Japan as the world’s second-largest economy.

The New York Times reported this week that “[a]fter three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States.” It went on to say that this is “the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.”

The latest prediction is that China will surpass the US as well. How soon? In another 20 years, or 10, or even nine. By 2019, China might become the world’s largest economy.

How should one deal with a China that carries such economic weight? In recent years, the rise of China has inflicted much fear. There have been fears over its insatiable appetite for energy and natural resources and of the world running out of natural resources much faster because of China’s rise.

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If anything, the ongoing World Cup tournament that is exciting fans around the world only serves as a reminder to football fans in China of one of their greatest embarrassment in sports. Whereas the Chinese team had topped the medals table for the 2008 Olympics, the Chinese men’s football team was defeated in the World Cup qualifying games at the Asia group stage in the following year. In fact, in recent years, football has degenerated into such a sorry situation that parents have stopped sending children to football schools or the junior teams of football clubs. Teenagers show very little interest in this sport, a phenomenon that is hard to find in any other country. In a country of 1.3 billion people, the number of registered junior players has dropped from 600,000 in 2000 to only 30,000 in 2007.

The decline of Chinese football is caused by deep institutional factors. Starting from late 2009, there has been a government anti-corruption crackdown on the football industry, which has led to the expose of shocking cases. The top official of the Chinese Football Association was detained for taking bribes, while head coaches and club managers were investigated, implicating current and past football stars. Referees were also involved as some of the award-winning referees proved to be most corrupt. They were found by the police to have taken bribes that sometimes amounted to almost half a million yuan per game (about 73,000 USD).

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Perhaps everyone’s ultimate goal is to become happier, and perhaps the ultimate goal of every country’s government should be to make its citizens happier.

The sources of happiness are complex however. Happiness is related to macro factors such as culture, values, political system, and the level of economic development, as well as to micro factors such as an individual’s personality, mental health situation, family background, financial situation, religion, and worldview. Recently, Ronald Inglehart, a professor from the University of Michigan, and his collaborators published a research paper claiming that, “since 1981, economic development, democratization, and increasing social tolerance have increased the extent to which people perceive that they have free choice, which in turn has led to higher levels of happiness around the world.”  This research result is based on the survey data from the World Values Survey, which was started in 1981, and has since been carried out five times, covering more than 70 countries and 90% of the population of the world.

The economic development of China in the past 30 years is doubtlessly a miracle. However, does the high speed socio-economic development make the Chinese happier?

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In three decades of diplomatic relations between China and the United States, ties between the two countries have been a combustible mix of contradiction and cooperation. It has always been a rocky love-hate relationship, full of ups and downs but ultimately underpinned by economic interests. China has learned how to handle the US’ hot-and-cold political attitude while the US has learned how to press China for compromise.

But since US President Barack Obama concluded his visit to China last November, during which collaboration was placed at the top of the agenda, relations have been clouded by conflict once again. But this time the fundamental dynamics of the relationship appear to have shifted irrevocably.

China is offended by what it sees as a succession of US hostilities aimed at checking China’s rising global influence.

Since the start of 2010, it has been riled by the Obama administration’s explicit support of Google, the $6.4 billion arms deal with Taiwan, tariffs imposed on Chinese tires and steel pipes, heightened pressure to allow the renminbi to appreciate and, last week, the meeting between Obama and the Dalai Lama.

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In 2009, house prices in major Chinese cities rocketed by as much as 60 percent. This has two main implications for house prices. First, if the housing bubble is not controlled, it could potentially cause a financial crisis in China because of increases in non-performing loans and bankruptcies, thereby affecting the sustainable development of the Chinese economy. The second implication is that high house prices will exclude ordinary Chinese, especially the medium and low-income people, from the housing market as houses become unaffordable. This will further increase inequality in China, which is a big issue in Chinese society, as it can potentially trigger social and political instability.

The government is aware of this problem. Its first policy document in January 2010 contains specific policy options to contain house prices. First, it urged city governments and industry to gear up construction of low-cost economy housing. Secondly, it required a minimum down-payment of 40% for purchases of second homes. These and some other policy directives will certainly have a short-term effect.

But, the policy still does not specify clear long-term development goals for the housing market. My view is that China has a huge population so the demand for housing is not going to go away. As income increases, people will continue to buy houses. Therefore, without clear objectives, a short-term housing policy may only work to a certain extent. To have a sustainable development of the Chinese housing market, one must have a clear-cut policy for the long-term. For example, houses should be divided into different categories and sizes. So, local government and firms could be legally bound to not only build large houses, but to focus more on medium and small-size homes, because the majority of the Chinese population can only afford these, while only the well-off people can afford the big houses. Due to land shortages and environmental constraints, good housing policies should actually not encourage people to buy big houses, or more than one house for one household. This kind of policy will also make sure Chinese society will not be divided any further.

However, to achieve this goal, a very clear tax system must be designed and implemented. For example, owners of bigger homes, those of more than 150 square metres, must bear more taxes, while buyers of small houses (less than 70 square metres) should receive subsidies rather than be taxed. Secondly, people who buy two or more houses should also pay more taxes. Only when such an economic incentive system is implemented can the market be stable and sustainable. But currently, this kind of policy is very difficult to implement because of the dilemma between the need to contain home prices and to ensure social equality, and the need of local governments to raise local revenue. In 2009, for example, the Beijing Municipal Authority realised revenue of 200 billion RMB — 45% of which (90 billion RMB) came from selling land. The over-dependency on selling land for revenue is a major cause of high housing prices in Beijing and other big cities.

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With the East Asian Summit completed and the APEC meeting round the corner, it is an appropriate time to look at the role of the US role in the East Asian integration process. The US interest in joining the still-in-the-making East Asian Community is clear. At the very least, the US wants to maintain a strong presence in any regional organization being brought together by the East Asian countries.

Compared to other interested parties such as Russia and Pakistan, that the US becomes a member of the East Asian Community may be more appealing to some. As the world’s only superpower, the US is an important player in every major economic, political and security area in East Asia.

But how a high level of trust can be created to enable all East Asian nations to embrace the US is still a big question.

Many are uncertain about the motivations of the US. Does the US simply want to ensure that its core interests are protected and not neglected in such a process, or does it want to be in to help make a more successful East Asia?

In other words, is the US joining in order to check against an emerging East Asia Community, or is the US joining with an enthusiasm to make Asia better? Many are suspicious that it is the former reason instead of the latter.

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Grave product safety problems have repeatedly undermined Beijing’s effort to fashion a positive international image for China and build up its soft power. Many around the world still remember last year’s contaminated milk scandal. Now, reports of children in Shaanxi and Hunan provinces falling ill because of lead poisoning are likely to revive memories of previous international recalls of hazardous Chinese-made toys with high lead content.
 
While instances of shoddy products damaging China’s reputation are already well observed, the recent controversy over mainland China’s aid to Taiwan after Typhoon Morakot has shown another link between product safety and Beijing’s ability to wield soft power.

After the typhoon’s devastating effects became clear, the Mainland moved quickly to offer aid and assistance to Taiwan. Officials in the pro-independence region of southern Taiwan, however, declined the quick-assembly homes donated by the Mainland on the grounds that these homes might contain excessive levels of toxic chemicals. Although subsequent tests showed the goods products donated by the mainland to be safe, the bad reputation of Chinese products had apparently provided anti-China officials in Taiwan a convenient tool to resist Beijing’s charm offensive.

It is widely believed that China’s soft power has grown in tandem with its hard power in recent years. Not everybody welcomes this development. Plenty of people worry that the spread of Chinese soft power poses a threat. Such fears are premature. The Taiwan aid controversy has again demonstrated the vulnerability of China’s soft power.

In the foreseeable future, domestic problems such as poor product safety standards will effectively act as a rein on Beijing’s international soft power ambitions.

Recently, the executive vice president of China’s Supreme Court, Shen Deyong, remarked that “the distrust of the legal system among some people is gradually spreading and developing into a general social attitude. This is an extremely scary phenomenon.” The spreading distrust of the legal system can be seen in the Hu Bin case.

In May, Hu Bin, a young man from a wealthy family, had hit and killed a pedestrian in Hangzhou while car-racing on a public road. After the case went to court in July, a rumour circulated on the internet that Hu’s family had bribed the law enforcement departments and hired a substitute to stand trial and serve his jail term so that Hu could escape punishment. Many believed the rumour. Although both the court and the procurators’ office in Hangzhou have confirmed the identity of Hu Bin, the rumour has persisted, as many netizens choose not to believe the statements of the Hangzhou judicial authorities.        

Aware of the grim consequences of the crisis of confidence, the judiciary has taken measures to try to regain public trust. On 22 August this year, the People’s Daily carried a report about Henan province’s new judicial transparency programme. The programme started last year with the online posting of verdicts of the provincial high court in Henan on 30 December 2008. By the end of 2009, Henan is expected to make available online all court verdicts in the province.   

Interestingly, the public has discovered many mistakes in the published verdicts. One verdict was found to contain 43 mistakes. Another verdict had declared a person who was alive to be deceased. Many lower courts in Henan have been very reluctant to publish their verdicts. Every intermediate court has made a self-assessment of the percentage of its verdicts which they believed wouldn’t stand public scrutiny. The lowest figure of 5.9% was made from the Xinxiang Intermediate Court, while the highest figure was a shocking 60.3%.  

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In the early 1980s, China was considered to be one of the more advanced of the Communist states in terms of reform and there were high expectations of China leading the other Communist countries and setting a good example. When the Tiananmen incident happened, all of a sudden you got this major bloodshed. There was a sense of shock.

Immediately the Europeans imposed economic sanctions on China and broke off high-level contact.
However, despite the shock and action taken after the events in Tiananmen Square, it wasn’t long before the channels of dialogue were reopened between the Europeans and China.

Even in the immediate aftermath, it wasn’t as though China was completely isolated because contact was necessary, given China’s status. At first there was a decision by Europe as a whole to break off contact at the ministerial level but then exceptions were made for the United Kingdom and Portugal who were in negotiations with China over Hong Kong and Macau.

So, even at that time, the Europeans still needed to talk to China. Also, China was also one of five permanent members of the United Nations Security Council. It’s one thing to isolate a small pariah state in the developing world but you need to be able to talk to countries like China who have such influence over global issues.

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