Saturday, June 28, 2008


There is one thing we all need to learn from history: things that have never happened before do occur.

In the northern hemisphere it is summer now, but if you are watching us from the moon, then you may not be able to be reading this article now, but instead you may see a pretty busy picture down here. There is a buzz of activity in parts of the fast developing world. The cranes crank, the rigs rig, the pumps pump and the Federal Reserve Board ruminates. From the charming poppy fields of Afghanistan with their 2000% margin, to the empty floors of the profitless Bear Stearns building in Manhattan, the shifts in the relative wealth are of tectonic proportions.

We live in a world that over the last seven years has become much more energy intensive, more metal intensive and more food intensive. A cyclical recession, even in a large developed economy, may, at most, slow down this process of intensification, but will not reverse it. Tragically for a belt-tightening shopper from the developed world, the aggregate consumption patterns in OECD countries are not particularly relevant for what is happening to the prices of raw materials. And only the most myopic of analysts and investors still cannot reconcile the rising commodity prices with US recession…

Because of the fast pass-through into consumers’ pockets, the last leap in oil prices has grabbed most attention. The ubiquitous banner at the bottom of US TV screens is proclaiming daily the so called “America’s oil crisis”. But on a global basis, the wealth does not just evaporate from US households into the overheated, summertime atmosphere. It pops up elsewhere – in commodity producing nations and among those who supply them with machinery and technology. If the oil market was worth $2 trillion in 2007, it is now worth $3.5 trillion. In this way, one and half trillion dollars have changed hands, a sum roughly equivalent to 8% of consumer demand in the developed economies. Back in the 1970s, the Arab oil wealth was spent on Patek Philippe watches, buried around Lake Geneva or, worse, squandered. Today these petrodollars are put to better use. They are mostly reinvested in infrastructure development that is destined to serve the industrialization benefiting from stranded energy sources. At the same time, these petro-economies generate a multiplier effect much larger than the Western executives’ favorite mirage: “the Chinese consumer demand”. Postjudice will return to this last myth, but let us focus for the moment on what has happened to the oil market.

Oil demand is today largely about driving, floating and flying. With few exceptions located mainly in oil producing countries, oil has lost its market share in global power generation. And although it represents only 5% of global fuel use for power generation, it towers over other forms of the overall energy supply. It has reached nearly 40% of market share in developed economies, but it is the increasingly mobile population of the populous and fast growing emerging markets that affects the prices most.

Global oil demand has been stagnant in the last 3-4 years. The number of cars in Japan actually dropped in 2007. Indeed, net consumption losses in the developed economies had to be offset by growth in developing markets. And offset they did. While in the first quarter of 2008, the developed world’s demand fell by 1 million barrels of oil per day, the emerging market demand grew by 1.5bn barrels. In these conditions, it is not surprising that the oil prices responded accordingly. The price signal should have invited producers to capture some of the fattening margin, but they failed to come to the party. This development has set the stage for a panic in the market now bracing for flat future supply of ‘black gold’. With the global oil supply largely stable at between 84 and 86 million barrels per day, the oil price reciprocated with a 400% increase over the last four years.

But surely, “there is plenty of fossil fuels around, so this is just another bubble, isn’t it”. In a collective show of cognitive dissonance, the politicians, casual observers and drivers fail to understand that the occasional excitement about a “great new oil find” – be it off the Brazilian, Angolan or Nigerian coast, is often just a geological find, in other terms - a resource. And they fail to comprehend that a geological resource is not an economic reserve. And an economic reserve does not equal productive capacity. Nor does capacity instantly translate into refined product at the pump.

It is true that the Persian Gulf region, which provides 44% of all internationally traded production, still has between 500bn to 700bn barrels of oil of reserves. But OPEC’s production last February was 32mbpd, despite the presumed capacity of 35mbpd. This gap seems to be entrenched for several years now. For all the cheap politicized wailing against the Arab sheiks, the fact is that the number of Saudi oil rigs has actually grown from 20 four years ago to 55 now. Still, the production has been declining.

Optimistically, both vowel-rich information collectors - International Energy Agency and Energy Information Administration - show the OPEC supply projections rising from 32mpbd to 56mbpd between now and 2030 (equivalent to four Saudi Arabias). Unfortunately, industry insiders laugh this off.

So, with the geology that is so forgiving and the prices so inviting, why is there not more capacity? There are several reasons for this, the most important of which are reserve maturity, refining capacity and cost inflation.

Reserve maturity. Most large oil discoveries were made in the 1950s, 1960s and 1970s, turning pieces of Arabian desert into paradisiac oases. Today, approximately 40% of the world’s oil production comes from over 500 giant oilfields. The majority of these fields are in advanced stages of maturity with average reserve depletion of 53%. Of the 38 supergiant fields in the Middle East, 30% are depleted. Still, some four fifths of regional production comes from exactly these fields. Unaware of this, the world drove its voracious vehicles into the 21st century, overreliant on just a couple of oil fields: Ghawar in Saudi Arabia, Burghan in Kuwait, Canterell in Mexico, Samotlor in Russia and Daqing in China. Each of these is in various stages of decline.

Luckily, in Saudi Arabia, by far the most richly endowed nation, production is not determined by the geology of the reservoir, but by the quality of long term management of the reservoir. Conversely, keen to grab the marginal petrodollar, Russia has already picked up 10mbpd in low-hanging fruit and will see its production ebb from now, moving to smaller deposits. A recovery will take time because Russian state’s overtaxing of private operators may have delayed for many years the pipeline of new projects. Elsewhere, there are simply no virgin basins, except, possibly, in deep waters off the coasts of Mexico and Brazil. But that is 2000ft deep underground, below 10000ft of water. Kind of far from your nearest gas station...
More sanguine observers, addicted to the religion of mean reversion, point to new capacity coming from some 91 projects currently in development. Indeed, new non-OPEC capacity will eventually expand by 10.7mb/d, mostly in Kazakhstan, Brazil and Canada. In addition, Nigeria and Angola do offer a big upside, but their reservoirs are not massive, naturally continuing structures. Helpfully, by 2030 we should also obtain from 10 to 14mb/d from unconventional liquid fuels.

What does it all mean? The existing reservoirs are losing production by about 2% a year, which means that the new capacity is barely in balance with the demand growth. For the market to stay in equilibrium, all this new capacity is simply insufficient. Meanwhile, large scale supply solutions are of eminently political nature. Who would sell today technology to Iran, or durably secure exploration and development in western Iraq? Unfortunately, if politics does get in the way, then it is by potentially constraining the supply – as the destabilizing pronouncements by Venezuelan and Libyan leaderships have proved. Long term stability in the Niger delta would take even optimists by surprise.

Refining. But another development is durably changing the trade patterns. Much of the oil produced by traditional exporters will no longer leave the region in the form of energy source. Rather, it will now be consumed locally; ethane, methane, liquefied propane and butane will all be beneficiated near source. The Persian Gulf countries will send us not crude oil, but plastics. In this way, some 4.5mbpd of newly pumped crude will end up in local refineries. The building spree that these plans have caused affects other markets, such as steel. In Saudi Arabia alone some 50 giant petrochemical plants are projected. All together, the country has slated $500bn worth of capital projects – sunken into refineries, petrochemicals, smelters, roads, ports and rail. This is a far cry from shopping for Patek Philippe.

Because of the plateau that the global oil production has reached at 83mbpd or 85mbpd, you could end up with negative global demand and durably high prices because those who can afford it will pay for it. But this is not the end of this world-transforming story. If the near term price driver is the insecurity of supply, laced with some market speculation, then the long term floor under the price is supported by the cost of producing an incremental barrel of oil. And here the picture is not encouraging because the cost inflation is out of control.

Cost inflation. It would be tempting to look at the operating costs of, say, Exxon Mobile, compare them to the spot price of oil and infer how steep the price fall should be to still provide an incentive for pumping the smelly thing from the ground. Alas, in the current conditions of tight supply, the operating costs no longer tell the full story. Instead, we have to understand the costs of replacing the existing capacity. This “replacement” often has to take us to new areas in difficult climates and uncertain political settings, where we have to pump a product of lower quality and from deeper underground. In short, it will cost a lot more to build the infrastructure around the greenfields project than to simply manage the existing reservoirs. The huge increase in the costs of steel and other components will make this a nearly prohibitive exercise.

If you invest in a new drill hole, you usually look at the project’s internal rate of return (IRR). The current inflationary scare would probably require at least 18% return. In order to reach this level of return, the investor will need the long term price of oil to stay at about $100 per barrel. This sounds like a relief from the current (June 2008), prices but we should not yet rush to buy a gas guzzler because these are merely assumptions for a greenfields project, years away in terms of reaching its nameplate capacity. The wake-up call comes from those large-scale industrial projects which are already underway. To many an investor’s chagrin, these projects have seen an increase capital expenditure in the order of 100% over the last 3 years. Only over the last 18 months, the returns of the main oil projects have fallen by 46% on average… Barring a major recession in the developing world, it is hard to see quite how these headwinds could subside anytime soon.

It has become fashionable to look for a scapegoat. Major oil and gas companies pump up their frequent flyer miles by sending their CEOs on regular pilgrimages to Capitol Hill. In US and in certain European countries, there is always a threat of additional taxes, but so far the CEOs’ confessions have ended in a common prayer, or something equally benign. In fact, the western majors are giants with the feet of clay. Their oil reserve position is usually shrinking and their access to new oil fields is severely constrained by the widespread “resource nationalism”.

Next in the picking order are the so-called ‘speculators’. They are apparently solely responsible for the run up in the oil prices. Unfortunately, there is little evidence to support this claim. Investment in commodity indexes has certainly more appeal now than in the past, but many of the commodities incorporated into these indices have actually fallen in value over the last year. Besides, the aggregate index positions correspond to about 740m barrels of oil, barely 0.31% of global crude oil consumption. Meanwhile, many of the commodities that are not traded internationally have seen their prices run up even more through various iterations of contracts between suppliers and their customers. This is not to say that energy traders are incapable of taking major directional bets at various junctures of the value chain, offsetting them in the futures market. Some sudden shifts in the market certainly point to such activity. But for the physical dealers to impact the market by selling futures to indexers, massive hoarding would have to take place. Instead, there is no evidence of inventory build up in the developed countries. In short, while the financial players do have impact, their activity mostly helps the market find its level before we are hit by the massive demand tsunami pushed by several years of difficult supply constraints.

The third whipping boy is the foreign government. It is always ‘them’ with their market-distorting fuel subsidies, which artificially delay demand destruction. It is easier to be sympathetic to this allegation. In China, wasteful urbanization and lack of commuter train network means that more wealth will translate into more cars and more gasoline or diesel demand. When several years ago I mentioned to Chinese officials that it would be helpful to plan for urban de-congestion by introducing Japan-style light train network, I only heard a rather unconstructive response: “we hate the Japanese”. Today, Chinese oil subsidies keep local prices 55% below international level, shielding the consumer and flattening refiners’ margins. But the subsidies represent less than 1% of China’s GDP and the government can take some time before responding to international pressure. Your average Mr Wang does not yet drive a car and thus energy and fuel correspond only to 0.5% in consumer price inflation. Overall, the relation between the gasoline prices and consumer price inflation is not straightforward in emerging markets. In Latin America, Brazil may have the highest prices at the pump (2.3x Mexican level), but the annual inflation differential between the two countries is hardly meaningful.

The 1970s taught us to associate oil price upswings with inflation. And yet, in the developed economies, the signs of widespread inflation are few and far between. The US economy is hobbled by its unsold house inventory and tightened credit markets, neither of which fuels inflationary expectations. And the American worker spends most of her time trembling for her job, so it is unlikely that she will ask for a raise to offset the fuel costs. Indeed, the miles driven by US cars have collapsed this year – a healthy adjustment to the economic conditions, unseen since the 1970s.

Two weeks ago I visited a oil exporting country and expected to experience first hand a booming mood full of arrogant nouveaux riches and their cocky mistresses. I had last been there six months before and sensed tangible effervescence as the oil prices approached the magic barrier of $100/b. Now, at nearly $140/b, I found instead astonishing gloom. Businesses delayed spending and capital projects. Contracts were on hold. Everyone expected the oil prices to fall from the current levels. The aggregate result of these expectations was a slowdown of economic activity, something that is not particularly conducive to inflation. Only the oil producing region is still enjoying fast growth, but is slowly hitting capacity constraints as there are only an X number of drill rigs that can be manned by a Y number of engineers per square mile.

These casual observations could indicate that, at the current level, the oil prices affect the personal and business well-being by generating anticipatory behavior which will eventually slow down the rate of price increases. Whether or not it actually depresses the prices of crude oil will depend on the aggregate effect in the economies that are enthusiastically embarking on the development of their own transportation network. The sooner the oil prices clip their dreams of catching up with America’s resource wastefulness the better.

In the longer term, the only solution lies on the demand side. One does not have to travel to Tokyo’s Auto Show and get excited about the future of lithium batteries. But an increase in fuel efficiency from 20 miles per gallon to 30 miles per gallon would alone increase available crude supply by 15%. This is where the solution has to come from, and sooner rather than later. Or so believe the Saudis I met…

Sunday, June 22, 2008


Defined national histories were formulated in the 19th century. If Johann Gottfried von Herder established an idea that modern nations can only flourish if they have a distinct cultural identity, then the last 100 years of international sports have re-created this myth in the strife for national über-achievement. International competition all too often reminds us that national consciousness derives from the negative identity. One perceives one’s own nationality by spotting differences with the other, something our brains are better suited to than identifying similarities. This mechanism goes well beyond the primary groups of kin, band, or tribe. European Christian identity was galvanized by centuries-long challenge from the Islam. Ancient Egyptian and Chinese identity thrived not because of the fertility of their respective river valleys, but because the economic success of these lands attracted the attention and envy of hostile hordes whose language, mores, and economic behavior differed markedly from their respective targets.

However, even though the sportsmen and sportswomen can only represent one nation at a time, their separating national colors are less and less defining. Summer 2008 is filled with sports events that oppose nations: European Football (soccer) Championship in June and the Olympic Games in August. This is an ideal time to reflect on the sense and the nonsense of athletic struggles in which the healthiest youngsters compete in the name of their “nationality”, whatever the definition of the latter. It does matter because as we imperceptibly advance into the second decade of the 21st century, the boundaries of what a nation’s representative means is subject to ineluctable shifts.

Eight years ago, I was fortunate enough to be in Sydney to watch the events of the Olympic Games. A year before 9/11, hot on the heels of the hi-tech bubble, the echoes of the New World Order were still with us. The hugely successful Games played out in the atmosphere of bonhomie, where national distinctions were, at best, accidental. The cheering international crowd adopted the joie de vivre typical in outdoorsman-dominated Aussie culture. At the height of the sun-drenched beach volleyball competition on Bondi Beach one could even wonder if the days of the Summer of Love were not back – insouciant, communal, shared. The illusions of these days proved as short-lived as the mirage of the late 1960s.

Sport, with ‘nation’ as the defining basis of competition, became a mass phenomenon in the 20th c. On many occasions, the rivalry led to outbreaks of aggression, hooliganism and rioting. In one documented case – to a war. But such attitudes are increasingly difficult to sustain. Rich, Western European nations, which usually dominate the world’s soccer, have over decades attracted immigrants whose offspring picked up the game in the inner cities and in banlieues. Whether you a bigoted racist or a liberal trans-racialist, you cannot fail to notice that 85% of the French national team looks rather different than 95% of the French supporters who come to sing ‘la Marseillaise’ during international competitions. Surveys have shown that the pride in this Légion étrangère has not particularly affected the difficult racial and religious relations in France.

Other nations are only slowly coming to terms with the internationalization of their supposedly “national” teams. During the 2006 Soccer World Cup, the German team shone largely thanks to two Polish-born players who, among other feats, contributed to defeating the Polish side. As the two countries are now notionally allies in NATO and in European Union, their neighborly relations should surprise no one. Except when it comes to sport. German chatrooms were full of hate message from Polish “fans” accusing the two Polish/German strikers of being “Vaterlandsverräter” (traitors of the Fatherland). Little did they notice that the Polish side’s rare moments of brilliance has in recent years been largely dependent on the technical prowess of naturalized Nigerian or Brazilian citizens who subvert national mythologies of both the geneticist or culturalist variant.

Admittedly, the tragic history of Polish-German relations could have blinded the over-excited sports fanatics whose passions were fanned by the idea of “nations” pitted against each other. More recent histories have added “color” to otherwise bloodless sports rivalry. Argentina-England games often bring back tabloid attention to a military stand-off from a quarter of a century ago, a parenthesis long forgotten everywhere outside these two nations. The altercations between the Swiss and Turkish team are mindlessly a-historical. The sultan's army never got any further than Vienna, and modern Swiss football owes a lot to descendants of Turkish Gastarbeiter.

Whether in European Champions League, American Major League Baseball or Indian Cricket League, a modern form of feudalism opposes this petty nationalism of viewers, selective in the knowledge of their “nations’” complex history. Professional clubs draw in star players from around the world, weakening the main organizing principle of “nationhood”. The saving grace of the European soccer is the Feudalist Champions League and the network of a dozen wealthy clubs staffed with international stardom of all nationalities. The English clubs’ dominance has long ceased to be reliant on home-grown talent, making them a magnet of adulation for fans worldwide. When Manchester United’s international squad radiates among fans across the world, it undermines the national myths of blood and soil.

Nowhere has this process gone further than in the US. The US television networks advertise the 2008 European Football Championship’s uniqueness as a struggle of “a nation against a nation”. The concept of a “nation” fielding a team may be still taken for granted in European team sports, but in the world of US professional sports business it barely deserves a footnote. The reason is often sought in the fact that US teams do not perform particularly well in international competitions and when they do, the legend lasts for generations. Such was the hollywoodian saga of the 1980 Lake Placid US hockey team, which in a nerve-racking final overcame the favored Soviet side. An underdog, through sheer will and some heavens’ support reaches the glory of championship – like Rocky wrapped in a flag of a team that actually represents a “nation”. Star-studded US Basketball Dream Team at Barcelona Olympics could also make history by bringing celestially professional game, but it was only threatened in the entire tournament for about 50 seconds (by Croatia) and could not generate a Hollywood-prone “underdog” myth.

On any other day, US teams’ mark on international competition is a rare occurrence. When the US dropped out of the World Baseball Championship, the TV networks stopped bothering. One could argue that US Major League Baseball attracts the very best players from around the world. But it is instructive to watch the ethnically-defined following that the multinational New York Yankees team accrues among various groups of fans. While most of the US fans have for years focused on the personality of Derek Jeter, Japanese newspapers dispatched specialist journalistic crews covering every step of Hideki Matsui. Meanwhile, Taiwanese media’s front pages are full of stories about Wang Chien-Ming. After a review of international press covering a Yankee game, you could be excused for believing that the three stars play for different teams.

Coagulating local identities for the benefit of the US national team is much more difficult, not only because the internationally popular team sports are not the winners in network listings. Given the relative mobility of the US workforce, with few exceptions, these local identities are somewhat diffused. The perennial rivalry between Boston Red Sox and NY Yankees routinely uncovers a sizable fifth column of loyal Red Sox fans who fill the sports bars of Manhattan. Still, the rivalry remains good-natured. Dad and son from Boston who leave the Yankee stadium do not need a police cover and will often discuss the game on the southbound subway with the supporters of the opposite team.

Unfortunately, remnants of “national” symbols are still present at sports events that do not oppose national teams. Foreign visitors are often ill-at-ease when “God Bless America” is sung in the stands during a baseball game. Equally misunderstood is “Kimigayo” during the six main Sumo tournaments in Japan. For years this “unofficial” anthem of Japan was recognized by kids as the “sumo song” – which says a lot about the erosion of nationalism in Japanese schools, and much less about a allegedly ‘national’ sport long dominated by Hawaiians, Mongolians and Bulgarians. Nowhere was the national dogmatism more striking than in the contrasts revealed during the 2002 Soccer World Cup, co-hosted by Japan and Korea. While the Japanese stands were filled by locals wearing alternatively Brazilian, Argentine or French jerseys, the Korean stands were uniformly red, with tens of thousands of single-minded fans chanting slogans in support of the home side, and the home side only. I happened to be in Paris when a large group of Korean tourists staged a quasi-military march with white, blue and red paraphernalia, yelling “Hanguk, Hanguk”. With the French team by then long eliminated, the café-bound Parisians looked on, somewhat bemused.

Rabid Asian nationalism is an unsettling spectacle to watch, something we will unfortunately experience again this summer. But the whole idea of “Asia” is undermined in the minds of confused fans watching Asian Soccer Championship and their “exotic” teams - a (predominantly black) Saudi side and a (predominantly white) Uzbek side. Indeed, few East Asians comprehend the nature of their own geography that stretches from Magadan to Papua New Guinea.

The European soccer feudalism could soon be replicated by India’s professional cricket league, if it lives up to the expectations as a modern-day new Stupor Mundi. South Asians are cricket crazy, so the location (approximately halfway between Oceania and UK/African time zone) is a perfect choice. I once met a village boy in Rajasthan who told me of his only long distance trip - to see a famous South African cricket player who toured the Subcontinent. The family’s entire savings went to finance boy’s lifelong dream. The boy obtained the autograph, shook the player’s hand and returned north. Much to a nationalist’s despair, the hand he shook was white and African, not Indian.

Class consciousness may divide sports arenas within a nation, but it may lead to a form of brotherhood that bridges national divisions. There are, indeed, fewer displays of aggressive nationalism in the British Commonwealth’s most popular sports – cricket and rugby - fewer than in Olympic sports or nations’ soccer competition. In England, when posh-tongued boys from public schools mastered the intricacies of the bat, “football” was left to smoke-blighted cockney areas. The class consciousness entailed appropriate behavior, which somehow spilled over to the demeanor adopted in the former colonies. Rugby – rougher and less technically refined – caught on in specific regions even outside the Commonwealth, but the international competition remained largely free of hooliganism that plagued nations’ soccer. Rather, the selective appeal of these English sports often brings together Southern Hemisphere westerners whenever they find themselves isolated from their origins. Outdoorsy Aussi, Kiwi and South African professionals naturally bond and josh about “their” sports in New York or in Tokyo. This is the bond of language in its expressive and referential roles.

Not surprisingly, sport is sometimes dragged in to play a politically constructive role. Beyond ping-pong or cricket diplomacy, there is always hope that national pride stoked by achievements in sports will solidify nations that emerge from traumatic past. South Africa’s unsuccessful soccer team, commonly referred to as “Bafana Bafana” remains the passion of the mostly black population which rarely shares the excitement of the white minority-dominated rugby team. For years, white South African sportsmen and sportswomen who clinched international trophies in Formula 1, swimming or tennis remained entirely obscure for the depressed black population. However, since Nelson Mandela donned the green Springbok jersey in 1995, there has been a hope that sport nationalism would help weld the legacy of economic divisions in the country. It has not quite happened yet. More generally, inability of African teams to build a lasting success on the wealth of existing homegrown talent makes it difficult to imagine how the game could meaningfully contribute to override ethnic divisions. Iraqi soccer team’s successes prove that it is worth trying.

Sports nationalism is of particular importance for newly formed states whose claim to separate nationhood is often questioned by frustrated former empires. Croatian soccer, tennis and basketball, Ukrainian boxers and footballers, Lithuanian basketball players, Slovenian skiers, Taiwanese endurance athletes – they are all duly proud of their national colors and excited to evince a more positive side of sports nationalism.

But for former, presumed, and alleged ‘empires’, Olympic performance is a useless anachronism serving the self-glory of a regime - in East Germany, Cuba, USSR, or People’s Republic of China. The Chinese propaganda masters have recently issued a directive supposed to frame Chinese cheers in a 2-2-2-2 syllable rhythm (“ao-yun jiao, Zhonguo jiao”, which could be translated into “Go Olympics, Go China”) with specific hand gestures. FT reported that, in official parlance at least, the mandated chant is destined to “improve the quality of the citizenry, present a civilised image, embody a cultured Olympics and promote a harmonious society”. It is not clear whether lack of observance of the new regulations would lead to specific punishment, but expect the stands to be peppered with plain-clothed police nonetheless.

Saturday, June 14, 2008


“The rejection of the foreign was more anxious for the very arrogance that justified it. That is the paradox of the superiority complex: it is intrinsically insecure and brittle. Those who cherish it need it and fear nothing so much as contradiction”. David Landes “Wealth and Poverty of Nations”.

For the mainland Chinese and some increasingly vocal groups of overseas Chinese, it is the CCP that controls the institutional history of China. Much of its success hinges on creating a sense of collective self-victimhood among the people of “Han” descent. After all, who controls the present, controls the past. In the eyes of the young Chinese nationalists, China has some imagined “rightful place” in the world and is being prevented “by the West” from resuming this geopolitical (?) Eden. This main organizing principle draws from the supposed “humiliations” that pre-war China suffered in the hands of Westerners and the Japanese. Never mind that China was never colonized by these foreign (waiguo) powers – the projective blaming for the country’s failures has been among the founding myths of the Chinese chauvinism. Now it’s time to reverse the tide. The government in Beijing stands for the honor and respect of the Chinese statehood and thus should command ethnic support worldwide. But much to the surprise of the most avid believers in the official version of China’s history, their anti-foreign backlash somehow does not trigger automatic outpourings of respect. Occasional kowtow notwithstanding (from US toymakers, a French president or Australian miners) most western reactions range from consternation to fear to ridicule. The Chinese mainlanders’ poor knowledge of the outside world and their sinocentric obsession, when mediated with the messages of anger, jealousy, hatred and implicit inferiority complex appear particularly unattractive to post-modern, increasingly multicultural and polycentric societies in the West.

One could argue that most East Asian societies are all prone to some form of nationalism or at least a somewhat childlike conceptualization of the world in terms of nation-states. Many years ago in Tokyo a Korean friend overheard a conversation I conducted in French with another European. Knowing our respective nationalities, she asked: “what language are you speaking now? Is it Swiss or Belgian?”

There is, however, a critical difference between the aggressive sinocentrism of the fenqing and the surviving forms of nationalism among the Japanese, Korean or Taiwanese urbanites. These wealthy societies have now all developed globetrotting elites increasingly attracted to the cultural achievements of other peoples. The Asian tourists, artists and students admire European churches, study Western music and learn about other countries, as do many curious individuals in other developed countries. But now that the PRC nationals have gained incremental freedoms and begun to travel overseas, a peculiar image is emerging. It is the image of ethnocentric crowds on a conspicuous consumption binge (complete with “killZhang was here” pictures), sparing little, if any interest for the natural wonders or cultural heritage of the visited lands. A Taiwanese friend has recently overheard a group of Chinese tourists standing in front of Stephanskirche in Vienna. Some of them complained loudly that their sightseeing tour was a ‘waste of time’. After all, “the Great Wall is so much older, while these buildings are not even old”. Elsewhere, an Egyptian guide and fluent Mandarin speaker recounted a story of a two-week whirlwind tour organized for a Chinese group in Turkey and Egypt. A day before the departure for Beijing they wound up for the laser show in front of the Pyramids in Gizeh. During the show, a man with a strong Beijing accent picked up his cellphone and shouted: “we are going back tomorrow. We are in Turkey now”.

Could we just dismiss these anecdotes as examples of embarrassing ignorance of first generation nouveaux riches? Does this simply reflect lack of exposure in a country whose government for years has licensed only 20 foreign movies per year (which in dvd era translates into heaps of pirated B-movie trash)? Or is there a deeper message that goes beyond mono-dimensional materialism and naïve solipsism? I frequently sought answers to this among my Mainlander friends. A young woman who had recently returned from Cambodia revealed for me a much deeper dilemma that the confrontation with the outside world represents for this generation. Back in Beijing, I asked her about her impressions in Angkor. Her seemingly contradictory statements initially made little sense – she enjoyed the experience but reacted with malaise at the architectural splendor of the Khmer kings. Pressed to define her emotions, she eventually broke into tears: “I really loved Angkor. It was so beautiful”, she wept. “But here in China, we learn that the Great Wall is the most wondrous construction in the world. And yet, I liked Angkor better. I am a bad patriot. I am a bad person!!!”

Should 1.3 billion people head straight for the couch? Now that’s market potential!

“Turn barbarians into Chinese”
Border management practice, Qin dynasty

The events of Beijing Spring were a dramatic reminder of the brutal force that communist party cadres will harness to protect their privileges in the name of “stability”. On June 4, 1989, the hopes of China’s democratization were dashed. On the same day, voters in another People’s Republic - of Poland swept the communist party from power, leading to the creation of the first non-communist government in over 40 years. Like Taiwanese people a decade later, the Poles were getting rid of what was perceived not only as an undemocratic, but, importantly, a foreign rule.

The problem with the communist regimes of Soviet Russia and People’s China is that both were dominated by vernacular leaders who adroitly exploited Russian, or Chinese “national pride” to stir popular support. Unattractive Marxian dogmatism, discredited during the decade of the Cultural Revolution, never returned to China. The not-so-egalitarian exhortations of static Confucianism, whose tenets suffered greatly under ideological assault in 1974, were a poor alternative. State chauvinism was, by default, the most natural option in a country embarking on an economic opening. As many literate travelers to China will testify, large-character banners urging class struggle have long been outnumbered by the prickly calls to national “pride”.

The axiomatic assumptions of nationalism source this collective “pride” in the imagined past. The past somehow legitimizes all the excesses of the present, provided, however, that this past can be appropriated as “Chinese”. Not only are the Tungus-speaking Manchus now “Chinese” (as a separate ethnic group the 1 million strong Manchus disappeared even before the fall of the Qing), but even Genghiz Khan and his Mongol hordes are slowly being enlisted as “Chinese”. This is just a new sequel to not-so-novel efforts to extend the continuity of Chinese history both in time and in space. It does not matter that the Mongolian language bears no relation to Chinese and that the ancestors of the Mongolian minority within the PRC were as “Chinese” as the forefathers of US-dwelling Chinese were “American”. A Nazi-type renaissance of interest in anthropometry has been an important ally in the claims of Mongolian belonging to “the Chinese race”.

That could be more complicated in the case of the “Northern Wei” dynasty, whose elongated features grace us from the 5th c. sculptures. The descendents of these Turkic rulers of China continue to live today in Russia and are commonly referred to as the Chuvash. We do not know yet when the Beijing “historians” bestow on them the status of “Chineseness”. After all, the acceptance of Mongolians into the cultural “fold” of China is a precious gift that some people, like the ever ungrateful Vietnamese, although occupied for a 1000 years, do not deserve. Sending PLA packing in body bags in 1979 certainly did not help.

Our knowledge of the Mongolian military tsunami in the 13th century usually attracts a combination of awe with revulsion at the acts of genocide that these horse-mounted hordes inflicted on the peoples from Beijing to Baghdad to Budapest. However, the re-defined “Chineseness” of crimes against humanity makes them acceptable in the eyes of selective history worshippers. But beware. Should the Han people perish under the yoke of a people that refused to accept the value of sinocentrism, their wrath would be carefully nurtured and instilled as a key component in the Chinese education system. Such is the plight of the Japanese –the most odious of rulers in the eyes of the Chinese. Unlike the Mongols or the Manchus, the Japanese did not become anymore sinified, even though some Chinese still believe in the curious myth that the Japanese language is but “a dialect” of Chinese. Irritatingly, the Japanese technology and military prowess proved superior to China’s, albeit with tragic consequences for both countries. Today, Japan’s post-modern society offers a powerful model for many Asian societies. Still, most mainland Chinese have little knowledge of contemporary Japanese society and its entrenched pacifist attitudes. But you could do worse than reminding your Chinese friends that the Japanese do not “steal” Chinese technology – an incredible, but not uncommon allegation in some Chinese cities. Mention to your Chinese interlocutors that Mao’s crimes far outnumber the tragic victims of the Japanese occupation and brace for lengthy fulminations. Although Japan is not quite China’s alter ego, anti-Japanese allergy smacks of collective projection. Beijing’s recurrent insistence on Japan’s “apology” for the 2nd World War crimes comes from the mouths incapable of uttering an apology for any of China’s own violent acts.

But this visceral, anti-Japanese nationalism rarely troubles the Western observers. Yes, analysts and diplomats do take note of the increased level of “hatred” against the Japanese among the younger generation of Chinese. They deplore the early age indoctrination reinforced by the self-styled “museums” of Japanese occupation that expose Chinese children to the recreated scenes of torture. But the unresolved question of decentralized Japanese school manuals leaves Western observers somewhat indifferent to these manufactured emotions: since both sides seem at fault, there is little to complain about.

Importantly however, the Japanese are not the only Asian nation stubbornly resistant to Chinese cultural and institutional imports. Tibetan Buddhists are the other. Indeed, for all the potential problems with Chinese Muslims, it is the Tibetans who represent ‘the Other’ in China. Repeatedly portrayed as backward, feudal, liberated but recalcitrant, ungrateful, ‘splittist’, racist, unintelligent, superstitious and unscientific, Tibetans have committed the gravest of sins. They are a paramount example of the ethnic divergence between the rulers and the ruled. They have so far refused to dilute themselves in the cultural ocean of Chineseness, despite a supposedly common origin in the “Qiang” race. The “patriotic” education, economic progress “offered by the CCP to the Tibetan people”, urbanization, a train line, repeated destruction of the monasteries and infiltration of the monastic system, imprisonment, executions, forced sinification, rewritten history of the Tibetan state, ferocious vilifications of the Dalai Lama - all these ‘achievements’ have left most Tibetans not more Chinese than they were 50 years ago. Worse, the failure of these policies has turned the Chinese population strongly against the “Tibetan minority”. In the current anti-Tibetan fervor, the very few who do recognize the dilemma that the situation on the plateau constitutes do not dare to speak up. It is striking to encounter - even among overseas Chinese - the widespread belief in the ‘Beijing version’ of Tibetan history – a Chinese province populated by descendants of the Han settlers in Gansu and Qinghai who never aspired to an independent statehood outside of the Motherland. And were it not for the Dalai Lama “the splittist”, the PRC could have happily finalized the terms of the ancient adage: “yihua bianyi”, turn barbarians into Chinese…

But this monistic and uniform vision of Chinese history, so cherished by Beijing’s rulers, may, after all, be wrong. Periodically, contacts with other centers of “civilization” did leave a lasting impact. Several years ago a stunning exhibition of artifacts from Tang dynasty at the Metropolitan Museum of Art in New York left the visitors puzzled. “Is this China?” wondered New York Times. The archeologists’ bounty revealed a country of rich material and non-material exchanges with Sassanian Persia, Hellenistic middle east, Nestorian Christianity and, above all, with India and its religious exports. There lay the strength of China.

Sunday, June 8, 2008


40 years since the assassination of Robert F. Kennedy, America is confronted with the most thrilling prospect of political transformation. The unusually named candidate of mixed origin possesses unprecedented oratory skills and uses them to carry the promise of a spiritual renaissance, gaining the hearts and minds of idealistic intellectuals and not-quite-enfranchised black “minority” alike. Yet this remarkably enthusiastic, unlikely alliance labors within a nation sliding fast from its hard earned global pre-eminence. One does not have to espouse a Hegelian eschatology to notice that many of the pillars of America’s material prowess have been undermined - its artificial wealth propped up by successive asset bubbles, its sophisticated military machine capable of power projection around the planet and, last but not least, the dollar.

The creation of the United States was an eminently post-Enlightenment affair and in many ways, unlike its elder transatlantic cousins, the country has never lost its modernist optimism. Despite the dysfunctional character of some 50% of American families, the country’s citizens retain economically beneficial confidence and usually exude unparalleled faith in material progress. The systemic tolerance of business failure, the ethic of enrichment and the entrepreneurship rooted in the combination of frontier spirit and oft-lauded rule of law have all conspired against the prophets of gloom and doom. But the self-perpetuation of the system created on these foundations has been erected on much more dubious scaffolding – the centralization of the media since 1970s (dulling whatever residual curiosity into the exclusive focus on local news), competitively public displays of religiosity (as a ready-made label of “morality”), tacit promotion of recurrent asset bubbles (redirecting productive capital into ever thinner subsectors of the real economy), myopic tolerance of innumerable public taboos (“race”, “recession”, “lobbies”). No wonder conspiracy theories continue to thrive.

The oft-reiterated “hope” seems to assume that the transformation should come from the clean-up of special interests and from closing the gap between the young people’s enthusiasm for change and the well entrenched system of power brokers whose networking practices have durably distorted the work of the legislative and of the last two administrations. And indeed, this derivative political subsystem seems to have gained momentum since the early 1990s, something that the middle-aged (and anti-Bush) intelligentsia, gripped by the nostalgia for the tech-bubble era, often fails to recognize.

Coincidentally, these two decades may have also been the last easy period for a country whose underclass has swelled in numbers and in unhealthy obesity; a country whose public educational system has reinforced sharp divisions in advancement opportunities between various groups; a country whose workers have seen unprecedented wage compression and dug into debt facilitated by illusory home equity and a toxic credit market; a country whose tradition of wasteful resource management has led it to the brink of an energy crisis; a country whose lopsided remuneration system has pushed boardrooms to lobby for policies that shifted global capital flows away from democracies and into rival nations; a country whose current account is unable to recover from negative territory because it barely produces anything competitive that would be of value to its trade partners, and what it can produce in significant surplus, it cannot export for lack of adequate infrastructure; a country whose roads, bridges, power stations and phone networks crumble under years of underinvestment in appropriate physical and intellectual capital; a country whose political elites have for years focused on selected proxy issues of no concrete impact for the lives of most of its citizens; a country whose best educated nationals espoused extremist pet projects overseas and distorted US foreign policy through successful activities of influential and well-financed interest groups…

This astounding litany of woes would have sunken many a nation into a prolonged lethargy and economic depression. But not America, the land of ever diminishing opportunity, but opportunity nonetheless.

Should we, therefore, just “hope” that the US will simply readjust its domestic policies and assume again its dominant role in the world’s economic affairs? Not quite. One critical difference between this election and the last change in the White House lies in the shifts of global power that has occurred since.

There was a time where solipsism served America well. Small commercial travelers would crisscross this vast continent visiting accounts and seeking new clients. Big shot bond traders could always find domestic credit products to trade. Baseball World Series were what “the world” represented for Americans. The foreign, the exotic, the transoceanic were those poor places whose citizens sometimes owed America peace and sometimes owed it hamburgers. Otherwise, many of the unfortunate souls born in less blessed regions could, and did, find solace in immigration to this Promised Land. They brought their intriguing cuisine, worked hard and educated their children into mainstream success. The hosts’ total ignorance of the outside world and lack of interest in differences made these immigrants’ life easier than in other lands that periodically welcomed the shipwrecked. Despite occasional focus on border stalking militias and the probing, anti-terrorist infrastructure at the ports of entry, America remains a much more hospitable destination for new settlers than most of other developed nations.

But the ignorance of the world out there is no longer America’s asset. The tectonic shifts in the distribution of global savings since the beginning of this century and the accompanying changes in the industrial and military capabilities have made America’s deceivingly comfortable insulation a self-defeating proposition. Unlike in the 1980s, the country can no longer count on its allies to re-establish a lasting order in the currency markets. The flow of goods and economic factors is increasingly dominated by nations that do not perceive themselves as America’s allies. And unlike in the 1980s, the economy will struggle to revert the swelling of its trade account deficit, at least unless the unit costs in the inflation-plagued emerging markets meaningfully catch up with the costs of operating new industrial parks in the United States. Finally, as the importance of the financial services has grown exponentially in its contribution to the US economy, its incredible shrinking will not be easily replaced by other forms of economic activity.

This is a nation in manifold crisis. One day it may be the housing crisis and another day it’s “America’s oil crisis”. On both days, it will be poor people’s health crisis. 1/6 of the population lacks any health coverage but there is no shortage of ideological demagogues, such as Gary S. Becker, a widely respected 1992 Nobel Laureate in economics. During the run-up to 2004 presidential election Prof Becker notified American voters that economic theory does not warrant state’s intervention in the provision of health services. The market would simply govern the forces of supply and demand, dixit the Nobel Laureate. Never mind the efficiency loss, caused by the fact that a large chunk of the 45 million people left behind by the “market forces” cannot even afford eyeglasses.

This is a country, where you keep ahead of the Joneses. That means a house slightly larger than Joneses’, with impressive cubic volume to heat it in winter or cool it in summer (no Gulfstream or Kuroshio here, so the inter-seasonal amplitude is quite extreme). But the Joneses may not even notice that, courtesy a distorted power market, blessed with easily available natural gas and ubiquitous coal deposits. From these massive, oversize family houses, at least five times a week you have to out-drive the Joneses in your gas-guzzler, which runs on not-so-easily available gasoline, mixed with controversial (but available) ethanol. And when you do not, you are probably mowing your oversize and over-Jones-sized lawn, using a diesel-powered mower. The 1950s’ suburbanization of America was once the source of its strength, with ample land for greenfields construction and living standards considered “high”. Tragically, this has since promoted large-scale wastefulness and now caught the eyes of the nouveaux riches in fast developing emerging markets. The Zhangs and the Singhs are falling under the same illusion of unlimited space as perennially regenerative of equity and wealth. Watching the tiptoeing economies of resource-mindful Japan and Switzerland one could almost applaud.

For the most gifted American politician in 40 years, things will get only tougher. Not only because the famed Clinton machine will do its utmost to derail his campaign and reach out again to the matriarchs and Appalachians after another four lost years. Things will get tougher not only because more financial institutions will not be able to cover up their losses. No, things will get tougher because America will not be in a position to catch up with rising interest rates worldwide. As the hikes elsewhere increase the yield differential between various currencies and the dollar, the US energy bill will continue to rise, compounding the supply problems experienced by America’s two of the four largest exporters – Mexico and Venezuela. The constitution of the former slows down productive investment in its exploration and extraction capacity. The regime of the latter has fallen prey to a mirage of a just society, billing for the implementation of (well-intentioned, but lunatic) ideals the country’s oil monopoly. PDVSA’s days as a reliable oil supplier are counted. And then what? Blame the oil majors and the market speculators? These cheap tricks are poor populism and poorer policy yet, unless its proponents want to durably increase the volatility of their own pension fund accounts.

So while the current President will enjoy his 6-week vacation in Crawford, TX, the rest of the country will wonder what to do next, and so will the presidential candidates. In the short term, one could provide a shot in the arm by delivering necessary technology to the struggling oil industry in Venezuela and Iran. Alas, the former has a proven record of nationalizing natural resource assets, the latter is the currently most popular whipping boy in D.C. For as long as American Israel Public Affairs Committee and its messianistically obsessed Evangelical allies run the US foreign policy, any strategist suggesting economic engagement with the Tehran cranks risks Alan Dershowitz’s ire and instant political death.

In the longer term, the stabilization of fuel prices will depend on the demand destruction, but here the signals have been distorted, not least due to widespread domestic price controls imposed in the fast-growing emerging markets. Chinese domestic gasoline prices are between 40% and 70% below international prices, but the subsidies cost Beijing only 0.6% of GDP. As we have seen in Indonesia and India recently, these subsidies are a finite game, but they are unlikely to be removed entirely, at least not in China and the Gulf countries. With double-digit cost-push inflation spreading across Asia and former Soviet Union, the question of the subsidies may morph into a question of survival for the undemocratic regimes that run these economies. Despite the pressure from other Asian economies, China is unlikely to its “perfect” inflationary storm before the end of the Olympic Games.

America’s influence over the world’s affairs and over the world’s economy is at nadir. It is not through the illusion of force, projected by its deep blue navy or the PR appeal of its Hollywood flicks that the US will muster support for sustainable global policies, or bolster the Western, and allegedly universal values. Under the self-destructive excesses of the Clinton administration and the disastrous drift of the Bush-Cheney clique, today’s America commands at best fragmentary and grudging respect in the world. Thousands of miles away from the self-absorbed trailer parks stuck in the perennial wealth gap there is an urgent need for a critical, systemic shift in the perception of the United States. Barack Obama’s first six months in office, should he reach it, could deliver just that by taking out, even temporarily, some of the anti-American venom which has poisoned international relations for much too long and emboldened dictators, imperialists and religious fundamentalists around the globe.

Monday, June 2, 2008


Over centuries, China, as conceived by outsiders, has connoted an entire civilization, manifested by, if not necessarily defined by its various artifacts: its forms of government, its 3400 year-old written language, its sublime artistic expression and its precocious technological inventions. But while the marks of a civilization are distinctive, those of a “nation” are not. The convulsions of China’s history – regularly invaded, subjugated, divided or ruled by outsiders – has left the sycophantic sinologues with an unfinished task of defining who is and who is not Chinese. Within a tradition that customarily emphasizes the structure of human relations and the interests of collective stability over individual’s self-realization, this deficiency has presented a serious challenge to its rulers and subjects alike.

Whenever political ethnocentrism seeks to stabilize the boundaries of the group context, the deceivingly attractive ‘solution’ resides in biology. In the case of China, this emphasis, by default, will fall on the so-called Han “race”. But the very fact that the ideologues of the Chinese state have to resort to biologically untenable claims of supposedly common genetic pool is a testimony to the fact that the boundaries of the Chinese civilization are not co-extensive with the oft-failed Chinese statehood. The numerous and successful invasions by Altaic people – the Xiongnu, the Tabgach Turks, the Mongols, the Manchus – have made genetic claims to Chineseness highly dubious. Indeed, due its size and position on Asian mainland, China could never aspire to genetic purity. On the contrary, molecular research based on 110 genes indicates that mainland East Asia was a playground of influences between two genetically distinct groups. These populations – from the Northeast and Southeast – probably interacted as early as 50000 years before the millet-based culture expanded from Huang He river towards the rice-growing south. The northern and southern groups remain quite distinct to this day, both genetically and physically. And not only. An Australian friend of Cantonese origin once recalled the first thing he learned about China from his parents: “never trust a Northerner”.

When some hundred years ago, Chinese nationalists sought to abolish the Manchu dynasty they endeavored to rally support on the racialist grounds of the “Han” as opposed to the “Man”. But by dispossessing the tradition of the Qing state – dominated by the Manchu court and aristocracy – the nationalists risked rejecting 260 years of statehood, precisely the period during which the “Chinese” state achieved its largest ever territorial expanse, including the lands never before dominated by various historical Chinas. This Orwellian reversal of historical dogma is particularly sensitive today. When Lee Teng-hui celebrated his victory as Taiwan’s first popularly elected President, an angry email landed in my mailbox from Beijing. The young student, who had never been to Taiwan, dismissed Taiwan’s President as “unimportant person” and went on to quote Deng Xiaoping’s words, according to whom everyone who ‘splits the nation is Wu San-kuei’, referring to the Ming general who in 1644 opened the Great Wall to the Manchus. The historical confusion over the Qings’ colonial rule in Taiwan finds in this prosopopoeia an unstable parallel to the self-contradictory role of the Manchus in China’s history – the rulers and colonizers in the name of “China”, but also racially distinct caste which was opposed by all but the most odious of traitors.

Similar compartmentalization is necessary to deal mentally with the other legacy of the Manchus’ overlordship over China. The rejection of the Qing Empire as “foreign” would run the risk of undermining the legitimacy of the Chinese rule over Tibet, which became a vassal state during that period. In recent years, historical series produced by Chinese state TV have stressed the re-appropriation of the Qing as essentially “Chinese”. Even if the acculturation of the Qing is well documented, it was never complete. For example, the court’s officialdom was trilingual – a visit to any decent collection of Qing artifacts will reveal documents written in Chinese, in Manchurian and in Tibetan – certainly not something Chinese TV propagandists are planning to underline today.

But this is just as well. Any efforts to picture the Manchus or other “barbarians” as separate people will run aground in a country where “Chinese”, single syllable family names had been adopted for centuries and where it became virtually impossible to distinguish biologically between the true descendants of the proto-Chinese Xia tribe and the overwhelming majority of others. For all the efforts of its ideologues, China’s idiosyncratic cultural diffusionism has been drowned in explosions of fertility.

Sometimes, the race-based dogmatism seeks to anchor its objectives in the folk beliefs founded on ancestor worship and patriarchal tradition. Family structures dictated by virilocal residence and patrilateral kin groups are very strong among the Chinese, but absent, for example, among the neighboring Tibetan and Burmese traditions. This pervasive emphasis on patrilineal descent makes even educated Chinese an easy target of the genetic mythology. Drawing on paternalist sources, Sun Yatsen stressed in “Three Principles to the People” that ‘common blood’ was the greatest force. But devoid of tradition of civil law, China could not transform this concept into a legal tradition “ius sanguinis” and thus enshrine the question of nationhood in the way the Germanic tradition did.

Less legitimate, but just as frequently employed are the metaphors of Yellow River and Yellow Emperor – heritage supposedly manifested by the yellow pigment of the “Chinese race”. This proposition is, however, neither exclusivist (similar pigmentation is quite common in Asia and the Americas) nor historically appropriate (the yellow color was the preserve of the emperor, not its subjects). It was Kang Youwei who over a hundred years ago first manipulated the cult of agricultural deity later reinvented as allegedly historical ‘Yellow Emperor’ into a novel identity of huangzhong – yellow race. The invention did not instantly take off. A century ago, the problem for anti-Qing nationalists was that this “Yellow” concept would not exclude the Manchus. But obviously, for the Communist-nationalist propaganda today, the Manchu identity is no longer a threat. Today, a much elaborated belief in Yellow Emperor (Huang Di, believed to be born in 2704 BC) also serves a legitimizing purpose of backdating China’s recorded historical lineage by at least half a millenium. A perfect example of prochronism and presumptive continuity used to mark the “5000 years of history”.

With a similar objective, the political paleo-anthropology reaches out to prehistory and sometimes identifies the homo erectus Peking Man from Zhoukoudian as a polygenist sign not only of Chinese biological ‘otherness’ but also of its cultural antiquity (300,000 years of history?). Refuted by mitochondrial DNA studies, the widespread belief that the “Chinese race” is of a different origin than the rest of mankind, also panders to a particularly unattractive anti-African feature of Chinese racism. As recently as 1918, Chinese anthropologists referred to African as “black slave race” (hei nu) and to Japanese as “dwarf slaves” (wo nu).

These pseudo-scientific efforts to underline a common biological ancestry usefully support Great Han chauvinism (da Hanzu zhuyi), but do little to define the role for millions of PRC citizens who are not Han. The naïve biological distinctiveness that the China’s borderless nationalism exports, is not only the most easily accessible, but also the most divisive of the three putative pillars of nationalism. And even if the discourse of racialism makes heroic efforts to stabilize the sino-cultural sphere within a biological domain, we still do not know what the Chinese “race” is.

If the ideal of a “Han” race seems somewhat artificial, then the Chinese language would certainly prove to be the unifying force of “all Chinese”. The problem with this assertion is that the Chinese “language” exists only as a medium of communication in its written form. Its application is a matter of convention, not ethnic or linguistic unity. This assertion is appropriate both diachronically and synchronically. First, the current written (baihua) style replaced the traditional wenyan form only in the 1920s. Secondly, the Chinese characters (hanzi) have historically been adopted by the very different, non-tonal and originally agglutinative languages of Korea and Japan. These influences undoubtedly illustrate how pervasively attractive the highbrow culture of sinified literati was, but they distract us from defining the boundaries of the Chinese nationhood. Likewise, numerous communities of overseas Chinese in Indonesia or North America may not be able to decipher the hanzi, and yet their identity may be strongly attached to the elusive concept of Chineseness.

In its spoken form, “Chinese” refers to a group of tonal languages many of which are mutually unintelligible. For political reasons, they are referred to as “dialects”, but the differences between, say Cantonese and Mandarin are at least as large as between French and Spanish. Indeed, if we refer to the various Chinese languages with one term, we would also have to label Italian, French, Portuguese, Romanian, Spanish, Catalan and all the other romance languages together as “Latin”. The use of the term “language” is therefore a political, rather than linguistic decision. As one scholar once noted, “a language is a dialect with an army and a navy”. And true enough, neither the Fukenese nor the Hakka command their own troops. But you can argue that Mandarin does.

Although Mandarin is being told at schools in China, the history of its remarkable success has been actually quite short and goes back to the decision in 1920s to promote nationhood and literacy on the basis of one, unifying dialect. It is on that occasion that the supporters of (an admittedly easier) northern dialect based the spoken form used in Beijing area overruled the proponents of Nanjing dialect.

Most Chinese do not even know about the history of linguistic engineering and are surprised to learn about Nanjinghua’s “near victory”. The propaganda of linguistic unity is so pervasive that an adult friend from Shanghai area once tried to prove to me that she actually had not spoken “any language” until she went to school and learned Mandarin. The Shanghainese pride seems to appear later in life and is more related to local identities (“north of the river”, “south of the river”) than to any of the definitions of Chineseness.

The broader north/south divide among the so-called Han runs deeper. According to historical linguistics, it is the Cantonese language that has been the least affected by non-Chinese influences. It is, however, commonly referred to as Yuè, which is the name of the long-independent ‘barbarian’ kingdom. Consequently, if the linguistic heritage were to be coterminous with “race”, then this research would leave out the taller northerners as cultural imposters, less purely “Chinese” than the southerners. But linguistic differences offer only a poor proxy for genetics. The peoples of Southern China inhabit a much more diverse geographic setting. No wonder that the ethnic and linguistic differences among them have remained more entrenched. The long history of interaction among those groups – be it Han or non-Han has led to a higher level of tolerance for differences in customs and traditions. Many southerners are less paranoid about the “unity” of China, as their families have often known prosperity without “national” unity. This is why the aggressive nationalism may find less following in the traditional areas of Yunnan, then in the more recently settled parts of Sichuan, Gansu or in the north.

But the problem with the linguistic “Chineseness” remains unresolved. It leaves out the groups that the Chinese propaganda condescendingly refers to as “minorities”. These various groups, numbering in millions and thus representing much larger communities than those of many of the world’s independent states do not share the linguistic code of the Chinese languages. Others, overwhelmed by Chinese colonialism during the imperial Qing era, are no longer here to testify. Their descendants may be among the angry fenqing.

The history of Chinese state institutions is often used as a particularly alluring shortcut to understand the country’s “national character”. The study of the Han, Tang and Ming bureaucracies, their un-reformable conservatism, rigidity and eventual collapse tell us much about the formative role that Confucianism, legalism and neo-confucianism played in the development of the organization of Chinese public life. In light of the frequent identification between the Chinese state and Chinese bureaucracy, as well as virtual absence of religious revelation originating from outside the state structures, it is in the institutional tradition that scholars search for clues to comprehend the archetype of the Chinese collective psyche.

The authoritarian rule is often characterized as “traditional” in this part of the world, with arguments ad antiquitam serving to overemphasize its legitimacy. The justification of the present by the past has deep psychological roots and has found reflection among primitive societies, not least in the form of ancestor worship, which is common among Chinese communities. The justification of the present and the future by the events, values and achievements of the past leads to a logical error that deserves some attention.

As the CCP has fossilized the body and heritage of Mao Zedong, maintained the Leninist centralism and drew parallels with legalist and, more recently, even Confucian traditions, it often points to the time-honored tradition of the authoritarian rule, as not only “more appropriate” to the mores of the Chinese people, but also more ancient than modern democracy. This “traditionalist” fallacy reigns supreme. It is easy to demonstrate that while more modern forms are not, by definition, superior, they have been created by people who have lived in the societies that are older than those of Han Feizi or Kong Zi. If “old” equates with “wise”, then the world in 21st century is way older than the world of 5th c BC and somewhat older than the China of 1920s. In terms of our knowledge of the world, most of us are much wiser than Lenin or Mao, or indeed anyone who lived 100 years ago. This would not be the case if any of these men were still alive, but, alas, they are dead (albeit still stuffed and on display in their terrariums). The common experience of mankind is now more extended than during the period when CCP came to power. Appeals to antiquity and fixation on earlier times justify nothing, not even temporal regression. And they surely legitimize no particular form of government.

Still, the PRC perceives itself today as the only legitimate carrier of Chinese statehood and has deployed many efforts to implant its own version of the institutional tradition as the rallying symbol of Chinese nationhood worldwide. To be sure, the competition is weak. The relevance of overseas Chinese communities to the traditions of a “Chinese state” may be low, but the problem arises in the case of Taiwan. If Taiwan constitutes, as Beijing claims, “a part of China”, then its own, distinct institutional tradition offers a counterproposal for a future development. Its distinct history has been given a diverging momentum by the democratic transition of the 1990s. It is the everyday freedoms of a fully fledged democracy that define the separate Taiwanese collective identity, rather than its unique history fused from the Hakka and Fukenese settlements, Dutch, Portuguese and Qing colonization, Japanese occupation and modernization and finally Chinese KMT dictatorship. Only when Beijing eventually relinquishes the claim of sovereignty over Taiwan, will the competing and highly attractive model chosen by the Taiwanese people cease to threaten the institutions of PRC as a model of Chinese statehood. It will then remain of relevance only to the future of the island, rather than its more populous neighbor.

But as the crowds of excitable fenqing seem to show in their wholesale support for the regime in Beijing, one institution that appears victorious in the struggle to define the “Chineseness” of the public life is the surviving Leninist/Brezhnevist structure of the so-called “democratic centralism”. It underpins the system of appointments within the party and defines the terms of the selection of officials. Certain parallels between the Chinese bureaucratic tradition and the former Soviet system are quite astonishing. Scholars have identified striking similarities between the structure and functions of the Censorate, internal and external surveillance organ of the Tang Dynasty in 7th c. and the Procurator’s Office of the USSR. Do such parallels rule out the implantation of democratic institutions in China?

The term ‘democracy’ (minzhu) is one of many Western concepts that entered Chinese language via Japanese Meiji scholarship in the late 19th c. It is used coyly in the otherwise tedious proceedings of CCP’s conclaves, but the signifier has been long divorced from the commonly accepted signified. Rules and principles that govern internal competition within CCP rarely surface in a system which relies on decision-making by a small group of people.

The concept of human rights presents a different set of challenges. Chinese legal tradition is essentially vertical and focuses on the concept of retribution. Normativity was present only in punishment; criminal law was the only law, and civil affairs were governed by conciliation, not legal statutes. In the anti-egalitarian conservatism of Confucian “harmony”, there was no room for rights to counterbalance the notions of duty and obligation. Here, communism found a ready ally in Confucianism and its opposition to the concept of “rights” (in its bourgeois or legalist meaning, respectively).

Chinese intellectual tradition has not been a fertile ground for constructive institutional criticism or scientific skepticism. But as the bequest of critical thinkers such as Hu Shi (d.1962) and Bo Yang (d.2008) testifies, there has always been a margin of free debate that empowered such eminently Chinese thinkers. It is fallacious to observe the lack of evidence that the Chinese people have thrived under a democratic regime and then conclude that they would not, if given a chance. Lack of evidence that something is the case is not equivalent to the observation that something is not the case.

Nevertheless, in the so-called “People’s” Republic, to argue in favor of a broad-based, “Western” form of democracy or human rights is considered unpatriotic and therefore treacherous. Any arguments directed against “traditional”, and “Chinese” authoritarianism are not only dangerous, but unnatural, untraditional and therefore anti-Chinese. Allergic to westernization, Chinese Communist Party identifies its authoritarian tradition with “Chineseness”. Paradoxically, it is here that the Taiwanese experience represents a threat to Beijing. If it is to be considered “Chinese”, that is.