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CONTENTS

Economy

Above: The world has 12 million EVs, up from 1 million in 2015. EVs are now 1% of all cars on the road globally. 45% are in China, and 35% are in Europe, and North America is a distant third at 17%. It now takes 3 months to add a million and, by the end of this year, that will be down to 2 months. Read full article →

China’s April exports surged 32.3% YoY, as global consumer demand strengthened. Exports reached $263.9 billion, riding on a stupendous 60.6% rise in the first two months of 2021. Read full article →

Urban wages grew 7.7% YoY in the private sector, to $8,965 and 7.6% in the public sector. Highest wages are in the information, software and IT services (US $15,730; +18.7%) and finance (US $12,877; +9%), while hotel and catering wages declined.  Read full article →

Shares of China Three Gorges Renewables Co.  were oversubscribed 78 times in an online lottery ahead of its planned $3.6 billion listing on the Shanghai Stock Exchange. The wind and solar units of state-owned China Three Gorges Corp., which operates the world’s largest hydroelectric plant, will hold the largest ever IPO by a Chinese power company. The company set a preliminary IPO price for of 2.65 yuan per share and will use the proceeds to build offshore wind farms. Read full article →

China kicks off REIT market with 9 infrastructure products. China kicked off the sales of its first batch of nine public real estate investment trusts on Monday, a great leap forward for the country's asset-management industry.  Read full article →

The U.S. has three major carmakers with a global footprint, Japan around four and Europe a handful. China, home to the world’s biggest car market -- has a boggling 846 registered auto manufacturers, most unrecognizable outside its borders.  Read full article →

GDP growth averaged 8.1% from 1952-2018. 770m people living in rural China have been raised from poverty since 1978 and life expectancy has risen from 35 in 1949 to 77 today. More than $2 tn in foreign direct investment entered the country over the past 40 years. Financial Times

Trade & Travel

US teens are flocking to Shein, an online fast-fashion retailer based in China. Shein has twice ranked second only to Amazon as the favorite shopping site of upper-income US teens. 7% of upper-income teens picked Shein as their favorite shopping website. Read full article $→

Express delivery providers handled 40 billion express parcels in in Jan-May, close to the total during the whole year of 2017, according to the State Post Bureau (SPB). 266 million parcels were delivered and 500 million services provided each day during the period. Read full article $→

Suzhou Free Trade Zone launched the first electronic payments tool for foreign nationals visiting China briefly. Su-Pay enables users to link their online electronic accounts in China to overseas bank cards, as well as their UnionPay, Alipay and WeChat accounts. Read full article →

It is wrong to think China’s raw materials hegemony stemmed from a nefarious plot to hold the world ransom. The West was happy to dump its ores and concentrates and let the Chinese do the ugly processing with high carbon output. But China looked to the future, and supported this industry with cheap access to land and reagents, recognising a long-term strategic payoff. Read full article →

Technology & IP

Above: Nature Index summarizes China's research output based on article count and article share in 2020, and its global rank. A count of one is assigned to an institution if one or more authors of the article are from the institution, and accounts for the percentage of authors from an institution and the number of affiliated institutions per article. C= Chemistry; E= Earth & environmental sciences; L= Life sciences; P= Physical sciences. Read full article →

China will become self-sufficient in the production of 28nm chips this year. “Once domestic production is realised, many downstream application industries will become self-reliant in chips,” said Dr. Guangnan Ni, of the Chinese Academy of Engineering. 28nm chips are required for 5G infrastructure, new energy vehicles, UHV, and data centres. Read full article →

The Copyright Society of China launched its new blockchain copyright services platform. It provides copyright evidence storage, infringement monitoring, online evidence collection, letter delisting, copyright mediation and litigation for rights protection. “Blockchain possesses the unique features of inalterability, source tracing and distributed consensus,” said CSC director Yan Xiaohong.  Read full article →

Since 2014, China has enjoyed a net inflow of scientific talent. 10% of academics at Chinese universities arrived from abroad in the previous three years, triple the global average of 3.7%, and many are returning Chinese. China’s pool of 1.12 million  researchers is nearly as big as the EU’s (1.13 million), and exceeds America's 1.10 million. Read full article $ →

Five science stars making their mark: With research spanning particle physics, solar power, conservation and the mechanisms of coronavirus transmission, these researchers are standouts in China’s vast talent hub. Read full article →

Tianzhou 2 docked with Tianhe, the space station core module, eight hours after liftoff, a world record, and delivered 14,638 lb. of food, spare parts, and propellant. Connecting the 35' cargo craft with the 54' Tianhe created a complex 90 feet long, orbiting at an altitude of 230 miles. 3 astronauts will blast off next month for 3 months and will unpack Tianzhou's cargo. Tianzhou is docked at the rear port of Tianhe, and Shenzhou 2 will link up with the lab’s forward port. After the astronauts return to Earth, Tianzhou will detach, fly to the forward fuel port, and transfer propellant. Read full article $ →

Leading researchers set their sights on new frontiers: China sets lofty goals in quantum science, space exploration and nanocatalysis. Read full article $ →

One of China’s elite universities has a human-like, virtual student, powered by artificial intelligence. Hua Zhibing is enrolled at Tsinghua University’s department of computer science and technology. Her professor said she has some reasoning and emotive capabilities, thanks to a pre-trained machine learning model. “Next year, she may reach the cognitive level of a 12-year-old,” he said. Read full article $ →

Apple has 4.4 million registered developers in Greater China, up 76% from 2.5 million two years ago. A steady stream of Chinese developers are making a splash in the global marketplace. Read full article $ →

China may find itself at the heart of the climate business boom, says the Paulson Institute's Deborah Lehr, “Carbon could become a new currency, with China creating the terms, the standards, and the pricing”. Once all sectors are included in China’s program, it will cover 30% of global emissions. Goldman Sachs sees a $16 trillion opportunity for clean technology infrastructure investments on thel path to net zero by 2060, and 40 million new jobs. Read full article $ →

Morris Chang, founder of TSMC, is wary of building a $12 billion manufacturing plant in Arizona, “The United States stood out for cheap land and electricity when we looked for an overseas site but we struggled to find competent technicians and workers in Arizona because manufacturing jobs have not been popular among American people for decades.” Read full article →

Highly resistant to scab disease, new Yangmai 33 wheat variant will contribute to China's goal of increasing grain production by 2%. Wheat scab, which reduces yields and produces toxins, affects 25% of China's wheat growing areas (6.67 million hectares); despite molecular breeding breakthrough, scab and immature industry continues to pose a challenge. The new strain reduces infection by 90%. Read full article →

The Supreme People's Court's Intellectual Property Court selected 55 exemplary cases and generalized 46 adjudicative rules distributed across:
  • court hearings of substance involving patent civil and administrative litigation;
  • proceedings pertinent to disputes over new plant varieties, technical secrets, computer software, layout designs of integrated circuits and monopoly; and
  • hearings of jurisdiction and other procedural cases.
The Court's synopsis covers:
  • factors to be considered in granting behaviour preservation in an anti-suit injunction setting;
  • parameters by which an alleged act could be ascertained to be "for the purpose of production and operation" in the sense of patent infringement;
  • the burden of proof in determining the amount of damages on the basis of the profit of infringement;
  • the acceptance of declaratory judgments on non-infringement during patent invalidation proceedings; and
  • the effect of claim modification in parallel invalidation procedures.
The synopsis is intended to harmonize judicial practice and increase the predictability of court proceedings in the IP field. Read full article →

Health

China currently has seven vaccines approved for conditional or emergency use in its mainland territory, including five inactivated vaccines, one adenovirus vaccine and a protein subunit vaccine. It ranks number one globally in terms of the number of vaccines in use.

Sinovac reduced COVID-19 deaths by 95%. “The Butantan Institute, the São Paulo-based public-research center, said Monday that cases and deaths from the disease had plunged in Serrana, even as neighboring regions struggled with rising infections.” Read full article  →

Soon after Beijing informed the WHO that 41 people in Wuhan had fallen ill with a mysterious pneumonia, China’s A.I. companies started designing or refining their systems and algorithms to fight the pandemic. Accelerating deployment of AI–based “doctor” chatbots that connect rural communities with health care professionals and machine learning algorithms for pharmaceutical research, the AI firms opened four new fronts: public health monitoring, medical imaging, robotics, and human-computer interaction. Read full article  →

Free HPV vaccines for junior high girls: Xu Hong, a member of the Guangdong Provincial People’s Congress, suggests HPV vaccines for junior high school girls should be included in basic public health service. Read full article $→

A Covid-19 nasal spray vaccine developed by a Chinese biotech company has applied for emergency use approval. Read full article $→

Society

Less Than 10% of Chinese Want a Third Child. The latest census showed the fertility rate was 1.3, compared to the expected 1.8 under the current “two-child policy.” Ideally couples should have 1.8 children on average, a figure that China aims for, but new data shows that few families want three children. Read full article $→

China generates most plastic waste but per capita consumption (18kg/year) is about a third of Australia's (59kg) and US's (53kg). Sinopec was third-largest single-use plastics producer (5.3 million tonnes) after ExxonMobil (5.9 million tonnes) and Dow (5.6 million tonnes) of 2019 global total (130 million tonnes). Read full article $→

Extend maternity leave to three years: NPC member Zhu Lieyu said Monday that maternity leave should be extended to three years from 98 days at present, in response to the announcement of the new three-child policy by the country’s top leadership. Read full article $→

New record for gaokao10.78 million students will take this year’s national college entrance exam, gaokao, an increase of 70,000 from last year and a new record, the Ministry of Education said in a Thursday statement (external source, in Chinese). Read full article $→

New regulation bars schools from hiring abusers. A new regulation bars schools from employing staff who have been expelled or dismissed for abuse, sexual harassment or administering corporal punishment. Read full article $→

Over 700 million Covid vaccine doses administered in China: As of Thursday, more than 700 million doses of Covid-19 vaccines have been administered across China, according to the National Health Commission (external source). Read full article →

China has quintupled the acreage of public green space in its cities since 2001…Park construction has taken on greater urgency during the pandemic. Many people have been cautious about going to restaurants, cinemas and other indoor locations. Read full article $→
The man behind the Mao suit

Statistics

Governance

Martin Jacques: A Most Extraordinary Institution –
Introducing the Chinese Communist Party
China will build new desalination plants to raise capacity to 2.9 million tonnes a day in a new “five-year plan”. 1.25 million tonnes per day of new capacity will be commissioned between 2021-25, including 1.05 million tonnes in coastal cities and 200,000 tonnes in "island regions". Read full article →

China has long understood the value of cultivating dedicated, well-trained, and qualified cadres capable of governing. Its training system ranges from policy courses at domestic universities to national executive leadership academies and dedicated party schools for political and ideological education. But no less important are the CPC’s overseas training courses. There, carefully vetted political elites learn state-of-the-art governance methods and other skills at the top learning institutes in the world. Read full article →

Environment courts tried 253,000 cases in 2020 and concluded 38,000 criminal cases and 162,000 civil cases. By the end of 2020, 1,993 judicial institutes specializing in environmental lawsuits, including tribunals, collegial panels, and circuit courts, were established across the country. Read full article →

Xi Jinping: ‘Wholesale Sovietization in the past did not work, nor will wholesale Westernization, or any other "zation” work now. Start from the national situation, begin and end in Chinese practice, write your texts with full consciousness of the motherland, and make innovations in theory and policy conform to Chinese reality and possess Chinese characteristics.’ Xi’s words resonate loudly:  the Chinese path must take China as both center and method.” Read full article →

“What we call the politics of responsibility is the integration of responsibility into all aspects of political life, whether it be daily private life or the public life that concerns the functioning of politics, and responsibility is the pillar that provides norms and coordination for different actors, thus achieving a harmonious and orderly public life. The politics of responsibility is used to describe a form in which every actor in public life is responsible, and all institutional mechanisms are constructed according to the basic requirements of responsibility.” Zhang Xianming. Full-Process DemocracyRead full article →

Stronger death sentence review better protects human rights. China has reinforced human rights protection in death sentence review and tightened the conditions applicable to the death penalty in recent years. Read full article →

The first half of 2018 marked the start of the current round of financial opening in China, with both Chinese central bank governor Yi Gang and Chinese President Xi Jinping outlining the launch of ambitious measures at the Bo’ao Forum in April:
  • Banks: Starting from 2004 China’s big state-owned banks gradually began to accept foreign investment, and in 2006 Chinese regulators issued the “Foreign Invested Bank Regulatory Rules” (外资银行管理条例).  In August 2018 China canceled restrictions on the equity-stakes of foreign investors in Chinese-invested banks.  In October 2019 China cancelled requirements concerning the total assets of foreign investors seeking equity stakes in Chinese banks, as well as loosened conditions for the establishment of local institutions, and reduced requirements for renminbi operations.  In March 2019 Bank of Beijing and ING Bank announced plans to establish a joint-venture lender. 
  • Mutual funds: In 2002 China allowed foreign investors to hold a stake of up to 49% in fund management companies.  In 2016 China allowed foreign investors to wholly invest in privately offered securities fund companies.  In 2018 China raised the ceiling on foreign investment in publicly offered mutual fund companies to 51% from 49%, before cancelling it altogether in April 2020. In August 2019 JPMorgan Chase increased its holdings in its fund joint-venture China International Fund Management Co., Ltd. (上投摩根基金) to 51%. In August 2020 BlackRock obtained approval from Chinese authorities to establish China’s first wholly foreign invested fund management company. 
  • Securities: In 2002 China first allowed foreign investors to hold a stake of no more than one third in Chinese securities firms, before subsequently loosening this ceiling to 49% in 2012. In 2018 China raised the foreign investment ceiling for securities companies to 51% from 49%, and in December 2020 abolished it completely. During the period from 2019 to 2020 at least eight foreign banks took advantage of this lifting of the equity ceiling to increase ownership in their Chinese securities joint-venture to 51%. Securities companies in China controlled by foreign investors include: UBS Securities China, Morgan Stanley Huaxia Securities, Nomura Orient International Securities, Goldman Sachs (China) Securities, Daiwa Securities (China)
  • Credit ratings: In 2006 China first allowed foreign investors to obtain shares in domestic credit ratings agencies.  In 2017 China allowed foreign credit ratings agencies to undertake credit ratings operations on the  Chinese interbank bond market. In July 2019 China allowed them to conduct credit ratings of all types of bonds traded on the interbank market and Chinese exchanges. In January 2019 S&P Global obtained approval to launch the first foreign-invested credit ratings agency licensed to operate on China’s interbank bond market, followed by Fitch Ratings in May 2020. 
  • Futures: China first opening up its future sector to foreign investment in 2007 and in 2012 set a ceiling on equity holdings of 5%. This ceiling was lifted to 51% in 2018, and was cancelled altogether in December 2020. In June 2020 JPMorgan obtained approval to increase its ownership in JPMorgan Futures to 100% from 49%. 
  • Trust Companies: In 2007 China first commenced opening of its trust sector, allowing individual offshore institutions to acquire stakes in trust companies of up to 20%. In 2015 China cancelled the 20% equity ceiling completely, allowing foreign investors to acquire full ownership of trust companies. Starting from April 2020 China canceled the requirement that foreign investors in trust companies have USD$1 billion in assets. 
  • Wealth Management: In 2019 Chinese regulators encouraged foreign investors to participate in the launch of bank wealth management subsidiaries by taking minority equity stakes, and also allowed foreign investors to set up joint-venture wealth management companies under their control with Chinese banks and insurers. In September 2020 France’s Amundi saw the launch of its wealth management joint-venture with Bank of China – Amundi BOC Wealth Management.  In May 2021BlackRock obtained approval for the launch of a majority-owned wealth management joint-venture with China Construction Bank and Singapore’s Temasek holdings.  Later in the same month, Goldman Sachs obtained approval from CSRC to launch a majority-owned wealth management joint-venture with ICBC
  • Payments: In April 2015 China allowed foreign investors to apply for renminbi bank card settlement licenses. In March 2018 China allowed foreign investors to apply for third party payments licenses.  In September 2019 PayPal acquired a 70% equity stake in GoPay (国付宝), becoming the first foreign investor to obtain a stake in a domestic Chinese payments company.  In June 2020 American Express became the first foreign company to obtain a license to conduct renminbi bank card settlement operations within China. Read full article →
On June 26, Friends of Socialist China and the Geopolitical Economy Research Group will hold a webinar to explore how China was able to carry out the most extensive poverty alleviation program in history, and what lessons there are for humanity. Register for the Zoom event on Eventbrite

Propaganda

China Rethinks Autocracy as Deaths Pass 4,000,000

From Johnny Western, our Beijing correspondent, with reporting from Han Jian and Gong Zhi

As the official tally of Covid-19 deaths surpasses 4,000,000 in China, critics are questioning whether the authorities left out many more deceased. In yet another grim milestone and embarrassment for China’s communist leaders, the number of deaths on the Chinese mainland from the coronavirus pandemic is reported to have surpassed 4,000,000, with the total number of cases nationwide surpassing the 240 million mark.

The record high number of cases has prompted Chinese from all walks of life to question the government’s narrative that there are, in fact, 240 million infected and 4,000,000 dead, and that authoritarianism is the best remedy for dealing with public health crises.

Announcing the new numbers during a press conference, Chinese officials denied that their actions to combat the coronavirus, blasted by critics as inadequate and ineffective, contributed to the unprecedented number of lives affected and lost.

“Mandating citizens to wear masks, cracking down on large gatherings, and locking entire cities down were never necessary,” a government spokesperson said, before claiming that China has a high number of cases and deaths only because it has done “more testing” compared to other countries.

“Even though we have a large aggregate number of positive cases, the number of cases and deaths per capita is very low, because China has a very large population,” the spokesperson said.

But critics and experts are crying foul, saying that the situation in China could have been avoided if the authorities had taken the right steps.

They point to neighboring Hong Kong, which has only over 9,000 cases and 160 deaths, owing to the former British colony's regard for human hygiene and the civic awareness of its residents. In democratic Taiwan, over 800 have been tested positive and seven died.

This could have been China if the Chinese Communist Party, led by strongman Xi Jinping, was accountable to the people, according to Alex Smith, professor at Western University and author of The Struggle For Freedom in the Asia-Pacific.

“The problem with the party is that for the past several decades, it has prioritized economic development over everything else, including human well-being,” Smith said.

“And that is because nothing — including human well-being — is on the ballot in China.”

The coronavirus pandemic has grown to become the biggest crisis China’s leaders have faced since the bloody crackdown in Tiananmen Square in 1989, but Mr. Xi, who has ruled for eight years straight, is not showing signs of letting up.

Sources say Mr. Xi at a meeting behind closed doors denied any responsibility for the coronavirus pandemic, blaming Europe and the United States for spreading it to China in the first place. The Chinese Foreign Ministry echoed this belief shared by many in Beijing.

“This is the Spain virus,” said spokesperson Zhao Lijian. “If Spain did not give it to us, we wouldn’t have to deal with it.”

Despite Chinese officials’ attempts to absolve themselves, a growing number of citizens in China are leading the charge to call them out.

“Fighting the virus with Chinese characteristics,” mocked Zi You, an independent journalist who has documented the government’s failure to contain Covid-19 in Wuhan, the original epicenter of the outbreak.

“To stop this human tragedy, we need to return power to the people,” Zi said in an interview over the phone.

“They shut cities down in Italy. They shut cities down in France, and the UK. Why can’t they do that here?” Zi said. “These countries respect human rights, that’s why they told their people to stay home. Why can’t our government do that to us here?”

The interview was abruptly cut off after that.

Another independent journalist, Min Zhu, said “certainly more than 4,000,000 died,” substantiating claims from the International community that the Chinese government had engaged in a cover-up.

“How can it be that the situation is so out of control, but we can believe the party when it says 400,000 or so people died?” Min said. That interview was also cut off.

Outside of China, experts say that while the Communist Party can try to keep itself afloat as more people die from the pandemic, its hold on power is already compromised to a point of no return.

Human rights activists are concerned that the virus may have already wiped out China’s persecuted Uyghur Muslim minority, millions of whom have been held at secret “re-education” camps and were forced to undergo forced labor in the restive Xinjiang province. The virus may have affected Tibetans and Mongolians as well.

“We don’t even know if there are 56 ethnic groups in China anymore,” said Ling Chang, China director of Watch Human Rights. “If the leaked reports of Muslims not being admitted into hospitals to receive treatment for the coronavirus are true, then there is only one group left, and that is the majority. “This is 21st-century cultural genocide and biological warfare.”

Brian Johnson, senior East Asia fellow at the Occidental Security Institute, compared the Chinese government’s mishandling of the virus to slavery in pre-19th century America.

“This will go down in history as an original sin of the CCP, something that will undermine the party’s right to rule, if not in the short run then the long run,” he said. “Imagine an alternative universe where China kept the number of cases low relative to the rest of the world, especially the United States. There is no question that it would not have received any bad press. Anti-Chinese sentiment would disappear.”  [Parody by Jamin]

Geopolitics

China is ninth in the world in terms of the total number of troops deployed overseas, and the largest troop contributor among the five permanent members of the Security Council, thanks to a unique combination of good equipment, excellent personnel quality, and political will. Developing countries have the will, but not the equipment and personnel quality; developed countries have equipment and personnel, but not a strong will, and few of their personnel participate in peacekeeping. The US, with the strongest military, has only 28 active duty UN personnel while China has 2,548, which shows its political will is lacking. Read full article →

Academic study confirms that Hong Kong 'pro-democracy' activists were paid for their activities. The American Economic Review’s June edition has an extraordinary research paper, revealing that Western scholars paid 849 HKU students to participate in an “antiauthoritarian protest”  in 2017 and 2018.. Read full article →

New Zealand Court Clears Way for Murder Suspect’s Extradition to China: The Supreme Court insisted on assurances from Beijing that the man, accused of killing a Chinese woman in 2009, would not be tortured and would get a fair trial. Read full article $→

Beijing announces humanitarian aid to Palestine after Egypt mediates ceasefire between Israel and Hamas, in the biggest conflict since 2014. China announced a donation of US $2 million and 200,000 vaccines, support for two-state solution, and call for Israel to lift Gaza blockade, while pressuring US to support UN Security Council position. Read full article →

Defense

China released a new, self-propelled, eight-wheeled 35 millimeter anti-aircraft gun with two surface-to-air missiles. Its single-barrel gun has the same rate of fire as its two-barreled predecessors because it uses a completely new rotary autoloader. Equipped with advanced radar and fire control systems, it can act as a stand-alone combat unit, making it a high-end AA product. "We integrated detection, track and strike functions to the system and it can finish all of these tasks while it is moving," say to the lead designer. Read full article →

Pentagon recommends US military use Chinese drones despite bipartisan opposition and fears of espionage. After years of spying allegations and restrictions, the Pentagon has allowed the military to use two Chinese-made drones. The move has already stirred controversy. A recent Pentagon report, dated May 6, concludes that DJI’s drones are “recommended for use by government entities and forces working with US services.” Read full article →

Because of the tactical-technical similarities in weapons it is inevitable that tactically and operationally there are bound to be similarities. You launch a salvo of missiles against Carrier Battle Group, you need good intelligence and targeting. If Russia is helping China in developing and building a Missile Attack Early Warning System, who is to say that Russia will not provide targeting for Chinese weapons? Liana is already operational and its constellation is being augmented as I type this, China has her own targeting system. This is just a single example. The fact that Russians and Chinese form the mixed units during numerous exercises, including Chinese participation in such monster events as Vostok-2018, to joint air patrols of strategic bombers and their fighter escorts, gives a clue on what is going on. Read full article →
Beijing emphasizes transforming the PLA into a next-generation warfighting force by stepping up  Military-Civil Fusion. MCF seeks to harness the sophistication and output of China’s civilian economy for the benefit of defense supply chains. MCF is ushering Chinese companies into the defense economy even as Beijing’s policies encourage companies to innovate by acquiring and adapting foreign technology. The confluence of MCF with this approach, called “Introduce, Digest, Absorb, and Re-Innovate” (IDAR), obscures the distinction between civilian and military uses. Given China’s extensive business and academic presence abroad, there is a clear risk that foreign strategic technologies and expertise could inadvertently contribute to China’s growing military capabilities. Read full article →
LONG READS

Losing Game

Washington is playing a losing game with China

Chas Freeman, May 23, 2021

To hold its own, the US must renew its competitive capacity and build a demonstrably better governed society. 

Washington would be easy to spot in a game of chess. It’s the player with no plan beyond an aggressive opening. That is no strategy at all. The failure to think several moves ahead matters.

Washington developed some well-founded complaints about Chinese economic behaviour — and launched a trade war. Washington was alarmed about China’s potential to outcompete America — and tried to cripple it with an escalating campaign of ‘maximum pressure’. Washington saw China as a threat to US military primacy — and sought to contain it.

US farmers have lost most of their US$24 billion Chinese market. US companies have had to accept lower profits, cut wages and jobs, defer wage hikes, and raise prices for American consumers. The US shift to managed trade has cost an estimated 245,000 American jobs, while shaving about US$320 billion off US GDP. American families are paying as much as US$1,277 more a year on average for consumer goods. There has been almost no reshoring of American jobs outsourced to China. The United States can expect job losses of 320,000 by 2025 and a GDP US$1.6 trillion less than it would have been.

China’s overall trade surplus rose to a new high of US$535 billion in 2020. Beijing improved its position by lowering barriers, striking free trade deals with countries other than the United States, and sponsoring a trade dispute-settlement mechanism to replace the US-sabotaged WTO.

 

China is not breaking stride.

It is investing 8 per cent more each year in education. China already accounts for a quarter of the world’s STEM workforce. Its science investment is almost on par with that of the United States and rising at an annual rate of 10 per cent as America’s falls. Its infrastructure is universally envied. China accounts for 30 per cent of global manufactures, versus America’s 16 per cent, and the gap is growing. It became the world’s largest consumer market in 2020. Its economy is ferociously competitive. China has many problems, but it has its act together and appears on top of them.

The principal challenge that China presents is not military but economic and technological. But the United States is geared only to deal with military threats. China has become the antidote to the US post-Cold War-enemy-deprivation syndrome and a gratifying driver of US defence spending. There are US aircraft and ships aggressively patrolling China’s borders, but no Chinese aircraft and ships off America’s coast. US bases ring China. There are no Chinese bases near America. Still, Washington ups its defence budget to make its ability to overwhelm China more credible. Yet, in the long run, the United States cannot outspend China militarily and cannot hope to beat it on its home ground.

Competitive rivalry can raise the competence of those engaged. But antagonism, seeking to hamstring one other, is not beneficial. It entrenches hostility, justifies hatred, injures, and threatens to weaken both sides.

Without exception, countries want multilateral backing to cope with the challenge, not unilateral US confrontation. They want to accommodate China on terms that maximise their sovereignties, not make China an enemy. If the United States persists in confrontation, it will find itself increasingly isolated. Given the state of US democracy, if its China policy is defined as a moral effort, most other nations will be alienated, not attracted.

There are many issues that cannot be addressed without Chinese participation. Chinese capacity needs to be leveraged to serve those US interests.

The United States should let market forces play the major part in governing trade and investment, creating a framework for trade in sensitive sectors that safeguards defence interests while taking advantage of China’s contribution to supply chains.

The United States needs to cooperate with China to reform global governance and address global problems of common concern like the mitigation of environmental degradation, pandemics, nuclear proliferation, global economic and financial instability, global poverty, and set standards for new technologies.

 

Ease the Transition

The United States should work with China to ease the inevitable transition from dollar hegemony to a multilateral monetary order in ways that preserve American influence; leverage not boycott China’s Belt and Road Initiative to benefit from its opportunities and connectivities; promote cross-Strait negotiations and mutual accommodation rather than China–Taiwan confrontation; and expand consular relations, restore exchanges, and promote Chinese studies to enhance understanding of China.

Doubling down on military competition gives China a reason to up the ante and call the bluff, leading to a mutually impoverishing arms race.

Stoking China’s neighbours’ dependency on the United States rather than helping countries be more self-reliant implicates them in US conflicts of interest with China without addressing their own. They need US diplomatic support more than military backing to work out a stable modus vivendi with China.

US China policy should be part of a new, broader Asia strategy — not the determinant of relations with other Asian nations or the driver of policies in the region. To hold its own with China, the United States must renew its competitive capacity and build a demonstrably better governed, better educated, more egalitarian, more open, more innovative, healthier, and freer society. East Asia Forum.

Asian Values

Asian and Western Values

Zhang Weiwei, translated by David Cowhig

 

Asian values’ help us deconstruct the so-called ‘moral superiority’ of the West and enable us to realize a ‘win hearts and minds’ for our own values.

The role of a value is, first, to solve problems and, second, to explain the status quo. Now Western values cannot do either of these things. Even within a particular cultural zone, there are conflicts and rivalries. How do you understand a ‘cultural zone civil war’ that has broken out within a cultural zone?

When the novel coronavirus pneumonia epidemic broke out in 2020, East Asian countries in general responded significantly better than European and American countries. This once again drew the attention of the outside world to East Asian culture. Many knowledgeable people noticed that East Asian culture seems to be more collectivity-oriented, more concerned about the balance between freedom and self-discipline, have more trust in the role of government and so forth.

In the 1990s, there was an international discussion about “Asian values”. The general context of that discussion was the rise of Japan in the 1970s, followed by the economic take-off of the “Four Asian Tigers” (South Korea, Singapore, our own Taiwan, and Hong Kong) in the 1980s, and the revival of cultural confidence in these societies, which felt that they might modernize themselves based on their own cultural values. Those familiar with the process of the rise of the West know about Max Weber, a very famous German sociologist, who wrote a famous book called The Protestant Ethic and the Spirit of Capitalism. He argued that Protestantism required its adherents to fulfill their vocation, which included striving to become rich and then gaining salvation. This ethic brought about the development of capitalism and economic prosperity in countries like England, America and Germany. Frankly, I find Max Weber’s interpretation a bit of a stretch. But in any case, the book has been very influential.

Some scholars in East Asia also suggested that Confucian ethics, especially the espousal of these values such as education, labor, and diligence, was also a major reason for East Asia’s success. At that time, many Asian scholars and political figures were involved in the construction and discussion of this discourse. Two of the most vocal political figures would be Lee Kuan Yew, the Prime Minister of Singapore, and Mahathir, the Prime Minister of Malaysia. They believe that Asian societies have different values from Western societies, but it is also possible to modernize countries, or even better. According to Lee Kuan Yew, “Asian values” have transformed Singapore from a poor and backward “third world” country to a relatively wealthy one.

When the Asian financial crisis broke out in 1997, the mainstream Western view was that this meant that “Asian values” had failed, and the discussion came to an abrupt end. But many people still disagree with this view, and the 90-year-old Mahathir was still saying not long ago that “Asian values” are correct.

 

Lee Kuan Yew

Lee Kuan Yew, who is familiar to everyone, is a senior politician in Singapore. He said, “Asian values” include the following points:

  • First, the interests of society and the state take precedence over personal interests; 
  • Second, the goal of democracy is to achieve good government; 
  • Third, the relationship between the government and the people is a relationship of mutual trust; 
  • Fourth, harmony is more conducive to the development of the country and the happiness of the people than conflict; 
  • Fifth, the foundation of the country lies in the family; 
  • Sixth, the state should respect the individual; 
  • Seventh, the state should respect the individual; seventh, the state should respect the individual. 
  • Eighth, the state should respect the individual; and seventh, different religions should complement each other and live in harmony.

According to Lee Kuan Yew, these values are mainly derived from the Chinese Confucian cultural tradition, but also have modern elements, including respect for individual rights and acceptance of the market economy. But the main difference between “Asian values” and Western values is that even though these values are desired and shared by all, they do not have the same priority. In “Asian values,” the interests of the community, society, and family are given higher priority than the individual, freedom, and rights of the West. This is the biggest difference.

Lee Kuan Yew also emphasized the rule of law. As we know, Singapore is a country with strict law and order, but it also emphasizes the rule by morality. In order to resist the encroachment of Western culture, it openly advocates the eight virtues of Confucianism, and has made a new interpretation in the context of Singapore’s national conditions. These eight virtues are: loyalty, filial piety, benevolence, love, propriety, righteousness, integrity, and shame. The new interpretation is as follows: “loyalty” refers to loyalty to the country, with a sense of national interest and community first. “Filial piety” refers to filial piety to elders and respect for the old and the virtuous. According to him, the family is “the most sacred and inviolable” and is “the foundation for the consolidation of the nation and the nation’s perpetual existence.

Lee Kuan Yew also said that “benevolence” and “love” means to be compassionate and friendly, to care for others, to be “humane” and to avoid monetizing human relations as in Western societies. “He feels that courtesy can produce good interactions, but also emphasizes that the form of courtesy is to be educated.

Lee Kuan Yew also believed that righteousness is faithfulness. Between the government and the people, between the various nationalities in Singapore, and between each individual, one must be honest and trustworthy, not fraudulent or forgetful of righteousness. “Integrity” is mainly for government officials and politicians, they should be honest. A sense of “Shame” is to know beauty and ugliness. He thinks, “If the citizens of a country do not distinguish between beauty and ugliness, and do not think of civilized behavior as beautiful, and do not think of ugly behavior as ugly, then the standards of the country are disordered, and it is not far from collapse.”

Another major advocate of “Asian values” is Malaysian Prime Minister Mahathir. His faith is Islamic, so his “Asian values” have their own characteristics. Like Lee Kuan Yew, he believes that “Asian values” emphasize family and respect for authority. This authority includes parents, teachers, and government. In addition, he emphasizes the responsibility of the government, including its power to intervene in society, and the priority of the economic and social interests of the group over the freedom and rights of the individual. Emphasis should be placed on social stability and relying on reaching consensus to solve problems rather than through confrontation. On the issue of democracy, Mahathir has this view: “Democracy is not a religion, we must look at our democracy and the well-being of the people and the country is more important than democracy. Democracy is made for the country and the people, not for democracy itself.”

 

Mahathir’s Asian values

Mahathir’s “Asian values” have several characteristics, one is that Mahathir has been outspoken in the international arena, often criticizing the Western-dominated world economic order as unjust, and has also been critical of Western centrism and racism. I remember when the Asian financial crisis broke out in 1997, he said that the financial predators on Wall Street were greedy and bad and orchestrated the crisis that set our Malaysian economy back a full 20 years. He also dared to fight for the underdog, making him a leading voice of the Third World and the Islamic world in the 1990s.

Second, he advocated Malay nationalism. Internally, he sought Malay leadership; externally, he opposed Western imperialism. He called on the Malays to overcome the “inferiority complex” created by the long period of white colonial rule.

Third, he advocated “Asian values” which called on Muslims to focus on the substance and spirit of Islam rather than on external forms and unnecessary red tape. He opposed religious extremism and argued that Muslim societies should not believe in “fatalism” but should keep up with the times and modernize their countries.

After the Asian financial crisis in 1997, Thailand, South Korea, Indonesia, the Philippines and Malaysia were hit hard. Critics in the West believe that “Asian values” are responsible for the Asian financial crisis. Why? Because it led to the spread of cronyism, nepotism and corruption. The Asian financial crisis has exposed these problems. In the analysis of the causes of the Asian financial crisis, many American scholars, as well as some of our domestic scholars, have focused on a term called “Crony Capitalism. In other words, one of the major problems of the East Asian model is that the government dominates the economy, causing interest groups and collusion between government and business, resulting in credit inflation, power and money transactions, and lack of power supervision, which leads to a bubble economy.

At the same time, however, many East Asian scholars hold a different view. They believe that the main cause of the Asian financial crisis was “Casino Capitalism”, that is, the lack of supervision in the international financial market, and the financial predators without any moral restraint made a lot of money, and the process itself included a lot of corruption. The Asian financial crisis was caused by the premature opening of capital markets in some countries and regions by the United States and the lack of regulation of the international financial system.

One view is that the combination of “casino capitalism” and “power capitalism” caused the Asian financial crisis. We have a common saying that a fly does not bite an egg without a seam. Both the flies and the seams on the eggs are the causes of the crisis. So we have to condemn both “power capitalism” and “casino capitalism”. We need to promote the reform of the international financial system to curb “casino capitalism”, otherwise there will be a major crisis in international financial issues.

In 2008, the United States broke out the subprime mortgage crisis, the subprime mortgage crisis triggered a financial tsunami, not only hit the United States itself, but also the whole world, this is a very typical example. At this moment, the United States, in order to save the rich and the economy, adopted the policy of beggar-thy-neighbor and financial deflation, the end result of which may also be harmful to themselves and others.

At that time, after the outbreak of the financial crisis in 1997, Amartya Sen, an Indian-born Nobel laureate in economics, said, “This Asian financial crisis is a punishment for not practicing a democratic political system.” But in 2008 the U.S. financial tsunami broke out that was much worse than the Asian financial crisis. I wrote at the time that I wondered how Mr. Amartya Sen would explain in the face of such a U.S. financial tsunami that was countless times worse than the Asian financial crisis.

Later, Mahathir repeatedly said that “Asian values” are good and superior to the Western “universal values”, which are based on Western values. He said He said that “Asian values” have not caused as much damage to the world as Western values have. He also cited the 2008 financial tsunami in the U.S. as an example of how Western values are concerned with acquiring wealth, regardless of the means used. “Asian values” are different from Western values in that we are concerned with the interests of the majority of people, not the interests of a few elites.

Westerners, he said, like to sacrifice the lives of others to achieve their own goals, which we call war and killing. When they have disagreements with other countries, they usually resort to war as a means to solve their problems, which is why they develop strong military forces and develop all kinds of weapons. The reason why we find the whole world living in fear is that the trend of Western values inevitably leads to the sacrifice of others as a means to solve their own problems. I should say that he spoke quite profoundly.

Mahathir also said that our “Asian values” are very good and we should be proud of them, and we should defend them and not be easily influenced by Western values.

These “Asian values” are important because of the failure of Western values, which are based on materialism, wealth and individualism. This failure is a huge failure.

Looking back at this discussion more than twenty years ago reminds me of what we did in the fight against the epidemic last year, and how the different values compare. One of the major reasons for China’s success in this fight is that we, the ordinary people, embody a very valuable value that Chinese people believe in. For example, we believe that “human life is above all” and “life comes first”. We found that Western countries, which used to shout about human rights and “universal values” every day, do not have the concept of “human life is of paramount importance” that everyone in China understands, and do not agree that “human life is the most important”. It is surprising that they do not share such a common value as “human life is the most important. Frankly speaking, how can a country that does not even respect the right to life be qualified to teach China a lesson in human rights? This is a big joke.

Likewise, during this fight against the epidemic, the spirit of unity shown by the Chinese people as a united front touched countless Chinese and foreigners. Once again, we found that once a national tragedy is at hand, the value of “all people will come together to fight the national tragedy” is something that had long taken root within us. 

In contrast, Western countries are self-conscious and go their own way, which is a kind of egoism. We are proud of the solidarity of our great nation. In addition, during this fight against the epidemic, the Chinese demonstrated a sense of responsibility to their families, to others, to society, to their country, and to the world that is hard to match in the West. In Western societies, it is not easy to make people stay at home or wear masks in a neighborhood, not to mention more than a billion people, because the value of individual rights is deeply rooted in the marrow. In contrast, the Chinese people advocate the unity of freedom and self-discipline, the unity of rights and responsibilities. This value of responsibility is both a continuation of traditional Chinese culture and a true “great modern spirit,” as I call it.

In contrast, the failure to prevent and control the epidemic in the West was largely due to them taking individual freedom and individual rights as absolutes.

After this catastrophe, I really hope that the educated people in the West will reflect on the tendency of the Western culture to extremism of individualistic values. This tendency to take values as absolutes and to take them to extremes is frankly unsuited to the challenges of modern society.

 

Chinese values

Finally, our Chinese values, as well as many of the elements of the “Asian values” discussed earlier, are in fact very helpful in breaking away from the excessive influence of Western values on our Chinese society over time, and serving as a riposte to the so-called “moral superiority” of the West, and strengthening the formation of our own values. “It comes down to a “victory in our hearts” for our own values. We can not only look at Western values as equal to our own, but can in some ways look down on them, that is to say, we can find that their values have many problems, even serious ones.

Frankly speaking, this is not arrogance, but realism. We believe from the bottom of our hearts that many of the values of the Chinese and Asian peoples are indeed more humane and rational than many of those espoused in the West. These values are more in line with the general interest of all humanity, and more capable of meeting the challenges facing modern society in the 21st century than are Western values. Whether the West can understand or even accept these values is frankly of no particular concern to me. It is like a patient who is seriously ill and is told that there are some medicines in that part of Asia that are quite effective, but the patient just does not believe in them, so what can be done? No one can wake up a person who does not want to wake up. Subscribe to David Cowhig's blog.

Zhang Weiwei is a member of Chang’an Street Reading Group and director of the Institute of Chinese Studies at Fudan University). Transcribed and translated from This is China” CHINA NOW EP98 by David Cowhig.

Lab Leak?

The Methodology of the Chinese Path:

 China as Center and Method


Zhang Cheng

Introduction and Translation* by David Ownby
 
 
Mao Zedong's Selected Works begins with a clear statement: "A revolutionary party is the guide of the masses, and no revolution ever succeeds when the revolutionary party leads them astray.”[2] The question of the path is related to the success or failure of the cause. Our unique cultural tradition, historical destiny, and basic national conditions require that we take a development path that suits our own characteristics, namely the Chinese path.
 
In his 1989 essay “China as Method,” Japanese sinologist Mizoguchi Yūzō (1930-2010) sought to transform the methodology of Chinese studies from "world as method" to "China as method. "To take China as method is to move toward the creation of basic truths, and to the very creation of the world."[3]  Indeed, the “world” in a China studies that takes the "world as method" is not the world as it is, but the world as the West, and the West as the standard. In this world, China is merely trying to prove its legitimacy in Western terms.  Hence China lacks agency, and those "experiences" that are different from or go beyond Western truths as part of China’s own historical lineage cannot be regarded as truths to be valued.
 
As a great civilized country with thousands of years of history and hundreds of years facing the aggressive and powerful West in modern times, China has had to be neither obsequious nor supercilious, but rather composed and confident.  It has remade Chinese agency, formulating its own set of methodological paradigms, noting the specificity of both Chinese and Western truths, and converting the previously hierarchical relationship which placed Western truths above Chinese principles to a horizontal relationship of equality.   This enriches the world’s store of “truths,” thus renewing the prospect of world civilization.  This essay attempts to reshape China's agency and construct a methodology of the Chinese path based on China’s own historical development, on Chinese values and criteria, or in other words the truths and standards revealed by the Chinese path. 
 

Methodology in the Context of the History
of Modern Chinese Thought
  

Xi Jinping pointed out during the 2014 National People's Congress that "the Chinese people have traditionally had a strong sense of identity and pride in their culture, but when China was reduced to colonial or semi-colonial status in modern times, our confidence in our culture and in our citizens was greatly damaged." 
 
In the confident mindset of the Chinese of the pre-Opium War period, China was both center and method. Chinese civilization created itself, formed its own system, and had an enduring history, creating a strong sense, or consciousness, of agency. This consciousness of agency is represented by Chinese civilization's concept of yi-xia 夷夏, the distinction between what is Chinese and what is uncivilized, which is not a racial but a cultural distinction.  This describes a cultural, hierarchical order that was extremely flexible; as the expression put it: "If a feudal lord uses uncivilized rituals, he is uncivilized, but if his ritual practice approaches that of the Chinese, he is Chinese 诸侯用夷礼则夷之,进于中国则中国之."[4]
 
In essence, the yi-xia concept is a civilizational theory centered on China and using China as method. This civilizational theory was both rich in Chinese agency and yet very open and inclusive, as seen in the case of Buddhism, which arrived in China the end of the Eastern Han Dynasty and imposed itself in an impressive manner, only to become, after a few centuries, the very Chinese Chan (Zen) in the Sui-Tang period (581-907),  and finally merged together with Confucianism and Daoism to become part of Neo-Confucianism, the great philosophical contribution of the Song and Ming periods.  Another example is the Western knowledge that entered China in the late Ming-early Qing period, including mathematics, astronomy, calendars, religion, science, and art, etc., the important elements of which China was able to absorb in an unhurried and autonomous way.
 
In this sense, the Opium War was indeed a watershed for "China-centeredness," because prior to this point, whether it was a case of a foreign civilization, like Buddhism, or alien regimes such as those represented by Yuan and Qing dynasties, all such things entered China as a form of conquest, yet in the process were gradually sinicized, meaning that China always remained the center. After the Opium War, however, the situation changed qualitatively, and the invaders were no longer sinicized. As the historian Joseph Levenson (1920-1969) once noted: "China could be controlled from afar, which meant that modern Europeans, unlike the Manchus, could avoid being assimilated.  Because of the backwardness of their technology, the Chinese could not bring the Europeans into their own society, nor could they drive them out."
 
China was forcibly pulled down from its position the center of the Heavenly Kingdom and gradually reduced to a "semi-colonial and semi-feudal society," becoming a vassal of the West. This was the end of cultural self-confidence and the beginning of a sense of cultural inferiority. Chen Duxiu 陈独秀 (1879-1942) once pointed out: "What has changed the lives of the Chinese people and put them on the path of enlightenment is the arrival of Western civilization.  European culture is fundamentally different from the culture of our country. For hundreds of years, our country has been in turmoil, largely because of the contact and conflict between the two cultures.”  As a result, as defeat followed defeat, those seeking to understand what had happened directed their suspicious gaze toward tradition, whereupon our confident ideas like tianxia-ism (i.e., the idea of Chinese “universalism” in the premodern era) and the yi-xia concept, which had sustained us for thousands of years, fell apart.  In the face of Western civilization, with its civilized government and military mastery, what followed was a cultural sadness that endured in China for more than a hundred years.
 
In the search for truth in the late Qing period, China remained the center, but the West became the method. On the eve of the founding of the New China, Mao Zedong said: "Since the defeat of the Opium War in 1840, progressive Chinese have suffered many hardships in searching for truth in the West. Hong Xiuquan 洪秀全 (1814-1864), Kang Youwei 康有为(1858-1927), Yan Fu 严复 (1854-1921) and Sun Yat-sen  孙中山 (1866-1925) represented those looking to the West for truth before the arrival of the Chinese Communist Party. During that period, Chinese people seeking progress would read any book, as long as it was a new idea from the West. The number of foreign students sent to Japan, Britain, the United States, France and Germany reached alarming levels.  After the abolition of imperial examination system, new schools sprung up like mushrooms after a rain, the idea being to learn from the West…The only way to save the country was to renew it, and the only way to renew it was to learn from foreign countries."
 
These progressive Chinese people were not seeking the truth for the sake of seeking the truth, but instead were seeking answers to China’s urgent problems. What Mao Zedong particularly emphasizes here is the temporal starting point of the search for truth from the West, which was the defeat of the Opium War in 1840, after which, the search for truth became possible. From the moment that the great powers forcibly opened China’s door in a brutal and barbaric way, salvation and survival became the theme of social movements in China for more than a hundred years, and the main task to be faced was anti-imperialism and anti-feudalism.
 
Whether it was the Foreign Affairs Movement of the 1860s and 1870s, the reform and modernization efforts of the 1890s, or the Revolution of 1911 and the founding of the Republic of China, salvation was always at the center of the movement, and the only thing that kept changing was the method. Although salvation was directed at China, the truth needed to effect the salvation began to move from China to the West, and the West gradually became the method.
 
 In his 1843 volume, Illustrated Treatise on Maritime Kingdoms 海国图志, Wei Yuan[5] 魏源 (1794-1857) begins with a straightforward statement: "Why did I write this book? To get the barbarians to attack the barbarians, to get the barbarians to pay the barbarians, and to teach the advantages of barbarian technology so that we can use them to control the barbarians." Here he breaks with the yi-xia concept, which traditionally occupied a position of absolute authority, and begins to open his eyes to the outside world, measuring the shortcomings of the dynasty from a Western perspective, thus taking a first step away from the China/barbarian order and a first step toward the international world.
 
Along with the acceleration of the learning process, the methodology of "teaching the advantages of barbarian technology so that we can use them to control the barbarians" was stretched to the limit, and a more "inclusive" slogan was needed, which gave rise to the methodology of "Chinese learning as substance and Western learning as application 中学为体,西学为用."  As Feng Guifen 冯桂芬 (1809-1874) put it, "Take the ethical principles of well-known Chinese teachings as the base, and supplement it with the techniques of wealth and power of other countries." He was the first to propose the methodology of  Chinese learning as substance and Western learning as application. In the Sino-Japanese War of the late 19th century, China was defeated by a very small country, leaving the country all the more humiliated. Chinese intellectuals thinking about wealth and power argued that in military matters, China should imitate the West, and that Japan’s success came from imitating the Western political system.  As a result, "Chinese learning as substance and Western learning as application" became a methodology, and a fashionable "buzzword."  Liang Qichao 梁启超 (1873-1929) once said, "Zhang Zhidong 张之洞 (1837-1909) was the most enthusiastic about this methodology, which he took to be the key to revitalizing the country.” 
 
Although “Chinese learning as substance and Western learning as application” claimed to be protecting the Chinese Way, for Woren 倭仁 (1804-1871) and others who suspected that “learning from the West” was a way to “replace the Chinese with barbarians,” it was just a clever way of getting Western knowledge in the through the back door.  Under the cover of “Chinese learning as substance and Western learning as application,” the process of learning from the West moved from the external from the internal, from a means of studying natural phenomena to matters of philosophy.  In the process of expansion, the Western “application” constantly fermented within the Chinese “substance,” ultimately breaking through its original body, so that the entire notion of “Chinese learning as substance and Western learning as application” came to be stretched to the limits. 
 
In order to protect themselves and to thwart the obstruction of the stubborn conservatives, some people began to propose the more extreme slogan that "Western learning grew out of Chinese learning 西学中源."  The historian Chen Xulu 陈旭麓 (1918-1988) once commented that "’Chinese substance’ should have been a constraint on 'Western application,’ but the 'Western application' used ‘Chinese substance’ to get its foot in the door, which allowed it to have an impact according to its own needs, so that while people wanted to restrict it to a certain set of purposes, it proved to be difficult to do so. As this contradiction became increasingly evident, more enlightened people followed the logic of what was happening and pushed things even further." As a result, while the object of salvation was of course centered on China, truth had to be imported from the West, and the West became the method. Once the gates of the country were opened, various doctrinal trends took the stage one after the other, including capitalism, reformism, liberalism, social Darwinism, anarchism, pragmatism, populism, rural reconstruction, and labor unionism. In essence, they were all methodologies to solve China's problems, and each one excited people’s expectations, and each solution was indeed about the future and fate of China.
  
In the early years of the Republican period, we see a competition between Westernization and Sovietization.  The difference between the reformists and the revolutionaries was merely that the reformists brought in the new without getting rid of the old, while the revolutionaries both brought in the new and got rid of the old. The establishment of the Republic of China put an end to thousands of years of imperial rule. However, the Republic of China was not the panacea people expected at the time, and quickly gave way to a period of turmoil, chaos, and unrest. Sun Yat-sen once lamented: "The Republic has been in existence for six years, but the people have never enjoyed its blessings."
 

Republican in Name Only

In fact, the Republic of China was “republican” in name only.  The end of the imperial power left a vacuum of authority, and no party was able to control the situation and restore order in the short term. In the face of this chaos, two influential intellectual trends emerged.   One of these was cultural conservatism, represented by Liang Qichao and Liang Shuming 梁漱溟 (1893-1988). Liang Shuming declared that "the future of world culture is the revival of Chinese culture.” The other was the trend of extreme Westernization trend, represented by Hu Shih 胡适 (1891-1962) and Chen Xujing 陈序经 (1903-1967). 
 
According to Hu Shih, "At this time there is no other option; our only choice is to fully import the new civilization of this new world." Chen Xujing was an even firmer supporter of the theory of total Westernization: "To save China from its present danger, we must fully Westernize." As a Chinese intellectual, to arrive at the point of advocating total Westernization necessarily fills one with sadness.  After all, taking such a step thoroughly eclipses Chinese spiritual agency, as the West has become both method and center.  After such an overcorrection, the road to rebuild Chinese cultural confidence has been long.
 
While the "total Westernization theory" was in full swing, the "total Sovietization theory" also emerged in the CCP, a view which saw the Soviet Union as both center and method.  This was the same as Westernization except that the Soviet Union took the place of the West, which is the dogmatism that Mao Zedong later strongly criticized: "China had two dogmas, the old one and the foreign one, both of which were forms of ideological enslavement. The May Fourth Movement broke the enslavement of the old dogma and was a major enlightenment movement. After the defeat of the 1911 Revolution, our Party was guilty of foreign dogmatism, and now we are carrying out a rectification campaign against subjectivism, sectarianism, and Party formalism.  This is an equally important enlightenment movement, because many cadres have been deeply poisoned by this dogma, and need to do enlightenment work.” 
 

Foreign Dogmas

The "foreign dogmas" referred to here include the "total Westernization" and the "total Sovietization," the latter of which was certainly more serious for the CCP and was a matter of life and death for the Party.  The example of the "Sino-Soviet Conflict中东路事件" can give us a glimpse of the serious "total Sovietization" in the Party at that time.
 
The "Sino-Soviet conflict" refers to a conflict between China and the Soviet Union in 1929 over the Chinese recovery of Soviet railroad privileges in northeast China.[6] After Chen Duxiu was dismissed from his post as General Secretary of the CCP, the dogmatists who had studied in the Soviet Union held the real power in the Party and were subservient to the Communist International, which was controlled by the CPSU (Bolsheviks).  This was especially true after Stalin took power, when his nationalist position of defending Soviet interests made this situation completely obvious.
 
In the course of the conflict, the Kuomintang called for the defense of China’s "national interests" and strove to recover the rights of East China Road from the Soviet Union, and while there was some trickery involved on the KMT side, it is true that the majority of the Chinese people were not enlightened enough to view the Soviet Union from the internationalist proletarian standpoint, and instead took the nationalist position that the Soviet Union was encroaching on Chinese territory. The dogmatist returned Russian students within the Chinese Communist Party, however, ignored the facts and openly declared that "arming to protect the Soviet Union is our central slogan for mobilizing the masses.” 
 
All of this made Chen Duxiu anxious: "Our propaganda methods seem not to have achieved the simplicity as those of brother parties in other countries.  In other words, we only blather on about vast theories of world revolution, and cannot answer the practical questions that need to be answered in the minds of the masses…Monotonous propaganda abstracted from concrete issues can only be understood by the most enlightened elements.  It is incapable of mobilizing the masses, and leads the masses to misunderstand us as playing merely the role of the ‘ruble,’ without regard for national interests; and makes it easy for the Kuomintang to pit their 'pro-China' slogans against our 'pro-Soviet Russia' slogans, letting the masses choose one for themselves."
 
Chen Duxiu's fears were not empty, as can be seen in Liang Qichao's letter to his children: "The Communist Party, under the command of the Third International, has only one goal, which is to sacrifice China as the first step toward world revolution." In response to Chen Duxiu's letter, the top brass of the CCP continued to insist on the centrality of the Soviet Union and gave Chen Duxiu a stern rebuke, stating clearly that even if the masses were backward in their consciousness, the Party could not "pitch our slogans lower and chase after the backward consciousness of the masses," and that "to support the Chinese revolution is to support the Soviet Union, and to support the Soviet Union is to support the Chinese revolution."
 
Mao Zedong later made a profound summary of the "total Sovietization theory" that "took the Soviet Union as both center and method:" "It took several decades for us to understand China. How will it do for Chinese people to not understand the Chinese situation? The real understanding of independence began with the Zunyi Conference 遵义会议[7] of 1935, which criticized dogmatism. The dogmatists said that the Soviets got everything right in the Soviet Union and did not integrate the Soviet experience with Chinese reality." Thus, similar to "total Westernization," the "total Sovietization" of the Soviet dogmatists was another version of foreign dogma, which merely replaced the West with the Soviet Union.
 

Yan’an’s Quest: China as Center and Method

 On the eve of the founding of the New China, Mao Zedong made a profound summary of the historical process of China’s learning from the West in modern times: "From the Opium War in 1840 to the eve of the May Fourth Movement in 1919, a total of more than seventy years, the Chinese had no ideological weapons with which to resist imperialism. The stubborn old feudal ideological weapons had lost on the battlefield, were incapable of resisting the West, and were declared bankrupt. As a last resort, the Chinese people were forced to learn ideological weapons and political programs such as theories of progress, evolution, human rights, and bourgeois republicanism from the arsenal of the era of the bourgeois-capitalist revolution in the West, the breeding ground of imperialism, and organized political parties and revolutions, thinking that they could defend themselves against outside foreign powers and build a republic within. But these weapons turned out to be just as weak as the ideological weapons of feudalism, and once again, unable to resist the West, they were defeated and declared bankrupt."
 
Indeed, in modern times, advanced Chinese looked to the West for truth, and found many solutions, including even the most advanced bourgeois republican system, which they tried, but it did not change the tragic fate of the Chinese people who were enslaved and oppressed. It was not until the outbreak of the October Revolution in 1917 that Marxism-Leninism became known to the Chinese people for the first time, at which point China changed its direction.
 
The young Mao Zedong took China as center and Russia as method. In his youth, although Mao Zedong was a staunch supporter and organizer of the work-study movement in France, he insisted on staying in China after sending off his dear friends, for which he once gave this explanation: "I think we need someone to go to foreign countries, to see something new, to learn something new, to study something useful, and to bring it back to transform our country. At the same time, we also need people to stay in our own country and study our own problems. I feel that I know too little about my own country, and it would be more beneficial to my country if I spent my time here."
 
Mao Zedong did not share the general cultural inferiority complex of Chinese students, nor their eagerness to study abroad to save the country. In his letter to his classmate Zhou Shizhao 周世钊 (1897-1976), he looked at the Chinese problem from the height of the history of world civilization and showed his far-sightedness: "World civilization is divided into two streams, the Eastern and the Western, and Eastern civilization has to occupy a half of world civilization. However, Eastern civilization can be said to be Chinese civilization. It seems that we should first study the major points of our ancient and modern theories and systems before studying in the West, which will enable us to make apt comparisons." "If we want to make a contribution to the current world situation, then we cannot leave China out.  As to China’s situation, we need to investigate and study things here. If we put this off, waiting for those studying abroad to return home, it seems to me that this will be difficult for personal and practical reasons.  It is better to do it now, first, because we will avoid some of the problems just discussed; and second, we can take some of our experience to the West, to be used as a comparison in our studies."
 
In Mao Zedong's view, even if you want to study abroad, saving the country must nonetheless focus on China as center, and the exercise requires solid, in-depth understanding of national conditions, the fruit of good research done in China. The young Mao Zedong, who was greatly influenced by Russia’s October Revolution, expressed his eagerness to find a new path in a letter to a close friend: "In the past few months I have finally understood.  The political world has become so corrupt that there is no hope for political improvement. We have no choice but to ignore everything and find another way to create a new environment."
 
He gradually discovered that this alternative path was the new path of the Russian class revolution. In his speech at the Changsha Congress of the New People's Association in January 1921, he pointed out that there were five ways to solve social problems in the world today: first, social policy; second, social democracy; third, radical communism (Lenin's doctrine); fourth, moderate communism (Bertrand Russell's doctrine); and fifth, anarchism. Regarding these five, he strongly disagreed with the reformist method, and favored following the Russian example and advocating large-scale revolution: "In terms of method, I highly approve of using the Russian style to bring about democracy, because it is a newly invented method that succeeds where all else has failed, and if only for this contains more possibilities than other methods of transformation…Radical communism, also known as labor-peasantism 劳农主义, uses the method of class dictatorship, and we know the results it produces, so this is what we should use." Indeed, the Bolshevik October Revolution set an example, and it was the inevitable choice of the times to follow the Russian path.
 

Soviet Russia as Method?

Mao Zedong strove to break through the theoretical framework in which “Soviet Russia as method” determined both content and form, and to rebuild something where "China would be both center and method."  Having survived a baptism of fire during the revolutionary war, and having suffered the dogmatists’ attacks, he arrived at the small northwestern city of Yan'an after the drama of Long March with a well thought-out plan, and began to think systematically about the methodology of China’s path. 
 
Especially in response to the "total Sovietization theory," proposed by the returned Russian students, which took the Soviet experience as center and method, Mao Zedong first argued that the Chinese revolution must be centered on China. Mao Zedong gave a strong rebuttal to the popular view that the comrades of the Communist International who were in charge of the direction of the China question knew China better than the Chinese: "From an overall perspective, China’s objective world is understood by the Chinese people, and not by the comrades of the Communist International who are in charge of the China question. These comrades of the Comintern do not know or understand—or do not know or understand well—Chinese society, the Chinese nation and the Chinese revolution. It took us a long to arrive at a clear understanding of China’s objective world, which means that the task much be all the more difficult for foreign comrades.” 
 
To grasp Chinese problems and to understand revolutionary practice, Mao always insisted on the agency of Chinese people, "The victory of the Chinese revolutionary struggle depends on our Chinese comrades' understanding of the Chinese situation." After a long revolutionary struggle, Mao Zedong was convinced of this. "Over the course of his life, Marx was unable to foresee and solve all the problems that would emerge in the future. Russia’s problems could only be solved by Lenin, and China’s problems can only be solved by the Chinese people." During the Yan'an rectification period, Mao abhorred the dogmatists who ignored Chinese questions and could only talk about the Soviet Union, like a broken record.  "We have to study China, China has to be the center, and when we study the things of the world, we have to do so from a Chinese perspective. Some of our comrades have a problem, which is to always look to the outside.  They are like a record player that mechanically and uncritically talks about bringing foreign things into China.  They do not study China’s characteristics. If you do not study China’s characteristics, but only bring in things from abroad, you cannot solve China’s problems." 
 
On this basis, Mao Zedong argued that putting China front and center should be established as a major Party principle and become a guideline for the entire Party to follow. "We must establish the policy of taking the study of the actual problems of the Chinese revolution as the center, and using the basic principles of Marxism-Leninism as our guide." In fact, the familiar phrase "make the ancient serve the present and the foreign serve the Chinese 古为今用,洋为中用" is a clear expression of Mao's China-centered approach. Employing this method, and through the persistent and painstaking practice of revolutionary struggle, Mao Zedong created a number of Chinese theories with the theory of New Democracy as the general outline (and also including the theories of the villages encircling the cities, armed struggle, the United Front, etc.).
 
Mao Zedong held firm to the idea of China as center, but he had a harder time with the idea of China as method.  From the moment of the very creation of our Party, the influence of the Soviet Union and the Communist International has been huge in terms both of theory and practice, especially the theories of Lenin and Stalin regarding the national liberation struggle of colonial and semi-colonial countries. In the context of the national liberation of the Eastern countries, Stalin’s demand was: "In terms of content, it will be proletarian; in terms of form, it will be national—this is the universal culture towards which socialism is moving. The culture of the proletariat does not erase national culture, but rather gives it content. By the same token, national culture, does not erase the culture of the proletariat, but gives it form."
 
During the Yan'an period, in the process of systematically thinking about the sinicization of Marxism, Mao Zedong was deeply influenced by this, which is prominently expressed in the theory of New Democracy: "Chinese culture should have its own form, which is the national form. The form is the nation, the content is New Democracy—this is today’s new culture."[8] Basing himself on China’s specific national conditions, Mao simply replaced the content of the proletariat with the content of New Democracy. But this was not all, and Mao still felt quite distant from this simple and mechanical "content plus form" understanding of the sinicization of Marxism. 
 
In the article "The Role of the Chinese Communist Party in the National War," which was included in the Selected Works of Mao Zedong after the founding of New China, we find the following familiar passage: " Another of our tasks is to study our historical heritage and use the Marxist method to sum it up critically. Our national history goes back several thousand years and has its own characteristics and innumerable treasures. But in these matters we are mere schoolboys. Contemporary China has grown out of the China of the past; we are Marxists in our historical approach and must not lop off our history. We should sum up our history from Confucius to Sun Yat-sen and take over this valuable legacy. This is important for guiding the great movement of today."[9]
 
There were two major changes to the text when it was published in Selected Works.  The first is that after " our national history goes back several thousand years " there was originally another phrase: "with its own laws of development and its own national characteristics."  The second is that " We should sum up our history from Confucius to Sun Yat-sen and take over this valuable legacy" was originally followed by another phrase "take over this valuable legacy and transform it into a method.” 
 
When the Selected Works of Mao Zedong was compiled after the founding of New China, this statement was deleted as a matter of course, probably in consideration of the situation at the time regarding learning from the Soviet Union. But what was deleted from the original text is crucial, because it reflects Mao's thinking on China as method. The Chinese nation "has its own laws of development,» and it is extremely important to inherit this cultural heritage "and turn it into a method," illustrating that the long-standing Chinese civilization is not just a national form, but that it is about the nation's own laws of historical development, and these laws themselves make up an important part of the content of socialism. 
 
In his conversation with the journalist Günther Stein, Mao said: "Without the Chinese people, there would be no Chinese Communist Party…There are many good things in the legacy Chinese history has handed down to us. We must make these legacies our own." In the practice of brutal struggle, Mao Zedong deeply understood the great significance of national characteristics to the Chinese revolution:  "A country always has its own characteristics, and things that do not fit with these characteristics will not work."
 
That said, from the Yan'an period until Khrushchev’s criticism of Stalin at the 20th Congress of the Communist Party of the Soviet Union, Mao Zedong tried not to mention slogans such as "sinicization" because of the relationship between the two parties and the two countries, and especially because of Stalin’s authority. For a time, he even stopped mentioning "Mao Zedong Thought."
 
But Mao was ultimately not satisfied with the simple "content plus form" understanding of the sinicization of Marxism and remained determined to make a theoretical breakthrough. In particular, when talking with the head of the Chinese Musicians' Association in 1956, Mao Zedong clearly pointed out that it was necessary to learn from the ancients and foreigners, but also to oppose conservatism and dogmatism, and to learn the good things from both sides, and turning two "half bottles of vinegar" into two "full bottles of vinegar." "This has nothing to do with 'Chinese learning as substance, Western learning as application.’ 'Learning' refers to basic theory, which is the same in China and abroad, and should not be divided into Chinese and Western."
 
The meaning of this is only too obvious:  that like Western theory (even Marxism), Chinese "learning" also contains many things that are no less valuable than Western theory.  Chinese learning is one of many “contents” and is not just a matter of form. "To say that the Chinese national heritage has no laws is to negate this heritage, which is not right…Chinese things have their own laws." Mao Zedong further pointed out, "Foreign things should be absorbed in function of the Chinese foundation.  The two should match up in an organic integration…When we absorb foreign things, we change them and make them Chinese…We must pay attention to the national heritage, and not Westernize everything…It will only make sense in this way and we will not lose our national confidence." Finally, Mao Zedong humorously pointed out that sinicization must "create something new and unique to China", such as a new species resulting from mating donkeys and horses, for example, a "mule" that is neither a donkey nor a horse.
 
Hu Qiaomu 胡乔木 (19122-1992) once shrewdly pointed out that "Chinese culture played a great role in the Chinese revolution. Why was China able to embrace Marxism?...What are the characteristics of the integration of Chinese history and culture with Marxism? On what issues exactly has integration occurred? This needs to be studied."
 

On Contradiction 

In fact, in “On Contradiction,” Mao Zedong had already clearly pointed out the relevant Chinese law: " The October Socialist Revolution ushered in a new epoch in world history as well as in Russian history.  It exerted influence on internal changes in the other countries in the world and, similarly and in a particularly profound way, on internal changes in China. These changes, however, were effected through the inner laws of development of these countries, China included."[10] And in "On New Democracy," Mao further pointed out that nationality is not only a form, but also a content: the culture of New Democracy "belongs to our own nation and bears our own national characteristics. It links up with the socialist and new-democratic cultures of all other nations and they are related in such a way that they can absorb something from each other and help each other to develop, together forming a new world culture."[11]
 
As content, Chinese civilization combines with the advanced cultures of other nations to form a new world culture. Mao had already made a distinction between national characteristics and national forms: "The universal truth of Marxism and the concrete practice of the Chinese revolution must be completely and properly united, that is to say, combined with national characteristics and through a certain national form, before it can be useful, and it must not be applied subjectively or formulaically." In this respect, the philosopher Feng Qi 冯契 (1915-1996) offered a profound explanation: "What we call regional characteristics or national style is never solely a matter of form. When we talk about Chinese style, we often only mention national form. In fact, form and content must not be separated into two parts, and style exists in the unity of content and form." Therefore, only Chinese civilization in which both form and content are manifested at the same time is truly powerful and vital. 
 
After the founding of New China, Mao Zedong consistently sought a way to break through the simple "content plus form" formula concerning the sinicization of the Marxist path in China, becoming all the more conscious of the urgency of the task after Khrushchev's thorough-going criticism of Stalin at the 20th Congress of the Communist Party of the Soviet Union. "Now, thanks to Khrushchev's lifting of the lid, we should consider all aspects of the question of how to act in accordance with the Chinese situation.  There is no need to be as superstitious as we were in the past.  In fact, we were not completely superstitious in the past and made our own original breakthroughs. Now it is all the more important to try to find the specific path to build socialism in China." One might say that Mao’s mission as a Chinese Marxist involved a lifelong and continuous effort to find a methodology for the Chinese path.
 

Reinventing the New Era: China as Center and Method

As we enter a new era, Xi Jinping has clearly signaled that "the solution to China's problems can only be found within China, and by exploring the path and methods that suit us." Xi Jinping is seeking to reshape a methodology of the Chinese path in which China is both center and method.   "Wholesale Sovietization in the past did not work, nor will wholesale Westernization, or any other ‘-zation,’ work now." Xi Jinping has always been vigilant about "wholesale Sovietization" or "wholesale Westernization" in history or at the present time: "Start from the national situation, begin and end in Chinese practice, write your texts with full consciousness of the motherland, and make innovations in theory and policy conform to Chinese reality and possess Chinese characteristics." Xi’s words resonate loudly:  the Chinese path must take China as both center and method.
 
The approach to China's problems must take China as both center and message.  Xi Jinping has emphasized, "The kind of ‘ism’ a country practices depends crucially on whether that ‘ism’ can solve the historic problems facing the country." In modern times, the extremely impoverished and weak Chinese nation has been at the mercy of others, and progressive intellectuals tried various isms, including reformism, liberalism, social Darwinism, anarchism, pragmatism, and labor unionism, one after the other, but none of them solved China's problems. "Everything else has been tried and has failed. Some of those who favored these approaches else have lost their positions, some have come to their senses, and some are currently changing their minds."
 
The Chinese people finally chose Marxism, realized their long-cherished dream of revolutionary nation-building, and fundamentally reversed the fate of the Chinese nation. Therefore, even Marxism was chosen by the Chinese people for the purpose of comprehensively solving China's problems, and it cannot be abstracted or dogmatized. "Adherence to Marxism, to socialism, must have a developmental perspective, must be centered on the actual problems of China's reform and opening,  on modernization, on what we are doing."
 
Each country and nation has different historical traditions, cultural accumulations, and basic national conditions, and their development paths are bound to have their own characteristics. If we unthinkingly take foreign academic ideas and methods as norms, and if everything is Western-centered and governed by Western standards, we cannot have agency and originality. To continuously promote the sinicization of Marxism, it is necessary to start from China, to know truth through practice, and test and develop such truth. 
 
Xi Jinping has stressed, "Do not forget our ancestors…to solve China's problems, to put forward Chinese solutions to human problems, requires adhering to a Chinese worldview and methodology." If you only respect and follow Western things, if you enthusiastically embrace de-sinicization, once your noble head is lowered, then even the most powerful body cannot stand.  In the end this will certainly lead the Chinese nation astray, and into danger! 
 
Xi Jinping has repeatedly emphasized the need to firmly establish cultural confidence and adhere to the Chinese cultural position. "If we have no spiritual independence of our own, this pulls the carpet out from under out our political, ideological, cultural and institutional independence.”  Therefore, we must come to a profound understanding of Xi Jinping's strategic intention of promoting cultural self-confidence from the ideological height of maintaining our national spiritual agency.
 
The report of the 19th Party Congress in 2017 clearly emphasizes that we must "adhere to a Chinese cultural standpoint grounded in contemporary Chinese reality." Chinese civilization is the cultural fertile ground in which socialism with Chinese characteristics is rooted, and it is the deepest cultural soft power of the Chinese nation. The Chinese have created China’s enduring culture, and will certainly be able to push this culture to new heights. 
 
Marx pointed out, "Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past."[12] With the arrival of the new era, Xi Jinping has treated Chinese civilization with integrity and sincerity, seeking to correct wrong attitudes toward Chinese culture. Influenced by the radical anti-traditionalism of the May Fourth New Culture Movement, some extreme views painted traditional culture as a product of the agrarian era and part of a feudal culture. Mao Zedong once pointed out that "China's culture of several thousand years is mainly the culture of the feudal era, but not all of it is feudal, there are grass-roots elements, there are anti-feudal elements. It is necessary to distinguish feudal elements from non-feudal elements. Not all feudal things are bad."
 
If even feudalism cannot be wholly negated, how much more is this true for the spiritual lifeblood of Chinese civilization that has lasted for thousands of years. A culture is not born out of nowhere, but must be nurtured within a certain maternal body.  Chinese civilization, with Confucianism as its mainstream, was born in the body of Chinese agricultural civilization, and has experienced ups and downs for thousands of years while continuing to thrive. Xi Jinping has pointed out that "our agricultural civilization stretches back to the depths of time, and is the root of our excellent Chinese traditional culture." 
 

Since Yan'an

Ever since the Yan'an period, Mao Zedong was dissatisfied with the "content plus form" theoretical framework for the sinicization of Marxism and tried to make a breakthrough, but there were too many obstacles.  "After Marxism was introduced to China, it was no accident that the ideas of scientific socialism were warmly welcomed by the Chinese people and eventually took root and blossomed in China, but they were integrated with the excellent history and culture inherited for thousands of years in China and the values that the people unconsciously practice every day."
 
In the new era, Xi Jinping has continued this tradition and has continued to explore, taking the lead in breaking new theoretical ground, trying to go beyond the theoretical model of "content plus form," and pointing out that Chinese civilization is not only our national form, but is also the very content itself, thus putting forward the "cultural gene theory,"  demonstrating the deep integration of Marxism with Chinese history and Chinese culture. 
 
In December 2013, Xi Jinping pointed out during the collective study of the Political Bureau of the CPC Central Committee that "in the course of the 5,000 years of the development of our civilization, the Chinese people have created a splendid and profound culture, and we need to make the most basic cultural genes of the Chinese people adapt to contemporary culture and harmonize with modern society, presenting them in such a way that people can enjoy and participate, promoting a cultural spirit that transcends time and space, transcends national boundaries, radiating eternal charisma and contemporary value."
 
Subsequently, Xi Jinping repeatedly mentioned that "Chinese traditional culture is broad and deep…and its core elements have become the most basic cultural genes of the Chinese nation." "We must adhere to the Chinese cultural stance and inherit the Chinese cultural genes." In his speech on September 22, 2020, Xi Jinping particularly stressed that "we should seriously study the origins and qualities of Chinese civilization and Chinese culture, and form a more complete conceptual system of China’s cultural genes." In Xi Jinping's view, the basic values and spiritual doctrines embedded in Chinese civilization, which transcend time and space, transcend national boundaries, are rich in eternal charm and have contemporary value, have become flesh, blood, and water, fusing with the Chinese people, and have eternal value in the past and in the present.
 
The purpose of Xi Jinping's "cultural gene" theory is to emphasize the great importance that he attaches to the relationship between Marxism and Chinese civilization, which is related to the question of the methodology employed in the theoretical construction of the sinicization of Marxism. Marxism's sinicization is not a simple theoretical structure of "content plus form," with Marxism as the content and Chinese civilization as the form, in which Marxism "transforms" China and China "transforms" Marxism. 
 
On the one hand, Marxism, by serving as a guide to practice, has greatly changed Chinese society and transformed and upgraded Chinese civilization.  On the other hand, the application of Marxism to China required attention to China’s own national conditions, and Chinese civilization itself has its own "universal" value principles and national characteristics, i.e., the cultural genes of the Chinese nation, which have the significance in terms of China as method.  The combination of the two arrives at a new type of theoretical construct containing both Marxist guidance and the Chinese cultural standpoint.
 
In this regard, the role of Chinese civilization in the sinicization of Marxism is not just as national form which serves the Marxist content, it is itself an innate cultural gene, and as long as Chinese people apply Marxism on Chinese territory, they are bound to inherit this cultural gene, which itself constitutes a basic content, which combines with Marxism, another content, creating a new theory suitable to China’s national characteristics. "Marxism’s entry into China not only triggered profound changes in Chinese civilization, but Marxism itself also went through a process of gradual sinicization." Otherwise, the sinicization of Marxism would not possess its vigorous and exuberant vitality.
 
As Liang Shuming 梁漱溟 (1893-1988) said in his later years, "China's history of the last hundred years proves that complete Westernization' is not in line with China's national conditions, and its essence was to dismiss the fact that the characteristics of traditional Chinese culture have acted on the Chinese people yesterday and today, so naturally, ‘complete Westernization’ cannot work. Even the construction of socialism has to respect 'Chinese characteristics' in order to take root and blossom in China, a wise proposition much in line with traditional Chinese culture."
 

Xi Jinping's Cultural Gene Theory

Xi Jinping's cultural gene theory transcends the relationship between Marxism as content and Chinese civilization as form, and truly realizes the deep integration of Marxism and Chinese civilization, a marriage of two forms of content. Thus, Marxism and Chinese civilization are dialectically intertwined, constructing a new theoretical form for the sinicization of Marxism in the new era, and making an original contribution to the advancement of the sinicization of Marxism.
 
"Only by not forgetting history have we opened up the future, and only by accepting our heritage have we excelled at innovation. Only by keeping history in mind while moving toward the future, and only by preserving the people’s culture while charting future progress have we been able to undertake today’s great cause." From the day it was founded, the Communist Party of China has been both an active leader and practitioner of China's advanced culture and a faithful inheritor and promoter of China's excellent traditional culture.
 
During the Yan'an period, Mao Zedong emphasized that the Chinese Communists were Marxist historicists and attached importance to inheriting the cultural heritage from Confucius to Sun Yat-sen, which can be said to be our Party’s first cultural self-awareness. However, due to the domestic and international situation at that time and after the establishment of New China, the work of inheriting the cultural heritage was not carried out sufficiently and thoroughly. With the arrival of reform and opening, although the emphasis was on both material civilization and spiritual civilization, the central task conferred on us by history was nonetheless economic construction.
 
Hu Qiaomu once pointed out: "In the Yan’an period, Comrade Mao Zedong proposed to study China's history and culture in a systematic manner, but it was not done. We cannot blame our predecessors, because the proper conditions did not exist at the time.  After liberation, although the conditions existed, it is sad to say that the efforts we should have undertaken were done poorly. There was no great concentration of effort focused in-depth exploration, so this task is for the present and the future, and there is still a long way to go."
 
Entering the new era, Xi Jinping stood at the strategic height of the revival of Chinese civilization and put forward his important argument concerning cultural confidence, calmly displaying the historical and cultural outlook of a great Party, a great country, and a great nation. "Culture is the soul of a country and a people. History and the present both illustrate that a nation that abandons or betrays its history and culture cannot develop, but is likely to live a historical tragedy. Cultural self-confidence is a more basic, broader and deeper self-confidence, a more fundamental, deeper and more lasting strength."  Thus, re-examining Chinese civilization as a cultural gene and focusing on the cultural role of a great Party and a great country have become the cultural mission conferred on the Chinese Communists by history and the present era.
 
Of course, what must be made clear here that an approach that takes China as both center and method is not blindly self-confident, something that will lead us once again close to close our doors and isolate China from the world. The new century, and especially the past few years, has seen an undercurrent of counter-globalization, but China will not close its doors, and instead will only open them wider and wider! Whether in terms of China’s ancient civilization or the advanced West, today's China is able to maintain the rationality and the calm confidence of a great nation.
 
Looking back at the intellectual development of China over the past hundred years, it is true that China's old ideological weapons were clearly obsolete, and China clearly lagged behind world trends after the Industrial Revolution. Although all the movements to emulate the West since the Opium War have taken the West as method, even producing extreme trends such as complete Westernization and complete Sovietization, this was the inevitable path by which a late-developing country catches up. Some scholars call this Western-centered attitude a "defensive mentality."
 
The wanton aggression of the imperialist West in modern times has indeed brought much suffering to the Chinese nation. However, as the representative of advanced productive forces following the Industrial Revolution, the West has also opened China’s eyes, and the introduction of Western advanced techniques has also allowed China to catch up rapidly. In particular, Marxism, which emerged in the West and was strongly critical of Western capitalism, was studied and mastered by the Chinese, enabling them to renew themselves by changing their spirit from passive to active.  Through the continuous efforts of progressive Chinese in recent times, especially the Chinese Communist Party and the continuous efforts and exploration from Mao Zedong down to Xi Jinping, and through the synthesis of the Hegelian dialectic, they have tried to return to an approach where China will be both center and method. 
 
But this is not a return to the traditional, pre-Opium War concept—including the distinction between Chinese and barbarian—of China as center and method, but rather the reshaping of Chinese agency and the Chinese spirit after more than a hundred years of loss of cultural confidence, like a phoenix rising from the ashes. Neither China as center nor China as method will be a narrowly regional, traditional, old-fashioned, or nationalistic China.  Instead, it will be a more inclusive China that has survived imperialist aggression and seeks to rejuvenate, knowing that China’s development and progress cannot be separated from the world.
 
This China can neither blindly restore its past to rest in ignorance and the rejection of others, and recognizes the necessity of learning form others even while focusing on the national subject.  “Guided by Marxism, and faithful to the standpoint of Chinese culture,” we will apply lessons from the past and from abroad to China’s needs, not forgetting our roots but absorbing things from the outside, looking ever toward the future.  China's path is not created out of nothing, nor is it like the Monkey King who suddenly evolved out of a stone.[13]  Instead, we need to reposition this path in the historical perspective of the ancient and modern civilizations of China and the West, subject it to objective and rational self-examination, so that the understanding of China's path becomes more rich and profound, the future development of China's path more confident!
 
As one scholar said, "I don't think our path is one that only China can follow, because a path that China can truly follow, must be a path that is acceptable to human beings throughout the world, and the path we are following now should be a path that all humanity may need in the future." With China as center and China as method, this is the civilizational self-awareness and cultural self-confidence of the Chinese nation after a century of cultural sorrow, and moreover, it is the reshaping and return of the spirit of Chinese agency, which is methodologically meaningful in our consideration of the Chinese path, and also seeks to step towards the creation of truth and the renewal of human civilization.

Zhang Cheng is a young professor in the history section of the Central Party School in Beijing.  Introduction and Notes can be found at Reading the China Dream.

BRI Alternative?

Optimizing Your China Profits through Intercompany Royalty Payments 

By Chris Devonshire-Ellis : Optimizing Your China Profits

 
The benefits and tax implications behind intercompany royalty payments in China as a profit repatriation strategy for multinational companies.

With the progressive introduction of marketization, many multinational corporations have chosen to set up subsidiaries in the Chinese mainland. However, given China’s strict foreign exchange control regime, repatriating cash from the subsidiaries has always been a challenging issue. Businesspeople should understand and develop a profit repatriation strategy to ensure their access to the profit earned.

There are several ways to repatriate cash. The most common way is direct remittance of dividends, yet this method is subject to certain prerequisites and constraints. Intercompany payments, such as charging service fees or royalties, offer an alternative with some advantages. The latter method has no limit on the number of remittances in a year, nor restrictions on cumulative profit, which is simpler and more tax efficient.

This article discusses one type of intercompany payments – royalties (which refer to the payments for the use of, or the right to use intangible assets, such as technical know-how, trademark, design or model, secret formula, or process, etc.) It introduces you to the tax implication, tax benefits under a double tax avoidance agreement (DTA), and what needs to be considered before making royalty payments.
 

Tax implications

To give you a better understanding on the tax implication of intercompany payments of royalties, we will use a simple case:

A wholly foreign-owned enterprise (WFOE) is a value-added tax (VAT) general taxpayer in China. It pays RMB 106 as royalties to its overseas related company.
If we look at the transaction from a group level, the tax burden caused by intercompany royalties will be less than the total taxes the overseas related company paid. As WFOE is a VAT general taxpayer, the VAT it withheld for the overseas related company could be used to reduce its own VAT payable and the royalties paid could be deducted before its corporate income tax (CIT), if such expense is qualified as a deductible expense. Thus, there is a great chance that royalty payment is more tax efficient than dividend repatriation.

However, the DTA benefit is not automatically applicable. The WFOE and the applicant (the overseas related company which the royalties are paid to) need to satisfy certain qualifications and go through relevant procedures to obtain the benefits. Among those, “beneficial owner” is one of the basic concepts that is important when applying for DTA treatments on royalties.

Beneficial owner refers to an individual, company, or any other group having the ownership and right of control over the income or the right or property that the income is derived from.

To determine the beneficial owner status of an applicant, a comprehensive analysis should be carried out, taking into account the actual conditions of the specific case. Among others, there are some factors being regarded as “unfavorable” during the beneficial owner assessment stipulated by the Announcement of State Administration of Taxation (SAT) on Issues Relating to Beneficial Owner in Tax Treaties (SAT Announcement [2018] No. 9).
  • The applicant is obligated to pay 50 percent or more of the income to a resident of a third country (region) within 12 months from receipt of the income (“Obligated” shall include agreed obligations and de facto payment even though there is no agreed obligation).
  • The business activities undertaken by the applicant do not constitute substantive business activities.
  • The counterparty country (region) of the tax agreement does not levy tax or exempts tax on the relevant income, or the actual levy rate is very low.
  • Aside from contracts for the transfer of copyrights, patents, proprietary technologies, and other usage rights based upon which royalties are derived and paid, there exist contracts between the applicant and a third party pertaining to the transfer of copyrights, patents, proprietary technologies, and other usage rights or ownership.
The payee of the royalties needs to determine whether it qualifies for the DTA benefits and make record-filing to enjoy the preferential tax rates. The tax bureau will conduct post supervision and management on the royalty payment.
 

Concerns and Dezan Shira's Opinion

With the advantages partly mentioned above, intercompany royalties, as a tool for avoiding tax and shifting profit, are easily subject to special scrutiny by tax authorities.

When signing an intercompany royalty contract, the company would better take the below-listed particulars into consideration to make sure the royalty payment is compliant with tax regulations:
  • Whether such transaction will be beneficial to the WFOE that could bring economic benefits to it.
  • Whether the pricing complies with the arm’s length principle that the economic benefit the WFOE gained from the licensing of intangible assets is comparable to the transactions that non-related parties concluded under identical or similar circumstances.
  • Whether the payee of royalties performed relevant function and bore corresponding risks in the forming and use of the intangible assets, and the royalties are charged based on the payee’s contributions to the value of the intangible assets.
  • Whether the royalties derived from licensing of intangible assets match the economic benefits brought by using the intangible assets to WFOE.
  • Whether the value of the licensed intangible assets has changed during the years and the intercompany royalties are adjusted accordingly.

Chris Devonshire-Ellis is the Founding Partner of Dezan Shira & Associates. The practice was established in 1992, has 13 offices throughout China and advises foreign investors on their legal, tax and operational compliance and best practice management. Contact: china@dezshira.com or visit www.dezshira.com 

Interdependence?

BOOKS

From Tea to Coffee

Isabella Weber discusses, among other things, how China escaped shock therapy and the Big Bang, and created, or stumbled upon, its own way to economic growth. 

Weber mentions only in passing that China also escaped another possible calamity: the debt trap. That threat loomed around 1978 when Hua Guofeng wanted to relaunch the economy by using the East European approach to economic growth. Weber writes about the Chinese economic delegations that went to Hungary and Yugoslavia in 1988 to discuss the experience of reforms in these two countries; they came back with a fairly negative assessment, based on anemic growth performance and high inflation in these countries. But, I surmise, they might have also come back with a cautionary tale of not falling into the debt trap.

Thus it is worth surveying more closely how Yugoslavia, Romania, Poland, and Hungary, all independently engaged in the 1970s, after the oil shock and when the petro-dollars were plentiful, into large-scale borrowing from both public and private sources in the West. The borrowing responded to the desire to accelerate growth, the process that also motivated economic reforms in Yugoslavia in 1965, Hungary in 1968, and change of government in Poland in 1970 after the Gdansk riots. The idea the reformers had in mind was to borrow from the West, use the funds to build either import-substitution industries (as was indeed done in most of the world those days), or hard-currency-earning export-oriented production. In either case, they hoped, borrowings would pay  for itself. Countries would either save money they were spending on hard-currency imports by producing the “stuff” at home, or they would became exporters to the West. (Poland had its program under Gierek most clearly defined.) 

In addition, borrowing was politically preferable to trying to lure foreign (Western) investors. When you borrow, you obviously retain full control over the use of such money; one can choose to fulfill other objectives like to help development of poorer regions, to garner political support, or even to use the funds for consumption. With foreign investors, one is limited to accept what they like. 

That logic led, as is well known, all socialist countries into impasse. Their investments were inefficient, new companies became a burden. (There is a very nice book on the most wasteful Yugoslav investments of the period, published in 1990, that I read then and still keep on my shelf. It is called, in English translation, “Among the ruins of wasted investments” by Ratko Bošković). Thus, the rate of return on the money borrowed was lower than the rate of interest countries were paying on their Western loans. It is not impossible, I think, that the rate of return might have even been negative. In any case, it means that all socialist countries that went on a borrowing spree in the seventies, suddenly had, when the US and world interest rates increased following the Volcker shock, to transfer significant percentage of their GDP abroad.
(Volcker, it could be argued, thus ended socialism in these countries. Of course, this is a somewhat facetious comment—because what ended socialism was, among other things, that investments were inefficient. The Volcker shock just made that plain.)

The inability to service debt manifested itself in different, but related ways. In Yugoslavia, it led to massive borrowing from the IMF. The IMF loan to Yugoslavia in 1981 was the largest loan that the IMF had even given by that point in time. This, to a country of 20 million people! But Yugoslavia was strategically important for the West. (One needs to remember that the loan came at the height of the Cold War tensions, about a year after the invasion of Afghanistan which made the strategic importance of Yugoslavia even greater. The West always thought that the Soviets are praying on Yugoslavia to bring it back into the fold.) Although the West was not willing to forgive the previous commercial loans, it was willing to help (or “help”) by opening the IMF spigots.Yugoslavia never succeeded to get out of the “debt trap”, and by mid-1980s, hyperinflation and high youth unemployment, together with the unsolvable Kosovo issue, moved the attention of the political elites toward nationalism. But there is, I think, little doubt that the economic catastrophe of the 1980s paved the way to it.

In Poland, the balance-of-payment crisis led to the attempts to impose austerity, which under conditions of perennially restless working class, created “Solidarity”, and brought in yet another change in government. (Gierek fell on the same test that brought him to power in 1970.) Poland imposed martial law in December 1981 and defaulted to the Paris Club. Although Poland was by 1986 member of the IMF and the World Bank it received no support from either of them. Technically, absence of lending was explained by its default status—but of course the true reason was political. The US was not going to bail out a communist regime that had just imposed a state of emergency, and banned a ten-million strong anti-communist union. In 1988, Poland tried another austerity program (“The price and income operation”) which was not very different from the Balcerowicz program a year later. But it foundered on the workers’ unwillingness to accept wage cuts. The Round Table talks were supposed to solve the impasse, and they did  by (rather unexpectedly) replacing communist party in the government, opening the way to the rescheduling of the Polish debt, and to the implementation of the Balcerowicz program.  

  In Romania, the debt crisis led to Ceausescu deciding to go on a crash course of foreign debt repayment—in order to forever be rid of foreign economic meddling. He imposed incredibly austere measures, including draconian cuts in electricity, reduction in the availability of food etc. In 1989, Ceausescu cut a lonely figure in Europe and was overthrown in a coup.  

Hungary limped along with low growth and permanent balance of payment issues, without even being in default, or even rescheduling its debt. (Some Hungarians used to complain that, after 1989, Poland got some 65% of its debt forgiven, while Hungary had to pay back everything). The change of regime ensued in Hungary as well.

China, however, avoided all of this, perhaps by sheer luck of being a late reformer and seeing where borrowing without a change in the structure of economic governance led. It escaped the Big Bang too, having come, as Weber details, three times within the hair’s breath to implementing it. Unlike the crackdown in Poland which left Jaruzelski in a limbo, the 1989 Tiananmen violence ironically shifted the energies away from political change into economic development. When Deng made his famous “Southern tour” in 1992 (which he made as, technically, a private citizen) China was ready to embrace the other way: to attract foreign and diaspora investments, to acquire foreign technology, and to emulate the East Asian “miracle” economies.

The story told here is important for two reasons. First, in understanding the sources of Chinese success that were not planned, but the product of a number of serendipitous developments. Second, to make us understand that the main impetus behind the fall of communist regimes was economic. Western political scientists  love to write about “freedom” and “the spirit of 1989” etc. They often do not know much about communist economics, nor do they have a grasp about how inefficient economies, and a desire to reform them using Western credits, created a powerful combustion that, rather quickly (within less than a decade), broke the back of communism.  Amazon.

Why China Leads the World

 
The first–and only–book to explain the three elements of China's success: 
  1. Talent at the Top: Only the brightest, most idealistic people are are admitted to politics–a policy unchanged in 2200 years.
  2. Data in the Middle: policies are implemented, tracked, and optimized based on terabytes of data. The PRC is the world's largest consumer of public surveys.
  3. Democracy at the Bottom: ordinary people, all unpaid amateurs, assemble twice a year to check the stats and sign off on new legislation. Policies need a minimum of 66% support to become law. That's why 95% of Chinese say the country is on the right track.
The proof? There are more hungry children, more poor, homeless, drug addicted, and imprisoned people in America than in China.  

Why China Leads the World
investigates why the epidemic accelerated the change of global leadership from America to China and examines China’s bigger, steadier economy, its science leadership, stronger military, more powerful allies, and wider international support.

Crammed with charts, footnotes, and lengthy quotes, Why China Leads the World is a profoundly disturbing book that helps readers understand the tectonic shift and adapt to this new era–and even thrive in it.
***
The size of China's displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world. Lee Kuan Yew: The Future of US-China Relations. The Atlantic.  
***
The Coronavirus accelerated the pace of change of global leadership from America to China. There are now more hungry children, more poor, homeless, drug addicted, and imprisoned people in America than in China. 

Suddenly, China's larger, steadier economy, its leadership in science, its stronger military, more powerful allies, and wider international support have handed it a lead that widens every day.  Crammed with direct quotes from its movers and shakers, charts, and footnotes, Why China Leads the World tells a remarkable tale, explains a tectonic shift, and helps you adapt to this new era, and even thrive in it. 
 ***
If we could just be China for one day we could actually authorize the right decisions. Thomas L. Friedman. The New York Times  

300 pages, 27 charts and graphs. $9.99 on Amazon and in bookstores worldwide.

The ISC Report

The ISC (Needham) Report


The Report of the International Scientific Commission for the Investigation of Facts Concerning Bacteriological Warfare in Korea and China (the ISC report), published at the height of the Korean War, validated claims by North Korea and China that the US had launched bacteriological warfare (biological warfare, BW) attacks against both troops and civilian targets in those two countries over a period of several months in 1952.
   

The most vilified document of the 20th Century.

The report’s release in September, 1952, brought a withering international attack. It was roundly denounced by American and British politicians of the highest rank, ridiculed by four star generals, accused of fraud by celebrated pundits, misquoted by notable scientists, and scorned by a compliant Western press. Charges were made against the quality and truthfulness of its science. Its “unstated” political agenda was denounced. The ethics of interviewing captured US pilots was excoriated and its authors were publicly flayed as communist dupes. The report was red baited in the US halls of Congress and deemed unpatriotic to read, and therefore went unread and deliberately forgotten over the years, which has been the fate of Korean War history in general. In subsequent decades, volumes placed in American university library collections were quietly and permanently removed from circulation.
   
When the rare copy came up for auction, it was discretely purchased and disappeared from public view. This critical 67 year old truth commission document from the Korean War was slipping towards oblivion. For these very reasons, historians and truth seekers should exalt the wondrous rebirth of the ISC Report from near extinction with the publication of this new electronic edition. We welcome the sunshine that re-publication brings to a shadowy and suppressed chapter of American Cold War history. (from the introduction by Thomas Powell) 800 pages.  $9.99.

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