Noteworthy Links (October 2020)

A Plenum, a Plan… and a Paramount Leader?
(China Digital Times, 10/29/2020, Joseph Brouwer)

What to Expect from China’s New Five-Year Plan
(Rhodium Group, 10/26/2020, Vincent Zhu)

China Wants a Baby Boom. Its Parents Aren’t Interested
(Sixth Tone, 10/24/2020, Wang Lianzhang)

China’s Top Finance Regulators Send Raft of Policy Signals at 2020 Financial Street Forum
(China Banking News, 10/22/2020)

As China recovers from the pandemic, will zombie firms return?
(Peterson Institute for International Economics, China Economic Watch, 10/21/2020, Tianlei Huang)

CCTV Airs Disappeared Taiwan Citizens’ Confessions, War Games
(China Digital Times, 10/15/2020, Joseph Brouwer)

5 takeaways from Xi Jinping’s speech during 40th anniversary visit to Shenzhen
(South China Morning Post, 10/14/2020, Holly Chik)

Behind Xi Jinping’s Steely Façade, a Leadership Crisis Is Smoldering in China
(The Diplomat, 10/9/2020, Sarah Cook)

Mixed Signals on China’s Energy Picture?

If you think understanding China’s energy future is difficult, it may not be you…

Coal on the rise in China, US, India after major 2016 drop                        (Matthew Brown and Katy Daigle, AP, 06.26.2017)

China energy demand may already have peaked: researchers
(David Stanway and Alister Doyle, Reuters, 06.30.2017)

To be fair, the AP article focuses on domestic Chinese coal production, finding:

China’s production rose more than 4 percent through May, according to government figures, compared to a drop of more than 8 percent for the same period a year earlier.

while the Reuters article focuses on China’s total energy consumption, noting that, according to a study by the China Academy of Social Sciences (CASS):

China’s total energy consumption is expected to fall to the equivalent of 4 billion tonnes of standard coal in 2020, which would represent a decline of 8 percent from last year.

The Reuters article also quotes Qiang Liu, director of CASS’s Institute of Quantitative and Technical Economics, as saying:

“(Peak demand) could be this year or next year”

Of course, the Reuters article goes on to say:

The CASS study suggests Beijing is cutting coal use far faster than expected

which does bring the subject of coal directly into the article, at least in terms of consumption, if not production.

Perhaps CASS is just wrong?

As Reuters notes, the study comes weeks after President Trump decided to quit the Paris agreement on climate change and ahead of the July 7-8 Group of 20 summit in Hamburg, Germany.

Moreover, according to Reuters:

The CASS forecast contrasts with China’s 2016-2020 energy plan that said total energy use would grow around 2.5 percent a year until 2020 and a forecast by state-owned China National Petroleum Corp for energy consumption to peak by 2035.

Is there anything else that could explain the seeming divergence between trends in domestic Chinese coal production and consumption?


Don’t fight China, the Federal Reserve of Coal
(Nathaniel Taplin, WSJ, 06.29.2017)

According to the Taplin article, China – far and away the world’s largest producer and user of coal – has been struggling with excess capacity at home for nearly half a decade, and:

China is now poised to curtail coal imports

in particular:

Chinese state-owned media said Wednesday that many of China’s small or midsize ports were already refusing imported coal shipments, although major ports appear to still be open.

The rationale:

State media said regulators want any benefit from its “supply side reforms” – that is supply curbs – to remain in China.  Translation: higher coal prices and profits at home, not abroad.

Now, if the decline in coal imports were large enough, it is possible that domestic coal production could increase even as overall coal consumption fell.

Is that what’s going on?  Who knows.  An increase in domestic coal production coupled with flat or declining coal consumption is also consistent with an increase in domestic coal inventories.

They say patience is a virtue; so stay tuned, and in time, maybe we’ll learn more.


Mixed Signals on China’s Energy Picture?


Where will the vehicle that replaces today’s gasoline/diesel powered automobile come from?

One way to think about this question is to evaluate possible replacement technologies, pick a favorite, and figure out which countries around the world seem to be making the most progress effectively developing the technology. There’s nothing wrong with such an approach. In fact, it seems pretty sensible.

That said, this essay takes a slightly different approach to gaze into the future. Instead of trying to understand specific technologies, this note tries to consider some institutional constraints that may make it more challenging for certain economies to become the location of such dramatic innovation.

What kinds of economies seem like they may be fertile environments for vehicle innovation? What kinds of economies seem less likely to be locations for dramatic vehicle innovation?

This note suggests the following:

(1) economies that are known for being innovative are more likely to be the location of dramatic vehicle innovation than those that are not known for their innovation.

(2) all other things being equal, larger countries are more likely to be the site of a particular innovation than smaller countries.

(3) already having some vehicle production in the country is a plus, because the advantage of having some familiarity with the non-engine aspects of vehicles outweighs the potential disadvantage of having current producers slow down the adoption of a new vehicle platform.

(4) having some degree of a car culture is helpful

(5) to the degree that the development of a new vehicle to replace current gasoline/diesel powered automobiles requires a concerted national effort, then countries that have no oil production are less likely to be conflicted (and so, more likely to be the site of such vehicle innovation) than those that are oil producers.

If one is willing, at least for a moment, to entertain the above notions, what countries look most promising?

To answer this question, it is helpful to have some data. This note considers the five points above as follows:

To measure a country’s general degree of innovativeness (point #1), this essay uses the World Economic Forum’s innovation index as found in its 2015-2016 Global Competitiveness Report.

To measure a country’s size (point #2), this essay uses July 2015 population estimates from the World Factbook.

To determine the amount of vehicle production in a country (point #3), this essay uses 2015 statistics from OICA (the Organisation Internationale des Constructeurs d’Automobiles).

To proxy the depth of a country’s car culture (point #4), this essay looks at the number of motor vehicles per 1000 people in different countries around the world based on data found in the Wikipedia entry “List of countries by vehicles per capita”, much of which appears to come from 2010-2011 World Bank data.

To determine the relative importance of oil production to a country (point #5), this essay looks at the ratio of a country’s production of crude oil, NGPL (natural gas plant liquids), and other liquids divided by its total petroleum consumption based on 2013 data from the U.S. Energy Information Agency (EIA).

Looking at the twenty most innovative countries in the world as per the Global Competitiveness Report along with all major vehicle producing countries (those producing at least a million vehicles in 2015), we find the following (please see Table 1. Country Information).

Using the criteria noted above, the most promising locations for the development of a vehicle that will replace today’s gasoline/diesel powered automobiles appear to be Japan and Germany. After that, France and South Korea also look like possibilities.

Japan and Germany are both innovative (the 5th and 6th most innovative economies in the world according to the WEF’s Global Competitiveness Report), large (populations of more than 120 million and 80 million respectively), are already substantial vehicle producers (having made over 9 million and 6 million vehicles respectively in 2015), have reasonable consumer appreciation for cars (roughly 588 motor vehicles per 1000 individuals), and very modest oil production (0.4% and 4.1% of total petroleum consumption respectively).

France and South Korea are similar in many respects, just not as large (with populations of 66 million and 49 million respectively) and perhaps not quite as innovative (the 18th and 19th most innovative economies). They also produce fewer vehicles (1.97 million and 4.56 million vehicles respectively) and have slightly lower vehicle densities (578 and 450 vehicles per 1000 individuals). That said, oil production is similarly modest (with domestic production meeting 1.5% of France’s total consumption and 0.9% of South Korea’s total consumption).

While Switzerland is ranked as the world’s most innovative country, it is ultimately small (population of only 8 million) and does not produce motor vehicles. Israel (the Global Competitiveness Report’s 3rd most innovative economy) shares a similar profile.

Now, if it turns out that the existence of a sizable domestic motor vehicle industry is, in fact, a hindrance to developing a replacement for today’s vehicles, then Switzerland and Israel look pretty good (as long as size is not so important). That said, if the truth is somewhere in between (i.e. it’s helpful to have some motor vehicle production, as long as the domestic industry is not too big), then Finland may be a reasonable bet (2nd most innovative economy, 69,000 vehicles produced in 2015, population of 5.4 million), or if Finland is just too small, then perhaps the Netherlands (8th most innovative country, 44,000 vehicles produced in 2015, population of 16.9 million) or Taiwan (11th most innovative country, 351,000 vehicles produced, population of 23.4 million).

While, in many ways, the United States (4th most innovative country, population of more than 320 million, more than 12 million vehicles produced in 2015, roughly 809 motor vehicles per 1000 individuals) looks at least as promising as Germany or Japan – in fact its scores on all of the measures just noted are higher than those of both Germany and Japan – the United States has a potential problem in terms of unity of effort. If the development of a replacement for today’s gasoline/diesel powered vehicles requires a concerted national effort, then the existence of a pretty substantial domestic oil industry (in 2013, domestic production represented about 59% of total consumption) may present a challenge.

That said, one shouldn’t count the U.S. out. There is a lot of wealth in the United States, and if a solution is amenable to individual effort and all that is needed is an eccentric billionaire with a vision, then the U.S. may just be the site of such innovation. Heck, if Elon Musk is right, the future may already be here.




Contemplating a New Era in Taiwan

On January 16th, 2016, voters across Taiwan went to the polls to elect a new President, and by the end, the Democratic Progressive Party’s candidate, Tsai Ing-wen, had emerged victorious, capturing over 56% of the vote (Eric Chu, the Kuomintang’s candidate, came in second with 31% of the vote). On that day, voters also elected a new legislature, and for the first time ever, the Democratic Progressive Party (DPP) also obtained a majority of seats there as well (68 out of 113).

With the election having been nearly two months ago, this may seem like an odd time to be writing about Taiwanese politics. That said, by a quirk in Taiwan’s political calendar, Tsai Ing-wen will not take over as President until May 20th (in contrast, the new legislature was sworn in on February 1st). Politically speaking, then, we appear to be in a period of unusual calm (where Ma Ying-jeou, Taiwan’s incumbent President, has almost no mandate to act, while Tsai Ing-wen, Taiwan’s President-elect, has no ability to do). As a period of calmness can often be a good environment for reflection, it seems like this then may be a good time to consider Taiwan and its political development.

In thinking about Taiwan, a prominent notion has been that of a Taiwan miracle. For many, the Taiwan miracle consists of two parts, an economic miracle and a political miracle. The economic aspect of Taiwan’s miracle is often understood in terms of “growth with equity.” Not only has Taiwan’s economy seen a sustained period of fast growth over multiple decades, but the economy has grown without seeing a substantial uptick in economic inequality. On the political side, Taiwan has undergone a remarkably peaceful transition from what was essentially an authoritarian, one party dictatorship to a vibrant multiparty democracy.

Over the years, there has been no shortage of those proclaiming a Taiwanese miracle in political and economic spheres (Fei, Ranis, and Kuo, 1979; Kuo, Ranis, and Fei, 1981; Gold, 1986; Copper, 1997), and on the political side, we can find something distinctive about nearly every presidential election in Taiwan since the island’s first direct, popular election in 1996.

Not only was the 1996 election the first, but Lee’s win was also the most lopsided to date (the gap between Lee and Peng Ming-min, the next largest vote getter, was over 32 percentage points). His victory was also the most broad based (he won 24 of 25 regions).

While voter turnout was good in 1996 (76% voter turnout rate), it was even better in the 2000 election (voter turnout rate of 82.7%), with the 2000 number seemingly representing a high water mark for voter turnout for Taiwanese elections. Similarly, if the 1996 election represents Taiwan’s most lopsided presidential election, the 2004 election represents Taiwan’s closest presidential election to date, with just 29,000 votes (about 0.2 percentage points) separating the winner and runner up.

In comparison, the 2008 election presents a stark contrast to the 2004 event. In 2008, not only did KMT candidate Ma Ying-jeou receive more votes (7,659,014) than any other candidate before or since, he also received the highest percentage of votes (58.4%) of any candidate ever.

Relative to that, the 2012 election was a somewhat sedate affair, most notable perhaps in that it represented the worst showing by third parties in any election in which there were candidates from more than two parties running (James Soong received a mere 2.8% of all votes cast). While there have been times when third party candidates have done even worse (e.g. Li Ao and Hsu Hsin-liang in 2000), looking across all elections where voters have had a non-KMT, non-DPP choice, 2012 represents a low mark in the election performance of non-KMT, non-DPP candidates.

Finally, while it is undoubtedly true that Tsai Ing-wen did well in the most recent election – second highest percent of votes received (56.1%), second most broad based victory (18 of 22 regions) – it is also true that, coming in at 66.3%, voter turnout was the lowest to date, continuing a slide that began in 2004 (80.3% voter turnout versus a turnout of 82.7% in 2000) and has yet to reverse itself (turnout was 76.3% in 2008 and 74.4% in 2012 respectively).

Of course, not all significant events in a country’s democratic evolution are observable in election results. The founding of the DPP on September 28, 1986, and Chiang Ching-kuo’s willingness to let it persist, the rise of Lee Teng-hui as leader of country and Kuomintang (KMT) after the death of Chiang Ching-kuo – none of these events were related to broad based elections, but they were fundamental to Taiwan’s political development.

That being said, several elections do seem to have served as markers of Taiwan’s political maturity. In particular, as the first direct election of a President, Lee Teng-hui’s victory in Taiwan’s 1996 election was a watershed moment. Similarly, in bringing an opposition candidate in as President for the first time, Chen Shui-bian’s victory in 2000 was also notable.

Of course, it has been said that all good things must come to an end. With many of the conditions that gave rise to Taiwan’s economic miracle having played themselves out and Taiwan’s economic growth having become increasingly erratic, use of the miracle narrative for understanding Taiwan’s economic circumstances today is misleading.

It is therefore tempting – from the perspective of symmetry, if nothing else – to want to call an end to Taiwan’s political miracle as well (or, if that seems too severe, then to decide that, with Taiwan’s political system having arrived, there is nothing more to observe – “Yes, it’s a democracy. Nothing to see here. Move along…”) On top of that, with the Taiwan miracle having been proclaimed so often, there seems to be little force in announcing it once again.


When the traditional ruling party of a country finds itself completely out of power and wandering in the wilderness, yet still manages to conduct itself with grace and dignity, and in so doing, allows the country to prosper – that truly is a miracle! Taiwan’s economic miracle may be over, and as a result, Taiwan may have to grope forward into an uncertain future just as most other developed economies do. Taiwan’s political miracle, however, is about to enter a new phase. There is no guarantee that all will go smoothly, but still, we can hope. The miracle is over. Long live the miracle!



Copper, John Franklin (1997) The Taiwan political miracle: essays on political development, elections, and foreign relations. Lanham: East Asia Research Institute, University Press of America.

Fei, John C. H., Gustav Ranis, and Shirley W. Y. Kuo. (1979) Growth with Equity: The Taiwan Case. New York: Oxford University Press.

Gold, Thomas B. (1986) State and Society in the Taiwan Miracle. Armonk, NY: M. E. Sharpe.

Kuo, Shirley W. Y., Gustav Ranis, and John C. H. Fei (1981) The Taiwan Success Story: Rapid Growth with Improved Distribution in the Republic of China, 1952-1979. Boulder, CO: Westview Press.


Contemplating a New Era in Taiwan