Paul Krugman Says Defense Is More Important than Opulence

He says that control of oil resources, possibly very scarce in the future, is more important than the value of the Chinese Communist Party as an agency of corporate control. As I read Paul, he says that if we did not need Chinese help on North Korea and if we were not very vulnerable to a cut-off of capital inflows, then it would be a no-brainer. In fact, he says, it's a close call. But he still would argue against allowing the Chinese bid for Unocal on the grounds that there are possible future states of the world in which control of oil flows will turn out to be very important indeed.

But we do need Chinese help on North Korea, and we are very vulnerable to a cut-off of capital inflows

The Chinese Challenge - New York Times : Maytag is a piece of American business history, [but] it isn't a prestige buy for Haier, the Chinese appliance manufacturer. Instead, it's a reasonable way to acquire a brand name and a distribution network to serve Haier's growing manufacturing capability.... Maytag's stockholders will gain, and the company will probably shed fewer American workers under Chinese ownership than it would have otherwise....

The more important difference from Japan's investment is that China, unlike Japan, really does seem to be emerging as America's strategic rival and a competitor for scarce resources - which makes last week's other big Chinese offer more than just a business proposition.

The China National Offshore Oil Corporation, a company that is 70 percent owned by the Chinese government, is seeking to acquire control of Unocal, an energy company with global reach. In particular, Unocal has a history -- oddly ignored in much reporting on the Chinese offer -- of doing business with problematic regimes in difficult places, including the Burmese junta and the Taliban....

Unocal sounds, in other words, like exactly the kind of company the Chinese government might want to control if it envisions a sort of "great game" in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.) So the Unocal story gains extra resonance from the latest surge in oil prices.

If it were up to me, I'd block the Chinese bid for Unocal. But it would be a lot easier to take that position if the United States weren't so dependent on China right now, not just to buy our I.O.U.'s, but to help us deal with North Korea now that our military is bogged down in Iraq.

Comments

[Steve Carr]

Very disappointed in this post. Krugman's piece was precisely the kind of mercantilist posturing that he once was so hard on, and that you're presumably opposed to, and you've given him a complete pass. I'm also baffled by the logic here: "control of oil flows"? In what sense does the United States control the oil and natural gas that Unocal owns -- much of which is not located anywhere near the U.S.? The only future state of the world in which Krugman's view makes sense is a world in which the United States has nationalized big oil companies, appropriating their reserves and selling them to Americans, and necessarily defending those reserves in battle. If that is what the future looks like, we'll have a lot more to worry about than whether CNOOC owns Unocal. And in the meantime we're betraying our commitment to free trade, interfering with the free flow of capital, denying Unocal shareholders the right to dispose of their property the way they wish, dictating who can and cannot own a company, and telling the Chinese that we regard them as an enemy, not a partner. Even if we weren't reliant on the Chinese for a dime in capital inflows, that would be a horrible trade-off. Krugman is completely off in the gamma quadrant on this one.

[pgl]

Have you see the take from Alex Tabarrok (Marginal Revolution)? I ask as Alex's comments make a lot of sense to me as do the comments about this proposed sale from Max Sawicky and Kash (Angrybear).

[Randolph Fritz]

Well, duh.

Sometimes I think Krugman deserves an award for pointing out the obvious, and sometimes I wonder why he has to. For those of you who regard his remarks as "illiberal", please remember that trade economics is Krugman's field; he's not just talking through his hat. He's concerned with neo-mercantilism on the part of China and an appropriate response to it; it seems likely that China is, in fact, pursing a neo-mercantilist policy and while this is not, in the long run, a wise policy, "in the long run we are all dead" and "the market [or its players] can stay irrational longer than you [as a player] can stay solvent."

[Steve Carr]

There is no connection between the proper response to neo-mercantilism and the proper response to market irrationality. Krugman put it this way himself in 1994: "saying that we should be protectionists because other countries are is like saying that, because other countries have got rocky coasts, we should mine our own harbors. I mean, this is not a sensible policy. Just because there are some Japanese who do things- you've got to remember that the main victims of aggressive trade policies are your own citizens, not the foreign country."

[Chuck Roast]

"If it were up to me, I'd block the Chinese bid for Unocal."
Of course there is no military draft and Krugman's kid is not in line to stand before 1/3 of the world's population determined to obtain reliable energy resources. So, he can blithely toss-off this kind of foolishness.
At least we can say that the guy is consistent in his neo-liberal views, and continues to maintain that our trans-national capitalists are ever so trustworthy.
I wonder how many cars he owns?

[engels]

denying Unocal shareholders the right to dispose of their property the way they wish

Can you hear that? It's the world's tiniest violin playing just for the Unocal shareholders...

[Steve Carr]

What a surprising response from someone who goes by the name "Engels."

[sm]

How much oil could you buy for the cost of the Iraq war -- so far?

"Control of oil flows" my foot. The cost of the war will add to the inability of the United States to buy what it needs.

[Ian Whitchurch]

Even if this bid is blocked, CNOOC wont stop shopping - they want more reserves, are prepared to pay for them, and it's much easier to grow by acquisition than drill wildcats.

Personally, I'm expecting them to bid on ANWR, as and when it becomes available (nb Alaska sucks as an oil province ... apart from Prudhoe Bay, what big cats/elephants been found up there ?).

But if you block a bid for Unocal, do you block a cash bid for Apache, for Kerr-McGee or (in Australia's case) for Hardman ?

At the end of the day, CNOOC will find somewhere in the industry to spend their money. In the long term, it's probably better for them to grow organically than by acquisition, anyway.

[kharris]

Not to make too much of it, but folks around here were discussing Unocal in pretty much the same terms a few days ahead of the Krugman article. There is nothing remarkable about Krugman's argument, other than than it came from him. As it came from a staunch defender of trade, perhaps we ought to give Krugman's anti-trade position on Unocal a hearing.

China has, after all, been buying up timber, metal, and energy resources around the world. Under the trade rules that now prevail (most of the time) if ya hold a contract for delivery, ya get yer raw materials. We have reason to ask why China thinks that raw materials in other peoples countries are a better investment idea that productive capacity in China. Two possibilities come to mind. Chinese policy makers may not believe that they will have access to raw materials if they cross the US. We do, after all, have a record of interfering with trade for strategic reasons. On the other hand, Chinese policy makers may not care whether we would interfer, because their real intention is to stop playing by the present rules. They may intend to behave create vertical combines that result in raw materials being pulled out of world trade and directed straight to Chinese productive facilities. The only difference here is who gets to play the bad guy. The underlying assumption is that world trade rules are likely to change. The more Chine has before that change gets underway, the greater power China has to enforce the change.

[Steve Carr]

Why would it make a difference if they did create these "vertical combines"? The Chinese demand that had previously been met by part of the extant world supply would instead be met by the Chinese "vertical combine" supply. But that would mean the Chinese demand would be gone, which would mean that the rest of the world's supply would meet the rest of the world's demand. In other words, there would be no effect on the price of the resource. So why is it in our interests to stop them from playing the game they want to play?

[Ian Whitchurch]

They may also merely see buying the in-ground resource as cheaper than buying the production as and when it comes out of the ground.

I remember Rockefeller's comment about how surprised he was that the US steel industry didnt own it's own raw material sources, but preferred to buy coal and iron ore on the open market.

This might just be a feature of developing capitalism ... not instinctively trusting long dated futures contracts.

[George]

Taken from - http://www.alternet.org/envirohealth/23184/

Exponential Enrons Ahead

By Kelpie Wilson, TruthOut.org. Posted June 28, 2005.

A little-discussed section of the Bush energy bill will drive public
utilities out of business, letting oil giants like Halliburton
control your electricity.

One of the least-discussed provisions in the Bush energy bill that
has passed the House and is now fast-tracked in the Senate is PUHCA
repeal. "Pooka repeal," you say, "what's that?"

The Public Utilities Holding Company Act (PUHCA) is a cornerstone New
Deal financial reform signed into law in 1935. It was the biggest
battle in FDR's first term. Utilities had become cash cows for power
moguls who created complex holding company pyramids for milking ultra-
reliable ratepayer income to feed speculative investments. The crash
of 1929 knocked these structures flat and took down millions of small
investors who had been sold on the reliability of utilities as an
investment.

Does any of that sound familiar?

Both the House and Senate versions of the energy bill now contain the
PUHCA repeal provision. At the insistence of Democrats, the Senate
added in some extra oversight by FERC (Federal Energy Regulatory
Commission), but it is a thin reed compared to PUHCA.

Supporters of PUHCA point out that for 50 years, we have had
reliable, cheap electric power that has allowed strong economic
growth, and that no PUHCA-regulated energy holding company has ever
gone bankrupt. Furthermore, it was partial PUHCA repeals in the 1990s
that opened the door to Enron, Westar and other energy debacles. To
repeal PUHCA now is equivalent to blowing up the barn after the
horses have escaped, never mind shutting the barn door.

PUHCA subjects utility finances and operations to strict regulation
by the states and federal government. Most importantly, it restricts
ownership of utilities to public or private entities that are in the
business of producing power, and keeps speculators out. Replacing
this kind of control with mere oversight is a joke. It is like trying
to rebuild the barn with splinters.

Lynn Hargis is an attorney with a long professional career in power
generation, including ten years at FERC. For the past two years, she
has held a volunteer position at Public Citizen educating the public
about the perils of PUHCA repeal. She says that "it is clearly
impossible for a state (or even federal) utility commission, with its
limited staff, to review, much less understand and control, the books
and records of a huge conglomerate ..." Once PUHCA is gone, she
predicts, "there will be a white-hot fury of buying and selling
utilities and utility assets -- it will be a revival of the 1920s,
when three huge companies owned half of all utilities."

There has been a lot of media focus on the $18 billion in tax
incentives contained in the Senate energy bill, but almost nothing
about PUHCA repeal, even though the latter is by far the greatest
prize: according to Lynn Hargis the value of all regulated utilities
exceeds one trillion dollars.

Hargis says there will be so much money chasing these utilities that
even the venerable public-owned and municipal-owned utilities (PUDs
and MUDs) won't be able to hold out.

And get ready to start paying your power bill to Halliburton because
some of the companies best positioned to take advantage of this
deregulation are oil companies: "The top five oil companies now
control 50 percent of US oil production. If they also controlled
public utilities, they would be too powerful for any government to
regulate," said Hargis.

Also, the impact on renewable energy could be devastating. "If GE
owns your utility," Hargis told me, "nothing will be able to stop
them from shoving a nuclear plant down your throat. This will kill
renewables."

David Sokol is CEO of MidAmerican Energy Holdings Company, a
subsidiary of Warren Buffett's Berkshire Hathaway that is now in the
process of acquiring PacificCorp, a western utility based in
Portland, Oregon. In a 2002 issue of Electric Perspectives, an
industry newsletter, Sokol made the case for PUHCA repeal, calling
it "the most blatantly out-of-date energy law." In fact, the law as
it stands would prevent him from acquiring PacificCorp.

Sokol claims that: "Consumers have saved tens of billion of dollars
since Congress began the process of opening wholesale electricity
markets to competition 10 years ago." He also argues that by
restricting utility ownership, PUHCA is keeping new capital out of
the energy industry that is needed for upgrading the electric power
transmission grid.

I spoke with Jack Casazza, an electrical engineer who was a Senior VP
for an investor-owned utility and who now serves on a task force
investigating the power blackout of August 14, 2003. Casazza scoffs
at the idea that regulation is keeping needed grid upgrades from
happening. "Warren Buffett doesn't know what he's talking about," he
said, "and he doesn't have very good technical people. Utilities
today have no problem investing in transmission facilities if they
are needed and provide economic returns."

On the other hand, grid reliability is an issue of vital concern, and
labor is the key. Jim Spellane, communications director for the
International Brotherhood of Electrical Workers (IBEW), said that the
problem with grid reliability arose with deregulation in the
1990s. "It squeezed things like maintenance and worker training."

Casazza echoed that opinion and said that one significant cause of
the 2003 blackout was labor reductions. He wondered how Warren
Buffett "would get the 25 percent rates of return he is used to. He
can't cut labor, that's already been cut."

The IBEW issued a statement on June 15 praising the Senate Energy
Committee for including the new FERC authority in the bill, while
recognizing that the greater regulatory powers of PUHCA were still
needed. The union had flatly opposed any PUHCA repeal in the past,
but Spellane said, "We could see this energy bill has legs. It is
going to pass and we want to make sure that the FERC oversight does
not get stripped out along the way." House Republicans are against
even that minimum amount of consumer protection and Spellane said the
IBEW will oppose the final bill if it does not include it.

Senator Ron Wyden was the only member of the Energy Committee who
voted against sending the bill to the Senate floor. A top reason
given for his dissatisfaction was repeal: "The bill also repeals the
Public Utility Holding Company Act (PUHCA) without providing adequate
safeguards to prevent captive ratepayers from getting fleeced to
support unregulated businesses of utility parent companies."

Jack Casazza is wistful for the utilities of the past. "I'm a
believer in capitalism," he said, "and I believe in getting a
reasonable return on my investment. But the company I came up in
believed that you don't hurt the customer. I have grandchildren and I
want to see this country run so they benefit, not so Warren Buffett
can put money in his pocket."

Lynn Hargis fears we are headed for another Great Depression. She
said, "Not only is it going to be horrible for the whole country, but
nobody is even talking about it."

Kelpie Wilson is the environment editor of TruthOut.org.
>>>

[charles_utwater_ii]

Evidently some people have not yet mastered the concept that maximizing market efficiency is not the *only* value system in the world. Stakeholders who are harmed by increased market efficiency would be idiots not to defend their self-interest.

Nations often find they are stakeholders in issues, and recognize their determination to defend their self-interest in the face of market efficiency by declaring certain interests to be strategic. Oil happens to be one of those, one that the United States identified in 1940s.

Does it matter if the senior management of a company is of one nationality or another? Why, yes, as a matter of fact it does. Anyone familiar with the history of espionage would know that the nationality of companies does matter. The US government was able to do massive wiretapping in the prosecution of World War II and the Cold War precisely because the phone company was an *American* company. The British have recently been consternated by the fact that their nuclear missiles are serviced by an American company. Anyone minimally familiar with how Defense contracting works would know that there is concern about placing production of key components outside of American control.

Laissez faire markets are not identical to civilization, as some seem to think. Krugman is merely stating what Dick Cheney probably told the task force whose meeting's minute's he won't disclose. The fact that one of the usual suspects has to descend to cheap ad hominem betrays the intellectual bankruptcy of his position.

[elizabeth_a]

Just for fun, lets all imagine the US government or Exxon as its representative makes a bid for Total (French oil company)...

[me]

elizabeth, I am with you.

when my job was sent to India, too bad, isn't globilzation great?

Now, we have borrowed all this money from the Chinese, and now WE pretend to be in the dirvers seat and tell them how to spend it? We don't want India to buy gas from Iran. We don't want China to own an oil company with its assets is Asia.

Did anyone ever think that maybe China feels as threatened by having a US oil company own Asian oil assets in China's backyard. I mean, China buys this oil and not the US.

Like aI always said it depends on whose ox is gored. My job, nobody cares. Oil, everybody is upset.

Guess what folks, you thought globilization is great, not deal with it. Did you really think they would be satisfied with low paying T bills and low level manufacturing jobs? Too be we have exported our expertise and will have trouble catching up. Maybe India and China will start graduating petroleum engineers.

[George]

http://www.treas.gov/tic/mfh.txt

This gets updated monthly.

You can see that Japan's holdings are basically unchanged for the last
year. Japan holds the lion's share of US Govt. debt.

China quit making substantial accumulations about 6 months ago.

Hong Kong is roughly level for the last year.

(South) Korea quit accumulating about 6 months ago.

The big accumulations over the last few months have been from the UK
and "Carribean Banking Centers", which, I believe, effectively means
hedge funds, many of which conduct business in the Carribean due to
better (for them) laws.

So the statement that Asian countries have stopped buying new US debt
is justified.

[nate]

commodities over the last 150 years have not been as good of investment as stock equities? they may be somewhat inversely related, so there may be value in owning both. and commodities may have relatively brighter outlook during the next 10-20 years (see Roger's book "Hot Commodities...")

Owning equity of commodity companies does not necessarily equal owning commodities.

The Chinese bid is more than 10% higher than Chevron's bid, and it is a cash bid.

On jan 2005 unocal share price was just over $40 per share. today it is a little higher than $60 per share. This is around a 50% return in less than a year. I just did a quick estimatation, and this 50% added more than $4 million to the value of the Unocal President's stock (based on info at Yahoo Finance). what do you think is the president's marginal propensity to save, invest, and consume the extra $4 million?

we should be looking for a pattern and trying to identify the next Unocal (no insider tips please), and invest before the 50% increase. we can call this discussion the "DeLong Macro Hedge Board"

[nate]

scroll to the bottom... Gary Becker has some interesting thoughts on the Chinese company bid for Unocal-

http://www.becker-posner-blog.com/

i think a krugman-becker blog would be pretty interesting.

[nobody]

Professor DeLong said:

"As I read Paul, he says that if we did not need Chinese help on North Korea and if we were not very vulnerable to a cut-off of capital inflows, then he would argue against allowing the Chinese bid for Unocal on the grounds that there are possible future states of the world in which control of oil flows will turn out to be very important indeed.

But we do need Chinese help on North Korea, and we are very vulnerable to a cut-off of capital inflows."

Ehhh, no. Paul is acknowledging the difficulties of blocking the Unocal deal, given our susceptibility to capital inflow cutoffs and our need for assistance with North Korea, but as he says in the last paragraph, were it up to him, he'd block the deal:

"If it were up to me, I'd block the Chinese bid for Unocal. But it would be a lot easier to take that position if the United States weren't so dependent on China right now, not just to buy our I.O.U.'s, but to help us deal with North Korea now that our military is bogged down in Iraq."

[nk]

http://money.cnn.com/2005/06/27/news/economy/gas_prices/index.htm

http://www.famoustexans.com/boonepickens.htm

[anne]

Interesting that the price for Unocal is 18 billion dollars, while the market value of Google is 84 billion. That we are dependent on China is no more than saying China is dependent on us, and I find this mutual need, mutual relationship quite promising. I do not know whether China should be allowed to buy Unocal, but I find the ever increasing strategic, economic and cultural ties between the countries benign.

[anne]

China is accomplishing what not long ago Brad DeLong first corrected lamented and then recognized and brightened, China is developing a remarkable better life for 1.4 billion people. Why development did not close the gulf between richer and poorer economies for almost the entire 20th century was not clear, but then China and India began to show the most hopeful development. Life for 2.4 billion people could be more promising than imagined only 15 years ago. With no exception African friends iterate that they look in hope to the development pattern set in Asia, and I do as well.

[anne]

Where there are American cultural events and business labels evident through Beijing, there are Chinese cultural events about Boston and New York and Chicago and San Francisco, and Chinese tourists all about. More Chinese are now visiting Paris than any other national group, as merchant exhibits will show :)

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5506&u=4|18|...

House Wren at Dawn with Insect in Beak
New York City--Central Park, Maintenance Field.

[jalrin]

This same company (CNOOC) is poaching on the coastal interests of our allies in Japan as well as menacing the rest of Asia with their lust for resources. They are cutting deals to prop up genocidal regimes like Sudan. If that is not enough, China is buying warships (Sovernemy class Destroyers) whose only practical use is to attack a modern navy (there are cheaper ships that are better suited to protecting coasts or hunting pirates).

It is time to start thinking strategically and take action to put the United States on a stronger footing to deal with this rising security threat. That means not only blocking sales of such vital resources (they can buy things plenty of luxury goods or maybe even pay for American prdoucts instead of pirating them) but also by taking measures to close the budget and trade deficits so that we are in not in hock to China.

[Steve Carr]

This is exactly the kind of dubious rhetoric that makes me distrust all these critiques of China: their "lust for resources." Their lust? As opposed to our demure, measured consumption? China is a booming, growing economy, lifting hundreds of millions of people out of poverty. They need resources to do it. We should hope and be glad that this is the case. We want the Chinese to be wealthier and healthier, both for economic reasons and on humanist grounds. It's just better when fewer people live their lives in poverty and die early. What we should be trying to figure out is not how to keep China from getting access to oil, but how to make sure that we benefit from their boom, too.

[jalrin]

Yes, we want too much stuff. Yes, the world would be a better place if the Chinese people were better off. That does not mean that it is okay to allow China to steal Japanese resources, menace Taiwan, and reorder the balance of power to threaten the United States, the people of Darfur, Vietnam and all of the other people who are depending on the United States to protect them from China. We have gotten a lot of goodies from being a mighty superpower and now it is time to repay the world for that by using our power to promote a stable and secure world order.

[Gareth]

Krugman just sold out. He is prepared to be a protectionist Sinophobe if it helps the Democratic Party. Brad should have called him on it.

If the Chinese government pays too much for Unocal (which is likely) then Unocal's shareholders benefit at the expense of China's treasury. It is hard to see how this can have any strategic implications whatsoever. Krugman knows this, so I would call bad faith.

[me]

"That does not mean that it is okay to allow China to steal Japanese resources, menace Taiwan, and reorder the balance of power to threaten the United States, the people of Darfur, Vietnam and all of the other people who are depending on the United States to protect them from China."

But it IS OK for the US to bomb Iraq to provoke a war, and then when that does not work, to just invade a sovereign nation and depose its leader, without one shred of truth? But I guess there is no OIL in Iraq. And we certainly are protecting those poor souls in Darfur aren't we?

[anne]

http://www.nytimes.com/books/98/11/15/reviews/981115.15greenbt.html

Orienteering
By STEPHEN GREENBLATT

THE CHAN'S GREAT CONTINENT
China in Western Minds.
By Jonathan D. Spence.

A young, impressionable Scottish woman, shortly after arriving in China in 1859, sends home an account of a boat trip she has taken on the Wusong River:

''On each side hung weeping willows, dropping their bending branches into the limpid stream. Back from the river were numerous fields waving with golden corn, and many a neat farmhouse peeped out amid a very luxuriance of trees. We were now nearing a beautifully arched bridge, green with flowering creepers. . . . On the top of a pretty green hill stood a time-worn pagoda, its numberless corners and juttings, edged with bronze and brass, catching a glow from the morning rays, and glittering in the fair sunlight.''

She is no doubt describing exactly what she saw, but she is also, of course, describing the wallpaper and porcelains and delicately figured boxes that had been the rage in Europe since the 18th century and have remained a staple of interior decoration ever since. When I was a child, I gazed at the same scenes on the walls of my parents' house in suburban Boston, and when I went to China in the 1980's, I reached for my camera to photograph certain landscapes because they looked, well, so much like China -- which is to say, so much like that wallpaper. No doubt I was careful to exclude from my snapshots whatever did not fit.

Jonathan D. Spence's wonderful new book, ''The Chan's Great Continent: China in Western Minds,'' is about the history of these ''sightings,'' as he calls them, the numerous glimpses of a country that has fascinated and on occasion obsessed Western observers since the publication of Marco Polo's ''Travels'' in the late 13th century. My own childhood store of China sightings included more than chinoiserie: I was intrigued by Charles Finney's surreal novel ''The Circus of Dr. Lao'' and, at a younger age, terrified by the devilish cunning of Sax Rohmer's villain, Dr. Fu-Manchu. These purveyors of exotic stereotypes find their place in Spence's wide-ranging essays, which are based on a series of lectures first given at Yale University in the spring of 1996. They are joined by an enormous cast of missionaries, soldiers, traders, scholars, satirists, philosophers, linguists, poets, playwrights, painters, diplomats, scientists, adventurers, spies, visionaries, politicians and picture-taking tourists. As he moves through seven centuries of encounters, Spence makes time for figures as various as Jane Austen and Gottfried Wilhelm Leibniz, Bret Harte and Henry Kissinger.

Is there an overarching order to these multifarious perspectives? ...

[anne]

The question is do we see China from her perspective or ours? And if from ours, what are we missing? Look to Jonathan Spence, and China will never be the same.

[anne]

http://www.nytimes.com/2005/02/08/arts/dance/08joyc.html?ei=5070&en=7fcc98505141c024&ex=1120622400&emc=eta1&pagewanted=all&position=

In Modern Dance, Reflections of a Restless China in Flux
By ANNA KISSELGOFF

In a country where the arts are expected to support government policy rather than exist primarily as independent forms, China's still-young and rapidly expanding modern dance has a distinct advantage. It is a wordless means of individual expression, especially open to ambiguity and interpretation.

When the Beijing Modern Dance Company, founded in 1995, makes its New York debut tonight at the Joyce Theater, with "Rear Light," a piece choreographed to music from "The Wall," the 1979 rock album by Pink Floyd, viewers will certainly spot the general aura of alienation. It may be less easy to agree about specifics.

The sight of young people placed "up against the wall" and of crime-scene body silhouettes painted on the floor as well as dancing that veers between turbulence and regimentation may all evoke the 1989 repression of demonstrators in Tiananmen Square.

Yet there is also an intimate male-female duet and a wild disco scene, usually with audience participation onstage. For Willy Tsao, the company's Hong Kong-born artistic director, this disco episode is not just a release but also a critique of mindless youth. "It shows a wild bunch of kids enjoying themselves," Mr. Tsao said. "They don't know what's going on around them. They hide from the truth."

Any recent visitor to China who has run into the night life in Shanghai and Beijing or seen the pop art in official museums that portrays Maoists and punk rockers side by side will understand that artists who do not want a return to the past may also be unhappy with China's rediscovery of materialist values.

An allegorical transposition of the original tale about an alienated rock star in the 1982 movie version of "The Wall," "Rear Light" is at a far remove from a realistic dance about peasants in the fields that was included in the 1991 United States debut of the Guangdong Modern Dance Company, the seedbed of Chinese contemporary dance.

Reflecting a society in flux, professional modern dance has spread beyond Guangzhou, Beijing and Shanghai to attract budding choreographers in universities in other provinces. True to the essence of modern dance anywhere, it is no longer limited to one kind of movement idiom or aesthetic....

[anne]

http://www.nytimes.com/2004/10/03/arts/design/03solo.html?ex=1254542400&en=1da811ddcc91071c&ei=5090&partner=rssuserland

This Diverse Realm, This Melting Pot, This China?
By ANDREW SOLOMON

UNTIL fairly recently the history of China has been imperial history, and the art history has been the imperial collection, now housed in the Palace Museums of Taipei and Beijing. Quotidian life was of limited interest to Chinese scholars; the culture valued the extraordinary rather than the representative, and meaning was found at the center of the society rather than at its periphery. But the last hundred years or so have seen a shift. Though the study of Chinese art still focuses on court life, it has broadened to include the lives of ordinary citizens. These revisions largely come from archaeology of the last hundred years, and particularly of the last three decades. "If excavations simply confirmed what we know of early China," said Alfreda Murck, an independent scholar based in Beijing, "we would all have an easier time. But they don't. Archaeology has upset and confounded the traditional linear narrative with discoveries that no one could have anticipated. What we call China is revealed as a complex world more culturally diverse, more multiethnic than previously imagined. Archaeological discoveries are redefining what it means to be Chinese."

On Oct. 12 the Metropolitan Museum of Art will open its groundbreaking "China: Dawn of a Golden Age, 200-750 A.D.'' The show took seven years to assemble and is the first major exhibition organized by James Watt, who took over as chairman of the department of Asian art in 2000. It is the Met's largest exhibition of Chinese art since the splendid Palace Museum show in 1996. While that was a triumph of canonical connoisseurship, featuring many of the best-known masterworks of Chinese art history, the ones you studied in college if you studied art history, this one has objects that no one has seen from the time they were created until quite recently. Indeed, no one even knew about most of this work. More than a hundred of the 247 works in this show were excavated after the Cultural Revolution ended, in 1976; eight objects, added at the last minute, were found after 2000. Cordial relations between the United States and China paved the way for the loan of an unusually high number of "class one" objects of particular artistic merit and historic interest. There are works in every medium, including ceramic, bronze, jade, wood, stone, glass, gold and textile, as well as paintings and calligraphy.

The exhibition furthers the conversation that began with the Met's "Great Bronze Age of China" in 1980 and continued in the National Gallery's "Golden Age of Chinese Archaeology" in 2000. Unlike the Guggenheim's incoherent "China: 5000 Years" show in 1998, this one gives a measured, intelligent analysis of the oft-neglected period immediately preceding what we think of as the highest accomplishments of dynastic China, and turns up some superb things in the process....

[nk]

Anne-

Your post that pointed out the market cap of Google vs. purchase price of Unocal was interesting.

The market cap of ExxonMobil (XOM) is $376 billion (if I did not confused by Yahoo finance). XOM's p/e ratio is 13.8.

http://finance.yahoo.com/q?s=xom

[anne]

NK

The difference is market capitalization between ExxonMobil anbd Unocal is stark 376 billion dollars to 18 billion.

http://flagship3.vanguard.com/VGApp/hnw/FundsHoldings?FundId=0951&FundIntExt=INT

The Vanguard Energy Index has an average market cap of 28.8 billion, a price earning ratio of 12.9, return on equity of 19.3 and earning growth rate of 20.9.

[P O'Neill]

If an Indian company was buying Unocal, would the US care? No.

[nk]

Anne-

The reference to the Vanguard Energy Index is interesting.

Related to an earlier post from me, equities in commodity companies may be a better investment than the commodities? There may be gains from consolidation of industries?

There is still something to be said for owning commodities in a part of one's diversified portfolio.

And how is this for a macro idea: it is possible that a big consolidated company could become a modern-day Tower of Babel (note I did not say probable)

[nk]

Book on China: The Keys of the Kingdom (Cronin) (recommended to me by an undergrad prof)

Investment idea for older and wealthy people: Look into acquiring some cool residential property in Hong Kong or Japan (note: I am not looking into this because it is way beyond my current means and priorities)(see The Economist's House Price Indices - June 16, 2005)(location location location)

[Ian Whitchurch]

P O'Neill,

The Indians are shopping as well

Ian Whitchurch

[anne]

Ian

Definitely, the Indians are shopping for energy. Also, there will likely be 18 billion dollars in American subsidies for traditional energy producers.

[chris]

Anne:

That Spence piece you posted was a repeat from within the past two weeks, please why that one?

[chris]

From the piece in the FT over the weekend, Unocal has some facilities in the U. S. that CNOOC says they are willing to sell. The CEO or GM, whatever the title, is a petroleum engineer. Unocal has gas production in Thailand and Indonesia but most of the gas goes back to the country of origin or is already tied up in long term contracts to East Asian countries. It does have big gas production in Uzbekistan, oh, great, one of our allies in the war against terror, but again that is mostly contracted out. For China to obtain natural gas from a potential Unocal purchase they would have to increase production greatly from Uzbekistan.

It looks like there is no oil, mostly natural gas, and as it is all overseas, who says it's ours? Unocal has some sort of contractual claim to extracting it, selling it, and paying royalties to respective host countries. Who knows what the Uzbeki view of that contract will be in 5, 10 or 20 years time. I say let's stick to our supposed values and let the sale go through. And a counter-point maybe it'll free our mind to start working on alternative sources of energy as nuclear presently looks like one of the few options.

[chris]

With the story of our Keystone CIA agents operating in Italy, it's going to be a notable day when the U. S. tries to block an acquistion by China in Australia or Canada. Am I wrong, Canada is after Saudi Arabia in supplying oil to the U. S.?

I'd say a poorer China would be more likely to send its army into Burma, Mongolia, or Siberia for a natural resource grab. A richer China would be more likely to play by the rules which is what their leadership has been stating in their recent public talks and which has been our foreign policy aim since the end of WWII. Trading nations see the mutual benefit to avoid armed conflicts.

Part of China building a stronger navy is definitely in reaction to what they perceive as a threat from our powerful navy. And if Japan has a claim to resources around Okinawa, the Chinese will believe they have historical claims from before the time Imperial Japan projected force into China and across Southeast Asia. Now it's stronger and is looking to negotiate. As to China-Taiwan, the two nations claimed that Taiwan is part of China, only with the democratization of Taiwan has a Taiwan identity emerged clearly over, say, the last 15 years while it had been repressed earlier.

I don't know what is scarier, the thought of Bush belligerently riding to Taiwan's rescue or caving to Chinese pressure. While there are some true believers in democracy amongst his closest supporters/advisors, one of their few admirable qualities, I suspect Bush more as a cave-man.

[anne]

Though I find Jonathan Spence terrific through and through, "The Chan's Great Continent: China in Western Minds" has a special relevance at a time when I am told by friends and students they are hearing the harshest of comments about China. Now, beyond the comments that are so frequently made, we really do need to ask ourselves what we understand of China on her terms not merely on ours. But, reading Spence is a pleasure and I would not argue for instance with "Treason by the Book" or "Mao Zedong."

[anne]

Several months ago there was a report that 3 Chinese people had entered the country through Mexico and had come to Boston to do who knows what. A Chinese student joked in lecture that for the rest of semester he would be eating alone in public. We all laughed, some less than others :)

[chris]

I didn't mean that as a criticism of Spence, just posting the same quotation twice within a short period of time. Your recent posting of that was clear in my mind yesterday when I past through a little village seeing a silhouette of a man standxing on a stone bridge in deep shade under a banyan tree about 10 k south of the Pearl River and 40 k from Canton which was a "China" image. Now before that image gets too pretty, let me tell you of the beggars and the traffic accident victims laying in the road which is a stronger image.

For some reason I've been trying to harden my conscience to avoid giving something to anyone so i can avoid beggars and concentrate on contributing to the orphanage for the severely disabled near my house in my adopted home in Taipei and to Partners in Health for Boston. Everyone, check out P I H, you can find it on the web, please donate heavily.

In the U. S. the only place that has the intensity of China is N Y C. San Francisco is genteel. Boston is tame.

[nk]

This was the first time I heard of Spence and his books on China. I ordered a couple via Amazon. Anne - thanks for mentioning it.

Some people in Chicago have been looking at Fishman's book "China, Inc. : How the Rise of the Next Superpower Challenges America and the World". What are your thoughts on this book? I have not had a chance to read it.

[anne]

http://www.nytimes.com/2005/01/09/magazine/09COUNTERFEIT.html?ei=1&en=3da83dec761aae97&ex=1121062499&pagewanted=all&position=

Manufaketure
By TED C. FISHMAN

An interesting essay on "China, Inc."

http://query.nytimes.com/gst/fullpage.html?res=9C0CE5D7153AF936A25751C0A9639C8B63&n=Top%2fFeatures%2fBooks%2fBook%20Reviews

'China Inc.'
'How the Rise of the Next Superpower Challenges America and the World'
By Ted C. Fishman

The review.

[nk]

Anne-

to diversify your NYT reading:

http://www.theonion.com/news/index.php?issue=4124&n=1

please note this posting is not necessarily endorsement or agreement with the article.

[China Hand]

I was also pretty astounded to see Paul Krugman join the herd of protectionist bleaters on this one. As a contrast, in the same NYT edition's business section Joseph Kahn had a brilliant piece on Chinese energy security that made me nostalgic for the old days when the NYT emphasized information and insight over spin, and not the other way around.

Here's the link: http://www.nytimes.com/2005/06/27/business/worldbusiness/27energy.html?

China is pursuing zero-sum deals for oil, but on the Eurasian continent using pipeline exclusivity on a government-to-government basis. The idea that Beijing is going to extend some giant straw and suck Unocal natural gas from Thailand and oil from the Gulf of Mexico into its gaping maw is simply ridiculous. Does anybody see Chinese tankers chugging from distant Unocal fields to deliver oil to China at twice the transportation costs? Nope, the oil gets sold, enters the international market, and China buys the oil that's right for it on the same international market. Unocal oil looks more like free-market win-win oil. CNOOC's government backing and China's oil needs give a good assurance that the new company will be strongly financed and its operation will actually increase the amount of energy available to the international markets. The CNOOC bid makes sense in the globalized, win-win free market scenario. US opposition only makes sense in the context of the sort of crude economic warfare that economists (and government bureaucrats keen on a healthy international market for our debt) are supposed to avoid.

[Kit]

What, precisely, is the reason Krugman opposes CNOOC's Unocal bid? I remember him mocking all those neo-mercantilist arguments. If he's got national security arguments, what exactly are they?

For Krugman to appear to be turning against his own longstanding positions, he really ought to have made his reasoning more clear.

[anne]

Especially from the expression "the great game," I expect there is much beyond an economics argument here. I imagine the idea is to keep control of what reserves Unocal has as well as exploration data as a strategic precaution.

[anne]

http://www.nytimes.com/2005/06/05/international/asia/05india.html?ei=5070&en=652c733aa1566589&ex=1120708800&emc=eta1&pagewanted=all

Hunger for Energy Transforms How India Operates
By SOMINI SENGUPTA

NEW DELHI - Fed by a decade-long economic boom, India's ever-growing appetite for energy is quietly reshaping the way it operates in the world, changing relations with its neighbors, extending its reach to oil states as far flung as Sudan and Venezuela, and overcoming Washington's resistance to its nuclear ambitions.

Hovering over India's energy quest is its biggest competitor: China, which is also scouring the globe to line up new energy sources. The combined appetite of the two Asian giants is raising oil prices and putting greater demands on world oil supplies.

Already India's energy ambitions have led to developments unthinkable just a couple of years ago: a proposed pipeline to ferry natural gas from Iran across Pakistan; a new friendship with the military government in gas-rich Myanmar, formerly Burma; and budding talks with the United States to let India buy nuclear technology.

Nuclear power is expected to top the agenda when Prime Minister Manmohan Singh visits Washington to meet with President Bush in July. While India covets new equipment to strengthen its feeble nuclear energy program, the United States has prohibited the sale of nuclear technology to India since it tested a nuclear bomb in 1998....

[anne]

Fine analysis, as suggested by China Hand:

http://www.nytimes.com/2005/06/27/business/worldbusiness/27energy.html?pagewanted=all

China's Costly Quest for Energy Control
By JOSEPH KAHN

BEIJING - From the dusty plains of East Africa to the shores of the Caspian Sea, China is seeking to loosen the grip of the United States on world energy resources and secure the fuel it needs to keep its economy in overdrive.

Its energy deal-making has cost tens of billions of dollars and has dominated China's foreign policymaking for the past two years. At times it has put China in direct competition with American policy goals, especially in Iran and Sudan, whose leaderships are among the least favored by the United States government.

Now Washington has the chance to shape China's frenetic quest. The China National Offshore Oil Corporation, known as CNOOC, has offered $18.5 billion for the American oil company Unocal. If its bid is successful, Beijing will have a greater stake in the global oil markets, in the same way that Japanese and European oil companies work closely with major American companies around the world....

[anne]

Notice that Paul Krugman points out that Unocal has worked with governments that are troublesome for America, and the experience of working with the Afghanis or Burmese may be considered another strategic asset we might like to keep.

[Ian Whitchurch]

Lookie that. A CNOC (*) subsiduary just cut a deal with Baraka Petroleum (an Australian subjunior linked to Hardman) to play in onshore Mauritania.

Ian Whitchurch

(*) CNOC and CNOOC are different companies. Think of em as like the Standard Oil of California and Standard Oil of New Jersey

[anne]

Notice that PetroChina is China's prime energy producer with a market capitalization of about 133 billion dollars. Warren Buffett's Berkshire Hathaway owns more than 1% of the shares. PetroChina is now the largest Asian company. CNOOC by comparison has a market cap of about 24 billion dollars.

[anne]

There is so much potential in Africa, if only properly handled. Mauritania is a low mountain of minerals resources, a relatively lightly populated difficult land so far for agriculture. Interesting.

[anne]

Ian noted, much of the oil story involves India:

http://www.nytimes.com/2005/02/18/business/worldbusiness/18refinery.html?ex=1120708800&en=e5a8de6981eb6d16&ei=5070&emc=eta1

A Former Gas Station Attendant's Big Bet on a Refinery Has Paid Off
By KEITH BRADSHER

JAMNAGAR, India - The vast refinery and petrochemical complex here is the size of Manhattan south of Central Park. It could have been a costly white elephant.

Instead, the quirky project, which includes the world's largest mango plantation, has become one of the most profitable bets in the global refining industry. The success of the complex shows the changing economics of refining, a business once regarded as an unglamorous backwater by oil executives more interested in finding the next big oil field.

Completed by Reliance Industries of Mumbai in 1999 at a cost of $6 billion, the operation's $7 billion a year in sales equals 4 percent of the entire revenue of India's corporations. It is one of the few refineries in the world that can take very thick high-sulfur highly acidic grades of crude oil and process them into extremely pure, low-polluting gasoline and diesel fuel.

The New York region, with its demanding environmental standards, has become the biggest single destination for shipments from here, said Captain Sunil Pradham, who manages a four-mile-long jetty that stretches into deep water where tankers pick up cargos, four at a time....

[nk]

http://www.chinadaily.com.cn/english/doc/2005-07/04/content_456838.htm