2013-05-20T20:56:58-04:00 Patricia Adams http://www.huffingtonpost.ca/author/index.php?author=patricia-adams Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Patricia Adams Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.3175291 2013-04-29T17:06:01-04:00 2013-04-29T17:39:56-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/
According to Fan Xiao, geologist and chief engineer of the Regional Geological Survey Team of the Sichuan Geology and Mineral Bureau, this week's earthquake -- which has so far killed nearly 200, injured more than 13,000 and left thousands homeless -- may have been an aftershock of the massive magnitude-8 earthquake that collapsed schools and killed close to 90,000 people in May 2008. The two quakes occurred on the same fault. As Fan explains it, "the fault line became active as its stress wasn't completely released." This made the region a more dangerous area, he said.

Even five years later, said Fan, "the probability of a magnitude-7 aftershock occurring after a magnitude-8 earthquake ... is very high."

The Chinese government would like to believe that both earthquakes were the result of the natural movement of the earth's crust -- an "Act of God."

But, mounting scientific evidence suggests that the Wenchuan earthquake was more likely a man-made disaster, triggered by the nearby Zipingpu hydro power dam. If true -- a review by Fan Xiao of close to 60 scientific studies points to this conclusion -- the Chinese public can be expected to ramp up opposition to government plans to build some 130 dams in seismically hazardous southwest China.

One of those studies, by Shemin Ge et al. of the University of Colorado in Boulder, argued that China's massive 2008 earthquake may have been "hastened" by "tens to hundreds of years" by the Zipingpu Reservoir. Building reservoirs in unstable regions like Sichuan, says Ge, might affect the local seismology.

Understanding the forces behind the recent quake should sound warning bells. According to New Scientist, many of China's planned hydrodams lie along fault lines as these form natural sites for river courses.

Large reservoirs built on fault lines can induce earthquakes, in a phenomenon known as "reservoir-induced seismicity" (RIS). By adding pressure to fractures, Fan Xiao told the Global Times, a reservoir with a capacity of over 1 billion cubic metres and a dam more than 100 metres tall would have a 30 per cent to 40 per cent chance of inducing an earthquake.

The Lushan quake seems to have proved Fan Xiao's concerns, to deadly effect. In a report published just last month, Fan Xiao documented the recent rash of earthquakes in China's southwestern region, warning about the probability of reservoir-induced seismicity, and especially the risk of strong RIS in the area.

Fan argued that the government's current plan to build huge, cascading dams close together along the great rivers of Sichuan and Yunnan in actively seismic zones increases the probability that these dams will both induce and be damaged by seismic activity. He added that the next 10 years are an especially dangerous period as scientists have observed that reservoir-induced seismicity is most likely to occur within the first few years after a dam is filled. Typically, it takes time for reservoir water to penetrate deep into seismic faults and fissures before it triggers seismic activity.

New concerns are emerging; for example at the 186 metre tall dam Pubugou Dam, which holds 5.39 billion cubic metres of water and where some 1,834 small earthquakes were recorded between October 2006 and December 2011. Pubugou is just 80 kilometres from the epicentre of this week's quake at Lushan.

While it is very difficult to know where or when the next deadly quake will hit, scientists are struggling to understand just what role dams play in triggering a chain reaction of seismic activity. According to Mian Liu, Geological Sciences professor at the University of Missouri in Columbia, the Lushan and Wenchuan quakes may have slightly increased the stresses along the Anninghe fault, further south, making it the area now at most risk.

Fan Xiao calls this man-made seismic risk created by the government's ambitious plan to turn all natural rivers into reservoirs "a dangerous new reality." If more killer quakes are linked to dams, they surely will become a lightning rod for public protest. And that must make the Chinese government nervous.

]]> tag:www.huffingtonpost.com,2013:/theblog//3.2750464 2013-03-13T14:34:20-04:00 2013-05-13T05:12:01-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ warned against building the Three Gorges Dam in the 1980s, fearing it would become a "strategic target" for China's enemies, they imagined the weapon of choice would be dam buster bombs.

Now, 25 years later, as the threat of cyber warfare grows, China's military men must worry about modern day weapons -- malicious software infiltrating computers that control critical systems like pumps, motors, alarms, and valves that could allow an attacker to take control of the world's largest dam, along with other critical infrastructure.

This nightmare scenario isn't just the material of spy thrillers.

In 2010, when Stuxnet, a computer virus dubbed the world's "first cyber superweapon," infected Siemens' control systems and caused Iran's nuclear centrifuges to spin out of control, it also attacked six million computers and nearly 1,000 industrial control systems in China, according to Beijing-based antivirus service provider Beijing Rising International Software. Siemens, a German multinational, is one of China's biggest overseas suppliers of industrial computers.

While the China Information Technology Security Evaluation Center downplayed the malware threat, saying that no severe damage had been reported, according to the South China Morning Post, neither Beijing nor Siemens would provide a full list of the industrial facilities affected by the virus. Nevertheless, it is widely known that Siemens's control system is used throughout China by airports, railways (including the Shanghai Maglev), nuclear power plants, and the Three Gorges Dam.

Others were less sanguine about the threat. Professor Sun Jianping, a hydropower expert who led a study on the reliability and stability of the generators at the Three Gorges Dam, told the South China Morning Post: "If someone hacks into the system and takes over, we will be blinded and disabled. It could cause more destruction than a bomb." According to U.S. hydrologist Dr. Philip Williams, catastrophic dam failure at Three Gorges would "rank as one of history's worst man-made disasters."

To the best of anyone's knowledge, Stuxnet did no harm to the Three Gorges Dam or other industrial facilities in China. But it was a wakeup call. "Alarm bells have been sounded in almost every key industrial sector ‒ steel, energy, transport ... This has never happened before," Wang Zhantao, a network security engineer with Beijing Rising International Software told the South China Morning Post.

China's generals considered dams "strategic targets" because of their potential to suddenly release vast quantities of water, causing massive loss of life and chaos to civil defences. Bunker busting bombs could cause such catastrophic releases. So could uncontrolled overtopping caused by the failure of sluice gates to open. That nightmare scenario was narrowly averted at the Zipingpu Dam in 2008 when workers racing against time freed sluices jammed when the Wenchuan earthquake cracked the dam.

China is currently building more than 170 new mega dams, all of them strategic targets. Compounding the risk that each poses to China's security, is the fact that many are being built in cascades, so close to one another that catastrophic failure at one upstream, causing a tsunami -- would likely mean failure of those downstream.

China's leaders have an interest in playing up the threat of malicious foreign spyware, but malfunctioning domestic software could cause the same dam catastrophes.

In 2011, Sunway Force Control Technology, a Chinese software provider to major projects such as the Three Gorges Dam, the Daqing oil field, and China's space program, was ordered by the National Computer Network Emergency Response Technical Team to notify its clients of bugs that hackers could exploit. The bugs had been detected by Dillon Beresford, who works for the U.S. private security firm NSS Labs Inc., and who , in a reassuring example of international cyber cooperation, worked with Sunway and Chinese authorities and the Department of Homeland Security to fix the bugs he found.

This was not the first time Mr. Beresford had found flaws in Chinese software. Another attempt to correct dangerous flaws was ignored until Mr. Beresford went public. Then the Chinese authorities posted a fix for the vulnerability within a few days.

Ironically, despite China's notorious record as a cyberspace aggressor, security specialists say China's computer-controlled infrastructure is more vulnerable to cyber-attacks than are Western systems.

The great majority of computers used in China run pirated software, much of it derived from the Russian mafia, according to a Washington Times interview with James A. Lewis, a cybersecurity scholar at the Center for Strategic and International Studies. "So your software sector is stunted because no one can make any money selling a product that will be so quickly and easily pirated.... if you use pirated software, you have no idea where it comes from," he said, noting that pirated software may be surreptitiously designed with "back doors" that allow unauthorized access. At best, pirated software cannot be patched to correct for flaws.

Moreover, China's infrastructure is especially vulnerable because of the country's "lack of transparency," states Mr. Beresford. Patches cannot be effective if they aren't universally applied, making it necessary for the patches to be publically available for downloading.

Openness is not exactly a characteristic of China's cyber-world.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1655486 2012-07-12T14:25:07-04:00 2012-09-11T05:12:10-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ declared complete on July 4 when the last of its 32 generators went online, 10 years after the first turbine went into operation. There is no end in sight, however, for costs associated with the vast and controversial project, which remains closer to disaster than triumph.

At a ceremony to mark the completion of the dam, Zhang Cheng, general manager China Yangtze Power, said "The complete operation of all the generators makes the Three Gorges dam the world's largest hydropower project, and the largest base for clean energy."

Zhang did not mention that the cost of the project (US$60 billion) had grown six-and-a- half times more than the original estimate of $9 billion approved in 1992 by the National People's Congress. Earlier this year, a study presented at a symposium on the impact of the dam, suggested that the cost may be higher still.

Meanwhile, the price per kilowatt of power produced by Three Gorges is four times higher than the national standard set by China's State Electricity Regulatory Commission (SERC). Other costs remain harder to pin down, such as the project's toll on livelihoods and the region's geological stability as the risk of landslides continues to force more residents out.

Chinese officials admit that the constantly rising and falling reservoir level is triggering landslides in some 5,000 potential danger sites around the reservoir, requiring the evacuation of 300,000 people, over and above the 1.4 million already moved to make way for the dam's 600 km-long reservoir. Meanwhile, a study by seismologists at the China Earthquake Administration indicates that the dam has "significantly increased" seismic activity 30-fold in a phenomenon called reservoir-induced seismicity.

While Chinese officials were quick to crow that the dam would harness the power of the Yangtze River to produce clean energy -- the dam's combined generating capacity is now at 22.5 gigawatts and provides 11 per cent of China's hydroelectric capacity -- it isn't clear how long that will last.

Geologist Fan Xiao, of the Sichuan Geology and Mineral Bureau, says in a study that dam developers have gone wild building so many dams along the Yangtze that their combined reservoir volume will exceed the Yangtze's flow. There simply isn't enough water to fill all the dams to their designed capacity which will result, he says, in "an enormous waste of money."

Even Cao Guangjing, chairman of China Three Gorges Project Corporation - the state-owned company responsible for the dam - acknowledges that his dam will face stiff competition for water as other dams are completed.

Other costly problems continue to plague Three Gorges. Clear, silt-free water released from the dam has caused riverbanks to collapse, and the erosion of a section of the Yangtze riverbed downstream from the dam has increased ten-fold since the dam began storing water.

The economic costs of this altered hydrogeomorphology are enormous: last year, ships were beached for lack of water and China's great Poyang and Dongting lakes shrank, depriving millions of their water and livelihoods.

Officials have always fallen back on the dam's power to control floods to justify the project's exorbitant price tag, but even that argument has grown flimsy. Officials now admit that the dam's storage capacity is smaller than claimed and of questionable benefit in the event of a major flood.

The last generator might be connected, and the Three Gorges dam may now be declared finished, but never-ending expenditures to treat the problems it has caused will continue to remind Chinese citizens that the world's largest dam may also be the world's largest albatross.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1404033 2012-04-12T16:07:06-04:00 2012-06-12T05:12:01-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ report commissioned by Probe International, the organization I head, says the consequences could be disastrous.

There is great risk that the dams will be damaged by earthquakes, or that they will induce earthquakes themselves, says the report, Earthquake Hazards in Large Dams in Western China. In a worst-case scenario, dam collapses could create a tsunami that would wipe out everything in its path, including downstream dams, and cause untold loss of life and property.

Little is known about the seismic risk of China's dam-building because of government secrecy surrounding the dam industry and the country's seismic records. The Probe report overlays a Chinese map of dam locations with US Geological Survey earthquake data and a United Nations' seismic hazard map. Google Earth satellite images were also used to confirm the state of completion of about half of the dams.

According to the report, 98.6% of the dams being constructed in western China are located in moderate to very high seismic hazard zones. The Zipingpu dam, for example, which is now thought to have triggered the magnitude 7.9 Sichuan earthquake in 2008 that killed an estimated 80,000 people, was built in a moderate seismic zone. The force of that quake cracked the dam and shook it so severely that it sunk one metre and moved 60 centimetres downstream.

"The location of large dams near clusters of recorded earthquakes with magnitudes greater than 4.9, and especially when the earthquake focal points are also close to the surface, is cause for grave concern," said John Jackson, a geologist and the report's author.

Earthquakes greater than magnitude 4.9 have been known to damage dams and other structures. Shallow earthquakes (less than 10 km deep) indicate active faults that could be reactivated by routine practices, such as the filling of a reservoir to accommodate flood waters and its drawdown to generate power, he says.

"In addition to the hazards of high natural seismicity in western China, reservoir-induced seismicity is likely to increase the frequency and perhaps the magnitude of earthquakes in this area," he warns.

Western China is known to be a large regional stress field because of the rapid, geologically speaking, northward motion of the Indian subcontinent into western China. This "continental collision" has, for example, lifted seafloor sediments to the top of Mt. Everest and created the Tibetan Plateau. Since detailed record-keeping began in 1973, an average of nine earthquakes with a magnitude of 4.9 or higher have occurred in western China each year.

Especially worrying in this environment, said Mr. Jackson, is the cascade-like positioning of the dams, which follow one another so closely that there is no terrain between them for energy to dissipate in the event of catastrophic dam failure.

"If one dam fails, the full force of its ensuing tsunami will be transmitted to the next dam downstream, and so on, potentially creating a deadly domino effect of collapsing dams," he says.

China is the world's largest hydropower producer with some 87,000 dams and reservoirs, of which nearly half are considered to be dangerous and at risk of collapse.

In the interest of public safety and a sound power sector, the report urges the Chinese government to disclose the details of its current slate of dam construction, and to ensure that a thorough and independent regional seismic risk assessment is done without delay and publicly disclosed.

These views are echoed by one of China's leading geologists, Fan Xiao, Chief Engineer with the Sichuan Geology and Mineral Bureau, who says "the risks described in this study are real and potentially catastrophic for innocent Chinese citizens."

"We owe it to them, as scientists, to investigate and expose these risks immediately," he adds.

Chinese citizens are becoming increasingly vociferous in their outrage over lives risked, and lost, to shoddy standards, most recently in the country's food and high-speed rail industry. Should a dam suffer catastrophic dam collapse, that anger could quickly spill over to the hydropower industry for threatening ordinary citizens' lives.

]]> tag:www.huffingtonpost.com,2011:/theblog//3.1144946 2011-12-13T12:39:38-05:00 2012-02-12T05:12:01-05:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ declared at the close of the UN Durban climate conference, which negotiated a Green Climate Fund of up to $100-billion a year that keeps the Kyoto spirit alive. More likely, all that she saved is face for China's renewable-energy industry and the EU carbon market, both in danger of freefall. These two corporate groups will land the lion's share of the spoils coming out of Durban. As for Kyoto, it can be presumed dead.

The group of taker-nations under the Kyoto Protocol remain united: China, India, and all the other developing nations that have been receiving climate cash are as eager as ever to see Kyoto continue. But the giver-nations have mostly gone. Canada, Japan, and Russia will formally leave Kyoto when it expires at the end of 2012 and the U.S. never joined. That leaves virtually the entire burden of supporting Kyoto to the European Union. And all that's left of Kyoto, in any tangible sense, is the EU carbon market.

Just a few years ago, investors were banking on a $2-trillion global carbon market by 2020. Instead economic gloom and growing doubt about global warming science has made it a pariah. In the last six months, the price of carbon has plummeted by 50 per cent to a record low. UBS, JP Morgan and other banks have already retreated from the market and cut their climate-related businesses this year.

The industry, in fact, has fallen into such disrepute that "carbon" has become a dirty word. The Carbon Markets and Investors' Association, representing more than 50 firms that finance and invest in emissions reduction, renamed itself the Climate Markets and Investors' Association and the Voluntary Carbon Standard Association renamed itself the VCS Association. "Carbon trading in particular does not have the best reputation, so if you want to stay in this space but draw less ire from some quarters, it would make sense to use climate instead of carbon," VCS Chief Executive David Antonioli told Reuters.

The EU, which last year saw the European cap and trade program valued at $160-billion, is not prepared to give up on the industry it had so proudly created, particularly with so many viewing the EU itself as dysfunctional and incapable of getting its member states to agree on concerted action for the common benefit. To protect its trademark industry, and its own reputation, the EU has unilaterally, in effect, decided to continue Kyoto.

As for the giver-nations abandoning Kyoto, they are promising to fund a Green Climate Fund to the tune of $100-billion per year as a farewell gift to the taker-nations, and to appease their own citizens. As with so many other Western promises of foreign aid -- witness the West's now-forgotten $10-billion pledge to rebuild Haiti -- much of this money will never materialize.

There's also another reason the money will not materialize -- that $100-billion would largely go to purchase products stamped "Made in China." The Green Climate Fund is designed to help poor countries adapt to climate change and to purchase renewable-energy technologies. The seller of those technologies will generally be Chinese, thanks to aggressive state subsidies that squeezed out foreign competitors, to the ire of U.S. lawmakers.

China's domination in renewables, which made its industry a national champion when countries around the world were tripping over themselves to buy wind and solar technologies, now looks like a national chump: Much of that capacity sits idle because orders from major markets such as Spain, Italy, Germany, and the U.K are drying up, withered by European austerity programs and a recognition that green power is unaffordable. Four of China's solar energy firms announced last month that their shipments would be lower than expected and, according to the Financial Times, "their shares have all more than halved."

Because China wants to rescue this industry on which it has placed its prestige, it lobbied hard at Durban for a healthy Green Climate Fund, promising in return to consider subjecting itself to Kyoto II after 2020. In exchange for this promise, China received the promise of a Green Climate Fund.

These future promises, like the past promise of Kyoto, will likely collapse long before the parties will be called upon to deliver on them. In the meantime, backs can be patted all around.


This article appeared in the Financial Post.
]]> tag:www.huffingtonpost.com,2011:/theblog//3.1108478 2011-11-28T00:30:31-05:00 2012-01-27T05:12:02-05:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/
Popular opinion, including several Chinese scientists, government officials, and the press have said yes, some even arguing that drought on the Yangtze will become chronic thanks to the dam.

Now, the Chinese Academy of Social Sciences, an agency affiliated with China's State Council, has entered the debate, arguing that there is no scientific evidence that Three Gorges caused changes to the climate or is to blame for meteorological disasters in recent years.

This debate, one of the hottest inside China, has become politically explosive because it goes to the heart of whether the Three Gorges Dam should have been built, and whether heads should roll in the Chinese leadership.

The dam, the world's largest hydropower project, faced blistering criticism this past spring when it was blamed for aggravating China's worst drought in 50 years -- by storing water upstream that was needed for purposes of power generation, it deprived areas downstream. As a result, critics say, China's two largest freshwater lakes, Poyang and Dongting, all but vanished, fish stocks died off and shipping on the Yangtze -- China's most important water transportation route -- was suspended

Eventually, the dam's operators were forced to release water to relieve the downstream areas. Suspicions grew that authorities had not properly anticipated the downstream costs of damming the Three Gorges.

They should have, according to Fan Xiao, Chief Engineer with the Sichuan Geology and Mineral Bureau, who says this year's drought was nothing new. The annual filling of the Three Gorges dam reservoir has reduced water levels downstream in the Yangtze basin and caused a plethora of problems for the millions of people who live and work along the banks of the Yangtze River.

In 2006, just after the reservoir level was raised to 156 metres above sea level for the first time, water levels downstream at Dongting Lake plummeted to the lowest levels in history, exposing much of the lake bottom. This caused an infestation of rats, destruction of fish habitats, and saltwater intrusion of seawater into the estuary at Shanghai, which threatened the city's water supply.

Then in October 2009, when dam operators tried to fill the reservoir to its maximum height of 175 metres, water levels in the middle and lower reaches of the Yangtze dropped precipitously and ships ran aground. The dam operators were ordered to release water and their attempt to fill the reservoir was aborted.

Then in 2010, Three Gorges' officials were under pressure to show that the dam could generate power at full throttle so they tried again to fill the reservoir. This time they succeeded, but at the highest price to date.

As Three Gorges' reservoir filled with the largest amount of water ever, China's worst drought in 50 years hit and scenes of dead fish, exposed riverbed and beached ships downstream began showing up in newspapers around the world.

China's cabinet, the State Council, was forced to admit that the Three Gorges Dam had "problems... which should be solved urgently," but did not concede that the dam had caused or exacerbated the drought conditions. The Yangtze River Water Resources Committee, a government agency that manages the river, even took credit, bizarrely, for relieving the downstream drought conditions by releasing water.

Now, China's Academy of Social Sciences has come to the defence of Three Gorges -- and the government -- by claiming that "extreme weather conditions," not the dam, caused the drought. None of this washes with the millions living downstream who know that their water shortages began when the Three Gorges reservoir began to fill and that this year's drop in precipitation was a mere aggravation of what has become a man-made problem -- chronic water shortages caused by the damming of the Yangtze.

Patricia Adams is the Executive Director of Probe International, a Toronto-based environmental organization. She is also the editor of the English translation of "Yangtze! Yangtze!" and "The River Dragon has Come!"
]]> tag:www.huffingtonpost.com,2011:/theblog//3.928740 2011-08-18T09:58:44-04:00 2011-10-18T05:12:01-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ A Mighty River Runs Dry," a new study by geologist Fan Xiao of the Sichuan Geology and Mineral Bureau in China. Because there isn't enough water in the Yangtze to fill all the dams to their designed capacity, "an enormous waste of money" will result and the losses to China's economy, 40 per cent of which comes from agriculture, fishing, industry and shipping along the Yangtze, could be staggering.

"The fate of the Yangtze is sealed," Fan says, noting that the Yellow River, once known as the "cradle of Chinese civilization" met a similar demise. After the construction of more than 3,300 dams over 50 years, the Yellow River all but dried up. For nearly the entire year of 1997, no water at all flowed into the sea from the Yellow River. Despite this, 30 more giant dams are now being built on the mainstem of the Yellow, bringing the combined reservoir capacity to more than twice the average runoff of the river in a year.

Fan describes the chaotic dam building as a tragedy of the commons. State governments require local officials in jurisdictions along the Yangtze to meet economic growth targets. To spur development, the local governments hand out permits to power companies that allow them to build more dams. The various power companies, meanwhile, try to maximize their power revenues by withholding as much water as possible in their own reservoirs. "Each administers its affairs regardless of the overall interest," explains Fan, while everyone else -- power consumers and river users -- pay the price.

Though all the dams along the Yangtze and its tributaries are responsible for turning the once mighty river into a series of ponds, the most culpable is the Three Gorges Dam, the world's largest. After several failed attempts to fill its enormous reservoir, Three Gorges operators finally succeeded in filling it last October, to the sorrow of downstream areas which soon experienced rapidly plummeting water levels.

A study, commissioned by Probe International, explains this spring's unprecedented drought in the middle and lower reaches of the Yangtze. Shipping on the Yangtze came to a standstill, fish stocks died and, for perhaps the first time in memory, the usually water-rich Yangtze valley dried up, giving rise to the spectre of an African-like drought.

"Clearly, a serious conflict exists between water supply and demand along the Yangtze River valley," says Fan Xiao who foresees the demise of what is still called China's Golden Waterway.

The unchecked development of hydropower resources is like "draining the pond to catch the fish," he warns, resulting in a water crisis in rivers and valleys on the one hand, and a large waste of financial resources through the construction of crippled water projects on the other.

To read the full study, click here.

Patricia Adams is an economist and the executive director of Probe International, a Toronto-based think-tank. She is also the publisher of several books on China's Three Gorges Dam.
]]> tag:www.huffingtonpost.com,2011:/theblog//3.884435 2011-06-26T09:41:00-04:00 2011-08-26T05:12:01-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/
"We have made a solemn declaration," stated Wu Bangguo, chairman of the National People's Congress standing committee, in affirming China's "five no's" -- no multiparty elections, no diversity in guiding thought, no separation of powers, no federal system and no privatization.

In the past, the Chinese government had denied that it had a policy of squeezing out the private sector. This unofficial policy, which entrepreneurs dubbed "guo jin min tui" -- literally "the state advances as the private sector recedes" -- has since become a household term that serves the government well: To assert its authority, the government now unabashedly declares that its absolute control of all power centres in Chinese society includes the private sector. China is heading for a degree of government ownership and central planning unseen since Mao's passing.

The extent to which the Chinese government believes that a few people at the top of the government hierarchy can micromanage an economy for 1.4 billion people became clear with the recent release of the government's latest five-year plan. Many governments think they can pick a few winners in their economy. China's central government thinks it can pick 750 of them, and plans to provide them with the support needed to make theirs a self-fulfilling prophesy. More, China thinks it can pick losers -- it found 426 of them -- and will ensure their demise.

The winners include coal mines, perfumes, electric cars, airports and wildflowers. "National champions" and other state-owned companies operating in winning sectors get free land, cut-rate financing, instant approvals, guaranteed domestic markets and expedited stockmarket listings. The losers -- they include companies in disposable foam plastic dinnerware, vertical gas water heaters and cardboard detonators -- get nothing but a date by which they must terminate operations.

China's micromanagers also have a third category -- a kind of purgatory -- for industries that will be tolerated for a while. These include villa-type real estate developments, golf courses, artificial leather, certain types of toothpaste and small versions of the winners -- small coal mines, for example. These tolerated sectors -- typically in the private sector -- will receive no government favours and are expected to disappear over time.

China, disdainful of what it sees as the West's weakling management of its economies, is confidently taking the helm of its own. As put by Premier Wen Jiabao at last year's National People's Congress, "The socialist system's advantages enable us to make decisions efficiently, organize effectively and concentrate resources to accomplish large undertakings."

China's liking for national champions -- state-owned companies that are typically also traded on stock exchanges -- is easily understood. According to one study of the decade ending in 2008, its national champions' assets, sales and R&D expenditures grew on average 25 per cent a year, while their profits grew at an astonishing 40 per cent a year. From the Communist party's perspective, national champions and top-down planning have another advantage -- they provide the party with control that would be impossible if people and industries could act independently.

The architect of China's top-down plan is its National Development and Reform Commission. This all-powerful agency, easily the world's largest planner, itself operates at the very highest levels in the Chinese hierarchy -- directly under the State Council, China's Cabinet. This is the agency that issues the country's five-year plans (the twelfth five-year plan has just begun), that both plans and manages China's economy, and that epitomizes the China model, the envy of much of the world for its readiness to act decisively.

Yet top-down decisive action -- when detached from market demand -- also has large, less-easy-to-measure downsides. China's ghost cities provide the most spectacular example of central planners that got it wrong -- entire cities able to house tens and even hundreds of thousands each that remain mostly deserted years after their completion. Less well known are the high-speed rail lines that run devoid of passengers, the four-lane highways devoid of cars, the airports devoid of planes and the hydro dams devoid of water.

China's signature Three Gorges Dam, the world's largest and once the epitome of the China model, now symbolizes the folly of central planning -a Shanghai daily even called it "that monstrous damming project" -- because it has failed to achieve any of its major goals, including flood control, navigation, and the provision of cheap power. There is, in short, no way of knowing whether the immense gains that central planning conferred on the national champions exceeded the immense costs that central planning imposes on the rest of the economy.

And now China is taking central planning to a new level through guo jin min tui. Through this creeping nationalization of the existing private economy, the Chinese planners expect the winners to absorb many of the small industries in purgatory, adding to the heft of the winners while eliminating the small fry and streamlining the industrial sector. China's planners are taking other steps, too, to ensure that the private sector recedes.

Foreign competitors to China's national champions will generally be restricted by being prevented from operating in China in competition with Chinese companies. The only exception to this rule involves Western companies with technologies that Chinese champions need. In such instances, the Western firm would be allowed in, as a junior partner to the Chinese national champion, on condition that it turn over its technology to China.

Western firms have been accepting China's terms. In high-speed rail, for example, foreign companies such as France's Alstom, Germany's Siemens and Japan's Kawasaki had until recently controlled about two-thirds of the Chinese market. In 2009, the Chinese government changed the rules, requiring them to provide their technology to state-owned Chinese corporations in exchange for the right to bid on future rail projects. These multinationals now account for less than 20 per cent of the Chinese market. The national champions, meanwhile, not only dominate the local market, they are now competing against their junior partners in foreign countries, most recently having won contracts in Australia and New Zealand.

In another example of how the private sector is giving way to state producers, foreign multinationals until recently held 75 per cent of China's wind market. They're now down to 33 per cent or less, having failed to win a central government-funded wind energy project since 2005. China accomplished this feat using sticks and carrots. The big carrot: China offered the stateowned companies' customers lavish subsidies that effectively squeezed out foreign manufacturers. The big sticks: The government slapped a 70 per cent local-content requirement on the foreigners and hiked tariffs on imported components.

Not surprisingly, Western companies -- feeling unwanted -- have begun to pull up stakes in China. Which suits China just fine. Its planners take the goal of guo jin min tui seriously -- the state advances as the private sector recedes.

The question that remains: Will the current helmsmen of the Chinese communist economy fare better than their predecessor, Great Helmsman Mao? The answer may lie in an alternative meaning for guo jin min tui that Chinese citizens understand all too well. The phrase can mean both, "The state advances as the private sector recedes" and "The nation advances as the people fall behind."

Patricia Adams is an economist and the executive director of Probe International, a Toronto-based think-tank.

This article appeared in the Financial Post.

]]> tag:www.huffingtonpost.com,2011:/theblog//3.867713 2011-05-27T08:00:00-04:00 2011-07-27T05:12:01-04:00

Patricia Adams http://www.huffingtonpost.com/patricia-adams/ his own admission, will be an "incredibly effective way to combat hunger and extreme poverty."

This "has nothing to do with the old aid model of donors and recipients," Gates said at a speech in Washington this week to promote the Global Agricultural and Food Security Program, at which he presented foreign aid version 2.0.

Except version 2.0 looks exactly like every other version of foreign aid that has been unveiled with much hoopla over the past 50 years and then failed. Version 2.0 is about aid donors and recipients.

As in every previous version, smart First World donors shake their heads in dismay at the ignorance and inefficiency of the dumb Third World farmer. "If you could get African production even at two-thirds of European or U.S. production, you'd be talking about tripling their productivity," Gates said, in lockstep with the failed foreign aid mindset of the past.

To achieve this goal, Gates wants a top-down centralized effort, involving all the big players that have always been involved. "No one can do it alone -- it demands the full participation of donor countries and national governments," he asserts, as if the World Bank, African Development Bank, United Nations Development Program, and countless other multilateral efforts haven't also been beating the same drum.

Or as if the World Bank wasn't already involved -- in fact, Gates's project is being hosted by the World Bank, with money from the same-old same-old: the U.S. ($67 million), Canada ($230 m), Spain ($95m), and South Korea ($50m).

Gates claims that "this is about catalyzing a business opportunity with enlightened investments."

Except he isn't talking about real investors or real businesses -- he's talking about one more round of handouts from aid agencies to farmers who have been cajoled into running their businesses differently in order to qualify for his lucre. They'll take the new round of money, but it won`t lead to anything. Past versions of foreign aid 2.0 all failed and so will Gates's Global Agricultural and Food Security Program.

Africa has not lacked foreign cash or smart foreign white men with ideas -- Africa has received $1-trillion in aid over the last 50 years.

The result? Africa became a graveyard for failed development projects. Today, its per capita incomes are actually lower than before Gates and his predecessors came carrying their gifts. Africans do have lacks, however -- they lack the property rights to protect their homes and businesses from expropriation, and the institutions based on property rights that provide stability for innovation and investment.

Africans lack the rule of law they need to protect their investments from thugs, dictators and crony capitalists. They need equality before the law to ensure justice is served and not reserved for the well connected. They need access to markets without having to bribe officials for the right to make a living. And they need the tools - the right to know, freedom of the press, and free and fair elections -- so they can hold their lawmakers accountable.

Foreign aid -- including that practiced by Gates -- erodes each of these institutions by freeing African governments from their people. It breaks down the tax system and all the natural checks and balances that taxpayers can use to hold their governments to account.

After version 2.0 goes by the boards, I suggest Gates try, as version 3.0, something never tried before. Instead of spending money in the Third World, thinking he can raise the IQ of Africans, he should spend it at home, by convincing Western lawmakers to drop their protectionist policies that keep Third World goods and services out of Western markets.

Gates's Microsoft built its success in part by tapping into Indian programmers and service providers, in the process also enriching India and Indians. Had Microsoft instead provided India and other Third World countries with feel-good foreign aid programs, he would have helped neither them nor his own company.

Patricia Adams is executive director of Toronto-based Probe International.]]>