China's chance to come clean

By Michael Pascoe

The popping of the commodities bubble
provides the opportunity for China
to abandon its criminal associates and clean up its industries.

There's a common belief that the Chinese word for "chaos" also means "opportunity". Unfortunately it's just a popular myth - unfortunate because it's such a good line and because the present financial crisis does indeed contain plenty of opportunity.

That's especially the case for China which now has a great opportunity to come clean on two highly problematic fronts: the Middle Kingdom's opportunistic support for the world's worst thugs and criminals; and its domestic mishmash of dirty factories and export licences.

Think of the world's worst regimes, its most bloody and ruthless tyrants, the blood-sucking murders and thieves who routinely rape and pillage their own people and you'll compile a list of tin-pot dictators and juntas propped up by Beijing.

Wherever there are Western sanctions and pressure being applied on despots, you'll find China happily undermining those international efforts. Zimbabwe, Burma (with plenty of Indian help for the military kleptocracy there as well), Sudan et al all depend on China's willingness to fence what the criminal ruling classes steal.

The big surprise about China sending war ships to the Gulf of Aden is that they're allegedly going to fight Somali pirates - it would be more in keeping with Beijing's record if they intended to trade with them.

So focused has China been on securing natural resources, it would happily deal with the devil himself - Lucifer (TS he means :-) ) apparently has access to plenty of heat energy for a start.

The popping of the commodities bubble provides the opportunity for China to abandon its criminal associates. With the mania taken out of the resources scramble, China has the capital and the presence to start trading a little ethically.

And that could reasonably become one of the conditions for allowing more direct Chinese investment in Australian resources projects. After all, would you want to jump into bed with someone who also sleeps with Sudan's Omar al-Bashir or Zimbabwe's Robert Mugabe? (Nooope I am jealous)

(And whether you care for cricket or not, Peter Roebuck's excellent piece on one aspect of South African-supported Zimbabwean corruption is a most educational read.)

Then there's China's internal dirty business - its literally dirty business.

During the boom times of 12% growth, countless inefficient and filthy factories continued to pump out pollutants of every type. They still are, but with the slowdown reducing production, Beijing has the opportunity to see that it's the worst polluters that close down as demand lessens.

It's axiomatic that the most inefficient steel mills, for example, are also the worst polluters. Good riddance to them - and the cleaner and more efficient mills will benefit from their absence.

Rather than causing the abandoning or delaying of Beijing's five-year plan to reduce pollution, a period of slower growth has the potential to speed it up. (There's an echo here somewhere about Australia and greenhouse pollution, but let's stick to China for now.)

China has made the best of mass dislocation before and can do so again.

To mark the 30th anniversary of Deng Xiaoping's opening up of the economy, China's official media listed the "top ten catch phrases" of the three decades.

Right up there as the No. 2 catch phrase, two places ahead of "It doesn't matter if the cat is black or white, so long as it catches mice", is "Be laid off and get re-employed", as Xinhau reports:

"To adapt to the market economy and improve competitiveness of state-owned enterprises (SOEs) in the 1990s, China began restructuring.

"Encouraging mergers, standardising bankruptcy, laying off and reassigning redundant workers, streamlining for higher efficiency was a guideline in the SOEs reforms.

"No official statistics show how many workers were laid off during that period, but experts estimate the number could be tens of millions.

"To avoid social unrest and help most of those workers find new jobs, the Chinese central government offered occupational trainings, small loans and preferential tax policies."

And that's just Xinhua's version of events. The cadres once again have their work cut out to "avoid social unrest" as the economy adjusts and some of that adjustment needs to be in their own red tape.

Just as various surveys have shown that Australia's best companies tend to be exporters and our exporters tend to be our best companies, China's export-oriented factories are generally of a higher order than those dedicated to the domestic market.

Unlike Australia, many of China's exporters are not licensed to supply their domestic market.

There's been plenty of coverage of export orders slowing and factories shutting, but not of the challenge for the bureaucracy to reform its licensing system and unleash its full export capabilities on domestic consumers.

Of course none of this is the stuff of magic bullets, but they are another dose of "Reform and opening up" that can help towards a reprise of "Rise abruptly" - which is just what Australia needs China to do.

Michael Pascoe is a BusinessDay contributing editor - SMH