Foreign Policy
-
With a new government now in place, what are the prospects for financial reform in China, will interest rates become market-based, will the Renminbi become convertible, will banks begin to price capital economically? The talk explores these themes and discusses some of the obstacles to change that the new government faces.
 
At its core China's financial system is all about its banks. They are the provider of capital to all sectors of the Chinese economy, whether by outright loans or acting as both underwriter and principal investor in the country's growing bond markets. They operate now, as they have always operated, within the narrow framework of interest and currency rates set not by markets but by administrative fiat. For most of their history they have acted as simple conduits of capital based on an economic blueprint contained in a central plan. Some 15 years ago the entities then called specialized banks began to be restructured into what were meant to be commercial banks modeled after international, and particularly, US best practice. The outbreak of the global financial crisis not only called into question this ongoing effort, the massive economic stimulus had the effect of washing away the past decade long effort to transform what had been policy banks into more economically-oriented commercial banks. 
 
Please click here to download the talk slides. 
 
ABOUT THE SPEAKER

Dr. Carl Walter has contributed articles to publications including Caijing, the Wall Street Journal and the China Quarterly. He is also the co-author of Red Capitalism: The Fragile Financial Foundations of China's Extraordinary Rise (2012) and Privatizing China: Inside China's Stock Markets (2005).

Dr. Walter lived and worked in Beijing from 1991 to 2011, first as an investment banker involved in the earliest SOE restructurings and overseas public listings, then as chief operation officer of China's first joint venture investment bank, China International Capital Corporation. For ten years he was JPMorgan's China chief operating officer as well as chief executive officer of its China banking subsidiary.

Dr. Walter holds a PhD in political science from Stanford University, a certificate of advanced study from Peking University and a BA in Russian Studies from Princeton University.

 

McClelland M104
Knight Management Center
655 Knight Way
Stanford, CA 94305

Carl Walter Speaker
Seminars
Paragraphs

Following Pakistan's historic elections held in May 2013, CISAC Visiting Scholar Rifaat Hussein discusses next steps for Islamabad's foreign policy, particularly in relations with India, a new nuclear policy shift, and a more stable presence in South Asia. 

All Publications button
1
Publication Type
Journal Articles
Publication Date
Journal Publisher
The Jinnah Insitute
Authors
-

Catherine Ashton will be introduced by Gerhard Casper.

 

Co-sponsored by CISAC, Hoover Institution and CREEES.

CISAC Conference Room

Catherine Ashton High Representative of the Union for Foreign Affairs and Security Policy of the European Union; Vice-President of the European Commission Speaker
Seminars
Authors
News Type
Q&As
Date
Paragraphs
Q&A with FSE visiting scholar and food aid expert Barry Riley.

President Barack Obama’s 2014 budget proposal promises significant food aid reform that will enable the United States to feed about 4 million more people without a significant increase of the current $1.8 billion spent on feeding the world's most hungry. Since the food aid program's inception in 1954, the U.S. has helped feed more than 1 billion people in more than 150 countries, and remains the largest provider of international food aid.

The intention of the reform is to make food aid more efficient, cost effective, and flexible. It aims to use local and regional markets to lower the cost of food and speed its delivery, and calls for the use of cash transfers and electronic food vouchers.

The proposed reforms would also end monetization—the sale of U.S. food abroad to be sold by local NGOs for cash. This practice has been criticized for hurting vulnerable communities by depriving local farmers of the incentives and opportunities to develop their own livelihoods. Several studies, including one by the Government Accountability Office, found monetization to be costly and inefficient—an average of 25 cents per taxpayer dollar spent on food aid is lost.

Barry Riley, a food aid expert and visiting fellow at the Center on Food Security and the Environment, discusses his perspective on the importance of these new reforms, their chances of passage, and the country's current role in international food aid.

Why is local procurement such an important addition to food aid reform?

An increase of funding for local and regional procurement is the most important programmatic element of the proposed reforms. It would help managers working in food security-related development programs to determine for each emergency what commodities are most appropriate and where they can be procured most quickly and inexpensively. Some studies have shown local and regional procurement of food and other cash-based programs can get food to people in critical need 11 to 15 weeks faster at a savings of 25-50 percent. Equally important, local procurement is less likely to disrupt local economic conditions, but rather promote self-sufficiency by increasing demand (often for preferred local staples) and incomes of local producers. The move to 45 percent local (and 55 percent tied) procurement is a BIG step, and one to face strong opposition from American commodity interests and U.S.-flag shippers. 

How difficult is it to ensure vouchers and electronic cash transfers are getting into the hands of people that really need the aid?

Vouchers (and similar urban coupon shops) have been used many times over the past decades as a food transfer mechanism (also sometimes used in food for work programs) enabling the recipient to trade the voucher(s) for foodstuffs when it is most convenient or when they are most needed. Electronic vouchers are new, and how well they work depends on local situations. In places like urban Latin America, Africa and India, it probably could be made to work quite well; the technology is evolving quickly that would enable this sort of transfer mechanism.  

Rural Ethiopia, Burkina Faso, Central African Republic, Malawi – probably not so well. I’m admittedly skeptical that electronic transfers of purchasing power to remote areas would be sufficient in most cases to motivate traders to move food to these hungry areas. Their risks are extremely high and, in my experience in Africa, traders will only deliver food to remote rural areas (inevitably over very bad roads) if they can command prices considerably higher than costs plus a high risk premium.

Why aren’t international food aid organizations more in favor of direct dollar support for local operating costs?

There is (and has long been) opposition among many of the NGOs to the President’s proposal to replace “monetization” with a promise of on-going direct dollar support for the local operating costs of NGO food security-related projects. They believe it will continue to be easier to get Congress to approve money to buy American food commodities to ship overseas than to get approval for dollars to ship overseas, particularly in light of tightening budgets. These NGOs have tended, over the years, to receive a sympathetic ear from Congress.

The proposal shifts oversight of the food aid program from the Agriculture Committees within the U.S. Department of Agriculture (USDA) to the Foreign Affairs/Relations Committees of the State Department’s U.S. Agency for International Development (USAID). What is the likelihood of Congress approving this transfer?

The chance of that happening, in this of all Congresses, is about the same as winning the Power Ball Lottery. Crusty committee chair-people are extremely sensitive to reductions in their empires and the agriculture committees – especially in the Senate – are powerful committees. On top of that, there are so many elements in the overall 2014 federal budget creating heartburn on the Hill that food aid considerations are far, far, far down the line. The best the President is likely to get in the present divided Congress are hearings and a continuing resolution of some sort.

What did you wish to see in the food aid reform proposal that was not addressed in this budget?

Change, if it ever comes, will likely be incremental and halting. I’ll be happy to see any step, however small, in the right direction. The total end of tied procurement would be at the top of my wish list. Even more important, perhaps, iron-clad, multi-year commitments of funding to food security programs intended to overcome long-term institutional impediments to achieving enduring food security in low income food deficit situations…and sticking with such commitments for 15 years.

What role does food aid play in advancing American foreign policy goals?

Most importantly, by being the single largest source of food commodities to the World Food Program in confronting disaster and emergency situations. Food support to American NGOs has been under-evaluated over the past 40 years. I’ll be talking about this later in the book I am writing, but these small projects were all that kept agricultural development (and early food security efforts) going in many small countries during the “dark decades” when international finance institutions and bilateral donors were not financing agricultural development. There are valuable on-the-ground lessons in that NGO food-assisted experience still waiting to be assessed.

Let me add, given what we know about the onset of serious climate change in the decades to come, the need to supply large amounts of food to populations suffering severe food deprivation will probably grow in the future. Where will the food come from and who will pay for those future transfers?

While the U.S. remains the largest provider of food aid, what can the EU and Canada teach the U.S. about food aid policy?

Donors hate to think that other donors have something to teach them. But, of course, they always do. The Canadian and European experience with food aid is best summed up in the way their objective has come to be restated over the past 15 or so years: not “food aid” but “aid for food.” The purpose of assistance intended to improve food security is to improve either, or both, availability and access over the long term (leave nutrition aside for a moment).

European and Canadian assistance can be much more flexible in choosing the instruments – food, cash, technical assistance, training, institutional strengthening, public policy, public-private cooperation, etc. – required to achieve a realistic food security goal which I would describe as pretty good assurance that most people can get their hands on the food they need most of the time. Commodity food aid, in some form – or the promise of its ready availability when needed – will probably need to be part of the total array of inputs required for the several years needed in particular food insecure countries to achieve that “pretty good assurance.” Europe and Canada are closer to understanding this and have become appropriately flexible in concerting resources to get it done. That’s the lesson.

Hero Image
USAID wheat logo
All News button
1
-

The United States spends hundreds of billions of dollars on transforming the international landscape through military force in order to enhance America’s national security. But is there any other way? This lecture explores America`s Cold War experience in dealing with the communist states of Eastern Europe in an effort to make them less tyrannical and less hostile to the Western world. The focus will be on economic and psychological warfare, cultural and economic border penetration, and diplomacy as a tool of coercion in particular. The presentation also analyzes these policies in the light of the ideology, goals, strategies and tactics employed by the other side, while also considering the difficulties U.S. policy faces in adequately responding to external challenges. The discussion touches on the changing goals and strategies of U.S. foreign policy in Eastern Europe within the national independence/stability paradigm.

Co-sponsored by the History Department

Building 200 (History Corner)
Room 307

Laszlo Borhi Fulbright Visiting Professor at Indiana University, Bloomington and Senior Research Fellow Speaker the Institute of History, Hungarian Academy of Sciences
Seminars
-

Speaker:    Dr. Carl E. Walter, Author of “Red Capitalism”

Moderator:  Michael Harris, President of Finance, Ambow Education

Until China began its highly successful reform effort in 1978, banks as institutions hardly existed, they were mostly a channel to provide funding to state enterprises. Yet after the economic reform in the 1980s, there was a rush of banking privatization and this enthusiasm to drive economic growth led to excessive bank lending and high rates of inflation in the 1990s. Following the Asian Financial Crisis and the collapse of Guangdong International Trust and Investment Co., a single party committee for each of the big state banks was created. The objective was to build relatively independent banking institutions with centralized management structures, thus forming special bond between the Party and Banks in China. Dr. Walter will discuss the modern evolution of China’s banks and the challenges in transiting to a more open, consumption-based model of economic development.

Carl E. Walter has worked in China′s financial sector for the past 20 years, participating in many of the country's financial reforms. He played a major role in China′s groundbreaking first overseas IPO in 1992 as well as the first listing of a state–owned enterprise on the New York Stock Exchange in 1994. He held a senior position in China′s first joint venture investment bank where he supported a number of significant domestic stock and debt underwritings for major Chinese corporations and financial institutions. More recently, he helped build one of the most successful and profitable domestic security, risk and currency trading operations for a major international investment bank. He holds a PhD from Stanford University and a graduate certificate from Beijing University.

Stanford Center at Peking University

Carl E. Walter Author of "Red Capitalism" Speaker
Michael Harris President of Finance Moderator Ambow Education
Lectures
-


** We are currently experiencing some problems with our online RSVP system.  If you have any difficulty registering for this event, please send an email directly to the organizer, Meiko Kotani, via email meiko@stanford.edu. Thank you for your cooperation.  **



 

China has surpassed Japan to become the second largest economy in the world, and is able to strongly impact the global economy, politics and society.  But can China sustain and maintain relatively high economy growth in the future?  Can China surpass the United States to become the largest economy in the world?  Will the "China Growth Model" change?  These questions are now of great concern to the world.  Being a member of the management team of China's leading investment bank for ten years, Tatsuhito Tokuchi will speak on these themes from his China insider point of view.  He will also touch upon the future prospect of the China-Japan relationship and Chinese foreign diplomatic policy, which are the questions that people in neighboring countries are very much concerend about. 


Tatsuhito (Ted) Tokuchi is a Managing Director of CITIC Securities, the largest investment banking in China, and Chairman of CITIC Securities International, a subsidiary of CITICS in Hong Kong.  He is known as an only executive of a native of Japan for large indigenous Chinese companies.  Tokuchi was born in Tokyo in 1952.  In 1964, he went to Beijing with his parents, and there he spent thirteen years of his youth.  Tokuchi joined Daiwa Securities Comapny in 1980 in Japan, and during his twenty-year career at Daiwa, he engaged in investment banking and management of teams in Tokyo, New York, Hong Kong, Singapore and Beijing.  In 2002, he joined CITIC Securities Company as a head of the investment banking division.  Tokuchi received a B.A. in Chinese Literature from Beijing University in 1976, and an M.A. in East Asian Studies from Stanford University in 1985.

Philippines Conference Room

Tatsuhito Tokuchi Managing Director of CITIC Securities in China, Chairman of CITIC Securities International in Hong Kong Speaker
Seminars
Authors
News Type
News
Date
Paragraphs

China’s commitment to agricultural development over the last thirty years has dramatically transformed the country’s economy. Rural income per capita has risen an astounding 20 times after 30 prior years of stagnation. Its poverty rate (US$1.25/day) has dropped from 40 percent to less than five, and 350 million rural people between the ages of 18-65 are now working in the industrial or service sector, enjoying rising wages and new economic opportunities.

This rapid transformation is largely the result of three key agricultural policy decisions: putting land in the hands of farmers, market deregulation, and major public investment in the agricultural sector. Although China must now contend with extreme inequality, high levels of pollution, and an aging farming sector there are still lessons to draw from China’s experience that could hasten the transformation of other developing countries.

China expert and agricultural economist Scott Rozelle broke these lessons down at FSE’s fourteenth Global Food Policy and Food Security Symposium Series last week, opening with an underlying theme of the series.

“Growth and development starts with agriculture,” said Rozelle. “Agriculture provides the basis for sound, sustained economic growth needed to build housing, invest in education for kids, start self-employed enterprises, and finance moves off the farm.”

To prove this point he referenced China’s ‘lost decades’ (1950s-1970s) when 80 percent of the population lived in the rural sector and relied on communal, subsistence agriculture. Poor land rights, weak incentives, incomplete markets and inappropriate investments left the average rural farmer poorer at the end of 70s than they were in the 50s with almost no off-farm employment growth.

So what changed? Incentives, market deregulation and strategic investments by the state were key.

Creating the right incentives

In 1978 the Chinese government broke the communes down into small “family farms” such that every rural resident was allocated a small parcel of land. A family of five farmed an area the size of a football field. While they did not own nor could sell the land, they had the right to choose what crops and inputs they used and the right to the income generated from their land.

“Incentives are important, and can be enough in the short run,” said Rozelle. “Hard work led to money in the pockets of farmers and China was off.”

“Every two and half years China added another California in term of agriculture,” said Rozelle.

Between 1979 and 1985 productivity for wheat, maize, and rice went up 50 percent using the same amount of labor, land and inputs. Agriculture across the spectrum has grown at an astounding rate of 5 percent since 1988 (about four times the population growth rate). Livestock and fisheries have grown even faster – accounting for most of the output of the agricultural sector by 2005.

Income growth from farming enabled family members to begin to seek work off the farm. Between 1980 and 2011, off-farm work increased 71 percent with more than 90 percent of households reporting that at least one family member worked off the farm.

Increasing efficiency through liberalization and investment

Another key policy decision was China’s commitment to market liberalization and investment in public goods.

“Markets can be an effective, pro-poor tool of development,” said Rozelle. “A remarkable partnership is formed when you let farmers do production and government do infrastructure…let markets guide decisions.”

The government dismantled state-owned grain trading companies and deregulated trading rules. Prices were set once a week the same day across China to better integrate markets, and eventually prices for major crops closely mirrored those of world prices. Villages began specializing in crops and livestock and incomes of the poor increased. By not providing government input subsidies (e.g, pesticides, fertilizers), traders were incentivized to participate in the market.

“Giving land to farmers and letting the private sector emerge is an easy thing for governments, even without a lot of money, to do,” said Rozelle.

The government provided more indirect market support by publicly investing in better roads, communications, and surface water irrigation. Groundwater was left to the private sector. There were no water or pumping fees nor subsidies for electricity, keeping it completely deregulated. As a result, 50 percent of cultivated land in China is irrigated, compared to 10 percent in the US and only four percent in sub-Saharan Africa.

Finally, China has invested heavily in agricultural research and development (R&D). One percent of China’s agricultural GDP is now invested in agricultural R&D while US investment has fallen over time. US$2 billion alone goes to investments in Chinese biotechnology.

Despite major investment, China only has one major success story to show for so far. The introduction of Bt cotton led to a significant drop in pesticide use (with important health benefits for farmers), and drop in labor and seed price; resulting in a huge 30 percent increase in net income.

“GM technology benefits exist but big policy decisions still need to be made in the face of much resistance both in China and elsewhere in the world on its application,” said Rozelle.

Status of China’s economy

China has largely solved the country’s macro-nutrient food security problem at the household level (>3000 Kcal/day/person) and millions have been lifted out of poverty. Practically all 16-25 years old are now working off the farm.

“This is a real transformation, and one that could not have happened without a major investment in agriculture,” said Rozelle.

While China’s agricultural accomplishments have been major, Rozelle recognizes the system is far from perfect. For starters, there are serious food safety concerns due to lack of traceability. An astounding 98 percent of Beijing consumers think their food is tainted, said Rozelle.

Water is being pumped like crazy and farmers are aging. The younger generation is neither willing nor interested in following in their parents’ farming footsteps. To make up for a labor deficit farmers are applying huge amounts of fertilizer on their land with serious environmental consequences. As a result of changing demographics and an increasing demand for meat, fish, fruits and vegetables, China is likely to be a net importer of food in the long run.

China also faces major urban and rural inequality issues. Even though wages have risen, inequality has not fallen, largely a result of China’s decision not to privatize rural land.

“Rural people have no assets on which to build wealth while urban people were given assets in the form of housing,” said Rozelle. “Housing prices in major cities in China now rival those in the Bay Area!”

The Chinese government fears losing control of the land, but this comes at a price of less individual incentive to invest and inability to build larger farmers. As agricultural growth slows, Rozelle worries high levels of inequality could lead to instability.

Adding fuel to the fire, investment in rural health, nutrition, and education remains far from sufficient. Only 40 percent of the rural poor go to high school resulting in 200 million people who can barely read or write.

“What’s going to happen in 20 years when low skill manufacturing jobs move to other countries?” asked Rozelle. “The rural, uneducated poor are going to become unemployable.”

China’s record leaves room for improvement, but presents a strong case for supporting smallholder agriculture. For those countries emerging out of their own lost decades, smallholder agriculture should remain a primary focus of investment and development.

Hero Image
china rice Sevents
All News button
1
-

Abstract
Since the early years of her career working with children in some of the direst situations in Sri Lanka and Bangladesh, Susan Bissell, UNICEF’s Chief of Child Protection, has witnessed children being targeted for such exploitative practices as human trafficking, recruitment into armed forces, and child labor. Violations of the child’s right to protection take place in every country and are massive, under-recognized, and under-reported barriers to child survival and development, in addition to being human rights violations. Children subjected to violence, exploitation, abuse and neglect are at risk of death, poor physical and mental health, HIV/AIDS infection, educational problems, displacement, and vagrancy.

 Protecting children from violence, exploitation and abuse is an integral component of protecting their rights to survival, growth, and development. UNICEF advocates and supports the creation of a protective environment for children in partnership with governments, national and international partners including the private sector, and civil society.  Bissell guides UNICEF’s Child Protection program in 170 countries, working with government officials and other partners to shape child protection policies. During this discussion, she will provide an overview of her role at UNICEF and the work she does to help ensure that governments honor their commitments to strengthen child protection systems and protect children.

In 2009, Susan Bissell was appointed to her current position in New York, heading all of UNICEF’s Child Protection work.  She oversees a team of professionals guiding efforts for children affected by armed conflict, child protection systems strengthening to prevent and respond to all forms of violence against children, and a range of other matters.

Richard and Rhoda Goldman Conference Room

Susan Bissell Chief of Child Protection Speaker UNICEF
Seminars
Paragraphs

The lost decades for China in the 1950s, 1960s and 1970s look remarkably like the lost decades of Africa in the 1980s and 1990s. Poor land rights, weak incentives, incomplete markets and inappropriate investment portfolios. However, China burst out of its stagnation in the 1980s and has enjoyed three decades of remarkable growth. In this paper we examine the record of the development of China’s food economy and identify the policies that helped generate the growth and transformation of agriculture. Incentives, markets and strategic investments by the state were key. Equally important, however, is what the state did not do. Policies that worked and those that failed (or those that were ignored) are addressed. Most importantly, we try to take an objective, nuanced look at the lessons that might be learned and those that are not relevant for Africa. Many parts of Africa have experienced positive growth during the past decade. We examine if there are any lessons that might be helpful in turning ten positive years into several more decades of transformation.

All Publications button
1
Publication Type
Books
Publication Date
Journal Publisher
Center on Food Security and the Environment, Stanford University
Authors
Scott Rozelle
Subscribe to Foreign Policy