Black swans are a part of life. They are the term given by trader and author Nassim Nicholas Taleb to the unexpected, random, unpredictable events that disrupt models and forecasts, and make fools about economists and analysts. SARS was a black swan, and so was 9/11. So are SocGen’s troubles and Obama’s surge. Who could have predicted them? Who could have predicted the snow and traffic madness that hit China around the lunar new year?

Taleb’s book on the subject, Fooled by Randomness, is a must-read. He often gives the impression of being smug ands arrogant, but he’s right that a wise investment strategy has to take into account the unknowable – the random event that shifts a situation in a fundamental way, upsetting predictions happily or more usually tragically.

The government dodged a bullet for sure in the middle of the snow. It was the first serious black swan to hit China since SARS in 2003, and the fact that there was no disaster – no headlines reporting 50 dead in a stampede at Guangzhou railway station – was a pleasant relief and even a surprise.

It is worth remembering as the GDP train speeds towards another solid year of 10% growth that China is still susceptible to more black swans. Overall, it is probably true that the more mature, regulated and transparent a society, the less chance there is of seriously negative black swans. In those terms, China is in better shape today to ward off the birds than it has been for a long time.

But just as SARS got its start, it would seem, in a civet cat cage in a market in Guangzhou, what else is brewing out there? Who knows? Another religious cult? An environmental disaster somewhere no one thought of? A stand-off between the authorities and middle class property owners that turns nasty? A sudden stock market plunge? A couple of back-to-back airline crashes?

This is not a doomsday prediction, just a reminder that the unexpected is to be expected. China got over the snow pretty easily, but still has an endless capacity to surprise. It is worth keeping in mind.

It’s never good sign when someone stares past your shoulder while you’re trying to interview them. The finer points of economics are, well, fine, and so when I fail to grasp the nuances it’s understandable that those well-schooled in numbers might turn away in despair.

This appeared to be happening earlier today during an audience with an economist high up in Hong Kong’s International Finance Centre… until the economist shouted, “Hey, look at that!” I turned to the window behind me and saw a large bird of prey (I’ve since been informed it may have been a kite) sitting on the sill outside.

This may be a regular occurrence for those who pay a chunk of change for space at IFC but neither the economist or myself can call the building a home so it was a bizarre twist to an otherwise routine conversation about Southeast Asia’s fear of being overwhelmed by China. In a way, it was quite apt. (All we needed was for the bird to start circling menacingly above a small mouse called ASEAN…)

Needless to say, we both reached for our mobile phones…

It’s not easy being an old China hand. There’s a lot of competition to be a ‘China expert’ these days, and a lot of it isn’t just eccentric Sinophiles and orientalists. Which brings us to Access Asia’s weekly newsletter, which is published by the market research company founded by consummate China expert Paul French. The newsletter’s theme is n00b-bashing and its latest edition was no exception. Here’s an acerbic, and bitingly funny, excerpt:

China for Dummies…
Some Suggestions

Last week we got moaned at a bit by the rather serious authors of Doing Business in China for Dummies, who felt we were a little flippant and derogatory about their book. Of course we were, due to the dumb title, but apparently it’s quite good, according to the authors – surprise, surprise. Which got us thinking about other possible titles in the Dummies series that could be of use to all you people analysing and trading in China. You might even care to write one yourself, if there is anyone left in China who’s been here for more than 5 minutes and hasn’t written a book yet.

o Fake Eco-cities in China for Dummies – by Arup

o Lead Toys for Dummies – by the Mattel China Sourcing Team

o Limiting Workers Rights for Dummies – By AmCham Shanghai

o Creating Traffic Jams and Toxic Air for Dummies – by GM and SAIC

o Getting China Spectacularly Wrong for Dummies – by Will Hutton

o Chinese Pension Funds and Their Various Uses for Dummies – by Chen Liangyu (retired)

o Doing ‘Business’ on Tongren Lu and/or Sanlitun for Dummies – by some very experienced but somewhat overweight German businessmen

o Irrational Exuberance in China for Dummies – by selected consultancies run by MBAs in China

o Urban Sprawl for Dummies – by the Shanghai Property Developers Association

o Moist Cardboard and its Culinary Applications for Dummies – by the Beijing Jiaozi Producers Association

o Formaldehyde for Dummies – by the China Beer Brewers Federation

o China’s Stock Markets for Dummies – by Mrs Wang, Our Office Cleaner

o Negotiating with the French for Dummies – by the Chairman of Wahaha

We carried a bit of news today in the daily briefs about a major victory in the global intellectual property rights battle. Karaoke lounge owners are - perhaps reluctantly! - coming to the rescue of the beleaguered record companies. KTV lounges will have to pay a karaoke copyright fee starting some time later this year. Boybands that have been buried by the sands of time - I’m talking to you, Michael Learns To Rock - rejoice!

A slightly macabre post today. The news of toy company boss Zhang Shuhong’s suicide in the wake of Mattel’s first global product recall brought to mind another recent suicide, also apparently caused by external pressures. On June 3, Song Pingshun, formerly Tianjin’s representative to the Chinese People’s Political Consultative Conference, was found dead in an apparent suicide as he was being questioned for corruption.

The 61-year-old Song’s rank was equivalent to that of a cabinet minister, because of Tianjin’s economic clout, according to Reuters. Song had held a number of powerful positions in the city over the course of his career, having been vice mayor, chief of police and party official in charge of the judiciary and law enforcement.

Song was expelled from the party posthumously in July, a rare disgrace. From China Daily:

The CPC Central Commission for Discipline Inspection decided to take the rare step of posthumous expulsion after finding that Song had “abused his public power to seek benefits for his mistress, seriously violating CPC discipline.”

“Song, morally degenerate, kept a mistress and helped her obtain money through illegal means,” the discipline watchdog said.

Talk about flogging a dead horse!

Cheeky feline blogger Black and White Cat makes some excellent points about the mysterious circumstances surrounding Song’s death, including the fact that mainland media took nearly a month to report it, and that initial reports couldn’t even determine whether he had suffocated himself or leaped out of a building.

Whether it’s business or politics, it seems suicide is a new way out.

The cover story in the August issue of China Economic Review looks at how certain companies are positioning themselves to leverage the marketing opportunities created by the 2008 Olympics.

Obviously, a host of other firms - most with no official Olympic ties whatsoever - are going to extremes to cash in on the Olympics story. They include, it seems, a wildlife research center in Chengdu, in southwestern China. Staff at the center are sculpting Olympic souvenirs out of panda dung, of which they are blessed with 300 metric tons each year.

“We used to spend at least RMB6,000 a month to get rid of the droppings, but now they can prove lucrative as half of them will be sold as souvenirs,” said Jing Shimin, assistant to the director of the center.

And don’t worry about the smell.

“They don’t smell too bad because 70% of the dung is just remains of the bamboo that the pandas are unable to digest.”

Food safety in China has always been a concern but that concern has been whipped up into an international frenzy recently by the media. Abroad, the concern is about the safety of Chinese imports. Here in China, there was a kafuffle about an investigative report that purportedly showed dumplings made of cardboard being sold in Beijing.

Now a new food class must be approached with caution. In Beijing again, a “high-ranking” South Korean diplomat died after eating a sandwich from a shop near his office. He suffered a stomach-ache and diarrhea after ingesting the food item.

The Beijing hospital conducting the postmortem said only that results would be out in a month.

This makes me rethink the wisdom of having eaten a sandwich I just bought from a shop near my office.

I originally came across this article on the website of the Straits Times, Singapore’s main paper, which is pay-only, and there were some comments left by readers. Since Beijing will be host to plenty of tourists and foreigners next year, their comments might be worth reading: (more…)

China’s a source of low-cost workers, but no one said anything about slavery — until now, that is. This week has seen a slew of slave, forced and child labor stories in the media. It’s making all those analogies of modern-day China with the Dickensian image of Industrial Revolution-era England ring truer than ever.

The big one was the discovery of nearly 400 slaves in Shanxi and Henan province brick kilns, including 29 children. They were found in horrific condition, having survived regular beatings, 16-hour work days and starvation.

Then there was also the allegation that children, some as young as 12, were being forced to manufacture Olympics merchandise — caps and bags, to be precise.

In both cases authorities were caught flat-footed. The ponderously named BOCOG (the Games’ organizing committee) simply said that the factories hadn’t told them they were using child labor — which Dickensian slave master would? — and that they would investigate. The Public Security Ministry admitted today that they had known about child labor cases three years ago, but hadn’t done enough to stop its “spread”.

There’s no question that the central government would stamp out these cases if it knew about them, but all the same they beg the question: What part did the constantly rising pressure for low-cost production in China have to play in these terrible cases of exploitation and abuse? Also, were these cases symptoms of systemic opacity and corruption, or simply unstoppable instances of rogue abusers? The upshot is we can’t rule out the former until the system actually changes.

On a side note: Check out this post by Positive Solutions, the fly on the wall blog by a foreign English copy editor at China Daily, about the slavery cases implications for investigative journalism in China.

We get various inquiries via the China Economic Review website and are happy to receive them. We are even happier if we can actually help. This is easier in some cases than in others.

Top of this month’s “most curious” list is the following from Singapore…

Message:Will like to enquire how to contact Bao Xishun, World Tallest Man. Like to invite him over to Singapore for a Major Launch. Please advise. Thank you

We have to admit knowing very little about Bao Xishun, apart from the fact that the former People’s Liberation Army basketball player (kind of inevitable, really) is, at 7 feet 8.95 inches, more than two meters taller than his wife. Also, as we discovered at the end of last year, Bao is not unknown for his kindness towards animals.

If anyone wants to tell us his phone number, those folks in Singapore would no doubt be absolutely delighted. Quite what they want him to launch remains a mystery. Perhaps it’s a rocket…

So it’s farewell to Chinese Foreign Minister Li Zhaoxing, who is to be pensioned off at the age of 66 (a year beyond the official ministerial-level retirement age of 65).

Obviously, Li has been at the focal point of a number of controversial incidents relating to Chinese foreign policy over the years and his successor will likely face similar challenges. Given the current state of US-China relations, it’s no surprise that the new man will be Yang Jiechi, a former ambassador to the US and a long-time friend of the Bush family (he was George H.W.’s translator for a China visit in 1977).

As Li shuffles off towards a tree-lined compound probably somewhere on Beijing’s west side, how should we remember him (apart from the fact he is the current administration’s best known amateur poet)?

How about this discussion he had on an internet chatroom in 2003. It was the first time a senior government official had taken part in an interactive chat and, while most of the questions focused on foreign policy, a SCMP report highlighted some more personal exchanges…

Participant 1: “People are not too keen about your looks. What do you say?”

Li: “My mother would not agree with this view. She is an ordinary woman in a village in Shandong province who once made shoes for the communist army. She is quite proud of the way I look.”

Other participants rushed to his defense…

Participant 2: “Although some people have not said anything flattering about your looks, to us women you are a very special and charming man. In the arena of foreign policy you have made us see the beauty of the Chinese man.”

Bless…