Staff editors attended some of the myriad Asia-related talks at Harvard. Their summaries include presentations by Nancy Chen, Anthony Neoh, Lee Ching-Huan, and Elizabeth Remick.

Nancy Chen: "Cultivating qi and the body politic: Chinese Constitutional Revisions and Social Change"

Jin Chen

On October 8, 1999 Professor Nancy Chen gave a rich presentation on qigong, the ancient breathing techniques, and Falun Gong, a sub-branch of qigong, filled with vivid examples and evidences shown in slides, overheads, and video tapes. She explained the background of Falun Gong as a spin off of Chinese qigong, described Falun Gong followers' demonstration in Beijing and the subsequent crackdown, and interpreted them in the social and political context of contemporary China.

The Chinese body politic promotes qigong as an efficient healing practice primarily because it is uniquely Chinese and promotes an important element of state identity. Chinese traditions of healing and inner body cultivation have been very powerful and pervasive for many centuries. Ironically cultivation through qi exercises and meditation provide the very foundations for forging notions of identity that can transcend the fundamental social units of the state.

Falun Gong was founded by Li Hongzhi and is based on an amalgamation of Buddhist meditation, Taoist cultivation, and qigong exercises. The organization claimed not to practice qigong but emphasized instead the spinning wheel of law (referred to as falun) in meditation exercises. The organization of Falun Gong claimed to have millions of followers worldwide and maintained a visible presence in most major cities.

On April 26, 1999 more than 10,000 members of the Falun Dafa organization staged a silent protest outside nanhaizhong, the official state residency compound. The timing of the event was on a Sunday in the spring when several key historic moments of the 20th century were remembered, including the May 4th movement, the tenth anniversary of the Tiananmen protests, and the fiftieth anniversary of the People's Republic of China. The location of the gathering also made clear the intentions of the group. Therefore, this protest immediately became front page news in the international press. The thousands of protesters, mostly in their 40's -60's, lined up silently in orderly rows with designated appointees to speak with onlookers or reporters.

The Chinese government promulgated a massive crackdown on Falun Gong organizers and practitioners in July 1999. Graphic stories of suicides, deaths, and other family disasters such as the castration of a young son by his father was viewed as concrete evidence of Falun Gong's socially disruptive effects. At the beginning of the decade, the Chinese state also carried out a concerted crackdown on qigong masters who were charged with spreading superstition and psuedo-science with "false" qigong practices. Professor Chen argued that the crackdown brought to mind historic responses of various governments to rebellions in China. Specifically, the patterns of denouncement, containment, and ultimately punishment repeated similar actions taken at the beginning of the decade, as well as in other periods. There was a time delay of several weeks before any official actions were undertaken. Then on July 22, over 70 key figures of the Falun movement in China were detained for questioning, while a ban on all practice quickly followed. In the weeks afterward, a highly visible and orchestrated crackdown was conducted. A government produced documentary on the false practices of Falun Gong was aired on television several times. Leading scientist He Zuoxiu spoke out vehemently against the group, denouncing it as a cult and anti-science. While more Falun Gong practitioners showed up to protest the detainment of their leaders, there were swift actions taken to round up any demonstrators immediately.

The emergence of Falun Gong and the eventual crackdown has resonated immensely with sectarian organizations in the Chinese past. Most western media was quick to locate the Falun followers within a long history of resistance movements, including the White Lotus rebels, the Yellow Turbans, and the Boxers. Certainly, key elements such as the presence of a charismatic leader and mental and physical exercises based on qi were noted in all of these groups. Professor Chen argued that several interventions in the late twentieth century illuminated some distinctions of the Falun group from historical sectarian organizations.

She first analyzed the elements or preconditions that are necessary for the spread of charismatic sects. Anthony Wallace noted that charismatic leaders were often at the core of such social movements. The initial conversion or origin of a leader's transformation would often be mythologized and used as a catalyst for the group's progression from small bands of believers to regional and even national organizations with hierarchies of status and power. What further distinguished millenarian movements from other spiritual organizations with charismatic leaders was the persistent belief that the existing world order was troubled, corrupt, and doomed to end. Only through avid participation in the social movement and even at times acts of violence or outright warfare could one be saved from eventual destruction. For several centuries, China has seen the emergence of numerous millenarian movements that have threatened the legitimacy of existing rule and social stability. The Chinese government in imperial and in contemporary periods has inevitably responded with full crackdowns - usually with death for the leaders and re-education for followers.

Professor Chen also highlighted some differences in late twentieth century sectarian movements. Most of the pre- and early 20th century rebellions have been rural based with peasants as the primary participants. The Boxers and the White Lotus rebels were overwhelmingly described as young males. In contrast, the majority of Qigong practitioners, including Falun Gong, tended to be urban based with more or less equal distribution among male and female practitioners at the initial level. Most qigong and Falun Gong devotees in China were notably older retired workers, intellectuals, and cadres - people who were solidly integrated in the socialist system rather than outsiders. Finally the more cosmopolitan travel of qigong masters via circuits of "greater" China meant that the political arena of containment at home has been entirely transformed and is now less effective. Using foreign press coverage as an intervention in the Chinese mainland has meant that the state also needed to respond to a larger audience at the international level.

Professor Chen talked about the impact of the Internet on this crackdown in the end of her presentation. The Internet proved to be a complicated entity for the Chinese government to contain. When the Chinese government announced its ban on Falun Gong sites, letters of protest flooded the site. Even Li Hongzhi posted a letter with his public response to Chinese government calls to extradite him back to China. Within a few days all Falun related websites operating within the mainland were shut down while various official government news sources went online with new accounts about the false and superstitious practices that Falun represented. Access to the Internet for users in China became restricted as many servers were shut down. In sum, the two-month anti-Falun campaign followed a familiar path of declaring war on heterodox rebellion and establishing the legitimacy of the central state with strict countermeasures.

Anthony Neoh: "The Present and Future of Chinese Financial Markets"

Sunny Chu

On October 1, 1999, the 50th anniversary of the founding of the PRC, Mr. Anthony Neoh spoke at Harvard Law School. Mr. Neoh, the former head of the Securities and Futures Commission in Hong Kong, currently serves as an advisor to Premier Zhu Rongji and a Professor at Beijing University.

Mr. Neoh began by noting recent currents in the Chinese financial sector. First, poor incentives overburdened state-owned enterprises. Management, for example, was often immune to bankruptcy, as it held no ownership stake. Second, the Asian Financial Crisis revealed the value of deepening China's capital markets. Capital flow statistics show diverging trends between foreign direct investment and equity portfolio investmentthe former held stable during the crisis, but the latter dropped precipitously. Mr. Neoh noted that $149 billion in equity investment was withdrawn between 1996 and 1998, $137 billion of it by commercial banks. Deeper capital markets would insulate the region by providing more long term investors and more stable capital. Since 1990, China had been working toward this by lowering its external debt, increasing the term period of its loans and increasing reserves. Finally, a paradigm shift initiated in 1997, during the 15th Party Congress, opened planners "to develop and consider all [financial] systems" A 1998 constitutional amendment acknowledged the role of the rule of law and put forth the view that the state should encourage more diversity in the economy, through legal protections of the private economy, alienable property rights and rational risk allocation. These suggestions depart significantly from prior views of a state-micromanaged economy.

Mr. Neoh then discussed the case study of the Guangdong Investment Company. After an international audit found the enterprise hopelessly insolvent, it went bankrupt, leaving in its wake several cross-defaults. Interestingly, the state stood aside. When asked why the state did not bail the company out, Premier Zhu responded, "I've had enough. When will we stop?" The premier instead felt that it was more vital to air problems, receive criticism, and learn, so as to better allocate future financial risks. Mr. Neoh suggested that a revival of the private sector would revise the traditional emphasis upon omnipresent state-ownership and achieve such a goal.

Mr. Neoh then outlined critical legal preconditions for viable capital markets. First, risk must be properly allocatedspecifically, through a legal separation of securities and commercial banking systems. Second, all systems must exhibit a greater degree of transparency, in accordance with international standards. He alluded to the fact that few banks in Asia met the Basel standard of preserving capital sufficient to deal with risks. China had difficulty meeting this standard, with protracted disputes over when a loan qualified as a good asset. While accounting standards permitted provisions for bad loans, too large a provision would burden shareholders. Banks throughout Asia were in the habit of lending more money to debtors, simply to recover payments on outstanding loans. This practice, while acceptable in a closed system, was unsustainable in an open system, where default was a very real risk. Finally, in 1998, the state decided to reduce (??) its role in this system, forcing banks to seek more private backing. Private shareholders gained an incentive to police the banks, thus increasing the importance of the capital markets.

Mr. Neoh suggested that the view of capital markets had shifted from one of experimentalism to one of integration in the national economy. This shift necessitated a new regime of proper, consistent, and predictable regulations and policies. On July 1, 1999, such a regime was enacted. Whereas before, to access capital markets, one needed a quota from a government, the new system provided for a more objective review process. Mechanisms such as requiring written reasons for denial, administrative review, an advisory committee to help with the process of application, and objective standards, all created a more professional and transparent administration. Moreover, the money at stake created private incentives to pursue any further reforms needed.

Some other preparatory structural changes are also needed. First among these, in keeping with the notion of transparency, are rules for disclosure, against false disclosure and against insider trading. Mr. Neoh suggested an SEC-like organization to ensure compliance through criminal, civil, and administrative consequences. A finding of liability, though severe, would still be subject to judicial review. As an even more stringent step, Mr. Neoh suggested maintaining positive duties upon intermediaries to ensure compliance with the laws. For example, in one case, an accountant was deregistered for life. The ultimate objective is to create a self-regulating capital market.

Oe persistent weakness, however, is the lack of a private cause of action for investors to protect themselves. One such action, when raised before a Shanghai Court, was dismissed for "lack of a natural causal link" between a false disclosure and an investor's loss. Mr. Neoh proposed that such a change, along with injunctions to protect minority shareholders, would make the system even more sound. Paired with these projects is the necessary creation of a "thick layer" of practitioners to counsel compliance.

Mr. Neoh optimistically predicted that the market will grow to great importance, as laws and investments develop. Insurance fund investing and privatization of pension funds and social security might predictably follow. He hoped that the capital market would grow into a long-term investment magnet, attracting foreign investment and permitting renminbi buying through Foreign Qualified Institutional Investors. These, of course, would require more administration than is currently in place.

In closing, Mr. Neoh justified his silence over Hong Kong, by expressing his lack of worries over the SAR. Hong Kong would remain critical to China, especially as a conduit for institutional investment. The internal tasks which the country now faced are structuring the capital market, developing a layer of supporting professionals, and refining the existing legal system.

Professor Lee Ching-huan, "Labor Activism in Northeastern China"

Victor Shih

Professor Lee Ching-huan discussed the transformation of workers' identity and working class politics in the wake of economic reform in China. First, Professor Lee argued that recent reform of the state sector triggered three processes: the making of a global worker, the re-making of a socialist worker, and the un-making of redundant workers. Second, she argued that the promulgation of labor regulations has emboldened workers to use them as a legal basis for protest against local situations. In other words, the norms and principle of the rule of law now frame workers' actions. She cited several examples of this phenomenon. In Northeastern China, where she conducted her research, she observed instances of petition drives, sit-ins, and even investigations against local violation of national labor regulations. These protest activities were typically triggered by the promulgation of a new labor law that the local enterprise or government was violating. In other words, workers used national laws to legitimize their protest against local authorities. However, protesting workers refused to make a coalition with disgruntle workers in other factories for fear of violating state security laws. Since these protestors tended to be pensioners, the local government has been reluctant to carry out any kind of crackdown. Professor Lee noted that, in addition to the emergence of a legal culture among workers, labor activism also signified the emergence of a class society, with the state, workers, and management being the major actors. Professor Lee also provided some alarming figures about unemployment in the northeast. She estimated that unemployment in reality is likely to be between 19% and 41%.

Professor Elizabeth Remick, "Prostitution and Taxation"

Victor Shih

In this talk, Professor Remick discussed the relationship between prostitution tax and local state building in early 20th century Guangdong. According to her investigation, even though provincial level government did not rely heavily on prostitution tax, county and municipal governments, including that of Guangzhou and other big cities, relied heavily on prostitution tax to finance state building efforts, including the building of schools. She also found that the need to monitor prostitution revenue and collect prostitution tax in itself extended the reach of the state downward, as local governments created new agencies and contracted tax farmers to conduct such activities. Prostitution tax came in a variety of formats and was collected in some 40% of the counties in Guangdong Province in the 1920s. The revenue collected from prostitution tax was particularly important for state development in poorer counties, since they had few other sources of revenue. Professor Remick is still in the midst of her research and is grappling with issues including the role of triad societies in prostitution and its taxation and why prostitution took off as a business after the turn of the century.