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In this report I provide a summary of the work that I have been doing on China’s vegetable economy over the past year. This work, in part, was supported financially by the Western Growers Association (WGA). The funds provided by the WGA were mostly used to support a survey of vegetable producers and wholesale procurement traders in rural China. It also went to support the procurement of a data set that could aid in the analysis of the productivity of China’s vegetable producers. The work that I summarize here, however, is from far more different sources. I greatly appreciate the support of WGA and look forward to continuing to interact with the management and members in the coming years.

To make the material more accessible, I plan on organizing this report by asking a question and then summarizing the answer. In this way I can cover a lot of ground without getting lost in the details. I am more than willing to try on any given aspect of the final report to expand on the issues.

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Scott Rozelle
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The project studies the impact of China's current economic transition on its agricultural economy with special reference to the consequences of trade liberalization and of changing trade flows. The project will track impacts on social conditions and on the environment in China's rural areas as well as on markets in the rest of the world, with particular emphasis on the EU. For this, the research considers (a) the dynamic, rapid pace of the transition; (b) the size and geographical diversity of the country; and (c) the effect of the changes on the rest of the world. The research opts for a quantitative approach, supplemented by qualitative investigations, and focuses on three themes: trade, social conditions, and environment. On trade, the research aims to account for the size of China's trade and take a closer look at trade between the EU and China with scenario simulations over the period 2000-2030, by establishing a linkage between (a) the Chinagromodel, a spatially explicit equilibrium model that comprehensively depicts China's farm sector in 2433 counties, while connecting these through trade and transportation flows; (b) the GTAPmodel of world trade; (c) FEA-27, a model of EU-agriculture for 27 members states. The research on social conditions proceeds by linking geo-referenced household surveys to a population census of China and a detailed geographical data set, relying on a suitable adaptation of poverty mapping methodology, so as to trace impacts at household level. Finally, we use agro-ecological assessment tools to quantify the environmental pressures resulting from intensified livestock industry as well as from intensified horticulture production. Findings on the three themes are subsequently integrated to arrive at policy suggestions that account for efficiency, equity and sustainability considerations. Throughout the project, a policy dialogue and dissemination program, conducted in both China and the EU, maintains communication with policy makers.

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The supermarket revolution has arrived in China and is spreading as fast as or faster than anywhere in the world. As the demand for vegetables, fruit, nuts and other high valued products have risen, urban retailers are finding new venues from which they can sell to the increasing prosperous city residents. However, the experience of many developing countries suggests that there could be serious distributional impacts of the rising of supermarkets. There is concern among policy makers and academics that poor, small farmers might be excluded from market. The main goal of our paper is to understand what types of farmers have been able to participate in the horticultural revolution, how they interact with markets and how supply chains affect their production decisions. Using a unique set of spatially sampled communities in the Greater Beijing area, in contrast to fears of some researchers, we find small and poor farmers have actively participate in the emergence of China's horticulture economy. Moreover, there has been almost no penetration of modern wholesalers or retailers into rural communities. In the paper we document seven characteristics of China's food economy that we believe account for this set of findings.

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The nuclear issue on the Korean Peninsula is one of the greatest challenges facing the global non-proliferation system. Yet the very root of that issue reaches far beyond the non-proliferation system. The Six-Party Talks, involving North Korea, South Korea, the United States, Russia, Japan, and China, bring hope for a peaceful solution between these nations. However, the continued strategic mistrust between the United States and North Korea casts an uncertain light on the struggling negotiations. Yang Xiyu will speak about the challenges of the nuclear issue on the Korean Peninsula, the profound mutual mistrust between the US and North Korea, and China's role in the Six-Party Talks. He will also discuss a possible solution.

Before coming to Shorenstein APARC as a visiting scholar, Yang Xiyu was Director of the Office for the Korean Peninsula Issues in Chinese Foreign Ministry. The office was set up in January 2004, when Dr. Yang was its first director to deal with the nuclear issue on the Korean Peninsula, as well as, affairs relating to the Six-Party Talks. He began his involvement in issues related to the Korean Peninsula in 1994, when he worked in the Chinese Embassy in the United States. During the following years, he took part in the launch of the Four-Party Talks, and was the representative for the Chinese side in the working level meeting of the talks, as well as, a member of the Chinese Delegation in the Four-Party Talks that were held in New York and Geneva.

He was awarded the National Award for Outstanding Contribution to Social Science Studies by the State Council of China, and the Honorable Allowance for National Distinguished Experts.

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Xiyu YANG Visiting Scholar Speaker Shorenstein Asia-Pacific Research Center
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In the past two years, Professor Xueguang Zhou conducted ethnographic research through participatory observations in villages and the township government and in-depth interviews/daily interactions with cadres and villagers. His presentation focuses on the episode of implementing state-sponsored Reforestation Project in the villages and related events to illustrate interactions between villages and the township government, corporatist bases in resource mobilization, and shifting group boundaries and identities.

His research shows that, in rural areas of northern China today, corporatist institutions are still a major organizing basis for resource redistribution and mobilization. In recent years, however, major changes have been underway that put the corporatist institutions under severe strain. As a result, these institutions are becoming fragile, truncated, and marginalized, with great variations among villages and townships. These observations lead him to argue that rural China today is at the crossroads of profound institutional changes, with significant implications for the role of local governments, patterns of social inequality, and collective action.

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Xueguang Zhou Professor of Sociology Speaker Duke University
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The Chen administration has attempted to deal with the growing economic and technological links across the Taiwan Straits through confrontation with and coercion against Taiwanese businesses with investments in the People's Republic of China. These attempts have done little to stop the flow of capital and knowledge from Taiwan to China, but this failure is not necessarily bad for Taiwan even as it is a boon for China. This talk will address in which sectors and in what ways the flow of Taiwanese business activities to China have been beneficial or detrimental to each economy. Looking forward, the talk will also attempt to answer how further integration will benefit each side.

Douglas Fuller has spent over ten years researching technological development in East Asia. Most recently, he completed a doctorate at MIT in political economy. The topic of his thesis was technological development in China's IT industry. For this and previous research, he has interviewed IT firms in Malaysia, Japan, Korea, Taiwan, the People's Republic of China and the US. He has published articles in Industry and Innovation and other peer-reviewed journals.

A wine and cheese reception will follow the seminar.

This is the inaugural seminar of the CDDRL Taiwan Democracy Program and it is co-sponsored by the Walter H. Shorenstein Asia Pacific Research Center.

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Doug Fuller SPRIE Postdoctoral Fellow Speaker
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Rosamond L. Naylor
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This past autumn the Freeman Spogli Institute for International Studies (FSI) in conjunction with the Woods Institute for the Environment launched a program on Food Security and the Environment (FSE) to address the deficit in academia and, on a larger scale, the global dialogue surrounding the critical issues of food security, poverty, and environmental degradation.

"Hunger is the silent killer and moral outrage of our time; however, there are few university programs in the United States designed to study and solve the problem of global food insecurity," states program director Rosamond L. Naylor. "FSE's dual affiliation with FSI and the new Stanford Institute for the Environment position it well to make significant steps in this area."

Through a focused research portfolio and an interdisciplinary team of scholars led by Naylor and CESP (Center for Environmental Science and Policy) co-director Walter P. Falcon, FSE aims to design new approaches to solve these persistent and under-prioritized problems, expand higher education on food security and the environment at Stanford, and provide direct policy outreach.

Productive food systems and their environmental consequences are at the core of the program. While many of these systems are global in character, but they are influenced significantly by differing food objectives, income level, and instruments among nations. The program thus seeks to understand the food security issues that are of paramount interest to poor countries, the food diversification challenges that are a focus of middle-income nations, and the food safety and subsidy concerns prominent in richer nations.

Chronic hunger in a time of prosperity

Although the world's supply of basic foods has doubled over the past century, roughly 850 million people (12 percent of the world's population) suffer from chronic hunger. Food insecurity deaths during the past 20 years outnumber war deaths by a factor of at least 5 to 1. Food insecurity is particularly widespread in agricultural regions where resource scarcity and environmental degradation constrain productivity and income growth.

FSE is currently assessing the impacts of climate variability on food security in Asian rice economies. This ongoing project combines the expertise of atmospheric scientists, agricultural economists, and policy analysts to understand and mitigate the adverse effects of El Niño-related climate variability on rice production and food security under current and future global warming conditions. As a consequence of Falcon and Naylor's long-standing roles as policy advisors in Indonesia, models developed through this project have already been embedded into analytical units within Indonesia's Ministry of Agriculture, the Planning Ministry, and the Ministry of Finance.

"With such forecasts in hand, the relevant government agencies are much better equipped to mitigate the negative consequences of El Niño events on incomes and food security in the Indonesian countryside," explain Falcon and Naylor.

Food diversification and intensification

With rapid income growth, urbanization, and population growth in developing economies, priorities shift from food security to the diversification of agricultural production and consumption. "Meat production is projected to double by 2020" states Harold A. Mooney, CESP senior fellow and an author of the Millennium Ecosystem Assessment. "In China alone, meat consumption has more than doubled in the past generation." As a result, land once used to provide grains for humans now provides feed for hogs and poultry.

These trends will have major consequences on the global environment-affecting the quality of the atmosphere, water, and soil due to nutrient overloads; impacting marine fisheries both locally and globally through fish meal use; and threatening human health, as, for example, through excessive use of antibiotics.

An FSE project is looking at these trends as it relates to intensive livestock production and assessing the environmental impacts to gain a better understanding of the true costs of this resource-intensive system. A product of this work recently appeared as a Policy Forum piece in the December 9, 2005, issue of Science titled "Losing the Links Between Livestock and Land".

Numerous factors have contributed to the global growth of livestock systems, lead author Naylor notes, including declining feed-grain prices, relatively inexpensive transportation costs, and trade liberalization. "But many of the true costs remain largely unaccounted for," she says. Those costs include destruction of forests and grasslands to provide farmland for corn, soybeans, and other feed crops destined not directly for humans but for livestock; utilization of large quantities of freshwater; and nitrogen losses from croplands and animal manure.

Naylor and her research team are seeking better ways to track all costs of livestock production, especially the hidden ones related to ecosystem degradation and destruction. "What is needed is a re-coupling of crop and livestock systems," Naylor says. "If not physically, then through pricing and other policy mechanisms that reflect social costs of resource use and ecological abuse."

Such policies "should not significantly compromise the improving diets of developing countries, nor should they prohibit trade," Naylor adds. Instead, they should "focus on regulatory and incentive-based tools to encourage livestock and feed producers to internalize pollution costs, minimize nutrient run-off, and pay the true price of water."

Looking ahead

The future of the program on Food Security and the Environment looks bright, busy, and expansive. While a varied portfolio of projects is in line for the upcoming year, a strong emphasis remains in the area of food security. Building on existing research at Stanford, researchers are identifying avenues for enhancing orphan crop production in the world's least developed countries-crops with little international trade and investment, but with high local value in terms of food and nutrition security. The work seeks to identify advanced genetic and genomic strategies, along with natural resource management strategies, to improve orphan crop yields and stability, enhance crop diversity, and increase rural incomes through orphan crop production.

Another priority area of research centers on the development of biofuels. Biofuels are becoming increasingly a part of the policy set for world food and agriculture. As countries such as the United States seek energy self-reliance and look for alternatives to food and feed subsidies under WTO (World Trade Organization) rules, the conversion of corn, sugar, and soybeans to ethanol and other energy sources becomes more attractive. New extraction methods are making the technology more efficient, and crude oil prices at $60 per barrel are fundamentally changing the economics of biomass energy conversion. A large switch by key export food and feed suppliers, such as the United States and Brazil, to biofuels could fundamentally alter export prices, and hence the world food and feed situation. A team of FSE researchers will assess the true costs of these conversions.

The FSE program recently received a grant through the Presidential Fund for Innovation in International Studies to initiate new interdisciplinary research activities. One such project links ongoing research at Stanford on the environmental and resource costs of industrial livestock production and trade to assess the extent and rate of Brazil's rainforest destruction for soybean production. "Tens of millions of hectares of native grassland and rainforest are currently being cleared for soybean production to supply the global industrial livestock sector," says Naylor. A significant share of Brazil's soybeans is being shipped to China, where rapid income growth is fueling tremendous increases in meat consumption."

A team of remote-sensing experts, ecologists, agronomists, and economists will be looking at the ecological effects on the landscape through biogeochemical changes and biodiversity loss, the impacts of land clearing on the regional hydrologic cycle and climate change, the economic patterns of trade, and the role of policies to achieve an appropriate balance between agricultural commodity trade, production practices, and conservation in Brazil's rainforest states.

"I'm extremely pleased to see the rapid growth of FSE and am encouraged by the recent support provided through the Presidential Fund for Innovation in International Studies," states Naylor. "It enables the program to engage faculty members from economics, political science, biology, civil and environmental engineering, earth sciences, and medicine-as well as graduate students throughout the university-in a set of collaborative research activities that could significantly improve human well-being and the quality of the environment."

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Diplomatic maneuvering in response to the North Korean nuclear crisis has presented the United States, South Korea, and China each with strategic dilemmas that go beyond the issue of how to address the prospect of a nuclear North Korea. In response to the immediate question of how to denuclearize the Korean peninsula, a complicated triangular relationship between China, South Korea, and the United States has emerged that reflects longer-term strategic anxieties about the future of a revamped security order in Northeast Asia following the resolution of the North Korean nuclear crisis.

Increasingly, these three countries perceive that how the crisis is resolved, and the policies that each member of the triangle is likely to pursue as steps toward resolving the crisis, may influence their relative positions and regional influence after the immediate issue of North Korea's denuclearization--or North Korea's future--has been resolved. Strategic anxieties about the future of Northeast Asia may be emerging as an obstacle that is as serious as apparent North Korean intransigence in explaining the lack of progress in diplomatic efforts thus far. Based on interviews with foreign policy analysts representing each actor in the triangle, the presentation will attempt to explain how each country in the triangle perceives its respective foreign policy choices and how those choices might influence the interests of its neighbors in Northeast Asia.

Scott Snyder is a Pantech Fellow at Stanford University's Shorenstein Asia-Pacific Research Center during 2005-2006 and is concurrently a senior associate in the International Relations program of The Asia Foundation and Pacific Forum CSIS. He spent four years in Seoul as Korea Representative of The Asia Foundation during 2000-2004. Previously, he has served as a program officer in the Research and Studies Program of the U.S. Institute of Peace, and as acting director of The Asia Society's Contemporary Affairs Program. Past publications include Paved With Good Intentions: The NGO Experience in North Korea (2003), (co-editor with L. Gordon Flake) and Negotiating on the Edge: North Korean Negotiating Behavior (1999). Mr. Snyder received his B.A. from Rice University

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Shorenstein APARC
Stanford University
Encina Hall, Room E301
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Scott Snyder is a senior associate in the International Relations program of The Asia Foundation and Pacific Forum CSIS, and is based in Washington, DC. He spent four years in Seoul as Korea Representative of The Asia Foundation between 2000 and 2004. Previously, he served as a program officer in the Research and Studies Program of the U.S. Institute of Peace, and as acting director of the Asia Society's Contemporary Affairs Program. He has recently edited, with L. Gordon Flake, a study titled Paved With Good Intentions: The NGO Experience in North Korea (2003), and is author of Negotiating on the Edge: North Korean Negotiating Behavior (1999).

Snyder received his BA from Rice University and an MA from the Regional Studies East Asia Program at Harvard University. He was the recipient of an Abe Fellowship, administered by the Social Sciences Research Council, in 1998-99, and was a Thomas G. Watson Fellow at Yonsei University in South Korea in 1987-88.

Scott Snyder Speaker
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George Krompacky
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The following is a short summary of the November 29, 2005 presentation by SPRIE Fellow Dr. Xiaohong (Iris) Quan on her study of the research and development done by multinational corporations in China.

Multinational corporations (MNCs) have increasingly located research and development (R&D) in developing countries such as China and India since the 1990s. On the one hand, governments in developing countries are eager to attract R&D to their local economies; on the other hand, developed countries are concerned about losing their competitive advantage due to R&D offshoring. At the same time, intellectual property protection is a growing concern.

What are the MNC R&D labs actually doing in China? Quan noted that her 2004 survey of MNC R&D labs in information technology industries in Beijing found that these MNC R&D labs are not just providing technical support, product localization, or product development for the local market; rather, they are developing products for the global market. Her study documents an emerging spatial division of labor in R&D based on the increasing specialization of R&D activities.

Ensuring returns appropriation

Appropriating returns is essential to continuous R&D investment. However, returns appropriation is not necessarily realized through formal IP protection institutions such as the patent system. As the growing trend of globalization of R&D has evolved to this new stage characterized by MNCs locating R&D labs in developing countries, it provides a good test bed to further explore more theoretical mechanisms of IP protection. Considering the weak intellectual property rights regimes these developing countries typically have, it is crucial for MNCs to find an effective way to protect their valuable technologies thus facilitating returns appropriation from their R&D activities in host developing regions. It is in fact the effective means of IP protection that can greatly assist MNCs' location of R&D offshore, in addition to other well-known incentives such as low cost R&D labor and market attraction.

R&D specialization essential

Using evidence from MNC R&D labs in Beijing and Shanghai, Quan's study proposes that R&D is further specialized within MNCs' global R&D network. Furthermore, IP protection and returns appropriation can be realized through such R&D specialization. The key proposition is formulated as below: 'Hierarchical modular R&D structure can be an effective way for MNC R&D labs to protect their intellectual property and thus facilitate returns appropriation in weak IPR regime developing countries'. This 'hierarchy' includes 'core R&D' and 'peripheral R&D', based on two dimensions--technology value-added, desire and ease of IP protection. While 'core R&D' is mostly done in developed countries, 'peripheral R&D' is conducted in developing countries. Dr. Quan's study suggests that this hierarchical modular R&D structure facilitates the global configuration of MNC R&D labs.

Slides from this presentation can be found at the event link below.

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Meeting the world's energy needs and at the same time reducing emissions of greenhouse gases is one of the grand challenges humans must face in this century. China's situation illustrates the magnitude of the challenge as well as any place in the world. Its economy is growing rapidly, energy shortages abound, and a primary source of energy is coal. This talk reviews China's current and projected future emissions of carbon dioxide, examines alternatives for meeting the combined goals of increasing energy supply and reducing emissions, and describes research underway to provide more options to meet the challenges China faces.

Lynn Orr focuses his research activities on the interactions of fluid phase behavior with multiphase flow in porous media, the design of gas injection processes for enhanced oil recovery, and C02 sequestration in subsurface porous media. In August 2005, Dr. Orr and the Global Climate and Energy Project hosted an international conference at Tsinghua University in Beijing, China, to explore opportunities for collaborative research to integrate advanced coal technologies with CO2 capture and storage in China.

This series is co-sponsored with the Center for East Asian Studies at Stanford University.

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Franklin M. Orr Keleen and Carlton Beal Professor of Petroleum Engineering, Professor, by courtesy, in Chemical Engineering and Director of the Precourt Institute for Energy, FSI senior fellow by courtesy Speaker Stanford University
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