China’s Last Option: Let the Yuan Soar

From FAR EASTERN ECONOMIC REVIEW

China’s Last Option: Let the Yuan Soar
June 2007

by Michael Pettis

After their sold-out concert last month, legendary American
punk band NOFX met with Beijing’s leading musicians at
the trendy club D22. Music is moving forward as quickly as
everything else in this wildly interesting country, and as they
interacted drunkenly with the cream of Beijing’s
underground, members of NOFX expressed surprise at the
dizzying speed of change.
It is probably a safe bet that the FX in the band’s name is not
a reference to foreign exchange, and that the changes they
noted have nothing to do with the financial sector, but it turns
out that a rock band is not a bad metaphor for China’s
markets. Monetary conditions are clearly out of control, and
the country is drunk on excess money. What’s worse, there is
a hangover still to come. At some point China must make a
monetary adjustment, and with so few alternatives left among
policy options, this adjustment is increasingly likely to
involve a one-off maxirevaluation in which the financial
authorities engineer a revaluation of the currency designed to
stop capital inflows without causing a banking system
breakdown.
Why would the authorities do something they have
steadfastly and sincerely insisted they will not do? By
coincidence, the day NOFX performed in Beijing,
newspapers around the world noted with awe the huge $136
billion first-quarter increase in central bank reserves reported
the previous day. This latest number brings total reserves
held by the Chinese central bank to $1.2 trillion. First-quarter
imports amounted to $206 billion, up 18% from 2006
first-quarter numbers (exports were up 28%), so that total
central bank reserves cover nearly 18 months of
imports—well beyond the six- to nine-month coverage ratio
that most economists recommend.
A $136 billion rise in first-quarter reserves—equal to 21% of
first-quarter GDP—is by any measure an astonishing
number. For comparison, during all of 2003 China’s reserves
grew by $117 billion, to an already hefty $403 billion. At the
time there was a serious debate about the implications of this
level of reserve growth. Many commentators expressed
concern that the accompanying monetary growth—which
takes place as the People’s Bank of China, the country’s
central bank, is forced to fund the purchase of reserves by
issuing currency or central bank bills—was beyond the needs
of the economy. Such rapid monetary growth was likely to
lead to excessive loan growth at the nation’s already weak
commercial banks, to overinvestment in a number of
industries, including real estate, and perhaps eventually to
inflation, which once ignited would be hard to control.
Since then, reserve growth, and with it the growth in money
supply, has accelerated. In 2004, reserves were up $207
billion to $610 billion. In 2005 they increased by another
$209 billion to $819 billion. In 2006 reserves climbed $247
billion to just over $1 trillion, comfortably ensconcing China
in the position of holding the world’s largest hoard of
central-bank reserves. Add to this the first-quarter growth of
2007, and it becomes clear that growth in reserves is out of
control, and with it, growth in the nation’s money supply.
What explains this first-quarter jump, which surprised most
China-watchers long inured to surprising numbers? Part of it
of course comes from China’s rising trade surplus, which hit
$46 billion in the first-quarter of 2007, double last year’s $23
billion first quarter surplus. China also received $16 billion
in foreign direct investment during the period. Although the
composition of the central bank’s reserves is a secret, Brad
Setser, senior economist at Roubini Global Economics,
estimates that currency appreciation, mainly of the euro, may
have added $5 billion, which when aggregated to another $10
billion to represent returns on investment, still leaves nearly
$60 billion unaccounted for.
In order to head off concern that this might represent a
resurgence of hot money inflows, Chinese authorities took
the unusual step of trying to explain the first-quarter surge.
Three days after the news was released, Wu Xiaoling, a
deputy governor of the People’s Bank of China, speaking at a
seminar in Guangzhou, said that the unwinding of swap
agreements between the central bank and Chinese
commercial lenders had resulted in foreign exchange coming
back onto the PBoC’s books during the first quarter. In
addition some of the funds raised in offshore initial public
offerings by Chinese banks and other enterprises had also
been brought back onshore, driven by the desire to take
advantage of the rising yuan.
Wu Xiaoling’s comments eased market concerns somewhat.
However they gave no information on the actual size of other
inflows (although these were probably still small), and they
didn’t address the fundamental problem that these first
quarter inflows, which included capital inflows that were a
postponement of inflows generated in 2006, will still have an
adverse monetary impact. Excessive monetary expansion is
as much a stock problem as it is a flow problem, and the fact
that reserves are growing rapidly is much more important
than the precise timing of the initial cause of the growth.
The Money Trap
What the first quarter numbers did highlight is that for the
past several years China has been caught in a money trap,
and it is not at all obvious how it can escape. The trap
consists of self-reinforcing structures in which cause and
effect are intertwined. At the heart of this is the trade surplus.
China’s trade surplus means, by definition, that it produces
more than it consumes. If it produces substantially more than
it consumes, as it currently does, the Chinese economy is
forced to run a substantial trade surplus.
This trade surplus is self-reinforcing because it generates
too-rapid growth in reserves as dollars pour into the country
through the export account. As the People’s Bank of China is
forced to buy the incoming dollars, it expands the domestic
money supply, either by creating money or by issuing a close
substitute for money, short-term central bank bills. The
money creation itself forces further expansion in investment,
either directly or through the banking system, which results
in ever-greater production and with it ever-greater trade
surpluses.
The result can be seen in the numbers. For all the attempts to
manage the process over the past five years, including
administrative controls, yuan appreciation, numerous
increases in minimum reserve requirements, and several
interest rate rises, industrial production continues to soar,
along with the trade surplus and the money supply. M2 was
up 17.3% in the first quarter of 2007, against a target of 16%.
Industrial production was up 18.3% over the same period last
year, a 10-year record (versus an already high 16.7% for first
quarter 2006). With this level of growth in industrial
production, it is unrealistic to expect a narrowing of the trade
surplus any time soon, and if the trade surplus doesn’t
narrow, neither money growth, loan growth, nor investment
is likely to slow down. As they continue to surge, they will
put more upward pressure on China’s exports.
The Chinese Academy of Sciences recently forecast this
year’s trade surplus to be 43% higher than last year’s $178
billion. China, it seems, is stuck in what once seemed like a
virtuous cycle but is increasingly a vicious one. As in Japan
in the 1980s, trade surpluses create the conditions for more
trade surpluses. Unless authorities can somehow force down
the surplus—perhaps by going on a massive (and probably
inefficient) international buying spree—it is hard to see what
can reverse this self-reinforcing process, short of a sudden
appreciation in the currency or a sudden contraction in the
domestic money supply, which is perhaps just another name
for a domestic financial crisis.
Undermining the Balance Sheet
There is an old banker’s saying that bad loans are made
during good times. Times are as good as they can get for
Chinese banks: GDP is growing quickly, corporate
profitability seems to be rising (although at least part of this
may come from speculating on financial markets, China’s
latest corporate fad), and China and the world are flooded
with liquidity that has kept interest rates low, asset prices
high and rising, and has not yet shown up as inflation.
But it is precisely in this sort of Minsky paradise that the
financial system is likely to evolve in a direction where risks
are built up and even more bad loans are made. Loan growth
and investment growth in China have been high—in the first
quarter of 2007 loans grew by 1.4 trillion yuan, an amount
equal to nearly 28% of first-quarter GDP and more than half
of last year’s already high loan growth. The authorities have
raised minimum reserve requirements an unprecedented
seven times since April 2006, they have raised interest rates
three times during this period, and they have made
tremendous sterilization efforts, with no apparent impact on
the economy and without putting a dent in the pace of loan
growth or stock-market appreciation.
Even China’s much-vaunted administrative controls haven’t
done much. During the last three years every bout of
excessive growth was moderated, to much fanfare, by
administrative policies—but never for more than two or three
months, after which the country’s economy once again
picked up speed. Analysts often laud the use of
administrative controls as Beijing’s ultimate weapon, but the
track record seems to provide very weak evidence for their
usefulness. They seem temporarily to slow down growth in
the areas in which the authorities are most concerned, but
have no impact beyond a few months. For all the talk of
administrative controls over the past five years, GDP grew
by 11.1% in the first quarter of 2007—after its already heady
10.7% and 10.4% surges in 2006 and 2005. Administrative
controls seem mainly effective in shifting problems from
where they are noticed to where they are not.
The failure of market and administrative measures will
almost certainly increase systemic risk. There are many
problems in the country’s financial markets, but the two
greatest have to do with the banking system. The most
obvious problem, of course, is that the country’s financial
system is dominated by its banks, whose lending policies
tend to be inflexible, whose risk systems are rudimentary,
and whose ability to adjust is constrained by a rigid (and
opaque) governance structure. This means that since banks
are the primary source of financing, contractions in the
banking system are likely to be transmitted into the
underlying economy. There they can set off more
self-reinforcing processes in which banking-sector
contractions caused by rising bad loans lead to economic
contraction as the banks clumsily attempt to reduce loan
exposure, which then leads to further banking-sector
contraction as corporate defaults rise in response to bank
tightening.
The second problem is that the banking system is already in
trouble. While there have certainly been improvements in
lending practices in recent years, Chinese banks have a long
way to go before they are healthy and prudently managed. If
nonperforming loans and other assets were valued correctly,
these banks would be technically insolvent. In a November
2006 report, Fitch Ratings calculated that total unrealized
losses in the banking system exceeded total capital and
reserves by more than one-third. This figure does not include
estimates made for the rapid loan expansion of the past two
years, which most analysts believe will result in a surge in
new nonperforming loans.
The financial authorities have attempted to clean the banks
by carving out roughly $300 billion in bad loans and selling
them to asset management companies for liquidation.
Unfortunately, because the actual liquidation process has
been glacial, the cleaning up of the banks, as limited as it has
been, fails on two counts. First, liquidating bad loans is not
done simply to clean up the banks. It also permits overly
indebted companies to eliminate financial-distress costs
associated with the debt overhang and begin to operate
normally. This not-widely-understood benefit of loan
liquidations is a very important element in repairing a badly
functioning banking system, but in China it has barely taken
place.
Perhaps more importantly, the cleanup of bad loans has
consisted largely of transferring the loans from the banks’
balance sheets, where they were effectively contingent
obligations of the government, to other entities where they
are direct obligations. This wouldn’t be a problem if the
government’s credit were unassailable, but the government’s
total liabilities, including contingent liabilities, have been
rising and may well exceed 60% of GDP. It is not obvious
that the government’s credit can withstand much more
increase in contingent debts, which would probably occur if
some event were to set off an economic contraction. Because
of this shuffling of bad loans, the credit-worthiness of
Chinese banks has barely improved in the past 10
years—while the banks’ direct credit has improved, that of
their guarantor has deteriorated.
Monetary Policies
During the national People’s Congress in March, Premier
Wen Jiabao said that the economy is “unstable, unbalanced,
uncoordinated and unsustainable.” China’s feverish economy
and weak national balance sheet are largely the consequence
of the past several years’ explosive monetary growth, and as
it accelerates, it is clear that some sort of adjustment needs to
happen. Perhaps it is possible that the adjustment will take
place in a benign context and the consequences will be mild.
If China is lucky, if global growth and liquidity conditions
are maintained for at least another five to seven years, and if
the government gets serious about cleaning up the banking
system and developing alternative financial markets, China
may muddle through.
But this may be a lot to hope for. It is not clear that anyone
can count on benign conditions for so long, and it is even less
clear that the financial authorities are seriously repairing the
financial system. In retrospect the financial authorities have
made two major mistakes. The first was to have dragged their
feet on cleaning up the banks, when they should have been
strengthening and clarifying the governance framework,
carving out bad loans, liquidating them as quickly as
possible, and so limiting their current and future impact on
the country’s credit. The second mistake may have been
harder to predict at the time, but it now seems that the
financial authorities waited too long in beginning the
appreciation of the yuan. By waiting until 2005, and then
only permitting a gradual upward creep, they forced the yuan
to stay too low for too long.
As things stand now, there is little that the authorities can do
to rectify the currency problem. To continue allowing the
yuan to appreciate at its current glacial path means that the
monetary imbalances will persist, and as they do, the
combination of a further weakening in the national balance
sheet and the greater monetary pressure will make the
eventual adjustment more difficult. To allow a more rapid
appreciation of the yuan brings equally serious difficulties. It
would almost certainly cause a pick-up in hot money inflows,
which would exacerbate monetary conditions and increase
the set of problems—overinvestment, excessive loan growth,
and asset-price bubbles—that the authorities need so urgently
to fix.
None of the standard policy options seem to be
working—domestic monetary contraction via interest-rate
increases, minimum-reserve increases, and administrative
measures have proven as ineffective as faster or slower
appreciation of the currency. Another as-yet-untried option,
however, which now seems so unlikely that most economists
dismiss it out of hand, will eventually draw much wider
support—not because it is obviously good policy but rather
because it may be the only option left.
The central bank can engineer a large one-off jump in the
value of the yuan, followed by a peg, which would halt hot
money inflows and after a period of adjustment reduce the
trade surplus, to bring China’s monetary system back into
balance. If the revaluation is sufficiently high, and is
followed by a credible peg, it will cause an import-related
boost in consumption that will help bring down the trade
surplus while also reducing or even reversing capital inflows.
The slowing of reserve growth will slow investment, which
by reducing production will limit export growth.
This policy option is not without significant risks. A
too-great revaluation could hurt export industries and lead to
capital flight which, by weakening bank loans to export
companies and simultaneously creating deposit outflows,
could jeopardize the banking system and precipitate the crisis
it was designed to modify. And of course anything that
reverses the self-reinforcing process of investment and
growth may result in a rise in unemployment in the short
term.
Although the relative attractiveness of this policy option is
increasing and will continue to increase over time, there is
still great resistance because of its potential impact on the
banking sector. That is not surprising given the risks, but
what else can the financial authorities do? Monetary growth
is caught in a self-reinforcing trap whose consequence is an
ever-weakening national balance sheet. The failure of market
measures places even more emphasis on the use of
administrative measures, but administrative measures are
most powerful when least used. The threat of using them is
often more effective than the actual measures, and because of
their overuse no one now expects them to have much effect.
The market has already been trained to buy every dip.
In April Xia Bin, director of the finance division of the
Development Research Center and advisor to senior
government officials, told members of a financial forum that
“The central bank of China’s current monetary policy is a bit
weak. In other words, money supply is a bit out of control.”
This is an admirably (and surprisingly) frank assessment, and
if true implies an uncomfortable future. China is muddling
through its monetary management and will probably continue
to muddle through for the foreseeable future, but at some
point there must be a substantial adjustment made, in which
not only does money-supply growth slow significantly but
also the previous excess money-creation is wrung out of the
economy.
The authorities have tried nearly every gradualist tool at hand
and nothing seems to work. They can’t even get the attention
of financial journalists, who relegate these moves to the back
pages of their newspapers. No one seems to care what the
authorities do. China’s latest reserve-increase announcement
(up 50 basis points, to 11%) made two days before the May 1
holidays saw the stock market respond contemptuously the
next day by surging 2.17%.
This is not surprising if the root problem is excessive
monetary growth caused by ballooning reserves, because
none of the tools have so far been able to address the root
problem. Until they do so, it is hard to see how this story can
end well. Perhaps the best thing for Chinese bankers,
investors and businesses to do now is to enjoy the party and
try not to think too much about tomorrow’s hangover. That’s
probably what the punk band NOFX would do.
Mr. Pettis is a director of Galileo Global Horizons, a New
York-based fund-managing firm.

Beautiful Dark Skin

Aesthetics can be objective but concepts of physical beauty are influenced by the development of human society. During the pinnacle of ancient Chinese culture plump women with light skin were considered more attractive than skinny ones with dark skin. the same is true of Renaissance Europe, when lily white women with love handles were objects of desire. This notion, of course, has changed in the east and west in the 21st century where being overweight is no longer associated with wealth. Skin, though, is a different matter.
Lily white skin is no longer considered beautiful in western countries anymore. White people consider a golden brown tan to be the most attractive hue for their skin. Most see this as objectively the most beautiful color, even Asian. However, Chinese see light skin as the most attractive color too, as if this were just as objective. Perhaps part of the reason for this discrepancy is that beauty is often tied tho the notion of wealth. A nice tan in the west signifies a life of leisure and money. Dark skin tin the east is associated with working in the fields, the life of an impoverished farmer. Who wants to be perceived this way?

My black friend described the color of her skin to me as coffee with a bit of milk stirred in, which is much darker than any Chinese farmer. It is a beautiful shade of brown but every time she sees a cosmetics commercial in china she is reminded that people here do not agree. People have even given her unsolicited advice on how to lighten her skin. She finds this quite frustrating because in American this would be considered a racist comment. Perhaps the concept of "white Chinese" will change as the society develops just as being overweight has gone out of fashion.

surnames could be changed

In china a nationwide survey by the ministry this April found that about 85 percent of Chinese use one of only 100 surnames, this cause a lot of repetition, which makes it hard for authorities to do their do-to-day work.
In the future, people could have a surname made up of both their parents' family names. If a recent Ministry of Public Security ruling become law. And If the father's family name is A, and the mother's family name is B, a person could have four options for their surname: A, B, AB, BA.

Dark Matter 暗物质

Inspired by a true story

From one world to another
A brilliant Mind
A new life
A blinding ambition

They took his hopes
They took his dreams
until he could take no more......


This is the Dark Matter that controls the fate of the universe.

Meryl Streep: Ni hao

Meryl Streep: I’d like to propose a toast to our new Chinese students.

Meryl Streep: I just want to make a connection

LY: Just for success

Man: This is the highest score we ever had on the qualifying exams, you know that?

LY: Thank you, I am excited

Meryl Streep: You certainly are

Aidan Quinn: Welcome to the team

Aidan Quinn: This is excellent work, Liu Xing

LY: Thank you

Aidan Quinn: Now this is America

LY(to a gril): Do you like Chinese food?

Man: But we are all working for Reiser here

Aidan Quinn: Are you out of your mind, this is way over your head

LY: But but….

Aidan Quinn: I said absolutely no

Meryl Streep: Is there something you could do because he looks up to you so much?

Aidan Quinn: He is a brilliant guy. Unfortunately he’s not a team player

LY: Pa Ma, here is the money I saved in America

Girl: You are a really nice guy but I’m sorry

Aidan Quinn: You have to pay your dues first

Aidan Quinn: You work for me, don’t you?

Professional: It’s a highly original piece of work

Aidan Quinn: He’s an arrogant little bastard

Man: I’m afraid we can’t accept your dissertation until you re-do the computations

Liu Ye: Why you never tell this to me?

Man: Do it again


The feature film debut of renowned opera and theater director Chen Shi-Zheng, DARK MATTER delves into the world of Liu Xing (Chinese for “Shooting Star”), a Chinese science student pursuing a Ph.D in the US in the early 1990s. Driven by ambition, yet unable to navigate academic politics, Liu Xing is inexorably pushed to the margins of American life, until he loses his way.
Liu Xing (Liu Ye) arrives at a big Western university with plans to study the origins of the universe. In the beginning, everything is looking up. He finds other Chinese students to share a cheap apartment with him, and flirts with an attractive American girl who works in a local tea shop. When the head of the department, Jacob Reiser (Aidan Quinn), welcomes Liu Xing into his select cosmology group, it seems that only hard work stands between him and a bright future in American science. At an orientation for foreigners sponsored by a local church, Joanna Silver (Meryl Streep), a wealthy patron of the university, notices the earnest student. An unspoken bond forms between them.
Liu Xing becomes Reiser’s protégé, accompanying him to a prestigious conference where he makes an impressive debut. He is drawn to the study of dark matter, an unseen substance that shapes the universe, but it soon becomes clear that his developing theories threaten the Reiser Model. Excited by the possibility of a breakthrough, Liu Xing is deaf to warnings that he must first pay his dues. Soon he is eclipsed within the department by Laurence, a more dutiful Chinese student, and is forced to go behind Reiser’s back to publish his discoveries. When the article draws ire instead of accolades, Liu Xing turns to Joanna, who naively encouarges him on his collision course.
Liu Xing clings to the idea of America science as a free market of ideas, and American society as wide open to immigrants. But in the end, his dissertation is rejected, and the girl in the tea shop brushes him off. His roommates find job, leaving him behind. Too proud to accept help from Joanna, and unwilling to return home to his parents, Liu Xing becomes a ghost-like presence in the university. Left alone with his shattered dreams, he explodes in a final act of violence.
Inspired by a real event, DARK MATTER has a screenplay by Billy Shebar and a story by Chen Shi-Zheng and Billy Shebar. The film was financed by American Sterling Productions and produced by Janet Yang of American Sterling Productions and Mary Salter and Andrea Miller of Saltmill LLC. Kirk D’Amico and Linda Chiu are executive producers.

Official Site：

http://www.darkmatterthefilm.com/

Lessons from Hardship

From: xinjiang economic news
author: Tim Hathaway in urumqi

A good friend of mine grew up in the countryside of shanxi in the 1960's. His stories are very different from my childhood on the east coast of America. My family is not rich, but we always had three meals a day, a car to drive to work,and a television to relax in the evenings. That TV also showed me images of other less fortunate people in the world, which were much worse than my friend's description of his childhood. he once told me though," Chinese are more able to endure hardship than anyone else in the world." I did not say this to him, but I found his opinion to have the wrong focus."
According to the United Nations, nearly one sixth of the world lives on less than one dollar a day, and 10.6 million children died before the age of five in 2005, most of whom could have been saved very easily,. In the same year the United Nations proposed the same year the United Nations proposed the Millennium Goals, which are eight developmental goals for the world to reach by 2015. It is hoped that with the cooperation and generosity of governments and businesses poverty and extreme hunger will be eradicated and the child mortality rate will be reduced, etc. Already there has been progress, especially in Asia, but many people in the world still endure more hard ship than necessary.
Is there such a thing as necessary hardship? People like my friend have gone through more than was necessary and it has shaped his character. I will never fully grasp the depth of this impact, and his child will not be able to either.Many people today say that kids cannot endure hardship. What kind is necessary for them?
When my friend's 19 year old daughter went back to college he made her ride in the hard seat class. The trip was over 40 hours and she later complained bitterly of sore legs and back. When her father asked her why she did not get up and walk around, she said that someone would have taken her seat.
I would not be able to take this kind of trip. I simply cannot endure what many other people do, but my parents instilled in me a sense of compassion. Does it take an over 40hour train ride to create this in Chinese youth? What can we learn from hardship that will help us as a world to reach theUNMillennium Goals?

china's rock now

While crowds of Chinese gather in Beijing's Tiananmen Square to celebrate the people's republic's 57th birthday, thousands of young Chinese have been flocking to the capital's western suburbs to worship rock and roll.

It is rare for the government to sponsor a rock music festival, and this one will rock usually quiet western Beijing for seven days in a row – a huge army of 77 bands has been invited to play at the outdoor venue.

The festival begins at 2:30 every afternoon of the National Day Holiday, but things really hot up when night falls in International Sculpture Park. The sound is sometimes so deafening it can be heard in nearby Babaoshan Cemetery where many of the country's founding fathers and revolutionary martyrs lie in peace.

"Rock it up, friends, to beat the cool night!" Ying Peng, vocalist of the power metal band Ordnance, yelled at 2,000 fans standing in front of the stage, as he performed the band's famous number "Struggle."

The crowd exploded. People shouted, jumped and danced. Some firmly gave the middle-finger salute, and some splashed cups of beer into the air.

China may be taking the world economy by storm, but its cultural sector is developing quite slowly. Rock, the western-born music style which has nurtured scores of Chinese bands, is still struggling for acceptance 20 years after entering the country.

The music, viewed as angry and rebellious, was scorned by most Chinese whose traditional culture values obedience and hierarchy more than freedom.

"China's rock and roll needs to fight. We need to fight with people who never listen to rock music but criticize it a lot, and fight with people who try to get in to rock concerts for free," the skinny but energetic Beijing native Ying shouted to the screaming crowd.

In the capital Beijing, less than five clubs host regular rock performances. Outdoor festivals are therefore a rare opportunity for rock bands to be heard.

"Rock is still a sensitive topic in China," said Jing Ziye, chief organizer of the festival. He said the government's authorization of the outdoor concert was "extremely difficult to obtain" as officials fear excited crowds will cause social instability.

Jing said it is the first rock concert directly sponsored by the government with 360 police and safety guards present for each day's performances. Performances have to end by 10 PM.

Despite all the difficulties, the rockers seem to be making progress. Their music is increasingly popular with young people.

People attending the Beijing festival are mostly in the 20s. Many dress up in typical punk fashion with spikes, chains, and Mohawk style haircuts. The less frenetic fans also wear T-shits with pictures of rock bands such as Nirvana, Radiohead and domestic groups.

Cheng Xiang, a 20-year-old from the central province of Henan, said he had a tough train ride and slept only one hour on his way to Beijing. He paid 280 yuan (US$35) for a seven-day ticket to the festival.

"How can we stay home and listen to rock music downloaded from the Internet all the time? I think we should move and act out the rocker life," Cheng said in a weak voice that had not recovered from the cold.

During the performances, he took part in nearly every crowd-surf and pogo, a free-style dance often seen in punk concerts where dancers can occasionally go offbeat and collide with others. "We don't hurt each other. Energetic, aggressive, but still friendly – that is the character of today's rock fans," Cheng said.

Rock has been bubbling away in China for 20 years but it has not yet reached its prime, said Jing, who is also a director of China Performing Arts Agency, China's major art performance promotion company.

He said at present rock has little commercial viability in China, but the potential is great.

"Holding a concert like this is not profitable," said Jing, adding that they have no company sponsors and need to sell tickets worth at least 600,000 yuan per day, which is not easy with a daily audience of only 3,000 people on average.

But he is hopeful about rock's future. "You see, there are so many young people coming to the festival. Rock will eventually become popular, it's just a question of time."

The government seems to be aware of the trend too, because it has given the green light to more outdoor rock concerts over the past few months. Three large outdoor rock festivals have been held in Beijing alone since May.

In hosting the festival, Jing said he wanted to promote rock music among ordinary Chinese and build trust with the government so that he can convince them that rock and roll is "not as dangerous as most people think," he said.

dont make the lyrics become a philosophy of your life, a religion

in the early 90s in china,you basically cant find any rock recordings in shops.then a special kind of tape arrived here from america called 'cut-tape'('da,kou' in chinese pinying).it is checked by customs and they sell them at very cheap price to some pelple,who then sell them to us. many of these tapes are rock recordings or punk rock.

as our poor english at that time,no one knew what these guys say,we didnt pay much attention to the lyrics,to me,the solo electric guitar part is cool,always sharp,the weird rhythm,simply breathtaking,the vocals,Very emotional,With a voice that rumbles and purrs like a moody lion,to enrage or provoke emotions in a person.

but thanks to my poor level english!now i think repeated exposure to violence in music can actually inspire violence,and im really worried about how many more children are moving towards the fringe.now rock music is more than just music,its their life!it is their most devoted companion.

not mention rock star, marilyn manson,led zeppelin,bon jovi……

hotel californiathe was one of top songs in 70s by the eagles. most people have no idea the song refers to the church of satan, which happens to be located in a converted hotel on california street.

when you played forward, nothing but garbled noise is heard, but when played backwards,you hear the real message:"Satan had help. he organized his own religion." over and over!

you can also see the lyrics:"warm smell of colitas","cola", in spanish, means tail. "colita" is the diminutive form of "cola".its the buds of the marijuana plant. these have the highest THC content, and are therefore most desirable for smoking.