Covid-19

SARS-CoV-2 is following the evolutionary rule book

Its new variants are optimised for spreading


Natural selection is a powerful force. 

In circumstances that are still disputed, it took a bat coronavirus and adapted it to people instead. The result has spread around the globe. 

Now, in two independent but coincidental events, it has modified that virus still further, creating new variants which are displacing the original versions. 

It looks possible that one or other of these novel viruses will itself soon become a dominant form of sars-cov-2.

Knowledge of both became widespread in mid-December. In Britain, a set of researchers called the Covid-19 Genomics uk Consortium (cog-uk) published the genetic sequence of variant b.1.1.7, and nervtag, a group that studies emerging viral threats, advised the government that this version of the virus was 67-75% more transmissible than those already circulating in the country. 

In South Africa, meanwhile, Salim Abdool Kalim, a leading epidemiologist, briefed the country on all three television channels about a variant called 501.v2 which, by then, was accounting for almost 90% of new covid-19 infections in the province of Western Cape.

Britain responded on December 19th, by tightening restrictions already in place. South Africa’s response came on December 28th, in the wake of its millionth recorded case of the illness, with measures that extended a night-time curfew by two hours and reimposed a ban on the sale of alcohol. 

Other countries have reacted by discouraging even more forcefully than before any travel between themselves and Britain and South Africa. 

At least in the case of b.1.1.7, though, this has merely shut the stable door after the horse has bolted. That variant has now been detected in a score of countries besides Britain—and from these new sites, or from Britain, it will spread still further. 

Isolated cases of 501.v2 outside South Africa have been reported, too, from Australia, Britain, Japan and Switzerland.

So far, the evidence suggests that despite their extra transmissibility, neither new variant is more dangerous on a case-by-case basis than existing versions of the virus. 

In this, both are travelling the path predicted by evolutionary biologists to lead to long-term success for a new pathogen—which is to become more contagious (which increases the chance of onward transmission) rather than more deadly (which reduces it). And the speed with which they have spread is impressive.

The first sample of b.1.1.7 was collected on September 20th, to the south-east of London. 

The second was found the following day in London itself. A few weeks later, at the beginning of November, b.1.1.7 accounted for 28% of new infections in London. By the first week of December that had risen to 62%. It is probably now above 90%.

Variant 501.v2 has a similar history. It began in the Eastern Cape, the first samples dating from mid-October, and has since spread to other coastal provinces.

The rapid rise of b.1.1.7 and 501.v2 raises several questions. One is why these particular variants have been so successful. A second is what circumstances they arose in. 

A third is whether they will resist any of the new vaccines in which such store is now being placed.

The answers to the first of these questions lie in the variants’ genomes. cog-uk’s investigation of b.1.1.7 shows that it differs meaningfully from the original version of sars-cov-2 in 17 places. That is a lot. 

Moreover, several of these differences are in the gene for spike, the protein by which coronaviruses attach themselves to their cellular prey. 

Three of the spike mutations particularly caught the researchers’ eyes.

One, n501y, affects the 501st link in spike’s amino-acid chain. This link is part of a structure called the receptor-binding domain, which stretches from links 319 to 541. 

It is one of six key contact points that help lock spike onto its target, a protein called ace2 which occurs on the surface membranes of certain cells lining the airways of the lungs. 

The letters in the mutation’s name refer to the replacement of an amino acid called asparagine (“n”, in biological shorthand) by one called tyrosine (“y”). 

That matters because previous laboratory work has shown that the change in chemical properties which this substitution causes binds the two proteins together more tightly than normal. 

Perhaps tellingly, this particular mutation (though no other) is shared with 501.v2.

Golden spike

b.1.1.7’s other two intriguing spike mutations are 69-70del, which knocks two amino acids out of the chain altogether, and p681h, which substitutes yet another amino acid, histidine, for one called proline at chain-link 681. 

The double-deletion attracted the researchers’ attention for several reasons, not the least being that it was also found in a viral variant which afflicted some farmed mink in Denmark in November, causing worries about an animal reservoir of the disease developing. 

The substitution is reckoned significant because it is at one end of a part of the protein called the s1/s2 furin-cleavage site (links 681-688), which helps activate spike in preparation for its encounter with the target cell. 

This site is absent from the spike proteins of related coronaviruses, such as the original sars, and may be one reason why sars-cov-2 is so infective.

The South African variant, 501.v2, has only three meaningful mutations, and all are in spike’s receptor-binding domain. Besides n501y, they are k417n and e484k (k and e are amino acids called lysine and glutamic acid). These two other links are now the subject of intense scrutiny.

Even three meaningful mutations is quite a lot for a variant to have. Just one would be more usual. The 17 found in b.1.1.7 therefore constitute a huge anomaly. How this plethora of changes came together in a single virus is thus the second question which needs an answer.

The authors of the cog-uk paper have a suggestion. This is that, rather than being a chance accumulation of changes, b.1.1.7 might itself be the consequence of an evolutionary process—but one that happened in a single human being rather than a population. 

They observe that some people develop chronic covid-19 infections because their immune systems do not work properly and so cannot clear the infection. These unfortunates, they hypothesise, may act as incubators for novel viral variants.

The theory goes like this. At first, such a patient’s lack of natural immunity relaxes pressure on the virus, permitting the multiplication of mutations which would otherwise be culled by the immune system. 

However, treatment for chronic covid-19 often involves what is known as convalescent plasma. 

This is serum gathered from recovered covid patients, which is therefore rich in antibodies against sars-cov-2. As a therapy, that approach frequently works. But administering such a cocktail of antibodies applies a strong selection pressure to what is now a diverse viral population in the patient’s body. 

This, the cog-uk researchers reckon, may result in the success of mutational combinations which would not otherwise have seen the light of day. It is possible that b.1.1.7 is one of these.

The answer to the third question—whether either new variant will resist the vaccines now being rolled out—is “probably not”. It would be a long-odds coincidence if mutations which spread in the absence of a vaccine nevertheless protected the virus carrying them from the immune response raised by that vaccine.

This is no guarantee for the future, though. The swift emergence of these two variants shows evolution’s power. 

If there is a combination of mutations that can get around the immune response which a vaccine induces, then there is a fair chance that nature will find it.

Brazil and the EU: The Value of Going Green

Environmental concerns over the Amazon serve geostrategic purposes.

By: Allison Fedirka


Representatives from Brazil and the European Union will meet next month to discuss an environmental addendum for the Mercosur-EU free trade agreement, without which the deal will not be ratified, or so says Europe. 

Specifically, the EU wants Mercosur members – that is, Brazil – to reinforce commitments to the environment, climate and sustainable development. At the heart of the issue is the Amazon basin, an enormous untamed region filled with biodiversity and natural resources. 

For both Brazil and the EU, the future of the Amazon ties into economic necessities and developments critical to their future.

The significance of EU-Mercosur trade has changed since initial talks started 20 years ago, when the end of the Cold War heralded a future of healthy, robust regional blocs meant to prop up a new, multipolar world. But now it’s not so clear cut. The EU grew from 15 members to 27. 

Brazil became the powerhouse in Mercosur as Argentina spent the better part of the post-Cold War era tending to its sluggish economy. This is to say nothing of how the global economy has since been shaped by financial crises, a pandemic, trade wars, sanctions and so on.

This is why the environmental aspects of the FTA are so important. The two sides already have healthy trade ties: The EU is Mercosur’s second largest trading partner after China and is its top source of foreign investment. 

From 2000 to 2017, the accumulated stock of EU investment in Mercosur grew from 130 billion euros to 365 billion euros ($160 billion to $445 billion). But how their ties shape up going forward will depend on how they pursue geostrategic agendas that intersect with environmental and climate concerns.

For Brazil

From Brazil’s perspective, the Amazon represents a challenge to its cohesion and national defense. 

A north-south socio-economic divide has been one of the country’s defining features since the second half of the 19th century. Wealth, resources and development have historically been concentrated in the south; the north, which includes the Amazon, lagged behind. 

This is a problem for a central government whose wants and needs are not shared by a large portion of its citizens. The Brazilian government has thus regularly sought out strategies and projects to help decrease the socio-economic gap between the north and south.

For example, in 1953 the government introduced the concept of the Legal Amazon to group together an area of the country that historically shared similar political, economic and social challenges. 

The idea was that creating a subregion would make it easier for the government to plan and promote economic development. The Legal Amazon now includes 25 million Brazilians and covers 61 percent of the country’s territory (about 5.2 million square kilometers). 



On matters of national defense, the Amazon is a series of security problems for the central government. 

The length, impermeability, distance from the country’s core and lack of connectivity with the rest of Brazil make it nearly impossible for the Brazilian military to physically enforce border controls. 

Brazil uses the military it does have in the region as a springboard for trying to integrate the region with the mainstream country. The Amazon Triangle (where the borders of Brazil, Peru and Colombia meet) is a hotbed for drug trafficking and other illicit activity, which eventually spreads to Brazil’s metropolitan areas. 

Without much of a government presence, areas such as these are vulnerable to outside influence that challenges what little control the government does have in the Legal Amazon. Finally, the region is a critical doorway for Brasilia to extend its reach into the Northern Hemisphere and to give it much-needed strategic depth.

In other words, the Amazon could be key to unlocking Brazil’s economic and geostrategic potential.

For the EU

For the European Union, the Amazon symbolizes a commitment to long-term energy, finance and infrastructure strategies. Earlier this month, Brussels finally passed its multiannual financial framework, which designates EU funding from 2021 to 2027. 

Much of the budget incorporated ideals from the Green Deal, which calls for environmentally friendly initiatives and clean energy, as well as the infrastructure modernization, sustainable financing and responsible R&D to support those efforts. 

The budget allocates 132.8 billion euros to the single market, innovation and digital, and 356.4 billion euros to natural resources and the environment, both of which directly fund initiatives in line with the Green Deal and which account for about 45 percent of the entire budget.





This being the EU, however, its members don’t all agree on the Green Deal or its mandates. The strategy promoted by the Green Deal favors Western Europe’s more developed economies. 

According to the European Environment Agency, western economies also sustain the greatest amount of economic losses per capita related to climatic change. 

The negotiations surrounding environmental components of the EU budget pitted the interests of western EU economies against eastern EU economies. The new budget puts a premium on renewables and industrial-tech activities, which are more expensive and more difficult for the less developed eastern economies to pursue. Due to the high cost of going green, these countries tend to accept more easily the continued use of cheaper fossil fuels. While EU countries cannot undo the 2021-27 budget, the proponents of the Green Deal must regularly stand by their decision lest they risk losing face and reigniting the climate debate. 

By taking up issue with the Amazon, the western, pro-Green Deal countries have a convenient PR opportunity with which they can promote their ideals without alienating the eastern economies that have little to lose from greater Amazon protection.

Jockeying for Position

Brazil and the EU remain at loggerheads because their individual economic and political priorities result in competing visions for the future of the Amazon. 

Brazil has a need to develop Amazonian territory, including using natural resources and building out infrastructure, such as hydroelectric dams. 

The EU, however, has an interest to publicly speak in favor of preservation and reduced activity. Both are motivated by fundamental needs to maintain economic and political agendas that aim to strengthen their standing in the long term, and both are trying to position themselves to achieve those ends.

Brazil is using its national sovereignty over much of the Amazon to set the rules of play. 

Earlier this month, for example, the Brazilian Senate approved a bill that allows foreigners to purchase rural land. 

Foreign land purchase has been highly regulated in Brazil; this bill merely removes certain restrictions – i.e., purchases must be less than 25 percent of the municipality. 

Acquisition of real estate in areas essential to national security or that involve certain types of nongovernmental organizations require foreign buyers to obtain the prior consent of the National Defense Council. 

The bill also specifies that any land purchase in the Amazon must have council approval. 

The central government believes that opening up rural land purchases could attract up to 50 billion reais ($9.6 billion) per year in investment that would help stimulate rural economies, create jobs and improve food supply. (Support for the bill includes the bloc led by President Jair Bolsonaro, but opponents say it creates risks to national security and to commodity production.)

Brazil also designed initiatives that focus on halting illegal activities in the Legal Amazon that leave open plans for legal economic development. 

In February, the government created the Amazon Council, which is meant to design plans and initiatives for protecting, defending and sustainably developing Brazilian forestry. 

In practice, the council would be an intermediary between the outside world and Brazil over Amazon issues. It still supports the government’s broader development and is currently proposing reforms that would allow it to control NGOs operating in the Amazon and for the Amazon Fund to use its money to support economic development. (Both have already been rejected by the Europeans.) In April, the military started Operation Green Brazil 2, which aims to crack down on illegal logging and drug trafficking in the Legal Amazon. 

Its mandate was recently extended by six months to April 2021. All of these gestures are Brazil’s attempts to demonstrate some environmental concern and appease outside demands without compromising its national agenda. 



For its part, the EU is trying to improve its negotiating position by targeting Brazil’s economy. 

Leading the charge are European Green parties, whose membership consists largely of lawmakers from France, Germany, Belgium, Austria, the Netherlands, Finland and Sweden – all developed European economies that will benefit from Green Deal initiatives. 

The EU’s PR campaign has focused heavily on mobilizing NGOs, one of Europe’s strengths, and the private sector to use financial pressure against the Brazilian government. 

Global investment funds, banks, multinationals and large Brazilian companies have threatened to divest from the country if it does not change its stance on the Amazon. 

Especially concerning is the momentum building on soybeans, one of Brazil’s most prized and valuable commodity exports. 

Food companies such as Nestle, Walmart, Tesco, McDonald’s and others have started to ask major suppliers like Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. to stop trading soybeans associated with deforestation in Brazil’s Cerrado region. 

The food companies have said they may refuse soy from these traders if it comes from this deforested area. The Brazilian economy has performed poorly in the past decade, and especially within the last five years. 

The country has been unable to execute much-needed structural reforms because of the COVID-19 pandemic and relies even more now on investment to spur economic growth. 

It’s vulnerable to fluctuations in European spending behavior, so threats to investment or boycotting illegally sourced goods resonate with Brazil.

The battle over the Amazon highlights the intersection of geopolitics with environmental concerns. The latter have typically been put on the back burner, partly because climate change is such a long-term issue that it’s easy to ignore (and partly because it’s financially beneficial to). 

But as climate-related issues become more important, these types of frictions will increasingly arise.

PERFECT STORMS AND FAIRY TALES

By Matthew Piepenburg


It should and will come as no surprise that fundamentals like valuation basics and sane credit levels have left the building (and securities markets) for some time.

Today, we literally invest (i.e. buy and sell) in a veritable market Twilight Zone beyond sight, sound, reason and, well…earnings, profits and cash-flow.

But that’s what happens when a central bank produces fiat money like this…


That is, gobs and gobs of printed dollars (of which the FOMC has promised more this week) keep banks artificially liquid, bond prices artificially bought/high, yields artificially repressed and thus rates (i.e. the cost of borrowing) stapled to the floor of history.

But as the Austrian School reminds, cheap debt leads to debt binging, and debt binging leads to very bad things…

Cheap Debt = Crappy Bonds & Zombie Enterprises

Smelling cheap rates, U.S. companies will borrow (i.e. binge) like this…


Corporations chase cheap debt almost as much as college kids seek discounted beer, and use it just as dangerously—i.e. to buy-back their own shares or issue dividends with borrowed dollars, make no profits and then call themselves “recovered” as their stock prices fly, literally, on borrowed wings.

Many, in fact 15%, of these debt-drunk enterprises are walking dead “zombies” who borrow at advantaged rates just to pay yesterday’s interest and have no chance at all of ever repaying the principal.

These zombies, however, are just one member of an over-all embarrassing club of U.S. corporate bond issuers, 67% of which are rated at or just a pinch above junk, high yield or levered loan status—namely the very bottom of the credit barrel.


From Bad Bonds to Inflated Stocks: Just Do the Math

But when not issuing IOU’s to stay alive, many of those same enterprises are passively riding a stock market wave above jagged rocks of broken balance sheets hidden just beneath the waterline.

And as for modern balance sheets–do they or any other rule of math and common sense even matter anymore in this new Twilight Zone?

Toward that end, I’m thinking of  those pesky items of the ancient past like earnings, profits, cash flow, book value etc.

As Doug Cass recently reminded, nearly every traditional and once-respected measure of sound stock valuation—i.e., PE ratios (27.9), Cyclically Adjusted PE multiples (32.9), Price to Earnings ratios (27.9), Price to Sales (3.0) or even Buffet’s favorite, the classic Total Market Cap to GDP (170%)—are all at record high levels of over-valuation today.

And yet buyers are crowding in for more, buying at (and chasing) frothy tops like sheep following a mad herdsman.

Speaking of mad crowds and their even madder herdsman, Citigroup is forecasting an S&P at 3800 for 2021 while JP Morgan and Kantor Fitzgerald are anticipating 20% surges from current stock valuations for the coming year–pandemics, recessions and unemployment levels be damned.

Price to What?

But let’s pause and consider (for the sake of brevity) just one of the many 100th percentile metrics of market overvaluation—the infamous price to operating earnings ratio.

It’s worth noting that current PE ratios for the S&P are now where they were just before the infamous bubble-popping of 2001 and even higher than where they stood before the great rise of 2008 made history as the Great Financial Crisis of that same year:


Look a little scary to you?

Now look even closer.

What’s particularly eerie is just how fast those ratios (i.e. metrics of gross over-payment) have climbed since the market tanked in March of this year.

Folks, it’s not as if earnings were rising by double digits because valuation was rising at the same pace.

Au contraire.

If we look at actual earnings per share data, they confirm that earnings today are where they stood in 2018 when the market was valued much lower.

This means today’s (and tomorrow’s) investors are literally riding such an optimistic high that they are openly (and likely unknowingly) paying 35% higher prices for the same companies whose earnings have not risen for the same period.

Furthermore, earnings per share data has been totally distorted by trillions in corporate stock buy-backs, which means investors are paying far more than even these staggering percentages confirm.

So, what gives? What’s going on? How did things get this crazy?

Mania and Market Psychology

In simple terms, we are witnessing a mania, and manias, like viruses, can last for a long time.

Mania’s moreover, have less to do with valuations and math—i.e. PE ratios and bond yields—and more to do with psychology, a topic absent from most Wall Street (and even Main Street) reading lists.

Looking at past manias and bubbles, we know that maniacal investors always pile in together on the buy-side, ignoring valuation sobriety until they are forced to—i.e. when it’s too late.

We also know that market manias often have no correlation to underlying economic conditions, and thus markets can thrive while economies (as now) are literally gasping for air.

In fact, manias typically gain speed rather than tire out as markets pierce resistance levels and reach new, record-highs, seemingly, with each weekly headline and despite every red flag from traditional valuation metrics.

Confidence follows headlines, and headlines create crowds, and crowds follow each other (and the sell-side)—right up to, and then eventually, right over a market cliff.

This is true of all bubbles and maniacal markets, from Revolutionary France (1793), the roaring 20’s (1929), the bloated Nikkei (1989), the irrational NASDAQ (2000), or the sub-prime S&P (2008).

Overestimating Skill While Underestimating Humility

Psychologists, for example, would remind that a cognitive bias often occurs in bull markets wherein individuals of a low ability at a given skill begin to overestimate their abilities due simply to an “inability to face their inability.”

This often takes place when investors are enjoying a trend (or mania) rather than genius or fair price discovery.

The fancy lads call this psychological phenomenon the Dunning-Kruger Affect, and I’d contend that many self-smug Fed Chairs and wealth advisors, as well as many investors, are suffering from it now as they passively enjoy (and take credit for) a maniacal market rise.

This disease of false confidence spurred by false (i.e. artificial markets) is particularly the case for Janet Yellen, who is now heading from the Fed to the Treasury with much applause.

Ah, how the ironies do abound. When it comes to monetary discipline, Yellen at the Treasury makes as much sense as Madoff at the SEC.

And no, this time is not different. It’s worse.

The level of current mania (Tesla to Bitcoin) surpasses prior bubbles, and the depth of the debt and economic (as well as political) weakness beneath it is now greater than prior recessions.

With global debt now at an unprecedented $280T and combined corporate, household and consumer debt in the U.S. now at $80T, this in no time for losing one’s mind (and portfolio) to the buzz of yet another Fed-driven mania.

In short, the Twilight Zone market is colliding with a Perfect Storm (psychological, financial, social, political).

Mean Reversion—The Great Humbler

All markets revert to the mean. It’s a law of markets as real and natural as gravity is to the laws of physics.

And math, as well as natural market forces, like the laws of physics, still matter.

Together, these forces stand in the background rubbing their hands as maniacal investors go all-in to chase a market top that would make the Matterhorn blush.

By example, math reminds us that the median PE ratio for the S&P is 17. Today, that PE ratio is a jaw-dropping 30.

Once (not if) this market reverts to its mean (as all markets do), this would place the S&P closer to 1500 or 2,000, where the real value investors can start buying the bottoms rather than these dangerous tops, now poised to needle-peak further before they tank.


More Fiat Dope, More Addiction & More Debased Currencies

But as we also know, and after years of addiction to Fed “accommodation,” whenever and however markets begin their next implosion (typically on some headline scandal or event), the Fed will crank out the money printers and deliver more fiat dope to markets suffering “the needle chill.”

Global money supply, now at a staggering $6.5T, is only going to shoot higher, as central banks shoot more steroids into a system which they helped corrupt, debasing currencies with blind elan as markets inflate on the backs of fiat dollars and unpayable, rotten debt.

As always, all rivers and informed market conversations eventually turn toward physical gold, often castigated as a “barbarous relic” in times of market mania and then no longer available/affordable when desperately needed in times of market pain.

In short, those who were once chasing tops suddenly find themselves looking for a safe and precious place to land when there’s nowhere left to hide.

Three Little Piggies & The Big Bad Wolf

Such cycles remind us of our youth and the tale of the three little piggies and the big, bad wolf.

In that childhood fairy tale, two piggies, enjoying all the blissful ignorance of the Dunning-Kruger Affect, are too busy playing to worry about a big, bad wolf around the corner.

Thus, they build their huts of straw or mud while the third little piggy, all too aware of that big, bad wolf, diligently builds his home of bricks.

When the wolf comes, guess which hut is left standing?

Of course, the same is true of weak and strong portfolios and the big, bad market wolves of debt, over-valuation and risk asset bubbles: Some investors are prepared, but most are sitting on straw and mud.

When risk assets are slaughtered by the wolf’s fangs of 1) needle-sharp debt, 2) gross equity over-valuation and 3) fatal currency debasing policies like “unlimited QE,” only those investors who built their portfolios on a foundation of physical gold are left standing.

Why?

Precious Metals Don’t Bow to the Wolves

Because unlike the straw and mud of fiat currencies and dangerously overvalued stocks and bonds, gold rises strong (rather than falls into dust) when the market wolf huffs and puffs and blows bad portfolios down.

Smart money, like just about anything smart, including that third little piggy above, are by nature a smaller circle, a more far-sighted minority, and thus think more of steady wealth preservation than easy wealth creation.

In short, the smart money understands the difference between staying rich and getting rich.

Physical gold, as a timeless (rather than trendy or passẻ) instrument of wealth preservation, serves as the historically-confirmed and surest way to ensure one’s wealth against the ravages of currency debasement.

For those who refuse to see such facts, the following chart is worth repeating as much as possible, and makes such warnings obvious rather than theoretical:


And so, as central bankers and consensus-thinking investors maniacally continue to build markets, currencies and portfolios of straw and mud, will you be joining that crowd or looking for some gold bricks upon which to preserve your wealth? 

A Marshall Plan for the Planet

The climate crisis has taken a back seat to COVID-19 this year, but prospects for bold international action to tackle global warming in 2021 are much more encouraging. There is no reason why the world cannot apply the ingenuity and agility it has shown during the pandemic to combat climate change while there is still time.

Paul Polman



LONDON – In a year dominated by COVID-19, it’s perhaps understandable that we’ve neglected the most profound, existential crisis we face: runaway climate change. 

But we must quickly make up for lost time, before it’s too late.

The world received the blessings of cutting-edge science this holiday season with the record-fast development of effective COVID-19 vaccines that promise to end a pandemic that has so far killed more than 1.7 million people and caused the worst economic crisis in generations. 

But the rush by rich-country governments to secure enough doses for their own citizens threatens to prolong the agony for the developing world.

Fortunately, the prospects for effective international climate action in 2021 already look much better than they did a few months ago. 

For starters, as soon as President-elect Joe Biden takes office in January, the United States will rejoin the 2015 Paris climate agreement – the historic protocol that aims to limit global warming to well below 2°C, and preferably to 1.5°C, relative to pre-industrial levels.

This will send an unmistakable signal that the world’s biggest economy is again serious about accelerating its transition to net-zero carbon-dioxide emissions, and will build on China’s recent commitment to become carbon neutral before 2060. 

These two superpowers will define the twenty-first century, so the prospect of their enhanced climate collaboration provides real cause for optimism.

Likewise, the European Union is pressing ahead with its ambitious European Green Deal and aims to be climate neutral by 2050. And UK Prime Minister Boris Johnson’s ten-point plan for a Green Industrial Revolution also points the way ahead. 

Energy efficiency and diversification, sustainable infrastructure and housing, renewable power generation, green technologies, carbon capture and storage, and nature-based solutions all provide a clear pathway to a net-zero future. 

This is the “Marshall Plan for the Planet” we urgently need, and we must now double down on achieving a true green recovery.

It is encouraging to see the international community mobilizing. 

Next year, China will play a pivotal role in helping to protect and restore nature as the host of the United Nations Biodiversity Conference (COP15). 

The meeting comes at a critical time: one million species are threatened with extinction, and the destruction of our oceans, forests, peatlands, and mangroves – which all act as essential carbon sinks – has regrettably become routine business.

Valued at $125 trillion a year, our natural capital and biodiversity are the real source of our wealth. Or, as the economist Herman Daly argues, “the economy is a wholly owned subsidiary of the environment, not the reverse.” 

That’s why Business for Nature – a diverse group of more than 600 firms and 50 partner organizations – is advocating more ambitious government and corporate action to provide nature with the safety net it needs to flourish.

Next year’s UN Food Systems and Nutrition for Growth summits will also be important opportunities to raise collective ambition. 

We urgently need to repurpose agricultural subsidies to deliver better outcomes for people, climate, and nature. 

In addition, we must shift public food procurement toward plant-based diets and away from highly processed foods, deploy more productive and regenerative agricultural practices, support rural livelihoods, and commit to ambitious targets for reducing food loss and waste. 

Given that 25% of global CO2 emissions are linked to land use, we should not underestimate the contribution that transforming food systems can make in the fight against climate change.

But perhaps the most critical international meeting in 2021 will be November’s UN climate conference (COP26) in Glasgow. 

Governments must boost their carbon-cutting measures in a race to the top that helps the world achieve net-zero emissions by 2050 – at the latest. 

Crucially, COP26 must also uphold rich countries’ commitment to provide poorer economies with the climate finance they need to manage extreme weather hazards – storms, droughts, and wildfires – which are increasing in prevalence and holding back their development and growth.

That said, decisive climate action cannot be the responsibility of governments alone. 

Business must also play its part by setting science-based emission-reduction targets, improving energy efficiency, enhancing climate reporting and disclosures, and eliminating deforestation from supply chains.

The We Mean Business coalition is a great example of joint private-sector action. 

Companies with a combined market capitalization of over $24 trillion are working together to drive more ambitious climate policies and accelerate the transition to a zero-carbon economy. 

Similarly, the Task Force on Climate-related Financial Disclosures is helping firms better calculate the risks and opportunities of climate change, thereby making it easier for investors to support sustainable businesses. 

This is creating a domino effect that is helping to move financial markets in a greener direction.

The pandemic has led to a temporary decrease in greenhouse-gas emissions and a resurgence of nature. But a brief reprieve for the planet is no substitute for a coherent global climate strategy. 

All told, 2021 promises to be a super-year for climate action, with the stars aligning for a cleaner and more sustainable future. 

We must seize the opportunity while we still can.


Paul Polman is Chair of the Food and Land Use Coalition.

The Dawn of the Dragon

How Xi Jinping Has Transformed China

In 2012, Xi Jinping took office as the head of the Communist Party at the same time Bernhard Zand become DER SPIEGEL's correspondent in Beijing. Before leaving the country, he traveled all across the nation to measure how the Chinese people are faring today.

By Bernhard Zand

The skyline of Harbin, a city of over 10 million in northern China: The country is more conscious of its power today than it has been since the days of the great dynasties. Foto: Fu Qiang / Costfoto / Sipa USA / ddp images


Deep in Siberia, at the same latitude as Hamburg, China begins. It only comes to an end some 4,000 kilometers away, on the beaches of the tropical island Hainan. Both are places of great beauty.

In the north, the Heilongjiang, the Black Dragon river, winds silently eastward. It marks the border to Russia, where it is known as the Amur. The pine forests of the Taiga stretch out behind it.

In the south, the surf of the South China Sea gently rolls into Hainan’s Yalong Bay. Plane and palm trees line the coast and children frolic on the beach. Hainan is often called "the Hawaii of China."

In between lies a country about the size of the United States, but with four times as many people – twice as many as in Europe, more than in Africa.

China’s dimensions have always been difficult to grasp, but rarely has the country's size, combined with its growing political and economic weight, become as apparent to the world as it has over the past eight years.

I arrived in China in fall 2012. And just a few weeks later, in the Great Hall of the People in Beijing, a thickset man appeared before the press. The Communist Party had just appointed him as general secretary. 

The responsibility for governing China now rested on him and his colleagues. "Our people love life and expect better education, more stable jobs, better income ... and a more beautiful environment," he said. "People's yearning for a good and beautiful life is the goal for us to strive for.”

The accession of designated head of state Xi Jinping, then 59, raised hopes in both China and the West. In the place of his lackluster predecessor Hu Jintao, a relatively young and self-confident politician was now taking over leadership of the rising world power, an authoritarian country that seemed to be ready to open up. 

Four years earlier, Beijing had hosted the Olympic Games, and millions of Chinese set off abroad as tourists, business people and students. "China needs to learn more about the world,” Xi said at the end of his inaugural speech, "and the world also needs to learn more about China.”

Xi has fulfilled an important part of his promise, but other hopes have been dashed. Prosperity has increased inside the country and there is also less poverty. At the same time, the power of the state has grown, with Xi having secured his office for life, cemented party rule and perfected the surveillance state. 

In the west of the country, hundreds of thousands of the Muslim Uighur population are in labor camps, and critics of the regime have fled or been silenced.


DER SPIEGEL correspondent Bernhard Zand Foto: DER SPIEGEL


Internationally, China is leveraging its power more assertively than it has since the days of the great dynasties. In the South China Sea, Beijing has transformed islands into military bastions; and in Hong Kong, China has pushed aside an international agreement and imposed a draconian security law. Spurred on by the West’s weakness, China is expanding its influence.

The outbreak of the coronavirus and the ensuing crisis, certainly the most momentous event of the past eight years, has only served to accelerate this trend. Xi Jinping still speaks of the "reform and opening-up policy” today. But it has been a long time since he last said that China needs to learn more about or from the rest of the world.

How have the lives of the Chinese changed in these eight years? Are things better, as Xi pledged they would be back in 2012? And how do the Chinese think about their country, about the way they are perceived - and how they perceive themselves?

Before my tenure as Beijing correspondent comes to an end, my colleague Wu Dandan and I went on a trip to investigate these questions. We traveled from the north to the south, from Manchuria through Beijing to Shanghai, up the Yangtze River to Wuhan and Chongqing, into the hinterlands of Guizhou Province and then south to Hainan.

We met up with people we had met before, but we also visited towns and villages we didn’t know ourselves. The Chinese authorities knew where we were at every turn. And it wasn’t just security officers who shadowed us. In each of the 11 provinces we visited, an app on our mobile phones recorded where we were going. A journey across China in times of corona.

Heilongjiang

A large red star with a yellow hammer and sickle marks China's northernmost point in Heilongjiang. Beyond their symbols, the two countries that share a border here had very little in common when the Soviet Union disintegrated almost 30 years ago. Beijing and Moscow had spent most of the Cold War as rivals.

Since then, their relationship has improved, while many in the West now see China as having succeeded the Soviet Union as their main rival. But what differentiates China from the U.S.S.R. and Russia is its economic strength.

A group of Chinese tourists arrives to visit the border monument – women in beautiful dresses and men with expensive cameras. A modern coach has brought them to this remote place, traveling along a perfectly constructed highway leading 100 kilometers through deserted birch forests. 

A bit upstream, a holiday town has sprung up, complete with a wide waterfront and chalets that could just as easily be located in Switzerland or the Rocky Mountains. The tourists look inquisitively across to the Russian shore, where the few structures that can be seen sink into darkness at night. Colorful lanterns shine on the Chinese side.

As great as the contrast to Russia may seem, China’s northeast is poor when measured against the rest of the country. Manchuria, with a population of 110 million, was once home to heavy industry: coal mines and cement works, steel mills and arms factories. But China’s economic miracle began elsewhere in the early 1980s, on the Yangtze River and in the Pearl River Delta, in the east and in the south.

The north still hasn’t managed to make sufficient progress on structural change, despite billions in investments. Baoyu, our first driver on the trip, makes a good living from the tourists he drives through the greenery in summer and the snow in winter. He just bought himself a big SUV. But his wife and daughter have moved to Zhengzhou, a city of 10 million inhabitants located around 2,000 kilometers further south. "Our parents and I will follow them,” says Baoyu. "Life is just better there. More education, more jobs and a better future.”

His colleague Wang Bo in the provincial capital Harbin, famous for its annual ice festival, tried in vain to persuade his daughter to stay with him. "Dad,” she said, "I earn four times as much in Beijing as I do here. What did I go to university for?"

Yusheng

Around 50 kilometers south of Harbin -- past a train station from the time of Japanese occupation, an abandoned factory and a few provisional-looking concrete structures housing car repair shops -- a gravel road turns off into a cornfield. 

It leads to Yusheng, one of the 600,000 villages in China that you only notice when you zoom in on Google Earth between the country's 113 cities of over a million inhabitants. The dense symmetry of these settlements can be seen from above: houses lined up next to each other, with small backyards behind them.

Bruce’s family of farm workers lives in one of these homes. He's been calling himself "Bruce" since he became the first from his village to study English in Beijing. Later, he changed his major and wrote his doctoral dissertation on the literature of the ethnic minority to which he belongs, the Manchu, which gave Manchuria its name and China its last dynasty.

Communist Party leader Xi Jinping at the party congress in Beijing in May: "China needs to learn more about the world." Foto: Li Gang / Xinhua / eyevine / laif


A 35-year-old man with thick hair and the soft hands of a bookworm, Bruce reports with satisfaction on the interest scholars at Harvard and Oxford have shown in him, his research and the 10 million-strong ethnic group to which he belongs. 

The same cannot be said for modern China, which looks with suspicion toward anything having to do with the Manchu. The Qing Dynasty emerged from their midst before it disappeared in 1911, taking feudal China along with it -- and the Communist Party continues to treat the dynasty with contempt to this day.

Bruce chooses his words carefully and doesn’t want to be quoted too extensively. He’s not a dissident, not even remotely. But it bothers him to see the degree to which the official history marginalizes the achievements of minorities like the Manchu. 

"But there are professorships within my field," he says. His career is precisely planned, like that of many young Chinese: He left Beijing in the summer because his chances of advancement are better in the provinces. He is now taking up a lecturing position in Harbin, where he hopes to marry before one day returning to Beijing as a professor. 

He spends most of the day in his room. At night, he sleeps on a brick bed, which, like all the others in the house, is connected to the kitchen stove and is therefore well heated in the winter. 

The toilet is in an outhouse in the backyard -- like most homes in the village, the house has no running water. Many of his peers grew up in the same way, as will have many of his students.

"He was always the best in school,” Bruce’s mother says proudly. "Ah, mom,” he replies, sheepishly. The parents' recognition is still an obligation for young Chinese, especially for the successful ones. 

The expectation is that they will one day provide for the rest of the family. China’s pension and welfare systems are rudimentary compared to those in Europe, especially in rural areas.

In Manchuria, China doesn't look like the power and money machine that the West perceives it to be. It's an emerging country -- ambitious, but far from reaching its goal, a state that doesn't succeed in everything it sets out to do. 

China’s massive export figures obscure the fact that per capita wealth in China is only about a quarter of that in Europe and America. Perhaps this is one of the reasons the leadership doesn’t trust its people.

Shortly after we leave, Bruce gets paid a visit by the local public security bureau. Who were those people, the officials ask, and what did they want?

Hearing that news worries us, but it's not surprising. Already back in Harbin, four men wearing sunglasses had been following us around - on foot in the center, and in two alternating cars further out. The state doesn’t trust us, either.

Jinzhou

In Jinzhou, a steel town around 700 kilometers further south on the Yellow Sea, they’re already waiting for us. Again, there are four of them, and again, they're wearing sunglasses and avoiding eye contact as they sit in the lobby of our hotel in the morning.

But it appears that we briefly gave them the slip on the previous evening. Immediately after our arrival in the city the day before, we visited Li Tianyou, 29-year-old, fallen superstar of the Chinese live streaming scene, who we had met three years earlier at the peak of his career.

MC Tianyou, as he was known at the time, coined a new rap genre called hanmai, meaning literally: "shouting at a microphone.” The rap style, rooted in the northern Chinese working class, may be harmless by Western standards, but it is salacious and crude to many Chinese. "Listen Up, Girls,” was the name of Tianyou's biggest hit.



His success was phenomenal. He had 22 million followers, and on one evening, he attracted more than a million of them to his chat room and earned the equivalent of 200,000 euros. A fashion label in London even booked him for an ad campaign and he says almost all young people still recognize him on the street today.

But this success was followed by a deep fall for Tianyou and for many of his imitators. His streaming platform terminated his account in early 2018 under government orders and banned three of his hits. 

Chinese state broadcaster CCTV portrayed the hanmai culture as a dark cloud that rained down filth, weapons, panties and whips on the country’s youth. Bloggers loyal to the state welcomed Tianyou’s ban, saying he lacked "positive energy.”

Two years later, the once well-traveled Tianyou is back in Jinzhou, the city where he grew up. He’s an athletic young man with a gladiator haircut. 

His headquarters are a mixture of office, gym and motorcycle museum. Ten employees sit on the first floor and manage other live streamers that Tianyou now has under contract.

"I wouldn’t even want to be online anymore,” he says. "I was an entertainer. I talked and rapped. Live streaming in China today has more to do with selling things, like beer or shampoo. 'Hey, why don't you order a few more bottles?' That's not my world anymore."

Outside his door are two classic cars, an Austin Mini and a vintage Mercedes, and he has built a big toy racetrack for himself inside the office. The internet rebel who tested the boundaries of Chinese taste has retreated back to his comfort zone, the small area where the regime lets its citizens do business in peace. 

Tianyou doesn’t mention a word about the crisis caused by the coronavirus or the details surrounding the ban on his work. "I can’t talk about that,” he says.

Tianyou’s rise and fall is a testament to how obsessive the Chinese state has once again become. It may not be fundamentally opposed to its citizens embracing new technologies and cultures, but it can be relentless when it believes red lines are being crossed. 

A decade or so after it seemed like social media was nudging the door open in China, the party has returned to the total control that it exercised when it first came to power a hundred years ago.

The morning after our meeting with Tianyou, as we check out and drive to the train station, the four agents get out of their seats and follow us in a black Toyota. At the station, three of them jump out of the car and follow us to the ticket office. One of them stays at the security gates long enough that he can be sure we're not coming back.

Beijing

In Beijing a few days later, we have a meeting arranged with Liu Chengcheng, 31, a startup founder we first met six years ago. Liu, known as CC for short, started a blog as a student that became one of the most successful Chinese tech websites, showcasing new apps and inventions and bringing together startups and investors.

Our first meeting took place in an office in Beijing's University District, back when Liu had 50 employees. In 2018, he welcomed us for a visit at the company's new headquarters on Chang'an Boulevard, not far from the Great Hall of the People. By that point, he had 700 employees and had founded two other companies.

Once again, two years have passed and Liu invites us for a meal at a Japanese restaurant that’s even a little closer to the city center. He now has 1,000 employees and one of his companies is listed on the NASDAQ technology exchange in New York.

Liu, who hasn’t totally shaken his student habits, arrives late, although a few pounds heavier this time. That morning, he was in Chengdu, the capital of Sichuan, meeting with the leadership of a province that has about as many inhabitants as Germany. 

He was accompanied by an employee of his who is working on a major project: an all-Chinese operating system that could make computers and mobile phones in China independent of U.S. market leaders Microsoft and Android.

    Startup founder Liu in 2018: "Anything but a Mercedes." Foto: Gilles Sabrié


"Technically, it's not a big problem," Liu says. What will be more difficult is building up an "ecosystem” connecting the software and hardware. 

But the political situation makes it increasingly likely that the digital world will fragment – not just in an American and Chinese one, but into many national and regional spheres, including a European one, a Russian one and an Indian one.

The amiable nerd we met six years ago has since become a CEO, a man who thinks in global terms and routinely avoids any questions that could potentially land him in hot water with the financial regulators. 

He soon plans to take the second of his three companies public, but this time he will do so in Shanghai rather than New York.

Liu says the corona crisis is accelerating trends that emerged before the pandemic, some of which are beneficial to China. "Between March and June 2020,” he says, checking the numbers on his mobile phone, "China’s gross domestic product was only 5 percent below that of the U.S. 

The mood is good for tech companies in China." This is in large part due to the fact that Beijing wants to become technologically self-sufficient. 

"It wouldn’t be this way if relations with Washington were better."

Entrepreneurs still have more freedom to talk about sensitive issues than scientists, lawyers or even human rights activists. The state praises and encourages young founders like Liu, hoping to profit from their entrepreneurial spirit. But there are red lines that apply for them as well. 

The party’s primacy has once again become sacrosanct under Xi Jinping. It’s easier to talk about private matters than about the party.

Shortly before our first meeting in 2014, Liu had just got his driver’s license. When asked what car he wanted to buy at the time, he answered: "A blue one." Which brand? "Anything but a Mercedes. 

That's what businessmen drive around in.” Six years later, he calls his driver during lunch. Liu has a hunch what our last question might be and laughs. "OK, he’s coming in a Mercedes. But that's just my company car."

Shanghai

It's 1,318 kilometers by train from Beijing to Shanghai, about as far as from Hamburg to Bologna. A flight takes just under two hours, a train journey takes more than four and a half hours, hardly a minute of which passes without a city, a factory or at least a skyscraper being visible when looking out the window. 

Travelers from Beijing typically arrive in the Hongqiao transportation hub in western Shanghai, a massive concrete structure that connects Asia’s largest train station with the city’s domestic airport.

Less than a year after the outbreak of the coronavirus, the halls and corridors of Hongqiao are as crowded as ever before, perhaps even fuller, whereas emptiness reigns at Pudong Airport’s international terminal. China has isolated itself, and travel to foreign countries has almost completely ground to a halt.

About halfway between Hongqiao and Pudong, financial broker Zhang Jiahua, 30, works in a skyscraper. He’s wearing a green t-shirt, track pants and athletic shoes, the "Shanghai financial look,” he says. The Chinese may have adopted Western financial capitalism, but they have ignored its dress code.

Zhang is upbeat about his day-to-day business. He manages the fortunes of entrepreneurs and investors on China’s east coast and he recently took on a prominent author and a race car driver as clients. That kind of thing counts among Chinese investment bankers.


But Zhang doesn’t trust the stock market boom that has swept China in the wake of the pandemic. In the large, industrial provinces along the Yangtze River where most of his clients live, the mood remains cautious. Some companies that manufacture products largely for export are suffering from weaker demand from certain countries.

Like Beijing founder Liu, Zhang is also worried about relations between China and the U.S. and believes the situation is even more fraught than Liu does. "I don’t fear a major war,” he says, "but I do anticipate a regional conflict in which China and the U.S. could get entangled.” The crisis scenarios he discusses with his colleagues focus on the island of Taiwan, which Beijing considers to be an "inalienable part of China.”

It is true that the majority of mainland Chinese consider Taiwan to be a part of China. 

But with the pandemic, nationalist sentiments have increased dramatically and are being promoted by state propaganda – to make people forget China’s failures at the beginning of the crisis, on the one hand, and to distinguish themselves from Western governments that are perceived as incompetent, on the other. 

By cutting itself off from the rest of the world, the feeling of superiority is being reinforced from the inside.

Stock broker Zhang is betting on the "Fear Index.” He advises his clients to buy gold and real estate, investments that may retain their value even after a severe political crisis.

Wuhan

Wuhan, the central Chinese city of 11 million where the coronavirus first appeared, is located 1,000 kilometers up the Yangtze River from Shanghai. In the West, its name has become synonymous with disaster. But for most Chinese, Wuhan is a city of heroes.

On Chezhan Street, which leads up to the old colonial railway station, parking spaces grow scarce in the evening. The tables in front of restaurants fill up, guests laugh and glasses are clinked. 

It must have looked something like this last autumn -- before, a few kilometers away, the first people began falling ill with a mysterious form of pneumonia at the now infamous Huanan seafood market.

"If I didn’t know what happened, I wouldn’t believe it,” says Yang Xiu. She has run a restaurant with frog hotpot specialties on Chezhan Street for more than 20 years.

We first met Ms. Yang in April, when she returned to her restaurant for the first time after more than two months of lockdown, opened the windows, emptied the refrigerators and started all over again.

Initially, her fears were confirmed. It took another two months for enough guests to return to enable her to rehire her first employees. She estimates today that she lost the equivalent of 30,000 euros.



Now, though, she says business is "tebie hao,” extraordinarily good. "We are now allowed to put the tables on the street in the evening, which had been strictly prohibited before. But it’s true: It’s good for business but bad for the epidemic if people are eating and drinking outside. 

Sometimes, it seems like people are taking their revenge on the virus by going out to eat even more often in the evening.” On a good night, she has revenues of around 10,000 yuan, about 1,300 euros.

Unlike in Europe and the United States, Wuhan was the only city in China that suffered thousands of deaths, likely many times the official figure of 3,869 victims – because the numbers were initially manipulated and many sick people couldn't get tested during the first few weeks.

The government, which initially dragged its feet before then crushing the virus with severe lockdowns, has rewritten the story of the past 11 months into a heroic saga. And Wuhan plays a leading role: Its residents are portrayed as having made a great sacrifice to save the motherland. This grand narrative is celebrated in paintings, documentary films and TV shows. Wuhan for all, all for Wuhan.

But that myth has never been very perceptible in the city itself. When the sirens wailed shortly after Wuhan's opening in April, only those people stopped who didn't realize it was a signal for reflection and commemoration. The rest just carried on with their shopping and errands. They hadn’t been allowed to do so for a long time.

Bijie

On the evening of that November day in 2012 when Xi Jinping introduced himself as the new leader of the Communist Party in Beijing, a tragedy took place in the city of Bijie in the poor, southwestern province of Guizhou. 

Five boys, left behind by their parents, who were migrant workers, shut themselves in a large dumpster and lit a fire to warm up. They suffocated from the carbon monoxide poisoning. The country was shocked. Where was the state? Where were the teachers? Where was the care?

Four weeks later, we traveled to Bijie to report on the case. It was raining, and the drive from the provincial capital of Guiyang to Bijie took five hours. Today, Bijie is connected to the Chinese high-speed rail network. The train ride from Guiyang now takes just 48 minutes.

Eight years ago, the road to the village of Caqiangyan, where the five boys grew up, led up into the mountains over muddy dirt roads with knee-deep potholes. In the end, a four-wheel drive vehicle had to be called to get us back. Today, the road is paved all the way to the village. 

The house from which three of the boys had run away looks deserted. Two wild turkeys are running around in front of it and there are children’s shoes on a window sill. Then a boy comes out, 12 years old. 

He shares the same last name as his cousins, with whom he had played as a toddler. His parents are also migrant workers, who left him behind to stay with his grandfather.

In the regional capital down in the valley, Mr. Li sits in the municipal office, which is responsible for the villages in the mountains. It consists of a single large room, the walls of which are papered with huge charts. 

On them, line by line, are the names of all the families living on the brink of poverty. The aid they are currently receiving is listed in the columns next to them. "We help them buy things like food, heating oil, electricity and health insurance,” says Mr. Li. 

He said steps were taken to address poverty before the deaths of the five children, but the program was improved afterward.

Li Yuanlong is the man who first reported the 2012 tragedy in Bijie -- on the internet, because the state media initially declined to cover the story. He had been fired years earlier from the Bijie Newspaper and imprisoned for taking on the powers-that-be in the city. When the authorities requested that he cease with his reports after the deaths of the five children, he refused -- whereupon officials took him and his wife, a teacher named Yang Xiumin, into custody.

Restaurant owner Yang Xiu in Wuhan: "Good for business but bad for the epidemic" Foto: Gilles Sabrie / DER SPIEGEL


When they returned home, Li helped us with our reporting, which first created problems for him, and then for us. Just before we left Guizhou, our hotel rooms were broken into. The intruders deleted our hard drives and destroyed our equipment.

Eight years later, we called Li again. He has since changed jobs and works for a company far outside of town. He said he would like to see us again but asked if he could have a night to think it over. The next day, he said: "I think it would cause too much trouble for you and for me. But please visit my wife. She would be pleased to see you."

In 2012, Li and Yang Xiumin lived in an unplastered house on the outskirts of the city, only one room of the small apartment was heated. Today, they have an apartment on the 28th floor of a modern residential tower. The view from the elevator looks down on a futuristic new museum and the riverfront park promenade. It’s an impressive panorama.

But as we step out of the elevator, three men from the public security bureau are standing outside the door to Li’s apartment. "Who are you?" they ask. "What do you want here?” Before we can answer, Mrs. Yang opens the door, looks past the officials and invites us in. 

The men force their way in behind us as a dog yaps at them. An absurd situation ensues, and even the officials seem confused for a time. Yang Xiumin simply ignores them and starts talking about her son, who lives in the U.S., but whom they are not allowed to visit because of the ban on leaving the country.

Then she takes us to the building’s rooftop terrace, with the public security officials and the yapping dog in tow. "My husband relaxes up here during the weekends,” Mrs. Yang says, "writing poetry and watering the plants.”

At some point, the presence of the public security officers grows unbearable. Yang Xiumin apologizes, but it is actually us who should apologize. We bid a resigned farewell. The men keep following us, first to the elevator, then in a white car back to the hotel and in a Volvo to the train station.

Hainan

Haikou, the capital of the island province of Hainan, is a city of 2 million people that’s just like dozens of others in China: monotonous apartment blocks, wide urban highways and office towers in Chinese neo-brutalism. If you didn't see the ocean on the approach, you might never realize that Haikou is located on a tropical holiday island.

Still, as our driver points out, there are "serious bars” in the city. He means nightclubs, maybe even illegal ones, but when asked about it, he says: "I can’t say it quite like that. Conversations in taxis are recorded these days.”

A grandiose Palace Hotel, the guest house for the government of the People’s Republic, is located in the center of the city. Here we meet Victor Gao, who was the interpreter in the 1980s for Deng Xiaoping, the reformist politician who opened China up economically after Mao’s death and had the Tiananmen Square uprising smashed in 1989. 

Today, Gao is a member of the board at a government-affiliated think tank and, by virtue of his convictions and polished English, serves as a kind of unofficial government spokesman.

Over the years, Gao has accompanied many delegations to Hainan and has a surprisingly sober view of the island’s development. Hainan was elevated to the rank of a province in 1988, with the declared intent of developing the same economic dynamism here as in Taiwan, a democracy that is roughly twice the size.

Visitors to the island of Hainan in the south: "The Chinese never bluff." Foto: VCG / Getty Images


That goal still hasn’t been achieved, despite 30 years of effort. "Hainan is beautiful. But I know many people who have made a fortune here and lost it again,” says Gao. 

The first era of "exuberance” was followed by disappointment.

Like Manchuria, which remains underdeveloped to this day, Hainan is an example of how a seemingly omnipotent Beijing is far from reaching all of its goals. 

Hainan was also covered with airports, roads and railways; and in the south, a huge cruise terminal was built, modeled on Miami. But none of these projects has really taken off yet. Instead, Hainan is today one of the most indebted provinces in the country.

This spring, the government decided to turn the whole island into what would become the world’s largest free trade zone. Since then, some in nearby Hong Kong have feared that Hainan could one day overtake Asia’s most important financial center. Gao doesn’t think that's very likely.

He says that Beijing has another role for Hainan, one that goes beyond making it a profitable tourism center. The island, he says, is located on the "front line of a major geopolitical confrontation,” the conflict between China and the United States. 

From Beijing’s point of view, Hainan Province also includes islands in the South China Sea - islands that have been developed into military fortresses despite the fact that they are claimed by other countries. "The South China Sea is fully, comprehensively and seamlessly monitored by the Chinese defenses,” says Gao. 

"Every ship, every submarine, every hostile object is accounted for. War should not be an option, but if one broke out between China and the U.S., the South China Sea will become a graveyard for America’s ships. The Chinese never bluff.”

Gao is no radical – he represents the more moderate wing of the Beijing establishment. 

The fact that he can speak about the beauty and investment opportunities on a tropical island and then about a "graveyard” for the U.S. Navy shows two of the many faces of modern China: a soft civilian one and a hard military one.

At Yalong Bay in southern Hainan, a three-hour drive from Haikou, this contradiction is repeated, but it's barely noticeable initially. A long sandy beach stretches along the western side of the bay, with a dozen large hotels lined up behind it. Swimsuits hang to dry on the balconies, the first joggers set off in the morning and employees carry fresh hotel towels down to the beach.

On the eastern side, an inconspicuous, verdant forested mountain rises out of the sea. There is hardly any other place on China's coast that militaries in the West are keeping such a close eye on. The bunker where China’s navy stations its fleet of nuclear submarines is hidden inside the mountain. It’s the place from which Beijing symbolically asserts its claim to power over the South China Sea, the Western Pacific and, more recently, far beyond.

China has risen to become a world power for the second time in recent decades, an unprecedented comeback. One reason is China’s sheer size, its vastness, its density and the deep roots of its culture. The other, which is even more important, is the diligence, creativity and patience of its people.

There’s an unwritten contract between the Chinese and their leadership that still binds them today: You stay quiet and we will set the course for growth, success and China's path to the top. It's a tough, unambiguous contract. 

Way up in the north, by the Black Dragon River, where our journey began, there was a red banner: "Violate the laws of this boundary," it read, "and you will be caught and crushed like a worm."


Bernhard Zand has since moved to Hong Kong as DER SPIEGEL's correspondent there.