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July 31, 2007
Japanese Investment in China Wanes
The Economist observes that Japanese firms are starting to favor more investment both at home (Honda is building its first new plant in Japan in three decades) and in other Asian countries than in China:
. . . for Japanese firms that are investing overseas, surveys show a shift away from China in favour of other Asian countries. In 2004 around 86% of Japanese firms planned to expand in China; last year the figure dropped to 77%, and 2% said they were actually scaling back their Chinese operations. In another survey, which asked Japanese firms to rate which countries they regarded as the best places to invest in the next three years, the proportion opting for China dropped from 91% in 2004 to 77% last year, while the appeal of Vietnam and India rose substantially . . . This is partly because China has become expensive compared with elsewhere in Asia. There is also concern over anti-Japanese sentiment.
The article goes on to point out that Japanese business practices often don’t wear well in China. Chinese executives apparently joke that if you want to learn something about communism, go to work for a Japanese firm.
Posted by John at 6:00 AM | Comments (0) | TrackBackImmigrants Driving Housing
Roughly half a million housing units in the U.S. are newly occupied each year by immigrants. To compare, new housing starts for the country are currently running at about 1.4 million annually.
In some regions of the U.S., immigrants account for more than 90 percent of all growth in housing demand. [Source: AP]
Posted by John at 5:32 AM | Comments (0) | TrackBackThanks to Hispanic Viewers, Soccer Kicks Hockey
According to ESPNsoccernet, nearly twice as many U.S. viewers tuned in for the June 24 Spanish language broadcast of the Gold Cup finals between the U.S. and Mexico as those who watched this year's deciding Stanley Cup match. [Thanks to Hispanic Tips for the pointer.]
Posted by John at 4:46 AM | Comments (0) | TrackBackQuote of the Day for Tuesday, July 31, 2007
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July 30, 2007
Beware the "Quality Fade" from Chinese Suppliers
Knowledge@Wharton has an excellent examination of the "quality fade" many Chinese suppliers engage in. The "quality fade" is the subtle, yet progressive degradation in product quality Chinese manufacturers engage in so as to cut costs and improve margins. My friend Dan Harris at the China Law Blog, addressing this same subject, says that "quality fade tends to happen disproportionally on the fourth shipment, probably because it is at this point that the Western importer is feeling comfortable enough with its Chinese manufacturer to place a large order and the Chinese manufacturer is feeling comfortable enough to cut corners."
From Wharton's point of view, the "quality fade" has a lot to do with short-sightedness on the part of Chinese manufacturers:
There is a sense of urgency in China, the feeling that one must work fast before the window of opportunity closes. For factories, that means taking shortcuts on quality. Many factory owners can't see beyond the next purchase order.
One reason for the short-sightedness may have to do with China's political environment. The one-party government does what it wants, when it wants. And while there may be some advantages to a government that can operate without restraint or controversy, such a system limits predictability and leaves the business sector keenly aware that it is subject to the evanescent whims of officials who may or may not know which policy is best.
The U.S. administration has recently been applying pressure on China to revalue its currency in order to close the growing trade gap between the two countries. To appease the U.S., China has responded by reducing the tax rebates it offers to manufacturers. For some suppliers, the tax rebates have constituted a major portion of their bottom line. Massive and sudden changes such as these only confirm the factory owner's paranoid suspicions that the manufacturing opportunity could disappear at any moment. No one in China is sure how long anything will last -- a situation that keeps many focused on the immediate present.
Chinese manufacturers that engage in quality fade unfortunately subscribe to the view that business is about increasing one's share of the pie rather than growing the pie over time. They often focus on extracting profit through short-term maneuvers that inevitably militate against long-term development. This approach, it should be noted, contrasts sharply with the success strategies of such economies as Japan and Korea, which focus on building market share and developing strategic relationships.
Dan Harris offers a more subtle analysis of the situation in his reaction to the Wharton commentary:
Quality fade is a major problem in China. However, the reason why this is happening is not so much so Chinese manufacturers can rake in big margins, it is so they can survive. Many Chinese manufacturers have no margin whatsoever. With currency revaluation, massive competition, tax reform and the end of VAT rebates, huge numbers of Chinese manufacturers are operating at a loss. They are doing the quality fade in a desperate attempt to stay alive for a few more months or years. China is in a desperate situation of pursuit of the absolutely lowest price. China's manufacturers cannot continue this race to the bottom and continue to survive. At some point, they will need to shift to higher quality goods at a higher margin. This shift is already happening in the market as a whole and I have seen individual Chinese companies make this shift as well. Just this month, a client of mine was told by his Chinese supplier that the supplier could not continue to maintain expected quality without a price increase. My client wisely went along with this. I have seen companies fight a price increase when they had to have known there was no way quality could be maintained without it.
In my view, it all comes down to economics and, contrary to Midler's assertion, Adam Smith will do just fine here. Economics is what is driving quality fade right now (just as it did when Japan and then Korea were known not for the quality of their goods, but for their low price), not some special characteristic of the Chinese people. Since it is driven by economics, it can be understood. The next topic is to consider whether the Chinese can break out of the cycle. Japan and Taiwan did it and I do not see why China cannot do the same.
In light of product quality concerns, Dan goes on to give some areas of focus for companies sourcing from China in his excellent post which you can read in full here.
Posted by John at 7:07 AM | Comments (0) | TrackBackChina the Biggest Driver of Global Growth
For the first time in modern economic history, the IMF predicts China will be the biggest contributor to global economic growth this year. Further, China, Russia, and India, taken together, will account for half of the world's growth this year. See this Times story for more details.
Posted by John at 6:51 AM | Comments (0) | TrackBack
Quote of the Day for Monday, July 30, 2007
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July 29, 2007
Retail Sales Growth to Be Fueled by Hispanics, Says Wal-Mart's Scott
In a speech given to the National Council of La Raza convention, Wal-Mart CEO Lee Scott sees Hispanics as his company's most loyal customers, accounting for 14% of the 127 million who shop in Wal-Mart each week. Additionally, growth in Hispanic buying power will fuel retail sales for years to come, notes Scott. Read more at Marketing y Medios.
Posted by John at 4:54 AM | Comments (0) | TrackBackQuote of the Day for Sunday, July 29, 2007
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July 28, 2007
On How America Should Embrace China's Rise
America should do with China what Britain was wise enough to do with America a century ago: co-opt and shape China's rise. So argues Thomas P.M. Barnett in a thoughtful U.S. News & World Report commentary. China's military needs to be repositioned, built, and rebranded as a force for global security, just as America's was:
. . . A good place to start is Africa. The Pentagon has recently established a dedicated Africa Command to thwart radical Islam's penetration of the continent. That military unit should work hand-in-glove with China, which has already flooded Africa with 80,000 nationals engaged in pre-emptive nation building. In this alliance, America focuses on governance and security while China focuses on infrastructure and markets to accelerate Africa's integration into the global economy.
Why would China help?
Posted by John at 4:30 AM | Comments (0) | TrackBackThis is what Europe did to North America in the 1800s, and—in turn—what America achieved in East Asia in the last half-century. Now it's Asia's turn to engineer globalization's spread, and Africa, with its natural resources and cheap labor, is the next logical target.
It's time to shelve antiquated balance-of-power strategies and end China's free riding on our global security system. Our nations' strategic goals coincide: globalization's preservation and continued expansion in the face of radical extremist challenges.
All we lack—on both sides—is the next generation of visionary leaders to make this strategic alliance happen. Until then, both capitals remain trapped in myopic arguments about Taiwan, tainted products, and trade deficits.
Jim Rogers Still Bullish on Chinese Stocks
A year ago, Jim Rogers was right on the money in emphasizing Chinese stocks.
Today, while acknowledging that Chinese stock market averages are at extremely high levels, Rogers still sees excellent long-term opportunity in Chinese equities overall, but particularly in companies which are involved in environmental protection, water, green energy, railroads and education. [Source: China Daily]
Posted by John at 4:16 AM | Comments (0) | TrackBackQuote of the Day for Saturday, July 28, 2007
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July 27, 2007
Gone to the Dogs
U.S. consumers spend about $41 billion a year on their pets, a sum larger than the GDP of all but 64 countries in the world. This figure is expected to rise to $52 billion in the next few years. BusinessWeek has a full report.
Posted by John at 8:23 PM | Comments (0) | TrackBackQuote of the Day for Friday, July 27, 2007
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July 26, 2007
$50 Billion Added to the Chinese Overseas Investment Pool
Authorities in Beijing have raised the permitted cap on overseas investments by insurance companies, from 5% of assets to 15%. This move, effective immediately, adds potentially $50 billion to the amount of China-domiciled funds available for global investment. Read more in the Financial Times.
Posted by John at 4:30 AM | Comments (0) | TrackBackU.S. Remittances to Mexico Fall for the First Time in Eight Years
Cash sent to their home country by Mexicans living in the U.S. fell in May for the first time since 1999, and are up less than 2% year to date. Remittances from the United States to Mexico in 2006 rose 15%, so the slowdown is of dramatic proportions.
Analysts attribute this trend to the slowdown in new housing starts in the U.S. and tighter border measures, and an increase in deportations.
Reuters has the full story.
Posted by John at 4:18 AM | Comments (0) | TrackBackQuote of the Day for Thursday, July 26, 2007
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July 25, 2007
ICBC the World's Most Valuable Bank
The Industrial and Commercial Bank of China has surpassed Citigroup to become the world's most valuable bank, as measured by market capitalization.
This development is part of a larger trend: Asia's potential no longer sells at a discount in equity markets, and many cases trades at a premium.
ICBC's valuation is a premium one, to say the least. The bank's market capitalization now exceeds Citigroup's in spite of having only one-third the earnings. In other words, investors are willing to pay three times as much for one dollar of ICBC's earnings as for one dollar of Citigroup's.
It's hard not to think of an earlier time, as the Financial Times's Lex column points out, when another Asian country's banks seemed destined to take over the world:
In the second half of the 1980s, as the market value of the Tokyo Stock Exchange closed in on New York’s, many feared that Japan was going to buy everything in sight. Its banks, in particular, had become enormous. By the end of that decade, the top five global banks by total assets were Japanese, lead by Dai-ichi Kangyo Bank. . .
Today, three of those banks, Dai-ichi Kangyo Bank, Fuji Bank, and Industrial Bank of Japan, have been merged into Mizuho Financial Group. Even so, such a megamerger doesn't even get Mizuho ("abundant rice" in Japanese) a spot in the the top ten financial institutions worldwide, as measured by market cap.
I'm not predicting travails of the same intensity for China's banks as occurred for Japan's a decade ago. The past is not always prologue.
It's hard not to believe, however, that the prospects for Citigroup (and other large U.S. banks) are discounted much too deeply, and that this disparity will correct itself over the next several years.
Posted by John at 3:41 AM | Comments (0) | TrackBackFor Chinese Car Buyers, It's Style That Counts
Sales of low emission cars are about the only category of automobiles in China where sales are falling:
Sales of low-emission cars in China declined 11.67 percent in the first half of the year with the majority consumers valuing social status over the environment.
The dip in sales was in stark contrast to general automobile sales figures in China which increased nearly 30 percent on the previous year, reported the China Association of Automobile Manufacturers.
Posted by John at 2:44 AM | Comments (0) | TrackBackLow-emission car sales dropped 25 percent in Beijing alone, according to Su Hui, head of Yayuncun automobile market.
"When consumers purchase automobiles, their tend to consider how the automobiles reflect their 'face', their social status. Larger vehicles, more expensive models and famous brands are usually preferred," Su explained. . . .
[The full article from People's Daily can be found here.]
Quote of the Day for Wednesday, July 25, 2007
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July 24, 2007
China Development Bank Takes a Stake in Barclays
"Eight years ago, Asia as a whole was desperate for money but now it is desperate to spend it."
So says one economist quoted in a Financial Times story on China Development Bank's investment, along with Singapore's Temasek, in Barclays. The British bank is piling up additional capital in order to increase its chances of winning its fight to acquire ABN Amro.
China Development Bank has agreed to invest a little over $3 billion of Barclays now, and another $10.5 billion if Barclays succeeds in acquiring ABN Amro.
While this investment is China's largest outbound investment ever, expect more announcements such as this one; these figures are a pittance relative to the roughly $200 billion in reserves earmarked for such investment.
Posted by John at 5:10 AM | Comments (0) | TrackBackFor Hispanics, Education is the Top Issue
The National Council of La Raza has issued survey results which indicates that the top issue for Latinos in evaluating Presidential candidates is not immigration or health care, but education. Half of those surveyed regard public schools as either "mediocre" or "poor".
While there are obviously political implications in these results, there are business implications as well. Like families of other ethnic groups concerned about the quality of their children's education, look for Hispanic spending on personal computers, educational software, aids, and supplies to experience significant rates of growth in coming years.
Posted by John at 4:23 AM | Comments (0) | TrackBackWhen Georgia Resembles China
Headlines, in just the past few days, from the Atlanta Journal-Constitution:
"Canned chili sauce linked to botulism" (Augusta-based Castleberry's not only has some bad hot dog chili sauce on its hands, but a few days later the company expands its recall from 10 brands to 80, including not only chili but beef stew, corned beef hash, and other canned meat products.)
"Raw milk sickens three Georgia families" (Three families in Murray County become ill due to campylobacter present in unpasteurized milk sold by a farm which had labeled it as pet food.)
The two are not equivalent; food safety standards in China are markedly lower nationwide than they are in Georgia and the other 49 states. Let's not get too sanctimonious about it, though. Food-borne illness occurs everywhere, even under the best of conditions sometimes.
Posted by John at 4:12 AM | Comments (0) | TrackBackQuote of the Day for Tuesday, July 24, 2007
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July 23, 2007
From Pirate to Partner
Doing business in China often entails an extraordinary amount of flexibility. Proving the point, Thomas Nelson Publishers is weighing the establishment of relationship with a Chinese distributor which had been selling pirated copies of Nelson's titles previously. Now that the distributor has apologized and paid the publisher of self-help and leadership titles compensatory damages, Thomas Nelson is considering establishing a distribution relationship with the same company. The process of confronting this distributor and getting to know each other has helped a legitimate business relationship blossom. You can read the full story, courtesy of the Nashville Tennessean, here.
Posted by John at 3:17 PM | Comments (0) | TrackBackQuote of the Day for Monday, July 23, 2007
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July 22, 2007
Another Reason for Optimism: Worldwide Movement to Entrepreneurism
. . . Half the managers and business leaders in younger, emerging markets were ready to embrace entrepreneurship, even when working in large organisations, compared to just over a quarter in Europe and the UK.
And in Africa, almost nine out 10 managers in believed entrepreneurialism was something that could be developed and nurtured, against just over a third in the UK and the rest of Europe.
Less constrained by tradition, managers from emerging markets are more open to risk taking and creating a more flexible environment and culture, argued McKinney Rogers. . . .
[Thanks to TP Wire Service for the pointer.]
Posted by John at 4:04 AM | Comments (0) | TrackBackSpecial Guest Quote: Cave's Quote
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Quote of the Day for Sunday, July 22, 2007
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July 21, 2007
Our Increasingly Less Competitive Corporate Tax Policy
In a Wall Street Journal editorial, Treasury Secretary Hank Paulson points out that the United States is getting less competitive, relative to the rest of the globe, with its corporate tax policies:
Posted by John at 6:12 AM | Comments (0) | TrackBack. . . Over the past two decades, while U.S. tax law has grown more complicated and our statutory corporate income tax rate has increased, other nations have been reducing their rates to replicate our miracle. A study by Treasury economists estimated that a country with a tax rate one percentage point lower than another country's attracts 3% more capital. It's not surprising then, that average OECD corporate tax rates have trended steadily downward. . .
With Florida Real Estate, "The Vultures Are In The Trees"
An interesting look at the real estate situation in Florida, from Bloomberg:
Posted by John at 5:41 AM | Comments (0) | TrackBack. . . In the 1970s, when condos were a new product, Florida developers built 500,000 units and prices fell 50 percent, said Brad Hunter of MetroStudy, a research firm in West Palm Beach.
"The difference is, back then they were two-story condo buildings that had $50,000 units," Hunter said. "Nowadays they are $700,000 units in 20-story buildings. Instead of building too much stuff that people could afford like we did then, this time we built too much stuff that people can't afford."
A lot of the inventory 30 years ago was sold off and converted to rental apartments, Goodkin said. That solution won't work now because prices have soared and properties coming on the market will compete with existing condos whose prices have plummeted, he said.
Goodkin said opportunistic investors will buy construction loans from banks at a discount of 30 percent or more.
"The vultures are in the trees," Goodkin said. "Reality has become the new pessimism." . . .
The U.S. is a Growth Market for Opera
The U.S. has 125 opera companies, more than Germany and Italy, and about as many Americans attend live opera performances every year as attend NFL football games. What's interesting about the growth in opera in this country is that unlike companies in Europe, which receive significant state funding, most opera companies here receive very little government funding, relying on patrons to fund operating deficits.
Read more in The American.
Posted by John at 5:08 AM | Comments (0) | TrackBackSometimes the Old Bites Back
[Thanks to Sinosplice for the pointer.]
Posted by John at 3:38 AM | Comments (0) | TrackBackQuote of the Day for Saturday, July 21, 2007
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July 20, 2007
U.S. Advantage Over Europe: Greater Economic Openness
This study indicates that the cause of European economic performance relative to the United States is greater openness in the later, in both goods and financial markets.
Just in case you need a study.
Posted by John at 5:22 AM | Comments (0) | TrackBackQuote of the Day for Friday, July 20, 2007
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July 19, 2007
A Grim Warning from the OECD on China's Pollution
The OECD has issued a full length review of the state of China's environment; some of the grim findings include:
--300 million people drink contaminated water daily
--190 million contract water-related diseases annually
--About 70% of the rural population does not have access to safe sanitation and over 17,000 towns have no sewage facilities whatsover
--Over 27% of the country's landmass is being desertifed
---By 2020, air pollution will cause 600,000 premature deaths in cities, 20 million cases of respiratory illnesses a year, and 5.5 million of cases of chronic bronchitis annually.
You can read more here, here, and here.
Posted by John at 7:11 AM | Comments (0) | TrackBackIf the Democrats in Congress Were Truly Interested in the Labor Standards of our Trading Partners . . .
. . . they would press for a free trade agreements with Colombia instead what they are actually doing: pandering to their trade union base at home. Having a free trade agreement in place gives you the basis on which to press for changes in labor standards in other countries, as Robert Rogowsky and Eric Chyn explain in a commentary for The American:
. . . The 15 partners in U.S. trade agreements have made notable efforts to realize these rights [International Labor Organization standards]. In Morocco, for instance, a comprehensive new labor law went into effect in 2004 to combat child labor, reduce the work week, periodically review the minimum wage, improve worker health and safety, address gender equity in the workplace, promote employment of the disabled, guarantee rights of association, and prohibit employers from taking actions against workers because they are union members. Similarly, the Costa Rican government is taking steps to create a better environment for workers. The government has issued new administrative guidelines to deal with anti-union activities and increased the Ministry of Labor budget by 25 percent between 2002 and 2005, strengthening enforcement and labor official training efforts. Thirty-seven new labor court judges have also been appointed to address a backlog of labor cases in the judicial system.
These developments highlight only some of the results of established U.S. trade policies on labor standards in developing countries. It is true that the recent exposure of labor standards violations in Jordan, a U.S. free trade partner, shows that trade commitments are not a panacea. Active enforcement and monitoring efforts complement trade agreement labor measures. Nonetheless, the economic incentive to trade duty-free with the United States is a profound one, and those interested in raising global labor standards have used previous U.S. trade preference agreements to create change rather effectively for a long time. Meanwhile, current talks between Congress and the White House also give reasonable hope that U.S. trade policy will continue to promote labor development.
As Rogowsky and Chyn point out, the worldwide supply of labor available to the global economy has tripled to about 3 billion since 1980, driven in large part by China and Russia's opening to globalization. Giving Colombia, a country of 45 million people, the finger on a free trade agreement is hardly going to counter this megatrend in labor and its attendant effect on wage rates. Further, it's a terrible way to treat a country which has made extraordinary progress in reforming it economy and making the country attractive for foreign investment.
Posted by John at 3:39 AM | Comments (0) | TrackBackQuote of the Day for Thursday, July 19, 2007
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July 18, 2007
Home Depot Headed to Chengdu
All Roads to China reports that Home Depot is opening an office in Chengdu and plans to increase its sourcing from Sichuan-based suppliers.
Posted by John at 5:00 AM | Comments (0) | TrackBackEntrepreneurial Party
The Chinese Communist Party, whose membership already includes an estimated 2.9 million managers and employees of privately-owned firms and over 800,000 self-employed individuals, is actually seeking more entrepreneurs as members.
Posted by John at 4:43 AM | Comments (0) | TrackBackChina Pork Chopper
Pork prices have risen so high in China that thieves are stealing pork meat. According to this report, stolen pork can be fenced for more than a stolen motorcycle.
Posted by John at 3:08 AM | Comments (0) | TrackBackQuote of the Day for Wednesday, July 18, 2007
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July 17, 2007
Free Market Believers in China, Even When It Comes to Beef Noodles
Unhappy with price inflation of beef noodles, local officials in Lanzhou, a town in China's Gansu Province, decided to slap price controls on this favorite breakfast dish:
. . . price controls announced June 26 that in "an ordinary grade restaurant," a large bowl of beef noodles cannot be sold for more than 2.5 yuan (HK$2.58), and no more than 2.3 yuan for a small bowl, has given rise to arguments on how far the government should interfere in commercial decisions.
Following a survey of 12 beef noodle shops, authorities found the price of a large bowl of beef noodles was 2.19 yuan.
"It would be [therefore] reasonably profitable to sell at 2.50 yuan," said Wei Lizhong, deputy chief of the city's consumer price regulator. "Beef noodles are no less important than water and electricity and its price level should comply with people's livelihood."
Wei said allowing the market to determine prices would not be realistic . . . .
While Lanzhou authorities may not believe in a free market for beef noodles, officials at the national level have a different viewpoint:
The pricing move is not seen in a good light by top policy planners. The National Development and Reform Commission said Lanzhou's move is not in keeping with the "rules of the market economy."
A scholar at the Chinese Academy of Social Sciences remarked that the intervention was a "return to a planned economy."
[Source: The Standard; thanks to Simon World for the pointer.]
A brand of Communism even Milton Friedman would approve of!
According to a CCTV report on the situation, price controls on beef noodles has had the predictable effect: supplies, in the form of portion sizes, are shriveling:
Posted by John at 5:52 AM | Comments (0) | TrackBackJust a couple of days after the order was issued, reports were coming in of restaurants cutting back on the amount of noodles and beef they serve.
"It doesn't fill me up anymore. Before, a big bowl of beef noodles really made me feel full," said Miao Huihui, a Lanzhou native who always eats noodles in the morning before going to the office.
A Harder Working Wealthy Class
In a New York Times commentary on the definition of "fair" when it comes to taxes, Greg Mankiw points out that today's wealthy, as opposed to early times, are earning real wages, not idly clipping bond coupons:
Posted by John at 4:41 AM | Comments (0) | TrackBack, , , Indeed, the share of top incomes coming from capital is much lower now than it has been historically. According to Emmanuel Saez, an economist at the University of California, Berkeley, for the richest Americans — those in the top 0.01 percent of the distribution — the percentage of income derived from capital fell to 25 percent in 2004 from 70 percent in 1929.
If your image of the typical rich person is someone who collects interest and dividend checks and spends long afternoons relaxing on his yacht, you are decades out of date. The leisure class has been replaced by the working rich. . . .
We Can't Legislate Happiness . . . and Shouldn't Try
Helen Johns and Paul Ormerod, writing in the Financial Times, argue that governments should quit trying to legislate happiness:
Posted by John at 4:15 AM | Comments (0) | TrackBackGovernment attempts to increase measured happiness, rather than making life better for us, may well do the opposite: create arbitrary objectives that divert civil service energies from core responsibilities; give many people the message that happiness emanates from national policy rather than our own efforts; and create pressure for government to appear to increase an indicator that has never before shifted systematically in response to any policy or socioeconomic change. These are exactly the mistakes of the target-driven mentality that now pervades the British public sector. We should learn from these rather than replicate them.
More sinisterly, the happiness view of the world has tendencies that are inherently anti-democratic. The expert with his or her clipboard and regressions knows better than ordinary people themselves what makes them happy. So local democratic or individual decisions can be overridden with a clean conscience. Because, at face value, promoting happiness is an incontestable aim, it would be ideal for steamrolling opposition to policies that, on closer inspection, pose the same very real tough choices that are a continual presence in politics.
Quote of the Day for Tuesday, July 17, 2007
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July 16, 2007
It Takes More Than Copying a Spark Plug
Jeremy Haft, writing in the Wall Street Journal, on why China is not the "manufacturing juggernaut" so many in this country fear:
On average, it takes China 17 separate parties to produce a product that would take us three. Unlike Japan in the 1980s, little companies drive China's economic growth, not big ones. China's industries are composed of hundreds of thousands of tiny factories and farms -- plus traders, brokers, haulers and agents, all of whom take control of the goods and materials but add little value to the product. With every additional player in the chain, the cost, risk and time grow. Effective quality control in this environment is difficult.
Haft goes on to note that the next century "will not be led by the country that can make the cheapest copy of a spark plug", but the country which is the most innovative, entrepreneurial, and responsive to change. Those characteristics, Haft argues, are America's strengths.
What's more, the Chinese know all this. They understand their own assets and liabilities, better, I think, than we in the U.S. often do.
Posted by John at 7:02 AM | Comments (0) | TrackBackChina's Economy Poise to Pass Germany's as World's Third Largest
At current rates of growth, China will pass Germany to become the world's third largest economy before year end. Read more here. Before the China fearmongers start wringing their hands too much, Germany's GDP per capita on a purchasing power parity basis will still be over five times greater than that of China. (See the global ranking of per capital GDP PPP here.)
Posted by John at 4:11 AM | Comments (0) | TrackBackQuote of the Day for Monday, July 16, 2007
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July 15, 2007
Text Messaging the Most Effective Way to Reach China's Masses
As illustrated by the following: thanks in part to test messages of warning sent by local flood control authorities, more than 150,000 people in Sichuan Province escaped a flood which submerged the first floor of most houses in the affected area. [See the full story here; thanks to Smart Mobs for the pointer.]
Posted by John at 10:20 AM | Comments (0) | TrackBackWhy Global Warming Should be Treated as Humanity's "Crisis of the Age"
It would help lower the probability of greater stupidity, observes the always insightful Thomas P.M. Barnett:
. . . I know full well that the "war on terror" and "clash of civilizations" are current front-runners for "crisis of the age." I've come to the conclusion that we're deeply mistaken to so elevate either notion, given our current administration's track record.
So how to "solve" this crisis? Replace it with a bigger, more attractive one and, by doing so, de-escalate the harmful rhetoric vis-a-vis Islam while systematically de-legitimizing al Qaeda's self-declared importance as that religion's lead resistance to globalization's advance.
If forced to choose, I'd go with global warming right now because we'll do less damage to both our world and ourselves by myopically focusing on that crisis versus terrorism or radical Islam or China's latest submarine.
Read his complete commentary here.
Posted by John at 10:04 AM | Comments (0) | TrackBackHow Globalization's Winners Among Cities Will Be Determined
In this commentary, Edward Glaeser observes that cities like New York have thrived from the manufacture of ideas, and ideas are developed by clusters of smart people. Encouraging the growth and development of those clusters of brainpower, through both immigration and education, says Glaeser, will determine winners and losers among cities in a globalized world.
Posted by John at 8:59 AM | Comments (0) | TrackBackQuote of the Day for Sunday, July 15, 2007
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