March 19, 2008
Georgia Shouts "How 'Bout Them Asians!"
University of Georgia Bulldog fans like to holler "how 'bout them Dawgs" when rooting for their athletic teams. All Georgians, regardless of their sports preferences, should be rooting for the Asian economies, particularly China.
More than three-fourths of the total import volume processed through the Port of Savannah during the current fiscal year arrived from Asia. Moreover, just over half of the total export volume during the same period was bound for Asia. [Source: Connect Savannah]
Remember, the overall economic impact Georgia's ports have on the state is enormous, and much of that volume is due to trade, both imports and exports, with Asia, and China in particular.
To say Georgia is a stakeholder in Asia's growth in a mild understatement.
Posted by John at 6:17 AM | Comments (0) | TrackBackMarch 18, 2008
Cumulative Investment in Post-Reform China Reaches $2.11 Trillion
According to the China's State Administration For Industry and Commerce, foreign investment in the country from 1978, the year economic reforms began, to 2007 cumulatively adds up to $2.11 trillion. [Source: China Daily]
That's slightly less than the current annual GDP of the entire German nation, the fifth largest economy in the world.
Posted by John at 4:22 AM | Comments (0) | TrackBackMarch 16, 2008
China Passes the U.S. in Number of Internet Users
According to this InformationWeek story, China now has over 216 million internet users.
Posted by John at 10:33 PM | Comments (0) | TrackBackFebruary 25, 2008
Georgia's "China Decade"
Tomorrow, the Georgia-China Alliance celebrates the fourth "China Day" at the State Capitol. In a relatively short period of time, Georgia's ties with China have multiplied rapidly, as I expressed in an editorial in this week's issue of the Atlanta Business Chronicle:
This week, thanks to a joint resolution sponsored by Sen. Judson Hill and Rep. Charlice Byrd, we will be celebrating “China Day” at the State Capitol. Georgia’s relationship with China has come a long way very quickly.
About four years ago, a State Senate Committee led by Sen. Sam Zamarripa conducted research on Georgia’s relationship with China to determine how our ties could be enhanced. Since this study (pdf) was done, Georgia’s Chinese connections have flourished, thanks to the efforts of both private and public sector individuals too numerous to name. While celebrating “China Day” again this year, we Georgians are really in the midst of celebrating “The China Decade”.
In 2001, China trailed the Netherlands and Brazil as Georgia’s eighth largest trading partner. According to the latest available data, Georgia’s exports to China have mushroomed to $1.1 billion, a 23% compound annual growth. China is now Georgia’s third largest export market, ahead of the United Kingdom, Japan, or Germany.
Georgia is a Southeastern leader in attracting Chinese business; we have several different Chinese companies in various stages of constructing facilities here. Imports from China are the principal reason Savannah is America’s fastest growing port.
Despite this progress, our relationship with China still has remarkable unrealized potential. We must press our federal officials to clear the way for China to locate its next U.S. consulate in Atlanta. As has been the case with Houston, a Chinese consulate in Georgia would plant our state in the sights of many more Chinese businesses contemplating a U.S. location than would otherwise be the case.
With disposable income in China rising quickly, our state should commit funds which promote Georgia to Chinese tourists looking at potential U.S. destinations. Those tourists can’t get here, however, without visas granted by the U.S. government. Consequently, we must press our Washington representatives to overhaul and streamline the visa approval process for both tourists and businesspeople.
While the growth in our state’s relationship with China has been dramatic and profitable, we have much more work ahead of us to fully realize the potential of our “China Decade”.
My friend Kathe Falls, Director of International Trade at the Georgia Department of Economic Development, was nice enough to get me the 2007 trade statistics, which she has faster access to than I do. Trade statistics for 2007 reveal that China is now in second place on Georgia's list of export markets, behind only Canada. Exports to China from Georgia grew by 26% in 2007. That's really big news, and further indication of the rapidly growing Georgia-China relationship.
Posted by John at 10:20 AM | Comments (0) | TrackBackFebruary 15, 2008
Privatization at a Record Pace
According to the World Bank (pdf), 249 privatization transactions from 48 developing countries occurred in 2006, valued at a record $104.9 billion. Two of these transactions, the IPOs of the Industrial and Commercial Bank of China and Bank of China, account for one-third of the volume.
In nominal terms, this deal volume is a record; in real terms it is 17% less than the peak in 1997.
Posted by John at 6:19 PM | Comments (0) | TrackBackFebruary 12, 2008
China's Tax Structure Explains Incentives for Growth
When you understand China's sources of tax revenue, as explained in this Wall Street Journal article, you understand why the government is so anxious to maintain growth:
Posted by John at 6:03 AM | Comments (0) | TrackBackYears of big gains in the tax take have helped the government increase spending and trim its already small budget deficit, but the increases have come largely from taxes paid by big companies. Last year, a windfall from a transaction levy on China's booming stock market helped boost the tax take by nearly 30%.
Although finances are sound now, the lopsided structure of China's tax system could become a challenge if corporate profits weaken, as the stock market has already begun to do. The new spending commitments President Hu Jintao's administration has been ramping up in recent years will likely require a broader, more stable revenue base. And the ease with which China's new rich can evade taxes has become politically embarrassing for a government that espouses socialist ideals.
Those concerns are behind a push to expand the reach of the income tax, starting with the top earners. The potential payoff is large. Like many developing countries, China gets little money from the personal income tax, which provides 6.5% of government revenue. Most Chinese have never filed a tax return. By contrast, the income tax made up about 45% of the U.S. federal government's total tax take in the fiscal year that ended in September.
February 9, 2008
The Tide Turns: Prices of Chinese Imports Rising
Posted by John at 8:05 AM | Comments (0) | TrackBack. . . A confluence of events -- the weakening dollar, soaring domestic inflation, new labor laws, the end of some government export subsidies, the increasing cost of raw materials, more stringent product safety regulations, and bad weather -- means the cost of goods produced in Chinese factories is rising fast.
Those increased costs are already showing up in import prices. After falling for years, the price index of goods from China rose 2.4 percent in 2007, according to the U.S. Bureau of Labor Statistics division of international prices. That's the largest annual increase since the index was first published four years ago. . . .
February 8, 2008
One Billion People, Up in Smoke
That's the number of people the World Health Organization believes will die of smoking and other tobacco-related illnesses this century, in the absence of any sustained effort to reduce tobacco usage. The WHO's report indicates that almost all of these deaths will occur in developing countries, which lack many of the same anti-smoking efforts developed countries have undertaken for many years.
Almost one-third of the world's smokers are in China, according to the report, and about 100 million Chinese men under 30 will die because of their tobacco consumption unless they quit.
Posted by John at 12:36 PM | Comments (0) | TrackBackBooks on Doing Business in China
The Economist reviews several newly released volumes on the subject here. Yes, these volumes add to a library-sized stack of books on this subject, but don't roll your eyes; Jack Perkowski's Managing the Dragon looks particularly good.
Posted by John at 12:07 PM | Comments (0) | TrackBackHappy Lunar New Year!
I've been on the run and unable to post: Happy Lunar New Year greetings and best wishes for a prosperous Year of the Rat!
Posted by John at 5:57 AM | Comments (0) | TrackBackJanuary 30, 2008
China Mobile
China now has over 547 million mobile phone users, which represents a penetration rate of more than 41%. [Source: TelecomAsia.net]
Posted by John at 5:21 AM | Comments (0) | TrackBackJanuary 26, 2008
Market Forces Swinging More in Favor of China's Migrant Workers
The Sydney Morning Herald has a report:
Posted by John at 6:32 AM | Comments (0) | TrackBackChina's vast migrant labour market is bifurcating. One branch is made up of the old . . . who know nothing about rights, have no sense of entitlement and accept whatever treatment is dealt them. The rest are the worldly, internet-savvy young who know how quickly the world is changing in their favour. . . . [they] are canvassing job options, taking on the system and learning how to wield a transformative asset that ordinary Chinese workers have not known for 5000 years: bargaining power.
Their leverage has partly improved because the Government is starting to enforce its labour laws. Mainly, however, workers are becoming more valuable because China's seemingly endless supply of cheap peasant labour is starting to dry up.
"In every place in China there is a shortage of labour," says Professor Lu Ming, a labour expert at Fudan. "That means employers have to improve workplace conditions and governments have to improve labour institutions - and both of these will lead to higher wages."
The same Fudan University study that showed how bad conditions were also revealed how rapidly they are improving. It said average migrant worker wages rose 20 per cent last year, to 1200 yuan. . . .
Employers have been forced to improve conditions to stop workers going elsewhere. Cities and provinces are also competing to enforce more effective regulations and provide the kind of environment to which migrant workers are willing to return. . . .
January 25, 2008
Another Sign of Rising Prosperity in China
China's divorce rate is up by 20% over the past year.
Posted by John at 7:07 PM | Comments (0) | TrackBackJanuary 17, 2008
Getting More Bang for the Buck in Asia
Since 2002, the $240 billion gain in U.S. energy imports equals and may exceed, depending on year end trade statstics, the total growth in imports, over the same time period, from China, Hong Kong, Taiwan, Japan, Korea, and Sinapore combined. [Source: PPI]
It's fair to say that our Asian trading partners are giving us a lot more for our money, too. While the tab for energy imports has tripled over the last five years, our actual usage has increased only 10%.
Posted by John at 4:19 AM | Comments (0) | TrackBack
January 14, 2008
Who's the Damsel in Distress, and Who's Got the Cash?
Isn't it ironic that there's seemingly a debate among Chinese officials about whether an investment in one America's largest banks--Citigroup--is a sound investment opportunity? (Read more in the Wall Street Journal.)
I've expressed my skepticism about the multiples at which Chinese banks trade, but based on recent track records, it's a lot harder to find evidence that Citigroup is a markedly better managed bank than ICBC, China's largest bank. In fact, as recently as a year ago, most knowledgeable observers would have sooner bet that ICBC would be much more likely to announce a $24 billion write-down in asset values than Citigroup, yet the latter looks poised to not only to post a massive write-down, but to slash the dividend and eliminate thousands of jobs in order to "stabilize its finances", as one press account put it.
Not only is Citigroup the winner of this meltdown derby, but they're apparently getting turned down by the Chinese in their quest for capital to plug the holes.
ICBC and other large Chinese banks could end up in similarly tough straits when the Chinese economy has its own stormy weather. The irony of what's happening now, however, is simply delectable.
Posted by John at 9:53 PM | Comments (0) | TrackBackDecember 17, 2007
Chinese and Indian Scientists Welcomed Home with Open Arms
The San Diego Union-Tribune offers an extensive look at the loss of top Chinese and Indian scientists, due to visa problems and more attractive research funding offers from their homelands:
. . . One-fourth of all patents filed in the United States are filed by foreigners, [Vivek] Wadhwa said.
"Those are the people we are sending back home, where they will compete with us," he said.
Returnees are coveted employees because they bring with them the experience of working in U.S. industry.
Yu Liang Huang has the experience on both sides of the Pacific that Chinese companies wanted and U.S. companies are just now growing to appreciate. After pursuing postdoctoral work at Ohio State University, he worked for several years as a consultant to British and U.S. biotechnology companies trying to do business in China and, later, at the now-defunct San Diego bioprocessing company Egen.
Posted by John at 4:22 AM | Comments (0) | TrackBackBut when Huang decided to start his own bioprocessing company, Generon, he did it in his native China.
The company licenses early-stage compounds out of U.S. companies or research institutes or forms strategic partnerships that allow the clinical development of the drug in China. The goal is to complete early clinical testing and then bring the drug back to the lucrative U.S. market.
Labor costs in China are cheaper than in the United States, and the local and central governments of China offer monetary support, help making necessary business connections and assistance in securing licenses and other needed approvals, Huang said.
"It is hard to get to this level in the United States," the 45-year-old CEO said. "So right now we have to enjoy that advantage provided by China, and maybe later we can return to the U.S."
December 15, 2007
Global Funds Flows
Posted by John at 12:04 PM | Comments (0) | TrackBackTotal global remittances from workers to their families will reach $318 billion in 2007, up from $170 billion in 2002. Most of the money goes to developing countries, which will receive $240 billion this year—more than double the value of foreign aid. The three countries getting the most are India, China and Mexico, which together account for nearly a third of remittances to the developing world. However, Mexico has been affected by the economic slowdown in the United States and its previous rapid growth of inflows slowed to a trickle this year. The largest recipient region is Latin America and the Caribbean, but since 2002 transfers to Europe and Central Asia have increased the fastest.
December 11, 2007
Energy Thristy China
The power generation capacity China added this year equals the United Kingdom's entire electricity grid. [Source: Financial Times]
Posted by John at 5:40 AM | Comments (0) | TrackBackDecember 10, 2007
Vietnam Rising as Attractive Manufacturing Locale
Bloomberg's Andy Mukherjee sees Vietnam gaining on China as a low-cost manufacturing locale:
. . . James Koh, a Singapore businessman, makes dining tables and chairs in Vietnam for customers around the world, including Williams-Sonoma Inc.'s Pottery Barn stores in the U.S.
Koda Ltd., of which Koh is the managing director, also has factories in Malaysia and China. Yet, it's Vietnam's lower costs that are prompting the company to expand capacity here by 25 percent.
"The labor cost in Vietnam is half that of China, while worker productivity is about the same," says Koh. . . .
Read Mukherjee's complete article here.
Posted by John at 3:36 AM | Comments (0) | TrackBackDecember 9, 2007
Increasingly Flood-Prone China
China's development has put an increasing share of its people and economy in flood-prone regions, accounting to the country's Minister of Water Resources:
Posted by John at 12:31 PM | Comments (0) | TrackBack--By 2020, 41% of China's population will be living in flood-prone areas.
--By the same time, cities in downstream areas potentially subject to rising waters will have an aggregate population of 600 million people, and two-thirds of the country's GDP will originate in these regions.
December 8, 2007
Air Leaking from the Chinese IPO Bubble?
The Economist ponders whether such is the case:
Posted by John at 12:29 PM | Comments (0) | TrackBackOf the 15 largest offerings to have debuted on the mainland exchanges this year, the share prices of eight are below their first-day close. The most vivid example of the market's gloom was once the most vivid example of its elation. PetroChina, an energy producer, became the most valuable company in the world when its shares more than doubled on its November 5th debut in Shanghai. Since then, its shares have dropped in value by a third and PetroChina has become shorthand for a sucker's trade among angry Chinese punters. More recently, Sinotruk and Sinotrans Shipping also fell below their opening prices on the day of listing, shocking retail investors who had fought for shares in the certain knowledge that every offering could only go up.
December 6, 2007
U.S.-China Interdependence Fact of the Day
Buried in the results of the 2007 Duke University/CFO Magazine Global Business Outlook survey is the following little nugget: 61% Chinese public and private firms surveyed indicate a U.S. recession would hurt their business, while 9% say it would hurt a great deal.
Posted by John at 5:31 AM | Comments (0) | TrackBackDecember 5, 2007
Learning by Doing at Chery
The Wall Street Journal offers a first hand look at Chery, one of China's rising automobile manufacturing giants:
"In the beginning, no one had confidence in us," says Yin Tongyao, Chery's chairman and general manager, in a rare interview. Now, he says, "we are looking globally for markets." . . .
. . . rapid growth is already taking its toll, as executives strain to manage the company's expansion amid a shortage of experienced workers. "We are still fighting for our survival," says Mr. Yin. "We didn't get to learn from books. We have to learn everything by doing it."
Read the complete story here.
Posted by John at 3:00 PM | Comments (0) | TrackBackGlobal Manufacturers Remain Committed to China
Despite recent incidents regarding toothpaste, dog food, and toy product quality, global manufacturers remain committed to China. In an survey conducted by business research firm the smart cube, almost 80% of global manufacturers surveyed, all of which currently source product in China, remain confident in the quality of their supply chain. Further, these manufacturers see recent product quality incidents as an aberration, and not indicative of some systemic problem with Chinese manufacturing generally. The press release can be found here (pdf), and further commentary on the survey can be found here:
. . . The fact that an overwhelming majority of manufacturers did not feel compelled to review their supply chains is reflective of remarkable confidence, especially in light of the media attention the issue has received. To be sure, though, this is not to imply any sort of complacency on the part of the these manufacturers. Indeed, in our one-on-one discussions with the surveyed companies, respondents indicated that they would “be more cautious” about their supply chain activities, which suggests that while they feel they are structurally sound, they are mindfully vigilant. . . .
. . . survey respondents were very explicit that the onus was on them to ensure effective supply chain management and quality control. They feel that the U.S. government is doing everything reasonable within its power to improve the quality of outsourced products. The Chinese government, in their view, could do more, and by some possibly extreme measures, is at the moment trying. However, at the end of the day, it is the individual company’s responsibility to ensure safety and quality of the end product. (To illustrate the limitations of the regulatory approach, although the Consumer Product Safety Commission (CPSC) and General Administration of Quality Supervision (GAQS) of the U.S. and China, respectively, recently reached an agreement to boost the safeguards on Chinese-made toys, this is a mere sliver of the manufacturing universe.) [Emphasis mine.]
This last point is particularly important. Manufacturers themselves understand that it is their responsibility and they are legally liable for their product quality. It's why Mattel apologized and took responsibility for the recent problems with their supply chain. Regulatory authorities on both sides are likely to make a big show of what they're doing to protect the consumer, and actually maybe even accomplish a few things. Ultimately manufacturers themselves are responsible for quality control of their supply chain, however, whether it includes China or not.
It's also why all the campaign rhetoric regarding Chinese product quality, which was in full flower in last night's NPR/Iowa Public Radio Democratic presidential debate, is simply hot air. Christopher Dodd prattling about only buying toys from Iowa? Good grief. Let's hope, for his own sake, he doesn't make any promises, when he comes here to Georgia, about only buying chili made in Georgia. He might get a dose of reality on product safety.
Posted by John at 10:25 AM | Comments (0) | TrackBackNovember 29, 2007
Dancing Little Emperors
Marketplace examined the rise in childhood obesity in China and the country's effort to curb the problem, which includes dance classes. In the story, James Rice of Tyson Foods, who has worked in China since the 1980s, observed the change in diet over the last two decades:
Twenty years ago, if you went to a Chinese person's home as a guest, the snacks they would have put out on the table to receive a guest, it would have been hot tea, and then seeds, or vegetables, fruit and nuts. And of course those were the only choices in China in those days . . .[Today, you get] Coca-Cola, 7-Up, Pringles potato chips, Frito-Lay snacks, and these sort of processed foods.
You can read the transcript or listen to the audio of the Marketplace story here.
Posted by John at 6:33 AM | Comments (0) | TrackBackNovember 26, 2007
In the Developing World, "Lifestyle Diseases" Dwarf Other Healthcare Problems
A perverse indicator of rising global incomes and declining poverty rates is the rapidly rising incidence of chronic diseases such as heart disease, strokes, and type 2 diabetes. These "lifestyle diseases" now comprise the greatest share--over 60%--of death and disability worldwide. The science journal Nature reports:
Posted by John at 6:32 AM | Comments (0) | TrackBack. . . Some 80% of chronic-disease deaths occur in low- and middle-income countries. They account for 44% of premature deaths worldwide. The number of deaths from these diseases is double the number of deaths that result from a combination of infectious diseases (including HIV/AIDS, tuberculosis and malaria), maternal and perinatal conditions, and nutritional deficiencies.
Over the coming decades the burden from CNCDs [chronic non-communicable diseases] is projected to rise particularly fast in the developing world. Without concerted action some 388 million people worldwide will die of one or more CNCDs in the next 10 years. With concerted action, we can avert at least 36 million premature deaths by 2015. Some 17 million of these prevented deaths would be among people under the age of 70 . . .
November 25, 2007
Even with a Scorecard, It's Hard to Figure Who the Communist Players Really Are
Forty years ago, the Soviet Union and China were at odds over whether their version of communism was the most authentic. Today, communists argue with each other about who's the most "capitalist", and they all seem to be drifting in that general direction. A recent Economist visit with West Bengal Chief Minister Buddhadeb Bhattacharjee is indicative:
Posted by John at 8:58 PM | Comments (0) | TrackBackBut how on earth does Mr [Buddhadeb] Bhattacharjee reconcile his capitalism-friendly actions with his Marxist colours? He claims to remain a communist to his tobacco-stained finger-tips. Yet he admits that it is getting hard to know what that means. “The world is changing, communists are changing, even in China,” he says. “We are learning from our mistakes.” The comparison with China is obvious. Some Indian commentators have likened Mr Bhattacharjee to China's great moderniser, Deng Xiaoping. He laughs off this suggestion, and notes that communist ideology is practically extinct in China. Yet his own “Marxist principles”, which he says he has discussed at length with Hugo Chávez, the president of Venezuela, do not sound terribly radical. They are, he says, to “protect the poorest of the poor, protect un-organised workers, protect womenfolk who have no income.”
November 23, 2007
China's IP Piracy Rate Much Less than the United States
Aaron Schwabach of the Thomas Jefferson School of Law asserts in a paper (pdf) that an examination of statistics across countries reveals the U.S. to be a much larger source of intellectual property piracy of movies and music than China. A portion of the abstract follows:
. . . by many measures, China, taken as a whole, is not the leading violator. Some measures show China as the leading violator only because they are aggregates, and do not take into account China's size. When figures are adjusted for population, China's rates of intellectual property violation are lower than those of many other countries, including the United States.
The article first looks at examples of the current round of political and media China-bashing. It then examines figures on international movie piracy provided by the Motion Picture Association (the international counterpart of the Motion Picture Association of America) and compares those figures to the populations of the countries involved. It concludes that the problem of movie piracy is more severe in the U.S. than in China, possibly because of greater broadband access, and more severe still in other countries, including France, Spain, and the United Kingdom.
Schwabach's paper can be read here in full; thanks to the always on the case China Law Blog for the pointer. Here's a particularly pointed excerpt from the paper:
. . . Someone who hijacks airplanes and flies them into buildings full of people is
an enemy. Someone who sells pirated copies of Rush Hour 3 is not. Apparently, though,
political discourse in the U.S. has grown so irrational that concerns about intellectual
property rights, currency exchange rates and leaded paint add up to enmity. And Chinabashing,
like Japan-bashing before it, has become an industry from which people can
make money.
And a pastime for fear mongers trying to win votes, as well.
Posted by John at 10:46 AM | Comments (0) | TrackBackNovember 19, 2007
Seeding Weather Modification in China
China is investing $100 million a year in weather modification research, including cloud seeding to relieve droughts and weather shortages:
When next summer's Olympics roll around, the Beijing Weather Modification Office will be poised to intercept incoming clouds, draining them before they get to the festivities. No fewer than 32,000 people nationwide are employed by the Weather Modification Office -- "some of them farmers, who are paid $100 a month to handle anti-aircraft guns and rocket launchers" loaded with cloud-seeding compounds. Some estimate that up to 50 billion tons of artificial rain will be produced by 2010. . . . [Source: Wired]
According to Wired, the U.S. is apparently spending a pittance on research in weather modification. Given the drought we're experiencing in the Southeast, maybe we can learn something from the Chinese.
Posted by John at 5:56 AM | Comments (0) | TrackBackChina's Economy is 40% Smaller--So What?
The Economist's Free Exchange offers an interesting perspective on the news that China's economy is 40% smaller than originally estimated:
Posted by John at 3:04 AM | Comments (0) | TrackBack. . . this news should not meaningfully change our perception of China's place in the global economy. A 40 percent write-down in the size of the economy sounds massive, but at recent growth rates, it only represents about a five year setback. That's the magic of double-digit annual output growth. If China can maintain anything like its current growth pace, those poverty numbers should look significantly better in no time at all.
November 18, 2007
Reclaiming a Past Heritage of Technological Innovation in China and India
In the 15th century, both China and India turned away from their history of invention and innovation and began to coast. The Economist examines why:
In his book “The Lever of Riches”, Joel Mokyr settles on a simple explanation for China's technological stagnation: the country's imperial state lost interest. Its purposes were better served by continuity than by progress, and there was no rival source of power and patronage to pick up the threads it dropped. Roddam Narasimha of India's National Institute of Advanced Studies reaches a similar conclusion for India. “Up to the 18th century, the East in general was strong and prosperous, the status quo was comfortable, and there was no great internal pressure to change the global order,” he writes.
Posted by John at 12:09 PM | Comments (0) | TrackBackThat diffidence no longer hampers either state. Both China and India are now restless with technological ambition. China's government does not have the luxury of choosing between progress and stability; it cannot enjoy social peace without economic advance. For the past 30 years it has tried to turn the clock forward. By 2015 its research scientists and engineers may outnumber those of any other country. By 2020 it aims to spend a bigger share of its GDP on research and development (R&D) than the European Union.
India, for its part, surveys the future with uncharacteristic optimism. Its technological confidence has grown immeasurably thanks to the success of its software and IT firms. The heirs to Aryabhata and Brahmagupta, India's digital ambassadors have won acclaim for their mastery of ones as well as zeros. . . .
November 16, 2007
Smaller and Poorer: Estimate Revisions of China's Economy Coming
Albert Keidel of the Carnegie Endowment for International Peace predicts that when the World Bank announces PPP data revisions later this year, China's economy will prove to be 40% smaller than originally estimated; the implications of this revision are significant:
. . . This more accurate picture of China clarifies why Beijing concentrates so heavily on domestic priorities such as growth, public investment, pollution control and poverty reduction. The number of people in China living below the World Bank’s dollar-a-day poverty line is 300m – three times larger than currently estimated.
Why such a large revision in the estimates of China’s economic condition? Until recently, China had never participated in the careful price surveys needed to convert accurately its gross domestic product into PPP dollars.
Posted by John at 6:38 AM | Comments (0) | TrackBackThe World Bank’s estimates based on summary data from the late 1980s probably overstated China’s PPP gross domestic product even then. Up to now, the bank has revised its estimate very little. In the meantime, China has repeatedly raised the prices of food, housing, healthcare and a range of other non-traded goods and services. These reforms should have lowered the PPP adjustment, but the bank left it basically unchanged. . . .
For China, the correction needs to be made back to the 1980s and 1990s, when instead of World Bank estimates of roughly 300m people below the dollar-a-day poverty line, the number was more likely more than 500m. China has made enormous strides in lifting its population out of poverty – but the task was perhaps more gargantuan than most people thought and progress has been overstated by bank estimates.
These calculations are not just esoteric academic tweaks. Based on the old estimates, the US Government Accountability Office reported this year that China’s economy in PPP terms would be larger than the US by as early as 2012. Such reports raise alarms in security circles about China’s ability to build a defence establishment to challenge America’s.
Well-informed analysts know that PPP calculations are a poor measure of a country’s potential military base, but with the corrected China PPP statistics, the whole question is moot. China is just not that big now and will not get that big any time soon. . . .
November 14, 2007
China Giveth, Subprime Taketh Away
Bank of America reported a $3 billion hit due to subprime mortgages, while its paper gain on its 19.9% stake in China Construction Bank is $30 billion.
Posted by John at 5:48 AM | Comments (0) | TrackBackNovember 13, 2007
Pragmatic Changes in China's Overseas Shopping Trips
The FT's Lex column offers specifics:
Posted by John at 4:03 AM | Comments (0) | TrackBack. . . In a reversal of the abortive 2005 bid for US oil major Unocal, Chinese buyers are willing to settle for minority stakes. They are also prepared to forgo voting rights, as with the sovereign wealth fund’s 10 per cent stake in Blackstone, the US private equity firm. And, since technical expertise and human capital is part of the attraction, management jobs are seldom on the line.
A more commercial attitude also prevails, although that will not necessarily extend to pricing discipline – or to rival bids from Chinese entities. However, some dud performance has put the focus on price, at least among Chinese bloggers. Blackstone shares are down more than 20 per cent since Beijing’s June investment; Barclays, in which China Development Bank took a stake in July, has fallen 31 per cent, precluding further hasty acquisitions. Subsequent structuring shows lessons have been learnt by, for example, using convertible bonds for protection from price drops. With deep-pocketed Chinese crowding the auction rooms, sellers have less to fear from retreating private equity firms.
Omens of the Age in China and India
PetroChina becomes the world's first trillion dollar company, and news reports pegged India's Mukesh Ambani as the world's richest man. Not so fast, reported his company, Reliance Industries, Ambani's wealth is only $50 billion, still behind Bill Gates' estimated $63 billion net worth.
Isn't it interesting, and two omens of our times, however, that both benchmarks occur within days of each other?
Posted by John at 3:52 AM | Comments (0) | TrackBackNovember 9, 2007
This Just In: China and India to Drive Energy Demand
The World Energy Outlook 2007, produced by the International Energy Agency, offers forecasts for future energy demand which will surprise no one:
--Worldwide energy needs are expected to grow by 55% from 2005 to 2030.
--Developing economies will account for about three-quarters of this increase, with China and India alone accounting for 45% of the gain.
--Among energy sources, coal use will experience the greaterest increase, jumping 73%; China and India will account for most of this increase.
--$22 trillion in supply infrastructure spending will be required to meet worldwide energy demand by 2030.
An executive summary and the complete report can be found here.
Posted by John at 2:56 AM | Comments (0) | TrackBackThe Scale of Chinese-European Trade
And one reason for Europe's angst over China; from the IHT:
Posted by John at 2:39 AM | Comments (0) | TrackBackBeijing is now Europe's largest source of manufactured imports, but the 27-nation bloc, with a population of about 470 million people, exports less to China than it does to Switzerland. [Hat tip: Marginal Revolution]
November 7, 2007
PetroChina's Eclipse of Exxon Should Draw Respect, Not Skepticism
The Financial Times compares PetroChina and Exxon, and concludes that the former's eclipse of the present day descendant of John D. Rockefeller's Standard Oil Company is not totally preposterous:
Posted by John at 9:45 AM | Comments (0) | TrackBack. . . A comparison of their recent records, compiled by PFC Energy, a consultancy, does Exxon few favours. While over the past five years the US giant has added 6 per cent to its oil and gas reserves, for example, PetroChina has added 19 per cent.
PetroChina’s reserves are already on a par with Exxon’s, and are set to grow further.
A recent report by Wood Mackenzie, another consultancy, noted that the large Chinese oil companies, including PetroChina, were investing more in exploration and development than many western companies, and said: “Higher domestic spending is starting to provide some payoffs.”
PetroChina’s Nanpu discovery is thought to hold up to 11bn barrels of oil which would make it the biggest oil find in China for decades. . . .
. . . it is getting harder for Exxon, like all the big oil companies, to get access to resources.
PetroChina, with the full backing of the Chinese state behind it, is able to do business in countries such as Venezuela where Exxon cannot or will not go.
It will be many years before PetroChina can match Exxon’s technology and skills, if it ever does, and that will continue to give the American company an edge.
But sceptics would do well to remember that there was a time when people laughed at the idea that Toyota would topple General Motors from its world number-one slot.
November 5, 2007
PetroChina Breathes More Air in China's Stock Market Bubble
PetroChina shares soared in the wake of a share offering on the Hong Kong market, placing a value of more than $1 trillion on the company. PetroChina's market capitalization is not only now twice than of Exxon, the world's second largest company by market cap, but greater than Exxon and General Electric, the world's third largest company, combined. PetroChina's market cap is now also greater than Google, Bank of America, Toyota, and Microsoft combined.
Here's one analyst's assessment of PetroChina's prospects:
Posted by John at 8:05 AM | Comments (0) | TrackBack"Production is static with limited upside for the next three to four years," Grace said. "As for the downstream, the price controls and overall regulatory trend limit the company's earnings." [Bloomberg]
November 3, 2007
Wearing Out Shoe Leather in Wenzhou
In the first three quarters of 2007, the shoe industry in the city of Wenzhou exported just under half a billion pairs of shoes, value at just under $3 billion. Given a global population of 6.6 billion, that's one pair of shoes for every eleventh person in the world. [Source: Fibre2Fashion]
Posted by John at 8:39 PM | Comments (0) | TrackBackOctober 28, 2007
Governor Bredesen on China's "Audacity" and Skirting the Edge of Opportunities
Tennessee Gov. Phil Bredesen, fresh from leading a state trade mission to China, reflects on his trip in a Nashville Tennessean commentary:
First, an insight about America: The Chinese are willing to do big things; we need to rediscover that audacity here at home. I've felt for a long time that we confine ourselves far too much to frittering around the edges of opportunities — in infrastructure, in transportation, in health care. This trip has crystallized this feeling. Hong Kong has 7 million people, a little larger than Tennessee; I flew out of a new Hong Kong airport this morning that cost $8 billion to construct. Can you even imagine an $8 billion public infrastructure project in Tennessee? With even bigger ones on the drawing boards?
Posted by John at 12:18 PM | Comments (0) | TrackBackSecond, China is enormous; 1.3 billion people is a quarter of the world. The refrain repeated over and over by our Tennesseans: "You just have to see it to believe it." There are cities in China you've never heard of that are bigger than any city in the U.S. And with that size, there is an astonishing amount of money in China. Shanghai defies description. A lot of what is going on right now has to be a dot-com-like bubble — but it's the underlying wealth to buy these assets that is the real story, and that wealth is definitely there and growing exponentially. China is having its coming-out party.
Third, the political system in China is unique and defies labels. It's not the gray communism that I knew in the 1970s in Eastern Europe; it's not Western-style capitalism either. My best one sentence description would be, "A one-party capitalist country with no Bill of Rights."
We can compete economically just fine with that system, but only with very clear-eyed study of how it really works and not through some ideological prism.
And fourth, we need to work hard to open more doors to China. I want more trade missions, and I especially want more Chinese students here and more American students to go to China. For the past century, America has been the higher education destination of choice in the world. After 9/11 and the massive visa restrictions that were put in place, Chinese students looked elsewhere. Places like Australia and parts of Europe are now where many of them go. We lost an invaluable franchise, and we need to regain it.
I already know that this trip will be a business success for Tennessee; how many eyes got opened is even more important. I believe that once we come to understand the gravity of the challenge to us, America will compete just fine. Open and free societies can adapt and change better than any competitor.
But I also came to believe this past week that we need to actually use that freedom to do some thinking and to do some planning; resting on our considerable laurels is a prescription for our kids to raise theirs in the China Century.
October 21, 2007
PetroChina the World's Second Largest Company
At $433 billion, PetroChina has surpassed General Electric in market capitalization to become the world's second largest company. After its forthcoming offering and listing on the Shanghai exchange, the company is poised to challenge Exxon ($526 billion) for the world's top spot. [Source: Financial Times]
Posted by John at 8:42 AM | Comments (0) | TrackBackOctober 20, 2007
China's Exports and Emissions
Roughly one-quarter of China's carbon dioxide emissions are produced from the manufacture of goods exported to the West. (Source: BBC)
Posted by John at 6:56 AM | Comments (0) | TrackBackChina's Rise Drops World Poverty Population Below One Billion
The Sydney Morning Herald reports:
Posted by John at 6:06 AM | Comments (0) | TrackBackThe number of people living in poverty has fallen below 1 billion for the first time since measurements began, and the one-third decline since 1981 is almost entirely due to a rising China.
China explains why the world is on track to meet the World Bank's millennium development goal of halving the number of people on less than $US1 a day by 2015, Martin Ravallion, the director of the World Bank's Development Research Group, told a poverty conference in Beijing this week. "We've never seen anything like it," he said.
A Stockholm University professor, Peter Svedberg, said the number of stunted and underweight Chinese children had halved in the 10 years to 2002. . . .
However, as China appears to be rescuing the world from poverty, it has also become the most unequal country in Asia, rivalled only by Nepal. "It's the most dramatic increase in inequality that I've seen in any data anywhere," Dr Ravallion said. . . .
October 19, 2007
China's Corruption Problem
Minxin Pei of the Carnegie Endowment for International Peace recently released a report (PDF) on China's corruption problem, and finds the problem has ballooned over the last two decades to a point that it is a major threat to the country's long-term prosperity:
Posted by John at 6:58 AM | Comments (0) | TrackBack--Corruption such as bribery, kickbacks, and theft cost at least 3% of China's GDP, or about $86 billion. That's just the direct cost, and it's more than the government's entire education budget.
--Each year, researchers at the Communist Party's Central Party School, the prestigious training ground for top government officials, survey their enrollment. From 1999 to 2004, officials responding to the survey listed corruption as either the first or second most serious social problem in China.
--A survey of mostly non-state owned firms by the State Council’s Development Research Center asked respondents to rate their local officials in terms of integrity. Almost 40% responded "bad" or "very bad".
--The odds of a corrupt government official going to jail is less than 3%.
October 6, 2007
Wuxi Sees Green
Wuxi is getting serious about improving its environmental protection, as the Washington Post reports:
. . . For almost three decades, the city had welcomed some of the world's biggest polluters. Churning out paper, photographic film, dye, fertilizer, cement and other products for the global marketplace, the businesses helped make Wuxi into one of China's wealthiest industrial cities.
They also poisoned the province's vast network of lakes, rivers and canals. In late May, when the toxic sludge reached Tai Lake, which is the main source of potable water for Wuxi's 5.8 million residents, people turned on their taps and got only sludge.
City officials decided they'd had enough. In a series of radical proclamations that sent shudders though the business community, Wuxi declared itself a newly reformed green city.
By September, the city had closed or given notice to close more than 1,340 polluting factories. Wuxi ordered the rest to clean up by June or be permanently shut down. . . .
Wuxi's example, however, is hardly being followed by other Chinese cities:
Posted by John at 8:31 PM | Comments (0) | TrackBack. . . Wuxi's environmental campaign has been held up as an example of how cities should deal with polluters. But the publicity has not had its desired affect. Instead of shunning the polluting companies in Wuxi, delegations from other parts of China have been coming to Wuxi to invite them to come to their cities.
"This is impossible to understand," said Wang [Guoxiang, director of the Research Center for Eco-Environmental Sciences] of Nanjing Normal University. "We keep telling them they are just moving pollution around and it isn't good for them, good for China."
September 30, 2007
A Cautionary Tale for Foreign Companies in China
The always insightful Dan Harris of the China Law Blog just got back from China with this gem:
Posted by John at 10:58 PM | Comments (0) | TrackBackA Chinese lawyer told me he now asks all of his Chinese clients who their foreign competitors are and then offers to see if he can put them out of business for operating illegally. This has become so lucrative for him that he does not even charge to determine if they are legal or not. He makes that determination for free and if they are, he charges a large flat fee for putting them under. He proudly gave me the name of a Seattle company I know (but do not represent) which was next on his list. He also said that come 2008, he would be suing foreign companies whose Chinese employees did not have written contracts.
September 29, 2007
China's Sovereign Wealth Fund Officially Launched
The China Investment Corporation is officially open for business:
Posted by John at 7:55 PM | Comments (0) | TrackBack. . . The fund will initially have about $200bn (€140.5bn, £98bn) under management, with the bulk of the remainder of the reserves, which stood at $1,410bn at the end of August, remaining under the control of an agency of the central bank.
A large portion of that $200bn will be used to buy the assets of another agency, which holds the government’s shares in state banks. This will leave the CIC with much less to invest initially.
About $67bn will be spent acquiring assets of the agency, Central Huijin Investment, and tens of billions more may be set aside for the future recapitalisation of state financial institutions.
The CIC has had to grapple with intense internal jockeying over its investment strategy inside China and demands from rival agencies to be represented on its management committee. . . .
Gauging China's Economic Outlook
The Economist offers an extended look at the Chinese economy, on which overall global economic growth is more dependent than ever before:
The list of potential threats to China's economy is long and some might shave a couple of percentage points off its growth rate (leaving it close to 10%). But none seems likely by itself to cause the economy to collapse in the next two years—ie, during the time when America's economy is likely to stumble. But what if several blows land at the same time? For example, an American recession breeds greater protectionism, global financial turmoil unnerves Chinese stockmarket investors,