China Economy: News & Discussion

[badguy2000]

what is ignorance??
1 dollar in your holding now has 55 cent value or buying power.
Russia and India and many other central banks dumping the dollar
Russia switching to canadian looney
China has 40% holding in US debt no market =no value china is counting it as an asset when it is worthless since nobody in their right mind wants it
China has to continue exports to USA for which they still receive an American IOU which is esentially worthless in the international market
do not mix US IOU which are bonds and treasury notes with Dollars.
US IOU is worthless while dollars are liquid and still have value but the dilemma for China is they continue to accept the worthless IOU when nobody else in the world does, what does China know that the rest of the world dosen't??

what CHina cares is how many oil and other resource CHina can buy with its 2 trillion dollars.

When bendover price of oil was 150 dollar, 2 trillions dollars devalued most in the eyes of CHina.

CHina doesn't care much how much euros or Japan yens its 2 trillion dollars can exchange ,because what China want is not the assets in Europe,USA or Japan,but the resource in Africa and other developing countries.

So, the exchange rate of dollars is not much meaningful to China at all.

instead, the price of resouce marked with dollars means much to China.


As we see, after the crisis, the price of resouce made a rapid dive down...in fact it is just what CHina want....

so, however much the exchange rate of dollars goes down, CHina can buy more resouce including oil with its 2 trillion dollars now.

 

[LETHALFORCE]

2 trillion is not correct you mean 2 trillion -800 billion in debt you hold so that would mean 1.2 trillion.

 

[RPK]

Spurious cosmetic, body spray products from China seized at Chennai port


CHENNAI: Spurious cosmetic and body spray products from China are flooding Indian markets and making it very difficult for established brands. In third such instance in less than five months, Chennai Seaport Customs has seized counterfeit cosmetics with popular brand names imported from China.

While baby products, facial creams and shampoos were seized in the past, this time smugglers have imported spurious body sprays and perfumes. Customs commissioner C Rajan said 1.2 lakh units of fake products various brands Denim (Hindustan Unilever), Charlie and Moon Drops (Modi Revlon), Maxi, Blue Lady, Havoc Silver, Open, Tomy Girl and Nike worth Rs two crore were seized from two containers imported by Chennai-based Limra Import and Export firm.

The first container, sent by Zong Jian Industry Company in Shenzehen, China, arrived on August 25. It contained about 60,000 pieces of Stock lot Denim deodorant', claimed to have been manufactured by Codaa Fragrances, Switzerland AG. The second one with an equal number of perfumes and deodorant bottles from Thailand Nina Trading Company, Guangzhou, China, reached Chennai on November 20.

"Since we have been keeping a watch on products coming from China, we intimated senior executives of Hindustan Unilever and Modi Revlon about the consignment and sought cooperation in ascertaining whether they were original products. We could not make out any difference between the original and the duplicate. But G S Srinivasa Rao, assistant legal manager, Hindustan Unilever, responding to our plea, said Codaa has confirmed that the samples are spurious. Revlon, too, said the products are spurious," said Rajan.

Regarding the involvement of the importer, Limra, in the trade of the contraband, Rajan said its proprietor Ali Khan had pleaded innocence saying that he was not aware that it was spurious material. Khan told customs officials that it was his relative, based in Dubai, who got in touch with a Chinese agent for importing the stuff. "But that does not absolve Khan from the crime. We are proceeding against him under the Customs Act 1962," said Rajan. He, however, said that no action could be initiated against others involved in the racket as all of them were based abroad. The entire commodity would be destroyed after due legal process, Rajan added.

Georgi Tharakan, associate director, quality control, Modi Revlon, told TOI, "We get to know about the import of two to three containers of spurious products every year. They come via Chennai, Mumbai and Kolkata ports. Through our network in China, we have put all our efforts to trace the manufacturers, but in vain. In spurious deodorant, the manufacturers use cheap alcohol, fragrance oil and perfume fixers. They harm skin and lead to rashes. Since customers cannot differentiate between original and spurious material, our advice to customers is to buy products only from leading stores."

A spokesperson of Hindustan Unilever said: "Spurious products not only affect the industry but, more importantly, impacts consumer interests. We partner with industry bodies and government to promote consumer awareness, promote awareness among shareholders, engage with enforcement agencies and government bodies through regular representations and actively take market action through raids and seizures with the help of enforcement agencies, to help mitigate this problem to the extent possible and protect consumer interests."

 

[Vladimir79]

Mumbai trader involved in smuggling of Chinese drug

CHENNAI: The Central Drugs Standard Control Organisation (CDSCO) has busted a racket involving the smuggling of a spurious albendazole bulk drug

(used for de-worming) by a Mumbai firm from China through the Chennai sea port by falsely declaring it as a chemical.

Based on a tip-off provided by their Chennai counterparts, CDSCO officials in Mumbai raided the Borivli office of Sheetal Pharma, the importer, along with officials of Food and Drug Administration, Maharashtra, on Friday and seized details of trade of the contraband from the firm’s computer. On Monday, CDSCO also served a notice on Sheetal under section 18 (a) of the Drugs and Cosmetics Act for producing documents concerning the import immediately.

A senior official of CDSCO told TOI, “In our preliminary investigation, we found that between April 2008 and March 2009, the firm had imported seven consignments, totalling 21 tonnes of albendazole worth Rs 1.75 crore, from King Tang Import and Export Corporation and Zhejiang Chemicals Import Export Corporation, both Chinese firms. In the bill of entries filed before the customs department, the importer had claimed that the consignments were chemicals, and thus bypassed the clearance of the Assistant Drugs Controller, which is mandatory for import of any drug. The firm, subsequently, sold the contraband to several pharma companies and traders in Mumbai, Ahmedabad, Nagpur, Haryana and Baddi in Himachal Pradesh.”

Sheetal’s partners, Nailesh K Shah and Kalpesh K Shah were not available at the office during the raids on Friday. However, Pradeep Nanubhai Soni, the authorised signatory of the firm, who was present, gave a statement to CDSCO officials that the firm did not possess a drug import licence on Form 10 and drug registration on Form 41 under the Drugs and Cosmetics Rules 1945 for import of albendazole, said the official.

This is the second time in less than six months that Sheetal Pharma has come under CDSCO’s scanner for smuggling of drugs from China. In the previous case, the firm had imported two tonnes of spurious cimetidine (an anti-ulcer drug) from a Chinese trader by faking a Chinese manufacturer’s labels and bills. TOI had reported it on June 17.

Three other importers, one based in Kheda in Gujarat and two others based out of Mumbai were also caught in similar cases of import of spurious Chinese drugs by faking licensed Chinese manufacturers’ labels and invoices. (Licensed Indian drug importers can buy drugs only from those foreign manufacturers who are licensed by the government of India). All the four cases are now being investigated by the Central Bureau of Investigation (CBI) based on a request from CDSCO.

Nailesh K Shah of Sheetal, when contacted for his response, told TOI, “We had imported albendazole through Chennai port claiming that it is a chemical because we are not using it for making drugs. We sell it to traders for non-pharma purposes. We are not the only ones importing drugs by declaring them as chemicals. We are being victimised by CDSCO.”

However, a CDSCO official disputed Nailesh’s claim saying that even in case of import of drugs for non-pharma purpose, it needs a Drug Controller’s licence. Also, such licences for import of non-pharma purposes (for example making biscuits) are given only to the actual users and not to traders like Sheetal.

Mumbai trader involved in smuggling of Chinese drug - Chennai - City - The Times of India

 

[Vladimir79]

Economic miracle, environmental disaster

The following is an excerpt from "What Matters," the latest book by "Day in the Life" series creator David Elliot Cohen.

Liu Tianheng, who has stomach cancer, examines his X-ray at the Shenqiu County Hospital.

Decades of extraordinary growth have catapulted China to the top of the world's economic charts, earning the admiration of much of the rest of the world.

Indeed, China's continued economic rise has been one of the few certainties of the 21st century. Increasingly, however, the China story is not one of economic miracle but of environmental disaster.

Worries over air quality at the Beijing Olympics, tainted products and China's rapidly growing contribution to global climate change have focused international attention on the environmental downside of China's growth.

At home, the Chinese people watch as environmental degradation and pollution transform their landscape, and in the process endanger their health and future livelihoods.

No one is exempt from the environmental consequences of China's brand of unfettered economic development, but as Stephen Voss' pictures so heartbreakingly illuminate, China's poorest are particularly vulnerable. Hear Voss describe his photos in an audio slideshow »

In China's cities, merely walking out the front door results in an immediate assault on the senses. The Chinese people complain most often about noise pollution. A cacophony of construction booms and car horns is a permanent fixture of life. The sky is often blanketed in a thick gray haze of pollutants.

The culprits are the ever-present coal-fired power plants and giant heavy-industry complexes that fuel the country's growth, and more and more the noxious emissions of automobiles.

The Chinese are in the midst of an American-style love affair with private cars. The country is adding 14,000 new cars to its roads every day and is in the process of laying 52,000 miles of new roadways -- 10,000 more miles than the entire U.S. interstate highway system. By 2030, China is expected to surpass the United States as the country with the most cars on its roads.

More broadly, Chinese consumption patterns are also following those of the West, despite the warnings of prominent Chinese cultural and environmental leaders. The country's moneyed city dwellers desire air conditioners, refrigerators and second homes.

Popular leisure activities for the wealthy include carbon-intensive activities such as yachting, golfing and car clubs. In the process, urban residents consume 350 percent more energy than rural Chinese, and more than 70 percent of this energy comes from dirty burning coal. Every seven to 10 days, another coal-fired power plant, big enough to serve all the households in Dallas or San Diego, opens somewhere in China.

The environmental toll is enormous. China has five of the world's 10 most polluted cities, and on an average day in China's major cities, 75 percent of the residents are breathing unclean air. The end result: 750,000 Chinese die prematurely every year from air pollution-related respiratory diseases.

For all their wealth, China's cities have yet to conquer the challenge of clean water. Among all of China's 660-odd cities, only one small city of 200,000, Lianyuan in Hunan Province, can claim to provide clean drinking water straight from the tap. In the rest of the country -- even the country's capital, Beijing -- residents boil their water or buy it in bottles.

Even then, they have no real assurance that the water is safe to drink. And in this desperately water-scarce country, the urban infrastructure does little to conserve. Urban China loses up to 20 percent of its water through leaky pipes. Cities such as Shanghai and Tianjin have sunk six feet over the past decade and a half as precious underground water reserves are drawn down, causing skyscrapers to tilt and encouraging coastal flooding.

Yet tilting skyscrapers are the least of the cities' concerns. In Beijing, factories, buildings and underground pipelines have all been destroyed by the plundering of underground aquifers and the resultant land subsidence.

The environmental costs levied on China's 400 million urban residents pale in comparison, however, to those faced by the country's more than 800 million farmers and other rural residents.

Much of China's countryside suffers from severe land degradation, the result of centuries of deforestation and poor land management.

Today, China -- which is roughly the same size as the United States -- is almost one-quarter desert, and the desert is advancing at more than 1,300 square miles, approximately the size of the state of Rhode Island, each year.

Entire villages in China's north have been lost, submerged in sand by the encroaching desert. The country's State Forestry Administration estimates that desertification affects 400 million Chinese, many of whom lose the ability to farm their land or graze their animals and join the ranks of the tens of millions of internal environmental refugees, who often migrate to the big cities in search of new homes and jobs.

Rural Chinese must also contend with a dire water situation. The small-scale industries that have sprouted throughout the countryside pollute with impunity.

As Voss' photographs illustrate, pulp and paper, tanning, chemical and other factories set up shop along the banks of China's rivers and simply dump their waste into the water. Often the factories are protected by local officials who have a financial stake in their survival. More than a quarter of the water that flows through China's seven major river systems and their tributaries is unfit even for industry or agriculture, much less human consumption.

The Yellow River, one of the world's longest, supplies water to more than 150 million people and 15 percent of China's agricultural land. Yet two-thirds of its water is considered unsafe to drink, and 10 percent is classified as sewage. In 2007, Chinese officials announced that over one-third of the fish species native to the Yellow River had become extinct due to damming or pollution.

Such alarming statistics beget other even more alarming numbers. Nearly 700 million people drink water contaminated with animal and human waste, and according to the country's Ministry of Water Resources, 190 million Chinese drink water so contaminated that it makes them sick. It doesn't help that an estimated two-thirds of China's rural population lacks access to piped water -- a development failure that has become one of the leading causes of death among children under the age of five. Local economies also suffer when villagers can't sell their grain or eat the crops planted along the river because the water is so polluted. As much as 10 percent of China's farmland is believed to be polluted, and each year 12 million tons of grain are contaminated with heavy metals absorbed from the soil.

China's environmental challenge moves well beyond simply the problems faced by any society at the height of its industrialization.

The lack of transparency, official accountability and rule of law that defines China's authoritarian political system makes protecting the environment particularly difficult. Perhaps no project better exemplifies this challenge than the Three Gorges Dam.

After decades of promoting the virtues of the dam -- the largest in the world -- Chinese officials are only now beginning to acknowledge the dam's failures. The potentially negative consequences of the dam, including dramatically rising levels of water pollution, deadly landslides, loss of species and relocation of millions of Chinese, were all known to those involved in the planning of the dam for decades, yet open discussion was forbidden.

A journalist, Dai Qing, was imprisoned for 10 months for her efforts to air publicly the dam's likely costs and benefits. Now that the dam has contributed to the death or homelessness of thousands and there is talk of relocating three to four million more Chinese, the price of silence has become clear. Yet still, the Chinese government refuses a fully honest and open assessment of the situation.

The Chinese people increasingly have little patience for official obfuscation and corruption. Journalists push to report honestly on pollution disasters, and lawyers bravely take cases on behalf of pollution victims.

When confronted with poisoned water and air, sick children, and ruined crops, the Chinese people sometimes simply take to the streets. There are more than 50,000 environmental disputes in China every year. For example, in 2006, the residents of six neighboring villages in the poor interior province of Gansu held repeated protests over a six-month period against zinc and iron smelters that they believed were poisoning them. Fully half of the 4,000 to 5,000 villagers exhibited lead-related illnesses ranging from vitamin D deficiency to neurological problems. In 2007, when local officials in southern China illegally confiscated farmers' land to construct a power plant, there were violent demonstrations.

In the cities, where education levels are often higher and information flows more freely, Chinese citizens have even begun to protest in advance of a potential environmental threat. In 2007, for example, Beijing residents protested a proposed waste incinerator, and the people of the coastal city of Xiamen marched by the thousands, successfully halting the planned construction of a petrochemical plant near the city center.

As pressure on China's leaders mounts from below, the rest of the world is also increasingly impatient with the country's failure to turn its environmental situation around. Pollutants that build up and threaten China's ecosystem and the health of its people also traverse the Pacific and affect the United States and other countries.

China's contribution to global climate change will soon dwarf that of the rest of the world. The country already ranks as the world's largest importer of illegally logged timber and the biggest polluter of the Pacific Ocean.

China's leaders are well aware of the crisis they confront. The environment has moved to the top of their political agenda, and they have promised increased environmental investment, set impressive targets for reducing pollution and launched grand-scale campaigns to address particularly challenging problems of environmental degradation.

International environmental nongovernmental organizations and their counterparts in China are working aggressively to provide grassroots support for environmental protection. A number of multinational corporations have even adopted environmental protection as an important and integral part of their business ethic in China.

Public pressure from around the world counts in Beijing. Yet the situation continues to deteriorate. Rapid growth remains the priority for many in Beijing, and certainly for most local officials. Hundreds of millions of Chinese still live in relative poverty; per-capita GDP amounts to less than $2,000 annually.

In such an economic environment, the up-front costs of environmental protection can appear daunting, particularly for officials in the less-developed interior of the country with far fewer economic resources. And there are few incentives for local officials to put the environment first.

Moreover, opening the political space to allow for greater citizen involvement in environmental protection -- through a free media, unregulated nongovernmental organizations or an independent judiciary -- is seen as too politically risky by most Chinese Communist Party officials, whose primary concern is maintaining power.

Yet only this type of fundamental reform of the country's political economy will yield the environmental improvements the Chinese leaders and people desire. In the meantime, local economies will suffer, people's health will deteriorate, social unrest will grow and the China story may, in the end, change from economic miracle to environmental collapse.

 

[huanle]

The Most Polluted Cities in the World | EarthTrends

 

[Daredevil]

The World of China Inc.

By Hannah Beech / Ramu

Lunch at the site of the future Ramu nickel and cobalt mine in the remote hills of Papua New Guinea is a hurried affair, food shoveled into eager mouths. But the menu is as divided as the two distinct groups of workers squatting in the heat, swatting away flies and filling their bellies before their nine-hour, seven-day-a-week shifts begin again. In one huddle are local laborers chewing chunks of sweet potato and the canned fish known in pidgin dialect as tinpis. In another clump are imported workers from China who dig into rice topped with pork belly and chili – black bean sauce. The Chinese, who were shipped in by the state-owned China Metallurgical Group Corp. that has invested $1.4 billion into this faraway outpost, can understand neither English nor pidgin, two of the national languages. The Papua New Guineans speak no Mandarin. Even at mealtime, an event during which both cultures would normally encourage community and hospitality, the air is weighted by mutual incomprehension. "How can we eat together if everything about us is different?" asks Shen Jilei, whose first overseas experience transferred him directly from China's Sichuan province to a South Pacific nation he hadn't even known existed.

Notes of culture clash ring everywhere I wander in the vast construction zones that by the end of this year will turn a pristine stretch of virgin forest and grassland into one of the world's largest nickel-extraction sites. On the palm-fringed coast of Basamuk Bay, where the Ramu refinery will be situated, a chatty Beijing-born building engineer tells me that before the Chinese arrived, "the natives were completely uncivilized and running around almost naked." I voice my doubts, telling him that I've just talked to a nearby villager who described a PowerPoint presentation she recently made detailing environmental concerns about the mine. The engineer, like many other Chinese I meet, remains unimpressed. "All they do is chew betel nut and act lazy," he says. "They don't know how to work hard like we Chinese do." (See pictures of Chinese investment in Africa.)

The impression the Chinese have left on many P.N.G. nationals isn't much better. A local landowner whose ancestral territory lies in the middle of the mine site alleges, improbably, that the nickel will be used to feed a secret Chinese weapons program. In the capital Port Moresby, my driver announces that if a gang to evict Chinese from P.N.G. is formed, he will be the first to join. "I will sharpen my bush knife and chop 10 or 20 heads," he says. The unease about Chinese influence extends to government circles, even if the Ramu mine promises to add 8 percentage points to the country's GDP. "I know the Chinese are going out everywhere in the world and investing successfully," says Rona Nadile, an assistant secretary of labor and industrial relations. "But what I don't understand is why are they are so stubborn to not respect our local culture. We are a democracy. They have to play by our rules or we will rise up."

Mixed Blessings

When China began its global investment push in the early part of this century, the flood of new money was welcomed, particularly in those parts of Asia, Africa and Latin America that felt abandoned by the West. China's promise not to politicize aid and investment by attaching pesky conditions like improved human rights pleased many governments. Between 2003 and 2008, Chinese direct investment overseas skyrocketed — rising from $75 million to $5.5 billion in Africa, 1 billion to $3.7 billion in Latin America and jumping from $1.5 billion to $43.5 billion in Asia. The People's Republic now ranks as the No. 1 foreign investor in countries as diverse as Sudan and Cambodia. In exchange for the natural resources needed to feed China's economic engine, Beijing began an assiduous campaign to win foreign hearts and minds by financing stadiums, hospitals and lavish government offices. The Foreign Ministry in East Timor was built courtesy of the Chinese, while Guinea-Bissau's marble-accented parliament building was a gift from Beijing.

Some countries, however, are no longer as willing to extend a red carpet toward the globetrotting Chinese. Although political strings might not come with Beijing's cash, there are economic catches. The roads, mines and other infrastructure on offer are most often built by armies of imported Chinese labor, cutting down on the net financial benefit to recipient nations. Chinese companies investing abroad also tend to ship in nearly everything used on building sites, from packs of dehydrated noodles to the telltale pink-hued Chinese toilet paper. It's not only the contracted Chinese workers who show up, either. Within a few years, their relatives invariably seem to materialize to set up shops selling cheap Chinese goods that threaten the livelihood of indigenous entrepreneurs. Locals who do get work on Chinese-funded projects complain that their bosses don't heed national labor laws ensuring minimum wage or trade-union protection. Over the past three years, anti-Chinese riots have erupted everywhere from the Solomon Islands and Zambia to Tonga and Lesotho. Tensions are also simmering in India, where the Chinese are involved in several major infrastructure projects. Even high-level officials are speaking up. In Vietnam, plans for a $140 million Chinese-operated open-pit bauxite mine were publicly excoriated by none other than revolutionary hero General Vo Nguyen Giap because, he said, of "the serious risk to the natural and social environment."

An Island Apart

Nestled in one of the most backward parts of one of the world's least developed nations, the Ramu mine has emerged as an acute example of resentment against China Inc. In 2004 P.N.G. Prime Minister Michael Somare returned home from Beijing, triumphant at having snared the country's largest foreign-investment project to date. The euphoria was short-lived. Landowners brandished slingshots and announced they wouldn't sign off on their tribal territory being used for mineral extraction, no matter what document was signed in China's Great Hall of the People. Environmentalists cried foul over plans to deposit mine waste in the sparkling Basamuk Bay, while local workers protested conditions that even P.N.G.'s Minister for Labor and Industrial Relations David Tibu described as slavelike and "not fit for pigs or dogs." Skirmishes repeatedly broke out between villagers and the 1,500-plus imported Chinese laborers, some of whom were working illegally in P.N.G. At the same time, anger has boiled over because of an influx of thousands of Chinese who over the past couple of years have monopolized businesses that by law should be reserved for P.N.G. nationals. In May, anti-Chinese riots convulsed cities nationwide, and several people were killed amid the looting of Chinese-owned shops. "Our timber, our minerals, everything, goes to China," says Damien Ase, founder of the nonprofit Centre for Environmental Law and Community Rights in Port Moresby. "But we get so little in return."

For many Papua New Guineans, it's not surprising that their nation stands on the front lines of China's global campaign. Located on the eastern half of the world's second largest island, P.N.G. is the most linguistically diverse region of the world, with at least 800 distinct local languages spoken by just 6.5 million people. Yet despite the tribal diversity, the nation is unified in at least one aspect: suspicion of foreign exploitation of its plentiful resources, ranging from natural gas and timber to fisheries and gold. Tensions exploded in the 1990s on the P.N.G. island of Bougainville, where concerns over the environmental and economic effects of an Anglo-Australian-run copper mine sparked a secessionist struggle that claimed 15,000 lives over the course of a decade. (The mine, one of the world's largest open-pit sites, is now closed as a result of the civil war, which officially ended in 2000.) Separately, the national government was forced to declare a state of emergency in Southern Highlands province three years ago when protests over a multinational consortium's proposed gas pipeline reached a crescendo. (The project has since stalled.)

The Ramu site had lain dormant for four decades, as a series of Australian firms calculated that the low-grade nickel wasn't worth extracting in such a remote area rife with shifting clan allegiances. But Ramu NiCo, the subsidiary of China Metallurgical Group that has developed the mine, thought it could succeed where others were afraid to try. In 2007, Ramu NiCo dispatched battalions of Chinese workers, who macheted their way through dense foliage and built a mirage-like Chinatown where elephant grass and kwila trees used to be. Today, in what was a malarial stretch of hills and valley, huge dormitories, offices and processing plants dot the landscape, along with a 135-km slurry pipeline that snakes its way from Ramu to the coast at Basamuk. (From Basamuk, ships laden with nickel and cobalt will sail to China.) Last December, Ramu NiCo unveiled the first-ever bridge over the Ramu River, eliminating the need for a perilous canoe crossing. The company also paved a ribbon of concrete through the forest, one of the few roads in a tropical country where asphalt is almost as rare as snow. Although the project has displaced thousands of landowners, it has also provided badly needed infrastructure to the area. What just a few years ago was a 10-hour bush walk from the mine site to the river has now been cut to a 30-minute drive. (See "World Economic Forum: Can China Compete?")

A Growing Backlash

Roads and bridges aren't enough to placate locals, whose tenacious attachment to their ancestral land is mystifying to Chinese schooled in the communist principle of state ownership. At Ganglau village, a collection of shacks fronting a bay teeming with dolphins and tuna, community elder Mou Bilang complains that most villagers haven't been compensated for the loss of land once used to plant cash crops, save a $125 "dust payment" issued as an apology for the dirt the project has kicked up. "The Chinese promised us free electricity, free water supply, free job training for our boys," Bilang tells me. "But they have delivered nothing." Tensions reached a crisis point five months ago, when a local youth was accidentally injured by a Chinese-driven tractor. More than 100 villagers went on the rampage, targeting the Chinese with stones and bush knives. The foreigners defended themselves with welding torches, but three were so gravely injured — one had his stomach sliced open — that they had to be airlifted to a hospital.

In July, relations reached a new nadir when P.N.G.'s chief mines inspector ordered all construction on the Ramu NiCo sites to be shut down because of significant health-and-safety concerns. Work ceased for a month before "noticeable progress" by Ramu NiCo convinced the government to allow construction to continue. The dispute echoed another flare-up that erupted last year when locals armed with slingshots critically injured another three Chinese workers over what the P.N.G. nationals considered to be workplace apartheid: everything, from their food and toilets to salaries and dormitories, they alleged, was far inferior to those of the Chinese workers. "The Chinese think we are animals," says a welder named Nenge, who refuses to give me his full name lest he get fired from his job. "No days off, sometimes tinned fish for overtime pay, dirty latrines with a bad smell. How can they respect themselves after treating us so poorly?"

Labor issues are compounded by environmental concerns voiced by international academics. The Australia-based Mineral Policy Institute believes that Ramu NiCo's assurances about mine-waste disposal in the Basamuk Bay not poisoning the fish-rich waters are based on "fatally flawed" data. (Other Chinese companies have been accused of importing vast amounts of illegal timber from P.N.G.'s dwindling forests, even as Beijing tries to protect its own natural bounty by cracking down on illicit logging at home.) "With other countries, we try to make foreign companies accountable by lobbying shareholders or raising public awareness in that country," says Matilda Koma, who runs an ecological watchdog called the Centre for Environmental and Research Development in Port Moresby. "But with China, the state and the company are the same and the public doesn't have much voice — so who can we complain to?"

 

[Daredevil]

Continued...

The Trying Game

To its credit, Ramu Nico has done far more than the average Chinese state-owned enterprise to repair its image and court community approval. Unlike most other Chinese firms, the company responds promptly to international press queries and has published a comprehensive project sustainability report. Ramu NiCo has an English-language website that bandies about the proper catchphrases for a FORTUNE 500 subsidiary: sustainable development, competitive benefits, cross-cultural human resources. The glass-sheathed Ramu NiCo headquarters in the town of Madang, where the fastest pace of life is set by swarms of flying foxes, boasts human-resources and health-and-safety departments. (At four stories, it is the tallest building in town.) Ramu NiCo has expanded several schools and health centers in mine-affected areas and sent P.N.G. engineers on training courses to China. Remarkably for a company owned by the officially atheist Chinese communist state, Ramu NiCo has even funded church activities.

Most notably, the company has agreed to a 2.5% ownership stake in the mine for a group of local landowners, although many others say they have been iced out of the deal. "For Chinese and Papua New Guineans, who are from such different cultures, it will naturally take some time for us to truly understand each other, and sometimes it is not easy," says Wu Xuefeng, deputy general manager at Ramu NiCo. "Our proposal to tackle all these challenges is to address them within our overall sustainability development framework, [and] we are glad that we have been improving along the way and that our linkage with the community has been strengthening." Wu also correctly notes that the obstacles his company has faced are "largely the same sort that most of the international mining companies have faced in P.N.G."

But new classrooms and small ownership stakes don't fully solve the land-compensation issue or another major point of contention: the fact that so many Chinese have descended on P.N.G. — many illegally. Last November, in a low point for Sino-P.N.G. diplomacy, the police raided the construction sites at Basamuk and Ramu and arrested 223 Chinese for immigration violations. The foreign workers, it turned out, had entered on visas that prohibited employment. Ramu NiCo, in turn, complained that government bureaucracy was so slow that getting the proper paperwork would have taken years so they were forced to circumvent the rules. But there were other infractions. Local regulations specify that foreigners can only work in jobs that locals cannot perform and that they must be able to speak either English or pidgin. Most of the Chinese workers couldn't speak a word of either language.

Still, the P.N.G. government didn't want to risk derailing such a major investment. A compromise was reached, part of which required the Chinese working at the mine to attend English-language classes. Yet not a single Chinese I spoke to at Ramu or Basamuk said they had ever attended any of these language courses. Furthermore, despite assurances that the Chinese working on-site were only engineers or other specialists, I saw Chinese sweeping up construction debris and doing other menial labor that locals could surely do. (See pictures of the making of modern China.)

Discrepancies between national immigration policy and local reality are acknowledged even by P.N.G.'s Department of Labor and Industrial Relations. Assistant secretary Nadile bluntly tells me she suspects that most Chinese who entered the country have done so without the necessary visas and work permits. Today, in major cities across P.N.G., the vast majority of so-called kai bars, or fast-food restaurants, are run by recent Chinese immigrants, as are nearly all the grocery stores. But few Chinese have the correct papers to run such businesses. I ask Nadile if she can tell me of a place nearby that she suspects is being run illegally. She takes me to an office window overlooking Port Moresby and points at two low-slung kai bars located within a minute's walk from the government office: the Rickshaw and the Noodle Shop.

Later I visit the Rickshaw and meet its affable owner Liu Lianghua. The tale he tells is like a caricature of the Chinese immigrant story. His in-laws moved to P.N.G. over a decade ago because they had some family who had settled there previously. Liu eventually followed with his family. Several other relatives joined them after that. More than a dozen members of Liu's family now live in P.N.G. The downtown building in which the Rickshaw is located also has a clothing shop, a variety store, a gaming bar and another eatery, all run by Chinese. When I ask about visas, he laughs and says immigration issues are not a problem in Papua New Guinea. "The locals don't know how to do trade, and the government knows that," says Liu. "If locals get money, they spend it immediately on liquor. The Chinese don't come here to enjoy life. We only come to make money."

Strange Bedfellows

In Papua New Guinea, at least, normal citizens can express their reservations about Chinese investment. But in many of the countries where China has made its biggest business forays, such democratic dissent is squelched by repressive governments that are taking the lion's share of any investment profits. Still, tensions can bubble up in surprising ways. In July, an al-Qaeda wing in North Africa vowed to target Chinese immigrants living there as revenge for the recent ethnic strife in China's largely Muslim Xinjiang region. The next month, riots against Chinese traders broke out in the Algerian capital Algiers, where residents accused the foreigners of failing to respect Islam. Last year, nine Chinese oil workers living near the Darfur area of Sudan were kidnapped by an unknown group. Five were later killed. An international trade embargo because of the unfolding genocide in Darfur may have kept most other foreign investors out of Sudan, but China consumes more than 60% of Sudanese oil. For a government keen on keeping economics and politics separate, Beijing is finding that the two have a nasty habit of intertwining. China is also learning that it can't keep a lid on political scandals overseas as easily as it can clamp down on information back home. In P.N.G., for instance, the local press has widely covered a government investigation into claims that corrupt local officials allowed Chinese immigrants to buy passports. In May Prime Minister Somare went so far as to implicate the immigration department, commenting, "We know some are saying, 'You give me a six-pack [of beer], and I'll give you a passport.'"

An even more sensitive case turned up in July. Namibian prosecutors are charging representatives connected to a Chinese state-owned manufacturer of security scanners with bribing local officials to win a $55 million contract in 2008. Until last year, the head of the company, Nuctech, was none other than Hu Haifeng, the son of China's President Hu Jintao. Although the younger Hu has not been publicly implicated in the case, Chinese censors quickly squelched news stories on the bust within China. (Separately, E.U. officials are also investigating whether Nuctech engaged in illegal activity in Europe.)

Still, for all the controversy surrounding the influx of Chinese money in Africa, Latin America and Asia, the truth is that the vast majority of Chinese working abroad aren't going to go home rich. Driving up to the Ramu mine site, I stopped the car at an incongruous sight: against a backdrop of rain forest, a lone Chinese man perched on a piece of cardboard overseeing a crew of local workers struggling in the sun to sheath a pipeline with insulation tape. There was a feudal tinge to the scene, but the life of Chen Ming, the Sichuan-born supervisor, is hardly idyllic. He has been in P.N.G. for 18 months, working seven days a week, though he sees little point in holidays "because there's nothing to do here." By the time he finishes paying hefty deductions for his room and board, he makes less than he would at an equivalent job back home. But unemployment is rising in China, and Chen struggled for months to find alternative work back home. "It's not a good job, but what else can I do?" he asks, fanning himself with the strip of cardboard. "I have to eat and send money home." For Chen and the other workers — Chinese as well as Papua New Guinean — toiling deep in the bush, all they can ask for is survival. But the big Chinese firms, and the local governments they support — they expect nothing less than the kind of fortunes that will reshape the world.

The World of China Inc. - TIME

 

[Daredevil]

China's record debt has economists worried

The nation is taking on record levels of debt to keep its economy humming. Some say that can't last.

By Bill Powell, contributor

(Fortune Magazine) -- In a world still awash in economic worry, China has stood apart as the one country that has come through the global slump with only the briefest of hiccups.

Last quarter the nation grew at a brisk 8.9% rate, and many economists expect it to expand even faster over the remainder of the year. Profits at large, state-owned companies that have benefited from Beijing's aggressive stimulus program are up sharply.

Li Xiaochao, spokesman for the National Bureau of Statistics, summed up the zeitgeist in China these days: "The overall situation of the economy is good."

A lot of global CEOs, of course, are on the thank-God-for-China bandwagon, and it might seem a little churlish to question one of the world's few good-news economic stories. Yet a growing number of observers believe that China is creating its own bubble economy. And they have a case to make.

The U.S. fueled its housing and consumption bubbles by providing easy credit. China seems headed in the same direction, although the victims would be different this time.

In the first nine months of the year, Beijing has shoveled $1.27 trillion in new loans into the economy, up 136% from the same period last year. That money has gone to three main areas: infrastructure, manufacturing, and real estate.

According to a recent analysis by Monaco-based hedge fund Pivot Capital Management, China's total lending reached 140% of GDP at midyear. That kind of lending makes China an "outlier" compared with other BRIC (Brazil, Russia, India, and China) countries -- and is already well beyond the levels that "have led to sharp and brief credit crises in the past," the Pivot Capital report contends.

Moreover, an increasing number of Chinese loans are being funneled into projects unlikely to generate an attractive economic return. From 2000 to 2008 it took just $1.50 in new credit to generate $1 of GDP growth. Now that ratio is 7 to 1. (In the U.S., just before the financial crisis hit, the ratio was only 4 to 1.)

That's because the loans are creating huge amounts of manufacturing capacity -- which is unneeded in the bears' view. China's spare capacity in the cement industry, for example, equals the total annual consumption in the U.S., Japan, and India combined.

So where will the growth come from? China's export markets are tapped out. Its domestic consumption, stalled at around a third of GDP, hasn't yet started to rise significantly. Additional manufacturing investment would be crazy, leading arguably to a global deflationary bust of epic proportions.

Over the past decade China has spent massively on roads, bridges, and other infrastructure. Some economists believe China's infrastructure, already superior to that of many other developing economies, has now passed the point where more investment can contribute much to growth. China, in other words -- despite the rosy, headline GDP numbers -- might be stuck.

Those bullish on China say the government will keep spending no matter what to keep the economy humming, given its relatively healthy domestic balance sheet compared with that of the U.S. Skeptics reply that if the debt taken on by provincial governments is taken into account, China's fiscal health begins to look questionable.

The good news is that the authorities are well aware of the problems. Behind the scenes, Chinese officials are engaged in an increasingly rancorous debate about whether and how quickly to take away the credit-filled punch bowl. Lending has slowed a bit from the red-hot levels in the first half, and recently China's National Development and Reform Commission, a key government policymaking body, said it would begin to deal with excess capacity in key sectors of the economy by forcing mergers and in some cases ordering factories to close.

So, yes, Beijing may be working hard to keep its economy vibrant, but danger lurks out there. Avoiding an American-style meltdown is the economic test that's coming.

 

[Koji]

The world's forgotten fair

Banyan: The world's forgotten fair | The Economist

MORE familiar these days with the works of Adam Smith, China’s leaders may nonetheless recall Marx’s adage that history repeats itself, first as tragedy, second as farce. This might explain their apparently wilful oversight of an important event in Chinese history. In 1910 modernisers in the imperial court sought to whip up national pride by staging a world’s fair. The models were the West’s great expositions, whose iconic edifices, such as the Eiffel Tower and Crystal Palace, had inspired visitors with the industrial world’s swelling might. Too late, alas. The Manchu empire collapsed a year later. Undaunted, China’s Communist rulers, nurturing similar dreams, are having another go.

Officials in Shanghai, where the 2010 World Expo will run from May until October, understandably do not dwell on the historical precedent. The Shanghai fair, said the bid document the city submitted in 2000 to the body governing world’s fairs, the Bureau International des Expositions (BIE) in Paris, would be the first in any developing country. Technically, that might be right. Before the BIE’s founding in 1928, no rules covered what constituted “world’s fairs”. But many cities had already held them, beginning in 1851 with London, in its now-ruined Crystal Palace.


Nanjing’s effort went by the cumbersomely modest title of the “South Seas Encouraging Industry Meeting”. But contemporary Western accounts referred to it as “China’s first world’s fair”. Fourteen foreign countries took part. In a paper published in 1978 (“China’s World’s Fair of 1910: Lessons from a Forgotten Event”), Michael Godley, an historian, described it as “the last, and most monumental, effort by the Manchu house to prove to the foreign powers and growing numbers of domestic critics that the traditional leadership was capable of modernising the country”.

In the West world’s fairs have long since lost their allure. But China’s rulers see Shanghai’s World Expo as a hugely important chance to flaunt the party’s organisational power and the nation’s engineering prowess and cultural greatness. The prime minister, Wen Jiabao, has called it the fulfilment of a “100-year-old dream”, the kind of hyperbole evoked by the 2008 Beijing Olympics (unquestionably China’s first, and used by the party to show off national strength in a way not seen at the Olympics since the cold war). The notion that a tottering regime now vilified by Chinese historians could have staged a world’s fair a century ago might diminish the aura of what Shanghai officials like to call their city’s “economic Olympics”.

China is lavishing as much money on the World Expo and accompanying makeover of Shanghai ($45 billion) as it did on the Olympics and sprucing up Beijing. Some 18,000 homes have been demolished to make way for the site’s construction on the banks of the Huangpu river which flows through the city. A massive expansion of the Shanghai Metro underground and light-rail network is under way. Non-existent 15 years ago, it will be as big, by the time the Expo opens, as the London Underground. Shanghai’s two airports are being enlarged. The road along the historic Bund is being ripped up to build a new promenade. Of course, Shanghai would anyway be pouring money into its favourite pursuits of demolition and construction. But the pace has been stepped up, bringing disruption for citizens. In consolation, officials urge them to look at what a world’s fair did for Chicago in 1933 and 1934 during the Depression.

China boasts that more countries are taking part in Shanghai’s Expo than any in history. It has helped by paying for the pavilions being erected by poorer countries. But recessions are not good times to persuade foreigners to spend freely. America’s diffidence for a while cast a dark shadow over the event. Part of the problem was a 1991 law that prevents the American government from spending money on Expo pavilions. Without strong government backing, the private sector was loth to fork out. It took a new president in Washington, and much chivvying by China, to get America moving. Hillary Clinton threw her State Department’s weight (though not its money) behind a $61m pavilion, for which $49m has now been raised. Construction has started at last, to the huge relief of China. America’s pavilion, surveys suggest, will be one of the biggest crowd-pullers.

So will China’s own, an elaborate red structure that towers above the others. But officials have quietly shelved what had been planned as the Expo’s defining monument: an ornate, French-designed, pedestrian bridge across the Huangpu, projected to cost more than 1 billion yuan ($145m). The “flower bridge”, as it was to be called, was criticised as too low, and thus an obstacle to shipping. But raising it might have made it hard going for pedestrians. Also quietly dropped were plans to extend Shanghai’s 430kph maglev rail-line to the Expo site. Residents had protested about what they feared would be its impact on the environment and hence, even more worryingly, on house prices.

Dual-track approach
A century ago, in Nanjing, the moribund Manchu Qing dynasty extended a railway spur to the Expo site and built a miniature track around it. The event was, as Mr Godley described it, a financial debacle, but many Chinese at the time felt “justly proud”. The fair drew hundreds of thousands of paying visitors. Getting the country’s rivalrous regions to co-operate in the venture was a feat in itself. Echoes of such tensions still resonate. Siegfried Wu, chief planner of the 2010 Expo, says the Nanjing event had none of the state involvement required of a world’s fair (some historians would disagree). But a deputy mayor of Nanjing has been quoted as saying that his city was indeed the first to hold one. It is planning centennial celebrations next year. “If Nanjing feels happy, that’s fine,” says Mr Wu, as dismissive of a smaller-city forerunner as China’s Communists are of the Qing.

 

[Vladimir79]

Global shipping companies can cancel up to 40% of orders for shipbuilding

Global shipping companies in 2009-2010 in a crisis can cancel up to 40% of orders for ships of all types. Told a conference held in Shanghai, the head of China Cosco Holdings Co. Wei Dzhayfu, reported Bloomberg.

"The financial crisis severely hit the world economy and brought serious problems for international navigation", - said Wei.

Chinese shipbuilding companies since the beginning of the year to October, at the request of shipping companies have stopped construction of 88 vessels. Covokupny volume of orders that are in the magazine orders ship building companies, 60% of the current world fleet and 36% of the fleet of container ships.

tbu.com.ua - Ìèðîâûå ñóäîõîäíûå êîìïàíèè ìîãóò îòìåíèòü äî 40% çàêàçîâ íà ñòðîèòåëüñòâî ñóäîâ - ðóêîâîäèòåëü COSCO / Êèåâ, Óêðàèíà

__________________________________________________

Looks like Chinese overcapacity has hit the shipbuilding industry hard.

 

[ppgj]

China's 'economy on steroids' may be a global risk
Venkatesan Vembu / DNA
Tuesday, December 8, 2009 2:52 IST

Hong Kong: The aftershocks of the global credit crisis may have been felt most recently in Dubai, causing minor palpitations globally, but experts believe that a far bigger rumbler may be waiting to explode in faraway China, with far greater destructive force.

In particular, long-standing structural deficiencies in the Chinese economy are being accentuated by Chinese policymakers' response to last year's global economic crisis, and jeopardising economic recovery in China and around the world, they fear. "Overcapacity is a blight on China's industrial landscape, affecting dozens of industries and wreaking far-reaching damage on the global economy in general, and China's economic growth in particular," notes a recent report from the European Union Chamber of Commerce in China in partnership with Roland Berger Strategy Consultants.

And although there's nothing new about overcapacity in China, "its pervasive influence has become ever more prominent -- and its effects on both the Chinese and international economies have become ever more destructive -- in light of the global economic crisis that still grips world market," it added.

Much of that "overcapacity" has been driven by an orgy of capital spending and the artificial peg of the Chinese renminbi to the US dollar to protect the export-led manufacturing industry.

But analysts at Pivot Capital Management warn that when it runs out, it heightens "the chances of a hard landing" in China.

"Given China's importance to the thesis that emerging markets will lead the world economy out of its slump, we believe the coming slowdown in China has the potential to be a similar watershed event for world markets as the reversal of the US subprime and housing boom," they warn.

The key to the Chinese miracle has been its very high investment relative to its gross domestic product (GDP). All developing countries tend to overinvest for certain periods during their economic progress, but China's investment spend (gross fixed capital formation to GDP ratio) has broken all record. Post-war Germany achieved a peak investment to GDP ratio of 27% in 1964; Japan's peaked at 36% in 1973, and South Korea's at 39% in 1991. But China's economy is reporting a 50%-plus investment to GDP ratio. For every renminbi yuan it produces, half goes back as investment.

Not only that, the investment boom has lasted longer in China than anywhere else: before China, the longest any country has sustained an investment to GDP ratio of over 33% was nine years (Thailand and Singapore). China is now in its 12th year of investment-led growth.

Few economists believe this is sustainable, but there are optimists, too, who do not share this "sky-is-falling" outlook on China. "China is not facing an imminent collapse from a big investment bubble or a mountain of debt," says UBS economist Tao Wang. "The truth about China's growth and risks is not as dramatic as some pundits make it to be."

Wang argues that when analysing the issue of "overinvestment and excess capacity" in some sectors, it's important to bear in mind that China is going through "a phase of rapid industrialisation and capital accumulation, which started from a relatively low base and is still at a relatively early stage." The high investment-GDP and capital-output ratios, she argues, "are specific to the current phase of China's growth, which has been very manufacturing-intensive and, in particular, biased toward heavy-industries."

But even she believes that unless "structural imbalances" in China's economy are addressed through adjustments to macro policies, "we expect... non-performing loans to increase down the road, and asset bubbles and excess capacity problems to worsen."

BNP Paribas economist Guy Longueville points out that "production overcapacity is less significant than had been feared in autumn 2008." But, he reckons, "there is still a general latent problem of overcapacity... which can re-emerge in the future."

"The triptych of latent corruption, excess credit and excess liquidity favours dangerous or criminal investment," adds Longueville. "Waves of 'sheep-like' investment by Chinese companies as soon as a sector looks promising can saturate demand a few years later."

Hong Ho-fung at the Indiana University has a more searing account of what China's "mega-fiscal-stimulus" did. Many of the investments under the stimulus programme, he reckons, "are inefficient and generally unprofitable. If the turnaround of the export market does not come in time, the fiscal deficit, non-performing loans and the exacerbation of overcapacity will generate a deeper downturn in the medium term."

Citing a Chinese economist, Hong says that China's "mega-stimulus programme is like 'drinking poison to quench a thirst'."

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[ppgj]

Why China needs a change
Venkatesan Vembu
Monday, November 30, 2009 2:43 IST

China's economic growth model, which served it well for 30 years, is due for a structural overhaul because of changes that wrack China and the world, according to Dragonomics Research and advisory managing director Arthur Kroeber. In an interview to DNA, the Beijing-based erstwhile journalist surveys the economic landscape. Excerpts:

When China's GDP grew 8.9% in the third quarter, your research said, "the structure of growth stinks." Growth is expected to be 10% this quarter. How does that smell?

In the first three quarters of 2009, about 95% of growth came from investments. That's far higher than is the case even during a cyclical investment boom in China, and is not sustainable. For the whole year, we're looking at 8% growth this year, and maybe 8-8.5% next year. I'm sceptical about claims that China can somehow grow 9-10-11%. I don't think that's possible.

8% growth is sustainable, but over the next few years China has to move from 8% growth that's coming 95% from investments, to 8% that's balanced between investment and consumption. Current policy measures have succeeded in stabilising economic growth, but have not addressed structural problems in the economy.

If distorted investment-led growth is a problem, why did Chinese policymakers go for it?

In the fourth quarter of 2008, as far as we can tell, quarter-on-quarter GDP growth was about zero. China faced a severe demand shock, and leaders responded with a stimulus, almost of all of which pointed to investments. It's a perfectly legitimate thing to do - as a short term measure. But it needs to be followed up with more medium- and long-term measures to change the structure of the economy.

What kind of structural reforms are needed, and is it happening?

There are three major areas where structural reforms are needed: (a) financial system (b) fiscal system and (c) services markets.

In the financial system, there have actually been a lot of reforms, and I feel they will proceed at a rapid pace. But nothing has been done on the fiscal front. It presents a political problem, and I don't expect anything to be done at least until the next government takes over in 2012. As for service sector deregulation, we've seen a lot of lip service, but nothing concrete. On balance, there are reasons to be cautiously optimistic that they will eventually get these things right, but there are also reasons to be concerned.

What kind of fiscal sector reforms are needed?

First, there needs to be a lot more government spending on social services; in fairness, they've started doing that: we've seen increased government spending in education, healthcare and pensions. But more broadly the fiscal structure needs to be change so local governments have fewer incentives to overinvest.

Did the 4 trillion yuan stimulus do its job or did it feed the structural imbalances?

The 4 trillion number is kind of fictional. What we've seen is a significant increase in government fiscal spending, but more importantly, a large increase in bank lending, and borrowing by local governments via the bond market. The actual amount of increased spending this year is considerably more than 4 trillion yuan. The stimulus was meant to get a lot of construction projects started, and it seems to have done that - initially in infrastructure and subsequently in the property sector.

What about concerns that bank lending was misdirected into stocks and proprety markets?

That issue is overstated. Most of that money went into physical projects or is sitting around waiting to be deployed in physical projects. Yes, there is extra money in the property market, and you are likely seeing signs of asset price inflation. If prices rise further, you could have a social equity problem, with a large number of people priced out of the market.

When the stimulus effect runs out, if we don't see global growth return, will China need a second stimulus?

The problem is the opposite: what China wants is not a second stimulus, but to get a sense of how quickly it needs to withdraw the current stimulus. Right now, we have inflationary pressures, particularly in the property market. If you had the same level of monetary expansion next year as you had this year, it will affect the consumer price inflation as well.

Why does China need to change its growth structure, which has worked well for 30 years?

China is heading towards two turning points, both of which indicate that a change of economic structure is necessary. First, over 30 years, the dependency ratio (the ratio of people of non-working age per 100 people of working age) fell from about 80 in the early 1970s to under 40 today. But it will now start to rise as the population ages. Second, for the past 20 years, average export growth was about 20% (in US dollar terms); since 2001, when China entered WTO, until 2008, the average export growth was 27%. This year it will be minus 10. In the coming years, it will be of the order of 5-10% - much lower than in the past. The productivity growth and the technological transfer that come from rapid export growth will be reduced.

Two of the significant contributors to Chinese growth will, going forward, contribute a lot less than they did in the past. The challenge for economic policymakers in China is to address this problem. Demographic transition can be addressed by investing more in human capital: educate people better so that even though there are fewer workers, they become more productive and can work more years. And to counterbalance export growth slowdown, domestic demand needs to be more, with higher emphasis on generating efficiency in the domestic economy. Capital productivity is a big part of this.

Does 'capital productivity' mean fewer investments?

China invests in infrastructure and heavy industrial capacity, which are good things, but offer low fianancial returns, particularly when done by state-owned enterprises (SOEs). This needs to be shifted so that there is less investment by SOEs, and more by private enterprise, which invests more opportunistically, on whatever works. That's a gradual process, over time. But for this, the private sector must have industries it can invest in, which is well served by opening up the service sector.

How long will the transition take?

It's a 10-year process. Initially, capital allocation will be better and efficiency of investments will improve. A social safety net will be built. After that's gone on for several years, it should generate more household income. The share of private consumption in GDP fell sharply over the past decade. If good things happen, and are supported by demographic trends, it should be possible to increase private consumption growth over a decade.

Retail sales numbers in China are over the top. What's with them?

China's retail sales numbers sometimes make no sense. End 2008, when we knew quarterly GDP growth was zero, and some 20 million people were laid off from export industries, and wages were weakened substantially, retail sales accelerated! That's unbelievable. Technically, they are not comparable with retail sales statistics elsewhere: they measure not just retail purchases but wholesale as well -- not just household consumption but purchases by governments and businesses. So you need to look beyond retail sales numbers to get a sense of private consumption.

How does one account for the dissonance between 65% car sales growth and virtually flat fuel sales?

Throw those car sales growth numbers out of your head. A more accurate measure would be the increase in the total stock of passenger cars. For years now, the stock of passenger cars on the road has grown, on average, around 20-25% a year. Over the same period, apparent gasoline demand growth was about 9% a year. So there's been a persistent discrepancy.

The likely explanations are (a) people are buying more smaller, fuel-efficient cars; second, they may be driving their cars less, and there's anecdotal evidence of that. Most people in China are first-time car buyers who are drawn by the low sticker price but don't calculate the operational cost. When they realise the operational cost implications, they drive a lot less.

You say China isn't building 'bridges to nowhere' -- that is, wasteful infrastructure. But why are there so many empty, see-through buildings in many cities?

You have to distinguish between infrastructure and property. The infrastructure that China builds is mostly economically productive; even if it doesn't offer financial returns in the short run, it provides economic returns in the long run. China still has a huge infrastructure deficit, and needs to build next-generation infrastructure -- high-speed rail networks, for instance. The alternative is, as in the US, to put everyone in cars -- but there isn't enough oil in the universe to keep them on the road. Even if there is waste in infrastructure, most of it is necessary and efficient.

In the property sector, there are some problems -- but even there, there's a difference between residential (80% of the property market) and commercial real estate. In terms of macroeconomy, the commercial real estate is such a small part.

If you travel in Chinese cities by night, you may see no lights on in many residential buildings. But these are apartments that were sold --and remain unoccupied. That's because given the underdeveloped financial markets and inadequate social safety nets in China, property is a major investment vehicle. Second, there is no property tax, so the carrying costs are low; buyers can leave it empty for years, looking only for capital returns.

The peg of the renminbi to the US dollar is generating friction. How urgent is the need for RMB appreciation?

It's a problem and the Chinese will be forced to do something by the second half of next year. Earlier, China was under pressure from the US, but now those frictions have been passed on to Europe, Brazil and elsewhere. It's very difficult for China to say 'It's the evil Americans who are beating us.'

More substantively, the real exchange rate needs to appreciate. This can be done either by appreciating the nominal exchange rate -- allowing the RMB to appreciate -- or living with a slightly higher level of inflation. But China had a free lunch for many years until 2004-05 -- when it ran a very high-growth economy, did not appreciate its exchange rate and did not have inflation. Perhaps some policymakers think the free lunch will continue forever. But by next year, they'll have to do one of three things: settle for a lower growth; raise the exchange rate; or allow inflation to rise. Even Chinese policymakers who understand this may find all the options unpalatable. There's a lack of consensus in the government about what to do and what the mechanisms for adjustment must be. But I think they're going to be forced to act by next year.

Earlier this year, there was breathless talk of the RMB as a reserve currency. Can it happen?

The Chinese government never gave any indication that it had an interest in seeing the RMB as a reserve currency. But there was a lot of loose, ill-informed talk from others about that. There is a lack of understanding about what a reserve currency is. Right now, there are three reserve currencies: the US dollar, the euro and the yen. People failed to distinguish between a reserve currency in general -- which is any currency that people are willing to hold some of their forex reserves in -- and the principal reserve currency, the US dollar.

There are two types of reserve currencies -- primary and secondary -- and the RMB is neither. What is requires for the RMB to get there is to get convertible, for China to have deep and liquid debt markets that people can park a part of their excess holdings in and get into and out of easily and quickly without affecting the price.China's currency is not convertible; China doesn't have debt markets that enable that to happen; and when you think of all the structural requirements needed to make the RMB convertible, it will take a minimum of 10 years -- and probably more like 20 years.

You argue that there isn't a realistic alternative to the dollar as a global reserve currency. In the event of a trade friction, cannot China drop the 'dollar bomb'? Can they not afford to do it?

It's not just that China cannot afford to it. It cannot do it. If they sell their dollar holdings, they have to buy something else. What will it be? No one has an answer.There's not enough JGB (Japanese government bonds), or euro securities -- or iron ore mines -- in the world to absorb anywhere near enough of China's needs. There just isn't enough. So, it's not that they cannot afford to. It's that they cannot. Impossible!

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[thakur_ritesh]

Why China needs a change
Venkatesan Vembu
Monday, November 30, 2009 2:43 IST


Retail sales numbers in China are over the top. What's with them?

China's retail sales numbers sometimes make no sense. End 2008, when we knew quarterly GDP growth was zero, and some 20 million people were laid off from export industries, and wages were weakened substantially, retail sales accelerated! That's unbelievable. Technically, they are not comparable with retail sales statistics elsewhere: they measure not just retail purchases but wholesale as well -- not just household consumption but purchases by governments and businesses. So you need to look beyond retail sales numbers to get a sense of private consumption.

i am a little confused with the above red highlighted part, when did that happen. zero quarterly growth in late 2008, is it right?

if i am not mistaken they did around 7% odd, or am i missing something. someone please care to clear it out for me.

thanks.

 

[ppgj]

i am a little confused with the above red highlighted part, when did that happen. zero quarterly growth in late 2008, is it right?

if i am not mistaken they did around 7% odd, or am i missing something. someone please care to clear it out for me.

thanks.

i think the guy is talking quarter on quarter growth. whereas-

GDP growth slows to 6.8% in Q4 of 2008

The country's GDP, the most widely watched measure of its economic strength, grew 6.8 percent from a year earlier in the fourth quarter of 2008, said Ma Jiantang, Commissioner of the National Bureau of Statistics (NBS), on Thursday at a press conference in Beijing.

which shows they are taking year on year growth. may be therein lies the truth. howerver chinese accounting practices have been widely crticised by the west.

 

[thakur_ritesh]

ppgj,

thanks for the reply mate, but i am still not getting it .

their yoy growth for 08 was at 9.1%, qoq (4th quarter 08) growth was 6.8%, so where does the "0" growth rate figure come from and fit in?

 

[ppgj]

ritheshji
my understanding of what i said in the reply is this.
the economist (based in beijing) is saying from qtr ending sept 08 to qtr ending dec 08. (qoq).
what china daily is saying is qtr ending dec 07 compared to qtr ending dec 08. (yoy)

note - having said that may you need to look at all the figs to figure out yourself. my knowledge of economics is pretty basic.

 

[thakur_ritesh]

ritheshji
my understanding of what i said in the reply is this.
the economist (based in beijing) is saying from qtr ending sept 08 to qtr ending dec 08. (qoq).
what china daily is saying is qtr ending dec 07 compared to qtr ending dec 08. (yoy)

note - having said that may you need to look at all the figs to figure out yourself. my knowledge of economics is pretty basic.

okay, got it, thanks for clearing the air.

yes this can be cleared if they released the gdp figures after each quarter which i doubt is the practice, so very likely there indeed was a "0" growth rate in the 4th quarter compared to 3rd quarter.

smart way of misleading .......... !

 

[ppgj]

In China, a proxy for yuan's rise?
Venkatesan Vembu / DNA
Thursday, November 26, 2009 3:06 IST

Hong Kong: Under pressure to allow its undervalued currency to appreciate, China on Wednesday hinted at greater flexibility in determining the renminbi's (RMB) value, echoing similar sentiments from the central bank a fortnight ago. But economists say that the real adjustments will come more by way of real exchange rate adjustments and price hikes, which effectively to an appreciation by proxy.

On Wednesday, China's vice-foreign minister Zhang Zhijun said China would "increase the flexibility" of the RMB exchange rate "at a controllable level in the future... based on the market demand and with reference to a basket of currencies."

That sentiment reflected the observations of the central bank, the People's Bank of China (PBoC), in its report on monetary policy implementation, released earlier this month. The PBoC report, which had for the first time moved away from terminology that spoke of "stability" of the RMB, was widely seen as a signal of likely appreciation of the currency, which, critics say, is grossly undervalued. However, in subsequent comments, policymakers vehemently denied that an appreciation was imminent, much less so under "international pressure."

Zhang repeated that formulation on Wednesday, and emphasised that China would "further work on the exchange rate policy on its own initiative and in a constructive and controllable manner." His comments come ahead of a key meeting of the 12th China-European Union Summit scheduled next week in Nanjing in eastern China, where the subject of currency valuations is bound to come up.

Ever since the global recession intensified, China has pegged the RMB to the US dollar in order to protect its export sector, which remains badly affected. Critics say China's policy is feeding global trade imbalances and impairing a nascent recovery, but not everyone agrees with that assessment.

"When it comes to the renminbi exchange rate, there are always intense debates as well as confusion," says UBS economist Wang Tao. "Contrary to what many may believe, the renminbi has not depreciated against most (Asian) regional currencies since the onset of the financial crisis. This is because many regional currencies depreciated sharply against the US dollar in late 2008, when the RMB was held unchanged."

In any case, she adds, "what really matters to the economy is the movement of real effective exchange rate --- that is, the trade weighted exchange rate movement relative to the price movements in China compared to trading partner countries." In her estimation, the more relevant prices in the case of China, measuring the costs of tradable goods production, are probably producer prices.

According to Wang, while it is important to look at the RMB/USD rate, it is "more" important to look at "the trade weighted effective exchange rate, as well as the relative prices adjustments." That's because, she adds, a key source of the cost-competitiveness in China's manufacturing goods is "the low costs of resource and energy, helped by various policy and implicit subsidies."

Recently, electricity tariffs charged on industries was hiked by 5%, which, Wang says, is "as important a real exchange rate adjustment as a move in the nominal RMB/USD rate," but which hasn't received as much attention as exchange rate movements might have got.

"While the nominal rate may see very little movement in the coming year, the relative price adjustments could help to appreciate the real exchange rate, at least the rate the heavy industries are facing," she adds.

In China, a proxy for yuan's rise? - dnaindia.com

 

[ppgj]

a little old but must read interview.

'Don't make excuses for poor quality Made-in-China'
Venkatesan Vembu
Tuesday, August 25, 2009 3:40 IST

As a fix-it man for overseas importers and retailers sourcing from China, Paul Midler, a Chinese-speaking Wharton MBA grad, gained a unique perspective into the Made-in-China story. That experience, during which he worked with hundreds of Chinese factories, made him an eyewitness to the manipulation of product quality by factories and the other ways in which they bamboozled overseas businessmen and partners. In an interview to DNA, Midler, author of Poorly Made in China, reveals the dark secrets of the Made-in-China story. Excerpts:

How widespread is the problem of 'Quality Fade' (a gradual fadeaway of quality) in China?

It's very widespread. When there was a problem with lead-painted toys coming out of China in 2007, the media said, 'China has a toy problem'. When there were problems in China's dairy industry, they saw it as a 'dairy problem'. When it was tyres, they said, it was a 'tyre problem'. There were others: toothpaste, petfood...

The problems in those specific areas came out of a certain behaviour among manufacturers in China. The instances of quality failure in the headlines are not the root problem, but the symptoms of the root problem, which is a certain attitude towards business, customer service, business ethics... the question of how you conduct yourself with somebody who is considered your partner. And that is something China is struggling with.

Why did not these 'symptoms' -- lead-painted toys and melamine-tainted baby milk powder -- serve as a wake-up call for foreign importers and Chinese manufacturers?

People in the West don't want to believe there's a problem in China. They try to brush it aside and make excuses for China. These are people I call "China enablers": those who enable bad habits and patterns of behaviour. The US, as a big buyer, should be doing more, but people are making excuses for China, saying, 'China's not developed enough', or 'They're poor', or 'They were forced to do this'. This doesn't help the situation. The Chinese manufacturing industry doesn't want to 'lose face', and people who deal with China want to be polite; there are no frank discussions about quality in China. There's nobody who thinks 'What can do to make things better in China?'

How much of the problem is because profit-minded importers are beating down the 'China Price' excessively?

If you're dealing with someone who is unethical, and if you're suggesting that that someone is unethical because the price is too low, my view is this: if they're unethical at a dollar, they're not going to suddenly become ethical for $1.20. The really unethical player would convince you to pay more and will still deliver bad products.

Chinese manufacturers are savvy business owners. They know how to prevent counterfeit goods from being passed on to him; in some cases, he may know how to engage in counterfeiting. I've a difficult time believing suppliers who say, 'We didn't know we bought things that had lead in it. We didn't notice.'

What are the most common manufacturing 'tricks of the trade' you've encountered?

The business strategising aspect of China manufacturers is as interesting as the Quality Fade. Manufacturers are generally very quick to agree to certain conditions and terms: it's part of the success of the China model. Low-balling on the bidding to win projects is common anywhere. What's really striking about China is that you have operators that bid below any expectation of profits. I call it 'Profit Zero'.

So, how do they find their profit margins? The key is to capture the customer. They know that down the road they can engage in some 'price creep', ratchet up the price in different ways. They do it just before the order can be produced, saying they need another 10%, which moves some of the profit margin from the importer to the factory in the short term. Then, over a series of time frames, they reduce the quality in small, incremental amounts that the customer doesn't notice. Meantime, they're learning about the business. They say, 'Maybe I don't make any money on Customer A, but I can take this knowledge and information and I make money on Customer B.' That's also part of the business strategy.

There's a willingness to move fast, they're eager to please, they price low. Yet, a lot of American importers that go to China end up regretting it because a deal with one of these factories is never as good as it is in the beginning. Things tend to get worse over time. That's a bad sign. If there's hope for the China-US relationship, you'd think there'd be signs of the relationship getting better over time. With China manufacturing, it actually gets much worse over time.

We're being set up for being taken advantage of.

Why don't importers switch manufacturers or countries -- to India, Vietnam, or Bangladesh?

India vs China is an interesting case, and there's been a lot of chatter about that. But one of the problems with India is lead time. Think about this: if China is competing with India in manufacturing, why are there so many Indians sourcing from China? I've had Indian clients; they could be sourcing from India, but they say they can't wait six months for a product to be introduced.

Vietnam is in a similar situation. The labour there is cheaper, but unless you control your own production, it's a nightmare to get anything done. No other country has put together what China has. Take China's clustering phenomenon. You want to purchase knives? You go to a city that has nothing but knives. No other country has not just economies of scale and levels of convenience.

China's infrastructure is all set up, right down to a larger number of agents on the ground. In many cases these middle-men are the guys who make the decisions about where the product is to be made. They are the real deflationary heroes, more than the factory owner who makes the product or the retailer who sells it. It's he who keeps prices down, who threatens to move to another factory when things don't go well...

But that never happens...

They say it all the time: it's just a Western habit to bang on the table and threaten to walk away, but they never do. And the factories know this: they're aware of American negotiating tactics. It never happens.

Also, in the past 10-15 years, there's been a lot of disintermediation. The customer who was importing $50 million worth of products from China is now competing with five different customers who are importing products for $10 million each. That's a proliferation of importers, and in such a situation your buying power shrinks, and your prices go up. All these importers were made to think that things are so easy in China that they can bypass the intermediary and come out ahead. A lot of people who go to China directly realise it's too late because they've already burnt their bridges with the intermediary.

Why haven't US consumer protection agencies been able to filter out low-quality goods from China?

One, these agencies are resource-constrained. The US Consumer Product Safety Commission just doesn't have enough people. But even if it had, it can't inspect everything that comes into the US: the volume is too large. Most industries are self-regulated...

The other problem is that when it comes to poor quality, you have to know what you're looking for. In China, you're dealing with a partner who is not straightforward with you. A lot of counterfeiting goes on. With hindsight, everybody says, 'Why weren't we looking for melamine in milk?' But a year ago, nobody even knew what melamine was. When you send, say, a shampoo sample to the lab for testing, you can't just tell the lab to make sure there's no bad stuff in it. Labs charge by the screen, and want to know what screens to run. You have to tell them what you're looking for. And each of those tests adds to the cost.

You also make the point that at some stage, some importers don't want to know about quality problems.

Factories have their ways of making things cheap, and they don't always disclose their production secrets. Sometimes we don't want to ask. That way, we don't know what they're doing, so if something bad happens, we can say,

'We didn't know.' But if we ask and we find out they're using some chemical that's not legal, we have a problem: now we know.

You were on the ground in China (on behalf of importers). You speak Chinese. You had access to factories. Why could you not prevent these manufacturing tricks?

In matters like this, there has to be trust; there's no other way to do it. For me to guarantee what's in a shampoo, I shouldn't have to stand in the factory on the days that they were mixing the shampoo, test every ingredient, ask them what they were putting in... There has to be a level of trust...

And you can't trust Chinese manufactures?

I won't say you can't trust all manufactures. But in China, it's not just the number of quality failures that's worrisome, it's also the kind of quality failures. It goes beyond just accidents in the factory or negligence; it also goes beyond worker 'laziness' or a factory owner 'cutting corners'. 'Cutting corners' is too benign an expression to describe some of the things that go on in China, where some people are going out of their way to 'slip one past the inspectors', as the melamine-in-milk scandal showed. Not all the quality failures are alike: some of them are more unethical than others; but it doesn't get any worse than the melamine case. Dozens of companies were involved, which means potentially hundreds of people knew about it. Children were dying. So why didn't people talk? Why aren't there whistle-blowers in China? It's because employees don't want their factory or China to lose face, so they think it's better to sweep it under the rug.

You claim that the most bullish China analysts are the ones who don't want to live in mainland China. What does the lived-in, grassroots experience of mainland China tell you that faraway analysts don't see?

Right now, we're in the middle of an economic crisis. When the book was being written, there was a much bigger gap between my understanding of the problems in China and the outside-in view of China as this paradise of investment or opportunity.
How do you have Wall Street analysts being so bullish on China when they've never seen what goes on over there and the problems there are in China? One of my friends is a Hong Kong-based analyst. Like a lot of analysts, he talks about how he will move to Beijing (or Shanghai), but like a lot of analysts, he's waiting for the "right time". They never do it because in mainland China, the education system, the health system, pollution... it's bad. It's a huge irony; analysts are very happy to write about this fantastic phenomenon called China, but they just don't want to be there...

A great example is (US investor) Jim Rogers. He famously sold his Manhattan home and announced he was moving his family to China because that's where the global economic focus was shifting. Yet, after considering many Chinese cities, including Shanghai, Dalian and Qingdao, the 'China bull' finally settled in Singapore! There wasn't a place in all of China that he would live in: imagine that! That's the problem: there's been a lot of bluster and a lot of boasting. You have to be a little frank with what you have here...

Hasn't the Made-in-China story been a force for good in any way at all?

People talk about the good that China does... But I have a difficult time saying big positive things about China. People say China kept costs down for a lot of countries. But you go to Cambodia or Laos, and you can't find anything that's not made in China today. From a trade balance perspective, I don't know if those countries are well off...

'Don't make excuses for poor quality Made-in-China' - dnaindia.com