every so often a thread comes along that is so informative that makes participation on these threads worth every bit of the time spent..... thanks guys... sometimes issues are just so large that one person's perspective just can't capsulize or encompass the breadthe of the issue. China spends its money from enslaved and cheap labor done under conditions that would not be acceptable in most countries, not just the United States, and especially even in most South American countries. They simply have such a long way to go and hundreds of millions of citizens to account for. One of their often quoted expressions has something to do with throwing a million citizens here and throwing another million citizens there and all of a sudden the objective is conquered. China rising, South America selling its resources and farm goods, America falling, well god bless them all! My challenge is converting information from this thread into trade-able positions that I can take on the next business day's trades... simply put, then after making sufficient monies, I can fly one of those newly purchased Boeing 787's or Airbus 340's nonstop from NY to China or Hong Kong and visit them or to Rio DiJanero and visit there too.. profits first?
So you are happy profiting from their enslaved and cheap labor and accuse them that such practice is not accepted in most countries? No slave labor in South America? No kidding? I think there is a saying that goes like this: "Never bite the hand that feeds you" Especially when you need, want and love the food.
I have been struggling with the China question now for about a year and while I have made some progress, I am still not entirely clear what is going on there. For the moment, I continue to treat it as an emerging market economy & invest accordingly (i.e. small), although I do have a preference for longer term fundamental long macro position plays with those equities who profit from China here in the US. For a punt, FXI is as good as any. It seems to adjust to currency changes, which gives you double the bang for your buck. PGJ is smaller, more thinly traded, and doesn't seem to behave the way you would expect, so I would trade the former over the latter. For those of us who are out of our twenties, doesn't this whole thing seem eerily familiar? Think back to 1980. Ineffective president in power (carter - bush?), surging oil prices ($32 ish in 1983, longest I can get back -- $57 now), global disdain for US policies (iran hostages -- iraq) and ... A new emerging market country coming up out of nowhere to kick our asses (Japan --- China) with impending bankruptcy of one of our largest industrial concerns (Chrysler -- GM) The main difference between the two eras is the deflationary overtones in our global economy which have mitigated the previous run up in inflation that occurred during that era. Finally, one thing to think about regarding the Chinese. If you think that your government 'fudges' numbers (look at GDP and CPI revisions) to fulfill economic policy goals (which I am not saying is a bad thing, just making a comment), at least we have laws, congress, etc... to create a certain amount of transparency. Such transparency does not exist with the Chinese; and I agree that a lot of the FX reserves are being transferred to bail out Chinese businesses and the loans made to them by banks. Such loans are made on a political basis, since the employment serves a social good to the chinese people (basically an alternative form of public assistance), while creating the deflationary influence we have felt (by running the business at a loss). I almost feel it is my patriotic duty to purchase such products since they won't come along cheaper again! The Chinese government does not offer that type of transparency. I seem to recall similar claims being made by both China (during the great leap forward!) and the USSR during the cold war where they claimed their GDP, productivity, etc... were far superior to the US. That was so much smoke and mirrors. Here is an interesting newsletter from Simon Hunt worth reading that suggests that Chinese demographics may not be all they seem. Would china's leaders also overstate their GDP for political gain (inside or outside the country? Hmmm?) http://futures.fxstreet.com/Futures/content/101960/13-12-2005.asp
. December 22, 2005 SouthAmerica: For the people interested on what is happening in China today, I suggest that you read the following article published on Harperâs Magazine - December 2005. The actual article is 18-pages long, but here I am quoting a portion of that article as follows: **** Part 1 of 3 Harper's Magazine (December 2005) â Letter from China The Great Leap: Scenes from China's industrial revolution by Bill McKibben On the flight from Newark to Beijing, I read the following small item in the China Daily: According to media reports, several air conditioner installers have fallen to their deaths in the last couple of days in Beijing alone. As the sweltering summer heat sweeps the country, sales of air conditioning units are booming. This has naturally led to strong demand for installation services. The spurt in installation service demand has left many firms under staffed, so some are temporarily recruiting untrained installers to cash in ... [Some] even refuse to provide safety belts to installers in order to save costs. The article - evoking as it did a hazy urban sky filled with plummeting air-conditioner installers - coincided perfectly with my mental image of China, so I tore it out and filed it away. I'd done the same thing a hundred times before, creating for myself a carefully imagined China full of smog-blackened cities where people wore gas masks against the clouds of coal smoke; savagely Dickensian factories where young women were paid slave wages; a heedless and rapidly expanding consumer class hell-bent on buying cars and appliances with no regard for the environmental costs of their consumption. I wanted to see it for myself, to indulge in the kind of disaster tourism that makes one gaze agape at the sheer can't-take-your-eyes-off spectacle of it all, like the visitors who flocked to Niagara to watch boats filled with zoo animals wash over the falls. And then come home with head-shaking cautionary tales about what this combination of heedless growth and ecological unconcern meant for the future of the world. That was the plan, anyhow. The "watch out for China" narrative offers something to every American. Liberals can be repulsed by China's destruction of the environment and conservatives can portend the rising hegemon of the East. Americans from across the political spectrum can frown upon China's dismal disregard for personal freedom - jails filled with Falun Gong devotees, always Tiananmen hovering in the background. The problem with actually reporting about a place, however, is that you start collecting stories, and they never quite fit. It's not that any of these angles are wrong - there are countless well documented stories of nightmarish factory conditions, human-rights violations, local corruption, and environmental folly - but even taken together they don't come close to adding up to China. And they allow us to ignore what might be most crucial about the emerging nation: the ways it is starting to resemble our own. On my third day in China, still slightly jet-lagged, I piled into a VW Jetta driven by a Beijing software designer named Wen Jie and headed for the "Rongcheng Industry Zone" about 100 miles southwest of Beijing - one of hundreds of such zones spread along China's coastline. We took an empty new highway out of the city. That highway joined another, and another, till finally we exited the toll-road system altogether and plunged into Third World rural chaos: overloaded trucks, flocks of sheep wandering across the street, a landscape scarred by tiny brickworks whose owners had mined out the top few feet of much of the surrounding landscape. And, covering every other bit of available land, the underlying green order of corn and rice fields, punctuated at irregular intervals by men and women, straw-hatted, backs bent, hoeing under the hot sun. The Rongcheng Industry Zone turned out to be less grand than it sounded - a rural district with a higher density of factories and (another) brand-new highway, this one leading directly to Tianjin, the largest manmade port in China. We stopped at the Hebei Rongcheng LeJia shower-curtain factory to pick up its owner, Bao Jijun, who wanted to show us his and some of his friends' operations. Now, given what I'm going to say, it matters how I came across Bao. I had avoided registering as a reporter with the Chinese government, and so I was spared a tour of some showpiece installation. On the other hand, the owner of any dark satanic mill or prison-slave-labor operation was surely bright enough to keep an American with a notepad away. In fact, I found Bao in as random a way as I could imagine: a friend in Vermont, where I live, introduced me to Wen (the software designer), who in turn introduced me to Bao, a kind of shirtsleeve cousin, who'd been making shower curtains since 2002. Before showing me his factory, Bao wanted us to visit the Hua Xin Li Dress Co, Ltd, which was by Chinese standards a venerable firm. It had opened its doors in 1987, right around the time that Deng Xiaoping had begun to allow any such enterprise. From a home factory with five or six employees, it had grown into a medium-sized enterprise with several hundred workers. "'First Quality and Prestige Supreme' is our aim", says the company's brochure; on the day we visited they were churning out slightly garish yellow dress shirts for the Eastern European market. The factory was three stories tall, and on each floor young women, and a few young men, in white company T-shirts sat, four abreast, in front of new sewing machines imported from Japan. It was a hot day, but big fans moved plenty of air around. There was a busy hum, but not a din. The women worked fast, especially the button-sewers at the end of the room, but not frantically. A large red banner hung over the middle of each room reading, in Chinese, "The Customer Is God and the Market Decides Everything". What "the market" had decided was that these women would earn about 10,000 yuan a year (fifty cents an hour). {1} Two thirds of them commuted from the surrounding villages. The rest came from the provinces and lived behind the factory, in a dormitory with a water pump and a clothesline out in the courtyard. I cannot tell you if this was a hard life or even an acceptable life, but later, as we drove away from the factory, we did pass field after field of those men and women with bent-over backs. After our tour of the Hua Xin Li Dress Co, Ltd, we got back in the Jetta and headed down the road to the Gold Pioneer Cow shirt factory, where in similar (although smaller) rooms young women and some men were sewing track suits for Germans, black vests for hotel waiters, and - under the Tact Squad label - dark blue uniforms for American cops. Gold Pioneer Cow also makes men's suits for the Chinese market. "In China, the requirement is that if you get married you need to have a wedding suit", the owner explained happily. And then, at the end of a dusty road, we returned to the shower-curtain plant. Bao Jijun is in his early forties, tall, lean, and vigorous. He'd started his business three years before in a Beijing apartment with his wife and two other workers; within six months he was renting space at another factory; within a year he had leased this place. Now he had a hundred employees. We wandered through the workrooms, watching kids - almost everyone was between eighteen and twenty-two, as if the place were some kind of shower-curtain college - smooth long bolts of polyester onto huge tables, sew hems and grommets, fold the finished curtains into plastic bags, pack them into cartons. It's hard to imagine a much simpler product than a shower curtain. â¦TENS OF MILLIONS OF CHINESE ARE LEAVING THEIR FARMS EVERY YEAR. IT'S THE BIGGEST MIGRATION IN THE HISTORY OF THE PLANET Depending on the model, Bao can make a shower curtain for about 21 yuan. He can sell one for about 24 yuan. When you buy a similar shower curtain in an American big-box store it retails for about $30, or about 240 yuan. But Bao doesn't do much business directly with American-owned retailers. When a pair of buyers from the States came to visit a few months earlier, they had told him they could sell millions of curtains. But he would somehow have to drive the price down to 18 yuan. Which would mean, say, getting rid of the Ping-Pong table, or adding a few hours to the workday, or doubling the price of the soup. {2} Seeing the sheer volume of industrious labor in those few factories began my education. But it was only toward the end of my four-week visit, in the city of Yiwu, that I really began to understand not only the scale of China's manufacturing enterprise but the force of the momentum behind it. I'd taken a packed and sweltering train from Shanghai to Yiwu, which despite being home to more than a million people didn't even appear in my 900-page tourist guide to China. Yiwu is home to the International Trade City, where you can see sights every bit as awesome as the terracotta warriors of Xian or even the Great Wall. The place is only two-fifths complete, but the two huge buildings already standing - they each look like the Empire State Building laid on its side and mated with a fleet of aircraft carriers - demonstrate the unavoidable truth that anything that can be made can be made cheaper in China. .
. Harper's Magazine (December 2005) â Letter from China The Great Leap: Scenes from China's industrial revolution by Bill McKibben Part 2 of 3 â¦Take, for instance, the "Suit cases and Bags, Including School Bags" section of the International Trade City. There are about eight hundred 10 x 12 stalls, each representing a different factory, each showing its wares to buyers in the hope they'll order lots of ten or twenty or thirty thousand. There are stalls with duffel bags, change purses, wallets of every kind. Fanny packs, metal lunchboxes, jewelry cases. It's a kind of headquarters of dubious English: "I dream of being the best basketballer in the town". "Durable Performance Based on the 58's 123-45 Vintage Spirit". "My grandfather has white hair like snow". I stared for a long time at a backpack that said "All Things Grow with Love" before I figured out that it looked weird because it was grammatically correct. "Suitcases and Bags, Including School Bags", took up only half a floor. The story above was entirely devoted to "Hardware Tools and Fittings", which is another way of saying pretty much everything on earth: knife blocks, car jacks, chaise longues, surge protectors, lint rollers, jumper cables, carabiners, bike pumps, rubber bands, cheese graters. One stall had thousands of those Lance Armstrong "Livestrong" bracelets in a rainbow of colors. Lucky rabbit's feet, singing birthday cards, nail clippers, safety pins, ratchet sets, thigh exercisers, bathroom scales, toilet-bowl deodorizers, plaid wheelchairs, feather dusters, meat-pounding mallets. Dozens of models of magnetic patriotic ribbons for the backs of American cars ("Freedom Is Not Free"). Pruning shears, putty knives, carafes, egg cups, cake-decorating nozzles, depilatory machines, giant martini glasses, immersion heating coils, disposable cameras, hip flasks, sake sets, mortar and pestles, cereal dispensers (like you see on the buffet at the Motel 6), rolling pins, exit signs, sander belts, key rings, rubber gloves. In the "Regular Toys" section of Building 1 there are hundreds of stalls offering variations on those weird squishy rubber balls: skull-shaped balls whose eyes pop out when you squeeze, "yucky maggot balls". Not to mention boogie boards, plastic hand grenades, squeaky mallets, bow-and-arrow sets, toy pianos, "small chef" ovens. After twenty minutes of walking you emerge into the "Electric Toys" section. ("Does thinking the son and daughter become the scientist? Then start growing from the electronic toy bricks! Train pilot! Look for the Bill Gates!") And then the "Inflatable Toys" section, and then, biggest of all, the "Fabric Plush Toys". The next floor is divided between artificial flowers and hair ornaments - you suddenly realize that there are three billion women on this planet, many of whom would probably be happy to have ribbons in their hair. And above that, miles of kitsch - the "Tourism Crafts" section, which could stock every gift shop on earth, with light-up Virgin Marys, "African" carvings, novelty bottle openers, refrigerator magnets by the millions. And on the top floor, the stalls that bring the world Christmas. Groves of artificial trees blinking with LEDs, squads of Santas playing electric guitars and riding exercycles and spinning hula hoops. Tinsel tinsel tinsel. Once I'd been to Yiwu, sights I'd seen earlier made more sense. Chunming, for instance, was a tiny rural town in the hills of Sichuan. We'd spent the night before in Chengdu, the provincial capital, which is larger than New York City. Chunming was an hour's drive away, but it was the usual world apart. Most of the men worked up the hill at a makeshift coal mine, trying to avoid the cave-ins and explosions that claim a hundred miners a week around the country. The place was pretty bleak. With my translator, a young environmental journalist named Zhao Ang, I wandered up to the first house we came to. The place was actually pretty big, a series of interlinked and crumbling courtyards. It had belonged to the local landlord until 1949, when it was expropriated in the wake of the Communist victory and given to seven or eight families to share. A few pigs slept in the room next to the kitchen. There was one girl we could talk to here, Zhao Lintao (no relation). She was twelve years old, and proudly spoke the English she'd learned in the overcrowded village school. When we asked her about her life, though, she was soon in tears: her mother had gone to the city to work in a factory and never returned, abandoning her and her sister to her father, who beat them regularly because they were not boys. The government was taking care of her school fees until ninth grade, but after that there would be no more money. Her sister had already given up and dropped out. Multiply that story by half a billion and you will begin to understand why the biggest migration in the history of the planet is underway in China, why there are always more bodies to sit behind those sewing machines. Tens of millions of people leave desperately poor farms every year to work at the factories that feed Yiwu. By one estimate the country needs to add an urban infrastructure equivalent to Houston every month just to keep pace. More than a hundred cities in China have populations that top a million. And even so, the countryside still bulges. What struck me about China, in fact, was not so much the teeming cities as that teeming countryside. China has a third of the planet's farmers and one fourteenth of its farmland. In places, the average farm plot is a sixth of an acre - smaller than many American houses. About 800 million people, roughly 65 percent of China's population, are crowded onto those tiny farms. And on average they are earning one third the income of city dwellers. It is easy to see why the United Nations predicts that by 2030, sixty percent of Chinese will live in the cities. With a massive effort, that number might be held down to fifty percent. But since about one percent of Americans currently work as farmers, down from 39 percent a century ago, we should be able to understand this tide. Not that the path to the city is easy. The gulf between urban and rural Chinese is as profound as the racial gulfs that plague our own country. â¦The Chinese authorities, who value stability above all else, are attempting to respond. The Party, for instance, under the influence of European environmentalists, has pledged its commitment to what it calls a "circular economy". In, say, Denmark this would mean organizing industrial parks such that a power company, a drug plant, a wallboard producer, and an oil refinery would be located near one another so that they could use one another's wastes as raw materials. In China it's so far meant a large number of conferences and pledges and confident announcements - pilot projects to turn sulphur slag into fertilizer, promises that, say, Guangdong province would, since round numbers are big in China, "introduce standard clean production systems to 100 industrial enterprises, turn 100 heavy polluting enterprises into more clean and efficient operations and promote 100 types of new clean production skills and techniques". Given that there are millions of plants across China, it's hard to tell what any of this means, though the World Bank is ready to start spending and the restaurant next to the best hotel in Guiyang has an impressive list of German beers for the Teutonic experts who are arriving to dispense advice. â¦To get a sense of the burden the Chinese face, I got in a Chinese-made SUV one day in Beijing with Zhao Ang and a telecom programmer, Zhang Junfeng, who volunteers with a local environmental group that is monitoring the capital's water supply. Our goal was to follow the Chao River, the main source of Beijing's chief reservoir, as far upriver as we could. It was a trip none of us had taken before, and revealing in - well, in a hundred ways. Each village we passed - and the villages essentially ran together without end - had one building with a long blackboard nailed to a wall. The blackboards turned out to contain the town records - the corn-planting schedule, the electricity fees. And a list of each of the recent births: name, date, whether it was the first or the second child for the couple in question, and whether it was legal or not. (Under certain circumstances, rural families can have two kids). {3} â¦It's questionable, though, whether such changes will make any real difference to the encroaching desertification. Although the country's south is saturated, always trying to fend off flood, China's north is simply parched. As the flow of the Chao and other rivers has been siphoned off by the cities growing alongside them, Beijing has been drawing more and more of its own water from an underground aquifer - half or more of the water it uses comes from underground, and as a result the water table is sinking by meters every year. "Some northern cities will simply be out of water in eight or ten years", Ma Jun, author of China's Water Crisis, the one great environmental book China has yet produced, told me over lunch in Beijing one day. The earth subsides into sinkholes in dozens of places every year now, and fissures yards wide suddenly appear like earthquake faults. National Geographic recently came for a look and decided the country was committing "ecological suicide". To deal with the crisis, China's leaders have dusted off a plan that Mao dreamed up in 1952: construct 800-mile-long canals to carry water from the south to the north. That's an almost unimaginable idea, roughly comparable to putting Lake Superior in an aqueduct in order to let Phoenix keep watering its lawns. .
. Harper's Magazine (December 2005) â Letter from China The Great Leap: Scenes from China's industrial revolution by Bill McKibben Part 3 of 3 â¦But the problem, he quickly added, is that the extra water will probably just be used to fuel a new round of rapid growth. One of the million reasons the Chao has run dry is that Beijing has thirteen ski slopes in the surrounding mountains, all of them relying on manmade snow. And they've just opened a fourteenth, this one entirely indoors. When we'd reached the head-waters of the Chao, we crossed a few valleys and drove back to Beijing along the equally dry White River - another of the city's main tributaries. But this time we were more interested in power than in water. Along the way we passed one new high-tension line after another. These massive, still-shiny steel towers crossed the mountains in the same lovely undulating ripples as the Great Wall; indeed we hiked to one ruined section of the wall to get a better look at the power lines, which represent an engineering feat on the same heroic/insane scale. In 2004, China added fifty billion watts of generating capacity to its electric grid. In 2005, it will have added another 65 billion watts. You can do the math any number of ways - they're adding two New Englandâs to their electric system annually, or half of India, or a Brazil. No power grid on earth has ever grown anywhere near that fast. Almost all of the new power comes from coal, which China has in cheap abundance; Party officials have announced ambitious plans to build two nuclear reactors every year until 2020, but even if they manage to pull it off, only about four percent of their electricity will come from atomic reactors. Essentially, China is going to burn coal - it will have passed the two-billion-ton mark this year. And even with that utterly unprecedented growth in supply, the country is stretched to the breaking point - twenty-four of thirty-one provinces had power shortages in 2004. "In some provinces plants operate only three or four days a week", said Yang Fuqiang, the Beijing-based vice president of the Energy Foundation. "You get five or six or seven percent loss in local GDP". In late July the Beijing authorities announced that the 4,689 local factories "will arrange week-long summer vacations for their employees in the coming four weeks" to save power, and then offset the holidays by "adopting a temporary six-day week schedule in the coming fall". The explanation for this surge is relatively simple, and it has everything to do with those farmers streaming into the city: Yang, hunched over his computer in a Beijing office where the thermostat is turned to 82 to save energy, says the best guess is that more than twenty million people come to the cities every year. There they make enough money to start consuming power - in the city people get, say, small refrigerators or even air conditioners. And they get jobs making shower curtains and spatulas and suitcases, which also take some energy. And building even simple concrete huts for them requires all sorts of resources - five percent of China's fuel may go to producing cement alone. China makes more steel than any nation on earth - not primitively, a la Mao, in the back yard, but it still takes energy. Oh, and cars. Ten years ago there weren't any. "Driver" was an occupation - you took Party officials around in a big black sedan. Today, China is the world's number-three car market. Demand is surging - vehicle sales grew ten percent in the first half of 2005 - and automakers expect to sell 5.6 million vehicles by year's end. Visiting the big car markets in Beijing is like going to a ball game in the United States - you park blocks away at a gas station where attendants wave you in; sidewalk vendors sell Cokes to the gawkers. It's a fascinating place to drive, because almost everyone is a tyro. The traffic patterns are unlike anywhere else in the world - people weave in and out constantly, merging from side streets without stopping - but crashes are relatively uncommon because speeds are low. Five years ago, you suddenly realize, these people were riding bikes. Again, it's not as if the Chinese haven't noticed there are big problems that come with this kind of growth⦠But without that level of growth, there'd be no way to absorb the endless influx from the countryside. How are you going to keep people down on their sixth of an acre once they've heard that city dwellers eat meat! Only with a level of repression that the post-Mao Chinese probably wouldn't tolerate, a level of repression that would shake the country's power structure. (And if that power structure fell, the democracy that replaced it would have many virtues, but controlling migration wouldn't be one of them.) That's why the country is busy building cars - because automaking, road-building, tire-patching, bumper-fixing, and gas-pumping are ways to build an economy. What's good for Shanghai Automotive, or so the thinking goes, is good for China. And so the country is trying to muddle through. On the one hand, it must keep growing fast enough to absorb all that restless labor - the newspapers are already full of reports about college graduates unable to find jobs, and then there are those people pushed out of work in the vast and useless state heavy industries. And on the other hand, it must keep resource and energy use enough in check that China doesn't simply crash and burn. The official goal is to quadruple the size of the economy by 2020 while only doubling energy use - a target that's probably unattainable due to the huge growth in electric generation in the last couple of years. â¦And the government has adopted most of these schemes, at least on paper. It has pledged to provide ten percent of the power with renewable resources in the next fifteen years - windmills are being built left and right, which is more than we can say. And some of what the Chinese are doing we couldn't even begin to imagine. In Shanghai, for instance, if you want a new car you not only have to go buy it, you have to bid for a license plate - in an effort to control the growth in autos, the city allows only about 6,000 new plates a month, and in June's auction they went for more than $4,000 apiece. Not only that, but they've built a remarkably good subway system, designed to persuade people to hold off buying cars. "Look, if you have a cheap, low-end metro, then the people who need to wear business clothes to the office simply won't take it", Ma Jun said. "And those are exactly the people with enough money to buy a car". The Shanghai metro has plasma screens on every car, delivering a continuous English lesson; the weekend I was riding the metro the screens were endlessly explaining the phrase "home field". â¦It used to be said that the point of travel was to see your own home more clearly. So let's look. When you're standing in Shanghai, at the city's urban-planning exhibition, admiring the basketball-court-sized model of the city's future plan, with every skyscraper and apartment complex carefully detailed, you just viscerally know that there are two countries that really count right now. You just viscerally know that this is the story that will define the future. China and the United States are now the world's biggest consumers of raw material, and of food, and of energy. Are they therefore morally equivalent? â¦The longer I looked, however, the less alike the two nations seemed. Take cars, for instance. Cars define America - their proliferation is the single physical item that makes our continent's civilization unique. We have nearly the same number of cars as we have people. In China the number of automobiles is growing fast. But if the Chinese sell six million cars this year, that will be eleven million less than the United States - in a population more than four times as large. â¦The world, as it turns out, cannot afford two countries behaving like the United States. It lacks the atmosphere (and it also may lack the resources, as this summer's scramble for control over oil makes clear. We can't let the Chinese buy Unocal, because we need its reserves for us). And the reason it's an actual tragedy is because, right now, a rapidly growing China is actually accomplishing some measurable good with its growth. People are enjoying some meat, sending their brothers to school, heating their huts. Whereas we're burning nine times as much energy per capita so that we can: air-condition game rooms and mow half-acre lots, drive SUVs on every errand, eat tomatoes flown in from Chile. I understand that our country has people living in poverty, some of whom are now losing their jobs to Chinese competition, but that's simply our shame - we have all the money on earth, and we haven't figured out how to spread it around. Notes {1} At the moment, the exchange rate is at around eight yuan to the dollar. But for an approximate number, it works to just drop the last digit - 10,000 yuan is something like a thousand dollars. {2} Ikea's slogan, which in the modern economy almost passes as humane, is "Low Price, But Not at Any Price". {3} No one knows for sure how effective the one-child policy has been. One demographer estimates that China has as many as 37 million uncounted children, hidden at least in part because local officials don't like to report bad news. But total population growth is not the main force driving China's problems. And however cruel the legislation was, most people I talked to, in the cities anyhow, seem to have internalized it as an indisputable fact of life. *** Author: Bill McKibben, a scholar-in-residence at Middlebury College, is the author of many books, including The End of Nature and Wandering Home. The entire article was posted at the following website: http://billtotten.blogspot.com/2005/12/letter-from-china.html .
. âBusiness Weekâ April 10, 2006 - Innovation âBlinding Science: China's Race to Innovateâ By Bruce Einhorn - with Dexter Roberts in Beijing The country is making a move to be a leader in science, medicine, technology, R&D, and energy -- and the government is behind the charge. Looking for the cutting edge of stem cell science? Instead of Stanford or Cambridge or Singapore, consider Shenzhen. That's where Chinese entrepreneur Sean Hu has set up one of the most radical businesses in the field. Hu is chairman of Beike Biotech, a joint venture involving the Shenzhen government, Peking University, and the Hong Kong University of Science and Technology. Launched last year, Beike specializes in stem cell treatments that doctors in the U.S. wouldn't dare to try experimentally, let alone commercially: taking stem cells from aborted fetuses and implanting them into patients with otherwise incurable diseases. In the U.S., simply using stem cells from embryos is controversial. That's not the case in China, where regulators are also far more permissive about experimental therapies than their U.S. counterparts. So far, Hu and his doctors have treated more than 100 patients suffering from autism, ALS (Lou Gehrig's disease), crippling strokes, and other severe problems. Now, Hu plans to make Beike a nationwide company with global reach. "We will be able to apply the most advanced stem cell technology and use our network to collaborate with foreign biotech companies," he says. IT'S A SCIENCE. Hu's ambitions -- and the regulations that allow him to operate -- indicate just how far China is going in its attempt to build a more modern, flexible economy. In Beijing, innovation is the buzzword. President Hu Jintao set the tone in January with his call for China to make the transition from a manufacturing-based economy to an innovation-based one. Innovation was a major theme at the recently concluded National People's Congress, with the government unveiling its latest five-year plan calling for big increases in spending to nurture innovation. China is targeting a broad range of sectors, including some controversial areas such as stem cells, gene therapy, and genetically modified crops; and some areas that the U.S. has long dominated, including software, semiconductors, and space exploration. And China aims to become a leader in emerging technologies such as renewable energy sources ranging from solar, hydro, and wind power to fuel cells. By 2050, China intends to surpass the U.S. and become the biggest player in the world of science. There are many reasons that Beijing wants to push the innovation agenda. One is national pride: As a great nation that was coming up with innovative breakthroughs when Europe was in the Dark Ages, China believes it should be a leader, not a follower. Another reason is national security. The Communist regime doesn't like being at the mercy of foreigners for key technologies. CALL TO INNOVATE. There are solid economic reasons for China to reduce its reliance on smokestack industries that have devastated the environment and dramatically increased China's consumption of oil. "The leadership has been searching for a new, more sustainable model for growth for some time," says Richard Zhang, a director at McKinsey & Co. in Shanghai. "With innovation, the hope is that the environmental cost will be much lower." As a result, the government is aggressively boosting the profile of China's scientists and engineers. Top government officials routinely exhort scientists and business leaders to get with the program and become more innovative. In January, for instance, Vice-President Zeng Qinghong spent the day visiting government-backed labs working on agritech and biotech projects and China's space program. In typical Chinese fashion, the government has unveiled an ambitious long-term plan to build its innovation economy. A big part of the strategy is money: Today, China devotes only 1.2% of its GDP to R&D spending, and the government has announced its intention to boost that figure to 2% by the end of the decade and 2.5% by 2020, with the government pitching in about 40% of the total, and the private sector contributing the rest. By then, China will be spending $110 billion annually on R&D, putting the country in the same league as the U.S. and Japan. PROJECT PROPAGANDA. To their credit, the Chinese recognize that more money alone won't put the country in the major leagues. So the government is also talking about the need to reform the financial and tax systems in order to promote the growth of cutting-edge industries. The regime is even planning to launch propaganda campaigns to educate the Chinese masses. The Party propaganda department has organized online discussions on the topic, and has put together an "innovation demonstration team" to tour the country promoting the idea. In March, the State Council, China's cabinet, said that improving "people's scientific knowledge is a basic social project in building an innovation-oriented country." Of course, China faces plenty of obstacles. For instance, the government is throwing money at Chinese-born academics from the U.S., luring them back to China to help boost the country's R&D base. But some are skeptical of the effort. One academic last year published an article in a Beijing newspaper complaining about "irresponsible" foreigners wasting China's money. MONOPOLY MONEY? China has been suffering through several academic scandals involving homegrown talent, with local professors accused of faking their achievements. One case in the news now involves Chen Jin, a high-flying professor at Jiaotong University in Shanghai who in 2003 led the team that developed China's first locally made digital signal processor. The government is now investigating charges that Chen stole his DSP design from Motorola. Other stumbling blocks include China's notoriously lax attitude toward counterfeiting. At a meeting in Beijing this week with U.S. Commerce Secretary Carlos M. Gutierrez, Vice-Premier Wu Yi said China's innovation economy ambitions require the country to do more to safeguard intellectual property. China may also have trouble staffing all the research labs and start-ups needed to create an innovation economy. For example, despite having about 1.6 million engineers, only 160,000 of those have the skills required by multinationals, estimates McKinsey & Co. "China has zillions of talented people," says McKinsey's Zhang. "But people with English, who are capable of operating in a global environment, and who have strong technological [skills] are still very limited." CORPORATE ROLE. One key to the push will be China's state-controlled research labs. Among them is the China Academy of Sciences, a massive collection of research institutes that is the midst of a major expansion and reorganization. By the end of the decade, the government hopes the Academy will be a major incubator for high-tech, and its labs are already at the forefront of Chinese efforts to build the country's biotech and nanotech industries. The Academy's labs are also working to find ways to modernize and commercialize traditional Chinese medicine. China's corporate sector will play a role as well. Computer maker Lenovo, for instance, last year bought IBM's PC division and last month launched a new line of desktop and notebook PCs in the U.S. with the Lenovo brand name. Telecom gearmaker Huawei has boosted its research spending, and a big R&D center inhabits one of the signature buildings on the company's sprawling campus on the outskirts of Shenzhen. Huawei's biggest rival, Shenzhen-based ZTE, also recently completed a new R&D complex. Both companies are trying to become leaders in next-generation networks and other advanced telecom equipment. And appliance maker Haier has come up with a washing machine that requires no detergent. GOOD LOOKS. Plenty of foreign companies will contribute, too. Barely a week goes by without a multinational unveiling ambitious plans to expand its R&D presence in China. On Mar. 24, for instance, German software giant SAP announced its intention to build a Chinese R&D operation. The day before, Motorola, which already has 16 centers in China, announced it was opening yet another, this one focused on wireless technology, in the eastern city of Hangzhou. And Intel recently opened a new R&D center in Shanghai, adding to the 80 researchers it has in Beijing. These R&D centers are coming out with products that help their parent companies compete globally -- and also help them meet the needs of China's demanding consumers. China may be an emerging market, but its citizens want the latest innovations, says Colin Giles, senior vice-president and manager of China handset business for Nokia. "Chinese consumers pay a lot more attention to the design of products than consumers in other markets," he says. "This is one distinction that we see from the studies in China. Design plays a much greater role in purchase behavior." .
While we're all worrying about China's rise, it might do to have some perspective that US is still one of the most competitive economies around... http://www.futuresasia.com/html/modules.php?op=modload&name=News&file=article&sid=855
China is building more Volkswagons than Germany. The Shanghai Buick is building better quality Buicks than the Detroit counterpart. Very soon the Americans will be driving Chinese made cars instead of Japanese ones. but the Chinese are still flying in American made Boeings.