PRC Economy - New Reflections : Dec 15 2011

[Christopher Sidor]

^^^^^
What you are saying is that India has not experienced land grabbing on a national scale where a party assigns itself the privilege to own land without paying any compensation to the original owners. We do not want such types of reforms. The correct term for such a process is called stealing.

the redistribution of land ownership, whatever you call it( land reform, revolution , Enclosure movement or others) is one of most precondition for industrilazition and modernizaiton.

1. it ( by depriving with force or by buying with money) make land lords class hand out their land and industry enterprise can acquire necessory land for plants and the government can acquire enough land for infrastructure upgrade.

Great Britain finished it by "Enclosure Movement" , Japan, S.korea and Taiwan finished it by semi-forcefully "land_buying by Government. PRC and other Soviet did it by "land reform. those are all one of ways to "the redistribution of land ownership"


2.it turns millions of peasants into industry workers and provide enough cheap labour for industriazlition...
since peasants lose land, they have to enter into urban area and work as industry workers..

3. it turns some of "land lord" callss into industry entrepreneurs....
after selling their land to the government (in Japan, Taiwan and S.korea), those former "land lord" have to invest on industry and it provided the initial fund for industrialzaiton.

As a whole,"land reform" might be miserable to some people, some familty or even some class,bu it indeed benefit the whole country in a long run.
the industriazlation of UK,France,USSR,CHina,Japan,Korea and Taiwan all prove it.

The problem with force, anywhere applied, is that the people towards which force is applied are never willing partners. We in India have also stolen lands from our weakest sections, the tribals and scheduled tribes, so that a cabal of industries can prosper. That is why we are faced with the Naxal menace.

There is another way in which people willingly give up their land. Like they did in Sanand, in Gujarat for the Nano Factory. What happened in Singur, West Bengal when the state tried to force itself on people is there for everybody to see. The difference is that people in Sanad by far and large knew how to profit from giving up their lands. They knew that they could setup hotels, eateries and other ancillary businesses. What happened in WB is that the ruling government could not convince or did not make the case to its citizens properly. It did not make the people partner its plans.

A nation or the state is a collection of people and the land in which they reside. If a nation or state prospers but its citizens do not then that progress is wasted. Such a type of progress is useless. We in India want progress for our people. We want our people to prosper. And that prosperity has to reach every body especially those vulnerable. We do not want a case where India gets richer while Indians get poorer. Soviet collectivization in 1930s led to the worst famine in its history and second only to what PRC had to undergo when it was being ruled by Chairman Mao.

[Liu]

The problem with force, anywhere applied, is that the people towards which force is applied are never willing partners. We in India have also stolen lands from our weakest sections, the tribals and scheduled tribes, so that a cabal of industries can prosper. That is why we are faced with the Naxal menace.

There is another way in which people willingly give up their land. Like they did in Sanand, in Gujarat for the Nano Factory. What happened in Singur, West Bengal when the state tried to force itself on people is there for everybody to see. The difference is that people in Sanad by far and large knew how to profit from giving up their lands. They knew that they could setup hotels, eateries and other ancillary businesses. What happened in WB is that the ruling government could not convince or did not make the case to its citizens properly. It did not make the people partner its plans.

A nation or the state is a collection of people and the land in which they reside. If a nation or state prospers but its citizens do not then that progress is wasted. Such a type of progress is useless. We in India want progress for our people. We want our people to prosper. And that prosperity has to reach every body especially those vulnerable. We do not want a case where India gets richer while Indians get poorer. Soviet collectivization in 1930s led to the worst famine in its history and second only to what PRC had to undergo when it was being ruled by Chairman Mao.

to a country as large as china and india, there are only two ways : 1.sacrifice some classes for industrialization,that is chinese choice. 2.sacrifice industrializition for some classes,that is india's choice

[subhamoy.das]

When currency can be pegged, inflation can also be faked and pegged. China may be the world's number 2 manufacturer but their per capita manufaturing is way way low than than of US and other western countries which basically means that thay cannot manufacture their way out to 40k USD per capita income. Manufacturing in China is mostly contract manufacturing which means the high end of the chain - mean service portion which creates the jobs - lies outside of China. What China has done is something all east asian nations have done. China has one of the higest un-employment. Chinese grads have very little service jobs. There is no innovation in China and not a single brand in any sector - business or consumer. What China has done is build tons of plants to produce and ship to consumers outside the world. With consumers in world disappearing or trade barriers for such exports are being raised, China is now trying to divert the production of these plants to local market. But local market does not have the jobs to sustain these plants. So Chinse govt is subsidizing these plants with written off loans to the consumer which is increasing the bad debt ration of the banks to sky high .. and at some point this bad debth will have its effect !

[Liu]

When currency can be pegged, inflation can also be faked and pegged. China may be the world's number 2 manufacturer but their per capita manufaturing is way way low than than of US and other western countries which basically means that thay cannot manufacture their way out to 40k USD per capita income. Manufacturing in China is mostly contract manufacturing which means the high end of the chain - mean service portion which creates the jobs - lies outside of China. What China has done is something all east asian nations have done. China has one of the higest un-employment. Chinese grads have very little service jobs. There is no innovation in China and not a single brand in any sector - business or consumer. What China has done is build tons of plants to produce and ship to consumers outside the world. With consumers in world disappearing or trade barriers for such exports are being raised, China is now trying to divert the production of these plants to local market. But local market does not have the jobs to sustain these plants. So Chinse govt is subsidizing these plants with written off loans to the consumer which is increasing the bad debt ration of the banks to sky high .. and at some point this bad debth will have its effect !

few of your words are right.
1. Chinese RBM is not "pegged",but managed.....Since 2008,CHinese RMB has been appreciated 30% while Inida's Rupees has devalued 50%+.

2.CHina is not world NO.2 manufacturers,but NO.1 one by far ahead of USA. even measured by USD, CHinese manufacturing section is 126% of USA"s in 2012.but if measured by the output of real physical industry products, CHina's manufacturing might times more than USA's one.
in 2013, CHina's ahead is more obvious.

3. many of CHinese cities have reached 20-30K USD per capita income ,even measured with the current exchange.
their per capita income can easily catch up with that of USA and west Europe in 10 years.
In fact, due to the undervalue of RMB, the Chinese cities with 10K USD per capital Income has almost the life quality similar with Taiwan and S.korea,which have a 20-25K per capita income.
In fact, many mianland CHinese feel "cheated" by medias and after visiting Taiwan themselves and finding Taiwanese life quality is just so so.

4. Most of CHinese manufacturing products are not exported but sold to CHinese themselves.
for example, China produced 20M autos last years, and 90%+ of those 20M autos are sold to CHinese ,which is almost 10 times of India's and 2 times of USA's.
So are the other industry prouducts,such as steel, concrete,PC,food,ships,clothes,electricity..etc. CHinese consume those industry products than anyone else on the earth.

5. the same quality industry products( or even better industry prouducts) usually cost much less in CHina than in USA or India.
for example. CHinse highspeed railway might cost even less than traditional railway in USA.
the same quality houses cost much less than in India .

in a word the undervalue of RMB distorts the truth of CHinese economy quite much and makes people usually underesitmate CHinese economy.

[Suraj]

Moderation Note

Please stick to thread topic. Due to a long history of flamewars on the topic of differences between Indian and Chinese systems, we discourage it to maintain thread focus. Please stick only to the topic of China's economy.

[Suraj]

In fact, due to the undervalue of RMB, the Chinese cities with 10K USD per capital Income has almost the life quality similar with Taiwan and S.korea,which have a 20-25K per capita income.
In fact, many mianland CHinese feel "cheated" by medias and after visiting Taiwan themselves and finding Taiwanese life quality is just so so.

Standard of living involves a lot more than the quality of the physical infrastructure stock. Some parts of Taipei don't look any different from some parts of Bombay either (and I'm referring to generally decent areas, not too high or low end); I've been to both. High standard of living includes several things
- physical infrastructure stock
- organized transport
- well funded school and colleges of quality and quantity to absorb everyone coming through the system
- urban amenities - police, fire, hospitals, clinics, trash, utilities
- food safety standards, both for products and commercial eateries
- widespread effective healthcare and insurance cover
- a functional and funded pension system, which PRC is just starting to create,
- environment and sanitation - PRC ranks very poorly in air quality, among other factors
- and more

It isn't necessary to have absolutely cutting edge physical infrastructure - just a functional one. Fixed asset investment drives investment-led GDP growth (and the growth of the debt stock) and therefore per-capita GDP, but doesn't necessarily translate accurately in terms of quality of life. Countries with far less advanced physical infrastructure can and do have much greater quality of life due to much more mature or advanced capabilities in other aspects.

It's a very good point that PRC inflation is controlled by actually producing things of value in large quantities. However the undervaluation of the RMB remains a critical part of PRC's economic approach, so it is not 'artificial' - it's the true value needed to support the current standard of economic output by PRC.

[Liu]

Standard of living involves a lot more than the quality of the physical infrastructure stock. Some parts of Taipei don't look any different from some parts of Bombay either (and I'm referring to generally decent areas, not too high or low end); I've been to both. High standard of living includes several things
- physical infrastructure stock
- organized transport
- well funded school and colleges of quality and quantity to absorb everyone coming through the system
- urban amenities - police, fire, hospitals, clinics, trash, utilities
- food safety standards, both for products and commercial eateries
- widespread effective healthcare and insurance cover
- a functional and funded pension system, which PRC is just starting to create,
- environment and sanitation - PRC ranks very poorly in air quality, among other factors
- and more

It isn't necessary to have absolutely cutting edge physical infrastructure - just a functional one. Fixed asset investment drives investment-led GDP growth (and the growth of the debt stock) and therefore per-capita GDP, but doesn't necessarily translate accurately in terms of quality of life. Countries with far less advanced physical infrastructure can and do have much greater quality of life due to much more mature or advanced capabilities in other aspects.

It's a very good point that PRC inflation is controlled by actually producing things of value in large quantities. However the undervaluation of the RMB remains a critical part of PRC's economic approach, so it is not 'artificial' - it's the true value needed to support the current standard of economic output by PRC.

well, agree with some of your viewpoints.
life quality includes two parts:

one is hardware: good public infrastructures (roads,railways,public transport,subways,seaports,airports..etc),food,clothes,houses,household appliances,famiy autos,affordable vacation.

the other is software: decent and affordable medical care,education.awareness of civility and law-abiding.

as for hardware("food,clothes,houses,household appliance,auto and public infrastructure), Taiwan has not any edge on many areas of PRC.

Instead, after visiting Taiwan themselves,many mainland CHinese just feel that Taipei is "as undeveloped and $hitty as a tier 4 countytown in mainland China" and feel fooled by media's reports on taiwan's "high life quality".

but most of them still acknowlege that Taiwanese "sofeware"( mainly air quality and awareness of civility) is still ahead of mainland CHina.


but software is always set up after hardware is set up,because new-rich can not become gentlemen overnight.
however, after one become new-rich, it is always just a matter of time for them or their kids to upgrade to "gentlemen".

Mainland Chinese are just "new-rich",but give them some more time..they will upgrade to "gentlmen" ,following the other former "new-rich" such as Japanese and Taiwanese.

[Anand K]

May I suggest this book (Currency Wars) and works of this man (Barry Eichengreen) for a good view on what the Chinese are doing with the RMB and the future of Dollar/Euro?

Wish they said how the currencies and economies of Mexico, Brazil, India and Russia will fare in a strong (and possibly gold backed ) RMB and weakened Dollar/Euro world.

PS: Normally I am not a hardcore "Gold Bug", like some of us here in BRF , but when the storm's rising and tremors spill your morning cutting-chai what do you do?

[chola]

We boor brown Indians may not have seen Pudongs rise out of thin air overnight or other grand architectural statements; it's because our model is different. Like, we ain't led by genocidal despots for one. Corrupt/lethargic/careless maybe.... but surely not intentionally genocidal or cynical with a huge "face" problem. Unlike China does/did we cannot force directly or indirectly huge populations (wide demographic variations and too many interest groups too) to relocate, adopt certain lifestyles, discard tradition overnight and take up new jobs. That is, in effect artificially compressing the normal timeline. For the better of for the worse, we as a people are also in "Chalta Hai, Boss!" gear.
Let's see.....

Beyond us having different systems, this whole land reform being a pre-requisite for growth is bull manure concocted by the left. If confiscating land could create wealth then North Korea would be a wealthy state and so will Zimbabwe.

It would mean the USSR and the Communist bloc would be today's economic superpowers instead of being collapsed sh1tholes in the dustbin of history.

Land reform is a complete red herring to this debate. Think carefully about it. How can simply grabbing land create wealth? You can use it to grow food but people you grab that land from was already growing food.

You can take land but you still need capital to build on it. The PRC under Mao control all land and it was as poor as North Korea and it was mostly rural because land was good for growing crops. It couldn't have urbanized then if it wanted, it didn't have any capital back then. Urbanization in China pretty much happened after the global supply chain was set up.

[chola]

When currency can be pegged, inflation can also be faked and pegged.

This is even more stupid than Liu's land reform argument. Inflation can't be faked. If it could then every historical government from Weimar Germany to Argentina to India today should be obligated to "fake" it and save their national currencies from depreciating to nothing.

What's more, currency pegging either depletes your forex reserves if your currency is weaker than your peg (usually to the US dollar) or it creates inflation when your own currency is stronger than the pegged currency.

In the case of the PRC, their peg actually creates inflation because they use it to undervalue the Yuan and cheat on exports. They need to print more and more Yuans to keep the peg. Without the peg, the Yuan would be worth far more and everything they import would be cheaper therefore lowering inflation.

[chola]

May I suggest this book (Currency Wars) and works of this man (Barry Eichengreen) for a good view on what the Chinese are doing with the RMB and the future of Dollar/Euro?

Wish they said how the currencies and economies of Mexico, Brazil, India and Russia will fare in a strong (and possibly gold backed ) RMB and weakened Dollar/Euro world.

PS: Normally I am not a hardcore "Gold Bug", like some of us here in BRF , but when the storm's rising and tremors spill your morning cutting-chai what do you do?

Do you know why Nixon gave up the gold standard? Because US wealth was worth many times over whatever gold there was in the world at the time. The US was not going to be constrained by some soft metal dug out of the ground -- not when the dollar could be backed up by stuff that US owns like its gross national product.

I only hope the chinis are going to a gold-backed standard, it would stunt the growth of their currency. Unfortunately, this doesn't seem to be the case as they are printing the RMB like mad with less annual gold purchases than India and the Yuan still appreciates against the US dollar.

No great power would ever go back to the gold standard, Anand. Even entertaining the idea hints of a nation that cannot maintain its currency with its national product and needs gold as a backstop.

[Anand K]

eyond us having different systems, this whole land reform being a pre-requisite for growth is bull manure concocted by the left. ......

IMHO more than land reform or land grab (even resource rich) per see, it's about social capital - i.e. freeing people (sometimes against their wishes) from age old caste/class/bondage shackles (which was coupled to land issues) and using them elsewhere. This is done by crushing the structures that were invested in this system - like the Warlords/Manchus of China and the Zamindars/Entrenched Caste System of India - who resisted such changes. Of course the first generation is usually fu(ked but if the Big Brother is strong and determined enough the ensuing generations could adapt. Many feudal/semi-feudal and bondage institutions were forcibly broken up and people "shepherded" to other sectors in Mexico, the German Unification, Tokugawa Japan etc also.

Then again, as you said, there's the seed capital issue and the social-system shocks to take care of.

[Anand K]

Do you know why Nixon gave up the gold standard? Because US wealth was worth many times over whatever gold there was in the world at the time. The US was not going to be constrained by some soft metal dug out of the ground -- not when the dollar could be backed up by stuff that US owns like its gross national product.

I only hope the chinis are going to a gold-backed standard, it would stunt the growth of their currency. Unfortunately, this doesn't seem to be the case as they are printing the RMB like mad with less annual gold purchases than India and the Yuan still appreciates against the US dollar.

No great power would ever go back to the gold standard, Anand. Even entertaining the idea hints of a nation that cannot maintain its currency with its national product and needs gold as a backstop.

The change could be more on political maneuvering (or plain old spite) as against sound economic principles. I understand Gold makes things more difficult in a Globalized world sporting Tiger-by-the-Tail Official Ponzi schemes but if and when the music stops, ideas of "fundamental underwritings" could change, no?

[Liu]

Beyond us having different systems, this whole land reform being a pre-requisite for growth is bull manure concocted by the left. If confiscating land could create wealth then North Korea would be a wealthy state and so will Zimbabwe.

It would mean the USSR and the Communist bloc would be today's economic superpowers instead of being collapsed sh1tholes in the dustbin of history.

Land reform is a complete red herring to this debate. Think carefully about it. How can simply grabbing land create wealth? You can use it to grow food but people you grab that land from was already growing food.

You can take land but you still need capital to build on it. The PRC under Mao control all land and it was as poor as North Korea and it was mostly rural because land was good for growing crops. It couldn't have urbanized then if it wanted, it didn't have any capital back then. Urbanization in China pretty much happened after the global supply chain was set up.

redistrubition of land ,such as land reform is "pre requisite",but not the guarantee for industrialization,just as if indian citizenship usually is "pre requisite" to run for the president of India,but it can not guarantee you can be the president of India.

IMO,since WWII, no country can rise to be developed country without land reform,except those oil-based countries.

even Before WWII, UK and France also started their industrialization after enclosure movenent and French revolution redistributed land.

[DavidD]

CHina is particular because CHina is the sole combination of the following factors on the earth
1.cheap land-acquiring cost. Chinese social/political system is particular that Chinese government can provide large cheap land radiply for industry development and infrastructure upgrade. India and most capitalsim can not.

2.cheap labour cost. CHinese labour cost now is almost 3-4 times more than Indian's ,but it is still by far lower than developed economies such USA and West Europe.

3.enough well-educated and desciplined workers. CHinese workers are famous for hard-working and desciplined,while they are almost literated. India illterat rate is much higher ,and frankly speaking, most non-Chinese workers are not as desciplined and punctual as CHinese.

4.complete and full industry chains. it means that CHinese enterprises can gets their components,material ready at cheaper freight and stock cost. On the contary, India and other developing country have to import many components from other countries,which raises product cost greatly

5.decent infrastructures. Chinese infrastrcutre can shaddow USA,let alone developing countries. good infrastructure(road,seaports,airports,railways, HSR..etc) means fluent transport and less freight. For example,due to good infrastructure, the freight of one container from Beijing to Shanghai is surely less than that from New Delhi to Bombay,although it is much longer from Beijing to Shanghai.

6. reliable access to oversea resources...CHina has set up a reliable access to oversea resources such as ores ,oil..etc....
India can hardly acqure oversea resouces as many as CHines does now,because the resource on the earth is so limited and india has no enough hard cash to compete CHina.

1 and 2 can be replicated by nearly every despotic sh1thole in the world from North Korea to Zimbabwe. A nice pat and ultimately meaningless answer.

4, 5 and 6 come AFTER you gain the seed capital to actually to create those things. They arrive only because of Western money (including the FDI of Japan, Taiwan, HK and the Far East which ultimately comes from the Western market they all serve.)

3? Possibly created after the commie revolution but even here you can argue that education in the PRC was backwards until FDI. I can't see how the "Little Red Book" and the sh1tty thoughts of Uncle Mao did anything for a viable workforce.

Again pat and meaningless answers.

You can't see how being able to read, write, and do math does anything for a viable workforce?

[DavidD]

Quality is pretty good. Till now (not even a month). But the stuff ordered are generally respected companies with mfg in China. We don't foresee any QC issues cropping up.

You should never see the success of manufacturing in China as "Chinese." This is the result of global manufacturing from the MNCs. The standards are set by the western marketplace. Everything that the PRC exports to the West is done according to those standards which is why no one can name a Chinese brand in spite of the fact that China makes everything under the sun. The successful part of the Chinese economy is nothing more than the extension of the Western global supply chain.

China would have collapsed under its own weight like the USSR if it were not for this. It is a lifeline to capital, jobs and modern practices. It was what transformed Japan and the Asian tigers.

The game isn't designed by China, but it was up to the Chinese to play the game.

[Sri]

Why don't we Indians understand that CCP put growth at the centre of National agenda. From Beijing to local municipalities the whole system was geared towards growth and development. The current Chinese economy is product of single minded focus on economic growth at a national level.

[DavidD]

eyond us having different systems, this whole land reform being a pre-requisite for growth is bull manure concocted by the left. ......

IMHO more than land reform or land grab (even resource rich) per see, it's about social capital - i.e. freeing people (sometimes against their wishes) from age old caste/class/bondage shackles (which was coupled to land issues) and using them elsewhere. This is done by crushing the structures that were invested in this system - like the Warlords/Manchus of China and the Zamindars/Entrenched Caste System of India - who resisted such changes. Of course the first generation is usually fu(ked but if the Big Brother is strong and determined enough the ensuing generations could adapt. Many feudal/semi-feudal and bondage institutions were forcibly broken up and people "shepherded" to other sectors in Mexico, the German Unification, Tokugawa Japan etc also.

Then again, as you said, there's the seed capital issue and the social-system shocks to take care of.

I'm sure you didn't mean this, but this is actually one of the arguments for the Cultural Revolution. Yes, the bad still outweighs the good, but the Cultural Revolution completely crushed the "old culture" of China and broke down the class system in China. These days, China is much more class-mobile, at least economically.

[Suraj]

Do connections, i.e. guanxi, still play the dominant role when it comes to doing business in China ? Does someone who has a good proposal but doesn't have any worthwhile connections, have the ability to get off the ground and make money, compared to someone with a similar or worse idea who happens to be well connected ? If not, who are the connections that matter at the city and prefectural levels ?

[member_20292]

International companies are moving out of China due to heavy competition:

From here:

Some companies are leaving. Revlon said in December that it was pulling out altogether. L’Oréal, the world’s largest cosmetics firm, said soon afterwards that it would stop selling one of its main brands, Garnier. Best Buy, an American electronics retailer, and Media Markt, a German rival, have already left, as has Yahoo, an internet giant. Tesco, a British food retailer, last year gave up trying to go it alone, and entered a joint venture with a state-owned firm.

And these facts are AMAZING, for the worlds second largest consumer market, that some of the largest international brands could not find traction there enough.

When (and not if) India gets traction in manufacturing, I will hope that Indian products get built to higher standards than the CHinese ones; since the CPC will stilt the market towards state owned firms so much, and never be truly open and flat to international competition.

Ref:

http://www.economist.com/news/leaders/2 ... c30b6f1709

[Anand K]

AFAIK Guanxi EXPLODED after the Cultural Revolution! It is no more the old Biradari like network of pre-Mao and Mao era, even though back then it served like a second economy or a second currency (gifts/affection/IOU one) - AFAIK it is a whole new beast now. I posted some time about the Rolling of Loans in China; that's mainly through the Guanxi. It's not bribery per se nor does it have strong negative connotations..... anyone can bribe anyone, but Guanxi needs real connection. A lot flows through Guanxi even now. And when China opened up, Guanxi helped greatly in "distributing risk".

PS: Another important term is Tongxue - i.e. classmate networks. And then there's Xinyung - which means credit ties which is sometimes seen as opposite to Guanxi. The nuances you pick up working with real Chinese!

[Christopher Sidor]

The problem with force, anywhere applied, is that the people towards which force is applied are never willing partners. We in India have also stolen lands from our weakest sections, the tribals and scheduled tribes, so that a cabal of industries can prosper. That is why we are faced with the Naxal menace.

There is another way in which people willingly give up their land. Like they did in Sanand, in Gujarat for the Nano Factory. What happened in Singur, West Bengal when the state tried to force itself on people is there for everybody to see. The difference is that people in Sanad by far and large knew how to profit from giving up their lands. They knew that they could setup hotels, eateries and other ancillary businesses. What happened in WB is that the ruling government could not convince or did not make the case to its citizens properly. It did not make the people partner its plans.

A nation or the state is a collection of people and the land in which they reside. If a nation or state prospers but its citizens do not then that progress is wasted. Such a type of progress is useless. We in India want progress for our people. We want our people to prosper. And that prosperity has to reach every body especially those vulnerable. We do not want a case where India gets richer while Indians get poorer. Soviet collectivization in 1930s led to the worst famine in its history and second only to what PRC had to undergo when it was being ruled by Chairman Mao.

to a country as large as china and india, there are only two ways : 1.sacrifice some classes for industrialization,that is chinese choice. 2.sacrifice industrializition for some classes,that is india's choice

That is a very good way to put it. I wonder what choice would China have undertaken if there had not been PRC or CPC. Or rather would Chinese in PRC have willingly done what CPC is forcing them to do? After all there is RoC/Taiwan across the straits. Try to do what CPC does in PRC inside RoC and see the response. Inspite of this RoC/Taiwan has a high standard of living. Its GDP might not be as huge as PRC, but its per-capita income is definitely enviable.

The question one has to ask if RoC can go down the path which it did, in economics, why cant PRC go down the same path?

[Theo_Fidel]

Don’t forget a democratic system. Almost all people give political freedom top billing in standard of living. No Indian I know wishes to migrate to china. Other than a scant few who go for mercantilist reasons.

In fact even in places like AP & Himachal, there maybe a little impatience with the slower infrastructure upgrade on the Indian side but there is zero appetite to join the Han mothership.
--------------------------------------------------

WRT the inflation conundrum, here is what Michael Pettis had to say recently.
It is a long article but an absolute must read for anyone interested in the china economy.
He thinks the end game is some form of deflation and production destruction.

http://blog.mpettis.com/2013/12/monetar ... epression/

This is what it means to say that financial repression creates a bifurcation of monetary growth. For households, and net depositors more generally, real monetary expansion is in effect much lower than nominal monetary expansion because of the implicit financial repression “tax”, and so consumption growth and consumer-price inflation will seem abnormally low. For manufacturers, real estate developers, infrastructure investors and other net borrowers, real monetary expansion is in effect much greater than nominal monetary expansion because of an implicit financial repression “subsidy”, and so asset inflation and capacity growth seem abnormally high.

Perhaps one way of thinking about it is to consider how to make a comparable impact in a market system. Imagine if somehow the US were to enact a law whose result was that every time the Fed expanded the money supply, a one-off tax was imposed on households, the proceeds of which were transferred to corporate borrowers. In that case monetary expansion would be much less likely to cause an increase in demand for consumer products, and so would create much less consumer price inflation, and much more likely to cause a surge in production.

[member_20292]

but lots of people want to move to Singapore which also does not have a true democracy. ^^^ theo--

[Rishirishi]

Producing stuff in India is not any problem. India has more efficient manufacturers,as compared the Chinese state monopolies. The Balance of payment issue is mainly due to gold and oil imports. If GOI started 100 billion worth of projects, they could choose to limit imported contents and just demanded local input. Still India would get Inflation. Because the companies producing the "brick and mortar" would eventually make payments.

The Chinese economy is dominated by state run companies and banks. There has been a lending spree like never seen before. Even the regional economies are spending on welfare etc. I just do not buy your simplistic logic (no offence). There has to be some other explanation.

you are misled by west medias and accept their loose idea how unefficent CHinese enterprises are...

west medias loose idea is based on RMB exchange rate while RMB is obviulsy undervalued and it distort the truth.

if you really want to learn about the efficency of one enterprise or one country,you should learn about unit output of every worker or every KW electricity.

For example. if Plant A can produce 1000 auto with 1000KW electricity , and Plant B can produce only 500 auto with 1000 KW electricity, then Plant A plant is obviously more efficient than Plant B.

fact is that when China cunsumed only a bit more electricity than USA last year, CHina produced much more pysical industry products than USA,from food,steel,concrete,houses,house-hold appliances,ships ,roads,HRS,to clothes or other items you can imagine.
So, CHina industry activity is obviously more efficent than USA,that is why USA's industry is being asskicked by Chinese one.

Well look at it like this. A single BMW takes more energy, cost etc then say a QQ. Actually you can probably produce 5 QQ's for the price of a BMW. Same goes for most value added products. The swiss make only 1% of the watches in the world, but still make most money on them. You can purchase a container full of watches for the price of a dozen Rolexes.

Worlds most efficient steel manufacturar is TISCO (Indian) http://www.icmrindia.org/free%20resourc ... teel-2.htm

Worlds most efficient and largest oil refining complex is said to be Reliance Jamnagar refineries. http://petroleuminsights.blogspot.no/20 ... ul9Tvl5N8E

Indias Mobile phone industry is far more competative and the tariffs are much lower then China.

Worlds cheapest car remans the TATA NANO. It flopped, but still it is a car for less then 15000 RMB. You can actually get a Suzuki Alto for arround 25000 RMB. That is lower then China.

I have been to china at least 7-8 times during the last 14 years. I have found very cheap Chinease products. But it is usually because of low quality.

[Liu]

Do connections, i.e. guanxi, still play the dominant role when it comes to doing business in China ? Does someone who has a good proposal but doesn't have any worthwhile connections, have the ability to get off the ground and make money, compared to someone with a similar or worse idea who happens to be well connected ? If not, who are the connections that matter at the city and prefectural levels ?

"guanxi" is important not only in China,but also in USA and the other counties.

For example,
Gorge.W Bush(younger Bush) would have not been president of USA,had his father older Bush not been USA president ,either.

in USA, lots of John or Mary have no chance at all to get a decent job,just because their fathers are not someone important like older Bush

[Suraj]

Liu: I'm not making a judgement about it. I'm asking specifically about its role in China today.

[Liu]

to a country as large as china and india, there are only two ways : 1.sacrifice some classes for industrialization,that is chinese choice. 2.sacrifice industrializition for some classes,that is india's choice

That is a very good way to put it. I wonder what choice would China have undertaken if there had not been PRC or CPC. Or rather would Chinese in PRC have willingly done what CPC is forcing them to do? After all there is RoC/Taiwan across the straits. Try to do what CPC does in PRC inside RoC and see the response. Inspite of this RoC/Taiwan has a high standard of living. Its GDP might not be as huge as PRC, but its per-capita income is definitely enviable.

The question one has to ask if RoC can go down the path which it did, in economics, why cant PRC go down the same path?

well, it is acceptale economically in small areas like Taiwan,S.Korea or Japan to finish land reform by "buying land from landlords class in peacefully way".

But it is not acceptable economically at all to do so in large areas like mainland China,Russia and India,because their governments could never gather enough fund .

CPC's force-based land reform is the only economically acceptable way to acqure enough low-cost land and employees for industrialization in large areas like CHina and India.

that is one of reasons why industrialization is much more rapid in CHIna than in India.

[Liu]

you are misled by west medias and accept their loose idea how unefficent CHinese enterprises are...

west medias loose idea is based on RMB exchange rate while RMB is obviulsy undervalued and it distort the truth.

if you really want to learn about the efficency of one enterprise or one country,you should learn about unit output of every worker or every KW electricity.

For example. if Plant A can produce 1000 auto with 1000KW electricity , and Plant B can produce only 500 auto with 1000 KW electricity, then Plant A plant is obviously more efficient than Plant B.

fact is that when China cunsumed only a bit more electricity than USA last year, CHina produced much more pysical industry products than USA,from food,steel,concrete,houses,house-hold appliances,ships ,roads,HRS,to clothes or other items you can imagine.
So, CHina industry activity is obviously more efficent than USA,that is why USA's industry is being asskicked by Chinese one.

Well look at it like this. A single BMW takes more energy, cost etc then say a QQ. Actually you can probably produce 5 QQ's for the price of a BMW. Same goes for most value added products. The swiss make only 1% of the watches in the world, but still make most money on them. You can purchase a container full of watches for the price of a dozen Rolexes.

Worlds most efficient steel manufacturar is TISCO (Indian) http://www.icmrindia.org/free%20resourc ... teel-2.htm

Worlds most efficient and largest oil refining complex is said to be Reliance Jamnagar refineries. http://petroleuminsights.blogspot.no/20 ... ul9Tvl5N8E

Indias Mobile phone industry is far more competative and the tariffs are much lower then China.

Worlds cheapest car remans the TATA NANO. It flopped, but still it is a car for less then 15000 RMB. You can actually get a Suzuki Alto for arround 25000 RMB. That is lower then China.

I have been to china at least 7-8 times during the last 14 years. I have found very cheap Chinease products. But it is usually because of low quality.

Neither QQ nore BMW is not mainstream of auto sale in CHina.

Most popular autos in CHina is those 100-200K RMB(18-25K USD) family cars,such as Cruze .which occupy maybe 80% of 20M auto sale in CHina.

It is never wise to pay much attention to paticular cases

BTW, another case to compare the effiency between China and USA.

GM ,the largest auto company of USA,has 212K employees all over the world and produced about 9.7 million autos last year .
http://www.gm.com/company/aboutGM/our_company.html

FAW,the 3rd largest auto company of PRC(measured by sale), has 120K employees and produced 2.6 million autos in 2011( 2.9 m in 2013).

now you can easily compare the two auto giants' unit output of one employee
http://www.faw.com/aboutFaw/aboutFaw.js ... ut=Profile

[Christopher Sidor]

What is the average CTC for employees of FAW? Now compare that with GM. Further what is the margin that FAW is getting per car and per employee? Now compare that with GM. Then only we can say whether FAW is more efficient as far as "labour" is concerned.

Labour is one of the inputs to any industry, auto car included. There are other inputs like raw materials, like electricity/energy, like cost of land, cost of machinery. Then there is the quality and durability of the final product too be considered.

One cannot just take one factor of the equation, divide it by the output and claim that one is more efficient.

[Anand K]

^^
Then there is the huge R&D differential, the imported content, the JV structure in Chinese auto industries, the PRC Govt largesse and sops, the import duties.......

[Liu]

happy chinese new year! now it is a greeting from Ganzhou,CHina.

[Anand K]

Gong Xi Fa Cai!

PS: Best thing about Chinese New year for me, the wimmin all dress in Chinese gowns, then there's a holiday tomorrow, then there's the month long availability of Prosperity Beef Burger from MacDonald.... and of course, the oranges and festive dishes they bring to office.

[Christopher Sidor]

Happy new chinese year to all of our Chinese friends. By the way what Chinese year is it? Is it horse or dragon or something else?

[Rishirishi]

Happy New year to all Chinease frinds here

[DavidD]

to a country as large as china and india, there are only two ways : 1.sacrifice some classes for industrialization,that is chinese choice. 2.sacrifice industrializition for some classes,that is india's choice

That is a very good way to put it. I wonder what choice would China have undertaken if there had not been PRC or CPC. Or rather would Chinese in PRC have willingly done what CPC is forcing them to do? After all there is RoC/Taiwan across the straits. Try to do what CPC does in PRC inside RoC and see the response. Inspite of this RoC/Taiwan has a high standard of living. Its GDP might not be as huge as PRC, but its per-capita income is definitely enviable.

The question one has to ask if RoC can go down the path which it did, in economics, why cant PRC go down the same path?

The KMT did in Taiwan pretty much the same thing the CPC did on the mainland. Chiang Kai-shek learned from his mistakes and failures on the mainland and enacted some draconian land reforms in Taiwan as the KMT ruled Taiwan with an iron fist until they became rich. RoC/Taiwan has a high standard of living BECAUSE of this, not despite of this.

In fact, it wasn't just Taiwan, but South Korea, Japan, and really all the Asian Tigers who did this. The land reforms were not as forceful as those enacted by the CPC, but they were hardly "fair-and-square" either. The only major Asian nation within the American sphere of influence who did not do this was the Phillipines, as they went with the liberal democratic and laissez-faire capitalism from the get-go. I think the results are obvious.

[DavidD]

AFAIK Guanxi EXPLODED after the Cultural Revolution! It is no more the old Biradari like network of pre-Mao and Mao era, even though back then it served like a second economy or a second currency (gifts/affection/IOU one) - AFAIK it is a whole new beast now. I posted some time about the Rolling of Loans in China; that's mainly through the Guanxi. It's not bribery per se nor does it have strong negative connotations..... anyone can bribe anyone, but Guanxi needs real connection. A lot flows through Guanxi even now. And when China opened up, Guanxi helped greatly in "distributing risk".

PS: Another important term is Tongxue - i.e. classmate networks. And then there's Xinyung - which means credit ties which is sometimes seen as opposite to Guanxi. The nuances you pick up working with real Chinese!

No, guanxi exploded like 2000+ years ago. While corruption exploded after Deng Xiaoping's economic reforms, guanxi has always been big in China.

[heech]

After having done business both in China and overseas, I have a better appreciation now of "why" and "how" guanxi is critically important.

There are three primary contributing factors:

- the first is the dominance of rule of man over the rule of law. The bureaucratic system in China is substantial, and unfortunately there is a huge number of licenses or government approvals needed in any number of activities. I don't think corruption is quite as common as you'd think, but certainly having the right friends in the right departments will assure that your project proceeds smoothly.

- the second is the dominance of unprofessional state enterprises - a relic of the planned economy age. Many such enterprises are not strictly motivated by profit, and their employees reflect that fact. Knowing the right person in the right department will get your proposal seen by the right people.

- finally, the broader problem is the lack of common trust for anyone you don't have a social relationship with. Many social norms broke down over the past 4 decades, and frauds are common in every form at every level. The guanxi you have are an extension of how far / much you can trust. This applies to everything from hiring to finding vendors to selling product.

To answer the practical question of how important guanxi is.... it's clearly a very valuable lubricant. Knowing the right people gets your project in gear more quickly, gets your product in the right channels more quickly, and also increases the credibility of your marketing message. Two identical offerings from two different businesses, the one with better guanxi will come out ahead.

That said, lacking guanxi is NOT any kind of a death sentence.... far from it. The vast majority of Chinese are motivated by the same economic motives as anyone else on this planet. At worst, you'll lose the advantage of guanxi as a lubricant... But that doesn't mean people will actively work against you. If you have a compelling product and a good team, you can still execute and win fairly.

[Suraj]

Thank you, heech. That's an excellent post! I'm curious about the topic of the breakdown in social norms over the past four decades in the mainland. Would that imply that you might more implicitly trust a Taiwanese businessman than you would a Chinese one from the mainland, because the former didn't undergo the kind of upheaval the mainland did ?

[Rishirishi]

The concept of Guanxi is very much present in India as well. you need "source", "know someone" "have a ristedar" "be from the same community". Only certain community can do diamond trading because no one will deal with people outside their community or trusted people.