PRC Economy - New Reflections : Dec 15 2011

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 06 Jan 2014 22:32

chola you have yourself said that chin has followed e asia and used the manufacturing route. where is the mystery? hard reforms have been undertaken by them. not some kejriwal style socialism.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby nachiket » 06 Jan 2014 23:49

mahadevbhu wrote:chola you have yourself said that chin has followed e asia and used the manufacturing route.

Going the "manufacturing route" is easier said than done. Those manufacturers would have never set up shop there if the basic infra of 24X7 power, water, road connectivity and adequate port capacity weren't guaranteed by the PRC govt, basically all that is lacking in India. Developing all this takes a lot of money which they had to come up with before all the large units were built and began generating revenue.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 07 Jan 2014 00:40

Again just building it is not what the Chinese did. They did it cheap. Their power plants lack pollution control and efficiency standards and hence you end up with the smog of epic proportions. When was the last time you heard of power plant smog in India, though we have a bit less than 1/3rd the power capacity of china. Never right. This cheap build allows china to sell power cheap, very cheap. 7 cents a kwh or less. In India it is 15 cents a kwh for industry.

BTW many of the larger states like TN, GJ, MH, HY, etc fully guarantee power, water, land (within reason), docile labor, tax benefits, quite good roads, etc. Ports could be a negative but, now private ports are competing in performance out there. What they cannot do is China cheap cheep cheep cheep......

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby nachiket » 07 Jan 2014 02:08

Theo_Fidel wrote:Again just building it is not what the Chinese did. They did it cheap. Their power plants lack pollution control and efficiency standards and hence you end up with the smog of epic proportions. When was the last time you heard of power plant smog in India, though we have a bit less than 1/3rd the power capacity of china. Never right. This cheap build allows china to sell power cheap, very cheap. 7 cents a kwh or less. In India it is 15 cents a kwh for industry.

Accepting your argument about power plants, the question then arises about all the other infrastructural projects. The roads they have built (both in and out of the cities) are world's apart from ours. Their ports are gigantic. The airports are world class. How did they do all this "cheap"? So "cheap" is a relative term here. It may have been much cheaper than the first world nations, but compared to what we spend, it must have been huge.

BTW many of the larger states like TN, GJ, MH, HY, etc fully guarantee power, water, land (within reason), docile labor, tax benefits, quite good roads, etc. Ports could be a negative but, now private ports are competing in performance out there. What they cannot do is China cheap cheep cheep cheep......

Won't comment about the other states, since I have no first hand info, but what you say is certainly not true for MH, apparently the most industrialized state in India. The power situation in MH has been dire for the last 10-15 years with a shortfall of a few thousand MW. Even many parts of the eastern suburbs of Mumbai and the outskirts like Bhandup, Thane, etc. suffer from load-shedding. Conditions in the rural areas are orders of magnitude worse. This was a result of the govt. not acting on a report made by a power committee in the 90's, back when the state had a power surplus to build more plants because we would need them in the future. As usual they waited till they were dying of thirst to start digging the well. The situation is of course improving now. In some cases, the problems were exacerbated by local opposition to large projects for ridiculous reasons.

Edit: Acc. to this article from July, the power situation in MH is now far better than TN (the other state you mentioned) where there was an overall shortfall of 26.5%.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Virupaksha » 07 Jan 2014 02:21

nachiket,

You are behind the curve. Industries all over south and west india have decent reliable power. Railways, hospitals, industries and capitals have the official first right on electricity.

The cuts if they exist are always agricultural or residential.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 07 Jan 2014 17:58

mahadevbhu wrote:chola you have yourself said that chin has followed e asia and used the manufacturing route. where is the mystery? hard reforms have been undertaken by them. not some kejriwal style socialism.


Yes, I know. The question is partially rhetorical. China's growth follow the same manufacturing export trajectory as Japan and the four Tiger economies. I want India to not miss this next wave of the manufacturing saga as China grows more expensive by the day and the jobs flooding out of China (currently mostly to Vietnam and ASEAN and even Bangladesh.)

That said, the scale of infrastructure building is unprecedented. Something never achieved by even Japan or South Korea and even more incredible, it is happening when China is at a far lower per capita income level. We are talking about 50% of the world's concrete and 46% of the world's steel.

I want to see how they managed to buy so much of the world's core building material and THEN pay for the construction using them afterwards while at the same time maintaining their currency.

When India buys resources on the world's market, it shells out dollars and the rupee goes to hell. We buy oil and gold and our forex reserves drops which forces the rupee to go into the tank. But the Yuan behaves differently, they spend like hell (many many times over what India does) and the Yuan continues to rise and in fact needs to be tamped down so the chini export machine can stay competitive.

That is what I want India to have. A way of printing wealth and generating complete investor confidence so we can fund things to the level we want.
Last edited by chola on 07 Jan 2014 18:22, edited 1 time in total.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 07 Jan 2014 18:16

Theo_Fidel wrote:Again just building it is not what the Chinese did. They did it cheap. Their power plants lack pollution control and efficiency standards and hence you end up with the smog of epic proportions. When was the last time you heard of power plant smog in India, though we have a bit less than 1/3rd the power capacity of china. Never right. This cheap build allows china to sell power cheap, very cheap. 7 cents a kwh or less. In India it is 15 cents a kwh for industry.

BTW many of the larger states like TN, GJ, MH, HY, etc fully guarantee power, water, land (within reason), docile labor, tax benefits, quite good roads, etc. Ports could be a negative but, now private ports are competing in performance out there. What they cannot do is China cheap cheep cheep cheep......


Theoji, that is pat and ultimately worthless answer. It is like when someone asks me "How do you invest successfully on the stock market?" and I answer "Buy low, sell high" -- something our Wall Street community likes to tell people when we're too lazy to talk to them.

It is the easy way of dismissing a question by providing no study or insight.

The fact is Chinese stuff is cheap only compared to the West and Japan. Saying they are cheap in comparison to the rest of the world makes absolutely no sense at all. This is true especially of India.

http://www.asiabriefing.com/news/2013/0 ... omparison/

Laborers in China earn between 300% and 400% more than India and they work less hours.

Commodity prices are the same on the global market and Indians command far cheaper wages so how can you possibly have cheaper infrastructure in China, Theoji?

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Christopher Sidor » 07 Jan 2014 23:05

chola wrote:
Christopher Sidor wrote:Building flats, shops, shopping arcades/malls is not infrastructure. Especially flats, shops, or arcades which simply lie vacant cannot be classified as Infrastructure. Infrastructure is road, railways, airports, water lines, sewage lines, ports, electricity lines, oil+gas lines and so on.


Any man-made structure that is usable is infrastructure but "road, railways, airports, water lines, sewage lines, ports, electricity lines, oil+gas lines and so on" is what the Chinese have an overabundance of as well as the mall and flats. So how are they able to finance this?

The have practically doubled their banking credit size. Today figures of 22 trillion are being thrown around. One has to consider that PRC's economy is still predominantly state owned and driven. So they can go and do what they want.
Infrastructure needs upkeep and if it is not utilised or returns are not upto the mark then it starts to degrade. If returns are not as expected, especially for the upkeep, then the sovereign has to step in further putting a strain on its budget.

chola wrote:
Christopher Sidor wrote:Dubai has world class infrastructure. Next to zero personal income tax and yet it went belly up after Lehman+AIG fiasco. Or consider the case of Japan they built world class bullet trains. They built them so well that the Japanese Railways could never pay back the debt. Building awesome infrastructure is one thing. Building a sustainable or economical infrastructure is quite another thing.


And Dubai still has world class infrastructure. India gets over $6b yearly in remittances from Dubai and the UAE. It certainly hadn't hurt their economy overly. Japan's bullet train and other world class infrastructure is sustainable for Japan just as China's cheaper infrastructure is mostly sustainable for China. If they were not, then they would have stopped building a long time ago (not out of choice but because of lack of market confidence and credit.)

That is the key -- they are able to generate investor confidence and credit to get stuff built. The question how China does it is more pertinent than Japan because the PRC is third world and should never have been able to build on this scale.

Japan had over a decade of zero or next to zero growth even after building bridges to nowhere. Dubai had to go begging to its neighbours. In case of PRC they have built HSR in excess of 600 kms, when there are studies which say that beyond 600 kms HSR are not economical. Not exactly the role models which we should emulate in any sense.

The myth that these can simply be written off without consequences does not hold true. The same amount of money which was spent on getting a 6 lane highway built when a two lane would suffice could have been spend somewhere else say to increase the competitiveness of the economy as a whole. India may get 6 or 60 or 600 billon from UAE or Dubai but does not imply that there was not wasteful allocation of money. The problem with these so called infrastructure binges is that the real economy hardly sees the benefits of these. Rather it is the elite and business men linked to these elite who profit.

Having the best infra is not the point. Having the infra which is based on sound economic principles is what is essential.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby TSJones » 08 Jan 2014 04:06

Japan had a horrendous real estate bubble back in the '80's. At one point one square block of Tokyo real estate was worth one square mile of Manhattan or Los Angeles. It just made no sense. So when the bubble went bust as bubbles always do, the Japanese held on. No write offs by the banks. Why? Because everything is linked in Japan in business relationships. There is a Japanese name for it but I forget. It is a combination of business, banks, and government. So they held on to their investments even though they were worthless. It has taken them *decades* to go through the process of paying down the worthless investment tranches. I suppose that many of them are still on the books of those banks. The pubic over reacted just like everyone does when a bubble goes bust. They pull in their horns, hunker down, try to save more money and thus they institutionalize the memory of the bust. That means there is no demand. The government keeps borrowing and trying to build and the citizens keep saving and buying the bonds issued by the government but they aren't getting anywhere. There is just no demand.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 08 Jan 2014 11:48

Cholaji,

Please outline, in 5 points or less, steps that will get India to be where you (and I) want it to be.

I'll go first:

1. Govt. expenditure cut on subsidies on fuel. Raised capital all goes to road construction.
2. Privatization of railways / private + public usage of the railway network.
3. Efficient govt. (a la Gujarat - I know this first hand)

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby vina » 08 Jan 2014 14:16

Commodity prices are the same on the global market and Indians command far cheaper wages so how can you possibly have cheaper infrastructure in China, Theoji?

Land costs zero for Chinese , credit costs zero . So those two are by far among the biggest chunks of any Infra's cost. So take those two out and your costs plummet.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Shankas » 08 Jan 2014 22:00

President of China Railway Group commits suicide - reports

Economic Information, a newspaper published by the official Xinhua News Agency, quoted a colleague as saying that part of the cause of Bai's depression might be the heavy debts that his company has run up. Wang Mengshu, one of the country's top railway engineers, said that Bai had been under intense pressure as some branches of the group ran into problems paying their workers' wages at the end of last year.

By the end of October, 2013, China Railways Group had total assets worth 626.5 billion yuan, and total outstanding debts of 531.9 billion yuan, with a debt-to-asset ratio of almost 85 per cent, according to the company's Q3 filings.

Bai is among several senior railway officials and executives who have committed suicide since corruption scandals implicating the senior railway officials began to come to light three years ago. However, there have been no direct links between China Railway Group and the corruption cases.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 09 Jan 2014 03:24

I would like to point out some misconceptions here.

1 Private ownership; It is rightly said that land cant be owned, however one does get the "user rights" for a given time period (typically 80 years). And one is free to sell it. Hence it very much works like private ownership.

2
The infrastructure in China in several cases exceeds that of world class. I am talking about highways, airports, ports, no power cuts, worlds largest High speed rail. You name it they got it. It is truly world class. I have been to a dozen cities, including Guangzhou, Xiamen, Shenzen, Shanghai, Hanzhou, Nanjing, Shunde, several times. I have seen it with my own eyes. They build massive industrial zones and make available land for factories for almost free. Electricity, transport etc is all ready.

3
Build quality. Well, the construction in China is not Germany or Switzerland. But it certainly is much better then anything you see in India. Indian companies probably got screwed because the trusted the sellers. The sellers are not like Siemens or Mitsubishi. They do not care about reputation. They just make the cheapest offer and sell crap. They can supply good stuff, but you got to negotiate and control quality.

4
What puzzles me is how they finance all this. According to what I learned in economic theory; huge account surpluses and massive spending, should lead to very high inflation. This will in turn make the economy uncompetitive. But In china it is not happening. One explanation could be the very high savings rates. Other then that, I have not got a clue.

5
Chinese companies are not very competitive at all. Most of the large corporations are owned by the government and not really very well run at all. Here I think Indian companies are probably much more competitive. Take the telecom industry. China may have Huawei and ZTE. But the cost of calling is much cheaper in India.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Anand K » 09 Jan 2014 07:29

The fiscal reforms in China post '95 have also strengthened the infrastructure development in certain regions. However the rich cities/provinces are not allowed to raise own capital by issuing bonds. Not yet I think. There's debt financing - a LOT of it. A good share of the 3 Trillion USD provincial governments' banking-sector debt is due to the infrastructure financing alone. The central govt bonds and grants and old-comrade networks letting loans be rolled over (and pray things will get better) or making up for shortfalls by random grants also have caused big problems. Yeah, only the really prosperous coastal provinces are able to make good on the huge loans they take. The others have their own version of loan melas. :lol: In the big cities, land leasing has also been a major source of infrastructure financing. I dunno the state of mobilizing capital from the private sector though.... but this would mean higher service costs.

China has industrialized to much higher degree than it has urbanized, and has urbanized faster than it has invested in urban infrastructure. . AFAIK China’s degree of urbanization today corresponds to that of Japan in late 50s (there's a cultural element to Japanese urbanization drive but different topic) or the United States of the 1910s-20s. If the "correspondence" between industrialization and urbanization were to hold true in PRC, it should be 70%, instead of just over 50%. I guess their economic growth strategy rests on continued rapid urbanization to absorb surplus rural labor, throw freebies and homes to forestall rebellion. No matter the cost.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 09 Jan 2014 12:48

So essentially, we have lost the race, and we have to be happy as a Turkey types tier 2 GDP and GDP/capita nation. Tier One will be China Jap, EU, USA, Taiwan, etc.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby KLP Dubey » 09 Jan 2014 17:23

Theo_Fidel wrote:BTW many of the larger states like TN, GJ, MH, HY, etc fully guarantee power, water, land (within reason), docile labor, tax benefits, quite good roads, etc. ......


I thought TN industries were facing a bleak power situation, especially before KNPP came online. I don't know what guarantee you are talking about, except for "we guarantee power even if it is not there, since it is ultimately a state of mind."

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Aditya_V » 09 Jan 2014 20:49

mahadevbhu wrote:So essentially, we have lost the race, and we have to be happy as a Turkey types tier 2 GDP and GDP/capita nation. Tier One will be China Jap, EU, USA, Taiwan, etc.


We would require atleast 5 years of a committed Govt to tap potential of India and its people to get us back up again.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Austin » 10 Jan 2014 08:45

China 2013 trade surplus up 12.8% to $259.75 bn

China's annual trade surplus rose 12.8 percent to $259.75 billion in 2013 from the previous year, official data showed Friday.

Exports from the world's second-largest economy rose 7.9 percent to $2.21 trillion, while imports increased 7.3 percent to $1.95 trillion, the General Administration of Customs announced.

Voice of Russia, AFP

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 10 Jan 2014 18:36

mahadevbhu wrote:Cholaji,

Please outline, in 5 points or less, steps that will get India to be where you (and I) want it to be.

I'll go first:

1. Govt. expenditure cut on subsidies on fuel. Raised capital all goes to road construction.
2. Privatization of railways / private + public usage of the railway network.
3. Efficient govt. (a la Gujarat - I know this first hand)



1. open and streamline investments from manufacturers
2. open and streamline investments for infrastructure
3. open and streamline entry and exit for goods and people
4. plug into the regional economy


The first three will bring in the initial seed capital. Right now, India is an account deficit state. We need energy and raw material. But our currency is unwanted by anyone else so whatever hard currency (US dollars, Euros, Yens, etc.) we get goes back out to the world market. This is par for course for all developing nations but the East Asian tigers and China solved it by allowing in massive foreign investment. They target FDI, not FII like India, so the money stays in the nation. You can't liquidate a plant very easily but you can sell off funds overnight.

Number 3 is far more important than people think. Our inbound tourist industry sucks. If we look at regional traffic, it is much worse. We get some Western backpackers but the mainstay of any tourist industry needs to be regional. You look at Japan, China and Korea and they have massive cross border interactions (even though they hate each other.) Tourism brings in huge amounts of hard currency. We also completely lost out as transhipment point when our ports are ideally located between the Far East and Europe. This brings us to number 4.

Number 4 is related to number 3. About a month ago, I was at corporate strategy conference for Asia (set up by one of the big investment banks.) The main theme was regional integration. They used the Korean Wave as an example of cultural and economic integration. Basically, that goofy Korean guy doing that stupid dance in the music video was the culmination of the Korean Wave where Korean movies, music and popstars invaded China, ASEAN, Japan and finally American shores.

I, and several other desis there, brought up Bollywood. The hosts were respectful and said "yes Bollywood is very popular" and then the subject was dropped for lack of any examples of integration (I guess Pakistan, Bangladesh and the Gulf states don't count.) We spent a ton of time on the chini movie market which is the 2nd largest today and projected to be the world's largest with 10 years time. But bollywood, possibly our greatest asset, is not plugged into it or the other large ones in Japan, Korea or ASEAN.

India is completely pidgeon-holed with South Asia with nearly no strong economic or even cultural links to the Far East. Yes, yes, yes, Burma, Thailand, Cambodia, etc. have strong hindi and tamil influences historically but our economic and people links to them today are pathetic. Their trade with us is minor and their tourists rarely visit us. And yes, we live a crap neighborhood but we certainly have done nothing to integrate ourselves into the world greatest growth engines in the past five decades directly to our east.

Each one of these steps will bring in investment and make the rupee more relevant. We need to get to the point where we can print money with ease.

Seriously, I would be happy if India had ghost cities and miles of uneconomical high speed rail because it would mean that India have excess capacity to generate wealth and credit.

Again, you never see 3rd world nations with miles of unused housing, HSR and 8-lane highways. They could never generate the capital and credit to even get started. Excess infrastructure is common only in wealthy states with excess capital like the US and Japan. I want India here.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 11 Jan 2014 05:34

mahadevbhu wrote:So essentially, we have lost the race, and we have to be happy as a Turkey types tier 2 GDP and GDP/capita nation. Tier One will be China Jap, EU, USA, Taiwan, etc.


Nope, the race is on forever. I think India will surpass China, if the country can clean up the corruption. The AAP party just show how the country is yarning for better management. Indians know how to do it, they command the English language (which give the country a massive edge) and it has a young population.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Hitesh » 11 Jan 2014 19:20

Austin wrote:China 2013 trade surplus up 12.8% to $259.75 bn

China's annual trade surplus rose 12.8 percent to $259.75 billion in 2013 from the previous year, official data showed Friday.

Exports from the world's second-largest economy rose 7.9 percent to $2.21 trillion, while imports increased 7.3 percent to $1.95 trillion, the General Administration of Customs announced.

Voice of Russia, AFP


For comparison's sake, China's trade surplus is nearly equivalent to the entire trade exports by India. As a whole, China's trade including exports/imports is 10 times India's entire trade. Even if China enjoys a trade surplus of $260 billion dollars, the fact that China imports nearly 2 trillion dollars which is nearly India's GDP clearly indicates which priority that most countries would place on.

It is a very sobering thought and shows how far behind we are w.r.t. China in terms of economic development. Congress has messed up the boat and now we have to put it back on track to catch up with China.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 11 Jan 2014 19:42

I think anyone that does business (especially related to manufacturing) in China actively feels the advantages of its infrastructure.

I can ship a small package (say, 2 kg) door-to-door to any one of 800 million people (all of central + coastal China), and know it will arrive within 2-3 days for around $2 usd. I can be at the doorstep of thousands of suppliers (almost all of which are small private businesses) with a 5 hour trip (say, 4 hour high speed rail / flight + 1 hour taxi/subway ride). I can easily launch a factory within months, staffed with hundreds of blue collar workers (from all over the country), and not spend a second thinking about power or water or anything else. I have millions of college students I can recruit from every year (although many prefer to work as state workers - tragically).

All in all, these factors combined enable a wide, wide range of business opportunities both foreign and domestic.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 11 Jan 2014 22:50

Well package delivery In India is quite developed as well. I sent a TNT package to Thirunelveli and it got there next day morning 9:00AM for Rs162.
---------------------------------------------------

A lot of China exports are subject to round tripping so a little suspect. That said yes their manufacturing chains are definitely ahead of India. Infrastructure too they are ahead. But this is not a race. We are about 10 years behind. The bigger achievements of China were social. The one child policy brought population growth to a halt released vast amounts of dependent free young people at least temporarily. Allowing them to save save save. Also they have managed to give a HS level education to 80%+ of the overall population. Last time I checked the comparable number was 13% for India though some states are much much better. Save . invest . educate, that is the secret of the china growth rate. China being Han homogenous does this better than socially fragmented India for the moment.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby sanjaykumar » 11 Jan 2014 23:03

China being Han homogenous does this better than socially fragmented India for the moment.

Of course the public poverty and low average educational standards in India have a large unspoken social component. But we will leave such impolitic issues.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby sanjaykumar » 11 Jan 2014 23:31

A lot of China exports are subject to round tripping so a little suspect.


It is even more basic than that. A $10 Chinese component installed in a $100 iphone in China, accounts for $100 in Chinese export statistics. Absurd.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Hitesh » 11 Jan 2014 23:52

^
Doesn't matter. If the iphone was made in China, the market value of the phone counts. Even with rounding, China's economic stats come way ahead of India. There's no denying it. We have a lot of work ahead to catch up with China and China has a huge head start on us.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 12 Jan 2014 05:46

heech wrote:I think anyone that does business (especially related to manufacturing) in China actively feels the advantages of its infrastructure.

I can ship a small package (say, 2 kg) door-to-door to any one of 800 million people (all of central + coastal China), and know it will arrive within 2-3 days for around $2 usd. I can be at the doorstep of thousands of suppliers (almost all of which are small private businesses) with a 5 hour trip (say, 4 hour high speed rail / flight + 1 hour taxi/subway ride). I can easily launch a factory within months, staffed with hundreds of blue collar workers (from all over the country), and not spend a second thinking about power or water or anything else. I have millions of college students I can recruit from every year (although many prefer to work as state workers - tragically).

All in all, these factors combined enable a wide, wide range of business opportunities both foreign and domestic.



Chinas greatest advantage has been the low wages. But with the recent wage increase, China is rapidly loosing its edge. Second problem of china is the false demand that has been created by oversupply of money. Infrastructure can be found anywhere. It is relative easy to copy. The hard part is always how to sell your products with your own band name. There are very few Chinease brands in the western market. Huawei, Haier and lenovo are the only ones i can think of.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 12 Jan 2014 20:42

Rishirishi wrote:
mahadevbhu wrote:So essentially, we have lost the race, and we have to be happy as a Turkey types tier 2 GDP and GDP/capita nation. Tier One will be China Jap, EU, USA, Taiwan, etc.


Nope, the race is on forever. I think India will surpass China, if the country can clean up the corruption. The AAP party just show how the country is yarning for better management. Indians know how to do it, they command the English language (which give the country a massive edge) and it has a young population.



The whole idea of a "race" with China is a complete waste of time. If we wanted to race anyone, it should have been with Japan, South Korea and the Asian Tigers. If we didn't care about racing those nations then why should it matter to us now with China which is far poorer and of a much lower standard to measure ourselves against?

If we really need to compare ourselves with a communist craphole why don't we just "race" North Korea? We'll win that one by a landslide.

What this thread should be about is China as a economic entity (straight dollars and cents of its market) and a test case for India because it is the only other billion people nation out there.

Insisting on a non-existent "race" makes us look at the PRC with all the blinders that come with jingoism since we either can't afford to see ourselves behind in this "race" so we refuse to acknowledge their advantages or we totally give up because we see ourselves so far behind. It's absolutely worthless.

Even if we can't catch up we can still make use of the chini market (Tata yesterday reported that its operating profit comes nearly entirely from the sales of Land Rover and Jaguar in China) and we can also use some of its lessons in creating credit and investor confidence (no, it does not include state ownership of everything -- state ownership usually screws up investor confidence, look at the number of successful communist states in the world.)

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 12 Jan 2014 21:05

Rishirishi wrote:
heech wrote:I think anyone that does business (especially related to manufacturing) in China actively feels the advantages of its infrastructure.

I can ship a small package (say, 2 kg) door-to-door to any one of 800 million people (all of central + coastal China), and know it will arrive within 2-3 days for around $2 usd. I can be at the doorstep of thousands of suppliers (almost all of which are small private businesses) with a 5 hour trip (say, 4 hour high speed rail / flight + 1 hour taxi/subway ride). I can easily launch a factory within months, staffed with hundreds of blue collar workers (from all over the country), and not spend a second thinking about power or water or anything else. I have millions of college students I can recruit from every year (although many prefer to work as state workers - tragically).

All in all, these factors combined enable a wide, wide range of business opportunities both foreign and domestic.



Chinas greatest advantage has been the low wages. But with the recent wage increase, China is rapidly loosing its edge. Second problem of china is the false demand that has been created by oversupply of money. Infrastructure can be found anywhere. It is relative easy to copy. The hard part is always how to sell your products with your own band name. There are very few Chinease brands in the western market. Huawei, Haier and lenovo are the only ones i can think of.


Jobs are flooding out of China as we speak. This is actually one of the greatest economic stories today and dreadfully important to India though we hardly ever talk about it (overly enamored are we of the whole IT services thing? which btw never provided more than a million or two jobs out of a population of 1 billion.)

The global supply chain is at an inflection point once again. Global manufacturing went to Japan in the 1960s, the Asian Tigers in the 1970s and 80s, China in the 1990s. We need to make sure that India is a prime landing spot for this migration of jobs and wealth. But right now we are hardly in the game and losing to places like Vietnam and Bangladesh.

It's not just the wages or else Africa would have all the manufacturing in the world. It's a combination of low wages, infrastructure and commitment and competence from the government in charge. We have the first but have neither the second nor the third.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 12 Jan 2014 22:07

Jobs are flooding out of China as we speak. This is actually one of the greatest economic stories today and dreadfully important to India though we hardly ever talk about it (overly enamored are we of the whole IT services thing? which btw never provided more than a million or two jobs out of a population of 1 billion.)

The global supply chain is at an inflection point once again. Global manufacturing went to Japan in the 1960s, the Asian Tigers in the 1970s and 80s, China in the 1990s. We need to make sure that India is a prime landing spot for this migration of jobs and wealth. But right now we are hardly in the game and losing to places like Vietnam and Bangladesh.

It's not just the wages or else Africa would have all the manufacturing in the world. It's a combination of low wages, infrastructure and commitment and competence from the government in charge. We have the first but have neither the second nor the third.


Well, what is the point with creating massive level of extreemly low payed jobs. The garments, shoes, toys, electronic industry pay slave like wages. It creates a lot of pollution, and ruins the life of people. A T-shirt manufacturing unit that make 1 million T-shirt hardly create wealth of $20-50K fro the owner. The rest of the workers live in a slave like condition. I went to china recently and the manufacturers simply do not want to export any more. They would rather supply to better paying Chinese. A lot of people get impressed with the numbers from China and the "made in China" label. But in fact they have created the histories larges slavecamp.

India has actually leapfrogged the first phase of development. Mass manufacturing. Jobs for the educated are plentyfull. The main problem with India is the corrupt and mismanagement. If this can be fixed, you will see very very fast growth.

As for the CAD it is due to the massive amount of black money and inflation. People purchase gold because and this is the main culprit. Further a lot of money is leaving India, via the havala. Cost of land has been driven up, mainly because of black money. High cost of land is very bad for development, as it makes everything very expensive.
Hence, if they can solve the corruption and inflation, you will see; lower cost of land, lower demand for gold, increased influx of F.EX, lower interest rates. Less corruption will also drive down the costs and drive up the efficiency.
Government officials create artificial hinders to elevate their importance and create income for them selves.

India will surpass China. I had predicted this already in year 2003 here on BRF.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 12 Jan 2014 23:19

Rishirishi wrote:

Well, what is the point with creating massive level of extreemly low payed jobs. The garments, shoes, toys, electronic industry pay slave like wages. It creates a lot of pollution, and ruins the life of people. A T-shirt manufacturing unit that make 1 million T-shirt hardly create wealth of $20-50K fro the owner. The rest of the workers live in a slave like condition. I went to china recently and the manufacturers simply do not want to export any more. They would rather supply to better paying Chinese. A lot of people get impressed with the numbers from China and the "made in China" label. But in fact they have created the histories larges slavecamp.



It is where Japan, South Korea, Taiwan and the rest of them started. Without getting into the entry level I cannot see where we will create the jobs needed for the vast majority of our population.

Take China out of the equation. Every time we talk about China we get into subjective observations like "slave camps" and "slave wages" and we totally confuse the merits of how nations industrialize through manufacturing (which is the only known process that actually lifted non-western nations to the economic 1st world outside of having a ton of oil and mineral resources like Saudi Arabia.)

Just think of the global manufacturing process as its own entity. Global manufacturing just so happened to move into China during a particular phase. We know it moved through Japan, South Korea, Hong Kong, Singapore and Taiwan and each one in turn had become a developed nation.

Low wages brings in capital which in turn create infrastructure which in turn draws in more capital until you have enough to sustain an innovative economy.


India has actually leapfrogged the first phase of development. Mass manufacturing. Jobs for the educated are plentyfull.


All this leap-frogging pie-in-the-sky stuff comes from the IT wallahs who depend on US and UK for 90% of their revenue. They never understood that their skills are unsellable in the Indian economy itself because you cannot "leapfrog" a nation's development. If we can simply "leapfrog" then we can simply hire every Indian as a IT person. And so could every other poor nation in South Asia and Africa.

There is no mass reservoir of jobs for the educated even if Indians were all highly educated which we are not. Economies don't work that way. Demand has to be created from an economy progressing through its stages.



The main problem with India is the corrupt and mismanagement. If this can be fixed, you will see very very fast growth.


Yes you would and you will see very fast growth coming from being plugged into the global supply chain. Money is like water, it will always find its level. Indian wages are between 3 to 5 times cheaper than China, the world's current supply hub. Without Congress' socialist leanings and incompetence, the MNCs will come in.

India will surpass China. I had predicted this already in year 2003 here on BRF.


Me, you and everyone else after the collapse of the Soviet Bloc. It was the easiest prediction in the world. Communist nations are economically inferior to free societies. As long as the PRC remains communist, the contradictions will pile up until they collapse -- just like the USSR. But the problem with that iron-clad prediction is every year the PRC is moving closer and closer to the model we see in Taiwan, South Korea or Singapore and away from communism.

What is taking them away from communism? Their access to the global supply chain which is inherently capitalistic.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 13 Jan 2014 03:32

Firstly India should not aim to become the new South Korea or Japan. It should aim to become like Canada, Scandinavia or Germany. Both the Japanese and the South korean export model have proved to be semi successful. Yes they did bring the countries out of poverty, but did not manage to bring the social revolution that was needed. India and China are both too large to live on external exports.

The export model has worked fine, but it is not the only model available. All economies can thrive, but they depend on;

An effective and rigurously enforced legal system, yet easy to operate in. A transparent and open economy. And finally a growth oriented policies. The country does not have to be a democracy, but for large countries democracy has had some success. Scandinavia and Germany good examples, where as the US is a example of a "hijacked democracy".

China looks very good on paper and certainly when you travel there. But there the mismanagement is of biblical proportions. Most large industries are government owned, the legal framework is weak and there is a total lack of transparency.

India on the other had has many good things going for it self. A semi free press, English language, a legal system, small public sector and young population. If people like Kejriwal and others manage to crate a reguletary framework that kills corruption, there is nothing stopping India.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby svinayak » 13 Jan 2014 05:35

But who is Kejriwal

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 13 Jan 2014 08:16

Rishirishi wrote:Firstly India should not aim to become the new South Korea or Japan. It should aim to become like Canada, Scandinavia or Germany. Both the Japanese and the South korean export model have proved to be semi successful. Yes they did bring the countries out of poverty, but did not manage to bring the social revolution that was needed. India and China are both too large to live on external exports.




Exports are at the very least a kick start to get nations moving in the right direction by amassing investment and credit to do real work. And if the world's truly globalized then we better be able to export. If the world is not globalized then we're back where we started under the Nehru clan. No globalization also means no future IT/offshoring booms so where are we going to get our seed capital? Printing more rupees doesn't work. The bottom nearly fell out before Rajan wrestled that bear to the ground.

Model after Canada, Scandanavia, Germany? Cross out Germany, they use the same system as the East Asians -- exports, exports, exports. But Canada? Wonderful model, same as the UK and US. Scandanavia? Beautiful! And Sweden, Norway and Denmark are all surplus nations too. I would surely push for a Western plan to modernization if it would get India to be like Denmark or the US.

But the World Bank basically pushes the Western formula -- democracy, free markets and accountability in governance. Wonderful ideals but how successful is that for any nation? Would you or any of us want to accept WB oversight should the rupee sh1t the bed in the future?

I believe there is no formula for being like the US and Western Europe other than having generations grow up in a democratic, relatively corrupt-free society with proper respect for the rule of law.

Sorry, the export model is the only one where we see nations rise from p1ss-poor 3rd world to first world. It is also a Western system since it plugs into the Western market place. If you want Western affluence, you need Western seed capital and this is how you get it.


The export model has worked fine, but it is not the only model available. All economies can thrive, but they depend on;

An effective and rigurously enforced legal system, yet easy to operate in. A transparent and open economy. And finally a growth oriented policies. The country does not have to be a democracy, but for large countries democracy has had some success. Scandinavia and Germany good examples, where as the US is a example of a "hijacked democracy".


All the wealthiest nations on earth are democracies or are at the very least free and open states. The chances of non-democratic nations gaining first world status is practically nil.


China looks very good on paper and certainly when you travel there. But there the mismanagement is of biblical proportions. Most large industries are government owned, the legal framework is weak and there is a total lack of transparency.


Actually, China looks very poorly on paper. After all, it is communist to start off with. Mismanagement is part and parcel of being communist. It should have collapsed a long time ago along with the USSR.

The reason it hasn't is because Deng was astute enough to allow itself a place in the global supply chain.

India on the other had has many good things going for it self. A semi free press, English language, a legal system, small public sector and young population. If people like Kejriwal and others manage to crate a reguletary framework that kills corruption, there is nothing stopping India.


India has the above and every other advantage of a democracy (like the US, Canada and Scandinavia) but it still has no seed capital to kick start its economy. Advantages mean nothing unless it can be translated into wealth and then into demand.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 14 Jan 2014 11:25

India should aim to be like Germany, Canada, and Scandinavia? By the same token, I'd like my kids to be like Bill Gates' kids. Whatever they're doing, my kids should do.

But reality doesn't exactly work like that. chola's certainly right that development has to be a process. Your kids will only become billionaires not by emulating what Bill Gates' kids are doing, but rather by doing what Bill Gates did. No one "leap frogs" the first stages of industrialization and infrastructure building to become a capital-rich nation (in both intellectual and physical terms), just like no one "leap frogs" the actual *making* of money in order to become a billionaire.

The simple fact of the matter is, the vast majority of Chinese are living a much higher standard of living today than ever... and increasingly starting the transition to full on consumerism. In the second-tier city I live in, in eastern China... a very average 20-40 year old from the rural heartland can work in the service industry, and make a minimum of 2500-3000 RMB a month (roughly 400-500 USD), while having their room + board paid for. They have zero expenses, and pay zero taxes. That 400-500 USD is just take home income. I don't think those are "slave wages" by any stretch of the imagination.

There are more consumers in China than US and Europe combined. If/when this market erupts, then and only then, China will finally evolve to the next step of the process: creating meaningful local brands, starting to develop the service economy, etc, etc.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby kit » 14 Jan 2014 20:34

http://www.globalsources.com/NEWS/What-China-makes-10-things-infographic-090213.HTM


Would love the day when India competes with China economically as an industrial power !

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Christopher Sidor » 14 Jan 2014 23:25

China's Credit Bubble - Rothschild | Wealth Management & Trust --- Dated Oct-2013

For those who are wondering how PRC is able to build so called "world-class" infrastructure read this. Ignore the doomsday scenario painted. There is no rocket science. It is not quick decisions nor is it efficient working of the so called 2nd largest economy of the planet. Rather it is
The amount of debt in China has swelled from $9 trillion to around $23 trillion over the past five years.

So for a country whose GDP is about $6-8 trillion the financial sector (banking + non-banking sector) size is $23 trillion.

This debt lies predominantly with local governments and non-state-owned businesses, and now stands at more than 200% of the country’s GDP.
....
....
Credit growth has continued at an annual pace of 20%. The economy is now facing the consequences of the credit bubble the government helped to create. According to the People’s Bank of China (PBoC), the ratio of total debt to GDP (what China’s firms, household and government owe) has risen by more than 50 percentage points during the past five years and now stands above 200%. Japan crossed this threshold only a few years before its economy crashed in 1989.
....
....
China’s economy now requires increasing amounts of credit to support growth, roll over existing loans and service the interest payments on existing debt. According to estimates by Societie Generale, China’s debt service costs are nearly 40% of GDP. As a result, at least $4 trillion of fresh credit will be required in 2014 just to feed the economy’s existing debts.
....
....
Local government debt is an area of concern. It is estimated to have almost doubled since 2010 and now stands at around 40%of GDP ($3.3 trillion).
....
....
The government has some $3.4 trillion in foreign exchange reserves. Estimates suggest these reserves comprise around $1.4 trillion in US Treasuries, with the rest made up of German Bunds, peripheral Eurozone sovereign debt, equities, real assets and loans to developing countries. Theoretically, the PBoC could sell its US Treasuries and buy renminbi to use domestically. Yet this process would cause the renminbi to appreciate, hurting China’s already depressed exports. In any case, the amounts would not to be enough to bail out a banking system that is 320% of GDP.
Could China’s central bank print money? Effectively, the PBoC has been printing for many years in order to neutralise the effects of foreign currency flowing into the country. Its balance sheet is already around 60% of GDP, according to the PBoC. (By comparison, the US Federal Reserve’s balance sheet is 21% of US GDP.)


There are certain reasons why PRC will not go down the path of Japan and it makes sense to be a skeptic as far as doomsday scenarios are concerned.
1) PRC is at the end of the day is a dictatorship. If its citizens protest, PRC can always roll tanks over them, recall 1989.
2) PRC is still not a middle income country. It has still some slack which can absorb the shocks.
3) As the North Atlantic region recovers PRC can expect its export sector to give it some breathing room. Added to this is the ongoing structural rebalancing of the PRC's economy, recall the aims which were outlined in the 3rd Plenum of CPC.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Anand K » 15 Jan 2014 08:35

Look what Moody is saying!

PS: Just google out "China Credit Bubble" and "India Credit Bubble" and compare the results. Then I wonder if caution pays and if Good Guys actually finish first.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Austin » 15 Jan 2014 09:18

Credit Rating Agency these days are less of financial independent agency and more of politically loaded apparatus in hands of western government to screw other nation economy.

So Western countries will keep getting AAA rating no matter how deep shit their economy is in and China , India and other BRIC nations will get bad review in order to screw their economy and keep them dependent on Western Cash.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Anand K » 15 Jan 2014 10:06

We picked this one yet?

Small potatoes, but still..... shows a significant deal of confidence. Or chutzpah.


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