PRC Economy and Industry: News and Discussions

Arya Sumantra · Post by **Arya Sumantra** » 19 Mar 2009 05:28

Chinese government offers subsidies to farmers for buying new cars and pick-up trucks

In a bid to revive the flagging Chinese economy, the Chinese government has announced that it will subsidise 10% of the purchase price of a new car to farmers who trade in their old vehicles. Under this scheme, which has been effective from the 1st of this month, Chinese farmers who choose to replace their three-wheeler, pick-up truck or car with a new vehicle – one that’s powered by a 1.3-litre or smaller engine – will get a subsidy of 2,000-5,000 Yuan (Rs 15,000-37,640, depending on the type of vehicle being replaced) for their new vehicle.

vina · Post by **vina** » 19 Mar 2009 08:41

Cross posting.

Yawnn... Just as predicted, Unkil is running the printing presses at hyper speed to inflate it's way out of the mess. Basically giving Wampum back for the bonds.

Chipanda are screwed royally . Dump all the treasuries you want. Unkil will print notes and monetize 'em. Selling is like plunging a dagger in Chipanda's own belly.

Fed to Buy $1T in securities to aid economy

The New York Times
This copy is for your personal, noncommercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers here or use the "Reprints" tool that appears next to any article. Visit www.nytreprints.com for samples and additional information. Order a reprint of this article now.
Printer Friendly Format Sponsored By

March 19, 2009
Fed to Buy $1 Trillion in Securities to Aid Economy
By EDMUND L. ANDREWS

WASHINGTON — The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Having already reduced the key interest rate it controls nearly to zero, the central bank has increasingly turned to alternatives like buying securities as a way of getting more dollars into the economy, a tactic that amounts to creating vast new sums of money out of thin air. But the moves on Wednesday were its biggest yet, almost doubling all of the Fed’s measures in the last year.

The action makes the Fed a buyer of long-term government bonds rather than the short-term debt that it typically buys and sells to help control the money supply.

The idea was to encourage more economic activity by lowering interest rates, including those on home loans, and to help the financial system as it struggles under the crushing weight of bad loans and poor investments.

Investors responded with surprise and enthusiasm. The Dow Jones industrial average, which had been down about 50 points just before the announcement, jumped immediately and ended the day up almost 91 points at 7,486.58. Yields on long-term Treasury bonds dropped markedly, and analysts predicted that interest rates on fixed-rate mortgages would soon drop below 5 percent.

But there were also clear indications that the Fed was taking risks that could dilute the value of the dollar and set the stage for future inflation. Gold prices rose $26.60 an ounce, hitting $942, a sign of declining confidence in the dollar. The dollar, which had been losing value in recent weeks to the euro and the yen, dropped sharply again on Wednesday.

In its announcement, the central bank said that the United States remained in a severe recession and listed its continuing woes, from job losses and lost housing wealth to falling exports as a result of the worldwide economic slowdown.

“In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability,” the central bank said.

As expected, policy makers decided to keep the Fed’s benchmark interest rate on overnight loans in a range between zero and 0.25 percent.

But to the surprise of investors and analysts, the committee said it had decided to purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities on top of the $500 billion that the Fed is already in the process of buying.

In addition, the Fed said it would buy up to $300 billion worth of longer-term Treasury securities over the next six months. That would tend to push down longer-term interest rates on all types of loans.

All these measures would come in addition to what has already been an unprecedented expansion of lending by the Fed. The central bank also said it would probably expand the scope of a new program to finance consumer and business lending, which gets under way this week.

In effect, the central bank has been lending money to a wider and wider array of borrowers, and it has financed that lending by using its authority to create new money at will.

Since last September, the Fed’s lending programs have roughly doubled the size of its balance sheet, to about $1.8 trillion, from $900 billion. The actions announced on Wednesday are likely to expand that to well over $3 trillion over the next year.

Despite a trickle of encouraging data in the last few weeks, Fed officials were clearly still worried and in no mood to cut back on their emergency efforts.

Fed policy makers sharply reduced their economic forecasts in January, predicting that the economy would continue to experience steep contractions for the first half of 2009, that unemployment could approach 9 percent by the end of the year and that there was at least a small risk of a drop in consumer prices like those that Japan experienced for nearly a decade.

The Fed rarely buys long-term government bonds. The last occasion was nearly 50 years ago under different economic circumstances when it tried to reduce long-term interest rates while allowing short term rates to rise.

Ben S. Bernanke, the Fed chairman, has been extremely cautious in recent weeks about predicting an end to the recession, saying that he hoped to see the start of a recovery later this year but warning that unemployment, a lagging indicator, would probably keep climbing until some time in 2010.

In contrast to several recent Fed decisions, with the presidents of some regional Fed banks dissenting, the decision at Wednesday’s meeting of the 10 members of the Federal Open Market Committee, the central bank’s policy making group, was unanimous.

Jan Hatzius, chief economist at Goldman Sachs, said the Fed had adopted a “kitchen sink” strategy of throwing everything it had to jolt the economy out of its downward spiral.

But while Mr. Hatzius applauded the decision, he cautioned that the central bank could not solve the economy’s problems by expanding cheap money.

“Even if the Fed could make interest rates negative, that wouldn’t necessarily help,” Mr. Hatzius said. “We’re in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more. You can have a zero interest rate, but if you just offer more money on top of the money that is already available, it doesn’t do that much.”

Fed officials have been wrestling for months with the fact that lenders remain unwilling to lend and borrowers are unwilling or unable to borrow. Even though the Fed has been creating money at the fastest rate in its history, much of that money has remained dormant.

The Fed’s action is an expansion of its effort to bypass the private banking system and act as a lender in its own right.

The Fed and the Treasury are starting a joint venture this week called the Consumer and Business Lending Initiative in their latest effort to thaw the still-frozen credit markets. The program will start out with $200 billion in financing for consumer loans, small-business loans and some corporate purposes.

Fed officials have said they hope to expand the program next month, possibly to include the huge market for commercial mortgages, and both the Fed and Treasury hope the program will eventually provide up to $1 trillion in total financing.

RamaY · Post by **RamaY** » 19 Mar 2009 09:09

vina wrote:Cross posting.

Yawnn... Just as predicted, Unkil is running the printing presses at hyper speed to inflate it's way out of the mess. Basically giving Wampum back for the bonds.

Chipanda are screwed royally . Dump all the treasuries you want. Unkil will print notes and monetize 'em. Selling is like plunging a dagger in Chipanda's own belly.

Vina-saar,

What will happen in a hypothetical scenario, where China pulls out its US FX reserves partially (say 50% = $500B), in terms of
- Impact on US economy, value of $
- Impact of PRC FX reserves, reduced value (is this is money lost)
Assuming PRC uses most of this money to fund its own stimulus program,
- What will the additional GDP it can produce, ROI

I am trying to understand how many pounds of flesh US/PRC are trying to extract from the other so they keep supplying oxygen to the other (supposedly)

Thanks

vsudhir · Post by **vsudhir** » 19 Mar 2009 17:06

Steeling for 80% export drop

CHINA'S steel product exports may tumble 80 percent this year as a global slump hurts demand, the China Iron and Steel Association said yesterday.

This was much steeper than its previous forecast of 50 percent, the industry group said in a statement on its Website quoting a speech by its Secretary-General Shan Shanghua.

Wonder how many more such 'deeper [doo doo] than previously thought' surprises will emanate from PRC radiant like the midnight sun....

Meanwhile the Baltic dry Index [arguably the most objective and certainly the most accurate by past record indicator of int'l trade activity] is down 20%.

vina · Post by **vina** » 19 Mar 2009 18:48

RamaY wrote: I am trying to understand how many pounds of flesh US/PRC are trying to extract from the other so they keep supplying oxygen to the other (supposedly)

Thanks

Posted in Perspectives of Economic Meltdown thread.

vsudhir · Post by **vsudhir** » 20 Mar 2009 20:27

Can comsumers spend Asia out of a recession?

Many Asian countries [read PRC subnationalities] are handing out cash and vouchers to get people spending again. But real economic recovery may take a lot more

PRC experiment here will be interesting to watch. Though our problems are structurally different from theirs.

vsudhir · Post by **vsudhir** » 20 Mar 2009 20:30

Huiyuan Juice: China Says Coke Isn't It

Coca-Cola had high hopes for a deal to buy China's biggest pure juice brand, but Beijing rejected the offer, citing competition concerns

Huh, China has competition concerns? who dareth compete with soup-e-rear chini system onlee?

More seriously, is this payback for unocal and the many unocals nipped in the bud?

Elsewhere, someone (wink, wink) seems to have quietly stirred trouble. Must've had lotsa practice stirring trouble in Desi infra projects from Posco to gopalpur to meghalaya...

Rio Tinto China Deal Faces Growing Opposition

Singha · Post by **Singha** » 24 Mar 2009 20:14

youtube blocked in china
http://news.bbc.co.uk/2/hi/asia-pacific/7961069.stm

Rishirishi · Post by **Rishirishi** » 25 Mar 2009 04:18

Singha wrote:youtube blocked in china
http://news.bbc.co.uk/2/hi/asia-pacific/7961069.stm

They have blocked it because there is some pictures of Chinease soldiers beating up monks. Blocking you tube is the most stupid thing they can do. Chinese bloggers will get hold of what ever the government want to sensor and will pass it on to each other. The more the government sensor, the more people will blogg og discuss. The Chinease government has lost the battle of media control.The question is just when they will be capitulate.

Liu · Post by **Liu** » 26 Mar 2009 18:33

Rishirishi wrote:
Singha wrote:youtube blocked in china
http://news.bbc.co.uk/2/hi/asia-pacific/7961069.stm

They have blocked it because there is some pictures of Chinease soldiers beating up monks. Blocking you tube is the most stupid thing they can do. Chinese bloggers will get hold of what ever the government want to sensor and will pass it on to each other. The more the government sensor, the more people will blogg og discuss. The Chinease government has lost the battle of media control.The question is just when they will be capitulate.

agree. blocking is most stupid action people can imagine.

many chinese want to justify CHinese government and bash western median...now..the blocking prevents it and youtube become the backyard of western guys....

vsudhir · Post by **vsudhir** » 27 Mar 2009 15:56

My my.... the running dogs of imperialism in the very heart of the decadent west are having a free for all on soup-e-rear PRC's ability and nobility today....

"China want get back political and economic hegemony in Asia from US."
When was China's Asian hegemony over Asia? I thought those guys were perennially the Mongol's bitch? And then Japan's.

Erm. Don't they have ICBM technology? You don't need a big convetional fleet if you have the power to ignite global thermonuclear war.

I suspect the People's Liberation ICBMs are as reliable as other Chinese products.

PLA shall make these imperialists pay....mark my words.... MaoA, MaoA! And sure enough...

"You don't need a big convetional fleet if you have the power to ignite global thermonuclear war."

Even WOPR figured out that is not a winning strategy.

Particulary for China, who are supposed to be notorious for taking a 1,000 year view of things. More likely would be them to just wait for the USA to collapse as a result of our own greed and stupidity.

Plus the possiblity of funding Mexican drug catels to push us off the cliff. Say getting a tac nuke to Dallas, if push came to shove?

link

vsudhir · Post by **vsudhir** » 28 Mar 2009 05:54

MaoA biraders!

The decadent west is at it again.... bashing china's rosy image.

Why China Can't Save the World

What gall to suggest china can't do something....hmmph.

Every CPIM comlade knows china can do anything!

Mary Andrews · Post by **Mary Andrews** » 29 Mar 2009 09:24

The Economist's cover is funny. That's how the Westerners think how the Chinese think. Not necessarily true.

svinayak · Post by **svinayak** » 29 Mar 2009 10:23

We’re In A Whole New Territory

Nobel laureate Joseph E. Stiglitz on the coming global economic order.
By Rana Foroohar | NEWSWEEK
Published Mar 28, 2009
http://www.newsweek.com/id/191496

The power shift from west to east continues, as developing nations flexed their muscles at the G20 in London recently, and China and Russia called for a new international reserve currency to replace the dollar. Nobel laureate Joseph E. Stiglitz, who pioneered the idea of "global greenbacks" in his book "Making Globalization Work," and is now at the center of many debates over the future of global capitalism, spoke to NEWSWEEK'S Rana Foroohar about Asia's big bucks, America's bad loans and why the European welfare state still works.

FOROOHAR: You've been talking for years about how the dollar reserve system is broken. Why is everyone getting on the bandwagon now?
STIGLITZ: A reserve currency has to be stable to be effective, and for some time now, it's been clear that the dollar is not. The financial crisis has brought this home with a vengeance. The Fed's balance sheet is surreal. They are in uncharted territory, and there are serious concerns about inflation, and its subsequent effects on the dollar. The Chinese are clearly very concerned about this. They see that some of their investments in the U.S. (like Blackstone) have gone badly wrong, and they worry that they will have worked so hard to save their $2 trillion in reserves, only to see it blown away by inflation. At the same time, there's this broader concern about how the current reserve system basically entails poor countries lending to the U.S. at very low interest rates. It's inequitable, and it also reduces consumer demand at a time when it's really needed.

Why can't the euro help fill the currency void?
A two-currency reserve system would be even more unstable than what we have now, because people would move in and out of the dollar and the euro depending on which is up or down, increasing volatility.
Click Here

You proposed a new reserve system at the U.N. recently. How would it work?
The new system would be supported by an already approved IMF measure to double the Special Drawing Rights [SDRs] available to countries in need. Rather than putting their money into dollar reserves which do nothing to increase consumption, countries could draw from this SDR $42.8 billion fund at need. That way, they spend the income, rather than storing it in the ground.

Do you think China's support of a non–dollar reserve system represents a new and more aggressive economic policy stance in the world?
I think that China's been taking a more active role for some time in a way that's been overlooked. We know about their aid to Africa, and attempt to buy Rio Tinto and things like that, but what's not covered is that they are winning the most World Bank contracts in Africa. They are very competitive. I think they are trying to represent the less developed nations, but have tried mostly to do it in a nonconfrontational way, so as not to upset the U.S., which often sees itself in competition with China in a way that the Chinese themselves do not.

You just came back from China. How is the economy there?
I think they are running things very well. They've got a large and much deeper stimulus package than we do. And they don't have our financial market troubles.

And how about Europe? You've been working with the French government to come up with a new way of measuring economic growth that would account for the benefits of education, staterun health care, etc. How would that work?
GDP is a misguided accounting number. Input figures are almost always more important than output figures. I'll give you two examples. In the U.S., we spend a lot of money on health care, but we have much poorer outcomes in terms of life expectancy, morbidity, etc., than many European nations. Yet that spending has the effect of increasing our GDP, even though much of the health-care spending is actually wasted money. Another example: we have the highest percentage of people in prison of any developed nation. This is a symptom of a dysfunctional society. Yet prison spending increases our GDP; it's a perverse effect. So, we're trying to come up with a method of accounting that would factor in things like this, as well as the benefits of education and health care and many other factors. It's not easy, and it certainly won't happen overnight, but it's meant to start a conversation about how we can achieve real, sustainable growth.

Do you think that the European welfare model is actually better suited to the economic needs of the moment?
Yes, definitely. Europe's social safety net can actually act as a kind of economic stimulus encouraging people to keep spending, or not to save so much, because they feel more secure. What's clear is that the American model of corporate welfare —taking care of companies, but not of people—is broken.

What's your take on the Geithner plan to offload bad bank assets in the U.S.?
It's terrible. Investors don't have to take responsibility—they can still walk away if it all goes bad. It's what I call American socialism—you socialize the losses and privatize the gains.

© 2009

http://www.youtube.com/watch?v=X192rTX0zgI
[youtube]<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/X192rTX0zgI&co ... ram><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/X192rTX0zgI&co ... edded&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>[/youtube]

Katare · Post by **Katare** » 29 Mar 2009 11:27

China challenges US global financial leadership

SHANGHAI (AP) -- The only major economy still growing at a fast clip, China is being unusually forthright in challenging the U.S.-led global order ahead of an April 2 summit on the financial crisis.

In his second rebuke of U.S. leadership this past week, the central bank governor, Zhou Xiaochuan, said China's rapid response to the downturn -- including a 4 trillion yuan ($586 billion) stimulus package -- proved the superiority of its authoritarian, one-party political system.

"Facts speak volumes, and demonstrate that compared with other major economies, the Chinese government has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions," Zhou said in remarks posted on the People's Bank of China's Web site.

In the approach to the London summit of 20 leading economies, Zhou called on foreign governments to give their finance ministers and central bankers broad authority so that they can "act boldly and expeditiously without having to go through a lengthy or even painful approval process."

China has made its agenda clear: It wants a stable U.S. dollar, and has even advocated the creation of another global currency altogether. It is leery of protectionism. And it is demanding a larger say in how financial systems are regulated and rescued, while holding back on any promises for new rescue or stimulus measures of its own.

"So far, China has been playing a game set up by other powers. Now China wants to be part of the agenda or rules-setting," said Ding Xueliang, a China expert at Hong Kong's University of Science and Technology.

Whether Beijing has a workable alternative vision for the future of world finance remains to be seen.

But China's growing assertiveness also suggests a sharpening urgency over its vulnerability to the global financial meltdown.

Fearful of any moves that might weaken the dollar and imperil China's estimated $1 trillion in Treasuries and other U.S. government debt, Chinese Premier Wen Jiabao has urged the United States to remain "a credible nation." In other words, Beijing wants Washington to avoid spurring inflation with excessive government spending on bailouts and stimulus packages.

To keep the value of its own currency steady -- some say undervalued -- the Chinese government must recycle its huge trade surpluses. The biggest, most liquid option is U.S. Treasuries. But a weakening dollar saps the value of those investments.

The Chinese "are being hurt more than anyone else by the mismanagement of the dollar," said William Overholt, an expert with Harvard University's Kennedy School of Government.

Underscoring that grievance, earlier this week Zhou, the central bank governor, called for a new global currency to end the dollar's dominance in trade, foreign reserves and commodity pricing.

Echoing proposals that have been debated for years, he urged the International Monetary Fund to create a "reserve currency" based on shares in the organization held by its 185 member nations, known as special drawing rights, or SDRs.

Such a move would "achieve the objective of safeguarding global economic and financial stability," Zhou said in an essay released by the central bank both in English and Chinese.

Given the wariness of most governments toward relinquishing any sovereign control over their currencies, few even in China view Zhou's proposal as likely to catch on anytime soon.

"Nobody believes the current global monetary system will be changed soon. It's more like a warning or signal to America to let them know how important it is to keep the dollar stable," said Ding Xinghao, president of the Shanghai Association of American Studies, a private academic think-tank.

China's stolid and somber president, Hu Jintao, will likely focus on cooperation rather than table pounding when he meets President Barack Obama for the first time at next week's London summit on the financial crisis.

"There is no strong consensus between the U.S. and Europe. They have different policy priorities. The EU is quite weak. There are too many states with different opinions and different policy priorities," said Zheng Yongnian, director of the East Asia Institute at the National University of Singapore. "So it would be easier for the U.S. and China to work together, despite their huge differences."

Still, China is committed to leading a push by the developing world for a greater say in how global finance is regulated and managed.

G-20 members already have agreed that developing countries need a bigger voice in the IMF. But under a system devised 63 years ago, each country's vote is tied to its financial commitments to the institution, which are determined by economic size, currency reserves and openness to trade and capital flows.

Wang Qishan, a top Chinese financial official and vice premier, said Friday in a commentary in The Times of London that Beijing was ready to contribute more, but wants changes in the IMF's governance structure.

"China is ready to play an active part in exploring ways to raise resources (For IMF)and will contribute to this effort within its ability," Wang wrote.

But he reiterated China's rejection of calls for it to provide part of its $2 trillion in foreign reserves to an IMF bailout fund.

China's leaders have problems at home that they need to spend on, and they insist that their country's greatest contribution to a global recovery is keeping its own house in order and following through on its stimulus package.

Wen said fresh stimulus measures were possible, but only if necessary.

"They've barely spent half of the money. Why should they be spending more now?" said Jing Ulrich, chairwoman for China equities at J.P. Morgan. "They are pacing themselves."

Despite its massive foreign reserves and an economy that many analysts believe is on the brink of recovery, China's leaders face stunning challenges in finding ways to create jobs for millions of migrant workers left newly unemployed. Social welfare and health systems are inadequate and its environment wrecked by decades of rampant industrialization.

"On the top, national level, yes, China has lots of money," says Ding Xueliang, a former Communist Party official. "But if you look at the troubles, all the economic and social challenges the leadership faces, China may hold so much money but it's not enough. It's not enough," he said.

Still, he says, China's leaders do recognize the need to make a bigger contribution if they want a larger say in reshaping the world financial order.

"More and more of the leadership see there is an opportunity for China," Ding said. "I don't expect a big contribution is possible in the short-term, but a gradual increase in support is possible."

Sanjay M · Post by **Sanjay M** » 05 Apr 2009 05:41

China Moving to Make Yuan World's Currency:

http://www.latimes.com/business/la-fi-y ... 8437.story

shynee · Post by **shynee** » 06 Apr 2009 06:25

Inside Story - China questions the dollar's value - 26 Mar 09 - Part 2

http://www.youtube.com/watch?v=Si2vXUJy ... re=related

Sanjay M · Post by **Sanjay M** » 06 Apr 2009 08:59

China Seeks to Become Electric Automobile Leader

http://www.nytimes.com/2009/04/02/busin ... ctric.html

sanjaykumar · Post by **sanjaykumar** » 06 Apr 2009 09:50

http://www.nytimes.com/2009/04/05/world ... ap.html?em

Chinese Hunger for Sons Fuels Boys’ Abductions

This is too horrible to use as a stick with which to beat China.

Purush · Post by **Purush** » 06 Apr 2009 17:23

^ That's a sad article

In some cases, local officials may even encourage people desperate for a son to buy one. After their 3-month-old son died, Zhou Xiuqin said, the village family planning official went to her home and tried to comfort her and her husband, who was compelled to have a vasectomy after the birth of the boy their second child. “He said, ‘Don’t cry, stop crying, you can always buy another one,’ ” Ms. Zhou recalled.

WTF! Is it mandatory in the PRC that all males have to undergo snipping after the birth of a male child?

Vipul · Post by **Vipul** » 06 Apr 2009 17:41

'China's investment-led growth a time bomb'.

As a political economist who tracks China and India closely, Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other. "But my worry," says Huang, "is that they're learning the wrong lessons from each other." In this first part of a two-part interview to DNA in Hong Kong, the MIT Sloan School of Management professor and the author of, most recently, Capitalism with Chinese Characteristics traces the problems in China's growth model, the effects of which are showing up acutely during this global economic downturn. Excerpts:

Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other.You argue that China's growth model, which is the envy of India and much of the world, is flawed. Why?
In my view, the true China economic miracle happened in the 1980s, when the country was powered by bottom-up enterprises, especially in the rural areas. In the 1990s, China changed its development strategy by placing greater emphasis on big cities like Shanghai and Beijing. To me, the 'Shanghai model' represents the most extreme example of economic and financial distortion, but today that model is being replicated elsewhere in China.

The 'Shanghai model' is an extreme version of a model that's effective in building production but not in building a consumption base. Indicatively, in the 1990s, Shanghai's GDP per capita grew dramatically in comparison with the national average, but household incomes relative to the rest of the country were virtually unchanged.
That goes to the heart of the problem that China faces today: It's been successful in generating GDP growth, but far less successful in generating household income growth.

It's been good at building a huge production base but equally good at suppressing a consumption base. And now, as a result of the financial crisis and the global economic downturn, unemployment is rising and wage growth for China's rural migrants has slowed, which will only suppress incomes further.

If the model is flawed, how do you account for China's supernormal GDP growth for 30 years?
It's not a mystery. Some 50% of China's GDP comes from investment, which has a huge multiplier effect on GDP. Now, there's evidence that they are doing that again, with the 4 trillion yuan ($585 billion) stimulus package.

Sure, some of that will go into social spending, which is good. But much of that will trigger another wave of huge investments. You only have to look to Japan to know that such investments cannot get you out of a hole.

I feel very strongly that if you see a fast GDP recovery in China and if that recovery is powered by investment, it is a time bomb.
In the past, that kind of growth was sustained by high demand from the US and other developed countries. I don't see any evidence that the US economy will recover magically to the level it was before the financial crisis.

So, the stuff that China puts out has to be absorbed somewhere. The government is trying to increase domestic consumption, but they're trying that within the existing level of the income rather than thinking of growing the income.

In terms of household income and the small asset base, China is very poor - in some ways, poorer than India. China's consumption-to-GDP ratio is lower than India's. Savings rate of households are not high in China: It's only government corporations' savings that are high.

Since 2003, China's leaders have emphasised rebuilding the social safety nets and narrowing the income gap between rural and urban areas. Do these mark a return to the policies of the 1980s, which you believe underlie the China growth miracle?
There's an attempt to go back to the 1980s, but these developments have been mixed. Sure, there is more emphasis on rural issues and social safety nets. And connected to that is the emphasis on rural education and rural health provisions.
But there's very little connection with the 1980s in terms of the methods.

We're now seeing only baby steps, and more administrative measures, more government involvement. In the 1980s, on the other hand, rural financial reforms were put at the front and centre and at a very high level of policy response. In that sense, we've not returned to the 1980s model at all, even though leaders are talking about rural entrepreneurship today.

One similarity between now and the 1980s is that then too the country faced a huge unemployment problem. But support for rural entrepreneurship in the 1980s was driven not by ideology but pragmatism. Today, a majority of the policy emphasis is on preserving GDP growth at 8% by supporting exports. Even if there is a rural entrepreneurship initiative, it's not been highlighted.

There's been a slideback in China's efforts at poverty reduction since the 1990s. How did this happen despite high GDP growth and what are the socio-political implications of this?
The whole issue of rural migration has shaped many of the economic and social developments in China. Some of these are positive effects: China created this huge export industry, which was very successful for a time. In fact, I'd argue that India should have more of this broad-based export success.

But the issue in China is whether we need this level of migration to create this level of success. I acknowledge the success, but I also see a huge downside.

When rural migrants go to the cities for employment, they are excluded from the social services, educational services and health services. When I was in Guangdong province (in China's south, home to many special economic zones) recently, I saw a sign that said: "People born between September 1 1994 and October 1 2008 should report to the government to receive free immunisation shots."

Basically, one entire generation of rural people who were born in the 1990s simply fell off the map! The same is the case with education. Because the migrants are not urban residents, their children are not entitled to education in the cities. And when NGOs started schools for migrant workers' children, the government shut them down.

An entire generation of people in the 1990s fell through the cracks.
All this has enormous political implications. The rural situation makes politics less stable rather than more stable. I link everything to rural development. When rural development in China was successful, the country as a whole was successful.

The rural issue has to be front and centre - similar to what (Mahatma) Gandhi said. I disagree with Gandhi's methods, but the philosophy was right.

Rishirishi · Post by **Rishirishi** » 07 Apr 2009 03:19

Vipul wrote:'China's investment-led growth a time bomb'.

As a political economist who tracks China and India closely, Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other. "But my worry," says Huang, "is that they're learning the wrong lessons from each other." In this first part of a two-part interview to DNA in Hong Kong, the MIT Sloan School of Management professor and the author of, most recently, Capitalism with Chinese Characteristics traces the problems in China's growth model, the effects of which are showing up acutely during this global economic downturn. Excerpts:

Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other.You argue that China's growth model, which is the envy of India and much of the world, is flawed. Why?
In my view, the true China economic miracle happened in the 1980s, when the country was powered by bottom-up enterprises, especially in the rural areas. In the 1990s, China changed its development strategy by placing greater emphasis on big cities like Shanghai and Beijing. To me, the 'Shanghai model' represents the most extreme example of economic and financial distortion, but today that model is being replicated elsewhere in China.

The 'Shanghai model' is an extreme version of a model that's effective in building production but not in building a consumption base. Indicatively, in the 1990s, Shanghai's GDP per capita grew dramatically in comparison with the national average, but household incomes relative to the rest of the country were virtually unchanged.
That goes to the heart of the problem that China faces today: It's been successful in generating GDP growth, but far less successful in generating household income growth.

It's been good at building a huge production base but equally good at suppressing a consumption base. And now, as a result of the financial crisis and the global economic downturn, unemployment is rising and wage growth for China's rural migrants has slowed, which will only suppress incomes further.

If the model is flawed, how do you account for China's supernormal GDP growth for 30 years?
It's not a mystery. Some 50% of China's GDP comes from investment, which has a huge multiplier effect on GDP. Now, there's evidence that they are doing that again, with the 4 trillion yuan ($585 billion) stimulus package.

Sure, some of that will go into social spending, which is good. But much of that will trigger another wave of huge investments. You only have to look to Japan to know that such investments cannot get you out of a hole.

I feel very strongly that if you see a fast GDP recovery in China and if that recovery is powered by investment, it is a time bomb.
In the past, that kind of growth was sustained by high demand from the US and other developed countries. I don't see any evidence that the US economy will recover magically to the level it was before the financial crisis.

So, the stuff that China puts out has to be absorbed somewhere. The government is trying to increase domestic consumption, but they're trying that within the existing level of the income rather than thinking of growing the income.

In terms of household income and the small asset base, China is very poor - in some ways, poorer than India. China's consumption-to-GDP ratio is lower than India's. Savings rate of households are not high in China: It's only government corporations' savings that are high.

Since 2003, China's leaders have emphasised rebuilding the social safety nets and narrowing the income gap between rural and urban areas. Do these mark a return to the policies of the 1980s, which you believe underlie the China growth miracle?
There's an attempt to go back to the 1980s, but these developments have been mixed. Sure, there is more emphasis on rural issues and social safety nets. And connected to that is the emphasis on rural education and rural health provisions.
But there's very little connection with the 1980s in terms of the methods.

We're now seeing only baby steps, and more administrative measures, more government involvement. In the 1980s, on the other hand, rural financial reforms were put at the front and centre and at a very high level of policy response. In that sense, we've not returned to the 1980s model at all, even though leaders are talking about rural entrepreneurship today.

One similarity between now and the 1980s is that then too the country faced a huge unemployment problem. But support for rural entrepreneurship in the 1980s was driven not by ideology but pragmatism. Today, a majority of the policy emphasis is on preserving GDP growth at 8% by supporting exports. Even if there is a rural entrepreneurship initiative, it's not been highlighted.

There's been a slideback in China's efforts at poverty reduction since the 1990s. How did this happen despite high GDP growth and what are the socio-political implications of this?
The whole issue of rural migration has shaped many of the economic and social developments in China. Some of these are positive effects: China created this huge export industry, which was very successful for a time. In fact, I'd argue that India should have more of this broad-based export success.

But the issue in China is whether we need this level of migration to create this level of success. I acknowledge the success, but I also see a huge downside.

When rural migrants go to the cities for employment, they are excluded from the social services, educational services and health services. When I was in Guangdong province (in China's south, home to many special economic zones) recently, I saw a sign that said: "People born between September 1 1994 and October 1 2008 should report to the government to receive free immunisation shots."

Basically, one entire generation of rural people who were born in the 1990s simply fell off the map! The same is the case with education. Because the migrants are not urban residents, their children are not entitled to education in the cities. And when NGOs started schools for migrant workers' children, the government shut them down.

An entire generation of people in the 1990s fell through the cracks.
All this has enormous political implications. The rural situation makes politics less stable rather than more stable. I link everything to rural development. When rural development in China was successful, the country as a whole was successful.

The rural issue has to be front and centre - similar to what (Mahatma) Gandhi said. I disagree with Gandhi's methods, but the philosophy was right.

On top of this you can add the impact of the one child policy. China may face very uncertain times, as the 2 pillars of growth, Investments and exports are going to take a hit.

putnanja · Post by **putnanja** » 08 Apr 2009 02:14

“Single dominant currency not safe”

...
In a discussion with journalists from The Hindu at the newspaper’s office here on Tuesday, Mr. Zhang commented on the proposal of the Governor of China’s Central Bank to consider a new world reserve currency, possibly the International Monetary Fund’s SDRs or Special Drawing Rights, which are based on a basket of four currencies: the dollar, euro, pound and yen.

“I think that’s our wish and also I think it’s the wish of many countries, because a single currency as the world dominant currency is not safe and reliable, from what we have seen in the past one year,” he said. “So we need a basket of currencies to form as a basis for a world currency which in our view will be more secure. Furthermore, I think it will be more fair, fair to other countries. But now, it’s not fair to us, not fair to India.”
...

Vipul · Post by **Vipul** » 08 Apr 2009 17:21

'India learning wrong lessons from China'.

Indian policymakers' fascination with the 'Shanghai model' of development shows that India is learning precisely the wrong lessons from China's growth, says political economist and MIT Sloan School of Management professor Yasheng Huang. In this concluding part of a two-part interview to DNA, Huang, author of, most recently, Capitalism with Chinese Characteristics, points to the most important 'Chinese takeaway' for India. Excerpts:

Indians are enamoured of Shanghai, but your most recent book has an entire chapter detailing Shanghai's failings as an economic model. What is wrong with Shanghai?
A successful economic model creates value for everybody, rather than for some at the expense of others. Shanghai didn't do that. In Shanghai, the government intervened to acquire land as the sole buyer, without competition, from rural households, and gave it to domestic and international real estate developers. That creates value on huge infrastructure projects and impressive high-rises, but the average Shanghainese people's household income has not grown relative to the rest of the country.

My hunch about Shanghai -- even though I couldn't find the data to support it -- is that its growth was subsidised by the rest of China. I've heard that when Pudong (the Special Economic Zone in Shanghai) was built, virtually every Chinese province was required to invest there. There's a fundamental difference between Shanghai in the 1990s and Shenzhen in the 1980s. Shenzhen's development was a bottom-up, bootstraps model: in the 1980s, Shenzhen too drew entrepreneurs from the rest of the country, but it didn't receive subsidies from the central government the rest of China. And my biggest concern going forward is that the Shanghai model is being repeated for the whole country.

China's model of reckless urbanisation is also distorted. Migrant workers are denied entitlements in cities, and so urban areas get a labour contribution but they don't have to pay for it. I'm not against urbanisation; but urbanisation implies certain responsibilities and costs that are not currently reflected in the way China is urbanising itself.

In China today, there's a phrase that reflects mainstream view: political aesthetics, that is, beautiful cities for political reasons. There is a view that economic growth means gleaming airports, high-rises, six-lane highways... That's not productive.

If it's wrong for Mumbai to aspire to be a Shanghai, is there a China template to replicate?
You can have Mumbai becoming the next Shanghai - if you neglect Bangalore, Kerala, Tamil Nadu and so on.

But my criticism of the Indian model is this: If you're not building highways and buildings, are you investing your resources in education, health and so on? India isn't learning the truly successful Chinese model, which is the social model of the 1970s and 1980s, with emphasis on education and public health, especially in the rural areas. Instead, they are fascinated with high-rises, Shanghai and things like that.

But the Shanghai model is troubled, also because it relies heavily on foreign direct investment (FDI), which has slowed down in China. Shanghai relies so much on external sources of efficiency and business improvement that as soon as it runs out of external sources of capital, it will face problems.

The biggest lesson for India from China is the importance of the social sector: education and health. When India doesn't educate its girls, it's counterproductive --- economically and socially. The other important lesson is for India to get the sequence right. You look at China, and you see airports, highways and you think that China succeeded because of these. Whereas, in fact, these things followed China's success. China succeeded in the first place because of the social investments it made in the 1970s.

The conventional view is that democracies pay for political liberalism with slower growth; people cite India and China as contrasting examples. But you disagree...
I don't see a trade-off between economics and politics. India failed economically in the 1960s and 1970s, and people blamed it on democracy. But India had a centralised economic system then, so you have at least two competing hypotheses to explain India's slow growth.

In fact, in both China and India, the period when their growth was meaningfully fast was when they experienced some political liberalisation. We can have a debate about what constitutes political liberalism. I'd argue that India perhaps has to work on increasing accountability and reducing corruption. But the general principles of accountability and liberalism -- and some form of constitutional checks and balances -- constitute the formula for economic success. China, too, had a system of checks and balances in the 1980s: its politics was centralised, but economics was decentralised. The central government and the provinces had to consult each other. But in 1993, they centralised the economic system. Many of China's problems can be traced back to that: it deprived the country of a productive consultation process.

In the 1980s, for instance, you heard all kinds of opinions because various policy options were debated openly. People's Daily would run articles debating major policy issues. You don't see that now.

In that sense, what can China learn from India?
Economist Amartya Sen, in his book The Argumentative Indian, uses the term 'democracy by discussion'. I like that. China should more have 'democracy by discussion' even in the absence of a formal democracy.

The biggest value of the Indian model is that there isn't necessarily a contradiction between political liberalism and economic growth. When scholars in China cite India's problems, I say, "Yes, I acknowledge these problems, but the fact is that India showed it too can grow at 9%, so you have to convince me that there is a huge downside with that system."

When I first advocated the Indian model, it was much more difficult because India was a slow grower, but now it's a little easier. My view is that the Indian system is able to efficiently use the limited things it has, whereas China has lots of things in its favour but it also wastes its resources. Indian companies, for instance, may have old buildings or slow computers, but they have good managements and the right ideas, whereas in China, factory buildings are very good and the equipment is modern, but you still have quality problems.

So, I think both countries have a lot to learn from each other, but my worry is that they are learning the wrong things from each other.

Liu · Post by **Liu** » 11 Apr 2009 19:09

Vipul wrote:'India learning wrong lessons from China'.
.............

every dog has its time. for time being, CHina performs better than India, I think,if mesured by most indications.

Yogi_G · Post by **Yogi_G** » 11 Apr 2009 20:46

Liu wrote: every dog has its time. for time being, CHina performs better than India, I think,if mesured by most indications.

Errr...there is a slight problem, most of the numbers coming out of China are fabricated, I mean they have more tweaking in them by the CCP than the melamine in the milk!! So when you "measure" against the numbers you will come up with a result as genuine as the democratic credentials of China's "Dear" leaders...

BTW, I heard some dogs have their time up in China, some regions of China are avid consumers of dog-meat. My Chinese colleague informed me of this without even the slightest of hesitation!!

Arya Sumantra · Post by **Arya Sumantra** » 11 Apr 2009 21:36

Yogi_G wrote:some regions of China are avid consumers of dog-meat

dog meat is common in Korea too. Many amirkhans who generally mock yindians for not eating beef are themselves shell shocked when they hear about man's best friend being on dinner table in east asian restaurants.
They have a saying in chinese: Any animal that has the back pointing towards the sky can be eaten.
That only leaves man out

Vipul · Post by **Vipul** » 11 Apr 2009 22:56

Liu you are right.Now its China's time(due no doubt because of the 12 yrs of head start china had over India in ushering in the reforms process).Its going to be interesting from 2014 onwards when India will for the first time in history enjoy a more favorable demographic advantage over china in terms of available employable labor force.We will see how far China remains cost competitive as a manufacturing base.

vsudhir · Post by **vsudhir** » 11 Apr 2009 23:32

Vipul wrote:Liu you are right.Now its China's time(due no doubt because of the 12 yrs of head start china had over India in ushering in the reforms process).Its going to be interesting from 2014 onwards when India will for the first time in history enjoy a more favorable demographic advantage over china in terms of available employable labor force.We will see how far China remains cost competitive as a manufacturing base.

Good point.

In any case, we don't want to be competing with PRC in each and everything. Assuring a decent life to Indian citizens remains our #1 priority.

BTW, whats with this 2014 thing? Why does labor force size matter anymore when there's not enough jobs for the current lot itself? Also, PLA has been gaming and making noises of border conflicts around 2017. Wonder if the 2 are connected.

Vipul · Post by **Vipul** » 12 Apr 2009 00:58

2014 will be the first year when India will have more number of People joining the labor force then China.With the one child policy and its aging population increasing rapidly its going to be interesting times ahead for china.
As far as 2017 is concerned, i think China will attack india only if it is assured of a victory.Anything less and it will loose face which it cant afford to if it wants the world to treat her as a world power capable of taking on the US of A.So unless its able to take some territory(which i dont think is possible) 2017 aint going to happen.

shynee · Post by **shynee** » 12 Apr 2009 03:54

Nouriel Roubini's take on China's economic prospects - PDF

rundstedt · Post by **rundstedt** » 12 Apr 2009 16:22

Vipul wrote:2014 will be the first year when India will have more number of People joining the labor force then China.With the one child policy and its aging population increasing rapidly its going to be interesting times ahead for china.
As far as 2017 is concerned, i think China will attack india only if it is assured of a victory.Anything less and it will loose face which it cant afford to if it wants the world to treat her as a world power capable of taking on the US of A.So unless its able to take some territory(which i dont think is possible) 2017 aint going to happen.

where do india get investment in fixed assets to employ labor force? did you calculated it?
Indian's un-employed and spare rural labor force are 4 times larger than china nowadays. but india has no advantage in competition, since the broken industrial chain.

vina · Post by **vina** » 12 Apr 2009 17:26

Rundesdt, It is true that India probably has a higher percentage of workforce in agriculture (I dont think calling it "unemployment" is fair), than China, and yes, probably higher unemployment overall than China. But the Chinese experience is unsustainable and cannot be replicated in India. China is in deep trouble, (whether you recognize it or not is a different story) and even if the economy recovers today, you cannot continue doing what China did for the last 25 years for growth. No sir, China has to turn inwards to a much poorer population to sell goods and services to and needs. That is the bottomline. Chinese industrialization driven by selling goods to foreign markets has run it's course.

I am willing to bet that over the next five years, China's growth rate will be much less than the past 20 years average and it will continue to go down. I think the Chinese growth rate has peaked and it is over. It is going to trend down in the long term from here.

Yes and you heard it at BRF first. Remember that 5 years from now, when you look at the trend.

Dilbu · Post by **Dilbu** » 12 Apr 2009 17:43

My prediction is that in contrast to China, the SDREs will retain a considerable portion of their growth. Elephants are slow but steady animals.

rundstedt · Post by **rundstedt** » 12 Apr 2009 17:57

vina wrote:Rundesdt, It is true that India probably has a higher percentage of workforce in agriculture (I dont think calling it "unemployment" is fair), than China, and yes, probably higher unemployment overall than China. But the Chinese experience is unsustainable and cannot be replicated in India. China is in deep trouble, (whether you recognize it or not is a different story) and even if the economy recovers today, you cannot continue doing what China did for the last 25 years for growth. No sir, China has to turn inwards to a much poorer population to sell goods and services to and needs. That is the bottomline. Chinese industrialization driven by selling goods to foreign markets has run it's course.

I am willing to bet that over the next five years, China's growth rate will be much less than the past 20 years average and it will continue to go down. I think the Chinese growth rate has peaked and it is over. It is going to trend down in the long term from here.

Yes and you heard it at BRF first. Remember that 5 years from now, when you look at the trend.

Western media have been talking down chinese economy for 20 years, but the fact was walking to the contrary.

vsudhir · Post by **vsudhir** » 12 Apr 2009 18:33

Western media have been talking down chinese economy for 20 years, but the fact was walking to the contrary.

Hmmm. And you expect BRF to buy that, comrade? Next, will you claim that PRC rose 'despite the west'? That exports to western economies don't account for over a quarter of PRC GDP? That the coastal miracle wasn't built to serve export markets? That the capital and fixed asset creation in Guanzhong wasn't export driven? That the financing for many govt schemes comes from captive state owned banks that prey on their monopoly over the people's deposits? And now that the export mkts have slowed to a crawl, a lot of these fixed asset investments are still a grand idea? That should the US inflate its way out of this recession, PRC will continue to make merry with its 1.2T USD stash inflating to 0.5T in a few yrs? Sure, you can try selling off the stash in a collective fit. But then will you make the case that the US-UK have never defaulted before and they will again when it suits them?

In any case, doesn't a comlade of a soup-e-rear system with a burning mission have better things to do than argue with SDRE Yindians who will never anyway catchup with the greater glory of the people's republic?

Hey, PRC is well ahead in some, maybe many areas. We'd rather learn from the mistakes of all before us than make the same again, pointlessly. Anyway, things move slowly in India - hurrying it up coercively can strain the system to everyone's misfortune. Am just happy to note that some states (Gujrat is #1 example, hopefully the SEZs will also take off) are making Guangzhong level progress within the yindian system. And that too with a focus more on the domestic market than betting on export markets alone. Hope is that the laggard states will have no option but to reform and clean up their act when faced with an investment exodus.

Let us see. Time will tell. Bottomline - India can live with being second to China. We are at peace with ourselves for the most part. Can China live with even the 1% possibility it may lag the SDREs? Yup, didn't think so.

Dilbu · Post by **Dilbu** » 12 Apr 2009 18:37

Western media have been talking down chinese economy for 20 years, but the fact was walking to the contrary.

Conditions have changed boss. Look who was buying and what was being manufactured. Most of the products being manufactured in China has to be sold in overseas markets because of the lower purchasing power of domestic market. China does not have a large and diverse enough domestic market to sustain the kind of growth it was achieving over the last decade. It is dependent on export. Western economies will be forced to give a boost to their own domestic markets and naturally China's share of the global export pie will shrink.

Every exporter in the world including India will suffer but China will suffer more. An Indian exporter has the option of turning to local market if his exports are down. If we look closely at the kind of goods exported by china, it is obvious that a major portion of it will not be suitable for the Chinese market. That will make a huge difference. JMT onlee.

rundstedt · Post by **rundstedt** » 12 Apr 2009 19:17

vsudhir wrote:
Hmmm. And you expect BRF to buy that, comrade? Next, will you claim that PRC rose 'despite the west'? That exports to western economies don't account for over a quarter of PRC GDP? That the coastal miracle wasn't built to serve export markets? That the capital and fixed asset creation in Guanzhong wasn't export driven? That the financing for many govt schemes comes from captive state owned banks that prey on their monopoly over the people's deposits? And now that the export mkts have slowed to a crawl, a lot of these fixed asset investments are still a grand idea? That should the US inflate its way out of this recession, PRC will continue to make merry with its 1.2T USD stash inflating to 0.5T in a few yrs? Sure, you can try selling off the stash in a collective fit. But then will you make the case that the US-UK have never defaulted before and they will again when it suits them?.

In complete agreement with you except one point -- the china did not despite the west, she despite the advices of west. development of china is based on japanese model, looks strange in european eyes. I am always feeling strange that the indians who speaking english are entire european thinking.
In chinese developing progress, the most important thing is making poor ppls richer. sweatshops is cruel in european eyes, but they has made hundreds of millions ppl living in above $1000 a year. as you know, in year of 1978, 800 millions peasants lived in absolute poverty.
What do the indian's plan about your 600 millions absolute poverty population? How to save them from absolute poverty? By so called democracy which colonists told you?

vsudhir wrote: Hey, PRC is well ahead in some, maybe many areas. We'd rather learn from the mistakes of all before us than make the same again, pointlessly. Anyway, things move slowly in India - hurrying it up coercively can strain the system to everyone's misfortune. Am just happy to note that some states (Gujrat is #1 example, hopefully the SEZs will also take off) are making Guangzhong level progress within the yindian system. And that too with a focus more on the domestic market than betting on export markets alone. Hope is that the laggard states will have no option but to reform and clean up their act when faced with an investment exodus.

Let us see. Time will tell. Bottomline - India can live with being second to China. We are at peace with ourselves for the most part. Can China live with even the 1% possibility it may lag the SDREs? Yup, didn't think so.

Globalization of china is less than japan and germany, so export-oriented economy is not the problem.
the only thing which can make chinese economy touching ceiling is shortage of resource, China consumed too much oil, ore and coal. the earth could not afford in 5~10 years @ current increasing rate.

vsudhir · Post by **vsudhir** » 12 Apr 2009 20:45

the only thing which can make chinese economy touching ceiling is shortage of resource, China consumed too much oil, ore and coal. the earth could not afford in 5~10 years @ current increasing rate.

OK. So what solution do you propose?

What is you plan for 5-10 yrs down the line? When each emerging chinese comrade will have to support 4 dependent grandparents?

Note: Not saying the 1 child policy is good, bad or ugly. Time will tell what it is, I guess.

What do the indian's plan about your 600 millions absolute poverty population? How to save them from absolute poverty?

By innovating to unlock a new storehouses of energy - such as Thorium Power, w/o having to depend on outside sources, thank you.

By opening the domestic market to domestic capital on a priority basis,

By harnessing domestic ideational, intellectual, social and financial capital from all over the world to our benefit before rushing to create permanent assets that serve foreign fancies,

By having the leadership accountable to the people they serve in a orderly, non-disruptive, non-revolutionary way

By enabling property rights and the rule of law so that people are free and secure enough to live, travel, trade, innovate and be happy, (sounds corny, no? It certainly would to our Indian commies. All comlades are alike, I guess)

As for poverty, we will tackle it in our own slow, bumbling way, thank you again. The poor have the vote and experience behind them. It comes with a culture of taking responsibility - if India's poor despite the vote don't elect good leaders, they can't blame anyone but themselves. Its a system that will ensure India will rise to her level of competence, no more and no less. And that fine by me. No desire of over-reach on India's part. Enough to guarantee our security in our lands and our near-abroad is quite, quite enough. If that is difficult to understand, and our yindina comlades certainly face these difficulties, I can understand.

Well, shall stop here. Whats the point, I reckon? Bhains ke saamne been bajana? (Ancient Indian idiom)

By so called democracy which colonists told you?

Wrong. The democracy we now have is our own - with, without or despite the machination of the erstwhile imperial powers.

And what would you have yindia do, comlade? Follow the soup-e-rear chinese model? Because you say so?

John Snow · Post by **John Snow** » 12 Apr 2009 22:15

This is from late 1990s. From Frontline (not Indian owned by Hindu publications but Amercan )

Clinton was pushing Congress to permanently normalize trade relations with Beijing, helping to ease China's entry into the World Trade Organization (WTO). Big business was furiously lobbying Capitol Hill in favor of the legislation. It saw China, with its 1.2 billion consumers, as a vast new emerging market and many parts of Corporate America wanted a piece of the action.

Just weeks before the legislation received the president's signature, Robert Burt, chairman of the Business Roundtable, an association of CEOs of leading American corporations, spoke boldly about the future. "This historic legislation will be remembered as the key that opened the door for America to sell its products and services to the world's largest emerging marketplace," he declared.

Other executives around the U.S. were equally strong in supporting U.S. trade with Beijing, and China's efforts to get into the WTO because they reasoned that China would then be required to play by the same trading rules as the WTO's other members. Moreover, as Europeans rushed to do business in China, American corporate captains did not want to be left behind. They worried that unless the U.S. backed the move, they would lose out to the Europeans, a worry Chinese officials played upon effectively from time to time during the 1990s.

On Capitol Hill, legislation to normalize trade with China got overwhelming bipartisan support in the Senate, where it passed, 83 votes to 15. Even in the House, where Democrats were split on the issue, the president received support from three-quarters of the Republicans, and the legislation passed by a wide margin, 237 to 197.

President Clinton signed the legislation at the White House in early October, and China joined the WTO 14 months later, on Dec. 11, 2001.

So How Did the U.S. Trade Opening with China Work Out?

For many, America's trade with China has not lived up to the enthusiastic advance billing from the Clinton administration, its Republican supporters on Capitol Hill and Corporate America.

Expanded trade with China has, in fact, been a blessing for large U.S. multinationals like Boeing, Caterpillar, and Cargill, which had trumpeted the prospect of a massive Chinese market for American products and services. China is the world's fastest growing market for commercial aviation, and needs billions of dollars worth of airplanes from Boeing. Its growing infrastructure has been a boon for companies like Caterpillar, which produces tractors and other heavy equipment. And it is importing billions of dollars worth of farm products, a boon to companies like Cargill. Last year, China bought $2.9 billion worth of soybeans -- the top U.S. export crop to China. China also has proven to be a growing market for U.S.-made fertilizer and chemicals.

But China has been a tougher market to crack for smaller and mid-sized American companies, like those selling bicycles, vacuum cleaners, and lawn mowers, who face stiff price competition from Chinese manufacturers of these products. And they also face discriminatory rules, burdensome red tape, language difficulties, and a population that earns only a fraction of what U.S. consumers make, and therefore lacks the purchasing power to buy consumer goods made in America.

Yvonne Smith, the communications director at the Port of Long Beach, literally sees the imbalance in U.S.-China trade. She reports that through Long Beach alone, the U.S. is importing $36 billion in goods yearly from China and exporting just $3 billion. By her account, the mix of products is very unfavorable to the U.S.

"We export cotton, we import clothing," Smith reports. "We export hides, we bring in shoes. We export scrap metal. We bring back machinery. We're exporting waste paper, we bring back cardboard boxes with products inside them."

Overall, the U.S. trade deficit with China reached a record $124 billion dollars in 2003 and the figure is headed even higher this year. Today, U.S. imports from China outpace U.S. exports to China by more than five to one, and the deficit shows no signs of abating.

These deficits are much larger than the trade deficits that the United States experienced in the 1980s and 1990s with Asian trading partners such as Japan. Put in historical perspective, America's current trade deficit with China is roughly double what it was at its height with Japan in the mid-1980s, when trade frictions between the U.S. and Japan led Sen. Lloyd Bentsen (D-Texas) to famously declare on the floor of the U.S. Senate: "We're in a trade war, and we're losing it."

Does the Trade Deficit with China Matter?

Economists disagree about the significance of the U.S. trade deficit with China. The U.S.-China Economic and Security Review Commission, a 12-member panel set up by Congress several years ago to report annually on our relations with China, says the burgeoning trade deficit is a matter of "long-term economic health and national security" for the U.S.

Conservative economist Paul Craig Roberts, who served in the Reagan administration, predicts the trade deficit will cause a crash of the U.S. dollar before long, and warns that the U.S. will wind up having a third-world economy, supplying raw-materials to other countries, who then ship back finished goods to the U.S. Economist Larry Mishel, president of the liberal Economic Policy Institute, contends that the trade deficit with China has cost the United States more than a million jobs over the past decade.