PRC Economy and Industry: News and Discussions

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Hari Seldon
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Re: PRC Economy News and Discussions

Postby Hari Seldon » 15 Nov 2009 19:06

This NIIT should be banned for doing any biz in india


Thats one way of looking at it.

The other is to see that if PRC is anyway coming up on the IT map, let a desi form grab the spoils. Let a desi firm pre-empt chini rivals on the global stage by leveraging their feeding grounds for itself as well.

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Re: PRC Economy News and Discussions

Postby vera_k » 16 Nov 2009 02:09

In fact I have seen two cases where Indian owners have sold their outsourcing outfits to the Chinese owners.

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Re: PRC Economy News and Discussions

Postby Rishirishi » 16 Nov 2009 03:30

Hari Seldon wrote:
This NIIT should be banned for doing any biz in india


Thats one way of looking at it.

The other is to see that if PRC is anyway coming up on the IT map, let a desi form grab the spoils. Let a desi firm pre-empt chini rivals on the global stage by leveraging their feeding grounds for itself as well.


The Chinease have very very poor English skilles. And they do not have a ready source to learn it at advanced level. Imagine putting a Hindi medium graduate who does not know any English, at a 1 year training camp. At best the chap will be able to communicate on very basic and simple matters. No way near the call centre standard. And no way near what is readly available in Jaipur or kanpur.
As for their programming skilles, they do not have the experianced people, just graduate level.

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Re: PRC Economy News and Discussions

Postby Masaru » 16 Nov 2009 06:38

Rishirishi wrote:The Chinease have very very poor English 'skilles'. No way near the call centre standard. And no way near what is readly available in Jaipur or kanpur.
As for their programming skilles, they do not have the experianced people, just graduate level.


And why is this English skill issue such a sacrosanct one? Do the Chinese corporations conduct business in English? Why the assumption that the ultimate denouement of all IT is to produce call center people? Take a look at how many US/UK citizens learning Mandarin to get a drift of where the economic wind is blowing. English usage is just a byproduct of UK-US dominance of last 200 years; once that is gone there is no value in the so called english advantage that the IT people are tomtomming. One should be ashamed that a country of 1.2 B people hasn't or cannot throw away a Colonial language; not go around boasting about it. Well not too long ago the so called Indian intelligentsia used to take pride in it's mastery over composing songs/phrases in Persian/Arabic, what happened to that 'skill set'? 200 years down the line who is to say that English will not join the same league. Fine to take pride in one's native culture/philosophy and language not ones which were forced down the throat by invaders.

They are more interested in hard skills and real production technologies rather than mastering accents to be the ideal call center employee.
GE to Set Up China Venture to Produce Aircraft Electronics
The agreement highlights increasing competition among Western aircraft-engine makers and others to supply technology for a large passenger jet, the C919, that China's main state-owned commercial-aircraft maker, AVIC-offshoot Commercial Aircraft Corp. of China Ltd., or Comac, is trying to launch by 2016. The aim for that aircraft, the C919, is to compete with Boeing's B737 and Airbus's A320.

Boeing and Airbus are expected to come up with next-generation narrow-body jets to replace their aging jetliners, but by some projections, those replacements won't enter service until the early 2020s. Comac is aiming for a crucial edge by launching the C919 by 2016. Comac, based in Shanghai, has told suppliers it plans to sell 2,500 C919 planes over a period of 20 years.

For Comac, the C919 follows last year's launch of its first passenger jet, a 70-seat regional plane called the ARJ-21. The two aircraft represent significant steps by China to try to cut into the global aerospace market dominated by Boeing and Airbus and a handful of other aircraft makers. GE provided engines for the ARJ-21 and last year signed a deal with Comac to purchase five ARJ-21 jets, with an option to buy 20 more. GE said it planned to lease the regional jets to Chinese airlines to operate within China.

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Re: PRC Economy News and Discussions

Postby vera_k » 16 Nov 2009 10:58

The English language skills may be a non-issue. What I see is that they are staffing their US operations with a few Indians to get around their lack of people with the language skills.

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Re: PRC Economy News and Discussions

Postby Hitesh » 17 Nov 2009 00:10

An article in NYTimes says that the economy of China is $4.4 trillion up from $1.2 trillion in 2000. How the hell can China quadruple its economy in 8 -9 years only growing at 10% rate. In order to quadruple you would need 15% or higher. There must be some number fudging.

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Re: PRC Economy News and Discussions

Postby Suraj » 17 Nov 2009 00:13

Hitesh wrote:An article in NYTimes says that the economy of China is $4.4 trillion up from $1.2 trillion in 2000. How the hell can China quadruple its economy in 8 -9 years only growing at 10% rate. In order to quadruple you would need 15% or higher. There must be some number fudging.

Actual growth rate of an economy = real (reported) GDP growth rate + GDP deflator (inflation)

In other words, GDP grows at the rate given by the nominal growth rate, not real growth rate. In addition, they changed their base year to 2004-05 a few years ago, which has a significant upward effect on reported GDP.

The same applies to Indian GDP, which grew from ~$450 billion in 1999-00 to ~$1300 billion now, but we haven't changed our base year - we still effectively use 1993-94, since industrial production and inflation are reported on that base.

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Re: PRC Economy News and Discussions

Postby Hari Seldon » 17 Nov 2009 05:44

Sri Ambrose Evans Pritchard on why cheena's mercantilism is the #1 threat to world peace and economic stability:

By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – "stealing American jobs", says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too.

Western capitalists are complicit, of course. They rent cheap workers and cheap plant in Guangdong, then lobby Capitol Hill to prevent Congress doing anything about it. This is labour arbitrage.

At some point, American workers will rebel. US unemployment is already 17.5pc under the broad "U6" gauge followed by Barack Obama. Realty Track said that 332,000 properties were foreclosed in October alone. More Americans have lost their homes this year than during the entire decade of the Great Depression. A backlog of 7m homes is awaiting likely seizure by lenders. If you are not paying attention to this political time-bomb, perhaps you should.


Now this much is well known. Question is what will yamerika do about it?

It is fashionable to talk of America as the supplicant. That misreads the strategic balance. Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.

If provoked, the US has the economic depth to retreat into near autarky (with NAFTA) and retool its industries behind tariff walls – as Britain did in the 1930s under Imperial Preference. In such circumstances, China would collapse. Mao statues would be toppled by street riots.


Aha. Do I smell a threat here? PRC better not get cocky, you say? And just in case the message didn't hit home...

Beijing is indeed boosting pensions and extending health insurance to the countryside so that people feel less need to save, but cultural revolutions take time. :lol: All we have seen so far are "baby steps", says Morgan Stanley's Stephen Roach.

The reality is that much of Beijing's $600bn stimulus has been spent building yet more plant and infrastructure so that China can ship yet more goods, or has leaked into property and stocks.

Credit has exploded. Allocated by Maoist bosses for political purposes, it has become absurd. China is rolling as much steel as the next eight producers combined. It is churning more cement than the rest of the world. Fixed investment is up 53pc this year. Once you know that Hunan authorities have torn down two miles of modern flyway so that they can soak up stimulus by building it again, or that the newly-built city of Ordos is sitting empty in Inner Mongolia, you know what must come next.

Pivot Asset Management said lending has touched 140pc of GDP, "well beyond" levels that have led to crises in the past. With the revolution's 60th birthday out of the way, the central bank has begun to tighten. New yuan loans halved in October. So be careful. Pivot said a hard-landing in China could prove as traumatic for world markets as the US sub-prime crash.

The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.

My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China's investment bubble; and Europe's banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.


Well, there we have it. Moi only fear is that unrest in cheen don't spill out over the sino-yindian border since CCP feels a need to unify its populace by raking up wartime nationalism.

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Re: PRC Economy News and Discussions

Postby ShyamSP » 17 Nov 2009 10:20

Hari Seldon wrote:Sri Ambrose Evans Pritchard on why cheena's mercantilism is the #1 threat to world peace and economic stability:

By holding the yuan to 6.83 to the dollar to boost exports, Beijing is dumping its unemployment abroad – "stealing American jobs", says Nobel laureate Paul Krugman. As long as China does it, other tigers must do it too....

....

Now this much is well known. Question is what will yamerika do about it?

It is fashionable to talk of America as the supplicant. That misreads the strategic balance. Washington can bring China to its knees at any time by shutting markets. There is no symmetry here. Any move by Beijing to liquidate its holdings of US Treasuries could be neutralized – in extremis – by capital controls. Well-armed sovereign states can do whatever they want.


It is an opportunity for China to take leadership role and move out of US. Instead China continues to take subordinate role and devalue its currency itself along with US dollar. It indicates China doesn't have right social and economic models to spread and lead the world or US holds Chinese economy tight and not let go out of their economic sphere ("go along with us or die") or both.

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Re: PRC Economy News and Discussions

Postby kmkraoind » 17 Nov 2009 11:01

China and the American Jobs Machine

China's capital spending is on the way to exceeding that of the U.S., but its consumer spending is barely a sixth as large. Chinese companies are plowing their rising profits back into more productive capacity—additional factories, more equipment, new technologies. China's massive $600 billion stimulus package has been directed at further enlarging China's productive capacity rather than consumption. So where will this productive capacity go if not to Chinese consumers? Net exports to other nations, especially the U.S. and Europe.


The Chinese government also wants to create more jobs in China, and it will continue to rely on exports. Each year, tens of millions of poor Chinese pour into large cities from the countryside in pursuit of better-paying work. If they don't find it, China risks riots and other upheaval. Massive disorder is one of the greatest risks facing China's governing elite. That elite would much rather create export jobs, even at the cost of subsidizing foreign buyers, than allow the yuan to rise and thereby risk job shortages at home.

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Re: PRC Economy News and Discussions

Postby Hitesh » 18 Nov 2009 03:14

Suraj wrote:
The same applies to Indian GDP, which grew from ~$450 billion in 1999-00 to ~$1300 billion now, but we haven't changed our base year - we still effectively use 1993-94, since industrial production and inflation are reported on that base.


So, are you saying that if you update the base year, our GDP would be $2 trillion dollars or something like that?

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Re: PRC Economy News and Discussions

Postby Suraj » 18 Nov 2009 03:24

Hitesh wrote:So, are you saying that if you update the base year, our GDP would be $2 trillion dollars or something like that?

Can't speak for the number, but depending on how much new economic activity is covered by the base year revision, our reported GDP would indeed increase significantly. Several countries have conducted similar exercises in recent years - PRC, Russia, Pakistan... Don't ask why we haven't :)

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Re: PRC Economy News and Discussions

Postby Prem » 18 Nov 2009 07:11

Base year will be changed only after 2020. :D Plus by then we have moped up all the black economy and added to the GDP data.

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Re: PRC Economy News and Discussions

Postby Hari Seldon » 18 Nov 2009 07:27

Five Reasons China Is Not a Bubble

At first I thought twas a lifafa article. And then when I saw who wrote it, all doubts about the authors' possible lack of neutral objectivity faded away.

This article is a guest contribution by {Sri}Romeo Dator, Co-manager, China Region Fund (USCOX)


Lengthy read. The 5 reasons cited are:
1. Consumption Continues to be Strong...
2. Structural Changes to Domestic Economy.
...
3. Stimulus Exit Strategy in Place
...
4. Government Controls on Flow of Money
...
5. China’s Long-Term Goals Match Up With Short-Term Goals.


Good read in that it counters notions popular among desi jingoes about the People's Liberation economy.

Rapid economic growth may be common in emerging economies, but there’s only one China. Already the world’s third-largest economy on a nominal GDP basis and second-largest based on purchasing power parity, the Chinese aren’t making a break from the back of the pack—they’re leading it.

Domestic consumption, the rise of the service sector and increased private investment won’t make China immune to economic bubbles, but these strengths will provide some protection from external forces.


Wow. Am feeling all warm and fuzzy about investing in cheena already. As should you. BTW, how many phoren investors so far have made money in china playing the chini domestic market, again??

However, the fact that there's zero mention of rampant overcapacity in practically every sector there is and could be, money supply out of control thx to the fixed exchange peg coming under pressure from a deluge of dollahs being exchanged by the PBoC into renminbi, export markets under pressure as G7 consumers face real debt stress, obscenely misallocated stimulus and bank deposits into directed lending to prop up state enterprises as well speculate in equity and realty markets, etc etc.... gives pause. And cause. For concern only.

To make up for these omissions, Sri Author garu has this to say:

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.


Tenku tenku only.

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Re: PRC Economy News and Discussions

Postby Masaru » 19 Nov 2009 10:22

Chinese Jet Gets Boost From Obama

Death knell sounded for another industry!
President Barack Obama pledged Tuesday to push for closer technical collaboration and eventual U.S. safety approval for China's ARJ21 commuter jet. That amounts to both a symbolic and practical step to counter Beijing's growing frustration with U.S. aviation policy and U.S. restrictions on the purchase of certain technologies.

The high-profile U.S. initiative is especially significant because China's own safety regulators are still a year or more away from approving the 70-to-100-passenger aircraft being developed by Commercial Aircraft Corp. of China Ltd., or Comac.

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Re: PRC Economy News and Discussions

Postby a_bharat » 19 Nov 2009 11:27

High Tech Misery in China

Meitai Plastics & Electronics
Dongguan City, Guangdong
CHINA

Two thousand workers, mostly young women, produce computer equipment including keyboards and printer cases for Hewlett-Packard, Dell, Lenovo, Microsoft and IBM.
Management instructs the workers to “love the company like your home,” “continuously strive for perfection” and to spy on and “actively monitor each other.”
Workers are prohibited from talking, listening to music, raising their heads, putting their hands in their pockets. Workers are fined for being one minute late, for not trimming their fingernails—which could impede the work, and for stepping on the grass. Workers are searched on the way in and out of the factory. Workers who hand out flyers or discuss factory conditions with outsiders are fired.
The young workers sit on hard wooden stools twelve hours a day, seven days a week as 500 computer keyboards an hour move down the assembly line or one every 7.2 seconds. Workers are allowed just 1.1 seconds to snap each key into place, repeating the same operation 3,250 times an hour, 35,750 times a day, 250,250 times a week and over one million times a month.
The workers are paid 1/50th of a cent for each operation.
The assembly line never stops, and workers needing to use the bathroom must learn to hold it until there is a break.
All overtime is mandatory, with 12-hour shifts seven days a week and an average of two days off a month. A worker daring to take a Sunday off—which is supposedly their weekly holiday—will be docked 2 ½ days’ wages. Including unpaid overtime, workers are at the factory up to 87 hours a week. On average, they are at the factory 81 hours a week, while toiling 74 hours, including 34 hours of overtime, which exceeds China’s legal limit by 318 percent!
The workers are paid a base wage of 64 cents an hour, which does not even come close to meeting subsistence level needs. After deductions for primitive room and board, the workers’ take-home wage drops to just 41 cents an hour. A worker toiling 75 hours a week will earn a take-home wage of $57.19, or 76 cents an hour including overtime and bonuses. The workers are routinely cheated of 14 to 19 percent of the wages legally due them.
Ten to twelve workers share each crowded dorm room, sleeping on narrow metal bunk beds that line the walls. They drape old sheets over their cubicle openings for privacy. In the winter, workers have to walk down several flights of stairs to fetch hot water in a small plastic bucket, which they carry back to their rooms to take a sponge bath. In the summer, dorm temperatures reach into the high 90s.
Workers are locked in the factory compound four days a week and are prohibited from even taking a walk.
To symbolize their “improving lives” the workers are served a special treat on Fridays—a small chicken leg and foot. For breakfast, they are given watery rice gruel. The workers say the food has a bad taste and is “hard to swallow.”
Illegally, workers are not inscribed in the mandatory work injury and health insurance and Social Security maternity leave program. In the Molding department, due to the excessive heat, the workers suffer skin rashes on their faces and arms.
One worker summed up the general feeling in the factory: “I feel like I am serving a prison sentence.”


Is this just an aberration or is it the norm? No wonder everything is "Made in China".

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Re: PRC Economy News and Discussions

Postby Rishirishi » 22 Nov 2009 05:35

a_bharat wrote:High Tech Misery in China

Meitai Plastics & Electronics
Dongguan City, Guangdong
CHINA

Two thousand workers, mostly young women, produce computer equipment including keyboards and printer cases for Hewlett-Packard, Dell, Lenovo, Microsoft and IBM.
Management instructs the workers to “love the company like your home,” “continuously strive for perfection” and to spy on and “actively monitor each other.”
Workers are prohibited from talking, listening to music, raising their heads, putting their hands in their pockets. Workers are fined for being one minute late, for not trimming their fingernails—which could impede the work, and for stepping on the grass. Workers are searched on the way in and out of the factory. Workers who hand out flyers or discuss factory conditions with outsiders are fired.
The young workers sit on hard wooden stools twelve hours a day, seven days a week as 500 computer keyboards an hour move down the assembly line or one every 7.2 seconds. Workers are allowed just 1.1 seconds to snap each key into place, repeating the same operation 3,250 times an hour, 35,750 times a day, 250,250 times a week and over one million times a month.
The workers are paid 1/50th of a cent for each operation.
The assembly line never stops, and workers needing to use the bathroom must learn to hold it until there is a break.
All overtime is mandatory, with 12-hour shifts seven days a week and an average of two days off a month. A worker daring to take a Sunday off—which is supposedly their weekly holiday—will be docked 2 ½ days’ wages. Including unpaid overtime, workers are at the factory up to 87 hours a week. On average, they are at the factory 81 hours a week, while toiling 74 hours, including 34 hours of overtime, which exceeds China’s legal limit by 318 percent!
The workers are paid a base wage of 64 cents an hour, which does not even come close to meeting subsistence level needs. After deductions for primitive room and board, the workers’ take-home wage drops to just 41 cents an hour. A worker toiling 75 hours a week will earn a take-home wage of $57.19, or 76 cents an hour including overtime and bonuses. The workers are routinely cheated of 14 to 19 percent of the wages legally due them.
Ten to twelve workers share each crowded dorm room, sleeping on narrow metal bunk beds that line the walls. They drape old sheets over their cubicle openings for privacy. In the winter, workers have to walk down several flights of stairs to fetch hot water in a small plastic bucket, which they carry back to their rooms to take a sponge bath. In the summer, dorm temperatures reach into the high 90s.
Workers are locked in the factory compound four days a week and are prohibited from even taking a walk.
To symbolize their “improving lives” the workers are served a special treat on Fridays—a small chicken leg and foot. For breakfast, they are given watery rice gruel. The workers say the food has a bad taste and is “hard to swallow.”
Illegally, workers are not inscribed in the mandatory work injury and health insurance and Social Security maternity leave program. In the Molding department, due to the excessive heat, the workers suffer skin rashes on their faces and arms.
One worker summed up the general feeling in the factory: “I feel like I am serving a prison sentence.”


Is this just an aberration or is it the norm? No wonder everything is "Made in China".



This is for IBM, Many other workers have it much worse. I have been saying this for some time. Chinease "miracle" is a kind of a "self imposed slavry". There is no way the slalary level of workers and middle managers can sustain the basci lifestyle. the workers end up getting sick and disabled. The numbers for the Chinease government may be impressive, but they really have not created a system, where people can earn a decent wage. That is very different from India, as people have a much better chance to move up the ladder. The wage level in India is much better then China. In China you will find managers and fairly experainced professionals making arround 20-30 k per month. In India the same people will be making 60-80 K per month.

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Re: PRC Economy News and Discussions

Postby rohitvats » 22 Nov 2009 05:48

Now I'm not trained in the ways of an economist but if the reports (on BRF) about the Real Estate bubble (empty cities, high vacancy) in China is true, it begs couple of questions:

1. Who is paying for the construction in the real estate sector? The residential segment is most lucrative of real estate asset classes and the development of residential projects is generally self-financing except for small amount of debt required initially. But for that to happen, the sale pace and bookings have to be robust.
2. So, if the market already has high vacany, how is the new capacity getting added as there will be no takers for the supply? Only option for financing is loan from banks under the guidance of Communist Party.
3. But, if the sales are not happening and do not seem to be happening any time soon, how do the banks recover their money?
4. In India, the RBI allowed adjustment in the payments due by RE Sector due to crisis. But the same will become due in some time soon and if the developers still cannot pay up, the banks will have huge writeoffs (assuming even selling of assets by banks at low prices).
5. But our RE Sector is that much better and RBI did step in to stem the tide. In case of China, the central banks seems to be encouraging it-to keep up the facade of growth.
6. Question is, how will this ~600billion USD stimulus, going to bit the chinese in the ar#@.

Any enlightenment is welcome.

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Re: PRC Economy News and Discussions

Postby S.Gautam » 22 Nov 2009 07:01

And why is this English skill issue such a sacrosanct one? Do the Chinese corporations conduct business in English? Why the assumption that the ultimate denouement of all IT is to produce call center people? Take a look at how many US/UK citizens learning Mandarin to get a drift of where the economic wind is blowing. English usage is just a byproduct of UK-US dominance of last 200 years; once that is gone there is no value in the so called english advantage that the IT people are tomtomming. One should be ashamed that a country of 1.2 B people hasn't or cannot throw away a Colonial language; not go around boasting about it. Well not too long ago the so called Indian intelligentsia used to take pride in it's mastery over composing songs/phrases in Persian/Arabic, what happened to that 'skill set'? 200 years down the line who is to say that English will not join the same league. Fine to take pride in one's native culture/philosophy and language not ones which were forced down the throat by invaders.


Like it or not, it's the one and only international language now and it will stay that way. As Asia rises, Mandarin will not become more important because the more intertwined the world becomes, the greater the need for a common language for interaction. English is not special, but it's convenient and is already in a position of strength because of the way history turned out. Mandarin cannot force it out, especially because it's much more difficult to learn and only used in 3 countries, two of them tiny.

The number of English speakers in India at independence was tiny. It was fostered by Indians *after* independence because it was recognized as useful. I would hardly call that "getting shoved down our throat". Only a weak civilization with insecurities and an inferiority complex would toss out a language that has obvious benefits. The strong ones absorb useful foreign things without shame, changing them as necessary, and continuing their own culture, exactly what India did and is doing. In Germany most students start learning English in the 5th standard and its sustained until graduation. The result is that even lower class workers (among the younger generations) speak remarkably good English. We don't see Germans losing German because of it but we do see that they have an international reputation for being easy to do business with, which is attested by their remarkably high exports (1.5 trillion, highest in the world, compared to 1.3 trillion for the U.S. which has an economy 4 times bigger).

As for goras learning Mandarin, it's an extremely difficult language to learn for an Indo-European language native speaker. Ultimately their Mandarin will be crap just as Chini Engrish is crap because it's just not organic without reasonably frequent use and years of learning that only a fraction of learners have the discipline for. They'll know some words, but they wouldn't be able to converse smoothly or often at all, and they'll forget those few words that they know soon after they leave their course. It's the fate of most who take difficult languages. The primitive and atrocious writing system of Chinese, which requires the memorization of several thousand characters, only makes matters significantly worse. Trust me: Mandarin isn't going anywhere. A few may learn it for novelty value but that's the limit of it as English is too difficult, nearly impossible in fact, to displace. It's just the way things turned out (English speakers got lucky and produced two superpowers back to back during just the right time as the world became globalized). There's no reason to get worked up about it.

There is nothing sacrosanct about English. Marketing ourselves as English speakers increases business attractiveness and that's the bottom line. This is the "fault" of global history, not India.

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Re: PRC Economy News and Discussions

Postby Rahul M » 22 Nov 2009 07:39

rohit, from my limited understanding of this issue, I gather that the chinese banks have gathered an incredible amount of bad loans by lending freely according to CPC instructions.
if you are interested more on PRC (even political and military issues) have a look at reports from jamestown foundation.

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Re: PRC Economy News and Discussions

Postby Prasanth » 22 Nov 2009 08:58

Rishirishi wrote:
a_bharat wrote:High Tech Misery in China



This is for IBM, Many other workers have it much worse. I have been saying this for some time. Chinease "miracle" is a kind of a "self imposed slavry". There is no way the slalary level of workers and middle managers can sustain the basci lifestyle. the workers end up getting sick and disabled. The numbers for the Chinease government may be impressive, but they really have not created a system, where people can earn a decent wage. That is very different from India, as people have a much better chance to move up the ladder. The wage level in India is much better then China. In China you will find managers and fairly experainced professionals making arround 20-30 k per month. In India the same people will be making 60-80 K per month.


I don't think it's only for IBM and I don't think many have it worse. It all depends on the individual outsourcing companies and if they treat workers badly, they can't retain the work force. You are viewing as if only the workers have competition not the employers. How do I know this? My company specializes in outsourcing to China and one of the criteria is to evaluate the work environment based on minimum standards. For the past year, you know how much the cost have risen? Almost 30 percent. We then evaluated India, and I was ecstatic that finally they were thinking about India. We found out Indian wages was 2-3 times cheaper but the very very big drawback was the infrastructure. This sums it all, until we can get our infrastructure right, nothing will change.

There is nothing miraculous about China, yes it is just a slave labour economy. But slave labor to what standards? Western standards? Imagine this, if these workers were not employed as cheap labors, what would they be doing? In India, we have so much cheap labor and alot are unemployed. Most end up as cheap labor for landlords, giving away 50% produce as rent. That's why you see so much poverty in India compared to China. Middle class? Do you know how much these slave labors are earning? The average salary is 150$ - 200$ a month. Most dorm is free including electricity and water except for food. You know what is the impact? They just created millions of consumers. These people buy cellphones, send back money to villages and power rural economy.

As for professionals and maangers salary, what industry are you talking about? IT? If it's IT, I reckon it's true but for others, I don't think so. Please check out the link below,

http://www.bbgmumbai.org/userfiles/China%20India%20Purchasing%20%20Prices%202009.pdf

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Re: PRC Economy News and Discussions

Postby Prasanth » 22 Nov 2009 09:21

S.Gautam wrote:
And why is this English skill issue such a sacrosanct one? Do the Chinese corporations conduct business in English? Why the assumption that the ultimate denouement of all IT is to produce call center people? Take a look at how many US/UK citizens learning Mandarin to get a drift of where the economic wind is blowing. English usage is just a byproduct of UK-US dominance of last 200 years; once that is gone there is no value in the so called english advantage that the IT people are tomtomming. One should be ashamed that a country of 1.2 B people hasn't or cannot throw away a Colonial language; not go around boasting about it. Well not too long ago the so called Indian intelligentsia used to take pride in it's mastery over composing songs/phrases in Persian/Arabic, what happened to that 'skill set'? 200 years down the line who is to say that English will not join the same league. Fine to take pride in one's native culture/philosophy and language not ones which were forced down the throat by invaders.


Like it or not, it's the one and only international language now and it will stay that way. As Asia rises, Mandarin will not become more important because the more intertwined the world becomes, the greater the need for a common language for interaction. English is not special, but it's convenient and is already in a position of strength because of the way history turned out. Mandarin cannot force it out, especially because it's much more difficult to learn and only used in 3 countries, two of them tiny.

The number of English speakers in India at independence was tiny. It was fostered by Indians *after* independence because it was recognized as useful. I would hardly call that "getting shoved down our throat". Only a weak civilization with insecurities and an inferiority complex would toss out a language that has obvious benefits. The strong ones absorb useful foreign things without shame, changing them as necessary, and continuing their own culture, exactly what India did and is doing. In Germany most students start learning English in the 5th standard and its sustained until graduation. The result is that even lower class workers (among the younger generations) speak remarkably good English. We don't see Germans losing German because of it but we do see that they have an international reputation for being easy to do business with, which is attested by their remarkably high exports (1.5 trillion, highest in the world, compared to 1.3 trillion for the U.S. which has an economy 4 times bigger).

As for goras learning Mandarin, it's an extremely difficult language to learn for an Indo-European language native speaker. Ultimately their Mandarin will be crap just as Chini Engrish is crap because it's just not organic without reasonably frequent use and years of learning that only a fraction of learners have the discipline for. They'll know some words, but they wouldn't be able to converse smoothly or often at all, and they'll forget those few words that they know soon after they leave their course. It's the fate of most who take difficult languages. The primitive and atrocious writing system of Chinese, which requires the memorization of several thousand characters, only makes matters significantly worse. Trust me: Mandarin isn't going anywhere. A few may learn it for novelty value but that's the limit of it as English is too difficult, nearly impossible in fact, to displace. It's just the way things turned out (English speakers got lucky and produced two superpowers back to back during just the right time as the world became globalized). There's no reason to get worked up about it.

There is nothing sacrosanct about English. Marketing ourselves as English speakers increases business attractiveness and that's the bottom line. This is the "fault" of global history, not India.


Just stick to English. As for Mandarin, it will never become a global language, but as a second most powerful language after English, maybe. Their culture is their problem, try not to be racist and call it primitive, Indo script is not simple either.

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Re: PRC Economy News and Discussions

Postby disha » 22 Nov 2009 12:22

Prasanth wrote:Just stick to English. As for Mandarin, it will never become a global language, but as a second most powerful language after English, maybe. Their culture is their problem, try not to be racist and call it primitive, Indo script is not simple either.


Somebody has gone overboard, means you will too? Can you prove Indo script is not simple? Or do you mean that it has more consonants and vowels and hence it is more complex? Or it is more complex because it has *less* dyslexics compared to English? Or is it more complex because China is the new super power and we should be shivering in our dhotis but we are not? Inspite of you saying so?

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Re: PRC Economy News and Discussions

Postby Masaru » 22 Nov 2009 12:26

S.Gautam wrote:Like it or not, it's the one and only international language now and it will stay that way. As Asia rises, Mandarin will not become more important because the more intertwined the world becomes, the greater the need for a common language for interaction. English is not special, but it's convenient and is already in a position of strength because of the way history turned out. Mandarin cannot force it out, especially because it's much more difficult to learn and only used in 3 countries, two of them tiny.

The number of English speakers in India at independence was tiny. It was fostered by Indians *after* independence because it was recognized as useful. I would hardly call that "getting shoved down our throat". Only a weak civilization with insecurities and an inferiority complex would toss out a language that has obvious benefits. The strong ones absorb useful foreign things without shame, changing them as necessary, and continuing their own culture, exactly what India did and is doing. In Germany most students start learning English in the 5th standard and its sustained until graduation. The result is that even lower class workers (among the younger generations) speak remarkably good English. We don't see Germans losing German because of it but we do see that they have an international reputation for being easy to do business with, which is attested by their remarkably high exports (1.5 trillion, highest in the world, compared to 1.3 trillion for the U.S. which has an economy 4 times bigger).

As for goras learning Mandarin, it's an extremely difficult language to learn for an Indo-European language native speaker. Ultimately their Mandarin will be crap just as Chini Engrish is crap because it's just not organic without reasonably frequent use and years of learning that only a fraction of learners have the discipline for. They'll know some words, but they wouldn't be able to converse smoothly or often at all, and they'll forget those few words that they know soon after they leave their course. It's the fate of most who take difficult languages. The primitive and atrocious writing system of Chinese, which requires the memorization of several thousand characters, only makes matters significantly worse. Trust me: Mandarin isn't going anywhere. A few may learn it for novelty value but that's the limit of it as English is too difficult, nearly impossible in fact, to displace. It's just the way things turned out (English speakers got lucky and produced two superpowers back to back during just the right time as the world became globalized). There's no reason to get worked up about it.

There is nothing sacrosanct about English. Marketing ourselves as English speakers increases business attractiveness and that's the bottom line. This is the "fault" of global history, not India.


OT but still felt it is relevant in the broader politico-economic context to address some of the assumptions.

The myth that English is the permanent and inevitable 'global language is hard to break, considering 2 centuries of indoctrination from the Macaulaite school. The logic of my argument was that the power of English (like that of the $) is derived from the fact that it is the language of the most powerful economy. Everybody wanted to do business with UK and wants to do business with US, hence the drive worldwide to learn English (check the history of the British pound to get some perspective about what happens to the superstructure when the economic foundation is broken) . Beyond this there is nothing special about this language; in fact many linguists would argue that it is one of the less well structured languages of the world; particularly in the spelling and grammar aspect.

I had alluded to the fate of the turko-arabic-persian speaking Mughal clergy/bueraucrat in India. If one were to time travel back to 1700 AD and do a linear extrapolation based on past 600 years of history then there was no reason to question the supremacy of that imported language/culture. In fact quite a few of their descendants till today live in cognitive dissonance about the superiority of their language and culture with disastrous economic impact, which is of course is conveniently blamed on the majority. The dominance of UK/US and by extension English has been for an even shorter duration and by no means it can be argued to persist forever just because it is the current language of global trade and commerce. Going by that logic Greek or Latin must have persisted forever (at least in Europe, or Sanskrit for that matter in India) as the link language of choice.

I can go on and give the counterexample of Japan which has achieved as much and in many cases more spectacular success in trade/commerce and industry than Germany with little if any proficiency in English of the population. Even overlooking the fact that German and English are sister languages derived from the same medieval base (which makes it natural for a German person to pick up English as a second language), I am yet to see two Germans communicating in English or observe the Bundestag or the Bundesverfassungsgericht conduct their business in English. So why does every official business of importance of India be it the Cabinet/Parliament/Supreme Court has to be conducted in the language of a puny island 5000 km away, even after 60 years of independence? The reason English persists in India is not due to some enlightened decision foreseeing the economic benefit but due to persistent linguistic sub nationalism fanned by vested political interests and the resulting TINA syndrome. This is symptomatic of the compromises resulting from the unrelenting search for the consensus of the lowest common denominator kind that is the hall mark of post independent India's public life. To explain it as arising out of civilisational strength is laughable at best and is due to the same cognitive dissonance that afflicts the minority community of the pure kind. English might have given a transitory advantage to a small section of populace (to exploit the labour arbitrage existing with the US); but IMHO in the long run it will do more harm by preventing development of a core national identity. A country which cannot speak in the same voice can never develop internal consensus on the way forward much less progress in that direction and work cohesively to protect its interests outside its borders.

The example of popularity of Mandarin in the western world was to underline the rise of PRC as an economic power. It is not that one fine day people woke up to realise the beauty of Chinese calligraphy and started filling the classroom to understand and appreciate ancient Chinese classics. It is purely driven by the need to do business and have access to a growing market and capital base. As far as difficulty is concerned, well there are 1.3B people who have learnt to use it and unless one believes that they all possess some exclusive gene or have an extra helping of intelligence :), the rest should be able to do the same . The very fact that people are venturing out to learn such a 'difficult' language is a pointer to the growing importance PRC economy in global context. As far as the discipline of using it day in day out goes it automatically comes from continuously interacting/doing business with Chinese or staying in PRC for business needs; and the number of 'goras' doing this is not insignificant.
Last edited by Masaru on 22 Nov 2009 12:51, edited 1 time in total.

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Re: PRC Economy News and Discussions

Postby disha » 22 Nov 2009 12:35

Prasanth wrote: For the past year, you know how much the cost have risen? Almost 30 percent. We then evaluated India, and I was ecstatic that finally they were thinking about India. We found out Indian wages was 2-3 times cheaper but the very very big drawback was the infrastructure. This sums it all, until we can get our infrastructure right, nothing will change.


The infrastructure angle is overblown. There are shortcomings, but the "infrastructure boom" in China reminds one of real estate boom in Japan, like the multiple bridges to nowhere. The issue in India is more than the infrastructure shortage, for example the protest against the Tata Nano in W. Bengal.

They just created millions of consumers. These people buy cellphones, send back money to villages and power rural economy.


Migrant labour is actually a huge problem. The need is to shore up rural economy at the town & village level. Anyway, discussion about India and dishing down China is not the main purpose of this thread here...

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Re: PRC Economy News and Discussions

Postby S.Gautam » 22 Nov 2009 19:17

Going by that logic Greek or Latin must have persisted forever (at least in Europe, or Sanskrit for that matter in India) as the link language of choice.

Because today is different. One can get from one point in the world to another in a few days at most, call anyone instantly, and trade as % of GDP is enormous. English is the world lingua franca - not one region's and so the present situation is unprecedented. I categorically said English is not special. But the order in which things happened in history matters and that English was dominant at the time that the pace of technological innovation accelerated rapidly and globalization set in is significant.

It is the difficulty of displacing English that makes Mandarin hopeless. This follows from common sense, not "Macaulaite indoctrination" (I want to laugh, but I'll leave you alone on the use of that term as this is getting rather OT as it is). Recently there was a spate of articles about China having "overtaken" India in English-speaking (along with all the alarmist panic of India losing IT edge because of it) because they've begun to encourage English at a truly massive scale. One does not see Mandarin being taken up in the rest of the world combined at such levels. Yes, Mandarin is difficult, almost prohibitively so. Young children are hard coded to pick up language (hence why feral children have lost that ability permanently), so the fact that 1.3bn people speak it is irrelevant - they grew up doing so. Learning it as an adult is a whole another ball game.

It is easy to abstract away and conclude that Mandarin will become an important language for international communication. But when you get into the specifics of it, it becomes apparent that there is simply no path for this to happen. As I said, globalization encourages a single lingua franca, not many. It's English OR Mandarin, not both (Mandarin can be second place as Prasanth said, but it will be extremely distant second place). Ironically, the Chinese seem to have less faith in the viability of their language internationally then you do, or they would not be teaching themselves English by the hundreds of millions.

"Core national identity"? This is suitable for other states, not one which has more diversity than any continent except the one it's on. I'm content with a civilizational identity and it appears most Indians are as we still exist as a single state when others with far less diversity have shattered. National identity is more analogous to the identity of the different states of India. I don't think India needs to be like other states by forcing something that doesn't naturally exist nor do we need to feel inadequate because we lack it. What works, works. There is also a great irony in your insistence on abandoning English despite its obvious economic benefits when you cite the situation of Muslims suffering economically because of their failure to use other languages for the sake of identity.

As far as Indian "overuse" of English goes, this is your personal problem. I suggest you get over it because things aren't going to change. I see no harm in it as using Hindi is no different from the PoV of a non-Hindi speaker. If you want to explain that away by pretending I have a colonial/dhimmi mindset, go right ahead as I don't care enough to bother with it (as I said, this is your personal problem). I reconciled myself to these facts long ago and I maintain that this sort of fear derives from insecurity about the strength of one's own culture or an inferiority complex. I recall that there was a thread on BR for this very topic (link language for India). You can go vent there.

Prasanth, I do not consider it racist to call the Chinese writing system primitive as writing is a technology. The alphabetic system and its cousins have wiped out, without conquest, all competing systems in almost all other parts of the world despite the ancient civilizations all having non-alphabetic systems. It is an *innovation*, superior to its predecessors and it dominated by virtue of that superiority just as India's base 10 w/ 0 number system was picked up all over the world, even in East Asia. That the Chinese don't use it is probably because they weren't exposed to it early enough. This is nothing for the Chinese to be ashamed about as it's just how things turned out and it works for them so there's no need to transit to any other system. But there's no use pretending that alphabets/abugidas/abjads are not a better system, as the fact that countless languages have abandoned their native systems for it will attest to that. One can memorize the Latin alphabet in a matter of days. Indic systems are indeed more difficult because of the compound letters but these are rarely used today (which is a good thing) and everything that is commonly used can be memorized in a short time like Latin. Obviously one needs practice to develop speed but it's outright impossible to learn the Chinese logographic system quickly for those that are not linguistic savants.

Admins are about to get angry so I will not continue with this. As I said, go to the link language thread.
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Re: PRC Economy News and Discussions

Postby Prasanth » 22 Nov 2009 19:37

disha wrote:
Prasanth wrote: For the past year, you know how much the cost have risen? Almost 30 percent. We then evaluated India, and I was ecstatic that finally they were thinking about India. We found out Indian wages was 2-3 times cheaper but the very very big drawback was the infrastructure. This sums it all, until we can get our infrastructure right, nothing will change.


The infrastructure angle is overblown. There are shortcomings, but the "infrastructure boom" in China reminds one of real estate boom in Japan, like the multiple bridges to nowhere. The issue in India is more than the infrastructure shortage, for example the protest against the Tata Nano in W. Bengal.

They just created millions of consumers. These people buy cellphones, send back money to villages and power rural economy.


Migrant labour is actually a huge problem. The need is to shore up rural economy at the town & village level. Anyway, discussion about India and dishing down China is not the main purpose of this thread here...


Disha,

I think we better not talk about the language issue, my as* already been whipped a few times. Let's stick to China related discussion. Actually, infrastructure is really China's main advantage. The real competitor to China now is actually Vietnam. This is based on our analysis. Their population is relatively educated but not in English, infrastructure is Ok but not as good as China's but most important, they are also roughly 2-3 times cheaper than China and near Chinese cluster belts. In eelctronics, lower end things will eventually move to Vietnam while integration will most likely be in the Chinese clusters. Intel is also building a testing and assembly facility in Vietnam.

Migrant workers are a problem, but they come and go. Let me give you this example, most workers when they get laid off will go back their villages to farm. Their social security is their farm land, that's why they get edgy when the local government simply confiscate land with little compensation. I know this fact when I was talking to one of the factory workers in China, I asked them what will they do now when the plant is shut down for a few months awaiting recovery. They say it will impact their incomes, but they could probably go back to farm for a while where the living cost is peanuts.

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Re: PRC Economy News and Discussions

Postby Hari Seldon » 22 Nov 2009 19:57

Prasant,

You seem to be remarkably keyed into the PRC ekhanomy scene, sir. Kindly spill some gyan on the state of PRC's banking sector which, ostensibly is funding the said infrastructure splurge.

How big is their deposit base? What returns do they offer ordinary depositors? Then how come their deposits grow every year? Who do they lend to? On what basis? Do they have bad loans at all? The works.

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Re: PRC Economy News and Discussions

Postby ArmenT » 22 Nov 2009 20:18

In the late 1800s and early 1900s, some Chinese scholars came up with the idea of replacing the traditional Chinese writing with a new phonetic system of alphabet. Mao Tse Tung was a big proponent of this idea as well. In fact, in an interview with Edgar Snow in 1936, he is quoted as saying:
We believe Latinization is a good instrument with which to overcome illiteracy. Chinese characters are so difficult to learn that even the best system of rudimentary characters, or simplified teaching, does not equip the people with a really efficient and rich vocabulary. Sooner or later, we believe, we will have to abandon characters all together if we are to create a new social culture in which the masses fully participate.
[1]

Unfortunately for Mao, the traditionalists still had significant support and so the result was a compromise: the simplified Chinese writing system, which was introduced into Mainland China in 1954. However, they also came up with the Pinyin system of writing Chinese using Latin characters, so that they would have a phonetic system to write down how characters sound. Ironically, the first attempts to record Chinese words phonetically were actually done by Sanskrit scholars! [1]

It is a sad fact of life that there are some mathematicians and scientists from Chinese history, whose names are lost to mankind, because no one knows how to pronounce the characters they used to sign their names with! [2]

Other cultures that were heavily influenced by Chinese culture moved away from Chinese writing for precisely this reason: Koreans use Hangul alphabet (completely phonetic), Japanese use Hiragana(phonetic, used for Japanese words) and Katakana (phonetic, used mainly for writing down foreign words) along with Kanji (which is ideographic like Chinese) and Vietnamese switched to phonetic systems around the 14th century, finally settling with Latinized characters with diacritical marks.

[1] The Chinese Language: Fact and Fantasy - DeFrancis, John, University of Hawaii Press (c) 1984
[2] History of Mathematics - Smith, David Eugene, Dover Press (c) 1923

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Re: PRC Economy News and Discussions

Postby ArmenT » 22 Nov 2009 20:24

It is not just Vietnam, Indonesia is also slowly moving into the low-cost manufacturing space currently occupied by the Chinese. That is why Chinese manufacturing is also trying to adapt by moving some stuff into less developed areas in China where the costs are cheaper.

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Re: PRC Economy News and Discussions

Postby Rishirishi » 22 Nov 2009 21:18

rohitvats wrote:Now I'm not trained in the ways of an economist but if the reports (on BRF) about the Real Estate bubble (empty cities, high vacancy) in China is true, it begs couple of questions:

1. Who is paying for the construction in the real estate sector? The residential segment is most lucrative of real estate asset classes and the development of residential projects is generally self-financing except for small amount of debt required initially. But for that to happen, the sale pace and bookings have to be robust.
2. So, if the market already has high vacany, how is the new capacity getting added as there will be no takers for the supply? Only option for financing is loan from banks under the guidance of Communist Party.
3. But, if the sales are not happening and do not seem to be happening any time soon, how do the banks recover their money?
4. In India, the RBI allowed adjustment in the payments due by RE Sector due to crisis. But the same will become due in some time soon and if the developers still cannot pay up, the banks will have huge writeoffs (assuming even selling of assets by banks at low prices).
5. But our RE Sector is that much better and RBI did step in to stem the tide. In case of China, the central banks seems to be encouraging it-to keep up the facade of growth.
6. Question is, how will this ~600billion USD stimulus, going to bit the chinese in the ar#@.

Any enlightenment is welcome.


The cunstruction Inidustry is very different from India.
1 The government builds good infrastructure and sells the land at low cost. The building standards are not always that demanding. You can fo example build 7-8 stories without a lift. You hac build much higher and crammed. There is usually huge governemnt money involved in buildings, where known people and party members, get large loans. The Chinease banking system is very different from the Indian/free market economy. Let us say you have a factory or building project that cant pay the due interests. The soultion is to open another factory and take out a larger loan. Finance the first loan forom the second one. Just google arround and find out estimates of bad chinease debts.
So how is it possible to finance all that bad debt? The chinease are great savers and save up to 40% of their income. Hence the banks are flush with cash. A lot of that is long term saving and will not be withdrawn for a long time to come.

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Re: PRC Economy News and Discussions

Postby Prasanth » 23 Nov 2009 06:09

Hari Seldon wrote:Prasant,

You seem to be remarkably keyed into the PRC ekhanomy scene, sir. Kindly spill some gyan on the state of PRC's banking sector which, ostensibly is funding the said infrastructure splurge.

How big is their deposit base? What returns do they offer ordinary depositors? Then how come their deposits grow every year? Who do they lend to? On what basis? Do they have bad loans at all? The works.


Firstly, one must understand what is money. Money is nothing more than a promisory note to pay a debt or to exchange goods and services. In theory, as long as the government is powerful, you can perpetually print as much money as you could, if the corresponding amount of resources, goods and services are also increased. If money supply increases without the corresponding increment in services, goods and resource exploitation, you get hyperinflation.

Now, moving back to China, one must understand the bank is the state. Yuan is not freely exchangeable outside of China, and hence there is less vulnerability and more control. In this case, China cannot keep on printing money without an increment in resources. So, what do they do? Remember that USD$ reserve they have, where everybody on earth blissfully trusts? They use that green piece of paper to buy iron ore, oil and everything else on earth.

Money is nothing more than a tool to make people do things and develop a country. China and US are scam partners and the whole world is their playground. It doesn't matter how much their people save, it's how much the world trust the dollar. As long as America is militarily strong, China industrially competent, the dollar-yuan hegemony will persist.

Prad,

Indonesia used to do what China did and they are 1.5-2 times cheaper than China now. Their low cost export was virtually taken over by the Chinese 10 years ago. I used to see made in Indonesia Nikes 10 years back, now it's all made in China. I don't think lower cost manufacturing will exit from China anytime soon, now that China is also their banker.

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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 23 Nov 2009 08:36

^^ Sadly, moi must agree with Prasant above.

It is no secret that yo can't bankrupt a country that runs debts in its own currency. That way neither the USD nor the chini yuan are in any danger, really.

What can and often does get undermined is confidence in a particular currency but even that maynot be much of a problem here.

If unkil's debts are so high and required rollover so high and all, then bond yields should spike no, at least for long bonds (10 yr and 30 yr)? They haven't, showing, thus far at least, unkil has managed the crisis fallout rather well. Which is good. A khanate crash and burn helps nobody at this stage anyway. Similarly, there's every possibility of cheena making it through too. Perhaps.

WASHINGTON — The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.

{And too good it really is, esp when comparted with interest burdens relatively sounder ekhanomies like India's face, with the recent Moody ratings freeze and all}

But that happy situation, aided by ultralow interest rates, may not last much longer.
{No kidding! Really? Have heard this story so many times before that I now no longer think a rate surge is imminent. No, sir.}

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

{Baloney. And what if the Fed chooses not to raise int rates at all for yrs and yrs?}

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

{Payment shock? really? Where? Rates are low and will stay low for as long as the fed wants. Period.}

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan.
{Really? All this costed just half a trill so far, you mean? Unkil can and will print some more trills to bailout failing state and local gubmints in the next few months, just watch. IMO its disingenuous to paint a half trill like it were some large amount, it isn't, not for the Fed anyway, seems like.

Prepare ahoy for mykill jacksons' 'Triller' redux!}


The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.


From today's NYT

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Re: PRC Economy and Industry: News and Discussions

Postby wig » 23 Nov 2009 10:43

with reference to the above discussion i think a few ideas need to be appreciated in perspective;
human development has been propelled by innovations and hard work nothing more and nothing less.
money as has been rightly observed above; is a repository of the confidence people and nations have in the ability of the issuer of the currency to impose its writ and the stability in its government systems, liveablity of the country.
but the growth of innovations and development has slowly drifted from the industrialised west.
today whilst the west leads, asian nations are not exactly laggards. they are competing in equal terms and occassisonally excelling.
human power or what is termed as human resources; or, simply descrbed as the skill sets possessed by human populations is no longer the preserve of the west. the skills developed in the west which grew symbiotically with the industrial revoulution (18 century onwards) are now global and asian economies do have huge human resources with requisite skill sets.

it is this human resource that is the key factor.
presently the west: US and west europe are experimenting with options to extricate themselves and this will continue for one or two financial years when the results good or bad will be there for all to see.

the western economies, UK, USA, Japan, France, are all under tremednodus debt to their people, to china, west asia. this debt is now being systematically inflated away. when you mint currency to help financial behomoths to remortgage already overvalued assets you increase the overvalue further. thus the currency devaluates or inflates what have you!

the west, europe especially might not come out of this downward spiral whatever tightnening of the belt (euphemism!) they do. for as time passes the human development and skill sets of the asian nations grows.

capital that is invested into eastern nations (Foreign Direct Investment) fuels this skill development further. turning off the spigot will delay the human development but the cost of having idle money in western banks is not possible or desireable for the west either.

Prasanth
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Re: PRC Economy and Industry: News and Discussions

Postby Prasanth » 23 Nov 2009 13:56

Your money is only as good as your government, it all depends on how much your government can control the country and how confident the people are in their government. Confidence wise, imagine yourselves as ordinary Chinese, you watch TV, you see Obama sucking up to your President, how do you feel about your government. Your country sent people to space, organized one of the best olympics and built the biggest dam on earth. All this little projects has got a purpose besides their utilitarian ones . It instills confidence in the government and country and thus the Yuan. Imagine your are an Afican dictator trying to sell resources, is he gonna trust the Yuan more or the Russian Ruble after seeing all these showcase stuff, and if you don't like Yuan, I have got dollar too :roll: ?

Do you know what I think will happen. In this 5-10 years, China is going to grow even more. Now, it is their best time to consume and buy resources. Their mega project for the next 10 years is worth almost 2 trillion USD. Prices are now cheapest for cooper, iron, oil and gas. The purchasing power of their USD$ reserves will be magnified many times.

Some signs,

1) Aynak copper mine, the worlds largest untapped copper mine is in their hands now.

2) Iranian gas > remember the IPI pipeline? They are definitely gonna scoop this just like how they scooped Myanmar offshore gas discovered by ONGC.

Suraj
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Re: PRC Economy and Industry: News and Discussions

Postby Suraj » 23 Nov 2009 20:48

Hari Seldon wrote:It is no secret that yo can't bankrupt a country that runs debts in its own currency. That way neither the USD nor the chini yuan are in any danger, really.

And what enables PRC banks and the country itself for that matter, to retain a high CRA investment grade rating when the same jokers fart at our banks and system for less egregious practices ?

Hari Seldon
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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 23 Nov 2009 21:31

Suraj saar,

And what enables PRC banks and the country itself for that matter, to retain a high CRA investment grade rating when the same jokers fart at our banks and system for less egregious practices?


Dunno about why our banks are feeling the love but the cheeni banks aren't running USD debt. They seem to hold USD credit since cheena==CPC==PBoC==its state owned banks only (in terms of sovereign credit rating that is shared across all these hydrahead entities.

And the sovereign rating circus is a game of bluff that will soon be called, will have to be called, by Yindia somewhere down the line. Not yet though, we are nowhere near strong enough, perhaps.

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Re: PRC Economy and Industry: News and Discussions

Postby shyamd » 23 Nov 2009 22:04

Do Chinese Officials Have an Exit Strategy?
Print

Overview: Chinese officials have committed to maintaining a "relatively easy monetary policy" in 2009, but officials are beginning to worry about asset bubbles and even a potential increase in consumer prices in 2010. Tightening began at the margins in Q3 through new bond issuance and lower credit extension but policy makers pledge to make sure relatively easy monetary policy is maintained suggest that rate hikes are unlikely. Given China's money growth, first asset bubbles and then inflation are risks.

When Will China's Exit Strategy Begin?
* In its Q4 2009 policy statement, the People's Bank of China (PBoC) said its foreign exchange policy will adjust in a "proactive, controlled and gradual manner and based on international capital flows and movements in major currencies." This was a shift from the bank's Q3 statement, which said it would keep the RMB "basically stable."
The bank also reiterated its "moderately loose" monetary stance, but expressed "increased difficulty in liquidity management." The statement increased market expectations of RMB appreciation against the USD, with twleve-month non-deliverable forwards gaining 0.3 on the day. (via Bloomberg, 11/11/09)
* The State Council, which sets the monetary policy goals for the central bank, for the first time mentioned "managing inflation expectations" on the eve of Q3's economic data release. (via Bloomberg, 10/21/09)
* Ken Peng, Citi: The State Council's statement suggest that monetary policy is now neutral in China. A hike in reserve requirements is possible before the end of the year, but interest rates are likely to be maintained until the spring of 2010. (10/22/09)
* Morgan Stanley argues that the current monetary policy will remain in place until year-end, when it will turn neutral. Significant policy tightening (an interest rate or required reserves ratio hike, RMB appreciation) is unlikely until H2 2010. (10/23)
* Suan Teck Kin and Jimmy Koh, UOB: The Q3 data showed a mixed picture, with producer prices still down sharply and consumer prices approaching inflation. This seems to indicate that policymakers will wait to implement their exit strategy. Policy lending rates are likely on hold until mid-2010. (10/22)
* Tightening is likely to begin before interest rates are hiked though as China tends to use credit controls rather than interest rates to determine liquidity. 2008 and 2009 has been no exception to this trend. Early in 2008, China was tying to cool liquidity by restricting the banks and then it encouraged the banks to scale up lending at the end of the year. As such credit extension is a key part of monetary accommodation.
* Writing in the FT, Qin Xiao poses Chinese policy makers dilemma as such:"if we tighten monetary policy, there is a high possibility of a “second dip” next year; and if we continue the loose policy, another asset bubble might be not far away." However, in China and globally he worries that there "does not seem to be an exit strategy in place to drain this liquidity from the system." contributing to a risk of asset bubbles within China. Moreover he worries about the increasing role of the state in the economy (10/21/09)
* RGE's Adam Wolfe and Rachel Ziemba: The administrative controls likely to be enforced are blunt instruments and could contribute to overcorrection if authorities wait too long to remove loose credit. Moreover, the political incentives are to continue to support growth. Shifts in the credit policy are directing more funds to households (through mortgages) which is (over) supporting the property market. Despite a fall in the absolute level of loans extended in Q3, new loans extended in the quarter are over 30% greater than in the same period in 2008. Chinese policy makers are wary of over-inflating some sectors of the economy, while other sectors still remain weak, suggesting policy status quo is likely.
* John Foley, BreakingViews worries that the new controls that are likely to be put in place actually divert China farther from its goal of establishing a fully-functioning and "self-calibrating" financial system.

"Fine Tuning," but Little Tightening
* Despite the pledge not to use credit controls, Q3 2009 new bank lending was down sharply from the previous quarter. In what may be a sign of "fine tuning" new loans to the household sector have increased as a percentage of total new lending (up to 61% in Q3 from 14% in H1) and maturities on loans have shifted toward the longer term. This shift in composition and scale of the lending should help support the rebounding property market, an important revenue source for local governments and component of GDP.
* Brown Brothers Harriman: After six weeks of guiding money market rates higher (up 25 bps), the yield on one-year central bank notes did not increase at auction on August 18. This pushed the seven-day repo rate, a measure of inter-bank liquidity, down 12 bps. This may reflect concerns that the economic recovery is flagging or an effort to take pressure of of the stock market, which has fallen nearly 20% from its high on August 4. (8/18/09)
* Two Ministry of Finance debt auctions in early July failed to attract enough bidders as the PBoC resumed one-year bill sales after an eight-month pause, suggesting the PBoC could face some difficulties if it were to shift decidedly against credit easing. The low returns on government bills compared to other asset classes may discourage bidders.
* Ken Peng, Citi: In H1 2009, the central bank under-sterilized fx inflows, and with inflows increasing the bank must increase its net drainage just to be policy neutral. The first signal of a policy shift would be more aggressive liquidity drainage, possibly after the National Day holiday in October. An increase in reserve requirements might follow, as well as mandatory bill sales. (8/17/09)
* Senior Analyst Flemming Nielsen, Danske Bank: The use of lending quotas, long one of the "favorite and most effective tools" of the People's Bank of China (PBoC), contributed to "a culture of liquidity hoarding in China." When controls are removed, demand climbs, as participants assume that controls will return. This dynamic may account for some of the faster lending growth in June and July as well as monthly patterns. (7/30/09)
* Chinese Premier Wen Jiabao: China will continue to implement a moderately loose monetary policy to maintain stable and fast economic growth as its primary goal, in addition to ensuring steady and reasonable loan growth. (via Bloomberg, 6/21/09)
* December 22, 2008: The PBoC lowered one-year lending and deposit rates by 0.27 percentage points to 5.31% and 2.25% respectively, as inflation and money growth continued to fall and output slowed sharply. This cut, which was expected, was the fifth in three months, following a record 1.08% cut on November 26, 2008, the largest drop in 11 years.
* In December 2008, the PBoC also cut the reserve requirement ratio from 16% to 15.5% for large banks and from 14% to 13.5% for small banks, extending past cuts. Lending curbs were reversed, and China reduced sales of short-term bills.
* Li-Gang Liu and Andrew Tsang, BBVA: Reducing the reserve requirement ratio (RRR) by further 8ppts is equivalent to releasing liquidity of RMB 4 trillion to the banking system and returning the RRR to mid-2006 levels. The increased liquidity in the banking system would help ease interest-rate rises caused by the expected large government debt issuances to finance the fiscal stimulus.(November 2008)

Future Risks?
* While the PBoC began soaking up some liquidity through open-market operations, bank lending continues to grow above 34% y/y. China remains in technical deflation, but concerns are growing about future inflationary risks. Still, early tightening could threaten China's fragile economic recovery.
* Economist Ken Pang, Citi: Weak trade data have been the main source of resistance to a shift in monetary policy. Given the return of hot-money inflows, asset inflation and aggressive loan growth, the risk of future tightening is increasing. (7/15/09)
* DBS: Prolonged deflation is not a worry, but the current loan policy increases the risk of medium-term inflation. Money supply growth exceeded GDP growth by seven times in Q1, compared to a peak of 2.8 times during the Asian financial crisis. China may over-loosen, given that there is no deleveraging process to go through. Excessive liquidity will show up first in asset inflation, then consumer inflation. (6/10/09)
* The PBoC cut the lending and deposit rates 0.27% on October 8, 2008, the same day as the coordinated rate cut of U.S., EU and Canadian central banks.

Suraj
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Re: PRC Economy and Industry: News and Discussions

Postby Suraj » 23 Nov 2009 22:13

Hari Seldon wrote:Dunno about why our banks are feeling the love but the cheeni banks aren't running USD debt. They seem to hold USD credit since cheena==CPC==PBoC==its state owned banks only (in terms of sovereign credit rating that is shared across all these hydrahead entities.

And how is this any different from India ? We don't hold significant USD debt either. In fact, we can pay out all real (i.e.,m not bookkeeping) external debt tomorrow and have >$200 billion of forex reserves left over. Never mind the CRA racket, I would like to understand what combination of policies the Chinese banking sector pursues that the CRAs don't find egregious w.r.t. to their ratings tamasha. Clearly, they've understood the game and have played along, or are actively colluding (since the CRAs are paid to rate). It helps to understand how they're doing it.

Hari Seldon
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Re: PRC Economy and Industry: News and Discussions

Postby Hari Seldon » 23 Nov 2009 22:41

^^^ Isn't India running a net net deficit whereas cheena is running a huge surplus? That might figure since sovereign risk rating carries over to all the banks under the regulation of the sovereign gubmint.

In any case, am not here to defend the CRAs any. Sure, if paying them hawala money helps our avg rating, then wth not?


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