PRC Economy and Industry: News and Discussions

[vina]

Wrdos. What this 'downturn'/ 'collapse'/ 'economic reset' (choose whichever) has brought out is the fact that are huge limits to investment and exports driven growth. This was the classic "East Asian" economic model that S.Korea, South East Asia and China very successfully drove over the past 25 years. The Koreans, Singaporeans, Malaysians, Thais and Taiwanese had their "currency" crisis around 10 years ago that blew the S.E Asian /NIC investment bubble . Those economies never again regained their pre 1998 growth rates.

This 'downturn' (use your choice here) is going to do the same thing to the chinese. The old formula of huge fixed investments, savings and exports are not going to work. There has to be a fundamental re think and will take massive and wrenching changes. No longer can you export your way out of trouble under any circumstance. The massive chinese goods exports have stagnated. Now you need to get domestic spending up. Now that is a far harder thing to do. While the "China Price" will be a "killer" in developed markets the "China Price" is still largely too much for the vast majority of the Chinese consumers and their spending capacity is minuscule compared to the foreign markets .

Take out exports as the growth driver and you see a fundamental mismatch in what Chinese capacity is for (geared towards exports) and what it's domestic consumers can spend on (oh no, they are not going to buy the shoes and toys from all those factories and certainly cant buy all the cars and alumnium and steel and everything else the chinese can make).

No, even when the recovery comes (whenever it comes, people thought that in 1928 the recovery will come in 6 to 9 months max and the depression persisted for 12 years until WWII , though I agree that today people have a better idea on how to handle such things via central bank response), the demand will be fundamentally different and the world would have seen big changes. Do not automatically assume that the demand will be the same for exactly those things you spent massively on for investments in the boom.

What will China do if all those huge ports, airports (oh no , I dont think they are even breaking even, must be making massive losses and bleeding enough to show the whites of the bones) and all that thing that you built up and the one power plant a day and all those huge fixed investments go kaput?. The entire Beijing olympics infra is a massive write off. The chicken will come home to roost . Okay you can hide them under a "central" balance sheet at the country level and not have a liquidity crisis by printing currency. But anyway, the all the bills will become "due" sometime or another and you will have a massive blow up. It is a pressure cooker. It is under control now. But the pressure is building up all the time (however incrementally) and eventually will go over the limit and then it will be Kaboom!

[Singha]

the giant birds nest stadium is being converted to a shopping center.
tourist visitors have been quite low after olympics.

http://www.digitaljournal.com/article/266328

The Bird's Nest stadium in Beijing was a showpiece of the 2008 Olympic games. But financial constraints are forcing the owners of the stadium to convert it into a shopping centre.

The $450 million stadium was the symbol of China's rising power and confidence, the major venue for the last year's Beijing Olympics. But, in less than six months after the games, the stadium has fallen into disuse with paint already peeling in some areas. Nowadays, the only income the stadium gets is from tourists who pay approximately $7 for a walk on the stadium floor and browse a souvenir shop.

The stadium may never recoup its huge construction costs amid a global recession.The structure costs a staggering 60 million yuan, or $8.82 million U.S., to maintain every year. The Citic group which operates the stadium said.

The Bird's Nest will continue to have tourism as its major business, while gradually tapping its auxiliary commercial facilities and turning them into a centre for entertainment and shopping.

According to the group, the transformation of the stadium into a shopping complex will take three to five years. The only confirmed event at the 91,000-seat stadium is Puccini's opera "Turandot," on August 8, 2009 - the first anniversary of the Olympics' opening ceremony.

[wrdos]

Hmmm, I am very poor at English language so I prefer using shorter sentences and more numbers. It seems to me there are too many friends here who enjoy making all kinds of predictions and conlusions, with a lot of beautiful and occationally emotional English vocabularies, but never exact numbers.

OK.

Firstly, the Definition of the end of the crisis:
All major economies, US, EU and Japan walk out of the recession with plus increasing rates.

Then my personal guesses once more:

1. This crisis will be over by the end of 2010.
2. At that time,
- China will become relatively stronger if compared with US, EU, Japan and India
- Chinese norminal GDP will surpass 5.5 trillion US dollar
- China will become the 2nd largest economy, surpassing Japan

On Jan. 31, 2011, I will try to find this post out. Should it be deleted, I would post it once more.

Let's wait and see.

[wrdos]

China auto sales seen surpassing US in January
Wednesday February 4, 5:50 am ET

http://biz.yahoo.com/ap/090204/as_china ... .html?.v=2

By Elaine Kurtenbach, AP Business Writer

China auto sales seen surpassing US in January -- and perhaps for all of 2009

SHANGHAI (AP) -- China likely overtook the U.S. in vehicle sales for the first time last month, a trend that could make China into the world's largest auto market this year.

Official data for China's auto sales in January will not be out until next week. But they are expected to show sales at about 790,000 units for the month, Zhang Xin, an analyst at Guotai Junan Securities in Beijing, said Wednesday.

In the U.S., meanwhile, auto sales in January tumbled 37 percent to 656,976 vehicles, the lowest monthly level in 26 years.

"This is the first time in history that China has passed the United States in monthly sales," Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said in a conference call late Tuesday.

For all of 2009, DiGiovanni projected that Chinese auto sales are likely to hit 10.7 million vehicles, more than the estimated 9.8 million unit sales in the U.S. this year. Autodata Corp. forecasts 2009 U.S. sales at 9.57 million.

[vina]

Ah Wrdos, why did you snip that entire article!. I know a "mini skirt" that hides "only a little" is nicer, but for for a "full picture" sometimes it makes sense to see the whole story !.

Lets see the interesting parts you left out.

After seeing sales slow abruptly in the autumn, Beijing moved aggressively to prop up the industry it has nurtured over the past two decades.

Last month the government announced it was halving the tax on purchases of cars with engines less than 1.6 liters, to 5 percent, until the end of the year. It is spending 5 billion yuan (about $730 million) on subsidies to farmers replacing their three-wheeled vehicles or outdated trucks with small, 1.3-liter or less vehicles.
..
So far, the steps seem to be helping somewhat.

"Sales rebounded last month due to the vehicle purchase tax cut," said Gao Zhiyuan, a salesman at Shanghai Automobile Industry Hudong Sales Co., a Volkswagen dealership.

"Customers feel it's a good chance to buy a car for less since the tax cut is temporary. Also, with lower gasoline prices people are less worried about fuel costs," Gao said.

But even though China's auto industry may appear to be weathering the crisis with less of the misery seen in the Detroit and elsewhere, it still has a long way to go to catch up with global rivals, analyst Zhang cautioned.

"Our technology is still weak. We still have to copy or use Western advanced manufacturing systems. That's kind of awkward, isn't it?" he said.

There are large one time effects and subsidies to help sales. And the US 26% drop is again temporary. So 2009 will be an exception, if at all.

But for all the cash that has been thrown by the CHinese in major industries like Autos etc , they have precious little to show. The less said about the Haiers etc, the better. They are not sustainable in a market economy. I would like to see a balance sheet of Hauwei according to a common standard like the US GAAP. Please post a link if Huawei's financials to US GAAP or any half way decent accounting standard is available anywhere.

Remember , what is unsustainable in a market economy will be sustainable in a command economy for a long while. But eventually, many "unsustainable" things add up and the state itself ends up becoming unsustainable.

I really do hope for the sake of the Chinese that your guess of a quick recovery (no that wont do, you need the economy to boom .. 8% growth is not "normal"). Beyond that, China too cannot keep carrying the wounded and dead industries. It is unsustainable. If the recession lingers any longer, see huge swathes of southern china / Pearl River delta turn into "Ghost Towns" and start to crumble.

[wrdos]

Hehe, your 2 conclusions:
- China has a over supply problem,
- China is command economy.

My dear friend, can you give me another example of a command economy with over supply problem?
Russia? East Germany? or North Korea?

Yes, by 2010, maybe the US will become the No.1 auto market once more. 2011? who knows.

The basic fact is, Chinese auto market is there, at par of the US market. Similar things can be said to the markets of housings, TVs, air conditioners, PCs, and almost all the other items. Some friends here always boast that Indian jobs are higher paid and China has only slave factory workers.

But the truth is, the slave factory workers country is supporting an auto market as big as the US and twice more than Japan.

China has a giant domestic market which is expanding at the fastest rate among all major economies . Comapred with the most boasted Indian domestic market, the Chinese market is much larger (4 or 8 times for almost everything) and even expanding faster. It is why India has been influenced worsely in this crisis, until now. It is why the Chinese and Hong Kong currency can keep appreciation in this crisis, among only 5 or 6 economies.

This is an inconvenient truth of this forum.

[vina]

Hehe, your 2 conclusions:
- China has a over supply problem,
- China is command economy.

My dear friend, can you give me another example of a command economy with over supply problem?
Russia? East Germany? or North Korea?

Ah, but wasn't it Deng Xiao Ping who coined the term "Socialism with Chinese Characteristics"? . Here is an example.

The basic fact is, Chinese auto market is there, at par of the US market. Similar things can be said to the markets of housings, TVs, air conditioners, PCs, and almost all the other items.
....
China has a giant domestic market which is expanding at the fastest rate among all major economies .

Yes. However, what you are overlooking that this "Chinese Market" is driven in large part by the Growth and that was in turn driven in huge part by exported oriented manufacturing and Foreign Direct Investment flooding in to support investment.

Now with exports evaporating and FDI starting to reverse (my earlier post- Rats Desert Sinking Ship), I would think the legs have been kicked away from under the growth. Hence the desperate need by your govt to spend like there is no tomorrow to keep the overcapacity "engaged" somehow.

The problem is that Chinese production capacity is geared more towards external demand. It is very difficult to turn focus inwards. I doubt the Chinese consumption basket will be similar to that of the US or European customer! The price points will be different, the tastes will be different, and they might want entirely different things.

So that is how you have "overcapacity" in a "command economy" like China. And oh, just like every businessmen, the Communist Planners too have this "engineering mindset" about growth and invested massively based on their projections of growth. All that has gone Kaput!. Now like real businessmen, lets see how the Chinese Communist Planners handle the excess capacity and the waste.

Comapred with the most boasted Indian domestic market, the Chinese market is much larger (4 or 8 times for almost everything) and even expanding faster. It is why India has been influenced worsely in this crisis, until now.

Fact is India severely under invested and paid for it with lower investment led growth and poorer fixed assets like roads, ports etc. The flip side is the capacity overhang is minimal!.

It is why the Chinese and Hong Kong currency can keep appreciation in this crisis, among only 5 or 6 economies.

This is an inconvenient truth of this forum.

The inconvenient truth is that the Chinese currency was kept artificially low all this while to boost exports and remain price competitive in the interests of "social stability" and that much vaunted high growth. Now with the US taking the gauntlet on that, Chines currency manipulation will soon come to an end.

Oh, just like the Japanese are paying with a deep recession (I heard Panasonic just announced 15000 job cuts , following NEC, Sony etc), the Chinese too will feel great pain when the currency rises and exports become uncompetitive. Mark my words. China will not be allowed to export its way out of trouble this time, especially by manipulating currency. China will absolutely HAVE to let currency float or face quantitative limits and bans on it's exports as a "Non Market" economy

[Mary Andrews]

I think vina has a valid point. It's time for China to re-think its development model. It doesn't mean the past 30 years was wrong. It was right at the time. Now it's time for China to grow out of that stage.

Becoming the second largest economy is not a guess of wrdos. This is an (almost inevitable) projection. Export can make China the second largest economy. But that's as far as it can get you. After that, domestic consumption must kick in.

Chinese government knew that and didn't overlook domestic market. In fact, China's retail sale growth rate is an astonishing 20%! But it's just not as fast as export growth.

[Raghav K]

Hmmm, I am very poor at English language so I prefer using shorter sentences

We seem to have Chinese on BR.

[Baljeet]

Raghav
Nothing wrong with that. This is an open forum where everyone is invited as long as they are civil in their manner, interested in debate, discussion. Everyone is entitled to his opinion.

[Avinash R]

Let's hope this post is not harmonised.

On Jan. 31, 2011, I will try to find this post out. Should it be deleted, I would post it once more.

Let's wait and see.

[Avinash R]

Is China Covering up a New Bird Flu Epidemic?

February 03

Is China covering up a new outbreak of bird flu? Certainly there seems to be very strong evidence it is. There have already been eight reported cases of humans contracting the potential deadly H5N1 virus, from which five people have died this year. And despite the fact that Hong Kong officials have been finding dead birds infected with the virus washing up onto its shores in recent days from the mainland, China has not made any official statement concerning an outbreak among birds. At least one Hong Kong health advisor to the government, Lo Wing-lok, says the government “just isn’t admitting” to the problem.

If this is true, both Chinese health officials and the state media must share the blame. Surely after so many human infections people must be asking questions of how the caught the virus, as human to human transmission is highly unlikely. But China has a horrible track record of squelching bad news at the cost of public safety, usually with the complicity of the local media. Back in 2003 Guangdong provincials covered up the SARS epidemic for 22 weeks before informing neighboring Hong Kong. By that time it was too late, and nearly 300 people died of SARS in Hong Kong, as did hundreds more worldwide. You would have thought that China had learned its lesson back then.

But as last summer’s melamine milk scandal showed, China is still unwilling to inform the public of health hazards in a responsible and timely manner, with tragic consequences. Had the problem come to light sooner, the lives of four infants who died from poison milk might have been saved, and while hundreds of thousands of other kids might have avoided contracting kidney disease.

How many more people must die before Beijing takes the muzzle off its health officials and reporters?

[Avinash R]

China’s Drought May Make Birds More Susceptible to Avian Flu

By William Bi and John Liu

Feb. 4 (Bloomberg) -- A drought in northern China that has limited drinking water to almost 4 million people may also be making birds more susceptible to the deadly H5N1 avian-flu strain.

The lack of rainfall in Shandong, Shaanxi and other northern provinces since October causes stress for local fowl, said Hong Kong Veterinary Association President Veronica Leong, who specializes in birds. “Any sort of stress would make birds more susceptible to disease,” she said by e-mail today.

Bird flu killed five people in China last month, three of whom were from regions experiencing drought. Lo Wing-Lok, a health adviser to the Hong Kong government, said yesterday China has an outbreak of bird flu among poultry that its government hasn’t reported.

“As drinking water becomes more scarce for wild birds, they may come into closer contact with domestic fowl, increasing chances of cross-infection,” said Nie Ben, agricultural commodities manager at Shanghai Continent Futures Co. in Dalian.

The Chinese government last week reported the nation’s fifth bird flu death in 2009. The deaths were in the provinces of Shandong, Hunan, Guangxi, the municipality of Beijing and the Xinjiang autonomous region. Shandong, Xinjiang and Beijing have droughts.

About 3.7 million people and 1.85 million big animals have limited access to drinking water in northern China, the Ministry of Water Resources said on its Web site yesterday. Reduced soil moisture affected an estimated 9.7 million hectares of crops, it said.

Dead Birds

Deng Haihua, director of the Ministry of Health’s news department, declined to comment. The Ministry of Agriculture didn’t respond to faxed questions about bird flu.

Hong Kong’s government has found 18 dead birds on Lantau Island, three testing positive for the H5 strain of avian flu. Further testing is required to determine whether they carried the H5N1 strain, which can kill humans.

The city’s Agriculture, Fisheries and Conservation Department said it’s working with Chinese authorities to determine whether the dead birds washed ashore on Lantau from the mainland.

“There’s no doubt of an outbreak of bird flu in China, though the government hasn’t admitted it,” Lo, the Hong Kong health adviser, said in an interview yesterday.

Health and disease tolerance determine how easily illness can spread between birds, said the veterinary association’s Leong. A drought “does not mean that it would be automatically easier for disease to travel from one bird to another bird,” she said.

Eight Human Infections

China has said eight people have been infected by bird flu this year, including those killed by the disease. A three-year- old girl in Shanxi province infected by the H5N1 strain was discharged from a local hospital yesterday, making her the youngest person in China to survive an infection, the Ministry of Health said today.

Gong Guifen, director of the poultry division at the China Animal Agriculture Association in Beijing, said there are no direct links between drought and cases of bird flu.

“Poultry birds are more susceptible to viruses when the weather is cold or when living conditions are dense,” she said. “But this winter hasn’t been that cold.”


Now fake diabetes drug deaths in China
05/ 02/ 2009

BEIJING, February 5 (RIA Novosti) - The Chinese security agency on Thursday issued an arrest warrant for a man suspected of masterminding the sale of fake diabetes drugs that killed two people and poisoned several others, Xinhua said.

The main suspect Li Dong is currently the subject of a nationwide manhunt. Five people have already been arrested on suspicion of selling the drugs that left two dead in the northwestern Xinjiang Uygur Autonomous Region on January 17.

Police recovered 215 bottles of the counterfeit diabetes drug branded Tang Zhi Ning Jiao Nang containing six times the normal dose of glibenclamide, which is used to lower blood sugar, the agency said.

Nine other people have been hospitalized after taking the drugs and four of them are still receiving treatment in hospital.

A search is continuing to try and trace the deadly medicine with police seizing over 9,000 bottles of the drug on Sunday in the Xinjiang Uygur Autonomous Region, with over 2,600 of them being seized from customers.



Emergency as drought hits key farm regions in China

BEIJING (AFP) — China on Thursday declared an emergency for parts of the country experiencing their worst drought in half a century, with some of the nation's winter harvest at risk, state media reported.

President Hu Jintao called for an all-out effort to help offset the dry spell that has spread across seven key farming provinces, leading to water shortages for millions of people and livestock.

"With the drought reaching a severity rarely seen in history, the State Flood Control and Drought Relief Headquarters has called a level two emergency," China National Radio reported.

Level two is categorised as a "serious" emergency on a four-stage scale, with level one being the worst.

Hu and Premier Wen Jiabao on Thursday ordered everything be done to secure a good summer harvest, Xinhua news agency said.

To this end, a cabinet meeting decided to earmark 300 million yuan (44 million dollars) for drought relief on top of 100 million yuan already allocated, the agency reported.

At least 3.7 million people and 1.9 million head of livestock are short of water, according to the China Daily.

About 9.5 million hectares (23.5 million acres) of farmland, representing 43 percent of the country's winter wheat supplies, are also affected, the paper said.

The situation is unlikely to improve soon as no rain has been forecast for the next 10 days, according to the China Daily.

Meteorological authorities in the central province of Henan, one of China's most populous with 93.6 million people, have called the drought the worst since 1951, after 105 days without rain.

"The severest-hit regions of Henan and (the neighbouring province of) Anhui will see their wheat harvest down by about 20 percent," Ma Wenfeng, a Beijing-based agricultural analyst, told the paper.

Further north in the capital Beijing, rain has not fallen for 100 days, a situation not seen in 38 years, the paper said.

A shortage of water, worsened by the relentless demands of a rapidly growing economy, is one of the main long-term worries for the Chinese government.

[abhischekcc]

It's time for China to re-think its development model. It doesn't mean the past 30 years was wrong. It was right at the time.

Nothing wrong with this actually. But it is easier to organize producers than consumers. We have seen China forcing its people to produce more and more. But China's ability to command people to eat more remains to be seen.

Chinese government knew that and didn't overlook domestic market. In fact, China's retail sale growth rate is an astonishing 20%! But it's just not as fast as export growth.

Indian retail grows at something similar, but its the organized part. Correct me if I am wrong here. But you need to clarify whether the growth rate is for organized or unorganized retail.

[vsudhir]

Why China Needs to Grow Its Economy, or Risk Growing Unrest

Chinese Premier Wen Jiabao took to the stage at last week's World Economic Forum in Davos, Switzerland, and confidently predicted that China's economy would grow by 8% this year -- the minimum growth that China's leaders say is needed to maintain order and keep everyone employed.

But what if it doesn't hit that target?

Where did this magic 8% figure come from? IMHO, its an exagerrated figure designed to make breathing and negotiating space with foreign gub-mints. I doubt PRC risks serious danger from, say 5% growth as opposed to the 8% one esp since their 1 child policy kicked off in 1978 is sending its reduced strength into the workforce now. Of course, pressure builds up elsewhere from dependency ratios coz each mom-dad-child family has four elderly dependents now.

The fact that the system is in no danger comes through later in the article:

DeLisle suggests that the very legitimacy of China's leaders is at stake. "The regime has so hitched its wagon to rapidly rising prosperity that it, in fact, has to do better than most governments." But even as discontent rises, "this is not a regime at risk of being toppled." He believes Chinese leaders will use carrot-and-stick tactics to keep order -- "a judicious mix of making transfer payments to quell discontent, and cracking down on uprisings or political opposition that is gaining speed."

"It's easy for the [Chinese] government to control the news and deflect criticism," says Wharton finance professor Jeremy J. Siegel. "They can say that the global crisis was triggered by irresponsible financiers in the U.S., and that it's beyond our control, even though we're doing all we can to minimize the impact."

Siegel is hopeful that a turnaround may begin in the second half of this year, and he predicts that the Chinese economy will gain speed quickly as Western consumers -- especially in the U.S. -- return to stores in search of cheap goods. "Markets are linked, economies are linked. We're all in the same boat."

China's government has been successful in the past at diverting resources "to assure that the level of unhappiness is kept to a low boil," says Avery Goldstein, a Penn political science professor. He believes the Chinese regime already has sent out an order that state-owned industries cannot lay off workers and that the government also has the authority to order banks to lend.

Meanwhile the oft repeated shibboleths abt the PRC savings rates come back tot he forefront.

DeLisle believes the real barrier to raising domestic demand is over-saving by Chinese workers, who sock away about 40% of their income because of the absence of a reliable safety net for social security or healthcare. "Until the government can get people to start spending income, there will be limits to increasing domestic demand. What they really need is consumer demand, which will remain weak as long as people feel compelled to save at a high rate."

China is in the process of building a better social safety net, DeLisle adds, but "it's a very, very big project and nowhere near complete. Confidence that it will come together is not high among the populace." Meyer agrees that a stronger safety net would encourage spending. "However, peasant workers don't want to contribute to social security, required under the new Labor Contract Law. Why? Social security is administered by provincial rather than central authorities. Peasant workers know they won't get their money back. The same holds for medical insurance."

China has a household registration system with a "hukou" permit that ties every family to one place. Migrants moving around the country would pay into a regional fund, but not reap the benefits. "No hukou, no benefits," Meyer says.

"The bottom line," according to Meyer, "is that employing people takes priority over everything, and the central government has not yet addressed the issue of creating sustainable domestic markets." Spending on rural infrastructure would help, he says. "But the real problem is the preponderance of small, local businesses, the logistics nightmare created by industry fragmentation, and the reluctance of government to permit private enterprises to grow beyond a point."

[Prem]

Bloomberg reporting severest drought in 38 years in China and claimed the wheat production will effected quite a bit. Panda is in real bad luck streak .

[derkonig]

Now is a good time for yindian govt. to start buying off as much wheat as possible from the intl market. Afterall election year, the govt. should ensure adequate supplies onlee. Let panda survive on bamboo shoots, their tarrel fliends sure can help on that aspect.

[abhischekcc]

Chinese investment is mostly done by the government, which is based on taxes, which rose with the growing economy.

Hence, a slowing economy will pull those astronomical investment rates down as well.

So, here's the score card:
Exports - down
Investment - down
Consumption - down
CCP - down
Pakistan - down
JNU - down
Indian media - down

BJP - up
Modi - upper

[amit]

Where did this magic 8% figure come from? IMHO, its an exagerrated figure designed to make breathing and negotiating space with foreign gub-mints. I doubt PRC risks serious danger from, say 5% growth as opposed to the 8% one esp since their 1 child policy kicked off in 1978 is sending its reduced strength into the workforce now. Of course, pressure builds up elsewhere from dependency ratios coz each mom-dad-child family has four elderly dependents now.

Vsudhir,

Our resident Chinese Wrdos will not admit to it but the Chinese leadership is caught between the rock and the hard place. That's because of the export led growth model that it has been following for the past 30 years.

It's resulted in massive growth but that growth is similar to building your muscles using steroids - in short an unnatural growth. And the moment you run out of steroids your body starts to hurt. Exports is the steroid on which the Chinese economy depends on.

As a result China needs a minimum 8 per cent growth just to ensure that the 7 million or so graduates who enter the job market every year are employed and do not add to the already massive ranks of unemployed and under-employed.

There was a very authoritative article on this on my hard disk which I can't seem to find now. Will post when and if I can find it.

Meanwhile, this link also talks about the same thing.

China says it needs 8 per cent annual growth, after adjustment for inflation, just to provide jobs for the seven million or so young people entering the labour force. A recent World Bank study concluded that China actually needs to grow by about 9.5 per cent to keep unemployment steady. For Indonesia, the comparable figure is at least 6 per cent. For India, a younger country than China, growth needs to be at least 10 per cent to cope with a workforce expanding by 14 million a year, about one quarter of the world's new workers.

Until now, China has done remarkably well in expanding employment. Since its reform and opening began 30 years ago, the economy has grown at an annual average of 9.8 per cent, lifting some 200 million people out of poverty. The rate for India was 6 per cent between 1992 and 2002. In the last five years, it has averaged 8.8 per cent. Indonesia's performance has been somewhat slower but was picking up. Growth had accelerated to a 10-year high of 6.3 per cent last year.

What happens if these three big emerging Asian economies slow sharply next year and recovery afterwards is sluggish? The big fear is that they will descend into a spiral of rising unemployment, social unrest and protests that could undermine stability and make recovery even more difficult. Interest rate cuts, stimulus packages and other measures by the governments of all three countries are intended to cushion the downturn. Hopefully, they will be successful.

The 19th century French historian, Alexis de Tocqueville, noted that revolution comes not when conditions are at their worst but when they have been improving steadily, and the improvement suddenly stops.

So you see the Chinese leaders are mortally afraid of social unrest if they cannot get those new job seekers jobs. They will move heaven and earth to ensure 8 per cent growth - it's another matter, however, that even that may not be sufficient.

India is better placed because the major difference between China and India is that in the later a majority of working class are self-employed and will continue to be so in the near future. As a result the system has a greater capacity to absorb the working class.

Also the political system is more flexible and can handle unrest - the government of the day will simply be thrown out of power. But what does China do? It's like, Vina said, a pressure cooker in which the steam vent has choked!

[amit]

Xpost:

Arun_S posted this in the PRC Political thread:

China official says 20 million migrants lost jobs

By Chris Buckley BEIJING (Reuters) - About 20 million Chinese rural migrants have lost jobs as the nation's economic growth has faltered, a senior official said on Monday, promising policies to boost incomes and a softer approach to potential unrest ... ..

This supplements my post above. It has an interesting quote:

Chen Xiwen, director of the Office of the Central Rural Work Leading Group, told a news conference that a recent survey showed 15.3 percent of the 130 million migrants moving from villages to cities and factories had returned jobless to the countryside.

Adding this year's 6 to 7 million new entrants into the rural labor market, Chen added, China will this year have about 25 million jobless and potentially restive rural unemployed.

For the ruling Communist Party, which has yoked its authority to decades of rapid growth, these new rural jobless -- amounting to more than Australia's total population of 21 million -- are a worry, especially if migrant workers find their farmland has been taken for development.

Just look at the numbers of rural umemployed. Now you see why China's leaders shit bricks at the thought of anything less than 8-10 per cent growth. Anything less exponentially adds to the huge unemployed pool.

Before Wrdos jumps in with the standard "Oh but India is worse..." post let me state that the unemployment problem is equally bad in India. But there are two crucial differences, which I pointed out in my previous post.

1) The democratic system gives an outlet to restive unemployed in India and thus chances of social unrest disrupting the country is less.

2) A major part of India's working class is self-employed especially in the rural countryside. And this trend is able to absorb a lot of the unemployed in low-productivity jobs - but jobs nonetheless.

None of these two work in China and hence this current crisis is the worst China has faced ever since the opening up of the economy in 1978 or thereabouts. Being the world's largest auto market is not going to sweep that under the carpet.

JMT

[vina]

I just finished reading the latest issue of the Economist , the one with the "Golden Buddha Eye" in the front page. It was largely focused on the economic crisis in Asia. Some of it wrt China, especially, I found it fascinating!.

For eg, it said that China still has the Mao era legacy of classifying people as "Urban" and "Rural" according to PARENTAGE. So what happens if you were born in Beijing to "rural" parents I wonder. Well, since it says any Chinese city consists of the core city and an adjoining hinterland, we have situations such as this.

Much of the rural folks/ migrant folks who work in the factories , since they are "rural" are effectively "farmers" and the wages they earn are "farm income" .

Now our JNU ding dong commies will take such "statistics" and tom tom about incredible "rural" income growth rates in China (just google around for the huge no of articles on that).

That apart, the Economist states that the current crisis in China is only partly due to the collapse of exports. The far greater reason for the crisis is the lack of domestic demand, mainly due to the collapse of the construction industry . The only thing those huge massive high rises , rows and rows of them that we see and much of the skyscrapers in Shanghai, dont have a ghost of a chance of even recovering any what they even spent on building them.

Yup, like Singha says, the best use for them would be to house the millions of migrant workers, who have been thrown out of their jobs and who have no place to live in becuase their dormitories are closed along with the factories!.

[Singha]

a chinese JNURM/NREGS is reqd in which these hordes of umemployed who have no factory jobs, no real farming skills, poor farmland due to decades of overfertilization & pollution, less farmland due to development are given a new work - to tear down the empty towers , smash the concrete into smaller blocks and cart them away to the shore where land can be reclaimed from the sea.

perhaps the entire Bo Hai bay can be filled in and a new huge future
awaits there.

[abhischekcc]

Vsudhir,

Our resident Chinese Wrdos will not admit to it but the Chinese leadership is caught between the rock and the hard place. That's because of the export led growth model that it has been following for the past 30 years.

Hey, that's where I live

I am sure I can arrange a warm welcome for them over here.



-------------------------


Guys, get off the idea that the impending crisis in China will lead to regime change. What will really happen is that the old socialist guard, which never really went away, will be back with a bang.

Watch what the PLA does. The PLA has for long considered itself the final guaranteer of peace and stability for the country. They supported (or at least stayed out of the way) of the reformers as long as the money kept flowing in.

Now, with economic reforms failing, economic reformers will be blamed for the pain that the population is going through. An alliance between PLA and old socialists will oust the reformers, and try to maintain peace through a mixture of force and 'iron rice-bowl' policies, which ensure basic needs, but not prosperity.

There will be an intra party coup, not a regime change. I think most poor Chinese will support this coup. But, reforms have also created a mass class committed to economic openness. The interesting part, and the wild card in China, is how these people react to the military-socialist alliance.

There is a geographical dimension to this as well. The reformers are all in sea-linked provinces, mostly in the south. The other group is by default more landlocked and north based.

Will the reformers be able to influence PLA???? - Trillion dollar question.
Because right now they are the most tempting target for being made fall guys.

[vina]

Money talks. The PLA is just as mercantile as anyone else. Yup. No regime change or anything, but a internal coup definitely with more "pro poor" noise made and the jack boot used to kick some sorry asses.

[putnanja]

China's official figures obscure sharp decline

...
The difference lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.

But experts say that compared to the previous three months — the system used by most other major countries — China's growth fell to as low as 1 percent or possibly zero.

"The recent weakness is much worse than the long-term trend," said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was "close to zero."

...
It was only in 2005 that booming service industries such as restaurants were counted in economic output. That forced NBS to revise a decade's worth of growth figures. But only annual numbers were revised, not those for each quarter, making it harder for analysts to make historical comparisons.

"China's statistics system is really in a mess," said Merrill's Lu. "It's extremely difficult and close to impossible to calculate the quarter-on-quarter growth rate in China."

The bureau says it wants to create a reporting system like those of other countries.

"We are doing research right now on setting up this system," its boss, Commissioner Ma Jiantang, said last month, though he gave no timetable.
...

[Abhijeet]

The projected growth rates for China over 2009 and 2010 are still higher by a couple of percentage points than India's, which doesn't seem to fit the theory that they will be affected more by the crisis than we will. Are these overestimates for China or underestimates for India?

[vsudhir]

The projected growth rates for China over 2009 and 2010 are still higher by a couple of percentage points than India's, which doesn't seem to fit the theory that they will be affected more by the crisis than we will. Are these overestimates for China or underestimates for India?

Neither. Or perhaps both. Hard to say. Will be a while before clarity seeps in on whether and where things are moving.

The core issue is whether a % drop in econ growth has similar or even comparable current and future social impact in 2 countries. And therefore the nature and scale of the policy responses in the 2.

[Singha]

It a massive H&D thing for them to have higher growth rate than
India. its the very justification CCP uses - "look at these wild, uncontrolled unwashed democrazy - onree 6%!! Ha!! live with our order and you get 8%" thing.

whatever be the real growth rate, stuff will be massaged to just above the indian rate in the worst case.

and the western media will fall in line or get deported like anyone
who criticized the beijing regime did. the big accounting firms were
also coerced as is documented.

[svinayak]

The projected growth rates for China over 2009 and 2010 pe of the are still higher by a couple of percentage points than India's, which doesn't seem to fit the theory that they will be affected more by the crisis than we will. Are these overestimates for China or underestimates for India?

The media control is used for this kind of dis information.
The hype of the fastest growing economy has 2-4 points padded to its real number

[abhischekcc]

The projected growth rates for China over 2009 and 2010 are still higher by a couple of percentage points than India's, which doesn't seem to fit the theory that they will be affected more by the crisis than we will. Are these overestimates for China or underestimates for India?

These are the numbers they pull out of their backsides or some other place.

Go back 20 years+. You will find the same 2+ percentage point difference in growth rate of India and China. It is almost as if they look at India's projection, add 2+, and go to town with it.

There is one thing the Chinese do better than India, and that is lie. They have thousands of years practice in saving face.

[Sagar]

These are the numbers they pull out of their backsides or some other place.

Go back 20 years+. You will find the same 2+ percentage point difference in growth rate of India and China. It is almost as if they look at India's projection, add 2+, and go to town with it.

There is one thing the Chinese do better than India, and that is lie. They have thousands of years practice in saving face.

China vs India has always been a delicious topic. In the 1960s after Mao's revolution, China was doing much better than India- This was conventional wisdom and widely accepted. IIRC, Subramanyam Swamy was one of the few who dissented with this opinion. And he was proved right after 1979.

[vsudhir]

Dissecting China’s GDP Yields … Confusion (WSJ blogs section)

Just how fast is China growing –- or is it growing at all?

Very genteel and polite article onlee. The deference, oh the deference..... The firangs have figured out that face-saving is the be all end all for PRC. So grant them face, then you can say whetever you need to...

Obtaining precise answers to these questions has become increasingly urgent for many economists and investors as they try to gauge trends in the world’s third-largest economy. It’s not clear that China’s statistics are wildly inaccurate, or even intentionally manipulated, as has long been argued by some economists. But the numbers are funky, to say the least.

It’s also impossible to avoid the conclusion there are some problems with the source. “These data are really dicey to use,” Keidel said. “I think we’ve got a long way to go before we can really rely on quarter-to-quarter seasonally adjusted data.”

“The numbers are strange, to say the least,” said Standard Chartered’s Mr. Green, in a recent report explaining his calculations. “The NBS is doing itself no favors. The lack of a revised quarterly GDP series and any explanation of how the 2008 numbers were calculated only increases suspicion that the data is being deliberately manipulated.”

The head of NBS, Ma Jiantang, strongly disputes such suspicions. In a recent interview with the People’s Daily newspaper (in Chinese), he admitted that there is room for improvement in China’s GDP calculations, but insisted its methodology is still fairly advanced for an Asian country.

“After the figure of 6.8% for China’s GDP growth in the fourth quarter of last year was published, I heard two opinions coming from abroad. One is that the figure is higher than in reality: ‘You have negative growth in electricity consumption, so how can GDP be growing by 6.8%?’ People who hold this view do not actually understand the internal relationships of different factors in the economy. Another opinion is that the figure is deliberately low: ‘The Chinese government has deliberately lowered the previous year’s figure in order to make advance preparations for achieving the 8% target for 2009.’ This is a completely subjective assumption, without any evidence,” Mr. Ma said. – Andrew Batson

[Sanjay M]

Businessweek

India Looking to Pip China on Economic Growth

Hehe, the comments are good too:

Dragon Warrior Feb 9, 2009 11:39 PM GMT
Keep on dreaming you darkskinned towel-head. How I wish a repeat of the 1962 war will occur again so that we could easily pop u hindus by simply aiming at the dots on your foreheads. How I laughed when I learned that you babuns used the same white head wraps to quickly umwrap and wave it in surrender at the site of PLA soldiers marching in. Lets just wait and see at the end of 2009 who will have done what. I bet u two curry powdered cows that CHINA will have succeeded YET again to outdo india for the umpth time. india simply doesn't have it to be better than CHINA, and indians simply aren't capable to be better than their superiors: us CHINESE.

Dragon Warrior Feb 9, 2009 11:54 PM GMT
One last thing. I have soo much confidence in my own country of CHINA that if india can beat CHINA in economic development I will lower myself by having sex with india's best looking actress.

Hehehe, I loves me a good Chinese put-down. They always go whole-hog and over-the-top.

[Singha]

its been revealed here that all the wages of factory workers are counted
as rural income because originally they hail from rural areas and are in the cities on residency permits or illegally.

thats the fig leaf they have been hiding under all these years to show high
growth in rural economy and incomes using export industry incomes

[vera_k]

Singha the Hindu Nationalist is famous on the BW blogs .

[Singha]

big 34 storey building burns badly in beijing
http://www.nytimes.com/2009/02/10/world ... ml?_r=1&em

[Purush]

big 34 storey building burns badly in beijing
http://www.nytimes.com/2009/02/10/world ... ml?_r=1&em

Accident or insurance scam?

[krishnan]

Looking at how the building is burning, doesnt look like an accident

[Singha]

similar fires in india have been shut down with far less mayhem. maybe 2-3 floors got gutted but that was it. this building looks like it was stuffed to the rafters with dry wood, straw and napalm.

[krishnan]

Those two guys seems to be enjoying the show