PRC Economy - New Reflections : Dec 15 2011

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Chinmayanand » 06 Dec 2012 22:20

China's Economic Dead End

For corporate China, the music has stopped playing. Profits of China's industrial companies in aggregate could fall this year for the first time in more than a decade, threatening job losses that will make the necessary transition to consumer-driven growth difficult to achieve. Firms are struggling under the burden of investment excesses, suddenly high real interest rates and slowing global growth.

The problem here is government policy. Beijing engineered a spectacular stimulus in the wake of the financial crisis but misguidedly aimed it at investment and exports. Investment as a share of output was already exorbitant at 41% in 2004, yet went up to 46% in 2011. Just to compare, Japan's investment rate peaked at 36% and Korea's at 39% during their boom eras.

The stimulus, and all that investment in general, may have helped many capital-intensive businesses start projects, but what after that? With so much capital being invested, the marginal unit of investment was probably getting wasted. It made companies inefficient, which explains their losses.

This marginal unit matters for efficiency and hence growth, but the China bulls won't tell you that. They argue that China's capital stock is low, both relative to output and even more so relative to its huge population. But the amount of capital in China doesn't tell us anything. What matters is the flow of capital, and where it's flowing to.

The fundamental flaw in China's economy is that it doesn't serve its consumers. The flipside of its high investment rate is low consumption, down to 35% of output in 2011, from 45% a decade ago. This gets economic theory backward: We produce in order to consume and we invest in order to be able to produce more. A country cannot increase its investment relative to output forever.

Ultimately, China's economic strategy is a dead end because, after a while, such investment becomes unprofitable. A point comes when companies cannot sell the extra products made possible by the extra investment. Their profits slump, as we see in China today.

If this weren't bad enough, companies have to contend with other adverse changes too. China's massive monetary injection after 2008 produced such a burst of inflation that it made its way into labor markets. Wages have risen 43% since 2009 and unit labor costs in dollar terms 22% since 2007. This has wiped out China's cost advantage in world markets. Plus, the yuan is no longer undervalued against the dollar.

Besides the vise of excessive investment and rapid wage inflation that have squeezed corporate margins, real interest rates shot up as Beijing tightened starting late 2010, in response to the economy's overheating. The global recovery also floundered and deprived China of the market its investment-led model needs for growth.

In this environment, private companies have reassessed their need for investment and are likely to slash capital expenditure further. Beijing eased monetary policy a bit in the late summer, but that has helped only large state-owned enterprises—which don't create new jobs—and perhaps contributed to a slight industrial expansion that data this week point to. Capital-goods exports to China from Korea and Taiwan have also picked up pace in the past couple of months.

However, if Beijing eases financing conditions dramatically to go for state-driven muscle-bound development, as it did in 2009, it still won't help. The government debt burden is much higher than official figures suggest, when you include the hidden liabilities in the state-owned banks. Beijing doesn't have much scope for stimulus before debt becomes excessive.

Moreover, large capital outflows have undermined bank liquidity, making it harder to use the banks to finance expansion. Activity could perk up in coming quarters if the government pushes more investment, but the prospects for growth further down the line will be undermined even more.

Those among the China bulls who acknowledge wasteful investment still suggest the consumer will take up the baton, and ensure decent growth. But if companies are to slash investment, consumer incomes will be hurt as unemployment rises and wage growth wanes. That risks a demand deflation spiral, which is sure to increase the debt burden and sharply slow down growth, not to mention stress the financial system.

So the likely scenario China will see over the next few years is the share of consumption rising, but with overall growth weakening to at most 5% a year, as the investment share falls. A rising share of consumption won't drive strong growth and help China stay close to its previous rates of expansion, as the bulls like to think.

Such a slowdown may be good for China in the long run as economic policy becomes more rational. If Beijing stops mollycoddling state firms, reforms to ensure that investment is efficient and that the share of household income in output rises, and cuts red tape, growth in China will be on much sounder footing. As for businesses, they will need to reorient themselves toward consumers. Chinese people will welcome higher growth of their incomes and consumption much more than "roads to nowhere." :mrgreen:

But all this will only take place if Beijing reforms in earnest, and loosens controls on interest and exchange rates significantly. That's a big "if" for the Communist Party.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Chinmayanand » 06 Dec 2012 22:25

In SEC Action Against "Made-in-China" Stock Scams, A Second Shoe Drops

A second shoe has dropped in the SEC’s ostensible effort to crack down on the “red collar” crime wave. The term refers to stock scams emanating from China that, on TheStreet.com’s estimate, already by last year had cost U.S. investors at least $34 billion. As I pointed out on Tuesday, this scandal puts the United States and China on an epic collision course.
-----------------
Chinese Civilisational motto : Steal,Copy,Scam
Feel free to add more.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Chinmayanand » 06 Dec 2012 22:43

Move over China: Apple to make Macs in US

Apple is investing more than $100 million to bring production of a line of Mac computers to the US from China, where Macs have been assembled for years.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby wong » 07 Dec 2012 00:00

^^^^

LOL. Apple PR Stunt. It was announced on the Today Show!! Wow, $0.1 Billion investment for a company with $100 Billion in cash. It figures you guys would buy into it. I would have been more impressed if those jobs went to India instead of back to the US.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby sanjaykumar » 07 Dec 2012 00:36

I am afraid the glorious CCP will lose face. And extend the Indo-China Sea claims.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby zlin » 08 Dec 2012 10:03

The same group of bridge fans (Eric Sakowski from highestbridges.com) went to China again in summer 2012 to visit more might Chinese bridges along Yangtse River.
week one: http://highestbridges.com/wiki/index.ph ... hoto_Album
week two: http://highestbridges.com/wiki/index.ph ... bum/Week_2
week three: http://highestbridges.com/wiki/index.ph ... bum/Week_3

The following images were all taken during the "China 2012 Yangtze River Bridge Tour" that took place during the month of August in several Western China Provinces. Bridge fans Roger Perrin of Great Britain and Georges of France joined me on HighestBridges.com's second ever 3 week tour to experience almost 100 of the world's longest bridge spans that included visits to half of the world's 20 longest suspension and cable stayed bridges. The adventurous journey took us along 2,000 miles / 3,500 kilometers of roads and highways with bridge engineer Jiang Changiang and driver Mr. Chen.

The trek along the Yangtze took place in more urban environments making for some navigation challenges that we did not encounter in the more rural regions of the 2011 trip. We often found ourselves traveling along roads that were not yet on our GPS map tracker while at other times a clearly marked road had been blocked or was no longer in existence - wiped off the map due to some new mega high-rise development that did not exist just a year earlier. We also encountered a lot of overcast and haze that made for some less then best photo opportunities but when the sun did come out we captured all the drama and beauty of the world's greatest river crossings.

Our plan to visit all 80 known Yangtze bridge crossings was successful though in an unexpected way as we passed up 2 cable stayed spans due to time constraints and 2 others we had seen in 2011 but discovered 3 new previously unknown crossings including the under construction Huangyi, Qingcaobei and Fengdu 2 bridges. Only in China can someone stumble upon a suspension and 2 cable stayed bridges that will rank among the world's 50 longest of their type with main spans of 520, 788 and 680 meters!

We also ventured up one of the Yangtze's greatest tributaries in the form of the Jialing River where we encountered a varied collection of nearly a dozen new beam, arch and cabled stayed bridges. In the 3 Gorges region the new G42 expressway continued to amaze with more then a dozen more giant spans that cross some of the Yangtze's biggest tributaries.

Look for an even more exciting Chinese in adventure in 2013 when we visit more than 75 of the world's highest spans including first ever construction site visits to the highest road and railway bridges on earth!


This trip just covered Yangtse River alone, which is a small part of China.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby vina » 08 Dec 2012 10:31

The same group of bridge fans (Eric Sakowski from highestbridges.com) went to China again in summer 2012 to visit more might Chinese bridges along Yangtse River.

And in addition the "Great Wall" as well. Both the bridges and Great Wall, paid for with the sweat , blood and tears of the Chinese people and equally useless, with only value being aesthetic and as tourist traps.

Money well spent indeed.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby subhamoy.das » 08 Dec 2012 17:47

The CPC GOC ( govt of china ) is doing its raj dharma to remain in power - projecting might to its people. The UPA GOI is also doing its raj dharma by projecting welfare to its people but that is another story for another thread. CPC was first doing a economic power projection - building the longest and tallest items, producing all of goods of the world minus the IP, consuming all the resources of the earth etc etc and when that is coming down to a more down to earthly levels , it is trying to ramp up military might projection of landing soviet brand aircraft on a soviet built carrier to shooting down sats to sending folks to space to yanking off 5th gen ( not one but two at the same time ), to a having open spat with all of its powerful neighbours over south-china sea etc. These are clear signs of CPC becoming more and more nervous about staying in power and bears an un-canny similarity with UPA which is doing all kind of nervous things like free money, free food, free education etc etc etc...UPA is checked to some extent by world bank and rating agencies etc. Not sure what will check CPC and eventually bring its down fall - may be some folks like Kejriwal or Anna exists there!

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Chinmayanand » 08 Dec 2012 18:12

Why China's Super-Rich Are Packing Up And Moving Abroad

Zhang Lan, founder of restaurant chain South Beauty, is one of China’s richest women and a symbol of the country's booming economic success. Thus it is not surprising that the recent news that the billionaire has renounced her Chinese citizenship to take on a foreign nationality has been met with some significant national soul-searching.

Though it is still not clear what nationality Zhang will take on (China doesn't allow for dual citizenship), her choice is part of broader trend of wealthy Chinese emigrating overseas.

According to the 2011 Private Wealth Report, 27% of Chinese entrepreneurs worth more than 100 million RMB ($15.9 million) have already emigrated, while another 47% say they are considering doing so. The number of these so-called “naked businessmen” is massive. The main reasons for businessmen emigrating are: their children’s education, protecting assets, and preparing for retirement.

Increasingly, the general Chinese public has grown aware of this dramatic trend. Last year, out of 5,000 investment immigration visas issued by the U.S., Chinese people accounted for two-thirds of them.

Undoubtedly, the most dazzling fact in all of this is that over 70% of China’s privileged have either emigrated or are on the way to emigrate. It is definitely not normal for 70% of a country’s wealthy class to want to leave the place where they were born and made their fortune. When we connect this piece of news to another study conducted a few years back in which it was said 80% of China’s wealth is in 20% of people’s hands, then it is easy to imagine the scale of the loss of China’s national wealth.

Apart from the immediate loss of national wealth, massive emigration will no doubt also shake the public’s confidence in the future prospects for China’s domestic development. In general, unless their riches were amassed by unlawful means, the rich are the economic elite of a country.

The choices of a country’s elite influence the emotions, judgment and decisions of ordinary people. When the rich pin the hope of their children’s education and retirement on other countries, it means that they have a pessimistic view regarding the improvement of their country’s education and social security. When people flee a country just to protect their assets, it’s further proof that they do not hold too much hope for the country’s rule of law.

Many people like to take a moral high ground and criticize the rich Chinese emigrants. A renowned scholar recently commented on China’s emigration trend in an interview. At the turn of the 20th century the Chinese students who went to study abroad all tried to come home as fast as they could to serve their country, whereas the Chinese children who go abroad today scramble to find ways to stay in their host countries, even if they've barely graduated from high school.

I personally prefer to look at the issue from another angle.

First, in my view, the fact that the rich are fleeing is sad and even worthy of compassion. Out of the three main reasons for the rich emigrating, their offspring’s education is the most important. This says that, like every parent, wealthy people want their children to get the best education they can. As for protecting their assets, it’s related to the status of the rule of law in China, while hoping for a sound retirement is just human nature. None of these reasons are about personal happiness. In other words, the wealthy do not leave just for the sake of better material conditions.

The flight of the rich also helps to reverse the deep-rooted “eating philosophy” pursued by China’s rulers, where development is the supreme ideal, and as long as the people have enough to eat, all dissatisfaction will disappear. Compared to this, universal values such as rule of law, freedom, and human rights are just quaint ideas.

Nevertheless China’s wealthiest, the people who eat the most, are voting with their feet. This may indeed mark the end of the “eating philosophy.” The fleeing wealthy show us that, as human beings, we have spiritual needs and need to be respected beyond just having enough to eat. When the citizens of a country turn to other states for these things, we should not blame them. What we should rather think about is the quantity and quality of public service that this country provides.

From what Xi Jinping said in November’s Communist Party Congress, we can undoubtedly see that China’s new generation of leaders has started to take stock of the problem. Since Xi became China’s leader, “livelihood” and “anti-corruption” have become the most repeated expressions in his speeches.

It’s easier to shout slogans than to act. If our country can improve public services, accelerate the process of the rule of the law and put an end to corruption as fast as possible, China will become a pleasant country to live in. And then, I’m convinced that the rush to exile by the rich will come to a halt.

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china and pakistan have one more thing in common. Their super rich are ditching them.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 08 Dec 2012 18:34

looking at all those cities like chongqing in the tall bridges links, it seems there is a significant lack of good arable and flat land in china. this is borne out by studying the terrain map, pretty much half the country is desert and of the other half, a lot is mountainous...which leads to big thick cities coming up in deep ravines and hills which would not happen in india at all - there were always good locations available for our old cities to come up.

perhaps thats what drives the need for high numbers of bridges to cross all this hilly terrain.

despite being 3X our area, the arable land in cheen is said to be less than India.

this scary tea horse road was the main route between south china and tibet for centuries to exchange horses for tea.
http://www.bbc.com/travel/slideshow/201 ... horse-road

we had much better terrain to work with in indic river valleys and plateaus.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby chaanakya » 08 Dec 2012 21:39


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Re: PRC Economy - New Reflections : Dec 15 2011

Postby harbans » 09 Dec 2012 01:09

^Have pointed this out on many occasions. 95% Chinese live on about 90% of India's land area. Tibet is about 2 million sq km more or less. Between the Mainland China (excludes Tibet, Xinjiang) and mainland India the natural balance of power between Han and Dharmic lie the highlands. The Highlands North of India that is the Tibetan stretch should naturally be under Indian protection against Han influence. It is an area that is natural to the practice and retention of Dharmic influences as it has been throughout centuries and millenia. All major river systems of Asia, yes..originate this area. Some ofthe most Dharmic holiest spots are located in this region. How coldly India has abandoned this area to the Han, chills me to the bone. Sometimes i wonder whether i have to fight this India which abandons it's own or to protect it.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 09 Dec 2012 09:59

looking at how thin strips of land backed up steep hills on one side and big swift rivers on another side have become large cities in Cheen, things could get pretty ugly during major floods. prolly need some huge expenses in controlling these rivers.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby subhamoy.das » 10 Dec 2012 08:34

Chinmayanand wrote:Why China's Super-Rich Are Packing Up And Moving Abroad

-----------------------------------------------------
china and pakistan have one more thing in common. Their super rich are ditching them.


This is called the "sinking ship" indicator. May be, may be, the democracy factor has stared to kick in. People in high places in both countries are seeing the mass of people coming towards them soon. All totalitarian countries - be it france before bastile rebel or arab countries in recent times, will have to keep a date with history on this front.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby subhamoy.das » 10 Dec 2012 08:47

zlin wrote:The same group of bridge fans (Eric Sakowski from highestbridges.com) went to China again in summer 2012 to visit more might Chinese bridges along Yangtse River.
week one: http://highestbridges.com/wiki/index.ph ... hoto_Album
week two: http://highestbridges.com/wiki/index.ph ... bum/Week_2
week three: http://highestbridges.com/wiki/index.ph ... bum/Week_3


This trip just covered Yangtse River alone, which is a small part of China.


if we look at the pictures of the human beings, their quality of life indicator is not in sync with the bridges. They look comparable to their Indian counter-parts in terms of quality of life. So clearly the money has gone to the bridge and not to their pockets ( read well paid jobs ).

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 10 Dec 2012 09:01

they are on a big push to criss cross the country with large expressways. so having to build a lot of bridges to keep things level is inevitable given the very rolling nature of the terrain in a lot of china. idea is backward integration of coastal industries with other factories and supplies more inland...ie extend the benefits of the coast in manufacturing to 100s of km deeper inland.
dont see anything wrong with the basic idea. the coasts are overused and better to develop the inland.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Bade » 11 Dec 2012 01:59

One of the wisest things PRC has done is invest in infrastructure, it can never go waste even if it means some needs rebuilding in due course due to wear and tear or even poor quality of construction. This is something India can learn from them.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Anand K » 11 Dec 2012 08:38

They have quite TFTA centralized flood control and water conservation systems..... I once got a dekko at the Yellow River Conservancy Project. Not bad Short Round..... not bad! :)

I remember this article someone posted on BR about the grand infra projects serving mutiple purposes. One is of course to serve the logistic and transportation needs; the second is to serve as a tribute to top party/military bosses (there's the pork barrel aspect too) finally it's a rite-of-passage for the "new-blood" Project Manager. If he does the job well he can move to better things and if not he can say, supervise a soda mine in the Ordos Desert.... if he gets off lightly.

Anyone got that link? it talked about Mao getting dams as birthday gifts and Uncle Hu's iron hand in Tibet.....

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 11 Dec 2012 12:54

I wonder how one can calculate ROI on these huge road and railway investments?

Are they necessary at all...or is the GOI, with its lethargy, doing a better job of allocating capital than THE CPC?

One thing I know for sure. The Delhi Metro has not broken even, and it is used to the tune of millions per day. How the long roads to nowhere in China plan to break even is anyones guess.

DLF and Airtel both have huge loans on their books and they are the most successful companies of their generation in India.

How important is govt. spending on roads? How does one calculate ROI on them?

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Abhijeet » 11 Dec 2012 14:06

Not everything needs to pay for itself in isolation. Many pieces of infrastructure are necessary because they form the underpinnings of a civilized society. A narrow focus on ROI for each piece of infrastructure both misses the point and does not account for the many opportunity costs that need to paid because of poor infrastructure.

Here are some of the costs of poor roads in India that are not taken into account by simple ROI methods:

- Thousands of people needlessly killed each year in avoidable accidents. The cost at a basic economic level is their foregone earnings over the rest of their lives. I am keeping the emotional costs to their family members apart.

- People needing to spend much longer than necessary commuting, and the associated costs in lower productivity.

- Being unable to transport goods quickly, efficiently and predictably from point A to point B, resulting in higher costs for businesses and higher prices for consumers.

- Fuel wasted idling on traffic-jammed roads.

- Pollution caused by traffic jams, and associated health costs.

And so on and so forth. Many of these costs are typically not included in a simple ROI analysis.

Building good roads and other pieces of important infrastructure like railways, sewerage systems, power generation plants and so on -- on a war footing -- is essential for a country at India's stage of development. There is nothing chankian or clever about building under-capacity infrastructure several years too late with 100% cost overruns and poor quality, as happens routinely in India.

You should consider that the ROI on the US interstates is probably low or negative, yet I doubt even the most extreme libertarians in the US would say that the system should not have been built.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 11 Dec 2012 16:09

what you said is pretty much normal factors. Productivity, fuel costs, health costs, etc. which cannot be put into ROI.

However. That is still vague.

If I was the PM. How do I decide whether, lets say, building a uniform network of feeder roads to the national highways is going to give me more ROI than, say building the golden quadrilateral, or say, putting the same amount of money towards basic education and health?

There has to be some way of measuring ROI. See. Look at the grand plans of the US govt. It gave huge loans to companies like A123 systems...which has filed for bankruptcy, and Solyndra, which has also collapsed. Now. The ROI on these projects, for the US govt. was negative.

So ideally, it should not have invested in them? Of course not. It might have been better to not invest in them...and rather invest more in shale gas, for example, which has led to more immediate benefit.

ROI, again. How does anyone calculate it for such projects, which have a SOFT , theoretical ROI???

Anyone?

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_23686 » 11 Dec 2012 17:50

^^^
Indian Railways were always in loss. Imagine India without it. (yes I know, started by Brits for siphoning off money but consider the period after independence)

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_23686 » 11 Dec 2012 17:55

Massive road projects also bring in tons of jobs, skills and put money in flow. US build most of its infrastructure to pull the country out of recession. Similarly Germany build the Autobahn. China is doing the same and I personally think that we can get away by "wasting" some money on constructing good roads.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Bade » 11 Dec 2012 22:01

There is nothing sacrosanct about any RoI calculation.

If you wait long enough the land acquisition costs will be such a burden, that any RoI calculation will tell you that you will not to able to profitably build roads or expressways where most of the population lives and conducts business.

Such investments are useful across multiple generations, so how are you going to do a reasonable RoI unless you can predict the future. It is a lost cause from the get go. Just bite the bullet and do it asap, or create ghost towns and force people to move to the new areas in the periphery of current settlements to reduce costs.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 12 Dec 2012 02:04

The massive infrastructure projects are probably the best thing that has happned to China. Me thinks it will go bust, soner or later. But it will be left with some great infrastructure. The only uncertainty is about the quality of the Chinease projects. I know for a fact that some of them are of lower quality. Nevertheless, it is something India currently only can dream of having.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 12 Dec 2012 08:10

their construction boom has also led to rise of world scale contractors who can design huge roads, bridges, tunnels in any terrain and execute projects. same for the shipbuilding and oil rig sectors, a huge scale has been built up. delhi T3 shakinaw glass sheets came from cheen and so did the fitters who bolted it together.


formerly this was the domain of specialized european cos. we still run to such cos whenever a civil engg challenge comes like the jammu katra railway or some 3km tunnel or how to span a huge valley in a single span. they have done this 100s of times now and built a huge scale and speedy execution.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Raja Bose » 12 Dec 2012 09:26

From the above debate, I hope the resident chipanda drones realize what is considered an educated discussion and what democracy gives you, instead of smirking like a Paki that "Look the Indians themselves claim that they have are shitty in XYZ, we Chipandas would never do that in public! Clearly we are soup-e-rear! 8) "

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 12 Dec 2012 10:06

^^^^
No clear answers above. Any research papers with mathematics , folks? Look at this to see how the manufacturing sector is heading for a steep slope downwards.
http://www.nytimes.com/2012/12/12/opini ... ?hpw&_r=1&

And why we will, in the future be pretty wealthy, provided we focus on IT strong.

Hence, India, with its institutional focus on IT, starting from kid maths, to CDOT and Sam Pitroda, to Infy in the 80s ......has invested in better infrastructure than shakina roads and railway investing China?

May be. See. Shiny roads and manufacturing capability is not all that vaunted. ROI is the determining factor.

The interstate of the US is great and it works very well. It is more suited to the country than the railways. Similarly, railways is better suited to densely populated regions in India and China. The British might have accidentally stumbled into something good, but sure, they made it when they realized that their ROI would be great, from it.

We've got to think about these things before we make grand national plans. before NREGA and direct subsidies and the like. The way forward may not be more well thought of, high ROI govt schemes, but actually LESS. And more focus on LESS governance and govt. rather than MORE. Individuals usually make good decisions vis a vis ROI.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 12 Dec 2012 10:07

^^^^
SInghaji..lets outsource manufacturing to China, like the Americans have done, and focus on IT. I think this is what we are doing now. Let the Chinese people pay for our shakina objects of desire, through their indirect subsidies given to large state manufacturers.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 12 Dec 2012 10:11

And chinese posters. India strong be very afraid.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Bade » 12 Dec 2012 10:20

You can outsource all your manufacturing and civil engineering works to China if you want India to become a client state of PRC or a tributary as they would like to claim. :-)

What do you do in war outsource rebuilding to your likely enemy's friend. What kind of a strategy would that be ? You can outsource maybe 10% of any sector not even 51%. So in the end you need to build up your own skill levels in all sectors not just IT for a large and aspiring country.

Anand K
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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Anand K » 12 Dec 2012 16:20

China hasn't done too badly in core Instrumentation, Control & Automation, Communication and IT folks..... they have decent homegrown DCS/SCADA and instruments which have a market in China SE Asia. (PS: All ABB/Siemens/E+H ityadi manufacture their instruments in China) Chinese cellular devices and providers have a footprint even in Desh. Once met couple of senior folks from a *top* signals & telecomm provider for railway systems who worked for the Tibetan rail link; they remarked that the local products turned out to be pretty world class and reliable [even in those godforsaken zones].... the integration with the superduper foreign TFTA maal was also good. They have a good handle on LARGE scale distributed monitoring & control in transportation, energy, water, sewage, information & broadcasting fields.

Couple this with increasing maturity in metallurgy, motors and precision machining IMHO one can expect them to narrow the technology gap with the US within the next 20 years. and we got to catch up..... that old Red Queen funda and all that.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 13 Dec 2012 07:51

another area where they are expanding global footprint is construction machinery - stuff like dozers and earth movers competing with komatsu and caterpillar and gantry cranes where "zoomlion" is now very common in all indian construction projects beating out a couple of other cos.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 13 Dec 2012 09:20

^^^

Again. At this point of time, even with higher Chinese salaries, I do not see the potential for Indian manufacturing to attain anywhere near the scale of the Chinese, anytime soon. For all sorts of reasons, I foresee that the Indian destiny is more in line with the role of Britain in Europe, and the Chinese, the role of Germany in Europe.

Which is all fine and good. Nothing wrong with it either. But to say that we have to build X Y and Z in order to keep up with them, is superfluous.

We just cannot keep up with them in manufacturing. They have outlapped us several times ; it is best that we carve out finer sectors with more money in them, for ourselves and use that to power our salaries for the future.

IT is one of them.

And, yes, if any folks can give me a good idea of how to calculate ROI for a project before it is started, please do. thanks.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Singha » 13 Dec 2012 09:56

i dont think the world needs another UK - one is enough.

its not true that Cheen is pushing out everyone from manufacturing - taiwan, singapore, south korea, japan, italy, france, germany , USA still do a lot of manufacturing and earn huge surpluses based on exports of these goods.

a country like India cannot hang its hat on just one or two areas which singapore or taiwan can.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Christopher Sidor » 13 Dec 2012 23:19

China’s Ghost Towns Won’t Have a Hard Landing --- Bloomberg Dated 12-Dec-2012

This is an opinion piece. What the author is saying is that China has space for another stimulus if it is required. The author claims that the Chinese Debt is about 50% of GDP. The author also claims that
Fiscal policy had previously been conservative, and high domestic savings meant that China didn’t rely on external borrowing. That created fiscal space for action when it was needed, and the government used it.

China like Japan and India does not rely that much on external borrowing directly. This is in contrast to some european nations which depend on externally borrowing. But this is not the whole truth. China just like India uses Foreign inflows too. In India it is investment by FIIs in the stock market and FDI is various sectors. In China it is also the same. This is something which the author overlooks.

Now where the author goes negative is given below
The real danger for China isn’t that the consolidated public sector is flirting with insolvency or that the dead hand of government planning is reaching out to strangle the country’s private sector. It’s that the financing model for subnational public investment has been dangerously overstretched.
....
The money for all that new infrastructure has mainly come not from long-term bond issuance but from short-term bank lending, opaquely mediated through local financing vehicles. If the investments fail to generate high economic returns, the revenue needed to service the debts will fall short. That’s a real possibility.
....
A lot will depend on the real extent of overinvestment -- and that’s hard to say, reports of “ghost towns” with empty roads and buildings notwithstanding. Rapid growth has a way of justifying apparently excess investment, as China has proved before. (Meanwhile, ask India what too little investment in infrastructure does for your growth prospects.)

The problem is that no body knows what is the acceptable level of RoI in china. It is entirely possible that Chinese investment post 2008 may not yield anything. But in a national Capitalism structure that is hardly of any consequence. China's investment or over-investment might pay for itself once growth returns. But the question is will the high growth rate return? China is an export oriented country. If markets outside do not do well then China also will not do well. Fixed investment will take the economy only so far. Moreover it is a tool to help the real economy grow. This investment has to assist in driving up efficiency and/or productivity. Whether it will be able to do that is another question.

The dig that the author takes on towards India is justified.
Our low growth and extreme high inflation, bordering on stagflation, is due to our very low spending on basic infrastructure. Think about it, in 1980s we established railway tracks with the potential of running 200+kmph trains on Delhi-Bombay and Delhi-Calcutta route. But after that we concentrated on increasing frequency of trains or adding new trains or worse creating new zones. The average speed for most of our passenger trains is 60kmph and for goods train it is about 40kmph.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby member_20292 » 14 Dec 2012 00:16

^^^ The above poster, thanks.

You have indirectly answered my question on ROI.

But it still stands. How the damn to calculate something, which , any sane person would say is something

"for the general good of Rome/India/China " as Brutus would say.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Rishirishi » 14 Dec 2012 04:05

There are several factors that the article does not mention.

1 local governments are "selling off land" to finance their activities. A property crash will lead to this source drying up, leaving several local authorities without funds.

2 The infrastructure and construction industry is of epic scale. A reduction in construction activity will have devastating effect. They cant let that happen.

3 Pumping in more money will lead to inflation. China will not be able to devaluate, as it will involve adverse reaction from EU and US. Hence Chinas export oriented industry will suffer and with global mobility, the factories will move elsewhere.

4 Unhappiness is growing.

Theo_Fidel

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 14 Dec 2012 09:06

We have been through this debate many many times before.

The key statistic is that the Panda overlords control 55% of GDP while GOI only controls < 20% of GDP. As a percentage more of Indian GDP ends up in mango indians hands. At some poiunt that dynamic has to change with panda overlords dropping to 20%-25% of GDP. The question is what sort of economy they can support then.

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Re: PRC Economy - New Reflections : Dec 15 2011

Postby Don » 14 Dec 2012 17:52

http://news.yahoo.com/brent-rises-above ... nance.html

Brent rises above $108 as China data points to economic recovery
By Florence Tan | Reuters – 7 hrs ago

SINGAPORE (Reuters) - Brent crude rose above $108 a barrel on Friday on a brighter economic outlook for China, the world's second largest oil consumer, but worries about the economic impact of a possible U.S. fiscal crisis capped price gains.

Growth in China's vast manufacturing sector picked up in December, adding to other data that pointed to a gradual economic recovery that could boost fuel demand. Employment in the United States and retail sales also improved, indicating that its economic recovery may also be picking up.

Brent crude is set to eke out its first weekly gain in three weeks. The January contract, which expires later on Friday, rose 37 cents to $108.28 a barrel by 0322 GMT. U.S. crude for January delivery was up 53 cents to $86.42.

"We're seeing positive PMI, industrial data and they are all pointing to the direction of an economic recovery," said Sijin Cheng, a commodities analyst at Barclays Capital.

"The underlying demand is going to improve gradually."

The HSBC flash purchasing managers' index for December rose to 50.9, a 14-month high. Data released earlier this week showed that China's November crude imports matched the third highest on record as new refining units started operations.

Chinese officials meeting this weekend are expected to maintain next year the 2012 GDP growth target of 7.5 percent.

In the United States, stalled talks in Washington to avert the "fiscal cliff" of steep tax increases and spending cuts overshadowed improvements in jobs data and retail sales.

Frustration mounted over the recent lack of progress in negotiations between the Democrats and the Republicans as the year-end deadline loomed.

"There's just more headline policy risk for the time being," Cheng said, adding that this would create volatility in oil prices.

On crude supply, the Organization of the Petroleum Exporting Countries (OPEC) agreed on Wednesday to maintain its oil output target of 30 million barrels per day (bpd), a production level the group exceeded in November by 800,000 bpd.

OPEC is relaxed about the prospect of rising inventories in the first half of next year, the group's secretary general said on Thursday, so long as oil prices avoid extreme moves from their current acceptable level.

Iraq has said other OPEC producers should shoulder the burden of output cuts in the event a reduction in supply is required.

But the second largest producer after Saudi Arabia is falling behind production targets as logistical bottlenecks and weak infrastructure hampered investors' ability to ramp up output.

Oil major BP is close to reaching a deal with Iraq to cut the final production target for the supergiant Rumaila oilfield to between 1.8 million and 2.2 million bpd, down from 2.85 million bpd agreed in 2009.


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