PRC Economy - New Reflections : Dec 15 2011

[Theo_Fidel]

About the only comment one can infer economics in so far, dear ashi, is this : "Cheap cost is not the only factor of having an export industry. It is only one of them. You need great infrastructures, a large pool of educated and young labors, supportive government policies, efficient supply chains etc. India lacks all of these. And this cannot be changed overnight."

Prasad,

Actually even that is not fully accurate. You need infrastructure cheap.

The key attribute is cheap. Panda keeps the cost cheap by raping its countryside and people. Every one is getting in on the Cluster-f$ck that is going on. That is all. China burns the hell out of coal and makes cheap electricity and steel, of course everyone wants to get in on the action.

No one wants to get into and stay in Pandaland by choice. There are no hordes beating down the wall of Chinese embassies trying to get in. Even India gets its fair share of poorer and desperate folk tryin to get in. No bangladeshi's are beating down the doors tryin to get into Pandaland for instance.

By the same measure you don't buy a Panda product because you want a Panda product. You buy it because it is cheap, thats all.

The question that has to be asked is what happens when Panda is done building say 400 million apartments and its 20,000 km of HSR. 50%+ of its economy is quite simply investment. Most of it supplied through wild printing of yuan. The end date will soon be here if it is not already.

[VikramS]

Suraj:

We had variety of posters from PRC here before. Most of them move on after some time.

I enjoy ashi's posts. They are to the point, and have a thesis behind them. We may not agree with all, but at least there is some food for critical reasoning.

wong however creates the following image.

Mirror Mirror on the Wall, who has the biggest schlong of them all: The CCP version.


There is a child who has a concave mirror in his home.
His neighbor has a convex mirror.

The child looks at himself in the concave mirror, and then sneaks a peek at the neighbor and sees the neighbor's image in the convex mirror. He then compares the size of the schlong and then gets a hard-on. The child is proud that his schlong is bigger than anyone around, and Uncle Wen's pat in the back helps affirm the vision.

However when someone shows a regular mirror without the distortions, the child can not accept it, telling everyone that his sch.. is the biggest them of all; and he saw it with his own eyes in the mirror on the wall.

What I find truly odd is that even though the drones live outside the PRC, their faith in the CCP is taller and deeper than anything. It such a contrast with the argumentative Indian, especially those with a touch of DDMitis, focused on the negative, with little time spent enjoying the positives.

[ashi]

Nothing new with any of the PRC drone psychology; it's been like this since back in 2000-01 or so when I first saw this forum.

The basic approach is "here's some great news from PRC! China rocks, right ?" We're expected to unquestioningly agree, whereupon the response will be a condescending "Thanks. You Indians are doing rather well too. Good luck trying to accomplish more." Of course the PRC has made tremendous progress that isn't lost on anyone. But that is not the point here.

Critical review on the other hand, prompts a furious "how dare you ? India is in no position to criticize because {insert randomly chosen Dharavi/Durex/dysentery item}. Know your place." Like I said before - to some, the irony of inviting responses by posting something, and then telling others what they can say, does not register.

Alternately, we see someone who posted a d*ck measurement survey now vigorously stating how it's beneath him to respond to the sexual innuendo targeting him. From a moderation perspective, I thought of editing his original post and censuring him for thread disruption, but decided to let the responses take their own natural course instead.

This isn't much different from the mechanism by which Chinese achievements are propagated in the press. There's a method to it. The process is to hide something till a moment when its revelation can be striking and unsettling, and hopefully intimidating leading to a sudden jump in sales of brown pants (Chinese made of course). It's not original, being an evolved version of the Soviet approach. Their approach is tailormade for a system where information release can be controlled in that manner.

Take for example the recent Varyag satellite pics. The western press response is typically Pavlovian, as if to suggest Chinese CBGs will blockade LA, SF, NY etc by new year. It's not supposed to get a BRF SDRE response like "Oh, a carrier ? Nice. We've been operating one or more of them continuously for the past 50 years. Have fun learning how to launch planes off them."

Disseminating information in short effective bursts like that helps control discourse in a manner that exaggerates your abilities and more importantly, acts as a camouflage that gets adversaries to react in a predictable manner focusing upon being unsettled by your strengths, rather than investigate your weaknesses and build up their own strengths to target those.

When you understand how the mechanism works, responding in a manner different from the kneejerk one becomes possible.

Since 2001 till now, who is more right on China, those who were labeled as "chinese drones" or the majority of the BRF SDRE?

[ashi]

No one wants to get into and stay in Pandaland by choice. There are no hordes beating down the wall of Chinese embassies trying to get in. Even India gets its fair share of poorer and desperate folk tryin to get in. No bangladeshi's are beating down the doors tryin to get into Pandaland for instance.

Shanghai alone has more than 300,000 foreigners living there, many of them are South Koreans, Japanese, Americans. You will be surprised how many illegel residents from Africa are living in Guangzhou. They almost have their own "small down" inside the city.

[VikramS]

Since 2001 till now, who is more right on China, those who were labeled as "chinese drones" or the majority of the BRF SDRE?

The PRC threads have come alive more recently, especially after the collapse of 2008.

Both you and wong claim that these the SDRE's are wrong on China for 10 years. However, what I do not understand is what exactly was wrong.

There are very few Indians who visit China and have an opinion. Most of the stuff posted here are articles from the Western press. Since 2008 many of these articles have been warning of a potential of the debt bubble affecting China too. And they raise specific issues which are either accepted or dismissed as misguided.

If you look at this particular thread, you will notice that while the Pritchard article was negative, another SDRE posted the article from the WSJ reporter who said that the statistics from China are now a lot more reliable than before.

Similarly those Indians who have worked with Chinese recognize the progress made. They also however recognize the emptiness they see. Some have commented that they prefer the hidden from the limelight "original parts" of Chinese cities since they see a lot more of the real Chinese culture and people, instead of the sanitized projections of the new developments.

The reaction of the Chinese drones is interesting. They summarily dismiss what the article says with very little critical analysis. And then people like wong come and talk about capitulation and what not.

While Indians look up to see what China did right or wrong, and how it may effect India, the drones conveys the following:

• The need to project that nothing is wrong in China
• China is number one in everything,
• No one can over take China
• Nobody else can be like China
• The CPC is the best thing that happened to mankind
• The Chinese people must be thanking the stars that CPC came into existence.

I see next to nothing analysis of the negative press from the West from the drones. As if the issues raised are not even worth commenting on.

For a bunch of people who are very critical of what happens in India, this blind conviction is very unusual to see. I know very little to pass judgement on whether the Westerners are right or wrong, but I do find this unqualified worship of the CPC/PRC a big disconcerting.

I also notice a tendency to completely ignore anything which pokes holes in what the drones say. While you are more reasonable than others, even you ignored the stats from wikipedia which showed that GDP growth in India actually beat out PRC by 0.1% which gkakkad posted.

If you disagreed with the numbers, you could have said so, and clarified why you believe that those stats need to be reviewed. But you completely chose to ignore whatever does not agree with what you think is right! As if being like an ostrich would change things.

The drones would get more respect if they are more detailed and thoughtful in their critique. All we see right now is the schlong comparison, as your post about the past 10 years very well illustrates.

[ashi]

Since 2001 till now, who is more right on China, those who were labeled as "chinese drones" or the majority of the BRF SDRE?

The PRC threads have come alive more recently, especially after the collapse of 2008.

Both you and wong claim that these the SDRE's are wrong on China for 10 years. However, what I do not understand is what exactly was wrong.

There are very few Indians who visit China and have an opinion. Most of the stuff posted here are articles from the Western press. Since 2008 many of these articles have been warning of a potential of the debt bubble affecting China too. And they raise specific issues which are either accepted or dismissed as misguided.

If you look at this particular thread, you will notice that while the Pritchard article was negative, another SDRE posted the article from the WSJ reporter who said that the statistics from China are now a lot more reliable than before.

Similarly those Indians who have worked with Chinese recognize the progress made. They also however recognize the emptiness they see. Some have commented that they prefer the hidden from the limelight "original parts" of Chinese cities since they see a lot more of the real Chinese culture and people, instead of the sanitized projections of the new developments.

The reaction of the Chinese drones is interesting. They summarily dismiss what the article says with very little critical analysis. And then people like wong come and talk about capitulation and what not.

While Indians look up to see what China did right or wrong, and how it may effect India, the drones conveys the following:

• The need to project that nothing is wrong in China
• China is number one in everything,
• No one can over take China
• Nobody else can be like China
• The CPC is the best thing that happened to mankind
• The Chinese people must be thanking the stars that CPC came into existence.

I see next to nothing analysis of the negative press from the West from the drones. As if the issues raised are not even worth commenting on.

For a bunch of people who are very critical of what happens in India, this blind conviction is very unusual to see. I know very little to pass judgement on whether the Westerners are right or wrong, but I do find this unqualified worship of the CPC/PRC a big disconcerting.

I also notice a tendency to completely ignore anything which pokes holes in what the drones say. While you are more reasonable than others, even you ignored the stats from wikipedia which showed that GDP growth in India actually beat out PRC by 0.1% which gkakkad posted.

If you disagreed with the numbers, you could have said so, and clarified why you believe that those stats need to be reviewed. But you completely chose to ignore whatever does not agree with what you think is right! As if being like an ostrich would change things.

The drones would get more respect if they are more detailed and thoughtful in their critique. All we see right now is the schlong comparison, as your post about the past 10 years very well illustrates.

According to World Bank, China's GDP growth in 2010 is 10.4% and India is 8.8%. See for yourself.

http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

This is not to take foreign exchange fluctuation into consideration. And 8.8% I believe is official data from India government. If you do take foreign exchange as part of the equation, does the recent dramatic devalue of rupee mean a big drop of India's GDP?

[Suraj]

Since 2001 till now, who is more right on China, those who were labeled as "chinese drones" or the majority of the BRF SDRE?

Clearly the fact that over the last decade, the average Chinese poster here lasts barely a few weeks before getting banned for thread disruption means they didn't manage to say much right

[VikramS]

While the IMF has this table:
http://en.wikipedia.org/wiki/List_of_co ... test_year)

So does the CIA Fact Book
https://www.cia.gov/library/publication ... 3rank.html

And they both list India higher than China.

The whole point of this debate is actually lost to me. However to the drones it is a matter of intense pride.

As they say there are lies, damned lies, and statistics. There are a lot of variables in these calculations and so many fudge factors to take it the way you want.

However to the Chinese it seems to be a number of immense importance (as Acharya said, the first sentence in a talk...). To me it sounds like another case of the "need to prove that we have the biggest ...." (and you better capitulate to us).

In the long run what truly matters is the sustainability of the growth, and the distribution of its benefits among the rank and file of the country.

[chola]

Chola,

I completely agree that Panda is an investment lead economy. Your comparison with the Soviets is perfect. Despite the sham of appearing to be open to market policies, it is a communist economy.

The question of course is how did a investment economy support such a massive consumer market. What was the mechanism to transfer wealth to the populace. And what is source for this investment. Is it resource investment as it was for the Soviets. They were at one point the Soviets were burning 7 tonnes of coal per ton of steel as compared Western plant.

Whenever a government picks and chooses who wins and who dies in an economy, it is not free. In pandaland, it is not just companies chosen but entire industries. For example, now they are supporting the clean energy sector (especially solar panel) even though it is a loss making proposition anywhere around the world, even in China.

Now to the question of how China developed a consumer market when it is not consumption led.

To begin with, most companies in the US and EU that sell to China (which includes the vast majority of the Fortune 500) believe that the chini consumer market is vastly understated. Actually they don't just believe it, they know it from the sales numbers. If you are GM or VW and you can sell more cars in China than the US and Germany then you must assume that the chini consumer population is as large if not larger than your own when it comes down to budgeting and sale forecasting.

The reason that consumer market is understated -- until you come to actual sales -- is that small and medium private businesses operate on the margins in China. They are not supported by the state. Getting capital from state banks is nearly impossible. So is getting state contracts. So what happens is they operate in the shadows, making money but not paying taxes since they get no benefits.

This phenomenon happens in the US and India as well. But in societies where small private businesses can get loans, you have to come out of the shadows a bit and open your books to the lender if you want capital. In a communist state where there is no possibility of loans or other incentives, they stay in the shadows. They have nothing to gain by coming out. This shadow economy is mostly people buying things in small increments trillions of times from each other not individual high volume export orders. So in effect it is a consumer-led system but one that is off the books and won't show up in GDP figures but will show up in sales figures.

Now that established, we can look at how the whole system is funded. In effect, it is the US dollar.

Remember, every sovereign nation can print as much of its money as it wants to create wealth. It is nothing but paper so why not print more? But the one catch -- as everyone here knows -- is that currency when not backed by something becomes worthless.

Now, the US dollar is not backed by gold or silver even though Fort Knox holds tons of precious metals. The Dollar is backed by US financial and industrial might. You hold an US dollar, you can exchange that for an American loan guarantee or an American product. Also, you and the person you are passing the dollar to, no matter where in the world, are both confident that it will be accepted.

The Chinese yuan was nothing like this. In the 1970s, it was nothing outside its borders. Inside its borders, it was worth barely more. So how do you get your currency to be worth more than the paper it is printed on? You can dig for gold or oil.

Or you can attract hard currencies like the US dollar that is accepted around the world. The owners of those currencies had already done the hard work of making people around the world accept them.

This is what the Special Economic Zones (SEZs) did. They pulled in FDI which provided the capital to build industries that Chinese themselves didn't have. You can buy iron ore and oil from Africa and South America or machine tools from Germany with US dollars or Japanese yens.

Every piece of hard currency in China is held by the state which in turns prints yuans in strict proportion to every dollar, yen or deutschmark (or today, euro) it got. Basically, the yuan became to be backed by gold but by the hard currency of advanced nations.

Gradually as the industrial base of the PRC grew, its own products start to back the Yuan. Today, if you have a yuan you know you can use it to buy something in China. But what is more important is the manufacturing base originally created for exports has reached a point that items are created so cheaply that the local population can actually purchase them.

Materially, the average Chinese is better off than the average Indian by several multiples because of the economy of scale in manufactures.

So in a nutshell, how did the Chinese create such a large consumer economy?

1. FDI, I can't emphasize the importance of this. Unless you are resource rich like Saudi Arabia or South Africa, you cannot hope to create worth for your economy unless you get the seed capital from others.

2. Controlled FX exchange rates; by managing exchange rates tightly, you can control both inflation and competitiveness.

3. Manufacturing over services; it is far easier for a person holding a yuan to equate that something that he can get from a Chinese factory. Cheap goods expand consumption habits.

There is a reason why China keeps $3 trillion worth of foreign currency. People have asked, why not spend it? The above is the reason why not. It is China's Fort Knox. Every trillion US dollars backs 6 trillion Chinese yuan, that's why.

With the rupee crisis going on -- caused by the rapid outflow of liquid foreign capital in the FIIs, you should see why having large reserves of FX is important. Also why FDI is far better since it is not liquid.

[Theo_Fidel]

Shanghai alone has more than 300,000 foreigners living there, many of them are South Koreans, Japanese, Americans. You will be surprised how many illegel residents from Africa are living in Guangzhou. They almost have their own "small down" inside the city.

Oh yeah! we know all about the African traders in China and how they got there and how they are treated.

I note the foreigners are from Japan, SK and America only. None share a border with China. All are paid to be there and will leave once the rape is over. Bah!

[Theo_Fidel]

Meanwhile....

Here is land sales data. Apparently in freefall. Full on financial panic is not here yet.


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

Chola,

That was a very interesting read. So the China black economy is now backed by the US dollar.

And you are right to point out that should China liquidate its $3 Trillion horde of cash, the economic panic that results, will make 2008 seem like a tea party. So Panda took foreign dollar, used them to back its Yuan, then directed the resulting cash explosion at investment specific sectors.

So what happens when the Dollars stops coming in. The US is politically putting a big time squeeze on this practice. I completely agree that without US dollar no wants wants to give a hill of beans for a Yuan! Absolutely worthless by itself even now. And the Pandaland wackos were propogating the craziness about turn the Yuan into a reserve currency of all things!!

[RamaY]

Did anyone notice the download file that starts when you try to go to the first page of this thread?

[rohitvats]

Meanwhile....

Here is land sales data. Apparently in freefall. Full on financial panic is not here yet.


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

<SNIP>

WoW!!!! That is phenomenal.

Apart from 97 in Bangalore and 92-93 in Mumbai, I've never seen property prices, let along land prices, fall beyond 5%-6% range in India.

There is something more worrying which that charts tell me - that, someone needs to sell land for the demand-supply situation to kick-in and manifest itself in the land price. While there are no formal studies per se, the land prices in India are highly unelastic (I know this from professional experience)...how come they vary so much in China? And BTW, who owns the land? Because that would add a different dimension.

[gakakkad]

@ Theo , I have a different take on what Chola is trying to say - And I agree with him.

There are 4 things which the Chinese have done right and which India should learn from them -

1) Go for a manufacturing based economy . A large population can only be provided employment if abundant low skill , manual labour jobs are available. Manufacturing is the only arena for such jobs .


2) Don't play it fair - Manipulate your exchange rates . Titrate it to balance inflation v/s competitiveness.

3) FDI are almost always good- Unlike FIIs . It is easy for FIIs to exit . But extremely difficult for FDIs to exit.

4) Spend on Infrastructure - Spending billions on subsidies or digging holes is burning money. Spending them on infrastructure which will eventually be used for something is a wise investment .

China may be a piss poor country , and the present model may well be unsustainable in the long run. But that is inherent of any communist regime. Besides the above 4 lessons , India must understand that there is money to be made in China.

And 8.8% I believe is official data from India government. If you do take foreign exchange as part of the equation, does the recent dramatic devalue of rupee mean a big drop of India's GDP?

No . For 2 reasons-1) The growth rate represents the REAL GDP (INFLATION ADJUSTED) and not the NOMINAL GDP. India's nominal growth rate in 10 was 25 % . The base year used for the calculation was 2006. This year the base year is changed to 2010 . So by that standard there will be a further rise in the GDP .

The official Indian statistics always has the lowest gdp growth data . I read a paper sometime back as to the reason for doing such a thing. Regarding fiscal 10 there are economic intelligence agencies which even estimate a higher growth .

2) The forex slide is temporary. If you look at the data of the last 3 year INR has vacillated back an forth from 40-50 on 2-3 occasions in the past 3 years or so . Besides a weak rupee means more rupee / dollar . Also ,India's major imports are gold + crude oil . So a weaker rupee is likely to moderate the demand for these commodities.

[VikramS]

Shanghai alone has more than 300,000 foreigners living there, many of them are South Koreans, Japanese, Americans. You will be surprised how many illegel residents from Africa are living in Guangzhou. They almost have their own "small down" inside the city.

Oh yeah! we know all about the African traders in China and how they got there and how they are treated.

I note the foreigners are from Japan, SK and America only. None share a border with China. All are paid to be there and will leave once the rape is over. Bah!

http://www.globalpost.com/dispatch/chin ... r-pressure

“The Chinese make money from Africa,” he said, “but they want to stop us doing the same here. To me, it doesn’t make sense.”

This all for me and nothing for you attitude of the CPC is starting to bite back. The supposed peaceful rise of China has been exposed to be far from true. I think Kissinger's view quoted by Jaswant Singh about the historical Chinese notion of a supreme power (versus shared power) are going to hurt. The Europeans colonists could get away with it but the world is a very different place now.
===
http://www.chinaafricarealstory.com/
A blog by a Western academic, so take everything with a pinch of salt. There is an article about Chinese workers in India, helping train and fill the skill short-fall in basic trades like welding, electrician etc. A refreshing read indeed. Also points to how schemes like NREGA can be used to create a more useful labor force instead of ditch diggers.

http://www.chinaafricarealstory.com/201 ... re-in.html

[member_20317]

Meanwhile....
Here is land sales data. Apparently in freefall. Full on financial panic is not here yet.

----------------------------------------------------------
Chola,
That was a very interesting read. So the China black economy is now backed by the US dollar.
And you are right to point out that should China liquidate its $3 Trillion horde of cash, the economic panic that results, will make 2008 seem like a tea party. So Panda took foreign dollar, used them to back its Yuan, then directed the resulting cash explosion at investment specific sectors.

WoW!!!! That is phenomenal.

There is something more worrying which that charts tell me - that, someone needs to sell land for the demand-supply situation to kick-in and manifest itself in the land price...how come they vary so much in China? And BTW, who owns the land? Because that would add a different dimension.

That has SCAM written large on it.

TSPA owns Brand Islam, Pakjabi willingly plays along so long as the Sindhi/Balochi and sundry others can be sucked dry.

Change TSPA to CPC, Islam to Land, Pakjabi to these drones and the Sindhi/balochi to the rest 70% of China.
Should I don’t blame the Amrikhans, pussyfooting on Darul Islam, the rot keeps getting bigger and bigger.


Or

[sha]

As a matter of fact, I kind of hope Indian guys view China the same way as Theo_Fidel , VikramS, Vina and the like.
The longer they hold their belief, maybe the better for China. The Chinese road of development is crowed now.
Leave the Indian furture to the Indian elites's big talks. Just fell sorry for the India poors.

[a_bharat]

^^
Sorry to disappoint you; the purpose of this forum is not to "crow" Chinese road of development. Anyway, why do pseudo commies need our approval so badly that people like you come here to "crow".

Just fell sorry for the India poors.

You just fell! "India poors" are sorry for you.

[sha]

Post deleted

[RamaY]

1) Go for a manufacturing based economy . A large population can only be provided employment if abundant low skill , manual labour jobs are available. Manufacturing is the only arena for such jobs .

2) Don't play it fair - Manipulate your exchange rates . Titrate it to balance inflation v/s competitiveness.

3) FDI are almost always good- Unlike FIIs . It is easy for FIIs to exit . But extremely difficult for FDIs to exit.

4) Spend on Infrastructure - Spending billions on subsidies or digging holes is burning money. Spending them on infrastructure which will eventually be used for something is a wise investment .

What will you manufacture and who will you sell it to? If PRC and India are combined, you are talking about a labor pool of >1 billion. How much a 1 billion labor can produce in a modern manufacturing setup and how much consumer base is required to consume what is manufactured?

Are we playing fair now? If so, what are the repercussions of not playing fair. How do you plan to move towards this goal?

Can you please analyze SENEX growth since 1998(Jan1998 = 3224; Dec2011=15491) and provide data based analysis on how much addition growth FIIs added to Sensex. Rough calculations show the SenSex grew about 1% per month. Indian economy grew by 8% per year and if you add the average inflation of 4-5% then Sensex growth is ~equal to economic growth. If possible please provide FII flows both sides and please show us how much return FIIs recorded in the same period from Sensex. Then tell us your findings on whether FIIs got benefited from Sensex (ROI > 12% Sensex growth) or Sensex benefited from FIIs (ROI < 12%).

Please explain us why India has to emulate Communist PRC in terms of social, economic and industrial policies to be able to invest significant amounts in Infrastructure and if this cannot be done by GoI despite of its democracy and existing economic and industrial policies if the ruling dispensation can avoid 2G like scams.

[gakakkad]

^^ ouch ... :

Boss I have been pissing and dissing the Chinese onlee. I did not recommend emulating the Chinese . They have got 1000 things wrong for every single right one . Hardly a model to emulate.

But IMHO Chola does have a point . We need to manufacture more .Regarding consumer base , india is its own consumer base. There are 250 million households without TV , washing machine , microwave , cars etc. There you have your consumer base . And the national manufacturing policy seeks to increase the share of manufacturing to 25-30% of the economy by 2025. The projected gdp then is 10-12 Trillion. So Indian govt does have to get the manufacturing base from 600b to about 2.5-3 trillion. creating about 100 million direct jobs and many more ancillary .

[RamaY]

I am not a smart guy, so please be kind with me. I also do not want to take discussion to India here. so I will post my response in Indian Economy dhaga.

[chola]

Please explain us why India has to emulate Communist PRC in terms of social, economic and industrial policies to be able to invest significant amounts in Infrastructure and if this cannot be done by GoI despite of its democracy and existing economic and industrial policies if the ruling dispensation can avoid 2G like scams.

The question is not whether to emulate the chinis. The question was how the PRC created a consumer class that buys so much. Concentration on manufacturing, currency manipulation and attraction of FDI were the main reasons they were able to achieve this.

It is not a trifling matter either. Firstly, all Indian firms are on the back foot compared to the other multinationals around the world if we cannot compete in what is already the largest consumer market for many things and will be the largest for the others in the near future. Secondly, when GM or VW sell a large percentage of their products in the PRC then they become lobbyists for the panda in Washington or Bonn to the detriment of other nations that buy less.

Unless we understand the size of the Chinese market and understand how they got there then we will always be behind the curve. Again, we see peoples and nations with far more acrimonious relations with the chinis making money hand over fist in their market while we sit on the sidelines with our jingles. Why? Because the Japs, Koreans, Americans and gora of all shapes and sizes study, understand and then attack other markets -- friends or foes.

Now, whether we need to follow the chini way of doing things is besides the point. Manufacturing in economies of scale create jobs and lower goods to the price range where it came be afforded by the general populace, including one's own. FDI sinks capital into your land and cannot be removed when the world goes into a downturn.

Now are there better mechanisms? Surely, but we need time to show us which processes are better. Right now, services have not created the jobs to the same extent as manufacturing and a service-based economy means our goods are not cheap enough to lower runaway inflation. The flight from FII is weakening the rupee to a critical level and the RBI is draining precious hard currency to fight this instead of keeping it as a stabilizing backstop unlike FDI which would mean hard currency entering and staying in the hands of Indians.

[Theo_Fidel]

Chola,

Those are very good points.

Everyone wants these things. The question is why Panda managed to get so much. Even India has been getting about $30 Billion of FDI for several years now. Panda claims $100 Billion but a lot of that is round tripping. As a proportion of GDP it is not so different.

Think about this. Panda is about 2.5 times India GDP, Despite all the wild claims. Yet it burns 10 times as much coal, 10 times as much steel and 10 times as much infrastructure and 10 times as much Apartments and then there is HSR. What is different that an economy so wildly wasteful is also so competitive with India. WRT manufacturing, yes absolutely is a must for our economy. The question is can we get people to do it productively for the wages being offered. Right now anything less that Rs5000/month and folks prefer NREGA to working in a textile factory.

Compared to their wages Panda workers are at least twice as productive. This is the key ratio. If Indian workers were twice as productive WRT their wages they too would be highly coveted.

[rohitvats]

Is there any open source information/data base on real estate in China? Thanx.

[chola]

Chola,

Those are very good points.

Everyone wants these things. The question is why Panda managed to get so much. Even India has been getting about $30 Billion of FDI for several years now. Panda claims $100 Billion but a lot of that is round tripping. As a proportion of GDP it is not so different.

Round-tripping occurs only when a nation becomes wealthy enough to round-trip. When the chinis started with the SEZs they had nothing to round-trip with. What gave them the seed money was an influx of Yen, Dollars and other hard currency through FDI. Without which they would never got off the ground much less have enough money to move overseas, paying fees to foreign institutions during the trip, and then bring back into the nation.

Think about this. Panda is about 2.5 times India GDP, Despite all the wild claims.

No one in the business world who actually sells and buys on the front line looks at or cares about the GDP, Theoji. That is because sales rule. By that measure, China is not 2.5 times or even 5 times that of India. Take any American multi-national and they will show you figures that China outbuys India 10, 20, even 30 times over.

Don't look at chini claims, look at the money and those can be seen in researchable sales by publicly own Western firms selling in China. There is an atrocious amount of money is there and the gora and the Japanese and the rest are taking advantage of it while we debate its reality on the sidelines.

Yet it burns 10 times as much coal, 10 times as much steel and 10 times as much infrastructure and 10 times as much Apartments and then there is HSR.

Another way of looking at things is they have the cash to waste on 10 times on steel, infrastructure, apartments, cars, flatscreen tvs, toilets, what have you.

If the fools are willing to be parted with their money why worry about them wasting it? The Germans, the Japanese, the Thais, the Taiwanese and the Koreans certainly don't.

Again the problem we have is we have no understanding or research of the chini economy while the West and the rest of Asia do.

We are of the mindset that they are only 2.5 times our GDP and are being wasteful. But what good does that do us?

The MNCS in the US and Japan don't worry about reconciling the fact that China is only 2.5 times the GDP of India but spends 10 times more. All they care about is the 10 times more. And as I stated before, the sales figures are far more than just 10 times that of India for many MNCs. How much the chinis have to spend is far more important to the MNCs than whether it is rational. It should be for us too.

What is different that an economy so wildly wasteful is also so competitive with India. WRT manufacturing, yes absolutely is a must for our economy. The question is can we get people to do it productively for the wages being offered. Right now anything less that Rs5000/month and folks prefer NREGA to working in a textile factory.

Compared to their wages Panda workers are at least twice as productive. This is the key ratio. If Indian workers were twice as productive WRT their wages they too would be highly coveted.

Theoji, panda workers are only productive because of Western, Japanese and Taiwanese technology bought through FDI and the infrastructure that was built from the hard currency that FDI gave the PRC government. Panda workers as communist proles are if anything less productive in their natural state without the advantages of their imported machine tools and infrastructure.

The key is foreign investment and standards, without which the PRC would be another North Korea. FDI first came in the because of cheap Chinese labor, now they come in because the Chinis spend like an economy several times the size of the US.

Everything today flowed from the one fateful decision to allow FDI otherwise we would see none of this in China today. Something we should be aware of with the retail fiasco.

At any rate, if a nation is using half the world's steel and half the world's cement, don't worry about it being wasteful. Make sure you have something to sell them when they make use of that steel and cement.

[VikramS]

chola:

Very interesting points. Indians know very little of China, and whatever the DDM prints is heavily influenced by Western interests. It is high time that Indians do their own discovery instead of relying on Western projections.

No one in the business world who actually sells and buys on the front line looks at or cares about the GDP, Theoji. That is because sales rule.

Now if the CPC drones could read those lines ...

By that measure, China is not 2.5 times or even 5 times that of India. Take any American multi-national and they will show you figures that China outbuys India 10, 20, even 30 times over.

The numbers above are for Western brands or luxury brands or in general the overall trade? Does it not show up in trade-figures?



That article about Chinese workers in India and their overall work ethics/productivity was a very refreshing to read. I hope there is greater interaction so that the Indian commies can "see what their Master does" instead of just preaching what the Master says.

sha:

It is clear that it is not your English but your power of comprehension which is the problem.

The question is not what China achieved in the past, but whether that model is sustainable for the future and more importantly what can India learn from the Chinese experience. But somehow PRC drones just can not see it. Another drone is sent in to repeat the same old, after the previous drones can no longer continue peddling the nonsense; and the cycle starts all over again.
======================
I think it might be time to have a more aggressive policy in managing the posts of CPC drones. Anything which provides a critical review or adds value to the discussion is more than welcome. All these schlong comparisons, personal attacks, and "please continue../ I am waiting till you capitulate" kind of posts do not add any value to the discussion.

[Theo_Fidel]

No one in the business world who actually sells and buys on the front line looks at or cares about the GDP, Theoji. That is because sales rule. By that measure, China is not 2.5 times or even 5 times that of India. Take any American multi-national and they will show you figures that China outbuys India 10, 20, even 30 times over.

Chola,

Our trade is flourishing really well so Indian business is very much alive to China market. A main problem has been the Panda insistence on Joint ventures and sharing of Intellectual property. How did Panda get FDI despite such arrogance. Market penetration should be left our business professionals, who absolutely know what they are doing. Just to take one sector, the leather goods manufacturers of Vellore have sent 6 delegations to Panda land over the past 18 months and have dozens of Joint ventures ongoing. This is something I know about personally.

I agree that the consumer market in Panda land is 10 times India. Many Indian firms have tried very hard to crack the Chinese market and have failed. Still many are trying still. The source of this miss match between GDP to consumer market is what we are trying to penetrate. Just to take simple numbers, Panda sold 18 Million cars last year. If on average a car costs $10,000 this works out to ~ $200 Billion in car expenses alone. They mined and burned ~ 4 Billion tonnes of coal last year. Coal costs about $50 per ton average, so that is another $200 Billion. Steel costs about $700/ton. So 500 million tonnes means another $250 Billion. These are long term structural expenses the economy has to carry.

How are they able to inflate their currency supply to such staggering proportions and still keep inflation at bay. How can they have so much consumption and still not face financial mayhem. Essentially the yuan is worthless right now, it has been printed and inflated so much. Yet they are not facing the consequences for this because they are using the Dollar as their gold standard. The hidden cost for Chinese is the permanent structural below inflation rate of return. Chinese savings are guaranteed to dwindle to zero because of long term guaranteed inflation.

Most reports indicate that the majority of western companies lost scads of money in China so I wouldn't put that in as a win just yet. This is despite a high sales volume. For every GM there is a Geely and for every Chevy there is a Cherry. The few that have are some luxury goods groups. Lets keep in mind both Home-Depot and Best-Buy have exited China after losing staggering sums of money. Even Wal-Mart is in deep trouble and continues to hemorrhage money. The Japanese and Koreans havn't made money there either. Volvo and Volkswagon continue to make loses and struggle to justify their presence. High sales does not mean profit.

I think that is the key difference. Indian companies can't make a profit so being good tea-kaddai wallahs they circle the melee trying to pick off the odd profitable venture. If you look Indian companies supply the shovels and components for many of these auto groups without themselves getting into branded merchandise where losses are likely. Also Indian companies must have a proper ROI. They pay high interest and stock payouts and must be careful with their money. They are very concious of risk.

http://www.thehindubusinessline.com/opi ... 692258.ece

[sanjaykumar]

Chola and Theo muchas gracias for the very informative posts

[chola]

Chola,

Our trade is flourishing really well so Indian business is very much alive to China market.

Sorry but this is not true. Our trade with China flourishes strictly because of iron ore and raw resources. The countries that have taken advantage of China in selling it products, both manufactured and agricultural, included middling economies like Thailand, Malaysia and Indonesia where India should have an advantage. We are not talking about the range of products from industrialized nations like Japan, South Korea and Taiwan.

A main problem has been the Panda insistence on Joint ventures and sharing of Intellectual property. How did Panda get FDI despite such arrogance.

What else? Why would any firm invest in a market? If it were just cheap labor they could have invested in Africa. The crowning lure is the local market. You submit to joint ventures and IP theft because you can make money.

I agree that the consumer market in Panda land is 10 times India. Many Indian firms have tried very hard to crack the Chinese market and have failed. Still many are trying still. The source of this miss match between GDP to consumer market is what we are trying to penetrate. Just to take simple numbers, Panda sold 18 Million cars last year. If on average a car costs $10,000 this works out to ~ $200 Billion in car expenses alone. They mined and burned ~ 4 Billion tonnes of coal last year. Coal costs about $50 per ton average, so that is another $200 Billion. Steel costs about $700/ton. So 500 million tonnes means another $250 Billion. These are long term structural expenses the economy has to carry.

Again as I noted earlier, the Chinese economy might actually be far larger than what it officially says to the world. The US government pretty much stated so when it claims that the Yuan is undervalued by 40%. It means the United States believes the Chinese economy is at least 40% bigger than chicom claims.

While Indians like to think that the chinis are inflating their statistics to look better, the Americans think that the PRC cheats by lowballing statistics to gain leverage and benefits as a poorer nation in the WTO, the carbon emissions discussions and the Doha rounds. The sales figures support the American position not ours.

How are they able to inflate their currency supply to such staggering proportions and still keep inflation at bay. How can they have so much consumption and still not face financial mayhem. Essentially the yuan is worthless right now, it has been printed and inflated so much. Yet they are not facing the consequences for this because they are using the Dollar as their gold standard.

Yes, as I stated before, it is US dollars that backs the chini economy. But the yuan is not worthless because of the very fact that it is backed by the PRC's $3 trillion worth of US dollars, yens and euros.

You understand part of the picture but not all. As a long as a currency is backed, it is not worthless no matter much of it you print. The chini FX reserves are nearly three times the nominal GDP of India in dollar terms.

In fact, pegging the Yuan to the US dollar is actually causing inflation in pandaland. That is because the chini government deliberately prints more yuans to inflate it against the dollar so it can cheat on the exchange rate.

Most reports indicate that the majority of western companies lost scads of money in China so I wouldn't put that in as a win just yet.

Theoji, the rate of returns from direct investment in China are actually much higher than those from the rest of the world. It is 13.5% in chiniland and 9.5% from the rest of the world. (http://www.economist.com/node/21541448)

This is despite a high sales volume. For every GM there is a Geely and for every Chevy there is a Cherry.

Chery is the only local brand in the top seven and it is number three. The rest are GM, VW, Honda, Hyundai, Toyota and Ford.

The few that have are some luxury goods groups. Lets keep in mind both Home-Depot and Best-Buy have exited China after losing staggering sums of money. Even Wal-Mart is in deep trouble and continues to hemorrhage money. The Japanese and Koreans havn't made money there either. Volvo and Volkswagon continue to make loses and struggle to justify their presence. High sales does not mean profit.

Walmart makes money in China. Ten percent of its total sales is in China. The Japanese and Koreans make money hands over fist. It is reflected in their trade surpluses with the chinis.

As for VW, they took in 1/3rd of their profits from chiniland. (http://www.thetruthaboutcars.com/2011/0 ... detroit-3/)

In general high sales do mean profit because companies would not stick around to generate high sales if there were no profits. Businesses are not charities.

Home Depot and Best Buy were not successful in Europe or Japan either. Not every company and business model will work.

For the PRC, "failures" such as Home Depot and Best Buy still contributed billions into the chini reserves which in turn increases the size and stability of chini economy as we were discussing.

[vina]

both manufactured and agricultural, included middling economies like Thailand, Malaysia and Indonesia where India should have an advantage

Not sure I am afraid. There are two types of businesses selling into china from these countries. 1) Ethnic Chinese businesses selling into "Guangxi" networks in China and translating cultural familiarity, language and other things into business success (stuff like F&B, services, tourism etc and 2) Multinationals with specialized manufacturing (high tech.. chips, disk drives, and other intermediate inputs), that get sold as part of the electronics and other manufacturing chain into China.

While 1) might get largely consumed in China, 2) is largely reexported as little value add as part of finished product export out of China to US/Europe/Rest of World. I am not sure how much of the exports out of SE Asia /Japan/Korea go into satisfying Chinese internal consumer demand. My guess is that the overwhelming majority is re-exported. But that is like a sort of double count (unless you take value addition approach ) and is reflected in both the SE Asian books and also Chinese books.

India is largely cut off from the global high tech manufacturing chain. We missed the high tech manufacturing move to SE Asia in the early 80s .We were at the height of socialist cool aid make believe and were simply not prepared for that kind of policies, China was bankrupt and had next to NO forex reserves. The only thing that saved their skin was the Iran -Iraq war and the bulk Iranian import of Chinese weaponry when Iran was cut off from both the western AND soviet arms markets, the Chinese starting 1979 under Deng were forced to do it, India was forced to do it only a decade later.. that is the difference, along with the shock of Tiananmen which forced the Chinese to double down on the economic opening.

[vina]

Very interesting article by Paul Krugman Will china Break?

To all Chinese posters here. Note ,this guy is a Nobel Prize winning economist, no wild eyed ideologue and if he can start worrying about a possible collapse in China, I would seriously worry about it if I were you . And like I posted earlier, "The Gleat, Patliotic CPC and it's Oh-So Soup-e-LeaL abirity to mangage anything , including a soft randing" is not something I would be cock sure about either. Like Krugman says, if the G-Men in Japan's MITI (the best, brightest, most suited booted, polished worldy wise and incredibly successful in building Japan to what it was by 1980 from WWII ruins) could blow it, I am not sure of Hu-Jin-Tao and his fellow thug's abilities too much.

[ashi]

Very interesting article by Paul Krugman Will china Break?

To all Chinese posters here. Note ,this guy is a Nobel Prize winning economist, no wild eyed ideologue and if he can start worrying about a possible collapse in China, I would seriously worry about it if I were you . And like I posted earlier, "The Gleat, Patliotic CPC and it's Oh-So Soup-e-LeaL abirity to mangage anything , including a soft randing" is not something I would be cock sure about either. Like Krugman says, if the G-Men in Japan's MITI (the best, brightest, most suited booted, polished worldy wise and incredibly successful in building Japan to what it was by 1980 from WWII ruins) could blow it, I am not sure of Hu-Jin-Tao and his fellow thug's abilities too much.

Being a Nobel prize winner really doesn't mean that much. Many of them have failed their predictions and theories before. I am just glad none of them is running China's government.

In fact isn't India's prime minister an Oxford and Cambridge trainned economist?

[niran]

The countries that have taken advantage of China in selling it products, both manufactured and agricultural, included middling economies like Thailand, Malaysia and Indonesia where India should have an advantage.

Sir, am a lowly ignorant abdul, can you explain your quoted sentence in abdul speak not geek speak?
TIA

[vina]

Being a Nobel prize winner really doesn't mean that much. Many of them have failed their predictions and theories before. I am just glad none of them is running China's government.

True. But , given that Krugman REALLY does know what he is talking about, he is trained in that field and is recognized as one of the world's greatest thinkers in it, when there is time to listen to counsel, who will you turn to, the expert in that field or a civil engineer whose claim to fame is that he brutalized a bunch of Tibetans while he was a governor there ?

Next time you get some serious illness, are you going to go to a doctor (doctors too have made pretty seriously bad diagnoses and treatments) or are you going to go to a civil engineer ?

In fact isn't India's prime minister an Oxford and Cambridge trainned economist?

Indeed he is, again, one of the best in the business that one can possibly get . I am sure, he does recognize the limitations of what govts can and cannot do (those guys RAN the equivalent of the soviet style planned economy here for 40 years remember?).

Like the old saying goes "Those who exercise power best are also the ones who knows the limits of it". I am not sure that the CPC knows it or even if it does, they sure as hell are not going to admit it to the PRC public. Fact is, China is in totally unchartered waters now, having faced nothing like this in the last 40 years. So good luck.

[Theo_Fidel]

http://business.rediff.com/report/2010/ ... -in-q1.htm

Our exports to China are low. And yes some of it is ore type stuff. But it is only 1/3 and with the new bans it is going to drop to zero. The real shocker is that we export so less to China. Less than $40 Billion. Indian companies prefer to manufacture in China I'm afraid. And that includes the Vellore leather goods companies. This is the side effect of your exhortation to exploit the Panda market. Indian companies are doing just fine, which was the observation. Our exports were not the question.

There is a reason everyone runs a deficit with Panda.

It claims a GDP of about $6 Trillion. So you think it could be a $8-9 Trillion economy. In which case its $3 Trillion horde does not look so impressive. Nor does its better HDI numbers or its inflated yuan supply which exceeds the US dollar supply by 50% at last count. But to burn through so much coal annually and pay for it Panda would need to be a $25-$30 Trillion economy.

So if that $3 Trillion horde gets deflated by the US or declines dramatically, what happens to Yuan value. That's what I meant when I said that the yuan is essentially junk now.

WRT to South East Asia the less said the better. Malaysia in particular is an oil kingdom like UAE or Qatar. Don't mistake them for anything else. Thailands exports to China are a Joke. Number 3 is processed Cassava by the way. Indonesias exports are Oil, Timber and coal in that order. Top three in 2010.

It is news to me that American FDI brings returns of 13.5%. Conveniently reported by a K.C.Fung who extrapolated it from another study. Head of East Asia Studies with grants from China based cultural exchange groups. No references or data supplied. This is how Panda plays the game. Don't kid yourself.

Also note that Volvo was sold to a Panda company and now miraculously shows a profit. Before selling it consistently showed loss. Wal-mart is losing money and market share hand over fist.
http://online.wsj.com/article/SB1000142 ... 91780.html
Apples market share continues to decline and fakes are clobbering it.

Ok. Volkswagon is making money, but largely because of its joint venture with what appears to be several very high party officials. But who else from the west is profitable. We have shown several complete failures, several losing money but clinging on and one success so far.

And keep in mind your thesis was that companies make money hand over fist in China. And that India is foolish to not get in. If not every company or business model will work in China maybe that is a huge part of the problem. Right. Indian companies have to show margins well above 13.5% to pay the 13% bank interest rate as at present. Indian companies are therefore very careful with money. They of course have access to equity money but only if they can make the business case. They are not able to make that business case in China. In fact the Panda government might kick them all out and confiscate everything tomorrow. How many will factor in that risk factor. Indians do.

[Theo_Fidel]

It appears what Krugman is saying is that because consumer demand is so low, Panda has to inflate its economy by printing more Yuan every year to keep the investment carousel going. It can't get off now.

Chola,

That is exactly what I'm talking about, how does a consumer market of 35% of GDP buy 18 Million cars every year. Your solution is GDP must be much bigger. My answer is money supply is much much bigger than revealed. The latest accounting is that there is about $22 Trillion of yuan printed and floating out there. Compared to entire US dollar supply of $15 Trillion. Western companies are being paid with this worthless junk cash. At some point the confidence will collapse and everyone will want dollars as payment. What happens then.

[gakakkad]

>> The latest accounting is that there is about $22 Trillion of yuan printed and floating out there.

You mean M2 ?

Here is the official data

M 2- (US$10.71 trillion) GROWTH = 18% M1 =US $ 3.91 T . MO = 6 TRILLION RMB , About 1 T USD

Official regulation mechanism is to increase the m2 for every increase in dollar reserve.

Something is surely fishy .

The important thing here is that they can keep doing it while they maintain an account surplus . Remember that PRC has no natural resource . And in a few years time it ll no longer has a surplus account. When the account deficit starts its $ reserve , which is the basic mechanism to control its M2 reserves would start to decline . And that is when things would start to get interesting.


The foreign companies get paid in $s . Which comes out of the 3 trillion in FOREX reserves. That is what they are interested in .The trolls were recently bragging about their super compooter , which they bought from HP before I exposed them to be used for "INTERNET SERVICE" and not research. No HP did not care a damn whether panda used them as research computers or watching p0rn or simply as construction material for Wens new dog house.

They sold the 50 odd machines and pocketed the millions. (in form of USD from the forex reserve) .They did not argue about hard landing or soft landing or China breaking into pieces or anything of that sort. The sold the stuff and made money . They may have even said some H&d flattering stuff like Panda the world leader in research.And milked them. IMHO we should do something similar .

There is a reason why US is the sooper dooper power .

[kumarn]

China Debts Dwarf Official Data With Too-Big-to-Finish Alarm

Not a long time ago, the Chinese could do no wrong! Now suddenly the tide has turned, it seems...

[abhischekcc]

Is there any open source information/data base on real estate in China? Thanx.

Why? Are you planning to shift base to the Middle Kingdom?