PRC Economy - New Reflections : Dec 15 2011

All threads that are locked or marked for deletion will be moved to this forum. The topics will be cleared from this archive on the 1st and 16th of each month.
heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 17 Jan 2012 18:47

Gus wrote:
heech wrote:snip
let me try to rephrase..

are you happy with what you have put in (exploited labor, tax payer money, lack of freedom etc) and what you got (GDP, infrastructure etc)?

"Happy with"? Well, it certainly isn't ideal. I'd prefer if everyone in China could just come in to their cubicle (in class A office space) at noon, write a few emails, and then head off to a bar / restaurant for drinks and dinner a few hours later. I'd prefer if all 1.3 billion of us could just vacation on the beach a couple of months a year, and spend most of our time worrying about the latest fashions + movies. I'd prefer it if we could all just retire at 50, with full confidence our kids could attend top-tier universities and improve their lives even above ours. In other words, I surely would "prefer" if all 1.3 billion of us could just emigrate to the developed world. Doesn't take a lot of insight, though, to say that doesn't seem like a realistic option.

If there's a way to grow a poor nation without "enslaving" the poor, I'd love to know about it. But in the present world, the rural poor in China, India, or any other under-developed nation) is putting up with much greater hardship than simply working 70 hours a week. No one has a short cut for magically creating wealth; it will take China (and yes, India) decades of compounded high-growth for that to go away... period.

Frankly... there is absolutely no policy that any genius (put in power via any political system, democratic or not) can suggest that would eliminate the hundreds of millions of poor in China overnight.

PrasadZ
BRFite
Posts: 122
Joined: 11 Apr 2010 08:42

Re: PRC Economy - New Reflections : Dec 15 2011

Postby PrasadZ » 17 Jan 2012 19:42

heech wrote:
Gus wrote:let me try to rephrase..

are you happy with what you have put in (exploited labor, tax payer money, lack of freedom etc) and what you got (GDP, infrastructure etc)?

"Happy with"? Well, it certainly isn't ideal.

amongst the less-than-ideal options available on the table, clearly china has taken one and discarded others. Are they rethinking that option now? If they are, is it because they succeeded too much in the past or because they did not succeed enough?
Its just normal to be circumspect about an unknown system, heech :) for you, just as much for me ..

heech wrote:Frankly... there is absolutely no policy that any genius (put in power via any political system, democratic or not) can suggest that would eliminate the hundreds of millions of poor in China overnight.

I agree .. Completely .. But i do note this is a non sequitor.
Do you then suggest no attempt should be made to discuss or debate policy since a perfect one aint possible ? :roll:

sha
BRFite -Trainee
Posts: 61
Joined: 11 Aug 2016 06:14

Re: PRC Economy - New Reflections : Dec 15 2011

Postby sha » 17 Jan 2012 20:35

PrasadZ wrote:
sha wrote:PrasadZ,you're expect some one which would like to enlighten you guys and are willing to endure insult from you guys.

Good luck to you! Let's pray he/she will show up.


Gong xi fa cai, sha !! A little in advance. Thanks for answering :)
And if you lack entertainment, you are welcome to read up indians tearing into other indians on the rest of this forum. Its in the nature of this forum to criticise outsiders but i do wish you all the best in the year ahead. A generation of free spirited dragons will be born this year - something to think about ..


Long nian ji xiang, PrasadZ!

It's not a matter of entertainment. It's about the tolorance, equal respect and rational dialogue. That's what a free spirited people like you from a great democratic country should preach.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 18 Jan 2012 00:14

PrasadZ wrote:I agree .. Completely .. But i do note this is a non sequitor.
Do you then suggest no attempt should be made to discuss or debate policy since a perfect one aint possible ? :roll:

No, not at all. I think policy discussions are always "fun", and I engage in them all the time. There are a million possible (mostly minor) refinements that I can suggest to Chinese domestic policy, if only someone gave me control of the PLA for a few years.

But what I find pointless are superficial discussions that focus on anecdotal inadequacies, without discussion of solution. Be it the presence of child labor, or inadequate living conditions, etc, etc... again, I would be the first to admit that they exist, but I'd argue also they add very little to the conversation. Does every conversation about India have to be about child brides marrying dogs, or the slums of Mumbai...? I would say, absolutely not. There's NOTHING that can be done today in India which will quickly eliminate the slums of Mumbai, or quickly end distasteful social behavior that probably 99.99% of BRites find equally distasteful.

Someone mentioned earlier they couldn't find my earlier posts about issues other than Tibet. You know, I have no idea where those posts went... maybe I posted under a different handle. But I remember very clearly having discussions here in 2002-2003, when the dominant theme was the work of China-skeptics like Rawski and Gordon Chang. For those who don't remember, Rawski insisted that China was lying about GDP growth in 1999, since his research based on electricity consumption suggested a very different picture. And Gordon Chang's "Coming Collapse of China" was read with great glee by many. 10 years later... I certainly believe my optimism from 10 years ago has been validated. Things may turn out differently over the next 10 years... but at least, the skeptics should certainly eat some crow for their failure to anticipate China's growth over the past 10 years. Unfortunately, skepticism here hasn't diminished in any way, shape, or form. It's just the way it is.

Some have pointed out China numbers/stories are always suspect... totalitarian government, brain-washed Chinese net-izens, etc, etc. 10 years ago, I think that argument at least had some weight. It was relatively difficult for foreigners to visit China (especially the rural countryside), and government statistics were obviously fiction. 10 years later... folks, if you don't believe the stories you read, then buy a plane ticket and just visit China. Rent a car (very easy to do), and drive the inner provinces (also very easy to do). Just go see for yourself. For every New Ordos "Ghost City" or abandoned New South China Mall, there are 50 new housing/shopping developments filled with happy, successful, wealthy urbanites. For every rural village untouched by time, there are 10 rural villages filled with new construction + satellite TV + motorcycle riding farmers.

And since you inevitably want to know my thoughts about what's *wrong* with China, here's my biggest gripes of 2011:

- government corruption has not been tackled, and the window to do so effectively is closing. It's a given that almost all officials abuse their positions to profit themselves/families; the longer this goes on, the harder it is for the small minority of "clean" officials to claim they weren't involved.

- environmental pollution. There has been *some* progress here (really, honestly)... but still a huge amount to do. The emphasis on building a car culture, IMO, is in danger of destroying Chinese society. I don't care how many jobs are created by manufacturing cars... I strongly feel cars should be heavily restricted from the urban core. China has only ONE chance to build cities which are sustainable, primarily built around mass-transit + low-carbon transportation. And if the present course continues for another 5 years, it will be too late. China will choke on smog + traffic.

- food pollution. The government has not done enough here, and increasingly looks incompetent. There's no reason the food chain can't be better regulated... except for the fact (see the first point above) some officials are probably lining their own pockets. I want to be able to eat food without being concerned I'm exposing myself to harsh chemicals.

That's really about it. Here's also a quick hit list about what I'm not worried about. I'm not concerned about HSR; I think it's a brilliant, great strategy that will pay huge dividends for China's future development. I'm not concerned about media/political controls; I think it's irrelevant... I believe the Communist Party is largely benevolent (if occasionally incompetent) and still represents the interests of *most* Chinese. I'm not overly concerned about the real estate market; I think there's a huge bubble and I've been telling everyone I know to NOT buy real estate in China at current price levels... but I think the bubble will deflate gradually, and the market will function normally in a few more years.

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 18 Jan 2012 03:43

heech:

Thanks for your views.

While the comparison between India and China are inevitable, it is important to keep the paths in perspective. The Chinese solution provides the best returns in the shortest time; however the longer term consequences are not well understood. The Indian solution is slow, and much less flashy; however the chance of creating undesirable long term consequences are lower. India has been able to sustain a high single digit growth rate in spite of all the problems.

I think what bothers most here, is that the almost one-sided perspective offered of the PRC. It is almost always rah-rah with nothing wrong. Couple that with the amount of censorship which goes on in China, the faith which most posters here place in the CCP looks weird apart from being hard to rely on.

I agree with you that Western style collapse which many doomsday folks are predicting is highly unlikely to happen in a managed economy like China. Heck even in the West and its so called free market, the can kicking has been successful for almost three years now.

However, a GDP dominated by fixed investments is likely to derive intense scrutiny since it is so unbalanced compared to what happens in the rest of the world. Perhaps the Chinese situation is unique and hence can not be compared with the rest of the world. However, there are always winners and losers.

In the case of China, the losers primarily are the savers who have little opportunities to invest outside China but were stuck with the negative real interest rates for decades now. They are also those late to the party home buyers who are now stuck with a stone around their neck as they go deeply underwater in their purchase.

Over time the bad loans in the domestic sector will also start affecting the ability to finance new fixed investments. It will be much harder to export the way to growth as the major foreign markets retrench and protectionism increases. However no Chinese talks about these.

OTOH, we have Indians here whining non-stop about the current government, its financial mismanagement, corruption etc. We know that no system is immune to these; however when the Chinese posters show no sign of even acknowledging that those problems may exist in China, the discussion reduces to an e-Size contest.

While I am sure a lot of Indians will love to have an HSR network to point to, it is unlikely to happen in the short term simply because the economics do not work out. But we see very little to no analysis on the economic viability of the Chinese HSR; as if they are immune to the laws of numbers.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 18 Jan 2012 05:05

I think there's some fundamental misunderstanding here, as to the role of fixed infrastructure investment in China's GDP growth. Definitely, in the immediate aftermath of the 2008 crisis, there was some accelerated construction of projects that was "wasted" in the name of maintaining GDP growth momentum... but that's just a small part of the bigger picture. The vast majority of fixed infrastructure investment in the last 20 years has been critical to China's continued success, and not at all wasted.

Physical infrastructure investment allows Chinese (and I would think Indians) to become more productive, and take better advantage of their work. Why are Chinese farmers paid less than their American counter-parts? Why shouldn't Chinese manufacturing industry dominate Western companies, if employment costs are so much less, and yet Chinese employees work so much harder? Clearly, the primary difference separating the developed/developing world is infrastructure. I see physical infrastructure as allowing Chinese workers to reach their full capacity and potential. One saying in Chinese actually goes, "to create wealth, first build a road". It's considered common knowledge that building a road to/past a village is the best way to enrich everyone in that village. And even today, there are still a lot of roads left to be built.

Why is the Three Gorges Dam important...? Not just for electricity generation, but because it immediately "moved" 50 million Chinese workers to the coast, by opening up the Yangtze to heavy cargo. Why is HSR important...? Not just because it's pretty and helps me save 30 minutes on my trip, but because it makes the transport of freight cheaper and faster. Why is urbanization important? Because it makes it possible for hundreds of millions of Chinese to become more economically productive. Now, at some point that physical infrastructure construction will reach saturation point... maybe we're there, but I personally suspect not.

We still have 300 million rural Chinese who need to move into cities over the next 20 years. And in support of that population + economic growth, we still need to build an obscene amount of subways, airports, and railways. The goal shouldn't be to artificially boost GDP, the goal is just to improve everyone's efficiency. Workers shouldn't be wasting their time stuck in traffic, machinery shouldn't be wasted due to unreliable electricity, and manufactured products shouldn't be wasting their time stuck in transit.

Frankly, China has an excellent record in terms of its fixed infrastructure investment. Obviously, and I'll repeat myself here... we don't know how the future will go. But the construction projects laid down 5, 10, 15 years ago have proved to be critical in fueling China's growth of today. So, the fact that the Chinese posters aren't complaining about this investment doesn't mean we are brain-washed into thinking the Chinese government can't fail at all... but rather, most of us believe that fundamentally, we need this. And if/when BR-ites continue to insist there *must* be something shady going on behind the scenes... well, I don't want to get into that debate again. I will just say, buy a plane ticket, go see for yourself.

On the other hand, on the areas of perverse corruption, pollution, soccer (!)... these are areas that the Chinese government has fallen behind on, as I mentioned earlier. So, if you want to talk about those areas of failure, then you'll find most Chinese more than willing to complain about our governments' failures.

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 18 Jan 2012 05:42

heech:

Regarding railways: while building a parallel freight corridor is a very desirable goal, whether the parallel rail infrastructure should be an HSR is the conundrum. Building and maintaining an HSR corridor is much more expensive than a regular network. Whether it is Spain or here in California, the problem with HSR is not how good it is but whether the ROI is there.

http://www.ocregister.com/news/speed-33 ... spain.html

"Already, service between some smaller cities has been cut because too few people ride the trains. Some wonder if it is anything more than a luxury commuter service."


And Spain is a much richer country, with much shorter distances, and a country which had strong finances and was running a budget surplus till 2007-2008.

You argue that China needs to build all this stuff to move people from rural to urban environments. The question is not the need or the demand, but the ability to pay.

Are the 300 million who will move at a point where they can afford to pay the price needed to service the loans used to develop the land and the associated infrastructure?

Those workers who toil for years to save $10K, can they afford the homes and the infrastructure being created?

Who is the target market for the HSR in the hinterland? I can understand major metros providing viable market but is it also true that the person earning $200-300 can also afford the HSR tickets? Or will they be priced at a loss (as passenger tickets are in India too) to keep the system rolling. However the difference is that there has been very little extravagant investment in India so there is no question of IR being plagued by a bad debt overhead.

And what about the reduced buying power of all the millions who work in the factories due to negative real interest rates? Those low rates provide a subsidy for all the infrastructure investment but in turn deprive the saver of any benefit. How will the society deal with this generation getting old, without getting rich, with a much smaller younger population to replace them or take care of them?

And then there is this propaganda factor:

The article a few posts ago says that the guy scouring the world for investments got put off by the poverty he saw in Chennai. I have tried hard to figure out the business logic behind that, except that the article is trying to take a dig at India, primarily for the consumption of the local population. For a capitalist, a large pool of workers hungry for gainful employment is likely to result in a much better return on investment than already rich workers.

Perhaps you are right that but for the last few years, the investment has returned good ROI. But the problem is that when the transparency is so poor and there is so much censorship, how can anyone trust anything.

You have to realize that very few Indians understand Mandarin/Chinese and most Indians know nothing about how China works. Whatever they get to see or hear is from the English press which has its own agenda. The PRC controlled English media offers a glimpse, but it is also has its share of condescending and threatening pieces which further diminish whatever value they may have had in the eyes of the reader.

There is of course the strategic issue of continued Chinese support to the TSP's nuclear program and the rogue regime. This in spite of the knowledge that if a nuke has to go off by accident, it would very likely be coming from a Chinese design, using a Chinese designed nuclear reactor and from a regime beholden to China. Who knows who might pull the strings to make that happen; there are many players who would control the wh*re. But they are many who would likely benefit if India, and in retaliation China gets devastated in a jehadi triggered nuke fireworks.

Sri
BRFite
Posts: 1326
Joined: 18 May 2005 20:19
Location: Earth

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Sri » 18 Jan 2012 11:18

Heech Ji, you are right with regards to physical infrastructure. Rather bang on. I have my clients who show me before and after pics of some of the areas in China. They are amazed and so am I. The way China goes about doing these things with a gusto is amazing. Purely business point of view it's amazing. IBM, Apple, Acer and GE will swear by it.

Further, Chinese worker is extremely disciplined. I have had first hand experience at that. I visited a high end factory few moons ago and I was really amazed with the discipline. I was walking the shop floor with the Chairman of the company, not one worker even raised their head and took notice of SDRE roaming about. I have not seen same level of discipline anywhere else.

But the question that lingers in my mind and for which I have no answer or no one has explained to me yet, even though I have asked this to many chinese, how is all this financed. We in India worry about the wrong things comparing infrastructure and inefficiencies. What we have to look at the financial structure of these establishments. Is the pricing of chinese manufacturer inline with global standards? Are they taking into account the cost of capital?

This is my hunch by some examples that I know off, but I feel many foreign manufacturers who invest in China end up hurt. They are muscled out either by chinese partners or the sheer economics of things that they don't understand. Also, one curious thing I have noticed. If I per se invest in an auto components unit in a random village, by end of 2 years with a Chinese partners, I see him and others mushrooming their own units around my establishment. Makes me wonder how that happens? Some of them use the same manufacturing techniques and raw material but sell goods at least 25% cheaper. before long my Chinese partner wants me out.

Same experiences could be red in 'a billion customers' which I recently picked up. Will we in future see some action by Chinese Authorities on IP rights? Are there any convictions regarding the same? These for me are burning questions. If you can tell us more about it, it will help.

chola
BRF Oldie
Posts: 4858
Joined: 16 Dec 2002 12:31
Location: USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 18 Jan 2012 15:56

amit wrote:
In way I agree with what Chola has been writing on this thread. We can thank our stars that the CPC rules over China - they are India's best friend.

Given the creativity, energy and cultural knowledge that the Chinese civilization possesses we would have fallen irrecoverably behind if it hadn't been for the handicap of having the CPC ruling over them.

I'd like to think that the CPC handicap is a bigger millstone around the Chinese neck than is the inefficient, corrupt and short-term outlook that our political class imposes on us (our millstone). That's why we're still in the same frame of reference with China.

If China becomes like a normal society and we still belabor under our handicap then God help us.

So, long live CPC!


All communist governments retards their populations. We see it from the USSR to East Germany to North Korea. You cannot have a more stark comparison between North and South Korea. Same race, same culture and on the same peninsula. For that matter, the comparison is just as stark between the PRC and Taiwan.

The longer the CPC remains in control the better.

chola
BRF Oldie
Posts: 4858
Joined: 16 Dec 2002 12:31
Location: USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 18 Jan 2012 16:26

Sri wrote:
This is my hunch by some examples that I know off, but I feel many foreign manufacturers who invest in China end up hurt. They are muscled out either by chinese partners or the sheer economics of things that they don't understand. Also, one curious thing I have noticed. If I per se invest in an auto components unit in a random village, by end of 2 years with a Chinese partners, I see him and others mushrooming their own units around my establishment. Makes me wonder how that happens? Some of them use the same manufacturing techniques and raw material but sell goods at least 25% cheaper. before long my Chinese partner wants me out.


There are hundreds of investors screwed in China as there are anywhere around the world, especially outside of Europe, the US and Japan. But there is a reason why foreign companies pour FDI into China year after year. Their consumer market is massive. And they lie about it. But not in the way we think. They pretend that their economy is smaller than it is to gain advantages in trade and negotiations.

The companies on the ground in chiniland are seeing this. I work on this in my field and I see it.

For example, read the comments of Michael Perschke, Head of Audi India in http://www.moneycontrol.com/news/busine ... 52533.html

Audi sold 300,000 cars in China but only 5,511 in India last year. What's more, most Chinese buy their cars with cash with only 12 to 15% using financing (70% of Indians need financing.) Their economy buys far more cars, bigger cars and with cash.

One of the biggest problems for Indians is we do not do our due diligence in market research. Everyone knows that the chinis cheat. But while Indians believe that the chinis are lying to show themselves bigger, the Americans, Japanese and Europeans believe that they are lying to pretend they are smaller.

Which approach is better? Pretending that the PRC is poorer does nothing except sooth our pride a bit. But making sure that the Panda acknowledge its proper size provides an array of advantages when negotiating in the WTO, in FTAs and across trade regimes of all sorts.

It was the US and Europe that forced China's WTO accession as a non-developing nation which allowed other members to impose safeguard tariffs (which we used quite a bit against China.) If it had entered as a third-world nation as the chicoms had wanted, it would have been protected from retaliation.

Pressure from the US and the West on China to raise its currency is basically a blunt statement to the Chinese that they know that the chini economy is much bigger. That they know they are cheating.

We need to see the PRC for what it is and formulate the correct strategy. What scares me is not only do Indians miss out on the market that everyone else is making money off of but the wrong strategy is being used based on a constant drumming of potempkin villages and false numbers. The numbers are false but in the opposite direction.

gakakkad
BRF Oldie
Posts: 4475
Joined: 24 May 2011 08:16

Re: PRC Economy - New Reflections : Dec 15 2011

Postby gakakkad » 18 Jan 2012 16:43

>>rs with cash with only 12 to 15% using financing (70% of Indians need financing.)

There is an interesting reason ,behind Indians needing financing for cars. Car sales are monitored by the income tax department.(especially expensive cars). Practically every Indian has undeclared assets. (black money) . Now if you buy the car without the loan , you ll have to explain it to the IT department the source of the cash .If they catch you , you are in trouble. But if you take a loan you can easily give them the answer .

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 18 Jan 2012 21:43

chola:

I have seen you criticizing Indian entrepreneurs multiple times on this thread for losing out to the rest of the world. For whatever reason you attribute that to jingo-giri.

I think you are way off. The average Indian is much less jingo than the average Amrican, Chinese or even TSPian. As some others have written, Indians have a trading mentality and that is typically agnostic to other issues. We see that almost everywhere in Indian way of life: they are not too disturbed by the status quo and will tolerate a lot just to keep peace.

While there may be a lot of individual energy and creativity among the Chinese people, when it comes to bigger decisions the role of the central planners is immense. Do you really feel that they would allow Indian companies to thrive when they turn a blind eye (or encourage) counterfeiting of even Indian medicines?

While the perspective you bring in regards to the Chinese consumer market, is really refreshing, it is also driven too much by the experience of "preferred" and "approved" Western brands. It would be great if you could share the experience of non-Western (and her Asian satellites like Japan/Soko) companies in China. Who have thrived? What did they do different?

Except for pure luxury brands, most Western companies have to invest a lot in the Chinese infrastructure (plants etc.) before they could get access to the market. And they possessed something unique, a global brand recognition which is impossible to create overnight. Which Indian company can do that?

Perhaps your criticism could be more relevant if you could point out areas in which Indian companies could excel and where they haven't. My gut feeling is not that they have not looked into it; but that they have looked into it and decided the political risks, the IP risks and other assorted complications with doing business with the CPC does not justify the investment; especially when compared to the other alternatives available to them in Africa/Asia/LatAm. And the country of origin and its brand catchet has a lot to do with that risk perception.

Suraj
Forum Moderator
Posts: 13650
Joined: 20 Jan 2002 12:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Suraj » 18 Jan 2012 22:37

VW/Audi are China's Maruti-Suzuki - they're a foreign player with a first mover advantage dating back to the 1980s. A large number of Chinese taxicabs are those boxy VW Santanas, while Audi A6 Chinese additions became their version of our white Ambys - the ubiquitous G-gars favored by the bureaucrats and party bosses. In comparison, VW didn't even get into India properly until <5 years ago if I recall - they first sold Skodas, before finally selling under their own marquee. Ditto for Audi - MB and even BMW were here much before them. The Chinese have been effectively making and selling an obsolete Passat derivative in the form of the Santana for close to 3 decades now - not much different from out beloved 50s era Ambys, except that we all know the Amby is cooler :twisted:

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 19 Jan 2012 00:18

First of all, VikramS, very good post on your part. You're asking many of the same questions that the Chinese themselves are asking.

But let me get the part I disagree with out of the way...
VikramS wrote:heech:

Regarding railways: while building a parallel freight corridor is a very desirable goal, whether the parallel rail infrastructure should be an HSR is the conundrum. Building and maintaining an HSR corridor is much more expensive than a regular network. Whether it is Spain or here in California, the problem with HSR is not how good it is but whether the ROI is there.

...
"Already, service between some smaller cities has been cut because too few people ride the trains. Some wonder if it is anything more than a luxury commuter service."


And Spain is a much richer country, with much shorter distances, and a country which had strong finances and was running a budget surplus till 2007-2008.

That damn Wikipedia block makes it hard for me to look up specific numbers... but I recall that the primary HSR line in Spain connects Barcelona (population 2-3 million) to a smaller city (population < 1 million) over a distance of approximately 350 km. That's approximately the same distance as, for example, the Nanjing / Shanghai HSR line... difference? Nanjing + Shanghai have a combined population of nearly 40 million, or 15 TIMES more than the Spanish cities on their HSR line. Even if on a per capita basis Spain is far wealthier, there are probably roughly a comparable number of people in Nanjing/Shanghai and Spain making more than $10,000 USD/yr. And as far as the *distance* of these HSR lines... the point of the Beijing/Shanghai HSR line isn't necessarily just for people looking to travel from Beijing to Shanghai, but the many, many cities with population over 1 million lying in between the two. So, absolutely, I think Chinese HSR lines will be economically viable. Even if there are operating losses in the early years, I don't think the losses will be extreme. And operating gains will quickly surge as incomes continue to grow.

As far as repaying debts associated with construction... I really don't think you can look at HSR as a project in isolation. There are the various other externalities you have to take into account. Looking forward 20 years, it seems clear to me the question of whether HSR makes sense will be seen in a completely different light. I think it will become increasingly obvious that China MUST have HSR in order to deal with the huge amount of passenger traffic. If we project out current trends, then in 20 years we will be looking at hundreds of millions of people in these target areas with GDP/capita of $20,000 USD/yr. The amount of inter-city travel will also increase exponentially: from purely a commute point of view, people will want to live in larger homes, and thus travel further for work/entertainment. When you have HUNDREDS OF MILLIONS of trips being taken on a yearly basis on any 300-500 km range, what are your alternatives to HSR? Driving? Flight? I don't think anything other than HSR is remotely sustainable.

The question then becomes, do we build HSR this year, or do we wait 20 years. Well, I think there are two considerations there:

- land acquisition costs will only be much higher in 20 years than they are now;
- foreign providers could very likely dominate the market in that time frame. By moving now, China builds up a domestic industry that can fulfill its own needs, and maybe (glass half full) fight for a share of the global market.

Now, on to some of the very good questions you ask ... which I'd add, many Chinese themselves are debating...

Who is the target market for the HSR in the hinterland? I can understand major metros providing viable market but is it also true that the person earning $200-300 can also afford the HSR tickets? Or will they be priced at a loss (as passenger tickets are in India too) to keep the system rolling. However the difference is that there has been very little extravagant investment in India so there is no question of IR being plagued by a bad debt overhead.

HSR in its present form is targeted only for the urban "elite", people who would otherwise be flying on these trips. (Perhaps the wealthiest 20% of Chinese society?) For the migrant workers, they must have a parallel system for the forseeable future... the next 20-30 years at least. But obviously, every penny that goes into HSR is taken away from investment in traditional rail... and many Chinese do see this as being unfair. (Investing for the rich while sacrificing the poor.)

The great annual migration for the Chinese New Year is happening right now in China, and there continue to be stories of migrant workers unable to buy a train ticket home... while HSR trains sit half full. The Chinese government introduced online ticketing this year, but it's also being slammed by many Chinese as being patently unfair: not only is the website crashing because the project was poorly planned, migrant workers are *least* prepared to purchase tickets online. Before, they could at least buy tickets by standing in line, even if it took 2-3 days... but now, they're completely shut out. That's the kind of stuff that "progressive" Chinese are really upset about.

Those workers who toil for years to save $10K, can they afford the homes and the infrastructure being created?

The migrant workers who are on the bottom of the income ladder will also be the last to "urbanize". Many of them don't even have the urban residency needed to send their kids to local schools, buy into local pensions, buy local insurance, etc, etc. So, no, they are really sacrificial lambs. I would argue their lives are still improving dramatically over the last 10 years, but clearly not as much as people higher on the income scale.

And as was the case above, investment dollars are mostly flowing towards servicing the rich. City governments and developers get more money by developing expensive properties than they would from affordable housing... so the poor suffer disproportionally. That said, the Chinese government isn't oblivious, and so there are attempted solutions on the way. There are millions of units of low-income/affordable housing being built across China right now in various pilot projects... certainly not enough, since we probably need (literally) hundreds of millions of units.

Not sure if this article was posted here, but I think it's a great read I'd strongly recommend to everyone here. More important than the actual projects being described here... I think the article helps you understand how the Chinese government is making its policy decisions. There is an emphasis on "scientifically" calculated measures of construction.

http://blogs.wsj.com/chinarealtime/2011 ... ket-goals/

The article a few posts ago says that the guy scouring the world for investments got put off by the poverty he saw in Chennai. I have tried hard to figure out the business logic behind that, except that the article is trying to take a dig at India, primarily for the consumption of the local population. For a capitalist, a large pool of workers hungry for gainful employment is likely to result in a much better return on investment than already rich workers.

I didn't see the post, so I have no idea what was said. But there's obviously a great deal of obvious urban poverty in India, and many visitors (Chinese or not) are immediately struck by this.

As far as that being a reason to *not* invest in India... as you said, that doesn't make sense. For what its worth, there are Chinese entrepreneurs + investors in every corner of the globe, ranging from sub-saharan Africa to the Caribbean to central Asia to Iraq. So, the Chinese certainly aren't averse to investing in "poor" nations. I will say though that the *human* cost in the price chain is far less important than people think. Cost of labor in China is already higher than many other surrounding nations... I was just in Shenzhen, where the minimum wage was just raised to 1500 RMB (or about $245 USD/mo). China's trying to remain competitive by slashing the other costs in the price chain.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 19 Jan 2012 02:54

Sri wrote:But the question that lingers in my mind and for which I have no answer or no one has explained to me yet, even though I have asked this to many chinese, how is all this financed. We in India worry about the wrong things comparing infrastructure and inefficiencies. What we have to look at the financial structure of these establishments. Is the pricing of chinese manufacturer inline with global standards? Are they taking into account the cost of capital?

Well, much of it was originally financed with foreign investment. All China could bring to the table initially were cheap employees and cheap land. Without foreign capital, we wouldn't have had anything. But we're now in a virtuous cycle where economic reforms are releasing so much repressed potential, that the economy is growing more than fast enough to pay for the projects. Roads which didn't exist 10 years ago are now packed full of traffic. Obviously some question whether this can continue into the future... I think the answer is "yes", but there's only way to be sure: wait and see.

Same experiences could be red in 'a billion customers' which I recently picked up. Will we in future see some action by Chinese Authorities on IP rights? Are there any convictions regarding the same? These for me are burning questions. If you can tell us more about it, it will help.

I honestly don't know whether "IP rights" will improve the way you seem to think it must. I think for many Chinese, the concept that ideas can be owned/possessed is simply not an intuitive one. Look, physical assets below to one person, and one person alone. It should be obvious that if I take some asset from you, then you are deprived of it, and that is "wrong". Probably every society since human beings began to walk upright has had rules/prohibitions against "stealing".

What about an idea? You came up with the idea of a shovel, and therefore I must forever pay you for the right of using a shovel?  I'm not preventing you from using your idea of a shovel, I'm just looking to improve my own life through the adoption of your design; is this really "stealing"? I want to point out the concept of "intellectual property" didn't exist ANYWHERE until Europe came up with it in the late 19th century. In other words, this is a brand new invention, not some natural part of traditional human society. None of our ancestors (Chinese, Indian, ANYWHERE) felt ideas should be protected and licensed. If you have a good idea, then expect it to be shared, expect it to be copied. And you know what, I'm of the opinion it didn't really hurt "innovation"; tradesmen still tried to trade better things, and merchants tried to sell them.

Now, the argument has been made that strong intellectual property laws will *strengthen* innovation by encouraging investment in R&D. That might be the case... but that is the only case that can be made in favor of intellectual property... that our lives collectively will all be improved if we respect its rules. I for one refuse to accept that not respecting intellectual property is inherently immoral, the way that stealing physical property is. And frankly, I don't think that argument that our lives will be improved through respecting IP has been successfully argued in front of the Chinese people collectively, as of yet. We might eventually get there, when China itself is far enough up the value chain that we need this type of protection for our own innovation... but for now, it looks an awful lot like a burden the developed world is using to insure it's continued profitability at the expense of the developing world.

In the case of China, international businesses which hold many of these patents are faced with a simple decision: you can make money off of our huge consumer market, you can use our very low-cost manufacturing environment.... but be prepared to have your ideas/technologies copied. Is this somehow morally wrong, as many seem to think? Frankly, I don't think so. IMO, it's no more "morally" wrong than tariffs/subsidies or any other aspect of international trade.

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 19 Jan 2012 04:17

heech:

Your point about the size of the cities (Spain vs China) is quite valid. However, if we compare the percentage of population which can afford the tickets and then the target size, it is likely going to be comparable. And thank you for pointing out the challenges faced by the non-neo rich.

There the contrast between the policies of India and China becomes more clear. China went for the HSR even though it may not benefit the most but because it is an image issue. It would be foolish to underestimate why image matters. Your reference to the very visible urban poverty in India is a strong reminder. Frankly speaking for distances above 300-400Km, low cost airlines are perhaps a better option. They require a much lower fixed investment, and offer much greater operational flexibility. Also I am not too sure how much traffic will be generated in the stops between major metros.

The article about low cost housing was interesting. However even there the math was blurry. The mayor expected people to pay 7x70K yuan for the homes, when the average income was 20K yuan/yr. His calculations were based on 7years of income and three working members per home. I am not sure how that works out. I guess the expectation is that there will be at least three full incomes per home, which assumes a multi-couple household.

And given that people need money to buy other stuff, what percentage of their salary will they be devoting to service the house? There were articles about people paying up to half of their income (software engineer) to service the debt on apartments in a big city where the property values have fallen dramatically, already wiping out the equity of the buyer (which was in turn obtained from the life-savings of his parents).

I completely agree with you about the value of infrastructure; it makes life easier and businesses more efficient. Thanks to the Yuan peg, companies do not have to worry about hedging foreign currency risk and it reduces the cost of doing business..

In a lot of ways the infrastructure is a subsidy to the local industries, because it is paid for by low interest loans, many of them now becoming non-performing. And the cost of the low interest rates is being borne by the workers who have been saving drop by drop; only to find the real buying power of their savings getting eroded every year.

The biggest issue I have is with the projections. Like all the Wall Street analysts, there seems to be that bias towards linear projection. While the past is a good template for the future, their is no guarantee. This is especially true now, where the tools used to drive Chinese growth over the past 30 years are becoming less viable.

It is clear that EU, the world's largest economy, is going to be entering a period of slow or even negative economic growth. While the US has been lumbering along with money printing, it is still operating well below capacity and true growth is missing. Both the US and the EU have outsourced almost all of their non-speciality manufacturing, primarily to China. The amount which can be sent abroad is now limited. Further expect a wave of protectionist sentiments to sweep these countries as the retrench and populist measures become more common.

Post 2008, China survived the slowdown with the massive stimulus, a lot of which went into the infra and is now being questioned as it is likely to lead to a staggering amount of NPAs. While it helped maintain the GDP growth, it should be clear that model is not necessarily going to work going forward.

The question of course is what is the next big driver which will sustain the growth rates in China. From whatever I have read and inferred, any incremental investment being made in China is now going to get less and less return as the low hanging fruits have been harvested. So while low-cost housing sounds a like a much needed and very noble goal, it is increasingly unclear whether the debt used for that can be paid off by the people who are will occupy those homes.

This is where the alarm bell start ringing in my mind. A managed economy can go on for a long time before one day you wake up to find the Berlin Wall has fallen. I do not expect that to happen in China since the state eventually controls everything.

However, I find it hard to believe the linear extrapolation which is being done. China is much bigger, her export market stagnant, and an era of protectionism awaiting us. And add an aging but poor population with lower number of replacements, and the linear extrapolation becomes even more hard to accept. While I see stop-gap measures being taken within the PRC the fundamental orientation has not changed.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 19 Jan 2012 09:53

VikramS wrote:heech:
There the contrast between the policies of India and China becomes more clear. China went for the HSR even though it may not benefit the most but because it is an image issue. It would be foolish to underestimate why image matters. Your reference to the very visible urban poverty in India is a strong reminder. Frankly speaking for distances above 300-400Km, low cost airlines are perhaps a better option. They require a much lower fixed investment, and offer much greater operational flexibility. Also I am not too sure how much traffic will be generated in the stops between major metros.

I find it disappointing you pulled out the above statement... how and when did we come to the comment that the HSR was an "image issue"? I completely disagree with the conclusion. I'll repeat myself, as far as why HSR makes sound economic sense:

- operationally, it will be break-even in the very near future because of the population involved. Almost every stop "between the major metros" has an urban population in the millions, so... why wouldn't there be substantial traffic?

- strategically, in the mid to long term, HSR is the only reasonable solution to dealing with China's transportation needs. Air travel does *not* scale well when you're dealing with hundreds of millions of passenger-trips.

- tactically, building HSR now saves on acquisition costs, while helping generate a domestic industry before foreign players can dominate the space.

China has built its share of white elephants over the years. The Beijing Olympics, the Shenzhen Universidad Games (just ended), the Shanghai Maglev... white elephants intended to demonstrate China's strength. HSR, Three Gorges Dam... IMO, not white elephants.

The article about low cost housing was interesting. However even there the math was blurry. The mayor expected people to pay 7x70K yuan for the homes, when the average income was 20K yuan/yr. His calculations were based on 7years of income and three working members per home. I am not sure how that works out. I guess the expectation is that there will be at least three full incomes per home, which assumes a multi-couple household.

The idea is just to use that measure as a rough multiple / ratio of "fair" housing prices versus local income... not to suggest that it's expected the typical home would actually be paid off in 7 years.

Sri
BRFite
Posts: 1326
Joined: 18 May 2005 20:19
Location: Earth

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Sri » 19 Jan 2012 11:01

Heech, a strong argument against IP rights above. Since we are generally knowledge driven economy (being traders included in that), we feel a little stronger about it. We have to simply wait for Chinese to go over the hump and start valuing the IP rights. Till then we can't ignore the Middle Kingdom, so we have to tug along.

As for India, the point you make about urban poverty, is little off the mark. The system here in India as I said above is designed for appeasement. These urban poor have something called a vote. Collectively they are called vote bank. That makes all this a potent mix. But discussion on that is for another thread and time.

Thank you for some great posts lately. Do keep visiting BRF.

chola
BRF Oldie
Posts: 4858
Joined: 16 Dec 2002 12:31
Location: USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby chola » 19 Jan 2012 18:57

VikramS wrote:chola:

I have seen you criticizing Indian entrepreneurs multiple times on this thread for losing out to the rest of the world. For whatever reason you attribute that to jingo-giri.


No, I am not criticizing the Indian entrepreneur. As I written repeatedly, he are our strength. Especially in comparison to China which crushes its private business class with state-owned enterprises.

What I do say is general jingoism in regards to China's market has led to a general lack of understanding of the chini market. We are too worried about whether it is all potempkin villages and insist on its economy being smaller while the rest of the world knows it is cheating by pretending it is smaller. We do not even understand how the Panda cheats. We think Panda is bragging because our jingos insist that its economy must be smaller. Meanwhile, the Americans, the Japanese and the Europeans press China to raise its currency and open up its market because they know the PRC is far bigger than it pretends. The Americans, Japanese and Europeans get hard results from this strategy with market access and strengthening of the Yuan which allows for more exports to chiniland.

We get nothing from pretending that a market that Western firms sell 10, 20 times more to is really just a mirage. It is foolish and ultimately dangerous. That is the danger of jingos is as great as that of lost markets. The application of wrong strategy because jingoism makes us see past the obvious.

I think you are way off. The average Indian is much less jingo than the average Amrican, Chinese or even TSPian. As some others have written, Indians have a trading mentality and that is typically agnostic to other issues.


We trade far, far, far less than the chini and the rest of the East Asians. Just look at the trade figures. Who are we kidding? The most vicious and brutal traders are those from Pandaland and its neighbors. Thank God, the PRC is still communist or else it would be even worse.

While the perspective you bring in regards to the Chinese consumer market, is really refreshing, it is also driven too much by the experience of "preferred" and "approved" Western brands. It would be great if you could share the experience of non-Western (and her Asian satellites like Japan/Soko) companies in China. Who have thrived? What did they do different?


Obviously my experience is with the Western MNCs since that is my world. But it is here where the world's most accurate sales and forecasting methods and statistics are kept. Why would you be anywhere else?

As for non-US/Western firms. Taiwan, Japan and South Korea all have China as their largest export market (not the US). They run massive trade surpluses with China! The PRC is largest or second largest for with Thailand, Malaysia and the rest of ASEAN.

Where China ranks for the a few Asian firms:

Hyundai, 1st
Samsung, 2nd
Acer, 1st
Toyota, 3rd after US and Japan
Sony, 3rd after US and Japan

The list goes on and on.

How do they do it? They attack the chini market. It is that simple. Every industry and every market has a different set of rules but what makes any company successful is to research the strength of the market and attack when they see potential. The Taiwanese, Koreans and Japanese see China as a rival and enemy far more than we even have the right to. But they make more money off of the Panda than they do the US who is an ally and protector.


Perhaps your criticism could be more relevant if you could point out areas in which Indian companies could excel and where they haven't. My gut feeling is not that they have not looked into it; but that they have looked into it and decided the political risks, the IP risks and other assorted complications with doing business with the CPC does not justify the investment; especially when compared to the other alternatives available to them in Africa/Asia/LatAm. And the country of origin and its brand catchet has a lot to do with that risk perception.


Where Indian companies have entered, they've excelled. Mahindra is arguably the world's largest tractor manufacturer because of its China market share. Tata's Jaguar/Land Rover sells 10 times more in China than in India, granted that was more from the legacy British sales force in place in the Far East. But that enforces the premise that Westerners are far more in tune with the market.

Unless you study the market, you have no chance. As I written before Indians have no troops on the ground in Chiniland. The Americans, Europeans and East Asians have researchers and reporters by the tens of thousands in this market.

It is the same in the rest of the world as well.

Indian investment in Asia and LatAm is as low as its investment is in China. There is not one major nation beside Dubai (which serves as a center for Indian remittance) rather than investment gateway that have received Indian cash in scale. Where China is important for Asian firms especially is it is a massive market on scale with the US and Europe but with the sophistication of Africa which means non-Fortune 500 firms have a chance in this market though the Fortune 500 are in there with force.

Theo_Fidel

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 19 Jan 2012 19:59

chola wrote: We are too worried about whether it is all potempkin villages and insist on its economy being smaller while the rest of the world knows it is cheating by pretending it is smaller.


Chola,

Isn't this what the entire PPP model is about. Many developing countries economies are much larger than their GDP's show them to be. As their GDP grows the multiplier diminishes until to reaches unity.

Right now China's multiplier is 1.7 while India's is 2.5. Both multipliers are declining fast.

BTW per a report posted earlier, the entire luxury goods business in Pandaland is $10 Billion only.

If they are buying 20 million cars worth 8% of GDP annually I suspect there are gaping holes in the Panda economy. Esp. in their service economy.

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 20 Jan 2012 01:10

chola:

1. All the brands you mentioned were established global brands before entering the China market. What equivalent does India have?

2. A lot of these companies use China as the final assembly point where the low labor cost is a boon for finishing, packing and QA. It also pays the dues to the CCP to create Chinese jobs. It would be really interesting to see how much of the exports of these countries are components often for re-export, and how much are finished products for end-user sale. They want to protect the core IP of their chips as much as they can.

I have no way of getting those stats; I am sure you can run some numbers.

3. Mahindra is truly unique among Indian companies when it comes to global thinking. LRJ is not an example which can be emulated by many. What companies or industries do you think Indian companies could have made their mark in China or could make their mark in the future. Remember, the CCP will ask for its pound of flesh to allow Indian companies to succeed. What do Indian companies offer which the Chinese already do not have?

4. Industries where Indians do well on the global scene like services, or diamond cutting have tried to operate in China. However the experience has not been something which would encourage more to do business. What your thoughts about that? To me it seems a clear message from the CCP that do not expect us to throw a welcome mat to Indian businesses. What are your thoughts?

5. Again examples of Indian industries which can succeed in China will lend a lot more value to your arguments.

svinayak
BRF Oldie
Posts: 14223
Joined: 09 Feb 1999 12:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby svinayak » 20 Jan 2012 04:23

VikramS wrote:
I completely agree with you about the value of infrastructure; it makes life easier and businesses more efficient. Thanks to the Yuan peg, companies do not have to worry about hedging foreign currency risk and it reduces the cost of doing business..

In a lot of ways the infrastructure is a subsidy to the local industries, because it is paid for by low interest loans, many of them now becoming non-performing. And the cost of the low interest rates is being borne by the workers who have been saving drop by drop; only to find the real buying power of their savings getting eroded every year.


With Yuan peg, companies do not have to worry about hedging foreign currency risk and it reduces the cost of doing business.. This is also supported by PRC largest trading partner US and its currency. So their is a long term support for the low cost of capital from the largest economy of the world. It has also helped PRC to recover from the low growth due to financial crisis in the last decade. This combination is strangling the world economy and also keeping India at an disadvantage.

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 20 Jan 2012 05:45

heech:

I do not have any numbers (doubt if any one has), but whatever analysis has been done by people who know a thing or two about cost accounting for railways shows that the HSRs is unlikely to break even, ever. And this is in spite of the financial subsidy provided by low cost loans. Of course no one has to know about it, since given the scale of the Chinese economy any wasteful expenditure there can be tolerated.

The key for me is not whether HSR will break even, but that even after the huge investment, the migrant worker has to waste many days to travel during the most important part of the year for them. I contrast that with what happens in India. In India they have this NREGA scheme where the rural unemployed are guaranteed some work for a certain amount of time. While it is doing a lot to help the poorest, it is putting a lot of stress on the fiscal condition of the government and not resulting in anything which can be useful in the future.

So one extreme we have a huge expenditure (HSR) which is primarily for the elite. Maybe, if the number of elite continue to increase, it will break even. But at least right now the expenditure has not helped the masses. On the other extreme, we have this blatant appeasement of the poor in India for political gains. The best way would be somewhere in the middle.

The problem with all the arguments for HSR, TGD is that there is little study done of how the same amount of money could be spent on alternative investments which may not be so glamorous but benefit a lot more. I am sure there are parts of the HSR network which makes a lot of economic sense; I also feel that given the overall distribution of wealth in China, there will be parts which become white elephants.

Could the same money be spent on a Not so high speed but still modern network at a lower cost? In India they upgrade parts of the network incrementally; part of reason is that it is very hard to acquire land for greenfield ventures in India, unlike China. Another part is that the ROI is measurable and justifies the investment.

The other aspect which no PRC poster addresses is how the growth in the future will be sustained. The drivers use prior to 2008 are no longer valid; the spending binge post 2008 is unlikely to be replicated. This is critical since almost all projections about China kind of project things linearly which rarely if every works in reality.

The numbers put out in that low-cost housing article are actually an eye-opener. Assuming the numbers are correct, it would require 21 man-years of average income to pay off that house. Do you really feel that is affordable?

The questions are not about whether the infrastructure and investment is needed. The question is whether the nature of infrastructure being built is the right kind, and can be affordable by the common Chinese. And if it can not be afforded, what happens to the debt used to finance that growth?

Theo_Fidel

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 20 Jan 2012 07:54

VikramS wrote:.... but whatever analysis has been done by people who know a thing or two about cost accounting for railways shows that the HSRs is unlikely to break even, ever.


Vikram,

not only that all the evidence is that Panda has constructed a very shoddy system by cutting all kinds of safety and design corners. Building a HSR is a slow methodical process of investigating the best option and building to the highest world standards. Panda has not done this, it remains to be seen how this system will be in 10 years. Let alone the 100 year life of typical HSR lines.

amit
BRF Oldie
Posts: 4325
Joined: 30 Aug 2007 18:28
Location: The Restaurant at the End of the Universe

Re: PRC Economy - New Reflections : Dec 15 2011

Postby amit » 20 Jan 2012 08:12

Theo_Fidel wrote:
VikramS wrote:.... but whatever analysis has been done by people who know a thing or two about cost accounting for railways shows that the HSRs is unlikely to break even, ever.


Vikram,

not only that all the evidence is that Panda has constructed a very shoddy system by cutting all kinds of safety and design corners. Building a HSR is a slow methodical process of investigating the best option and building to the highest world standards. Panda has not done this, it remains to be seen how this system will be in 10 years. Let alone the 100 year life of typical HSR lines.


To add to Theo's post, the only way the investment in HSR could be justified is if China became a leader in the field and figured out how to build the system a significantly lower cost than the other leaders such as German, Japan and France. However, with the recent accidents and reports of malfunctions, I think all export dreams have vanished.

And so all the infrastructure created to build HSR (as opposed to the HSR infrastructure itself) is going to be sitting idle. There's a limit to how many HSR lines China can construct within the country. The only way to keep the factories going is to build HSR line for free in African client states and Pakistan. I wonder!

PS: I'm convinced that HSR was a massive lemon sold to the CCP leadership.

gakakkad
BRF Oldie
Posts: 4475
Joined: 24 May 2011 08:16

Re: PRC Economy - New Reflections : Dec 15 2011

Postby gakakkad » 20 Jan 2012 08:20

I am glad that the Chinese guests are contributing posts with better reasoning.(even though i may not agree with some of it. ) The ones we had in the past were simply trolling .

zlin
BRFite
Posts: 178
Joined: 07 Aug 2003 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby zlin » 20 Jan 2012 09:54

R&D: the right chemistry?
By Liu Jie (China Daily)
Overseas pharmaceutical firms are conducting more research in China as the country's medical market expands and the West's health sector shrinks

NANJING - It took preliminary talks lasting more than a year, innumerable onsite investigations and seemingly endless negotiations, but all the effort ultimately led to a contract covering hundreds of pages.

That intensive groundwork resulted in cooperation between the international pharmaceutical company Bristol-Myers Squibb Co (BMS) and the Jiangsu-based Simcere Pharmaceutical Group, who in December 2010 reached a strategic partnership to co-develop an oncology compound (the creation and development of a cancer treatment).

One year later, with research and development (R&D) into the compound still at an early stage, BMS announced that it will expand the strategic partnership to tap a new area - cardiovascular diseases.

Unlike their previous sales-centered strategies, an increasing number of multinational pharmaceutical companies are eyeing the Chinese market as part of their efforts to boost their global R&D chains.

In 2011, BMS also established R&D collaborations with Wuxi AppTec Co Ltd for stability studies into small-molecule new-chemical entities and with Crown Bioscience Inc on the development of cancer treatments.

BMS is not the only international drugmaker actively seeking R&D cooperation with Chinese companies. A number of overseas businesses have enthusiastically embraced the idea of conducting joint R&D, especially with biopharmaceutical companies.

Pfizer Inc, the world's largest drugmaker by sales, has entered into collaboration with MicuRx Pharmaceuticals Inc, a Chinese biopharmaceutical company specializing in the development of antibiotics to treat drug-resistant bacteria, and with Cumencor Pharmaceuticals Inc to discover therapeutic agents for multi-drug-resistant tuberculosis (MDR-TB).

Merck Sharp & Dohme Corp (MSD) - known in the United States and Canada as Merck & Co, the world's second-largest drug producer by sales - recently reached a deal with Shenzhen-based BGI (formerly known as Beijing Genome Institute) to combine the research institute's sequencing and bioinformatics capabilities with MSD's expertise in drug development to identify a new generation of personalized therapies.

Chinese companies will benefit from collaborative partnerships with the multinationals that are exploring new approaches to advancing the clinical development of innovative products in China, on sound molecular pipelines (the number of products under development), extensive experience in R&D management, strong funding support and global R&D resources, said Guo Fanli, an analyst from China Investment Consulting Co Ltd.

Meanwhile, international drugmakers may benefit from rich clinical trial resources, locally tailored products for Chinese patients, technological support for their global R&D networks, cost reductions and easier access to registration and approval, Guo said.

However, challenges exist for both sides, such as cultural differences, analysts said.

Moving to China

Flat demand for medicines and the sluggish economic conditions in developed markets have prompted many multinationals to move their R&D activities to China.

Pfizer closed its R&D facility in the United Kingdom in early 2011, resulting in job losses for more than 2,400 engineers. Meanwhile, Novartis International AG announced in April 2011 that it will cut nearly 550 jobs at its UK R&D center by 2014. Both companies have recently increased their R&D capabilities in China. Pfizer set up its second facility in Wuhan, in Hubei province, in October, to complement an earlier facility in Shanghai. The new unit, where 200 staff will be employed by the end of this year, is also a platform for Pfizer to conduct cooperation with local companies, academic institutes and universities.

At the end of 2010, Novartis AG said it would invest $1 billion in China within five years to enhance its R&D strength in cancer treatments, and its local partners will be engaged in helping to increase efficiency in the research and commercialization of the products.

According to Liu Xue, a professor at the Guanghua School of Management at Peking University, the comparative slowdown in sales of medicines in developed markets means that it makes little economic sense to continue R&D investment in those countries.

According to the international healthcare market researcher IMS Health Inc, China became the world's third-largest pharmaceutical market in 2010. Sales of medicines are predicted to grow 25 to 27 percent year-on-year to exceed $50 billion in 2011. The researcher forecast that the market will grow at an average annual rate of 20.1 percent to reach 694 billion yuan ($110 billion) by 2015.

Apart from the size of the market, foreign companies are also drawn by China's rapidly improving R&D environment, said Liu, adding that cooperation with local partners allows companies to develop locally tailored products and make it easier for them to get industry registration and approval for their research activities.


The biopharmaceutical industry is one of seven strategic sectors for which the Chinese government has promised support in its 12th Five-Year Plan (2011-2015). The country, with the goal of becoming a major research hub in the international pharmaceutical sector, has already allocated 105 billion yuan to key drug-creation programs, launched to support local R&D projects with a view to developing 30 new treatments in 10 major therapeutic areas by 2020.

That government support has prompted overseas companies to further tap into the sector. However, Lydia Xu, a researcher on the pharmaceutical sector with the Samsung Economic Research Institute, said that the majority of the funds will be invested in State-owned researchers or academic institutes and universities.

Although cooperation with Chinese companies will not allow multinationals to access the funding, the domestic environment, which favors biopharmaceutical development, is a bonus in obtaining registration and commercialization approvals for treatments, analysts said.

Jean-Christophe Pointeau, president of BMS China, said that the company had to take registration and approval issues into consideration. Meanwhile, the higher price of self-developed drugs in the Chinese market was also an important element when the company decided to focus on self-developed medicines rather than high-quality generic products.

The ongoing reforms to China's healthcare system have focused on lowering drug prices and healthcare costs in general. Prices should be lower for generic drugs, because they require no technological innovation. However, "for a new innovation-originated product or a specific therapy for a serious disease, for example cancer, a higher price is acceptable, because the cost of R&D is high and it (the medicine) can save lives and bring benefits to the public", said Pointeau.

Common interest

Simcere's President Zhang Yehong said that the cooperation with BMS is based on mutual trust and common interests. Mark Pavao, president of BMS Emerging Markets and Global Access, said the partnership is exciting and hopefully will be a win-win situation.

"We have been committed to building up our R&D capability and are willing to invest significant financial and human resources (in China)," said Zhang, adding that Simcere invests between 7 and 8 percent of its sales in R&D every year.

Founded in 1995, the company now has almost 4,000 employees, with one-tenth of them working in R&D.

"Simcere is a leading Chinese company, a listed company (on the New York Stock Exchange) and very active in global partnership discussions," said Pavao. "We are pursuing 'selective integration' when choosing partners."

Regarding the company's second cooperative project in China, he said: "Our experience over the past year is that everything Simcere said they would do, they have done, ahead of schedule and with very high quality results, which made our companies think maybe we should talk about another one (project)."

According to the agreement, Simcere will receive exclusive rights to develop and commercialize the molecules in China, while BMS will retain exclusive rights in all other markets. The companies will jointly determine their strategic development plan to explore the potential of compounds to treat diseases.

At present, BMS provides molecules for Simcere. "Simcere will provide development expertise and resources to collect high-quality data, data that will stand up to potential applications around the world," said Pavao.

Some observers have said that BMS has an unfair advantage when cooperating with its Chinese partner: All intellectual property rights and income outside China will go to the overseas company, while the Chinese side is responsible for the whole R&D process, including financial investment and human resources.

However, Simcere's Zhang said he doesn't think the deal is skewed in favor of the overseas companies. "R&D collaboration is very complicated. Besides visible contributions, such as funds, equipment and human resources, there are many invisible things, such as the value of self-developed molecules, global resources and technological support," he said.

Zhang added that if a product is commercialized, Simcere will receive a "certain amount" of the revenue BMS generates from the medicine outside China, and in exchange, BMS will enjoy similar rights.

For many multinationals, their strong point is in early-stage molecular discovery, which requires a huge amount of money and can take decades of lab research. These relatively young Chinese biopharmaceutical companies can hardly be expected to discover those molecules by themselves, said Xu.

As a leading global biopharmaceutical company, BMS invests approximately 20 percent of its sales in R&D every year. Xu said that China has an advantage when it comes to clinical trials, because of the huge number of patients and the high standard of its R&D staff.

Challenges ahead

Biopharmaceutical development requires huge investment and carries high risks.

"What is important for people to understand is that each new drug costs approximately $1 billion and it takes an average of 12 years to develop a molecule into a medicine," said Chris H. Lee, president and CEO of Bayer HealthCare China, in an earlier interview.

"During the process, scientists filter the ideal drug out of millions of potential candidates, before selecting suitable candidates for clinical trials. Ultimately, only 5 to 10 percent of clinical candidates will receive regulatory approval," he said.

Many Chinese biopharmaceutical companies are very young and don't have the resources to devote to long-term development with huge investment, not to speak of shouldering the risk of the high possibility of failure, Liu said.

In collaboration with BMS, the foreign company has the resources for the molecular pipeline in its laboratory, but it does not have the resources for further development. "Partnering with us, they offer their early-stage technology and we focus on the next step, and our involvement greatly increases the possibility of success and reduces the risk of failure," said Zhang.

Cultural differences are also regarded as a potential hindrance for Sino-foreign R&D cooperation, Xu said.

There is a State-level biotech and pharmaceutical industrial base in Zhangjiang, Shanghai, which is known as China's "Drug Valley" and plays host to more than 100 drugmakers, including AstraZeneca Plc, Eli Lilly and Company and GlaxoSmithKline PLC as well as professional research institutions. Many of them have ongoing collaborative operative projects.

The administration committee at the Zhangjiang base has taken a number of measures - including hosting technology-transfer fairs, setting up specific departments to work as intermediary agencies and simplifying customs procedures for R&D equipment and biosample imports - to support partnerships between local institutions and foreign companies.

"It's a good way for Chinese academic institutions and enterprises to obtain funds to conduct more research and for foreign drugmakers to get reliable local resources to speed up their R&D in Zhangjiang," said Wang Lanzhong, general manager of the administration committee at the base.

Wang also said the heavy financial costs and long developmental period, coupled with the high failure rate in pharmaceutical R&D, have resulted in more than 500 local enterprises and institutions in Zhangjiang closing or moving out in the past decade.

Meanwhile, some projects don't last the agreed duration, mainly because the foreign and Chinese sides have different management ideologies and cannot compromise, said Liu, highlighting the importance of detailed and accurate contracts in addition to mutual understanding and communications.

"As market conditions continue to change, especially in China, where everything develops quickly, the partners should follow the changes and discuss appropriate responses, and then adjust their operations accordingly," Liu added.

However, Simcere's Zhang said he does not think the differences between Chinese and foreign cultures constitute a problem. "Cultural differences exist in all companies. There are differences between different multinational companies as between local companies. If two partners share the same philosophy and commitment, the problem will not be a problem at all."

Zhang received his college and business education in the United States. He worked for Merck for 12 years and served as the company's China president between 2007 and 2008. With experience in international consulting firms IMS Healthcare and McKinsey & Company, Zhang is knowledgeable about the Western style of business and the condition of China's pharmaceutical industry.

The pursuit of internationalization by Chinese companies and the sluggish market in Western nations have resulted in many Chinese professionals returning from overseas to work for local companies. These people - usually open-minded, flexible and with good professional training - are becoming the backbone of cooperative projects. These human-resource flows can help narrow the cultural gap between Chinese and foreign companies to some extent, said Liu.

"Good partnership means finding good partners. For BMS, finding good partners means finding someone who has good science, focuses on innovation and has the ability to conduct general scientific work," said Pavao.

"If any Chinese company wants to be innovation-oriented and R&D-focused in looking for treatments for serious diseases, we may have an interest in partnering with them," Pointeau said, signaling that BMS China is open to domestic companies while insisting on "selective integration".
Image

zlin
BRFite
Posts: 178
Joined: 07 Aug 2003 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby zlin » 20 Jan 2012 10:04

Audi raises ambitious three-year goal

From China DailyJanuary 19, 2012

China Daily (Beijing) - Encouraged by better-than-expected performance last year in the world's top vehicle market, German luxury carmaker Audi AG, owned by Volkswagen Group, has raised its three-year sales target in China.

"The three-year target now appears conservative because it will be reached as long as we can grow 8 percent annually over the next two years," Zhang Xiaojun, executive deputy general manager of the Audi sales division, said without releasing specific numbers.

"We already have a higher target." he said.

Audi moved 309,888 cars last year on the Chinese mainland, a surge of 37.4 percent from 2010, according to its sales division at FAW Volkswagen Automobile Co.

Its 2011 sales - which included 252,000 locally made cars and 57,888 imported vehicles - ensured Audi retained the crown of top luxury carmaker in China. The figures also enabled the country to outstrip Germany as the brand's No 1 single market in the world.

In October 2010, Audi released a three-year goal of selling a million cars in China from 2011 to 2013, which was widely believed to be very aggressive.


But Zhang noted the goal will be met and "as long as there's no big setbacks in China's macro economy, we will surely be able to achieve the new sales target".

He attributed Audi's success in China largely to its "strong full-value-chain localization" from R&D to parts sourcing, production and sales.

Audi began assembling cars at FAW Volkswagen in the northeastern city of Changchun two decades ago, becoming the world's first luxury brand with production in China. Audi and Volkswagen have a combined stake of 40 percent in the joint venture, with the rest held by FAW Group, one of China's top domestic automakers.

New products

Audi now produces the A6L and A4L sedans, as well as the Q5 SUV, at the joint venture. It also imports a slew of models such as the A8, Q7, A7, A3, TT and R8.

Dominique Boesch, general manager of the Audi sales division, said last week that Audi plans to introduce at least seven new models in China this year such as the new locally made A6L, the imported Q3 compact SUV, the Q5 full hybrid and S/RS high performance cars.

Audi said last month that it will make the A3 compact car in 2013 at a plant under construction in Foshan, Guangdong, part of FAW Volkswagen's new manufacturing facility in the southern province.

Zhang said Audi will also produce the Q3 in Changchun later, but did not give a specific timetable.

"In the future, Audi will take the lead in localization of many leading technologies amid the introduction of new models," Boesch said.

Beginning this year and in 2013, all locally made Audi models in China will be equipped with micro hybrid technologies - start-stop and intelligent thermal management systems, Boesch said.

Audi will also begin local production of hybrid models, he said.

In addition, he said the company will produce aluminum parts for the new A6L this year for the first time in China.

Capacity expansion

Audi last year announced that it will have an annual production capacity of 700,000 cars in China by 2015, up from 300,000 units at present.

Zhang said production at the two plants in Changchun could be further raised through adjustments this year.

The new plant in Guangdong will have an annual production capacity of 150,000 Audi cars when it begins operation. Zhang said the capacity could also increase in the future.

Boesch said the carmaker will aggressively expand its sales network in China to include more than 300 dealerships by the end of this year, up from 237 at the end of 2011.

Zhang said Audi will add 50 to 70 new dealerships in China annually to boost the total number to 600 in the coming years.

"We now have dealerships in 117 first and second-tier cities in China," he said. "We will give more importance to second and third-tier cities, which have more growth potential."

Market outlook

"We have carefully optimistic expectations for the premium car market in 2012," Boesch said.

He predicted that the premium car market in China will grow 15 to 20 percent this year, boosted by the country's stable economic growth and "very large rigid demand" for cars.

China's State Information Center forecasts an even faster pace of growth in the premium car market - an increase of 25 percent in 2012.

The segment soared by almost 40 percent to 950,000 units in 2011.

But Boesch noted some negative factors for the market this year, such as expiration of a phalanx of incentive policies, traffic congestion and purchase restrictions in some cities, rising oil prices and inflation.

At the same time, Audi faces mounting competition from major rivals such as Mercedes-Benz and BMW, which are speeding up introduction of new products in China and building more production capacity.

Infiniti, the premium brand from Nissan, will reportedly start to make cars in China this year or in 2013.

zlin
BRFite
Posts: 178
Joined: 07 Aug 2003 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby zlin » 20 Jan 2012 10:12

Over 230000 BMWs and Minis sold in China in 2011

Gasgoo.com (Shanghai January 13) - BMW AG's sales performance in China last year was relatively strong, with a total of 232,586 BMWs and Minis being sold in the country, Gasgoo.com (Chinese) statistics showed. The figure is 37.6 percent greater than the 168,998 vehicles the German manufacturer sold in 2010. China is still the manufacturer's third largest market worldwide.

BMW AG sold a grand total of 250,658 BMW and Mini vehicles in the Greater China area, including Hong Kong, Macau and Taiwan. The amount sold represents a sales growth of 37.2 percent for the manufacturer.

Among its best-selling models, a total of 33,500 7 Series (pictured above) were sold this past year, maintaining the model's place as a top seller in the luxury segment for the third year running. BMW's popular X series of SUVs also performed well, with a total of 46,042 units sold. Meanwhile, the brand new 5 Series (pictured below) managed to rack up sales of 70,850 units, growing over 68 percent from 2010. A total of 217,068 BMW branded vehicles were sold in 2011.

Meanwhile, sales of Mini vehicles also increased dramatically last year, growing 47.7 percent from 2010. A total of 15,518 Minis were sold, with the new Mini Countryman managing to accumulate sales of over 5,000 units.

zlin
BRFite
Posts: 178
Joined: 07 Aug 2003 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby zlin » 20 Jan 2012 10:15

Mercedes-Benz China sales in 2011 up by 35pct

China Knowledge reported that Daimler AG Mercedes-Benz unit has sold a record 198,520 vehicles including the models of Mercedes-Benz, Smart, Maybach and AMG in China last year reflecting a YoY increase of 35%.

In December, Mercedes-Benz unit auto sales jumped 30%YoY to 23,230 units. The sales of S-Class vehicles topped 31,050 units last year. Last month the company sold 3,700 S-Class vehicles reflecting the highest monthly level ever recorded.

The auto maker delivered 54,335 sports utility vehicles in China last year up by 85%YoY.

Beijing Benz Automotive Co Ltd a joint venture established by Beijing Automotive Industry Holding Company and Daimler saw its whole sales soar 86%YoY to 93,000 units more than its original target of 80,000 units.

(Sourced from China Knowledge)


abhischekcc
BRF Oldie
Posts: 4277
Joined: 12 Jul 1999 11:31
Location: If I can’t move the gods, I’ll stir up hell
Contact:

Re: PRC Economy - New Reflections : Dec 15 2011

Postby abhischekcc » 20 Jan 2012 10:32

amit wrote:PS: I'm convinced that HSR was a massive lemon sold to the CCP leadership.


That deal benefitted both sides - Germany was able to recover all its development costs, China got hold of technology that it could never have developed on its.

sha
BRFite -Trainee
Posts: 61
Joined: 11 Aug 2016 06:14

Re: PRC Economy - New Reflections : Dec 15 2011

Postby sha » 20 Jan 2012 10:54

Speaking of making money out of the Chinese, I believe India should make a further effort to explore Chinese tourism market. That's a relatively easy way to make money out of the Chinese.
Some facts:
1. The number of Chinese outboun tourism reached 70 millions in 2011, however, less than 0.2 milllion Chinese tourist went to India. That means a huge potential.
2. S.korea, Japan, SE asian countries race to woo Chinese tourists by easing visa regulations. Chinese toursists have made a name of being generous in EU and US. The Chinese tourists do help the local economy.
3. China's urban middle class is growing fast. India as an ancient civilization country and exotic land has some appealing for this group. The primay target market should be tens of Chinese cities which have a GDP per capita of above 10,000$. Just name a few with population more than 3 millions, Beijing(12,447$), Shenzhen(16,439$), Shanghai(12,784$), Nanjing(1,1823$), Souzhou(15,542$), Guangzhou(15,430$), Wuxi(16,771), Hangzhou(12,380$), Tanjing(13,331$).

And I think Bollywood films stands a chance in Chinese market. "Three Idiots" is the first Bollywood movie I watched, and I have to say it's very fantistc. India should introduce more such high-qualitied Bollywood movies to China.
Last edited by sha on 20 Jan 2012 13:44, edited 4 times in total.

anishns
BRFite
Posts: 1342
Joined: 16 Dec 2007 09:43
Location: being victim onlee...

Re: PRC Economy - New Reflections : Dec 15 2011

Postby anishns » 20 Jan 2012 11:35

Mods can we please have an exclusive 'Panda shining' thread for comrade zlin, where he can post his long cut-paste articles without disrupting the discussion on this particular thread?

amit
BRF Oldie
Posts: 4325
Joined: 30 Aug 2007 18:28
Location: The Restaurant at the End of the Universe

Re: PRC Economy - New Reflections : Dec 15 2011

Postby amit » 20 Jan 2012 11:53

abhischekcc wrote:
amit wrote:PS: I'm convinced that HSR was a massive lemon sold to the CCP leadership.


That deal benefitted both sides - Germany was able to recover all its development costs, China got hold of technology that it could never have developed on its.


Fully agree. In fact I made a similar comment in an earlier post of mine.

The point is these Western countries are not exactly babes in the wood with regard to IP as the Chinese would like to believe.

If interested, you can have a looks at this post of mine made a couple of pages ago on IP: viewtopic.php?p=1225185#p1225185

I don't have the time now, otherwise I'd would have liked to respond the Heech's incredible claims about IP. :-)

VikramS
BRFite
Posts: 1864
Joined: 21 Apr 2002 11:31

Re: PRC Economy - New Reflections : Dec 15 2011

Postby VikramS » 20 Jan 2012 21:08

anishsn:

Panda shining belong to this thread. I appreciate those posts; it helps build the proper perspective.

heech:

It would be great if you get some numbers about the Chinese HSR; perhaps an overall review article. Whatever we see in the West is either full of praise or ask too many questions. Need a balanced perspective.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 20 Jan 2012 23:04

Vikram,

On the HSR issue... I think you're certainly right there is the issue of how resources should be allocated. Any responsible development plan has to balance the needs of various interest groups. Many Chinese debate this issue as well, so you aren't alone in questioning it. I, for one, firmly stand on the side of those who believe HSR is enlightened policy, and doesn't represent unbalanced development at all.

Just some numbers from the Spring Festival period... China's projecting over *three billion* passenger trips will be made over the 2-3 week holiday period (across road/air/ferry/rail). By point of comparison, the number was *one* billion just 10 years ago. Isn't that a pretty unbelievable number? That's a 3x growth in passenger traffic in 10 years... none of which would have been possible without aggressive infrastructure development. And minor anecdotes aside, the system is working well this year. The vast majority of people are getting home successfully, and there's a nice mix of expensive/fast (airfare + HSR) and cheap/slow transit methods this year.

Generally though, we really can't focus on the Spring Festival period alone. You can't engineer/design your system strictly for 3 weeks out of the 52 week year. Otherwise, you will have a HUGE amount of over-capacity the other 49 weeks of the year. You have to seek the right balance; IMO, if travelers were NOT (somewhat) inconvenienced during this 3 week period, then China would be doing something wrong the rest of the year. I think HSR makes a ton of sense for all the reasons I already spoke of before. And let's be clear when we're talking about who the "elite" are... in the Guangdong region, I just read 24% of passengers traveling by rail are taking HSR this Spring Festival. In other words, HSR is not something that only appeals to the 1% elite... it's something that I'd expect has immediate appeal to 15-30% of Chinese travelers. That's a HUGE number! And that number will only grow quickly going forward. HSR is absolutely a game changer, it will affect how generations of Chinese live, shop, work.

At the end of the day, any informed debate about HSR can't be a black/white "good" or "bad" debate. Are there HSR lines which should have waited another 5-10 years...? Quite possibly. Are there HSR lines which serve a critical need immediately...? Absolutely. Anyone who tries to paint HSR as an absolute good or bad is being silly and ignorant.

Oh, and just to respond to the snarky comments about the accident last year + various malfunctions... Now, I can try to "defend" HSR: the crash happened on an older generation network (D- series), while literally thousands of newest generation G- trains are running every day (99.99% of which are arriving safe and timely). But most importantly, no country (or individual for that matter) gets ahead by being afraid of failure. I remember when Chinese airlines had planes dropping out of the air every year (and designing a Chinese jet sounded like fantasy). I remember when Chinese CZ rockets crashed into the ground more often than they made orbit. The key is whether you have a system in place to learn from your mistakes, and to get better. The Chinese aviation + space industry clearly got their act together. The question then is whether the Chinese rail ministry will learn from their mistakes, as well. (By the way, I suspect the previous head of the rail ministry will be executed by firing squad in the next year or two.)

Now, I don't want to make predictions about future HSR reliability... I didn't design the thing, and I don't have a crystal ball. It seems perfectly possible that there are latent errors in design which will lead to more accidents/fatalities. But, unlike some of the people here, I think China has a pretty good record on things like this. And I think by making an effort at building this potentially revolutionary system, China is really laying the foundation for the next fifty years of economic development. That's absolutely a risk worth taking.

Theo_Fidel

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Theo_Fidel » 21 Jan 2012 00:16

I don't think heech has any perspective on what is going on in Panda fantasy land. He seems to think think he lives in a undeveloped version of USA, and one can only laugh.

Such sweetly foolish naivete.

Sri
BRFite
Posts: 1326
Joined: 18 May 2005 20:19
Location: Earth

Re: PRC Economy - New Reflections : Dec 15 2011

Postby Sri » 21 Jan 2012 00:34

Heech, you know, I can see some parallels in Chinese HSR and Indian Airline industry. massive investment on hopes of future traffic. Traffic comes but at hugely discounted rates and hence difficulty in making operative cost (profits are long way off). Only difference is, in India's case it's the pvt sector both in terms of Airline ownership and Airport operator lease contract...

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 21 Jan 2012 02:38

Theo_Fidel wrote:I don't think heech has any perspective on what is going on in Panda fantasy land. He seems to think think he lives in a undeveloped version of USA, and one can only laugh.

Such sweetly foolish naivete.

I look forward to learning the truth about China from your informed, enlightened wisdom... formulated, undoubtedly, through decades of direct, personal experience with China.

heech
BRFite
Posts: 157
Joined: 21 Nov 2002 12:31
Location: California, USA

Re: PRC Economy - New Reflections : Dec 15 2011

Postby heech » 21 Jan 2012 03:02

Sri wrote:Heech, you know, I can see some parallels in Chinese HSR and Indian Airline industry. massive investment on hopes of future traffic. Traffic comes but at hugely discounted rates and hence difficulty in making operative cost (profits are long way off). Only difference is, in India's case it's the pvt sector both in terms of Airline ownership and Airport operator lease contract...

I unfortunately don't know enough about the Indian airline industry to comment. For what it's worth, projections are for operating profits on existing HSR lines within the next 3-5 years.

But that's only part of the story. The lines are already operating are some of the "best" lines, most likely to return operating profit. The real question is what comes next... a lot of lines are still in construction as we speak. Chinese rail construction is slowing down dramatically this year, partly due to the crash last year, and partly due to just a general rethink about the pace/direction of development. As a result, there are a lot of half-finished projects by the Chinese rail ministry on life support... estimates are 70%+ of railway construction projects were forcibly halted late last year due to capital shortages. The rail ministry barely won another 200 billion RMB ($30 billion USD) from banks + investors near the end of the year, enough to keep new construction afloat. The rail ministry's budget in 2012 is for 400 billion RMB (about $75 billion USD) of construction.

So, there are a lot of doubts, concerns, and fears in Chinese railway land. Everyone is anxiously waiting to see exactly what kind of returns the current HSR lines are able to generate. The Wuhan/Guangdong line was reportedly showing 50% YoY growth in passenger traffic... so if that continues across all lines, then obviously a lot of problems are solved. But if the projections are wrong, and my optimism is misplaced, then you can expect China's HSR construction to slow dramatically in the near future.


Return to “Trash Can Archive”

Who is online

Users browsing this forum: No registered users and 19 guests