PRC Economy - New Reflections : Dec 15 2011

[zlin]

BMW opens new plant in NE China

SHENYANG - Luxury automaker BMW on Thursday launched a new plant in the northeast China city of Shenyang to further tap into the world's largest auto market.

The capacity of the new 1.5-billion-euro plant, BMW's 25th worldwide and the second in China, will rise to 200,000 vehicles at the end of 2013, adding to the 100,000 cars currently produced at another factory in the Dadong district of Shenyang. (1.5 billion euros is equal to 1.89 billion U.S. dollars.)

As one of BMW's top three markets worldwide, China offers tremendous potential for future growth, Norbert Reithofer, chief executive officer of BMW, said at the inauguration ceremony.

BMW plans to further boost investment in China and purchase more parts from the Chinese market, Reithofer said.

China was BMW's largest market by sales in the first quarter of this year, surpassing Germany and the United States, he said.

[harbans]

Amit ji, thanks for the breakups and posts. Clears a lot of fog off the figures. However China as a major supplier is better integrated with the global economy. That also makes it's currency more valuable wrt leading currencies. India OTOH is still debating on many key areas whether it wants to join in, that plus a major lobby that still stalls basic needed reform, will keep Indian Rupee down. That will in turn increase costs of basic imports to Indians like fuel and infra investments costs. While fuel we cannot decrease demand too much, we can cut down on infra development. Also around 2005 the big break came for the Chinese. Yuan appreciated wrt the USD quite a bit. By 2006, China was already a 3.5 plus Trillion USD economy. Tripled in 3 years time. India while crossing the 1T USD mark is still hovering last couple of years below the 2T USD mark. One has to take that into account when compares the 2003 China GDP figures and 2011 Indian GDP figures and tries to match them.

[gakakkad]

@harbans the present Chinese GDP is 7.2 trillion... so it doubled in 5 years...and the rate of growth will only come down from here onwards...

indian gdp was 1 trillion in 2007...it is 2 trillion now (drones don't bother about the recent changes in the exchange rates, they ll be corrected soon)...so again doubling in 5 years....the rate of growth will only go up from here onwards ..

"better integrated with the world" etc are just buzz words which the strat-e-jee types created ...

[wrdos]

Mr. Suraj,

Thanks so much, your figure is telling a lot. India's per capita cereal consumption is China's 50 years ago and has not changed during the half century. Sir, I need not to travel the whole India to find the truth that millions of your fellow citizens are starving, at such a low level of food consumption. Your consumption of food is too too low.

And for your suggestions about the data of Japan, Korea, and China. Sir, it is meaning less. At around the level of Indonesia, a country has almost solved the starving problem. After that, it is a question about quality which is still a privilege to the Indian level. Japan's consumption of cereal (in fact meat also) is lower than Korea and even China, simply because Japanese people are enjoying some more tasteful and higher quality of food, such like Thunnus or salmon. I do not think it a good example for India, sir.

BTW, food consumption has such a development route.

1. Starving country, with low food consumption of any kinds, even cereal
2. Poor country, with increasing food consumption of all kinds, especially cereal
3. Mid income country, with growing meat/fish consumption, but steady or declining cereal consumption
4. High income country, with declining cereal consumption, steady or declining meat/fish consumption, but increasing privilege food consumption

Obviously China is at the 3rd stage and is entering the 4th stage, maybe 30 years after Japan and 10 years after the South Korea. Sir, it is also very clear that India is still at the 1st stage, just as it was in the 1950s and no signs of changes at all.

Per capita cereal consumption in India and malnutrition are two separate topics. The latter indeed still exists, due to a combination of economic and social factors. But per capita cereal consumption data between India and China hides more than it reveals . Chinese consumption figure is indeed 2x that of India according to this:

Note the Japanese and Korean stats ? Does that mean Japanese suffer twice the malnutrition of Korea ? Or that Japanese are much hungrier than Chinese ? Both suggestions are bullsh_t. If everyone in every country ate exactly the same thing throughout the last few decades, then such comparisons make some sense. If anything, Chinese data indicates a lot of wasteful production compared to Japanese figures. Indian stats aren't really poor considering consumption level close to one of the most advanced nations on the planet, well known for its healthy cuisine.

Children in both India and China are taller and heavier than they were a few decades ago:
link

On average an 18 year old child belonging to an upper income family is about 4.5 centimeters (about 2 inches) taller and about 4 kilograms heavier than in 1992, researchers from the Institute of Nuclear Medicine and Allied Sciences (INMAS) and All-India Institute of Medical Sciences (AIIMS) have reported.

[url=http://www.china.org.cn/english/health/194691.htm]link[url]

Chinese children are 6 centimeters (2.34 inches) taller and roughly 3 kilograms (6.6 pounds) heavier than 30 years ago as a result of the country's improved economic situation and better nutrition, according to national research published by the Ministry of Health on Saturday.

4.5cm average height increase in 20 years vs 6cm increase in 30 years sounds about the same level of improvement - in fact 2.25cm increase/decade in the Indian case is slightly better than 2cm in Chinese data.

[Suraj]

wrdos, so why has the average Indian gained more height and weight per decade than the average Chinese ? With your headstart you should all be 6ft plus height by now, but the average Chinese expat in the Bay Area is no taller than the average Indian.

[wrdos]

Mr. Suraj, they are not average Indian. You have carefully chosen an Indian example of "upper income families", right?
It looks like that the children from Indian "upper income families" are enjoying an improving nutrition condition during the past 30 years. Congratulations anyway.

wrdos, so why has the average Indian gained more height and weight per decade than the average Chinese ? With your headstart you should all be 6ft plus height by now, but the average Chinese expat in the Bay Area is no taller than the average Indian.

[amit]

Wrdos,

Here's you average Indian vs average Chinese comparison:

wrdos, so why has the average Indian gained more height and weight per decade than the average Chinese ? With your headstart you should all be 6ft plus height by now, but the average Chinese expat in the Bay Area is no taller than the average Indian.

Suraj,

Don't expect any coherent answers from this Chinese drone.

According to Disabled World

The average height of a Chinese male is 169.4 cm while the average height of a Indian male is 165.3 cm.

OTOH, the average height of a Chinese woman is 158.6 cm and that of an average Indian woman is 165.3 cm.

[Edit: I made a mistake! The 169.4 cm and 158.6 cm are actually the stats for Taiwan and non mainland Chinese diaspora and not PRC citizens!

The stats for PRC are 164.8 cm for males and 154.5 cm for women!!

So the average Chinese is not only shorter than the average Indian, they are even more shorter than the average Taiwanese! LOL!]


So where does this extra eating of cereals and pork go to one may ask Wrdos. Indian women are taller their Chinese counterparts and Chinese men are only marginally taller?

I'm sure he'll come up with a creative answer, like the one about Japanese eating more Salmon and hence the lower consumption of meat.

[BTW I wonder if he knows that folks from the state I come from, West Bengal, almost exclusive eat fish as a staple diet, much like the Chinese eat pork?]

More interestingly the link I posted has an interesting tidbit:

In certain countries like the Philippines, younger generations are significantly shorter than those born in the 1970s and 1980s despite the economic growth and better standard of living.

I wonder how Wrdos would explain that? However, I do have a theory. Maybe they import too much adulterated food from China?

[wrdos]

Dear Amit, thank you so much for the greatest data I've ever met.
So the average height of an Indian female is exactly same as the Indian male at, 165.3 cm?

Sir, would you please to open your window to see the real world at least one glance, before using this splendid data?

Wrods,

Here's you average Indian vs average Chinese comparison:

Don't expect any coherent answers from this Chinese drone.

According to Disabled World

The average height of a Chinese male is 169.4 cm while the average height of a Indian male is 165.3 cm.

OTOH, the average height of a Chinese woman is 158.6 cm and that of an average Indian woman is 165.3 cm.

In certain countries like the Philippines, younger generations are significantly shorter than those born in the 1970s and 1980s despite the economic growth and better standard of living.

I wonder how Wrdos would explain that? However, I do have a theory. Maybe they import too much adulterated food from China?

[Suraj]

wrdos, height increase isn't anywhere near restricted to upper income households. One of the primary reasons for this is that India has a milk consumption of ~100kg per capita, while China's is around 20kg / capita, last I checked. High dairy consumption is linked to greater increase in height. Indian diet is heavy in legumes and vegetables (made into many different curries/salads) and dairy (milk, buttermilk, yogurt, cottage cheese); east Asian diet is mainly rice + meat/seafood.

While I believe India needs to do much more to guarantee food security to its population, I don't see a statistical p*ssing match serving any meaningful purpose other than exaggerate distortions; Chinese dairy consumption is low because Chinese are largely lactose intolerant and milk is not a traditionally important part of diet, unlike in India. Indian meat consumption is low because India has a large vegetarian population together with a large number who are infrequent meat eaters. Meat is not a staple like it is part of Chinese diet; it has nothing to do with lack of animals - as anyone visiting India will agree, there's no shortage of cattle. We just don't, by and large, eat them.

[wrdos]

Dear Amit, I 'd rather to suggest you finding another and more reliable data source.

Dear Suraj, you are giving some excellent comments. Thanks!

[gakakkad]

Besides rice/wheat Indians also have other sources of carbs like jowar/bajra/millets etc

...for proteins Indians consume pulses/dals/legumes...if these are added to the per capita cereal consumption , the chart will appear far less skewed...

jowar/bajra/millets are usually consumed by the lower socio-economic Indians because they are a lot cheaper than cereals..but are by no means less nutritious ....bajra ki roti is a delicacy in saurashtra and i ll have it over wheat roti/bread any day...it has a higher protein content than wheat..(I don't remember the exact amino acid composition)

most of the piss-ops of mal nourished Yindians comes into account because these facts are not taken into account...

Most Indians do receive 2000 kcal per day and can afford a balanced diet that can meet there nutrient requirements...the bottom 10-20 percentile will not be able to afford the necessary food for some months in an year...that applies to China as well..

[shyam]

Even so, it is still too low in India.

Sir, vegetables could not provide enough protein of good quality to the children. If they could not eat meat adequately, at least they need to consume more fishes, other sea foods, milk, and eggs. Except milk, all too low in India, i have to say. Even the cereal consumption is too low in India, which means not enough calorie.

Average meat eating is for sure a good index of a country's economy level, health level as well. No matter how rich, a people can not eat a pig let alone a cow everyday. It is why in many sense, it would become a better index than the per capita GDP.

BTW, we Chinese start enjoying meat eating much earlier than the Europeans.

Why this obsession with eating meat?

Even Shaolin Kung Fu practitioners are strict vegetarians, and maintain their physical strength and fitness better than other meat eating Chinese.

[Singha]

even within india, I figure south indians on avg eat more lentils and less diary products than north indians. many south indians do not eat paneer at all, while its a common food in north. but does not mean the northies are tall , strong n fair while southies are short , dark and weak

the only people who subscribe to that thesis are the pakistanis who claim meat+wheat make them invincible. got their heads handed back to them by the rice n fish bangladeshis.

[Theo_Fidel]

South depends on coconut and coconut milk a lot more. Weaned children are fed 'kanji', rice water which with a little salt and sugar as a nutrition supplement.

Meat definitely has advantages for the vulnerable population. Growing children, pregnant/menstruating women, sick folks, etc respond much better to small portions of meat in their diet, typically 50gms-100gms per day, about the size of your thumb. As always a balanced diet is best. Small portions of every food group is required. For fully grown healthy adult male vegetarian diet is an option. Should not be imposed on others. The price for such imposition is typically paid over the generations.

[wong]

You've never been to China, have you?? I grew up in the West, so I think I know capitalism when I see it. If China is not capitalist, I don't know what is ?? One party vs two party state, who cares? For your information, there are corrupt "1 percenters" in multi-party states too (in case you didn't know).

I am gonna use this phrase now "China is a single-party democracy". This needs to go on the BRF Dictionary.

BTW wong sir, if you grew up in the "West" you would know that more than 2 political parties participate in US elections.

Did I ever call China a democracy ?? Anywhere??
Democracy vs. authoritarianism has nothing to do the economics of communism vs. capitalism.
Capitlalism and Authoritarianism are not mutually exclusive.

China is run like a corporation. This you can quote me on. It has a board of directors (standing committee). You join the CCP at the entry level and you can work your way up if you are smart and resourceful, like Hu Jintao (who came from humble roots). Now, you can try asking the CEO of your company for a vote on your next corporate strategy or major decision, but don't be surprised if you get shot/canned.

The US two-party system is just like a staged professional wrestling match. Only the idiot masses cares. All third parties in the US are a joke and hold no real power.

[wong]

^^Dunno how that works. India's GDP 2012 is == PRC one in 2003. <10 yrs behind. Wonder how that worked if India has *never* exceeded PRC's steroidal growth rates starting 1978. Just wondering onlee. jai hu, jai mao.

This comparison only works if there was no inflation in China or India, so India 2012 cannot be compared to China 2003 in economic terms. Commodity prices have increased more than 50%+ in the last ten years according to the US BLS.

Also, I am more and more impressed with the huge strides China has made in human capital the last 10 years. Google Code Jam 2012 Round 2 was this weekend and China just rocked it. Its results keep getting better and better every year.

[pankajs]

Japan, China to begin direct currency trading on June 1

"It is also an important step for yuan's internationalization, and it will also promote Asian currencies' entire standing in the global economy," Xing said.

[pankajs]

China Puts Laws of Economics Under House Arrest

Can even a command economy sidestep the laws of economics?

That’s the question you should be asking when it comes to China, because the Communists continue to try and prove the point. Stocks are getting a boost from two main sources today: opinion polls in Greece, and the prospects of fresh stimulus measures from the Chinese.

(Before we get to China, just a word about those Greek polls. Greece is in the middle of a depression, and on the verge of a calamity. They do not have a functioning government. The pressure on the citizenry is obviously oppressive. So, maybe you should take those poll numbers with a grain of salt.)

There was some hope that the Chinese would just go whole-hog with a direct stimulus package, something on the order of $300 billion. That was squashed, although that denial doesn’t seem to have quite filtered through the markets yet. But the Chinese aren’t just sitting still. They’ve gone with a cash-for-clunkers type program, as well as some other sweeteners to try and juice spending.

Heard on the Street’s Tom Orlik notes the government has gone a route other governments don’t have available to them: investment projects. The Chinese, through the National Development and Reform Commission, have been ramping up project approvals.

The team at WestPac’s Phat Dragon newsletter summed it up thusly:

Since the unsightly April data round, project approvals have been accelerated, with hydro and wind power, water, heating, hospitals, steel, inter-city and intraurban rail, airports and e-government endeavours all receiving official imprimatur. These new initiatives, alongside a more accommodative monetary stance, will join the on-going social housing build-out to provide an offset for the combined negative impact of the private housing development downturn, slower heavy industrial investment and the distressed export sector.

This reminds us of China’s ghost towns: entire cities, capable of supporting millions, nearly empty. It’s that kind of massive malinvestment that’s had China watchers waiting, for years, for the crash that almost always follows such a build-up. The Chinese have sidestepped it. So far.

China’s growth has been slowing for a year and a half now, and that’s going by the official numbers, which everybody knows are, how shall we say this, open to interpretation. The Chinese were more aggressive than their western counterparts when the global recession hit in 2008. They threw more money at the problem, relative to the size of their economy.

But those efforts appear to have just held up the slide, rather than turned it around. So, again, you need to ask yourself the question we posed at the beginning of this post. Can the Chinese sidestep the laws of economics?

[pankajs]

China NDRC Accelerates Project Approvals In Effort To Boost Growth

BEIJING (Dow Jones)--China has significantly accelerated approvals for new investment projects by companies and local governments, part of a campaign to support growth in the world's second-largest economy.

In the first four months of the year, China's economic planning agency, the National Development and Reform Commission, has approved more than twice as many investment projects as it did in the same period a year earlier, an analysis by Dow Jones Newswires reveals.

The accelerated approvals come as Beijing is pulling various levers to jump-start growth, from tax cuts to special purchase incentives for household appliances.

Those support measures have echoes of China's response to the global financial crisis in late 2008 and early 2009, when Beijing unleashed a massive stimulus centered around infrastructure and investment projects, funded by state-owned banks.

But Chinese government researchers say China will likely be more conservative this time around, for fear that too much investment could worsen overcapacity issues in some sectors, and also out of concern that its banks can't afford a second lending binge.

"I am very concerned that if people are worried about the economy and controls are loosened, then everyone will be able to get loans and all projects will be approved. Then we would be back to an old path," said Pan Jianheng, vice-director the Economic Monitoring Center at China's National Bureau of Statistics.

"The NDRC will be more cautious this time," said a researcher affiliated with the economic planning agency, who asked not to be named.

Compared with the investment surge in 2009, when infrastructure projects dominated, this year's approvals are concentrated in favored industries like clean energy, he added.

In January-April, the NDRC, which screens all large investment projects, approved 868 of them, up from 363 a year earlier, according to public notices posted on its website over the course of the year.

In April alone, the NDRC approved 254 projects, up from 213 in March, and more than triple the mere 74 projects that it approved in April of 2011.

The investment projects cover everything from new steel mills to hospitals and water treatment plants. But clean energy projects, including for wind, solar and hydroelectric power, are dominant. They accounted for over 71% of April's approvals.

The rapid pace of approvals appears to have been sustained in May, although the full data won't be available for some weeks, as the NDRC often delays official announcements following approvals.

In just the last week, the NDRC approved two major new steel plants, with investment sizes of $9.5 billion and $11 billion.

The majority of the announcements don't give details as to the total investment amount, so a precise analysis of the economic impact of the new approvals is impossible. But the increased pace of approvals clearly indicates that Beijing is shifting to support more investment, analysts say.

Credit Suisse, in a note to clients on Monday, estimated that the investment campaign will ultimately be worth a total of around CNY1 trillion to CNY2 trillion ($158 billion to $316 billion).

But some other economists responded with skepticism to the Credit Suisse report.

"It's too early to quantify China's stimulus," Bank of America Merrill Lynch economist Lu Ting said in a note on Tuesday. "If Greece does not exit from the euro zone and there is no global financial crisis, there is no need for China to introduce such a big stimulus package."

[pankajs]

Geography, not economy, counts in China's rebalancing

XI'AN, China (Reuters) - A gleaming new $1.4 billion airport extension, a $5.2 billion bullet train and Samsung's planned $7 billion electronics plant, touted as the largest single high-tech foreign investment in China, are sure signs of economic intent in ancient Xi'an.

Along with a $1.4 billion subway, a crane-cluttered skyline and rapidly rising tower blocks shrouded in industrial smog that cloaks the 3,000-year old former dynastic capital, they show that fixed asset investment remains the main route to growth for China - trod for three decades and likely for decades to come.

For all of China's talk of economic rebalancing to shield it from internal and external risks, the only real re-orientation in the medium term is geographic - shifting infrastructure spending west to replicate rewards reaped by 30 years of coastal development.

That is likely to stoke concerns already voiced by the International Monetary Fund about China's unprecedented rate of investment spending and confound investor expectations that rebalancing would be a swifter shift towards the consumption-driven growth of developed economies - not 20 more years of inland infrastructure creation.

"There are experiments everywhere in China. Some good points emerge and the best points are what the centre tries to identify and encourages others to learn from," Zhang Wei Wei, a leading scholar of China's development model who was translator to its architect - Deng Xiaoping - told Reuters.

China's rise, in Zhang's analysis, depends on a conscious effort by Beijing to perfect an urban development model that eases rural poverty and cements power in the capital.

It implies fixed asset investment on a scale as enormous as that which has generated around half of China's growth in the last decade - when it amassed a foreign reserves fortune of $3.3 trillion, became the world's second-largest economy, the biggest exporter and the most important driver of global growth.

Indeed, intensive urbanisation is the only way Xi'an and dozens of similar cities can grow fast enough for the Communist Party to make good on pledges to raise incomes for the poor and achieve social stability, thereby justifying its grip on power.

During the 2005-2010 five-year plan, average annual urban income in Xi'an roughly doubled to 22,244 yuan. The plan is to double it again by 2015. But that still leaves wages way behind Shanghai's 71,874 yuan average - China's highest.

STRATEGIC OBJECTIVE

China's 'Go West' development strategy, in its second decade after generating $325 billion in investment since its launch in 2000, is the manifest example of the China model in action and ample evidence to long-term investors of its durability.

"It is a conscious strategic objective," said Gang Zou , general manager in Xi'an for Applied Materials, the world's largest chip-fabrication equipment maker and an investor so important it is mentioned by name in the municipality's latest five-year plan - the cornerstone of government policy.

"The first 10 years of the 'Go West' policy helped Xi'an build the infrastructure to be ready to take more opportunities in the second 10 years," Zou told Reuters on a tour of Applied's $300 million research, development and training facility - and the world's biggest privately-owned solar cell R&D laboratory.

Applied, which has operated in China for 28 years, generated $2.5 billion of its $10.5 billion global revenues in the country in 2011 - a cool $1 billion more than it billed there in 2010.

No wonder Samsung is following suit with an investment in a plant to make memory chips that will total $7 billion over several years - or 11.5 percent of Xi'an city's entire 2011 GDP.

Samsung, like Applied, cites clear-planned, infrastructure-led urban development as a key reason for investing in a city that boasts one of the highest research institute and university campus concentrations in China.

Sustained spending though risks a further increase in internal economic imbalances already at levels that worry the IMF.

"Our fear is that China continues to invest so heavily as a share of GDP over the next four or five years that vulnerabilities begin to emerge," said Murtaza Syed, the IMF's chief representative in China.

World Bank data shows gross fixed capital formation, which covers in investment in things like buildings, roads, bridges, railways, airports, industrial equipment and machinery, rose to 45.4 percent of GDP from 36.3 percent between 2002 and 2010.

No economy of China's size has ever maintained investment at such a rate for such a sustained period before. The IMF believes it could stay around 45 percent for the next five years.

"What concerns us is how this capacity is absorbed. Either it goes into the global market, or it is absorbed domestically, or it leads to non-performing loans," Syed said.

COMPOSITION KEY

The composition of the investment is key.

That's why Beijing is determined to keep curbs on property speculation that it imposed two years ago after 4 trillion yuan of fiscal stimulus injected in the wake of the 2008-09 global financial crisis sparked frenzied development.

It's a lesson in how fixed asset spending can go wrong. The determination to avoid a repeat is so strong that growth is being sacrificed short term, with analysts citing property curbs as the main reason why 2012 is set to see China's slowest economic growth since 1999 - albeit at 8.2 percent.

Productive, efficient assets like essential infrastructure and globally competitive factories are welcome. Building too much speculative capacity, particularly real estate, could backfire if they lead to bad debts and the recapitalisation of the banks left holding them.

Xi'an plans to increase fixed asset investments by 26 percent in 2012. Between 2005 and 2010, the value of such spending rose four-fold compared with the previous five years.

Wolfgang Weil, chief operating officer at Xi'an Xianyang International Airport, reckons his new 20 million passenger-capable terminal and second runway - able to accommodate the Airbus A380 superjumbo jet - is part of a virtuous cycle.

"I'm pretty sure in the case of Samsung, one factor helping their decision was that there is now a runway available at Xi'an airport without any limitation to aircraft type and payload," he told Reuters a couple of weeks after the official opening.

Weil says sustainable passenger potential in Xi'an - home to 8.5 million people and the least developed, but fastest-growing city in China's four main metropolitan deltas - appealed greatly to Germany's Fraport, the airport's joint venture partner.

Sustainable is a key word for those concerned that China's intensive urbanisation is dangerously unbalanced development.

While investment has soared, final consumption fell to 48.3 percent of GDP in 2010 from 59.6 percent in 2002.

Economies of scale, however, mean that factories dwarf the household contribution to GDP and, by definition, a fall in investment spending in coastal provinces will naturally raise consumption's share of GDP there.

Meanwhile shifting investment inland to where workers are cheaper allows China to squeeze another decade or two from a development model pushing its maximum potential on the coast.

The apparently unbalanced development is China's greatest economic strength, according to Yukon Huang of the Carnegie Endowment for International Peace in Washington, who says the last major economy to develop in such a skewed way was the United States - the most powerful nation on Earth.

That means the key question for investors is how Beijing can manage the investment and political risks generated by another two decades of development spending, when China's urban population is expected to swell to 66 percent by 2030 from 51 percent in 2011.

"China is large and disparate enough for industry to shift and take advantage of comparative advantages and cheaper labour elsewhere in the country," said Eric Fishwick, head of economic research at brokerage CLSA.

"But China's scale implies continuing friction as policymakers in developed nations have a wrong-headed view of what China's rebalancing means."

[wong]

I'm not going to bother trying to make you understand but I do note a few of your fellow Chinese posters have understood and hence this sudden haste to prove that Deng was not the one who kicked off liberalisation in 1978 and that China's liberalisation actually started in 1992 the year India's started (surprise, surprise).

Amit, 1992 was the start of Deng Xiaoping's southern tour of Shenzhen. This date is part of Chinese economic history and has nothing to do with India. Before Deng's southern tour of China in 1992, the party was still debating if special economic zones were "capitalist" or "socialist". That was settled with white cat or black cat as long as it catches mice, it's a good cat.

[Advait]

wong, serious question here, not trolling.

Why do most Chinese in the west take on Western names and even become Christian. Ok, Christianity, some will say because it gives them spiritual comfort etc (although that can be done by going back to your native/ancestral religion too).

But what's with the names. Don't the Chinese have pride in their culture. Hardly any Indians change their names, or give their kids western names. And Indian names are hard to pronounce too, if not harder.

[wong]

wong, serious question here, not trolling.

Why do most Chinese in the west take on Western names and even become Christian. Ok, Christianity, some will say because it gives them spiritual comfort etc (although that can be done by going back to your native/ancestral religion too).

But what's with the names. Don't the Chinese have pride in their culture. Hardly any Indians change their names, or give their kids western names. And Indian names are hard to pronounce too, if not harder.

I think Christianity certainly has a role. Aren't you suppose to adopt a Christian name when you get baptized (Sorry, I guessing here - Christianity always seemed like nonsense to me).

For me, it's simple. Westerners butcher the pronunciation of my Chinese name. They might as well be speaking Klingon. Why not give them something simple like Bob, so I don't have to listen to it the rest of my life. Also, the common Chinese people have had this love/hate relationship with America since the Union Pacific railroad building days.

[sudarshan]

wong, serious question here, not trolling.

Why do most Chinese in the west take on Western names and even become Christian. Ok, Christianity, some will say because it gives them spiritual comfort etc (although that can be done by going back to your native/ancestral religion too).

But what's with the names. Don't the Chinese have pride in their culture. Hardly any Indians change their names, or give their kids western names. And Indian names are hard to pronounce too, if not harder.

I think Christianity certainly has a role. Aren't you suppose to adopt a Christian when you get baptized (Sorry, I guessing here - Christianity always seemed like nonsense to me).

For me, it's simple. Westerners butcher my Chinese name. They might as well be speaking Klingon. Why not give them something simple like Bob, so I don't have to listen to it the rest of my life. Also, the common Chinese people have had this love/hate relationship with America since the Union Pacific railroad building days.

Au contraire, I love it when westerners butcher my name. It puts them on the defensive, and they have to keep going "did I get that right?" And I just smile and say "close enough," even when it's nowhere close. I'm always able to pronounce their names much better than they pronounce mine, so that reinforces their defensiveness.

Just a question of attitude, I guess. One guy wanted to call me "Bobby." I didn't say anything, but he got the point from my body language, that he was welcome to call me anything he wanted, but not to expect a response from me until he called me by *my* name.

I'm so glad when I see even second or third generation Indian kids in the USA retaining their original names. Let the westerners get used to the fact that we outnumber them, and that our views also deserve respect.

Lots of Indians (just like Chinese) buy into the western world-view and behave like dhimmis, for sure, but being proud of your culture and your original name is a good start to reverse that trend. Some of my Chinese friends are catching on, and go only by their Chinese names (which I have no trouble pronouncing). Like I always say - it's your attitude which sets the trends. If you're proud of who you are, other people will find it "cool" and try to ape you. Soft power, and all that.

Sudarshan

[Suraj]

Amit, 1992 was the start of Deng Xiaoping's southern tour of Shenzhen. This date is part of Chinese economic history and has nothing to do with India. Before Deng's southern tour of China in 1992, the party was still debating if special economic zones were "capitalist" or "socialist". That was settled with white cat or black cat as long as it catches mice, it's a good cat.

India had a similar epoch with the very same thing - SEZs - in the mid 2000s: the height of the political debate on the SEZ policy was in the 2006-2008 timeframe. In that sense the timelines are essentially exactly alike - approx 12-15 years following Chinese moves: 1978 vs 1991 and 1992 vs 2006. Amit's point still holds.

[pankajs]

Is Chinese real estate nearing a tipping point?

China’s property developers — who last year contributed a collective 13 per cent of GDP — seem determined to hang on. Despite months of falling prices in most cities, completions are powering ahead.

Chinese real estate investment reportedly rose 23.5 per cent in Q1, year-on-year. And yet new construction rose only 0.3 per cent and sales of residential and commercial property fell 14.6 per cent. As Patrick Chovanec points out, despite accounting for the aforementioned 13 per cent of GDP, there was little questioning of the incongruence of these Q1 2012 numbers which showed steeply rising investment in a sector that was actually shrinking in terms of revenue.

And yet, while we and others have wondered about a wave of developer defaults was imminent, there’s been only the occasional reports of smaller developers running into difficulties.

It *might* be about to change, however. Inventories are well past the 12-month mark and are forecast to reach about 36 months by the end of this year, according to Standard Chartered. Last week we wrote about some research from Nomura arguing that a month-on-month collapse in housing starts in April (down 27 per cent) signalled a turning point.

Read the rest ...

[wong]

Amit, 1992 was the start of Deng Xiaoping's southern tour of Shenzhen. This date is part of Chinese economic history and has nothing to do with India. Before Deng's southern tour of China in 1992, the party was still debating if special economic zones were "capitalist" or "socialist". That was settled with white cat or black cat as long as it catches mice, it's a good cat.

India had a similar epoch with the very same thing - SEZs - in the mid 2000s: the height of the political debate on the SEZ policy was in the 2006-2008 timeframe. In that sense the timelines are essentially exactly alike - approx 12-15 years following Chinese moves: 1978 vs 1991 and 1992 vs 2006. Amit's point still holds.

To compare anything one would have to establish a proper baseline.
China in 1978 had no private businesses, private ownership of anything, and all businesses were state owned. Collective farming was throughout the entire country. The trader/entrepreneur class of people has not legally existed in China since at least the late 1950's. They all fled to HK, Taiwan or the US. Those that stayed were "re-educated".

So am I also describing India circa 1991?? Of course not, because we know the Indian business dynasties like Reliance and Tata had been around since well before 1978. That's my point, that 1978-1991 was undoing communism. Even in 1991, the initial class of Chinese entrepreneurs were returnees from the Chinese diaspora.

[pankajs]

China Real Estate Unravels

[...]
All that being said, I’m seeing some rather striking patterns in the data that tell us two main things:

1. The market is not poised to recover, but will continue to see greater downward pressure on prices; and
2. Real estate investment is likely to flatten out or start falling, erasing several percentage points of GDP growth.

Last month, many observers took comfort from reports that overall real estate investment in Q1 rose 23.5% (in nominal terms) compared to the same period the previous year. To be sure, this was a comedown from 2011, when property investment rose 27.9%, or 2010, when it rose 33.2%. But it still seemed to reflect resilient growth: hardly a collapse in market, more like the kind of modest slowdown consistent with “soft landing.”

Very few people paused to ask where this investment growth was actually coming from. After all, the market was clearly struggling. Year-on-year sales in Q1, for all real estate, was down -14.6%. The decline was even steeper, -17.5%, in residential property, which accounts for about 80% of the market. Office sales were down -10.2%, while growth in “commercial” (i.e., retail) property sales, which saw a boom in 2011, decelerated to +10.5%. Although many people were touting a month-on-month sales recovery in March, compared to the Chinese New Year period, March sales were still down -7.8% from the year before, for the sector as a whole, and -9.7% for residential properties (by comparison, sales in January-February were a disaster, falling -20.9% overall, compared to the first two months of 2011, -24.7% for residential).

Given this consistent fall-off in sales, it’s not surprising that new property starts began to stall. I already mentioned that the 19% drop in new starts in December may have been a bit of a statistical aberration. Starts (measured in floor space) in Jan-Feb were up 5.1%, although the gains came entirely from office and retail — housing starts were flat. But overall starts fell by -4.2% in March, with housing starts down -9.8%, ensuring that overall starts for Q1 were flat (+0.3%) with residential starts down -5.2%. Land sales for Q1 were also flat, with sales proceeds rising 2.5% but land area sold down -3.9%. In March, they were negative (-3.6% sales revenue, -8.5% area sold).

So if sales were down, and starts were either flat or down, where was the 23.5% investment growth coming from? Developers, burdened by 70% leverage ratios and loans threatening to come due, were rushing to complete whatever projects were already in their pipeline, in order to put those units onto the market and raise cash. Completions (measured in floor space) were up 39.3% in Q1, compared to last year (residential completions were similarly up 40.0%). But, of course, those completed units weren’t selling like last year, so unsold inventories expanded. At the close of Q1, the total amount of floor space “for sale” was up 35.5%, compared to the same date last year, while the floor space of residential units “for sale” grew 47.4%.

(That’s just the floor space that developers admitted was for sale. There are plenty of tricks they can use to hold units off the market, in order to massage the official data and avoid spooking buyers. At the end of 2011, total floor space “under construction” was roughly 4.6 times the floor space sold that year. Assuming it typically takes three years to build a unit, from start to finish, that suggests about a year and a half worth of excess inventory hidden somewhere in the pipeline. The ratio for residential property was 4.0, which suggests that, while there may be about a year’s worth of unsold inventory in the housing market, the overhang in commercial real estate is even steeper. Although in absolute terms, it’s the housing overhang that matters).

China’s developers are playing out a kind of prisoner’s dilemma: rush to complete, in hopes of cashing out. But while supply keeps going up, demand is going down. In late March, a central bank (PBOC) survey reported that only 14.1% of Chinese consumers were looking to buy a house in Q2, the lowest level since 1999. Only 17.7% expected home prices to rise in Q2, and 62.9% said they still consider prices to be too high. So all those rushed completions only add to the glut already on the market, driving prices down further and giving buyers — investors and aspiring residents alike — all the more reason to hold off for a better deal. Perhaps this is why Qin Hong, deputy head of research for the Ministry of Housing and Urban-Rural Development (MOHURD), told the Oriental Morning Post in late March that she doesn’t expect housing prices to rebound significantly for the rest of the year. A strong rebound is impossible, she said, due to the continued property tightening policy and high housing inventory (my italics).

The second implication of the dynamic I’ve just described is that the “resilient” growth in real estate investment that seemed to promise a “soft landing” is not very resilient at all. It’s more like the last gasp of a market that’s running out of steam. Once the surge in completions plays out, the declining number of new starts will become the pipeline, and growth in property investment will flatten or go negative. Property investment accounts for roughly a quarter of gross Fixed Asset Investment (FAI), and net FAI accounts for over half of China’s GDP growth. As I noted in January, in a back-of-the-envelope thought exercise, if property investment plateaus (growth falls to zero), it could shave as much as 2.6 percentage points off of real GDP growth. If it fell 10% (in real, not nominal terms) it could bring GDP growth down to 5.3%.

At the time I first saw this dynamic in the data, when the Q1 numbers came out, I figured it would take several months to begin playing out. But the April numbers suggest it is already happening. In April, overall completions rose only 2.8% year-on-year (down from 39.3% in Q1), and housing completions flatlined at 0.8% (down from 40.0% in Q1). As completions petered out, growth in real estate investment decelerated markedly, to just 9.2%, with residential investment growing just 4.0%. Investment actually fell month-on-month, in absolute terms, by -10.7% overall and -9.5% in housing. It only grew year-on-year at all because of a low base set last April. If you plugged this year’s April versus last year’s May, you’d get a year-on-year drop of -9.1% for property investment overall, and -11.0% for housing. (In this context, it’s worth noting that, according to the Beijing Municipal Bureau of Statistics, overall property investment growth in the capital already went negative in January-February, for the first time in three years, dropping -4.6%).

If there’s one bright side to the plateau in completions, it was that unsold inventories advanced less rapidly over the year before. Floor space “for sale” did rise in April, in absolute terms, but not by much. It’s important to remember, though, all the unsold inventory that remains held back and hidden in the pipeline, as noted before.

Meanwhile, the contraction in sales, new starts, and land sales deepened even further in April. Although the decline in sales appeared to moderate slightly for the sector as a whole (-4.5%) and for housing (-2.9%), this was again largely due to a lower base effect from last April, when sales contracted month-on-month by nearly RMB 100 billion. This year’s April sales also registered a significant month-on-month decline, by -17.2% for all property and -15.5% for housing. The more striking news, perhaps, is that commercial property sales, which have been much more resilient until now, also plunged, with office sales falling -23.4% year-on-year and -34.4% compared to March, and retail property sales falling -9.5% year-on-year and -22.7% month-on-month. April was the first month in which all three categories were in year-on-year decline.

New starts in April fell -14.6% year-on-year and -27.0% month-on-month, for property as a whole. Housing starts fell -14.4% year-on-year and -23.4% month-on-month. Office and retail starts, which had remained quite strong through Q1, also plunged. Office starts fell -21.0% year-on-year in April, and -45.1% compared to March. Retail property starts fell -18.7% year-on-year, and -36.8% compared to March. (The year-on-year April comparisons for office and retail rely on a reverse calculation to isolate April 2011 figures, which NBS did not provide in its earlier releases). In short, the trendline in starts has dipped into negative double digits across all categories.

Land sales, meanwhile, fell off a cliff. Land sale revenues in April (RMB 27 billion) were down -54.7% compared to April last year (RMB 60 billion), and -47.0% compared to March (RMB 51 billion). Total area sold was down -52.5% compared to last April, and -43.4% compared to March (the year-on-year comparison here relies on a similar reverse calculation as before).

It should be no surprise, then, that foreign investors are pulling back from China’s property sector. Foreign funding for property development was down -91.4% in March and -80.8% in April, compared to the same months last year.

I think most readers will agree, this is pretty powerful stuff. At least one major sector of the Chinese economy (10-13% of GDP), which had been a leading growth driver, is undoubtedly in contraction. More importantly, the dynamics behind these numbers suggest that the market has not bottomed out, but is still in the process of unraveling.
[...]

[paramu]

To compare anything one would have to establish a proper baseline.
China in 1978 had no private businesses, private ownership of anything, and all businesses were state owned. Collective farming was throughout the entire country. The trader/entrepreneur class of people has not legally existed in China since at least the late 1950's. They all fled to HK, Taiwan or the US. Those that stayed were "re-educated".

So am I also describing India circa 1991?? Of course not, because we know the Indian business dynasties like Reliance and Tata had been around since well before 1978. That's my point, that 1978-1991 was undoing communism. Even in 1991, the initial class of Chinese entrepreneurs were returnees from the Chinese diaspora.

In fact I did not hear this argument of real changes happening in China only from 1992, till during the roaring years of PRC. The first time I heard this argument was in mid 2000s (when India also started growing fast) and that too from an american analyst. Till then the argument was that China started modernizing in 1978 after Deng's initiatives.

[Suraj]

To compare anything one would have to establish a proper baseline.
China in 1978 had no private businesses, private ownership of anything, and all businesses were state owned. Collective farming was throughout the entire country. The trader/entrepreneur class of people has not legally existed in China since at least the late 1950's. They all fled to HK, Taiwan or the US. Those that stayed were "re-educated".

So am I also describing India circa 1991?? Of course not, because we know the Indian business dynasties like Reliance and Tata had been around since well before 1978. That's my point, that 1978-1991 was undoing communism. Even in 1991, the initial class of Chinese entrepreneurs were returnees from the Chinese diaspora.

And so the cookie crumbles.
Argument 1: "India is decades behind" . Turns out Indian GDP today is around where China was in early-mid 2000s.
Argument 2: "China did 'real' SEZ reforms in 1992 onlee" . India did the same over a decade later, a similar duration following the Chinese reform beginning in 1978.
Argument 3: "Must establish proper baseline. China was communist, no private ownership etc".

Here's my response to the remnant of the crumbling cookie - the Chinese government owns *all* the land. It effectively has an unlimited source of revenue to monetize through leases for development to unlock the value of its landholding that amounts to the entire territory of what is the 3rd largest nation in the world. It has always had this, regardless of whether it was communist or a state capitalist institution today. That it why it runs itself the way it does now.

The Indian government earns revenue the conventional way through taxation and borrowings. While it may not have had to dismantle communism and foster private industry, it also had far fewer means to generate and direct capital; industries either had to grow organically or via foreign investment.

This whole 'poor China! we had so much more to do!' line is naive; both nations had their respective challenges to overcome. The debate started with India being characterized as being vastly behind, and now its morphed into some sort of sympathy argument w.r.t China ?

[wong]

^^^

Actually I consider the Indian SEZ argument a bit of a straw man. It's like saying North Korea has had a SEZ with South Korea since ~2000, so North Korea must have started economic reforms 5 years ahead of India. We know that's not true.

North Korea today actually looks like China in 1978 to 1980's. Does North Korea today look like India circa 1991? Tiananmen Square Massacre still has everybody on bicycles. That's 1989 and human powered vehicles is still the main mode of transportation in Beijing.

[Suraj]

There are no strawmen here. What you have is a problem with going beyond mere timelines when it comes to the reform history of two very different economic systems and societies. You'll never find any note of agreement if you go into details, because both countries have their unique issues. At most you can compare some timelines and GDP numbers.

As I stated above, the following points stand no matter what you argue about the specifics:
* Indian GDP in 2012 = Chinese GDP in ~2003-2005
* Chinese reforms began with TVE reforms in 1978 : Indian reforms began in 1991-92
* Deng's southern tour in 1992 : Indian SEZ Act of 2005 came into effect in 2006-08

More specifics: the first Chinese SEZs came into being much before 1992 - Shenzhen, Xiamen, Shantou and Zhuhai were selected in 1980. Similarly, India had EPZs before the SEZ Act, but no coherent political backing. Just as Deng's 1992 tour was the catalyst, so was the Indian act based on how exports from them have grown rapidly since.

Recognize the limits of debating the details, and the fact that none of the original Chinese numerical or timeline claims have stood up to scrutiny. You've now been driven to obfuscate by attempting to go into details that bear no comparison simply because the underlying systems and imperatives have no similarity.

[Theo_Fidel]

Wong is speaking from western analyst perspective.

What we should also look at is the population structure of the two countries in 1991.

India's literacy rate was 40%. China's number from the 1978.
Dependency ration was 35. Chinas number from 1950's!
Infant mortality was hovering in the 150 per thousand range. Again from the 1950's.
To this day Chinese dependency ratio is 78, while India's is still 54.

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

Also as Suraj point sout, many Chinese SEZ's, including Shenzen were established in 1978-1980 or so. It was Pudong that was argued over in 1990 and the argument was over kicking out the farmers. AFAIK China has never had a discussion over capitalism vs socialism. The argument is always about opening out some particular area. Deng's 1992 tour was an attempt to restate his reforms program after Tiananmen and the inland cities were opened up as well. A few years later Banking was opened up IIRC.

In 1990 Chinas exports were already $65 Billion. Indias was about $8 Billion.

There is a lot of random history re-writing going on here in a my schlong is growing faster type argument.

[wong]

Surag, I do not concede India's real GDP today equals China 2003-2005. Nominal GDP, sure, but everything is worth 50% more today from inflation alone than in 2003. China's GDP today may be the same as the USA's GDP in 1995, but China today is definitely not the US in 1995. The US in 1995 is far richer than China today or will be for the next 20 years.

The SEZ timing I've already addressed. I think you placed too much importance on them for the Indian economy thus far.

Here's another specific example. When China started private sales of Shanghai apartments in the mid-1990's, they couldn't give them away. That's how unsophisticated the Chinese consumer was when it came to real estate in the mid-1990's. This is Shanghai, China's Manhattan, and they had to give away free residency permits to anyone in China who purchased at apartment there for less than $20,000. Again, another example of undoing communism and its legacy.

[Theo_Fidel]

BTW China exports of 2002 - $312 Billion.

Here's another specific example. When China started private sales of Shanghai apartments in the mid-1990's, they couldn't give them away. That's how unsophisticated the Chinese consumer was when it came to real estate in the mid-1990's. This is Shanghai, China's Manhattan, and they had to give away free residency permits to anyone in China who purchased at apartment there for less than $20,000. Again, another example of undoing communism and its legacy.

I have a counterpoint to this story. When land plots were first being offered on the outskirts of Chennai in 1980's-1990's, you could not give away the plots. No one wanted to buy them because no one had Rs90,000 free cash sitting around. The economy was starved for liquidity of any form. No mortgages were available and if you went to the bank without liquid collateral they would laugh at you.

[wong]

There is a lot of random history re-writing going on here in a my schlong is growing faster type argument.

Hardly necessary to re-write history. The GDP growth rates for both countries are published quarterly for everyone to see.

Again $300 billion in 2003 does not equal $300 billion in 2012. It's called time value of money and compound inflation.

[Theo_Fidel]

Inflation is accounted for in the rupee depreciation.

Also even then $312 Billion in 2002 only counts for $390 in 2012.

[Suraj]

Surag, I do not concede India's real GDP today equals China 2003-2005. Nominal GDP, sure, but everything is worth 50% more today from inflation alone than in 2003. China's GDP today may be the same as the USA's GDP in 1995, but China today is definitely not the US in 1995. The US in 1995 is far richer than China today or will be for the next 20 years.

So you want to measure purchasing power ?
Chinese PPP GDP in 2004: ~4.6 trillion international dollars
Indian PPP GDP in 2012: ~4.6 trillion international dollars

Chinese GDP doesn't compare to US GDP because of population difference. Indian population today is less than Chinese population in the mid 2000s, so that average per capita PPP incomes are higher for the respective periods mentioned above.

The SEZ timing I've already addressed. I think you placed too much importance on them for the Indian economy thus far.

How so ? SEZs generate a quarter of Indian exports (see the export growth data in latest Indian economy thread) and employ about a million people directly, and assuming a 1:5 dependent employment rate, about 5M indirectly. All this within half a decade of the act coming into effect.

Here's another specific example. When China started private sales of Shanghai apartments in the mid-1990's, they couldn't give them away. That's how unsophisticated the Chinese consumer was when it came to real estate in the mid-1990's. This is Shanghai, China's Manhattan, and they had to give away free residency permits to anyone in China who purchased at apartment there for less than $20,000. Again, another example of undoing communism and its legacy.

I can give you plenty of humorous anecdotes from the Indian side. When we started building out our first divided highways with marked lanes, many vehicles drove centering themselves on the lane, rather than drive within the lane. People still drive across the median and opposing traffic in order to take a shortcut, rather than wait for the next exit and head in the opposite direction there. I'm sure we can both find plenty to amuse each other with this way. What's the point ?

[shyamd]

PRC/Global stimulus of some sort anounced soon per some people.

[wong]

Surag, PPP GDP suffers from the same problem. You are still comparing 2003 dollars to 2012 dollars in a climate of rising commodity prices for a commodity exporting country. India exports petro chemicals and things like cotton, correct?? Commodities have risen over 50% since 2003, so even without doing a thing, exports would have risen 50% since 2003.

The point of this debate is you feel India is tracking China almost perfectly with a 10 year lag. That lag is 10 years because Indian reforms started 10 years later. The whole argument then stems on 1992 India being like China circa 1978 economically. I don't think that's realistic when you yourself say they are "two very different economic systems and societies". The GDP of India and China were essentially the same in 1980, both around $200 billion. That is as good, if not better, baseline than 1978 vs. 1992. As another Chinese member says, let's wait and see if you are right or not.