PRC Economy - New Reflections : Dec 15 2011

[wong]

^^^^

This is great news!!

Indians, I'll make it easier for you. ROI, IRR and NPV are not used in public finance. They do not adequately capture shadow prices and shadow costs. Some basic coursework in public finance economics or an economic history class would be greatly beneficial to your country.

[Don]

http://www.guardian.co.uk/world/2012/de ... onic-shift

China's economy to outgrow America's by 2030 as world faces 'tectonic shift'

National Intelligence Council also sees water and food shortages and suggests world is at a 'critical juncture in human history'

A US intelligence portrait of the world in 2030 predicts that China will be the largest economic power, climate change will create instability by contributing to water and food shortages, and there will be a "tectonic shift" with the rise of a global middle class.

The National Intelligence Council's Global Trends Report, published every five years, says the world is "at a critical juncture in human history".

The report, which draws in the opinion of foreign experts, including meetings on the initial draft in nearly 20 countries, paints a future in which US power will greatly diminish but no other individual state rises to supplant it.

"There will not be any hegemonic power. Power will shift to networks and coalitions in a multi-polar world," it says.

The report offers a series of potential scenarios for 2030. It says the best outcome would be one in which "China and the US collaborate on a range of issues, leading to broader global co-operation". It says the worst is a world in which "the US draws inward and globalisation stalls."

"A collapse or sudden retreat of US power probably would result in an extended period of global anarchy; no leading power would be likely to replace the United States as guarantor of the international order," it says, working on the assumption that the US is a force for stability – a premise open to challenge in Iraq and elsewhere in the Middle East and beyond.

The NIC report draws a distinction between what it calls "megatrends" – things that are highly likely to occur – and "game-changers", which are far less certain. Among the megatrends is growing prosperity across the globe. "The growth of the global middle class constitutes a tectonic shift: for the first time, a majority of the world's population will not be impoverished, and the middle classes will be the most important social and economics sector in the vast majority of countries around the world," the report says.

With prosperity spreading across the globe will come shifts in influence and power. "The diffusion of power among countries will have a dramatic impact by 2030. Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending, and technological investment. China alone will probably have the largest economy, surpassing that of the United States a few years before 2030," the report says.

That change will mean that the economic fortunes of the US and European countries will have a diminishing impact on the global economy. "In a tectonic shift, the health of the global economy increasingly will be linked to how well the developing world does — more so than the traditional west. In addition to China, India, and Brazil, regional players such as Colombia, Indonesia, Nigeria, South Africa, and Turkey will become especially important to the global economy.

"Meanwhile, the economies of Europe, Japan, and Russia are likely to continue their slow relative declines."

The report also says that "individual empowerment" will accelerate with the growth of the global middle class and reduction in poverty combined with new types of communications. The NIC warns that also has a downside.

"In a tectonic shift, individuals and small groups will have greater access to lethal and disruptive technologies (particularly precision-strike capabilities, cyber instruments, and bio terror weaponry), enabling them to perpetrate large-scale violence – a capability formerly the monopoly of states," it says.

The megatrends also point to increased instability because of rising demand for water, food and energy compounded by climate change.

"Demand for food, water, and energy will grow by approximately 35, 40, and 50% respectively owing to an increase in the global population and the consumption patterns of an expanding middle class.

"Climate change will worsen the outlook for the availability of these critical resources. Analysis suggests that the severity of existing weather patterns will intensify, with wet areas getting wetter and dry and arid areas becoming more so. Much of the decline in precipitation will occur in the Middle East and northern Africa as well as western Central Asia, southern Europe, southern Africa, and the US south-west."

The NIC says that a world of scarcities is not inevitable but "policymakers and their private sector partners will need to be proactive to avoid such a future". It says any solution will require more able countries to help more vulnerable states.

Among the less predictable but possible "game changers" identified by the report are the collapse of the euro, a severe pandemic, or a nuclear attack by Pakistan or North Korea. It also says a democratic or collapsed China, or the emergence of a more liberal regime in Iran, could have a significant impact on global stability.

The report warns that a number of countries are at high risk of becoming failed states by 2030, including Afghanistan, Pakistan, Rwanda, Uganda and Burundi. The risk of civil wars and internal conflicts remains high in Africa and the Middle East, but is declining in Latin America.

The intelligence assessment will add to pressure on Barack Obama to address the Israeli-Palestinian conflict, because it backs the president's view that the issue feeds instability in the Middle East alongside Iran's alleged pursuit of nuclear weapons. But it says the Arab spring could prove a stabilising force.

"On the one hand, if the Islamic Republic maintains power in Iran and is able to develop nuclear weapons, the Middle East will face a highly unstable future. On the other hand, the emergence of moderate, democratic governments or a breakthrough agreement to resolve the Israeli-Palestinian conflict could have enormously positive consequences."

[rsingh]

^^^^

True but we are not living in ideal world. Otherwise dogs are not supposed to be eaten, we don't filter oil from drain to be reused, we do not copy others design and be proud of it,we do not limit information for the fear of unrest.

[ashi]

The end of cheap China

If cheap China is fading, what will replace it? Will factories shift to poorer countries with cheaper labour? That is the conventional wisdom, but it is wrong.

Dwight Nordstrom of Pacific Resources International, a manufacturing consultancy, reckons China's supply chain for electronics manufacturers is so good that “there is no stopping the juggernaut” for at least ten to 20 years. This same advantage applies to low-tech industries, too. Paul Stocker of Topline, a shoe exporter with dozens of contract plants in coastal China, says there is no easy alternative to China.

[vina]

Indians, I'll make it easier for you. ROI, IRR and NPV are not used in public finance. They do not adequately capture shadow prices and shadow costs. Some basic coursework in public finance economics or an economic history class would be greatly beneficial to your country.

Indeed. It is as easy as anti gravity. Didn't you watch any Kung Fu movies lately, with the characters airborne and fighting , defying all laws of gravity. didn't you watch the Beijing olympics ceremony where there was a man running in space ?

Chinese defy gravity and Chinese economy defies gravity as well, floating on hot air. Wow!

[Christopher Sidor]

^^^^

This is great news!!

Indians, I'll make it easier for you. ROI, IRR and NPV are not used in public finance. They do not adequately capture shadow prices and shadow costs. Some basic coursework in public finance economics or an economic history class would be greatly beneficial to your country.

Well you are right. Most of the Public works project are based on break-even and zero-profitability-zero-loss. But since these projects are of such nature, they need to justify their existence on some other parameters, like increasing productivity or efficiency. Or like in the current FAD, Green credits, Reducing Carbon footprints, etc.

Just before the 1930's american and other banks gave massive money for capital expenditure to Germany and other countries. This money was given to what Chinese would refer to as local government or Indians would refer to as State/provincial governments. The problem was that these government used that money to build operas, museums, etc. Facilities which did not have any economic and financial value. Building low cost housing, hospitals, schools, is good, because economy benefits from these on the long run.

[g.sarkar]

http://blog.foreignpolicy.com/posts/201 ... toothpaste
China Daily's African edition, 'Black People Toothpaste' and China's race problem
"On Friday, China's largest English language newspaper China Daily launched Africa Weekly, a supplement that "will look at the precise nature of Chinese involvement in Africa and also the prominent role many Africans play in China." The announcement on the government-owned China Daily, featured quotes from Chinese and African diplomats falling over each other to praise how this initiative will improve mutual understanding, especially Africans understanding of China: "Minister of Culture Cai Wu said the weekly will will give African people a comprehensive and reliable guide to China" and "Abdul'ahat Abdurixit, president of the Chinese-African People's Friendship Association, said the launch of an Africa edition by China Daily "will surely help improve communication between China and Africa."
Improving African understanding of Chinese is a great goal, though it probably wouldn't hurt if Chinese expanded their views of Africans. During a China-Africa summit in 2006 billboards lining the road to the airport featured purporting to "glorify" Africans; though at least one, featuring a tribesman with a bone through his nose, depicted a Papua New Guinean. A month before a 2012 China-Africa summit in July, Africans rioted in Guangzhou after a Nigerian was found dead in police custody; "the Chinese social media response to the latest protest in Guangzhou was dismayingly xenophobic," wrote Time's Hannah Beech, who also noted that the districts were Africans congregate in Guangzhou are known as 'chocolate city.' While there's plenty of anecdotal evidence out there, it's hard to generalize about what Chinese think about Africans without being hypocritical, so I'll just quote what a Chinese English teaching recruiter once told me in Beijing: "We try not to hire black people. They tend to scare the children........."
Gautam

[Vayutuvan]

From New Scientist

Megacity China: the ultimate in urban migration

Chinese slang for urban sprawl is tan da bing, which means "spreading pancake". The pancake sure has spread rapidly since the country's economic reforms of the 1970s and 80s. These reforms have caused the middle class in China to steadily grow, and led to much of the rural population migrating to cities. By 2025, it is estimated that a total of 1 billion Chinese will live in urban areas. As of now, the country has at least 160 cities with over 1 million people. The US has nine.

Of course this means more housing, more public transportation and consequently more pollution. It's home to a number of cement and coal factories spewing filth into the atmosphere. (Qing, ironically, translates as "lush" or "green".)

[Vayutuvan]

The above article from New Scientist refers to the following $290 Billion for clean energy, but with a sting.

The Downside of China's Clean Energy Push

ha, we have to take Public Finance courses now?

The downside is that China’s $30 billion solar power industry is overbuilt and heavily in debt. Analysts say even billions of dollars in new government loans may not be able to pull it out of the hole.

Suntech Power Holdings (STP), the world’s largest solar panel maker, announced in September it would cut or reassign 1,500 workers at its photovoltaic cell factory in Wuxi. Suntech is counting on a $32 million loan from local authorities to avoid more job losses. To stay solvent, LDK Solar (LDK), China’s second-largest maker of solar wafers, was forced to sell a 20 percent stake to a renewable energy investor part-owned by the city of Xinyu, where LDK is headquartered. The support comes as the companies prepare to report combined 2012 losses of $987 million. China’s central government has weighed in, pledging 30 billion yuan (about $4.8 billion) in subsidies to keep large manufacturers afloat, says Wang Sicheng, vice director of China Renewable Energy Industries Association. Regional governments are loath to let their local solar panel makers fail. Yet policymakers in Beijing would prefer to consolidate the industry into a dozen large players from about 50.

I am getting tired of highlighting. Read it all (as Hari garu would say).

[Vayutuvan]

http://en.worldstat.info/Asia/China/Land
http://en.worldstat.info/Asia/India/Land

China's arable land is only 25% of the agri land. So, meat has to be a large component of their food. Would that lead to more health problems like heart disease, diabetes and the like?

[hanumadu]

The above article from New Scientist refers to the following $290 Billion for clean energy, but with a sting.

The Downside of China's Clean Energy Push

ha, we have to take Public Finance courses now?

The downside is that China’s $30 billion solar power industry is overbuilt and heavily in debt. Analysts say even billions of dollars in new government loans may not be able to pull it out of the hole.

Suntech Power Holdings (STP), the world’s largest solar panel maker, announced in September it would cut or reassign 1,500 workers at its photovoltaic cell factory in Wuxi. Suntech is counting on a $32 million loan from local authorities to avoid more job losses. To stay solvent, LDK Solar (LDK), China’s second-largest maker of solar wafers, was forced to sell a 20 percent stake to a renewable energy investor part-owned by the city of Xinyu, where LDK is headquartered. The support comes as the companies prepare to report combined 2012 losses of $987 million. China’s central government has weighed in, pledging 30 billion yuan (about $4.8 billion) in subsidies to keep large manufacturers afloat, says Wang Sicheng, vice director of China Renewable Energy Industries Association. Regional governments are loath to let their local solar panel makers fail. Yet policymakers in Beijing would prefer to consolidate the industry into a dozen large players from about 50.

I am getting tired of highlighting. Read it all (as Hari garu would say).

The chinese with their free supply of money without any concept of profit or loss f*(k it up for every body else. The plans of the genuine players who invest in R&D, play by the rules, take demand and supply into consideration and operate on a need to generate proft are sent for a toss once the chinese enter any field.

[Vayutuvan]

...so I'll just quote what a Chinese English teaching recruiter once told me in Beijing: "We try not to hire black people. They tend to scare the children........."
Gautam

Their military may be scared of our SDRE soldiers too

[member_20292]

The chinese with their free supply of money without any concept of profit or loss f*(k it up for every body else. The plans of the genuine players who invest in R&D, play by the rules, take demand and supply into consideration and operate on a need to generate proft are sent for a toss once the chinese enter any field.

What, so the CHinese print infinite money via their own version of QE?
And then subsidize their companies?

And this is done by what mechanism? Those fixed asset bubbles? If that is the case, then Yes, Jim Chanos is right. Buy CHinese stocks, short them, but take a 10 year position.

[kish]

Black money

However, India’s black money loss of $123 billion in 10 years is far less than China, which, according to the report, suffered a loss of $2.74 trillion during the same period (2001 to 2010), followed by Mexico ($476 billion), Malaysia ($285 billion), Saudi Arabia ($201 billion), Russia ($152 billion), the Philippines ($138 billion) and Nigeria ($129 billion).

[hanumadu]

The chinese with their free supply of money without any concept of profit or loss f*(k it up for every body else. The plans of the genuine players who invest in R&D, play by the rules, take demand and supply into consideration and operate on a need to generate proft are sent for a toss once the chinese enter any field.

What, so the CHinese print infinite money via their own version of QE?
And then subsidize their companies?

And this is done by what mechanism? Those fixed asset bubbles? If that is the case, then Yes, Jim Chanos is right. Buy CHinese stocks, short them, but take a 10 year position.

Seriously, I do not know how they come up with a seemingly limitless supply of money. But as discussed here any times, chinese companies are supported by the government with generous loans even as they pile on their losses.

[Suraj]

The Chinese government owns all land in China. It is then leased out for development on long term land leases, with the rent probably dictated by market values. The PRC government therefore has an interest in development as a means of furthering its own revenue base through land leases.

GoI doesn't have such a similar revenue stream - it gains revenue solely from taxation, and bridges the gap between revenues and spending by borrowing from the market. It makes the borrowing process simpler for itself by requiring PSU banks to hold a fraction of their deposits in the form of govt securities, via the statutory liquidity ratio, which ranges from 23-40%. Therefore GoI corners between a quarter and 40% of the PSU deposit base for itself to borrow. However, the bank deposit base in India isn't significant enough, and by cornering over a quarter of the deposit base, GoI ensures that credit is not cheap in India.

[hanumadu]

The Chinese government owns all land in China. It is then leased out for development on long term land leases, with the rent probably dictated by market values. The PRC government therefore has an interest in development as a means of furthering its own revenue base through land leases.

GoI doesn't have such a similar revenue stream - it gains revenue solely from taxation, and bridges the gap between revenues and spending by borrowing from the market. It makes the borrowing process simpler for itself by requiring PSU banks to hold a fraction of their deposits in the form of govt securities, via the statutory liquidity ratio, which ranges from 23-40%. Therefore GoI corners between a quarter and 40% of the PSU deposit base for itself to borrow. However, the bank deposit base in India isn't significant enough, and by cornering over a quarter of the deposit base, GoI ensures that credit is not cheap in India.

Thanks Suraj.
What is the point of raising money through land lease if it is to be given back as subsidies or become NPAs? What is the net effect of the cycle of leasing land, setting up a factory, incurring losses, pay money to cover the losses? Sure, it gets people employed, some things get produced and sold (albeit for a loss), the party bosses siphon some of the money. Is it a zero sum game as far as the chinese government is concerned? Ofcourse it keeps the people employed and keeps them away from the streets. How much land can the chinese government sell? How much more can the chinese produce that others are willing to buy?

Lets say some entity in china spends 100 yuan to buy some land from the chinese govt, another 100 yuan to set up a factory on the land and another 100 hundred yuan on labour etc to produce some stuff. Lets say they sell the stuff for 250 yuan. So they spent 300 yuan and sell it for 250 yuan, a loss of 50 yuan. Lets say the he government bails out the company by paying back the 50 yuan. So, in effect the govt still has 50 yuan from the sale of the land. The company is break even and continues to operate. The question is how much of the 250 yuan they sold comes from outside China? If the Chinese were not selling at a loss, would anybody buy anything from them. Basically there is a transfer of wealth into China because they are under cutting the competition. China can operate this way as long as the rest of the world buys their stuff.

Why is the rest of the world willingly getting shafted? Why don't they put up barriers? I wish at least India did. US simply watched Solyandra go bankrupt from the Chinese onslaught. Suzlon is having a difficult time selling wind turbines. I don't see how Moser Baer can make a profit on its PV division.

[member_20292]

OR.....the rest of the world can take advantage of cheap Chinese goods when it can.
after china goes bust, the world can buy up the Chinese companies for cheap.

Listen folks, if the CPC is selling things at a loss and making the Chinese eat crow to manufacture them....you don't look a gift horse in the mouth. You buy the cheap things and rejig your country to do other things.

Like software.

I met an old friend working for a large computer company yesterday. His largest clients are in Scandinavia. Apparently they charge close to 6 times the annual salary of the entire team involved in the project, to the client. Comes close to a 500% margin.

You want to do things with THAT margins my dear Sir. Not manufacture at a loss simply since it gives a few people employment. (right?)

[hanumadu]

OR.....the rest of the world can take advantage of cheap Chinese goods when it can.
after china goes bust, the world can buy up the Chinese companies for cheap.

Listen folks, if the CPC is selling things at a loss and making the Chinese eat crow to manufacture them....you don't look a gift horse in the mouth. You buy the cheap things and rejig your country to do other things.

Like software.

I met an old friend working for a large computer company yesterday. His largest clients are in Scandinavia. Apparently they charge close to 6 times the annual salary of the entire team involved in the project, to the client. Comes close to a 500% margin.

You want to do things with THAT margins my dear Sir. Not manufacture at a loss simply since it gives a few people employment. (right?)

Wrong, We cannot have 500 million software engineers.

[member_20292]

Never say never saar.

We cant have 500 million programmers today.

Tomorrow, with an even more highly interlinked knowledge economy....who knows?

alhamdulillah !

[subhamoy.das]

Does anybody know what % of the Chinese GDP ( read sales ) is contributed by MNC because that portion of the GDP will be going out to the native countries minus the local expenses like wages etc.

[Rishirishi]

Does anybody know what % of the Chinese GDP ( read sales ) is contributed by MNC because that portion of the GDP will be going out to the native countries minus the local expenses like wages etc.

The economics is very complex.

1 What is a MNC? Would you consider a chinease owner who ships off surplus to Singapore to be MNC?
2 You must subtract the import bill as well.

For most of the product China gets peanuts. Only the owner and some traders manage to make a decent living. workers and even middle managers are payed peanuts. You may be surprised, but the salary level for educated people, in India, is actually higher. Scores of educated people in China are desperate to find work, compared to India, where anyone with a decent education can get a job.

[ashi]

Record China sales for Apple’s iPhone 5

Apple sold over 2m units of its new iPhone 5 in its first weekend on sale in China, a record for the company’s smartphone in potentially its biggest market.

[krishnan]

how much loss did Apple make ??

[subhamoy.das]

Does anybody know what % of the Chinese GDP ( read sales ) is contributed by MNC because that portion of the GDP will be going out to the native countries minus the local expenses like wages etc.

The economics is very complex.

1 What is a MNC? Would you consider a chinease owner who ships off surplus to Singapore to be MNC?
2 You must subtract the import bill as well.

For most of the product China gets peanuts. Only the owner and some traders manage to make a decent living. workers and even middle managers are payed peanuts. You may be surprised, but the salary level for educated people, in India, is actually higher. Scores of educated people in China are desperate to find work, compared to India, where anyone with a decent education can get a job.

MNC would be a company with HQ outside China. If what u say is correct, that would be an exact opposite to what we have in India, and may be in other parts of the world also, where MNC jobs are high paying. How you can explain that CHINA has become a large market for consumer items from cars, cell phones, computers, internet etc etc. Their per capita GDP is also 3X ours. My perception is that manufacturing jobs pay less than a equivalent service jobs, world wide. That can be a explanation for low wages in China. Another explanation could be that investment driven buy and sell has not resulted in service or manufacturing job creation and hence well paid jobs are scare in China. Another reason could be that workers are paid below market wages to keep cost down.

Is there a salary index to show how many weeks of salary is required to purchase common items like phones, tv, fridges, cars, bikes etc by a chinese worker or manager in a MNC factory? We can then compare and see how the chines workers and managers are paid in a MNC Vs their peers in India?

[Suraj]

Thanks Suraj.
What is the point of raising money through land lease if it is to be given back as subsidies or become NPAs? What is the net effect of the cycle of leasing land, setting up a factory, incurring losses, pay money to cover the losses? Sure, it gets people employed, some things get produced and sold (albeit for a loss), the party bosses siphon some of the money. Is it a zero sum game as far as the chinese government is concerned? Ofcourse it keeps the people employed and keeps them away from the streets. How much land can the chinese government sell? How much more can the chinese produce that others are willing to buy?

It fosters economic activity and in turn increases the value of the land and the leasing potential. Of course they'll run out of land someday, but then they have a lot of land to lease out. It isn't necessarily efficient, and biased towards feeding speculative booms, but on the other hand, the government's policy imperatives are directly aligned with driving economic growth (at almost any cost); our system on the other hand, is decidedly parasitic in nature, and not necessarily directly aligned towards economic development - GoI is happy as long as it can set SLR to get its share of the deposit base.

Having dealt with Indian bureaucrats involved in tariff disagreements with PRC, your other questions are valid. Their selling below cost is a frequent source of conflict in trade negotiations, but they present the compelling option of competitive price, even if total cost of ownership would negate their advantage. They benefit from the shortsightedness of businesses in that regard.

[wrdos]

You may be surprised, but the salary level for educated people, in India, is actually higher. Scores of educated people in China are desperate to find work, compared to India, where anyone with a decent education can get a job.

Yes. I am really surprised. The better paid educated people in India can afford buying only less than 1/8 of cars (and most of them as tiny as a nano), and the televisions, and the smart phones, and an endless list of almost everything.......,
compared with the poorer paid educated Chinese who are desperate to find a job.

Sir, where is your higher salary is going? You spent all of them in your dream? This is dreaming forum indeed.

[Raja Bose]

biladel, did you just claim that conspicuous consumption is a sign of higher standard income?? I must admit that in terms of aping the American style of consumption, India is thankfully behind China - saving money instead of spending it blindly is still considered a virtue in India.

[wrdos]

saving money? Sir, you are comparing "saving money" with China?

biladel, did you just claim that conspicuous consumption is a sign of higher standard income?? I must admit that in terms of aping the American style of consumption, India is thankfully behind China - saving money instead of spending it blindly is still considered a virtue in India.

[Suraj]

1/8th the number of televisions ? India has more than 150M households with TVs , a lot of them with multiple TVs. So China has more than 1.2 billion TVs ? Interesting

Smartphones ? We will soon catch up - China used to have 100x more cellphone subscribers than India at one time, and now the gap is ~1B subscribers in China vs 900M subscribers in India. People will go from featurephones to smartphones as networks expand from largely 2G to largely 3G/4G .

It's the same with cars - people will not buy a midsize car they cannot use because of the lack of quality road network. Inner city streets are cramped - small cars are popular even in European cities for the same reason. Contrary to wrdos' imagination, the Nano has been a commercial failure considering how much it was originally intended to sell - people don't want to buy it much because it's considered 'cheap'

[Raja Bose]

saving money? Sir, you are comparing "saving money" with China?

uh, what? Please unscramble your post (& thoughts).

[krishnan]

You can only save something you have....

[Rishirishi]

The economics is very complex.

1 What is a MNC? Would you consider a chinease owner who ships off surplus to Singapore to be MNC?
2 You must subtract the import bill as well.

For most of the product China gets peanuts. Only the owner and some traders manage to make a decent living. workers and even middle managers are payed peanuts. You may be surprised, but the salary level for educated people, in India, is actually higher. Scores of educated people in China are desperate to find work, compared to India, where anyone with a decent education can get a job.

MNC would be a company with HQ outside China. If what u say is correct, that would be an exact opposite to what we have in India, and may be in other parts of the world also, where MNC jobs are high paying. How you can explain that CHINA has become a large market for consumer items from cars, cell phones, computers, internet etc etc. Their per capita GDP is also 3X ours. My perception is that manufacturing jobs pay less than a equivalent service jobs, world wide. That can be a explanation for low wages in China. Another explanation could be that investment driven buy and sell has not resulted in service or manufacturing job creation and hence well paid jobs are scare in China. Another reason could be that workers are paid below market wages to keep cost down.

Is there a salary index to show how many weeks of salary is required to purchase common items like phones, tv, fridges, cars, bikes etc by a chinese worker or manager in a MNC factory? We can then compare and see how the chines workers and managers are paid in a MNC Vs their peers in India?

1
Most manufacturing in China is done by contract manufacturars, who pay minimum wages. Foxcon for example has some 900K workers and make stuff for Apple, Samsung, Intel etc. Nike, Wallmart etc all use the same principle. An example. A T-shirt that Nike sells for 20 dollars, they purchase for 1,5 dollars. The manufacturar may only get some 20 cent profit per T-shirt. If he sells 1 million T-shirt, he stands to make 200K. The employee and rest of the value chain gets peanuts.

MNC's in India employ educated and higher competance staff, for which there is much more competition.


2
Why is the Chinease economy larger?
Simply because of the level of economic activity is greater. The government is spending a lot on infra. and the billions of dollars of export has created a lot of economic activity.

The problem for China is that as soon as their economy gets richer, their costs of production will also go up. Millions of jobs may move abroad. They are also under preshure to revalute their currency.

[subhamoy.das]

1
Most manufacturing in China is done by contract manufacturars, who pay minimum wages. Foxcon for example has some 900K workers and make stuff for Apple, Samsung, Intel etc. Nike, Wallmart etc all use the same principle. An example. A T-shirt that Nike sells for 20 dollars, they purchase for 1,5 dollars. The manufacturar may only get some 20 cent profit per T-shirt. If he sells 1 million T-shirt, he stands to make 200K. The employee and rest of the value chain gets peanuts.

MNC's in India employ educated and higher competance staff, for which there is much more competition.


2
Why is the Chinease economy larger?
Simply because of the level of economic activity is greater. The government is spending a lot on infra. and the billions of dollars of export has created a lot of economic activity.

The problem for China is that as soon as their economy gets richer, their costs of production will also go up. Millions of jobs may move abroad. They are also under preshure to revalute their currency.

So what u are saying is basically there is no Apple CHINA, Samsung CHINA or a INTEL CHINA? That is interesting and may explain the low paid jobs. But that is true for service in India also as service gets delivered via contract service delivery models with top IT companies. In the early 90s, we used to have a IBM office and a HP office inside a TCS office, but each one locked out from other but wages were good. So it is not contract manufacturing to be blamed but the system which encourages low wages!

[Rishirishi]

1
Most manufacturing in China is done by contract manufacturars, who pay minimum wages. Foxcon for example has some 900K workers and make stuff for Apple, Samsung, Intel etc. Nike, Wallmart etc all use the same principle. An example. A T-shirt that Nike sells for 20 dollars, they purchase for 1,5 dollars. The manufacturar may only get some 20 cent profit per T-shirt. If he sells 1 million T-shirt, he stands to make 200K. The employee and rest of the value chain gets peanuts.

MNC's in India employ educated and higher competance staff, for which there is much more competition.


2
Why is the Chinease economy larger?
Simply because of the level of economic activity is greater. The government is spending a lot on infra. and the billions of dollars of export has created a lot of economic activity.

The problem for China is that as soon as their economy gets richer, their costs of production will also go up. Millions of jobs may move abroad. They are also under preshure to revalute their currency.

So what u are saying is basically there is no Apple CHINA, Samsung CHINA or a INTEL CHINA? That is interesting and may explain the low paid jobs. But that is true for service in India also as service gets delivered via contract service delivery models with top IT companies. In the early 90s, we used to have a IBM office and a HP office inside a TCS office, but each one locked out from other but wages were good. So it is not contract manufacturing to be blamed but the system which encourages low wages!

Well, there will be a Apple China, but they will focus on selling finished goods in China. Same goes for all other brands. No one hardly has their own manufacturing units any more.
Difference between India and China is the wages payed. Any decent software dude makes RS 50 000,- and above. 80-100K is pretty normal. The outsourcing has driven the wages high for all educated people.


A Apple assembler used to make Rs 5-10K. Pretty much as a driver makes. But the prices are rising very fast in China. This is due to inflation caused by export surplus and government spending. Now the workers need Rs 20-30K. The companies are simply not able to pay this. Hence they are looking at other places to move their "dhanda".

China is screwed in many ways.
1 They are fast loosing their competative edge, due to rising cost.

2 China has a very large PSU sector. A lot of this sector is in no better shape then Indian PSU,s. The losses has been covered with bank loans and gov. subsidy. There is a limit to how long this can go on.

3 They have pumped in huge amounts into the construction part of the economy. There is a limit to how much they can push this, hence slowdown in this part of the economy is evident.

The question is how fast the Chinese can manage to move up the value chain and start to produce banded goods them selves. Some companies line Huawei, ZTE, Haier, lenovo has had some sucsess. But it is a far cry from what China needs to keep growing at 8%.

[member_20292]

to be honest, reading Paul Krugman in NYT leads me to believe that we can all, almost print any amount of money we like and go as much into debt as we want.

if he is right then China is on a very good path. Build. Take a loan from yourself. Never pay it back. Do a qe.

[Rishirishi]

It has been tried several times. There is just so much money you can pump into the economy. After a while inflation will start to hit in. The rule is somewhat different for US, as many governments and corp choose to use "safe hosue". But there is a limit to all this.

This logic does not apply for China. China is already having problems with inflation.

[chanakyaa]

Hope this has not been posted before....

When Money Dies: The Nightmare of the Weimar Collapse

WHEN a nation's money is no longer a source of security, and when inflation has become the concern of an entire people, it is natural to turn for information and guidance to the history of other societies who have already undergone this most tragic and upsetting of human experiences......

http://thirdparadigm.org/doc/45060880-W ... y-Dies.pdf

[subhamoy.das]

Well, there will be a Apple China, but they will focus on selling finished goods in China. Same goes for all other brands. No one hardly has their own manufacturing units any more.
Difference between India and China is the wages payed. Any decent software dude makes RS 50 000,- and above. 80-100K is pretty normal. The outsourcing has driven the wages high for all educated people.

A Apple assembler used to make Rs 5-10K. Pretty much as a driver makes. But the prices are rising very fast in China. This is due to inflation caused by export surplus and government spending. Now the workers need Rs 20-30K. The companies are simply not able to pay this. Hence they are looking at other places to move their "dhanda".

I was chatting with my brother-in-law last night who has been working in Singapore and Malayasis for some time now in a leading global bank and was telling me first hand account of how business is conducted in China. What you are saying above is matching very well with what I heard from him. He was telling that every thing in China is very tightly controlled to the minute detail. He was saying how only 5% ( the front ) of a leading MNC China is the real MNC to satisfy the MNC stake holders in US but rest is basically a large dorm with whole families working 7 days a week and eat and live and work in the factory with only 2 breaks in a year. It is like old Indian days of bonded labor. This 95% is not controlled by MNC CHINA. If they ask for higher wages they will loose the job AND their place to stay as they have no place which they can call "own home".

He was narrating another incident where his bank got a license to launch credit cards for the first time in China. The launch, which was such a small financial event, they have about 5K customers in China, was aborted due to the fact that the national CPC convention was in session, in fear that if some thing goes wrong. This event highlights the deep mistrust the CPC has with its citizens. The credit card business model is itself eye opener of another kind of how wealthy Chinese uses them and ONLY outside the country and does not mind to keep security deposits of half million USD to jack up the credit line.

Another event was at a leading hospital in Sanghai. His friend was in dire condition but when he reached this super duper hospital they found that the place was teeming with patients, the place was nice and all, but too many people, and the time by which you will get serviced by a doctor, it will be next day and you will be dead. He somehow managed to get hold of a US doctor and put his friend in a VIP private cabin where the service was 7 star but u need to have a credit card to get admitted and daily charge was US 12,000 ( yes twelve thousand )!

The bottom line is that there is a a huge gap between the top of the common and there is nothing in between to cater to middle class! And yes, he confirmed that jobs for the educated middle class is worse than in India. Overall, this model of building the largest, fastest, longest, is not sustainable and has harmed the aam admi and things will get worse in the coming days for the aam admi.

[member_20292]

Arrey. Then how are they able to eat, if the wages are so low? Going to school, colleges and all. The rates of admission to the US universities from China is enormously high, about 1.5 times that of Indian students. These guys must be getting money from somewhere to send their children abroad, no?

I believe what you are saying is true for the lower middle class. Not the middle class, which is rising fast.
The lower middle class is better off in India. China seems like a giant Sivakaaasi fireworks factory with accidents, hazardous chemicals, and low wages.

China is not an ephemera. What they are doing is okay. Its on steroids. But it seems to be okay from many perspectives. They work funnily, and they print money, and they cheat and lie and copy like hell.

But no denying they do it well. And their gdp per capita is growing strong. Consumer spending is also many times that of India. So something is working there...much as we debate the bad news coming out of China.