PRC Economy - New Reflections : Dec 15 2011

[Christopher Sidor]

Look what Moody is saying!

PS: Just google out "China Credit Bubble" and "India Credit Bubble" and compare the results. Then I wonder if caution pays and if Good Guys actually finish first.

Before we start, I agree with Austin, these credit rating agencies, their reports and ratings ought to be taken with a pinch of salt. What the above mentioned article is saying is

Such a level [i.e. Debt Level] is still manageable and future payment capabilities will be enhanced if China's GDP growth remains, in accordance with our central scenario, relatively strong at around 7% per year over the next five years.

What basically Moody is saying is that there is a minimum level to PRC's growth. If growth falls below this level then all bets are off. This minimum level according to Moody is 7%. And growth has to stay above this level, for at least 5 years. So according to Moody PRC is running from a tiger and has to run at a speed of 7% just to stop the tiger from devouring it.

[Theo_Fidel]

Thanx Christopher, that explains it very well.

I think the question of productivity has to come up at some point. If the PRC has splurged $23 Trillion and still is not at middle income status that should say something about the productivity level of the investments right. This is what destroyed the Soviets. When incremental increases in investment produced no additional wealth the entire circle quickly spiraled down.

BTW my view is that country that is dependent on making 80% world market of a commoditized product like A/C’s for its prosperity has nowhere to go but down. Such market dominance is unsustainable and will eventually fall towards a more normal 20% or so, which is the Chinese population WRT the world.

[DavidD]

Thanx Christopher, that explains it very well.

I think the question of productivity has to come up at some point. If the PRC has splurged $23 Trillion and still is not at middle income status that should say something about the productivity level of the investments right. This is what destroyed the Soviets. When incremental increases in investment produced no additional wealth the entire circle quickly spiraled down.

BTW my view is that country that is dependent on making 80% world market of a commoditized product like A/C’s for its prosperity has nowhere to go but down. Such market dominance is unsustainable and will eventually fall towards a more normal 20% or so, which is the Chinese population WRT the world.

1) That's not what Moody's said. It said the indebtedness is sustainable at 7% GDP growth, it didn't say it's unsustainable if it's below that. Then again, what Moody's says doesn't really matter anyway.

2) Of course that's unsustainable. China used to make probably 80% of the world's T-shirts, now that's no longer the case as higher value products such as A/C's replaced shirts, though it still makes close to 0% of the world's airliners or microchips. China will keep moving up the food chain as it grows, the 80% will eventually come down to 20%, but the 0% will raise to 20% eventually.

[Christopher Sidor]

^^^^
The important question is that, whether PRC is able to sustain its 7+% growth without getting deeper into the quicksand it is in currently.

If it is able to, then it's infrastructure that it has built so far will pay for itself or will be hidden and reams of paper will be spent on how far-sighted PRC's approach to the 2008 crisis has been and was.

If PRC is not able to, then a different scenario will play out.

[panduranghari]

So essentially, we have lost the race, and we have to be happy as a Turkey types tier 2 GDP and GDP/capita nation. Tier One will be China Jap, EU, USA, Taiwan, etc.

It's a marathon.

Why are you so obsessed with GDP numbers. We are 3rd biggest economy in the world in GDP PPP terms. Besides, Suraj ji had posted an economist article stating the Indian economy is so much in the unorganised sector that it's never accurately measured in the GDP stats. So when Friedman called Indian growth rate of 2% as Hindu growth rate, it was measured without including the colossal unorganised sector.

The colossal unorganised sector has been our strength since a long time. It will lead India out of the global economic downturn. 2 centuries of being a vassal state has taught us valuable lessons. Let's not consign India to the dustbin. Just yet anyway.

The way I see it is such- current Indian economy is a satellite economy of the west. If western economy crashes, Indian economy crashes too. We loose a lot due to the crash. But we can decide what way to take to grow out of this downturn. Simply copying old ways may not be the way forward. Or it may be.

Chinese economy is an independent economy geared to produce for the west. When western economy crashes, Chinese economy crashes too. Chinese loose but they already got infrastructure to start producing again. Before the west tries to begin production, Chinese can easily undercut them. They only need to ensure the raw materials and oil is secure in the supply. If not the infrastructure stands unused and then rots. They can still take a different way to come out of the down turn.

The west will need to unlearn their ways and then find another way to grow out of the downturn.

[Suraj]

It used to be said that Beijing sought a minimum baseline level of growth simply to stave off revolt by ensuring sufficient new jobs to absorb the incoming labor base. Now that the growth in labor base is tapering out, the reason for requiring a minimum baseline level of growth is to keep the cost of the debt load servicing down. The latter would seem a much more delicate balancing act because it's more timebound and clinical in nature, while a restive population can be soothed for a while.

[DavidD]

^^^^
The important question is that, whether PRC is able to sustain its 7+% growth without getting deeper into the quicksand it is in currently.

If it is able to, then it's infrastructure that it has built so far will pay for itself or will be hidden and reams of paper will be spent on how far-sighted PRC's approach to the 2008 crisis has been and was.

If PRC is not able to, then a different scenario will play out.

Well, you're basically saying that if the PRC's policies work then they'd be lauded, and if they don't, bad things may happen.

[wrdos]

Official data is issued by the government. In 2013, the Chinese GDP increased by about 7.7% to 56,884.5 billion yuan, i.e. roughly US$9.4 trillion at the current exchanging rate.

http://www.stats.gov.cn/english/PressRe ... 02079.html

[chola]

Our assault on the second largest box office in the world. Notice that we attract their women in particular.

http://www.daijiworld.com/news/news_dis ... _id=213726

Bringing China closer to India - through Bollywood

By Vishal Gulati
Shanghai, Jan 20 (IANS): Bollywood cinema is bringing China a wee bit closer to India. Chinese women in particular are now becoming big fans of Bollywood, due to the passionate romance, emotions and family bonding they show on screen.

Talk to the young Chinese and they express their love for Indian movies, even though their knowledge of India otherwise is limited and often viewed through the prism of Bollywood song and dance.

Going by the reaction of so many Chinese youngsters, the message of going by what one's heart says in Raj Kumar Hirani's "3 Idiots" is a big hit among them.

"Youngsters in China love to watch Indian love stories," 23-year-old Jiachen Fang told a visiting IANS correspondent.

"3 Idiots" dubbed in Chinese is particularly popular in China. "I liked '3 Idiots' so much that I would love to watch it time and again," she said.

[Christopher Sidor]

^^^^
The important question is that, whether PRC is able to sustain its 7+% growth without getting deeper into the quicksand it is in currently.

If it is able to, then it's infrastructure that it has built so far will pay for itself or will be hidden and reams of paper will be spent on how far-sighted PRC's approach to the 2008 crisis has been and was.

If PRC is not able to, then a different scenario will play out.

Well, you're basically saying that if the PRC's policies work then they'd be lauded, and if they don't, bad things may happen.

Yes to a degree. The situation is not black or white. It can be grey also. If PRC muddles along, does not stagnate and does not grow, then the price would be paid by the citizens of PRC. That would be sad. The citizens of PRC have worked very hard and have been very prudent, saving much not spending beyond what they earn. It would be shame to see them suffer because of decisions made by a few elite.

[chola]

The citizens of PRC have worked very hard and have been very prudent, saving much not spending beyond what they earn.

I wonder how true is that. I have before me on my desk two reports.

One is a survey of the automotive industry from one of the best consulting firms in the business -- something that Mary Barra or Alan Mulally, CEO's respectively of GM and Ford, would have on their desks.

The other is an article from the Hollywood trade magazine Variety.

The first shows us a China where is not only the largest car market but it is by far the most profitable -- for foreign firms. On average, the profits for each car sold in China is twice that of the US. The price in China for most American models is twice that of the US. Tesla which is selling its flagship model in China at $121,000 is actually taking a "risk" by not doubling its US price of $81,000 because a cheaper price indicates a lack of quality.

For US and European car firms, the Chinese spending population must be tackled not only as being larger than the US's (buying more cars) but actually richer since you can push prices to a level you cannot in the US or Europe. The only "weakness" in the Chinese market is that people pay in cash thus depriving car companies of profiting from financing charges and interests which is a cornerstone for US profitability.

The second report is an industry blockbuster, pardon the pun. Not only is the Chinese boxoffice growing at the rate of 30% a year officially but it is actually being under-reported by the cinemas as way of cheating on taxes and the Hollywood firms who provide most of the top hits in China. The Chinese government is finally cracking down on this which will raise profits and expectations in Los Angeles.

This one bothers me. Unlike autos, India has a competitive advantage in movies. This week "Despicable Me 2" is at number one while "Shadow Recruit" is at number three in the chini boxoffice. "Despicable" made $39m in 10 days in China which is more than the $30m that the "Dhoom 3" made in all year as the highest grossing film out of Bollywood in 2013 or the Salman Khan "Tiger" flick made as the top Bollywood grosser in 2012.

At any rate, splurging on cars priced twice that of the world's wealthiest nations and frivolous movies is not a good indicator of a population spending within its means (though paying for cars with cash instead of credit does moderate that fact.)

[Rishirishi]

The citizens of PRC have worked very hard and have been very prudent, saving much not spending beyond what they earn.

I wonder how true is that. I have before me on my desk two reports.

One is a survey of the automotive industry from one of the best consulting firms in the business -- something that Mary Barra or Alan Mulally, CEO's respectively of GM and Ford, would have on their desks.

The other is an article from the Hollywood trade magazine Variety.

The first shows us a China where is not only the largest car market but it is by far the most profitable -- for foreign firms. On average, the profits for each car sold in China is twice that of the US. The price in China for most American models is twice that of the US. Tesla which is selling its flagship model in China at $121,000 is actually taking a "risk" by not doubling its US price of $81,000 because a cheaper price indicates a lack of quality.

For US and European car firms, the Chinese spending population must be tackled not only as being larger than the US's (buying more cars) but actually richer since you can push prices to a level you cannot in the US or Europe. The only "weakness" in the Chinese market is that people pay in cash thus depriving car companies of profiting from financing charges and interests which is a cornerstone for US profitability.

The second report is an industry blockbuster, pardon the pun. Not only is the Chinese boxoffice growing at the rate of 30% a year officially but it is actually being under-reported by the cinemas as way of cheating on taxes and the Hollywood firms who provide most of the top hits in China. The Chinese government is finally cracking down on this which will raise profits and expectations in Los Angeles.

This one bothers me. Unlike autos, India has a competitive advantage in movies. This week "Despicable Me 2" is at number one while "Shadow Recruit" is at number three in the chini boxoffice. "Despicable" made $39m in 10 days in China which is more than the $30m that the "Dhoom 3" made in all year as the highest grossing film out of Bollywood in 2013 or the Salman Khan "Tiger" flick made as the top Bollywood grosser in 2012.

At any rate, splurging on cars priced twice that of the world's wealthiest nations and frivolous movies is not a good indicator of a population spending within its means (though paying for cars with cash instead of credit does moderate that fact.)

Sir, china is flush with cash. There is no doubt about that. But how sustainable is this? What happens if the construction and infrastructure suddenly comes to a halt?

[Anand K]

^^

Perhaps the CPC Government (a totalitarian Govt remember) can step in a stimulus to keep things on life support - perhaps ride it out for a few months? Like they did twice already? Perhaps give the Americans or the Europeans something in return for some borrowed time if things are that bad?

And on that note, what could cause such a debilitating shock on the infra/construction industry of China? IMHO there is a LOT more infrastructure they need to get in place and it's not all "HSR to nowhere". You have to put these billions of people somewhere, take them to another somewhere through a whole lot of something so that they can work in something.
Japan did this long time back and have 70% forest/farm land and their millions clustered in the sprawling cities. The Americans did this, but not on such a scale, despite having 100x the space and resources.

[Theo_Fidel]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

[Rishirishi]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

That is what puzzles me as well. Maybe it is because of the high savings rate??

[Liu]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

That is what puzzles me as well. Maybe it is because of the high savings rate??

reason is qiute simple...

inflation won't happen,just because the supply of real wealth(Physical wealth,such as food,houses,autos,household appliances..etc) increases more than money supply does.

only when supply of industry products increases less than money supply does inflation happen,such as the case of Zimbabwe.

Zimbabwe can not supply most of modern industry products,when it prints so many money...

[Liu]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

reason is very simple...
it is because CHina produces more realth wealth than USD too.

notes,whether RMB or USD, is not real wealth....

Real wealth are the Physical industry products such as food,houses,roads,autos ,house applances and clothes,which are useful to people life.

Today, CHina produces more almost all kinds of physical industry products than USA. ,from food,houses,roads autos ,house applances to clothes...

China's global largest industry output credits the huge RMB supply,which assure that people can turn RMB in their hands into physical industry products they need.


In a word, real wealth comes from hard work ,instead of money printing...

Chinese are working hard, so they gain real wealth.

Zimbabwe are pinting money, so they gain inflation.

[Liu]

^^

Perhaps the CPC Government (a totalitarian Govt remember) can step in a stimulus to keep things on life support - perhaps ride it out for a few months? Like they did twice already? Perhaps give the Americans or the Europeans something in return for some borrowed time if things are that bad?

And on that note, what could cause such a debilitating shock on the infra/construction industry of China? IMHO there is a LOT more infrastructure they need to get in place and it's not all "HSR to nowhere". You have to put these billions of people somewhere, take them to another somewhere through a whole lot of something so that they can work in something.
Japan did this long time back and have 70% forest/farm land and their millions clustered in the sprawling cities. The Americans did this, but not on such a scale, despite having 100x the space and resources.

it is wrong that you are comparing Japan in 1980s and CHina today.

Japan in 1980s are a fully urbanized country but CHina today is just a semi-urbanized country.

almost 50% of CHinese still live in rural area...those CHinese people will move into urban area and such urbanization just means that "ghost town" today in CHina may become prosperous downtown in 2 years...the "HSr to nowhere" may become a wisely-planned projects for "metropolics tomorrow..

you can not understand it,just because you have never experience such a rapid urbanization tide as CHina.

[Rishirishi]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

reason is very simple...
it is because CHina produces more realth wealth than USD too.

notes,whether RMB or USD, is not real wealth....

Real wealth are the Physical industry products such as food,houses,roads,autos ,house applances and clothes,which are useful to people life.

Today, CHina produces more almost all kinds of physical industry products than USA. ,from food,houses,roads autos ,house applances to clothes...

China's global largest industry output credits the huge RMB supply,which assure that people can turn RMB in their hands into physical industry products they need.


In a word, real wealth comes from hard work ,instead of money printing...

Chinese are working hard, so they gain real wealth.

Zimbabwe are pinting money, so they gain inflation.

Good explanation. But still do not fully understand it. I mean, if it was that easy, any closed economy could have started massive infrastructure projects and got away with it. The money has to go somewhere.

Even if China was to experience a massive "belly flop", it still would have all that infrastructure and housing.

Just wish Indian gov. could be as effective. An exclusive fund of 50B$ per year would be sufficient to build 6000KM of modern 6 lane highway. Put in perspective, India imports some 50B$ worth of gold.

[Liu]

Good explanation. But still do not fully understand it. I mean, if it was that easy, any closed economy could have started massive infrastructure projects and got away with it. The money has to go somewhere.

Even if China was to experience a massive "belly flop", it still would have all that infrastructure and housing.

Just wish Indian gov. could be as effective. An exclusive fund of 50B$ per year would be sufficient to build 6000KM of modern 6 lane highway. Put in perspective, India imports some 50B$ worth of gold.

the massive-upgrade of infrastructure need massive materials,such as steel,concrete...etc,beside labours..

for most developing countries,necessoary labours is hardly a problem,but most developing countries,including india,can hardly get enough materials from steels ,energy to concrete,simplly because they neither can produce them themselve nor can have enough hard cash to import them.

but it is very easy for CHina to upgrade its infrastructures as massive-scale, because CHina itself is the largest producer of those materials,and can get those material at global lowest cost....

India can not produce enough materials for upgradeing its infrastructure and have to import them with hard cash...that is why India trade deficit is so huge...

[Theo_Fidel]

CHina itself is the largest producer of those materials,and can get those material at global lowest cost....

I think this is the key point here as I mentioned it earlier. China is able to produce/construct at global low cost. Of course then the question turns on how. It is not a particularly efficient user of energy or materials. In fact every study has shown it is incredibly profligate. Somehow things are kept cheap and maybe even under priced. No other developing country can provide power at 5 cents per kw.

The lack of IP protection has a lot to do with this as well.

India for instance is unable to wind up the commercial window glass industry because most of the global manufacturers with IP protection are sitting in India with manufacturing outside India. The same is true for all the metro coaches, the manufacturers are global and restrict manufacture in India.

China is not restricted by such minor issues.

[Rishirishi]

Good explanation. But still do not fully understand it. I mean, if it was that easy, any closed economy could have started massive infrastructure projects and got away with it. The money has to go somewhere.

Even if China was to experience a massive "belly flop", it still would have all that infrastructure and housing.

Just wish Indian gov. could be as effective. An exclusive fund of 50B$ per year would be sufficient to build 6000KM of modern 6 lane highway. Put in perspective, India imports some 50B$ worth of gold.

the massive-upgrade of infrastructure need massive materials,such as steel,concrete...etc,beside labours..

for most developing countries,necessoary labours is hardly a problem,but most developing countries,including india,can hardly get enough materials from steels ,energy to concrete,simplly because they neither can produce them themselve nor can have enough hard cash to import them.

but it is very easy for CHina to upgrade its infrastructures as massive-scale, because CHina itself is the largest producer of those materials,and can get those material at global lowest cost....

India can not produce enough materials for upgradeing its infrastructure and have to import them with hard cash...that is why India trade deficit is so huge...

Producing stuff in India is not any problem. India has more efficient manufacturers, as compared the Chinese state monopolies. The Balance of payment issue is mainly due to gold and oil imports. If GOI started 100 billion worth of projects, they could choose to limit imported contents and just demanded local input. Still India would get Inflation. Because the companies producing the "brick and mortar" would eventually make payments.

The Chinese economy is dominated by state run companies and banks. There has been a lending spree like never seen before. Even the regional economies are spending on welfare etc. I just do not buy your simplistic logic (no offence). There has to be some other explanation.

[Rishirishi]

CHina itself is the largest producer of those materials,and can get those material at global lowest cost....

I think this is the key point here as I mentioned it earlier. China is able to produce/construct at global low cost. Of course then the question turns on how. It is not a particularly efficient user of energy or materials. In fact every study has shown it is incredibly profligate. Somehow things are kept cheap and maybe even under priced. No other developing country can provide power at 5 cents per kw.

The lack of IP protection has a lot to do with this as well.

India for instance is unable to wind up the commercial window glass industry because most of the global manufacturers with IP protection are sitting in India with manufacturing outside India. The same is true for all the metro coaches, the manufacturers are global and restrict manufacture in India.

China is not restricted by such minor issues.

India can force manufacturars to produce in India, by creating tariff barriers. Many products are not produced in India, because of insuficnet demand.
The basic problem with india is the high cost of electricity and red tape. Also poor infrastructure, adds to problems.

[Liu]

CHina itself is the largest producer of those materials,and can get those material at global lowest cost....

I think this is the key point here as I mentioned it earlier. China is able to produce/construct at global low cost. Of course then the question turns on how. It is not a particularly efficient user of energy or materials. In fact every study has shown it is incredibly profligate. Somehow things are kept cheap and maybe even under priced. No other developing country can provide power at 5 cents per kw.
The lack of IP protection has a lot to do with this as well.

India for instance is unable to wind up the commercial window glass industry because most of the global manufacturers with IP protection are sitting in India with manufacturing outside India. The same is true for all the metro coaches, the manufacturers are global and restrict manufacture in India.

China is not restricted by such minor issues.

CHina is particular because CHina is the sole combination of the following factors on the earth
1.cheap land-acquiring cost. Chinese social/political system is particular that Chinese government can provide large cheap land radiply for industry development and infrastructure upgrade. India and most capitalsim can not.

2.cheap labour cost. CHinese labour cost now is almost 3-4 times more than Indian's ,but it is still by far lower than developed economies such USA and West Europe.

3.enough well-educated and desciplined workers. CHinese workers are famous for hard-working and desciplined,while they are almost literated. India illterat rate is much higher ,and frankly speaking, most non-Chinese workers are not as desciplined and punctual as CHinese.

4.complete and full industry chains. it means that CHinese enterprises can gets their components,material ready at cheaper freight and stock cost. On the contary, India and other developing country have to import many components from other countries,which raises product cost greatly

5.decent infrastructures. Chinese infrastrcutre can shaddow USA,let alone developing countries. good infrastructure(road,seaports,airports,railways, HSR..etc) means fluent transport and less freight. For example,due to good infrastructure, the freight of one container from Beijing to Shanghai is surely less than that from New Delhi to Bombay,although it is much longer from Beijing to Shanghai.

6. reliable access to oversea resources...CHina has set up a reliable access to oversea resources such as ores ,oil..etc....
India can hardly acqure oversea resouces as many as CHines does now,because the resource on the earth is so limited and india has no enough hard cash to compete CHina.

[Liu]

Producing stuff in India is not any problem. India has more efficient manufacturers,as compared the Chinese state monopolies. The Balance of payment issue is mainly due to gold and oil imports. If GOI started 100 billion worth of projects, they could choose to limit imported contents and just demanded local input. Still India would get Inflation. Because the companies producing the "brick and mortar" would eventually make payments.

The Chinese economy is dominated by state run companies and banks. There has been a lending spree like never seen before. Even the regional economies are spending on welfare etc. I just do not buy your simplistic logic (no offence). There has to be some other explanation.

you are misled by west medias and accept their loose idea how unefficent CHinese enterprises are...

west medias loose idea is based on RMB exchange rate while RMB is obviulsy undervalued and it distort the truth.

if you really want to learn about the efficency of one enterprise or one country,you should learn about unit output of every worker or every KW electricity.

For example. if Plant A can produce 1000 auto with 1000KW electricity , and Plant B can produce only 500 auto with 1000 KW electricity, then Plant A plant is obviously more efficient than Plant B.

fact is that when China cunsumed only a bit more electricity than USA last year, CHina produced much more pysical industry products than USA,from food,steel,concrete,houses,house-hold appliances,ships ,roads,HRS,to clothes or other items you can imagine.
So, CHina industry activity is obviously more efficent than USA,that is why USA's industry is being asskicked by Chinese one.

[Liu]

India can force manufacturars to produce in India, by creating tariff barriers. Many products are not produced in India, because of insuficnet demand.
The basic problem with india is the high cost of electricity and red tape. Also poor infrastructure, adds to problems.

the problem of India roots in its social system..

India has never experienced land reform as harsh as east Asia,including PRC,Japan,Korea(N.Korea and S.Korea) and Taiwan. so the land cost in india is not accepted for industrialization.

[Christopher Sidor]

^^^^^
What you are saying is that India has not experienced land grabbing on a national scale where a party assigns itself the privilege to own land without paying any compensation to the original owners. We do not want such types of reforms. The correct term for such a process is called stealing.

[Suraj]

There's no 'land reform' in PRC. The Communist Party owns all the land. Everyone leases land off the party's hands. The party can and will evict you for a compensation sum that they determine, if and when they have to. If you appeal, it goes to a court that they run. That's not really reform of any legal kind. Japan, Korea and Taiwan are very different as far as land reform goes.

[Shankas]

Liu - Thank you for sharing your views. It helps me get an insight into how and what makes China tick and why other nations can not copy or replicate the China Model.

[Sri]

We just moved to a new office in Chennai. I was one of the people in the 3 member shifting committee. One of the first thing we decided was to prefer Indian Manufacturers (not Indian co. who import stuff). The whole capital expenditure was approx 4 cr. I had specifically asked the admin guys to tabulate in the cost sheet the origin of mfg unit for each item. Indian component (mainly servers assembled by Dell in India) and LAN wires was less than less then 60 lacs. China ..... 2.7 cr.

[Hitesh]

Sri,

How did the quality hold up?

[Sri]

Sri,

How did the quality hold up?

Quality is pretty good. Till now (not even a month). But the stuff ordered are generally respected companies with mfg in China. We don't foresee any QC issues cropping up.

[Christopher Sidor]

China Bank Regulator Said to Issue Alert on Coal Loans. --- Bloomberg dated 24-Jan-2014

From the article

The coal industry has come under scrutiny as investors seek repayment of a 3 billion-yuan ($496 million) trust product that’s facing default because the miner that borrowed the funds collapsed.
....
....
ICBC Chairman Jiang Jianqing told CNBC in an interview from the World Economic Forum in Davos, Switzerland that the bank won’t bail out investors in the Credit Equals Gold No. 1 product that it distribute in 2011. About 20 of those investors met with ICBC officials yesterday in Shanghai demanding their money ahead of the product’s Jan. 31 maturity date.

Standard & Poor’s said in a report today that it doesn’t expect ICBC to bail out investors in the product. Reputational damage from a default would be “well manageable,” it said.

So defaults may happen. That is good. It will allow the markets to price in the risks properly. The problem is that ICBC and other big banks of PRC are viewed as organs of states or branches of state. The indirect implication is that state sold rotten products to Investors and is trying to clean up its bad debts by hurting the balance sheets of investors. I always assumed that our system was predatory. But it seems that our politicians have much to learn.

Now when Goldman Sachs sold dubious and toxic products to its partners, on the eve of the financial crisis, when it was shorting the very same product or knew that these products would loose value very soon after its sale, nobody could make the accusation that it was US state or government that was carrying this out.

[chola]

CHina is particular because CHina is the sole combination of the following factors on the earth
1.cheap land-acquiring cost. Chinese social/political system is particular that Chinese government can provide large cheap land radiply for industry development and infrastructure upgrade. India and most capitalsim can not.

2.cheap labour cost. CHinese labour cost now is almost 3-4 times more than Indian's ,but it is still by far lower than developed economies such USA and West Europe.

3.enough well-educated and desciplined workers. CHinese workers are famous for hard-working and desciplined,while they are almost literated. India illterat rate is much higher ,and frankly speaking, most non-Chinese workers are not as desciplined and punctual as CHinese.

4.complete and full industry chains. it means that CHinese enterprises can gets their components,material ready at cheaper freight and stock cost. On the contary, India and other developing country have to import many components from other countries,which raises product cost greatly

5.decent infrastructures. Chinese infrastrcutre can shaddow USA,let alone developing countries. good infrastructure(road,seaports,airports,railways, HSR..etc) means fluent transport and less freight. For example,due to good infrastructure, the freight of one container from Beijing to Shanghai is surely less than that from New Delhi to Bombay,although it is much longer from Beijing to Shanghai.

6. reliable access to oversea resources...CHina has set up a reliable access to oversea resources such as ores ,oil..etc....
India can hardly acqure oversea resouces as many as CHines does now,because the resource on the earth is so limited and india has no enough hard cash to compete CHina.

1 and 2 can be replicated by nearly every despotic sh1thole in the world from North Korea to Zimbabwe. A nice pat and ultimately meaningless answer.

4, 5 and 6 come AFTER you gain the seed capital to actually to create those things. They arrive only because of Western money (including the FDI of Japan, Taiwan, HK and the Far East which ultimately comes from the Western market they all serve.)

3? Possibly created after the commie revolution but even here you can argue that education in the PRC was backwards until FDI. I can't see how the "Little Red Book" and the sh1tty thoughts of Uncle Mao did anything for a viable workforce.

Again pat and meaningless answers.

[chola]

Sri,

How did the quality hold up?

Quality is pretty good. Till now (not even a month). But the stuff ordered are generally respected companies with mfg in China. We don't foresee any QC issues cropping up.

You should never see the success of manufacturing in China as "Chinese." This is the result of global manufacturing from the MNCs. The standards are set by the western marketplace. Everything that the PRC exports to the West is done according to those standards which is why no one can name a Chinese brand in spite of the fact that China makes everything under the sun. The successful part of the Chinese economy is nothing more than the extension of the Western global supply chain.

China would have collapsed under its own weight like the USSR if it were not for this. It is a lifeline to capital, jobs and modern practices. It was what transformed Japan and the Asian tigers.

[chola]

Anandk,

They already did. Wasn't that the whole point of the $23 Trillion and the fantastic growth in money supply? CPC money supply is greater than USA dollars by 300% per some reports. Folks have more renminbi than they know what to do with.
The question is why did it not trigger inflation.

That is what puzzles me as well. Maybe it is because of the high savings rate??

It really is one of the two big questions we should have for bothering with China on Bharat Rakshak at all (the other one is how we can profit from what is pretty much the largest market in the world that just so happens to have crappy local brands and who loves and trusts foreign products far more.)

How does the PRC end up being able to print money like a wealthy nation with a reserve currency like the US and Japan? A big piece of the answer has to come from being part of the global supply chain where the Yuan is not only backed by the $3T forex reserve but basically by every MNC in China.

It means if you have Yuans in Russia, Angola or Chile, you can exchange that for real products from basically every one of the Fortune 500 since they all have sites in the PRC.

If we could get here, we could do things far better than a communist anomaly. And I believe the chance is here once more with global manufacturing moving out of China just as it moved out of Japan and then the Asian Tigers.

[Liu]

It really is one of the two big questions we should have for bothering with China on Bharat Rakshak at all (the other one is how we can profit from what is pretty much the largest market in the world that just so happens to have crappy local brands and who loves and trusts foreign products far more.)

How does the PRC end up being able to print money like a wealthy nation with a reserve currency like the US and Japan? A big piece of the answer has to come from being part of the global supply chain where the Yuan is not only backed by the $3T forex reserve but basically by every MNC in China.

It means if you have Yuans in Russia, Angola or Chile, you can exchange that for real products from basically every one of the Fortune 500 since they all have sites in the PRC.

If we could get here, we could do things far better than a communist anomaly. And I believe the chance is here once more with global manufacturing moving out of China just as it moved out of Japan and then the Asian Tigers.

the postion of RMB roots from CHina's huge industry capacity,instead of 3T forex.

the notes without the endorsement of physical industry products is just useless $hit.
USD can be accepted alllover the world,because people are sure that they can change USD in their hand into physical industry products they need.

So is CHinese RMB.
CHina has global largest industry output capacity ,from food,clothes,house,household appliances to roads(railways, seaports..).
It means that people can buy anything they want with RMB,because RMB is endorsed by Chinese huge industry capacity.

[Liu]

^^^^^
What you are saying is that India has not experienced land grabbing on a national scale where a party assigns itself the privilege to own land without paying any compensation to the original owners. We do not want such types of reforms. The correct term for such a process is called stealing.

the redistribution of land ownership, whatever you call it( land reform, revolution , Enclosure movement or others) is one of most precondition for industrilazition and modernizaiton.

1. it ( by depriving with force or by buying with money) make land lords class hand out their land and industry enterprise can acquire necessory land for plants and the government can acquire enough land for infrastructure upgrade.

Great Britain finished it by "Enclosure Movement" , Japan, S.korea and Taiwan finished it by semi-forcefully "land_buying by Government. PRC and other Soviet did it by "land reform. those are all one of ways to "the redistribution of land ownership"


2.it turns millions of peasants into industry workers and provide enough cheap labour for industriazlition...
since peasants lose land, they have to enter into urban area and work as industry workers..

3. it turns some of "land lord" callss into industry entrepreneurs....
after selling their land to the government (in Japan, Taiwan and S.korea), those former "land lord" have to invest on industry and it provided the initial fund for industrialzaiton.

As a whole,"land reform" might be miserable to some people, some familty or even some class,bu it indeed benefit the whole country in a long run.
the industriazlation of UK,France,USSR,CHina,Japan,Korea and Taiwan all prove it.

[Anand K]

it is wrong that you are comparing Japan in 1980s and CHina today.

Japan in 1980s are a fully urbanized country but CHina today is just a semi-urbanized country.

almost 50% of CHinese still live in rural area...those CHinese people will move into urban area and such urbanization just means that "ghost town" today in CHina may become prosperous downtown in 2 years...the "HSr to nowhere" may become a wisely-planned projects for "metropolics tomorrow..

you can not understand it,just because you have never experience such a rapid urbanization tide as CHina.

Not comparing to 80s Japan..... Japan urbanized to a high extent by the end of the Tokugawa period itself! The Tokugawa Shogunate did not modernize (in the full sense of the word) but they urbanized highly by 1850s and this made the economic and social modernizations of the late Tokugawa, the Meiji Restoration and subsequent periods much easier.
The urbanization of Tokugawa Japan took place over a full century - the social and economic effects OTOH took just a few decades to materialize. The important thing to remember is how the social shock in the urbanization period was handled slowly and steadily over the 250+ years of Tokugawa rule and the Meiji Era - the population control, the graded "prescribed education" systems like Rangaku, the marriage and childbearing permits, the abortions, the restricted and guided relocations and even power structure controls like the "Double Attendance System". All this sound familiar?
You guys ain't doing anything imaginative or revolutionary.... and by the looks of it, a lot of it's plain ham-handed in trying to compress timelines and zeitgeist straight out the Pakled Preamble. Japan had smaller population and smaller area to focus on, the culture made them extra-extra servile to leadership, nobdy wanted to return to the Age of War etc etc. Lots of innate advantages they had. But you are trying to replicate THIS model, and not the American one actually, using coercion, 360 degree control and bread-n-circuses primarily. Congratulations! Let's see if this pays off in the future.

We boor brown Indians may not have seen Pudongs rise out of thin air overnight or other grand architectural statements; it's because our model is different. Like, we ain't led by genocidal despots for one. Corrupt/lethargic/careless maybe.... but surely not intentionally genocidal or cynical with a huge "face" problem. Unlike China does/did we cannot force directly or indirectly huge populations (wide demographic variations and too many interest groups too) to relocate, adopt certain lifestyles, discard tradition overnight and take up new jobs. That is, in effect artificially compressing the normal timeline. For the better of for the worse, we as a people are also in "Chalta Hai, Boss!" gear.
Let's see.....

[Anand K]

A believable estimate of China's Gold hoard is 10,000T, long exceeded the official U.S. reserves - last year itself saw over 2,000T (?) import. And don't go by the quantity that flowed in through HK and hence traceable. Officially they have only about 1500 tonnes!
That is, driving up the global preference for gold as reserves instead of Dollar/Euro, which would surely aid the attractiveness and allure of the currency of a nation - which is highly export oriented by the way. Perhaps this is one reason they are betting on the huge RMB injection. The newly minted money circulated among the nations can safely return back to the Chicom Banks as payments or deposits. Maybe, they can even have a Gold backed RMB for an encore.... if they have what, about 20,000T gold reserves?

Anyway, IMO this has gone way too far right now; soon you will have a situation which is worse than the European situation - new real-collateral backing up the freshly printed RMB will be Rare Earths or Copper or Tungsten.

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

Added Later:

China's hard asset kitty also includes beyond very obvious oil, water also. They already have exclusive rights (?) to freshwater from lakes and glaciers in Patagonia (on a much larger scale than the Qataris do) for starters. Their moves in Tibet and PoK are also towards securing this no-compromise resource. Wish Kgoan or SS were here to see what the PRC is doing in narcotics/precious stones/high value art & artifacts too. Remember the old Balance of Wealth Thread?