PRC Economy and Industry: News and Discussions

[Theo_Fidel]

No one is immune to the laws of economics.

The Chinese have convinced themselves that they are. They believe they are the new economic model. Plain Hubris.

This year for the first time China will consume more coal that rest of the world put together. Think about that for a moment.

Last year China started producing more steel than the rest of the planet put together.

Since 2006 China has produced and consumed more concrete than the rest of the world put together.

Does anyone really think this can go on ad infinitum.

Above all I would remind the Chinese that they have been rich before and lost it all.

Don't underestimate the power of the CPC to squander the wealth.

[Rishirishi]

Hehe, anyway there is an Indian friend who is so kind to give me a YEAR for his prediction, not like all those "India will" stories.

I don't think we need to wait until 2014.
- I bet the Chinese currency will not go up 30% in this year. Maybe 5%, or 7%, but never 30%
- I bet China can develop faster in 2010 than in 2009

And seems you are exciting the Chinese inflation of 1.9%? What is the corresponding data of India then?

There is a limit to trade disbalance. So far the Party has had an obsession to collect wealth and create a demand for its products worldwide. The rest of the world is happy to purchase Chinease goods below cost. But for how long can this go on?

Secondly China needs to move away from cheap labour intensive products to higher value addition, if it wants its citizens to have a good lifestyle.

[abhischekcc]

China's banks are to spend USD 1.1 trillion in 2010 to 'stimulate' the economy. Given the amount of money they pour into the economy, the growth rate is quite low.

[abhischekcc]

Remember the Chinese claim that internet use grew 30% (IIRC) in the last year when google threatened to pull of the country?

Well, take a look at this http://www.comscore.com/Press_Events/Press_Releases/2010/1/Global_Search_Market_Grows_46_Percent_in_2009, which says that search growth in China was 13%, the slowest among the top ten countries.


These 2 statistics follow a usual pattern - any stats that can be confirmed by an independent non-Chinese source show that China's growth is unremarkable. Any chinese stat that cannot be confirmed by others 'show' that China is next best thing after sliced bread.

Same with stats which show China is the largest car market in the world (unverifiable), while fuel sales are flat (verifiable).

Geez, the brazen-ness reminds me of ... Pakistan. I guess this is one thing that the Pakis taught their taller than oceans and deeper than oceans friend.

[Hari Seldon]

Same with stats which show China is the largest car market in the world (unverifiable), while fuel sales are flat (verifiable).

Well, its slight misunderstanding onlee, abcc saar.

Seems cheena counts, recounts and accounts production as ==sales. IOW, if leeloo motors produces 10000 cars, then it has sold 10000 cars only.

Rumor has it that SOEs are piling up cars in their parking lots, all claimed as sales only. Jai Hu, Jai Hu!

Geez, the brazen-ness reminds me of ... Pakistan. I guess this is one thing that the Pakis taught their taller than oceans and deeper than oceans friend.

Hah, these pakis and cheenese are bachchas at this game. The grand old unkil has shown (and thereby sanctified) the way. The gleat famouse FASB FAS 157 rule aka 'mark to myth' that allows banks to carry toxic assets at what the banks (and not the open market) think they are worth is the mother of all accounting fraud in recent times. The amount of fraudulent assets these worthies carry dwarfs both cheense manipulated GDP + paki fantasized GDP put together only. Jai Hu! Jaihad hu!

[vera_k]

Rumor has it that SOEs are piling up cars in their parking lots, all claimed as sales only.

If such massive fakery is going on, these parking lots should be visible on Google Earth. I couldn't find any reports on the internet of such lots.

[Virupaksha]

If such massive fakery is going on, these parking lots should be visible on Google Earth.

Google Earth delays its photos by atleast one to two years by policy so as not to be the easiest tool for terrorists.

[abhischekcc]

If they have to just park the cars somewhere, why produce it at all? Just report X+Y cars produced to make comrade CEO happy onlee.

[vina]

Hmm. We had Chinese Commie apologists quoting about the "best Olympics ever" that was held at Beijing.

Was it the best because of the lip synchining, or the fact that the entire broadcast, especially of the opening ceremony fireworks was pre recorded and "digitally enhanced" and mixed with the feed (all is fair in love and war of course).

But those are trifles.. How about the deep human cost that went into the olympics. Entire neighborhoods were torn down, huge swathe of industries shut down in some 500- 700mile radius for a couple of weeks , tough regulations, crackdowns, everything , all of that just to "save face" and so that "foreign tourists" who land at the airports in Beijing and other places have the right "image" of China?. I already told folks here about it. How about looking at yourself in the mirror and see if you like it, rather than care about what "Foreign Tourists" and other Gwei Loh, think of you ?

How much more brutal than this can it gets. It seems that the entire Tibetan pouplation of Beijing was "Deported" (Hu-Kou has it's uses after all, doesn't it) and only now according to this article are Tibetans getting "permission" to trickle back into town.

Ah. But somehow, when a bureaucrat from Arunachal Pradesh applies for a visa, we are told he doesn't need one because he can travel anywhere in China becuase he is Tibetan stock/Chinese. Ah well, wonder what the Tibetans who were kicked out of Beijings because of "saving face" /"not pretty enough" / "trouble makers" will make out of that.

As the say, the moon is made of green cheese.

To end, let me quote Hari Seldon Guru.

Jai Hu

Very, very successful Olympics onree. Thank you. Thank you.

[Purush]

Here we go again....

http://news.bbc.co.uk/2/hi/asia-pacific/8478195.stm

Melamine-tainted milk products have been found on sale in China, more than a year after thousands of children became ill in a huge safety scandal.

Products made by three different firms were found to contain melamine and have now been removed from supermarkets in Guizhou province, officials say.

The companies involved in the latest recall blamed the contamination on milk powder they had bought as a raw material to add to their products, state media reported.

An official involved in the 2008 investigation told China Daily the powder may been part of that recalled batch which was still circulating on the market.

"There were still some leftovers in the dealers' hands that nobody cared about," said Wang Dingmian, former chairman of the Guangdong Provincial Dairy Association.

[amol.p]

Rumor has it that SOEs are piling up cars in their parking lots, all claimed as sales only.

If such massive fakery is going on, these parking lots should be visible on Google Earth. I couldn't find any reports on the internet of such lots.

This is really true...many companies just to show how many cars they churned out or sold...just do production and pile them off in interior areas. One of my friends working in TATA has told with qtrly results coming near they start 100% production one month in previous just to prop up the numbers and are parked in interior areas of Pune - banglore highway. Its not only the chinese that do it...everyone does....

[Shalav]

I'm not sure you have a good example there.

If you have worked in any manufacturing industry you would know the tremendous pressure to push as much inventory out the door during the last month of the FY in March. This applies to the production side (which is under pressure to increase productivity) and sales & marketing side which is under pressure to get their customers to order as much as possible. The problem with this is their customers are also trying to get their inventory down. Hence the pressure.

The idea is to reduce inventory as much as possible before the next FY. Finished goods which are in the godown are not counted as sold goods under any circumstances. This inventory of finished goods impacts the P&L statement negatively along with WIP inventory. Hence the drive to reduce inventory of both WIP and finished goods on hand before the close of the FY. Pressure from stockholders to improve performance is one of the main reasons for this.

Where this model differs from the Chinese model is

1. This is a once a year activity in India, and year around activity in China.
2. In India goods which are in the godown are not counted as sold; only goods which have been actually sold to customers and shipped before April 1 are counted as sold. In China - as I understand - goods once produced are counted as "sold goods" - even if they are lying in the manufacturer's godown.
3. In India the motive is to show higher profit to shareholders. In China the motive is show GDP growth.

[vina]

1. This is a once a year activity in India, and year around activity in China.

Umm. That is a quarterly activity. The pressure to clear out stuff and book sales before end of each quarter so that the quarterly numbers come selling of roses.

2. In India goods which are in the godown are not counted as sold; only goods which have been actually sold to customers and shipped before April 1 are counted as sold. In China - as I understand - goods once produced are counted as "sold goods" - even if they are lying in the manufacturer's godown.

Indian GAAP and US /IRSA GAAP are near equivalents of each other, the differences being in details in treatment of goodwill and probably pooling of interests is still there in Indian GAAP , but has been removed from the US GAAP (you have to account for all M&A by purchase method only by US GAAP).

However,the revenue recognition standards are exactly similar in principle (again some minor differences, which my colleagues at work (CAs all) get into details about, and which I dont because I am the "big picture" strategy guy), and that is you recognize revenue only when a sale has happened .

But that does not mean that you cant cheat. You can do "channel stuffing" ie, lean on the dealer and others in the supply chain to order more than what they demand they see warrant , so you can boost your quarterly numbers. That is really in the realm of revenue recognition "timing" manipulation which anyways corp managements have great discretion in managing. But you can do channel stuffing once, but cant continue doing it, because the entire supply chain is bloated with inventory and will break at some point (basically, inventory instead of lying around in your warehouse and hence "unsold", is pushed into the supply chain and hence "sold")

3. In India the motive is to show higher profit to shareholders. In China the motive is show GDP growth

Well in China the government "owns" everything so you can conflate GDP growth with "profits" . So it is largely equivalent.

However, the point is since there is no separation between, owners, shareholders and regulators, this can continue ad infinitum, until the entire thing collapses.

[Purush]

Link

China Bans Screenings Of 'Too Popular' Avatar

James Cameron's sci-fi blockbuster Avatar is to be banned from cinemas in China - despite breaking box office records in the country.

Non-3D versions of Avatar are to be pulled next week, in order to protect the nation's home grown films.

The country's censors ruled that the epic had become too dominant and also worried about its effect on audiences, according to reports.

"First, it has taken in too much money and has seized market share from domestic films," Hong Kong's Daily Apple said.

"Secondly, it may lead audiences to think about forced removal, and may possibly incite violence."

Some Chinese bloggers had already said parallels between the plight of the film's Na'vi creatures - who are forced to flee their homes - and Chinese people who have faced the threat of eviction would have raised concerns.

One wrote: "For audiences in other countries, such brutal eviction is something outside their imagining. It could only take place on another planet or in China.

Chipanda is so insecure....

[amit]

Link

China Bans Screenings Of 'Too Popular' Avatar

James Cameron's sci-fi blockbuster Avatar is to be banned from cinemas in China - despite breaking box office records in the country.

Non-3D versions of Avatar are to be pulled next week, in order to protect the nation's home grown films.

The country's censors ruled that the epic had become too dominant and also worried about its effect on audiences, according to reports.

"First, it has taken in too much money and has seized market share from domestic films," Hong Kong's Daily Apple said.

"Secondly, it may lead audiences to think about forced removal, and may possibly incite violence."

Some Chinese bloggers had already said parallels between the plight of the film's Na'vi creatures - who are forced to flee their homes - and Chinese people who have faced the threat of eviction would have raised concerns.

One wrote: "For audiences in other countries, such brutal eviction is something outside their imagining. It could only take place on another planet or in China.

Chipanda is so insecure....

Not the correct thread for this subject IMO but I've got to say that it scares me sh!t that the soon-to-be world's second largest economy, with the world's largest population and the world's biggest bank balance is ruled by a bunch of guys who think a Sc-Fi fantasy movie about 9-foot tall creatures with blue skin and large tails can be subversive for its population.

The combination of such paranoia and power for such an authoritarian regime can't be good for the world.

And yes now folks like Wrdos can come in a explain why nobody needs to be worried and hey Avatar is a crap movie anyway isn't it? It ain't made in China afterall?

Besides - of course - India is much worser off etc...

[JimmyJ]

Not sure if this is the correct thread, but still,
Ganging up on China
http://www.spacewar.com/reports/Walkers ... a_999.html

Dissatisfied with China on Indian exports, govt issues strong demarche
http://www.indianexpress.com/news/dissa ... e/569873/0

[Hari Seldon]

The combination of such paranoia and power for such an authoritarian regime can't be good for the world.

Nature's red in tooth and claw. Our quaint definitions of good and bad maynot pass its muster, I fear.

If PRC can demonstrate success (i.e. material prosperity) using its system, that automatically buys it acceptance, even respectability. Sounds corny, I know but the attribution of good things follow success not vice versa. Just like history is written by the victors, similarly cultural/systemic quality (superiority?) is also judged and recorded by the most prosperous. IMHO, of course.

Sure, even the Soviets seemed unbeatable a mere few decades ago etc. Success has to be sustained and consistent for this to happen. At the very least PRC system will have to outlast its rivals and be the last man standing. That is enough for its victory to be complete, perhaps.

[amit]

Hari,

Agree with you mostly. And here's Robert Samuelson ji's take on Global Dominance by ChinPanda. Pretty good reading of the situation me thinks.

Particularly these quotes:

Look elsewhere for the significance of the huge foreign exchange reserves. For starters, they confirm China's mercantilist trade policies. A country that practices mercantilism strives to increase exports at the expense of its trading partners. {And that includes US of A, something Samuelson ji should teach gushing US CEOs who see a pot of honey at the end of the Chinese rainbow} China has done this by keeping its currency, the renminbi (RMB), at an artificially low rate that gives its exports a competitive advantage on world markets. The resulting trade surpluses are huge -- even last year's, which were somewhat shrunken by the global slump.

Even if China had no trade surplus, its foreign exchange reserves would probably grow because it receives earnings on its existing reserves. These reserves serve China's other strategic purposes. They're used to invest in raw materials (oil, food, minerals) and important technologies around the world; or they buy political influence with foreign aid or favorable loans. In effect, China has a $2.4 trillion stash to use as it pleases. The irony: Despite complaints about big Treasury holdings, these holdings advance China's economic aims of job creation through exports and protection against scarcities of vital commodities. The underlying purpose is to bolster the government's grip on power by ensuring rapid economic growth. Granted, China is trying to generate more growth from domestic spending; still, it is promoting strong exports until that happens.

But what's good for China may not be good for the rest of the world, including the United States. It's not simply a redirection of economic power but a question of how that power will be used, consciously or unconsciously, to shape the global economic order.

Lopsided economic expansion poses many dangers. Already, China's huge reserves -- invested in U.S. bonds -- are cited as one reason for the low interest rates that brought on the financial crisis. The artificially depressed RMB hurts exports from developing countries and not just the United States, Europe and Japan. China grows at others' expense. The manipulation of trade subverts support elsewhere for open trading policies. For now, China has no desire to substitute the RMB for the dollar as the primary global currency. Its ambition is more sweeping: to create a world economy that serves China's interests and, only as an afterthought, anyone else's.

[Hari Seldon]

x-posting:
Sob story in the NYT unfolds.... kindly keep your hanky-pankys ready only. Tenku tenku.

As China Rises, Economic Conflict With West Rises Too

DAVOS, SWITZERLAND — As recently as 2008, when China was still an emerging economy eager to put its best foot forward for Western consumers, it lifted censorship on several Web sites before the Beijing Olympics. At the same time, it responded to entreaties from U.S. and European politicians, allowing its currency to appreciate against the dollar.

China is no longer emerging. It has emerged — sooner and more assertively than had been expected before the wrenching global financial crisis, which badly damaged all the established industrial powers, from the United States to Europe and Japan.

Yup. And the nyt joined the cnbc-ish mob in cheerleading PRC's harmonious rise only. Short term quarterly profits beckoned, I reckoned.

“China is the West’s greatest hope and greatest fear,” said Kristin Forbes, a former member of the White House Council of Economic Advisers and one of hundreds of top officials and executives flocking to this winter resort for the annual World Economic Forum, which is taking place Wednesday through Sunday.

“No one was quite ready for how fast China has emerged,” said Ms. Forbes, a professor at the Massachusetts Institute of Technology. “Now everyone is trying to understand what sort of China they will be dealing with.”

'no one could have foreseen it' sounds too much like the bromides and half-lies Umreeki Fed, regulators and economystics often tell themselves about the current meltdown. Truth is the inevitable was staring these worthies in the effing face all along and they were blind to it - just like they're being blind to TSPian perfidity again.

And here's exactly what I've been talking about - the challenger to the prevailing establishment consensus/conventional wisdom in very real terms:

And as developing countries everywhere look for a recipe for faster growth and greater stability than that offered by the now-tattered “Washington consensus” of open markets, floating currencies and free elections, there is growing talk about a “Beijing consensus.”

And that talk could well translate to belief and then, bhakti, who knows? Just like Marx was all talk in 1890 but soon became belief amongst this Bolshevik fringe and soon, bhakti for the second world, eh?

When the United States was snapping at the heels of the British empire, the global hegemon of the early 20th century, the situation caused plenty of friction, even though both countries spoke the same language, shared similar cultures and were liberal democracies.

China, in contrast, is a Confucian- Communist-capitalist hybrid under the umbrella of a one-party state {IOW, PRC is a fascist state. KIndly call a spade a spade, please!} that has so far resisted giving greater political freedom to a growing middle class. Now its ascendancy is about to set off what many officials and experts see as a backlash on both sides of the Pacific.{Why would there be any backlashes in prc, I wonder??}

Aah. But the business lobby will veto any tough action against PRC by the west, won't it?? Well, maybe. Maybe not.

Several foreign companies already complain that doing business in China has become more difficult. Lured until a few years ago by tax rates less than half of those applying to Chinese companies, executives now cite an increase in red tape and a growing number of “buy China” mandates from government procurement offices.

The standoff with Google has illustrated the difficulties foreign business faces in China. It has also starkly raised the question of who will have the upper hand in future negotiations.

“The operating environment is tougher than ever for Western companies,” said James McGregor, head of the government relations committee of the American Chamber of Commerce in China. “But unlike Google, most Western companies also need China more than ever.”

China is the biggest recipient of foreign direct investment in the world: 450 of the Fortune 500 companies have business presences there, and many of those still reeling at home are doing brisk business in China. “G.M. is hurting anywhere else, but here things are quite profitable,” Mr. McGregor said.

Business interests in China could make it harder for Western politicians to lash out. “It’s a situation the U.S. was in for a long time,” said Ms. Forbes, the M.I.T. professor. “Many people didn’t like U.S. policy, but you had to be in the U.S. market.”

If business executives are looking to China for its low manufacturing costs and sizable market, political leaders are studying a state perceived to have found a recipe for lifting millions out of poverty with fast growth, even if that means a stiff measure of domestic repression. “You hear more and more people talking about a Beijing consensus,” Ms. Forbes said.

And so it is set, the 'Beijing consensus' is then upon us. Hello, brave new world.

But what exactly is the Beijing consensus? Some see it as a form of economic management with greater government involvement that is on the rise across the world. Others interpret it to mean more strictly controlled capital markets, which have made a re-appearance even in previously open countries like Brazil. Policy makers in Malaysia and Dubai focus on replicating China’s special economic zones, which afford generous terms to foreign investors in manageable geographic areas.

Some suggest that China’s lack of democracy is an advantage in making unpopular but necessary changes. “It is more challenging for democratic systems because every day they come under public pressure and every short period they have to go back to the polls,” said Victor Chu, chairman of First Eastern Investment Group in Hong Kong, the largest direct investment firm in China. “China is lucky to have the ability to make long-term strategic decisions and then execute them clinically.”

And no, its not like asset bubble pops will undercut the PRC rise story, seems like...

Kenneth Rogoff, an economics professor at Harvard University who just spent two weeks in China, warns that the country will face its share of economic troubles in the years ahead. But that will not change the underlying trend, he said.
...
According to Mr. Rogoff, over the next four decades or so, the Chinese renminbi will gradually come to rival the dollar as the world’s leading reserve currency, making China’s response to its increasingly central role in the global economy critical.

The risk, Mr. Shambaugh of George Washington University said, is that “the world will be asking more and more of China but getting less and less in return.”{As if it isn't already}

A tad premature to celebrate the end of the dominant Western era perhaps but I can see that sunset happening in my lifetime, if I'm lucky. Nothing like a kick up the musharrafs of every neta and babu in what we call the 'free world' (yup that includes Yindia too) and PRC represents that kick in all its nastiness to shake things up a bit, eh?

[heech]

The similarities between China today and Japan in the 1980s may look ominous. But China’s boom is unlikely to give way to prolonged slump

Ah ! Good. So wrdos, as a good Chinese, you surely must be a betting man. Let us see you put your money where you mouth is! Put a bet.. How about even a token amount like say $10.

Lets bet on this "China's growth has crested. Going forward, it's average long run growth rates (say 5 year avg) is never going to be as good as what it was until 2010" ..

Go on.. Don't chicken out. Bet on it.

First of all, no policy maker inside of China could possibly desire a higher growth rate from 2010-2015, than the one it had in 2005-2010. Double-digit growth rates are *not* always desirable. I believe a good steady-state number for the next 5 years of development would be ~9% a year.

Second, no matter what that number is, I'm very confident it will be higher than India's growth rate. So, I'll bet you that China's growth rate from 2010-2015 will be higher than India's growth rate, despite the much higher base from which China is starting. I'll bet any amount you want on this proposition.

[vina]

First of all, no policy maker inside of China could possibly desire a higher growth rate from 2010-2015, than the one it had in 2005-2010. Double-digit growth rates are *not* always desirable. I believe a good steady-state number for the next 5 years of development would be ~9% a year.

Ah..If only wishes were horses. After all, man proposes, god disposes. Maybe commies think that they are masters of the universe and can control all environmental factors and the "unk-unks" (unknown unknowns). So what you "desire" vs what actually happens could be radically different !

Second, no matter what that number is, I'm very confident it will be higher than India's growth rate. So, I'll bet you that China's growth rate from 2010-2015 will be higher than India's growth rate, despite the much higher base from which China is starting. I'll bet any amount you want on this proposition.

Hmm. Nice proposition. India is a bit difficult coz it is a democracy and there is an election that is coming up in the middle and a hung parliament kind of think could whack the growth if there is big uncertainty. And we still have to get a couple of basics in place.

But you know what, I will take you up on this. I think the odds are on your side. But still odds I would bet on. Don't know what the financial year is in PRC. In India it is Apr 1 to Mar 30.

So I will take up your bet on this. From Apr,1 2010 to Apr 1 , 2015, India will have a higher REAL GDP growth rate on an average than China.

Terms of the bet are the same. If I lose, I pay $10 to BR and if you lose, you pay $10 to BR.

The only caveat I have is that if a reputed 3rd party, puts up a different GDP growth rate other than the Chinese govt, we will take those figures over the "official" numbers. We all know that the Chinese have the 8% cast in stone for "social stability" and all those reasons, so even if they go below that, I doubt they will report the real rate. So we cant let Shanghai stats get in the way. Other than that one point , I am game.

In fact, you can name the reputed 3rd party whose statistics on China both of us can agree on. I only ask that it not be in any way connected with the Chinese Govt/CPC and any "official" influence.

[wrdos]

- I bet China can develop faster in 2010 than in 2009

Come on. You are an engineer. A one year data is just that, a data point. You cant draw any trend analysis.

Let us look at a trend analysis, starting from today. Let us compare the next 5 years say with the previous 5 years.

The bet is this . I bet $10 on this.

If over the next 5 years the avg GDP growth rate of China (ie 2010 to 2015) is less than the previous 5 years (2010 to 2005), then I win , (or for that matter any 5 year period starting from 1985) and wrdos loses. So wrdos will contribute $10 towards Bharat Rakshak .

If over the next 5 years the avg GDP growth rate of China (ie 2010 to 2015) is HIGHER than the previous 5 years (2010 to 2005) the I lose, wrdos wins. So I (vina) will contribute $10 towards Bharat Rakshak.

Deal ?

Please don't take it personal, guy?
I am here for discussion and to learn the thought of Indian people, not for anything personal.

And what I learned is, some of the Indian friends are too too good at talking, hehe.

India will, would, can, should.......

after 10 or 20 or 30 or 40, or 100 years....

like that.

[vina]

India will, would, can, should.......

after 10 or 20 or 30 or 40, or 100 years....

like that

.

You can do better than "like that" . Put your money where your mouth is and bet!.

After all, I did bet when "Heech" called (I think the odds are in his favor and against me), but I still went on and bet where I see a realistic chance.

If you are so convinced, then it is a no brainer. Go ahead, bet . Lets see.

[wrdos]

To tell the truth, I have no patience to debate the detail with you,
the definition of GDP, of YEAR, of ......

as i mentioned,

you are too gifted in every matter related to "talking"

India will, would, can, should.......

after 10 or 20 or 30 or 40, or 100 years....

like that

.

You can do better than "like that" . Put your money where your mouth is and bet!.

After all, I did bet when "Heech" called (I think the odds are in his favor and against me), but I still went on and bet where I see a realistic chance.

If you are so convinced, then it is a no brainer. Go ahead, bet . Lets see.

[Singha]

http://www.ft.com/cms/s/0/dc8393f4-fafa ... SID=google

The soap opera of China’s housing boom

By Geoff Dyer

Published: January 6 2010 20:05 | Last updated: January 6 2010 20:05

The most talked-about television programme in China at the moment is a soap opera called Snail House, which offers the viewer sex, corruption and political intrigue. Really, however, it is all about house prices.

One character becomes the mistress of a party official to help her buy a flat, while another young couple struggles unsuccessfully to raise the deposit for an apartment in a city that looks suspiciously like Shanghai. The series struck such a raw nerve that the censors took it off the air at the end of last year, although that has not stopped it becoming a big online hit.

The success of Snail House says something important about the popular mood in China today. While much of the rest of the world is in awe of China’s rapid recovery, the programme tapped into the mounting wave of unease about the sky-rocketing cost of apartments in many cities. Urban Chinese complain loudly about becoming “mortgage slaves”.

The house-price angst is fuelling fears among investors that China’s super-charged lending boom last year is stoking a real estate bubble that will eventually burst and derail the economy.

Indeed, there is a whiff of Dubai about the Chinese property market at the moment. In Tianjin, a city two hours from Beijing, a developer is starting work on a vast project of luxury villas, built in clusters named after continents, which form the shape of a world map. If that does not sound familiar, nothing screams Dubai more than the 7-star hotel and indoor ski slope that are also part of the plans. (In defence of the skiing, it was -11°C in Tianjin on Wednesday, compared to Dubai’s 23°C.)

There are plenty of alarming statistics to back up the anecdotes. According to Knight Frank, average prices for new homes in the year to November rose by 68 per cent in Shanghai, 66 per cent in Beijing and 51 per cent in Shenzhen. The China Daily noted this week that in terms of house prices as a proportion of incomes, China is now the most expensive place in the world.

That said, anyone predicting problems in Chinese property needs to consider some pretty strong fundamentals underpinning the market. In recent years, incomes have mostly risen faster than house prices, and homeowner debt levels are low.

Then there is urbanisation. According to the State Council, as many as 400m people could move to cities over the next two decades – which works out, by the way, at 322 Dubais. It is hard to lose too much sleep, say the optimists, about a collapse in a property market facing that sort of potential demand.

But there is one factor that makes even property bulls pause for thought: the acres of empty flats in high-end compounds in many Chinese cities. Patrick Chovanec, an economist at Tsinghua University in Beijing, who bought an apartment in a new complex that was sold out but mostly empty, calls them “ghost-condos”. In the Pudong area of Shanghai in the evening there are whole blocks with almost no lights on. By one estimate, 587m sq m of apartments have been left empty by owners.

The reason, says Mr Chovanec, is that Chinese treat flats as “stores of value, like gold”. With few other investment options in a closed economy, they put a big chunk of savings into real estate. And it is this behaviour that is driving up house prices in plenty of cities and, if unchecked, could create a nasty bubble.

China needs not only to rebalance its economy, it also needs to rebalance its housing market, changing the incentives so that the investment goes into much-needed low-income housing and not to high-end flats that are unused. But this is where the politics get difficult.

The obvious solution is a property tax. Chinese pay a one-off transaction tax when they buy a house but nothing afterwards. With an annual tax, it would make less sense to keep empty properties. The juicy margins that developers get from top-end flats would be squeezed, forcing them to be build other types of property.

Indeed, plenty of Chinese economists see a property tax as a silver bullet to alter some of worst aspects of China’s increasingly unequal economy. It could create a sustainable source of income for local governments, which often rely on the one-off revenues from selling land they have taken from farmers. And it could provide a way to finance reforms of the household registration system, which denies health and education services to migrant workers in cities.

But while China has talked about a property tax for years, it has never been implemented. Some of the most powerful vested interests in China today are the tight webs of property developers and local government officials who both benefit from the current opaque set-up; Snail House had a lot to say about the corruption in some of these connections. A property tax would also shift the relationship between governed and government in a way that Beijing might find alarming – the only thing more middle-class than owning property is complaining about how local authorities spend tax revenues.

There is also the problem of implementation. A property tax might help to avoid a bigger bubble down the road, but if badly handled it could cause the market to slump. Helped by buoyant housing, Beijing has engineered a rapid economic recovery, but to sustain the rebound this year it faces some delicate political choices.

The writer is the FT’s China bureau chief

[Singha]

sounds to me like china is "realty boomtown bangalore 2000-2006" but on a scale of 100s of cities.

[rohitvats]

sounds to me like china is "realty boomtown bangalore 2000-2006" but on a scale of 100s of cities.

OT Alert:

Even during the realty boom in Bnglr, the bulk of sales happened in the price range as was within reach of the customer base. The problem came when the builders started selling entire projects@200-300 apts at prices which were achieved for only last 10% of the earlier phase. With prices more or less stuck in the same range(INR 2800+), the boom time is not going to come back..unless Bnglr becomes new El Dorado....and everyone discovers gold in his backyard....

Another important data point:Lot of purchases were by the genuine end users....say about 80%....the real problem arises in any RE Segment when the ratio of investors to end users is reversed...as happened in Mumbai in early 90s and Dubai recently.....

[amit]

One point which the otherwise informative FT article misses is financing.

Unless all those folks who are buying high end condos as investment and keeping them empty are doing so with cash down, then what about the servicing of the loans?

There are a lot of economies where, due to low interest rates in financial products, people buy houses for investment purposes after taking loans (at low interest rate). The calculation is that rental income would be above the interest rate and principal repayment; a yield in the region of 5 per cent is considered good investment. And hopefully property prices would appreciate and then a sell off at a later date gives a tidy profit.

However, if folks in China are buying high end apartments (FT speaks specifically about them) and keeping them empty (thus no rental income) then how are they servicing their loan components? That's a damn bad investment strategy I think. Over a five to 10 year period the loan servicing degrades the value of the property. [Note: The only way the Govt can prevent this is by keeping the housing bubble going with even more investment and thus ensuring that house prices become even more expensive - is that already happening?]

And if these flats are being bought without loans then it says a lot about the type of people who are buying them. Again note FT says that house prices as a proportion of income is the highest in the world in China. So it must be party officials and party linked businessmen who are buying the houses. They are the only ones with spare cash nowadays.

All said and done the idea of the "optimists" that folks from the rural hinterland would keep demand for housing going is laughable. Do they expect a rural farmer to buy these high end condos? There seems to be no effort to build low-cost housing - as per FT.

No disrespect to the Middle Kingdom and it's valiant warriors on this forum, but I think the situation is pretty messy out there. And no amount of papering over and valiant stand offs (like: Oh! China will always grow faster than India ) can keep the mess hidden.

[shaardula]

a related posting on npr today
http://www.npr.org/templates/story/stor ... =122990689

Just over three years ago, songwriter Liu Shuqiu protested China's high housing prices with a satirical song that urged "people who don't want to be slaves to their mortgages" to rise up.

The song used the tune of the Internationale, the anthem of international socialism, and the lyrics exhorted:

We should fight for houses, shatter the developers to pieces. Don't think we are obedient; the consequences will be serious if we get mad.

At the time, Liu says, no one could afford to buy apartments. "We thought prices were at their peak," he says. "We never could have known that over the years, it would get worse and worse."

New figures show that property sales in China jumped 75 percent last year as record levels of bank loans boosted purchases. Property prices rose by the fastest pace in 18 months in December, adding to fears of a real estate bubble. China has been trying to rein in speculation. One of the places with the fastest rise in prices is Shanghai. A new Shanghai apartment now costs 68 percent more than it did a year ago, according to Knight Frank, a commercial and residential property agency. In many other Chinese cities, prices rose by 40 percent, the agency says. Now, ordinary people fear they are being priced out of the market, while the luxury sector is soaring.

A Housing Bubble?
Even Chinese Premier Wen Jiabao acknowledges that property prices have risen too quickly. The government is trying to stop speculation by imposing resale taxes and raising down payments for second homes.

"The entities that are doing the leveraging in China are not individual people, but instead local government entities which have borrowed trillions from the banking system to develop real estate projects in the first place," says Victor Shih, an expert on China at Northwestern University.

Shih has been researching local governments' finances in China. He says, for example, that about half of the Shanghai government's revenues come from land sales. Because local governments need this income, he fears that measures to cool the real estate market might not work.

"Local governments now are forming their own real estate developers and would actually buy land from itself. As this becomes more common — and it is becoming very, very common — then local governments have a high stake in maintaining and increasing the value of real estate in their own jurisdiction," he says. "Therefore, I think local governments may intentionally ignore a lot of measures that are meant to deflate real estate prices."

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

'To Buy A Place In Shanghai'
Lu Zhengwei, a macroeconomic analyst at Fuzhou-based Industrial Bank, says prices are likely to continue going up in the medium term.

"Economists say the biggest factor in housing prices is demographics, and China's working population doesn't reach its peak until 2030," he says. "So I think China still has 15 or 20 years of growth, with some fluctuations because of macroeconomic controls."

Bubble or no bubble, official figures show 85 percent of Chinese can no longer afford to buy properties.

And Chinese authorities are worried the situation will create social instability.

That much is clear from the fate of a popular television soap opera, Dwelling Narrowness, which was pulled from the airwaves. The show charted two sisters' struggles to buy an apartment, with one of them eventually becoming the mistress of a corrupt official. The show coined a saying: "To buy a place in Shanghai means you are digging a grave for yourself, and burying your love."

[Hari Seldon]

China's runaway growth train on a dangerous course

Professor Yu Yongding says he is ''one of 50 well-known Chinese economists in China''. Some respected market economists say he has a better grasp of China's macro-economy than anybody else, full stop.

OK, creds established, I see.

"When a country has an investment rate over 50 per cent [of] GDP and rising, you say this country is not suffering from overcapacity! … are you serious?"

Yu has elaborated further on his views. He believes China is trapped in a cycle where constantly rising growth in investment is constantly increasing China's supply, but consumption has conspicuously failed to grow fast enough to absorb it. And so China is forced to increase investment in order to provide enough demand to absorb the previous round of increased supply, thus creating ever-widening cycles of oversupply. In this manner, the investment share of gross domestic product has increased from a quarter of GDP in 2001 to at least half. "There is sort of a chase - demand chasing supply and then more demand is needed to chase more supply," he says. "This is of course an unsustainable process."

From 2005 China's overcapacity problem had been "concealed" by ever-increasing net exports - but that strategy was interrupted by the financial crisis. Then came last year's globally unprecedented stimulus-investment binge, which might not have been so worrying if it were delivering things that people needed. But the Government's hand in resource allocation has grown heavier since the crisis without reforms to make officials more responsible for what they spend. "As a result of the institutional arrangements in China, local governments have an insatiable appetite for grandiose investment projects and sub-optimal allocation of resources," as Yu previously said, in his Richard Snape lecture for the Productivity Commission in November.

So there are now airports without towns, highways and high-speed railways running parallel, and towns where peasants are building houses for no reason other than to tear them down again because they know that will earn them more compensation when the local government inevitably appropriates their land. It's great for Australia in the short term, because we supply the materials, but it's unsustainable. One day China's overcapacity problem will become real.

That will be the Wile E. Coyote moment: when the resource-exporting world falls off a cliff.

Read it all.
Shall x-post also in the persp thread.

[heech]

Interesting that you think the "odds are in my favor", after all the skepticism aimed at Chinese development. I guess your skepticism of Indian development is even harsher.

How about, I pay $10 to BR if you win, and you pay $10 to China-Defense if I win:
http://www.china-defense.com/smf/

I have no idea where to find a GDP reporting source that's completely independent of the Chinese government. It simply doesn't exist, because no commercial entity could possibly provide that level of information. We can use World Bank or UN numbers, but those all come from the same place.

[paramu]

How about, I pay $10 to BR if you win, and you pay $10 to China-Defense if I win:
http://www.china-defense.com/smf/

Did Vina come to China-Defence or did you come to BR?

If Vina posts in China-Defence and puts the bet, I would agree with your demand. Otherwise, money should go to BR since it enabled you two to share ideas and put the bet here.

[amit]

X-Posting from the China news thread as this certainly has a lot of long-term economic implications

Ah! A great insight to the great education machine in the Middle Kingdom.

Education as a Path to Conformity

“Our education system is like ancient Sparta. Not physically, but mentally,” she said over coffee in a Beijing mall, where white marble sparkled under powerful lights. “Our children learn to calculate fast, play the piano, to do everything well. They have a lot of skills. But when they grow up they are lost, because no one ever asked them to think about what they want.”

Starting at 6, children are buried under an avalanche of studies until they graduate from high school. Twelve-hour days (less on weekends, but no days off) are common among first-graders. For his first Chinese New Year semester break, my 6-year-old son was given 42 pages of math and 42 pages of Chinese homework to complete in four weeks. The goal? Entrance to an elite college like Peking or Tsinghua University.

Yet once there, laziness can set in. Many students kick back, relying on their elite network to smooth a path through life. After the slog of the previous 12 years they feel they deserve a break. Perhaps they do. But it’s no incentive for academic brilliance.

To justify a study routine Hua calls “miserable,” parents have begun framing the system as imparting “kangya nengli,” or the ability to resist pressure. Tough is good, runs the logic. Only wimps can’t cope. At the bottom lies an intense fear of failure, often expressed thus: “He won’t even be able to find a wife.” There is no equivalent for a girl, but in a deeply patriarchal society that doesn’t matter.

Hua sees only mediocrity. “We don’t produce Bill Gates, or the Google guys, or Steve Jobs, because we don’t let these people grow. We don’t even come close. Everyone says Chinese people are clever. But where’s the evidence?”

There is little pressure to change. After all, isn’t this system producing a superficially impressive generation of people? Retail clerks memorize 11-digit mobile phone numbers in a flash and can recite orders faultlessly; perhaps they play the piano quite well, too. Yet, young Chinese struggle to think for themselves.

There is little pressure to change. After all, isn’t this system producing a superficially impressive generation of people? Retail clerks memorize 11-digit mobile phone numbers in a flash and can recite orders faultlessly; perhaps they play the piano quite well, too. Yet, young Chinese struggle to think for themselves. {Hear, Hear!}

Read it all folks. Next time you won't be surprised by the peculiar behaviour of our Chinese guests on BRF!

[Hari Seldon]

From one of the foremost outsider commentators inside PRC, Michael Pettis:
Why trade war is very likely to break out this year

Good article, nothing terribly new or original, just that thoughts previously dispersed have been collected and collated in a rather readable fashion only.

Dunno about others, but I recall these past 2 yrs moi repeatedly and confidently predicting a coming trade war only to be (mercifully) proved wrong everytime. Turns out mercy stock maybe running low.

For two years some commentators have been arguing that the contraction in global demand set off by the 2008 crisis would lead almost inevitably to a trade war, following much the same path that the world took in the 1930s. With anger already being expressed over disordered currency markets by several leaders before the meeting of the Group of Seven wealthy nations in Iqaluit, Canada, next month, it is beginning to look as if 2010 will be the year that proves them right.

Uh-oh. Can't say nobody saw this coming, esp with soaring unemployment numbers in the deficit-drowning west and the relentless investment activity in the surplus-constipated east.

As long as global demand surged, this was not a problem. But the global financial crisis set off a contraction in debt and of excess demand in overconsuming countries. China, like the US in 1930, has done everything it can to maintain its ability to export excess production, but Asian trade rivals and western importers, like Europe in 1930, are having none of it. The result is that trade is increasingly the centre of conflict, as it was after 1930. Since, as in 1930, each side has misunderstood or underestimated the others’ problems, it is hard to imagine trade disputes being resolved optimally. Escalating tensions, aggressive actions and reactions and a slower global recovery are more likely.

Good == b/w west and east. Undoubtedly nobody emerges smelling sweet outta this current mess. Yindia is too small to matter here, mercifully btw. west is west and now, east is prc.

One may ask, , "OK. There'll be a trade war. So what? better than a shooting war at least. No?"
No.
Globalization downsides are showing up all warts now. Nowhere to go and going nowhere only. A trade war, like in the 30s might well be a prelude to a shooting snatch-and-grab op only. And trade disruptions severely dent sector upon export dependent sector in economy after shrinking economy only. Yindia also took a export hit post 2008 - gems, texitiles, IT, labor - all our star export sectors were hit. Mercifully, exports aren't that big a % of our GDP as that for both west and east this time. But still, trade wars hurt.

This [trade war propsect] should cause alarm. A breakdown in trade will slow the global recovery and create hostility and mistrust between major economies, making a resolution of important global problems, including the environment, terrorism and nuclear proliferation, unlikely.

But since folk have been predicting trade wars since 2008, how come they are off by a whopping 2 yrs, eh? Well, turns out, the steriod rush of emergency massive, coordinated fiscal stimuli the world over certainly helped stave off cardiac arrest.

The massive monetary expansion engineered by the world’s major economies to protect themselves from the effects of the financial crisis has temporarily reduced the economic pain, but perhaps only at the cost of exacerbating the underlying imbalances. The US and European governments have postponed the necessary rise in savings. China has pumped money into increased production or into economically unviable infrastructure investment, which, since it must be paid for by China’s long-suffering consumers, will continue to inhibit consumption growth.

So what's at the core of the current trade war scare?

Beijing needs to understand that the world cannot continue indefinitely accepting policies, such as an undervalued exchange rate and excessively low financing costs, that force China’s consumers to subsidise its exporters. Washington and Brussels must understand that China cannot possibly rebalance quickly without causing massive disruptions to its own economy. Unless they expect Beijing willingly to engineer a transition that causes domestic manufacturing to collapse and unemployment to surge, the west cannot expect a quick resolution.
...
But it is also politically unacceptable for trade-deficit countries, especially in the developed west, to accept the high unemployment consistent with leakage of demand to trade-surplus countries. With 10 per cent US unemployment – and higher in some European countries – few will see the benefits of permitting domestic demand to be absorbed abroad to maintain employment in China.

Aha. Looks suspiciously like the J&K imbroglio. There's no common ground only. Let the games continue.

Finally, in conclusion:

Things will get worse before they get better.
...
Most importantly, if deficit countries demand structural change faster than surplus countries can manage, we will almost certainly finish with a nasty trade dispute that will slow the global recovery and poison relationships for years. Our new decade should not start out so badly.

shall x-post in the persp thread.

[abhischekcc]

A trade war will result in breakdown of talks about environment, IPR, human rights, and will lead to re-armament in most large countries.

[vina]

Yawwwwnn.. More signs that the major trading partners of the Chinese are not going to play sucker anymore.

China "hits back" at US over trade .

BR ahead of the curve as always.. Yeah folks. What we had thought of here has the highest probability of happening.

The Chinese thought that with the massive stimulus, they could ride out a one to to year slump of the world economy and then continue as business as usual (you cant continue the stimulus for ever beyond that without killing your self) by exporting it's way out of trouble even if the situation is just stable /case of tepid recovery in the other major global economies.

Looks like the others are going to say enough is enough and stop the flood of Chinese exports, especially where it is due to "non market" measures due to a rigged currency, tax give aways and unlimited credit lines at opaque interest rates and terms to "national champions".

Pull out the chairs, pop some corn and watch the fun folks. Yeah ChiMerica aint what you thought it was. It is actually the ChiMerica boxing match, like Muhammad Ali vs Joe Frazier.. Enjoy..

It aint going to be pretty. But then the

Millol Millol on the war, who is the failest of 'em arr.. ?
And the usual reply from the mirror - It's you my queen - China

story days are over. Maybe the soon , after the tlade wal is over, the mirror will reply "Yindia Snow White" . If that happens, just like the fury of witch just boiled over, I think we can see similar things.

Keep those weapons polished and oiled, the troops well exercised and on the alert folks. The dark clouds are gathering on the horizon.

[amol.p]

China Lodges WTO Complaint Over E.U. Shoe Tariff
....After US its EU's turn now...

China launched an unfair trade case against the European Union on Thursday, accusing the 27-nation bloc of imposing illegal duties on Chinese shoes, the World Trade Organization said.

The dispute concerns an EU decision in December to extend trade charges on Chinese and Vietnamese leather shoes by 15 months to protect European shoemakers.

China has complained about the antidumping duties, which it says are protectionist and damaging to free trade. European importers and retailers had also called for an end to the charges, saying they cost shoppers millions of euros (dollars) each year.

The EU charges ''violated relevant rules of the WTO and hurt the legitimate rights and interests of Chinese companies,'' said Yao Jian, a Chinese Commerce Ministry spokesman.

Beijing raised its concerns with Brussels in several rounds of negotiations, but the talks ''never solved the concerns of the Chinese side,'' Yao added.

Documents outlining China's case, which Vietnam did not participate in, weren't immediately available.........

However, shop owners and some shoe brands say they are the real victims because the charges forced them to pay more for the vast number of shoes now made in China.

''Ironically, the measure hurts European business and consumers the most,'' said the European Footwear Alliance, which represents Timberland, Ecco, Hush Puppies and Adidas, and estimates that EU consumers and businesses could lose hundreds of millions of euros through 2011.

EU officials say China is guilty of ''uncompetitive behavior,'' causing significant harm to EU manufacturers, which employ 260,000 people in Europe.

http://www.nytimes.com/aponline/2010/02 ... f=business

[svinayak]

Chinese are learning about India

The Colonial Legacy - Myths and Popular Beliefs

http://bbs.chinadai ly.com.cn/ viewthread. php?gid=2&tid=553936&page=26

While few educated South Asians would deny that British Colonial rule was detrimental to the interests of the common people of the sub-continent - several harbor an illusion that the British weren't all bad. Didn't they, perhaps, educate us - build us modern cities, build us irrigation canals - protect our ancient monuments - etc. etc. And then, there are some who might even say that their record was actually superior to that of independent India's! Perhaps, it is time that the colonial record be retrieved from the archives and re-examined - so that those of us who weren't alive during the freedom movement can learn to distinguish between the myths and the reality.

Literacy and Education
Several Indians are deeply concerned about why literacy rates in India are still so low. So in the last year, I have been making a point of asking English-speaking Indians to guess what India's literacy rate in the colonial period might have been. These were Indians who went to school in the sixties and seventies (only two decades after independence) - and I was amazed to hear their fairly confident guesses. Most guessed the number to be between 30% and 40%. When I suggested that their guess was on the high side - they offered 25% to 35%. No one was prepared to believe that literacy in British India in 1911 was only 6%, in 1931 it was 8%, and by 1947 it had crawled to 11%! That fifty years of freedom had allowed the nation to quintuple it's literacy rate was something that almost seemed unfathomable to them. Perhaps - the British had concentrated on higher education ....? But in 1935, only 4 in 10,000 were enrolled in universities or higher educational institutes. In a nation of then over 350 million people only 16,000 books (no circulation figures) were published in that year (i.e. 1 per 20,000).

Urban Development
It is undoubtedly true that the British built modern cities with modern conveniences for their administrative officers. But it should be noted that these were exclusive zones not intended for the "natives" to enjoy. Consider that in 1911, 69 per cent of Bombay's population lived in one-room tenements (as against 6 per cent in London in the same year). The 1931 census revealed that the figure had increased to 74 per cent - with one-third living more than 5 to a room. The same was true of Karachi and Ahmedabad. After the Second World War, 13 per cent of Bombay's population slept on the streets. As for sanitation, 10-15 tenements typically shared one water tap!

Yet, in 1757 (the year of the Plassey defeat), Clive of the East India Company had observed of Murshidabad in Bengal: "This city is as extensive, populous and rich as the city of London..." (so quoted in the Indian Industrial Commission Report of 1916-18). Dacca was even more famous as a manufacturing town, it's muslin a source of many legends and it's weavers had an international reputation that was unmatched in the medieval world. But in 1840 it was reported by Sir Charles Trevelyan to a parliamentary enquiry that Dacca's population had fallen from 150,000 to 20,000. Montgomery Martin - an early historian of the British Empire observed that Surat and Murshidabad had suffered a similiar fate. (This phenomenon was to be replicated all over India - particularly in Awadh (modern U.P) and other areas that had offered the most heroic resistance to the British during the revolt of 1857.)

The percentage of population dependant on agriculture and pastoral pursuits actually rose to 73% in 1921 from 61% in 1891. (Reliable figures for earlier periods are not available.)

In 1854, Sir Arthur Cotton writing in "Public Works in India" noted: "Public works have been almost entirely neglected throughout India... The motto hitherto has been: 'Do nothing, have nothing done, let nobody do anything.... ." Adding that the Company was unconcerned if people died of famine, or if they lacked roads and water.

Nothing can be more revealing than the remark by John Bright in the House of Commons on June 24, 1858, "The single city of Manchester, in the supply of its inhabitants with the single article of water, has spent a larger sum of money than the East India Company has spent in the fourteen years from 1834 to 1848 in public works of every kind throughout the whole of its vast dominions."

Irrigation and Agricultural Development
There is another popular belief about British rule: 'The British modernized Indian agriculture by building canals'. But the actual record reveals a somewhat different story. " The roads and tanks and canals," noted an observer in 1838 (G. Thompson, "India and the Colonies," 1838), ''which Hindu or Mussulman Governments constructed for the service of the nations and the good of the country have been suffered to fall into dilapidation; and now the want of the means of irrigation causes famines." Montgomery Martin, in his standard work "The Indian Empire", in 1858, noted that the old East India Company "omitted not only to initiate improvements, but even to keep in repair the old works upon which the revenue depended."

The Report of the Bengal Irrigation Department Committee in 1930 reads: "In every district the Khals (canals) which carry the internal boat traffic become from time to time blocked up with silt. Its Khals and rivers are the roads end highways of Eastern Bengal, and it is impossible to overestimate the importance to the economic life of this part of the province of maintaining these in proper navigable order ....... " "As regards the revival or maintenance of minor routes, ... practically nothing has been done, with the result that, in some parts of the Province at least, channels have been silted up, navigation has become limited to a few months in the year, and crops can only be marketed when the Khals rise high enough in the monsoon to make transport possible".

Sir William Willcock, a distinguished hydraulic engineer, whose name was associated with irrigation enterprises in Egypt and Mesopotamia had made an investigation of conditions in Bengal. He had discovered that innumerable small destructive rivers of the delta region, constantly changing their course, were originally canals which under the English regime were allowed to escape from their channels and run wild. Formerly these canals distributed the flood waters of the Ganges and provided for proper drainage of the land, undoubtedly accounting for that prosperity of Bengal which lured the rapacious East India merchants there in the early days of the eighteenth century.. He wrote" Not only was nothing done to utilize and improve the original canal system, but railway embankments were subsequently thrown up, entirely destroying it. Some areas, cut off from the supply of loam-bearing Ganges water, have gradually become sterile and unproductive, others improperly drained, show an advanced degree of water-logging, with the inevitable accompaniment of malaria. Nor has any attempt been made to construct proper embankments for the Gauges in its low course, to prevent the enormous erosion by which villages and groves and cultivated fields are swallowed up each year."

"Sir William Willcock severely criticizes the modern administrators and officials, who, with every opportunity to call in expert technical assistance, have hitherto done nothing to remedy this disastrous situation, from decade to decade." Thus wrote G. Emerson in "Voiceless Millions," in 1931 quoting the views of Sir William Willcock in his "Lectures on the Ancient System of Irrigation in Bengal and its Application to Modern Problems" (Calcutta University Readership Lectures, University of Calcutta, 1930)









Modern Medicine and Life Expectancy
Even some serious critics of colonial rule grudgingly grant that the British brought modern medicine to India. Yet - all the statistical indicators show that access to modern medicine was severely restricted. A 1938 report by the ILO (International Labor Office) on "Industrial Labor in India" revealed that life expectancy in India was barely 25 years in 1921 (compared to 55 for England) and had actually fallen to 23 in 1931! In his recently published "Late Victorian Holocausts" Mike Davis reports that life expectancy fell by 20% between 1872 and 1921.

In 1934, there was one hospital bed for 3800 people in British India and this figure included hospital beds reserved for the British rulers. (In that same year, in the Soviet Union, there were ten times as many.) Infant mortality in Bombay was 255 per thousand in 1928. (In the same year, it was less than half that in Moscow.)

Poverty and Population Growth
Several Indians when confronted with such data from the colonial period argue that the British should not be specially targeted because India's problems of poverty pre-date colonial rule, and in any case, were exacerbated by rapid population growth. Of course, no one who makes the first point is able to offer any substantive proof that such conditions prevailed long before the British arrived, and to counter such an argument would be difficult in the absence of reliable and comparable statistical data from earlier centuries. But some readers may find the anecdotal evidence intriguing. In any case, the population growth data is available and is quite remarkable in what it reveals.

Between 1870 and 1910, India's population grew at an average rate of 19%. England and Wales' population grew three times as fast - by 58%! Average population growth in Europe was 45%. Between 1921-40, the population in India grew faster at 21% but was still less than the 24% growth of population in the US!

In 1941, the density of population in India was roughly 250 per square mile almost a third of England's 700 per square mile. Although Bengal was much more densely inhabited at almost 780 per square mile - that was only about 10% more than England. Yet, there was much more poverty in British India than in England and an unprecedented number of famines were recorded during the period of British rule.

In the first half of the 19th century, there were seven famines leading to a million and a half deaths. In the second half, there were 24 famines (18 between 1876 and 1900) causing over 20 million deaths (as per official records). W. Digby, noted in "Prosperous British India" in 1901 that "stated roughly, famines and scarcities have been four times as numerous, during the last thirty years of the 19th century as they were one hundred years ago, and four times as widespread." In Late Victorian Holocausts, Mike Davis points out that here were 31(thirty one) serious famines in 120 years of British rule compared to 17(seventeen) in the 2000 years before British rule.

Not surprising, since the export of food grains had increased by a factor of four just prior to that period. And export of other agricultural raw materials had also increased in similar proportions. Land that once produced grain for local consumption was now taken over by former slave-owners from N. America who were permitted to set up plantations for the cultivation of lucrative cash crops exclusively for export. Particularly galling is how the British colonial rulers continued to export foodgrains from India to Britain even during famine years.

Annual British Government reports repeatedly published data that showed 70-80% of Indians were living on the margin of subsistence. That two-thirds were undernourished, and in Bengal, nearly four-fifths were undernourished.

Contrast this data with the following accounts of Indian life prior to colonization: -

" ....even in the smallest villages rice, flour, butter, milk, beans and other vegetables, sugar and sweetmeats can be procured in abundance .... Tavernier writing in the 17th century in his "Travels in India".

Manouchi - the Venetian who became chief physician to Aurangzeb (also in the 17th century) wrote: "Bengal is of all the kingdoms of the Moghul, best known in France..... We may venture to say it is not inferior in anything to Egypt - and that it even exceeds that kingdom in its products of silks, cottons, sugar, and indigo. All things are in great plenty here, fruits, pulse, grain, muslins, cloths of gold and silk..."

The French traveller, Bernier also described 17th century Bengal in a similar vein: "The knowledge I have acquired of Bengal in two visits inclines me to believe that it is richer than Egypt. It exports in abundance cottons and silks, rice, sugar and butter. It produces amply for it's own consumption of wheat, vegetables, grains, fowls, ducks and geese. It has immense herds of pigs and flocks of sheep and goats. Fish of every kind it has in profusion. From Rajmahal to the sea is an endless number of canals, cut in bygone ages from the Ganges by immense labour for navigation and irrigation."

The poverty of British India stood in stark contrast to these eye witness reports and has to be ascribed to the pitiful wages that working people in India received in that period. A 1927-28 report noted that "all but the most highly skilled workmen in India receive wages which are barely sufficient to feed and clothe them. Everywhere will be seen overcrowding, dirt and squalid misery..."

This in spite of the fact that in 1922 - an 11 hour day was the norm (as opposed to an 8 hour day in the Soviet Union.) In 1934, it had been reduced to 10 hours (whereas in the Soviet Union, the 7 hour day had been legislated as early as in 1927) What was worse, there were no enforced restrictions on the use of child labour and the Whitley Report found children as young as five - working a 12 hour day.

Ancient Monuments
Perhaps the least known aspect of the colonial legacy is the early British attitude towards India's historic monuments and the extend of vandalism that took place. Instead, there is this pervasive myth of the Britisher as an unbiased "protector of the nation's historic legacy".

R.Nath in his 'History of Decorative Art in Mughal Architecture' records that scores of gardens, tombs and palaces that once adorned the suburbs of Sikandra at Agra were sold out or auctioned. "Relics of the glorious age of the Mughals were either destroyed or converted beyond recognition..". "Out of 270 beautiful monuments which existed at Agra alone, before its capture by Lake in 1803, hardly 40 have survived".

In the same vein, David Carroll (in 'Taj Mahal') observes: " The forts in Agra and Delhi were commandeered at the beginning of the nineteenth century and turned into military garrisons. Marble reliefs were torn down, gardens were trampled, and lines of ugly barracks, still standing today, were installed in their stead. In the Delhi fort, the Hall of Public Audience was made into an arsenal and the arches of the outer colonnades were bricked over or replaced with rectangular wooden windows."

The Mughal fort at Allahabad (one of Akbar's favorite) experienced a fate far worse. Virtually nothing of architectural significance is to be seen in the barracks that now make up the fort. The Deccan fort at Ahmednagar was also converted into barracks. Now, only its outer walls can hint at its former magnificence.

Shockingly, even the Taj Mahal was not spared. David Carroll reports: "..By the nineteenth century, its grounds were a favorite trysting place for young Englishmen and their ladies. Open-air balls were held on the marble terrace in front of the main door, and there, beneath Shah Jahan"s lotus dome, brass bands um-pah-pahed and lords and ladies danced the quadrille. The minarets became a popular site for suicide leaps, and the mosques on either side of the Taj were rented out as bungalows to honeymooners. The gardens of the Taj were especially popular for open-air frolics....."

"At an earlier date, when picnic parties were held in the garden of the Taj, related Lord Curzon, a governor general in the early twentieth century, "it was not an uncommon thing for the revellers to arm themselves with hammer and chisel, with which they wiled away the afternoon by chipping out fragments of agate and carnelian from the cenotaphs of the Emperor and his lamented Queen." The Taj became a place where one could drink in private, and its parks were often strewn with the figures of inebriated British soldiers..."

Lord William Bentinck, (governor general of Bengal 1828-33, and later first governor general of all India), went so far as to announce plans to demolish the best Mogul monuments in Agra and Delhi and remove their marble facades. These were to be shipped to London, where they would be broken up and sold to members of the British aristocracy. Several of Shahjahan's pavilions in the Red Fort at Delhi were indeed stripped to the brick, and the marble was shipped off to England (part of this shipment included pieces for King George IV himself). Plans to dismantle the Taj Mahal were in place, and wrecking machinery was moved into the garden grounds. Just as the demolition work was to begin, news from London indicated that the first auction had not been a success, and that all further sales were cancelled -- it would not be worth the money to tear down the Taj Mahal.

Thus the Taj Mahal was spared, and so too, was the reputation of the British as "Protectors of India's Historic Legacy" ! That innumerable other monuments were destroyed, or left to rack and ruin is a story that has yet to get beyond the specialists in the field.





http://bbs.chinadai ly.com.cn/ misc.php? action=viewratin gs&tid=553936&pid=1594272



India and the Industrial Revolution
Perhaps the most important aspect of colonial rule was the transfer of wealth from India to Britain. In his pioneering book, India Today, Rajni Palme Dutt conclusively demonstrates how vital this was to the Industrial Revolution in Britain. Several patents that had remained unfunded suddenly found industrial sponsors once the taxes from India started rolling in. Without capital from India, British banks would have found it impossible to fund the modernization of Britain that took place in the 18th and 19th centuries.

In addition, the scientific basis of the industrial revolution was not a uniquely European contribution. Several civilizations had been adding to the world's scientific database - especially the civilizations of Asia, (including those of the Indian sub-continent) . Without that aggregate of scientific knowledge the scientists of Britain and Europe would have found it impossible to make the rapid strides they made during the period of the Industrial revolution. Moreover, several of these patents, particularly those concerned with the textile industry relied on pre-industrial techniques perfected in the sub-continent. (In fact, many of the earliest textile machines in Britain were unable to match the complexity and finesse of the spinning and weaving machines of Dacca.)

Some euro-centric authors have attempted to deny any such linkage. They have tried to assert that not only was the Industrial Revolution a uniquely British/European event - that colonization and the phenomenal transfer of wealth that took place was merely incidental to it's fruition. But the words of Lord Curzon still ring loud and clear. The Viceroy of British India in 1894 was quite unequivocal, "India is the pivot of our Empire .... If the Empire loses any other part of its Dominion we can survive, but if we lose India the sun of our Empire will have set."

Lord Curzon knew fully well, the value and importance of the Indian colony. It was the transfer of wealth through unprecedented levels of taxation on Indians of virtually all classes that funded the great "Industrial Revolution" and laid the ground for "modernization" in Britain. As early as 1812, an East India Company Report had stated "The importance of that immense empire to this country is rather to be estimated by the great annual addition it makes to the wealth and capital of the Kingdom....."

Unfair Trade
Few would doubt that Indo-British trade may have been unfair - but it may be noteworthy to see how unfair. In the early 1800s imports of Indian cotton and silk goods faced duties of 70-80%. British imports faced duties of 2-4%! As a result, British imports of cotton manufactures into India increased by a factor of 50, and Indian exports dropped to one-fourth! A similar trend was noted in silk goods, woollens, iron, pottery, glassware and paper. As a result, millions of ruined artisans and craftsmen, spinners, weavers, potters, smelters and smiths were rendered jobless and had to become landless agricultural workers.

Colonial Beneficiaries
Another aspect of colonial rule that has remained hidden from popular perception is that Britain was not the only beneficiary of colonial rule. British trade regulations even as they discriminated against Indian business interests created a favorable trading environment for other imperial powers. By 1939, only 25% of Indian imports came from Britain. 25% came from Japan, the US and Germany. In 1942-3, Canada and Australia contributed another 8%. In the period immediately before independence, Britain ruled as much on behalf of it's imperial allies as it did in it's own interest. The process of "globalization" was already taking shape. But none of this growth trickled down to India. In the last half of 19th century, India's income fell by 50%. In the 190 years prior to independence, the Indian economy was literally stagnant - it experienced zero growth. (Mike Davis: Late Victorian Holocausts)

Those who wish India well might do well to re-read this history so the nation isn't brought to the abyss once again, (and so soon after being liberated from the yoke of colonial rule). While some Indians may wax nostalgic for the return of their former overlords, and some may be ambivalent about colonial rule, most of us relish our freedom and wish to perfect it - not gift it away again.

References: Statistics and data for the colonial period taken from Rajni-Palme Dutt's India Today (Indian Edition published in 1947); also see N.K. Sinha's Economic History of Bengal (Published in Calcutta, 1956); and "Late Victorian Holocausts" by Mike Davis

Bibliography: (For further research into this area)

M. M. Ahluwalia, Freedom Struggle in India,
Shah, Khambata: The Wealth and Taxable Capacity of India
G. Emerson, Voiceless India
W. Cunningham, Growth of English Industry and Commerce in Modern Times
Brooks Adams, The Law of Civilization and Decline
J. R. Seeley, Expansion of England
H. H. Wilson, History of British India
D. H Buchanan, Development of Capitalist Enterprise in India
L. C. A Knowles: Economic Development of the Overseas Empire
L. H. Jenks: The Migration of British Capital







Another Post

Travelers such as Tavernier, traveling around India in the seventeenth century, remarking that “even in the smallest villages rice, flour, butter, milk, beans and other vegetables, sugar and other sweetmeats, dry and liquid, can be procured in abundance”. Many travelers at the time extolled Bengal as marvelous in the abundance of its resources, the advanced nature of its crafts. By the 1920s, after nearly two centuries of British rule, India was a byword for the vast abyss of its all-pervading poverty. “The average Indian income”, wrote two economists in 1924, “is just enough either to feed two men in every three of the population, or give them all two in place of every three meals they need, on condition they all consent to go naked, liver out of doors all the year round, have no amusement or recreation, and want nothing else but food, and that the lowest, the coarsest, the least nutritious”.

The British devastation of India was initially achieved by the simple means of taxing it into destitution. In the last year of the last Indian ruler of Bengal, in 1764-5, the land revenue realized was 817,000 pounds sterling. Within a few years of British rule the population had shrunk by one-third through famine, in which ten million perished in 1770 and a third of the country into “a jungle inhabited by wild beasts”. Nonetheless, by 1771-2 the Bengal revenues had risen to 2,341,000 pounds sterling. As Warren Hastings reported to the Court of the Directors of the East India Company in 1772 with bracing frankness,

“Notwithstanding the loss of at least one-third of the inhabitants of the province, and the consequent decrease of the cultivation, the net collections of the year 1771 exceeded even those of 1768… It was naturally to be expected that the diminution of the revenue should have kept an equal pace with the other consequences of so great a calamity. That it did not was owing to its being violently kept up to its former standard”.

The British destroyed the old manufacturing towns and the economy of the villages. In Palme Dutt’s words, “The millions of ruined artisans and craftsmen, spinners, weavers, potters, smelters, smiths, alike from the towns and the villages, had no alternative save to crowd into agriculture”... India was “forced to the status of agricultural colony of British manufacturing capitalism”, whose ideologues then invoked Malthus to explain India’s degraded condition



The Bengal famine of 1771 wiped out 10 million of Bengal's 30 million people.It was the precursor of numerous famines across the country during the Raj which killed 40 million people.

[amol.p]

Biggest bubble in history is growing every day


Real estate, stocks, credit. China sure has its share of bubbles. Oddly, little attention is paid to the biggest one of all. China’s currency reserves grew by more than the gross domestic product of Norway in 2009. Its $2.4 trillion of reserves is a bubble all its own, one growing before our eyes with nary a peep out of those searching for the next big one. The reserve bubble is actually an Asia-wide phenomenon. And we should stop viewing this monetary arms race as a source of strength.

Here are three reasons why it’s fast becoming a bigger liability than policy makers say publicly.

One, it’s a massive and growing pyramid scheme. The issue has reached new levels of absurdity with traders buzzing about crisis-plagued Greece seeking a Chinese bailout........{ I had said the same with in this thread}. After all, if economies were for sale, China could use the $453 billion of reserves it amassed last year to buy Greece and Vietnam and have enough left over for Mongolia. Countries such as the US used to woo the Bill Gross’s of the world to buy their debt. Now, they are wooing governments. Gross, who runs the world’s biggest mutual fund at Pacific Investment Management, is still plenty important to officials in Washington. He’s just not as vital as the continued patronage of state asset managers in places like Beijing.

You have to wonder what folks at the International Monetary Fund are thinking these days. Their aid packages tend to come with messy requirements, such as ‘get your economy in order’. China’s are merely about scoring resources or geopolitical points. We have already seen China throw lifelines to Wall Street giants, including Morgan Stanley. Entire countries seem like the natural next step.

China’s huge arsenal of reserves is increasing its global influence. The trouble is, China is trapped in an arrangement of its own making. As China and other Asian nations buy more and more US treasuries, it becomes harder to unload them without causing huge capital losses. And so they keep adding to them. “This is a titanically large foreign-exchange trade,” says David Simmonds, London-based analyst at Royal Bank of Scotland Group. “It’s the biggest one history has ever seen and there’s nowhere for these reserves to go.”

..................read all.....

http://economictimes.indiatimes.com/new ... 536524.cms

[Prasad]

Acharyaji,

Could you please check those links and correct them? They seem to be broken.